[6450-01-P]
 

DEPARTMENT OF ENERGY
 

10 CFR Part 430
 

[Docket Number EERE-2011-BT-STD-0011]
 

RIN: 1904–AC06
 

Energy Conservation Program: Energy Conservation Standards for Residential 

Furnaces and Residential Central Air Conditioners and Heat Pumps 

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. 

ACTION: Direct final rule. 

SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as amended, 

prescribes energy conservation standards for various consumer products and certain 

commercial and industrial equipment, including residential furnaces and residential 

central air conditioners and heat pumps. EPCA also requires the U.S. Department of 

Energy (DOE) to determine whether more-stringent, amended standards for these 

products would be technologically feasible and economically justified, and would save a 

significant amount of energy. In this direct final rule, DOE adopts amended energy 

conservation standards for residential furnaces and for residential central air conditioners 

and heat pumps. A notice of proposed rulemaking that proposes identical energy 

efficiency standards is published elsewhere in today’s Federal Register. If DOE receives 

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adverse comment and determines that such comment may provide a reasonable basis for 

withdrawing the direct final rule, this final rule will be withdrawn, and DOE will proceed 

with the proposed rule. 

DATES: The direct final rule is effective on [INSERT DATE 120 DAYS FROM 

DATE OF PUBLICATION IN THE FEDERAL REGISTER] unless adverse 

comment is received by [INSERT DATE THAT IS 110 DAYS FROM 

PUBLICATION IN THE FEDERAL REGISTER]. If adverse comments are received 

that DOE determines may provide a reasonable basis for withdrawal of the direct final 

rule, a timely withdrawal of this rule will be published in the Federal Register. If no such 

adverse comments are received, compliance with the standards in this final rule will be 

required on May 1, 2013 for non-weatherized gas furnaces, mobile home gas furnaces, 

and non-weatherized oil furnaces; and January 1, 2015 for weatherized gas furnaces and 

all central air conditioner and heat pump product classes. 

ADDRESSES: Any comments submitted must identify the direct final rule for Energy 

Conservation Standards for Residential Furnaces, Central Air Conditioners, and Heat 

Pumps, and provide the docket number EERE-2011-BT-STD-0011 and/or regulatory 

information number (RIN) 1904-AC06. Comments may be submitted using any of the 

following methods: 

1.	 Federal eRulemaking Portal: http://www.regulations.gov. Follow the 

instructions for submitting comments. 

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2.	 E-mail: ResFurnaceAC-2011-Std-0011@ee.doe.gov. Include Docket Numbers 

EERE-2011-BT-STD-0011 and/or RIN number1904-AC06 in the subject line of 

the message. 

3.	 Mail: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies 

Program, Mailstop EE-2J, 1000 Independence Avenue, SW., Washington, DC, 

20585-0121. If possible, please submit all items on a CD, in which case it is not 

necessary to include printed copies. 

4.	 Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of Energy, 

Building Technologies Program, 950 L’Enfant Plaza, SW., Suite 600, 

Washington, DC, 20024. Telephone: (202) 586-2945. If possible, please submit 

all items on a CD, in which case it is not necessary to include printed copies. 

No telefacsimilies will be accepted. For detailed instructions on submitting 

comments and additional information on the rulemaking process, see section VII 

of this document (Public Participation). 

Docket: The docket is available for review at www.regulations.gov, including 

Federal Register notices, framework documents, public meeting attendee lists and 

transcripts, comments, and other supporting documents/materials. All documents in the 

docket are listed in the www.regulations.gov index. However, not all documents listed in 

the index may be publicly available, such as information that is exempt from public 

disclosure. 

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A link to the docket web page can be found at: [This web page will contain a link 

to the docket for this notice on the regulations.gov site.] The www.regulations.gov web 

page contains simple instructions on how to access all documents, including public 

comments, in the docket. See section VII for further information on how to submit 

comments through www.regulations.gov. 

For further information on how to submit or review public comments, or view 

hard copies of the docket in the Resource Room, contact Ms. Brenda Edwards at (202) 

586-2945 or by email: Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: 

Mr. Mohammed Khan (furnaces) or Mr. Wesley Anderson (central air 

conditioners and heat pumps), U.S. Department of Energy, Office of Energy Efficiency 

and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence 

Avenue, SW., Washington, DC, 20585-0121. Telephone: (202) 586-7892 or (202) 586­

7335. E -mail: Mohammed.Khan@ee.doe.gov or Wes.Anderson@ee.doe.gov. 

Mr. Eric Stas or Ms. Jennifer Tiedeman, U.S. Department of Energy, Office of the 

General Counsel, GC-71, 1000 Independence Avenue, SW., Washington, DC, 20585­

0121. Telephone: (202) 586-9507 or (202) 287-6111. E-mail: Eric.Stas@hq.doe.gov or 

Jennifer.Tiedeman@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

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Table of Contents 

I. Summary of the Direct Final Rule 

A. The Energy Conservation Standard Levels 

B. Benefits and Costs to Consumers 

C. Impact on Manufacturers 

D. National Benefits 

E. Conclusion 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

2. History of Standards Rulemaking for Residential Furnaces, Central Air 

Conditioners, and Heat Pumps 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

III. General Discussion 

A. Combined Rulemaking 

B. Consensus Agreement 

1. Background 

2. Recommendations 

a. Regions 

b. Standard Levels 

c. Compliance Dates 

3. Comments on Consensus Agreement 

C. Compliance Dates 

a. Consensus Agreement Compliance Dates 

b. Shift from Peak Season 

c. Standby Mode and Off Mode Compliance Dates 

D. Regional Standards 

1. Furnace Regions for Analysis 

2. Central Air Conditioner and Heat Pump Regions for Analysis 

3. Impacts on Market Participants and Enforcement Issues 

a. Impacts on Additional Market Participants 

b. Enforcement Issues 

E. Standby Mode and Off Mode 

1. Furnaces 

a. Standby Mode and Off Mode for Weatherized Gas and Weatherized OilFired Furnaces 

b. Standby Mode and Off Mode for Electric Furnaces 

c. Standby Mode and Off Mode for Mobile Home Oil-Fired Furnaces 

2. Central Air Conditioners and Heat Pumps 

a. Off Mode for Space-Constrained Air Conditioners and Heat Pumps 

F. Test Procedures 

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1. Furnaces 

a. AFUE Test Method Comment Discussion 

b. Standby Mode and Off Mode 

2. Central Air Conditioners and Heat Pumps 

a. Proposed Test Procedure Amendments 

G. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible Levels 

a. Weatherized Gas Furnace Max-Tech Efficiency Level 

b. Space-Constrained Central Air Conditioner and Heat Pump Max-Tech 

Efficiency Levels 

H. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

I. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and Consumers 

b. Life-Cycle Costs 

c. Energy Savings 

d. Lessening of Utility or Performance of Products 

e. Impact of Any Lessening of Competition 

f. Need of the Nation to Conserve Energy 

g. Other Factors 

2. Rebuttable Presumption 

IV. Methodology and Discussion 

A. Market and Technology Assessment 

1. General 

2. Products Included in this Rulemaking 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

3. Product Classes 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

4. Technologies That Do Not Impact Rated Efficiency 

B. Screening Analysis 

1. Furnaces 

a. Screened-Out Technology Options 

2. Central Air Conditioners and Heat Pumps 

3. Standby Mode and Off Mode 

4. Technologies Considered 

C. Engineering Analysis 

1. Cost Assessment Methodology 

a. Teardown Analysis 

b. Cost Model 

c. Manufacturing Production Cost 

d. Cost-Efficiency Relationship 

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e. Manufacturer Markup 

f. Shipping Costs 

g. Manufacturer Interviews 

2. Representative Products 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

3. Efficiency Levels 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

4. Results 

5. Scaling to Additional Capacities 

a. Furnaces 

b. Central Air Conditioners and Heat Pumps 

6. Heat Pump SEER/HSPF Relationships 

7. Standby Mode and Off Mode Analysis 

a. Identification and Characterization of Standby Mode and Off Mode 

Components 

b. Baseline Model 

c. Cost-Power Consumption Results 

D. Markup Analysis 

E. Energy Use Analysis 

1. Central Air Conditioners and Heat Pumps 

2. Furnaces 

3. Standby Mode and Off Mode 

a. Central Air Conditioners and Heat Pumps 

b. Furnaces 

F. Life-Cycle Cost and Payback Period Analyses 

1. Product Cost 

2. Installation Cost 

a. Central Air Conditioners and Heat Pumps 

b. Furnaces 

3. Annual Energy Consumption 

4. Energy Prices 

5. Energy Price Projections 

6. Maintenance and Repair Costs 

a. Central Air Conditioners and Heat Pumps 

b. Furnaces 

7. Product Lifetime 

8. Discount Rates 

9. Compliance Date of Amended Standards 

10. Base-Case Efficiency Distribution 

a. Energy Efficiency 

b. Standby Mode and Off Mode Power 

11. Inputs to Payback Period Analysis 

12. Rebuttable Presumption Payback Period 

G. National Impact Analysis–National Energy Savings and Net Present Value 

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1. Shipments 

a. Impact of Potential Standards on Shipments 

2. Forecasted Efficiency in the Base Case and Standards Cases 

3. Installed Cost per Unit 

4. National Energy Savings 

5. Net Present Value of Consumer Benefit 

6. Benefits from Effects of Standards on Energy Prices 

H. Consumer Subgroup Analysis 

I. Manufacturer Impact Analysis 

1. Overview 

a. Phase 1: Industry Profile 

b. Phase 2: Industry Cash Flow Analysis 

c. Phase 3: Sub-Group Impact Analysis 

2. GRIM Analysis 

a. GRIM Key Inputs 

b. Markup Scenarios 

3. Manufacturer Interviews 

a. Consensus Agreement 

b. Potential for Significant Changes to Manufacturing Facilities 

c. Increase in Product Repair and Migration to Alternative Products 

d. HFC Phase-Out Legislation 

e. Physical Constraints 

f. Supply Chain Constraints 

J. Employment Impact Analysis 

K. Utility Impact Analysis 

L. Environmental Assessment 

M. Monetizing Carbon Dioxide and Other Emissions Impacts 

1. Social Cost of Carbon 

a. Monetizing Carbon Dioxide Emissions 

b. Social Cost of Carbon Values Used in Past Regulatory Analyses 

c. Current Approach and Key Assumptions 

2. Valuation of Other Emissions Reductions 

V. Analytical Results 

A. Trial Standard Levels 

1. TSLs for Energy Efficiency 

2. TSLs for Standby Mode and Off Mode Power 

B. Economic Justification and Energy Savings 

1. Economic Impacts on Individual Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash-Flow Analysis Results 

b. Impacts on Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Sub-Groups of Small Manufacturers 

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e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Consumer Costs and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance of Products 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

C. Conclusion 

1. Benefits and Burdens of TSLs Considered for Furnace, Central Air 

Conditioner, and Heat Pump Energy Efficiency 

2. Benefits and Burdens of TSLs Considered for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode Power 

3. Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Energy Efficiency 

4. Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode Power 

5. Certification Requirements 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Order 12866 and 13563 

B. Review Under the Regulatory Flexibility Act 

1. Description and Estimated Number of Small Entities Regulated 

2. Description and Estimate of Compliance Requirements 

a. Central Air Conditioning and Heat Pumps 

b. Residential Furnaces 

3. Duplication, Overlap, and Conflict With Other Rules and Regulations 

4. Significant Alternatives to the Rule 

C. Review Under the Paperwork Reduction Act of 1995 

D. Review Under the National Environmental Policy Act of 1969 

E. Review under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates Reform Act of 1995 

H. Review Under the Treasury and General Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality Bulletin for Peer Review 

M. Congressional Notification 

VII. Public Participation 

A. Submission of Comments 

VIII. Approval of the Office of the Secretary 

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I. Summary of the Direct Final Rule 

A. The Energy Conservation Standard Levels 

Title III, Part B1 of the Energy Policy and Conservation Act of 1975 (EPCA or the 

Act), Pub. L. 94-163 (42 U.S.C. 6291-6309, as codified), established the Energy 

Conservation Program for Consumer Products Other Than Automobiles. Pursuant to 

EPCA, any new or amended energy conservation standard that DOE prescribes for 

certain products, such as the residential furnaces (furnaces) and residential central air 

conditioners and central air conditioning heat pumps (air conditioners and heat pumps)2 

that are the subject of this rulemaking, shall be designed to “achieve the maximum 

improvement in energy efficiency . . . which the Secretary determines is technologically 

feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or 

amended standard must “result in significant conservation of energy.” (42 U.S.C. 

6295(o)(3)(B)) In accordance with these and other statutory provisions discussed in this 

notice, DOE adopts amended energy conservation standards for furnaces and central air 

conditioners and heat pumps. The standards for energy efficiency are shown in Table I.1, 

and the standards for standby mode and off mode3 are shown in Table I.2. These 

standards apply to all products listed in Table I.1 and manufactured in, or imported into, 

the United States on or after May 1, 2013, for non-weatherized gas and oil-fired furnaces 

1 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. 2 “Residential central air conditioner” is a product that provides cooling only. It is often paired with a 

separate electric or gas furnace. “Residential central air conditioning heat pump” is a product that provides 

both cooling and heating, with the cooling provided in the same manner as a residential central air 

conditioner and the heating provided by a heat pump mechanism. In this document, “residential central air 

conditioners and central air conditioning heat pumps” are referred to collectively as “central air 

conditioners and heat pumps,” and separately as “air conditioners” (cooling only) and “heat pumps” (both 

cooling and heating), respectively. 

3 In this rule, DOE is changing the nomenclature for the standby mode and off mode power consumption 

metrics for furnaces from those in the furnace and boiler test procedure final rule published on October 20, 

2010. 75 FR 64621. DOE is renaming the PSB and POFF metrics as PW,SB and PW,OFF, respectively. However, 

the substance of these metrics remains unchanged. 

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and mobile home gas furnaces, and on or after January 1, 2015, for weatherized furnaces 

and central air conditioners and heat pumps. 

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Table I.1 Amended Energy Conservation Standards for Furnace, Central Air 

Conditioner, and Heat Pump Energy Efficiency 

Residential Furnaces* 

Product Class National Standards Northern Region** Standards 

Non-weatherized gas AFUE = 80% AFUE = 90% 

Mobile home gas AFUE = 80% AFUE = 90% 

Non-weatherized oil-fired AFUE = 83% AFUE = 83% 

Weatherized gas AFUE = 81% AFUE = 81% 

Mobile home oil-fired‡‡ AFUE = 75% AFUE = 75% 

Weatherized oil-fired‡‡ AFUE = 78% AFUE = 78% 

Electric‡‡ AFUE = 78% AFUE = 78% 

Central Air Conditioners and Heat Pumps†

Product Class National 

Standards 

Southeastern 

Region††

Standards 

Southwestern Region‡

Standards 

Split-system air 

conditioners 

SEER = 13 SEER = 14 SEER = 14 

EER = 12.2 (for units with a 

rated cooling capacity less 

than 45,000 Btu/h) 

EER = 11.7 (for units with a 

rated cooling capacity equal 

to or greater than 45,000 

Btu/h) 

Split-system heat pumps SEER = 14 

HSPF = 8.2 

SEER = 14 

HSPF = 8.2 

SEER = 14 

HSPF = 8.2 

Single-package air 

conditioners‡‡

SEER = 14 SEER = 14 SEER = 14 

EER = 11.0 

Single-package heat pumps SEER = 14 

HSPF = 8.0 

SEER = 14 

HSPF = 8.0 

SEER = 14 

HSPF = 8.0 

Small-duct, high-velocity 

systems 

SEER = 13 

HSPF = 7.7 

SEER = 13 

HSPF = 7.7 

SEER = 13 

HSPF = 7.7 

Space-constrained products 

– air conditioners‡‡

SEER = 12 SEER = 12 SEER = 12 

Space-constrained products 

– heat pumps‡‡

SEER = 12 

HSPF = 7.4 

SEER = 12 

HSPF = 7.4 

SEER = 12 

HSPF = 7.4 

* AFUE is annual fuel utilization efficiency.
 

** The Northern region for furnaces contains the following States: Alaska, Colorado, Connecticut, Idaho, 

Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, 

Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode 

Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.
 † SEER is Seasonal Energy Efficiency Ratio; EER is Energy Efficiency Ratio; HSPF is Heating Seasonal 

Performance Factor; and Btu/h is British thermal units per hour. 

†† The Southeastern region for central air conditioners and heat pumps contains the following States: 

Alabama, , Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, 

North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia, and the District of Columbia. 

‡ The Southwestern region for central air conditioners and heat pumps contains the States of Arizona, 

California, Nevada, and New Mexico. 

‡‡ DOE is not amending energy conservation standards for these product classes in this rule. 

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Table I.2 Amended Energy Conservation Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode* 

Residential Furnaces** 

Product Class Standby Mode and Off Mode Standard 

Levels 

Non-weatherized gas PW,SB = 10 watts 

PW,OFF = 10 watts 

Mobile home gas PW,SB = 10 watts 

PW,OFF = 10 watts 

Non-weatherized oil-fired PW,SB = 11 watts 

PW,OFF = 11 watts 

Mobile home oil-fired PW,SB = 11 watts 

PW,OFF = 11 watts 

Electric PW,SB = 10 watts 

PW,OFF = 10 watts 

Central Air Conditioners and Heat Pumps††

Product Class Off Mode Standard Levels††

Split-system air conditioners PW,OFF = 30 watts 

Split-system heat pumps PW,OFF = 33 watts 

Single-package air conditioners PW,OFF = 30 watts 

Single-package heat pumps PW,OFF = 33watts 

Small-duct, high-velocity systems PW,OFF = 30 watts 

Space-constrained air conditioners PW,OFF = 30 watts 

Space-constrained heat pumps PW,OFF = 33 watts 

*PW,SB is standby mode electrical power consumption, and PW,OFF is off mode electrical power 

consumption. For furnaces, DOE is proposing to change the nomenclature for the standby mode and off 

mode power consumption metrics for furnaces from those in the furnace and boiler test procedure final rule 

published on October 20, 2010. 75 FR 64621. DOE is renaming the PSB and POFF metrics as PW,SB and 

PW,OFF, respectively. However, the substance of these metrics remains unchanged. 

** Standby mode and off mode energy consumption for weatherized gas and oil-fired furnaces is regulated 

as a part of single-package air conditioners and heat pumps, as discussed in section III.E.1. 

† PW,OFF is off mode electrical power consumption for central air conditioners and heat pumps. 

†† DOE is not adopting a separate standby mode standard level for central air conditioners and heat pumps, 

because standby mode power consumption for these products is already regulated by SEER and HSPF. 

B. Benefits and Costs to Consumers 

The projected economic impacts of today’s standards on individual consumers are 

generally positive. For the standards on energy efficiency, the estimated average lifecycle cost (LCC)4 savings for consumers are $155 for non-weatherized gas furnaces in 

4 The LCC is the total consumer expense over the life of a product, consisting of purchase and installation 

costs plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating 

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the northern region, $419 for mobile home gas furnaces in the northern region, and $15 

for non-weatherized oil-fired furnaces at a national level. (Today’s standards on energy 

efficiency would have no impact for consumers of non-weatherized gas furnaces and 

mobile home gas furnaces in the southern region.) The estimated LCC savings for 

consumers are $93 and $107 for split system air conditioners (coil only) in the hot-humid 

and hot-dry regions,5 respectively; $89 and $101 for split system air conditioners (blower 

coil) in the hot-humid and hot-dry regions, respectively; $102 and $175 for split system 

heat pumps in the hot-humid and hot-dry regions, respectively, and $4 for the rest of the 

country; $37 for single package air conditioners in the entire country; and $104 for single 

package heat pumps in the entire country. 6 For small-duct, high-velocity systems, no 

consumers would be impacted by today’s standards. 

Deleted: 96 

Deleted: 93 

Deleted: 110 

Deleted: 193 

Deleted: 10 

Deleted: 75 and $61 

Deleted: hot-humid and hot-dry regions, 

respectively, and -$85 for the rest of the 

Deleted: 87 and $164 

Deleted: 98 

Deleted: 100 

Comment [A1]: Footnote recommended by 

OIRA. 

Deleted: hot-humid and hot-dry regions, 

respectively, and -$26 for the rest of the 

For today’s national standards on standby mode and off mode power, the 

estimated average LCC savings for consumers are $2 for non-weatherized gas furnaces, 

$0 for mobile home gas furnaces and electric furnaces, $1 for non-weatherized oil-fired 

furnaces, $84 for split system air conditioners (coil only), $40 for split system air 

conditioners (blower coil), $9 for split system heat pumps, $41 for single package air 

conditioners, $9 for single package heat pumps and $37 for small-duct, high-velocity 

(SDHV) systems. 

costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the 

product. 

5 Throughout this notice, the terms “hot-humid” and “hot-dry” are used interchangeably with the terms 

“southeastern” and “southwestern,” respectively, when referring to the two southern regions for central air 

conditioners and heat pumps. 

6 For single-package air conditioners and single-package heat pumps, DOE has analyzed the regional 

standards on a national basis because the standard would be identical in each region. Additionally, given 

the low level of shipments of these products, DOE determined that an analysis of regional standards would 

not produce significant differences in comparison to a single national standard. 

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C. Impact on Manufacturers 

The industry net present value (INPV) is the sum of the discounted cash flows to 

the industry from the base year through the end of the analysis period (2010 through 

2045). Using a real discount rate of 8.0 percent, DOE estimates that the INPV for 

manufacturers of furnaces, central air conditioners, and heat pumps in the base case 

(without amended standards) is $8.50 billion in 2009$. For today’s standards on energy 

efficiency, DOE expects that manufacturers may lose 5.6 to 10.6 percent of their INPV, 

or approximately $0.48 billion to $0.90 billion. For today’s standards on standby mode 

and off mode power, DOE expects that manufacturers may lose up to 2.9 percent of their 

INPV, or approximately $0.25 billion. 

D. National Benefits 

DOE’s analyses indicate that today’s standards for energy efficiency and standby 

mode and off mode power would save a significant amount of energy–an estimated 3.36 

to 4.38 quads of cumulative energy in 2013–2045 for furnaces and in 2015-2045 for 

central air conditioners and heat pumps.7 This amount is comprised of savings of 3.20 to 

4.22 quads for today’s standards on energy efficiency and 0.16 quads for today’s 

standards on standby mode and off mode power. The total amount is approximately onefifth of the amount of total energy used annually by the U.S. residential sector. In 

7 DOE has calculated the energy savings over a period that begins in the year in which compliance with the 

proposed standards would be required (as described in the text preceding Table I.1) and continues through 

2045. DOE used the same end year (2045) for both types of products to be consistent with the end year that 

it used in analyzing other standard levels that it considered. See section IV.G of this notice for further 

discussion. 

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addition, DOE expects the energy savings from today’s standards to eliminate the need 

for approximately 3.80 to 3.92 gigawatts (GW) of generating capacity by 2045. 

The cumulative national net present value (NPV) of total consumer costs and 

savings of today’s standards for products shipped in 2013–2045 for furnaces and in 2015­

2045 for central air conditioners and heat pumps, in 2009$, ranges from $4.30 billion to 

$4.58 billion (at a 7-percent discount rate) to $15.9 billion to $18.7 billion (at a 3-percent 

discount rate).8 This NPV is the estimated total value of future operating-cost savings 

during the analysis period, minus the estimated increased product costs (including 

installation), discounted to 2011. 

In addition, today’s standards would have significant environmental benefits. The 

energy savings would result in cumulative greenhouse gas emission reductions of 113 

million to 143 million metric tons (Mt)9 of carbon dioxide (CO2) in 2013–2045 for 

furnaces and in 2015-2045 for central air conditioners and heat pumps. During this 

period, today’s standards would also result in emissions reductions of 97 to 124 thousand 

tons of nitrogen oxides (NOX) and 0.143 to 0.169 ton of mercury (Hg).10 DOE estimates 

the present monetary value of the total CO2 emissions reductions is between $0.574 

billion and $11.8 billion, expressed in 2009$ and discounted to 2011 using a range of 

8 DOE uses discount rates of 7 and 3 percent based on guidance from the Office of Management and 

Budget (OMB Circular A-4, section E (Sept. 17, 2003)). See section IV.G of this notice for further 

information. 

9 A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons. 10 DOE calculates emissions reductions relative to the most recent version of the Annual Energy Outlook 

(AEO) Reference case forecast. As noted in section 15.2.4 of TSD chapter 15, this forecast accounts for 

regulatory emissions reductions through 2008, including the Clean Air Interstate Rule (CAIR, 70 FR 25162 

(May 12, 2005)), but not the Clean Air Mercury Rule (CAMR, 70 FR 28606 (May 18, 2005)). Subsequent 

regulations, including the currently proposed CAIR replacement rule, the Clean Air Transport Rule (75 FR 

45210 (Aug. 2, 2010)), do not appear in the forecast. 

Deleted: 23 

Deleted: 51 

Deleted: 8 

Deleted: 6 

Deleted: 114 

Deleted: 573 

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discount rates (see notes to Table I.3). DOE also estimates the present monetary value of 

the NOX emissions reductions, expressed in 2009$ and discounted to 2011, is between 

$12.7 million and $169 million at a 7-percent discount rate, and between $30.7 million 

and $403 million at a 3-percent discount rate.11 

Deleted: 6 

Deleted: 402 

The benefits and costs of today’s standards can also be expressed in terms of 

annualized values. The annualized monetary values are the sum of: (1) the annualized 

national economic value, expressed in 2009$, of the benefits from operating products that 

meet today’s standards (consisting primarily of operating cost savings from using less 

energy, minus increases in equipment purchase costs, which is another way of 

representing consumer NPV), and (2) the monetary value of the benefits of emission 

reductions, including CO2 emission reductions.12 The value of the CO2 reductions, 

otherwise known as the Social Cost of Carbon (SCC), is calculated using a range of 

values per metric ton of CO2 developed by a recent interagency process. The monetary 

costs and benefits of cumulative emissions reductions are reported in 2009$ to permit 

comparisons with the other costs and benefits in the same dollar units. The derivation of 

the SCC values is discussed in further detail in section IV.M. 

11 DOE is aware of multiple agency efforts to determine the appropriate range of values used in evaluating 

the potential economic benefits of reduced Hg emissions. DOE has decided to await further guidance 

regarding consistent valuation and reporting of Hg emissions before it once again monetizes Hg emissions 

reductions in its rulemakings. 

12 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized 

values. First, DOE calculated a present value in 2011, the year used for discounting the NPV of total 

consumer costs and savings, for the time-series of costs and benefits using discount rates of three and 

seven percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a 

range of discount rates, as shown in Table I.3. From the present value, DOE then calculated the fixed 

annual payment over a 32-year period, starting in 2011 that yields the same present value. The fixed annual 

payment is the annualized value. Although DOE calculated annualized values, this does not imply that the 

time-series of cost and benefits from which the annualized values were determined would be a steady 

stream of payments. 

17 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Although combining the values of operating savings and CO2 emission reductions 

provides a useful perspective, two issues should be considered. First, the national 

operating savings are domestic U.S. consumer monetary savings that occur as a result of 

market transactions, whereas the value of CO2 reductions is based on a global value. 

Second, the assessments of operating cost savings and CO2 savings are performed with 

different methods that use quite different time frames for analysis. The national operating 

cost savings is measured for the lifetime of products shipped in 2013–2045 for furnaces 

and 2015-2045 for central air conditioners and heat pumps. The SCC values, on the other 

hand, reflect the present value of future climate-related impacts resulting from the 

emission of one metric ton of carbon dioxide in each year. These impacts continue well 

beyond 2100. 

Estimates of annualized benefits and costs of today’s standards for furnace, 

central air conditioner, and heat pump energy efficiency are shown in Table I.3. The 

results under the primary estimate are as follows. Using a 7-percent discount rate for 

consumer impacts and the SCC series that has a value of $22.1/ton in 2010 (in 2009$), 

the cost of the standards in today’s rule is $527 million to $773 million per year in 

increased equipment costs, while the annualized benefits are $837 million to $1106 

million per year in reduced equipment operating costs, $140 million to $178 million in 

CO2 reductions, and $5.3 million to $6.9 million in reduced NOX emissions. In this case, 

Deleted: 533 

Deleted: 780 

Deleted: 839 

Deleted: 1107 

the net benefit amounts to $456 million to $517 million per year. DOE also calculated Deleted: 451 

Deleted: 512 

annualized net benefits using a range of potential electricity and equipment price trend 

18 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

forecasts. Given the range of modeled price trends, the range of net benefits in this case is 

from $295 million to $623 million per year. The low estimate in Table I.3 corresponds to 

a scenario with a low electricity price trend and a constant real price trend for equipment, 

while the high estimate reflects a high electricity price trend and a strong declining real 

price trend for equipment. 

Using a 3-percent discount rate for consumer impacts and the SCC series that has 

a value of $22.1/ton in 2010 (in 2009$), the cost of the standards in today’s rule is $566 

million to $825 million per year in increased equipment costs, while the benefits are 

Comment [A2]: Change recommended by OIRA. 

Deleted: 573 

Deleted: 832 

$1289 million to $1686 million per year in reduced operating costs, $140 million to $178 

million in CO2 reductions, and $7.9 million to $10.2 million in reduced NOX emissions. 

In this case, the net benefit amounts to $871 million to $1049 million per year. DOE also 

calculated annualized net benefits using a range of potential electricity and equipment 

price trend forecasts. Given the range of modeled price trends, the range of net benefits in 

this case is from $601 million to $1,260 million per year. The low estimate corresponds 

to a scenario with a low electricity price trend and a constant real price trend for 

equipment, while the high estimate reflects a high electricity price trend and a strong 

declining real price trend for equipment. 

Deleted: 1290 

Deleted: 1687 

Deleted: 865 million to $1043 million per year 

Comment [A3]: Change recommended by OIRA. 

19 
 

 

 

Formatted Table ...

Deleted: 839...37 to 1,107 ...

Deleted: 722...23 to 955 ...

Deleted: 958...55 to 1,261 ...

Deleted: 290...89 to 1,687 ...

Deleted: 081...83 to 1,416 ...

Table I.3 Annualized Benefits and Costs of Standards for Furnace and Central Air 

20 

Conditioner and Heat Pump Energy Efficiency (TSL 4)* 

Discount Rate 

Primary 

Estimate** 

Low 

Estimate** 

High 

Estimate** 

Monetized (million 2009$/year) 

Benefits 

Operating Cost Savings 

7% 837 to 1,106 723 to 959 955 to 1,258 

3% 1,289 to 1,686 1,083 to 1,422 1,493 to 1,948 

CO2 Reduction at $4.9/t† 5% 34 to 43 34 to 43 34 to 43 

CO2 Reduction at $22.1/t† 3% 140 to 178 141 to 178 140 to 178 

CO2 Reduction at $36.3/t† 2.5% 224 to 284 225 to 285 224 to 284 

CO2 Reduction at $67.1/t† 3% 427 to 541 428 to 543 427 to 541 

NOX Reduction at 

$2,519/ton † 

7% 5.3 to 6.9 5.3 to 7.0 5.3 to 6.9 

3% 7.9 to 10.2 7.9 to 10.3 7.9 to 10.2 

Total†† 

7% plus CO2 

range 

876 to 1,653 762 to 1,509 994 to 1,805 

7% 983 to 1,290 869 to 1,144 1,100 to 1,442 

3% 1,437 to 1,874 1,232 to 1,611 1,641 to 2,136 

3% plus CO2 

range 

1,330 to 2,237 1,125 to 1,975 1,535 to 2,499 

Costs 

Incremental Product Costs 

7% 527 to 773 574 to 840 555 to 819 

3% 566 to 825 630 to 916 599 to 876 

Net Benefits/Costs 

Total†† 

7% plus CO2 

range 

349 to 880 188 to 669 438 to 986 

7% 456 to 517 295 to 305 545 to 623 

3% 871 to 1,049 601 to 695 1,042 to 1,260 

3% plus CO2 

range 

764 to 1,412 494 to 1,059 935 to 1,623 

* The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 

2015-2045 for the central air conditioner and heat pump standards. 

Deleted: 496...93 to 1,951 ...

Deleted: 33...4 to 42 ...

Deleted: 33...4 to 42 ...

Deleted: 33...4 to 42 ...

Deleted: 140 

Deleted: 224...25 to 284 ...

Deleted: 540 

Deleted: 427...28 to 540 ...

Deleted: 540 

Deleted: 6.9 

Deleted: 2 

Deleted: 877...76 to 1,655 ...

Deleted: 760...62 to 1,502 ...

Deleted: 996...94 to 1,808 ...

Deleted: 984...83 to 1,292 ...

Deleted: 867...69 to 1,140 ...

Deleted: 103...00 to 1,445 ...

Deleted: 438...37 to 1,875 ...

Deleted: 229...32 to 1,604 ...

Deleted: 644...41 to 2,139 ...

Deleted: 331...30 to 2,238 ...

Deleted: 122...25 to 1,967 ...

Deleted: 538...35 to 2,502 ...

Formatted Table ...

Deleted: 533...27 to 780 ...

Deleted: 496...74 to 722 ...

Deleted: 572...55 to 839 ...

Deleted: 573...66 to 832 ...

Deleted: 528...30 to 764 ...

Deleted: 619...99 to 901 ...

Formatted Table ...

Deleted: 344...49 to 875 ...

Deleted: 265...88 to 781 ...

Deleted: 424...38 to 968 ...

Deleted: 451...56 to 512 ...

Deleted: 371...95 to 418 ...

Deleted: 531...45 to 606 ...

Deleted: 865...71 to 1,043 ...

Deleted: 701...01 to 840 ...

Deleted: 025...42 to 1,239 ...

Deleted: 758...64 to 1,406 ...

Deleted: 594...94 to 1,203 ...

Deleted: 919...35 to 1,601 ...
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the 

AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In 

addition, the Low estimate uses incremental product costs that reflects constant prices (no learning rate) for 

product prices, and the High estimate uses incremental product costs that reflects a declining trend (high 

learning rate) for product prices. The derivation and application of learning rates for product prices is 

explained in section IV.F.1. Comment [A4]: Change recommended by OIRA. 

† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 

under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC 

distributions calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value 

of $67.1 per ton represents the 95th percentile of the SCC distribution calculated using a 3-percent discount 

rate. The value for NOX (in 2009$) is the average of the low and high values used in DOE’s analysis. 

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 

3-percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” 

and “3% plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount 

rate, and those values are added to the full range of CO2 values. 

Estimates of annualized benefits and costs of today’s standards for furnace, 

central air conditioner, and heat pump standby mode and off mode power are shown in 

Table I.4. The results under the primary estimate are as follows. Using a 7-percent 

discount rate and the SCC value of $22.1/ton in 2010 (in 2009$), the cost of the standards 

in today’s rule is $16.4 million per year in increased equipment costs, while the 

annualized benefits are $46.5 million per year in reduced equipment operating costs, 

$12.4 million in CO2 reductions, and $0.4 million in reduced NOX emissions. In this case, 

the net benefit amounts to $42.8 million per year. Using a 3-percent discount rate and the 

SCC value of $22.10/ton in 2010 (in 2009$), the cost of the standards in today’s rule is 

$19.1 million per year in increased equipment costs, while the benefits are $79.3 million 

per year in reduced operating costs, $12.4 million in CO2 reductions, and $0.6 million in 

reduced NOX emissions. In this case, the net benefit amounts to $73.2 million per year. 

21 
 

 

 

 

Table I.4 Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode (TSL 2)* 

Discount Rate 

Primary 

Estimate** 

Low 

Estimate** 

High 

Estimate** 

Monetized (million 2009$/year) 

Benefits 

Operating Cost Savings 

7% 46.5 40.4 52.8 

3% 79.3 67.9 90.8 

CO2 Reduction at $4.9/t† 5% 2.9 2.9 2.9 

CO2 Reduction at $22.1/t† 3% 12.4 12.4 12.4 

CO2 Reduction at $36.3/t† 2.5% 19.9 19.9 19.9 

CO2 Reduction at $67.1/t† 3% 37.6 37.6 37.6 

NOX Reduction at 

$2,519/ton † 

7% 0.4 0.4 0.4 

3% 0.6 0.6 0.6 

Total†† 

7% plus CO2 

range 

49.7 to 84.5 43.6 to 78.4 56.1 to 90.8 

7% 59.2 53.1 65.5 

3% 92.3 80.9 103.8 

3% plus CO2 

range 

82.8 to 117.5 71.4 to 106.2 94.3 to 129.1 

Costs 

Incremental Product Costs 

7% 16.4 15.2 17.7 

3% 19.1 17.6 20.6 

Net Benefits/Costs 

Total†† 

7% plus CO2 

range 

33.3 to 68.1 28.5 to 63.2 38.4 to 73.1 

7% 42.8 38.0 47.9 

3% 73.2 63.3 83.2 

3% plus CO2 

range 

63.7 to 98.4 53.8 to 88.5 73.7 to 108.5 

* The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 

2015-2045 for the central air conditioner and heat pump standards. 

22 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the 

AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In 

addition, the low estimate uses incremental product costs that reflects constant prices (no learning rate) for 

product prices, and the high estimate uses incremental product costs that reflects a declining trend (high 

learning rate) for product prices. The derivation and application of learning rates for product prices is 

explained in section IV.F.1. Comment [A5]: Change recommended by OIRA. 

† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 

under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC 

distributions calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value 

of $67.1 per ton represents the 95th percentile of the SCC distribution calculated using a 3-percent discount 

rate. The value for NOX (in 2009$) is the average of the low and high values used in DOE’s analysis. 

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 

3-percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” 

and “3% plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount 

rate, and those values are added to the full range of CO2 values. 

E. Conclusion 

Based on the analyses culminating in this rule, DOE has concluded that the 

benefits of today’s standards (energy savings, positive NPV of consumer benefits, 

consumer LCC savings, and emission reductions) would outweigh the burdens (loss of 

INPV for manufacturers and LCC increases for some consumers). DOE has concluded 

that today’s standards represent the maximum improvement in energy efficiency that is 

technologically feasible and economically justified, and would result in the significant 

conservation of energy. DOE further notes that products achieving these standard levels 

are already commercially available for all of the product classes covered by today’s 

proposal. 

II. Introduction 

The following sections briefly discuss the statutory authority underlying today’s 

direct final rule, as well as some of the relevant historical background related to the 

23 
 

 

 

 

 

 

 

establishment of standards for residential furnaces and residential central air conditioners 

and heat pumps. 

A. Authority 

Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA or the 

Act), Pub. L. 94-163 (42 U.S.C. 6291-6309, as codified) established the Energy 

Conservation Program for Consumer Products Other Than Automobiles,13 a program 

covering most major household appliances (collectively referred to as “covered 

products”), which includes the types of residential central air conditioners and heat 

pumps and furnaces that are the subject of this rulemaking. (42 U.S.C. 6292(a)(3) and 

(5)) EPCA prescribed energy conservation standards for central air conditioners and heat 

pumps and directed DOE to conduct two cycles of rulemakings to determine whether to 

amend these standards. (42 U.S.C. 6295(d)(1)-(3)) The statute also prescribed standards 

for furnaces, except for “small” furnaces (i.e., those units with an input capacity less than 

45,000 British thermal units per hour (Btu/h)), for which EPCA directed DOE to 

prescribe standards. (42 U.S.C. 6295(f)(1)-(2)) Finally, EPCA directed DOE to conduct 

rulemakings to determine whether to amend the standards for furnaces. (42 U.S.C. 

6295(f)(4)(A)-(C)) As explained in further detail in section II.B, “Background,” this 

rulemaking represents the second round of amendments to both the central air 

conditioner/heat pump and the furnaces standards, under the authority of 42 U.S.C. 

6295(d)(3)(B) and (f)(4)(C), respectively. 

13 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. 

24 
 

 

 

 

 

 

 

 

 

 

DOE notes that this rulemaking is one of the required agency actions in two court 

orders. First, pursuant to the consolidated Consent Decree in State of New York, et al. v. 

Bodman et al., 05 Civ. 7807 (LAP), and Natural Resources Defense Council, et al. v. 

Bodman, et al., 05 Civ. 7808 (LAP), DOE is required to complete a final rule for 

amended energy conservation standards for residential central air conditioners and heat 

pumps that must be sent to the Federal Register by June 30, 2011. Second, pursuant to 

the Voluntary Remand in State of New York, et al. v. Department of Energy, et al., 08­

0311-ag(L); 08-0312-ag(con), DOE agreed to complete a final rule to consider 

amendments to the energy conservation standards for residential furnaces which it 

anticipated would be sent to the Federal Register by May 1, 2011. 

DOE further notes that under 42 U.S.C. 6295(m), the agency must periodically 

review its already established energy conservation standards for a covered product. Under 

this requirement, the next review that DOE would need to conduct must occur no later 

than six years from the issuance of a final rule establishing or amending a standard for a 

covered product. 

Pursuant to EPCA, DOE’s energy conservation program for covered products 

consists essentially of four parts: (1) testing; (2) labeling; (3) the establishment of Federal 

energy conservation standards; and (4) certification and enforcement procedures. The 

Federal Trade Commission (FTC) is primarily responsible for labeling, and DOE 

implements the remainder of the program. Subject to certain criteria and conditions, 

DOE is required to develop test procedures to measure the energy efficiency, energy use, 

25 
 

 

 

 

 

 

 

 

 

 

or estimated annual operating cost of each covered product. (42 U.S.C. 6293) 

Manufacturers of covered products must use the prescribed DOE test procedure as the 

basis for certifying to DOE that their products comply with the applicable energy 

conservation standards adopted under EPCA and when making representations to the 

public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 

6295(s)) Similarly, DOE must use these test procedures to determine whether the 

products comply with standards adopted pursuant to EPCA. Id. The DOE test 

procedures for central air conditioners and heat pumps, and for furnaces, appear at title 10 

of the Code of Federal Regulations (CFR) part 430, subpart B, appendices M and N, 

respectively. 

DOE must follow specific statutory criteria for prescribing amended standards for 

covered products. As indicated above, any amended standard for a covered product must 

be designed to achieve the maximum improvement in energy efficiency that is 

technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) 

Furthermore, DOE may not adopt any standard that would not result in the significant 

conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a 

standard: (1) for certain products, including both furnaces and central air conditioners 

and heat pumps, if no test procedure has been established for the product, or (2) if DOE 

determines by rule that the proposed standard is not technologically feasible or 

economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a standard is 

economically justified, DOE must determine whether the benefits of the standard exceed 

its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after 

26 
 

 

 

 

 

 

 

 

 

 

 

 

 

receiving comments on the proposed standard, and by considering, to the greatest extent 

practicable, the following seven factors: 

1. The economic impact of the standard on manufacturers and consumers of the 

products subject to the standard; 

2. The savings in operating costs throughout the estimated average life of the 

covered products in the type (or class) compared to any increase in the price, initial 

charges, or maintenance expenses for the covered products that are likely to result from 

the imposition of the standard; 

3. The total projected amount of energy, or as applicable, water, 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 and water conservation; and 

7. Other factors the Secretary of Energy (the Secretary) considers relevant. (42 

U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) 

The Energy Independence and Security Act of 2007 (EISA 2007; Pub. L. 110­

140) amended EPCA, in relevant part, to grant DOE authority to issue a final rule 

(hereinafter referred to as a “direct final rule”) establishing an energy conservation 

standard on receipt of a statement submitted jointly by interested persons that are fairly 

Deleted: EPCA allows DOE 

27 
 

 

 

 

 

 

 

 

 

 

representative of relevant points of view (including representatives of manufacturers of 

covered products, States, and efficiency advocates), as determined by the Secretary, that 

contains recommendations with respect to an energy or water conservation standard that 

are in accordance with the provisions of 42 U.S.C. 6295(o). A notice of proposed 

rulemaking (NOPR) that proposes an identical energy efficiency standard must be 

published simultaneously with the final rule, and DOE must provide a public comment 

period of at least 110 days on this proposal. 42 U.S.C. 6295(p)(4). Not later than 120 

days after issuance of the direct final rule, if one or more adverse comments or an 

alternative joint recommendation are received relating to the direct final rule, the 

Secretary must determine whether the comments or alternative recommendation may 

provide a reasonable basis for withdrawal under 42 U.S.C. 6295(o) or other applicable 

law. If the Secretary makes such a determination, DOE must withdraw the direct final 

rule and proceed with the simultaneously-published NOPR. DOE must publish in the 

Deleted: ) 

Deleted: . 42 U.S.C. 6295(p)(4). 

Deleted: DOE 

Deleted: DOE 

Deleted: notice of proposed rulemaking. 

Federal Register the reason why the direct final rule was withdrawn. Id. 

The Consent Decree in State of New York, et al. v. Bodman et al., described 

above, defines a “final rule” to have the same meaning as in 42 U.S.C. 6295(p)(4) and 

defines “final action” as a final decision by DOE. As this direct final rule is issued under 

authority at 42 U.S.C. 6295(p)(4) and constitutes a final decision by DOE which becomes 

legally effective 120 days after issuance, absent an adverse comment that leads the 

Secretary to withdraw the direct final rule, DOE asserts that issuance of this direct final 

rule on or before the date required by the court constitutes compliance with the Consent 

Decree in State of New York, et al. v. Bodman et al. 

28 
 

 

 

 

 

 

 

 

 

EPCA, as codified, also contains what is known as an “anti-backsliding” 

provision, which prevents the Secretary from prescribing any amended standard that 

either increases the maximum allowable energy use or decreases the minimum required 

energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may 

not prescribe an amended or new standard if interested persons have established by a 

preponderance of the evidence that the standard is likely to result in the unavailability in 

the United States of any covered product type (or class) of performance characteristics 

(including reliability), features, sizes, capacities, and volumes that are substantially the 

same as those generally available in the United States. (42 U.S.C. 6295(o)(4)) 

Further, EPCA, as codified, establishes a rebuttable presumption that a standard is 

economically justified if the Secretary finds that the additional cost to the consumer of 

purchasing a product complying with an energy conservation standard level will be less 

than three times the value of the energy savings during the first year that the consumer 

will receive as a result of the standard, as calculated under the applicable test procedure. 

(42 U.S.C. 6295(o)(2)(B)(iii)) 

Additionally, 42 U.S.C. 6295(q)(1) specifies requirements when promulgating a 

standard for a type or class of covered product that has two or more subcategories. DOE 

must specify a different standard level than that which applies generally to such type or 

class of products “for any group of covered products which have the same function or 

intended use, if . . . products within such group – (A) consume a different kind of energy 

29 
 

 

 

 

 

 

 

from that consumed by other covered products within such type (or class); or (B) have a 

capacity or other performance-related feature which other products within such type (or 

class) do not have and such feature justifies a higher or lower standard” than applies or 

will apply to the other products within that type or class. Id. In determining whether a 

performance-related feature justifies a different standard for a group of products, DOE 

must “consider such factors as the utility to the consumer of such a feature” and other 

factors DOE deems appropriate. Id. Any rule prescribing such a standard must include an 

explanation of the basis on which such higher or lower level was established. (42 U.S.C. 

6295(q)(2)) 

Under 42 U.S.C. 6295(o)(6), which was added by section 306(a) of the Energy 

Independence and Security Act of 2007 (EISA 2007; Pub. L. 110-140), DOE may 

consider the establishment of regional standards for furnaces (except boilers) and for 

central air conditioners and heat pumps. Specifically, in addition to a base national 

standard for a product, DOE may establish for furnaces a single more-restrictive regional 

standard, and for central air conditioners and heat pumps, DOE may establish one or two 

more-restrictive regional standards. (42 U.S.C. 6295(o)(6)(B)) The regions must include 

only contiguous States (with the exception of Alaska and Hawaii, which may be included 

in regions with which they are not contiguous), and each State may be placed in only one 

region (i.e., an entire State cannot simultaneously be placed in two regions, nor can it be 

divided between two regions). (42 U.S.C. 6295(o)(6)(C)) Further, DOE can establish the 

additional regional standards only: (1) where doing so would produce significant energy 

savings in comparison to a single national standard, (2) if the regional standards are 

30 
 

 

 

 

 

 

 

 

 

economically justified, and (3) after considering the impact of these standards on 

consumers, manufacturers, and other market participants, including product distributors, 

dealers, contractors, and installers. (42 U.S.C. 6295(o)(6)(D)) 

Federal energy conservation requirements generally supersede State laws or 

regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 

6297(a)–(c)) DOE may, however, grant waivers of Federal preemption for particular 

State laws or regulations, in accordance with the procedures and other provisions set forth 

under 42 U.S.C. 6297(d). 

Finally, pursuant to the amendments contained in section 310(3) of EISA 2007, 

any final rule for new or amended energy conservation standards promulgated after July 

1, 2010 are required to address standby mode and off mode energy use. (42 U.S.C. 

6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that 

date, it must, if justified by the criteria for adoption of standards under 42 U.S.C. 

6295(o), incorporate standby mode and off mode energy use into the standard, if feasible, 

or, if that is not feasible, adopt a separate standard for such energy use for that product. 

(42 U.S.C. 6295(gg)(3)(A)-(B)) DOE’s current energy conservation standards for 

furnaces are expressed in terms of minimum annual fuel utilization efficiencies (AFUE), 

and, for central air conditioners and heat pumps, they are expressed in terms of minimum 

seasonal energy efficiency ratios (SEER) for the cooling mode and heating seasonal 

performance factors (HSPF) for the heating mode. 

31 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

DOE’s current test procedures for furnaces have been updated to address standby 

mode and off mode energy use. 75 FR 64621 (Oct. 20, 2010). DOE is in the process of 

amending its test procedures for central air conditioners and heat pumps to address 

standby mode and off mode energy use. 75 FR 31224 (June 2, 2010). In this rulemaking, 

DOE is adopting provisions to comprehensively address such energy use. In addition, 

DOE is amending the test procedure for furnaces and boilers to specify that furnaces 

manufactured on or after May 1, 2013 (i.e., the compliance date of the standard) will be 

required to be tested for standby mode and off mode energy consumption for purposes of 

certifying compliance with the standard. As noted above, for central air conditioners and 

heat pumps, DOE is currently in the process of amending the test procedures. 

Accordingly, DOE is including language to specify that off mode testing does not need to 

be performed until the compliance date for the applicable off mode energy conservation 

standards resulting from this rule. 

DOE has also reviewed this regulation pursuant to Executive Order 13563, issued 

on January 18, 2011 (76 FR 3281, Jan. 21, 2011). EO 13563 is supplemental to and 

explicitly reaffirms the principles, structures, and definitions governing regulatory review 

established in Executive Order 12866. To the extent permitted by law, agencies are 

required by Executive Order 13563 to: (1) propose or adopt a regulation only upon a 

reasoned determination that its benefits justify its costs (recognizing that some benefits 

and costs are difficult to quantify); (2) tailor regulations to impose the least burden on 

society, consistent with obtaining regulatory objectives, taking into account, among other 

things, and to the extent practicable, the costs of cumulative regulations; (3) select, in 

32 
 

 

 

 

 

 

 

 

 

 

 

 

choosing among alternative regulatory approaches, those approaches that maximize net 

benefits (including potential economic, environmental, public health and safety, and other 

advantages; distributive impacts; and equity); (4) to the extent feasible, specify 

performance objectives, rather than specifying the behavior or manner of compliance that 

regulated entities must adopt; and (5) identify and assess available alternatives to direct 

regulation, including providing economic incentives to encourage the desired behavior, 

such as user fees or marketable permits, or providing information upon which choices can 

be made by the public. 

We emphasize as well that Executive Order 13563 requires agencies “to use the 

best available techniques to quantify anticipated present and future benefits and costs as 

accurately as possible.” In its guidance, the Office of Information and Regulatory Affairs 

has emphasized that such techniques may include “identifying changing future 

compliance costs that might result from technological innovation or anticipated 

behavioral changes.” For the reasons stated in the preamble, DOE believes that today’s 

direct final rule is consistent with these principles, including that, to the extent permitted 

by law, agencies adopt a regulation only upon a reasoned determination that its benefits 

justify its costs and select, in choosing among alternative regulatory approaches, those 

approaches that maximize net benefits. Consistent with EO 13563, and the range of 

impacts analyzed in this rulemaking, the energy efficiency standard adopted herein by 

DOE achieves maximum net benefits. 

33 

Comment [A6]: Change recommended by OIRA. 
 

 

 

 

 

 

 

 

 

 

 

 

B. Background 

1. Current Standards 

a. Furnaces 

EPCA established the energy conservation standards that apply to most residential 

furnaces currently being manufactured, consisting of a minimum AFUE of 75 percent for 

mobile home furnaces and a minimum AFUE of 78 percent for all other furnaces, except 

“small” gas furnaces (those having an input rate of less than 45,000 Btu per hour), for 

which DOE was directed to prescribe a separate standard. (42 U.S.C. 6295(f)(1)-(2); 10 

CFR 430.32(e)(1)(i)) The standard for mobile home furnaces has applied to products 

manufactured for sale in the United States, or imported into the United States, since 

September 1, 1990, and the standard for most other furnaces has applied to products 

manufactured or imported since January 1, 1992. Id. On November 17, 1989, DOE 

published a final rule in the Federal Register adopting the current standard for “small” 

gas furnaces, which consists of a minimum AFUE of 78 percent that has applied to 

products manufactured or imported since January 1, 1992. 54 FR 47916. 

Pursuant to EPCA, DOE was required to conduct further rulemaking to consider 

amended energy conservation standards for furnaces. (42 U.S.C. 6295(f)(4)) For 

furnaces manufactured or imported on or after November 19, 2015, DOE published a 

final rule in the Federal Register on November 19, 2007 (the November 2007 Rule) that 

revised these standards for most furnaces, but left them in place for two product classes 

(i.e., mobile home oil-fired furnaces and weatherized oil-fired furnaces). 72 FR 65136. 

This rule completed the first of the two rulemakings required under 42 U.S.C. 

34 
 

 

 

 

 

 

 

 

6295(f)(4)(B)-(C) to consider amending the standards for furnaces. The energy 

conservation standards in the November 2007 Rule consist of a minimum AFUE level for 

each of the six classes of furnaces (10 CFR 430.32(e)(1)(ii)) and are set forth in Table 

II.1 below. 

Table II.1 Energy Conservation Standards for Residential Furnaces Manufactured 

On or After November 19, 2015 

Product Class AFUE (percent) 

Non-weatherized Gas Furnaces 80 

Weatherized Gas Furnaces 81 

Mobile Home Oil-Fired Furnaces 75 

Non-weatherized Oil-Fired Furnaces 82 

Weatherized Oil-Fired Furnaces 78 

b. Central Air Conditioners and Heat Pumps 

Congress initially prescribed statutory standard levels for residential central air 

conditioners and heat pumps. (42 U.S.C. 6295(d)(1)-(2)) DOE was required to 

subsequently conduct two rounds of rulemaking to consider amended standards for these 

products. (42 U.S.C. 6295(d)(3)) In a final rule published in the Federal Register on 

August 17, 2004 (the August 2004 Rule), DOE prescribed the current Federal energy 

conservation standards for central air conditioners and heat pumps manufactured or 

imported on or after January 23, 2006. 69 FR 50997. This rule completed the first of the 

two rulemakings required under 42 U.S.C. 6295(d)(3)(A) to consider amending the 

standards for these products. The standards consist of a minimum SEER for each class of 

air conditioner and a minimum SEER and HSPF for each class of heat pump (10 CFR 

430.32(c)(2)). These standards are set forth in Table II.2 below. 

35 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table II.2 Energy Conservation Standards for Central Air Conditioners and Heat 

Pumps Manufactured On or After January 23, 2006 

Product Class SEER HSPF 

Split-System Air Conditioners 13 -

Split-System Heat Pumps 13 7.7 

Single-Package Air Conditioners 13 -

Single-Package Heat Pumps 13 7.7 

Through-the-wall Air Conditioners and Heat Pumps – 

Split System* 

10.9 7.1 

Though-the-wall Air Conditioners and Heat Pumps – 

Single Package* 

10.6 7.0 

Small-Duct, High-Velocity Systems14 13 7.7 

Space-Constrained Products – Air Conditioners 12 -

Space-Constrained Products – Heat Pumps 12 7.4 

*As defined in 10 CFR 430.2, this product class applies to products manufactured prior to January 23, 

2010. 

2. History of Standards Rulemaking for Residential Furnaces, Central Air Conditioners, 

and Heat Pumps 

a. Furnaces 

Amendments to EPCA in the National Appliance Energy Conservation Act of 

1987 (NAECA; Pub. L. 100-12) established EPCA’s original energy conservation 

standards for furnaces, which are still in force, consisting of the minimum AFUE levels 

described above for mobile home furnaces and for all other furnaces except “small” gas 

furnaces. (42 U.S.C. 6295(f)(1)-(2)) Pursuant to 42 U.S.C. 6295(f)(1)(B), in November 

1989, DOE adopted a mandatory minimum AFUE level for “small” furnaces. 54 FR 

47916 (Nov. 17, 1989). DOE was required to conduct two more cycles of rulemakings to 

determine whether to amend all of the standards for furnaces. (42 U.S.C. 6295(f)(4)(B)­

(C)) As discussed above, the November 2007 Rule completed the first cycle of required 

14 In 2004 and 2005, DOE’s Office of Hearings and Appeals (OHA) granted exception relief from the 

standards for this class of products, under section 504 of the DOE Organization Act (42 U.S.C. 7194), to 

allow three manufacturers to sell such products so long as they had a SEER no less than 11 and an HSPF no 

less than 6.8. See Office of Hearings and Appeals case numbers TEE-0010 and TEE-0011, which were 

filed on May 24, 2004. 

36 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

rulemaking to consider amendment of the standards for furnaces under 42 U.S.C. 

6295(f)(4)(B). 

Following DOE’s adoption of the November 2007 Rule, however, several parties 

jointly sued DOE in the United States Court of Appeals for the Second Circuit to 

invalidate the rule. Petition for Review, State of New York, et al. v. Department of 

Energy, et al., Nos. 08-0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The 

petitioners asserted that the standards for residential furnaces promulgated in the 

November 2007 Rule did not reflect the “maximum improvement in energy efficiency” 

that “is technologically feasible and economically justified,” as required under 42 U.S.C. 

6295(o)(2)(A). On April 16, 2009, DOE filed with the Court a motion for voluntary 

remand that the petitioners did not oppose. The motion did not state that the November 

2007 Rule would be vacated, but indicated that DOE would revisit its initial conclusions 

outlined in the November 2007 Rule in a subsequent rulemaking action. Motion for 

Voluntary Remand, State of New York, et al. v. Department of Energy, et al., supra. The 

Court granted the voluntary remand on April 21, 2009. State of New York, et al. v. 

Department of Energy, et al., supra, (order granting motion). Under the remand 

agreement, DOE anticipated that it would issue a revised final rule amending the energy 

conservation standards for furnaces by May 1, 2011.15 DOE also agreed that the final rule 

would address both regional standards for furnaces, as well as the effects of alternate 

15 The current rulemaking for furnaces is being conducted pursuant to authority under 42 U.S.C. 

6295(f)(4)(C) and (o)(6). DOE notes that the second round of amended standards rulemaking called for 

under 42 U.S.C. 6295(f)(4)(C) applies to both furnaces and boilers. However, given the relatively recently 

prescribed boiler standards under 42 U.S.C. 6295(f)(3), with compliance required for products 

manufactured or imported on or after September 1, 2012, DOE has decided to consider amended standards 

for boilers under 42 U.S.C. 6295(f)(4)(C) in a future rulemaking. 

37 
 

 

 

 

 

 

 

 

 

 

standards on natural gas prices. Subsequently, the furnaces rulemaking was combined 

with the central air conditioners and heat pumps rulemaking because of the functional 

and analytical interplay of these types of products (see section III.A for more details). 

The petitioners and DOE agreed that the final rule for furnaces should be issued on June 

30, 2011, to coincide with the date by which the central air conditioner and heat pump 

rulemaking is required to be issued. 

DOE initiated the portion of this rulemaking that concerns furnaces on March 11, 

2010, by publishing on the DOE website its “Energy Conservation Standards for 

Residential Furnaces Rulemaking Analysis Plan” (furnaces RAP). (The furnaces RAP is 

available at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/furnaces_nopm_r 

ulemaking_analysis.html.) The furnaces RAP set forth the product classes DOE planned 

to analyze for purposes of amending the energy conservation standards for furnaces, and, 

as set forth below, the approach DOE would use to evaluate such amended standards. 

DOE also published a notice of public meeting (NOPM) announcing the availability of 

the RAP and a public meeting to discuss and receive comments on the subjects in that 

document, and requesting written comment on these subjects. 75 FR 12144 (March 15, 

2010) (the March 2010 NOPM). In this notice, DOE stated its interest in receiving views 

concerning other relevant issues that participants believe would affect energy 

conservation standards for furnaces or that DOE should address. Id. at 12147-48. 

38 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The RAP provided an overview of the activities DOE planned to undertake in 

developing amended energy conservation standards for furnaces. It included discussion 

of: (1) a consensus agreement16 that recommended particular standards for DOE 

adoption for furnaces and central air conditioners/heat pumps; (2) DOE’s consideration 

of whether to conduct a single rulemaking to address standards either for these two 

products or for these products and furnace fans, and (3) DOE’s intention to develop 

regional standards for furnaces. In addition, the RAP described the analytical framework 

that DOE planned to use in any rulemaking that considered amended standards for 

furnaces, including a detailed description of the methodology, the analytical tools, the 

analyses DOE would perform, and the relationships among these analyses. DOE also 

summarized in detail all of these points in the March 2010 NOPM, including the nature 

and function of the analyses DOE would perform. Id. at 12146-47. These analyses are as 

follows: 

• A market and technology assessment to address the scope of this rulemaking, 

identify the potential classes for furnaces, characterize the market for this product, and 

review techniques and approaches for improving its efficiency; 

• A screening analysis to review technology options to improve the efficiency of 

furnaces, and weigh these options against DOE’s four prescribed screening criteria; 

16 On January 15, 2010, several interested parties submitted a joint comment to DOE recommending 

adoption of minimum energy conservation standards for residential central air conditioners, heat pumps, 

and furnaces, as well as associated compliance dates for such standards, which represents a negotiated 

agreement among a variety of interested stakeholders including manufacturers and environmental and 

efficiency advocates. The original agreement (referred to as the “consensus agreement”) was completed on 

October 13, 2009, and had 15 signatories. For more information, see section III.B of this direct final rule. 

39 
 

 

 

 

 

 

• An engineering analysis to estimate the manufacturer selling prices (MSPs) 

associated with more energy-efficient furnaces; 

• An energy use analysis to estimate the annual energy use of furnaces; 

• A markups analysis to convert estimated MSPs derived from the engineering 

analysis to consumer prices; 

• A life-cycle cost analysis to calculate, for individual consumers, the discounted 

savings in operating costs throughout the estimated average life of the product, compared 

to any increase in installed costs likely to result directly from the imposition of a given 

standard; 

• A payback period (PBP) analysis to estimate the amount of time it takes 

individual consumers to recover the higher purchase price expense of more energyefficient products through lower operating costs; 

• A shipments analysis to estimate shipments of furnaces over the time period 

examined in the analysis, for use in performing the national impact analysis (NIA); 

40 
 

 

 

 

 

 

 

 

• A national impact analysis to assess the national and regional energy savings, 

and the national and regional net present value of total consumer costs and savings, 

expected to result from specific, potential energy conservation standards for furnaces; 

• A manufacturer impact analysis to evaluate the effects on manufacturers of new 

efficiency standards. 

• A utility impact analysis to estimate specific effects of standards for furnaces on 

the utility industry; 

• An employment impacts analysis to assess the indirect impacts of standards on 

employment in the national economy; 

• An environmental impact analysis to quantify and consider the environmental 

effects of amended standards for furnaces; and 

• A regulatory impact analysis to address the potential for non-regulatory 

approaches to supplant or augment standards to improve the efficiency of furnaces. 

The public meeting announced in the March 2010 NOPM took place on March 

31, 2010 at DOE headquarters in Washington, D.C. At this meeting, DOE presented the 

methodologies it intends to use and the analyses it intends to perform to consider 

amended energy conservation standards for furnaces. Interested parties that participated 

41 
 

 

 

 

 

 

in the public meeting discussed a variety of topics, but focused on the following issues: 

(1) the consensus agreement; (2) the scope of coverage for the rulemaking; (3) a 

combined rulemaking; (4) regional standards and their enforcement; (5) test procedure 

and rating metrics; (6) product classes; (7) efficiency levels and representative products 

analyzed in the engineering analysis; (8) installation, repair, and maintenance costs; and 

(9) product and fuel switching. The comments received since publication of the March 

2010 NOPM, including those received at the March 2010 public meeting, have 

contributed to DOE’s resolution of the issues in this rulemaking. This direct final rule 

quotes and/or summarizes these comments, and responds to all the issues they raised. (A 

parenthetical reference at the end of a quotation or paraphrase provides the location of the 

item in the public record.) 

b. Central Air Conditioners and Heat Pumps 

As with furnaces, NAECA included amendments to EPCA that established 

EPCA’s original energy conservation standards for central air conditioners and heat 

pumps, consisting of two minimum SEER levels for air conditioners and for heat pumps 

when operating in the cooling mode and two minimum HSPF levels for heat pumps when 

operating in the heating mode. (42 U.S.C. 6295(d)(1)-(2)) One of the SEER levels and 

one of the HSPF levels applied to split systems, and the other SEER and HSPF levels 

applied to single package systems. Each “split system” consists of an outdoor unit and an 

indoor unit which are ‘‘split’’ from each other and connected via refrigerant tubing. The 

outdoor unit has a compressor, heat exchanger coil, fan, and fan motor. The indoor unit 

has a heat exchanger coil and a blower fan unless it resides within a furnace, in which 

42 
 

 

 

 

 

 

 

 

 

 

 

 

case the furnace contains the blower fan for air circulation. In “single package systems,” 

all the components that comprise a split system, including the air circulation components, 

are in a single cabinet that resides outdoors. In both types of systems, conditioned air is 

conveyed to the home via ducts. 

EPCA, as amended, also requires DOE to conduct two cycles of rulemakings to 

determine whether to amend the energy conservation standards for central air 

conditioners and heat pumps. (42 U.S.C. 6295(d)(3)) Pursuant to 42 U.S.C. 

6295(d)(3)(A), on January 22, 2001, DOE published a final rule in the Federal Register 

that adopted amended standards for split system air conditioners and heat pumps and 

single package air conditioners and heat pumps. 66 FR 7170 (the January 2001 Rule). 

However, shortly after publication of the January 2001 Rule, DOE postponed the 

effective date of the rule from February 21, 2001 to April 23, 2001 in response to 

President Bush’s Regulatory Review Plan, and in order to reconsider the amended 

standards it contained. 66 FR 8745 (Feb. 2, 2001). While reviewing the amended 

standards, DOE further postponed the effective date pending the outcome of a petition 

submitted by the Air Conditioning and Refrigeration Institute. 66 FR 20191 (April 20, 

2001). DOE subsequently withdrew the 2001 final rule and published another final rule 

which adopted revisions of these amended standards, as well as new amended standards 

for the product classes for which the January 2001 Rule had not prescribed standards. 67 

FR 36368 (May 23, 2002) (the May 2002 Rule). The Natural Resources Defense Council 

(NRDC), along with other public interest groups and several State Attorneys General 

filed suit in the U.S. Court of Appeals for the Second Circuit, challenging DOE’s 

43 
 

 

 

 

 

 

 

 

 

 

withdrawal of the January 2001 final rule and promulgation of the May 2002 final rule. 

On January 13, 2004, the U.S. Court of Appeals for the Second Circuit invalidated the 

May 2002 Rule’s revisions of the standards adopted in the January 2001 Rule, because 

the May 2002 final rule had lower amended standards than the January 2001 Rule and, 

thus, violated 42 U.S.C. 6295(o)(1) (i.e., the “anti-backsliding clause”). Natural 

Resources Defense Council v. Abraham, 355 F.3d 179 (2d Cir. 2004). However, the 

Court’s decision did not affect the standards DOE adopted in the May 2002 Rule for 

products not covered by the standards in the January 2001 Rule. To be consistent with the 

court’s ruling, DOE published the August 2004 Rule, which established the standards 

currently applicable to central air conditioners and heat pumps. 69 FR 50997 (August 17, 

2004). As stated above, this rule completed the first cycle of rulemaking for revised 

standards for central air conditioners and heat pumps under 42 U.S.C. 6295(d)(3)(A), and 

these standards took effect on January 23, 2006. Id. 

DOE initiated the current rulemaking on June 2, 2008, by publishing on its 

website its “Rulemaking Framework for Residential Central Air Conditioners and Heat 

Pumps.” (A PDF of the framework document is available at 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/cac_heatpumps_n 

ew_rulemaking.html.) DOE also published a notice announcing the availability of the 

framework document and a public meeting on the document, and requesting public 

comment on the matters raised in the document. 73 FR 32243 (June 6, 2008). The 

framework document described the procedural and analytical approaches that DOE 

anticipated using to evaluate energy conservation standards for central air conditioners 

44 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

and heat pumps and identified various issues to be resolved in conducting this 

rulemaking. 

DOE held the public meeting on June 12, 2008, in which it: (1) presented the 

contents of the framework document; (2) described the analyses it planned to conduct 

during the rulemaking; (3) sought comments from interested parties on these subjects; 

and (4) in general, sought to inform interested parties about, and facilitate their 

involvement in, the rulemaking. Interested parties discussed the following major issues at 

the public meeting: (1) the scope of coverage for the rulemaking; (2) product classes; (3) 

test procedure modifications; (4) effects on cost and system efficiency of phasing out 

certain refrigerants due to climate and energy legislation such as the Waxman-Markey 

bill (H.R. 2454); (5) regulation of standby mode and off mode energy consumption; and 

(6) regional standards. At the meeting and during the comment period on the framework 

document, DOE received many comments that helped it identify and resolve issues 

pertaining to central air conditioners and heat pumps relevant to this rulemaking. 

DOE then gathered additional information and performed preliminary analyses to 

help develop potential energy conservation standards for these products. This process 

culminated in DOE’s announcement of another public meeting to discuss and receive 

comments on the following matters: (1) the product classes DOE planned to analyze; (2) 

the analytical framework, models, and tools that DOE was using to evaluate standards; 

(3) the results of the preliminary analyses performed by DOE; and (4) potential standard 

levels that DOE could consider. 75 FR 14368 (March 25, 2010) (the March 2010 Notice). 

45 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

DOE also invited written comments on these subjects and announced the availability on 

its website of a preliminary technical support document (preliminary TSD) it had 

prepared to inform interested parties and enable them to provide comments. Id. (The 

preliminary TSD is available at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/cac_heatpumps_n 

ew_rulemaking.html) Finally, DOE stated its interest in receiving views concerning other 

relevant issues that participants believed would affect energy conservation standards for 

central air conditioners and heat pumps, or that DOE should address in this direct final 

rule. Id. at 14372. 

The preliminary TSD provided an overview of the activities DOE undertook to 

develop standards for central air conditioners and heat pumps and discussed the 

comments DOE received in response to the framework document. Similar to the RAP for 

furnaces, it also addressed the consensus agreement that recommended particular 

standards for DOE adoption for furnaces and central air conditioners/heat pumps, and it 

addressed DOE’s consideration of whether to conduct a single rulemaking to address 

standards either for these two products or for these products and furnace fans. The 

preliminary TSD also described the analytical framework that DOE used (and continues 

to use) in considering standards for central air conditioners and heat pumps, including a 

description of the methodology, the analytical tools, and the relationships between the 

various analyses that are part of this rulemaking. The preliminary TSD presented and 

described in detail each analysis that DOE had performed for these products up to that 

point, including descriptions of inputs, sources, methodologies, and results, and it 

46 
 

 

 

included DOE’s evaluation of potential regional standards for central air conditioners and 

heat pumps. These analyses were as follows: 

• A market and technology assessment addressed the scope of this rulemaking, 

identified the potential classes for central air conditioners and heat pumps, characterized 

the markets for these products, and reviewed techniques and approaches for improving 

their efficiency; 

• A screening analysis reviewed technology options to improve the efficiency of 

central air conditioners and heat pumps, and weighed these options against DOE’s four 

prescribed screening criteria; 

• An engineering analysis estimated the manufacturer selling prices (MSPs) 

associated with more energy-efficient central air conditioners and heat pumps; 

• An energy use analysis estimated the annual energy use of central air 

conditioners and heat pumps; 

• A markups analysis converted estimated MSPs derived from the engineering 

analysis to consumer prices; 

• A life-cycle cost analysis calculated, for individual consumers, the discounted 

savings in operating costs throughout the estimated average life of central air conditioners 

47 
 

 

 

 

 

and heat pumps, compared to any increase in installed costs likely to result directly from 

the imposition of a given standard; 

• A payback period analysis estimated the amount of time it takes individual 

consumers to recover the higher purchase price expense of more energy-efficient 

products through lower operating costs; 

• A shipments analysis estimated shipments of central air conditioners and heat 

pumps over the time period examined in the analysis, and was used in performing the 

national impact analysis; 

• A national impact analysis assessed the national and regional energy savings, 

and the national and regional net present value of total consumer costs and savings, 

expected to result from specific, potential energy conservation standards for central air 

conditioners and heat pumps; and 

• A preliminary manufacturer impact analysis took the initial steps in evaluating 

the effects on manufacturers of amended efficiency standards. 

In the March 2010 Notice, DOE addressed the consensus agreement, regional 

standards, and the possibility of a combined rulemaking. DOE also summarized in detail 

in the notice the nature and function of the following analyses: (1) engineering analysis; 

48 
 

 

 

 

 

 

 

 

 

 

 

 

(2) energy use analysis; (3) markups to determine installed prices; (4) LCC and PBP 

analyses; and (5) national impact analysis. 75 FR 14368, 14370-71 (March 25, 2010). 

The public meeting announced in the March 2010 Notice took place on May 5, 

2010 at DOE headquarters in Washington, D.C. At this meeting, DOE presented the 

methodologies and results of the analyses set forth in the preliminary TSD. Interested 

parties that participated in the public meeting discussed a variety of topics, but centered 

on the following issues: (1) the consensus agreement; (2) a combined rulemaking with 

furnaces and furnace fans; (3) efficiency metrics; (4) technology options; (5) product 

classes; (6) installation, maintenance, and repair costs; (7) markups and distributions 

chains; (8) central air conditioner and heat pumps shipments; and (9) electricity prices. 

The comments received since publication of the March 2010 Notice, including those 

received at the May 2010 public meeting, have contributed to DOE’s resolution of the 

issues in this rulemaking as they pertain to central air conditioners and heat pumps. This 

direct final rule responds to the issues raised by the commenters. (A parenthetical 

reference at the end of a quotation or paraphrase provides the location of the item in the 

public record.) 

III. General Discussion 

A. Combined Rulemaking 

As discussed in section II.B.2, DOE had been conducting or planning separate 

standards rulemakings for three interrelated products: (1) central air conditioners and heat 

pumps; (2) gas furnaces; and (3) furnace fans. Rather than analyze each set of products 

49 
 

 

 

 

 

 

 

 

 

 

 

 

 

separately, DOE considered combining the analyses to examine how the interaction 

between the three products impacts the cost to consumers and the energy savings 

resulting from potential amended standards. In both its RAP regarding energy 

conservation standards for residential furnaces and preliminary analysis for residential 

central air conditioners and heat pumps, DOE specifically invited comment from 

interested parties related to the potential for combining the rulemakings regarding energy 

conservation standards for residential central air conditioners and heat pumps, residential 

furnaces, and furnace fans. 

NRDC commented that it supports accelerating the furnace fan rulemaking to 

coincide with the rulemakings for furnaces and central air conditioners, because a 

combined rulemaking would potentially provide analytical simplification and is 

consistent with the President’s request that DOE meet all statutory deadlines and 

accelerate those with large potential energy savings. (FUR: NRDC, No.1.3.020 at pp. 9­

10)

17 The California investor-owned utilities (CA IOUs, i.e., Pacific Gas & Electric, 

Southern California Gas Company, San Diego Gas and Electric, and Southern California 

Edison) also supported a combined rulemaking, arguing that this approach would allow 

DOE to more accurately analyze the energy-efficiency impacts of various standards 

options. The CA IOUs also stated that a combined rulemaking would reduce redundant 

workload for DOE and minimize the number of public meetings. (FUR: CA IOUs, 

No.1.3.017 at p. 2) Proctor Engineering Group (Proctor) stated support for combining 

17 In this direct final rule, DOE discusses comments received in response to both the furnaces rulemaking 

analysis plan and the central air conditioners and heat pumps preliminary analysis. Comments received in 

response to the furnace rulemaking analysis plan are identified by “FUR” preceding the comment citation. 

Comments received in response to the central air conditioners and heat pump preliminary analysis are 

identified by “CAC” preceding the comment citation. 

50 
 

 

 

 

 

 

 

the furnace, furnace fan, and central air conditioner and heat pump rulemakings because 

the three products work together. Proctor asserted that the standards need to be 

integrated together and that the analysis should be integrated as well. (FUR: Proctor, 

Public Meeting Transcript, No. 1.2.006 at p. 29) In written comments, Proctor elaborated 

that DOE could improve current standards by promulgating standards that recognize the 

interdependence of furnaces, air conditioners, heat pumps, and air handler fans within the 

average U.S. household and that are consistent such that they can be properly integrated 

within a system to produce results that are representative of a system typically found in a 

home in the United States of America. (FUR, Proctor, FDMS No. 0002 at p. 2) 

The American Council for an Energy Efficient Economy (ACEEE), Heating Airconditioning & Refrigeration Distributors International (HARDI), Ingersoll Rand, 

Southern Company (Southern), Edison Electric Institute (EEI), and Lennox supported a 

combined rulemaking of furnaces and central air conditioners and heat pumps, but did not 

support a combined rulemaking that also covers furnace fans. (FUR: ACEEE, No.1.3.009 

at p. 4; HARDI, No.1.3.016 at pp. 2, 5-6; Ingersoll Rand, No.1.3.006 at p. 1; Lennox, 

No.1.3.018 at p. 2) (CAC: ACEEE, No. 72 at p. 2; HARDI, No. 56 at p. 2; Lennox No. 

65 at p. 2; Ingersoll Rand, No. 66 at p. 8; Southern, No. 73 at p.2; EEI, No. 75 at p. 4) 

HARDI commented that there would not be time for a thorough analysis of furnace fans 

if that rulemaking is accelerated to include it with furnaces and central air conditioners 

and heat pumps. (FUR: HARDI, No.1.3.016 at pp. 2, 5-6) Ingersoll Rand concurred, 

further stating that furnace fan efficiency is a complex topic that needs to be handled 

separately. (FUR: Ingersoll Rand, No.1.3.006 at p. 1) (CAC: Ingersoll Rand, No. 66 at p. 

51 
 

 

 

 

 

 

 

 

 

 

8) Lennox stated that the furnace fan rulemaking will be more complicated than typical 

DOE proceedings, and valuable information can be obtained by conducting the furnace 

and central air conditioner and heat pump rulemakings in advance of the fan rulemaking. 

Additionally, Lennox stated that the furnace fan rulemaking should not be rushed by 

accelerating the schedule by a year and a half. (FUR: Lennox, No.1.3.018 at p. 2) (CAC: 

Lennox, No. 65 at p. 2) 

The Appliance Standards Awareness Project (ASAP) submitted a joint comment 

on behalf of ACEEE, the Air-conditioning, Heating and Refrigeration Institute (AHRI), 

Alliance to Save Energy (ASE), ASAP, California Energy Commission (CEC), National 

Consumer Law Center (NCLC) (on behalf of low-income clients), NRDC, Northeast 

Energy Efficiency Partnerships (NEEP), and Northwest Power and Conservation Council 

(NPCC). Collectively, these organizations are referred to as “Joint Stakeholders,” when 

referencing this comment. The Joint Stakeholders stated that rules for furnaces and air 

conditioners can be completed much earlier than a final rule for furnace fans, especially if 

the furnace and air conditioner rules are based on the consensus agreement. (FUR: Joint 

Stakeholders, No.1.3.012 at p. 3) Similarly, AHRI supported a separate rulemaking for 

furnace fans, but it stated that it would agree to a combined central air conditioners and 

heat pumps and furnaces rulemaking, if the consensus agreement is adopted by DOE in a 

direct final rule or through an expedited normal rulemaking. In the event that DOE 

decides not to adopt the consensus agreement, AHRI recommended separate rulemakings 

for all three products, and explicitly stated that the furnace fan rulemaking should not be 

combined with either of the other two products under any circumstances because AHRI 

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believes that shortening the furnace fan rulemaking is unreasonable given that DOE has 

no prior experience with furnace fans. AHRI stated that more time is needed to fully 

analyze the electrical energy consumed by furnace fans in order to establish appropriate 

energy conservation standards for those products. (FUR: AHRI, No.1.3.008 at p. 3) 

(CAC: AHRI, No. 67 at p. 3) Rheem recommended that DOE should conduct a separate 

rulemaking for furnace fans and should only combine the rulemakings for furnaces and 

central air conditioners and heat pumps if DOE adopts the consensus agreement. Rheem 

stated that much study and analysis is needed to determine the appropriate energy 

conservation standards for furnace fans, and that shortening the timeframe is 

unreasonable and not imperative. (FUR: Rheem, No.1.3.022 at pp. 2-3) The American 

Public Power Association (APPA) commented that it supports an "across the board" 

rulemaking that creates an "even playing field" for residential space heating technologies 

(e.g., heat pumps and furnaces) so as to avoid a less competitive market that would cause 

market distortions and non-rational purchasing behavior. (FUR: APPA, No.1.3.011 at p. 

4) 

The Air Conditioning Contractors of America (ACCA) stated there is no added 

benefit in combining the rulemakings for furnaces, residential central air conditioners and 

heat pumps, and furnaces fans. (FUR: ACCA, No.1.3.007 at p. 3) The American Public 

Gas Association (APGA) commented that it does not support combining the furnace, 

central air conditioner, and furnace fan rulemakings. (FUR: APGA, No.1.3.004 at p. 2) 

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DOE agrees with the comments supporting a combined rulemaking for central air 

conditioners, heat pumps, and furnaces because these products are linked as part of the 

complete heating, ventilation, and air-conditioning (HVAC) system for a home. A 

residential HVAC system often includes a central air conditioner, a furnace, and a 

furnace fan, or in some instances a heat pump, a furnace, and a furnace fan. Further, all of 

the major manufacturers of these products produce central air conditioners, heat pumps, 

and furnaces and use the same distribution network for these products. Combining the 

analyses for these products simplified the analyses and allowed for the analyses to 

accurately account for the relations between the different systems. 

However, DOE also believes there are merits to the comments suggesting that 

DOE should not attempt to combine furnace fans with the furnace and central air 

conditioner and heat pump rulemaking. While previous rulemakings have been conducted 

to regulate central air conditioners and heat pumps and furnaces, furnace fans are not 

currently regulated. DOE recognizes that the analyses required to develop a test 

procedure and to determine appropriate energy conservation standards for furnaces fans 

are complex and will be extensive. Therefore, DOE has determined that the furnace fan 

analysis cannot be accelerated such that it could be completed in the shortened timeframe 

that would be necessary for a combined rule that would also include furnace fans, while 

still generating valid and reliable results. Additionally, DOE believes that the furnace fan 

rulemaking would benefit from insights gained during the combined rulemaking of 

central air conditioners and heat pumps and furnaces. Therefore, DOE has decided to 

combine only the central air conditioner and heat pump and furnace rulemakings into a 

54 
 

 

 

 

 

 

 

 

 

single combined rulemaking. The furnace fan rulemaking will continue as a separate 

rulemaking, and DOE will publish a final rule to establish energy conservation standards 

for furnace fans by December 31, 2013, as required by 42 U.S.C. 6295(f)(4)(D). 

B. Consensus Agreement 

1. Background 

On January 15, 2010, AHRI, ACEEE, ASE, ASAP, NRDC, and NEEP submitted 

a joint comment to DOE’s residential furnaces and central air conditioners and heat 

pumps rulemakings recommending adoption of a package of minimum energy 

conservation standards for residential central air conditioners, heat pumps, and furnaces, 

as well as associated compliance dates for such standards, which represents a negotiated 

agreement among a variety of interested stakeholders including manufacturers and 

environmental and efficiency advocates. (FUR: Joint Comment, No. 1.3.001; CAC: Joint 

Comment, No. 47) More specifically, the original agreement was completed on October 

13, 2009, and had 15 signatories, including AHRI, ACEEE, ASE, NRDC, ASAP, NEEP, 

NPCC, CEC, Bard Manufacturing Company Inc., Carrier Residential and Light 

Commercial Systems, Goodman Global Inc., Lennox Residential, Mitsubishi Electric & 

Electronics USA, National Comfort Products, and Trane Residential. Numerous 

interested parties, including signatories of the consensus agreement as well as other 

parties, expressed support for DOE adoption of the consensus agreement in both oral and 

written comments on the furnaces and central air conditioners rulemakings, which are 

described in further detail in section III.B.3. In both the furnace RAP and the central air 

conditioner and heat pump preliminary analysis, DOE requested comment on all aspects 

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of the consensus agreement, including the regional divisions, recommended standard 

levels, and the suggested compliance dates. 

After careful consideration of the joint comment containing a consensus 

recommendation for amended energy conservation standards for residential central air 

conditioners, heat pumps, and furnaces, the Secretary has determined that this 

“Consensus Agreement” has been submitted by interested persons who are fairly 

representative of relevant points of view on this matter. Congress provided some 

guidance within the statute itself by specifying that representatives of manufacturers of 

covered products, States, and efficiency advocates are relevant parties to any consensus 

recommendation. (42 U.S.C. 6295(p)(4)(A)) As delineated above, the Consensus 

Agreement was signed and submitted by a broad cross-section of the manufacturers who 

produce the subject products, their trade associations, and environmental and energyefficiency advocacy organizations. Although States were not signatories to the 

Consensus Agreement, they did not express any opposition to it. Moreover, DOE does 

not read the statute as requiring absolute agreement among all interested parties before 

the Department may proceed with issuance of a direct final rule. By explicit language of 

the statute, the Secretary has discretion to determine when a joint recommendation for an 

energy or water conservation standard has met the requirement for representativeness 

(i.e., “as determined by the Secretary”). Accordingly, DOE will consider each consensus 

recommendation on a case-by-case basis to determine whether the submission has been 

made by interested persons fairly representative of relevant points of view. 

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Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine whether a 

jointly-submitted recommendation for an energy or water conservation standard is in 

accordance with 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. This 

determination is exactly the type of analysis which DOE conducts whenever it considers 

potential energy conservation standards pursuant to EPCA. DOE applies the same 

principles to any consensus recommendations it may receive to satisfy its statutory 

obligation to ensure that any energy conservation standard that it adopts achieves the 

maximum improvement in energy efficiency that is technologically feasible and 

economically justified and will result in significant conservation of energy, Upon review, 

the Secretary determined that the Consensus Agreement submitted in the instant 

rulemaking comports with the standard-setting criteria set forth under 42 U.S.C. 6295(o). 

Accordingly, the consensus agreement levels were included as TSL 4 in today’s rule, the 

details of which are discussed at relevant places throughout this document. 

In sum, as the relevant criteria under 42 U.S.C. 6295(p)(4) have been satisfied, the 

Secretary has determined that it is appropriate to adopt amended energy conservation 

standards for residential central air conditioners, heat pumps, and furnaces through this 

direct final rule 

As required by the same statutory provision, DOE is also simultaneously 

publishing a NOPR which proposes the identical standard levels contained in this direct 

final rule with a 110-day public comment period. (While DOE typically provides a 

comment period of 60 days on proposed standards, in this case DOE provides a comment 

period of the same length as the comment period on the direct final rule.) DOE will 

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consider whether any comment received during this comment period is sufficiently 

“adverse” as to provide a reasonable basis for withdrawal of the direct final rule and 

continuation of this rulemaking under the NOPR.. Typical of other rulemakings, it is the 

substance, rather than the quantity, of comments that will ultimately determine whether a 

direct final rule will be withdrawn. To this end, the substance of any adverse comment(s) 

received will be weighed against the anticipated benefits of the Consensus Agreement 

and the likelihood that further consideration of the comment(s) would change the results 

of the rulemaking. DOE notes that to the extent an adverse comment had been previously 

raised and addressed in the rulemaking proceeding, such a submission will not typically 

provide a basis for withdrawal of a direct final rule. 

2. Recommendations 

a. Regions 

The consensus agreement divides the nation into three regions for residential 

central air conditioners and heat pumps, and two regions for residential furnaces based on 

the population-weighted number of heating degree days (HDD) of each State and 

recommends a different minimum standard level for products installed in each region. 

For these products generally, States with 5,000 HDD or more are considered as part of 

the northern region, while States with less than 5,000 HDD are considered part of the 

southern region, and these regions (and the States that compose them) are discussed 

further in section III.D. For residential central air conditioners and heat pumps, the 

consensus agreement establishes a third region – the “southwest” region – comprised of 

California, Arizona, New Mexico, and Nevada. For furnaces, the southwest region States 

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are included in the southern region. For residential central air conditioners and heat 

pumps, the States in the northern region would be subject to the “National standard” 

under 42 U.S.C. 6295(o)(6)(B)(i), while regional standards would apply for States in the 

two southern regions (i.e., the hot-dry region and hot-humid region). For furnaces, the 

States in the southern region would be subject to the “National standard” under 42 U.S.C. 

6295(o)(6)(B)(i), while the States in the northern region would be required to meet a 

more-stringent regional standard. DOE received numerous comments from interested 

parties regarding the regional definitions for the analysis, some of which were related to 

the regions recommended in the consensus agreement. These comments are discussed in 

detail in section III.D, “Regional Standards.” 

b. Standard Levels 

The minimum energy conservation standards for furnaces and central air 

conditioners and heat pumps recommended by the consensus agreement are contained in 

Table III.1 and Table III.2. (CAC: Joint Comment, No. 47 at p. 2) The consensus 

agreement recommends amended AFUE standards for all furnace product classes that are 

being considered in this rulemaking for amended minimum AFUE energy conservation 

standards. However, the agreement does not contain recommendations for amended 

SEER and HSPF standards for the space-constrained or small-duct, high-velocity 

(SDHV) product classes of central air conditioners and heat pumps, which are also 

included in this rulemaking. Additionally, the consensus agreement does not contain 

recommendations for energy conservation standards for standby mode and off mode 

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energy consumption, which DOE is required to consider in this rulemaking pursuant to 

42 U.S.C. 6295(gg)(3). 

For central air conditioners, the consensus agreement recommends that DOE 

adopt dual metrics (i.e., SEER and EER) for the hot-dry region. Generally, DOE notes 

that EPCA’s definition of “efficiency descriptor” at 42 U.S.C 6291(22) specifies that the 

efficiency descriptor for both central air conditioners and heat pumps shall be SEER. 

Accordingly, DOE used SEER as the sole metric for analyzing most of the TSLs 

considered for today’s direct final rule. However, DOE believes that the language at 42 

U.S.C 6295(p)(4) provides DOE some measure of discretion when considering 

recommended standards in a consensus agreement, if the Secretary determines that the 

recommended standards are in accordance with 42 U.S.C. 6295(o). 

Table III.1 Consensus Agreement Recommended Minimum Energy Conservation 

Standards for Residential Furnaces 

System Type 

Recommended AFUE 

Requirement for States 

with ≥ 5,000 HDD* 

% 

Recommended AFUE 

Requirement for States 

with < 5,000 HDD** 

% 

Non-weatherized Gas Furnaces† 90 80 

Non-weatherized Oil Furnaces 83 83 

Gas-Packs (weatherized furnace) 81 81 

* These States include: Alaska, Colorado, Connecticut, Idaho, Illinois, Indiana, Iowa, Kansas, Maine,
 

Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New
 

York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, 

Washington, West Virginia, Wisconsin, and Wyoming.
 

** These States include: Alabama, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, 

Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, New Mexico, Nevada, North Carolina,
 

Oklahoma, South Carolina, Tennessee, Texas, and Virginia.
 † Non-weatherized gas furnaces also include mobile home furnaces. 

Table III.2 Consensus Agreement Recommended Minimum Energy Conservation 

Standards for Residential Central Air Conditioners and Heat Pumps 

System Recommended Recommended Recommended 

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Type SEER/HSPF 

Requirements for 

Northern “Rest of 

Country” Region* 

SEER/HSPF 

Requirements for 

Southeast “HotHumid” Region** 

SEER/HSPF 

Requirements for 

Southwest “Hot-Dry” 

Region† 

Split AC 13 SEER 14 SEER 

14 SEER/12.2 EER 

<45,000 Btu/h 

14 SEER/11.7EER 

>45,000 Btu/h 

Split HP 14 SEER/8.2HSPF 14 SEER/8.2 HSPF 14 SEER/8.2 HSPF 

Packaged 

AC 14 SEER 14 SEER 14 SEER/11.0 EER 

Packaged 

HP 14 SEER/8.0 HSPF 14 SEER/8.0 HSPF 14 SEER/8.0 HSPF 

Space 

Constrained 

AC and HP 

and SDHV 

No standard 

recommended 

No standard 

recommended 

No standard 

recommended 

* These States include: Alaska, Colorado, Connecticut, Idaho, Illinois, Indiana, Iowa, Kansas, Maine,
 

Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New
 

York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, 

Washington, West Virginia, Wisconsin, and Wyoming.
 

** These States include: Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Hawaii, 

Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, 

Texas, and Virginia.
 † These States include: Arizona, California, New Mexico, and Nevada. 

c. Compliance Dates 

The compliance dates specified in the consensus agreement are May 1, 2013, for 

non-weatherized furnaces and January 1, 2015, for weatherized furnaces (i.e., “gaspacks”) and central air conditioners and heat pumps. These dates are at least eighteen 

months earlier than the compliance dates for these products as determined under 42 

U.S.C. 6295(d)(3)(B) and (f)(4)(C). DOE received several comments from interested 

parties regarding its consideration of the compliance dates specified by the consensus 

agreement, as well as comments about the compliance dates under EPCA. A full 

discussion of comments related to the compliance dates for energy conservation 

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standards for furnaces and central air conditioners and heat pumps is contained in section 

III.C. 

3. Comments on Consensus Agreement 

In its RAP for residential furnaces and the preliminary analysis for residential 

central air conditioners and heat pumps, DOE specifically invited comment from 

interested parties on the consensus agreement. In particular, DOE was interested in 

comments relating to the recommended AFUE, SEER, and HSPF requirements, the 

recommended regional divisions, and the recommended compliance dates for amended 

standards. As noted above, comments on the regional divisions are discussed in section 

III.D. Additionally, DOE discusses compliance dates and the related comments in section 

III.C. DOE received numerous other comments regarding whether interested parties 

support or do not support the consensus agreement, whether DOE should adopt the 

consensus agreement as a direct final rule, and additional concerns interested parties have 

about the agreement. These comments are discussed in the paragraphs below. 

Many commenters expressed support for the adoption of the consensus 

agreement. ACEEE stated it is the best available route to the maximum savings that are 

technologically feasible and economically justified. (FUR: ACEEE, No.1.3.009 at p. 1) 

(CAC: ACEEE, No. 72 at p. 1) NRDC requested that DOE move expeditiously to adopt 

the levels and dates presented by the agreement. (FUR: NRDC, No.1.3.020 at pp. 1-2) 

NEEP expressed support for the standard levels and procedural improvements in the 

consensus agreement and urged DOE to implement the recommendations through a direct 

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final rule. (FUR: NEEP, No.1.3.021 at p. 1) ASAP stated its strong support for adoption 

of the consensus agreement, and encouraged DOE to adopt the consensus agreement as a 

direct final rule. (FUR: ASAP, Public Meeting Transcript, No. 1.2.006 at pp. 38-39) 

AHRI stated that the agreement has several benefits including: (1) an accelerated 

compliance date of May 2013; (2) acceleration of the next rulemaking iteration; (3) a 

significant amount of energy savings; (4) economic savings to consumers; and (5) the 

fact that it would allow DOE to focus its resources on completing other rulemakings 

involving new or amended energy conservation standards. In the event that DOE cannot 

promulgate a direct final rule, AHRI recommended that DOE adopt the agreement in an 

expedited rulemaking process. (FUR: AHRI, No.1.3.008 at pp. 1-3) (CAC: AHRI, No. 67 

at pp. 1-2) Carrier stated that DOE should adopt the consensus agreement, because it 

includes a comprehensive, harmonized approach for new regional efficiency standards 

that could be implemented in an accelerated fashion. (FUR: Carrier, No.1.3.013 at p. 2) 

(CAC: Carrier, No. 60 at p. 1) Ingersoll Rand and EEI echoed these comments. (FUR: 

Ingersoll Rand, No.1.3.006 at p. 1) (CAC: Ingersoll Rand, No. 66 at p. 1; EEI, No. 75 at 

p. 2) Southern initially stated at the furnaces public meeting that DOE should issue a 

NOPR and have a comment period rather than go directly to a final rule because many 

stakeholder groups were left out of the consensus agreement process. (FUR: Southern, 

Public Meeting Transcript, No. 1.2.006 at pp. 258-59) However, in its later comments on 

the central air conditioners and heat pumps rulemaking, Southern clarified its position, 

recommending that DOE accept the consensus agreement and, proceed with a direct final 

rule on central air conditioners, heat pumps, and furnace standards, if the necessary minor 

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statutory revisions (e.g., changes to building codes) are approved by Congress. (CAC: 

Southern, No. 73 at p. 1) 

Lennox and NPCC supported the adoption of the consensus agreement in full, 

including the AFUE standards, recommended regional divisions, and recommended 

compliance dates. Lennox supported DOE’s use of a direct final rule to adopt the 

agreement or, as an alternative, use of the standard rulemaking process in an expedited 

fashion. (FUR: Lennox, No.1.3.018 at p. 1) (CAC: Lennox, No. 65 at pp.1-2) (CAC: 

NPCC, No. 74 at p.1) Ingersoll Rand commented that DOE should adopt the consensus 

agreement because it would allow DOE to focus its resources on the furnace fan rule and 

on development of regional standards. (CAC: Ingersoll Rand, No. 66 at p. 1) Rheem 

asserted that Congress authorized DOE to issue direct final rules upon receipt of joint 

stakeholder proposals and that the agreement satisfies the criteria of the law and the 

Process Improvement Rule.18 However, Rheem stated that if DOE cannot issue a direct 

final rule, Rheem would recommend that DOE adopt the agreement in an expedited 

rulemaking process. (FUR: Rheem, No.1.3.022 at pp. 1-2) (CAC: Rheem, No. 71 at p.2) 

Daikin expressed support for the consensus agreement, provided that the SEER level for 

new construction is raised to 15 SEER on January 1, 2013 and to 18 SEER on January 1, 

2016. (CAC: Daikin, No. 63 at p.2) 

18 The Process Improvement Rule was published in the Federal Register by DOE on July 15, 1996, and 

codified in Appendix A to 10 CFR part 430, subpart C. 61 FR 36974. The Process Improvement Rule 

elaborated on the procedures, interpretations, and policies that guide DOE in establishing new or amended 

energy conservation standards for consumer products. 

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The Joint Stakeholders expressed support for the agreement and encouraged DOE 

to expedite the adoption of the agreement through either a direct final rule or through the 

standard rulemaking process. The Joint Stakeholders cited many of the previously 

mentioned benefits and added that the consensus agreement would enable States to 

incorporate more-stringent appliance efficiency standards into their building codes, which 

are limited by Federal appliance efficiency standards. The Joint Stakeholders stated that 

DOE should address the issues of standby mode and off mode energy consumption for 

residential furnaces and standards for furnace fans in separate rulemakings without 

impeding the adoption of the consensus agreement in a final rule in the current 

rulemaking. (FUR: Joint Stakeholders, No.1.3.012 at pp. 1-4) 

APPA stated that it is in favor of the consensus agreement because it provides a 

high degree of regulatory certainty for manufacturers and utilities, and increases the 

minimum efficiency of gas and oil furnaces, products for which energy conservation 

standards have not been updated since 1992. APPA argued that DOE has the authority to 

adopt the consensus agreement in a direct final rule. (FUR: APPA, No.1.3.011 at pp. 2-3) 

EEI expressed support for the consensus agreement for many of the reasons outlined 

above, adding that the consensus agreement would have the added benefit of increasing 

standards for furnaces at nearly the same time as the efficiency standards for residential 

boilers are increasing. (FUR: EEI, No.1.3.015 at p. 2) CA IOUs supported the consensus 

agreement as a balanced package that would achieve significant energy, economic, and 

environmental benefits, while providing regulatory certainty. They urged DOE to adopt 

as efficiently as possible the regulatory aspects of the agreement, either through a direct 

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final rule or the normal rulemaking process. However, the CA IOUs recognized that not 

all stakeholders supported the consensus agreement, and encouraged DOE to choose a 

rulemaking path that will produce a robust, defensible, and enforceable final standard. 

(FUR: CA IOUs, No.1.3.017 at p. 1) 

On behalf of Texas Client Services Center, Massachusetts Union of Public 

Housing Tenants, Texas Ratepayers Organization to Save Energy (collectively referred to 

hereafter as Low Income Groups), the National Consumer Law Center encouraged DOE 

to accept and implement the recommendations contained in the Joint Comment as soon as 

possible. The Low Income Groups are particularly interested in having DOE adopt the 

standards for furnaces, heat pumps, and central air conditioners included in the consensus 

agreement, along with the associated effective dates and regional boundaries. (FUR: Low 

Income Groups, No.1.3.019 at pp. 5-6) 

In contrast to the above viewpoints, some commenters expressed opposition to, or 

reservations about, adoption of the consensus agreement. The American Gas Association 

(AGA) stated that DOE should not adopt the consensus agreement and should continue 

refining the November 2007 Rule. AGA strongly recommended that DOE should not 

issue a direct final rule requiring a 90-percent AFUE minimum efficiency for furnaces in 

the northern States and should, instead, proceed with an analysis of the technological 

feasibility and economic justification of the proposal, consistent with governing statutory 

requirements. It added that the signatories of the agreement do not represent consumer 

interests in the affected States, and that DOE needs to more fully account for potential 

66 
 

 

 

 

 

 

 

 

 

 

consumer impacts. (FUR: AGA, No.1.3.010 at p. 2) In the public meeting, AGA 

expressed concerns about replacing a non-condensing furnace with a condensing furnace 

due to potential problems with venting systems. (FUR: AGA, Public Meeting Transcript, 

No. 1.2.006 at pp. 40-41) APGA expressed similar comments, further stating that DOE 

should consider non-regulatory mechanisms to encourage market transformation to 

condensing non-weatherized furnaces, including through building codes. (FUR: APGA, 

No.1.3.004 at pp. 3-4) The National Propane Gas Association (NPGA) also opposed 

requiring 90-percent AFUE furnaces in northern States, because of concerns related to 

venting issues in replacement installations (particularly when a furnace that has a 

common vent with a water heater is being replaced). (FUR: NPGA, No.1.3.005 at p. 4) 

HARDI stated that it supports the consensus agreement only to the extent that 

DOE is confident it can justify increases to residential HVAC minimum efficiency 

standards and regionalization of standards. HARDI is not convinced such justification is 

possible given its experiences since the last amendments to the central air conditioners 

and heat pumps standards in 2006. (FUR: HARDI, No.1.3.016 at p. 4) (CAC: HARDI, 

No. 56 at p. 4) HARDI believes DOE will have difficulty justifying a higher heating 

standard in a northern region that includes both North Dakota and Kentucky, which have 

vastly different heating demands. HARDI also stated that a southeastern regional 

standard that applies to both Florida and Maryland, or a southwestern regional standard 

that includes cities with significantly different climates appears to significantly threaten 

consumer choice and product availability. (FUR: HARDI, No.1.3.016 at p. 5) HARDI is 

also concerned that: (1) the standards in the consensus agreement will encourage utilities 

67 
 

 

 

 

 

 

 

to exit the energy-efficiency business as it pertains to HVAC systems, because they might 

no longer see value in providing an incentive for 95-percent AFUE premium furnaces if a 

standard is set at 90-percent AFUE; and (2) the loss of such incentives would make 

purchases of higher-than-minimum-efficiency furnaces highly unlikely. (FUR: HARDI, 

No.1.3.016 at p. 8) 

ACCA expressed concern over the requirement for condensing furnaces in the 

northern region, noting that the cost of replacing a non-condensing furnace with a 

condensing furnace (which might require venting retrofit measures) could be prohibitive 

in some cases. (FUR: ACCA, No.1.3.007 at pp. 2-3) 

DOE also received comments that, while not specifically addressing the 

consensus agreement, concern the standard-level recommendations for central air 

conditioners and heat pumps. Specifically, Southern remarked that standards should have 

equal cooling efficiency requirements for central air conditioners and heat pumps, and 

Ingersoll Rand, Rheem, and EEI provided similar statements. (CAC: Southern, No. 73 at 

p. 3) (CAC: Ingersoll Rand, No. 66 at p. 1) (CAC: EEI, No. 75 at p. 5) (CAC: Rheem, 

No. 76 at p. 2) 

In considering the proposed standard levels in the consensus agreement, DOE 

reviewed 42 U.S.C. 6295(p)(4)(C), which states that if DOE issues a direct final rule (as 

suggested by the signatories to the consensus agreement) and receives any adverse public 

comments within 120 days of publication of the rule, then DOE would be forced to 

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withdraw the final rule. Interested parties have already submitted comments expressing 

opposition to the consensus agreement, which indicates there is a possibility that DOE 

may receive adverse comments to the adoption of the consensus agreement as part of this 

direct final rule. 

DOE recognizes the substantial effort and analysis that resulted in the consensus 

agreement and analyzed it as a separate TSL, in conjunction with other TSLs for this 

direct final rule. As described above, the interested parties opposing the consensus 

agreement were primarily concerned with the requirement that non-weatherized gas 

furnaces and mobile home furnaces in the northern region achieve a minimum of 90­

percent AFUE. In its analysis for today’s direct final rule, DOE addressed the issues 

raised by the parties with respect to replacement installations of 90-percent AFUE nonweatherized gas furnaces or mobile home furnaces. DOE believes that, although in some 

instances it may be costly, consumers can replace non-condensing furnace with 

condensing furnaces in virtually all installations. 

As suggested by AGA, DOE performed an analysis of the technological 

feasibility and economic justification of the consensus agreement recommendations, 

consistent with statutory requirements in EPCA. DOE fully considered all costs of 

replacing non-condensing furnaces with condensing furnaces in the northern region. 

DOE’s results indicate that some consumers would be negatively impacted by a northern 

region standard at 90-percent AFUE for non-weatherized gas furnaces or mobile home 

furnaces, but that on balance, the benefits of such a standard would outweigh the costs. 

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Section V.C of this notice discusses the results of DOE’s analyses and the weighting of 

benefits and burdens when considering the consensus agreement standard levels and 

compliance dates (i.e., TSL 4). 

C. Compliance Dates 

EPCA establishes a lead time between the publication of amended energy 

conservation standards and the date by which manufacturers must comply with the 

amended standards for both furnaces and central air conditioners and heat pumps. For 

furnaces, EPCA dictates an eight-year period between the rulemaking publication date 

and compliance date for the first round of amended residential furnace standards, and a 

five-year period for the second round of amended residential furnace standards. (42 

U.S.C. 6295(f)(4)(B)-(C)) DOE has concluded that the remand agreement for furnaces 

does not vacate the November 2007 Rule for furnaces and boilers. Therefore, the 

November 2007 Rule completed the first round of rulemaking for amended energy 

conservation standards for furnaces, thereby satisfying the requirements of 42 U.S.C. 

6295(f)(4)(B). As a result, the current rulemaking constitutes the second round of 

rulemaking for amended energy conservation standards for furnaces, as required under 42 

U.S.C. 6295(f)(4)(C), a provision which prescribes a five-year period between the 

standard’s publication date and compliance date. For central air conditioners and heat 

pumps, the statutory provision at 42 U.S.C. 6295(d)(3)(B) establishes a similar five-year 

time period between the standard’s publication date and compliance date. 

Therefore, in its analysis of amended energy conservation standards for furnaces 

and central air conditioners and heat pumps, DOE used a five-year lead time between the 

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publication of the standard and the compliance date for all TSLs, except for the TSL 

which analyzed the consensus agreement. Because the accelerated compliance dates were 

a negotiated aspect of the consensus agreement which amounts to an important benefit, 

DOE used the accelerated compliance dates when analyzing the consensus agreement 

TSL. (See section V.A for a description of the TSLs considered for this direct final rule.) 

In response to the RAP for furnaces and the preliminary analysis for central air 

conditioners and heat pumps, DOE received comments from interested parties regarding 

the required lead time between the publication of amended energy conservation standards 

and the date by which manufacturers must comply with the amended standards. These 

comments are discussed in the section immediately below. 

a. Consensus Agreement Compliance Dates 

Several interested parties commented on the issue of the compliance dates for 

amended energy conservation standards for furnaces and central air conditioners and heat 

pumps in the context of the dates specified in the consensus agreement. AHRI argued that 

DOE has the authority to adopt the accelerated standards compliance dates in the 

consensus agreement whether DOE proceeds via a conventional rulemaking process or 

via direct final rule. AHRI asserted that 42 U.S.C. 6295(p)(4), “Direct final rules,” which 

delineates procedures for when DOE receives a joint recommendation for amended 

standards by interested parties that are fairly representative of relevant points of view 

(including manufacturers, States, and efficiency advocates), trumps 42 U.S.C. 6295(m), 

“Amendment of standards,” which contains specific provisions pertaining to compliance 

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dates and lead time. Further, AHRI commented that DOE has itself previously 

recognized that in circumstances where the manufacturers who must comply with a 

standard support acceleration of the compliance date of the standard, DOE has the 

flexibility to adopt the earlier compliance date (see 67 FR 36368, 36394 (May 23, 2002) 

and 69 FR 50997, 50998(August 17, 2004)). (FUR: AHRI, No.1.3.008 at pp. 3-4) (CAC: 

AHRI, No. 67 at pp. 3-4) NRDC and Rheem expressed similar views. (FUR: NRDC, 

No.1.3.020 at p. 2; Rheem, No.1.3.022 at p. 3) (CAC: Rheem, No. 71 at p. 3) However, 

AHRI further clarified its position that if DOE decides in a final rule to adopt levels that 

are different from those in the consensus agreement, then AHRI would maintain that the 

compliance date (for furnaces) specified by the law would be eight years after publication 

of the final rule. (FUR: AHRI, Public Meeting Transcript, No. 1.2.006 at p. 126) 

EarthJustice asserted that DOE must either adopt the compliance dates specified 

in the consensus agreement, or adopt an expedited compliance deadline of its own design. 

EarthJustice asserted that the provisions of EPCA relevant here do not require an eightyear lead time for furnaces, but instead require a hard-date deadline, which has passed. 

Therefore, EarthJustice believes DOE has discretion in setting a compliance date. 

EarthJustice added that there is no basis to the argument that maintaining an eight-year 

lead time is necessary to ease manufacturers' compliance burdens since manufacturers 

have indicated via the consensus agreement that they can meet the levels in the consensus 

agreement in a much shorter timeframe than eight years. (FUR: EarthJustice, No.1.3.014 

at pp. 2-4) 

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Similarly, ACEEE stated that DOE should seriously consider adopting the 

compliance dates in the consensus agreement because the compliance dates in the statute 

are intended to provide manufacturers time to reengineer their products and production 

facilities, but in this case, manufacturers have agreed to the compliance dates specified in 

the consensus agreement. (FUR: ACEEE, Public Meeting Transcript, No. 1.2.006 at pp. 

112-113) ACEEE acknowledged that while having the same compliance dates for all 

products is desirable for implementation and enforcement purposes, limited engineering 

resources led to different compliance dates for non-weatherized gas and weatherized gas 

furnaces in the consensus agreement (of 2013 and 2015, respectively). (FUR: ACEEE, 

Public Meeting Transcript, No. 1.2.006 at pp. 109-110) 

EEI suggested that if DOE rejects the consensus agreement, DOE should establish 

a compliance date for all covered furnaces that is no later than November 19, 2015 (i.e., 

the compliance date for the standards promulgated in the November 2007 Rule). This 

date is shortly before the compliance date for the new efficiency standards for heat pumps 

in June 2016, and according to EEI, it would avoid potential market distortions for space 

heating equipment that might result from increasing efficiency standards for one product 

type but not for a competing product. (FUR: EEI, No.1.3.015 at p. 4) (CAC: EEI, No. 75 

at p. 4) APPA reiterated EEI’s comments on these points. (FUR: APPA, No.1.3.011 at 

pp. 3-4) 

After careful consideration of these comments, DOE has concluded that it is 

bound by EPCA in terms of setting the lead time between the publication of amended 

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energy conservation standards and the date by which manufacturers must comply with 

those amended standards. DOE has consistently interpreted the statutory time period 

between publication of a final rule and the compliance date for amended standards to 

reflect Congress’s determination as to adequate lead time for manufacturers to retool their 

operations to ensure that the product in question meets the new or amended standards, 

even in those instances where the statutory deadline has passed. However, DOE agrees 

with AHRI, Rheem, and NRDC that in circumstances where the manufacturers who must 

comply with the standard support acceleration of the compliance date of the standard 

(such as in the case of the consensus agreement where compliance dates were an integral 

part of the agreement), DOE has some flexibility in establishing the compliance dates for 

amended energy conservation standards. For the other levels, DOE believes the statutory 

provisions pertaining to lead time should continue to govern, particularly for levels more 

stringent than the consensus agreement (i.e., levels to which manufacturers never agreed, 

particularly on an accelerated basis). Therefore, as noted in the preceding section, DOE 

has determined that for all TSLs analyzed – except for the consensus agreement TSL – 

DOE is bound by the lead time requirements in EPCA when determining compliance 

dates. For those other TSLs, the analysis accounts for a five-year lead time between the 

publication of the final rule for furnaces and central air conditioners and heat pumps and 

the date by which manufacturers would have to comply with the amended standard. 

However, for the consensus agreement TSL, DOE’s analyses utilized the compliance 

dates specified in the consensus agreement. 

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b. Shift from Peak Season 

Several interested parties noted that if DOE follows a typical rulemaking schedule 

and publishes a final rule on June 30, 2011, then the compliance date (June 2016) would 

fall during the peak of the air conditioner shipment season in 2016. Interested parties 

expressed concern that a compliance date during peak season could potentially lead to 

costly disruptions in the distribution chain, as well as consumer confusion. HARDI, 

Southern, ACEEE, and Ingersoll Rand stated that the compliance date should not be set 

during the peak cooling season. (CAC: HARDI, No. 70 at p.2; ACEEE, No. 72 at p. 3; 

SCS, No. 73 at p. 2; Ingersoll Rand, No. 66 at p. 3). HARDI, ACEEE, and Southern went 

further and recommended that January 1 be used as the compliance date instead for 

central air conditioners and heat pumps. (CAC: HARDI, No. 70 at p.2; ACEEE, No. 72 

at p. 3; SCS, No. 73 at p. 2) EEI also noted that if compliance dates are moved for central 

air conditioners and heat pumps, then the compliance dates for furnaces should be moved 

as well to avoid the same issue for the heating season. (CAC: EEI, No. 75 at p.3) 

As discussed above in this section, DOE believes that the applicable statutory 

provisions (i.e., 42 U.S.C. 6295(f)(4)(C) for furnaces and 42 U.S.C. 6295(d)(3)(B) for 

central air conditioners and heat pumps) necessitate a five-year time period between the 

final rule publication date and the compliance date. The only exception would be in the 

case of the adoption of the consensus agreement, because of the importance of 

accelerated compliance dates to the energy savings provided by this agreement. If DOE 

adopts any standards besides those in the consensus agreement, DOE believes that it is 

constrained by EPCA and does not have the authority to shift the compliance dates away 

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from the peak cooling season (either earlier or later). However, this constraint does not 

prevent manufacturers from voluntarily complying at an earlier non-peak season date to 

ease the transition to amended energy conservation standards. 

c. Standby Mode and Off Mode Compliance Dates 

EPCA, as amended, does direct DOE to incorporate standby mode and off mode 

energy consumption into a single amended or new standard, if feasible. (42 U.S.C. 

6295(gg)(3)(A)) Under such a circumstance where standby mode and off mode energy 

consumption is integrated into the existing regulatory metric, the standby mode and off 

mode standards would have the same compliance dates as the amended or new active 

mode standards. Therefore, DOE believes that, when feasible, the compliance dates for 

standby mode and off mode should be the same as the compliance dates for amended 

active mode energy conservation standards. Although DOE has determined that it is 

technically infeasible to integrate the standby mode and off mode energy consumption 

into a single standard for furnaces and central air conditioners/heat pumps, DOE believes 

it is still sensible to keep the timeline for compliance with standby mode and off mode 

standards the same so that manufacturers of furnaces, central air conditioners, and heat 

pumps can bring all of their compliance-related modifications forward at the same time. 

DOE further believes that this approach would provide adequate lead time for 

manufacturers to make the changes necessary to comply with the standby mode and off 

mode standards. As a result, DOE is adopting standby mode and off mode standards with 

compliance dates that match the compliance dates for amended AFUE, SEER, and HSPF 

minimum energy conservation standards. 

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D. Regional Standards 

As described in section II.A, EISA 2007 amended EPCA to allow for the 

establishment of a single more-restrictive regional standard in addition to the base 

national standard for furnaces, and up to two more-restrictive regional standards in 

addition to the base national standard for residential central air conditioners and heat 

pumps. (42 U.S.C. 6295(o)(6)(B)) The regions must include only contiguous States (with 

the exception of Alaska and Hawaii, which can be included in regions with which they 

are not contiguous), and each State may be placed in only one region (i.e., a State cannot 

be divided among or otherwise included in two regions). (42 U.S.C. 6295(o)(6)(C)) 

Further, EPCA mandates that a regional standard must produce significant energy 

savings in comparison to a single national standard, and provides that DOE must 

determine that the additional standards are economically justified and consider the impact 

of the additional regional standards on consumers, manufacturers, and other market 

participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 

6295(o)(6)(D)) For this rulemaking, DOE has considered the above-delineated impacts of 

regional standards in addition to national standards for both furnaces and central air 

conditioners and heat pumps. 

For single-package air conditioners and single-package heat pumps, DOE has 

Deleted: because the analyses indicate that 

regional standards will provide additional positive 

impacts. (See chapter 10 of the direct final rule 

TSD.) 

Deleted: Accordingly 

analyzed the standards on a national basis where the standard would be effectively the 

same in each region. For consistency with the consensus agreement and ease of 

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presentation, DOE specifies the requirements of the standard by region, but for all 

practical purposes the standard is a national one. DOE evaluated whether regional 

standards with different requirements in certain regions satisfied the statutory criteria for 

regional standards. Given the low level of shipments of these products, DOE determined 

that enforcement of regionally distinct standards would be difficult for these product 

categories. DOE believes that it is likely that given a less stringent requirement in some 

regions there would be leakage effects (i.e. installers purchasing product in less stringent 

regions and shipping them to regions with more stringent requirements). Such leakage 

effects would decrease the energy savings of regionally distinct standards requirements 

relative to a national standard with the same stringency in each region. DOE has 

therefore determined that regional standards would not produce significant energy 

savings in comparison to a single national standard for these products. DOE made a 

similar determination for oil-fired furnaces. 

Where appropriate, DOE has addressed the potential impacts from regional Comment [A7]: Change recommended by OIRA. 

standards in the relevant direct final rule analyses, including the mark-ups to determine 

product price, the LCC and payback period analysis, the national impact analysis (NIA), 

and the manufacturer impact analysis (MIA). DOE’s approach for addressing regional 

standards is included in the methodology section corresponding to each individual 

analysis, in section IV of this notice. For certain phases of the analysis, additional 

regional analysis is not required. For example, technologies for improving product 

efficiency generally do not vary by region, and thus, DOE did not perform any additional 

regional analysis for the technology assessment and screening analysis. Similarly, DOE 

did not examine the impacts of having two regions in the engineering analysis, since the 

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technologies and manufacturer processes are the same under both a national and regional 

standard. 

1. Furnace Regions for Analysis 

To evaluate regional standards for residential furnaces, in the RAP, DOE stated its 

intention to use the regions shown in Table III.3 and Figure III.1. The allocation of 

individual States to the regions is similar to the evaluation methodology DOE used in 

exploring regional standards in the November 2007 Rule, although DOE ultimately 

decided that it could not adopt such an approach because it lacked statutory authority, a 

situation which changed with enactment of EISA 2007. The allocation considered in the 

November 2007 Rule was largely based on whether a State’s annual heating HDD 

average is above or below 5,000. 72 FR 65136, 65146-47 (Nov. 19, 2007). This level 

offers a rough threshold point at which space heating demands are significant enough to 

require longer operation of heating systems, which provides a basis for utilization of 

higher-efficiency systems. In the RAP, DOE proposed two changes from the November 

2007 Rule methodology to establish regions for furnaces. The first was moving Nevada 

from the Northern region to the Southern region, and the second was moving West 

Virginia from the Southern region to the Northern region. These changes better reflect the 

climate characteristics of these two States – West Virginia has on average more than 

5,000 HDD, and Nevada’s major population areas have fewer than 5,000 HDD. DOE 

notes that the changes resulted in a regional allocation of States that is the same as the 

regions defined in the consensus agreement. 

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Table III.3 Regions for Analysis of Furnace Standards 

Northern Region States (Rest of Country) Southern Region States 

Alaska Pennsylvania Alabama 

Colorado Rhode Island Arizona 

Connecticut South Dakota Arkansas 

Idaho Utah California 

Illinois Vermont Delaware 

Indiana Washington District of Columbia 

Iowa West Virginia Florida 

Kansas Wisconsin Georgia 

Maine Wyoming Hawaii 

Massachusetts Kentucky 

Michigan Louisiana 

Minnesota Maryland 

Missouri Mississippi 

Montana Nevada 

Nebraska New Mexico 

New Hampshire North Carolina 

New Jersey Oklahoma 

New York South Carolina 

North Dakota Tennessee 

Ohio Texas 

Oregon Virginia 

Figure III.1 Map of the Regions for the Analysis of Furnace Standards 

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Commenting on the furnaces RAP, Ingersoll Rand stated that the regions 

proposed for the regional analysis are appropriate. (FUR: Ingersoll Rand, No.1.3.006 at p. 

1) Lennox expressed a similar view, noting that the regional definitions outlined in the 

furnaces RAP are consistent with the consensus agreement. (FUR: Lennox, No.1.3.018 at 

p. 2) NCLC commented that the Low Income Groups support the regions defined as 

north and south in the agreement. (FUR: NCLC, No.1.3.019 at p. 6) HARDI stated that 

the 5,000 HDD demarcation makes the most sense. (FUR: HARDI, No.1.3.016 at p. 5) 

ACEEE expressed a similar view, but added that if the consensus agreement is not 

adopted, DOE needs to examine the economics and other impacts of high-efficiency 

furnaces at other possible regional boundaries, such as 4,500 and 4,000 HDD. (FUR: 

ACEEE, No.1.3.009 at p. 4) ASAP expressed support for the regions proposed for the 

furnaces regional analysis and stated that having consistent regional borders for furnaces 

and central air conditioners is important to help reduce issues associated with 

implementing and enforcing regional standards. (FUR: ASAP, Public Meeting Transcript, 

No. 1.2.006 at pp. 64-65) APPA stated that if DOE rejects the climate zones specified in 

the consensus agreement, DOE should modify its definition of the northern region in such 

a way that, in effect, it would include “southwestern” States, such as Arizona, Nevada, 

and New Mexico, in the northern region, because the majority of these States have a 

climate that is similar to some other States that DOE has classified in the northern region. 

(FUR: APPA, No.1.3.011 at p. 3) EEI stated that DOE should consider establishing 

California, Nevada, Arizona, and New Mexico as northern States for purposes of regional 

standards, in order to be more consistent with DOE’s classification of northern States, 

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and to avoid leaving energy savings on the table when establishing new heating 

efficiency standards. (FUR: EEI, No.1.3.015 at pp. 3-4) 

After evaluating these comments, DOE has concluded that using a 5,000 HDD 

threshold as the basis for assigning States to northern or southern regions, as proposed in 

the furnaces RAP, is appropriate. DOE does not believe that the States mentioned by 

APPA and EEI should be classified as northern States for the analysis of furnaces. On 

average, these States have significantly lower heating loads than the other States that 

DOE has classified as northern States. Therefore, for the direct final rule analysis of 

furnaces, DOE used the regions as defined in Table III.3 and Figure III.1. Regarding 

ACEEE’s suggestion that DOE consider additional analysis using other possible regional 

boundaries if the consensus agreement is not adopted, because DOE is adopting standards 

consistent with the consensus agreement in today’s rule, DOE does not see a compelling 

reason to conduct such analyses. DOE notes that the 5,000 HDD threshold is supported 

by most of the interested parties, including ACEEE. DOE further notes that the 5,000 

HDD threshold would provide benefits in terms of minimizing the difference between the 

regional boundaries for central air conditioners/heat pumps and furnaces. Harmonizing 

boundaries, to the extent possible, may also facilitate subsequent compliance and 

enforcement efforts. 

2. Central Air Conditioner and Heat Pump Regions for Analysis 

To evaluate regional standards for residential central air conditioners and heat 

pumps in the preliminary analysis, DOE used the regions listed in Table III.4 and Figure 

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III.2. For cooling equipment performance, the annual number of operating hours and 

relative humidity during those operating hours are the most important regional variations. 

DOE established two regions (i.e., a “hot-dry” region and a “hot-humid” region) in the 

south based upon these factors, in addition to a “rest of country” region (i.e., northern 

region), composed of the remaining States. The southern limit of the northern region was 

approximately based on whether a State’s annual HDD average was above or below 

4,500 HDD, and the division between the hot-humid and hot-dry regions was determined 

from analysis of typical meteorological year (TMY3) weather data.19 TMY3 weather 

data are sets of typical hourly values of solar radiation and meteorological elements 

developed for a one-year span for selected locations based on long-term historical data. 

The selection of regions for the preliminary analysis was discussed in detail in Appendix 

7C of the preliminary TSD. 

Table III.4 Preliminary Analysis Proposed Regions for Central Air Conditioner and 

Heat Pump Standards 

Northern Region States 

(Rest of Country) 

Southern Region 

States 

(Hot-Humid) 

Southwestern 

Region States 

(Hot-Dry) 

Alaska Nebraska Alabama Arizona 

Colorado New Hampshire Arkansas California 

Connecticut New Jersey Florida Nevada 

Delaware New York Georgia New Mexico 

District of Columbia North Dakota Hawaii 

Idaho Ohio Louisiana 

Illinois Oregon Mississippi 

Indiana Pennsylvania North Carolina 

Iowa Rhode Island Oklahoma 

Kansas South Dakota South Carolina 

Kentucky Utah Tennessee 

Maine Vermont Texas 

Maryland Virginia 

19 S. Wilcox and W. Marion, Users Manual for TMY3 Data Sets, NREL/TP-581-43156 (May 2008). 

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Massachusetts Washington 

Michigan West Virginia 

Minnesota Wisconsin 

Missouri Wyoming 

Montana 

Figure III.2 Map of Preliminary Analysis Proposed Regions for Central Air 

Conditioner and Heat Pump Standards 

In response to DOE’s request for comment on the regions used in the preliminary 

analysis for central air conditioners and heat pumps, several stakeholders submitted 

comments. HARDI, Southern, and Ingersoll Rand stated that the regions defined in the 

consensus agreement should be used instead of those in Table III.4. This suggested 

change would necessitate moving Delaware, the District of Columbia, Maryland, 

Kentucky, and Virginia into the southern hot-humid region. (CAC: HARDI, No. 56 at p. 

4; Ingersoll Rand, No. 66 at p.4; Southern, Public Meeting Transcript at p. 33; HARDI, 

No. 56 at p. 4) Southern also remarked that the regional boundaries for central air 

84 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

conditioners and heat pumps and furnaces should be the same to avoid unnecessary 

complexity for manufacturers and public confusion. (CAC: Southern, No. 73 at p. 2) 

ACEEE expressed views similar to those of HARDI, Southern, and Ingersoll Rand and 

further warned that the confusion and complexity associated with differing regional 

boundaries could lead to inadvertent non-compliance. (CAC: ACEEE, No. 72 at p. 3) 

Conversely, EEI commented that Nevada should be moved to the “rest of country” region 

for heating efficiency requirements and the hot-dry region for cooling efficiency 

requirements because 90 percent of the State is located in climate zone 5, as specified in 

Figure 2 of 10 CFR 430, subpart B, appendix M . (CAC: EEI, No. 75 at p.3) 

In response to these comments, DOE agrees that a unified regional allocation of 

States for both central air conditioners and heat pumps and furnaces would provide key 

benefits. As mentioned in section III.A, similar manufacturers produce these products and 

use the same distribution network. Using the same regional allocation of States, as 

compared to the “rest of country” national standard, would be easier for manufacturers 

and distributors to implement and would also help to minimize consumer confusion. 

Additionally, regional standards may shift enforcement from the manufacturer to the 

point of sale or place of installation, and a single boundary between regions would reduce 

the motivation for non-compliance as well as simplify the overall enforcement of regional 

standards. Of course, there would be some differentiation, given that there is only one 

regional standard for furnaces, but two regional standards for central air conditioners and 

heat pumps. Nevertheless, DOE believes that there would still be benefits with 

harmonizing the States included in the northern region across these products. 

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To this end, DOE agrees with the comments recommending use of the regions in 

the consensus agreement for central air conditioners and heat pumps and furnaces. Doing 

so would also align the boundary of the northern region for the central air conditioners 

and furnaces. The regions selected for the direct final rule analyses for central air 

conditioners and heat pumps are shown in Table III.5 and Figure III.3. 

Table III.5 Regions for Analysis of Central Air Conditioner and Heat Pump 

Standards 

Northern Region States 

(Rest of Country) 

Southeastern 

Region States 

(Hot-Humid)* 

Southwestern 

Region States 

(Hot-Dry)* 

Alaska New York Alabama Arizona 

Colorado North Dakota Arkansas California 

Connecticut Ohio Delaware Nevada 

Idaho Oregon District of 

Columbia 

New Mexico 

Illinois Pennsylvania Florida 

Indiana Rhode Island Georgia 

Iowa South Dakota Hawaii 

Kansas Utah Kentucky 

Maine Vermont Louisiana 

Massachusetts Washington Maryland 

Michigan West Virginia Mississippi 

Minnesota Wisconsin North Carolina 

Missouri Wyoming Oklahoma 

Montana South Carolina 

Nebraska Tennessee 

New Hampshire Texas 

New Jersey Virginia 

*The combined southeastern and southwestern regions for central air conditioners and heat pumps 

correspond to the southern region for furnaces. 

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Figure III.3 Map of the Regions for the Analysis of Central Air Conditioners and 

Heat Pumps 

3. Impacts on Market Participants and Enforcement Issues 

As described in section II.A of this notice, DOE is required to evaluate the impact 

of introducing regional standards on consumers, manufacturers, and other market 

participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 

6295(o)(6)(D)) Chapter 17 of the preliminary TSD for central air conditioners and heat 

pumps details DOE's preliminary analysis on the potential impacts of regional standards 

on market participants other than manufacturers and consumers for residential central air 

conditioners and heat pumps and residential furnaces. (However, impacts on 

manufacturers and consumers were fully addressed in a manner consistent with any other 

energy conservation standards rulemaking.) The analysis focuses on the unique burdens 

associated with introducing differentiated energy conservation standards based on 

geography. The analysis does not incorporate the impact of more-stringent energy 

conservation standards on market participants, only the impact of multiple geographic 

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standards, because the impacts of more-stringent standards would occur regardless of 

whether differentiated regional standards are promulgated. 

a. Impacts on Additional Market Participants 

Chapter 17 of the preliminary TSD began by identifying the primary market 

participants, identified as distributors, contractors, and general contractors. It described 

their basic business models and assesses how additional regional standards may impact 

those models. The chapter then investigated potential non-enforcement impacts on 

distributors, contractors, and general contractors. Finally, the chapter provided two 

quantitative analyses looking at the key changes that distributors may face as a result of 

regional standards: (1) a distributor inventory impact analysis, and (2) a distributor 

markup impact analysis. 

HARDI voiced concern about DOE’s preliminary distributor inventory impact 

analysis, citing its belief that distributors located within border regions would have to 

carry two lines of stock. As a result, HARDI predicts at least a 5-percent stock increase 

for these distributors. (CAC: HARDI, No. 56 at p.7) In response, DOE’s inventory 

analysis does assume that distributors located along border regions will need to carry two 

lines of stock, as indicated by HARDI, and, thus, requires some additional safety stock. 

In the absence of additional data supporting more or less severe inventory impacts, for 

the direct final rule, DOE has not revised its estimate of a 2-percent inventory impact for 

the reference case. However, the impacts of inventory changes ranging from 0 percent to 

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10 percent are considered in Chapter 17 of the direct final rule TSD as a sensitivity 

analysis. 

Regarding the inventory change analysis, ACEEE stated that distributors located 

along a border region may find it more cost-effective to stock fewer product models and 

meet customer demand by shipping the next higher-efficiency model at the same price as 

the lower-efficiency model under regional standards. (FUR: ACEEE, No.1.2.006 at 

p.103) ACEEE suggested that this hypothetical substitution effect would reduce the 

additional inventory necessary for distributors to meet customer demand under regional 

standards. Based on interviews with distributors and DOE’s understanding of the HVAC 

industry, DOE considers such a scenario unlikely. Such a substitution would remove 

upsell opportunities for distributors and potentially commoditize higher-margin products. 

Furthermore, not having the units desired by some contractors may jeopardize 

relationships with at least some customers. DOE does not expect such a strategy to be 

the lowest-cost option for distributors along the border region. 

HARDI contested the four shipment scenarios detailed in the distribution 

inventory impact analysis discussed in chapter 17 of the preliminary TSD. Citing the 

experience following the change in central air conditioner energy conservation standards 

from 10 SEER to 13 SEER in 2006, HARDI asserted that an impact of increasing 

standards is a decrease in shipments due to substitution effects. (FUR: HARDI, No. 

1.3.016 at p.7) In chapter 17 of the TSD, DOE analyzed the impact of differentiated 

regional standards rather than the impacts of higher standards. The analysis is intended 

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to model changes in distributor inventory resulting from bimodal product demand, and 

not the impacts resulting from higher standards. However, DOE notes that the impacts of 

higher standards on replacement rates and product orders for the industry are accounted 

for and modeled in DOE’s shipments analysis conducted for this direct final rule. A 

reduction in product replacement is reflected in the NIA and in the industry net present 

value analysis presented in the MIA. 

Additional comments were received regarding the analysis of distributor markup 

impact analysis. These comments are addressed in markups portion of this document in 

section IV.D. 

b. Enforcement Issues 

Although the preliminary TSD for central air conditioners and heat pumps did not 

analyze enforcement issues, it did discuss potential enforcement impacts on market 

participants in chapter 17, section 17.4, of the preliminary TSD. In addition, in section 

II.A of the RAP for furnaces, DOE described a number of enforcement options and 

requested data on how, if at all, the enforcement options would increase compliance or 

other costs. 

Multiple manufacturers and trade associations commented on enforcement issues 

discussed in either the preliminary TSD for central air conditioners and heat pumps or the 

RAP for furnaces. ACCA, AHRI, and HARDI all emphasized the need for strong 

enforcement to ensure fair competition in the marketplace and to mitigate risk of diluting 

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intended energy savings. (FUR: ACCA, No. 1.3.007 at p.2) (CAC: AHRI, No. 67 at p.4; 

HARDI, No. 70 at p.2) HARDI emphasized the complexity of enforcing regional 

standards and explained that their members (i.e., the industry’s distributors) are not 

equipped to bear the burden of ensuring that product installations are occurring within the 

boundaries of regional standards. (FUR: HARDI, No. 1.3.016 at pp. 4-7) Manufacturers, 

including Lennox, Rheem, and Ingersoll Rand; trade groups, including ACCA, AGA, 

ARI, EEI, and HARDI; advocacy groups, including ACEEE, NCLC, and NRDC; and 

utilities, including Pacific Gas and Electric, Southern California Gas Company, San 

Diego Gas and Electric, and Southern California Edison, all commented on the 

effectiveness, viability, and complexity of various enforcement mechanisms. (FUR: 

Lennox, No. 1.3.018 at pp.2-4; Rheem, Public Meeting Transcript No. 1.2.006 at p.80; 

AGA, No. 1.3.010 at pp.2-3; EEI, No. 1.3.015 at p.4; ACEEE, No.1.3.009 at pp.4-5; 

NCLC, 1.3.019 at p.9; NRDC, No. 1.3.020 at pp.7-8 ) (CAC: Ingersoll Rand, No. 66 at 

pp.7-8; ACCA, No. 7 at p. 3; HARDI, No. 56 at p.6; PG&E, No. 17 at pp. 3-4) 

DOE recognizes the challenges of regional standards enforcement and continues 

to investigate the most effective means of meeting those challenges. DOE will 

incorporate all feedback into the enforcement rulemaking it will conduct within 90 days 

of the issuance of this direct final rule establishing regional standards, as required by 42 

U.S.C. 6295(o)(6)(G)(ii). 

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E. Standby Mode and Off Mode 

As noted in section II.A of this direct final rule, any final rule for amended or new 

energy conservation standards that is published on or after July 1, 2010 must address 

standby mode and off mode energy use. (42 U.S.C. 6295(gg)) As a result, DOE has 

analyzed and is regulating the standby mode and off mode electrical energy consumption 

for furnaces and off mode energy consumption for central air conditioners and heat 

pumps. These provisions are addressed in further detail immediately below. 

1. Furnaces 

AFUE, the statutory metric for furnaces, does not incorporate standby mode or off 

mode use of electricity, although it already fully addresses use in these modes of fossil 

fuels by gas and oil-fired furnaces. In the October 2010 test procedure final rule for 

furnaces, DOE determined that incorporating standby mode and off mode electricity 

consumption into a single standard for residential furnaces is not feasible. 75 FR 64621, 

64626-27 (Oct. 20, 2010). DOE concluded that a metric that integrates standby mode 

and off mode electricity consumption into AFUE is not technically feasible, because the 

standby mode and off mode energy usage, when measured, is essentially lost in practical 

terms due to rounding conventions for certifying furnace compliance with Federal energy 

conservation standards. Id. Therefore, in this notice, DOE is adopting amended furnace 

standards that are AFUE levels, which exclude standby mode and off mode electricity 

use, and DOE is also adopting separate standards that are maximum wattage (W) levels 

to address the standby mode and off mode electrical energy use of furnaces. DOE also 

presents corresponding TSLs for energy consumption in standby mode and off mode. 

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DOE has decided to use a maximum wattage requirement to regulate standby mode and 

off mode for furnaces. DOE believes using an annualized metric could add unnecessary 

complexities, such as trying to estimate an assumed number of hours that a furnace 

typically spends in standby mode. Instead, DOE believes that a maximum wattage 

standard is the most straightforward metric for regulating standby mode and off mode 

energy consumption of furnaces and will result in the least amount of industry and 

consumer confusion. 

DOE is using the metrics just described – AFUE and W – in the amended energy 

conservation standards it adopts in this rulemaking for furnaces. This approach satisfies 

the mandate of 42 U.S.C. 6295(gg) that amended standards address standby mode and off 

mode energy use. The various analyses performed by DOE to evaluate minimum 

standards for standby mode and off mode electrical energy consumption for furnaces are 

discussed further in section IV.E of this direct final rule. 

a. Standby Mode and Off Mode for Weatherized Gas and Weatherized Oil-Fired 

Furnaces 

DOE did not find any weatherized furnaces (both gas and oil-fired) available on 

the market that are not sold as part of a single package air conditioner or a “dual fuel” 

single package heat pump and furnace system. In this direct final rule, DOE is adopting 

new energy conservation standards for the maximum allowable average off mode power 

consumption (PW,OFF) for single package air conditioners and single package heat pumps 

to account for the power consumed in off mode, and DOE has already determined that the 

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existing test procedures for central air conditioners and heat pumps account for standby 

mode power consumption within the SEER rating. DOE notes that the proposed test 

procedure provisions for measuring off mode power consumption of central air 

conditioners and heat pumps and the existing test procedure provisions for calculating 

SEER do not provide instructions for disconnecting certain components (e.g., igniter, gas 

valve) that are only used for furnace operation in single package units. As a result, DOE 

believes that because weatherized furnaces on the market are manufactured and sold as 

part of single package air conditioners and heat pumps, and because all standby mode and 

off mode energy consumption for single package air conditioners and heat pumps is 

accounted for by PW,OFF and SEER, there is no need to adopt separate standby mode and 

off mode standards for weatherized gas or weatherized oil-fired furnaces. 

b. Standby Mode and Off Mode for Electric Furnaces 

As discussed in detail in section IV.A.2.a of this direct final rule, DOE believes 

that any improvements to electric furnaces to improve the AFUE of these products would 

have a de minimis energy-savings potential because the efficiency of electric furnaces 

already approaches 100-percent AFUE. However, DOE notes that the AFUE rating for 

electric furnaces does not include the electrical power used in standby mode and off 

mode. As a result, DOE performed an analysis of potential standby mode and off mode 

energy conservation standards for electric furnaces, and is adopting standards for these 

products in this direct final rule. The approach for analyzing standby mode and off mode 

energy conservation standards for electric furnaces is described throughout section IV of 

this direct final rule. 

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c. Standby Mode and Off Mode for Mobile Home Oil-Fired Furnaces 

DOE is not considering amended AFUE standards for mobile home oil-fired 

furnaces due to a de minimis potential for energy savings, as discussed in detail in section 

IV.A.2.a of this notice. However, in order to satisfy the statutory provision in EPCA for 

establishing standby mode and off mode standards, and to keep a level playing field for 

all products, DOE examined potential standby mode and off mode standards for mobile 

home oil-fired furnaces. 

To analyze potential standby mode and off mode standards for mobile home oilfired furnaces, DOE examined specification sheets and manufacturer literature to identify 

components that are present and would consume standby power (e.g., transformer, 

burner). DOE determined that these components in mobile home oil-fired furnaces are 

largely the same as the standby mode and off mode energy-consuming components found 

in non-weatherized oil-fired furnaces. Therefore, DOE estimated that a mobile home oilfired furnace would have the same standby mode and off mode energy consumption as a 

non-weatherized oil-fired furnace, and it did not conduct separate analysis for this 

product. Accordingly, DOE is adopting standards for non-weatherized oil-fired furnaces 

and mobile home oil-fired furnaces at the same level in today’s direct final rule. The 

standby mode and off mode analysis for non-weatherized oil-fired furnaces (which is also 

applicable to mobile home oil-fired furnaces) is discussed throughout section IV of this 

direct final rule. 

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2. Central Air Conditioners and Heat Pumps 

For central air conditioners and heat pumps, the standby mode is in effect when 

the system is on but the compressor is not running (i.e., when the system is not actively 

heating or cooling but the compressor is primed to be activated by the thermostat). Thus, 

the standby mode for central air conditioners functions during the cooling season and for 

heat pumps during both the cooling and heating seasons. Correspondingly, the off mode 

generally occurs for air conditioners during all non-cooling seasons and for heat pumps 

during the “shoulder seasons” (i.e., fall and spring) when consumers neither heat nor cool 

their homes. The SEER and HSPF metrics already account for standby mode but not off 

mode energy use, because off mode energy use occurs outside of the seasons to which 

these descriptors apply. However, incorporation of off mode into these descriptors would 

mean that they would no longer be seasonal descriptors. Thus, because EPCA requires 

use of these descriptors for central air conditioners and heat pumps (see 42 U.S.C. 

6291(22) and 6295(d)), it would not be feasible for DOE to incorporate off mode energy 

use into a single set of standards for both central air conditioners and heat pumps. 

Additionally, DOE has concluded that a metric that integrates off mode electricity 

consumption into SEER is not technically feasible because the off mode energy usage is 

significantly lower than active mode operation and, when measured, it is essentially lost 

in practical terms due to the fact that manufacturers’ ratings of SEER are typically 

presented to consumers with one or zero decimal places. Therefore, in this notice, DOE is 

adopting for central air conditioners and heat pumps standards that are SEER and HSPF 

levels (which exclude off mode energy use), and DOE is also adopting separate standards 

that are maximum wattage (W) levels to address the off mode energy use of central air 

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conditioners and heat pumps. DOE also presents corresponding TSLs for energy 

consumption in off mode. DOE has determined that a wattage requirement is 

appropriate, because it avoids unnecessary complexities and assumptions that may be 

created by using an annualized metric. The use of a wattage requirement is consistent 

with the approach used to regulate standby mode and off mode energy consumption in 

furnaces. 

DOE is using the metrics just described – SEER, HSPF, and W – in the amended 

energy conservation standards it adopts in this rulemaking for central air conditioners and 

heat pumps. This approach satisfies the mandate of 42 U.S.C. 6295(gg) that amended 

standards address standby mode and off mode energy use. The various analyses 

performed by DOE to evaluate minimum standards for off mode electrical energy 

consumption for central air conditioners and heat pumps are discussed further throughout 

section IV of this direct final rule. 

a. Off Mode for Space-Constrained Air Conditioners and Heat Pumps 

As discussed in section III.G.2.b, DOE decided not to amend the existing SEER 

or HSPF standards for the space-constrained product classes of central air conditioners 

and heat pumps, because the existing standard is both the baseline and max-tech 

efficiency level. However, DOE analyzed these products to determine appropriate off 

mode energy conservation standards. Based on teardowns and manufacturer literature, 

DOE determined that the space-constrained product classes have the same components 

contributing to off mode power consumption as split-system air conditioners and heat 

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pumps. Consequently, DOE assumed that the off mode power consumption for the spaceconstrained products classes is the same as for the split-system product classes, and DOE 

believes that the off mode analysis for the split-system product classes is representative 

of the space-constrained products. Therefore, DOE adopted its engineering analysis of off 

mode energy consumption for split-system air conditioners and heat pumps for use in its 

engineering analysis of the off mode electrical energy consumption of space-constrained 

air conditioners and heat pumps. As with all other product classes, the off mode analysis 

for space-constrained products is described in further detail throughout section IV of this 

direct final rule. 

F. Test Procedures 

As noted above, DOE’s current test procedures for central air conditioners and 

heat pumps, and for furnaces, appear at 10 CFR part 430, subpart B, appendices M and 

N, respectively. Moreover, EPCA, as amended by EISA 2007, requires DOE to amend its 

test procedures for all covered products, including those for furnaces and central air 

conditioners and heat pumps, to include measurement of standby mode and off mode 

energy consumption, except where current test procedures already fully address such 

energy consumption. (42 U.S.C. 6295(gg)(2)) Because test procedure rulemakings were 

ongoing to address this statutory mandate regarding standby mode and off mode energy 

consumption during the course of the current standards rulemaking, a number of test 

procedure issues were raised in this rulemaking, particularly in terms of how test 

procedure amendments could impact standard levels. The following discussion addresses 

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these comments and explains developments related to amended test procedures for 

residential furnaces, central air conditioners, and heat pumps. 

1. Furnaces 

DOE’s existing test procedure for gas and oil-fired furnaces accounted for fossil 

fuel consumption in the active, standby, and off modes, and for electrical consumption in 

the active mode (although active mode electrical consumption is not included in the 

AFUE rating for gas and oil-fired products). For electric furnaces, DOE’s existing test 

procedure accounted for active mode electrical energy consumption. However, the test 

procedures for gas, oil-fired, and electric furnaces did not address standby mode and off 

mode electrical energy consumption. Therefore, DOE issued a NOPR in which it 

proposed modifications to its existing furnace test procedures to include the measurement 

of standby mode and off mode electricity use. 74 FR 36959 (July 27, 2009) (hereafter 

referred to as the “July 2009 test procedure NOPR”). DOE held a public meeting at DOE 

headquarters in Washington, D.C. on August 18, 2009, to receive oral comments on the 

July 2009 test procedure NOPR. DOE also sought and received written comments from 

interested parties. 

Subsequent to the July 2009 test procedure NOPR, DOE issued a supplemental 

notice of proposed rulemaking (SNOPR) for the purpose of adding an integrated metric 

that incorporates standby mode and off mode energy consumption into the statutorilyidentified efficiency descriptor, AFUE. The SNOPR was published in the Federal 

Register on April 5, 2010. 75 FR 17075. In response to the April 2010 test procedure 

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SNOPR, DOE received a number of comments that opposed both the need for an 

integrated metric and the possibility of regulating by such a metric. In sum, these 

comments suggested that DOE misinterpreted the statute in terms of requiring the 

integration of standby mode and off mode energy consumption into the AFUE metric. 

Commenters further suggested that regulating by an integrated metric would be counter 

to the intent of EISA 2007; instead, these commenters urged DOE to regulate standby 

mode and off mode for these products by using a separate standard, as contemplated by 

EISA 2007, in situations where an integrated metric would not be technically feasible. 

DOE also received similar comments regarding incorporating standby mode and off 

mode electrical consumption into AFUE in response to the RAP for residential furnaces, 

which are summarized below. In addition, DOE received comments relating to the 

AFUE test procedure in general (i.e., not specifically about the incorporation of standby 

mode and off mode electrical energy consumption into AFUE), which are also discussed 

in the sections that follow. 

After considering the comments in response the April 2010 test procedure 

SNOPR and RAP (discussed below), DOE published a final rule in the Federal Register 

on October 20, 2010 that amended the test procedures for furnaces and boilers to address 

standby mode and off mode energy use of these products. 75 FR 64621. In light of the 

comments on the April 2010 test procedure SNOPR and RAP, DOE reconsidered the 

feasibility of an integrated AFUE metric in the final rule and abandoned its proposal in 

the April 2010 test procedure SNOPR that would have integrated the standby mode and 

off mode electrical energy consumption into the existing AFUE test metric. Accordingly, 

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the final rule amended the test procedure for residential furnaces and boilers to include 

provisions for separately measuring standby mode and off mode. Id. at 64626-27. 

a. AFUE Test Method Comment Discussion 

In response to the RAP for residential furnaces, DOE received several comments 

related to DOE’s test procedure for determining the AFUE of residential furnaces. 

ACEEE commented that AFUE is an imperfect metric, because for weatherized 

furnaces,20 a unit operating at part load (i.e., at a reduced input capacity less than the full 

capacity) might deliver the same comfort as it would at full load, but using less energy 

(i.e., more efficiently). However, since weatherized furnaces must be kept noncondensing during peak load operation, ACEEE stated that the AFUE metric may not 

reflect the efficiency benefit from part load operation. (FUR: ACEEE, Public Meeting 

Transcript, No. 1.2.006 at p. 159) Ingersoll Rand stated that weatherized furnaces have 

to be non-condensing regardless of whether the furnace is running at a lower input or at 

the peak input [because these units are not designed to handle corrosive condensate]. 

(FUR: Ingersoll Rand, Public Meeting Transcript, No. 1.2.006 at pp. 159-160) In 

response, DOE believes that two-stage and modulating furnaces meet heating load 

requirements more precisely by operating at a reduced input rate for an extended period 

of burner on-time, which might deliver the same comfort using less energy as ACEEE 

asserts. However, DOE also notes that due to issues with condensate freezing in 

weatherized gas furnaces, products that are currently on the market are typically designed 

so that they will not condense during part-load or full-load operation, as Ingersoll Rand 

20 Weatherized furnaces, unlike non-weatherized furnaces, are designed to be installed outdoors. As such, 

weatherized furnaces are often subjected to harsh weather, including below freezing temperatures, rain, 

snow, etc. 

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states. Even if a weatherized furnace were designed with materials and components to 

handle the corrosive condensate, if that condensate freezes while being drained, it will 

have a significant adverse impact the performance and reliability of the unit. DOE notes 

that DOE’s existing AFUE test procedure contains provisions for two-stage and 

modulating operation in furnaces, and DOE believes these provisions are adequate for 

rating the performance of weatherized furnaces. It may be possible for DOE to consider 

revisiting the provisions for testing the AFUE of two-stage and modulating weatherized 

furnaces in a future test procedures rulemaking. 

Proctor stated that in California, non-weatherized furnaces are installed in attics, 

which get hot in the summer and cold in the winter. As a result, AFUE may not properly 

represent what happens in the field, because jacket losses (i.e., heat losses through the 

outer covering of the furnace) may not be accounted for in the AFUE test procedure for 

non-weatherized furnaces. (FUR: Proctor, Public Meeting Transcript, No. 1.2.006 at pp. 

163-64) In contrast, Ingersoll Rand commented that the AFUE test for non-weatherized 

furnaces does measure jacket losses, because these furnaces are tested as isolated 

combustion systems (meaning they are assumed to be installed indoors, but outside of the 

conditioned space, such as in a garage or unheated basement) with an assumed 45 degree 

ambient temperature. Ingersoll Rand noted that jacket losses in non-weatherized furnaces 

are accounted for and multiplied by 1.7 in the AFUE calculation. Ingersoll Rand further 

stated that weatherized furnaces have a 3.3 multiplier for jacket losses, which accounts 

for the effects of wind, rain, and other factors affecting the performance of an outdoor 

furnace. (FUR: Ingersoll Rand, Public Meeting Transcript, No. 1.2.006 at p. 164) In 

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response, DOE agrees with Ingersoll Rand, and notes that the DOE test procedure 

requires jacket losses to be adjusted by a 1.7 multiplier and a 3.3 multiplier for all nonweatherized furnaces and weatherized furnaces, respectively, in order to account for 

jacket losses that may occur in the field. 

Proctor also remarked that the current standards (which are set in terms of AFUE) 

are unrepresentative of actual system performance in the home and produce contrary 

results, by assigning efficiency ratings which are not representative of ratings achieved in 

the field. Proctor stated that in certain rare situations, the current rating system is such 

that products’ tested efficiency ratings may be reversed in comparison to their actual field 

performance (i.e., a product with a higher AFUE rating may actually perform less 

efficiently than a product with a lower AFUE rating in certain situations). (FUR: Proctor, 

FDMS No. 0002 at p. 2) The energy efficiency ratings for furnaces are developed using 

DOE’s test procedure and sampling plans at the point of manufacture. For residential 

furnaces, DOE believes that requiring certification at the point of manufacture is the best 

way to capture the energy use information and variability of the installations that can be 

experienced in the field. Given the expense of performing tests on the products and the 

breadth of the installation network for these products, testing and certification based on 

field installations could be significantly more difficult. DOE believes that its test 

methods represent product performance in the field; however, DOE agrees with Proctor 

in that many factors experienced in the field can alter the performance of the furnace 

(e.g., installation location, external static pressure). Consequently, DOE’s analysis takes 

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into account many of the variations experienced in the field on the energy use of the 

product in the life-cycle cost analysis. 

Proctor argued that heating performance and heating fan performance are rated at 

external static pressures that are a function of furnace heating capacity and are 

significantly lower than those found in typical residential duct systems, resulting in the 

furnace blower moving less air or having higher watt draw, or both, when installed. 

Proctor claimed that these effects reduce the field efficiency of the furnace and that the 

type of fan motor believed by consumers and HVAC contractors to be the highest 

efficiency model performs significantly worse at typical field static pressures than at the 

rating condition. (FUR: Proctor, FDMS No. 0002 at p. 3) The current DOE test procedure 

assumes a given value for the external static pressure. While DOE acknowledges that the 

external static pressure of an HVAC system is, in part, a function of the ductwork, DOE 

believes variations in external static pressures experienced in the field that impact the 

efficiency of the furnace fan are outside the scope of coverage of this rulemaking. This 

issue will be considered in DOE’s separate rulemaking for furnace fans. Additionally, 

DOE acknowledges that the blower motor responds to the differences in external static 

pressure between the ductwork in the field and the pressure specified by the DOE test 

procedure by increasing or decreasing power draw as needed to maintain consistent 

airflow. However, the DOE test procedure to calculate AFUE does not account for the 

type or performance of the blower, and therefore, the rated AFUE is not impacted by the 

blower power draw. As noted above, there is a separate rulemaking under way to 

address the efficiency of furnace fans. DOE is also developing a test procedure for 

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furnace fans in a separate rulemaking, in which DOE will examine the appropriate 

external static pressure at which to rate the air handling performance of the furnace. 

Proctor also commented that the furnace heating performance and air handling 

performance should be rated separately because some furnace components are related to 

heating, while others are related to moving household air. Further, Proctor stated that the 

furnace rating standard should include the energy use of heating-related components, 

such as the igniter, while components that are not directly related to heating should be 

included in the air handling rating. (FUR: Proctor, FDMS No. 0002 at p. 4) In response, 

DOE first notes that this rulemaking to examine amending the minimum AFUE standards 

addresses the heating performance of furnaces, and the air handling performance will be 

addressed separately in a furnace fans rulemaking, as Proctor recommends. In response to 

Proctor’s assertion that the furnace heating performance standard should include the use 

of heating-related components such as the igniter, DOE notes that it is required under 42 

U.S.C. 6291(22) to use AFUE as the rating metric for the fuel performance of furnaces. 

DOE incorporates by reference the definition in section 3 of ANSI/ASHRAE 103-1993 

of “annual fuel utilization efficiency” as “the ratio of annual output energy to annual 

input energy, which includes any non-heating-season pilot input loss and, for gas or oilfired furnaces or boilers, does not include electric energy.” 10 CFR 430 subpart B, 

appendix N, section 2.0. Under this definition, which captures how efficiently the fuel is 

converted to useful heat, electrical components such as electronic ignition and the blower 

motor are outside of the AFUE rating metric coverage. Components in the blower 

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assembly will be covered in DOE’s current energy conservation standards rulemaking for 

residential furnace fans. 

b. Standby Mode and Off Mode 

As noted above, DOE received numerous comments from interested parties 

regarding the approach to regulating standby mode and off mode energy consumption 

proposed in the furnaces RAP. In particular, the comments received pertained to the 

metric that would be adopted for such regulation. 

ACEEE, the CA IOUs, EEI, HARDI, Lennox, AHRI, NRDC, APPA, Ingersoll 

Rand, and the Joint Stakeholders opposed the proposal to integrate standby mode and off 

mode electrical power into a new metric and instead supported a separate metric for 

regulating standby mode and off mode electrical energy consumption in furnaces. (FUR: 

ACEEE, Public Meeting Transcript, No. 1.2.006 at pp. 130-131; ACEEE, No. 1.3.009 at 

pp. 1-2; CA IOUs, No. 1.3.017 at p. 3; EEI, No. 1.3.015 at pp. 4-5; HARDI, No. 1.3.016 

at p. 8; Lennox, No. 1.3.018 at p. 3; NRDC, No. 1.3.020 at p. 7; APPA, No. 1.3.011 at p. 

4; AHRI, Public Meeting Transcript, No. 1.2.006 at pp. 132-133; Ingersoll Rand, No. 

1.3.006 at p. 2; Joint Stakeholders, No. 1.3.012 at pp. 3-4) EEI qualified its support for a 

separate descriptor for standby mode and off mode electrical energy consumption, stating 

that it supports a separate descriptor for standby mode and off mode efficiency as long as 

furnaces would be required to provide information about standby mode and off mode 

fossil fuel consumption as well. EEI asserted that if DOE looks at electric energy 

attributable to standby mode, it should also look at fossil fuel energy consumption 

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attributable to standby mode just as rigorously. (FUR: EEI, No. 1.3.015 at pp. 4-5) In 

response, DOE notes that in the final rule for residential furnaces and boilers test 

procedures, published in the Federal Register on October 20, 2010, DOE concluded that 

the AFUE metric comprehensively accounts for fossil fuel energy consumption over a 

full-year cycle, thereby satisfying the fossil fuel portion of the EISA 2007 requirement to 

regulate standby mode and off mode energy consumption. 75 FR 64621. Lennox 

supported the use of the ESO value that DOE proposed in the July 27, 2009 test 

procedures NOPR (74 FR 36959) as the metric for setting standby mode and off mode 

standards. (FUR: Lennox, No. 1.3.018 at p. 3) In today’s direct final rule, DOE is using 

the standby mode and off mode power consumption metrics (PW,SB and PW,OFF, 

respectively), as defined in the October 2010 test procedure final rule21 (74 FR 64621, 

64632 (Oct. 20, 2010)), as the test metric for regulating standby mode and off mode 

power consumption. As noted in section III.E of today’s notice, DOE believes this metric 

will provide a more straightforward approach for comparing the standby mode and off 

mode energy consumption of furnaces, because it does not include assumptions related to 

the amount of time spent in standby mode or off mode, as an annual metric, such as ESO, 

would require. 

ACEEE, EEI, HARDI, and Lennox stated that DOE should not use an integrated 

AFUE metric (one which includes standby mode and off mode electrical energy 

consumption, along with active mode energy consumption) to regulate standby mode and 

21 In this direct final rule, DOE is changing the nomenclature for the standby mode and off mode power 

consumption metrics for furnaces from those in the furnace and boiler test procedure final rule published on 

October 20, 2010. 75 FR 64621. DOE is renaming the PSB and POFF metrics as PW,SB and PW,OFF, 

respectively. However, the substance of these metrics remains unchanged. 

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off mode electrical energy consumption because doing so would require rerating existing 

furnaces, which could cause existing ratings to decrease and could lead to confusion in 

the marketplace. (FUR: ACEEE, No. 1.3.009 at pp. 1-2; EEI, Public Meeting Transcript, 

No. 1.2.006 at pp. 134-135; EEI, No. 1.3.015 at pp. 4-5; HARDI, Public Meeting 

Transcript, No. 1.2.006 at p. 138; HARDI, No. 1.3.016 at p. 8; Lennox, No. 1.3.018 at p. 

3) Further, AHRI noted that every program that provides incentives for people to buy 

more-efficient furnaces would have to change its descriptor to avoid widespread 

confusion in the marketplace, and therefore, AHRI argued that combining metrics is not 

feasible. (FUR: AHRI, Public Meeting Transcript, No. 1.2.006 at pp. 136-137) Ingersoll 

Rand added that adoption of an integrated metric would lead to confusion in the 

marketplace by making higher-capacity furnaces appear more efficient, because standby 

power is not a function of heating capacity. (FUR: Ingersoll Rand, No. 1.3.006 at p. 2) 

DOE believes these points are valid. Ultimately, in the test procedure rulemaking, DOE 

concluded in the final rule that it would not be technically feasible to integrate standby 

mode and off mode electrical energy consumption into AFUE, because “the standby 

mode and off mode energy usage, when measured, is essentially lost in practical terms 

due to the fact that manufacturers’ ratings of AFUE are presented to the nearest whole 

number.” 75 FR 64621, 64627 (Oct. 20, 2010). For further details on DOE’s reasoning 

for not integrating standby mode and off mode electrical energy consumption into AFUE, 

please consult the October 2010 test procedure final rule. Id. at 64626-27. 

ACEEE, NRDC, APPA, and the Joint Stakeholders observed that, due to the 

rounding provisions specified for the AFUE descriptor, standby mode and off mode 

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electrical energy consumption would effectively be lost in an integrated metric. More 

specifically, these parties reasoned that the magnitude of active mode fuel consumption 

would obscure the standby mode and off mode electrical energy consumption, thereby 

providing manufacturers with little or no incentive to reduce standby energy 

consumption. (FUR: ACEEE, Public Meeting Transcript, No. 1.2.006 at pp. 130-131; 

ACEEE, No. 1.3.009 at pp. 1-2; NRDC, No. 1.3.020 at p. 7; APPA, No. 1.3.011 at p. 4; 

Joint Stakeholders, No. 1.3.012 at pp. 3-4) The CA IOUs further asserted that it is not 

feasible from a testing and enforcement perspective to regulate standby mode and off 

mode electrical energy consumption when it may be less than the rounding error of the 

regulated metric, and suggested that DOE would need to regulate an integrated AFUE 

metric to a hundredth of a percent in order to accurately capture differences in standby 

mode and off mode energy use. (FUR: CA IOUs, No. 1.3.017 at p. 3) Additionally, 

according to Ingersoll Rand, the homeowner would not be able to determine how much 

power is used in standby mode, and an integrated metric would be unlikely to focus 

furnace redesigns on providing actual reduction in electrical power usage, because the 

standby power usage could be masked with small improvements in heating efficiency. 

(FUR: Ingersoll Rand, No. 1.3.006 at p. 2) DOE considered these observations to be 

valid points, and they played a role in the Department’s decision to abandon an integrated 

AFUE metric in favor of a separate descriptor for standby mode and off mode electrical 

energy consumption. Again, for further details on DOE test procedures for measuring 

standby mode and off mode energy consumption, please consult the October 2010 test 

procedure final rule. 75 FR 64621 (Oct. 20, 2010). 

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2. Central Air Conditioners and Heat Pumps 

DOE has determined that its existing test procedures for central air conditioners 

and heat pumps address energy use in standby mode, but not in off mode. As explained 

above in section II.B, off mode occurs for air conditioners during the non-cooling seasons 

and for heat pumps during the “shoulder seasons” (i.e., fall and spring). Therefore, in a 

test procedure NOPR published in the Federal Register on June 2, 2010, DOE proposed 

to modify to its existing test procedures for central air conditioners and heat pumps by 

adding provisions to determine off mode energy use. 75 FR 31224 (hereafter referred to 

as “the June 2010 test procedure NOPR”). In the June 2010 test procedure NOPR, DOE 

also proposed to alter its existing test procedures by adopting: (1) new testing and 

calculation methods relevant to regional standards for these products, specifically SEER 

Hot-Dry; (2) a limited number of other new testing methods; (3) a new calculation for the 

determination of sensible heat ratio,22 which could be used to assess the dehumidification 

performance of an air conditioner or heat pump; and (4) modifications and clarifications 

of certain calculations, testing methods, test conditions and other provisions currently in 

the test procedure. Id. Similar to off mode for furnaces, DOE concluded that it would not 

be technically feasible to integrate off mode electrical energy consumption into SEER or 

HSPF, because SEER and HSPF are seasonal descriptors, not annualized descriptors, and 

the off mode energy usage, when measured, is essentially lost in practical terms due to 

the fact that it is a very small portion of overall electrical energy consumption. DOE held 

a public meeting on June 11, 2010 at DOE headquarters in Washington, D.C., to receive 

22 “Sensible heat ratio” is the relative contribution of an air conditioner or heat pump which reduces the dry 

bulb temperature of the ambient air to the cooling output which reduces the moisture content of the ambient 

air. 

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oral comments on its proposal, and it also sought and received numerous written 

comments. 

Given the interrelated and tandem nature of these two rulemaking proceedings, 

during the public meeting for the preliminary TSD and in subsequent written comments, 

interested parties also commented on the revision of the central air conditioner and heat 

pump test procedure. Several comments were related to standby mode and off mode 

energy consumption. ACEEE commented that DOE must determine whether any 

products use crankcase heaters and whether such use is standby mode or off mode. 

(CAC: ACEEE, No. 72 at p. 3) In response, DOE believes that off mode power exists for 

central air conditioners and heat pumps in the form of controls, certain types of fan 

motors, and refrigerant crankcase heaters, so DOE worked to develop appropriate 

standards for off mode power for each class of equipment based on how the components 

that contribute to a unit’s off mode power consumption are treated in the test procedure. 

Ingersoll Rand and EEI commented that a standard for off mode energy consumption is 

not needed, because the existing ratings (SEER and HSPF) already account for off mode 

power. (CAC: Ingersoll Rand, No. 66 at p. 8; CAC: EEI, No. 75 at p. 3) DOE agrees that 

SEER and HSPF already account for off mode and standby mode energy consumption of 

an air conditioning system during the cooling season and, for heat pumps, during the 

heating season. However, the energy consumed by an air conditioner during the heating 

and shoulder seasons, while the unit sits idle but powered, is not currently accounted for 

within the DOE test procedure. Similarly, the energy consumed by a heat pump during 

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the shoulder season, while the unit sits idle but powered, is not currently accounted for 

within the DOE test procedure. 

A number of interested parties commented during the public meeting that DOE 

should use the combination of SEER and energy efficiency ratio (EER) rather than SEER 

Hot-Dry as a metric for hot-dry climates because EER is more indicative of performance 

than SEER Hot-Dry and also more straightforward to calculate and understand. (CAC: 

ACEEE, Public Meeting Transcript at pp. 93, 95, 103; CAC: AHRI, Public Meeting 

Transcript at p. 94; CAC: PGE, Public Meeting Transcript at p. 97; CAC: Southern, 

Public Meeting Transcript at p. 100; CAC: Rheem, No. 76 at p. 6) EEI expressed concern 

that incorporating a SEER Hot-Dry metric would significantly change the results of the 

preliminary TSD because a new efficiency metric would result in different energy and 

cost savings to the consumer. (CAC: EEI, No. 75 at p. 5) DOE agrees that using a SEER 

Hot-Dry metric is unnecessary because the combination of SEER and EER is more 

representative of system performance. As discussed in section III.B.2, DOE has 

determined that it can consider dual metrics (i.e., SEER and EER) when considering 

recommendations arising out of a consensus agreement. For its analysis of potential 

standards apart from those recommended in the consensus agreement, DOE chose not to 

use the SEER Hot-Dry metric, which it had been considering, to characterize equipment 

performance in the hot-dry region, because DOE did not have sufficient information on 

how product costs and overall system performance might change if a SEER Hot-Dry 

metric were used. Therefore, DOE continued to use the current SEER rating metric for 

analysis of those potential amended standards. 

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a. Proposed Test Procedure Amendments 

As mentioned above, DOE proposed amendments to its test procedure for central 

air conditioners and heat pumps to measure off mode power consumption during the 

heating and shoulder seasons for central air conditioners and the shoulder season for heat 

pumps. 75 FR 31224, 31238-39 (June 2, 2010). For central air conditioners and heat 

pumps, these changes included a measurement of the off mode power consumption 

during the shoulder season, P1, in watts. For central air conditioners only, the test 

procedure also provides a method to measure the off mode power consumption during the 

heating season, P2, also in watts. Id. at 31269. P2 does not apply to heat pumps, because 

heat pumps are used during both the heating and cooling seasons, and, therefore, off 

mode power consumption only occurs during the shoulder seasons. 

However, the June 2010 test procedure NOPR did not contain an off mode metric 

which combined P1 and P2. In general, issues concerning test procedure provisions for 

standby mode and off mode power consumption are being addressed in a separate 

SNOPR for the Residential CAC test procedure. However, in that SNOPR, DOE is 

proposing the following off mode metric, PW,OFF, to regulate off mode power 

consumption for central air conditioners and heat pumps. PW,OFF is calculated for air 

conditioners using an equation involving P1 and P2 based on the national average relative 

lengths of each season (739 hours for P1 and 5,216 hours for P2). For heat pumps, PW,OFF 

equals P1 because the heat pump is in active mode during the heating season. The 

equations used to calculate PW,OFF are as follows: 

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For air conditioners: PW,OFF = 0.124*P1 + 0.876*P2 

For heat pumps: PW,OFF = P1 

As noted above, these equations were not included in the June 2010 test procedure 

NOPR, but are being addressed in an SNOPR. 

G. Technological Feasibility 

1. General 

In each standards rulemaking, DOE conducts a screening analysis, which it bases 

on information it has gathered on all current technology options and prototype designs 

that could improve the efficiency of the products or equipment that are the subject of the 

rulemaking. As the first step in such analysis, DOE develops a list of design options for 

consideration in consultation with manufacturers, design engineers, and other interested 

parties. DOE then determines which of these means for improving efficiency are 

technologically feasible. DOE considers a design option to be technologically feasible if 

it is in use by the relevant industry or if research has progressed to the development of a 

working prototype. “Technologies incorporated in commercial products or in working 

prototypes will be considered technologically feasible.” 10 CFR 430, subpart C, appendix 

A, section 4(a)(4)(i). Further, although DOE does consider technologies that are 

proprietary, it will not consider efficiency levels that can only be reached through the use 

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of proprietary technologies (i.e., a unique pathway), which could allow a single 

manufacturer to monopolize the market. 

Once DOE has determined that particular design options are technologically 

feasible, it further evaluates each of these design options in light of the following 

additional screening criteria: (1) practicability to manufacture, install, or service; (2) 

adverse impacts on product utility or availability; and (3) adverse impacts on health or 

safety. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(ii)-(iv). Section IV.B of 

this notice discusses the results of the screening analyses for furnaces and central air 

conditioners and heat pumps. Specifically, it presents the designs DOE considered, those 

it screened out, and those that are the basis for the TSLs in this rulemaking. For further 

details on the screening analysis for this rulemaking, see chapter 4 of the direct final rule 

TSD. 

2. Maximum Technologically Feasible Levels 

When DOE proposes to adopt (or not adopt) an amended or new energy 

conservation standard for a type or class of covered product, it must “determine the 

maximum improvement in energy efficiency or maximum reduction in energy use that is 

technologically feasible” for such product. (42 U.S.C. 6295(p)(1)) Accordingly, DOE 

determined the maximum technologically feasible (“max-tech”) improvements in energy 

efficiency for furnaces and central air conditioners and heat pumps in the engineering 

analysis using the design parameters that passed the screening analysis and that lead to 

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the creation of the most efficient products available. (See chapter 5 of the direct final rule 

TSD.) 

The max-tech efficiency levels are set forth in TSL 7 for residential furnaces and 

again in TSL 7 for central air conditioners and heat pumps and represent the most 

efficient products available on the market in the given product class. Products at the maxtech efficiency levels for both furnaces and central air conditioners and heat pumps are 

either currently offered for sale or have previously been offered for sale. However, no 

products at higher efficiencies are available or have been in the past, and DOE is not 

aware of any working prototype designs that would allow manufacturers to achieve 

higher efficiencies. For central air conditioners and heat pumps, the max-tech levels are 

listed at various cooling capacities within the each product class, because they vary 

depending on the cooling capacity of the product. Table III.6 and Table III.7 list the 

max-tech levels that DOE determined for the products that are the subjects of this 

rulemaking. 

Table III.6 Max-Tech AFUE Levels Considered in the Furnaces Analyses 

Product Class Max-Tech AFUE Level 

% 

Non-weatherized Gas 98 

Mobile Home Gas 96 

Non-weatherized Oil-Fired 97 

Weatherized Gas 81 

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Table III.7 Max-Tech SEER and HSPF Levels Considered in the Central Air 

Conditioner and Heat Pump Analyses 

Product Class Cooling 

Capacity 

Max-Tech 

Efficiency 

Level 

Split Systems 

Air 

Conditioners 

Blower-Coil* 

2 Ton 24.5 SEER 

3 Ton 22 SEER 

5 Ton 18 SEER 

Air 

Conditioners 

Coil-Only* 

2 Ton 18 SEER 

3 Ton 17 SEER 

5 Ton 16 SEER 

Heat Pumps 

2 Ton 22 SEER 

3 Ton 21 SEER 

5 Ton 18 SEER 

SinglePackage 

Systems 

Air 

Conditioners 3 Ton 16.6 SEER 

Heat Pumps 3 Ton 16.4 SEER 

Niche 

Products 

SDHV 3 Ton 14.3 SEER 

SpaceConstrained Air 

Conditioners 

2.5 Ton 12 SEER 

SpaceConstrained 

Heat Pumps 

2.5 Ton 12 SEER 

* Although analyzed separately, DOE is setting the same standard level for split-system blower-coil air 

conditioners and split-system coil-only air conditioners. DOE analyzed these products separately for 

greater accuracy in its analyses, but is adopting the same standard level. The difference between the two 

types of split-system air conditioners is that a blower-coil unit is matched with an indoor fan, while a coilonly unit is not. The rating method for a coil-only unit uses a default fan power consumption (limiting the 

SEER that can be achieved), while a blower-coil unit uses the measured fan power consumption of its 

matched indoor fan. For additional discussion of DOE’s treatment of blower-coil and coil-only products, 

see section IV.A.3.b of this direct final rule. 

For the weatherized gas furnace product class and the space-constrained central 

air conditioner and heat pumps product classes, the max-tech levels identified are the 

same level as the existing minimum standards for each respective product. The max-tech 

levels for these products are further discussed in the subsections immediately below. 

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a. Weatherized Gas Furnace Max-Tech Efficiency Level 

For the RAP, DOE examined the efficiencies of weatherized gas furnaces 

available on the market and determined that 81-percent AFUE is the highest efficiency 

available for weatherized gas furnaces. In the RAP, DOE proposed to analyze several 

efficiency levels for weatherized gas furnaces, including an 81-percent max-tech level, 

and received feedback from several interested parties, described below. 

ACEEE suggested that DOE should use a condensing furnace at 90-percent 

AFUE for the max-tech level for weatherized gas furnaces, because limited numbers of 

commercial packaged units are available with condensing gas sections, and this 

technology may be feasible for use with condensate drains to the house interior. (FUR: 

ACEEE, No. 1.3.009 at p. 6) In contrast, Lennox stated that it supports the 81-percent 

AFUE max-tech efficiency levels shown for weatherized gas furnace furnaces only for 

the purposes of undertaking required analysis; Lennox does not support DOE’s setting 

max-tech as the minimum required efficiency level in a standard, and stated that DOE 

should avoid doing so. (FUR: Lennox, No. 1.3.018 at p. 3) 

During the screening analysis (see section IV.B of this direct final rule), DOE 

considered technologies to improve the AFUE of weatherized gas furnaces, but 

determined that no weatherized gas furnace technologies satisfied all four screening 

criteria. As a result, 81-percent AFUE is the maximum technologically feasible efficiency 

level for these products. At efficiencies above 81-percent AFUE, the potential for the 

formation of condensate increases, causing concerns about condensate freezing in 

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weatherized furnaces, which are installed outdoors. When condensate freezes, the 

performance of the unit is impacted, and failure rates increase, while reliability decreases. 

As suggested by ACEEE, DOE examined a condensing design for weatherized gas 

furnaces. In researching weatherized gas furnace designs currently on the market as well 

as prototype designs, DOE did not discover any designs that have been or are currently 

being used in commercially-available designs or working prototypes for residential 

condensing weatherized gas furnaces. Therefore, DOE is not aware of any designs that 

have reliably overcome issues associated with condensate freezing in weatherized gas 

furnaces, and this direct final rule does not include efficiency levels where condensate 

formation is possible for this product class. However, DOE recognizes that if the issues 

associated with condensate freezing in weatherized gas furnaces can be reliably 

overcome, there may be potential for developing products at condensing efficiency levels 

in the future. 

The minimum energy conservation standard for weatherized gas furnaces that was 

promulgated by the November 2007 Rule is 81-percent AFUE. 72 FR 65136, 65169 

(Nov. 19, 2007); 10 CFR 430.32(e)(1)(ii). Because DOE has concluded that the 

November 2007 Rule was not vacated by the remand agreement, 81-perecent AFUE was 

used as the baseline for this rulemaking. As a result, DOE has determined that 81-percent 

AFUE is both the baseline and max-tech level for weatherized gas furnaces. DOE 

concluded that there is no need to perform additional analyses for these products, since 

the de facto minimum standard will be 81-percent AFUE. 

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b. Space-Constrained Central Air Conditioner and Heat Pump Max-Tech 

Efficiency Levels 

In conducting its analyses, DOE determined that the max-tech levels for both the 

space-constrained air conditioner and heat pump product classes are 12 SEER, which is 

equivalent to the baseline level. DOE has concluded that unique factors may prevent 

through-the-wall products from realizing the full potential of energy saving design 

options available to other product classes. Typically, increased condenser coil surface 

area is the most cost-effective energy saving measure available for air conditioners and 

heat pumps. However, manufacturers of space-constrained products are limited in their 

ability to implement this option by the apparent constraints upon coil size inherently 

present in this product class, and some manufacturers have expressed concern that the 

available condenser coil surface area may have already been maximized in order to reach 

the 10.9 SEER standard, which was set forth in the previous rulemaking for through-thewall products. 69 FR 50997, 51001(August 17, 2004). Similarly, manufacturers have 

claimed that the number of coil rows has also been maximized to the point at which the 

addition of further rows would not provide a noticeable improvement in performance. 

Other coil improvements, such as micro-channel tubing23, were proven technologically 

infeasible during research and development testing because manufacturers have been 

unable to solve defrosting issues, calling into question the technological feasibility of this 

technology option for all types of heat pumps. If coil improvements are insufficient to 

increase product efficiency, through-the-wall manufacturers must explore more-costly 

23 Microchannel heat exchangers have a rectangular cross-section containing several small channels 

through which refrigerant passes. Fins pass between the tubes and are brazed to the tubes. These heat 

exchangers are capable of transferring more heat per unit of face area than a round-tube plate-fin coil of 

comparable capacity. 

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design options, such as high-efficiency compressors and fan motors and controls. 

According to certain manufacturers, higher-efficiency compressors were incorporated 

into products on the market to meet the 10.9 SEER standard, and variable speed fan 

motors and advanced controls were incorporated into product designs when the throughthe-wall product class expired and those products were required to meet the 12 SEER 

standard as part of the space-constrained product classes. The expiration of this product 

class and inclusion of the through-the-wall units in the space-constrained product class is 

discussed in greater detail in section IV.A.3.b. The implementation of these technologies 

to meet the 12 SEER requirement of the space-constrained product class suggests that 

manufacturers have few, if any, technology options left to improve efficiency level 

beyond 12 SEER. 

DOE conducted teardowns and further market research to confirm this hypothesis 

and found the space-constrained max-tech efficiency level to be 12 SEER for both the 

space-constrained air conditioner and heat pump product classes. This level matches the 

baseline, and therefore, DOE would be unable to raise the energy conservation standards. 

Therefore, DOE concluded that there is no need to perform additional analyses for these 

products, since the de facto minimum standard will be 12 SEER. However, during its 

investigation, DOE found that space-constrained products have the potential to achieve 

higher off mode efficiency levels, and, therefore, considered these products in the off 

mode analysis, which is discussed in section III.E.2.a. 

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H. Energy Savings 

1. Determination of Savings 

DOE used its NIA spreadsheet to estimate energy savings from amended 

standards for residential furnaces and central air conditioners and heat pumps. (The NIA 

spreadsheet model is described in section IV.G of this notice and chapter 10 of the direct 

final rule TSD.) For most of the considered TSLs, DOE forecasted cumulative energy 

savings beginning in the year in which compliance with amended standards would be 

required, and ending 30 years afterward. For TSL 4, which matches the recommendations 

in the consensus agreement, DOE forecasted the energy savings from 2015 through 2045 

for central air conditioners and heat pumps, and from 2013 through 2045 for furnaces.24 

DOE quantified the energy savings attributable to each TSL as the difference in energy 

consumption between the standards case and the base case. The base case represents the 

forecast of energy consumption in the absence of new or amended mandatory efficiency 

standards, and considers market demand for more-efficient products. 

The NIA spreadsheet model calculates the energy savings in “site energy,” which 

is the energy directly consumed by products at the locations where they are used. DOE 

reports national energy savings on an annual basis in terms of the source (primary) 

energy savings, which is the savings in the energy that is used to generate and transmit 

energy to the site. To convert site energy to source energy, DOE derived annual 

conversion factors from the model used to prepare the Energy Information 

24 TSL 4 incorporates the recommendations of the consensus agreement, which include compliance dates in 

2015 for central air conditioners and heat pumps and in 2013 for furnaces. 

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Administration’s (EIA) Annual Energy Outlook 2010 (AEO2010), which presents longterm projections of energy supply, demand, and prices.25 

2. Significance of Savings 

As noted above, under 42 U.S.C. 6295(o)(3)(B), EPCA prohibits DOE from 

adopting a standard for a covered product if such standard would not result in 

“significant” energy savings. While the term “significant” is not defined in the Act, the 

U.S. Court of Appeals for the D.C. Circuit, in Natural Resources Defense Council v. 

Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended 

“significant” energy savings in this context to be savings that were not “genuinely 

trivial.” The energy savings for all of the TSLs considered in this rulemaking are 

nontrivial, and, therefore, DOE considers them “significant” within the meaning of 42 

U.S.C. 6295(o)(3)(B). 

I. Economic Justification 

1. Specific Criteria 

As discussed in section II.B, EPCA provides seven factors to be evaluated in 

determining whether a potential energy conservation standard is economically justified. 

(42 U.S.C. 6295(o)(2)(B)(i)) The following sections generally discuss how DOE is 

addressing each of those seven factors in this rulemaking. For further details and the 

results of DOE’s analyses pertaining to economic justification, see sections IV and V of 

today’s notice. 

25 For more information on AEO2010, see: http://www.eia.doe.gov/oiaf/aeo/. 

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a. Economic Impact on Manufacturers and Consumers 

In determining the impacts of a new or amended standard on manufacturers, DOE 

first determines the quantitative impacts using an annual cash-flow approach. This 

includes both a short-term assessment (based on the cost and capital requirements 

associated with new or amended standards during the period between the announcement 

of a regulation and when the regulation comes into effect) and a long-term assessment 

(based on the costs and margin impacts over the 30-year analysis period). The impacts 

analyzed include INPV (which values the industry on the basis of expected future cash 

flows), cash flows by year, changes in revenue and income, and other measures of 

impact, as appropriate. Second, DOE analyzes and reports the impacts on different types 

of manufacturers, paying particular attention to impacts on small manufacturers. Third, 

DOE considers the impact of standards on domestic manufacturer employment and 

manufacturing capacity, as well as the potential for standards to result in plant closures 

and loss of capital investment. Finally, DOE takes into account cumulative impacts of 

different DOE regulations and other regulatory requirements on manufacturers. 

For individual consumers, measures of economic impact include the changes in 

LCC and the PBP associated with new or amended standards. The LCC, which is also 

separately specified as one of the seven factors to be considered in determining the 

economic justification for a new or amended standard (42 U.S.C. 6295(o)(2)(B)(i)(II)), is 

discussed in the following section. For consumers in the aggregate, DOE also calculates 

the net present value from a national perspective of the economic impacts on consumers 

over the forecast period used in a particular rulemaking. 

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b. Life-Cycle Costs 

The LCC is the sum of the purchase price of a product (including the cost of its 

installation) and the operating expense (including energy and maintenance and repair 

expenditures) discounted over the lifetime of the product. The LCC savings for the 

considered efficiency levels are calculated relative to a base case that reflects likely 

trends in the absence of amended standards. The LCC analysis requires a variety of 

inputs, such as product prices, product energy consumption, energy prices, maintenance 

and repair costs, product lifetime, and consumer discount rates. DOE assumes in its 

analysis that consumers purchase the product in the year in which compliance with the 

amended standard is required. 

To account for uncertainty and variability in specific inputs, such as product 

lifetime and discount rate, DOE uses a distribution of values with probabilities attached 

to each value. A distinct advantage of this approach is that DOE can identify the 

percentage of consumers estimated to achieve LCC savings or experiencing an LCC 

increase, in addition to the average LCC savings associated with a particular standard 

level. In addition to identifying ranges of impacts, DOE evaluates the LCC impacts of 

potential standards on identifiable subgroups of consumers that may be 

disproportionately affected by an amended national standard. 

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c. Energy Savings 

While significant conservation of energy is a separate statutory requirement for 

imposing an energy conservation standard, the Act requires DOE, in determining the 

economic justification of a standard, to consider the total projected energy savings that 

are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) DOE 

uses the NIA spreadsheet results in its consideration of total projected savings. 

d. Lessening of Utility or Performance of Products 

In establishing classes of products, and in evaluating design options and the 

impact of potential standard levels, DOE seeks to develop standards that would not lessen 

the utility or performance of the products under consideration. None of the TSLs 

presented in today’s direct final rule would reduce the utility or performance of the 

products considered in the rulemaking. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) During the 

screening analysis, DOE eliminated from consideration any technology that would 

adversely impact consumer utility. For the results of DOE’s analyses related to the 

potential impact of amended standards on product utility and performance, see section 

direct final rule TSD. 

e. Impact of Any Lessening of Competition 

EPCA directs DOE to consider any lessening of competition that is likely to result 

from standards. Specifically, it directs the U.S. Attorney General (Attorney General) to 

determine in writing the impact, if any, of any lessening of competition likely to result 

from a proposed standard and to transmit such determination to the Secretary, not later 

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than 60 days after the publication of a proposed rule, together with an analysis of the 

nature and extent of such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (ii)) DOE is 

simultaneously publishing a NOPR containing energy conservation standards identical to 

those set forth in today’s direct final rule and has transmitted a copy of today’s direct 

final rule and the accompanying TSD to the Attorney General, requesting that the U.S. 

Department of Justice (DOJ) provide its determination on this issue. DOE will consider 

DOJ’s comments on the rule in determining whether to proceed with the direct final rule. 

DOE will also publish and respond to the DOJ’s comments in the Federal Register in a 

separate notice. 

f. Need of the Nation to Conserve Energy 

Another factor which DOE must consider in determining whether a new or 

amended standard is economically justified is the need for national energy and water 

conservation. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from new or 

amended standards are likely to provide improvements to the security and reliability of 

the Nation’s energy system. Reductions in the demand for electricity may also result in 

reduced costs for maintaining the reliability of the Nation’s electricity system. DOE 

conducts a utility impact analysis to estimate how new or amended standards may affect 

the Nation’s needed power generation capacity. 

Energy savings from today’s standards are also likely to result in environmental 

benefits in the form of reduced emissions of air pollutants and greenhouse gases 

associated with energy production (i.e., from power plants), and through reduced use of 

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fossil fuels at the homes where gas and oil furnaces are used. DOE reports the 

environmental effects from today’s standards, as well as from each TSL it considered for 

furnaces and central air conditioners and heat pumps, in the environmental assessment 

contained in chapter 15 in the direct final rule TSD. DOE also reports estimates of the 

economic value of emissions reductions resulting from the considered TSLs. 

g. Other Factors 

The Act allows the Secretary, in determining whether a standard is economically 

justified, to consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 

6295(o)(2)(B)(i)(VII)) In developing the standards set forth in this notice, DOE has also 

considered the comments submitted by interested parties, including the recommendations 

in the consensus agreement, which DOE believes provides a reasoned statement by 

interested persons that are fairly representative of relevant points of view (including 

representatives of manufacturers of covered products, States, and efficiency advocates) 

and contains recommendations with respect to energy conservation standards that are in 

accordance with 42 U.S.C. 6295(o). DOE has encouraged the submission of consensus 

agreements as a way to get diverse stakeholders together, to develop an independent and 

probative analysis useful in DOE standard setting, and to expedite the rulemaking 

process. In the present case, one outcome of the consensus agreement was a 

recommendation to accelerate the compliance dates for these products, which would have 

the effect of producing additional energy savings at an earlier date. DOE also believes 

that standard levels recommended in the consensus agreement may increase the 

likelihood for regulatory compliance, while decreasing the risk of litigation. 

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2. Rebuttable Presumption 

As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA provides for a rebuttable 

presumption that an energy conservation standard is economically justified if the 

additional cost to the consumer of a product that meets the standard level is less than 

three times the value of the first-year energy (and, as applicable, water) savings resulting 

from the standard, as calculated under the applicable DOE test procedure. DOE’s LCC 

and PBP analyses generate values that calculate the payback period for consumers of 

potential new and amended energy conservation standards. These analyses include, but 

are not limited to, the three-year payback period contemplated under the rebuttable 

presumption test. However, DOE routinely conducts a full economic analysis that 

considers the full range of impacts to the consumer, manufacturer, Nation, and 

environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis 

serve as the basis for DOE to evaluate the economic justification for a potential standard 

level definitively (thereby supporting or rebutting the results of any preliminary 

determination of economic justification). The rebuttable presumption payback calculation 

is discussed in section IV.F.12 of this direct final rule and chapter 8 of the direct final 

rule TSD. 

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IV. Methodology and Discussion 

DOE used two spreadsheet tools, which are available online,26 to estimate the 

impact of all the considered standard levels, including today’s standards. The first 

spreadsheet calculates LCCs and payback periods of potential amended energy 

conservation standards. The second provides shipments forecasts and then calculates 

national energy savings and net present value impacts of potential energy conservation 

standards. The Department also assessed manufacturer impacts, largely through use of 

the Government Regulatory Impact Model (GRIM), which is an industry cash-flow 

model that is described in detail in section IV.I. 

Additionally, DOE estimated the impacts on utilities and the environment of 

potential amended energy efficiency standards for furnaces and central air conditioners 

and heat pumps. DOE used a version of EIA’s National Energy Modeling System 

(NEMS) for the utility and environmental analyses. The NEMS model simulates the 

energy sector of the U.S. economy. EIA uses NEMS to prepare its Annual Energy 

Outlook. For more information on NEMS, refer to The National Energy Modeling 

System: An Overview, DOE/EIA–0581 (98) (Feb. 1998) (available at: 

http://tonto.eia.doe.gov/FTPROOT/forecasting/058198.pdf). 

The version of NEMS used for appliance standards analysis is called NEMS-BT, 

which is based on the AEO version but with minor modifications.27 NEMS-BT offers a 

26 http://www1.eere.energy.gov/buildings/appliance_standards/residential/furnaces_boilers.html and 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html 

27 EIA approves the use of the name “NEMS” to describe only an AEO version of the model without any 

modification to code or data. Because the present analysis entails some minor code modifications (to allow 

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sophisticated picture of the effect of standards, because it accounts for the interactions 

between the various energy supply and demand sectors and the economy as a whole. 

A. Market and Technology Assessment 

1. General 

When beginning an energy conservation standards rulemaking, DOE develops 

information that provides an overall picture of the market for the products concerned, 

including the purpose of the products, the industry structure, and market characteristics. 

This activity includes both quantitative and qualitative assessments based primarily on 

publicly-available information (e.g., manufacturer specification sheets, industry 

publications, and data from trade organization websites, such as AHRI at 

http://www.ahrinet.org/). The subjects addressed in the market and technology 

assessment for this rulemaking include: (1) quantities and types of products sold and 

offered for sale; (2) retail market trends; (3) products covered by the rulemaking; (4) 

product classes; (5) manufacturers; (6) regulatory requirements and non-regulatory 

programs (such as rebate programs and tax credits); and (7) technologies that could 

improve the energy efficiency of the products under examination. See chapter 3 of the 

direct final rule TSD for further discussion of the market and technology assessment. 

2. Products Included in this Rulemaking 

This subsection addresses the scope of coverage for this energy conservation 

standards rulemaking for furnaces, central air conditioners, and heat pumps. It will also 

modeling of the impact of energy conservation standards on the appropriate energy end uses) and uses the 

model under various policy scenarios that deviate from AEO assumptions, the name “NEMS-BT” refers to 

the model as used here. (“BT” stands for DOE’s Building Technologies Program.) 

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address whether EPCA covers certain other products and authorizes DOE to adopt 

standards for them. 

a. Furnaces 

EPCA defines a residential “furnace” as a product that: (1) either uses only singlephase electric current, or uses single-phase electric current or direct current (DC) in 

conjunction with natural gas, propane, or home heating oil; (2) is designed to be the 

principal heating source for the living space of a residence; (3) is not contained within the 

same cabinet with a central air conditioner whose rated cooling capacity is above 65,000 

Btu per hour; (4) is an electric central furnace, electric boiler, forced- air central furnace, 

gravity central furnace, or low pressure steam or hot water boiler; and (5) has a heat input 

rate of less than 300,000 Btu per hour for electric boilers and low pressure steam or hot 

water boilers and less than 225,000 Btu per hour for forced-air central furnaces, gravity 

central furnaces, and electric central furnaces. (42 U.S.C. 6291(23)) This definition 

covers the following types of products: (1) gas furnaces (non-weatherized and 

weatherized); (2) oil-fired furnaces (non-weatherized and weatherized); (3) mobile home 

furnaces (gas and oil-fired); (4) electric resistance furnaces; (5) hot water boilers (gas and 

oil-fired); (6) steam boilers (gas and oil-fired); and (7) combination space/water heating 

appliances (water-heater/fancoil combination units and boiler/tankless coil combination 

units). 

Residential boilers are outside the scope of this rulemaking. EISA 2007 included 

amendments to EPCA that established amended standards for these boilers (42 U.S.C. 

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6295(f)(3)), and DOE subsequently incorporated these standards into its regulations at 10 

CFR 430.32(e)(2)(ii). 73 FR 43611 (July 28, 2008). Compliance with the new statutory 

boilers standards is required for covered products manufactured or imported on or after 

September 1, 2012. As discussed in section II.B.2.a above, under the voluntary remand, 

DOE agreed to undertake analyses to determine whether it should establish regional 

energy conservation standards for residential furnaces. As part of this analysis, DOE 

agreed to consider the effect of alternate standards on natural gas prices. The current 

rulemaking for furnaces is the second amended energy conservation standards 

rulemaking which is being conducted pursuant to authority under 42 U.S.C. 

6295(f)(4)(C) and (o)(6). Given the relatively recent enactment of statutorily-prescribed 

boiler standards in EISA 2007, DOE has decided to consider amended energy 

conservation standards for boilers under 42 U.S.C. 6295(f)(4)(C) in a future rulemaking. 

For furnaces, this rulemaking covers the same products as those covered by the 

November 2007 Rule, consisting of the following types of furnaces: (1) non-weatherized 

gas; (2) weatherized gas; (3) mobile home gas; and (4) non-weatherized oil-fired. 

However, DOE did not perform an AFUE analysis for weatherized gas furnaces because 

the November 2007 Rule promulgated standards at the max-tech AFUE level. As 

described in section III.G, DOE has concluded that 81-percent AFUE is still the max-tech 

efficiency achievable for weatherized gas furnaces. Therefore, because EPCA’s antibacksliding clause would not allow DOE to consider adoption of a minimum standard 

below 81-percent AFUE, and because there are no viable efficiency levels above 81­

percent AFUE, DOE did not perform an AFUE analysis for weatherized gas furnaces. 

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Although DOE did not consider amended AFUE standards for electric furnaces, 

mobile home oil-fired furnaces, and weatherized oil-fired furnaces in this rulemaking for 

the reasons discussed in the following sections, DOE did consider standby mode and off 

mode standards for these products. Additionally, DOE did not analyze energy 

conservation standards for combination space/water heating appliances for reasons 

discussed below. 

(i) Mobile Home Oil-Fired and Weatherized Oil-Fired Furnaces 

DOE is not proposing amended AFUE standards for mobile home oil-fired 

furnaces and weatherized oil-fired furnaces because DOE understands that only a very 

small number of these products are shipped (as these products combine to make up less 

than one percent of all furnace models in the AHRI directory) and that the few models 

that are shipped exceed the currently applicable standards (i.e., 75-percent AFUE for 

mobile home oil-fired furnaces and 78-percent AFUE for weatherized oil-fired furnaces). 

As a result, DOE believes that promulgating higher standards for these products would 

result in de minimis energy savings. DOE initially made these determinations in the 

proposed rule leading to the development of the November 2007 Rule (71 FR 59204, 

59214 (Oct. 6, 2006)), and based on a more recent review of products on the market and 

feedback from manufacturers, DOE believes the market for all of these furnaces has not 

changed. DOE initially made this proposal in the RAP and did not receive any related 

comments. 

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(ii) Electric Furnaces 

EPCA initially prescribed standards at 78-percent AFUE for “furnaces,” which 

did not exclude electric furnaces. (42 U.S.C. 6295(f)(1)) The definition of a “furnace” in 

EPCA (42 U.S.C. 6291(23)) explicitly includes “electric furnaces,” and, therefore, the 

78-percent AFUE standard set by EPCA applies to electric furnaces. In the November 

2007 final rule, DOE stated that it was not adopting amended standards for electric 

furnaces. 72 FR 65136, 65154 (Nov. 19, 2007). However, when outlining the minimum 

AFUE requirements for the other furnace product classes, DOE did not restate the 

requirement for electric furnaces that was originally established by EPCA. To clarify the 

existing standards for electric furnaces, DOE is reaffirming the 78-percent minimum 

AFUE level for electric furnaces that was originally established by EPCA in today’s 

direct final rule. As noted previously, DOE is not adopting amended AFUE standards for 

electric furnaces because it understands that their efficiency already approaches 100­

percent AFUE. The AFUE ratings for electric furnace products currently on the market 

range from 96-percent (for outdoor units due to jacket losses) to 100-percent, and as 

discussed below, the test procedures for these products effectively limit them from 

having AFUE ratings any lower than this. Therefore, for the reasons explained below, 

DOE believes that any improvements to electric furnaces would have a de minimis 

energy-savings potential and did not consider amending the AFUE standards for these 

products. (However, as noted in section III.E.1.b of this direct final rule, DOE analyzed 

new energy conservation standards for standby mode and off mode energy consumption 

of these products.) 

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The test procedure for residential furnaces specifies that AFUE for electric 

furnaces is calculated as 100 percent minus jacket losses, and gives the option of 

assigning jacket losses equal to 1 percent.28 The AFUE is calculated in this manner 

because the electric heating elements convert all of the electrical input energy into heat 

energy, and the only losses at the point of operation are through the jacket. The jacket 

losses are then multiplied by a factor of 1.7 for indoor furnaces (which must be tested as 

isolated combustion systems) and 3.3 for outdoor furnaces, and subtracted from 100 

percent to get the AFUE rating. Therefore, the lowest possible AFUE rating for an 

electric furnace, according to DOE’s test procedure and assuming a default value of 1 

percent jacket losses, is 98.3 percent AFUE for non-weatherized (indoor) electric 

furnaces and 96.7 percent AFUE for weatherized (outdoor) electric furnaces. Further, a 

significant portion of electric furnaces are installed in the conditioned space, and any heat 

lost through the jacket in such installations would contribute to the heated space, 

effectively making the electric furnace completely efficient at the point of use. 

The jacket losses of furnaces currently on the market are low, as jacket losses are 

already assumed by the test procedure to be a default of 1 percent, and it is unlikely that 

further improvements will have much impact on efficiency. Because reducing jacket 

losses are the only means for improving the efficiency of these products as rated by 

DOE’s test procedure, they have an extremely limited potential for additional energy 

28 For the rulemaking analysis in support of the 2007 Final Rule for residential furnaces and boilers, DOE 

gathered test data on the jacket losses for furnaces. This data is summarized in a presentation available at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/support_material.pdf. The 

actual jacket loss values based on testing ranged from 0.11 percent to 0.75 percent. Thus, DOE believes one 

percent jacket losses to be representative of a conservative estimate of the actual jacket losses of furnaces. 

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savings. Any efficiency levels analyzed would be very unlikely to result in significant 

energy savings. 

In response to DOE’s planned approach for considering amended AFUE 

standards for electric furnaces, which was outlined in the RAP, DOE received several 

comments. 

NRDC stated that DOE should include electric furnaces in the scope of this 

rulemaking because these products represent a low-cost option that could grow in market 

penetration as the efficiency (and as a result, cost) of competing products that provide the 

exact same consumer utility (i.e., heat pumps, which in most cases have electric furnaces 

as back up and would use the same duct system) may potentially increase with upcoming 

standards. Further, NRDC stated that unless the energy savings potential of amended 

standards for electric furnaces is less than 0.032 quads (an amount deemed significant by 

DOE in the packaged terminal air conditioners (PTACs) rulemaking29), DOE should 

include them in the scope of this rulemaking. (FUR: NRDC, No. 1.3.020 at pp. 8) 

ACEEE recommended including electric furnaces and requiring a minimum AFUE of 

greater than 100-percent for all ducted electric furnaces, given the substantial energy 

losses in transmission from source to site. (FUR: ACEEE, No. 1.3.009 at p. 3-4) AGA 

stated that excluding electric furnaces from consideration in the rulemaking is 

counterproductive to reducing energy consumption, so the commenter urged DOE to look 

at the number of electric furnaces on the market and to use that number in a comparative 

29 DOE published the final rule for PTACs on October 7, 2008. 73 FR 58772. 

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analysis to determine the potential impact of inclusion of such products in this 

rulemaking. (FUR: AGA, Public Meeting Transcript, No. 1.2.006 at p. 42) 

Conversely, EEI stated that it supports the scope of the current rulemaking and 

agreed with DOE’s conclusions in the RAP regarding electric resistance furnaces and 

boilers. (FUR: EEI, No. 1.3.015 at p. 3) The American Public Power Association (APPA) 

commented that if DOE decides to reject the use of the consensus agreement and proceed 

with a rulemaking, APPA would support the scope as outlined by DOE. More 

specifically, APPA supported the finding that the rulemaking should not cover electric 

resistance furnaces because their efficiency is already very high. (FUR: APPA, No. 

1.3.011 at p. 3) 

In response, DOE notes that it cannot promulgate a standard that would lead to 

the elimination of any product class. (42 U.S.C. 6295(o)(4)) Because it is currently 

impossible for manufacturers to achieve an AFUE standard of greater than 100 percent 

for electric furnaces, and because such a standard would effectively eliminate electric 

furnaces from the market, DOE does not believe ACEEE’s suggestion is a valid 

opportunity for energy savings under EPCA. Additionally, as noted above, DOE 

reviewed the market for electric furnaces and determined that because the efficiency of 

these products approaches 100-percent AFUE, the energy-savings potential is de 

minimis. As a result, DOE does not believe there is reason to consider amended standards 

for electric furnaces in this rulemaking. 

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EarthJustice stated that DOE has the statutory authority to consider heat pump 

technology as a design option to improve the efficiency of electric furnaces. EarthJustice 

asserted that because heat pumps use the same kind of energy and provide the same 

functionality as electric resistance furnaces, there is no basis for treating the products 

differently, and separate standards for these products are inconsistent with EPCA's 

mandate to save energy. Further, EarthJustice stated that the definition of a “furnace” is 

broad enough to cover heat pumps even though they are already defined under 42 U.S.C. 

6291(24) and argued that a heat pump meets all of the requirements of the furnace 

definition. (FUR: EarthJustice, No. 1.3.014 at pp. 3-6) Similarly, NRDC stated that 

electric furnaces should be added to the heat pump product class and be required to 

achieve the same performance. NRDC suggested rating both types of products using the 

same metric – testing the furnaces for HSPF if possible, or exploring an AFUE rating for 

a heat pump. (FUR: NRDC, No. 1.3.020 at pp. 8-9) 

DOE notes that EPCA defines a “furnace” as “an electric central furnace, electric 

boiler, forced-air central furnace, gravity central furnace, or low pressure steam or hot 

water boiler.” (42 U.S.C. 6291(23)(C)) Further, DOE’s definitions in the Code of Federal 

Regulations define an “electric central furnace” as “a furnace designed to supply heat 

through a system of ducts with air as the heating medium, in which heat is generated by 

one or more electric resistance heating elements and the heated air is circulated by means 

of a fan or blower.” 10 CFR 430.2. Separately, EPCA defines a “heat pump” as a 

product that (1) consists of one or more assemblies; (2) is powered by single phase 

electric current; (3) is rated below 65,000 Btu per hour; (4) utilizes an indoor 

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conditioning coil, compressors, and refrigerant-to-outdoor-air heat exchanger to provide 

air heating; and (5) may also provide air cooling, dehumidifying, humidifying circulating, 

and air cleaning. (42 U.S.C. 6291(24)) DOE believes that the definition of “heat pump” 

in EPCA does not include electric furnaces, because electric furnaces do not meet all of 

the criteria of the “heat pump” definition (such as utilizing a compressor and refrigerant). 

(42 U.S.C. 6291(24)(D)) Further, DOE believes that because “heat pumps” are defined 

separately by EPCA, they are not included under the definition of a “furnace” under 42 

U.S.C. 6291(23)(C), which states that a furnace is an electric central furnace, electric 

boiler, forced-air central furnace, gravity central furnace, or low pressure steam or hot 

water boiler. Because an electric central furnace utilizes heat “generated by one or more 

electric resistance elements,” a heat pump would not be covered under the definition of 

an “electric central furnace.” Once heat pump technology is added to an electric furnace, 

the product would no longer generate heat using an electric resistance element, but 

instead would use a refrigerant-to-outdoor-air heat exchanger to provide air heating. Such 

a change in the mechanism for generating heat would exclude the product from being 

covered as a furnace (as it would no longer be an “electric furnace” under the definition 

of a “furnace” in 42 U.S.C. 6291(23)(C))), and would instead cause it to be classified it as 

a heat pump, under EPCA’s definitions. Therefore, DOE has concluded that it will not 

consider heat pump technology as a design option for electric furnaces in the analysis. 

(iii) Combination Space/Water Heating Appliances 

DOE excluded combination space/water heating appliances from consideration in 

this rulemaking, as was done in the NOPR leading to the November 2007 Rule for 

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furnaces and boilers. 69 FR 45420, 45429 (July 29, 2004). An adequate test procedure 

does not exist that would allow DOE to set standards for these products. 

ACEEE urged DOE to develop a test method and energy conservation standard 

for combination hot water/space heating units. (FUR: ACEEE, No. 1.3.009 at p. 3) EEI 

stated that if combination space/water heating appliances obtain greater market share, 

then DOE should create a test procedure and efficiency standards in a future rulemaking 

because they are a competitive product. (FUR: EEI, No. 1.3.015 at p.3) 

DOE has not yet initiated a test procedure rulemaking to establish a test procedure 

for combination space/water heating appliances. DOE believes that doing so as a part of 

this rulemaking would cause delays that could prevent DOE from issuing amended 

standards for residential furnaces and central air conditioners and heat pumps in a timely 

manner, and thus, may reduce energy savings to the Nation from amended standards (if 

the compliance date must be delayed). Therefore, DOE may consider a test procedure and 

energy conservation standards for combination space/water heating appliances in future 

rulemakings, but will not do so as a part of this rulemaking for residential furnaces and 

central air conditioners and heat pumps. 

b. Central Air Conditioners and Heat Pumps 

EPCA defines a residential “central air conditioner” as a product, other than a 

packaged terminal air conditioner, which is: (1) powered by single-phase electric current, 

(2) air cooled, (3) rated below 65,000 Btu per hour, (4) not contained within the same 

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cabinet as a furnace the rated capacity of which is above 225,000 Btu per hour, and (5) a 

heat pump or a cooling only unit. (42 U.S.C. 6291(21)) Furthermore, EPCA defines a 

“heat pump” as a product, other than a packaged terminal heat pump, which: (1) consists 

of one or more assemblies, (2) is powered by single-phase electric current, (3) is rated 

below 65,000 Btu per hour, (4) uses an indoor conditioning coil, compressors, and 

refrigerant-to-outdoor air heat exchanger to provide air heating, and (5) may also provide 

air cooling, dehumidifying, humidifying circulating, and air cleaning. (42 U.S.C. 6291 

(24)) 

For this rulemaking, DOE is evaluating amended energy conservation standards 

for the products covered by DOE’s current standards for central air conditioners and heat 

pumps, specified at 10 CFR 430.32(c)(2), which DOE adopted in the August 2004 Rule. 

These products consist of: (1) split-system air conditioners; (2) split-system heat pumps; 

(3) single package air conditioners; (4) single package heat pumps; (5) small-duct highvelocity (SDHV) air conditioners and heat pumps; (6) space-constrained air conditioners; 

and (7) space-constrained heat pumps. The August 2004 Rule also prescribed standards 

for through-the-wall air conditioners and heat pumps, but those products are now 

considered space-constrained products because the through-the-wall product class 

expired on January 23, 2010. 69 FR 51001. 

(i) Evaporative Coolers 

In response to the preliminary analysis, ACEEE indicated that DOE should 

consider evaporative pre-cooled air conditioner condensers (i.e., the evaporative pre142 
 

 

 

 

 

 

 

 

cooler is an add-on to a conventional condenser) as a technology that could improve the 

efficiency of air conditioners. (CAC: ACEEE, No. 72 at p. 4) As a result of this input, 

DOE reexamined its treatment of evaporative coolers both as stand-alone products and as 

add-ons to air conditioners. Evaporative coolers, also sometimes referred to as swamp 

coolers, can be used as stand-alone residential cooling systems. This type of system is 

generally found in hot, dry regions such as the southwestern United States. Evaporative 

coolers operate by passing dry outdoor air over a water-saturated medium, which cools 

the air as the water evaporates. The cooled air is then directed into the home by a 

circulating fan. As mentioned above, EPCA defines a residential “central air 

conditioner,” in part, as “air-cooled.” (42 U.S.C. 6291(21)) Because residential 

evaporative coolers are “evaporatively-cooled” (instead of “air-cooled”), DOE has 

determined that they do not meet this definition and are, therefore, outside the scope of 

this rulemaking. 

In some instances, however, evaporative coolers can be added on to air 

conditioners, and the combined system is referred to as an evaporative pre-cooled air 

conditioner. In this application, the add-on evaporative cooler functions in the same 

manner as the stand-alone system, except that its output air is blown over the air 

conditioner condenser coils, instead of directly into the conditioned space. The increased 

temperature gradient between the condenser coil and the air improves heat transfer and 

increases the efficiency of the condenser coil. DOE is unaware of either any evaporative 

pre-cooled central air conditioning systems offered as a complete package by any air 

conditioner manufacturer, or of any prototype of such a system. Consequently, without 

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cost or performance data, DOE cannot give this combined system full consideration in 

the analysis. Therefore, the assumed cost of meeting each TSL is based on other 

technologies, which may be more or less costly than evaporative pre-cooling. 

3. Product Classes 

In evaluating and establishing energy conservation standards, DOE generally 

divides covered products into classes by the type of energy used, or by capacity or other 

performance-related feature that justifies a different standard for products having such 

feature. (42 U.S.C. 6295(q)) In deciding whether a feature justifies a different standard, 

DOE must consider factors such as the utility of the feature to users. Id. DOE normally 

establishes different energy conservation standards for different product classes based on 

these criteria. 

a. Furnaces 

The existing Federal energy conservation standards for residential furnaces are 

codified at 10 CFR 430.32(e)(1)(i). The November 2007 Rule amended energy 

conservation standards for residential furnaces and established six residential furnace 

product classes. 72 FR 65136, 65169 (Nov. 19, 2007). In the furnaces RAP, DOE stated 

that it intends to maintain these product classes. Ingersoll Rand commented that the 

planned product classes seem appropriate. (FUR: Ingersoll Rand, No. 1.3.006 at p. 2) 

Lennox stated that it supports DOE’s planned product classes to the extent they mirror 

those in the consensus agreement. (FUR: Lennox, No. 1.3.018 at p. 3) 

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For today’s direct final rule, DOE reviewed the market for residential furnaces, 

and determined that it is appropriate to consider the same six product classes established 

for the November 2007 Rule for this analysis. In addition, DOE also considered electric 

furnaces for standby mode and off mode standards only. Therefore, the furnace product 

classes are: 

Non-weatherized gas; 

Weatherized gas; 

Mobile home gas; 

Mobile home oil-fired; 

Non-weatherized oil-fired; 

Weatherized oil-fired; and 

Electric. 

As stated in section IV.A.2.a above, DOE only performed an AFUE analysis for 

non-weatherized gas, mobile home gas, and non-weatherized oil-fired furnaces. 

Additionally, DOE conducted a standby mode and off mode analysis for non-weatherized 

gas, mobile home gas, non-weatherized oil-fired (including mobile home oil-fired), and 

electric furnaces. DOE did not perform a standby mode and off mode analysis for 

weatherized gas and weatherized oil-fired furnaces, as discussed in section III.E.1.a. 

In response to the RAP for furnaces, DOE received several comments related to 

setting different standards for new construction and replacement installations for 

furnaces. AGA recommended that DOE should adopt a condensing standard at 90­

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percent AFUE for new construction, but allow non-condensing 80-percent furnaces to be 

installed in replacement applications. (FUR: AGA, Public Meeting Transcript, No. 

1.2.006 at p. 41) NEEP stated that it does not support limiting a revised standard to new 

construction, because approximately 70 percent of furnace sales are into the replacement 

market, and such a limitation would undermine too much of the amended standard’s 

projected energy savings. (FUR: NEEP, No. 1.3.021 at p. 3) ACEEE stated that the 

expected life of a house is roughly 100 years, and that exempting existing houses from a 

standard sets a precedent for the following rounds of rulemakings. Further, ACEEE stated 

that at some point, DOE would have to set standards that force consumers to retrofit their 

homes to accommodate more-efficient products, and the cost to do this will not go down 

with time. Therefore, ACEEE reasoned that the sooner this is done, the longer the 

benefits will be recognized in an existing house. (FUR: ACEEE, Public Meeting 

Transcript, No. 1.2.006 at pp. 51-52) 

EEI stated strong opposition to setting new efficiency standards for new 

construction for only gas heating products (and not other types of heating products). EEI 

asserted that if new efficiency standards for gas furnaces are to only apply to new 

construction, then new efficiency standards for all other competitive products covered by 

DOE should also apply only to new construction. EEI stated that otherwise, standards in 

each product class should apply to both new construction and retrofit situations to 

maximize energy savings and economies of scale (as has been done in the past). (FUR: 

EEI, No. 1.3.015 at p. 3) 

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In response, DOE notes that setting different standards for products intended for 

replacement installations and products intended for new construction would effectively 

create separate product classes for each of these types of products. As stated above, 

EPCA directs DOE to divide covered products into classes based on the type of energy 

used, capacity, or other performance-related feature that justifies a different standard for 

products having such feature. (42 U.S.C. 6295(q)) DOE does not believe that the 

intended installation type (i.e., new construction or replacement) falls under any of the 

qualifications listed above. As a result, DOE has determined that it does not have the 

authority to establish differentiated standards for product installed in new construction 

and products installed in replacement of an existing unit. Therefore, DOE did not 

consider such standards for this direct final rule. 

b. Central Air Conditioners and Heat Pumps 

The existing Federal energy conservation standards for residential central air 

conditioners and heat pumps went into effect on January 23, 2006. 69 FR 50997 (Aug. 

17, 2004). At 10 CFR 430.32(c)(2), there is a list of the nine product classes of 

residential central air conditioners and heat pumps and their corresponding energy 

conservation standards. However, because the through-the-wall air conditioner and heat 

pump product classes expired on January 23, 2010, DOE examined only seven product 

classes for this residential central air conditioner and heat pump rulemaking. 69 FR 

50997, 51001 (Aug. 17, 2004). The seven product classes DOE examined are: 

Split-system air conditioners; 

Split-system heat pumps; 

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Single-package air conditioners; 

Single-package heat pumps; 

Small-duct, high-velocity systems; 

Space-constrained air conditioners; and 

Space-constrained heat pumps. 

The subsections below provide additional detail and discussion of stakeholder 

comments relating to these seven product classes. 

(i) Expiration of Through-the-Wall Product Class 

Through-the-wall systems were established as a separate product class, and were 

required by the August 2004 Rule to meet a 10.9 SEER standard. As previously 

mentioned, when the through-the-wall product class was created, DOE included a 

provision that the product class would expire on January 23, 2010, after which time units 

in the through-the-wall product class could be considered part of the space-constrained 

product class. 69 FR 50997, 50998 (August 17, 2004). In the August 2004 Rule, DOE 

also established a separate product class for space-constrained systems, requiring them to 

meet a 12 SEER standard. For this direct final rule, because the through-the-wall product 

class has expired, DOE reclassified through-the-wall products. The product class 

assignment of any product depends on that product’s characteristics, but DOE believes 

that most (if not all) of the historically-characterized “through-the-wall” products would 

now be assigned to one of the space-constrained product classes. As a result, DOE 

considered through-the-wall products to be part of the space-constrained product class for Deleted: . 

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its analyses. In addition, DOE is updating the footnote to the table in 10 CFR 

430.32(c)(2) to clarify the classification of through-the-wall products. 

In the preliminary analysis, DOE sought feedback on this classification and 

potential market shifts which may result from considering the former through-the-wall 

products to be space-constrained products. Ingersoll Rand commented that replacement 

units of all types have to contend with the space constraints of the existing installation, 

and the intended benefit of minimum efficiency standards would be severely diminished 

if special treatment of the space-constrained products is continued. (CAC: Ingersoll 

Rand, No. 66 at p. 2) 

Federal law does not allow DOE to promulgate efficiency standards that would 

result in the unavailability in the United States in any covered product type (or class) of 

performance characteristics (including reliability), features, sizes, capacities, and volumes 

that are substantially the same as those currently on the market. (42 U.S.C. 6295(o)(4)) 

The space-constrained product class acts as a safe harbor for product types available 

before 2001 whose efficiency is limited by physical dimensions that are rigidly 

constrained by the intended application. DOE believes that through-the-wall equipment 

intended for replacement applications can meet the definition of space-constrained 

products because they must fit into a pre-existing hole in the wall, and a larger throughthe-wall unit would trigger a considerable increase in the installation cost to 

accommodate the larger unit. On the other hand, while split system and single package air 

conditioners and heat pumps have certain size limitations mainly associated with 

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installation and consumer preferences, these units typically have a component installed 

outdoors. Because part of the unit is outdoors, there is more flexibility to allow for 

increases in the overall unit size. This greater flexibility with regard to product size 

provides these products with an advantage in achieving an increased efficiency because a 

larger coil can be used. Because physical size constraints for through-the-wall products 

continue to exist, DOE determined that continuation of the space-constrained product 

class is warranted. 

(ii) Large-Tonnage Products 

For the preliminary analysis of conventional central air conditioner and heat pump 

product classes, DOE selected 36,000 Btu/hour (i.e., three-tons) as the representative 

capacity for analysis because units at this capacity are ubiquitous across manufacturers, 

have high sales volumes, and span a relatively large range of efficiencies. However, 

large-tonnage products (i.e., products with cooling capacities of approximately five tons) 

have additional constraints that three-ton products do not have, such as added installation 

costs and space requirements, which could potentially lead to different incremental costs 

between efficiency levels for three-ton units as compared to larger-capacity units. In its 

preliminary analysis, DOE determined that these incremental cost differences between 

three-ton units and large-tonnage units were not large enough to necessitate a largetonnage product class, but sought comment on the treatment of larger-tonnage products in 

the analysis. 

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Ingersoll Rand stated that in the past there have not been sufficient differences to 

justify a separate large-tonnage product class. However, when considering the EER 

metric, Ingersoll Rand asserted that the marketability, serviceability, and installation cost 

differences are substantial enough to warrant a separate product class. (CAC: Ingersoll 

Rand, No. 66 at p. 2) Rheem noted that achieving higher efficiency in large-tonnage 

products is more difficult because of size limitations in the coils and the air handler, and 

that there are other issues such as additional refrigerant charge and handling issues 

associated with the larger size. (CAC: Rheem, No. 76 at p. 3) 

For this direct final rule, DOE only considered an EER minimum conservation 

standard for the consensus agreement TSL (see section V.A for more details about the 

TSLs analyzed). The consensus agreement TSL has separate EER levels for largetonnage products to account for the unique characteristics of those products that lead to 

increased costs. DOE believes that the impacts of unit size on EER are enough to justify a 

separate product class for large tonnage units, but does not believe these impacts on 

SEER are enough to justify a separate product class. Therefore, DOE believes a large 

tonnage product class is applicable for the consensus agreement TSL due to the EER 

standard. Because DOE is not considering minimum EER standards for the other TSLs, 

DOE did not establish a separate product class for large-tonnage products for other TSLs. 

However, DOE has determined that the differences among products with different 

cooling capacities are substantial enough to justify an expansion of the engineering 

analysis to two, three, and five tons for split systems. See section IV.C.5.b of today’s 

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direct final rule for further information on DOE’s approach to scaling the analysis at the 

representative cooling capacity to additional cooling capacities. 

(iii) Blower-Coil and Coil-Only Designation for Split System Air Conditioners 

In replacement applications for split-system air conditioners, consumers are 

presented with two options: (1) replace a portion of their system, or (2) replace the entire 

system. For the first option, if a consumer has a furnace installed, and a portion of the air 

conditioning system (i.e., condensing unit or evaporator coil) fails, the consumer may 

choose to only replace the air conditioning portion of the system. This scenario involves 

the replacement of a condensing unit and an evaporator coil used with the existing blower 

fan in the furnace. In these applications, manufacturers are constrained by the efficiency 

of the fan in the installed furnace, and they only have the ability to modify the 

condensing unit or evaporator coil to achieve the desired efficiency. These systems are 

referred to as “coil-only” systems and are tested and rated using the combination of a 

specific condensing unit and evaporator coil with a default indoor fan energy 

consumption specified in the DOE test procedure. Because the default indoor fan energy 

consumption value specified in the test procedure is not for a high-efficiency furnace fan, 

these types of units are limited in the SEER levels that they can achieve. 

For the second option, if a consumer’s entire system is replaced or installed as one 

complete system (as in new construction), the consumer has the ability to select a 

combination of indoor and outdoor units that can achieve any efficiency within the 

commercially-available range of efficiencies for split-system air conditioners because the 

indoor fan efficiency no longer limits the achievable SEER. Because the systems are sold 

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as specific combinations of indoor and outdoor units, manufacturers have the ability to 

modify all portions of the system (i.e., condensing unit, evaporator coil, and indoor fan 

blower) to achieve the desired efficiency. These systems are referred to as “blower-coil” 

systems and are tested and rated using the combination of a specific condensing unit, 

evaporator coil, and indoor fan blower. Because manufacturers have the option to 

improve the efficiency of the indoor blower fan in blower-coil systems, the costefficiency relationship is inherently different than for coil-only systems. Both types of 

systems are prevalent in the marketplace, and for the preliminary analysis, DOE 

characterized split-system air conditioners with separate cost-efficiency curves for 

blower-coil and coil-only systems within a single product class. 

In response to DOE’s request for comment on establishing a single product class 

for blower-coil and coil-only systems, Ingersoll Rand noted that the distinction between 

coil-only and blower-coil systems is artificial because all systems have some means for 

moving indoor air, even when rated coil-only. (CAC: Ingersoll Rand, No. 66 at p. 5) In 

this direct final rule, DOE is not establishing separate product classes for coil-only and 

blower-coil split system air conditioners, and, therefore, DOE continued to analyze them 

separately within the split system air conditioner product class for the direct final rule 

analysis. 

(iv) “Dual-Fuel” Systems 

In the preliminary analysis, DOE found that the majority of split-system heat 

pumps are sold as a matched set of indoor and outdoor units for both the new 

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construction and replacement markets. However, DOE recognized that in some instances 

heat pumps are used in conjunction with gas or oil-fired furnaces, providing a “dual-fuel” 

heating capability. Consequently, DOE sought input on the characterization of the heat 

pump replacement market and whether installations of matched sets of indoor and 

outdoor products should be the basis for DOE’s analysis for all heat pumps. 

Ingersoll Rand commented that DOE should consider installations of matched sets 

of indoor and outdoor products for all heat pumps, and that the few heat pumps in “dualfuel” systems are found primarily in the northern region of the United States. (CAC: 

Ingersoll Rand, No. 66 at 6) Rheem supported this statement and stated that heat pump 

installations should be considered as matched sets. (CAC: Rheem, No. 76 at p. 8) In 

response, DOE believes the large majority of heat pump shipments consists of matched 

sets (i.e., pairing an outdoor and indoor unit) and has assumed that all heat pumps are 

installed with matched indoor air handlers for purposes of the direct final rule analyses. 

4. Technologies That Do Not Impact Rated Efficiency 

As part of the market and technology assessment performed for the direct final 

rule analysis, DOE developed a comprehensive list of technologies that would be 

expected to improve the energy efficiency of furnaces and central air conditioners and 

heat pumps, including those that do not impact the efficiency as rated by AFUE (for 

furnaces), SEER (for central air conditioners and heat pumps), and HSPF (for heat 

pumps). For example, certain technologies have the potential to reduce the electrical 

energy consumption of furnaces, but the AFUE metric does not capture the electrical 

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energy use, and, therefore, such technologies would not be used to improve AFUE. 

Chapter 3 of the direct final rule TSD contains a detailed description of each technology 

that DOE identified. Although DOE identified a complete list of technologies that 

improve efficiency, DOE only considered in its analysis technologies that would impact 

the efficiency rating of the appliance as tested under the applicable DOE test procedure. 

Therefore, DOE excluded several technologies from the analysis during the technology 

assessment because they do not improve the rated efficiency of furnaces or central air 

conditioners and heat pumps. Technologies that DOE determined have an impact on the 

rated efficiency were carried through to the screening analysis and are discussed in 

section IV.B, which also contains the technologies that were considered as part of the 

standby mode and off mode analyses. 

In response to DOE’s preliminary analysis for central air conditioners and heat 

pumps, ACEEE remarked that DOE eliminated technologies that save energy in realworld conditions or would require an additional performance metric, but do not improve 

the SEER or HSPF rating according to the current DOE test procedure. ACEEE stated 

that as a result, DOE screened out many important technologies in the central air 

conditioners and heat pumps preliminary analysis. (CAC: ACEEE, No. 72 at p. 4) 

Similarly, during the public meeting to discuss the furnaces RAP, ACEEE commented 

that the initial screening-out of technologies based on their impact on AFUE, as opposed 

to end-use efficiency, is unnecessarily restrictive to DOE’s consideration of options. 

(FUR: ACEEE, Public Meeting Transcript, No. 1.2.006 at p. 149) 

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A product’s efficiency rating under the applicable Federal test procedure 

determines whether it meets a particular minimum efficiency standard. An individual 

technology is relevant in the rulemaking process only to the extent that the technology 

has the potential to raise the efficiency rating of a product as measured under the test 

procedure. Therefore, DOE removes from consideration technologies that have no 

impact on a product's rating. Major changes to the DOE test procedures would be 

required to update the test procedures to include provisions that account for the impact of 

certain technologies on product efficiency, which would significantly delay the standards 

rulemaking such that DOE would not be able to meet its deadline of June 30, 2011, for 

publishing the final rule for these products. However, potential changes in the test 

procedures could be considered during the next round of test procedure rulemakings for 

these products. DOE believes that such delays may reduce energy savings to the Nation 

from amended standards (if the compliance date must be delayed). Therefore, in this 

rulemaking, DOE will continue to exclude technologies that do not improve the energy 

efficiency ratings of residential furnaces and central air conditioners and heat pumps, as 

tested by the applicable DOE test procedures. 

For residential furnaces, DOE has determined that the following technologies 

would not impact AFUE as it is rated using the DOE test procedure: (1) infrared burners; 

(2) positive shut-off valves for oil burner nozzles; (3) improved blower efficiency; and 

(4) micro combined heat and power. DOE did not analyze these technologies further 

because the technology either does not improve AFUE or there are insufficient data 

available to demonstrate an AFUE benefit of the technology. 

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For central air conditioners and heat pumps, DOE has determined that the 

following technologies would not impact the SEER and HSPF as calculated using the 

DOE test procedure: (1) condenser fan motor controllers; (2) liquid-suction heat 

exchangers; and (3) heat pump defrost mechanisms. DOE did not analyze these 

technologies further because the technology either does not increase the SEER or HSPF 

ratings, or there are insufficient data available to demonstrate a SEER or HSPF benefit of 

the technology. 

In response to the technology assessment performed for the preliminary analysis, 

DOE received feedback from several interested parties. ACEEE noted that in the 

preliminary analysis, DOE excluded advanced defrost controls for heat pumps that can 

save significant amounts of energy at low relative humidity outdoors. (CAC: ACEEE, 

No. 72 at p. 4) Regarding solar-assist products, EEI stated that this technology has no 

influence on units in terms of cooling efficiency as measured by SEER or EER. (CAC: 

EEI, No. 75 at p. 5) Ingersoll Rand commented that solar-assist technology should be 

excluded because it does not improve the operating efficiency of the refrigeration cycle. 

(CAC: Ingersoll Rand, No. 66 at p. 9) Southern remarked that there would need to be 

significant changes made to the test procedure to measure the solar-assist contribution. 

Additionally, a solar-assist component could potentially be used to qualify a unit at a 

minimum SEER level and then removed later, resulting in unit operation at levels below 

the minimum standard. (CAC: Southern, No. 73 at p. 3) Rheem commented that 

technological feasibility of high-volume manufacture, installation, and servicing of both 

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solar-assist and three-stage heat pumps has not been established (CAC: Rheem, No. 76 at 

p. 11) Regarding three-stage heat pumps, Ingersoll Rand stated that the HSPF values for 

these products are not higher than conventional single-stage systems, because compressor 

capacity is not the only limiting factor on low-temperature heating capacity. (CAC: 

Ingersoll Rand, No. 66 at p. 9) 

In response to these comments, DOE reassessed its preliminary views on the 

technologies in question. DOE revisited its conclusion regarding advanced defrost 

controls in the preliminary analysis, and found that advanced defrost controls can 

increase the HSPF of heat pumps according to the DOE test procedure. Accordingly, 

DOE has considered advanced defrost controls in the analyses for the direct final rule. 

Regarding solar-assist technology, DOE has determined that this technology has 

no impact on SEER or HSPF using the DOE test procedure, and, therefore, DOE did not 

consider it as a technology option for the screening and engineering analyses. Similarly, 

three-stage heat pumps appear to have no impact on SEER or HSPF using the DOE test 

procedure, and therefore, DOE decided not to consider it as a technology option for 

analysis. 

B. Screening Analysis 

DOE uses the following four screening criteria to determine which design options 

are suitable for further consideration in a standards rulemaking: 

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1. Technological feasibility. DOE will consider technologies incorporated in 

commercial products or in working prototypes to be technologically feasible. 

2. Practicability to manufacture, install, and service. If mass production and 

reliable installation and servicing of a technology in commercial products could be 

achieved on the scale necessary to serve the relevant market at the time the standard 

comes into effect, then DOE will consider that technology practicable to manufacture, 

install, and service. 

3. Adverse impacts on product utility or product availability. If DOE determines a 

technology would have significant adverse impact on the utility of the product to 

significant subgroups of consumers, or would result in the unavailability of any covered 

product type with performance characteristics (including reliability), features, sizes, 

capacities, and volumes that are substantially the same as products generally available in 

the United States at the time, it will not consider this technology further. 

4. Adverse impacts on health or safety. If DOE determines that a technology will 

have significant adverse impacts on health or safety, it will not consider this technology 

further. 

10 CFR part 430, subpart C, appendix A, sections (4)(a)(4) and (5)(b). 

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In response to the screening criteria outlined in the furnace RAP, ACEEE argued 

that, although it is inappropriate to preclude from initial consideration technologies that 

are not widely used in the U.S., it may be appropriate to eliminate them in the screening 

analysis after adequate consideration if DOE finds the labor force to be insufficient to 

adequately manufacture, sell, and service products on the scale necessary to serve the 

relevant market by the compliance date of the amended standard. (FUR: ACEEE, Public 

Meeting Transcript, No. 1.2.006 at pp. 148-151) ACEEE also commented that DOE 

should screen in technology options that are not used in the United States, but that are 

used internationally. (FUR: ACEEE, No. 1.3.009 at p.2) 

In response, DOE considers a complete list of technology options in the market 

and technology assessment, including those used on the international market, and then 

examines each technology that impacts the rated efficiency to determine if the four 

screening criteria are met. International technology options are treated no differently than 

those that are domestic and must meet all four screening criteria, including practicability 

to manufacture, install, and service on the scale necessary to serve the U.S. market by the 

compliance date. If DOE determines that a technology option does not meet all of the 

relevant criteria, it will eliminate that technology option from further consideration. 

1. Furnaces 

DOE identified the following technology options that could improve the AFUE 

rating of residential furnaces: (1) condensing secondary heat exchanger for nonweatherized furnaces; (2) heat exchanger improvements for non-weatherized furnaces; 

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(3) condensing and near-condensing technologies for weatherized gas furnaces; (4) twostage or modulating combustion; (5) pulse combustion; (6) low NOX premix burners; (7) 

burner derating; (8) insulation improvements; (9) off-cycle dampers; (10) concentric 

venting; (11) low-pressure, air-atomized oil burner; (12) high-static oil burner; and (13) 

delayed-action oil pump solenoid valve. 

In response to DOE’s request for comments on technologies in the furnaces RAP, 

Ingersoll Rand commented that all of the technology options that are technologically 

feasible and economically justified for furnaces are already incorporated by 

manufacturers into their current products, and that there are no new efficiency-benefitting 

technologies on the horizon. (FUR: Ingersoll Rand, No. 1.3.006 at p. 2) 

DOE notes that a large amount of research regarding technology options for 

improving the efficiency of furnaces has already been conducted by industry and others. 

However, DOE’s initial list of technology options identified in the market and technology 

assessment includes all technology options that could improve rated efficiency, without 

regard to technological feasibility or economic justification (a matter considered in other 

downstream analyses). Each technology option is reviewed during the screening analysis 

according to the four screening criteria. If a prototype or other technology option is 

“screened in,” DOE further considers it in the engineering analysis regardless of whether 

it is already widely used in the market. 

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a. Screened-Out Technology Options 

DOE excluded six of the technologies listed above from consideration in this 

rulemaking based on one or more of the four screening criteria. The technology options 

that DOE “screened out” include: (1) condensing and near-condensing technologies for 

weatherized gas furnaces; (2) pulse combustion; (3) low NOX premix burners; (4) burner 

derating; (5) advanced forms of insulation; and (6) low-pressure, air-atomized oil burner. 

The following discussion explains DOE’s rationale for screening out these technologies. 

Due to lack of evidence of technological feasibility, DOE screened out: 

condensing and near-condensing technologies for weatherized furnaces; low NOx premix 

burners; advanced forms of insulation (including foam insulation, vacuum insulation 

panels, gas-filled panels, aerogel insulation, and evacuated panels); and low-pressure, airatomizing oil burners. To the best of DOE’s knowledge, none of these technologies have 

been successfully demonstrated in the design of a commercially-available furnace model 

or a working prototype. Therefore, they were eliminated from further consideration. 

Pulse combustion was screened out due to concerns about adverse impacts on 

safety. Although products with this technology are generally safe, discussions with 

manufacturers indicated that the same or similar efficiencies could be achieved using 

other technologies that do not operate with positive pressure in the heat exchanger. In 

pulse combustion systems, the positive pressure in the heat exchanger could cause 

hazardous combustion products (e.g., carbon monoxide) to leak into the home if fatigue 

caused the heat exchanger to breach. DOE concluded that the efficiency-related benefits 

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of these products in terms of AFUE do not outweigh the possible adverse impacts on 

health or safety, especially given that manufacturers already achieve high efficiencies 

without the use of pulse combustion. 

Finally, burner derating (i.e., reducing the burner firing rate) lessens heat output 

from the furnace. As such, burner derating was eliminated from further consideration due 

to its significant adverse impacts on product utility to the consumer. 

For more detail regarding each technology option and the screening process, see 

chapters 3 and 4 of the TSD accompanying today’s notice. 

2. Central Air Conditioners and Heat Pumps 

DOE identified the following technologies that could improve the SEER and/or 

HSPF efficiency ratings of central air conditioners and heat pumps: (1) higher-efficiency 

compressors; (2) higher-efficiency fan motors; (3) higher-efficiency fan blades; (4) 

improvements to baseline coils; (5) micro-channel heat exchangers; (6) flat-tube heat 

exchangers; (7) heat pump defrost controls; (8) inverter technology; and (9) highefficiency expansion valves. 

After eliminating those technologies which did not increase the SEER or HSPF 

ratings (as described in section IV.A.4), DOE subjected the remaining technologies listed 

above to the four screening criteria. DOE determined that each of the technologies listed 

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above passed all four of the screening criteria, and thus, DOE considered those 

technologies further in the downstream analyses. 

In response to the central air conditioner and heat pump preliminary analysis, 

DOE received comments from interested parties suggesting the inclusion of inverterdriven components as a technology option in the analysis. Daikin noted that inverter 

technology can substantially increase the energy efficiency of central air conditioners and 

should be considered as a technology option. (CAC: Daikin, No. 63 at p. 2) Further, 

Daikin also commented that inverter technology is in widespread use outside of the 

United States, which demonstrates that it is not cost-prohibitive, and the technology is not 

proprietary. (CAC: Daikin, No. 63 at p. 4) Northwest Power and Conservation Council 

(NPCC) remarked that inverter technology is already used domestically in ductless minisplits, and the technology is applicable to both conventional split system and packaged 

central air conditioners and heat pumps. (CAC: NPCC, No. 74 at 5) 

After considering these comments, DOE believes that inverter technology is a 

non-proprietary method of improving the SEER and HSPF ratings of central air 

conditioners and heat pumps. Accordingly, DOE included inverter technology as a 

technology option in its analysis. 

In response to DOE’s request for comment on the preliminary screening analysis, 

ACEEE questioned DOE’s decision to screen out several important technologies, 

including modulating compressors and condenser fans. (CAC: ACEEE, No. 72 at p. 4) 

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However, DOE believes that the higher-efficiency fan motors and higher-efficiency 

compressors technology options encompass the technologies that ACEEE identified. 

Therefore, DOE did not identify those technologies as separate technologies in the 

preliminary analysis, but both modulating compressors and modulating condenser fans 

were considered in the engineering analysis. 

3. Standby Mode and Off Mode 

As discussed above, DOE is required by EPCA, as amended by EISA 2007, to 

amend its test procedures for furnaces and central air conditioners and heat pumps in 

order to address standby mode and off mode energy consumption of these products. (42 

U.S.C. 6295(gg)(2)) As explained in the October 20, 2010 test procedure final rule for 

furnaces and boilers, DOE determined that it was not technically feasible to set an 

integrated metric encompassing active mode, standby mode, and off mode, so the 

Department adopted a separate metric to address standby mode and off mode energy 

consumption. 75 FR 64621, 64626-27. Accordingly, DOE conducted a separate screening 

analysis for standby mode and off mode technologies. DOE identified the following 

technology options that could improve the standby mode and off mode efficiency rating 

of residential furnaces: (1) switching mode power supplies; (2) toroidal transformers; and 

(3) a relay that disconnects power to the blower’s electronically-commutated motor 

(ECM) while in standby mode. 

DOE identified the following technology options that could improve the off mode 

efficiency rating of central air conditioners and heat pumps: (1) thermostatically165 
 

 

 

 

 

 

 

 

 

controlled crankcase heaters; (2) toroidal transformers; (3) self-regulating (i.e., variable 

resistance) crankcase heaters; (4) compressor covers and (5) a relay that disconnects 

power to the ECM blower while in off mode. 

After applying the four screening criteria to these technology options for furnaces 

and central air conditioners and heat pumps, DOE screened out the technology option of 

a control relay for disconnecting power to the ECM blower because of the potential for 

adverse impacts to product utility for all product classes. DOE believes that such a design 

would cause failure rates of blower motors to increase significantly, which would 

severely degrade reliability and consumer utility of the product. Furthermore, DOE is not 

aware of any commercially-available models or working prototypes of an ECM that 

completely depowers between uses, making the design option technologically infeasible 

in the context of this rulemaking. The remaining two design options for furnaces were 

screened in and carried forward in the analyses. For central air conditioners and heat 

pumps, the remaining four design options were screened in and were considered in the 

downstream analyses. 

4. Technologies Considered 

Based upon the totality of the available information, DOE has concluded that: (1) 

all of the efficiency levels discussed in today’s notice are technologically feasible; (2) 

products at these efficiency levels could be manufactured, installed, and serviced on a 

scale needed to serve the relevant markets; (3) these efficiency levels would not force 

manufacturers to use technologies that would adversely affect product utility or 

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availability; and (4) these efficiency levels would not adversely affect consumer health or 

safety. Thus, the efficiency levels that DOE analyzed and discusses in this notice are all 

achievable through technology options that were “screened in” during the screening 

analysis. 

C. Engineering Analysis 

The engineering analysis develops cost-efficiency relationships to determine the 

manufacturing costs of achieving increased efficiency. DOE has identified the following 

three methodologies to generate the manufacturing costs needed for the engineering 

analysis: (1) the design-option approach, which provides the incremental costs of adding 

to a baseline model design options that will improve its efficiency; (2) the efficiencylevel approach, which provides the relative costs of achieving increases in energy 

efficiency levels, without regard to the particular design options used to achieve such 

increases; and (3) the cost-assessment (or reverse engineering) approach, which provides 

“bottom-up” manufacturing cost assessments for achieving various levels of increased 

efficiency, based on detailed data as to costs for parts and material, labor, 

shipping/packaging, and investment for models that operate at particular efficiency 

levels. 

The Department conducted the engineering analyses for this rulemaking using a 

combination of the efficiency level and cost-assessment approaches for analysis of the 

minimum AFUE standards for furnaces and minimum SEER and HSPF standards for 

central air conditioners and heat pumps. More specifically, DOE identified efficiency 

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levels for analysis, and then used the cost-assessment approach to determine the 

manufacturing costs at those levels. For analyzing standby mode and off mode electrical 

energy consumption standards, DOE used the design-option approach to develop the 

cost-efficiency relationship, as explained in greater detail in section IV.C.7. Additional 

details of the engineering analysis are in chapter 5 in the direct final rule TSD. 

1. Cost Assessment Methodology 

At the start of the engineering analysis, DOE identified the energy efficiency 

levels associated with residential furnaces and central air conditioners and heat pumps on 

the market, as determined in the market assessment. DOE also identified the technologies 

and features that are typically incorporated into products at the baseline level and at the 

various energy efficiency levels analyzed above the baseline. Next, DOE selected 

products for the physical teardown analysis having characteristics of typical products on 

the market at the representative input capacity for furnaces and representative cooling 

capacity for central air conditioners and heat pumps. DOE gathered information from 

performing a physical teardown analysis (see section IV.C.1.a) to create detailed bills of 

materials that included all components and processes used to manufacture the products. 

DOE used the bills of materials (BOMs) from the teardowns as an input to a cost model, 

which was used to calculate the manufacturing production cost (MPC) for products at 

various efficiency levels spanning the full range of efficiencies from the baseline to the 

maximum technology available. For the central air conditioners and heat pumps, DOE 

reexamined and revised its cost assessment performed for the preliminary analysis based 

on additional teardowns and in response to comments received on the preliminary 

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analysis. Additionally, DOE decided to expand the analyses for split system air 

conditioners to include capacities beyond the representative capacities, as described in 

section IV.C.5. 

During the development of the engineering analysis for the direct final rule, DOE 

held interviews with manufacturers to gain insight into the heating, ventilation, and air 

conditioning (HVAC) industry, and to request feedback on the engineering analysis and 

assumptions that DOE used. DOE used the information gathered from these interviews, 

along with the information obtained through the teardown analysis and public comments, 

to refine the assumptions and data in the cost model. Next, DOE derived manufacturer 

markups using publicly-available furnace and central air conditioner and heat pump 

industry financial data, in conjunction with manufacturers’ feedback. The markups were 

used to convert the MPCs into manufacturer selling prices (MSPs). Further information 

on comments received and the analytical methodology is presented in the subsections 

below. For additional detail, see chapter 5 of the direct final rule TSD. 

a. Teardown Analysis 

To assemble BOMs and to calculate the manufacturing costs of the different 

components in residential furnaces and central air conditioners and heat pumps, DOE 

disassembled multiple units of each product into their base components and estimated the 

materials, processes, and labor required for the manufacture of each individual 

component, a process referred to as a “physical teardown.” Using the data gathered from 

the physical teardowns, DOE characterized each component according to its weight, 

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dimensions, material, quantity, and the manufacturing processes used to fabricate and 

assemble it. 

DOE also used a supplementary method, called a “virtual teardown,” which 

examines published manufacturer catalogs and supplementary component data to 

estimate the major physical differences between a product that was physically 

disassembled and a similar product that was not. For supplementary virtual teardowns, 

DOE gathered product data such as dimensions, weight, and design features from 

publicly-available information, such as manufacturer catalogs. DOE also obtained 

information and data not typically found in catalogs and brochures, such as fan motor 

details, gas manifold specifications, or assembly details, from the physical teardowns of a 

similar product or through estimates based on industry knowledge. The teardown 

analysis included over 40 physical and virtual teardowns of furnaces for the direct final 

rule analysis, 31 physical and virtual teardowns of central air conditioners and heat 

pumps during the preliminary analysis, and one additional central air conditioner and heat 

pump teardown for the direct final rule analysis. The additional teardowns performed for 

the direct final rule analysis allowed DOE to further refine the assumptions used to 

develop the MPCs. 

The teardown analysis allowed DOE to identify the technologies that 

manufacturers typically incorporate into their products, along with the efficiency levels 

associated with each technology or combination of technologies. The end result of each 

teardown is a structured BOM, which DOE developed for each of the physical and virtual 

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teardowns. The BOMs incorporate all materials, components, and fasteners, classified as 

either raw materials or purchased parts and assemblies, and characterize the materials and 

components by weight, manufacturing processes used, dimensions, material, and 

quantity. The BOMs from the teardown analysis were then used as inputs to the cost 

model to calculate the MPC for each product that was torn down. The MPCs resulting 

from the teardowns were then used to develop an industry average MPC for each product 

class analyzed. See chapter 5 of the direct final rule TSD for more details on the 

teardown analysis. 

b. Cost Model 

The cost model is a spreadsheet that converts the materials and components in the 

BOMs into dollar values based on the price of materials, average labor rates associated 

with manufacturing and assembling, and the cost of overhead and depreciation, as 

determined based on manufacturer interviews and DOE expertise. To convert the 

information in the BOMs to dollar values, DOE collected information on labor rates, 

tooling costs, raw material prices, and other factors. For purchased parts, the cost model 

estimates the purchase price based on volume-variable price quotations and detailed 

discussions with manufacturers and component suppliers. For fabricated parts, the prices 

of raw metal materials (e.g., tube, sheet metal) are estimated on the basis of 5-year 

averages (from 2005 to 2010). The cost of transforming the intermediate materials into 

finished parts is estimated based on current industry pricing. For the central air 

conditioners and heat pumps analysis, DOE updated all of the labor rates, tooling costs, 

raw material prices, the costs of resins, and the purchased parts costs used in the 

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preliminary analysis when developing costs for the direct final rule analysis. For 

furnaces, there was no preliminary analysis, and DOE used the updated rates and costs 

described in the preceding sentence when conducting the direct final rule analysis. 

Chapter 5 of the direct final rule TSD describes DOE’s cost model and definitions, 

assumptions, data sources, and estimates. 

Ingersoll Rand commented on the material prices collected for use in the cost 

model, noting that due to the volatility and overall increasing trend of material prices, 5­

year average material prices will potentially be an underestimation of current material 

prices, which could lead to significant errors. (FUR: Ingersoll Rand, No. 1.3.006 at p. 5) 

DOE acknowledges Ingersoll Rand’s concerns about the material costs used in the 

engineering analysis because a large portion of the manufacturer production cost can 

typically be attributed to raw materials, the price of which can fluctuate greatly from year 

to year. However, DOE uses a 5-year span to attempt to normalize the fluctuating prices 

experienced in the metal commodities markets and screen out temporary dips or spikes. 

DOE believes a 5-year span is the longest span that would still provide appropriate 

weighting to current prices experienced in the market. DOE updates the 5-year span for 

metal prices based on a review of updated commodity pricing data, which point to 

continued increases. Consequently, DOE calculated a new 5-year average materials price 

using the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) Producer Price 

Indices (PPIs)30 for various raw metal materials from 2005 to 2010 for use in this 

rulemaking. The updated material prices incorporate the changes within each material 

30 For more information, visit the BLS website at http://www.bls.gov/ppi/. 

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industry and account for inflation. DOE also used BLS PPI data to update current market 

pricing for other input materials such as plastic resins and purchased parts. Finally, DOE 

adjusted all averages to 2009$ using the gross domestic product (GDP) implicit price 

deflator.31 See chapter 5 of the direct final rule TSD for additional details. 

c. Manufacturing Production Cost 

Once the cost estimates for all the components in each teardown unit were 

finalized, DOE totaled the cost of materials, labor, and direct overhead used to 

manufacture a product in order to calculate the manufacturer production cost. The total 

cost of the product was broken down into two main costs: (1) the full manufacturer 

production cost, referred to as MPC; and (2) the non-production cost, which includes 

selling, general, and administration (SG&A) costs; the cost of research and development; 

and interest from borrowing for operations or capital expenditures. DOE estimated the 

MPC at each efficiency level considered for each product class, from the baseline through 

the max-tech. After incorporating all of the assumptions into the cost model, DOE 

calculated the percentages attributable to each element of total production cost (i.e., 

materials, labor, depreciation, and overhead). These percentages are used to validate the 

assumptions by comparing them to manufacturers’ actual financial data published in 

annual reports, along with feedback obtained from manufacturers during interviews. DOE 

uses these production cost percentages in the MIA (see section IV.I). 

31 The GDP implicit price deflator is an economic metric that accounts for inflation by converting output 

measured at current prices into constant-dollar GDP. For more information, visit the Bureau of Economic 

Analysis website at www.bea.gov. 

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DOE revised the cost model assumptions used for the central air conditioner and 

heat pumps preliminary analysis based on additional teardown analysis, updated pricing, 

and additional manufacturer feedback, which resulted in refined MPCs and production 

cost percentages. For furnaces, DOE made cost model assumptions based on teardown 

analysis, publicly-available information, and manufacturer feedback. DOE calculated the 

average product cost percentages by product type (i.e., furnace, central air conditioner, 

heat pump) as well as by product class (e.g., non-weatherized gas furnace, split-system 

air conditioner) due to the large variations in production volumes, fabrication and 

assembly costs, and other assumptions that affect the calculation of the product’s total 

MPC. Chapter 5 of the direct final rule TSD presents DOE’s estimates of the MPCs for 

this rulemaking, along with the different percentages attributable to each element of the 

production costs that comprise the total product MPC. 

d. Cost-Efficiency Relationship 

The result of the engineering analysis is a cost-efficiency relationship. DOE 

created a separate relationship for each input capacity analyzed for each residential 

furnace product class examined for this direct final rule. DOE also created 12 costefficiency curves representing the cost-efficiency relationship for each central air 

conditioner and heat pump product class (except for the space-constrained product 

classes), as well as products having different capacities within the split air conditioner 

and split heat pump product classes. A cost-efficiency relationship was not developed for 

the space constrained product classes because the max-tech efficiency level is the same as 

the baseline efficiency level. 

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In order to develop the cost-efficiency relationships for furnaces and central air 

conditioners and heat pumps, DOE examined the cost differential to move from one 

efficiency level to the next for each manufacturer. DOE used the results of teardowns on 

a market share weighted-average basis to determine the industry average cost increase to 

move from one efficiency level to the next. Additional details on how DOE developed 

the cost-efficiency relationships and related results are available in the chapter 5 of the 

direct final rule TSD. Chapter 5 of the direct final rule TSD also presents these costefficiency curves in the form of energy efficiency versus MPC. Cost-efficiency curves 

relating HSPF to MPC can be created by using the relationship between SEER and HSPF 

that DOE derived (see section IV.C.6). 

The results indicate that, for both furnaces and central air conditioners/heat 

pumps, cost-efficiency relationships are nonlinear. In other words, as efficiency 

increases, manufacturing becomes more difficult and more costly. For furnaces, a large 

cost increase is evident between non-condensing and condensing efficiency levels due to 

the requirement for a secondary heat exchanger, and another large increase is evident at 

the max-tech efficiency level which employs continuously-modulating operation. For 

central air conditioners and heat pumps, large increases in cost are evident at efficiency 

levels requiring high-efficiency compressors and fan motors. 

In response to the furnace RAP, ACEEE stated at the public meeting that DOE’s 

depiction of the cost-efficiency relationship is a static one that does not reflect the time175 
 

 

 

 

 

 

 

variability of the MPCs subsequent to adoption of amended energy conservation 

standards. The commenter argued that DOE’s depiction does not reflect the consistent 

decline in the cost of manufactured products relative to the consumer price index (CPI). 

ACEEE requested that DOE complement the static cost-efficiency depiction with a more 

thorough retrospective analysis. (FUR: ACEEE, Public Meeting Transcript, No. 1.2.006 

at p. 153) In response, HARDI cautioned that a time-variable analysis of the costefficiency relationship could neglect the effect on the marketplace of peak price points 

that result from adoption and implementation of amended AFUE standards. (FUR: 

HARDI, Public Meeting Transcript, No. 1.2.006 at p. 155) In other words, HARDI 

believes that such an analysis suggested by ACEEE would not account for the peak prices 

that occur shortly after a new standard is implemented. 

In response, DOE notes that trends in the CPI reflect changes in consumer price 

that arise from a host of factors, including a change in market mix, market structure, 

profitability and manufacturing cost (including labor, capital, and energy costs), the cost 

of raw materials, and technological change. Historical averages of some of these factors 

are already used in DOE’s analysis. A more sophisticated projection of consumer price 

depends on the availability of credible, publicly-vetted tools for making such projections, 

as well as an expectation that such tools will enhance the robustness, accuracy, or 

usefulness of the analysis. Such a tool does not currently exist, and DOE is not 

convinced that development of such a tool would significantly benefit energy 

conservation standard rulemakings, when it is already possible to conduct a 

straightforward calculation of the effect of different product cost assumptions on 

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consumer payback. In the absence of a suitable tool, DOE believes that holding current 

manufacturing costs steady into the future provides the best balance between analytical 

transparency, credibility, and expected accuracy. 

DOE’s decision not to perform a historical analysis of the cost-efficiency 

relationship allays HARDI’s concern that a retrospective analysis would ignore one-time 

peak price points that would create the most significant burden on the marketplace. 

e. Manufacturer Markup 

To account for manufacturers’ non-production costs and profit margin, DOE 

applies a non-production cost multiplier (the manufacturer markup) to the full MPC. The 

resulting manufacturer selling price (MSP) is the price at which the manufacturer can 

recover all production and non-production costs and earn a profit. To meet new or 

amended energy conservation standards, manufacturers often introduce design changes to 

their product lines that result in increased manufacturer production costs. Depending on 

the competitive environment for these particular products, some or all of the increased 

production costs may be passed from manufacturers to retailers and eventually to 

customers in the form of higher purchase prices. As production costs increase, 

manufacturers typically incur additional overhead. The MSP should be high enough to 

recover the full cost of the product (i.e., full production and non-production costs) and 

yield a profit. The manufacturer markup has an important bearing on profitability. A high 

markup under a standards scenario suggests manufacturers can readily pass along the 

increased variable costs and some of the capital and product conversion costs (the one177 
 

 

 

 

 

 

 

 

 

 

 

 

 

time expenditures) to consumers. A low markup suggests that manufacturers will not be 

able to recover as much of the necessary investment in plant and equipment. 

To calculate the manufacturer markups, DOE used 10-K reports submitted to the 

U.S. Securities and Exchange Commission (SEC) by the six publicly-owned HVAC 

companies. (SEC 10-K reports can be found using the search database available at: 

http://www.sec.gov/edgar/searchedgar/webusers.htm.) The financial figures necessary 

for calculating the manufacturer markup are net sales, costs of sales, and gross profit. For 

furnaces, DOE averaged the financial figures spanning the years 2004 to 2008 in order to 

calculate the markups. For central air conditioners and heat pumps, DOE updated the 

financial figures used in the preliminary analysis (which spanned 2003 to 2007) by using 

10-K reports spanning from 2004 to 2008. To calculate the average gross profit margin 

for the periods analyzed for each firm, DOE summed the gross profit for all of the 

aforementioned years and then divided the result by the sum of the net sales for those 

years. DOE presented the calculated markups to manufacturers during the interviews for 

the direct final rule (see section IV.C.1.g). DOE considered the feedback from 

manufacturers in order to supplement the calculated markup and refined the markup to 

better reflect the residential furnace and central air conditioner and heat pump markets. 

DOE developed the manufacturer markup by weighting the feedback from manufacturers 

on a market share basis, since manufacturers with larger market shares more significantly 

affect the market average. DOE used a constant markup to reflect the MSPs of both the 

baseline products and higher-efficiency products. DOE used this approach because 

amended standards may transform high-efficiency products, which currently are 

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considered premium products, into baselines. See chapter 5 of the direct final rule TSD 

for more details about the manufacturer markup calculation. 

In response to the markup calculation methodology outlined in the furnaces RAP, 

and to the markup multiplier of 1.32 used in the central air conditioner and heat pump 

preliminary analysis, Ingersoll Rand argued that DOE has consistently underestimated 

manufacturer markup in past rulemakings. According to Ingersoll Rand, DOE has a 

tendency to underestimate unapplied labor that is involved in a wide range of support 

activities that are not associated with production, including research and development, 

engineering, field service, marketing, training, human resources, finance, legal, and 

business management. (FUR: Ingersoll Rand, No. 1.3.006 at p. 6; CAC: Ingersoll Rand, 

No. 66 at p. 5) 

In response, DOE’s manufacturer markups include all non-production costs (with 

the exception of shipping, which is calculated separately as described below) and profit. 

As noted above, as part of the process for developing manufacturer markups, DOE 

solicits manufacturer feedback during MIA interviews and incorporates that feedback on 

a market-share weighted average basis to refine the markups that are derived from 

financial data. Although DOE recognizes that the manufacturer markup will vary from 

one manufacturer to another, DOE believes this process allows for the development of a 

manufacturer markup that reflects the typical manufacturer markup in the industry. As a 

result, for the direct final rule analysis, DOE modified the markups for central air 

conditioners and heat pumps based upon additional manufacturer input. The markup 

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used in the direct final rule analysis for split system air conditioners and heat pumps was 

1.30, while the markup for packaged systems was 1.28. For SDHV systems, the markup 

remained 1.32. Because no additional data were provided to support a change, DOE 

developed a markup for furnaces for the direct final rule based on the methodology 

outlined in the furnaces RAP. 

f. Shipping Costs 

Manufacturers of HVAC products typically pay for freight to the first step in the 

distribution chain. Freight is not a manufacturing cost, but because it is a substantial cost 

incurred by the manufacturer, DOE is accounting for shipping costs of furnaces and 

central air conditioners and heat pumps separately from the other non-production costs 

that comprise the manufacturer markup. To calculate MSP for furnaces and central air 

conditioners and heat pumps, DOE multiplied the MPC determined from the cost model 

by the manufacturer markup and added shipping costs. More specifically, DOE 

calculated shipping costs based on use of a typical 53-foot straight frame trailer with a 

storage volume of 4,240 cubic feet. 

In the central air conditioners and heat pumps preliminary analysis, shipping costs 

were preliminarily determined on a weight basis at $0.20 per pound, based on quotes 

from freight shipping services. However, ACEEE suggested that shipping costs would be 

more accurately estimated if calculations were based on product volume, rather than 

weight. (CAC: ACEEE, No. 72 at p.7) 

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DOE reexamined of the physical attributes of the products (e.g., the outer 

shipping dimensions, the shipping weight) and consulted with manufacturers regarding 

their shipping practices, and as a result of this additional inquiry, DOE determined that 

manufacturers were likely to “cube-out” a truck (i.e., run out of space inside the truck) 

before reaching the maximum weight capacity for the truckload. Therefore, the limiting 

factor for transporting these products would be the size of the products rather than their 

weight. Accordingly, as noted above, DOE revised its methodology for the direct final 

rule in terms of shipping costs by determining a product’s shipping cost as a function of 

its volume for both central air conditioners and heat pumps and residential furnaces. To 

do so, DOE first calculated the cost per cubic foot of space on a trailer, based on a cost of 

$2,500 per shipping load and the standard dimensions of a 53-foot trailer. DOE examined 

the average sizes of products in each product class at each efficiency and capacity 

combination analyzed. DOE then estimated the shipping costs by multiplying the 

product volume by the cost per cubic foot of space on the trailer. For central air 

conditioners and heat pumps, where product size greatly depends on efficiency, DOE 

calculated a separate volumetric cost for each efficiency level. However, furnaces, which 

typically do not vary in size based on efficiency, had the same shipping cost across the 

range of efficiencies for a given capacity. In determining volumetric shipping costs, DOE 

also revised its estimates based on manufacturer feedback regarding product mix on each 

trailer, packing efficiency, and methods and equipment used to load the trailers. Chapter 

5 of the direct final rule TSD contains additional details about DOE’s shipping cost 

assumptions and DOE’s shipping cost estimates. 

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g. Manufacturer Interviews 

Throughout the rulemaking process, DOE has sought and continues to seek 

feedback and insight from interested parties that would improve the information used in 

its analyses. DOE interviewed manufacturers as a part of the direct final rule 

manufacturer impact analysis (see section IV.I.4). During the interviews, DOE sought 

feedback on all aspects of its analyses for residential furnaces and central air conditioners 

and heat pumps. For the engineering analysis, DOE discussed the analytical assumptions 

and estimates, cost model, and cost-efficiency curves with HVAC manufacturers. DOE 

considered all the information manufacturers provided when refining the cost model and 

assumptions. However, DOE incorporated equipment and manufacturing process figures 

into the analysis as averages in order to avoid disclosing sensitive information about 

individual manufacturers’ products or manufacturing processes. More details about the 

manufacturer interviews are contained in chapter 12 of the direct final rule TSD. 

2. Representative Products 

a. Furnaces 

DOE based its engineering analysis on teardown analysis of a representative 

sample of products from the furnace market. DOE selected units for teardown that have 

characteristics that are representative of most furnaces available on today’s market. In the 

rulemaking analysis plan, DOE identified several characteristics common to baseline 

furnaces in each product class, including a representative capacity for analysis, and 

focused the teardown selection for furnaces on products that exhibited those 

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representative characteristics. (However, DOE also scaled its analysis to products outside 

the representative capacity, as described in section IV.C.5.) 

DOE received several comments about the representative input capacity proposed 

in the furnaces RAP. AHRI remarked that each manufacturer offers their products in 

different input capacities, and, as such, DOE should not lock its analysis into discrete 

input capacities. (FUR: AHRI, Public Meeting Transcript, No. 1.2.006 at pp. 176-177) 

Likewise, Ingersoll Rand cautioned against comparing dissimilar products (with respect 

to number of burners and heat exchangers) chosen simply because their input capacities 

are close. Instead, the commenter suggested surveying the furnace market across 

efficiencies and capacities to characterize the number of heat exchangers and burners for 

each capacity and efficiency. Then, based on the results of this survey, DOE should select 

teardown units and determine the limits of interpolation. Ingersoll Rand further suggested 

that the sample selection should include products from a broad cross-section of 

manufacturers, concentrating on those with market shares greater than 10 percent, a 

representative spread of installation configurations, and a bias towards the most common 

heating and cooling air flow capacities. (FUR: Ingersoll Rand, Public Meeting Transcript, 

No. 1.2.006 at pp. 156-157; FUR: Ingersoll Rand, No. 1.3.006 at p. 4) ACEEE stated that 

many furnaces with the same input capacities are shipped with differing blower motor 

power and fan diameter, considerations to which DOE should be sensitive in its analysis. 

(FUR: ACEEE, Public Meeting Transcript, No. 1.2.006 at p. 178) 

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In response, for its direct final rule analysis, DOE attempted to compare similar 

furnace products made by a broad cross-section of manufacturers when choosing models 

for teardowns. DOE included factors such as blower characteristics and the number of 

burners and heat exchangers when choosing models for teardown. DOE modified the 

representative characteristics to include an airflow rate of 1,200 cubic feet per minute for 

a typical furnace (which corresponds to the three-ton representative capacity for central 

air conditioners and heat pumps). In addition, DOE recognizes that manufacturers may 

offer products at varying input capacities, and as a result, DOE did not restrict its analysis 

to discrete representative input capacities, but rather considered all models that were 

capable of satisfying a similar heating load. While DOE focused its analysis for furnaces 

around the representative 80,000 Btu/h input capacity, DOE also considered other units at 

input capacities near the representative capacity for manufacturers that do not 

manufacture products at the representative capacity. 

DOE also received feedback from Ingersoll Rand that two of the input capacities 

identified in the RAP to represent the furnace market are not common in the market. The 

company suggested that input capacities of 80,000 Btu/h and 90,000 Btu/h are more 

appropriate than 75,000 Btu/h for non-weatherized gas furnaces and weatherized gas 

furnaces, respectively. (FUR: Ingersoll Rand, No. 1.3.006 at p. 2) 

DOE reexamined the availability of input capacities on the furnace market and 

determined that 80,000 Btu/h is a very common and representative input capacity for 

non-weatherized gas furnaces. Thus, for the direct final rule analysis, DOE considered 

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80,000 Btu/h as the representative capacity for non-weatherized gas furnaces. As 

described in section III.G, DOE did not perform an analysis for weatherized gas furnaces. 

In the furnaces RAP, DOE proposed retaining the representative characteristics 

identified in the 2007 rulemaking, including the baseline efficiency of 78-percent 

AFUE.32 Ingersoll Rand commented that a baseline non-weatherized gas furnace would 

have the following characteristics: 80-percent AFUE; 80,000 Btu/h input capacity; 

induced draft; single-stage burner; permanent split capacitor (PSC) motor-driven, directdrive, forward curved blower, sized for use with a three-ton air conditioner; multi-poise 

configuration; builder model; and hot surface igniter. (FUR: Ingersoll Rand, No. 1.3.006 

at p. 3) 

After reviewing the current furnaces market, DOE agrees that the baseline 

characteristics identified by Ingersoll Rand are representative of many furnaces on the 

market. Although it is true that the majority of furnaces are manufactured and shipped as 

multi-poise units, the specific configuration in which the unit operates is determined by 

the configuration in the field. Therefore, DOE based its analysis on furnaces that could be 

installed in the representative configuration, whether multi-poise or not, and used the 

AFUE rating associated with the representative configuration. 

32 In the furnaces RAP, DOE took the position that the baseline for non-weatherized gas furnaces was 78­

percent AFUE, which is the current energy conservation standard for non-weatherized gas furnaces. 

However, DOE subsequently determined that because the November 2007 Rule was not vacated by the 

remand agreement, it will use 80-percent AFUE as the baseline for the direct final rule analyses in order to 

avoid violating the “anti-backsliding provision” in 42 U.S.C. 6295(o)(1). 

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With respect to the standby mode energy use analysis, Lennox cautioned that 

DOE should not exclude “premium” controls and features that that do not improve AFUE 

from its analysis, as these features could increase the standby power consumption of the 

furnace. (FUR: Lennox, Public Meeting Transcript, No. 1.2.006 at pp. 164-165; FUR: 

Lennox, No. 1.3.018 at p.4) 

For the direct final rule analysis, DOE performed a large number of furnace 

teardowns, including some teardowns on products with premium features that consume 

electricity in standby mode and off mode. Although the products with premium features 

were included for the standby mode and off mode analysis, DOE did not include these 

premium (non-AFUE efficiency related) features in its engineering analysis for analyzing 

amended AFUE standards, as they could distort DOE’s estimates of MPC at each 

efficiency level. 

Accordingly, the baseline furnace characteristics that DOE used in the direct final 

rule analysis are presented in Table IV.1. 

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Table IV.1 Characteristics of Representative Residential Furnaces 

NonWeatherized Gas 

Furnaces 

Mobile Home 

Gas Furnaces 

NonWeatherized OilFired Furnaces 

Input Capacity 

Btu/h 80,000 80,000 105,000 

Configuration Upflow Downflow Upflow 

Heat Exchanger 

Type 

Clamshell or 

Tubular 

Clamshell or 

Tubular Drum 

Ignition Type Hot Surface Hot Surface Intermittent 

Ignition 

Draft Induced Induced Forced 

Blower Size 1200 cfm 1200 cfm 1200 cfm 

Transformer 40 VA 

Laminated Core 

40 VA 

Laminated Core 

40 VA 

Laminated Core 

Power Supply 

Type Linear Linear Linear 

b. Central Air Conditioners and Heat Pumps 

DOE reviewed all of the product classes of residential central air conditioners and 

heat pumps and chose units for analysis that represent a cross-section of the residential 

central air conditioning and heat pump market within each product type. For the 

conventional split system and single package central air conditioner and heat pump 

product classes, as well as for the SDHV product classes, DOE selected 36,000 Btu/h 

(three tons of cooling capacity) as the representative capacity for analysis because units at 

this capacity are common across manufacturers, with high sales volumes spanning a 

relatively large range of efficiencies. 

DOE acknowledges that manufacturers tend to optimize residential central air 

conditioner and heat pump split systems around the three-ton capacity. Therefore, DOE 

expanded the engineering analysis to include additional cooling capacities for split 

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system central air conditioners and heat pumps based upon the analysis at the 

representative capacity. (See section IV.C.5.b for further information about the scaling of 

the engineering analysis to different cooling capacities.) 

In the preliminary analysis, DOE was unaware of any suitable alternative 

refrigerant which could be used as a replacement for R410a, and therefore, considered 

R410a to be the only available refrigerant option. During manufacturer interviews, the 

viability of HFO-1234YF as an alternative was discussed. However, manufacturer 

feedback indicated that this refrigerant is still in the early phases of development and is a 

more likely replacement for R134a in automotive applications than R410a in central air 

conditioners and heat pumps. This conclusion leads to questions about the technological 

feasibility of HFO-1234YF as a replacement. Further, because it is still in development, 

the requirements for large scale production of this refrigerant and the ability to service 

units charged with it on a national scale are undetermined. 

DOE received comments regarding the need for analysis on alternative 

refrigerants because of a possible hydrofluorocarbon (HFC) refrigerant cap and 

subsequent phase-out, which would force the industry to find a replacement refrigerant 

for R410a. Carrier did not mention specific climate policies but commented generally 

that there are climate policies which are going to restrict the use of HFC. However, 

higher SEER equipment requires more refrigerant charge, and, thus, it is critical to 

understand the impact on cost of refrigerant for this rulemaking. (CAC: Public Meeting 

Transcript at p. 152) Emerson noted that the cost of the additional refrigerant could be 

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much higher than what is paid today due to a possible leverage effect from a potential 

“cap-and-trade” regime.33 (CAC: Public Meeting Transcript at p. 153) DOE does not 

conduct analyses based on potential legislation because doing so would be highly 

speculative, and the lack of a suitable alternative refrigerant adds another speculative 

layer of uncertainty. Therefore, DOE decided not to alter its analyses and did not consider 

alternative refrigerants in the direct final rule analyses. 

DOE did not receive any comments on the other representative characteristics 

chosen for the baseline unit for preliminary analysis and continued to use the same 

representative traits for the direct final rule. These characteristics of a typical baseline 

unit are: 

36,000 Btu/h cooling capacity; 

Rifled copper tubes; 

Lanced aluminum fins; 

Single-speed, single-capacity compressor; 

Single-speed permanent split capacitor (PSC) fan and blower motor; 

Expansion orifice; and 

R410a refrigerant. 

3. Efficiency Levels 

For each of the representative products, DOE analyzed multiple efficiency levels 

and estimated manufacturer production costs at each efficiency level. The following 

33 “Cap-and-trade” is a market-based emissions trading program in which the government sets a limit on the 

amount of emissions and allocates permits to emit a specified amount. Companies with higher emissions 

are able to buy permits from companies which emit less. 

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subsections provide a description of the full range of efficiency levels DOE analyzed for 

each product class, from the baseline efficiency level to the maximum technologically 

feasible (max-tech) efficiency level. 

For each product class, DOE selected baseline units as reference points, against 

which DOE measured changes resulting from potential amended energy conservation 

standards. Generally, the baseline unit in each product class: (1) represents the basic 

characteristics of equipment in that class; (2) just meets current Federal energy 

conservation standards, if any; and (3) provides basic consumer utility. 

DOE conducted a survey of the residential furnace and central air conditioner and 

heat pump markets to determine what types of products are available to consumers and to 

identify the efficiency levels corresponding to the greatest number of models. Then, DOE 

established intermediate energy efficiency levels for each of the product classes that are 

representative of efficiencies that are typically available on the market. DOE reviewed 

AHRI’s product certification directory, manufacturer catalogs, and other publiclyavailable literature to determine which efficiency levels are the most prevalent for each 

representative product class. 

DOE also determined the maximum improvement in energy efficiency that is 

technologically feasible (max-tech) for furnaces and central air conditioners and heat 

pumps, as required under 42 U.S.C. 6295(p)(1). For the representative product within a 

given product class, DOE could not identify any working products or prototypes at higher 

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efficiency levels that were currently available beyond the identified max-tech level at the 

time the analysis was performed. 

a. Furnaces 

(i) Baseline Efficiency Level 

As discussed above, the energy conservation standards for residential furnaces are 

codified at 10 CFR 430.32(e)(1)(i), which sets forth the existing standard levels for 

residential furnaces, as well as the amended minimum standards codified at 10 CFR 

430.32(e)(1)(ii), which were set by the November 2007 Rule (72 FR 65136 (Nov. 19, 

2007)), which will require compliance starting on November 19, 2015. At the time of 

publication of the furnaces RAP, DOE believed that its voluntary remand of the 

November 2007 Rule in response to a joint lawsuit voided the furnace standards set forth 

by that rule. Under this interpretation, DOE proposed setting the baseline for the current 

analysis at 78-percent AFUE for non-weatherized gas furnaces, weatherized gas furnaces, 

and oil-fired furnaces, and at 75-percent AFUE for mobile home gas furnaces.34 

However, since the publication of the furnaces RAP, DOE has reevaluated its 

interpretation of the effect of the voluntary remand and determined that because the 

November 2007 Rule was not vacated, the standards promulgated in that rule will still 

require compliance for products manufactured on or after November 19, 2015. Due to 

EPCA’s anti-backsliding clause (42 U.S.C. 6295(o)(1)), DOE cannot set minimum 

standards below the levels promulgated in the November 2007 Rule. As a result, DOE 

considered the levels set in the November 2007 Rule to represent the baseline efficiency 

34 Energy Conservation Standards for Residential Furnaces Rulemaking Analysis Plan, March 11, 2010, p. 

31. Available at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/furnaces_framework_rap.pdf . 

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in each product class for the direct final rule analysis. Therefore, the baseline levels for 

the direct final rule analysis were set at 80-percent AFUE for non-weatherized gas 

furnaces and mobile home furnaces, 81-percent AFUE for weatherized gas furnaces, and 

82-percent AFUE for non-weatherized oil furnaces. (Note that, as described in section 

III.G.2.a, DOE did not perform an analysis for weatherized gas furnaces, because the 

standards adopted for this product are already set at the max-tech level.) 

(ii) Max-Tech Efficiency Level 

The “max-tech” efficiency levels are the maximum technologically feasible 

efficiency levels possible for each product class. As required under 42 U.S.C. 6295(p)(1), 

DOE determined the max-tech efficiency level for each residential furnace product class. 

DOE has identified the max-tech efficiency levels as being the highest efficiencies on the 

market at the representative capacities. In the furnaces RAP, for purposes of its analyses, 

DOE proposed using max-tech efficiency levels of 97.7-percent AFUE for nonweatherized gas furnaces, 95.5-percent AFUE for mobile home furnaces, and 97-percent 

AFUE for oil-fired furnaces. In addition, DOE proposed to use 81-percent AFUE as the 

max-tech for weatherized gas furnaces in the furnaces RAP, which DOE used for the 

direct final rule analysis. Consequently, no analysis was needed for weatherized gas 

furnaces because the standard was already set at the max-tech level, as discussed further 

in section III.G.2.a. 

DOE received several comments related to the max-tech levels proposed in the 

furnaces RAP. Ingersoll Rand stated that the max-tech level for non-weatherized gas 

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furnaces should be 98-percent AFUE. (FUR: Ingersoll Rand, No. 1.3.006 at p. 3) Lennox 

stated support for DOE’s proposed max-tech levels for the non-weatherized gas furnace 

and mobile home gas furnace product classes for the purpose of undertaking the required 

analysis, although Lennox noted that it does not believe that DOE should establish 

minimum efficiency standards at max-tech levels. (FUR: Lennox, No. 1.3.018 at p. 3) 

In response, DOE notes that the AFUE requirements for furnaces established in 

EPCA are specified as whole number percentages. Additionally, in previous rulemakings 

to amend standards for furnaces, DOE has specified amended minimum standards in 

terms of the nearest whole percentage point. To remain consistent with the original 

standards in EPCA, DOE rounded the efficiency levels being analyzed in today’s direct 

final rule (including max-tech AFUE) to the nearest whole percentages. For nonweatherized gas furnaces and mobile home furnaces, this results in max-tech levels of 98­

percent and 96-percent AFUE, respectively. DOE also notes that the DOE residential 

furnaces test procedure currently provides instructions for rounding annual operating cost 

and estimated regional annual operating cost to the nearest dollar per year. 10 CFR 

430.23(n)(1); 10 CFR 430.23(n)(3). However, the test procedure does not provide 

instructions for rounding AFUE. This lack of specificity for rounding may lead to 

uncertainty in terms of how to complete calculations using the reported metrics or to 

discrepancies among results generated by test laboratories for the same product. Overall, 

DOE is concerned that unless the applicable portion of DOE’s furnace test procedures are 

modified, there may be difficulties associated with ascertaining, certifying, and reporting 

compliance with the existing standards. Therefore, to remedy this situation, DOE is 

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adding instructions to 10 CFR 430.23(n)(2) requiring that AFUE be rounded to the 

nearest whole percentage point. 

Additionally, EEI stated that DOE should analyze gas-fired air source heat pumps 

with coefficient of performance (COP) ratings above 1.2 as a maximum technology 

option for gas furnaces. (FUR: EEI, No. 1.3.015 at p. 5) In response, DOE reexamined 

the definition of a “gas furnace.” DOE notes that EPCA defines a “furnace,” in part, as 

“an electric central furnace, electric boiler, forced-air central furnace, gravity central 

furnace, or low pressure steam or hot water boiler.” (42 U.S.C. 6291(23)(C)) DOE’s 

definitions in the CFR further clarify the definition of a “forced-air central furnace,” 

defining that term as a product in which “[t]he heat generated by the combustion of gas or 

oil is transferred to the air within a casing by conduction through heat exchange surfaces . 

. . . ” 10 CFR 430.2. DOE notes that products using gas-fired air source heat pump 

technology do not use the heat generated by the combustion of gas or oil to heat the 

circulation air, as required under DOE’s definitions. Therefore, DOE has concluded that 

products using this technology are outside the scope of this rulemaking because they do 

not meet the definition of a “furnace,” as defined by DOE. 

Regarding oil-fired furnaces, Lennox stated that it does not agree with DOE’s 

max-tech level, which it believes is unrealistic. Lennox asserted that although condensing 

oil-fired furnaces do exist in the market, they comprise a very small minority and are, 

therefore, not representative of the market and should not be considered in the 

rulemaking. Instead, Lennox urged DOE to consider oil-fired furnaces with AFUE values 

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between 85-percent and 87-percent as the true max-tech level for oil-fired furnaces. 

(FUR: Lennox, No. 1.3.018 at p. 3) 

While DOE does not believe that condensing oil-fired furnaces are representative 

of the market, their existence and commercial availability are evidence of technological 

feasibility. DOE believes that this technology warrants consideration in the analysis, and, 

therefore, the condensing level was retained for the oil-fired furnace product class. 

(iii) Efficiency Levels for Analysis 

For each residential furnace product class, DOE analyzed both the baseline and 

max-tech efficiency levels, as well as several intermediate efficiency levels. In the 

furnaces RAP, DOE identified the intermediate efficiency levels that it proposed to 

include in the analysis, based on the most common efficiencies on the market. These 

levels are shown in Table IV.2. 

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Table IV.2 Efficiency Levels Considered in the RAP for the Residential Furnaces 

Analysis 

Product Class Efficiency Level (AFUE) 

78% 

80% 

90% 

Non-weatherized Gas 92% 

93% 

95% 

97.7% 

75% 

80% 

Mobile Home 90% 

92% 

93% 

95.5% 

78% 

80% 

Oil-Fired Non-weatherized 83% 

84% 

85% 

97% 

For non-weatherized gas furnaces, Ingersoll Rand suggested performing 

teardowns at 90-percent, 95-percent, and 98-percent AFUE with interpolation to span the 

range of intermediate values. (FUR: Ingersoll Rand, No. 1.3.006 at p. 4) ACEEE 

suggested adding a level at 81-percent AFUE, substituting 94-percent for 93-percent 

AFUE if there are more models available, and keeping an efficiency level at 95-percent, 

which is the current tax credit level. (FUR: ACEEE, No. 1.3.009 at p. 6) 

In response to these comments, DOE reexamined the market and reduced the 

efficiency levels for analysis to the most common efficiencies on the furnace market. 

DOE determined that there are very few products currently on the market at 81-percent 

AFUE. Because shipments are so low, DOE determined that 81-percent AFUE did not 

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warrant consideration in the analysis. DOE also examined the prevalence of 93-percent 

and 94-percent AFUE products on the market, and determined that 93-percent AFUE 

models are more common. However, upon further consideration, DOE believes 92­

percent AFUE models are the most commonly shipped units in this range. Therefore, 

DOE analyzed only 92-percent AFUE instead of 93-percent or 94-percent AFUE. DOE 

kept the level at 95-percent AFUE for the direct final rule analysis, as was recommended 

by interested parties. Rather than performing teardowns at only 90-percent, 95-percent, 

and 98-percent AFUE, as Ingersoll Rand suggested, DOE performed teardowns at every 

efficiency level analyzed to provide greater accuracy in the analysis. 

The baseline, max-tech, and intermediate efficiency levels for each furnace 

product class analyzed are presented in Table IV.3. As noted above and discussed in 

section III.G.2.a, weatherized gas furnaces were not analyzed, and as a result, the table 

shows efficiency levels for only non-weatherized gas, mobile home, and non-weatherized 

oil furnaces. 

Table IV.3 Efficiency Levels Analyzed for Residential Furnaces 

Product Class Efficiency Level (AFUE) 

80% 

90% 

Non-weatherized Gas 92% 

95% 

98% 

80% 

Mobile Home 90% 

92% 

96% 

82% 

Oil-Fired Non-weatherized 83% 

84% 

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85% 

97% 

b. Central Air Conditioners and Heat Pumps 

DOE selected baseline efficiency levels as reference points for all of the product 

classes of central air conditioners and heat pumps and compared these baselines to 

projected changes resulting from potential amended energy conservation standards. 

Products at the baseline efficiency in each product class represent products with the 

common characteristics of equipment in that class that just meet current Federal energy 

conservation standards, while still providing basic consumer utility. 

For each of the representative products, DOE analyzed multiple efficiency levels 

and estimated manufacturer production costs at each efficiency level. Table IV.4 and 

Table IV.5 provide the full efficiency level range that DOE analyzed from the baseline 

efficiency level to the max-tech efficiency level for each product class. The highest 

efficiency level in each of the seven product classes was identified through a review of 

products listed in AHRI-certified directories, manufacturer catalogs, and other publiclyavailable documents. 

Table IV.4 Split-System SEER Values by Efficiency Level* 

Split AC Split HP 

2 

Ton 

3 

Ton 

5 

Ton 

2 

Ton 

3 

Ton 

5 

Ton 

Efficiency Level 1 - Baseline 13 13 13 13 13 13 

Efficiency Level 2 13.5 13.5 13.5 13.5 13.5 13.5 

Efficiency Level 3 14 14 14 14 14 14 

Efficiency Level 4 14.5 14.5 14.5 14.5 14.5 14.5 

Efficiency Level 5 15 15 15 15 15 15 

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Efficiency Level 6 15.5 15.5 15.5 15.5 15.5 15.5 

Efficiency Level 7 16 16 16 16 16 16 

Efficiency Level 8 16.5 16.5 16.5 16.5 16.5 16.5 

Efficiency Level 9 17 17 17 17 17 17 

Efficiency Level 10 18 18 18 18 18 18 

Efficiency Level 11 19 19 19 19 

Efficiency Level 12 20 20 20 20 

Efficiency Level 13 21 21 21 21 

Efficiency Level 14 22 22 22 

Efficiency Level 15 23 

Efficiency Level 16 24.5 

Max-Tech Efficiency Level** 24.5 22 18 22 21 18 

* The efficiency levels were analyzed independent of one another for each product class and are not linked
 

as they are when considered in the downstream analyses as trial standard levels. The table depicts various
 

levels for different product classes as part of the same efficiency level for convenience only, and not
 

because the levels were analyzed together across product classes for the engineering analysis. Therefore,
 

certain product classes have more or less efficiency levels depending on the number of levels analyzed for
 

the given product class. 

**This level is a summary of all of the max-tech efficiency levels for each product class and capacity, 

which corresponds to the highest efficiency level analyzed.
 

Table IV.5 Single-Package and Niche Product SEER Values by Efficiency Level* 

Single 

Pkg AC 

Single 

Pkg HP SDHV 

Efficiency Level 1 - Baseline 13 13 13 

Efficiency Level 2 13.5 13.5 13.5 

Efficiency Level 3 14 14 14 

Efficiency Level 4 14.5 14.5 14.3 

Efficiency Level 5 15 15 

Efficiency Level 6 15.5 15.5 

Efficiency Level 7 16 16 

Efficiency Level 8 16.5 16.4 

Efficiency Level 9 16.6 

Max-Tech Efficiency Level** 16.6 16.4 14.3 

* The efficiency levels were analyzed independent of one another for each product class and are not linked
 

as they are when considered in the downstream analyses as trial standard levels. The table depicts various
 

levels for different product classes as part of the same efficiency level for convenience only, and not
 

because the levels were analyzed together across product classes for the engineering analysis. Therefore,
 

certain product classes have more or less efficiency levels depending on the number of levels analyzed for
 

the given product class. 

**This level is a summary of all of the max-tech efficiency levels for each product class and capacity, 

which corresponds to the highest efficiency level analyzed.
 

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In the preliminary analysis of split system air conditioners and heat pumps, DOE 

1only examined products at the representative three-ton capacity. For the direct final rule, 

DOE performed additional analyses for two-ton and five-ton products. Therefore, the 

efficiency levels analyzed for split system products were expanded to include the relevant 

efficiency levels at the additional cooling capacities. For single package central air 

conditioners and heat pumps, as well as SDHV systems, the efficiency levels did not 

change from the preliminary analysis. 

For space-constrained products, AHRI certification directory listings and 

manufacturer catalogs only contain units rated at a single efficiency level. DOE defined 

the baseline for space-constrained products as the efficiency specified by the current 

Federal energy conservation standards (i.e., 12 SEER). This SEER value is the same as 

the max-tech SEER value identified in DOE’s analysis. Therefore, DOE did not conduct 

further analysis on the space-constrained products because the energy conservation 

standards for these two product classes are already set at the max-tech level and cannot 

be amended to provide additional savings. For additional details, see section III.G of this 

direct final rule. 

4. Results 

Using the manufacturer markup and shipping costs, DOE calculated estimated 

manufacturer selling prices of the representative furnaces and central air conditioners and 

heat pumps from the manufacturer production costs developed using the cost model. 

Chapter 5 of the TSD accompanying today’s notice provides a full list of manufacturer 

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production costs and manufacturer selling prices at each efficiency level for each product 

class and capacity analyzed, for both furnaces and central air conditioners and heat 

pumps. Chapter 5 of the TSD also contains the estimated cost to implement each design 

option that DOE analyzed for reducing the standby mode and off mode energy 

consumption of furnaces and off mode energy consumption of central air conditioners 

and heat pumps. 

5. Scaling to Additional Capacities 

DOE developed MPCs for the analysis of additional input capacities for furnaces 

and cooling capacities for residential central air conditioners and heat pumps by 

performing virtual teardowns of products at input capacities and cooling capacities other 

than the representative capacities. DOE developed a cost model for each virtual teardown 

product based on physical teardowns of representative units with a range of nominal 

capacities and from multiple manufacturers. Whenever possible, DOE maintained the 

same product line that was used for the physical teardown of the representative products 

to allow for a direct comparison of models at representative capacities and models at 

higher and lower capacities. For furnaces, the cost model accounts for changes in the size 

of components that would scale with input capacity (e.g., heat exchanger size), while 

components that typically do not change based on input capacity (e.g., gas valves, 

thermostats, controls) were assumed to remain largely the same across the different input 

capacities. Similarly, for central air conditioners and heat pumps, the cost model accounts 

for changes in the size of components that would scale with input capacity (e.g., coil size, 

compressor), while components that typically do not change based on input capacity 

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(e.g., expansion valves, electronic controls) were assumed to remain largely the same 

across the different input capacities. DOE estimated the changes in material and labor 

costs that occur at capacities higher and lower than the representative capacities based on 

observations made during teardowns and professional experience. Performing physical 

teardowns of models outside of the representative capacities allowed DOE to accurately 

model certain characteristics that are not identifiable in manufacturer literature. 

a. Furnaces 

DOE recognizes that there is a large variation in the input capacity ratings of 

residential furnaces beyond the representative input capacity, which causes large 

discrepancies in manufacturer production costs. To account for this variation, DOE 

analyzed additional common input capacities (as determined during the market 

assessment) for the largest class of residential furnaces (i.e., non-weatherized gas 

furnaces). DOE performed physical teardowns of several non-weatherized gas furnaces 

above and below the representative input capacity to gather the necessary data to 

accurately scale the results from the representative input capacity to other input 

capacities. Performing teardowns of models outside of the representative capacity 

allowed DOE to accurately model certain characteristics that are not identifiable in 

manufacturer literature. In the furnaces RAP, DOE set forth its plans to analyze models 

at input capacities of 50,000 Btu/h and 125,000 Btu/h in addition to the models at the 

representative input capacity. 

In comments, Ingersoll Rand stated that the additional input capacities which 

DOE planned to analyze are not very common, and instead, the company suggested that 

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DOE should analyze units at 40,000 Btu/h and 120,000 Btu/h, as the AHRI furnace 

directory lists a much greater number of models at these capacities. (FUR: Ingersoll 

Rand, No. 1.3.006 at p. 5) ACEEE, too, favored 40,000 Btu/h for analysis, because it 

argued that the smaller input capacity is more appropriate for the heating loads of 

modest-sized houses. (FUR: ACEEE, No. 1.3.009 at pp. 6-7) At the upper bounds of 

capacity, Ingersoll Rand also commented that there are not many condensing furnaces 

above 120,000 Btu/h input capacity. (FUR: Ingersoll Rand, Public Meeting Transcript, 

No. 1.2.006 at p. 178) AHRI again advised DOE not to lock into discrete capacities in its 

analysis of the low and high ends of the capacity range. (FUR: AHRI, Public Meeting 

Transcript, No. 1.2.006 at pp. 176-177) 

In response to these comments, DOE reevaluated the distribution of capacities on 

the furnace market and determined that the majority of non-weatherized gas furnace 

models on the market are offered in 20,000 Btu/h increments between 40,000 Btu/h and 

120,000 Btu/h, with the bulk of models at 60,000, 80,000, 100,000 and 120,000 Btu/h. 

Therefore, DOE scaled its analysis for non-weatherized gas furnaces (using virtual 

teardowns in conjunction with physical teardowns) to 60,000 Btu/h, 100,000 Btu/h, and 

120,000 Btu/h, in addition to the analysis that was performed for the representative input 

capacity of 80,000 Btu/h. DOE selected these three additional input capacities to align 

them with the number of additional cooling capacities being analyzed for the central air 

conditioners analysis. DOE believes that 60,000 Btu/h is more representative of the lower 

end of the capacity range than 40,000 Btu/h, which is the minimum specified input 

capacity that meets DOE’s definition. 

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The results of DOE’s analysis for the additional input capacities are presented in 

chapter 5 of the direct final rule TSD. Chapter 5 also contains additional details about the 

calculation of MPCs for input capacities outside of the representative capacity. 

b. Central Air Conditioners and Heat Pumps 

To account for the variation in the rated cooling capacities of split system 

residential central air conditioners and heat pumps, and differences in both usage patterns 

and first cost to consumers of split system air conditioners and heat pumps larger or 

smaller than the representative capacity, DOE developed MPCs for central air 

conditioners and heat pumps at two-ton and five-ton cooling capacities, in addition to 

MPCs for the representative three-ton units. 

To develop the MPCs for the analysis of two-ton and five-ton units, DOE used its 

cost model based on teardowns of representative units from multiple manufacturers. DOE 

modified the cost model for the representative capacity (i.e., three-tons) to account for 

changes in the size of central air conditioner and heat pump components that would scale 

with cooling capacity (e.g., evaporator and condenser coils, outer cabinet, packaging). 

DOE accurately modeled certain other characteristics (e.g., compressor, fan motor, fan 

blades) using information contained in manufacturer literature. 

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The results of DOE’s analysis for the additional cooling capacities are presented 

in chapter 5 of the direct final rule TSD along with details about the calculation of central 

air conditioner and heat pump MPCs. 

6. Heat Pump SEER/HSPF Relationships 

For heat pumps, energy conservation standards must establish minimum values 

for HSPF in addition to SEER. In previous rulemakings (see section 4.8.1 of the 2001 

final rule TSD available at 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_ 

r.html), analyses performed in terms of SEER were used as the basis for determining 

HSPF standards, and DOE has continued that approach for the current analysis. 

Consequently, DOE investigated the relationship between SEER and HSPF in the 

preliminary analysis, and reexamined that relationship for the direct final rule analysis. 

As a first step in examining the relationship, DOE plotted the median HSPF values for 

units that met or exceeded the existing standard of 7.7 HSPF for each product class and 

cooling capacity analyzed at half-SEER increments up to 16 SEER, and one-SEER 

increments from 16 SEER up to the max-tech level. For the preliminary analysis, DOE 

tentatively proposed using a SEER-HSPF relationship consisting of two separate linear 

sections, which roughly followed the median HSPF at each SEER. One trend line was 

developed for SEER values ranging from 13 to 16, and a separate second trend line was 

developed for SEER values above 16 SEER level. DOE proposed to use these two 

different trends because a substantial increase in the median HSPF was evident for units 

with cooling efficiencies greater than 16 SEER, which would be more accurately 

205 
 

 

 

 

 

 

 

 

 

 

reflected through the use of two lines. DOE proposed to use the same relationship for 

single package units as well. Niche product relationships were not developed because 

these products were not fully analyzed in the preliminary analysis. 

Based on updates to unit listings in the AHRI directory35 as of June 2010, DOE 

has reexamined and updated the SEER-HSPF relationship for the direct final rule 

analysis. When DOE plotted the median HSPF values for the various SEER increments 

using 2010 version of the AHRI directory as opposed to a 2008 version which was used 

in the preliminary analysis, the more recent data exhibited a more gradual increase in the 

HSPF trend at SEER values over 16 SEER. As a result, DOE trended the data set of 

median values using a single linear relationship. DOE believes that this approach, which 

follows the median more closely than the relationship developed for the preliminary 

analysis, is more representative of the SEER-HSPF relationship illustrated by heat pumps 

currently available in the market. Additionally, while examining the relationship for 

different product classes and capacity sizes, DOE determined that the differences in 

HSPF values across product classes were substantial enough to warrant separate SEERHSPF relationships for each product class and each cooling capacity analyzed. See 

chapter 5 of the TSD accompanying today’s notice for the specific HSPF values 

considered at given SEER levels based on the SEER-HSPF relationship developed for 

this direct final rule. 

35 Available at: http://www.ahridirectory.org/ceedirectory/pages/hp/defaultSearch.aspx. 

206 
 

 

 

 

 

 

 

 

 

 

 

 

7. Standby Mode and Off Mode Analysis 

As mentioned in section III.C, DOE is required by EPCA, as amended, to address 

standby mode and off mode energy consumption when developing amended energy 

conservation standards for furnaces and central air conditioners and heat pumps. (42 

U.S.C. 6295(gg)) DOE adopted a design-option approach for its standby mode and off 

mode engineering analysis for both furnaces and central air conditioners/heat pumps, 

which allowed DOE to calculate the incremental costs of adding specific design options 

to a baseline model. DOE decided on this approach because sufficient data do not exist to 

execute an efficiency-level analysis, and DOE is not aware of any manufacturers that 

currently rate or publish data on the standby mode energy consumption of their products. 

Unlike standby mode and off mode fossil-fuel consumption for furnaces which is 

accounted for by AFUE for gas and oil-fired furnaces, standby mode and off mode 

electricity consumption for furnaces (including for electric furnaces) is not currently 

regulated. Similarly, although SEER and HSPF account for the standby mode electricity 

consumption of central air conditioners and furnaces, off mode electricity consumption is 

currently unregulated. Because of this, DOE believes manufacturers generally do not 

invest in research and development (R&D) to design products with reduced standby 

mode and off mode electrical energy consumption. Therefore, DOE determined that there 

is no basis for comparison of efficiency levels among products in terms of standby mode 

and off mode energy consumption. The design-option approach, by contrast, allowed 

DOE to examine potential designs for reducing the standby mode and off mode power 

consumption of residential furnaces and the off mode energy consumption of central air 

conditioners and heat pumps. Standby mode energy consumption for central air 

207 
 

 

 

 

 

 

 

 

 

 

 

 

conditioners and heat pumps is already accounted for in the SEER and HSPF metrics. As 

discussed in section III.E of this direct final rule, DOE analyzed new, separate standards 

for standby mode and off mode energy consumption using separate metrics, because it is 

not technologically feasible to integrate standby mode and off mode into the existing 

metrics for these products; standby mode and off mode power consumption is orders of 

magnitude less than active mode power consumption, so in most cases, any effects would 

likely be lost because AFUE is reported to the nearest whole number for these products. 

a. Identification and Characterization of Standby Mode and Off Mode 

Components 

Using the design-option approach, DOE identified components that contribute to 

standby mode and off mode energy consumption in the teardown-generated BOMs used 

for analyzing amended AFUE and SEER standards. For furnaces, DOE performed 

measurements of standby mode and off mode electrical energy consumption of each 

product before it was torn down in accordance with the test procedures specified in 

DOE’s July 2009 furnaces test procedure NOPR (whose approach was subsequently 

adopted in a final rule published in the Federal Register on October 20, 2010 (75 FR 

64621)). 74 FR 36959 (July 27, 2009). In addition, DOE performed testing on 

individual components that DOE believes consume most of the standby energy (e.g., 

transformer, ECM blower motor). DOE aggregated these measurements to characterize 

and estimate the electrical energy use of each component operating in standby mode or 

off mode, as well as the standby mode and off mode consumption of the entire product. 

During manufacturer interviews, manufacturers provided feedback on these data, which 

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DOE used to update its estimates. DOE also estimated the costs of individual components 

and designs capable of being used to reduce standby mode and off mode power 

consumption based on volume-variable price quotations and detailed discussions with 

manufacturers and component suppliers, and DOE received feedback from manufacturers 

which was used to refine the estimates. 

For electric furnaces, DOE analyzed the expected standby mode and off mode 

power consumption of an electric furnace in comparison to the standby mode and off 

mode power consumption of a non-weatherized gas furnace. For non-weatherized gas 

furnaces, DOE found that for the baseline standby mode and off mode design, the 

components that primarily contribute to standby mode and off mode power consumption 

are the control transformer, an ECM fan motor (which was assumed present for the 

baseline standby mode and off mode design), and the control board power supply, which 

were estimated to use a total of nine watts on average. Additionally, furnaces with more 

complex controls and features (which are included in the baseline for the standby mode 

and off mode analysis since they are the highest-power consuming designs), DOE found 

that additional standby mode and off mode power requirements could be up to 2 watts, 

for a total of 11 watts of standby mode and off mode power consumption. 

To estimate the likely standby mode and off mode power consumption of electric 

furnaces, DOE compared wiring diagrams, control schematics, and images of control 

boards of gas and electric furnaces. DOE found that electric furnaces commonly use a 

40VA transformer that is very similar to those found in non-weatherized gas furnaces. 

209 
 

 

 

 

 

 

 

 

 

Hence, DOE expects the power consumption associated with these transformers is the 

same. A DOE review of electric furnaces suggests that other components are also the 

same as (or very similar to) those used in non-weatherized gas furnaces, such as ECM 

blower motors, which suggests similar standby consumption for these components also. 

Finally, DOE examined the control boards, their power supplies, and the electrical 

systems of both electric and gas furnaces to examine potential differences in standby 

mode and off mode power consumption. DOE found that control boards for both electric 

and non-weatherized gas furnaces typically share many common features, such as linear 

and/or zener-style power supplies, relays, and microchip controllers. Additionally, both 

furnace types need a wiring harness and some sensors for safety and control. The two 

key differences are that electric furnace control boards tend to be simpler (no flame 

ignition/supervision, staging, and other combustion safety controls needed) and that 

electric furnace control boards use relays and/or sequencers that have higher capacity 

ratings than the relays typically found in gas furnaces. Sequencers are used to turn the 

electric furnace heating elements on incrementally to limit inrush currents and prevent 

nuisance trips of circuit breakers. DOE estimates that the additional standby power 

associated with the use of larger relays and/or sequencers of electric furnaces is balanced 

by the lack of need for controls/components for combustion initiation and control on gas 

furnaces. 

As a result, DOE believes the evidence suggests that an electric furnace has a 

standby mode and off mode electrical consumption that is similar that of non-weatherized 

gas furnaces in similar models. Further, DOE believes the design options that were 

210 
 

 

 

 

 

 

 

 

identified for reducing the standby mode and off mode power consumption of gas 

furnaces (i.e., a switching mode power supply and a toroidal transformer) will have the 

same impact on the standby mode and off mode power consumption of electric furnaces. 

For central air conditioners and heat pumps, DOE measured off mode electrical 

energy consumption of units with and without crankcase heaters and with various 

crankcase heater control strategies in accordance with the test procedures specified in the 

DOE test procedure NOPR for central air conditioners and heat pumps. 75 FR 31224, 

31260 (June 2, 2010). As was done for furnaces, DOE aggregated these measurements, 

in conjunction with nominal power ratings, to characterize the electrical energy use of 

each component operating in off mode. During manufacturer interviews, manufacturers 

provided feedback on these data, which DOE used to update its estimates. DOE also 

estimated the costs of individual components based on the same approach as furnaces and 

received feedback from manufacturers which was used to further refine these cost 

estimates. 

b. Baseline Model 

As noted above, the design-option approach that DOE is using for the standby 

mode and off mode energy conservation standards engineering analysis calculates the 

incremental costs for products with standby mode or off mode energy consumption levels 

above a baseline model in each standby mode and off mode product class covered in this 

rulemaking. Because standby mode and off mode electrical energy consumption of 

residential furnaces and central air conditioners and heat pumps is currently unregulated, 

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DOE began by defining and identifying baseline components from the representative 

furnace teardowns that consumed the most electricity during standby mode and off mode 

operation. Baseline components were then “assembled” to model the electrical system of 

a furnace or central air conditioner or heat pump with the maximum system standby 

mode or off mode electrical energy consumption from DOE’s representative test data. 

The baseline model defines the energy consumption and cost of the most energyconsumptive product on the market today (i.e., units with the highest standby mode and 

off mode electricity consumption) operating in standby mode or off mode. See chapter 5 

of the direct final rule TSD for baseline model specifications. 

ACEEE stated that it expects the average furnace to have a standby power 

consumption of 8 watts or about 50 kilowatt-hours per year based on a 2003 study by the 

Wisconsin Energy Center.36 (FUR: ACEEE, No. 1.3.009 at p. 11) As noted above, DOE 

tested furnaces in standby mode using the procedure proposed in the July 2009 furnaces 

test procedure NOPR and later adopted in the October 2010 test procedure final rule. 

None of the furnaces tested were equipped with a “seasonal off switch,” and as a result, 

DOE did not have any reason to expect a difference in standby mode and off mode power 

consumption, as the terms are defined in the test procedure.37 As specified in the October 

2010 test procedure final rule, DOE assumed that standby mode and off mode power 

consumption were equal, as the test procedure directs for units that do not have an 

36 Pigg, S., “Electricity Use by New Furnaces: A Wisconsin Field Study,” Madison, WI: Energy Center of Wisconsin. 

(2003) (Available at: http://www.doa.state.wi.us/docs_view2.asp?docid=1812). 37 The test procedure for furnaces and boilers defines “standby mode” as “the condition during the heating 

season in which the furnace or boiler is connected to the power source, and neither the burner, electric 

resistance elements, nor any electrical auxiliaries such as blowers or pumps, are activated,” and “off mode” 

as “the condition during the non-heating season in which the furnace or boiler is connected to the power 

source, and neither the burner, electric resistance elements, nor any electrical auxiliaries such as blowers or 

pumps, are activated.” 75 FR 64621, (Oct. 20, 2010); 10 CFR part 430, subpart B, appendix N, section 2.0. 

212 
 

 

 

 

 

 

 

 

 

 

 

 

 

expected difference between standby mode and off mode power consumption. 10 CFR 

Part 430, subpart B, appendix N, section 8.6.2. DOE’s testing resulted in a range of 

values, both above and below 8 watts. Additional discussion of the results of DOE’s 

furnace testing is in chapter 5 of the direct final rule TSD. 

c. Cost-Power Consumption Results 

The results of the engineering analysis are reported as cost-power consumption 

data (or “curves”) in the form of power (in watts) versus MPC (in dollars). For furnaces, 

DOE developed two different data sets for standby mode and off mode: one to use for the 

non-weatherized gas, mobile home gas (DOE’s testing showed that the standby mode and 

off mode power consuming components are the same in mobile home gas furnaces as 

non-weatherized gas furnaces), and electric furnace product classes, and one to use for 

non-weatherized and mobile home oil-fired furnace product classes. For central air 

conditioners and heat pumps, DOE developed six off mode data sets: four for air 

conditioners and two for heat pumps. The data sets were produced based on units with 

ECM fan motors, because they will have a slightly higher off mode power consumption 

due to the fact that ECM fan motors have some controls integrated into them. 

The methodology for developing the cost-power consumption curves started with 

determining the energy use of baseline products and their full cost of production. For 

furnaces and central air conditioners and heat pumps, the baseline products contained the 

highest energy-consuming components, which included an ECM blower motor (rather 

than a PSC) when applicable. Above the baseline, DOE implemented design options 

213 
 

 

 

 

 

 

 

 

based on cost-effectiveness. Design options were implemented until all available 

technologies were employed (i.e., at a max-tech level). For furnaces and central air 

conditioners and heat pumps, the design options are not all mutually exclusive, and, 

therefore, systems could incorporate multiple design options simultaneously. 

After considering several potential designs to improve standby mode efficiency 

for furnaces, DOE ultimately examined two designs in addition to the baseline that 

passed the screening analysis (see chapter 4 of the direct final rule TSD for details). DOE 

first considered the use of a switch mode power supply instead of a linear power supply. 

DOE also considered the use of a toroidal transformer in addition to a switch mode power 

supply to further reduce standby mode and off mode energy consumption of a furnace. 

The power consumption levels analyzed for furnaces are shown in Table IV.6 below. 

Table IV.6 Standby Mode and Off Mode Power Consumption Levels for Furnaces 

Non –weatherized Gas, 

Electric, and Mobile Home 

Gas Furnace Standby 

Power Consumption 

(W) 

Non-weatherized Oil-fired 

and Mobile Home OilFired Furnace Standby 

Power Consumption 

(W) 

Baseline 11 12 

Efficiency 

Level 1 10 11 

Efficiency 

Level 2 9 10 

Although DOE’s test results for furnaces showed that the standby mode and off 

mode consumption could be reduced below efficiency level 2 by eliminating certain 

features (e.g., replacing an ECM blower motor with a PSC motor), DOE did not consider 

214 
 

 

 

 

 

 

these as potential design options, because the elimination of such features and 

components would result in a reduction of consumer utility. In its analysis, DOE only 

considered designs that could be implemented with no noticeable impacts on the 

performance and utility of the unit. 

For central air conditioners, DOE examined three designs (i.e., thermostaticallycontrolled fixed-resistance crankcase heaters, thermostatically-controlled variableresistance crankcase heaters with compressor covers, and thermostatically-controlled 

variable-resistance crankcase heaters with compressor covers and a toroidal transformer) 

in addition to the baseline for split-system blower coil and packaged air conditioners 

equipped with crankcase heaters. DOE only examined two designs (i.e., 

thermostatically-controlled fixed-resistance crankcase heaters and thermostaticallycontrolled variable-resistance crankcase heaters with compressor covers) in addition to 

the baseline for coil-only air conditioners, because the transformer is contained in the 

furnace or air handler and is not a component of a coil-only system. DOE believes that 

the crankcase heater is the only source of off mode power consumption for the coil-only 

systems, and consequently, a coil-only split-system air conditioner will have no off mode 

power consumption without a crankcase heater unless it has an ECM motor in the 

condensing unit. 

For heat pumps, DOE found during testing that heat pumps achieved a lower 

power consumption during the off mode period through the use of crankcase heaters with 

a control strategy based on outdoor ambient temperature, as opposed to compressor shell 

215 
 

 

 

 

 

 

 

temperature. However, using this control strategy prevents a heat pump from achieving 

any additional energy savings with a compressor cover, because while a cover helps the 

compressor shell retain heat, it has no effect on the outdoor ambient temperature sensor. 

Additionally, DOE found that the fixed-resistance and variable-resistance crankcase 

heaters had similar test results in terms of energy consumption and believes that 

manufacturers will choose the fixed-resistance heaters because they are more costeffective. Therefore, DOE did not include compressor covers as a design option for heat 

pumps because there is no benefit from them without the variable-resistance crankcase 

heaters and only considered thermostatically-controlled crankcase heaters and toroidal 

transformers. 

DOE also found during testing that the crankcase heater accounts for the vast 

majority of off mode power consumption for air conditioners and heat pumps. However, 

not every unit has a crankcase heater and, to accurately reflect this in the analyses, DOE 

determined separate efficiency levels within each product class for units with and without 

a crankcase heater. Because two of the design options are only relevant with crankcase 

heaters, the only possible improvement to units without crankcase heaters is the toroidal 

transformer. Table IV.7 through Table IV.9 contain the off mode efficiency levels for 

central air conditioners and heat pumps. 

Table IV.7. Split-System (Blower Coil), Packaged, and Space-Constrained Air 

Conditioner Off Mode Power Consumption 

Power Consumption with an 

ECM Motor and Crankcase 

Heater 

(W) 

Power Consumption with an 

ECM Motor and No Crankcase 

Heater 

(W) 

Baseline 48 11 

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Efficiency Level 1 36 10 

Efficiency Level 2 30 

Efficiency Level 3 29 

Table IV.8. Split-System (Coil-Only) Air Conditioner Off Mode Power 

Consumption 

Power Consumption with an 

ECM Motor and Crankcase 

Heater 

(W) 

Power Consumption with an 

ECM Motor and No Crankcase 

Heater 

(W) 

Baseline 37 3 

Efficiency Level 1 25 

Efficiency Level 2 19 

Table IV.9. Split-System, Packaged, and Space-Constrained Heat Pump Off Mode 

Power Consumption 

Power Consumption with an 

ECM Motor and Crankcase 

Heater 

(W) 

Power Consumption with an 

ECM Motor and No Crankcase 

Heater 

(W) 

Baseline 51 14 

Efficiency Level 1 33 13 

Efficiency Level 2 32 

For furnaces, the standby mode and off mode electrical energy consumption (in 

watts) of each design option was estimated based on test measurements performed on 

furnace electrical components, industry knowledge, and feedback from manufacturers 

during manufacturer interviews. For central air conditioners and heat pumps, the off 

mode energy consumption of each system design was calculated based on test 

measurements performed according to the off mode test procedure for central air 

conditioners and heat pumps that was proposed in the June 2010 test procedure NOPR 

(75 FR 31224 (June 2, 2010)), and information gathered during manufacturer interviews. 

See chapter 5 in the direct final rule TSD for additional detail on the engineering analyses 

217 
 

 

 

 

 

 

 

 

 

 

 

 

and for complete cost-power consumption results for standby mode and off mode 

operation. 

D. Markup Analysis 

The markup analysis develops appropriate markups in the product distribution 

chain to convert the estimates of manufacturer selling price derived in the engineering 

analysis to consumer prices. At each step in the distribution channel, companies mark up 

the price of the product to cover business costs and profit margin. After establishing 

appropriate distribution channels, DOE relied on economic data from the U.S. Census 

Bureau and industry sources to estimate how prices are marked up as the products pass 

from the manufacturer to the consumer. 

In the central air conditioners and heat pumps preliminary TSD, DOE determined 

two typical distribution channels for central air conditioners and heat pumps -- one for 

replacement products, and one for products installed in new homes. DOE then estimated 

the markups associated with the main parties in the distribution channels. For 

replacement products, these are distributors and mechanical contractors. For products 

installed in new homes, these are distributors, mechanical contractors, and general 

contractors (builders). 

DOE based the distributor and mechanical contractor markups on company 

income statement data;38 DOE based the general contractor markups on U.S. Census 

38 Heating, Air-conditioning & Refrigeration Distribution International (HARDI) 2010 Profit Report; Air 

Conditioning Contractors of America (ACCA) Financial Analysis (2005). 

Deleted: Airconditioning 

218 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bureau data39 for the residential building construction industry. For distributors and 

contractors, DOE developed separate markups for baseline products (baseline markups) 

and for the incremental cost of more-efficient products (incremental markups). Thus, for 

these actors, the estimated total markup for more-efficient products is a blend of a 

baseline markup on the cost of a baseline product and an incremental markup on the 

incremental cost. No comments were received on the distribution markups contained in 

the preliminary TSD for central air conditioners and heat pumps, and DOE retained the 

approach used in the preliminary analysis for today’s direct final rule. 

In the furnaces RAP, DOE stated its intention to determine typical markups in the 

furnace distribution chain using publicly-available corporate and industry data, 

particularly Economic Census data from the U.S. Census Bureau40 and input from 

industry trade associations such as HARDI. It described a similar approach for furnaces 

to estimate baseline and incremental markups as was used in the preliminary analysis for 

central air conditioners and heat pumps. 

Commenting on the furnaces RAP, HARDI stated that distributors do not 

categorize costs into labor-scaling and non-labor-scaling costs, and it recommended that 

DOE should not use this approach when projecting distributor impacts. HARDI 

recommended that DOE should use the markups approach taken in chapter 17 of the TSD 

for central air conditioners and heat pumps. (FUR: HARDI, No. 1.3.016 at p. 9) 

39 2007 Economics Census; available at: 

http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&sv_name=*&_SectorId=23&ds_nam
 

e=EC0700A1&_lang=en&_ts=309198552580. 40 U.S. Census Bureau, Plumbing, Heating, and Air-Conditioning Contractors: 2002 (Report EC02-231­

238220).
 

219 
 

 

 

 

 

 

 

 

 

 

In response, DOE notes that the analysis described in chapter 17 of the TSD for 

central air conditioners and heat pumps only used baseline markups because its purpose 

was to estimate the impacts of regional standards and not to estimate the incremental 

costs of higher-efficiency products for the LCC and PBP analysis. To derive incremental 

markups for the LCC and PBP analysis, DOE distinguishes between costs that change 

when the distributor’s cost for the appliances it sells changes due to standards and those 

that do not change. DOE agrees that the categorization of costs as non-labor-scaling and 

labor-scaling mentioned in the furnaces RAP may not be appropriate terminology. 

Accordingly, for the direct final rule, DOE refers to these two categories as variant and 

invariant costs. 

Chapter 6 of the direct final rule TSD provides additional details on the markup 

analysis. 

E. Energy Use Analysis 

DOE’s analysis of the energy use of furnaces and central air conditioners and heat 

pumps estimated the energy use of these products in the field (i.e., as they are actually 

used by consumers). The energy use analysis provided the basis for other follow-on 

analyses that DOE performed, particularly assessments of the energy savings and the 

savings in consumer operating costs that could result from DOE’s adoption of potential 

amended standard levels. In contrast to the DOE test procedure, which provides 

standardized results that can serve as the basis for comparing the performance of different 

220 
 

 

 

 

 

 

 

 

 

 

appliances used under the same conditions, the energy use analysis seeks to capture the 

range of operating conditions for furnaces and central air conditioners and heat pumps in 

U.S. homes and buildings. 

In the central air conditioners and heat pumps preliminary TSD, to determine the 

field energy use of products that would meet possible amended standard levels, DOE 

used data from the EIA’s 2005 Residential Energy Consumption Survey (RECS), which 

was the most recent such survey available at the time of DOE’s analysis.41 RECS is a 

national sample survey of housing units that collects statistical information on the 

consumption of and expenditures for energy in housing units along with data on energyrelated characteristics of the housing units and occupants. The sample is selected to be 

representative of the population of occupied housing units in the U.S. RECS provides 

sufficient information to establish the type (product class) of furnace, central air 

conditioner, or heat pump used in each housing unit. As a result, DOE was able to 

develop discrete samples for each of the considered product classes. DOE uses these 

samples not only to establish each product’s annual energy use, but also as the basis for 

conducting the LCC and PBP analysis. DOE described a similar approach for furnaces in 

the RAP. 

Commenting on the furnaces RAP, Lennox stated that DOE should use more 

recent data for the energy consumption of furnaces than those in the 2005 RECS. Lennox 

asserted that using the 2005 RECS will overstate the savings associated with higher 

efficiency levels, because the market share of high-efficiency furnaces has increased 

41 For information on RECS, see http://www.eia.doe.gov/emeu/recs/. 

221 
 

 

 

 

 

 

 

 

 

 

 

since the time of the survey. (FUR: Lennox, No. 1.3.018 at p. 4) Ingersoll Rand made a 

similar point. (FUR: Ingersoll Rand, No. 1.3.006 at pp. 7-8) In response, DOE notes that 

the increase in the market share of high-efficiency furnaces since 2005 does not result in 

overstated savings because, as described below, DOE uses information on the furnace in 

the RECS housing units only to estimate the heating load of each sample building (i.e., 

the amount of heat needed to maintain comfort). Since the heating load is a characteristic 

of the dwelling and not the heating equipment, DOE’s estimate of annual energy use of 

baseline and higher-efficiency furnaces (and the difference, which is the energy savings) 

is not affected if some households have acquired new, more-efficient furnaces since the 

time of the 2005 RECS. 

Details on how DOE used RECS to determine the annual energy use of residential 

furnaces and central air conditioners and heat pumps are provided below. A more detailed 

description of DOE’s energy use analysis is contained in chapter 7 of the direct final rule 

TSD. 

1. Central Air Conditioners and Heat Pumps 

In the central air conditioners and heat pumps preliminary TSD, DOE determined 

the annual energy use of central air conditioners and heat pumps at various efficiency 

levels using a nationally representative set of housing units that were selected from EIA’s 

2005 RECS. DOE began with the reported annual electric energy consumption for space 

cooling and space heating for each household in the sample. DOE then adjusted the 

222 
 

 

 

 

 

 

 

 

 

 

 

 

RECS household energy use data, which reflect climate conditions in 2005, to reflect 

normal (30-year average) climate conditions. 

DOE used the reported cooling equipment vintage (i.e., the year in which it was 

manufactured) to establish the cooling efficiency (SEER) and corresponding heating 

efficiency (HSPF) of the household’s air conditioner or heat pump. DOE estimated the 

energy consumption for each sample household at the baseline and higher efficiency 

levels using the 2005 RECS-reported cooling energy use multiplied by the ratio of the 

SEER of each efficiency level to the SEER of the household’s equipment. Similarly, 

DOE calculated the heating energy use for each household in the sample using the 2005 

RECS-reported heating energy use multiplied by the ratio of the HSPF of each efficiency 

level to the HSPF of the household’s equipment. 

DOE also estimated the energy consumption for central air conditioners and heat 

pumps shipped to commercial buildings, which DOE estimated at 7 percent of the 

market, using a model of a small office building, DOE’s EnergyPlus building energy 

simulation software,42 and weather data for 237 locations around the U.S. Four 

efficiency levels, starting with a baseline SEER 13 level, were modeled and the energy 

use at intermediate efficiency levels was estimated by interpolation between these four 

levels. Details of the energy analysis methodology are described in chapter 7 of the TSD. 

For more information on EnergyPlus refer to DOE’s EnergyPlus documentation, available at: 

http://apps1.eere.energy.gov/buildings/energyplus/energyplus_documentation.cfm. EnergyPlus software is 

freely available for public download at: 

http://apps1.eere.energy.gov/buildings/energyplus/energyplus_about.cfm. 

223 

42 
 

 

 

 

 

 

 

 

 

Commenting on the preliminary TSD, several commenters suggested that DOE 

use computer simulation models for the residential energy use estimates as well. (CAC: 

CA IOUs, No. 69 at p. 3; SCS, Public Meeting Transcript at p. 74) Commenters stated 

that using simulations is likely to be more accurate. (CAC: ACEEE, No. 72 at p. 6; 

NPCC, No. 74 at p. 3) Commenters noted that that RECS 2005 does not distinguish 

between heating and cooling used in the same 24-hour period (CAC: CA IOUs, No. 69 at 

p. 3), and that heat pump usage estimated using RECS data may be less accurate due to 

the small sample size, particularly when examining RECS statistics at the Census 

division level. (CAC: SCS, No. 73 at p. 3; NPCC, No. 74 at p. 2; ACEEE, No. 72 at p. 6) 

A commenter also noted that using RECS does not allow DOE to control for external 

system effects such as duct anomalies. (CAC: ACEEE, No. 72 at p. 6) More specifically 

with respect to heat pumps, NPCC commented that the approach used in the preliminary 

analysis assumed that improvements in efficiency result in comparable percentage 

savings across differing regions. NPCC noted that because HSPF is climate dependent, a 

simulation or bin temperature approach should be used to get at the right answer. (CAC: 

NPCC, No. 74 at p. 2; NPCC, Public Meeting Transcript at p. 44) NPCC also stated that 

presuming DOE moves to a simulation of the heat pump for the residential analysis, it 

should use a heat pump performance curve that reflects inverter-driven compressors 

because they perform quite differently at lower temperatures relative to the standard 

rating points that are now available. (CAC: NPCC, Public Meeting Transcript. at p. 70) 

Rheem commented that the proportional changes in SEER will reflect proportional 

changes in cooling energy use across climates, assuming similar characteristics for the 

underlying equipment design, but noted that SEER alone may not portray an accurate 

224 
 

 

 

 

 

 

 

 

 

 

difference in relative energy consumption for disparate climates if the underlying systems 

have different characteristics such as two-stage compressors or variable-speed fans. 

(CAC: Rheem, No 76 at p. 6) 

In response to these comments, DOE is aware that RECS observations for heat 

pumps are limited when analyzing geographic subsets at the Census division levels 

identified by commenters, but points out that it relies on larger regions with more 

observations for its regional or national analysis of heat pumps. In response to the 

comment that DOE does not distinguish between heating and cooling in a 24-hour period, 

DOE believes that this comment may be relevant to the energy analysis for heat pumps, 

but that its importance is overshadowed by the much larger concern of achieving 

household energy consumption estimates that are reflective of the variability in 

residential homes of different vintages and building characteristics, which is difficult to 

capture in modeling. With regard to controlling for duct anomalies, DOE points out that a 

simulation may allow DOE to presume some duct performance or, through a sensitivity 

study, understand how the assumptions for a duct system can impact the energy results, 

but in fact would not necessarily yield more accurate estimates of energy consumption 

than an analysis that is based on more empirical energy use data. 

In response to the concern regarding the climate sensitivity of HSPF and the 

overall heating performance of heat pumps, DOE agrees that its approach to estimating 

energy savings should take into account how the heating HSPF would vary as a function 

of climate. DOE examined several strategies for doing this and relied for the direct final 

225 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

rule on an approach that estimates the change in seasonal heating efficiency for heat 

pumps based on equations developed from building simulation analysis across the U.S.43 

DOE also examined other possible methods, including alternative simulation approaches, 

and discusses these in chapter 7 of the direct final rule TSD. For the direct final rule, 

however, DOE did not rely on separate simulations for residential buildings to estimate 

the underlying energy use at different efficiency levels, due to the concerns mentioned 

above, and, thus, did not include heating performance curves for inverter-driven heat 

pump systems. DOE acknowledges that certain inverter-driven heat pumps, primarily 

found in mini-split systems, have increased heating capacity at low temperature (relative 

to the nominal 47 °F heating capacity) compared with non-inverter systems. DOE also 

acknowledges that this difference has potential heating energy benefits over the course of 

the year that, while captured in the HSPF rating, may differ depending on climate. 

DOE also received a number of comments on the commercial analysis, which 

relied on the use of energy simulations. ACEEE commented that in the commercial 

energy analysis, it appreciated that DOE used realistic values for the total static pressure 

in the building modeling, but it was not confident that the motor efficiencies or combined 

efficiencies are realistic for residential equipment at these higher static pressures. (CAC: 

ACEEE, Public Meeting Transcript at p. 69) In addition, ACEEE stated that it believes 

that there should be some empirical data to underlie the assumption that constant air 

circulation is the predominant mode of operation in small commercial buildings that 

43 Fairey, P., D.S. Parker, B. Wilcox and M. Lombardi, “Climate Impacts on Heating Seasonal 

Performance Factor (HSPF) and Seasonal Energy Efficiency Ratio (SEER) for Air Source Heat Pumps,” 

ASHRAE Transactions, American Society of Heating, Refrigerating and Air Conditioning Engineers, Inc. 

(June 2004). 

226 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

utilize residential equipment. NPCC echoed this point, adding that it had not seen 

controls that provided switching between this mode and heating/cooling modes of 

operation. (CAC: NPCC, No. 74 at p. 5) NPCC also suggested that DOE use the most 

recent weather data in its analysis and provided an analysis of differences in TMY2 and 

TMY3 weather data for the northwest.44 (CAC: NPCC, No. 74 at p. 4) 

DOE was not able to identify a specific source of information regarding the use of 

continuous air circulation for residential (single-phase) heat pumps in commercial 

buildings, but notes that a California study of 215 small air conditioners in commercial 

buildings found intermittent (cycling) ventilation operation during the occupied period in 

38 percent of cases examined.45 DOE also notes that a programmable residential 

thermostat that is set in a continuous-circulation fan mode will still shift into a cooling or 

heating mode on a call for cooling or heat. However, in recognition that intermittent 

ventilation is common in small buildings, DOE modified its simulation model to have 40 

percent (two out of five) of the HVAC zones operate in intermittent-circulation mode 

during the occupied period. DOE maintained the fan power assumptions from the 

preliminary TSD. DOE acknowledges that higher fan static pressure may result in motor 

efficiency deviating from the values used, but it may also result in the actual air flow 

differing in the field, depending on both the type and size of motor used and on 

installation practices. DOE also notes that there may be variation in cooling and heating 

44 The TMY2 data are based on examination of weather data from 1961-1990 for 239 locations. See: 

National Renewable Energy Laboratory, User's manual for TMY2s (Typical meteorological years derived
 

from the 1961-1990 national solar radiation database) (1995).
 45 Jacobs, P. Small HVAC Problems and Potential Savings Reports. 2003. California Energy Commission, 

Sacramento, California. Report No. CEC-500-03-082-A-25. Available at: 

http://www.energy.ca.gov/pier/project_reports/500-03-082.html.
 

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efficiency when air flow rates deviate from nominal values. DOE has not attempted to 

systematically explore these variations in the commercial modeling. DOE has at this 

point not updated its commercial simulations to use TMY3 weather data but will consider 

doing so for the final rule. DOE believes that the impact of this change would be minimal 

with regard to the overall analysis. In the data provided by NPCC, the overall change for 

comparable TMY2 and TMY3 locations was on the order of a five percent reduction in 

heating degree days and no clear change in cooling degree days. 

DOE received multiple comments on the SEER-EER relationship that was used in 

the commercial modeling. Commenters expressed concern that the relationship that was 

used in the preliminary analysis did not reflect the correct relationship between SEER 

and EER. Several commenters stated that the Wassmer-Brandemuehl46 curve used in the 

preliminary analysis suggested a nearly linear relationship between SEER and EER, but 

that their review of the data in the AHRI directory suggested that this is not accurate. 

(CAC: CA IOUs, No. 69 at pp. 3-4; PG&E, Public Meeting Transcript at pp.63, 72; 

Ingersoll Rand, Public Meeting Transcript at p. 63; EEI, No. 75at p. 5) ACEEE suggested 

that the curve should include two lines, reflecting the slopes of this relationship for 

single-speed versus step-modulating compressors. (CAC: ACEEE, Public Meeting 

Transcript at p. 57; ACEEE, No. 72 at p. 4) ASAP noted that the relationship between 

SEER and EER may become clearer when set by a standard, and that the market migrates 

to the lowest-cost compliance path, although single-stage equipment will provide a 

46 Wassmer, M. and M.J. Brandemuehl, “Effect of Data Availability on Modeling of Residential Air 

Conditioners and Heat Pumps for Energy Calculations” (2006) ASHRAE Transactions 111(1), pp. 214­

225. 

228 
 

 

 

 

 

 

 

different EER at a 16 SEER than will two-stage equipment. (CAC: ASAP, Public 

Meeting Transcript at p. 64) 

EEI and NPCC reported concerns that the nearly linear relationship between EER 

and SEER would result in the analysis showing better apparent economic benefit than 

what might actually occur due to differences between estimated versus actual impacts on 

peak demand and calculated marginal price. EEI suggested that DOE should use AHRI’s 

published EER values in the simulations. (CAC: EEI, Public Meeting Transcript at pp. 

61, 104; EEI, No. 75 at p. 5; NPCC, Public Meeting Transcript at p. 130) Southern also 

agreed that a curve based on EER values representative of the current AHRI database 

should be used instead of the relationship used in the preliminary TSD, and further 

suggested that the SEER 16 and max-tech efficiency levels should be modeled as dualspeed or variable-speed equipment. (CAC: SCS, No. 73 at p. 4; SCS, Public Meeting 

Transcript at p. 60) PG&E commented that, based on their review of the equipment 

market, there is a decrease in EER at very high SEER. They emphasized that the impact 

of this relationship on peak performance is an important issue for utilities and is a reason 

why they are emphatic about not using SEER as the only efficiency metric in hot, dry 

regions. (CAC: PG&E, Public Meeting Transcript at p. 72) 

In response to the above concerns, DOE modified its commercial simulations to 

use EER values that reflect the median values taken from the most recent AHRI database 

for the selected SEER levels that were simulated. In addition, 16 SEER and higher 

efficiency levels were modeled as two-stage equipment. Additional changes to the 

229 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

commercial modeling included the incorporation of new equipment performance curves 

from a 3-ton split system air conditioner that DOE believes to be more representative of 

residential central air conditioners and heat pumps. 

DOE also received several comments suggesting that northern region heat pumps 

should not be sized based on cooling loads. (CAC: CA IOUs, No. 69 at p. 4; NPCC, No. 

74 at p. 4) At the public meeting, ACEEE asked if sizing based on cooling loads for 

northern climates is a recommended practice that one would find in an ACCA manual. 

(CAC: ACEEE, Public Meeting Transcript at p. 55) Southern also questioned the sizing 

based on cooling loads for northern climates. (CAC: SCS, Public Meeting Transcript at p. 

50) 

DOE understands that, in the Northwest, utilities encourage sizing heat pumps 

based on the maximum of either the cooling load or the heating load at an ambient 

temperature between 30 °F and 35 °F, and that such sizing is one component of many 

Northwest heat pump rebate programs. DOE reviewed the current ACCA manual for 

sizing of equipment (Manual S),47 which clearly states that sizing of heat pumps should 

be based on cooling loads. However, Manual S allows installers some additional 

flexibility by suggesting that they can consider sizing heat pumps up to 25 percent larger 

if the building balance point (i.e., where sensible heating loads equal compressor heating 

capacity) is relatively high. The manual specifically caveats this by pointing out that the 

47 Air Conditioning Contractors of America, Manual S Residential Equipment Selection (1995) (Available 

at: www.acca.org). 

230 
 

 

 

 

 

 

 

 

 

 

 

 

additional capacity may not translate into significant reduction in heating costs and may 

not justify the cost of a larger unit. 

In a 2005 study of installation practices of heat pumps in the Northwest provided 

by NPCC,48 the residential heat pump installations that were examined were undersized 

compared to the heating load in most of the locations examined except the sites in eastern 

Washington, which had higher cooling design temperatures and would be expected to 

have relatively comparable heating and cooling loads. (CAC: NPCC, No. 74, attachment 

2 at p. 65) Sixty percent of the contractors consulted in the study reported that cooling 

sizing was the principle factor in equipment selection. The study also noted that, given 

the observed equipment sizes in the study, it would appear that a 30-percent increase in 

capacity would be required in order to be able to meet the design heating load at a 30 °F 

outside temperature, particularly given the drop in capacity of heat pumps at lower 

temperatures. Given the additional cost for larger equipment (estimated at $1,000 in the 

study) and Northwest utility rates, the study noted that consumers may be making an 

economic decision to not invest in the larger equipment (and therefore to not meet the 

30°F heating load) at the expense of greater energy savings with the larger heat pump. 

With respect to commercial buildings, DOE expects that for most new small 

commercial buildings in the northern U.S., cooling design loads used for sizing will 

typically be larger than heating design loads at 30-35°F due to internal gain assumptions. 

However, DOE notes that variation in both ventilation and internal gain assumptions used 

48 Baylon, D., et al., “Analysis of Heat Pump Installation Practices and Performance, Final Report” (2005) 

(Available at: www.neea.org/research/reports/169.pdf). 

231 
 

 

 

 

 

in sizing in the small commercial building market will result in variation in relative 

design cooling and 30-35°F heating loads among buildings. DOE also notes that to the 

extent that continuous circulation is used in commercial buildings, fan energy use and 

corresponding cooling impact for larger equipment will have an offsetting factor on 

heating energy savings from larger heat pump sizing. DOE has not passed judgment on 

the economic or energy value of sizing for heating loads in commercial buildings, but, for 

the reasons cited above, DOE did not modify the sizing methods for the commercial 

modeling for the direct final rule. 

2. Furnaces 

In the furnaces RAP, DOE stated its intention to use RECS data to estimate the 

annual energy consumption of residential furnaces used in existing homes, and further 

described its planned method for determining the range of annual energy use of 

residential furnaces at various efficiency levels. 

For the direct final rule analysis, DOE followed the method described in the 

furnaces RAP. In addition to using the 2005 RECS data to estimate the annual energy 

consumption of residential furnaces used in existing homes, DOE estimated the furnace 

energy efficiencies in existing homes, again based primarily on data from the 2005 

RECS. To estimate the annual energy consumption of furnaces meeting higher efficiency 

levels, DOE calculated the house heating load based on the RECS estimates of the annual 

energy consumption of the furnace for each household. For each household with a 

furnace, RECS estimated the equipment’s annual energy consumption from the 

232 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

household’s utility bills using conditional demand analysis. DOE estimated the house 

heating load by reference to the existing furnace’s characteristics, specifically its capacity 

and efficiency (AFUE), as well as by the heat generated from the electrical components. 

The AFUE was determined using the furnace vintage from 2005 RECS and data on the 

market share of condensing furnaces published by AHRI.49 

DOE then used the house heating load to calculate the burner operating hours, 

which is needed to calculate the fuel consumption and electricity consumption using 

section C of the current version of the American Society of Heating, Refrigerating and 

Air-Conditioning Engineers (ASHRAE) test procedure SPC 103-2007, “Method of 

Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and 

Boilers.” To calculate blower electricity consumption, DOE accounted for field data 

from several sources (as described in chapter 8 of the direct final rule TSD) on static 

pressures of duct systems, as well as airflow curves for furnace blowers from 

manufacturer literature. 

To account for the effect of annual weather variations, the 2005 RECS household 

energy consumption values were adjusted based on 30-year average HDD data for the 

specific Census division or the large State location.50 In addition, DOE made adjustments 

to the house heating load to reflect the expectation that housing units in the year in which 

compliance with the amended standards is required will have a somewhat different 

49 Air Conditioning, Heating & Refrigeration Institute Industry Statistics is the reference source for the 

shipped efficiency data by vintage year. Available at: 

http://www.ahrinet.org/Content/EquipmentStatistics_118.aspx.
 50 Census divisions are groupings of States that are subdivisions of the four census regions. The large 

States considered separately are New York, Florida, Texas, and California.
 

233 
 

 

 

 

 

 

 

 

heating load than the housing units in the 2005 RECS. The adjustment considers 

projected improvements in building thermal efficiency (due to improvement in home 

insulation and other thermal efficiency practices) and projected increases in the square 

footages of houses between 2005 and the compliance date of today’s standards. 

Commenting on the furnaces RAP, Ingersoll Rand stated that in using furnace 

capacity to estimate energy consumption, DOE needs to account for the fact that furnaces 

are often over-sized to maintain comfort under extreme conditions. (FUR: Ingersoll 

Rand, No. 1.3.006 at p. 10) In response, DOE’s approach does account for the oversizing of furnace capacity, since the furnace capacity assignment is a function of 

historical shipments by furnace capacity, which reflects actual practice, as well as heating 

square footage and the outdoor design temperature for heating (i.e., the temperature that 

is exceeded by the 30-year minimum average temperature 2.5 percent of the time). 

In the furnaces RAP, DOE described its plans to consider the potential for a 

“rebound effect” in its analysis of furnace energy use. A rebound effect could occur when 

a piece of equipment that is more efficient is used more intensively, so that the expected 

energy savings from the efficiency improvement may not fully materialize. DOE stated 

that the rebound effect for residential space heating appears to be highly variable, ranging 

from 10 to 30 percent. A rebound effect of 10 percent implies that 90 percent of the 

expected energy savings from more efficient equipment will actually occur. 

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DOE received comments about applying a rebound effect associated with higherefficiency furnaces. ACEEE referred to a 1993 study by Nadel that suggests the rebound 

effect should be about one percent.51 (FUR: ACEEE, No. 1.3.009 at p. 7) Based upon its 

experience, Southern stated that the rebound effect should not exceed 5 percent. (FUR: 

Southern, No. 1.2.006 at p. 189) Lennox expressed concern with DOE's value for the 

rebound effect. (FUR: Lennox, No. 1.3.018 at p. 4) Ingersoll Rand stated that a 

significant rebound effect is unlikely, because it implies that consumers are currently 

tolerating discomfort with existing furnaces. (FUR: Ingersoll Rand, No. 1.3.006 at p. 10) 

In response, DOE examined a recently-published review of empirical estimates of 

the rebound effect.52 The authors evaluated 12 quasi-experimental studies of household 

heating that provide mean estimates of temperature take-back (i.e., the increase in indoor 

temperature in the period after improvement in efficiency) in the range from 0.14 ◦

C to 

1.6 ◦

C. They also reviewed nine econometric studies of household heating, each of which 

includes elasticity estimates that may be used as a proxy for the direct rebound effect. 

The authors conclude that “the econometric evidence broadly supports the conclusions of 

the quasi-experimental studies, suggesting a mean value for the direct rebound effect for 

household heating of around 20%.”53 Based on the above review, DOE incorporated a 

rebound effect of 20 percent for furnaces in the direct final rule analysis. The above-cited 

review found far fewer studies that quantified a direct rebound effect for household air 

conditioning. Two studies of household cooling identified in the review provide estimates 

51 S. Nadel, “The take-back effect: fact or fiction?” Proceedings of the 1993 Energy Program Evaluation
	

Conference, Chicago, IL, pp. 556-566.
 52 S. Sorrell, J. Dimitropoulos, and M. Sommerville, “Empirical estimates of the direct rebound effect: a
	

review,” Energy Policy 37(2009) pp. 1356–71.
 53 Id. at p. 1363.
 

235 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

of the rebound effects that are roughly comparable to those for household heating (i.e., 1– 

26 percent).54 Therefore, to maintain consistency in its analysis, DOE also used a rebound 

effect of 20 percent for central air conditioners and heat pumps. 

3. Standby Mode and Off Mode 

a. Central Air Conditioners and Heat Pumps 

DOE established annual off mode energy consumption estimates for each off 

mode technology option identified in the engineering analysis for air conditioners and for 

heat pumps. DOE estimated annual off mode energy consumption for air conditioners 

based on the shoulder season off mode power consumption and heating season off mode 

power consumption multiplied by the representative shoulder season rating hours (739 

hours) and heating season rating hours (5216 hours) established in the test procedure. 

DOE estimated annual energy consumption for heat pumps based only on the shoulder 

season off mode power consumption multiplied by the representative shoulder season 

rating hours (739 hours) established in the test procedure because heat pumps operate in 

active mode during the heating season. These seasonal hours are calculated to be 

consistent with the rating hours used in the SEER and HSPF ratings for air conditioners 

and heat pumps. 

DOE is considering national standards for off mode energy consumption, but does 

not intend to set regional standards for off mode energy consumption. DOE recognizes 

54 Dubin, J.A., Miedema, A.K., Chandran, R.V., 1986. Price effects of energy-efficient technologies—a 

study of residential demand for heating and cooling. Rand Journal of Economics 17(3), 310–25. Hausman, 

J.A., 1979. Individual discount rates and the purchase and utilization of energy-using durables. Bell Journal 

of Economics 10(1), 33–54. 

236 
 

 

 

 

 

 

 

 

 

that there will be some variation in off mode hours depending on location and individual 

household usage, but believes that the defined off mode hours in the test procedure will 

represent a reasonable basis for calculation of energy savings from off mode energy 

conservation standards. In the case of heat pumps, the off mode period includes the 

shoulder period between the heating and cooling season. It is fairly constant across most 

of the U.S. and, on average, is close to the test procedure rating value for the DOE 

climate zones. In the case of air conditioners, the off mode period includes all noncooling-season hours, so there is more variation across the nation. However, for the 

majority of the U.S. population, the off mode period is close to the test procedure rating 

value. 

DOE does not include in the off mode period the time during the cooling season 

when a unit cycles off, because energy use during this period is captured in the seasonal 

SEER rating of the equipment. Similarly, DOE does not include in the off mode period 

the time during the heating season when a heat pump cycles off, because energy use 

during this period is captured in the seasonal HSPF rating of the equipment. To avoid 

double counting the benefits of design options which reduce energy consumption when 

equipment cycles off, DOE has defined the off mode time period for the energy analysis 

to be consistent with the operating periods used for the SEER and HSPF ratings 

The component that uses the most power during off mode is the crankcase heater, 

but it is not found in all products. DOE established annual off mode energy use estimates 

237 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

for air conditioners and heat pumps using each considered off mode technology option 

for units with and without crankcase heaters. 

DOE was not able to identify a data source establishing the fraction of central air 

conditioner or heat pump products in the U.S. market that would be tested with crankcase 

heaters or would be expected to have crankcase heaters installed in the field. However, a 

2004 study of the Australian market estimated that one in six central air conditioners in 

that market utilized crankcase heaters.55 Given that the need to provide for compressor 

protection for central air conditioners is driven by similar refrigerant migration concerns 

during cool weather, DOE estimated that the use of crankcase heaters in Australia was 

roughly similar to that in the U.S. at that time. DOE estimated that changes in compressor 

technology since 2004, in particular market growth in the use of scroll compressors, have 

likely reduced the fraction of the central air conditioner market with crankcase heaters. 

Based on the above considerations, for the direct final rule analysis, DOE assumed that 

10 percent of central air conditioners within each air conditioner product class would 

utilize crankcase heaters. Discussion during manufacturer interviews and review of 

product literature suggest that crankcase heaters are most commonly used in heat pumps, 

which must be able to cycle on in cold weather. DOE assumed that two-thirds of heat 

pumps would utilize crankcase heaters in each heat pump product class. 

55 Australian Greenhouse Office, “Air Conditioners Standby Product Profile 2004/2006” (June 2004) 

(Available at: http://www.energyrating.gov.au/library/pubs/sb200406-aircons.pdf). 

238 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Because the technology options examined do not impact blower energy 

consumption in off mode, DOE determined that energy savings from equipment utilizing 

ECM or PSC blower motors would be identical for each off mode technology option. 

See chapter 7 in the direct final rule TSD for additional detail on the energy 

analysis and results for central air conditioner and heat pump off mode operation. 

b. Furnaces 

As described in section IV.C.7, DOE analyzed two efficiency levels that reflect 

the design options for furnaces with ECM blower motors. The energy use calculations 

account only for the portion of the market with ECM blower motors, because the power 

use of furnaces with PCS motors is already below the power limits being considered for 

standby mode and off mode power, and, thus, would be unaffected by standards. 

To project the market share of furnaces with ECM blower motors, for nonweatherized gas furnaces DOE relied on market research data from studies conducted in 

56 57 Vancouver, Canada and the State of Oregon. From these data, DOE estimated that 

non-weatherized gas furnaces with ECMs comprise approximately 29 percent of the 

market. For oil-fired, mobile home gas, and electric furnaces, DOE estimated that 

furnaces with ECMs comprise 10 percent of the market. 

56 Hood, Innes, “High Efficiency Furnace Blower Motors Market Baseline Assessment” (March 31, 2004) 

(Available at: http://www.cee1.org/eval/db_pdf/416.pdf). 57 Habart, Jack, “Natural Gas Furnace Market Assessment” (August 2005) (Available at: 

http://www.cee1.org/eval/db_pdf/434.pdf). 

239 
 

 

 

 

 

 

 

 

DOE calculated furnace standby mode and off mode electricity consumption by 

multiplying the power consumption at each efficiency level by the number of standby 

mode and off mode hours. To calculate the annual number of standby mode and off mode 

hours for each sample household, DOE subtracted the estimated burner operating hours 

(calculated as described in section IV.E.2) from the total hours in a year (8,760). 

Commenting on the furnaces RAP, Ingersoll Rand stated that standby mode and 

off mode power should not be included in DOE’s calculation of furnace energy 

consumption during the cooling season, when the furnace may provide power for a 

central air conditioner. (Ingersoll Rand, No. 1.3.006 at p. 9) In response, DOE would 

clarify that for homes that have both a furnace and a split central air conditioner, during 

the cooling season, the furnace blower controls operate in standby mode and off mode in 

conjunction with the air conditioner, but such energy consumption is not accounted for in 

the energy use calculation for the air conditioner. Therefore, DOE included this energy 

use in the calculation of furnace standby mode and off mode energy use. 

See chapter 7 in the direct final rule TSD for additional detail on the energy 

analysis and results for furnace standby mode and off mode operation. 

F. Life-Cycle Cost and Payback Period Analyses 

DOE conducts LCC and PBP analyses to evaluate the economic impacts on 

individual consumers of potential energy conservation standards for furnaces and central 

air conditioners and heat pumps. The LCC is the total consumer expense over the 

240 
 

 

 

 

 

 

 

expected life of a product, consisting of purchase and installation costs plus operating 

costs (expenses for energy use, maintenance, and repair). To compute the operating costs, 

DOE discounted future operating costs to the time of purchase and summed them over 

the expected lifetime of the product. The PBP is the estimated amount of time (in years) 

it takes consumers to recover the increased purchase cost (including installation) of a 

more-efficient product through lower operating costs. DOE calculates the PBP by 

dividing the change in purchase cost (normally higher) due to a more-stringent standard 

by the change in average annual operating cost (normally lower) that results from the 

standard. 

For any given efficiency or energy use level, DOE measures the PBP and the 

change in LCC relative to an estimate of the base-case appliance efficiency or energy use 

levels. The base-case estimate reflects the market in the absence of new or amended 

mandatory energy conservation standards, including the market for products that exceed 

the current energy conservation standards. 

For each considered efficiency level in each product class, DOE calculated the 

LCC and PBP for a nationally-representative set of housing units. As discussed in section 

IV.E, DOE developed household samples from the 2005 RECS. For each sampled 

household, DOE determined the energy consumption for the furnace, central air 

conditioner, or heat pump and the appropriate energy prices in the area where the 

household is located. By developing a representative sample of households, the analysis 

241 
 

 

 

 

 

 

 

 

 

captured the variability in energy consumption and energy prices associated with the use 

of residential furnaces, central air conditioners, and heat pumps. 

Inputs to the calculation of total installed cost include the cost of the product— 

which includes manufacturer costs, markups, and sales taxes—and installation costs. 

Inputs to the calculation of operating expenses include annual energy consumption, 

energy prices and price projections, repair and maintenance costs, expected product 

lifetimes, discount rates, and the year in which compliance with new or amended 

standards is required. DOE created distributions of values for some inputs to account for 

their uncertainty and variability. Specifically, DOE used probability distributions to 

characterize product lifetime, discount rates, and sales taxes. 

The computer model DOE uses to calculate the LCC and PBP, which incorporates 

Crystal Ball (a commercially-available software program), relies on a Monte Carlo 

simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo 

simulations randomly sample input values from the probability distributions and furnace 

and central air conditioner and heat pump user samples. The model calculated the LCC 

and PBP for products at each efficiency level for 10,000 housing units per simulation run. 

Details of the LCC spreadsheet model, and of all the inputs to the LCC and PBP analyses, 

are contained in TSD chapter 8 and its appendices. 

Table IV.10 and Table IV.11 summarize the inputs and methods DOE used for 

the LCC and PBP calculations for furnaces and central air conditioners and heat pumps, 

242 
 

 

respectively. For central air conditioners and heat pumps, the table provides the data and 

approach DOE used for the preliminary TSD and the changes made for today’s direct 

final rule. For furnaces, DOE has not conducted a preliminary analysis, so there are no 

changes to describe. The subsections that follow discuss the initial inputs and the changes 

DOE made to them. 

243 
 

 

 

 

 

 

Table IV.10 Summary of Inputs and Methods for the LCC and PBP Analysis for 

Furnaces* 

Inputs Direct Final Rule 

Installed Product Costs 

Product Cost Derived by multiplying manufacturer cost by 

manufacturer and retailer markups and sales tax, as 

appropriate. 

Used experience curve fits to develop a price scaling 

index to forecast product costs. 

Installation Cost Derived from RS Means data for 2010, the furnace 

installation model developed for the November 

2007 Rule, and consultant reports. 

Operating Costs 

Annual Energy Use Used household sample from 2005 RECS data. 

Energy Prices Natural Gas: Based on EIA’s Natural Gas Monthly 

data for 2009. 

Electricity: Based on EIA’s Form 861 data for 2008. 

LPG and Oil: Based on data from EIA’s State 

Energy Data System (SEDS) 2008. 

Variability: Separate energy prices determined for 

13 geographic areas. 

Energy Price Trends Forecasted using AEO2010 data at the Census 

division level. 

Repair and 

Maintenance Costs 

Costs for annual maintenance derived using data 

from a proprietary consumer survey. 

Repair costs based on Consumer Reports data on 

frequency of repair for gas furnaces in 2000-06, and 

estimate that an average repair has a parts cost 

equivalent to one-fourth of the equipment cost. 

Present Value of Operating Cost Savings 

Product Lifetime Estimated using survey results from RECS (1990, 

1993, 1997, 2001, 2005) and the U.S. Census 

American Housing Survey (2005, 2007), along with 

historic data on appliance shipments. 

Variability: characterized using Weibull probability 

distributions. 

Discount Rates Approach involves identifying all possible debt or 

asset classes that might be used to purchase the 

considered appliances, or might be affected 

indirectly. Primary data source was the Federal 

Reserve Board’s Survey of Consumer Finances for 

1989, 1992, 1995, 1998, 2001, 2004 and 2007. 

Compliance Date of 

Standard 

2016. 

* References for the data sources mentioned in this table are provided in the sections following the table or 

in chapter 8 of the direct final rule TSD. 

244 
 

 

 

 

 

 

 

Table IV.11 Summary of Inputs and Methods for the LCC and PBP Analysis for 

Central Air Conditioners and Heat Pumps* 

Inputs Preliminary TSD Changes for the Direct Final 

Rule 

Installed Product Costs 

Product Cost Derived by multiplying 

manufacturer cost by manufacturer 

and retailer markups and sales tax, 

as appropriate. 

Incremental retail markup changed 

as described in section IV.D. 

Additional multi-speed fan kit cost 

added for coil only air conditioners 

at 15 SEER and above. 

Used experience curve fits to 

develop a price scaling index to 

forecast product costs. 

Installation Cost National average cost of installation 

derived from RS Means data for 

2008, adjusted for regional labor 

price differences. Does not change 

with efficiency level or equipment 

size. 

Derived from RS Means data for 

2009. Does not change with 

efficiency level or equipment size. 

Operating Costs 

Annual Energy Use Residential: Derived using 

household sample from 2005 RECS 

data and reported energy use for 

space heating and cooling. 

Commercial: Derived using whole 

building simulations. 

No change in approach. 

Energy Prices Electricity: Marginal and average 

prices based on residential and 

commercial electricity tariffs for 90 

electric utilities in the Lawrence 

Berkeley National Lab Tariff 

Analysis Project database. 

Commercial prices incorporate 

demand and time of use rates 

calculated based on hourly 

electricity consumption. 

No change in approach. 

Energy Price Trends Forecasted using the April 2009 

update to Annual Energy Outlook 

2009 (AEO2009). 

Forecasts updated using AEO2010 

forecasts at the Census division 

level. 

Repair and 

Maintenance Costs 

Repair and maintenance costs 

calculated for 3-ton (36,000 Btu/hr) 

units. Varies with efficiency level 

of equipment. 

Repair costs calculated for 3-ton 

(36,000 Btu/hr) units. Varies with 

efficiency level and size of 

equipment (2-ton, 3-ton, or 5-ton). 

Preventative maintenance cost 

assumed to not vary with efficiency 

or size of equipment. 

245 
 

 

 

 

 

 

Present Value of Operating Cost Savings 

Product Lifetime Estimated using survey results from 

RECS (1990, 1993, 1997, 2001, 

2005) and the U.S. Census 

American Housing Survey (2005, 

2007), along with historic data on 

appliance shipments. 

Variability: characterized using 

Weibull probability distributions. 

No change. 

Discount Rates Approach involves identifying all 

possible debt or asset classes that 

might be used to purchase the 

considered appliances, or might be 

affected indirectly. Primary data 

source was the Federal Reserve 

Board’s Survey of Consumer 

Finances for 1989, 1992, 1995, 

1998, 2001, 2004 and 2007. 

For commercial installations used 

weighted average cost of capital 

derived from Value-Line listed 

firms at Damodaran Online website 

for 2008. 

No change to residential rates. 

Commercial discount rates updated 

to 2009, using Damodaran Online 

for January 2010 and revised 

values for risk-free rates and 

market risk factor. 

Compliance Date of 

New Standard 

2016. No change. 

* References for the data sources mentioned in this table are provided in the sections following the table or 

in chapter 8 of the direct final rule TSD. 

As discussed in section IV.E, DOE is taking into account the rebound effect 

associated with more-efficient residential furnaces, central air conditioners, and heat 

pumps. The take-back in energy consumption associated with the rebound effect provides 

consumers with increased value (e.g., enhanced comfort associated with a cooler or 

warmer indoor environment). The net impact on consumers is the sum of the change in 

the cost of owning the space-conditioning equipment (i.e., life-cycle cost) and the 

increased value of the more comfortable indoor environment. DOE believes that, if it 

were able to monetize the increased value to consumers of the rebound effect, this value 

would be similar in value to the foregone energy savings. Thus, for this standards 

246 
 

 

 

 

 

 

rulemaking, DOE assumes that this value is equivalent to the monetary value of the 

energy savings that would have occurred without the rebound effect. Therefore, the 

economic impacts on consumers with or without the rebound effect, as measured in the 

LCC analysis, are the same. 

1. Product Cost 

To calculate the consumer product cost at each considered efficiency level, DOE 

multiplied the manufacturer costs developed in the engineering analysis by the supplychain markups described above (along with applicable average sales taxes). For 

wholesalers and contractors, DOE used different markups for baseline products and 

higher-efficiency products, because DOE applies an incremental markup to the cost 

increase associated with higher-efficiency products. 

During the direct final rule analysis, DOE determined that split-system coil-only 

air conditioners rated at or above 15 SEER often have two stages of cooling capacity. 

Realizing the full efficiency of the product would require a fan that can operate at 

multiple speeds. DOE included a cost for a “multi-speed fan kit” that could be used to 

adapt the existing furnace fan for two-speed cooling operation. DOE estimated the kit 

cost to the consumer at $798 on a national average basis. DOE applied this cost to half of 

the split system, coil-only installations at 15 SEER, and all of the installations at 15.5 

SEER. 

247 
 

 

 

 

 

 

 

 

 

 

 

 

 

On February 22, 2011, DOE published a Notice of Data Availability (NODA, 76 

FR 9696) stating that DOE may consider improving regulatory analysis by addressing 

equipment price trends. Consistent with the NODA, DOE sought to apply the experience 

curve approach to this rulemaking. To do so, DOE used historical shipments data 

together with historical producer price indices (PPI) for unitary air conditioners and 

warm-air furnace equipment. DOE recognizes the limitations of PPI as a proxy for 

manufacturing costs because it represents wholesale price.58 However, the agency 

determined that even with this limitation, the use of PPI may offer some directionallycorrect information related to the experience curve approach. DOE believes that the PPI 

data may indicate long-term declining real price trends for both products. Thus, DOE 

used experience curve fits to develop price scaling indices to forecast product costs for 

this rulemaking. 

DOE also considered the public comments that were received in response to the 

NODA and refined its experience curve trend forecasting estimates. Many commenters 

were supportive of DOE moving from an assumption-based equipment price trend 

forecasting method to a data-driven methodology for forecasting price trends. Other 

commenters were skeptical that DOE could accurately forecast price trends given the 

many variables and factors that can complicate both the estimation and the interpretation 

of the numerical price trend results and the relationship between price and cost. DOE 

evaluated these concerns and determined that retaining the assumption-based approach is 

consistent when there are data gaps with the historical data for the products covered in 

58 U.S. Department of Labor, Bureau of Labor Statistics Handbook of Methods (Available at: 

http://www.bls.gov/opub/hom/homch14.htm). 

248 
 

 

 

 

 

 

 

 

 

 

 

this rule. As a result, DOE is presenting a range of estimates reflecting both the 

assumption-based approach and the experience curve approach. 

DOE also performed an initial evaluation of the possibility of other factors 

complicating the estimation of the long-term price trend, and developed a range of 

potential price trend values that was consistent with the available data and justified by the 

amount of data that was available to DOE at this time. DOE recognizes that its price 

trend forecasting methods are likely to be modified as more data and information 

becomes available to enhance the statistical certainty of the trend estimate and the 

completeness of the model. Additional data should enable an improved evaluation of the 

potential impacts of more of the factors that can influence equipment price trends over 

time. 

To evaluate the impact of the uncertainty of the price trend estimates, DOE 

performed price trend sensitivity calculations in the national impact analysis to examine 

the dependence of the analysis results on different analytical assumptions. DOE also 

included a constant real price trend assumption. DOE found that for the selected standard 

levels the benefits outweighed the burdens under all scenarios. 

A more detailed discussion of DOE’s development of price scaling indices is 

provided in appendix 8-J of the direct final rule TSD. 

249 

Comment [A8]: Change recommended by OIRA. 
 

 

 

 

 

 

 

 

 

 

 

 

 

2. Installation Cost 

Installation cost includes labor, overhead, and any miscellaneous materials and 

parts needed to install the equipment. 

a. Central Air Conditioners and Heat Pumps 

In its central air conditioners and heat pumps preliminary analysis, DOE 

calculated average installation costs for each class of equipment based on installation 

costs found in RS Means.

59 In the preliminary analysis, installation costs were assumed 

constant across efficiency levels, based on reported practices of installers in a limited 

telephone survey. 

Commenting on the above approach, Carrier suggested that DOE further explore 

the variation in installation costs by efficiency level, because when an installation project 

changes from one-man to a two-man job because of the size of the unit, this change will 

impact contractor installation costs. (CAC: Carrier, Public Meeting Transcript at p. 140) 

For the direct final rule analysis, DOE conducted some additional interviews with 

mechanical contractor/installers and learned that while some contractors use one-man 

crews for SEER 13 installations, generally two-man crews are dispatched. If extra labor 

is required beyond a two-man crew to move heavy components, additional laborers are 

brought to the site for the few minutes they are needed, resulting in minimal (less than 

$15) labor cost increase. Further, installation contractors reported that while installation 

costs vary due to specific differences among installation sites, they do not generally vary 

59 RS Means, Residential Cost Data 2010, Reed Construction Data, Kingston, MA. 

250 
 

 

 

 

 

 

 

by efficiency level. Larger equipment is needed to move some of the larger 5-ton units, 

but investments in such equipment generally have been made already. Installation labor 

costs differ by less than 20 percent between 2-ton or 3-ton units and the larger 5–ton 

units. The primary reason for the difference in installation cost is not related to the greater 

weight of 5-ton systems, but rather to the greater effort required to install larger duct 

systems and longer refrigeration line sets, which are not within the scope of the 

rulemaking. Therefore, DOE concluded that installation cost for central air conditioners 

and heat pumps generally does not increase with the efficiency or the size of equipment, 

so it retained the approach used in the preliminary analysis. DOE did include additional 

installation costs of $161 for the multi-speed fan kit used for split system coil-only air 

conditioners with ratings at 15 SEER and above. 

b. Furnaces 

In the furnaces RAP, DOE stated that it will: (1) estimate installation costs at each 

considered efficiency level using a variety of sources, including RS Means, manufacturer 

literature, and information from expert consultants; (2) account for regional differences in 

labor costs; and (3) estimate specific installation costs for each sample household based 

on building characteristics set forth in the 2005 RECS. 

DOE received a number of comments concerning installation costs when a noncondensing furnace is replaced with a condensing furnace. AGA and APGA stated that 

DOE should consider important differences in classes of consumers, particularly northern 

consumers having to replace a non-condensing furnace with a condensing furnace. (FUR: 

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AGA, No.1.3.010 at p. 4; APGA, No.1.3.004 at p. 4) APGA and NPGA stated that DOE 

must consider venting issues and other considerations unique to the replacement market. 

(FUR: APGA, No.1.3.004 at p. 4; NPGA, No.1.3.005 at p. 3) 

Several parties provided comments regarding the need for venting system 

modification when replacing a non-condensing furnace with a condensing gas furnace. 

Several comments referred to the venting considerations when installation of a 

condensing furnace no longer permits common venting with the pre-existing gas water 

heater. Ingersoll Rand stated that when a non-condensing furnace is replaced with a 

condensing furnace, the rework of gas appliance venting will add considerable cost; 

according to the commenter, it will have to include the cost of a dedicated vent for the 

condensing furnace, plus reworking the venting for a water heater, which was most likely 

on a common vent that will now be too large for the water heater. (FUR: Ingersoll Rand, 

No. 1.3.006 at p. 12) AGA, APGA, and NPGA made similar comments. (FUR: AGA, 

No. 1.3.010 at pp. 3 - 4; AGA, No. 1.2.006 at p. 41; APGA, No. 1.3.004 at p. 4; NPGA, 

No. 1.3.005 at p. 3) AGA added that DOE must also consider consumer and installer 

behaviors that favor inadequate venting system attention aimed at reducing installation 

costs; AGA cautioned that such practices may represent code violations, as well as threats 

to consumer safety from carbon monoxide poisoning, due to improper venting or venting 

system failure. (FUR: AGA, No. 1.3.010 at p. 3) HARDI stated that there are significant 

portions of existing gas furnace installations that could not use a condensing furnace 

without performing major renovations to the building. (FUR: HARDI, No. 1.3.016 at p. 

3) ACCA stated that in a recent ACCA member survey, a majority of respondents said 

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that 15-30 percent of furnace retrofits in the north would only accommodate noncondensing furnaces due to vent path issues or concerns about freezing condensate. 

(FUR: ACCA, No. 1.3.007 at pp. 3–4) 

In contrast to some of the above comments, AHRI and Rheem stated that the 

venting issues resulting from the “orphaned” gas water heater can be resolved through 

power venting and new venting systems. (FUR: AHRI, No. 1.3.008 at p. 4; Rheem, 

No.1.3.022 at p. 4) 

In response to these comments, for the direct final rule analysis, DOE conducted a 

detailed analysis of installation costs when a non-condensing gas furnace is replaced with 

a condensing gas furnace, with particular attention to venting issues in replacement 

applications. DOE gave separate consideration to the cost of installing a condensing gas 

furnace in new homes. As part of its analysis, DOE used information in the 2005 RECS 

to estimate the location of the furnace in each of the sample homes. 

First, DOE estimated basic installation costs that are applicable to both 

replacement and new home applications. These costs, which apply to both condensing 

and non-condensing gas furnaces, include putting in place and setting up the furnace, gas 

piping, ductwork, electrical hookup, permit and removal/disposal fees, and where 

applicable, additional labor hours for an attic installation. 

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For replacement applications, DOE then included a number of additional costs 

(“adders”) for a fraction of the sample households. For non-condensing gas furnaces, 

these additional costs included updating flue vent connectors, vent resizing, and chimney 

relining. For condensing gas furnaces, DOE included new adders for flue venting (PVC), 

combustion air venting (PVC), concealing vent pipes, addressing an orphaned water 

heater (by updating flue vent connectors, vent resizing, or chimney relining), and 

condensate removal. Freeze protection is accounted for in the cost of condensate removal. 

Table IV.12 shows the fraction of installations impacted and the average cost for each of 

the adders. The estimate of the fraction of installations impacted was based on the 

furnace location (primarily derived from information in the 2005 RECS) and a number of 

other sources that are described in chapter 8 of the direct final rule TSD. The costs were 

based on 2010 RS Means. Chapter 8 of the direct final rule TSD describes in detail how 

DOE estimated the cost for each installation item. 

Table IV.12 Additional Installation Costs for Non-Weatherized Gas Furnaces in 

Replacement Applications 

Installation Cost Adder Replacement Installations 

Impacted 

Average Cost 

(2009$) 

Non-Condensing Furnaces 

Updating Flue Vent 

Connectors 

7% $211 

Vent Resizing 1% $591 

Chimney Relining 16% $591 

Condensing Furnaces 

New Flue Venting (PVC) 100% $308 

Combustion Air Venting 

(PVC) 

60% $301 

Concealing Vent Pipes 5% $290 

Orphaned Water Heater 24% $447 

Condensate Removal 100% $49 

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DOE also included installation adders for fractions of new home applications. For 

non-condensing gas furnaces, a new flue vent (metal) is the only adder. For condensing 

gas furnaces, the adders include new flue venting (PVC), combustion air venting (PVC), 

accounting for a commonly-vented water heater, and condensate items. Table IV.13 

shows the estimated fraction of new home installations impacted and the average cost for 

each of the adders. For details, see chapter 8 of the direct final rule TSD. 

Table IV.13 Additional Installation Costs for Non-Weatherized Gas Furnaces in 

New Home Applications 

Installation Cost Adder New Construction 

Installations Impacted 

Average Cost 

(2009$) 

Non-Condensing Furnaces 

New Flue Vent (Metal) 100% $818 

Condensing Furnaces 

New Flue Venting (PVC) 100% $249 

Combustion Air Venting 

(PVC) 

60% $240 

Accounting for Commonly 

Vented WH 

50% $402 

Condensate Removal 100% $7 

Several parties provided comments regarding special considerations for installing 

condensing gas furnaces in manufactured homes. AGA, AGPA, and NPGA stated that 

replacement installation costs need to consider either: (1) freeze protection from 

condensate in the furnace as well as in the condensate handling system; or (2) altering the 

closet insulation system to put the furnace within the thermal boundary of the 

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manufactured home. (FUR: AGA, No. 1.3.010 at p. 5; APGA, No. 1.3.004 at p. 4; 

NPGA, No. 1.3.005 at p. 4) ACEEE stated that furnace manufacturers signed the 

consensus agreement and, therefore, foresaw no problems with use of their condensing 

products in manufactured housing. ACEEE added that applicable codes require that 

furnaces in manufactured housing be installed in separate cabinets with outdoor air 

supply, which makes retrofitting with a condensing furnace relatively easy. (FUR: 

ACEEE, No. 1.3.009 at p. 8) 

For the direct final rule analysis, DOE included basic installation costs for 

manufactured home gas furnaces similar to those described above for non-weatherized 

gas furnaces. DOE also included costs for venting and condensate removal. Freeze 

protection is accounted for in the cost of condensate removal. In addition, DOE 

considered the cost of dealing with space constraints that could be encountered when a 

condensing furnace is installed. 

For oil-fired furnaces, DOE included basic installation costs similar to those 

described above for non-weatherized gas furnaces. DOE also included costs for venting 

(including stainless steel vent for some installations at 83-85 percent AFUE) and 

condensate removal. In addition, DOE assumed that condensing furnaces require two 

additional labor hours to tune up the combustion system. For further details on 

installation costs for both manufactured home gas furnaces and oil-fired furnaces, see 

chapter 8 of the direct final rule TSD. 

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3. Annual Energy Consumption 

For each sample household, DOE determined the energy consumption for a 

furnace, central air conditioner, or heat pump at different efficiency levels using the 

approach described above in section IV.E. 

4. Energy Prices 

In its central air conditioners and heat pumps preliminary analysis, DOE 

developed marginal electricity prices to express the value of electricity cost savings from 

more-efficient central air conditioners and heat pumps. The marginal electricity price for 

a given consumer is the cost of the next increment of electricity use on his or her utility 

bill, and is the correct estimate of the value of savings that a consumer would see in the 

real world. 

DOE developed residential marginal electricity prices from tariffs collected in 

2008 from a representative sample of electric utilities throughout the United States. DOE 

collected data for over 150 residential tariffs from a sample of about 90 electric utilities. 

As described earlier, DOE developed samples of households using central air 

conditioners and heat pumps from the 2005 RECS. The location of each household can 

be identified within broad geographic regions (e.g., Census Divisions). DOE developed a 

weighted-average marginal electricity price for each household from all the possible 

utility tariffs that could be assigned to that household. DOE also developed commercial 

marginal electricity prices from tariffs for those commercial building applications that 

use residential central air conditioners and heat pumps. As with the residential household 

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sample, DOE developed a weighted-average marginal electricity price for each 

commercial building from the utility tariffs that could possibly be assigned to that 

building. For further details, see chapter 8 of the direct final rule TSD. 

Commenting on the central air conditioners and heat pumps preliminary TSD, the 

Joint Comment stated that the current impact analysis does not account for timedependent valuation (TDV) of electricity,60 which is expected to change significantly by 

2015 due to smart grid technology. (CAC: CA IOUs, No. 69 at p. 5) PG&E stated that 

time-of-use (TOU) tariffs are going to be present and important with respect to the impact 

of the standards on these products. (CAC: PG&E, Public Meeting Transcript at p. 113) 

In response, DOE determined in its preliminary analysis that many utilities in the 

U.S. offer optional time-of-use (TOU) tariffs that generally charge consumers more for 

electricity during peak periods, when it presumably costs the utility more to provide 

electrical service, in exchange for lower rates at other times. To determine the effect of 

TOU pricing structures on residential consumers, DOE collected data on TOU tariffs for 

those utilities in its sample that offered optional TOU tariffs. DOE found that 

approximately 50 percent of customers in the sample were offered TOU tariffs. Coupling 

hourly energy savings derived from typical residential household and central air 

conditioner/heat pump load profiles with TOU tariffs, DOE was able to derive TOUbased marginal electricity prices. These data show that, currently, there is no significant 

difference (on average less than 2 percent) between TOU and default tariffs for the 

60 TDV accounts for variations in electricity cost related to time of day, season, and geography. The 

concept behind TDV is that savings associated with energy efficiency measures should be valued 

differently at different times to better reflect the actual costs to users, the utility system, and society. 

258 
 

 

 

 

 

 

 

 

 

electricity costs used in the LCC and PBP analysis. 

The consensus agreement includes EER standards in addition to SEER 

requirements in the hot-dry region for split-system and single-package central air 

conditioners. Efficiency requirements that would improve the EER of a central air 

conditioner in the hot-dry region are believed to improve the performance of the 

equipment at peak conditions when the equipment is operating at its full capacity. 

Because the TOU tariffs in hot-dry climates are likely to yield higher electricity prices 

during peak conditions, DOE placed renewed focus on deriving TOU-based marginal 

prices for the hot-dry region. DOE also investigated the impact of TDV of electricity in 

the hot-dry region, given that the most populous State in the region (California) has used 

TDV of electricity to evaluate efficiency measures in updates to its building code 

standards. TOU-based and TDV-based marginal prices are not significantly different 

from the marginal prices derived from default tariffs. Therefore, DOE determined that 

they would not have a significant effect on the economic justification of more-stringent 

efficiency standards. Appendix 8-D of the direct final rule TSD describes the analysis 

that compares marginal prices developed from TOU tariffs and TDV of electricity with 

marginal prices developed from non-TOU tariffs. 

For commercial-sector prices, the existing tariff structures that DOE has used in it 

analysis of electricity prices already account for the effect that an end use, such as central 

air conditioning, has on marginal electricity prices. Because utilities bill their commercial 

customers with demand charges (i.e., charges on power demand expressed in $/kW) in 

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addition to energy charges, the resulting marginal prices reflect the contribution that air 

conditioning has on peak demand. 

In the furnaces RAP, DOE stated that it will derive average monthly energy prices 

using recent EIA data for each of 13 geographic areas, consisting of the nine U.S. Census 

divisions, with four large States (New York, Florida, Texas, and California) treated 

separately, to establish appropriate energy prices for each sample household. It added that 

in contrast to the situation with residential air conditioner and heat pumps, for which the 

appliance’s load primarily occurs during utility peak periods during the summer, 

electricity consumption of furnaces is not concentrated during peak periods, so DOE did 

not see a compelling reason to use marginal electricity prices. 

Commenting on the furnaces RAP, Ingersoll Rand stated that DOE’s intention to 

use average, not marginal, energy prices for the furnace LCC analysis is reasonable and 

avoids much unnecessary complexity. Ingersoll Rand further stated that, to improve 

accuracy, DOE should use State-level energy prices rather than prices determined 

according to Census division. (FUR: Ingersoll Rand, No. 1.3.006 at p. 11) In response, 

DOE agrees that average energy prices are appropriate for the furnace LCC analysis for 

the reason described above. DOE does not use State-level energy prices in its analyses, 

because the location of each sample household in the 2005 RECS dataset can be 

identified only within broad geographic regions. Thus, it would not be possible to make 

use of State-level energy prices in the LCC and PBP analysis. Accordingly, for the direct 

final rule analysis of furnaces, DOE derived average energy prices for the 13 geographic 

260 
 

 

 

 

 

 

 

 

 

 

 

 

areas mentioned above. For Census divisions containing one of these large States, DOE 

calculated the regional average excluding the data for the large State. 

DOE calculated average residential electricity prices for each of the 13 

geographic areas using data from EIA’s Form EIA-861 Database (based on “Annual 

Electric Power Industry Report”).61 DOE calculated an average annual regional 

residential price by: (1) estimating an average residential price for each utility (by 

dividing the residential revenues by residential kilowatt-hour sales); and (2) weighting 

each utility by the number of residential consumers it served in that region. The direct 

final rule analysis used the data available for 2008. 

DOE calculated average residential natural gas prices for each of the 13 

geographic areas using data from EIA’s “Natural Gas Monthly.”62 DOE calculated 

average annual regional residential prices by: (1) estimating an average residential price 

for each State; and (2) weighting each State by the number of residential consumers. The 

direct final rule analysis used the data for 2009. 

DOE estimated average residential liquefied petroleum gas (LPG) and oil prices 

for each of the 13 geographic areas based on data from EIA’s State Energy Data System 

(SEDS) 2008.63 

61 Available at: http://www.eia.doe.gov/cneaf/electricity/page/eia861.html. 62 Available at: http://www.eia.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.html. 63 Table S2a, Residential Sector Energy Price Estimates by Source (June 2010) (Available at:
 

http://www.eia.doe.gov/emeu/states/_seds.html).
 

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For each of the above energy forms, DOE disaggregated the annual energy prices 

into monthly prices using factors that relate historical prices for each month to the 

average annual prices. 

5. Energy Price Projections 

To estimate energy prices in future years for the central air conditioners and heat 

pumps preliminary TSD, DOE multiplied the average marginal electricity prices in each 

of the 13 geographic areas by the forecast of annual average residential or commercial 

electricity price changes in the Reference Case64 derived from AEO2009. In the furnaces 

RAP, DOE stated its intention to use projections of national average natural gas, LPG, 

electricity, and fuel oil prices for residential consumers to estimate future energy prices, 

and to use the most recent available edition of the AEO. 

Commenting on the furnaces RAP, Ingersoll Rand stated that using nationalaverage price changes to forecast future energy prices may distort the regional results. 

(FUR: Ingersoll Rand, No. 1.3.006 at p. 9) In response, DOE agrees that using regional 

energy price forecasts is appropriate for the analysis in this rulemaking. For today’s rule, 

for central air conditioners and heat pumps as well as furnaces, DOE developed 

electricity price forecasts for the considered geographic areas using the forecasts by 

Census division for residential and commercial heating and cooling end uses from 

AEO2010. To estimate the electricity price trend after 2035 (the end year in AEO2010 

projections) and through 2060, DOE assumed that prices would rise at the average annual 

64 The spreadsheet tool that DOE used to conduct the LCC and PBP analyses allows users to select price 

forecasts from either AEO’s High Economic Growth or Low Economic Growth Cases. Users can thereby 

estimate the sensitivity of the LCC and PBP results to different energy price forecasts. 

262 
 

 

 

 

 

 

 

 

rate of change from 2020 to 2035 forecasted in AEO2010. To estimate the trends in 

natural gas, LPG, and fuel oil prices after 2035 and through 2060, DOE assumed that 

prices would rise at the average annual rate of change from 2020 to 2035 forecasted in 

AEO2010. DOE intends to update its energy price forecasts for the final rule based on 

the latest available AEO. 

6. Maintenance and Repair Costs 

Repair costs are associated with repairing or replacing components that have 

failed in the appliance, whereas maintenance costs are associated with maintaining the 

proper operation of the equipment. 

a. Central Air Conditioners and Heat Pumps 

In its central air conditioners and heat pumps preliminary analysis, DOE used RS 

Means and industry literature to obtain estimates of average repair costs and preventative 

maintenance costs. Both costs were scaled proportionately with equipment price for 

higher-efficiency equipment. DOE did not receive any significant comments on its 

procedure or findings. However, after further review, DOE determined that the actual 

functions carried out as part of annual preventative maintenance (such as coil cleaning or 

checking of system pressures) are tasks that are not affected by the cost of the equipment 

and, thus, would not be more expensive as efficiency increased. Therefore, for the direct 

final rule, maintenance costs were held constant as efficiency increased. 

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b. Furnaces 

In the furnaces RAP, DOE stated that it will: (1) estimate maintenance and repair 

costs at each considered efficiency level using a variety of sources, including RS Means, 

manufacturer literature, and information from expert consultants; and (2) account for 

regional differences in labor costs. DOE did not receive any significant comments on this 

topic. 

For the direct final rule, DOE estimated costs for annual maintenance using data 

from a proprietary consumer survey65 on the frequency with which owners of different 

types of furnaces perform maintenance. For condensing oil furnaces, the high quantity of 

sulfur in the fuel results in frequent cleaning of the secondary heat exchanger, and DOE 

accounted for this cost. 

DOE estimated that about three percent of furnaces are repaired annually based on 

Consumer Reports data on frequency of repair for gas furnaces installed between 2000 

and 2006.66 DOE assumed that an average repair has a parts cost equivalent to one-fourth 

of the equipment cost, marked up by a factor of two, and requires 1.5 hours of labor. 

7. Product Lifetime 

In the central air conditioners and heat pumps preliminary analysis, DOE 

conducted an analysis of actual product lifetime in the field using a combination of 

65 Decision Analysts, "2008 American Home Comfort Study" (2009).
 66 Consumer Reports, "Brand Repair History: Gas furnaces" (Jan. 2008) (Available at:
 

http://www.consumerreports.org/cro/appliances/heating-cooling-and-air/gas-furnaces/furnaces-repairhistory-205/overview/index.htm). 

264 
 

 

 

 

 

 

 

 

 

 

 

 

shipments data, responses in RECS on the age of household central air conditioner and 

heat pump products, and total installed stock data in the U.S. Census’s American Housing 

Survey (AHS).67 DOE used RECS data from surveys conducted in 1990, 1993, 1997, 

2001, and 2005. DOE used AHS data from surveys conducted every other year from 

1991 to 2007. By combining the results of RECS and AHS with the known history of 

appliance shipments, DOE estimated the percentage of central air conditioner and heat 

pump products of a given age still in operation. This analysis yielded distributions with a 

mean life of 19 years for central air conditioners and 16.3 years for heat pumps. 

Commenting on the central air conditioners and heat pumps preliminary TSD, 

Southern stated that the impact of the hydrochlorofluorocarbon (HCFC) R22 refrigerant 

phase-out on equipment lifetimes needs to be considered. (CAC: SCS, No. 73 at p. 4) 

By way of background, effective January 1, 2010, the Montreal Protocol requires the U.S. 

to reduce its consumption of HCFCs by 75 percent below the U.S. baseline cap. As of 

January 1, 2010, HVAC system manufacturers may only produce or import HCFC-22 to 

service existing equipment. Virgin HCFC-22 may not be used in new equipment. As a 

result, HVAC system manufacturers may not produce new air conditioners and heat 

pumps containing HCFC-22. The timeline for the phase-out of HCFC-22 in new 

equipment has been known since the mid-1990s. Since that time, the industry has 

sponsored considerable research into the development of refrigerant alternatives with 

zero ozone depletion potential, and they eventually settled on R-410a as a replacement. 

Manufacturers have been producing products that utilize R-410a for the past decade in 

anticipation of the 2010 phase-out date. DOE concluded that given the lead time 

67 Available at: http://www.census.gov/hhes/www/housing/ahs/ahs.html. 

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accorded to the industry, and the fact that these products are widely distributed in the 

market, products manufactured with R-410a provide the same level of utility and 

performance, including product lifetime, as equipment utilizing HCFC-22. 

In the furnaces RAP, DOE stated its intention to use an approach based on an 

analysis of furnace lifetimes in the field using a combination of shipments data, the stock 

of furnaces, RECS data on the age of the furnaces in the surveyed homes, and AHS data 

on the total installed furnace stock. The same survey years were utilized to determine 

furnace lifetimes as were used for central air conditioners and heat pumps. Commenting 

on the furnaces RAP, Ingersoll Rand requested that DOE review and refine its lifetime 

estimate for gas furnaces, because the often-cited 18-year to 20-year lifetime may be 

unrealistically long. Instead, Ingersoll Rand stated that the mean population life 

expectancy for furnaces is probably in the range of 15-20 years. (FUR: Ingersoll Rand, 

No. 1.3.006 at pp. 8 & 10) 

For the direct final rule analysis, DOE derived probability distributions ranging 

from minimum to maximum lifetime for the products considered in this rulemaking. For 

central air conditioners and heat pumps, DOE used the same approach as it did in the 

preliminary analysis. For furnaces, it used the approach described in the RAP. The mean 

lifetimes estimated for the direct final rule are 23.6 years for non-weatherized gas 

furnaces, 18.7 years for mobile home gas furnaces, and 29.7 years for oil-fired furnaces. 

Regarding the comment by Ingersoll Rand, DOE believes that the method DOE used is 

reasonable because it relies on data from the field on furnace lifetimes. DOE was not able 

266 
 

 

 

 

 

 

 

 

 

to substantiate the validity of the life expectancy mentioned by Ingersoll Rand, because 

the commenter did not provide any corroborating data in its comment. 

Chapter 8 of the direct final rule TSD provides further details on the methodology 

and sources DOE used to develop product lifetimes. 

8. Discount Rates 

In the calculation of LCC, DOE applies discount rates to estimate the present 

value of future operating costs. 

In its central air conditioners and heat pumps preliminary analysis, to establish 

consumer (residential) discount rates for the LCC analysis, DOE identified all debt or 

asset classes that might be used to purchase major appliances or that might be affected 

indirectly. It estimated the average percentage shares of the various debt or asset classes 

for the average U.S. household using data from the Federal Reserve Board’s Survey of 

Consumer Finances (SCF) for a number of years.68 Using the SCF and other sources, 

DOE then developed a distribution of rates for each type of debt and asset to represent the 

rates that may apply in the year in which amended standards would take effect. For the 

purchase of products for new homes, which are included in the sales price of the home, 

DOE uses finance costs based on a distribution of mortgage rates. DOE assigned each 

sample household a specific discount rate drawn from the distributions. 

68 Available at: http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html. The surveys used range from 

1989 to 2007. 

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In the central air conditioners and heat pumps preliminary analysis, DOE 

developed commercial discount rates based on the weighted average cost of capital 

(WACC) calculated for commercial businesses expected to occupy small commercial 

buildings. For the commercial cost of capital data, DOE relied on financial data found in 

the Damodaran Online website as of January 2009 (since updated to January 2010). In 

the furnaces RAP, DOE stated its intention to use the same approach for furnaces as it 

used in the central air conditioners and heat pumps preliminary analysis. 

DOE did not receive any significant comments on consumer discount rates. 

Therefore, for the direct final rule, DOE used the same approach as it used in the central 

air conditioners and heat pumps preliminary analysis, with minor modifications to the 

estimation of risk-free rates and risk premiums that are needed to calculate WACC. See 

chapter 8 in the direct final rule TSD for further details on the development of discount 

rates for the LCC analysis. 

9. Compliance Date of Amended Standards 

In the context of EPCA, the compliance date is the future date when parties 

subject to a new or amended standard must meet its applicable requirements. DOE 

calculates the LCC and PBP for each of the considered efficiency levels as if consumers 

would purchase new products in the year compliance with the standard is required. 

For the reasons discussed in section III.C, DOE determined that for all TSLs 

analyzed – except for the consensus agreement TSL – DOE is bound to calculate 

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compliance dates in accordance with EPCA. For those TSLs, the analysis accounts for a 

five-year lead time between the publication of the final rule for furnaces and central air 

conditioners and heat pumps and the date by which manufacturers must comply with the 

amended standard. 

A final rule for the products that are the subject of this rulemaking is scheduled to 

be completed by June 30, 2011. Thus, for most of the TSLs analyzed, compliance with 

amended standards for furnaces and central air conditioners and heat pumps would be 

required in 2016. Accordingly, for purposes of the LCC and PBP analysis, DOE used 

2016 as the year compliance with the amended standards is required. 

10. Base-Case Efficiency Distribution 

To accurately estimate the share of consumers that would be affected by a 

standard at a particular efficiency level, DOE estimates the distribution of product 

efficiencies that consumers would purchase under the base case (i.e., the case without 

new or amended energy efficiency standards) in the year compliance with the standard is 

required. DOE refers to this distribution of product efficiencies as a base-case efficiency 

distribution. DOE develops base-case efficiency distributions for each of the considered 

product classes. 

a. Energy Efficiency 

In the central air conditioners and heat pumps preliminary analysis, DOE assumed 

that the base-case efficiency distributions in 2016 would be the same as in 2008. 

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Southern commented that it is not reasonable to assume efficiencies are going to stay 

frozen from 2008 to 2016, as there has been a huge increase in utility incentive programs 

for higher-efficiency units. Southern stated that there will be some increase in the 

shipment-weighted efficiency between 2008 and 2016. (CAC: SCS, Public Meeting 

Transcript at p. 196) HARDI commented that DOE must incorporate the role that energy 

efficiency incentive programs play in the sale and installation of higher-efficiency units. 

(CAC: HARDI, No. 70 at p. 1) 

In the furnaces RAP, DOE stated that its development of base-case efficiency 

distributions will use available data on recent market trends in furnace efficiency and will 

take into account the potential impacts of the ENERGY STAR program and other 

policies that may affect the demand for more-efficient furnaces. Commenting on the 

furnaces RAP, several parties stated that DOE should consider the extent to which 

incentives and other market forces are expanding the market for high-efficiency furnaces 

even without new standards. (FUR: AGA, No. 1.3.010 at p. 2 & pp. 5–6; APGA, No. 

1.3.004 at p. 4; and HARDI, No. 1.2.006 at pp. 168–70) 

For the direct final rule analysis, DOE considered incentives and other market 

forces that have increased the sales of high-efficiency furnaces and central air 

conditioners and heat pumps to estimate base-case efficiency distributions for the 

considered products. DOE started with data provided by AHRI on historical shipments 

for each product class. For non-weatherized gas furnaces, the historical shipments data 

were further specified by region and type of furnace (i.e., non-condensing or condensing). 

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DOE then used data on the distribution of models in AHRI’s Directory of Certified 

Product Performance: Furnaces (October 2010)69 to disaggregate shipments among 

condensing efficiency levels for 2009. For central air conditioners and heat pumps, the 

historical shipments data were accompanied with annual shipment-weighted efficiency 

data by product class. DOE then used data from the Air-Conditioning, Heating, and 

Refrigeration (ACHR) News70 to disaggregate shipments among efficiency levels for 

2008. 

DOE forecasted the non-weatherized gas furnace and central air conditioner and 

heat pump efficiency distributions to 2011 based on the average growth in efficiency 

from 2006 to 2009. The historical efficiency data from AHRI indicate a rapid growth in 

average equipment efficiency, based in large part on the availability of Federal tax credits 

for the purchase of high-efficiency products. The Federal tax credits expire on December 

31, 2011. After the expiration, DOE believes that the demand for high-efficiency 

products is likely to decline somewhat initially, but it assumed that the average efficiency 

will then increase at the historic rate seen in the decade prior to availability of the Federal 

tax credits. For further information on DOE’s estimation of the base-case efficiency 

distributions for non-weatherized gas furnaces and central air conditioners and heat 

pumps, see chapter 8 of the direct final rule TSD. 

Table IV.14 shows the estimated base-case efficiency distributions in 2016 for 

non-weatherized gas furnaces. Table IV.15 shows the estimated base-case efficiency 

69 See: http://www.ahridirectory.org/. 70 ACHR News, “Higher SEERs got popular” (Dec. 24, 2007) (Available at: 

http://www.achrnews.com/Articles/Web_Exclusive/BNP_GUID_9-5-2006_A_10000000000000222513). 

271 
 

 

 

 

distributions in 2016 for the four primary central air conditioner and heat pump product 

classes. DOE was unable to develop unique efficiency distributions by region, as data 

were not provided by AHRI on a regional basis. Therefore, DOE assumed that the 

efficiency distributions are the same in each region. 

Table IV.14 Base-Case Efficiency Distribution in 2016 for Non-Weatherized Gas 

Furnaces 

Efficiency North South National 

AFUE Market share in percent 

80% 29.1 75.6 48.1 

90% 13.7 4.7 10.0 

92% 33.6 11.6 24.6 

95% 23.0 7.9 16.9 

98% 0.6 0.2 0.4 

Table IV.15 Base-Case Efficiency Distribution in 2016 for Central Air Conditioners 

and Heat Pumps 

Efficiency Split CAC Split HP SinglePackage CAC SinglePackage HP 

SEER Market share in percent 

13.0 24.0 13.0 62.7 32.1 

13.5 47.0 40.0 20.0 32.0 

14.0 4.0 10.0 14.3 28.9 

14.5 7.3 13.0 2.0 5.0 

15.0 5.8 11.5 1.0 2.0 

15.5 2.0 3.5 0.0 0.0 

16.0 7.0 5.0 0.0 0.0 

16.5 0.5 2.0 0.0 0.0 

17.0 1.0 1.5 0.0 0.0 

18.0 0.7 0.5 0.0 0.0 

19.0 0.3 0.0 0.0 0.0 

20.0 0.2 0.0 0.0 0.0 

21.0 0.2 0.0 0.0 0.0 

22.0 0.1 0.0 0.0 0.0 

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For mobile home gas furnaces and oil-fired furnaces, DOE used data in the AHRI 

furnace models directory and manufacturer input to estimate current efficiency 

distributions. Because there is little indication of a trend in efficiency for these products, 

DOE assumed that the efficiency distributions in 2016 will be the same as in the current 

market (see Table IV.16). 

Table IV.16 Base-Case Efficiency Distribution in 2016 for Mobile Home Gas 

Furnaces and Oil-Fired Furnaces 

Mobile Home Furnaces Oil-fired Furnaces 

Efficiency National Efficiency National 

AFUE Market share in 

percent 

AFUE Market share in 

percent 

80% 90 82% 42 

90% 2 83% 20 

92% 4 84% 6 

96% 4 85% 32 

97% 1 

b. Standby Mode and Off Mode Power 

DOE also estimated base-case efficiency distributions for furnace standby mode 

and off mode power. As discussed in section IV.C.7.c, DOE considered efficiency levels 

only for furnaces with ECM motors. Baseline products contain the highest energyconsuming components, which include an ECM blower motor (rather than a PSC). 

Although DOE’s test results for furnaces showed that the standby mode and off mode 

consumption could be reduced by eliminating certain features (e.g., replacing an ECM 

blower motor with a PSC motor), DOE did not consider these reductions because the 

elimination of such features and components would result in a reduction of consumer 

utility. (The ECM motor maintains constant airflow volume and is suited for two-speed 

273 
 

 

 

 

 

 

 

 

 

 

 

 

equipment, which allows the consumer to maintain better comfort.) In its analysis, DOE 

only considered efficiency levels that could be implemented with no noticeable impacts 

on the performance and utility of the unit. As shown in Table IV.17 through Table IV.19, 

DOE estimated that all of the affected market would be at the baseline level in 2016. 

Table IV.17 Standby Mode and Off Mode Base-Case Efficiency Distribution in 

2016 for Non-Weatherized Gas Furnaces and Electric Furnaces 

Efficiency 

Level 

Motor 

Type 

Standby/Off-Mode 

Watts 

Market Share in 

percent* 

Baseline ECM 11.0 100 

1 ECM 9.8 0 

2 ECM 9.0 0 

* Refers to share of furnaces with ECM motor. 

Table IV.18 Standby Mode and Off Mode Base-Case Efficiency Distribution in 

2016 for Oil-Fired Furnaces 

Efficiency 

Level 

Motor 

Type 

Standby/Off-Mode 

Watts 

Market Share in 

percent* 

Baseline ECM 12.0 100 

1 ECM 10.8 0 

2 ECM 10.0 0 

* Refers to share of furnaces with ECM motor. 

Table IV.19 Standby Mode and Off Mode Base-Case Efficiency Distribution in 

2016 for Mobile Home Gas Furnaces 

Efficiency 

Level 

Motor 

Type 

Standby/Off-Mode 

Watts 

Market Share in 

percent* 

Baseline ECM 11.0 100 

1 ECM 9.8 0 

2 ECM 9.0 0 

* Refers to share of furnaces with ECM motor. 

DOE also estimated base-case efficiency distributions for central air conditioner 

and heat pump off mode power. As discussed in section IV.C.7.c, DOE considered 

efficiency levels only for air conditioning and heat pump equipment with crankcase 

heaters. DOE found that crankcase heaters account for the vast majority of off mode 

274 
 

 

 

 

 

 

 

 

 

 

 

 

 

power consumption for air conditioners and heat pumps. However, not every unit has a 

crankcase heater and, to accurately reflect this in the analyses, DOE determined separate 

efficiency levels within each product class for units with and without a crankcase heater. 

Although DOE’s test results for central air conditioners and heat pumps showed that the 

standby mode and off mode consumption could be reduced eliminating certain features 

(such as the crankcase heater), DOE did not consider such measures because the 

elimination of the features and components would result in a reduction of consumer 

utility.71 In its analysis, DOE only considered designs that could be implemented with no 

noticeable impacts on the performance and utility of the unit. 

As shown in Table IV.20, for split-system air conditioners, DOE estimated that 60 

percent of the affected market would be at the baseline level, 30 percent at efficiency 

level 1, and 10 percent at efficiency level 2 in 2016. Because off mode power 

consumption is a function of system type (i.e., blower-coil or coil-only), the market share 

is further disaggregated by system type for each efficiency level. As a result of this 

further disaggregation, two different off mode power consumption levels are reported at 

each efficiency level. 

71 Crankcase heaters are used in some compressors and prevent refrigerant condensation in the crankcase of 

a compressor. Without the crankcase heater, the condensed refrigerant will mix with the crankcase oil, 

resulting in a watery mixture that can wash out compressor bearings, leading to premature compressor 

failure. 

275 
 

 

 

 

 

 

 

 

 

 

 

Table IV.20 Off Mode Base-Case Efficiency Distribution in 2016 for Split-System 

Central Air Conditioners 

Efficiency 

Level AC Type 

Off-Mode 

Watts 

Market Share of Affected Market in 

percent* 

by Efficiency 

Level 

by Efficiency 

Level and 

AC Type 

Baseline Blower-Coil 48 60 6 

Coil-Only 40 54 

1 Blower-Coil 36 30 1 

Coil-Only 28 9 

2 Blower-Coil 30 10 3 

Coil-Only 22 27 

3 Blower-Coil 29 0 0 

Coil-Only NA 0 

* Refers to share of air conditioners with crankcase heaters. 

As shown in Table IV.21, for single-package air conditioners, DOE estimated that 

60 percent of the affected market would be at the baseline level, 30 percent at efficiency 

level 1, and 10 percent at efficiency level 2 in 2016. For split-system and single-package 

heat pumps (Table IV.22), DOE estimated that 50 percent of the affected market would 

be at the baseline level and 50 percent at efficiency level 1 in 2016. The off mode power 

consumption levels associated with ECM-equipped systems set the wattage limitations 

for each of the efficiency levels considered. Of further note, in the case of efficiency level 

3 for single-package air conditioners and efficiency level 2 for heat pumps, only the 

fraction of the market equipped with ECMs is impacted. Single-package air conditioners 

with PSC motors that comply with the off mode power requirements in efficiency level 2 

already meet the requirements in efficiency level 3. For heat pumps, units with PSC 

motors that comply with the off mode power requirements in efficiency level 1 already 

meet the requirements in efficiency level 2. 

276 
 

 

 

 

 

 

 

 

 

 

 

 

Table IV.21 Off Mode Base-Case Efficiency Distribution in 2016 for Single-Package 

Central Air Conditioners 

Efficiency Level 

Off-Mode 

Watts 

Market Share of Affected Market 

in percent* 

Baseline 48 60 

1 36 30 

2 30 10 

3** 29 0 

* Refers to fraction of central air conditioners with crankcase heaters.
 

** Impacts only that fraction of the market with ECMs; market with PSC motors meeting efficiency level 2
 

already meet efficiency level 3 off mode power requirements.
 

Table IV.22 Off Mode Base-Case Efficiency Distribution in 2016 for Split-System 

and Single-Package Heat Pumps 

Efficiency Level 

Off-Mode 

Watts 

Market Share of Affected Market 

in percent* 

Baseline 50 50 

1 33 50 

2** 32 0 

* Refers to fraction of heat pumps with crankcase heaters.
 

** Impacts only that fraction of the market with ECMs; market with PSC motors meeting efficiency level 1
 

already meet efficiency level 2 off mode power requirements.
 

For further information on DOE’s estimate of base-case efficiency distributions, 

see chapter 8 of the direct final rule TSD. 

11. Inputs to Payback Period Analysis 

The payback period is the amount of time it takes the consumer to recover the 

additional installed cost of more-efficient products, compared to baseline products, 

through energy cost savings. The simple payback period does not account for changes in 

operating expense over time or the time value of money. Payback periods are expressed 

in years. Payback periods that exceed the life of the product mean that the increase in 

total installed cost is not recovered in reduced operating expenses. 

277 
 

 

 

 

 

The inputs to the PBP calculation are the total installed cost of the equipment to 

the customer for each efficiency level and the average annual operating expenditures for 

each efficiency level. The PBP calculation uses the same inputs as the LCC analysis, 

except that discount rates are not needed. The results of DOE’s PBP analysis are 

presented in section V.B.1. 

12. Rebuttable Presumption Payback Period 

As noted above, EPCA, as amended, establishes a rebuttable presumption that a 

standard is economically justified if the Secretary finds that the additional cost to the 

consumer of purchasing a product complying with an energy conservation standard level 

will be less than three times the value of the energy (and, as applicable, water) savings 

during the first year that the consumer will receive as a result of the standard, as 

calculated under the test procedure in place for that standard. (42 U.S.C. 

6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of 

the first year’s energy savings by calculating the quantity of those savings in accordance 

with the applicable DOE test procedure, and multiplying that amount by the average 

energy price forecast for the year in which compliance with the amended standard would 

be required. The results of DOE’s analysis are presented in section V.B.1. 

G. National Impact Analysis–National Energy Savings and Net Present Value 

The national impact analysis (NIA) assesses the national energy savings (NES) 

and the national net present value (NPV) of total consumer costs and savings that would 

be expected to result from new or amended standards at specific efficiency levels. 

278 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

(“Consumer” in this context refers to users of the product being regulated.) DOE 

calculates the NES and NPV based on projections of annual appliance shipments, along 

with the annual energy consumption and total installed cost data from the energy use and 

LCC analyses. 

For most of the TSLs considered in the present analysis, DOE forecasted the 

energy savings from 2016 through 2045, and it calculated product costs, operating cost 

savings, and NPV of consumer benefits for products sold from 2016 through 2045. For 

TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted 

the energy savings from 2015 through 2045 for central air conditioners and heat pumps, 

and from 2013 through 2045 for furnaces.72 For TSL 4, it calculated product costs, 

operating cost savings, and NPV of consumer benefits for products sold in these periods. 

DOE evaluates the impacts of new or amended standards by comparing base-case 

projections with standards-case projections. The base-case projections characterize 

energy use and consumer costs for each product class in the absence of new or amended 

energy conservation standards. DOE compares these projections with projections 

characterizing the market for each product class if DOE adopted new or amended 

standards at specific energy efficiency levels (i.e., the TSLs or standards cases) for that 

class. For the base-case forecast, DOE considers historical trends in efficiency and 

various forces that are likely to affect the mix of efficiencies over time. For the standards 

72 Compared to all other TSLs, the compliance date for TSL 4 is earlier for furnaces (in 2013) and for 

central air conditioners and heat pumps (in 2015). DOE used the same end year for TSL 4 as for all other 

TSLs to demonstrate the additional national impacts that would result from these earlier compliance dates. 

279 
 

 

 

 

 

 

 

 

 

 

 

 

 

cases, DOE also considers how a given standard would likely affect the market shares of 

products with efficiencies greater than the standard. 

To make the analysis more accessible and transparent to all interested parties, 

DOE makes publicly available a spreadsheet model (in Excel format) to calculate the 

energy savings and the national consumer costs and savings from each TSL. The TSD 

and other documentation that DOE provides during the rulemaking explain the models 

and how to use them, and interested parties can review DOE’s analyses and also change 

various input values within the spreadsheet. The NIA spreadsheet model uses typical 

values as inputs (as opposed to probability distributions). 

For the current analysis, the NIA used projections of energy prices and housing 

starts from the AEO2010 Reference case. In addition, DOE analyzed scenarios that used 

inputs from the AEO2010 High Economic Growth and Low Economic Growth cases. 

These cases have higher and lower energy price trends compared to the Reference case, 

as well as higher and lower housing starts, respectively, which result in higher and lower 

appliance shipments to new homes. NIA results based on these cases are presented in 

appendix 10-A of the direct final rule TSD. 

Table IV.23 summarizes the inputs and methodology DOE used for the NIA 

analysis for the central air conditioners and heat pumps preliminary analysis and the 

changes to the analyses for today’s rule. For the direct final rule analysis, DOE used the 

same basic methodology for furnaces as it used for central air conditioners and heat 

280 
 

 

pumps. Discussion of these inputs and methods follows the table. See chapter 10 of the 

direct final rule TSD for further details. 

281
 
 

 

Table IV.23 Summary of Inputs and Methods for the National Impact Analysis 

Inputs Preliminary TSD Changes for the Direct Final 

Rule 

Shipments Annual shipments from shipments 

model. 

No change. 

Compliance Date 

of Standard 

2016.* No change. 

Base-Case 

Forecasted 

Efficiencies 

Based on historical SWEF** growth 

rates from 1992 to 2005. 

No change in basic approach; 

modified efficiency distributions 

based on new information from 

AHRI; historical SWEF growth 

rates from 1993 to 2002 (CAC 

and HP) or 2005 (Furnaces) used 

to forecast efficiencies. 

Standards-Case 

Forecasted 

Efficiencies 

Used a “roll-up” scenario to establish 

the distribution of efficiencies in the 

compliance year; forecasted 

efficiencies based on historical SWEF 

growth rates from 1992 to 2005 (same 

as base case). 

Modified efficiency distributions 

based on new information. 

Retained “roll-up” scenario. 

Forecasted efficiencies based on 

maintaining constant per-unit total 

installed costs relative to base 

case. 

Annual Energy 

Consumption per 

Unit 

Annual weighted-average values as a 

function of SWEF. 

No change. 

Total Installed 

Cost per Unit 

Annual weighted-average values as a 

function of SWEF. 

Incorporated learning rate to 

forecast product prices. 

Annual Energy 

Cost per Unit 

Annual weighted-average values as a 

function of the annual energy 

consumption per unit and energy 

prices. 

No change. 

Repair and 

Maintenance Cost 

per Unit 

Annual values as a function of 

efficiency level. 

No change. 

Energy Prices AEO2009 forecasts (to 2035) and 

extrapolation through 2043. 

Updated using AEO2010 

forecasts. 

Energy Site-toSource Conversion 

Factor 

Varies yearly and is generated by 

NEMS-BT. 

No change. 

Discount Rate Three and seven percent real. No change. 

Present Year Future expenses are discounted to 

2010. 

Future expenses are discounted to 

2011, when the final rule will be 

published. 

Deleted: No change. 

* The compliance date used for TSL 4 is 2013 for furnaces and 2015 for central air conditioners and heat 

pumps. 

** Shipments-Weighted Energy Factor 

282 
 

 

 

 

 

 

 

 

 

 

 

1. Shipments 

The shipments portion of the NIA spreadsheet is a model that uses historical data 

as a basis for projecting future shipments of the products that are the subjects of this 

rulemaking. In DOE’s shipments models, shipments of products are driven by 

replacement of the existing stock of installed products, new home or building 

construction, and existing households or buildings that do not already own the product 

(referred to hereafter as “new owners”). Central air conditioners and heat pumps are used 

in some commercial buildings as well as for residences. Based on industry input, DOE 

estimated that 7 percent of central air conditioner and heat pump shipments are to 

commercial applications, and accounted for these shipments in the shipments model. 

The shipments model takes an accounting approach, tracking market shares of 

each product class and the vintage of units in the existing stock. Stock accounting uses 

product shipments as inputs to estimate the age distribution of in-service product stocks 

for all relevant years. The age distribution of in-service product stocks is a key input to 

NES and NPV calculations because operating costs for any year depend on the age 

distribution of the stock. DOE used historical product shipments to assist in calibrating 

the shipments model. 

For the central air conditioners and heat pumps preliminary analysis, AHRI 

provided historical shipments data for each of the four primary product classes—splitsystem air conditioners, single-package air conditioners, split-system heat pumps, and 

single-package heat pumps. AHRI also provided regional shipments data for each 

283 
 

 

 

 

 

 

 

 

 

 

 

 

product class for two years—2008 and 2009. The limited regional shipments data, in 

combination with calibration of the resulting product stock saturations to the values 

specified by past RECS surveys and U.S. Census Bureau American Housing Survey 

(AHS) data, allowed DOE to develop historical residential shipments disaggregated by 

region. Commercial shipments were allocated regionally based on the percentage 

allocations determined for residential shipments. 

In the furnaces RAP, DOE stated its intention to: (1) develop base-case shipments 

forecasts for each of the four Census regions that, in turn, could be aggregated to produce 

regional or national forecasts; and (2) to project shipments of residential furnaces by 

primarily accounting for sales to the replacement market and new homes. 

For the direct final rule analysis, DOE’s base-case shipments forecasts used the 

same approach for central air conditioners and heat pumps as was used in the preliminary 

analysis, and used the approach described in the RAP for furnaces. For details on the 

shipments analysis, see chapter 9 of the direct final rule TSD. 

a. Impact of Potential Standards on Shipments 

For the central air conditioners and heat pumps preliminary analysis, to estimate 

the impact that potential standards would have on product shipments, DOE analyzed the 

impact that purchase price, operating costs, and household income have had on historical 

central air conditioner and heat pump shipments. From this analysis, DOE derived a 

relative price elasticity that estimates shipments impacts as a function of the increase in 

284 
 

 

 

 

 

 

 

 

 

 

 

 

purchase price, operating cost savings, and household income. Although the correlation 

among historical shipments and the above three parameters is not strong, there is enough 

evidence to suggest a connection. Of the three parameters, purchase price has the most 

significant impact on product shipments (an increase in product purchase price will lead 

to a decrease in product shipments). DOE only considered shipments decreases in the 

replacement and new owner markets.73 In the case of the replacement market, DOE 

assumed that any drop in shipments would be caused by consumers deciding to repair 

rather than replace their products. DOE estimated that the extended repair would last 6 

years, after which time the products would be replaced. 

Commenting on the central air conditioners and heat pumps preliminary TSD, 

HARDI expressed concern that increases in the minimum efficiency required of 

residential central air conditioner units could lead to increased repair of legacy units, 

which would impact sales of new units. (CAC: HARDI, No. 56 at p. 3) Ingersoll Rand 

expressed a similar view, arguing that such a trend was noticeable after the 

implementation of the 13-SEER central air conditioner standard. (CAC: Ingersoll Rand, 

No. 66 at p. 3) 

In the furnaces RAP, DOE stated its intention to develop standards-case forecasts 

that reflect the projected impacts of potential standards on product shipments. In the 

planned approach, the magnitude of the difference between the standards-case and basecase shipment forecasts depends on the estimated purchase price increase, as well as the 

73 Because most new construction is now routinely equipped with either a central air conditioner or heat 

pump, DOE assumed that any increase in purchase price caused by standards would not affect the decision 

to install a central air conditioner or heat pump system in new construction. 

285 
 

 

 

 

 

operating cost savings caused by the considered energy conservation standard, relative to 

household income. 

Commenting on the furnaces RAP, several parties stated that DOE should 

consider that high installed costs resulting from amended energy conservation standards 

might cause some consumers to repair their existing furnaces instead of replacing them 

with higher-efficiency units. Specifically, AGA stated that DOE has not considered the 

likelihood of repair over replacement of existing furnaces, particularly where replacement 

of non-condensing furnaces with condensing furnaces has potentially high venting system 

upgrade costs. (FUR: AGA, No. 1.3.010 at p. 2) Carrier stated that the economic burden 

of a 90-percent AFUE standard may lead some consumers in some areas not to replace a 

furnace that they might otherwise replace. (FUR: Carrier, No. 1.2.006 at p. 207) APGA 

made the same point, adding that the installation cost adders (i.e., costs over and above 

typical costs) of furnaces at 90-percent AFUE and above could even lead to the need for 

replacement of heat exchangers. (FUR: APGA, No. 1.3.004 at p. 3) Ingersoll Rand stated 

that preservation of the existing HVAC system is a very real prospect if the price for 

increased efficiency is not deemed warranted by the consumer. It added that if amended 

standards would require a condensing furnace with an ECM blower in a climate where 

consumers do not feel the added expense is warranted, they will be disposed to extend the 

life of the existing furnace, even to the point of replacing a heat exchanger and burners if 

that is necessary. (FUR: Ingersoll Rand, No. 1.3.006 at p. 12) AGA and APGA stated that 

DOE particularly needs to consider the likelihood of higher rates of repair over 

replacement in manufactured housing, where owners may have limited ability to afford a 

286 
 

 

 

 

 

 

condensing furnace as a replacement. (FUR: AGA, No. 1.3.010 at p. 5; APGA, No. 

1.3.004 at p. 4) HARDI stated that increases in minimum efficiency standards for HVAC 

systems could encourage repair of existing systems in need of replacement, which could 

risk the health and safety of homeowners. (FUR: HARDI, No. 1.3.016 at p. 3) 

DOE agrees that amended standards that result in considerably higher installed 

costs could lead some consumers to repair their existing furnace, central air conditioner, 

or heat pump instead of replacing it with a new, higher-efficiency unit. However, DOE is 

not aware of a satisfactory approach for estimating the extent of this phenomenon. There 

exists considerable uncertainty regarding the metric that consumers might use to make 

the decision to repair rather than replace their HVAC equipment. In addition, there are a 

variety of potential repair possibilities, each having different costs and impacts on 

extending equipment lifetime, and DOE has no way to estimate which types of repair 

would be most likely. Thus, DOE was not able to explicitly model the extent to which 

consumers might repair their existing furnace (or central air conditioner or heat pump) 

instead of replacing it with a higher-efficiency unit. Instead, for the direct final rule 

analysis, DOE used the same approach as in the central air conditioners and heat pumps 

preliminary TSD to estimate the impact that standards may have on shipments of central 

air conditioners, heat pumps, and also furnaces. That is, DOE applied a relative price 

elasticity that estimates shipments impacts as a function of the increase in purchase price, 

operating cost savings, and household income. Application of this elasticity parameter 

likely captures some of the effects of “extended repair” by some consumers. Although the 

elasticity parameter was estimated using data on historical central air conditioner and heat 

287 
 

 

 

 

 

 

 

pump shipments, DOE believes that it is reasonable to apply it to the case of furnaces as 

well, given the broad similarities in the markets for residential central air conditioning 

and heating equipment. 

Regarding the expressed concern that repair of existing systems in need of 

replacement could risk the health and safety of homeowners, DOE notes that contractors 

have a legal responsibility to perform repairs according to the requirements of applicable 

codes. Further, issues about sub-standard repair practices could as well arise in the 

absence of amended standards. 

Because home builders are sensitive to the cost of HVAC equipment, a standard 

level that significantly increases purchase price may induce some builders to switch to a 

different heating system than they would have otherwise installed. Such an amended 

standard level may also induce some home owners to replace their existing furnace at the 

end of its useful life with a different type of heating product, although in this case, 

switching may incur additional costs to accommodate the different product. The decision 

to switch is also affected by the prices of the energy sources for competing equipment. 

For the central air conditioners and heat pumps preliminary analysis, DOE used the 

relative price elasticity described above to account for any equipment switching that may 

result from standards requiring higher-efficiency products. That is, equipment switching 

was implicitly included in the response to higher equipment prices that is modeled using 

the elasticity parameter. In the furnaces RAP, DOE stated its intention to account for fuel 

288 
 

 

 

 

 

 

 

 

 

and equipment switching that may result from amended standards requiring higherefficiency furnaces. 

Commenting on the furnaces RAP, some parties stated that a standard requiring 

condensing furnaces could cause some consumers to switch from gas furnaces to electric 

resistance heating systems. (FUR: AGA, No. 1.3.010 at p. 6; APGA, No. 1.3.004 at p. 3; 

NPGA, No. 1.3.005 at p. 3) NPGA stated that in existing homes with central air 

conditioning and gas furnaces, switching to a heat pump represents a feasible option. 

(FUR: NPGA, No. 1.3.005 at p. 3) AGA and APGA also stated that a standard requiring 

condensing furnaces could cause some consumers with hybrid heat pump/furnace-backup 

heating systems to switch to all-electric heat pump systems. (AGA, No. 1.3.010 at p. 7; 

APGA, No. 1.3.004 at p. 3) 

Several parties regarded fuel switching as unlikely for a variety of reasons. 

ACEEE stated that the barriers to fuel switching in the retrofit market are high enough 

that few cases will be encountered. As an example, it stated that switching from a heat 

pump to a gas furnace is prohibitively expensive if gas service is not already available at 

the curb or in the house. With respect to fuel switching in new construction, ACEEE 

stated that it expects builders to seek favorable terms for installing gas heat and water 

heat rather than switch to electric heating. (FUR: ACEEE, No.1.3.009 at pp. 7-8) NEEP 

stated they found no reason consumers would switch from gas-fueled to either oil-fueled 

or electric technologies in response to standards. (NEEP, No. 1.3.021 at pp. 2–3) HARDI 

stated that a change in efficiency standards is unlikely to spur fuel switching, which more 

289 
 

 

 

 

 

 

 

 

 

 

 

 

commonly is driven by energy costs. (HARDI, No. 1.3.016 at p. 10) Ingersoll Rand stated 

that consumers tend to heat with gas if it is available. It added that retail gas suppliers can 

be expected, on the whole, to maintain gas prices at a level to discourage switching in 

existing homes, and with new construction, to strive to remain competitive in areas they 

wish to serve. (FUR: Ingersoll Rand, No. 1.3.006 at p. 14) 

For the direct final rule, DOE did not explicitly quantify the potential for fuel 

switching from gas furnaces to electric heating equipment, based upon the following 

reasoning. DOE conducted a thorough review of the 2005 RECS to assess the type of 

space-heating system utilized by consumers as a function of house heating load. Gas 

furnaces are primarily utilized in households with high heating loads, while electric space 

heating systems are almost exclusively used in households with low heating loads. 

Generally, this is because the operating costs of electric space heating systems are 

relatively high due to the price of electricity, so using an electric system in a cold climate 

is significantly more expensive than using a gas furnace. Based on the above finding, 

DOE inferred that consumers with high heating loads would be unlikely to switch to 

electric space heating systems as a result of amended standards. In addition, for a 

household with a gas furnace to switch to electric space heating, a separate circuit up to 

30-amps would need to be installed at a cost of approximately $300 to power the electric 

resistance heater within an electric furnace or heat pump system.74 On average, the 

electrical circuit cost is approximately 60 percent of the added installation cost of a more 

74 Based on RS Means, Residential Cost Data 2010, Reed Construction Data, Kingston, MA. 

290 
 

 

 

 

 

 

 

expensive venting system required for high-efficiency, condensing furnaces, further 

diminishing the likelihood of a consumer switching from gas to electric heating. 

As briefly described above, for the direct final rule, DOE conducted an analysis of 

the potential for equipment switching between a split system heat pump and the 

combination of a split system central air conditioner and electric furnace. To estimate the 

likelihood of equipment switching between these two systems, DOE utilized proprietary 

data from Decision Analysts,75 which identified for a representative sample of consumers 

their willingness to purchase more-efficient space-conditioning systems. From these data, 

DOE deduced the payback period that consumers would expect for a more-expensive but 

more-efficient product. For each pairing of split heat pump and split air conditioner 

efficiency levels, DOE applied the payback period criterion to estimate the fraction of 

consumers who would be expected to switch to the other type of equipment. For example, 

when comparing a 15 SEER split system heat pump and a combination of a 14 SEER 

split air conditioner and an electric furnace, DOE calculated the payback period of the 

more-efficient split system heat pump relative to the less-expensive combination of split 

air conditioner and electric furnace. If the resulting payback period for the split system 

heat pump exceeded the expected payback period deduced from the Decision Analysts’ 

data, DOE forecasted that the consumer would switch to the combination of split air 

conditioner and electric furnace. For every possible pairing of split system heat pump and 

split system air conditioner efficiencies, DOE calculated the fraction of consumers who 

would be expected to switch from one type of split system to the other. The fraction of 

75 Decision Analysts, "2008 American Home Comfort Study" (2009). 

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consumers switching was in turn used by DOE to forecast split system heat pump and 

split system air conditioner shipments in specific standards cases, as well as the increase 

in electric furnace shipments. Including the latter in accounting for the impacts of 

equipment switching is important for proper determination of national energy savings and 

national economic impacts. 

Because measures to limit standby mode and off mode power consumption have a 

very small impact on equipment total installed cost, and thereby would have a minimal 

effect on consumer purchase decisions, DOE did not analyze the impact to central air 

conditioner, heat pumps, and furnace shipments due to potential standards limiting 

standby mode and off mode power consumption. In other words, DOE estimated that 

base-case product shipments would be unaffected by standards to limit standby mode and 

off mode power consumption. 

For details on DOE’s analysis of the impacts of standards on shipments, see 

chapter 9 of the direct final rule TSD. For details on DOE’s analysis of equipment and 

fuel switching, see appendix 9-A of the direct final rule TSD. 

2. Forecasted Efficiency in the Base Case and Standards Cases 

A key component of the NIA is the trend in energy efficiency forecasted for the 

base case (without new or amended standards) and each of the standards cases. Section 

IV.F.10 describes how DOE developed a base-case energy efficiency distribution (which 

yields a shipment-weighted average efficiency (SWEF)) for each of the considered 

product classes for the compliance year used in the LCC analysis (2016). To forecast 

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base-case efficiencies over the entire forecast period for the direct final rule, DOE 

extrapolated from the historical trends in efficiency, as described below. 

For central air conditioners and heat pumps, DOE reviewed historical SWEF data 

from 1990 to 2009 provided by AHRI. The historical data, which encompassed years 

when new standards for central air conditioners and heat pumps required compliance 

(1992 and 2006), specified SWEFs for each of the four primary central air conditioner 

and heat pump product classes. DOE considered only the 1993 to 2002 time period to 

forecast SWEF growth rates in order to factor out: (1) any lingering effects on equipment 

SWEFs from industry efforts to comply with the 1992 standards; (2) any anticipatory 

efforts by the industry to comply with the 2006 standards that DOE issued in 2001; and 

(3) the effects of recent Federal tax credits to promote the purchase of high-efficiency 

central air conditioners and heat pumps. From 1993 to 2002, central air conditioner and 

heat pump efficiency increased, on average, by 0.5 to 0.7 SEER, depending on product 

class, which is an efficiency growth rate of approximately 0.06 to 0.07 SEER per year. 

For non-weatherized gas furnaces, DOE was provided historical data from 1990 

to 2009 by AHRI, detailing the market shares of non-condensing (80 percent AFUE and 

less) and condensing (90 percent AFUE and greater) equipment.76 Similar to its approach 

for central air conditioners and heat pumps, DOE used only the data from 1993 to 2002 to 

factor out the lingering effects of new furnace standards that required compliance in 1992 

as well as the effects of market-pull programs, including recent Federal tax credits, to 

76 The market share of furnaces with AFUE between 80 and 90 percent is well below 1 percent due to the 

very high installed cost of 81-percent AFUE furnaces, compared with condensing designs, and concerns 

about safety of operation. 

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promote the purchase of high-efficiency condensing furnaces. From 1993 to 2002, nonweatherized gas furnace efficiency increased, on average, by 0.5 AFUE and 1.5 AFUE 

percentage points in the southern and northern U.S., respectively, which implies 

efficiency growth rates of approximately 0.05 and 0.17 AFUE percentage points per year. 

DOE used the above growth rates for central air conditioners and heat pumps and 

furnaces to forecast base-case SWEFs over the forecast period. Due to the lack of 

historical efficiency data for mobile home and oil-fired furnaces, DOE estimated that 

product efficiency distributions would remain the same throughout the forecast period. 

To estimate efficiency trends in the standards cases, DOE has used “roll-up” 

and/or “shift” scenarios in its standards rulemakings. Under the “roll-up” scenario, DOE 

assumes: (1) product efficiencies in the base case that do not meet the standard level 

under consideration would “roll-up” to meet the new standard level; and (2) product 

efficiencies above the standard level under consideration would not be affected. Under 

the “shift” scenario, DOE retains the pattern of the base-case efficiency distribution but 

reorients the distribution at and above the potential new minimum energy conservation 

standard. 

In the central air conditioners and heat pumps preliminary TSD, DOE concluded 

that amended standards will cause baseline models to roll up to the standard efficiency 

level in the year of compliance, but that some fraction of shipments will remain above the 

minimum. DOE calculated the SWEFs from the resulting efficiency distribution. In the 

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years following the year of compliance, DOE estimated that SWEFs will continue to 

grow at the rate observed between 1992 and 2005 until the max-tech efficiency level is 

attained, at which point the SWEF was held constant. 

Commenting on the furnaces RAP, NRDC and ASAP stated that market 

penetration in standards cases will resemble the shift scenario more than the roll-up 

scenario. (FUR: NRDC, No. 1.3.020 at p. 10; ASAP, No. 1.2.006 at p. 216) NRDC added 

that the existence of successful Federal tax incentives for furnaces with 95 percent AFUE 

indicates that sales of these units are likely to continue to increase. (FUR: NRDC, No. 

1.3.020 at p. 11) In contrast, HARDI commented that roll-up and shift scenarios are 

unlikely under an amended energy conservation standard, and stated that an increase in 

minimum efficiency standards for furnaces or central air conditioners and heat pumps is 

likely to negatively impact the other energy efficiency programs that have been vital to 

achieving the growing penetration of higher-efficiency HVAC systems. (FUR: HARDI, 

No.1.3.016 at p. 3) ACEEE stated there is no strong reason to choose a roll-up scenario 

instead of a shift scenario based on the available evidence, and ACEEE encouraged DOE 

to consider both scenarios, premised on the likelihood of the continuation of incentives if 

there is a 90-percent AFUE furnace efficiency standard for the north. (FUR: ACEEE, 

No.1.3.009 at p. 8) The California IOUs also supported the use of both the roll-up and 

shift scenarios. (FUR: CA IOUs, No. 1.3.017 at p. 5) 

In response, DOE again reviewed the historical efficiency data for central air 

conditioners and heat pumps and furnaces from AHRI. It did not find any evidence to 

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support a shift in the efficiency distribution in the year of compliance with amended 

standards. Therefore, for the direct final rule analysis, DOE decided to continue to utilize 

the roll-up scenario for central air conditioners and heat pumps in order to forecast the 

impact of standards for the year of compliance. DOE applied the roll-up scenario to 

furnaces as well. However, DOE agrees with the suggestion by some of the commenters 

that the efficiency distribution will shift after compliance with amended standards is 

required. DOE captured this expected market change in its forecast of efficiency in the 

standards cases, as described below. 

To forecast standards-case SWEFs after the year of compliance, rather than use 

the same efficiency growth rate as the base case, DOE developed growth trends for each 

candidate standard level that reflect the likelihood that the consumer willingness to pay 

for an increment of efficiency will be the same in the base case and the standards case. In 

revising its analysis, DOE found that the cost of a relatively small efficiency 

improvement over the most common product in the standards case is much higher than in 

the base case. Therefore, assuming the same efficiency increment in the base case and 

standards case would imply that the consumer willingness to pay for an increment of 

efficiency would dramatically increase under standards without the addition of any 

incentives or information. This is a phenomenon that DOE has not observed in any of its 

efficiency market analysis or modeling investigations. Therefore, for the direct final rule, 

DOE developed an approach in which the growth rate slows over time in response to the 

increasing incremental cost of efficiency improvements. DOE assumed that the rate of 

adoption of more-efficient products under a standards case occurs at a rate which ensures 

Deleted: fact that as efficiency increases, it 

becomes more expensive for most efficiency levels 

(in terms of equipment cost) to maintain a constant 

growth rate. 

Deleted: . To do so, 

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that the average total installed cost difference between the standards case and base case 

over the entire forecast period is constant. 

DOE modified the general approach for split-system coil-only air conditioner 

replacement units at 15 SEER and above, for which many consumers would incur a very 

large additional cost (an average of $959) to install a furnace fan kit (as explained in 

section IV.F.1). DOE believes that for much of the market, this cost would constrain 

demand for split-system coil-only air conditioner replacement units at 15 SEER and 

Deleted: made an exception to 

Deleted: above 

Deleted: for 

above. Thus, in analyzing standards cases below 15 SEER, as well as the base case, DOE 

forecast that the market shares of units at 15 SEER and above would remain at the 2016 

Deleted: , so it assumed that the market share will 

not grow for these units for the 

Deleted: . 

level. 

For split-system coil-only air conditioner replacement units, DOE also analyzed a 

sensitivity case that reflects a more sophisticated model of efficiency market shares than 

the reference case analysis. In this case, there is a gradual shift of efficiency in the base 

case, with the rate of shift dependent on the price difference between an efficiency 

market share and the next highest efficiency market share. DOE calibrated the parameters 

of this model to the observed historical shift rate without tax incentives. The result of this 

model is that while there is more market shifting over the long term forecast to the very 

high efficiency levels, there is slower market shifting at the lower efficiency levels earlier 

in the forecast period. In analyzing standards cases below 15 SEER, DOE forecast that 

the market shares of units at 15 SEER and above would be no greater than the base case. 

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The results of this sensitivity in terms of the consumer NPV are presented in section 

V.B.3.a. More discussion along with detailed results from the sensitivity calculation are 

provided in appendix 10-D of the TSD. 

For single package air conditioners and heat pumps, DOE observes that the 

market conditions are somewhat distinct from split system air conditioners as more than 

90 percent of the single package market is comprised of low efficiency products of 13 to 

14 SEER. In addition, DOE observes that higher efficiency single-package systems are 

more expensive relative to the lower efficiency models compared to the general cost 

structure for split system units. This indicates that efficiency trends for single-package 

systems are likely to be smaller than those for split systems. Nonetheless, DOE modeled 

the efficiency trends for single-package units the same as it modeled the trends for 

blower-coil split systems. While DOE believes that this approach is conservative, DOE 

did not have the data available to calibrate a more precise forecast of efficiency trends for 

this product class. An overestimate of the efficiency trend will likely lead to an 

overestimate of equipment costs resulting from a standard for these products. As a result, 

net consumer benefits from a standard are likely to be higher the DOE estimate provided 

in this notice. 

In the case of standby mode and off mode power consumption, DOE used a rollup scenario to forecast the impact of potential standards for the year of compliance. Due 

to the lack of historical information on standby mode and off mode power consumption 

in central air conditioners, heat pumps, and furnace equipment, DOE estimated that 

Comment [A9]: Changes recommended by 

OIRA. 

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efficiency distributions of standby mode and off mode power consumption would remain 

the same until 2045. 

For further details about the forecasted efficiency distributions, see chapter 10 of 

the direct final rule TSD. 

3. Installed Cost Per Unit 

In the preliminary analysis, DOE assumed that the manufacturer costs and retail 

prices of products meeting various efficiency levels remain fixed, in real terms, after 

2009 (the year for which the engineering analysis estimated costs) and throughout the 

period of the analysis. As discussed in section IV.F.1, examination of historical price data 

for certain appliances and equipment that have been subject to energy conservation 

standards indicates that the assumption of constant real prices and costs may, in many 

cases, over-estimate long-term appliance and equipment price trends. 

On February 22, 2011, DOE published a Notice of Data Availability (NODA, 76 

FR 9696) stating that DOE may consider improving regulatory analysis by addressing 

equipment price trends. Consistent with the NODA, DOE used historical producer price 

indices (PPI) for room air conditioners and household laundry equipment as a proxy for 

price data. DOE does not have price data for this equipment. DOE believes that PPI 

might shed some directionally-correct light on the price trend, recognizing that PPI is not 

a good proxy for price information because it incorporates shipment information, among 

other reasons. DOE found a long-term declining real price trend for both products. DOE 

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used experience curve fits to forecast a price scaling index to forecast product costs into 

the future for this rulemaking. DOE also considered the public comments that were 

received in response to the NODA and refined the evaluation of its experience curve 

trend forecasting estimates. Many commenters were supportive of DOE moving from an 

assumption-based equipment price trend forecasting method to a data-driven 

methodology for forecasting price trends. Other commenters were skeptical that DOE 

could accurately forecast price trends given the many variables and factors that can 

complicate both the estimation and the interpretation of the numerical price trend results 

and the relationship between price and cost. DOE evaluated these concerns and 

determined that retaining the assumption-based approach of a constant real price trend is 

consistent with the NODA when data gaps are sufficient. DOE presents the estimates 

based on a constant real price trend as a reasonable upper bound on the future equipment 

price trend. DOE also performed an initial evaluation of the possibility of other factors 

complicating the estimation of the long-term price trend, and developed a range of 

potential price trend values that were consistent with the available data and justified by 

the amount of data that was available to DOE at this time. DOE recognizes that its price 

trend forecasting methods are likely to be modified as more data and information 

becomes available to enhance the rigor and robustness of the trend estimate and the 

completeness of the model. Additional data should enable an improved evaluation of the 

potential impacts of more of the factors that can influence equipment price trends over 

time. 

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To evaluate the impact of the uncertainty of the price trend estimates, DOE 

performed price trend sensitivity calculations in the national impact analysis to examine 

the dependence of the analysis results on different analytical assumptions. DOE also 

included a constant real price trend assumption as an upper bound on the forecast price 

trend. DOE found that for the selected standard levels the benefits outweighed the 

burdens under all scenarios. 

A more detailed discussion of price trend modeling and calculations is provided in 

Appendix 8-J of the TSD. 

4. National Energy Savings 

For each year in the forecast period, DOE calculates the NES for each considered 

standard level by multiplying the stock of equipment affected by the energy conservation 

standards by the per-unit annual energy savings. As discussed in section IV.E, DOE 

incorporated the rebound effect utilized in the energy use analysis into its calculation of 

national energy savings. 

To estimate the national energy savings expected from amended appliance 

standards, DOE used a multiplicative factor to convert site energy consumption (at the 

home or commercial building) into primary or source energy consumption (the energy 

required to convert and deliver the site energy). These conversion factors account for the 

energy used at power plants to generate electricity and losses in transmission and 

distribution, as well as for natural gas losses from pipeline leakage and energy used for 

Comment [A10]: Changes recommended by 

OIRA. 

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pumping. For electricity, the conversion factors vary over time due to changes in 

generation sources (i.e., the power plant types projected to provide electricity to the 

country) projected in AEO2010. The factors that DOE developed are marginal values, 

which represent the response of the electricity sector to an incremental decrease in 

consumption associated with potential appliance standards. 

In the central air conditioners and heat pumps preliminary analysis, DOE used 

annual site-to-source conversion factors based on the version of NEMS that corresponds 

to AEO2009. For today’s direct final rule, DOE updated its conversion factors based on 

the NEMS that corresponds to AEO2010, which provides energy forecasts through 2035. 

For 2036-2045, DOE used conversion factors that remain constant at the 2035 values. 

Section 1802 of the Energy Policy Act of 2005 (EPACT 2005) directed DOE to 

contract a study with the National Academy of Science (NAS) to examine whether the 

goals of energy efficiency standards are best served by measurement of energy 

consumed, and efficiency improvements, at the actual point-of-use or through the use of 

the full-fuel-cycle, beginning at the source of energy production (Pub. L. No. 109-58 

(Aug. 8, 2005)). NAS appointed a committee on “Point-of-Use and Full-Fuel-Cycle 

Measurement Approaches to Energy Efficiency Standards” to conduct the study, which 

was completed in May 2009. The NAS committee defined “full-fuel-cycle energy 

consumption” as including, in addition to site energy use, the following: (1) energy 

consumed in the extraction, processing, and transport of primary fuels such as coal, oil, 

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and natural gas; (2) energy losses in thermal combustion in power generation plants; and 

(3) energy losses in transmission and distribution to homes and commercial buildings.77 

In evaluating the merits of using point-of-use and full-fuel-cycle measures, the 

NAS committee noted that DOE currently uses what the committee referred to as 

“extended site” energy consumption to assess the impact of energy use on the economy, 

energy security, and environmental quality. The extended site measure of energy 

consumption includes the energy consumed during the generation, transmission, and 

distribution of electricity but, unlike the full-fuel-cycle measure, does not include the 

energy consumed in extracting, processing, and transporting primary fuels. A majority of 

the NAS committee concluded that extended site energy consumption understates the 

total energy consumed to make an appliance operational at the site. As a result, the NAS 

committee recommended that DOE consider shifting its analytical approach over time to 

use a full-fuel-cycle measure of energy consumption when assessing national and 

environmental impacts, especially with respect to the calculation of greenhouse gas 

emissions. The NAS committee also recommended that DOE provide more 

comprehensive information to the public through labels and other means, such as an 

enhanced website. For those appliances that use multiple fuels (e.g., water heaters), the 

NAS committee indicated that measuring full-fuel-cycle energy consumption would 

provide a more complete picture of energy consumed and permit comparisons across 

many different appliances, as well as an improved assessment of impacts. 

77 The National Academies, Board on Energy and Environmental Systems, Letter to Dr. John Mizroch, 

Acting Assistant Secretary, U.S. DOE, Office of EERE from James W. Dally, Chair, Committee on Pointof-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards (May 15, 2009). 

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In response to the NAS recommendations, DOE published in the Federal Register, 

on August 20, 2010, a Notice of Proposed Policy proposing to incorporate a full-fuel 

cycle analysis into the methods it uses to estimate the likely impacts of energy 

conservation standards on energy use and emissions. 75 FR 51423. Specifically, DOE 

proposed to use full-fuel-cycle (FFC) measures of energy and GHG emissions, rather 

than the primary (extended site) energy measures it currently uses. Additionally, DOE 

proposed to work collaboratively with the Federal Trade Commission (FTC) to make 

FFC energy and GHG emissions data available to the public so as to enable consumers to 

make cross-class comparisons. On October 7, 2010, DOE held an informal public 

meeting at DOE headquarters in Washington, DC to discuss and receive comments on its 

planned approach. The Notice of Proposed Policy, a transcript of the public meeting, and 

all public comments received by DOE are available at: 

http://www.regulations.gov/search/Regs/home.html#docketDetail?R=EERE-2010-BTNOA-0028. DOE intends to develop a final policy statement on these subjects and then 

take steps to begin implementing that policy in rulemakings and other activities that are 

undertaken during 2011. 

5. Net Present Value of Consumer Benefit 

The inputs for determining the NPV of the total costs and benefits experienced by 

consumers of the considered appliances are: (1) total annual installed cost; (2) total 

annual savings in operating costs; and (3) a discount factor. DOE calculates net savings 

each year as the difference between the base case and each standards case in total savings 

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in operating costs and total increases in installed costs. DOE calculates operating cost 

savings over the life of each product shipped in the forecast period. 

DOE multiplies the net savings in future years by a discount factor to determine 

their present value. For the central air conditioners and heat pumps preliminary analysis 

and today’s direct final rule, DOE estimated the NPV of appliance consumer benefits 

using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates 

in accordance with guidance provided by the Office of Management and Budget (OMB) 

to Federal agencies on the development of regulatory analysis.78 The 7-percent real value 

is an estimate of the average before-tax rate of return to private capital in the U.S. 

economy. The 3-percent real value represents the “societal rate of time preference,” 

which is the rate at which society discounts future consumption flows to their present 

value. The discount rates for the determination of NPV are in contrast to the discount 

rates used in the LCC analysis, which are designed to reflect a consumer’s perspective 

As noted above, DOE is accounting for the rebound effect associated with moreefficient furnaces, central air conditioners, and heat pumps in its determination of 

national energy savings. As previously discussed in section IV.F, because the rebound 

effect provides consumers with increased value (i.e., a more comfortable environment), 

DOE believes that, if it were able to monetize the increased value to consumers added by 

the rebound effect, this value would be similar in value to the foregone energy savings. 

For this standards rulemaking, DOE estimates that this value is equivalent to the 

78 OMB Circular A-4, section E, “Identifying and Measuring Benefits and Costs” (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/memoranda/m03-21.html). 

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monetary value of the energy savings that would have occurred without the rebound 

effect. Therefore, DOE concluded that the economic impacts on consumers with or 

without the rebound effect, as measured in the NPV, are the same. 

6. Benefits from Effects of Standards on Energy Prices 

In the furnaces RAP, DOE described its plans to use NEMS-BT to analyze the 

impact on natural gas prices resulting from amended standards on furnaces, and the 

associated benefits for all natural gas consumers in all sectors of the economy. 

Commenting on the RAP, EarthJustice stated that DOE must consider standards’ 

economic benefit to the nation through reductions in natural gas prices resulting from gas 

furnace efficiency improvements. (FUR: EarthJustice, No. 1.3.014 at p. 7) In contrast, 

Ingersoll Rand stated that standards may bring gas users no cost savings, and that DOE 

should not incorporate any potential savings into its considerations. (FUR: Ingersoll 

Rand, No. 1.3.006 at p. 13) 

For the direct final rule analysis, DOE used NEMS-BT to model the impact of the 

natural gas savings associated with possible standards on natural gas prices. The response 

of price observed in the NEMS-BT output changes over the forecast period based on the 

model’s dynamics of natural gas supply and demand. For each year, DOE calculated the 

nominal savings in total natural gas expenditures by multiplying the estimated annual 

change in the national-average end-user natural gas price by the annual total U.S. natural 

gas consumption projected in AEO2010, adjusted for the estimated natural gas savings 

associated with each TSL. DOE then calculated the NPV of the savings in natural gas 

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expenditures for 2016-2045 (or 2013-2045 for TSL 4), using 3-percent and 7-percent 

discount rates for each scenario. 

Although amended standards for furnaces may yield benefits to all consumers 

associated with reductions in natural gas prices, DOE retains the position (recently set 

forth in the final rule for residential heating products (75 FR 20112, 20175 (April 16, 

2010)) that it should not place a heavy emphasis on this factor in its consideration of the 

economic justification of standards. EPCA specifically directs DOE to consider the 

economic impact of an amended standard on manufacturers and consumers of the 

products subject to the standard. (42 U.S.C. 6295(o)(2)(B)(i)(I)) While it is true that 

EPCA directs DOE to consider other factors the Secretary considers relevant, in so doing, 

DOE takes under advisement the guidance provided by OMB on the development of 

regulatory analysis. Specifically, Circular A-4 states, “You should not include transfers in 

the estimates of the benefits and costs of a regulation.”79 When gas prices drop in 

response to lower demand and lower output of existing natural gas production capacity, 

consumers benefit but producers suffer. In economic terms, the situation represents a 

benefits transfer to consumers (whose expenditures fall) from producers (whose revenue 

falls equally). On the other hand, when gas prices decrease because extraction costs 

decline, however, consumers and producers both benefit, and the change in natural gas 

prices represents a net gain to society. Consumers benefit from the lower prices, and 

producers, whose revenues and costs both fall, are no worse off. DOE is continuing to 

investigate the extent to which a change in natural gas prices projected to result from 

79 OMB Circular A-4, section E, “Identifying and Measuring Benefits and Costs” (Sept. 17, 2003), p.38. 

(Available at: http://www.whitehouse.gov/omb/memoranda/m03-21.html). 

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potential standards represents a net gain to society. At this time, however, it is not able to 

reasonably determine the extent of transfers associated with a decrease in gas prices 

resulting from appliance standards. 

Reduction in electricity consumption associated with amended standards for 

central air conditioners and heat pumps could reduce the electricity prices charged to 

consumers in all sectors of the economy and thereby reduce total electricity expenditures. 

In chapter 2 of the central air conditioners and heat pumps preliminary TSD, DOE 

explained that, because the electric power industry is a complex mix of fuel and 

equipment suppliers, electricity producers, and distributors, and because it has a varied 

institutional structure, DOE did not plan to estimate the value of potentially-reduced 

electricity costs for all consumers associated with amended standards for central air 

conditioners and heat pumps. 

Commenting on the preliminary TSD, NPCC stated that the economic benefits of 

the reduced need for new power plants should be estimated using the NEMS-BT forecast. 

(FUR: NPCC, No. 74 at p. 6) ACEEE made a similar point. (ACEEE, No. 72 at p. 7) 

For the direct final rule, DOE used NEMS-BT to assess the impacts of the 

reduced need for new electric power plants and infrastructure projected to result from 

amended standards. In NEMS-BT, changes in power generation infrastructure affect 

utility revenue requirements, which in turn affect electricity prices. DOE estimated the 

impact on electricity prices associated with each considered TSL. Although the aggregate 

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benefits for electricity users are potentially large, there may be negative effects on some 

of the actors involved in the electricity supply chain, particularly power plant providers 

and fuel suppliers. Because there is uncertainty about the extent to which the benefits for 

electricity users from reduced electricity prices would be a transfer from actors involved 

in the electricity supply chain to electricity consumers, DOE has concluded that, at 

present, it should not place a heavy emphasis on this factor in its consideration of the 

economic justification of new or amended standards. DOE is continuing to investigate the 

extent to which electricity price changes projected to result from amended standards 

represent a net gain to society. 

H. Consumer Subgroup Analysis 

In analyzing the potential impacts of new or amended standards on consumers, 

DOE evaluates the impacts on identifiable subgroups of consumers that may be 

disproportionately affected by a national standard. DOE evaluates impacts on particular 

subgroups of consumers primarily by analyzing the LCC impacts and PBP for those 

particular consumers from alternative standard levels. 

In the central air conditioners and heat pumps preliminary TSD, DOE stated that 

it will evaluate impacts on consumer subgroups, especially low-income and smallbusiness consumers. For the direct final rule, DOE also analyzed a consumer subgroup 

consisting of households occupied solely by senior citizens (senior-only households) for 

national standards. However, in the 2005 RECS sample used for the subgroup analysis, 

the number of low-income and senior-only households with a central air conditioner was 

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too small to produce reliable results at the regional level, and the number of low-income 

and senior-only households with a heat pump was too small to produce reliable results at 

either the national or the regional level. Accordingly, DOE performed the analysis for 

these subgroups only at the national level and only for air conditioners. 

During the development of the preliminary TSD, it was thought that an analysis 

could be done of small businesses. However, DOE was not able to locate information on 

the energy use or economic characteristics of commercial users of residential air 

conditioning units in commercial buildings, so no analysis was done of a small business 

subgroup. 

In the furnaces RAP, DOE stated its intention to evaluate impacts of amended 

furnace standards on low-income and senior-only households, because the potential 

higher first cost of products that meet amended standards may lead to negative impacts 

for these particular groups. In response to the furnaces RAP, DOE received comments 

about which subgroups should be included in the consumer subgroup analysis. AGA and 

APGA stated that DOE should analyze the new construction and replacement markets 

separately for the subgroup analysis. (FUR: AGA, No. 1.3.010 at pp. 3-4; APGA, No. 

1.3.004 at p. 4) Southern stated that DOE should consider multi-family housing units and 

dwellings that require significant venting system work to accommodate a new furnace. 

(FUR: Southern, No. 1.2.006 at pp. 227–28) Ingersoll Rand stated that DOE should 

consider landlords and tenants as subgroups for the analysis. (FUR: Ingersoll Rand, No. 

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1.3.006 at p. 15) NPGA stated that owners of manufactured homes should be considered 

as a subgroup. (FUR: NPGA, No. 1.3.005 at p. 4) 

For the direct final rule analysis, DOE evaluated the impacts of the considered 

energy efficiency standard levels for non-weatherized gas furnaces on low-income 

consumers and senior citizens (i.e., senior-only households). DOE did not analyze these 

subgroups for mobile home gas furnaces or oil-fired furnaces because of the small sample 

sizes in the 2005 RECS database. In response to comments, for non-weatherized gas 

furnaces, DOE analyzed the impacts for three other subgroups: (1) multi-family housing 

units; (2) new homes; and (3) replacement applications. 

DOE did not consider dwellings that require significant venting system work to 

accommodate a new furnace as a subgroup, because there is no way to define 

“significant” venting system work that would not be arbitrary. DOE did not consider 

landlords and tenants as subgroups because DOE’s LCC and payback period calculation 

method implicitly assumes that either the landlord purchases an appliance and also pays 

its energy costs, or in those cases where the tenant pays the energy costs, the landlord 

purchases an appliance and passes on the expense in the rent. If a landlord passes on the 

expense in the rent, which is the more common situation, he or she is not a “consumer” in 

the context of DOE’s methodology, so landlords are not a meaningful consumer 

subgroup. DOE does not consider tenants (renters) as a consumer subgroup because: (1) 

DOE is not able to evaluate the pace at which the incremental purchase cost of a covered 

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product is passed on in the rent, and (2) not all tenants pay the energy costs for their 

dwelling. 

DOE did not consider owners of manufactured homes as a subgroup because the 

impacts of potential amended standards on these consumers are addressed in the LCC and 

PBP analysis of mobile home gas furnaces. 

DOE did not perform a subgroup analysis for the standby mode and off mode 

efficiency levels. The standby mode and off mode LCC analysis relied on the test 

procedure to assess energy savings for the off mode efficiency levels, and, thus, energy 

savings are not different for population subgroups. In addition, the analysis was done 

with national average energy prices and national average markups for residential and 

commercial users, and thus, these inputs would not vary for the subgroups. The 

information sources for the other parameters affecting LCC (e.g., repair and maintenance 

cost) also did not differ by subgroup. 

Results of the subgroup analysis are presented in section V.B.1.b of today’s direct 

final rule. For further information, consult chapter 11 of the direct final rule TSD, which 

describes the consumer subgroup analysis and its results. 

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I. Manufacturer Impact Analysis 

1. Overview 

DOE performed a manufacturer impact analysis (MIA) to estimate the financial 

impact of amended energy conservation standards on manufacturers of residential 

furnaces and central air conditioners and heat pumps, and to calculate the impact of such 

standards on direct employment and manufacturing capacity. The MIA has both 

quantitative and qualitative aspects. The quantitative component of the MIA primarily 

relies on the Government Regulatory Impact Model (GRIM), an industry cash-flow 

model customized for this rulemaking. The key GRIM inputs are data on the industry 

cost structure, product costs, shipments, and assumptions about markups and conversion 

expenditures. The key output is the industry net present value (INPV). Different sets of 

assumptions (markup scenarios) will produce different results. The qualitative component 

of the MIA addresses factors such as product characteristics, industry and market trends, 

and includes an assessment of the impacts of standards on sub-groups of manufacturers. 

Chapter 12 of the direct final rule TSD describes the complete MIA. 

DOE conducted the MIA for this rulemaking in three phases. In Phase 1, 

“Industry Profile,” DOE prepared an industry characterization. In Phase 2, “Industry 

Cash Flow,” DOE focused on the financial aspects of the industry as a whole. In this 

phase, DOE used the publicly-available information gathered in Phase 1 to prepare an 

industry cash flow analysis using the GRIM model. DOE adapted the GRIM structure 

specifically to analyze the impact of new and amended standards on manufacturers of 

residential furnace and central air conditioner and heat pump products. In Phase 3, “Sub313 
 

 

 

 

 

 

 

 

 

Group Impact Analysis,” the Department conducted structured, detailed interviews with a 

representative cross-section of manufacturers that represent approximately 75 percent of 

furnace and central air conditioning sales. During these interviews, DOE discussed 

engineering, manufacturing, procurement, and financial topics specific to each company, 

and obtained each manufacturer’s view of the industry as a whole. The interviews 

provided valuable information that the Department used to evaluate the impacts of 

potential amended standards on manufacturers’ cash flows, manufacturing capacities, and 

employment levels. Each of these phases is discussed in further detail below. 

a. Phase 1: Industry Profile 

In Phase 1 of the MIA, DOE prepared a profile of the residential furnace and 

central air conditioner and heat pump industry based on the Market and Technology 

Assessment (MTA) prepared for this rulemaking. Before initiating detailed impact 

studies, DOE collected information on the present and past structure and market 

characteristics of the industry. This information included market share, product 

shipments, markups, and cost structure for various manufacturers. The industry profile 

includes: (1) detail on the overall market and product characteristics; (2) estimated 

manufacturer market shares; (3) financial parameters such as net plant, property, and 

equipment (i.e., after accounting for depreciation), SG&A expenses, cost of goods sold, 

etc.; and (4) trends in the residential furnace and central air conditioner and heat pump 

industry, including the number of firms, technology, sourcing decisions, and pricing. 

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The industry profile included a top-down cost analysis of residential furnace and 

central air conditioner and heat pump manufacturers that DOE used to derive preliminary 

financial inputs for the GRIM (e.g., revenues; SG&A expenses; research and 

development (R&D) expenses; and tax rates). DOE also used public sources of 

information to further calibrate its initial characterization of the industry, including 

company SEC 10–K filings, Moody’s company data reports, corporate annual reports, the 

U.S. Census Bureau’s 2008 Economic Census, and Dun & Bradstreet reports. 

b. Phase 2: Industry Cash Flow Analysis 

Phase 2 of the MIA focused on the financial impacts of the potential amended 

energy conservation standards on the industry as a whole. New or more-stringent energy 

conservation standards can affect manufacturer cash flow in three distinct ways: (1) by 

creating a need for increased investment; (2) by raising production costs per unit; and (3) 

by altering revenue due to higher per-unit prices and possible changes in sales volumes. 

To quantify these impacts, in Phase 2, DOE used the GRIM to perform a cash-flow 

analysis of the residential furnace and central air conditioner and heat pump industry. In 

performing this analysis, DOE used the financial values determined during Phase 1, 

which were updated based on industry feedback and additional research, and the 

shipment projections used in the NIA. The GRIM modeled both impacts from energy 

efficiency standards (standards based on SEER, HSPF, and AFUE ratings) and impacts 

from standby mode and off mode standards (standards based on standby mode and off 

mode wattage). The GRIM results from the two standards were evaluated independent of 

one another. 

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c. Phase 3: Sub-Group Impact Analysis 

In Phase 3, DOE conducted interviews with manufacturers and refined its 

preliminary cash flow analysis. Many of the manufacturers interviewed also participated 

in interviews for the engineering analysis. As indicated above, the MIA interviews 

broadened the discussion from primarily technology-related issues to include financerelated topics. One key objective for DOE was to obtain feedback from the industry on 

the assumptions used in the GRIM and to isolate key issues and concerns. See section 

IV.I.3 for a description of the key issues manufacturers raised during the interviews. 

Using average-cost assumptions to develop an industry cash-flow estimate may 

not adequately assess differential impacts of new or amended standards among 

manufacturer sub-groups. For example, small manufacturers, niche players, or 

manufacturers exhibiting a cost structure that largely differs from the industry average 

could be more negatively affected. Thus, during Phase 3, DOE used the results of the 

industry characterization analysis in Phase 1 to evaluate how groups of manufacturers 

could be differentially affected by potential standards, and to group manufacturers that 

exhibited similar production and cost structure characteristics. The manufacturer 

interviews provided additional, valuable information on manufacturer subgroups. 

DOE investigated whether small business manufacturers should be analyzed as a 

manufacturer subgroup. During its research, DOE identified multiple companies that 

manufacture products covered by this rulemaking and qualify as a small business under 

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the applicable Small Business Administration (SBA) definition. The SBA defines a 

“small business” as having 750 employees or less for NAICS 333415, “Air-Conditioning 

and Warm Air Heating Equipment and Commercial and Industrial Refrigeration 

Equipment Manufacturing.” As a result of this inquiry, DOE decided to analyze small 

business manufacturers as a separate subgroup in this direct final rule. The small 

businesses were further sub-divided by product class to understand the impacts of the 

rulemaking on those entities. The small business subgroup is discussed in chapter 12 of 

the direct final rule TSD and in section VI.B.1 of today’s notice. 

2. GRIM Analysis 

As discussed previously, DOE uses the GRIM to quantify the changes in cash 

flow that result in a higher or lower industry value due to amended standards. The GRIM 

uses a discounted cash-flow analysis that incorporates manufacturer costs, markups, 

shipments, and industry financial information as inputs. The GRIM models changes in 

costs, distribution of shipments, investments, and manufacturer margins that could result 

from amended energy conservation standards. The GRIM spreadsheet uses the inputs to 

arrive at a series of annual cash flows, beginning in 2010 (the base year of the analysis) 

and continuing to 2045 (the last year of the analysis period). DOE calculated INPVs by 

summing the stream of annual discounted cash flows during these periods. 

The GRIM calculates cash flows using standard accounting principles and 

compares changes in INPV between the base case and each TSL (the standards case). The 

difference in INPV between the base case and standards case represents the financial 

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impact of the amended standard on manufacturers. The GRIM results are shown in 

section V.B.2. Additional details about the GRIM can be found in chapter 12 of the direct 

final rule TSD. 

DOE typically presents its estimates of industry impacts by grouping the major 

product classes served by the same manufacturers. In the residential HVAC industry, 

split-system air conditioning, split-system heat pumps, single-package air conditioning, 

single-package heat pumps, and non-weatherized gas furnaces make up 95 percent of 

total shipments, according to the NIA shipment model for 2010. These five product 

classes are considered to be “conventional” products. Manufacturers that compete in the 

marketplace for conventional products generally produce products in all five 

conventional product classes. 

Additionally, consumer selection of conventional products is often 

interdependent. As discussed in section IV.G.1 of the NIA methodology, the shipments 

forecasts that are an input to the GRIM incorporate product switching among the splitsystem air conditioning, split-system heat pumps, and non-weatherized gas furnaces 

product classes. To better capture the impacts of this rulemaking on industry, DOE 

aggregates results for split-system air conditioning, split-system heat pumps, singlepackage air conditioning, single-package heat pumps, and non-weatherized gas furnaces 

into a single “conventional” product grouping. 

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In section V.B.2.d pertaining to the MIA analysis, DOE discusses impacts on 

subgroups of manufacturers that produce niche products. Niche products, which serve 

much smaller segments of the market with unique needs, are produced by different 

manufacturers and include niche furnace products and niche central air conditioning and 

heat pumps products. Niche furnace products include weatherized gas furnaces, oil 

furnaces, and mobile home furnaces. Niche central air conditioning and heat pump 

products consist of the space-constrained and the small-duct, high-velocity (SDHV) 

product classes. 

For the weatherized gas furnaces product class and the space-constrained product 

class, the current energy efficiency standard was determined to be equal to the max-tech 

efficiency level in the engineering analysis. Based on DOE’s screening analysis, 

teardown analysis, and market research, DOE determined it would be unable to raise the 

energy efficiency standards on these products due to the state of technology and the 

design constraints inherent to these products. Therefore, DOE concluded that there is no 

need to perform an additional analysis for these products given that the current standard 

already meets the max-tech efficiency. For these product classes, no manufacturer impact 

analysis for energy efficiency standards was performed. 

For the small-duct, high-velocity product class, limited information was available 

for this market niche. DOE had insufficient information to build a shipments forecast 

model, and thus, did not perform a quantitative analysis using the GRIM for this product 

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class. However, DOE did conduct interviews with manufacturers of this product class and 

has performed a qualitative analysis of the impacts on manufacturers of SDHV products. 

For consideration of standby mode and off mode regulations, DOE modeled the 

impacts of the design options for reducing electricity usage discussed in section IV.C.7 

pertaining to the engineering analysis. The GRIM analysis incorporates the additional 

MPC cost of standby mode and off mode features and the resulting impacts on markups. 

Due to the small cost of standby mode and off mode components relative to the 

overall cost of a furnace, central air conditioner, or heat pump, DOE assumes that 

standards regarding standby mode and off mode features alone will not impact product 

shipment numbers. Additionally, DOE does not believe the incremental cost of standby 

mode and off mode features will have a differentiated impact on manufacturers of 

different product classes. DOE models the impact of standby mode and off mode for the 

industry as a whole. 

The GRIM results for standby mode and off mode standards include the electric 

furnace product class. Based on product catalogue information, DOE concluded that the 

major manufacturers of conventional products are also the major manufacturers of 

electric furnaces. 

The space-constrained and SDHV product classes were not analyzed in the GRIM 

for energy efficiency standards. As a result, quantitative numbers are also not available 

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for the GRIM analyzing standby mode and off mode standards. However, the standby 

mode and off mode design options considered for space-constrained and SDHV products 

are identical to the design options for split-systems air conditioning and heat pump 

products. DOE expects the standby mode and off mode impacts on space-constrained and 

SDHV products to be of the same order of magnitude as the impacts on split-system air 

conditioning and heat pump products. 

a. GRIM Key Inputs 

i. Manufacturer Production Costs 

Manufacturing a higher-efficiency product is typically more expensive than 

manufacturing a baseline product due to the use of more complex components and 

higher-cost raw materials. The changes in the manufacturer production cost (MPC) of the 

analyzed products can affect revenues, gross margins, and cash flow of the industry, 

making these product cost data key GRIM inputs for DOE’s analysis. 

In the MIA, DOE used the MPCs for each considered efficiency level calculated 

in the engineering analysis, as described in section IV.C.1 pertaining to the engineering 

analysis and further detailed in chapter 5 of the direct final rule TSD. In addition, DOE 

used information from its teardown analysis, described in section IV.C.1, to disaggregate 

the MPCs into material, labor, and overhead costs. To calculate the MPCs for products 

above the baseline, DOE added the incremental material, labor, and overhead costs from 

the engineering cost-efficiency curves to the baseline MPCs. These cost breakdowns and 

product mark-ups were validated with manufacturers during manufacturer interviews. 

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ii. Base-Case Shipments Forecast 

The GRIM estimates manufacturer revenues based on total unit shipment 

forecasts and the distribution of shipments by product class and efficiency level. Changes 

in the efficiency mix at each potential standard level affect manufacturer finances. For 

this analysis, the GRIM uses the NIA shipments forecasts from 2010, the base year for 

the MIA analysis, to 2045, the last year of the analysis period. In the shipments analysis, 

DOE estimates the distribution of efficiencies in the base case for all product classes. See 

section IV.G.1, above, for additional details. 

iii. Shipment Forecasts 

The GRIM used shipments figures developed in the NIA for residential furnace 

and central air conditioner and heat pump products. To determine efficiency distributions 

for the standards case, DOE used a “roll-up + market shift” scenario. DOE assumed that 

product efficiencies in the base case that did not meet the standard under consideration 

would “roll up” to meet the new standard in the standard year, when compliance with 

amended standards is required. DOE further assumed that revised standards would result 

in a market shift such that market shares of products with efficiencies better than the 

standard would gradually increase because “market-pull” programs, such as ENERGY 

STAR, would continue to promote efficient appliances after amended standards are 

introduced. 

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The shipment forecasts account for possible product switching that may occur 

among split-system air conditioning, split-system heat pumps, non-weatherized gas 

furnaces, and electric furnaces. The product switching calculations incorporate 

considerations of consumer climate zones, existing equipment, equipment costs, and 

installation costs. In the MIA results discussion in section V.B.2, the presentation of 

INPV and the MIA analysis of conventional products incorporate the impacts of product 

switching. See section IV.G.1 of this direct final rule and chapter 10 of the direct final 

rule TSD for more information on the standards-case shipment scenario. 

iv. Product and Capital Conversion Costs 

New or amended energy conservation standards will cause manufacturers to incur 

one-time conversion costs to bring their production facilities and product designs into 

compliance. DOE evaluated the level of conversion-related capital expenditures needed 

to comply with each considered efficiency level in each product class. For the purpose of 

the MIA, DOE classified these conversion costs into two major groups: (1) product 

conversion costs, and (2) capital conversion costs. Product conversion costs are one-time 

investments in research, development, testing, and marketing, focused on making product 

designs comply with the new energy conservation standard. Capital conversion costs are 

one-time investments in property, plant, and equipment to adapt or change existing 

production facilities so that new equipment designs can be fabricated and assembled. 

DOE assessed the product conversion costs at each considered standard level by 

integrating data from multiple sources. Those R&D expenditures, and other components 

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of product conversion cost, were validated through manufacturer interviews. DOE 

considered feedback from multiple manufacturers at each level. Manufacturer numbers 

were averaged using market share weighting of each company to provide a number that 

better reflects the industry as a whole. 

DOE also evaluated the level of capital conversion expenditures manufacturers 

would incur to comply with energy conservation standards. DOE used the manufacturer 

interviews to gather data on the level of capital investment required at each possible 

efficiency level. Manufacturer values were aggregated and scaled using market share 

weighting to better reflect the industry. Additionally, DOE validated manufacturer 

comments through estimates of capital expenditure requirements derived from the 

product teardown analysis and engineering model described in section IV.C.1. 

In general, DOE assumes that all conversion-related investments occur between 

the announcement year and the standards compliance year. For evaluation of the TSL 

corresponding to the consensus agreement, DOE used the accelerated timeframes to 

reflect the compliance dates recommended in the agreement. The GRIM models all 

furnace conversion costs occurring during the period between 2011 and 2013 for the TSL 

corresponding to the consensus agreement. Similarly, DOE assumed all central air 

conditioner and heat pump conversion costs would occur between 2011 and 2015 for the 

TSL corresponding to the consensus agreement. 

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For standby mode and off mode, DOE did not receive quantitative feedback 

during MIA interviews on the conversion costs associated with standby mode and off 

mode features. Based on the design options from the engineering analysis, DOE assumed 

that the standby mode and off mode capital conversion costs would be small relative to 

the capital conversion cost for meeting energy efficiency standards. However, DOE did 

incorporate product conversion costs for R&D, testing, and revision of marketing 

materials. The product conversion costs were based on product testing cost quotations 

and on market information about the number of platforms and product families for each 

manufacturer. 

The investment figures used in the GRIM can be found in section V.B.2.a of 

today’s notice. For additional information on the estimated product conversion and 

capital conversion costs, see chapter 12 of the TSD. 

b. Markup Scenarios 

As discussed above, manufacturer selling prices (MSPs) include direct 

manufacturing production costs (i.e., labor, material, and overhead estimated in DOE’s 

MPCs) and all non-production costs (i.e., SG&A, R&D, and interest), along with profit. 

To calculate the MSPs in the GRIM, DOE applied markups to the MPCs estimated in the 

engineering analysis for each product class and efficiency level. Modifying these 

markups in the standards case yields different sets of impacts on manufacturers. For the 

MIA, DOE modeled three standards-case markup scenarios to represent the uncertainty 

regarding the potential impacts on prices and profitability for manufacturers following 

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the implementation of amended energy conservation standards: (1) a tiered markup 

scenario, (2) a preservation of earnings before interest and taxes (EBIT), and (3) a 

preservation of gross margin percentage. These scenarios lead to different markups 

values which, when applied to the inputted MPCs, result in varying revenue and cash 

flow impacts. The first and second scenarios were determined to best represent the 

impacts of potential energy efficiency standards on industry mark ups. The second and 

third scenarios were used to model potential standby mode and off mode standards, 

because pricing tiers would not likely be impacted by standby mode and off mode 

standards. 

Under the “preservation of gross margin percentage” scenario, DOE applied a 

single uniform “gross margin percentage” markup across all efficiency levels. As 

production costs increase with efficiency, this scenario implies that the absolute dollar 

markup will increase as well. DOE assumed the non-production cost markup—which 

includes SG&A expenses, R&D expenses, interest, and profit—stays constant at the basecase percentage even as the standards-case efficiency increases. This markup is consistent 

with the one DOE assumed in the base case for the GRIM. Manufacturers noted in 

interviews that it is optimistic to assume that as their production costs increase in 

response to an amended energy conservation standard, they would be able to maintain the 

same gross margin percentage markup. Therefore, DOE assumed that this scenario 

represents a high bound to industry profitability under an energy conservation standard. 

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The tiered markup scenario models the situation in which manufacturers set 

markups based on three tiers of products. The tiers described by manufacturers in MIA 

interviews were defined as “good, better, best,” or “value, standard, premium.” The highvolume “value” product lines typically have fewer features, lower efficiency, and lower 

markups, while “premium” product lines typically have more features, higher efficiency, 

and higher markups. In the standards case, the tiered markups scenario considers the 

situation in which the breadth of a manufacturer’s portfolio of products shrinks and 

amended standards “demote” higher-tier products to lower tiers. As a result, higherefficiency products that previously commanded “standard” and “premium” mark-ups are 

assigned “value” and “standard” markups, respectively. 

In the preservation of earnings before interest and taxes (EBIT) scenario, the 

manufacturer markups are set so that EBIT one year after the compliance date of the 

amended energy conservation standards is the same as in the base case. Under this 

scenario, as the cost of production and the cost of sales go up, manufacturers are 

generally required to reduce their markups to a level that maintains base-case operating 

profit. The implicit assumption behind this markup scenario is that the industry can only 

maintain its operating profit in absolute dollars after the amended standards. Operating 

margin in percentage terms is squeezed (reduced) between the base case and standards 

case. 

During the March 2010 public meeting for residential furnaces and the May 2010 

public meeting for central air conditioners and heat pumps and in the written comments 

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for those public meetings, there were no comments on the assumptions of the preliminary 

MIA. 

3. Manufacturer Interviews 

As part of the MIA interviews, DOE discussed potential impacts of standards with 

five of the seven leading manufacturers of residential furnaces, central air conditioners, 

and heat pumps.80 DOE also interviewed six niche product manufacturers. 

In the interviews, DOE asked manufacturers to describe their major concerns 

about this rulemaking. The following sections discuss manufacturers’ concerns about the 

most significant issues they identified. 

a. Consensus Agreement 

All manufacturers interviewed either strongly supported or were amenable to the 

consensus agreement that was recommended and signed by a number of manufacturers, 

advocacy organizations, and trade groups. Most interviewees were signatories and urged 

the Department to act as quickly as possible to adopt the consensus agreement. 

Manufacturers indicated that the consensus agreement provides regulatory certainty, 

manageable conversion costs, and accelerated compliance dates that provide energy 

savings earlier than would otherwise be achieved. Due to the tight timelines outlined in 

the agreement, manufacturers stated their desire for DOE to adopt the agreement as soon 

as possible in order to have sufficient time to meet the agreement’s energy conservation 

standards and associated compliance dates.
 

80 The remaining two major manufacturers were approached, but they declined to be interviewed.
 

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b. Potential for Significant Changes to Manufacturing Facilities 

During interviews, several manufacturers indicated that central air conditioning 

and heat pump conversion costs are not linear, but would step up dramatically at various 

efficiency levels. In general, manufacturers were concerned that a national baseline 

energy conservation standard above 14 SEER for split-system air conditioners and splitsystem heat pumps would require extensive and costly product line redesigns. At various 

higher efficiency levels, system designs would have to incorporate additional or more 

complex technologies, including two-stage compressors, ECM fan motors, and larger 

heater exchangers. Therefore, to reach higher levels, units would have to increase in size, 

necessitating larger cabinet sizes and the purchase of new equipment and tooling. Several 

large manufacturers indicated that offshore production or completely new production 

facilities would be considered above 14 SEER due to the scope of changes required to 

meet an amended standard. Manufacturer estimates for the total investment required to 

meet national standards in the 14.5 to 16 SEER range varied widely, often depending on 

the current state of each manufacturer’s production lines and whether a completely new 

production facility was required. 

c. Increase in Product Repair and Migration to Alternative Products 

Several manufacturers stated that the higher cost of more-efficient systems 

resulting from amended energy conservation standards would need to be passed on to 

consumers, absorbed by manufacturers, or some combination of both. If manufacturers 

were to attempt to pass on higher costs, the industry is concerned higher prices would 

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result in consumers pursing lower-cost, less-efficient alternatives. In addition, 

manufacturers believe that consumers, facing higher first costs, would be more likely to 

repair older, less-efficient heating and cooling systems rather than replace those units 

with new, more-efficient models. Similarly, manufacturers expressed concern that 

consumers would be more likely to switch to lower up-front cost, lower-efficiency 

technologies such as room air conditioners and electric space heaters. Manufacturers 

agreed that these alternatives would reduce energy savings and reduce energy conserved. 

As evidence, manufacturers cited market trends following the 2006 compliance 

date of the 2004 central air conditioners and heat pump energy conservation rulemaking. 

69 FR 50997 (Aug. 14, 2004). Since 2006, manufacturers have noted a decline in central 

air conditioner and heat pump sales coupled with an increase in room air conditioner 

sales and an increase in orders for repair components. In general, the manufacturers are 

concerned that the decline in shipments from 2006 to 2010 will continue, and that a 

revised energy conservation standard will exacerbate the decline in unitary air 

conditioner shipments. 

d. HFC Phase-Out Legislation 

Manufacturers expressed strong concerns about legislation proposed in Congress 

that would phase out HFC refrigerants, including R-410A and R-134a. Any phase-out 

would require extensive redesign of all central air conditioners and heat pump products to 

make use of an alternative refrigerant. Manufacturers asserted that there is no clear 

replacement for HFC refrigerants today. Without a clear replacement, the manufacturers 

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stated that any phase-out would create a period of uncertainty as the industry identifies 

suitable alternatives and then redesigns products around the replacement. It is unclear 

what efficiency levels could be achieved at reasonable cost without HFC refrigerants. 

Manufacturers observed that past phase-outs generally have led to more-expensive and 

less-efficient refrigerant replacements. Additionally, manufacturers stated that alternative 

refrigerants may require substantially larger systems to achieve the same levels of 

performance. 

e. Physical Constraints 

Multiple manufacturers expressed concern that an increase in appliance efficiency 

standards would leave older homes, and multi-family homes in particular, with few costeffective options for replacing their cooling systems. As the efficiency of air conditioning 

increases, the physical sizes of the units also increase. Manufacturers are concerned 

because central air conditioner and heat pump units are already so large that they can be 

difficult to fit into some end-user homes. Attic entry ways, basement doors, and 

condensing unit pads all present physical constraints when replacing an air conditioner 

with a larger, more-efficient system. Multifamily homes are particularly restricted due to 

the limited space in utility closets and due to the limited options for renovation. These 

physical constraints lead to higher installation costs, which may encourage customers to 

repair existing systems rather than replace them. 

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f. Supply Chain Constraints 

Some manufacturers expressed concern about the impact of more-stringent 

standards on their supply chain. Changes in energy conservation standards could affect 

the competitive positioning and dominance of component suppliers. One manufacturer 

cited the example of the 2001 central air conditioner rulemaking (66 FR 7170 (Jan. 22, 

2001)), after which one of two critical compressor suppliers nearly went bankrupt 

(because the change in standards led most manufacturers to choose design options that 

favored the technology of one supplier over the other). According to the manufacturer, 

having the industry rely on a single supplier for critical components, even just a few, puts 

the entire industry at risk. 

Additionally, manufacturers stated that more-stringent energy conservation 

standards would increase the demand for some key components over current levels. 

Given that most manufacturers rely on the same set of suppliers, amended standards 

could result in long lead times for obtaining critical components, such as high-efficiency 

compressors, ECM motors, modulating gas valves, advanced control systems, and new 

production tooling. 

J. Employment Impact Analysis 

DOE considers employment impacts in the domestic economy as one factor in 

selecting a standard. Employment impacts consist of both direct and indirect impacts. 

Direct employment impacts are any changes in the number of employees of 

manufacturers of the appliance products which are the subject of this rulemaking, their 

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suppliers, and related service firms. Indirect employment impacts are changes in national 

employment that occur due to the shift in expenditures and capital investment caused by 

the purchase and operation of more-efficient appliances. The MIA addresses the direct 

employment impacts that concern manufacturers of furnaces, central air conditioners, and 

heat pumps. The employment impact analysis addresses the indirect employment 

impacts. 

Indirect employment impacts from standards consist of the net jobs created or 

eliminated in the national economy, other than in the manufacturing sector being 

regulated, due to: (1) reduced spending by end users on energy; (2) reduced spending on 

new energy supply by the utility industry; (3) increased spending on new products to 

which the new standards apply; and (4) the effects of those three factors throughout the 

economy. DOE expects the net monetary savings from amended energy conservation 

standards to be redirected to other forms of economic activity. DOE also expects these 

shifts in spending and economic activity to affect the demand for labor in the short term, 

as explained below. 

One method for assessing the possible effects on the demand for labor of such 

shifts in economic activity is to compare sectoral employment statistics developed by the 

Labor Department’s BLS.81 The BLS regularly publishes its estimates of the number of 

jobs per million dollars of economic activity in different sectors of the economy, as well 

81 Data on industry employment, hours, labor compensation, value of production, and the implicit price 

deflator for output for these industries are available upon request by calling the Division of Industry 

Productivity Studies (202-691-5618) or by sending a request by e-mail to dipsweb@bls.gov. (Available at: 

http://www.bls.gov/news.release/prin1.nr0.htm.) 

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as the jobs created elsewhere in the economy by this same economic activity. Data from 

BLS indicate that expenditures in the utility sector generally create fewer jobs (both 

directly and indirectly) than expenditures in other sectors of the economy. There are 

many reasons for these differences, including wage differences and the fact that the utility 

sector is more capital-intensive and less labor-intensive than other sectors.82 

Energy conservation standards have the effect of reducing consumer utility bills. 

Because reduced consumer expenditures for energy likely lead to increased expenditures 

in other sectors of the economy, the general effect of efficiency standards is to shift 

economic activity from a less labor-intensive sector (i.e., the utility sector) to more laborintensive sectors (e.g., the retail and service sectors). Thus, based on the BLS data alone, 

the Department believes net national employment will increase due to shifts in economic 

activity resulting from amended standards for furnaces, central air conditioners, and heat 

pumps. 

For the standards considered in today’s direct final rule, DOE estimated indirect 

national employment impacts using an input/output model of the U.S. economy called 

Impact of Sector Energy Technologies (ImSET). ImSET is a spreadsheet model of the 

U.S. economy that focuses on 187 sectors most relevant to industrial, commercial, and 

residential building energy use.83 ImSET is a special purpose version of the “U.S. 

82 See Bureau of Economic Analysis, Regional Multipliers: A User Handbook for the Regional InputOutput Modeling System (RIMS II), U.S. Department of Commerce (1992).
 83 M.J. Scott, O.V. Livingston, J.M. Roop, R.W. Schultz, and P.J. Balducci, ImSET 3.1: Impact of Sector
 

Energy Technologies; Model Description and User’s Guide (2009) (Available at: 

http://www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
 

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Benchmark National Input-Output” (I–O) model,84 which has been designed to estimate 

the national employment and income effects of energy-saving technologies. The ImSET 

software includes a computer-based I–O model with structural coefficients to characterize 

economic flows among the 187 sectors. ImSET’s national economic I–O structure is 

based on a 2002 U.S. benchmark table, specially aggregated to the 187 sectors. DOE 

estimated changes in expenditures using the NIA spreadsheet. Using ImSET, DOE then 

estimated the net national, indirect employment impacts by sector of potential amended 

efficiency standards for furnaces, central air conditioners, and heat pumps. 

No comments were received on the preliminary TSD for central air conditioners 

and heat pumps or the furnaces RAP concerning the employment impacts analysis. For 

more details on the employment impact analysis, see chapter 13 of the direct final rule 

TSD. 

K. Utility Impact Analysis 

The utility impact analysis estimates several important effects on the utility 

industry that would result from the adoption of new or amended energy conservation 

standards. For the direct final rule analysis, DOE used the NEMS-BT model to generate 

forecasts of electricity and natural gas consumption, electricity generation by plant type, 

and electric generating capacity by plant type, that would result from each considered 

TSL. DOE obtained the energy savings inputs associated with efficiency improvements 

to the subject products from the NIA. DOE conducts the utility impact analysis as a 

84 R.L. Stewart, J.B. Stone, and M.L. Streitwieser. U.S. Benchmark Input-Output Accounts, 2002. Survey 

of Current Business, October 2007. (Available at 

http://www.bea.gov/scb/pdf/2007/10%20October/1007_benchmark_io.pdf) 

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scenario that departs from the latest AEO Reference case. For this direct final rule, the 

estimated impacts of amended energy conservation standards are the differences between 

values forecasted by NEMS–BT and the values in the AEO2010 Reference case (which 

does not contemplate amended standards). 

As part of the utility impact analysis, DOE used NEMS-BT to assess the impacts 

on natural gas prices of the reduced demand for natural gas projected to result from the 

considered standards. DOE also used NEMS-BT to assess the impacts on electricity 

prices of the reduced need for new electric power plants and infrastructure projected to 

result from the considered standards. In NEMS-BT, changes in power generation 

infrastructure affect utility revenue, which in turn affects electricity prices. DOE 

estimated the change in electricity prices projected to result over time from each 

considered TSL. The benefits associated with the impacts of today’s standards on energy 

prices are discussed in section IV.G.5. 

For more details on the utility impact analysis, see chapter 14 of the direct final 

rule TSD. 

L. Environmental Assessment 

Pursuant to the National Environmental Policy Act of 1969 and the requirements 

of 42 U.S.C. 6295(o)(2)(B)(i)(VI), DOE has prepared an environmental assessment (EA) 

of the impacts of the potential standards for residential furnaces, central air conditioners, 

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and heat pumps in today’s rule, which it has included as chapter 15 of the direct final rule 

TSD. 

In the EA, DOE estimated the reduction in power sector emissions of CO2, NOX, 

and Hg using the NEMS–BT computer model. In the EA, NEMS–BT is run similarly to 

the AEO NEMS, except that furnace, central air conditioner, and heat pump energy use is 

reduced by the amount of energy saved (by fuel type) due to each TSL. The inputs of 

national energy savings come from the NIA spreadsheet model, while the output is the 

forecasted physical emissions. The net benefit of each TSL in today’s rule is the 

difference between the forecasted emissions estimated by NEMS–BT at each TSL and 

the AEO 2010 Reference Case. NEMS–BT tracks CO2 emissions using a detailed module 

that provides results with broad coverage of all sectors and inclusion of interactive 

effects. Because the on-site operation of non-electric heating products requires use of 

fossil fuels and results in emissions of CO2, NOX, and sulfur dioxide (SO2), DOE also 

accounted for the reduction in these emissions due to potential amended standards at the 

sites where these appliances are used. For today’s direct final rule, DOE used NEMS-BT 

based on AEO 2010. For the final rule, DOE intends to revise the emissions analysis 

using the most current version of NEMS-BT. 

DOE determined that SO2 emissions from affected fossil-fuel-fired combustion 

devices (also known as Electric Generating Units (EGUs)) are subject to nationwide and 

regional emissions cap-and-trade programs that create uncertainty about the potential 

amended standards’ impact on SO2 emissions. Title IV of the Clean Air Act, 42 U.S.C. 

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7401-7671q, sets an annual emissions cap on SO2 for all affected EGUs in the 48 

contiguous States and the District of Columbia (DC). SO2 emissions from 28 eastern 

States and DC are also limited under the Clean Air Interstate Rule (CAIR, 70 FR 25162 

(May 12, 2005)), which created an allowance-based trading program. Although CAIR has 

been remanded to the EPA by the U.S. Court of Appeals for the District of Columbia (DC 

Circuit), see North Carolina v. EPA, 550 F.3d 1176 (DC Cir. 2008), it remains in effect 

temporarily, consistent with the D.C. Circuit’s earlier opinion in North Carolina v. EPA, 

531 F.3d 896 (DC Cir. 2008). On July 6, 2010, EPA issued the Transport Rule proposal, 

a replacement for CAIR, which would limit emissions from EGUs in 32 States, 

potentially through the interstate trading of allowances, among other options. 75 FR 

45210 (Aug. 2, 2010). 

The attainment of the emissions caps is flexible among EGUs and is enforced 

through the use of emissions allowances and tradable permits. Under existing EPA 

regulations, and under the Transport Rule if it is finalized, any excess SO2 emission 

allowances resulting from the lower electricity demand caused by the imposition of an 

efficiency standard could be used to permit offsetting increases in SO2 emissions by any 

regulated EGU. However, if the amended standard resulted in a permanent increase in the 

quantity of unused emission allowances, there would be an overall reduction in SO2 

emissions from the standards. While there remains some uncertainty about the ultimate 

effects of efficiency standards on SO2 emissions covered by the existing cap and trade 

system, the NEMS-BT modeling system that DOE uses to forecast emissions reductions 

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currently indicates that no physical reductions in power sector emissions would occur for 

SO2. 

A cap on NOX emissions, affecting electric generating units in the CAIR region, 

means that energy conservation standards may have little or no physical effect on NOX 

emissions in the 28 eastern States and the D.C. covered by CAIR, or any States covered 

by the proposed Transport Rule if the Transport Rule is finalized. The standards would, 

however, reduce NOX emissions in those 22 States not affected by the CAIR. As a result, 

DOE used NEMS–BT to forecast emission reductions from the standards considered for 

today’s direct final rule. 

Similar to emissions of SO2 and NOX, future emissions of Hg would have been 

subject to emissions caps. In May 2005, EPA issued the Clean Air Mercury Rule 

(CAMR). 70 FR 28606 (May 18, 2005). CAMR would have permanently capped 

emissions of mercury for new and existing coal-fired power plants in all States by 2010. 

However, on February 8, 2008, the DC Circuit issued its decision in New Jersey v. 

Environmental Protection Agency, 517 F.3d 574 (DC Cir. 2008), in which it vacated 

CAMR. EPA has decided to develop emissions standards for power plants under Section 

112 of the Clean Air Act, consistent with the DC Circuit’s opinion on the CAMR. See 

http://www.epa.gov/air/mercuryrule/pdfs/certpetition_withdrawal.pdf. Pending EPA's 

forthcoming revisions to the rule, DOE is excluding CAMR from its environmental 

assessment. In the absence of CAMR, a DOE standard would likely reduce Hg emissions, 

and DOE is using NEMS-BT to estimate these emission reductions. However, DOE 

339 
 

 

 

 

 

 

 

 

 

 

 

 

continues to review the impact of rules that reduce energy consumption on Hg emissions, 

and may revise its assessment of Hg emission reductions in future rulemakings. 

The operation of non-electric heating products requires use of fossil fuels and 

results in emissions of CO2, NOX, and SO2 at the sites where these appliances are used. 

NEMS-BT provides no means for estimating such emissions. DOE calculated the effect 

of potential standards in today’s rule on the above site emissions based on emissions 

factors that are described in chapter 15 of the direct final rule TSD. 

Commenting on the furnaces RAP, EEI stated that DOE should include the 

environmental impacts of furnace production, especially if higher standards involve more 

equipment being manufactured in and transported from other countries. (FUR: EEI, No. 

1.3.015 at p. 6) APPA made a similar point. (FUR: APPA, No. 1.3.011 at p. 5) 

In response, DOE notes that the inputs to the EA for national energy savings 

come from the NIA. In the NIA, DOE only accounts for primary energy savings 

associated with considered standards. In so doing, EPCA directs DOE to consider (when 

determining whether a standard is economically justified) “the total projected amount of 

energy . . . savings likely to result directly from the imposition of the standard.” (42 

U.S.C. 6295(o)(2)(B)(i)(III)) DOE interprets the phrase “directly from the imposition of 

the standard” to include energy used in the generation, transmission, and distribution of 

fuels used by appliances. In addition, DOE is evaluating the full-fuel-cycle measure, 

which includes the energy consumed in extracting, processing, and transporting primary 

340 
 

 

 

 

 

 

 

 

 

 

 

fuels (see section IV.G.3). Both DOE’s current accounting of primary energy savings and 

the full-fuel-cycle measure are directly linked to the energy used by appliances. In 

contrast, energy used in manufacturing and transporting appliances is a step removed 

from the energy used by appliances. Thus, DOE did not consider such energy use in 

either the NIA or the EA. 

EEI commented that DOE’s environmental assessment should consider the 

standards’ effect on emissions associated with the extraction, refining, and transport of oil 

and natural gas. (FUR: EEI, No. 1.3.015 at p. 7) As noted in chapter 15 of the TSD, DOE 

developed only qualitative estimates of effects on upstream fuel-cycle emissions because 

NEMS-BT does a thorough accounting only of emissions at the power plant due to 

downstream energy consumption. In other words, NEMS-BT does not account for 

upstream emissions. Therefore, the environmental assessment for today’s rule did not 

estimate effects on upstream emissions associated with oil and natural gas. As discussed 

in section IV.G.3, however, DOE is in the process of developing an approach that will 

allow it to estimate full-fuel-cycle energy use associated with products covered by energy 

conservation standards. 

M. Monetizing Carbon Dioxide and Other Emissions Impacts 

As part of the development of today’s rule, DOE considered the estimated 

monetary benefits likely to result from the reduced emissions of CO2 and NOX that are 

expected to result from each of the TSLs considered. In order to make this calculation 

similar to the calculation of the NPV of consumer benefit, DOE considered the reduced 

emissions expected to result over the lifetime of products shipped in the forecast period 

341 
 

 

 

 

 

 

 

 

 

 

 

 

for each TSL. This section summarizes the basis for the monetary values used for each of 

these emissions and presents the benefits estimates considered. 

For today’s direct final rule, DOE relied on a set of values for the social cost of 

carbon (SCC) that was developed an interagency process. A summary of the basis for 

these values is provided below, and a more detailed description of the methodologies 

used is provided as in chapter 16 of the direct final rule TSD. 

1. Social Cost of Carbon 

Under section 1(b) of Executive Order 12866, “Regulatory Planning and 

Review,” 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent permitted by law, 

“assess both the costs and the benefits of the intended regulation and, recognizing that 

some costs and benefits are difficult to quantify, propose or adopt a regulation only upon 

a reasoned determination that the benefits of the intended regulation justify its costs.” The 

purpose of the SCC estimates presented here is to allow agencies to incorporate the 

monetized social benefits of reducing CO2 emissions into cost-benefit analyses of 

regulatory actions that have small, or “marginal,” impacts on cumulative global 

emissions. The estimates are presented with an acknowledgement of the many 

uncertainties involved and with a clear understanding that they should be updated over 

time to reflect increasing knowledge of the science and economics of climate impacts. 

As part of the interagency process that developed these SCC estimates, technical 

experts from numerous agencies met on a regular basis to consider public comments, 

342 
 

 

 

 

 

 

 

 

 

 

explore the technical literature in relevant fields, and discuss key model inputs and 

assumptions. The main objective of this process was to develop a range of SCC values 

using a defensible set of input assumptions grounded in the existing scientific and 

economic literatures. In this way, key uncertainties and model differences transparently 

and consistently inform the range of SCC estimates used in the rulemaking process. 

a. Monetizing Carbon Dioxide Emissions 

The SCC is an estimate of the monetized damages associated with an incremental 

increase in carbon emissions in a given year. It is intended to include (but is not limited 

to) changes in net agricultural productivity, human health, property damages from 

increased flood risk, and the value of ecosystem services. Estimates of the SCC are 

provided in dollars per metric ton of carbon dioxide. 

When attempting to assess the incremental economic impacts of carbon dioxide 

emissions, the analyst faces a number of serious challenges. A recent report from the 

National Research Council85 points out that any assessment will suffer from uncertainty, 

speculation, and lack of information about: (1) future emissions of greenhouse gases; (2) 

the effects of past and future emissions on the climate system; (3) the impact of changes 

in climate on the physical and biological environment; and (4) the translation of these 

environmental impacts into economic damages. As a result, any effort to quantify and 

monetize the harms associated with climate change will raise serious questions of 

science, economics, and ethics and should be viewed as provisional. 

85 National Research Council, Hidden Costs of Energy: Unpriced Consequences of Energy Production and 

Use, National Academies Press: Washington, DC (2009). 

343 
 

 

 

 

 

 

 

 

 

Despite the serious limits of both quantification and monetization, SCC estimates 

can be useful in estimating the social benefits of reducing carbon dioxide emissions. 

Consistent with the directive in Executive Order 12866 quoted above, the purpose of the 

SCC estimates presented here is to make it possible for agencies to incorporate the social 

benefits from reducing carbon dioxide emissions into cost-benefit analyses of regulatory 

actions that have small, or “marginal,” impacts on cumulative global emissions. Most 

Federal regulatory actions can be expected to have marginal impacts on global emissions. 

For such policies, the agency can estimate the benefits from reduced (or costs 

from increased) emissions in any future year by multiplying the change in emissions in 

that year by the SCC value appropriate for that year. The net present value of the benefits 

can then be calculated by multiplying each of these future benefits by an appropriate 

discount factor and summing across all affected years. This approach assumes that the 

marginal damages from increased emissions are constant for small departures from the 

baseline emissions path, an approximation that is reasonable for policies that have effects 

on emissions that are small relative to cumulative global carbon dioxide emissions. For 

policies that have a large (non-marginal) impact on global cumulative emissions, there is 

a separate question of whether the SCC is an appropriate tool for calculating the benefits 

of reduced emissions. DOE does not attempt to answer that question here. 

At the time of the preparation of this notice, the most recent interagency estimates 

of the potential global benefits resulting from reduced CO2 emissions in 2010, expressed 

344 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in 2009$, were $4.9, $22.1, $36.3, and $67.1 per metric ton avoided. For emission 

reductions that occur in later years, these values grow in real terms over time. 

Additionally, the interagency group determined that a range of values from 7 percent to 

23 percent should be used to adjust the global SCC to calculate domestic effects,86 

although preference is given to consideration of the global benefits of reducing CO2 

emissions. 

It is important to emphasize that the interagency process is committed to updating 

these estimates as the science and economic understanding of climate change and its 

impacts on society improves over time. Specifically, the interagency group has set a 

preliminary goal of revisiting the SCC values within two years or at such time as 

substantially updated models become available, and to continue to support research in 

this area. In the meantime, the interagency group will continue to explore the issues 

raised by this analysis and consider public comments as part of the ongoing interagency 

process. 

b. Social Cost of Carbon Values Used in Past Regulatory Analyses 

To date, economic analyses for Federal regulations have used a wide range of 

values to estimate the benefits associated with reducing carbon dioxide emissions. In the 

final model year 2011 CAFE rule, the Department of Transportation (DOT) used both a 

“domestic” SCC value of $2 per ton of CO2 and a “global” SCC value of $33 per ton of 

CO2 for 2007 emission reductions (in 2007 dollars), increasing both values at 2.4 percent 

86 It is recognized that this calculation for domestic values is approximate, provisional, and highly 

speculative. There is no a priori reason why domestic benefits should be a constant fraction of net global 

damages over time. 

345 
 

 

 

 

 

 

 

 

 

 

 

 

per year. 87 See Average Fuel Economy Standards Passenger Cars and Light Trucks 

Model Year 2011, 74 FR 14196 (March 30, 2009) (Final Rule); Final Environmental 

Impact Statement Corporate Average Fuel Economy Standards, Passenger Cars and Light 

Trucks, Model Years 2011-2015 at 3-90 (Oct. 2008) (Available at: 

http://www.nhtsa.gov/fuel-economy). It also included a sensitivity analysis at $80 per 

ton of CO2. A domestic SCC value is meant to reflect the value of damages in the United 

States resulting from a unit change in carbon dioxide emissions, while a global SCC 

value is meant to reflect the value of damages worldwide. 

A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton 

of CO2 (in 2006 dollars) for 2011 emission reductions (with a range of $0-$14 for 

sensitivity analysis), also increasing at 2.4 percent per year. See Average Fuel Economy 

Standards, Passenger Cars and Light Trucks, Model Years 2011-2015, 73 FR 24352 

(May 2, 2008) (Proposed Rule); Draft Environmental Impact Statement Corporate 

Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2011­

2015 at 3-58 (June 2008) (Available at: http://www.nhtsa.gov/fuel-economy). A 

regulation for packaged terminal air conditioners and packaged terminal heat pumps 

finalized by DOE in October of 2008 used a domestic SCC range of $0 to $20 per ton 

CO2 for 2007 emission reductions (in 2007 dollars). 73 FR 58772, 58814 (Oct. 7, 2008). 

In addition, EPA’s 2008 Advance Notice of Proposed Rulemaking for Greenhouse Gases 

identified what it described as “very preliminary” SCC estimates subject to revision. See 

Regulating Greenhouse Gas Emissions Under the Clean Air Act, 73 FR 44354 (July 30, 

2008) (Advance Notice of Proposed Rulemaking). EPA’s global mean values were $68 

87 Throughout this section, the term “tons of CO2“ refers to metric tons. 

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and $40 per ton CO2 for discount rates of approximately 2 percent and 3 percent, 

respectively (in 2006 dollars for 2007 emissions). See id. at 44416. 

In 2009, an interagency process was initiated to offer a preliminary assessment of 

how best to quantify the benefits from reducing carbon dioxide emissions. To ensure 

consistency in how benefits are evaluated across agencies, the Administration sought to 

develop a transparent and defensible method, specifically designed for the rulemaking 

process, to quantify avoided climate change damages from reduced CO2 emissions. The 

interagency group did not undertake any original analysis. Instead, it combined SCC 

estimates from the existing literature to use as interim values until a more comprehensive 

analysis could be conducted. The outcome of the preliminary assessment by the 

interagency group was a set of five interim values: global SCC estimates for 2007 (in 

2006 dollars) of $55, $33, $19, $10, and $5 per ton of CO2. 

These interim values represent the first sustained interagency effort within the 

U.S. government to develop an SCC for use in regulatory analysis. The results of this 

preliminary effort were presented in several proposed and final rules and were offered for 

public comment in connection with proposed rules, including the joint EPA-DOT fuel 

economy and CO2 tailpipe emission proposed rules. See CAFE Rule for Passenger Cars 

and Light Trucks Draft EIS and Final EIS, cited above. 

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c. Current Approach and Key Assumptions 

Since the release of the interim values, the interagency group reconvened on a 

regular basis to generate improved SCC estimates, which were considered in the 

evaluation of today’s rule. Specifically, the group considered public comments and 

further explored the technical literature in relevant fields. The interagency group relied on 

three integrated assessment models (IAMs) commonly used to estimate the SCC: the 

FUND, DICE, and PAGE models.88 These models are frequently cited in the peerreviewed literature and were used in the last assessment of the Intergovernmental Panel 

on Climate Change. Each model was given equal weight in the SCC values that were 

developed. 

Each model takes a slightly different approach to model how changes in 

emissions result in changes in economic damages. A key objective of the interagency 

process was to enable a consistent exploration of the three models while respecting the 

different approaches to quantifying damages taken by the key modelers in the field. An 

extensive review of the literature was conducted to select three sets of input parameters 

for these models: (1) climate sensitivity; (2) socio-economic and emissions trajectories; 

and (3) discount rates. A probability distribution for climate sensitivity was specified as 

an input into all three models. In addition, the interagency group used a range of 

scenarios for the socio-economic parameters and a range of values for the discount rate. 

All other model features were left unchanged, relying on the model developers’ best 

estimates and judgments. 

88 The models are described in appendix 16-A of the direct final rule TSD. 

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The interagency group selected four SCC values for use in regulatory analyses. 

Three values are based on the average SCC from three integrated assessment models, at 

discount rates of 2.5, 3, and 5 percent. The fourth value, which represents the 95thpercentile SCC estimate across all three models at a 3-percent discount rate, is included 

to represent higher-than-expected impacts from temperature change further out in the 

tails of the SCC distribution. For emissions (or emission reductions) that occur in later 

years, these values grow in real terms over time, as depicted in Table IV.24. 

Table IV.24 Social Cost of CO2, 2010–2050 (in 2007 dollars per metric ton) 

Discount Rate 

5% 

Avg 

3% 2.5% 

Avg Avg 

3% 

95th 

2010 

2015 

2020 

2025 

2030 

2035 

2040 

2045 

2050 

4.7 

5.7 

6.8 

8.2 

9.7 

11.2 

12.7 

14.2 

15.7 

21.4 

23.8 

26.3 

29.6 

32.8 

36.0 

39.2 

42.1 

44.9 

35.1 

38.4 

41.7 

45.9 

50.0 

54.2 

58.4 

61.7 

65.0 

64.9 

72.8 

80.7 

90.4 

100.0 

109.7 

119.3 

127.8 

136.2 

It is important to recognize that a number of key uncertainties remain, and that 

current SCC estimates should be treated as provisional and revisable since they will 

evolve with improved scientific and economic understanding. The interagency group also 

recognizes that the existing models are imperfect and incomplete. The National Research 

Council report mentioned above points out that there is tension between the goal of 

producing quantified estimates of the economic damages from an incremental ton of 

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carbon and the limits of existing efforts to model these effects. There are a number of 

concerns and problems that should be addressed by the research community, including 

research programs housed in many of the agencies participating in the interagency 

process to estimate the SCC. 

The U.S. Government intends to periodically review and reconsider estimates of 

the SCC used for cost-benefit analyses to reflect increasing knowledge of the science and 

economics of climate impacts, as well as improvements in modeling. In this context, 

statements recognizing the limitations of the analysis and calling for further research take 

on exceptional significance. The interagency group offers the new SCC values with all 

due humility about the uncertainties embedded in them and with a sincere promise to 

continue work to improve them. 

In summary, in considering the potential global benefits resulting from reduced 

CO2 emissions, DOE used the most recent values identified by the interagency process, 

adjusted to 2009$ using the GDP price deflator values for 2008 and 2009. For each of 

the four cases specified, the values used for emissions in 2010 were $4.9, $22.1, $36.3, 

and $67.1 per metric ton avoided (values expressed in 2009$). To monetize the CO2 

emissions reductions expected to result from amended standards for furnaces, central air 

conditioners, and heat pumps, DOE used the values identified in Table A1 in the “Social 

Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866,” which is 

reprinted as appendix 16A of the direct final rule TSD, appropriately adjusted to 2009$.89 

89 Table A1 in appendix 16-A presents SCC values through 2050. For DOE’s calculation, it derived values 

after 2050 using the 3-percent per year escalation rate used by the interagency group. 

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To calculate a present value of the stream of monetary values, DOE discounted the values 

in each of the four cases using the specific discount rate that had been used to obtain the 

SCC values in each case. 

2. Valuation of Other Emissions Reductions 

DOE investigated the potential monetary benefit of reduced NOX emissions from 

the TSLs it considered. As noted above, new or amended energy conservation standards 

would reduce NOX emissions in those 22 States that are not affected by the CAIR, in 

addition to the reduction in site NOX emissions nationwide. DOE estimated the 

monetized value of NOX emissions reductions resulting from each of the TSLs 

considered for today’s direct final rule based on environmental damage estimates from 

the literature. Available estimates suggest a very wide range of monetary values, ranging 

from $370 per ton to $3,800 per ton of NOX from stationary sources, measured in 2001$ 

(equivalent to a range of $447 to $4,591 per ton in 2009$).90 In accordance with OMB 

guidance, DOE conducted two calculations of the monetary benefits derived using each 

of the economic values used for NOX, one using a real discount rate of 3 percent and 

another using a real discount rate of 7 percent.91 

DOE is aware of multiple agency efforts to determine the appropriate range of 

values used in evaluating the potential economic benefits of reduced Hg emissions. DOE 

90 For additional information, refer to U.S. Office of Management and Budget, Office of Information and 

Regulatory Affairs, “2006 Report to Congress on the Costs and Benefits of Federal Regulations and 

Unfunded Mandates on State, Local, and Tribal Entities” (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf ). 

91 OMB, Circular A-4: Regulatory Analysis (Sept. 17, 2003). 

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has decided to await further guidance regarding consistent valuation and reporting of Hg 

emissions before it once again monetizes Hg emissions reductions in its rulemakings. 

Commenting on the central air conditioners and heat pumps preliminary TSD, 

Southern stated that the incremental climate change from a rulemaking is too uncertain to 

be included in the decision-making for energy conservation standard levels, and the 

benefits of reduced carbon emissions should not be included. (CAC: SCS, No. 73 at p. 2) 

Commenting on the furnaces RAP, several parties provided comments regarding the 

economic valuation of CO2 emissions. EEI objected to using the global value for the 

social cost of carbon because the rest of DOE’s analyses use domestic values. (FUR: EEI, 

No. 1.3.015 at pp. 8–9) APPA recommended that DOE use a set of hyperbolic discount 

rates for the value of CO2. It also stated that the wide range of values for the SCC could 

adversely impact the calculation of benefits from amended energy conservation 

standards, and that DOE should consider the value of carbon reduction separately from 

the NIA analysis. (FUR: APPA, No. 1.3.011 at p. 5) 

DOE acknowledges that the economic value of future CO2 emissions reductions is 

uncertain, and for this reason, it uses a wide range of potential values, and a range of 

discount rates, as described above. DOE further notes that the estimated monetary 

benefits of reduced CO2 emissions are only one factor among many that DOE considers 

in evaluating the economic justification of potential standard levels. 

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As to whether DOE should consider the value of carbon reduction separately from 

the NIA, the NIA assesses the national energy savings and the national net present value 

of total consumer costs and savings expected to result from standards at specific 

efficiency levels. Thus, DOE does not aggregate the estimated economic benefits of 

avoided CO2 emissions (and other emissions) into the NIA. However, it does believe that 

the NPV of the monetized benefits associated with emissions reductions can be viewed as 

a complement to the NPV of the consumer savings expected to result from new or 

amended energy conservation standards. Therefore, in section V of this notice, DOE 

presents the NPV values that result from adding the estimates of the potential economic 

benefits resulting from reduced CO2 and NOX emissions in each of four valuation 

scenarios to the NPV of consumer savings calculated for each TSL considered in this 

rulemaking. 

Commenting on the furnaces RAP, EEI stated that utilities have embedded the 

cost of complying with existing environmental legislation in the price for electricity and 

that DOE must not double-count the benefits of reduced emissions related to standards. 

(FUR: EEI, No. 1.3.015 at p. 6) In response, DOE calculates emissions reductions 

associated with potential standards relative to an AEO Reference case that includes the 

costs of complying with existing environmental legislation. The AEO Reference case 

still has emissions, of course, which are reduced in the case of standards. The reduction in 

emissions avoids impacts on human health or other damages, and DOE’s monetization of 

emissions reductions seeks to quantify the value of those avoided damages. 

353 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

V. Analytical Results 

The following section addresses the results from DOE’s analyses with respect to 

potential energy conservation standards for the products examined as part of this 

rulemaking. It addresses the trial standard levels examined by DOE, the projected 

impacts of each of these levels if adopted as energy conservation standards for furnaces, 

central air conditioners, and heat pumps, and the standards levels that DOE is adopting in 

today’s direct final rule. Additional details regarding the analyses conducted by DOE are 

contained in the publicly-available direct final rule TSD supporting this notice. 

A. Trial Standard Levels 

DOE analyzed the benefits and burdens of a number of TSLs for the furnaces, 

central air conditioners, and heat pumps that are the subject of today’s rule. A description 

of each TSL DOE analyzed is provided below. DOE attempted to limit the number of 

TSLs considered for the direct final rule by excluding efficiency levels that do not exhibit 

significantly different economic and/or engineering characteristics from the efficiency 

levels already selected as TSLs. While DOE only presents the results for those efficiency 

levels in TSL combinations in today’s direct final rule, DOE presents the results for all 

efficiency levels that it analyzed in the direct final rule TSD. 

1. TSLs for Energy Efficiency92 

Table V.1 presents the TSLs and the corresponding product class efficiency levels 

that DOE considered for furnace, central air conditioner, and heat pump energy 

92 In the context of presenting TSLs and results for each of them, DOE uses the term “energy efficiency” to 

refer to potential standards on SEER, HSPF, and AFUE throughout section V of this notice. TSLs for 

standby mode and off mode are addressed separately in the next section. 

354 
 

 

 

 

 

 

efficiency. Eight product classes are specified in Table V.1: (1) split-system central air 

conditioners (SAC); (2) split-system heat pumps (SHP); (3) single-package central air 

conditioners (PAC); (4) single-package heat pumps (PHP); (5) SDHV systems; (6) nonweatherized gas furnaces (NWGF); (7) oil furnaces (OF); and (8) mobile home gas 

furnaces (MHF). 

TSL 7 consists of the max-tech efficiency levels. For split-system central air 

conditioners and heat pumps, max-tech levels vary by capacity (tonnage) and, in the case 

of air conditioners, the type of unit (i.e., coil-only or blower-coil). Specifically, for splitsystem central air conditioners, the max-tech level specified in Table V.1of 22 SEER 

pertains only to 3-ton blower-coil units. The max- tech levels for the other tonnages and 

unit types are: 24.5 SEER for 2-ton, blower-coil; 18 SEER for 5-ton, blower-coil and 2­

ton, coil-only; 17 SEER for 3-ton, coil-only; and 16 SEER for 5-ton, coil-only. For splitsystem heat pumps, the max-tech level specified in Table V.1 of 21 SEER / 9.9 HSPF 

pertains only to 3-ton units. The max-tech levels for the other tonnages are: 22 SEER / 

9.9 HSPF for 2-ton; and 17 SEER / 9.0 HSPF for 5-ton. 

TSL 6 consists of a cooling efficiency level of 15 SEER for all central air 

conditioner and heat pump product classes with the exception of specifying a cooling 

efficiency level of 14 SEER for split-system central air conditioners in the “rest of 

country” region (i.e., the North) and SDHV systems. For furnaces, TSL 6 consists of 

efficiency levels for each product class which are one level below the max-tech level. 

355 
 

 

 

 

 

 

 

 

TSL 5 consists of cooling efficiency levels for each central air conditioner and 

heat pump product class which are one level below the efficiencies in TSL 6. This 

corresponds to a cooling efficiency level of 14 SEER for all product classes with the 

exception of specifying a cooling efficiency at the baseline level (13 SEER) for splitsystem central air conditioners in the “rest of country” region (i.e., the North) and SDHV 

systems. For furnaces, TSL 5 consists of the same efficiency levels as TSL 6 (i.e., each 

product class has an efficiency level which is one level below the max-tech level). 

TSL 4 consists of the efficiency levels included in the consensus agreement, 

including accelerated compliance dates (i.e., by 3 years for furnaces and 1.5 years for 

central air conditioners and heat pumps) and requirements for a second metric (EER) 

applicable to split-system air conditioners and packaged air conditioners in the hot-dry 

region. For SDHV systems, TSL 4 consists of the baseline efficiency level. 

TSL 3 consists of the same efficiency levels as specified in TSL 4, except with a 

lead time for compliance of five years after the final rule publication, and no EER 

requirements for split system air conditioners and packaged air conditioners in the hotdry region. TSL 2 consists of the efficiency levels within each region that correspond to 

those products which currently have the largest market share. TSL 1 refers to a single 

national standard and consists of the efficiency levels in each product class with the 

largest market share. For SDHV systems, TSLs 1, 2, and 3 consist of the baseline 

efficiency level. 

356 
 

 

 

 

 

 

 

 

 

 

 

 

Table V.1. Trial Standard Levels for Central Air Conditioners, Heat Pumps, and 

Furnaces (Energy Efficiency) 

SAC SHP PAC PHP SDHV NWGF OF MHF 

TSL Region Applicable SEER SEER/HSPF SEER SEER/HSPF SEER/HSPF AFUE AFUE AFUE 

7 

Rest of Country* 22** 21 / 9.9† 16.5 16.5 / 9.0 14.5 / 8.6 98% 97% 96% 

North (Furnace) 98% 96% 

Hot Humid (CAC-HP) 22** 21 / 9.9† 16.5 16.5 / 9.0 14.5 / 8.6 

Hot Dry (CAC-HP) 22** 21/ 9.9† 16.5 16.5 / 9.0 14.5 / 8.6 

6 

Rest of Country* 14 15 / 8.5 15 15 / 8.4 14 / 8.5 80% 85% 80% 

North (Furnace) 95% 96% 

Hot Humid (CAC-HP) 15 15 / 8.5 15 15 / 8.4 14 / 8.5 

Hot Dry (CAC-HP) 15 15 / 8.5 15 15 / 8.4 14 / 8.5 

5 

Rest of Country* 13 14 / 8.2 14 14 / 8.0 13 / 7.7 80% 85% 80% 

North (Furnace) 95% 96% 

Hot Humid (CAC-HP) 14 14 / 8.2 14 14 / 8.0 13 / 7.7 

Hot Dry (CAC-HP) 14 14 / 8.2 14 14 / 8.0 13 / 7.7 

4†† 

Rest of Country* 13 14 / 8.2 14 14 / 8.0 13 / 7.7 80% 83% 80% 

North (Furnace) 90% 90% 

Hot Humid (CAC-HP) 14 14 / 8.2 14 14 / 8.0 13 / 7.7 

Hot Dry (CAC-HP) 

14 / 

12.2 & 

11.7 EER 

14 / 8.2 14 / 

11 EER 14 / 8.0 13 / 7.7 

3 

Rest of Country* 13 14 / 8.2 14 14 / 8.0 13 / 7.7 80% 83% 80% 

North (Furnace) 90% 90% 

Hot Humid (CAC-HP) 14 14 / 8.2 14 14 / 8.0 13 / 7.7 

Hot Dry (CAC-HP) 14 14 / 8.2 14 14 / 8.0 13 / 7.7 

2 

Rest of Country* 13.5 13.5 / 8.1 13 13 / 7.7 13 / 7.7 80% 82% 80% 

North (Furnace) 92% 80% 

Hot Humid (CAC-HP) 13.5‡ 13.5 / 8.1‡ 13‡ 13 / 7.7‡ 13 / 7.7 

Hot Dry (CAC-HP) 13.5‡ 13.5 / 8.1‡ 13‡ 13 / 7.7‡ 13 / 7.7 

1 Nation 13.5 13.5 / 8.1 13 13 / 7.7 13 / 7.7 80% 82% 80% 

* The values presented under “Rest of Country” are the national standards, but they effectively apply to those States not subject to 

regional standards. Rest of Country refers to the Northern region for SAC, SHP and SDHV and to the Southern region for NWGF and 

MHF. For PAC, PHP and OF, the value refers to the entire Nation. 

** Max-tech of 22 SEER pertains to 3-ton blower-coil units only, which is the most common cooling capacity of products on the 

market. Max-tech efficiencies vary by tonnage and type. See chapter 5 of the direct final rule TSD or section III.G.2 of this direct 

final rule for more information on the max-tech efficiency levels. 

† Max- tech of 21 SEER / 9.9 HSPF pertains to 3-ton units only, which is the most common cooling capacity of products on the 

market. Max-tech efficiencies vary by tonnage. See chapter 5 of the direct final rule TSD or section III.G.2 of this direct final rule for 

more information on the max-tech efficiency levels. 

†† Compliance date is 1/1/2015 for central air conditioners and heat pumps and 5/1/2013 for furnaces. For the Hot Dry region, TSL 4 

has separate EER levels for SAC of 12.2 and 11.7 based on capacity (see section III.B.2). 

‡ Largest market share unknown; assumed to be equal to the market share for entire Nation. 

357 
 

 

 

 

 

 

 

2. TSLs for Standby Mode and Off Mode Power 

Table V.2 presents the TSLs and the corresponding product class efficiency levels 

(expressed in watts) that DOE considered for furnace, central air conditioner, and heat 

pump standby mode and off mode power consumption. For the central air conditioner 

product classes, DOE considered three efficiency levels, while for the heat pump and 

furnace product classes, two efficiency levels were considered. 

TSL 3 consists of the max-tech efficiency levels. For the central air conditioner 

product classes, the max-tech level is efficiency level 3, which specifies a maximum off 

mode power consumption of 29 watts. (For split-system central air conditioners, only 

blower-coil systems equipped with ECMs would be affected; the other system types are 

already below this level.) For the heat pump and furnace product classes, the max-tech 

level is efficiency level 2, which specifies a maximum standby mode and off mode power 

consumption of 9 watts for gas and electric furnaces and 10 watts for oil furnaces, and a 

maximum off mode power consumption of 32 watts for heat pumps. 

TSL 2 represents the efficiency level from each product class that is just below 

the max-tech efficiency level. TSL 2 consists of efficiency level 2 for the central air 

conditioner product classes, which specifies a maximum off mode power consumption of 

30 watts. . (For split-system central air conditioners, only blower-coil systems equipped 

with ECMs would be affected; the other system types are already below this level.) For 

the heat pump and furnace product classes, TSL 2 consists of efficiency level 1, which 

specifies a maximum standby mode and off mode power consumption of 10 watts for gas 

358 
 

 

 

 

 

 

 

and electric furnaces and 11 watts for oil furnaces, and a maximum off mode power 

consumption of 33 watts for heat pumps. 

TSL 1 consists of efficiency level 1 for all product classes. TSL 1 consists of 

efficiency level 1 for the central air conditioner product classes, which specifies a 

maximum off mode power consumption of 36 watts. For the heat pump and furnace 

product classes, it consists of efficiency level 1, which specifies a maximum standby 

mode and off mode power consumption of 10 watts for gas and electric furnaces and 11 

watts for oil furnaces, and a maximum off mode power consumption of 33 watts for heat 

pumps. Because the heat pump and furnace product classes have only two considered 

efficiency levels, TSL 1 for these classes is no different than TSL 2. 

Coil-only systems at efficiency level 1 would comply with off mode power 

requirements set at either efficiency levels 2 or 3 based on the blower-coil market. Of 

further note, in the case of efficiency level 3, only the fraction of the blower-coil market 

equipped with ECMs is impacted. Blower-coil systems with PSC motors and coil-only 

systems equipped with either ECMs or PSC motors that comply with the off mode power 

requirements in efficiency level 2 already meet the requirements in efficiency level 3. 

359 
 

 

 

 

 

 

 

 

 

 

Table V.2. Trial Standard Levels for Central Air Conditioners, Heat Pumps, and 

Furnaces (Standby Mode and Off Mode Power) 

TSL SAC SHP PAC PHP SDHV SCAC* SCHP* NWGF OF MHF EF 

Efficiency Level (Watts) 

3 29 32 29 32 29 29 32 9 10 9 9 

2 30 33 30 33 30 30 33 10 11 10 10 

1 36 33 36 33 36 36 33 10 11 10 10 

*SCAC = Space-Constrained Air Conditioner; SCHP = Space-Constrained Heat Pump; and EF = electric 

furnace. 

B. Economic Justification and Energy Savings 

1. Economic Impacts on Individual Consumers 

a. Life-Cycle Cost and Payback Period 

Consumers affected by new or amended standards usually experience higher 

purchase prices and lower operating costs. DOE evaluates these impacts on individual 

consumers by calculating changes in life-cycle costs (LCC) and the payback period 

(PBP) associated with potential standard levels. Using the approach described in section 

IV.F, DOE calculated the LCC impacts and PBPs for the efficiency levels considered in 

this rulemaking. For each product class, DOE’s analysis provided several outputs for 

each efficiency level. For energy efficiency, these results are reported for central air 

conditioners and heat pumps in Table V.3 through Table V.8, and for furnaces in Table 

V.9 through Table V.11. For standby mode and off mode, these results are reported for 

central air conditioners and heat pumps in Table V.12, and for furnaces in Table V.13. 

Each table includes the average total LCC and the average LCC savings, as well as the 

fraction of product consumers for which the LCC will either decrease (net benefit), or 

increase (net cost), or exhibit no change (no impact) relative to the product purchased in 

the base case. The last output in the tables is the median PBP for the consumer 

purchasing a design that complies with each TSL. 

360 
 

 

 

 

 

 

 

 

 

 

 

The results for each TSL are relative to the energy efficiency distribution in the 

base case (no amended standards). The average LCC savings and payback period 

presented in the tables were calculated only for those consumers that would be affected 

by a standard at a specific efficiency level. At some lower efficiency levels, no 

consumers would be impacted by a potential standard, because the products they would 

purchase in the base case are as efficient, or more efficient, than the specific efficiency 

level. In the cases where no consumers would be impacted, calculation of LCC savings 

or payback period is not applicable. 

DOE based the LCC and PBP analyses on energy consumption under conditions 

of actual product use, whereas it based the rebuttable presumption PBP test on 

consumption under conditions prescribed by the DOE test procedure, as required by 

EPCA. (42 U.S.C. 6295(o)(2)(B)(iii)) 

In its regional analysis, DOE used the same technology designs to describe the 

baseline and other considered efficiency levels in each region. However, the total 

installed cost varies among regions because the installation cost varies by region (due to 

labor cost differences), and in addition, there is some variation in the equipment price due 

to differences in the overall markup (including sales tax) among regions. 

(i) Central Air Conditioners and Heat Pumps 

361 
a

a

a

 

 

 

Median 

(years) 

Period 

Payback 

100

Table V.3. LCC and PBP Results for Split-System Air Conditioners (Coil-Only) 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

Baseline 2,026 4,872 6,898 n/a 0 100 0 n/ 

1 13.5 2,074 

1, 5, 7,

5, 7,

5,

n/a 

7,

5

5, 7, 34

46

(

n/ 

4,

8

8,

49

10

(

71

n/ 

6, 8,

5, 8,

5, 8,

5, 9, (

5, 9, (1,

2, 3, 5,

2, 3, 5, (

2, 3, (

3, 7, (1,

4,770 6,844 55 11 75 14 9.1 

Hot-Humid 

Baseline 834 649 484 n/a 0 100 0 

2 13.5 1,880 514 393 86 7 75 18 .6 

3,4,5 14 1,934 393 326 93 26 27 46 7.2 

6 15 2,515 188 702 303) 73 16 12 .4 

7 18* 3,365 923 288 797) 90 0 10 .6 

Hot-Dry 

Baseline 2,582 134 716 n/a 0 100 0 

2 13.5 2,642 977 619 104 10 75 14 .0 

3,4,5 14 2,713 837 550 107 37 27 36 .3 

6 15 3,510 598 108 468) 75 16 9 .0 

7 18* 4,673 288 960 182) 91 0 9 .2 

North (Rest of Country) 

3,4 5 Baseline 127 476 603 n/a 0 100 0 

2 13.5 175 434 609 8) 17 75 8 23.1 

6 14 231 401 5,633 26) 56 27 16 33.1 

7 18* 753 3,360 113 343) 99 0 1 .0 

Deleted: 117 

Deleted: 5,116 

Deleted: 7,232 

Deleted: 165 

Deleted: 5,003 

Deleted: 7,168 

Deleted: 63 

Deleted: 13 

Deleted: 10 

Deleted: 835 

Deleted: 632 

Deleted: 467 

Deleted: 497 

Deleted: 377 

Deleted: 93 

Deleted: 377 

Deleted: 310 

Deleted: 98 

Deleted: 47 

Deleted: 173 

Deleted: 688 

Deleted: 298 

Deleted: 72 

Deleted: 909 

Deleted: 274 

Deleted: 794 

Deleted: 89 

Deleted: 11 

Deleted: 156 

Deleted: 739 

Deleted: 999 

Deleted: 641 

Deleted: 91 

Deleted: 11 

Deleted: 858 

Deleted: 571 

Deleted: 100 

Deleted: 619 

Deleted: 129 

Deleted: 477 

Deleted: 10 

Deleted: 307 

Deleted: 980 

Deleted: 189 

Deleted: 126 

Deleted: 478 

Deleted: 604 

Deleted: 174 

Deleted: 436 

Deleted: 610 

Deleted: 4 

Deleted: 20 

* Varies by size of equipment: 2-ton units are 18 SEER; 3-ton units are 17 SEER; and 5-ton units are 16
 

SEER.
 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated.
 

362 
a

a

a

 

 

 

363 

Table V.4. LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

Baseline 3,015 4,869 7,884 n/a 0 100 0 n/ 

1 13.5 3,078 4,762 7,840 46 9 82 9 11.4 

Hot-Humid 

Baseline 2,774 5,640 8,413 n/a 0 100 0 n/ 

2 13.5 2,833 5,500 8,333 77 6 82 12 7.2 

3, 4, 5 14 2,894 5,371 8,265 89 21 45 34 7.9 

6 15 3,015 5,139 8,154 177 25 37 39 8.4 

7 24.5* 4,069 4,298 8,367 (130) 70 1 29 20.8 

Hot-Dry 

Baseline 3,825 6,171 9,995 n/a 0 100 0 n/ 

2 13.5 3,903 6,009 9,912 90 9 82 10 9.5 

3, 4, 5 14 3,984 5,860 9,844 101 28 45 27 10.7 

6 15 4,142 5,592 9,734 196 33 37 31 10.8 

7 24.5* 5,559 4,606 10,166 (311) 76 1 23 30.6 

North (Rest of Country) 

3, 4, 5 Baseline 3,110 3,468 6,577 n/a 0 100 0 n/a 

2 13.5 3,172 3,422 6,594 (18) 14 82 4 26.1 

6 14 3,236 3,381 6,617 (30) 43 45 12 27.5 

7 24.5* 4,410 3,193 7,603 (903) 96 1 3 100.0 

*Varies by size of equipment: 2-ton units are 24.5 SEER; 3-ton units are 22 SEER; and 5-ton units are 18 

SEER. 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

Deleted: 123 

Deleted: 5,124 

Deleted: 8,247 

Deleted: 186 

Deleted: 5,008 

Deleted: 8,194 

Deleted: 53 

Deleted: 10 

Deleted: 626 

Deleted: 400 

Deleted: 834 

Deleted: 486 

Deleted: 320 

Deleted: 85 

Deleted: 13 

Deleted: 6 

Deleted: 895 

Deleted: 358 

Deleted: 253 

Deleted: 96 

Deleted: 20 

Deleted: 35 

Deleted: 8 

Deleted: 016 

Deleted: 127 

Deleted: 142 

Deleted: 188 

Deleted: 24 

Deleted: 288 

Deleted: 357 

Deleted: 118 

Deleted: 21 

Deleted: 824 

Deleted: 193 

Deleted: 10,017 

Deleted: 902 

Deleted: 031 

Deleted: 933 

Deleted: 76 

Deleted: 9 

Deleted: 10 

Deleted: 983 

Deleted: 881 

Deleted: 864 

Deleted: 93 

Deleted: 26 

Deleted: 11 

Deleted: 141 

Deleted: 612 

Deleted: 753 

Deleted: 184 

Deleted: 30 
a

a

a

 

 

 

364 

Table V.5. LCC and PBP Results for Split-System Heat Pumps 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

Baseline 2,934 6,882 9,816 n/a 0 100 0 n/ 

1 13.5 2,999 6,743 9,742 71 5 86 9 6.6 

Hot-Humid 

Baseline 2,804 6,943 9,747 n/a 0 100 0 n/ 

2 13.5 2,867 6,791 9,658 82 4 86 10 6.1 

3, 4, 5 14 2,932 6,644 9,576 102 17 45 38 6.0 

6 15 3,114 6,383 9,496 137 29 23 48 7.2 

7 22* 3,983 5,513 9,496 103 60 0 40 12.6 

Hot-Dry 

Baseline 3,808 9,221 13,029 n/a 0 100 0 n/ 

2 13.5 3,890 8,987 12,877 148 4 86 11 4.5 

3, 4, 5 14 3,973 8,763 12,735 175 15 45 40 4.8 

6 15 4,212 8,348 12,560 274 25 23 52 5.4 

7 22* 5,387 6,894 12,280 477 51 0 49 9.4 

North (Rest of Country) 

Baseline 3,065 5,927 8,993 n/a 0 100 0 n/a 

2 13.5 3,129 5,861 8,990 5 9 86 5 13.2 

3, 4, 5 14 3,193 5,792 8,986 4 35 45 20 13.3 

6 15 3,380 5,693 9,073 (89) 58 23 19 20.1 

7 22* 4,262 5,362 9,624 (604) 87 0 13 32.7 

* Varies by size of equipment: 2-ton units are 22 SEER; 3-ton units are 21 SEER; and 5-ton units are 18 

SEER. 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

Deleted: 3,237 

Deleted: 7,755 

Deleted: 10,992 

Deleted: 3,305 

Deleted: 7,595 

Deleted: 10,900 

Deleted: 98 

Deleted: 87 

Deleted: 8 

Deleted: 921 

Deleted: 7,219 

Deleted: 10,140 

Deleted: 987 

Deleted: 7,062 

Deleted: 10,048 

Deleted: 97 

Deleted: 87 

Deleted: 9 

Deleted: 3,053 

Deleted: 908 

Deleted: 960 

Deleted: 110 

Deleted: 15 

Deleted: 47 

Deleted: 192 

Deleted: 633 

Deleted: 824 

Deleted: 199 

Deleted: 24 

Deleted: 24 

Deleted: 52 

Deleted: 4,062 

Deleted: 683 

Deleted: 744 

Deleted: 221 

Deleted: 57 

Deleted: 43 

Deleted: 954 

Deleted: 587 

Deleted: 541 

Deleted: 4,038 

Deleted: 9,342 

Deleted: 13,381 

Deleted: 164 

Deleted: 3 

Deleted: 87 

Deleted: 10 

Deleted: 4,123 

Deleted: 9,107 

Deleted: 13,230 

Deleted: 193 

Deleted: 12 
a

 

Table V.6. LCC and PBP Results for Single-Package Air Conditioners 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1, 2 Baseline 

13 

3,040 5,303 8,343 n/a 0 100 0 n/ 

3, 4, 5 14 3,223 5,077 8,301 37 50 17 33 15.1 

6 15 3,492 4,908 8,400 (68) 72 1 27 24.2 

7 16.5 4,064 4,760 8,825 (492) 84 0 16 46.3 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

Deleted: 063 

Deleted: 099 

Deleted: 162 

Deleted: ¶ 

Hot-Humid ...

Deleted: 174 

Deleted: 3,380 

Deleted: 6,554 

Deleted: (85) 

Deleted: 71 

Deleted: 12 

Deleted: 49 

Deleted: 427 

Deleted: 3,340 

Deleted: 6,767 

Deleted: 282 

Deleted: 92 

Deleted: 7 

Deleted: 100 

Deleted: 3,967 

Deleted: 3,357 

Deleted: 7,324 

Deleted: 836 

Deleted: 97 

Deleted: 3 

Deleted: 100 

365
 
a

 

Table V.7. LCC and PBP Results for Single-Package Heat Pumps 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1, 2 Baseline 3,623 7,834 11,457 n/a 0 100 0 n/ 

3, 4, 5 14 3,828 7,463 11,291 104 29 36 35 8.4 

6 15 4,163 7,182 11,345 15 63 2 35 13.6 

7 16.5 4,866 6,856 11,722 (363) 79 0 21 20.7 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

Deleted: 642 

Deleted: 827 

Deleted: 469 

Deleted: ¶ 

Hot-Humid ...

Deleted: 500 

Deleted: 6,940 

Deleted: 10,440 

Deleted: 87 

Deleted: 30 

Deleted: 34 

Deleted: 9 

Deleted: 6 ...

Deleted: 5,200 

Deleted: 8,750 

Deleted: 13,950 

Deleted: 89 

Deleted: 58 

Deleted: 40 

Deleted: 11 

Deleted: 7 ...

Deleted: 720 

Deleted: 012 

Deleted: 10,732 

Deleted: 794 

Deleted: 95 

Deleted: 5 

Deleted: 68 

366
 
 

a

a

 

Table V.8. LCC and PBP Results for Small-Diameter High Velocity (SDHV) Air 

Conditioners 

Trial 

Standard 

Level 

Efficiency 

Level 

SEER 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Consumers that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1 Baseline 

13 

4,915 4,853 9,768 n/a 0 100 0 n/a 

Hot-Humid 

2-5 Baseline 

13 

4,610 5,643 10,253 n/a 0 100 0 n/ 

6 14 4,883 5,385 10,268 (14) 68 0 32 17.8 

7 14.5 5,029 5,250 10,279 (25) 67 0 33 17.3 

Hot-Dry 

2-5 Baseline 

13 

6,302 6,105 12,407 n/a 0 100 0 n/ 

6 14 6,665 5,807 12,472 (65) 74 0 26 26.1 

7 14.5 6,859 5,654 12,513 (106) 74 0 26 23.3 

North (Rest of Country) 

2-5 Baseline 

13 

4,919 3,447 8,367 n/a 0 100 0 n/a 

6 14 5,198 3,370 8,568 (202) 95 0 5 74.3 

7 14.5 5,347 3,313 8,660 (294) 92 0 8 74.7 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

(ii) Furnaces 

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Deleted: 5,145 

Deleted: 10,203 

Deleted: 697 

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Deleted: 431 

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Deleted: 317 

Deleted: 345 

Deleted: 38 

Deleted: 69 

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Deleted: 18 

Deleted: 217 

Deleted: 519 

Deleted: 904 

Deleted: 569 

Deleted: 49 

Deleted: 24 

Deleted: 768 

Deleted: 627 

Deleted: 107 

Deleted: 75 

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Deleted: 26 

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Deleted: 314 

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Deleted: 515 

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Deleted: 94 

Deleted: 6 

Deleted: 77 

Deleted: 286 

Deleted: 634 

Deleted: 320 

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367
 
 

Table V.9. LCC and PBP Results for Non-Weatherized Gas Furnaces 

Trial 

Standard 

Level 

Efficiency 

Level 

AFUE 

Life-Cycle Cost (2009$) 

Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

2009$ 

% of Households that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1 Baseline 

80% 1,786 9,551 11,337 n/a 0 100 0 n/a 

South (Rest of Country) 

2-6 Baseline 

80% 1,614 6,566 8,180 n/a 0 100 0 n/a 

7 98% 2,661 5,624 8,286 (181) 72.3 0.2 27.4 28.9 

North 

3,4 90% 2,474 10,409 12,883 155 10.0 71.4 18.6 10.1 

2 92% 2,536 10,206 12,742 215 10.9 56.5 32.6 7.7 

5,6 95% 2,685 9,916 12,601 323 22.8 22.9 54.3 9.4 

7 98% 2,943 9,784 12,727 198 58.7 0.6 40.7 17.1 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

368 
Table V.10. LCC and PBP Results for Mobile Home Gas Furnaces 

Trial 

Standard 

Level 

Efficiency 

Level 

AFUE 

Life-Cycle Cost (2009$) 

Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Households that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1 Baseline 

80% 1,432 11,749 13,181 n/a 0 100 0 n/a 

South (Rest of Country) 

2-6 Baseline 

80% 1,340 11,453 12,793 n/a 0 100 0 n/a 

7 96% 2,415 9,780 12,194 391 51.0 3.8 45.2 13.0 

North 

2 Baseline 

80% 1,488 13,060 14,548 n/a 0 100 0 n/a 

3,4 90% 2,112 11,974 14,086 419 43.6 9.7 46.7 10.7 

5-7 96% 2,611 11,301 13,912 585 46.2 7.7 46.1 11.5 

369 
 

 

Table V.11. LCC and PBP Results for Oil-fired Furnaces 

Trial 

Standard 

Level 

Efficiency 

Level 

AFUE 

Life-Cycle Cost (2009$) 

Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Households that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Nation 

1, 2 Baseline 

82% 3,008 30,287 33,295 n/a 0 100 0 n/a 

3, 4 83% 3,157 29,946 33,103 15 9.9 58.3 31.8 1.0 

5,6 85% 3,622 29,287 32,909 (18) 34.6 33.0 32.4 19.8 

7 97% 4,810 27,809 32,619 272 51.0 0.9 48.1 18.2 

(iii) Results for Standby Mode and Off Mode 

Table V.12 and Table V.13 present the LCC and PBP results for the standby 

mode and off mode power efficiency levels considered for central air conditioners/heat 

pumps and furnaces, respectively. 

370 
 

Table V.12. LCC and PBP Results for Central Air Conditioner and Heat Pump 

Standby Mode and Off Mode Power 

Trial 

Standard 

Level 

Efficiency 

Level 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Households that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Split-System Air Conditioners (Blower-Coil) 

Baseline 17 105 122 n/a 0 100 0 n/a 

1 1 27 96 114 84 0 94 6 1 

2 2 23 93 115 40 3 91 6 6 

3 3 23 92 116 35 3 91 6 7 

Split-System Air Conditioners (Coil-Only) 

Baseline 1 27 27 n/a 0 100 0 n/a 

1, 2, 3 1 1 18 19 84 0 94 6 1 

Split-System Heat Pumps 

Baseline 19 31 50 n/a 0 100 0 n/a 

1, 2 1 23 21 44 9 0 67 33 4 

3 2 26 21 47 (1) 19 57 24 5 

Single-Package Air Conditioners 

Baseline 17 105 122 n/a 0 100 0 n/a 

1 1 17 96 114 84 0 94 6 1 

2 2 23 93 115 41 3 91 6 6 

3 3 23 92 116 36 3 91 6 7 

Single-Package Heat Pumps 

Baseline 20 31 51 n/a 0 100 0 n/a 

1, 2 1 24 21 45 9 0 66 34 4 

3 2 27 21 49 (1) 19 57 24 5 

Small-Duct High-Velocity Air Conditioners 

Baseline 18 107 124 n/a 0 100 0 n/a 

1 1 18 98 116 84 0 94 6 1 

2 2 24 94 117 37 3 91 6 7 

3 3 24 94 118 32 3 91 6 7 

371 
 

Space-Constrained Air Conditioners 

Baseline 17 107 123 n/a 0 100 0 n/a 

1 1 17 98 115 84 0 94 6 1 

2 2 23 94 117 42 3 91 6 6 

3 3 23 94 117 37 3 91 6 7 

Space-Constrained Heat Pumps 

Baseline 19 31 50 n/a 0 100 0 n/a 

1, 2 1 23 21 44 9 0 67 33 4 

3 2 26 21 47 (1) 19 58 23 5 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

372 
 

 

Table V.13. LCC and PBP Results for Furnace Standby Mode and Off Mode Power 

Trial 

Standard 

Level 

Efficiency 

Level 

Life-Cycle Cost (2009$) Life-Cycle Cost Savings (2009$) 

Payback 

Period 

(years) 

Installed 

Cost 

Discounted 

Operating 

Cost LCC 

Average 

Savings 

% of Households that 

Experience 

Median 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Non-weatherized Gas Furnaces 

Baseline 0 133 133 n/a 0 100 0 n/a 

1, 2 1 3 128 132 2 9.2 72.4 18.4 10.7 

3 2 8 125 133 (0) 16.8 72.4 10.8 16.1 

Mobile Home Furnaces 

Baseline 0 103 103 n/a 0 100 0 n/a 

1, 2 1 1 102 103 (0) 5.7 90.6 3.8 11.9 

3 2 4 101 104 (1) 7.7 90.6 1.8 17.9 

Oil-fired Furnaces 

Baseline 0 180 180 n/a 0 100 0 n/a 

1, 2 1 1 178 179 1 1.4 90.6 8.0 7.9 

3 2 3 177 179 1 3.8 90.6 5.7 11.9 

Electric Furnaces 

Baseline 0 111 111 n/a 0 100 0 n/a 

1, 2 1 1 110 111 0 4.3 89.9 5.1 10.3 

3 2 3 109 111 (1) 6.9 89.9 2.5 15.5 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

373 
 

 

 

 

 

 

 

 

 

 

 

 

 

b. Consumer Subgroup Analysis93 

(i) Central Air Conditioners and Heat Pumps 

As described in section IV.H, for central air conditioners and heat pumps, DOE 

determined the impact of the considered energy efficiency TSLs on low-income 

households and senior-only households. For low-income and senior-only households, the 

sample sizes from 2005 RECS were very small (i.e., less than 1 percent of the entire 

sample) at the regional level for central air conditioners and even at the national level for 

heat pumps, so DOE only performed the subgroup analysis at the national level for air 

conditioners. 

Table V.14 and Table V.15 present key results for split-system coil-only and 

blower-coil air conditioners, respectively. The analysis for low-income and senior-only 

households did not show substantially different impacts for these subgroups in 

comparison with the general population. See chapter 11 of the direct final rule TSD for 

further details. 

Table V.14. Split-System Air Conditioners (Coil-Only): Comparison of Impacts for 

Consumer Subgroups and All Households, Nation 

93 As described in section IV.H, DOE did not perform a subgroup analysis for the standby mode and off 

mode efficiency levels. The standby mode and off mode analysis relied on the test procedure to assess 

energy savings for the considered standby mode and off mode efficiency levels. Because the analysis used 

the same test procedure parameters for all sample households, the energy savings is the same among the 

consumer subgroups. 

TSL Efficien 

cy Level 

SEER 

LCC Savings 

(2009$) 

Median Payback Period 

Years 

Senior Low 

Income 

All Senior Low 

Income 

All 

1, 2 13.5 21 33 55 13 12 9 

3, 4, 5 13 0 0 0 n/a n/a n/a 

6 14 9 24 51 18 17 12 

7 18* (1,212) (1,150) (1,046) 100+ 100+ 100+ 

Formatted Table 

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* Varies by size of equipment: 2-ton units are 18 SEER; 3-ton units are 17 SEER; and 5-ton units are 16
 

SEER.
 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated.
 

Table V.15. Split-System Air Conditioners (Blower-Coil): Comparison of Impacts 

for Consumer Subgroups and All Households, Nation 

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Deleted: 53 

Deleted: 10 

TSL Efficiency 

Level 

SEER 

LCC Savings 

(2009$) 

Median Payback Period 

Years 

Senior Low 

Income 

All Senior Low 

Income 

All 

1, 2 13.5 11 25 46 15 15 11 

3, 4, 5 13 0 0 0 n/a n/a n/a 

6 14 7 22 49 17 16 13 

7 24.5* (696) (630) (421) 68 62 41 

* Varies by size of equipment: 2-ton units are 24.5 SEER; 3-ton units are 22 SEER; and 5-ton units are 18
 

SEER.
 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated.
 

(ii) Furnaces 

As described in section IV.H, for furnaces, DOE evaluated the impacts of the 

considered energy efficiency standard levels on low-income consumers and senior 

citizens (i.e., senior-only households). In addition, DOE analyzed the impacts for three 

other subgroups: (1) multi-family housing units; (2) new homes; and (3) replacement 

applications. DOE only presents the results for the Northern region in this section 

because, with the exception of TSL 7, there are no consumers impacted by national 

standards at the considered TSLs. At TSL 7, the impacts of national standards on the 

considered subgroups are approximately the same as the impacts of the standard for the 

Northern region. 

Table V.16 compares the impacts of the TSLs for the Northern region for nonweatherized gas furnaces for low-income, senior-only, and multi-family households with 

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Deleted: 616 

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375 
 

 

 

 

 

 

those for all households. The senior and low-income households show somewhat higher 

LCC savings from more-efficient furnaces than the general population. In contrast, the 

multi-family households show lower LCC savings due to generally higher installation 

costs and lower heating energy use. 

Table V.17 compares the impacts of the TSLs for the Northern region for nonweatherized gas furnaces for new home and replacement subgroups with those for all 

households. The households in new homes show significantly higher LCC savings 

because their average installation costs are lower, while the households in replacement 

applications show lower, but still positive, LCC savings compared to the general 

population. The latter result is primarily due to the high installation costs in some 

replacement applications. See chapter 11 of the direct final rule TSD for further details. 

Table V.16. Non-Weatherized Gas Furnaces: Comparison of Impacts for SeniorOnly, Low-Income, and Multi-Family Consumer Subgroups and All Households 

(North) 

TSL Efficiency LCC Savings Median Payback Period 

Level (2009$) Years 

AFUE Senior Low 

Income 

MultiFamily All Senior Low 

Income 

MultiFamily All 

2, 4 90% 201 175 63 155 8.4 9.4 13.9 10.1 

3 92% 273 242 104 215 6.6 7.2 9.8 7.7 

5, 6 95% 410 367 176 323 8.3 8.5 11.3 9.4 

7 98% 307 229 (26) 198 14.8 16.5 23.2 17.1 

Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

Table V.17. Non-Weatherized Gas Furnaces: Comparison of Impacts for 

Replacement and New Home Consumer Subgroups and All Households (North) 

TSL Efficiency 

Level 

AFUE 

LCC Savings 

(2009$) 

Median Payback Period 

Years 

Replacement New 

Home 

All Replacement New 

Home 

All 

376 
 

 

 

 

 

 

 

 

 

 

2, 4 90% 90 343 155 12.9 2.5 10.1 

3 92% 151 404 215 9.0 5.1 7.7 

5, 6 95% 262 502 323 9.7 8.8 9.4 

7 98% 158 315 198 16.9 17.9 17.1 

c. Rebuttable Presumption Payback 

As discussed above, EPCA provides a rebuttable presumption that an energy 

conservation standard is economically justified if the increased purchase cost for a 

product that meets the standard is less than three times the value of the first-year energy 

(and, as applicable, water) savings resulting from the amended standard. (42 U.S.C. 

6295(o)(2)(B)(iii)) In calculating a rebuttable presumption payback period for the 

considered standard levels, DOE used discrete values based on the applicable DOE test 

procedures rather than distributions for input values, and it based the energy use 

calculation on the DOE test procedures for furnaces and central air conditioners and heat 

pumps, as required by statute. Id. As a result, DOE calculated a single rebuttable 

presumption payback value, and not a distribution of payback periods, for each 

considered efficiency level. 

For central air conditioner and heat pump energy efficiency, only single-package 

heat pumps at the 13.5 SEER level meet the less-than-three-year criteria. Rebuttable 

paybacks calculated for standby mode and off mode TSL 1 for the split system, singlepackage, small-duct high-velocity, and space-constrained air conditioners also meet the 

less-than-three-year criteria. None of the furnace energy efficiency levels meet the lessthan-three-year criteria. The rebuttable presumption payback values for each considered 

efficiency level and product class are presented in chapter 8 of the direct final rule TSD. 

377 
 

 

 

 

 

 

 

 

 

 

 

 

While DOE examined the rebuttable presumption criterion, it considered whether 

the standard levels considered for today’s direct final rule are economically justified 

through a more detailed analysis of the economic impacts of these levels, including those 

to the consumer, manufacturer, Nation, and environment, as required under 42 U.S.C. 

6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE to definitively 

evaluate the economic justification for a potential standard level (thereby supporting or 

rebutting the results of any preliminary determination of economic justification). 

2. Economic Impacts on Manufacturers 

DOE performed a manufacturer impact analysis (MIA) to estimate the impact of 

amended energy conservation standards on manufacturers of residential furnaces, central 

air conditioners, and heat pumps. The section below describes the expected impacts on 

manufacturers at each considered energy efficiency TSL (trial standard levels based on 

SEER, HSPF, and AFUE ratings) and each considered standby mode and off mode TSL 

(trial standard levels based on standby mode and off mode wattage). Chapter 12 of the 

TSD explains the analysis in further detail. A summary of the energy efficiency TSLs can 

be found in Table V.1, and a summary of standby mode and off mode TSLs can be found 

in Table V.2. 

a. Industry Cash-Flow Analysis Results 

Table V.18 through Table V.22 depict the financial impacts on manufacturers and 

the conversion costs DOE estimates manufacturers could incur at each TSL. The 

378 
 

 

 

 

 

 

 

 

 

 

 

financial impacts on manufacturers are represented by changes in industry net present 

value (INPV). DOE presents the results by grouping product classes that are commonly 

produced by the same manufacturers. 

Results for the energy efficiency standards for furnaces and central air 

conditioners and heat pumps are grouped as conventional products and niche products. 

These product groupings were analyzed under two markup scenarios: (1) the preservation 

of earnings before income and taxes (EBIT) scenario; and (2) the tiered markup scenario. 

As discussed in section IV.I.1 of the Methodology and Discussion section of this 

document, DOE considered the preservation of EBIT scenario to model manufacturer 

concerns about the inability to maintain their margins as manufacturing production costs 

increase to reach more-stringent efficiency levels. In this scenario, while manufacturers 

make the necessary investments required to convert their facilities to produce amended 

standards-compliant equipment, operating profit does not change in absolute dollars and 

decreases as a percentage of revenue. 

DOE also considered the tiered markup scenario. The tiered markup scenario 

models the situation in which manufacturers maintain, when possible, three tiers of 

product markups. The tiers described by manufacturers in MIA interviews were defined 

as “good, better, best” or “value, standard, premium.” In the standards case, the tiered 

markups scenario considers the situation in which the breadth of a manufacturer’s 

portfolio of products shrinks and amended standards effectively “demote” higher-tier 

products to lower tiers. As a result, higher-efficiency products that previously 

379 
 

 

 

 

 

 

 

 

commanded “standard” and “premium” mark-ups are assigned “value” and “standard” 

markups, respectively. Typically, a significant fraction of the market will seek the lowestcost unit available for purchase, particularly in the new construction market. 

Manufacturers expect this phenomenon, in the standards case, to drive price competition 

at the new minimum efficiency and foster efforts to convert what was previously a 

“better” product into the new baseline “good” product. This scenario, therefore, reflects 

one of the industry’s key concerns regarding this effect of product commoditization at 

higher efficiency levels. 

Standby mode and off mode standards results are presented for the industry as a 

whole, without groupings. Due to the small incremental cost of standby mode and off 

mode components relative to the overall cost of furnaces, central air conditioners, and 

heat pumps, DOE has concluded that standby mode and off mode features would not 

have a differentiated impact on different manufacturers or different product classes. The 

impacts of standby mode and off mode features were analyzed for two markup scenarios: 

(1) a preservation of gross margin percentage scenario; and (2) a preservation of EBIT 

scenario. The preservation of gross margin percentage scenario assumes that 

manufacturers will maintain a constant gross margin percentage even as product costs 

increase in the standards case. This scenario represents an upper bound to manufacturer 

profitability after energy conservation standards are amended. In contrast, the 

preservation of EBIT scenario assumes manufacturers will not be able to maintain the 

base case gross margin level. Rather, as production costs go up, manufacturers will only 

be able to maintain the same operating profit—in absolute dollars—reducing gross 

380 
 

 

 

 

 

 

 

margin as a percentage of revenue. In other words, as products get more expensive to 

produce, manufacturers are not able to make as much profit per unit on a percentage 

basis. 

Each of the modeled scenarios results in a unique set of cash flows and 

corresponding industry value at each TSL. In the following discussion, the INPV results 

refer to the difference in industry value between the base case and each standards case 

that result from the sum of discounted cash flows from the base year 2010 through 2045, 

the end of the analysis period. To provide perspective on the short-run cash flow impact, 

DOE includes in the discussion of the results a comparison of free cash flow between the 

base case and the standards case at each TSL in the year before amended standards take 

effect. 

(i) Cash-Flow Analysis Results for Conventional Products 

Table V.18 and Table V.19 show the MIA results for each TSL using the markup 

scenarios described above for conventional residential furnace, central air conditioner, 

and heat pump products. This “conventional products” grouping includes the following 

product classes: (1) split-system air conditioning; (2) split-system heat pumps; (3) singlepackage air conditioning; (4) single-package heat pumps; and (5) non-weatherized gas 

furnaces. 

381 
 

 

 

 

Table V.18 Manufacturer Impact Analysis for Conventional Products Under the 

Preservation of EBIT Scenario 

Units Base 

Case 

Trial Standard Level 

1 2 3 4 5 6 7 

INPV 2009$ 

millions 8,347 8,354 7,847 7,936 7,893 7,857 7,685 6,855 

Change in INPV 

2009$ 

millions n/a 8 (500) (411) (454) (490) (662) (1,492) 

(%) n/a 0.1 (6.0) (4.9) (5.4) (5.9) (7.9) (17.9) 

Product 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 5 12 12 25 127 279 

Capital 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 15 16 16 52 158 532 

Total Investment 

Required 

2009$ 

millions n/a 0.0 20 28 28 77 284 810 

Parentheses indicate negative (-) values. 

Table V.19. Manufacturer Impact Analysis for Conventional Products Under the 

Tiered Markups Scenario 

Units Base 

Case 

Trial Standard Level 

1 2 3 4 5 6 7 

INPV 2009$ 

millions 8,347 8,379 8,021 7,638 7,475 7,467 6,509 4,578 

Change in INPV 

2009$ 

millions n/a 33 (326) (709) (871) (879) (1,837) (3,768) 

(%) n/a 0.4 (3.9) (8.5) (10.4) (10.5) (22.0) (45.1) 

Product 

Conversion Costs 

2009$ 

millions n/a 0.0 5 12 12 25 127 279 

Capital 

Conversion Costs 

2009$ 

millions n/a 0.0 15 16 16 52 158 532 

Total Investment 

Required 

2009$ 

millions n/a 0.0 20 28 28 77 284 810 

Parentheses indicate negative (-) values. 

Sales of split-system air conditioners make up more than 60 percent of residential 

central cooling shipments, and non-weatherized gas furnaces make up more than 80 

percent of the residential furnace shipments, respectively. These two product classes are 

the largest drivers of INPV in the conventional product grouping. In the base case, the 

382 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

conventional products industry is estimated to have an INPV value of $8,347 million 

(2009$). 

TSL 1 represents the efficiency levels for the conventional product classes that 

have the largest market share today. At TSL 1, DOE estimates impacts on INPV to be 

small, but positive. INPV impacts range from $33 million to $8 million, or a change in 

INPV of 0.4 percent to 0.1 percent. At this considered level, industry free cash flow94 is 

estimated to remain steady at $511 million for both the base case and standards case in 

the year before the TSL 1 compliance date (2015). 

At TSL 1, the impacts on the industry are minor because manufacturers already 

ship products at TSL 1 efficiencies in high volumes. Eighty-one percent of all 

conventional HVAC products shipped today meet or exceed the TSL 1 standards. 

Additionally, an increase in standards from 13 SEER to 13.5 SEER for split-system air 

conditioning and heat pumps is expected to require no significant conversion costs. As a 

result, INPV remains mostly stable at this considered standard level. 

TSL 2 has a higher standard for non-weatherized gas furnaces than TSL 1. This 

results in a greater negative impact on INPV. TSL requires non-weatherized gas furnaces 

to meet a 92-percent AFUE minimum efficiency in the North. DOE estimates TSL 2 

impacts on INPV to range from -$326 million to -$500 million, or a change in INPV of ­

3.9 percent to -6.0 percent. At this level, industry free cash flow is estimated to decrease 

94 Free cash flow (FCF) is a metric commonly used in financial valuation. DOE calculates FCF by adding 

back depreciation to net operating profit after tax and subtracting increases in working capital and capital 

expenditures. See TSD chapter 12 for more detail on FCF and its relevance to DOE’s MIA results. 

383 
 

 

 

 

 

 

 

 

 

 

 

 

 

by approximately 5.3 percent to $484 million, compared to the base-case value of $511 

million, in the year 2015. 

At TSL 2, for the non-weatherized gas furnace standard, manufacturers may incur 

elevated conversion costs as they redesign a 92-percent AFUE furnace product to meet 

the requirements of the builder market and adjust their product families accordingly in 

the North. At 92-percent AFUE, these furnaces would require a secondary heat 

exchanger, and, when compared to a 90-percent AFUE design, the heat exchangers 

would need to be sized up. DOE estimates that at this level, non-weatherized gas furnace 

conversion costs total approximately $20 million for the industry. These conversion 

costs, along with changes in shipments due to standards, account for much of the drop in 

INPV from TSL 1 to TSL 2. 

TSL 3 incorporates regional standards for split-system air conditioning and 

furnace products. Compared to the baseline, TSL 3 proposes a higher air conditioning 

and heat pump standard in the South (14 SEER minimum) and a higher furnace standard 

in the North (90-percent AFUE minimum). At TSL 3, DOE estimates impacts on INPV 

to range from -$411 million to -$709 million, or a change in INPV of -4.9 percent to -8.5 

percent. At this considered level, industry free cash flow is estimated to decrease by 

approximately 5.8 percent to $481 million, compared to the base-case value of $511 

million, in the year leading up to the year in which compliance with considered energy 

conservation standards would be required (2015). 

384 
 

 

 

 

 

 

 

 

 

 

 

Both markup scenarios in the GRIM for the energy efficiency standards at TSL 3 

assume that a commoditization of 14 SEER air conditioning units in the South would put 

downward pressure on margins for 14 SEER units sold in all regions. Similarly, the 90­

percent AFUE standard for non-weatherized gas furnaces in the North would negatively 

affect margins for non-weatherized gas furnace units sold in all regions. This impact on 

markups is more severe in the tiered scenario, because the change in the standard also 

compresses markups on higher-AFUE products, which are effectively demoted in the 

“good, better, best” sales model. As a result, INPV decreases by 8.5 percent in the tiered 

markup scenario, compared to 4.9 percent in the preservation of EBIT scenario. 

TSL 4 represents the consensus agreement level and incorporates accelerated 

compliance dates. The standards are set at the same level as TSL 3, except that TSL 4 

also includes EER standards for central air conditioners in the hot-dry region. In addition, 

the furnace standards are modeled to take effect in 2013, and the air conditioning and 

heat pump standards are modeled to take effect in 2015, instead of the 2016 compliance 

dates used in TSL 3. At TSL 4, DOE estimates impacts on INPV to range -$454 million 

to -$871 million, or a change in INPV of -5.4 percent to -10.4 percent. At this level, 

industry free cash flow is estimated to decrease by approximately 9.6 percent to $462 

million, compared to the base-case value of $511 million, in the year 2015. 

To comply with the earlier compliance dates, manufacturers must make earlier 

investments in product conversions, which negatively affect INPV because of 

discounting effects. Additionally, the accelerated schedule for amended standards leads to 

385 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

earlier commoditization of residential furnace, central air conditioner, and heat pump 

products. As a result, the INPV value is slightly more negative in TSL 4 than in TSL 3 

for both the preservation of EBIT scenario and the tiered markups scenario. 

TSL 5 includes higher furnace standards than TSL 4. Non-weatherized gas 

furnace standards would increase to 95-percent AFUE. Additionally, TSL 5 lacks the 

accelerated compliance dates associated with TSL 4. All HVAC standards in TSL 5 

would require compliance in 2016. At TSL 5, DOE estimates impacts on INPV to range 

from -$490 million to -$879 million, or a change in INPV of -5.9 percent to -10.5 

percent. At this considered level, industry free cash flow is estimated to decrease by 

approximately 9.7 percent to $461 million, compared to the base-case value of $511 

million, in the year 2015. 

At 95-percent AFUE, non-weatherized gas furnace efficiency would be one 

efficiency level below max-tech. To comply with such a standard, manufacturers would 

need to increase heat exchanger size up to the physical constraints of the furnace 

cabinets. Furnace manufacturers would need to upgrade their 95-percent AFUE 

production lines to meet demand. Additionally, manufacturers expect this efficiency level 

would require significant R&D costs to redesign and convert a premium, feature-loaded 

product into a basic value-line product, which would be demanded by the builder market. 

As a result, industry conversion costs could grow from $28 million at TSL 4 to $77 

million at TSL 5. INPV becomes slightly more negative from TSL 4 to TSL 5. 

386 
 

 

 

 

 

 

 

 

 

 

 

TSL 6 elevates the standard for air conditioning and heat pumps over TSL 5 while 

maintaining the same standards for all furnace product classes. TSL 6 is the most 

aggressive regional standard considered in this rulemaking (although TSL 7 has more 

stringent standards, the standards in TSL 7 are national rather than regional). At TSL 6, 

DOE estimates impacts on INPV to range from -$662 million to -$1837 million, or a 

change in INPV of -7.9 percent to -22.0 percent. At this considered level, industry free 

cash flow is estimated to decrease by approximately 24.7 percent to $385 million, 

compared to the base-case value of $511 million, in the year 2015. 

In the base case, 73 percent of split-system air conditioning shipments in the 

North are below 14 SEER, and 84 percent of split-system air conditioning shipments in 

the South are below 15 SEER. Increasing the minimum efficiency to 14 SEER in the 

North and 15 SEER in the South requires significantly more capital expenditure from 

manufacturers. At TSL 6, manufacturers would need to redesign their highest-volume 

product lines in both the South and the North. There are multiple design paths that 

manufacturer could take; however, the changes will likely involve the addition of twostage compressors, the enlargement of heat exchangers, the application of moresophisticated controls, the incorporation of microchannel technology, or some 

combination of these options. Some manufacturers indicated that new production 

facilities would be necessary at this potential standard level. 

387 
 

 

 

 

 

 

 

 

TSL 7 represents the max-tech efficiency level for all product classes. At TSL 7, 

DOE estimates impacts on INPV to range from -$1,492 million to -$3,768 million, or a 

change in INPV of -17.9 percent to -45.1 percent. At this considered level, industry free 

cash flow is estimated to decrease by approximately 65.9 percent to $174 million, 

compared to the base-case value of $511 million, in the year 2015. 

At TSL 7, the industry incurs significant R&D costs and loses the ability to 

differentiate products based on efficiency. For central air conditioning systems, 

manufacturers would likely have to move to add a second compressor, incorporate 

inverter technology, or make their product significantly larger. For furnaces, 

manufacturers would likely have to incorporate burner modulation technology, which 

would include adding modulating gas valves, variable speed inducer fans, and moresophisticated controls. These potential standard levels would require much higher R&D 

and product design expenditures by manufacturers. It could be difficult for all major 

manufacturers to justify the investments necessary to reach max-tech. A few 

manufacturers indicated that building a new facility would create less business disruption 

risk than attempting to completely redesign and upgrade existing facilities. Additionally, 

some manufacturers noted that lower labor rates in Mexico and other countries abroad 

may entice them to move their production facilities outside of the U.S. There was general 

agreement that the high conversion costs and more expensive components required in 

TSL 7 could also make foreign-based technologies, which have traditionally been more 

expensive, more attractive in the domestic market. 

388 
 

 

 

 

 

(ii) Cash-Flow Analysis Results for Niche Furnace Products 

Table V.20 and Table V.21 show the MIA results for each TSL using the markup 

scenarios described above for niche furnace products. The niche furnace grouping 

includes the mobile home and oil furnace product classes. In the base case, annual mobile 

home furnace shipments total approximately 120,000 units/year, while annual oil furnace 

shipments total approximately 80,000 units/year for 2010. 

Table V.20. Manufacturer Impact Analysis for Niche Furnace Products Under the 

Preservation of EBIT Scenario 

Units Base 

Case 

Trial Standard Level 

1 2 3 4 5 6 7 

INPV 2009$ 

millions 149 149 151 132 125 131 131 109 

Change in INPV 

2009$ 

millions n/a 0 2 (17) (24) (18) (18) (40) 

(%) n/a 0.0 1.2 (11.6) (16.4) (12.1) (12.1) (26.7) 

Product 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 0 4 4 8 8 16 

Capital 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 0 11 11 17 17 35 

Total 

Investment 

Required 

2009$ 

millions 

n/a 0.0 0 15 15 24 24 51 

Parentheses indicate negative (-) values. 

Table V.21. Manufacturer Impact Analysis for Niche Furnace Products Under the 

Tiered Markup Scenario 

Units Base 

Case 

Trial Standard Level 

1 2 3 4 5 6 7 

INPV 2009$ 

millions 149 149 151 129 120 114 114 94 

Change in INPV 

2009$ 

millions n/a (0) 2 (20) (29) (36) (36) (55) 

(%) n/a (0.0) 1.4 (13.5) (19.6) (23.8) (23.8) (36.7) 

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Product 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 0 4 4 8 8 16 

Capital 

Conversion 

Costs 

2009$ 

millions 

n/a 0.0 0 11 11 17 17 35 

Total 

Investment 

Required 

2009$ 

millions 

n/a 0.0 0 15 15 24 24 51 

Parentheses indicate negative (-) values. 

At TSL 1 and TSL 2, the standards-case efficiency remains at the baseline level 

for both mobile home furnaces and oil furnaces. There are no conversion costs, and the 

INPV varies very little from the baseline value. 

At TSL 3, the oil furnace standard increases to 83-percent AFUE, while the 

mobile home furnace standard increases to 90-percent AFUE in the North. At TSL 3, 

DOE estimates impacts on INPV to range from -$17 million to -$20 million, or a change 

in INPV of -11.6 percent to -13.5 percent. At this level, industry free cash flow is 

estimated to decrease by approximately 54.0 percent to $5.1 million, compared to the 

base-case value of $11.0 million, in the year 2015. 

TSL 3 would require the addition of a secondary heat exchanger for mobile home 

furnace products sold in the North. As a result, mobile home furnace manufacturers could 

incur conversion costs for redesigns and tooling. Oil furnace manufacturers would likely 

need to increase the surface area of heat exchangers. DOE estimates conversion costs for 

the entire industry to meet the TSL 3 to be $15 million. 

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TSL 4 represents the consensus agreement level and incorporates accelerated 

compliance dates. The mobile home furnace standard and the oil furnace standard do not 

vary from TSL 3. DOE estimates impacts on INPV to range from -$24 million to -$29 

million, or a change in INPV of -16.4 percent to -19.6 percent. At this level, industry free 

cash flow is estimated to decrease by approximately 11.5 percent to $9.8 million, 

compared to the base-case value of $11.0 million, in the year 2015. 

The accelerated compliance dates of TSL 4 lead to earlier investments by 

manufacturers. The production line changes necessary to produce secondary heat 

exchangers for mobile home furnace products and larger heat exchanges for oil furnaces 

would need to occur before the standards year 2013. Manufacturers could incur 

conversion costs for redesigns and additional tooling totaling $15 million. There is a 

decrease in INPV in TSL 4, as compared to TSL 3, due to the earlier commoditization 

impacts of the accelerated compliance dates. In TSL 4, INPV decreases 4.8 percent to 

6.1 percent lower than in TSL 3. 

TSL 5 and TSL 6 represent an increase in standards for mobile home furnaces and 

oil furnaces above the level set in TSL 1 through TSL 4. The standard in the North for 

mobile home furnaces increases to 96-percent AFUE, and the national standard for oil 

furnaces increases to 85-percent AFUE. TSL 5 and TSL 6 require compliance in 2016. 

DOE estimates impacts on INPV to range from -$18 million to -$36 million, or a change 

in INPV of -12.1 percent to -23.8 percent. At this level, industry free cash flow is 

391 
 

 

 

 

 

 

 

 

 

estimated to decrease by approximately 86.0 percent to $1.6 million, compared to the 

base-case value of $11 million, in the year 2015. 

TSL 5 and TSL 6 would raise the standard in the North for mobile home furnaces 

to the max-tech level (i.e., 96-percent AFUE). At this level, all mobile home furnaces in 

the North would be required to be condensing. This change would drive the increase in 

conversion cost, as manufacturers work on condensing furnace designs that function 

within the physical dimension and price constraints of the mobile home market. Mobile 

home furnace manufacturers would no longer be able to differentiate products based on 

efficiency. In interviews, manufacturers noted that the loss of product differentiation 

would lead to increased focus on cost competitiveness. Given the size of the mobile home 

furnace market (approximately 120,000 units per year) and manufacturer feedback that 

the mobile home market is highly price sensitive, a number of manufacturers could 

choose to exit the market rather than compete at this efficiency level. Additionally, TSL 5 

and TSL 6 would increase the standard for oil furnaces to 85-percent AFUE. To reach 

this level, manufacturers would continue to increase the surface area of heat exchangers, 

incurring additional production costs and higher raw material costs. Conversion costs for 

TSL 5 and TSL 6 are $24 million. At this cost, it is possible that some oil furnace 

manufacturers would exit the business. 

TSL 7 raises the standard for oil furnaces and mobile home furnaces to max-tech. 

DOE estimates impacts on INPV to range -$40 million to -$55 million, or a change in 

INPV of -26.7 percent to -36.7 percent. At this considered level, industry free cash flow 

392 
 

 

 

 

 

 

 

 

 

 

is estimated to decrease by approximately 193 percent to -$9.2 million, compared to the 

base-case value of $11 million, in the year 2015. 

TSL 7 sets a national standard for oil furnaces at the max-tech level (i.e., 97­

percent AFUE). This efficiency level would require the development of condensing oil 

furnaces as the baseline product. DOE was only able to identify one domestic 

manufacturer offering a condensing oil furnace. The development of cost-effective, 

reliable, and durable oil furnace products would require significant capital expenditures 

by a majority of the industry. It is unclear how many manufacturers would make the 

product conversion investment to compete in a market that supplies fewer than 80,000 

units/year and, according to most manufacturers, is shrinking. However, given the limited 

size of the oil furnace market and the market’s declining shipments, it could be expected 

that a number of manufacturers would choose to leave the market rather than compete at 

this efficiency level. DOE expects a similar effect in the mobile home furnace market. 

(iii) Cash-Flow Analysis Results for Standby Mode and Off Mode Standards 

Table V.22. Standby Mode and Off Mode Impacts for Furnace, Central Air 

Conditioning, and Heat Pump Products Under the Preservation of Gross Margin 

Percentage Scenario 

Units Base Case Standby Mode and Off Mode TSL 

1 2 3 

INPV 2009$ 

millions 8,711 8,715 8,716 8,734 

Change in INPV 2009$ 

millions n/a 4 5 23 

(%) n/a 0.05 0.06 0.26 

Product 

Conversion Costs 

2009$ 

millions n/a 2.77 2.77 2.77 

Capital Conversion 

Costs 

2009$ 

millions n/a 0 0 0 

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Total Investment 

Required 

2009$ 

millions n/a 2.77 2.77 2.77 

Table V.23. Standby Mode and Off Mode Impacts for Furnace, Central Air 

Conditioning, and Heat Pump Products Under the Preservation of EBIT scenario 

Units Base 

Case 

Standby Mode and Off Mode TSL 

1 2 3 

INPV 2009$ 

millions 8,711 8,458 8,457 8,456 

Change in INPV 2009$millions n/a (253) (253) (255) 

(%) n/a (2.91) (2.91) (2.93) 

Product 

Conversion Costs 

2009$ 

millions n/a 2.77 2.77 2.77 

Capital Conversion 

Costs 

2009$ 

millions n/a 0 0 0 

Total Investment 

Required 

2009$ 

millions n/a 2.77 2.77 2.77 

Parentheses indicate negative (-) values. 

The preservation of gross margin percentage and preservation of EBIT markup 

scenarios for the standby mode and off mode analysis provide similar results. DOE 

estimates impacts on INPV to range from $23 million to -$255 million, or a change in 

INPV of 0.26 percent to -2.93 percent. These results include the impacts of conversion 

costs, estimated at $2.8 million for the industry. DOE estimated total conversion costs to 

be similar at all three standby mode and off mode TSLs, because the levels of R&D, 

testing, and compliance expenditures do not vary dramatically. Furthermore, DOE did not 

identify significant changes to manufacturer production processes that would result from 

standby mode and off mode standards. In general, the range of potential impacts resulting 

from the standby mode and off mode standards is small when compared to the range of 

potential impacts resulting from the energy efficiency standards. 

394 
 

 

 

 

 

 

 

 

 

 

 

b. Impacts on Employment 

DOE quantitatively assessed the impacts of amended energy conservation 

standards on domestic employment. DOE used the GRIM to estimate the domestic labor 

expenditures and number of domestic production workers in the base case and at each 

energy efficiency TSL from 2010 to 2045. DOE used statistical data from the U.S. 

Census Bureau’s 2008 Economic Census,

95 the results of the engineering analysis, and 

interviews with manufacturers to determine the inputs necessary to calculate industrywide labor expenditures and domestic employment levels. Labor expenditures resulting 

from the manufacture of products are a function of the labor intensity of the product, the 

sales volume, and an assumption that wages remain fixed in real terms over time. 

In the GRIM, DOE used the labor content of each product and the manufacturing 

production costs from the engineering analysis to estimate the annual labor expenditures 

in the industry. DOE used Census data and interviews with manufacturers to estimate the 

portion of the total labor expenditures that is attributable to U.S. (i.e., domestic) labor. 

The production worker estimates in this section only cover employment up to the 

line-supervisor level for functions involved in fabricating and assembling a product 

within a manufacturer facility. Workers performing services that are closely associated 

with production operations, such as material handing with a forklift, are also included as 

production labor. DOE’s estimates only account for production workers who manufacture 

the specific products covered by this rulemaking. For example, even though a 

95 Annual Survey of Manufacturing: 2006. American FactFinder. 2008. Bureau of the Census (Available 

at: < http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=AM0631GS101>). 

395 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

manufacturer may also produce hearth products, a worker on a hearth product line would 

not be included with the estimate of the number of residential furnace workers. 

Impact on employment results are based on analysis of energy efficiency 

standards. For standby mode and off mode, the technology options considered in the 

engineering analysis result in component swaps, which do not add significant product 

complexity. While some product development effort will be required, DOE does not 

expect the standby mode and off mode standard to meaningfully affect the amount of 

labor required in production. Therefore, the standby and off mode would not result in 

significant changes to employment calculations based on the energy efficiency TSLs. 

The employment impacts shown in Table V.24 represent the potential production 

employment that could result following the adoption of amended energy conservation 

standards. The upper end of the results in the table estimates the maximum change in the 

number of production workers after amended energy conservation standards must be met. 

The upper end of the results assumes that manufacturers would continue to produce the 

same scope of covered products in the same production facilities, or in new or expanded 

facilities located in the United States. The upper end of the range, therefore, assumes that 

domestic production does not shift to lower-labor-cost countries. Because there is a real 

risk of manufacturers evaluating sourcing decisions in response to amended energy 

conservation standards, the lower end of the range of employment results in Table V.24 

includes the estimated total number of U.S. production workers in the industry who could 

lose their jobs if all existing production were moved outside of the U.S. Finally, it is 

396 
 

 

 

noted that the employment impacts shown are independent of the employment impacts to 

the broader U.S. economy, which are documented in chapter 13 of the direct final rule 

TSD. 

Using the GRIM, DOE estimates that in the absence of amended energy 

conservation standards, there would be 16,902 domestic production workers involved in 

manufacturing residential furnaces, central air conditioners, and heat pumps in 2016. 

Using 2008 Census Bureau data and interviews with manufacturers, DOE estimates that 

approximately 89 percent of products sold in the United States are manufactured 

domestically. Table V.24 shows the range of the impacts of potential amended energy 

conservation standards on U.S. production workers in the residential furnace, central air 

conditioner, and heat pump market. The table accounts for both conventional products 

and niche furnace products. 

Table V.24. Potential Changes in the Total Number of Residential Furnace, Central 

Air Conditioner, and Heat Pump Production Workers in 2016 

Trial Standard Level 

Base 

Case 

1 2 3 4 5 6 7 

Total 

Number of 

Domestic 

Production 

Workers in 

2016 

16,90 

2 16,998 17,242 17,48 5 17,746 17,940 17,998 18,102 

(without 

facilities 

moving 

offshore) 

Potential 96 ­ 340 ­ 583 ­ 844 ­ 1038 ­ 1096 ­ 1200 ­

Changes in n/a (16,902 (16,902 (16,90 (16,902 (16,902 (16,902 (16,902 

Domestic ) ) 2) ) ) ) ) 

397 
 

 

 

 

 

 

 

 

 

 

Production 

Workers in 

2016* 

*DOE presents a range of potential employment impacts. 

Parentheses indicate negative (-) values. 

Based on the GRIM analysis, DOE estimates that there would be positive 

employment impacts among conventional residential furnace, central air conditioner, and 

heat pump manufacturers at the upper bound of the employment estimates. This effect 

occurs because the required labor content increases per product at higher efficiency 

levels, and the analysis assumes manufacturers do not alter the current mix of domestic 

and international production. DOE believes the assumption for the employment scenarios 

become less realistic at the most stringent TSLs when complete technology changes 

would likely require the development of new manufacturing plants. 

c. Impacts on Manufacturing Capacity 

(i) Conventional Furnaces, Central Air Conditioners, and Heat Pumps 

Most manufacturers currently have excess production capacity, reflected in part 

by the substantial decline in shipments since the height of the housing boom in 2005. 

Manufacturers did not express major capacity-related concerns at the efficiency levels 

included at TSL 1, 2, and 3. Additionally, manufacturers did not express concerns about 

the production capacity at TSL 4, which includes accelerated compliance dates arising 

out of the consensus agreement. All major manufacturers that were interviewed agreed 

that the timelines in TSL 4 could be met and that no capacity shortages were likely to 

occur. 

398 
 

 

 

 

 

 

 

 

 

 

 

 

At TSL 5, the standard levels for all central air conditioners and heat pumps 

product classes would be the same as at TSL 4, so DOE does not anticipate capacity 

impacts for these products. For non-weatherized gas furnaces, TSL 5 would be more 

challenging for manufacturers because of the 95-percent AFUE standard in the North (as 

opposed to the 90-percent AFUE standard in the North in TSL 4). However, because the 

regional standard in the South is set at the baseline efficiency, manufacturers would not 

have to redesign all production lines. Additionally, TSL 5 allows for an additional 3 years 

beyond TSL 4’s consensus timeline for manufacturers to ramp up production capabilities. 

Therefore, DOE does not believe there would be any impact on manufacturing capacity 

from TSL 1 to TSL 5. 

At the efficiency levels included in TSL 6 and TSL 7, manufacturers were 

concerned that the changes in technology could impose production capacity constraints in 

the near to medium term. At TSL 6, the higher energy conservation standard would 

increase industry demand for some key components and tooling over current levels. All 

major manufacturers would seek to increase their purchasing volumes of high-efficiency 

compressors, ECM motors, and production tooling during the same timeframe. Given that 

the industry relies on a limited number of suppliers for these parts, some manufacturers 

expressed concern that a bottleneck in the supply chain could create production 

constraints. 

At TSL 7, the major domestic manufacturers of split-system air conditioners and 

heat pumps would likely need to redesign all of their existing products to incorporate 

399 
 

 

 

 

 

 

 

 

 

more-efficient technologies for residential applications. If manufacturers chose not to or 

could not afford to develop new technologies, they would likely need to significantly 

enlarge the products’ exchangers, which in turn would require a redesign of their 

production lines to accommodate significantly larger units or to add a second compressor. 

This increased demand for components and production tooling could lead to short-term 

constraints on production. Manufacturers would face similar concerns with nonweatherized gas furnaces. Manufacturers would have to redesign all product lines to 

incorporate burner modulation technology, which would include adding modulating gas 

valves, variable-speed inducer fans, and more-sophisticated controls. The coinciding 

demand for modulating gas valves and variable-speed inducer fans from seven major 

manufacturers could potentially create supply chain constraints. 

In summary, production capacity implications for the conventional product 

classes would be most severe at TSL 6 and TSL 7. 

(ii) Niche Furnace Products 

According to the manufacturers of oil furnace and mobile home furnace products, 

amended energy conservation standards should not significantly affect production 

capacity, except at the max-tech levels (where condensing operation would be required). 

According to manufacturers interviewed, these capacity-related concerns are focused on 

the technical feasibility of increasing oil furnace efficiency to condensing levels. Most 

manufacturers have not found a design that reliably delivers performance above 95­

percent AFUE. Some manufacturers indicated that they would not be able to produce 

400 
 

 

 

 

 

 

 

 

products at the condensing level until the sulfur content of heating oil was regulated and 

substantially lowered in key markets. 

d. Impacts on Sub-Groups of Small Manufacturers 

As discussed in section IV.I.1, using average cost assumptions to develop an 

industry cash-flow estimate is not adequate for assessing differential impacts among 

manufacturer subgroups. Small manufacturers, niche equipment manufacturers, and 

manufacturers exhibiting a cost structure substantially different from the industry average 

could be affected disproportionately. DOE used the results of the industry 

characterization to group manufacturers exhibiting similar characteristics. Consequently, 

DOE identified two sub-groups for analysis: (1) small manufacturers and (2) SDHV 

manufacturers. 

(i) Small Manufacturers Sub-Group 

DOE evaluated the impact of amended energy conservation standards on small 

manufacturers, specifically ones defined as “small businesses” by the U.S. Small 

Business Administration (SBA). The SBA defines a “small business” as having 750 

employees or less for NAICS 333415, “Air-Conditioning and Warm Air Heating 

Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing.” 

Based on this definition, DOE identified four niche central air conditioner and heat pump 

manufacturers and five niche furnace manufacturers that are classified as small 

businesses. DOE describes the differential impacts on these small businesses in today’s 

notice at section VI.B, Review Under the Regulatory Flexibility Act. 

401 
 

 

 

 

 

 

 

 

 

 

 

 

 

Section VI.B concludes that larger manufacturers could have a competitive 

advantage in multiple niche product markets due to their size and ability to access capital. 

Additionally, in some market segments, larger manufacturers have significantly higher 

production volumes over which to spread costs. The Department cannot certify today’s 

rule would not have a significant economic impact on a substantial number of small 

manufacturers. However, DOE has carefully considered these potential impacts and has 

sought to mitigate any such impacts in today’s rule. For a complete discussion of the 

impacts on small businesses, see chapter 12 of the direct final rule TSD. 

(ii) Small-Duct, High-Velocity Manufacturers Sub-Group 

Small-duct, high-velocity systems serve a niche within the residential air 

conditioning market. A SDHV system consists of a non-conventional indoor unit and air 

distribution system (produced by the SDHV manufacturer) mated to a conventional 

outdoor unit (produced by split-system manufacturers). These SDHV systems typically 

make use of flexible ducting and operate at a higher static pressure than conventional air 

conditioning systems. This product class makes up less than 0.5 percent of central air 

conditioning shipments. DOE estimates the total market size to be less than 30,000 units 

per year. 

SDHV systems are primarily installed in existing structures that do not have air 

conditioning duct work. In this application, SDHV systems are often a more costeffective solution for centralized cooling because conventional systems may require 

402 
 

 

 

 

 

substantial installation and retrofit costs to install ducting. The SDHV system delivers 

conditioned air via small diameter flexible tubing, which requires less space than 

conventional ductwork. SDHV systems are often paired with hydronic heat, radiant heat, 

and ground temperature heat pump systems. Historically, approximately 80 percent of 

shipments have been for the retrofit market, and 20 percent of shipments have been for 

the new construction market. 

DOE has identified three manufacturers of SDHV systems that serve the U.S. 

market. The two domestic manufacturers, Unico Systems and SpacePak, serve the 

majority of the market. SpacePak is a subsidiary of MesTek Inc., a U.S. holding company 

with over 30 specialty manufacturing brands. Unico is a small business, as defined by the 

SBA. 

DOE’s analysis of AHRI Directory product listings indicates that the primary 

difference between SDHV products rated at 11 SEER and SDHV products rated above 11 

SEER is the paired condensing unit. The indoor unit, which is the component designed 

and manufactured by SpacePak and Unico, does not change as the AHRI-certified 

efficiency increases. SpacePak and Unico are reaching higher efficiencies by pairing their 

products with larger condensing units, which are produced by conventional air 

conditioning and heat pump manufacturers. 

According to SDHV manufacturers, the small size of the SDHV industry limits 

influence on key suppliers. As a result, SDHV manufacturers must choose from stock fan 

403 
 

 

 

 

 

 

 

 

 

 

 

motors, compressors, and products that are optimized for other applications and 

industries. The selection of available components limits the technology options available 

to SDHV manufacturers, thereby constraining the manufacturers’ ability to achieve 

efficiencies above 11 SEER through improved product design. Interviewed SDHV 

manufacturers indicated that they are near max-tech for the SDHV indoor unit with 

today’s standards and available components. 

In 2004, both Unico and SpacePak petitioned DOE’s Office of Hearings and 

Appeals (OHA) for exception relief from the 13 SEER energy efficiency standard found 

at 10 CFR 430.32(c)(2), with which compliance was required for products manufactured 

on or after January 23, 2006. OHA granted both petitions on October 14, 2004.96 

Accordingly, the manufacturers were authorized to produce equipment that performed at 

11 SEER / 6.8 HSPF and above. In their 2004 application for exception relief, SpacePak 

and Unico both indicated that a 13 SEER standard would create significant hardships for 

the SDHV industry. SpacePak wrote in its application for exception relief that an absence 

of relief would lead to “the loss of all sales within the Unites States.” As part of the 2004 

OHA Decision and Order (case #TEE-0010), Lennox International filed comments 

stating that “it agrees these [SDHV] products would be unfairly burdened by...the 13 

SEER/7.7 HSPF minimum level.” 

Since 2004, SDHV manufacturers have been able to reach efficiencies of 13 

SEER, but the vast majority of products listed in the AHRI Directory are below 13 SEER 

96 Department of Energy: Office of Hearings and Appeals, Decision and Order, Case #TEE 0010 (2004) 

(Available at: http://www.oha.doe.gov/cases/ee/tee0010.pdf) (last accessed September 2010). 

404 
 

 

 

 

 

 

 

 

 

 

(see chapter 3 of the direct final rule TSD for a distribution of SDHV systems by 

efficiency level). This improved efficiency is primarily the result of pairing their products 

with higher-efficiency outdoor units produced by other manufacturers. One manufacturer 

has incorporated variable-speed technology to improve product efficiency. However, 

overall, SDHV manufacturer still face many of the same challenges they faced in 2004 

and have limited options for further improving the efficiency of the air handling unit, 

which is the only component designed and produced by SDHV manufacturers. As a 

result, higher standards would force SDHV manufactures to pair their products with more 

expensive, higher-efficiency outdoor units to provide performance that meets energy 

conservation standards. TSL 1 through TSL 5 would require only the baseline efficiency 

level (13 SEER), while TSL 6 and TSL 7 would increase the level to 14 SEER and 14.5 

SEER, respectively. DOE believes the increases represented by TSL 6 and TSL 7 would 

significantly adversely impact the financial standing of SDHV manufacturers. As 

discussed in their 2004 application for exception relief, such an increase would likely 

significantly depress shipments because it would require additional controls and a much 

more expensive outdoor unit. As a result manufacturers would be forced to spread fixed 

costs over a lower volume and would be less able to pass on the higher incremental costs. 

Manufacturers would face increasingly difficult decisions regarding the investment of 

resources toward what would likely be a much smaller market. 

e. Cumulative Regulatory Burden 

While any one regulation may not impose a significant burden on manufacturers, 

the combined effects of several impending regulations may have serious consequences 

405 
 

 

 

 

for some manufacturers, groups of manufacturers, or an entire industry. Assessing the 

impact of a single regulation may overlook this cumulative regulatory burden. In addition 

to DOE energy conservation standards, other regulations can significantly affect 

manufacturers’ financial operations. Multiple regulations affecting the same 

manufacturer can strain profits and can lead companies to abandon product lines or 

markets with lower expected future returns than competing products. For these reasons, 

DOE conducts an analysis of cumulative regulatory burden as part of its rulemakings 

pertaining to appliance efficiency. 

During previous stages of this rulemaking, DOE identified a number of 

requirements, in addition to amended energy conservation standards for furnaces, central 

air conditioners, and heat pumps, that manufacturers of these products will face for 

products they manufacture within three years prior to and three years after the anticipated 

compliance date of the amended standards. These requirements included DOE’s amended 

energy conservation standards for other products produced by the manufacturers covered 

under this rulemaking. Amended energy conservation standards coming into effect during 

the analysis period that are expected to affect at least a subset of the manufacturers 

include the rulemakings for residential boilers, packaged terminal air 

conditioners/packaged terminal heat pumps, furnace fans, room air conditioners, and 

residential water heaters. DOE discusses these requirements in greater detail in chapter 

12 of the direct final rule TSD. 

406 
 

 

 

 

 

 

 

 

 

 

 

 

 

The most common regulatory burden concern raised by manufacturers during 

interviews was the potential phase-down of HFCs. While no phase-down is currently 

required, air conditioning and heat pump manufacturers raised these concerns because of 

HFC phase-down language in proposed legislation, such as H.R. 2454, the American 

Clean Energy and Security Act of 2009. Manufacturers cited concerns that a phase-down 

of HFC refrigerants could negatively impact product efficiency, product functionality, 

and manufacturing processes for central air conditioners and heat pumps. Additionally, 

there is the potential for significant conversion costs as well as higher on-going costs for 

production. 

Furnace manufacturers also cited concerns about the cumulative burden 

associated with low NOX and ultra-low NOX standards adopted in the South Coast Air 

Quality Management District (SCAQMD) and other air quality districts of California for 

mobile home furnaces, weatherized gas furnaces, and non-weatherized gas furnaces.97 

Manufacturers stated that these standards will require R&D resources, which may be 

limited due to conversion costs associated with Federal standards. 

Several manufacturers indicated that Canada has programs in place that regulate 

products covered in this rulemaking. DOE research indicates that Natural Resources 

Canada (NRCan) regulates residential furnaces, central air conditioners and heat pumps, 

and furnace fans.98 

97 California Air Resources Board, South Coast AQMD List of Current Rules (2010) (Available at:
 

http://www.arb.ca.gov/drdb/sc/cur.htm) (last accessed September 2010).
 98 Natural Resources Canada, Canada's Energy Efficiency Regulations (2009) (Available at: 

http://oee.nrcan.gc.ca/regulations/guide.cfm) (last accessed October 2010).
 

407 
 

 

 

 

 

 

 

 

 

 

 

 

 

DOE discusses these and other requirements, and includes the full details of the 

cumulative regulatory burden, in chapter 12 of the direct final rule TSD. 

3. National Impact Analysis 

This section presents DOE’s estimates of the national energy savings and the 

NPV of consumer benefits that would result from each of the TSLs considered as 

potential amended furnace, central air conditioner, and heat pump energy efficiency 

standards, as well as from each of the TSLs considered as potential standards for standby 

mode and off mode. 

In estimating national energy savings and the NPV of consumer benefits, for 

TSLs 2, 3, and 4, DOE calculated a range of results that reflect alternative assumptions 

with respect to how the market for non-weatherized and mobile home furnaces will 

respond to a standard at 90-percent or 92-percent AFUE. DOE believes that the response 

of the market to a standard at either of these efficiency levels is sufficiently uncertain that 

it is reasonable to use a range to represent the expected impacts. The low end of the range 

reflects the approach to forecasting standards-case efficiency distributions described in 

section IV.G.2. With this approach, the part of the market that was below the amended 

standard level rolls up to the amended standard level in the year of compliance, and some 

fraction of shipments remains above the minimum. The high end of the range reflects the 

possibility that, under an amended standard that requires a minimum AFUE of 90 percent 

or 92 percent, the entire market will shift to 95 percent because the additional installed 

408 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

cost, relative to 90-percent or 92-percent AFUE, is minimal. In both cases, the approach 

to forecasting the change in efficiency in the years after the year of compliance is the 

same. 

a. Significance of Energy Savings 

To estimate the energy savings attributable to potential standards for furnaces, 

central air conditioners, and heat pumps, DOE compared the energy consumption of these 

products under the base case to their anticipated energy consumption under each TSL. As 

discussed in section IV.E, the results account for a rebound effect of 20 percent for 

furnaces, central air conditioners, and heat pumps (i.e., 20 percent of the total savings 

from higher product efficiency are “taken back” by consumers through more intensive 

use of the product). 

Table V.25 presents DOE’s forecasts of the national energy savings for each TSL 

considered for energy efficiency, and Table V.26 presents DOE’s forecasts of the 

national energy savings for each TSL considered for standby mode and off mode power. 

The savings were calculated using the approach described in section IV.G. Chapter 10 of 

the direct final rule TSD presents tables that also show the magnitude of the energy 

savings if the savings are discounted at rates of 7 percent and 3 percent. Discounted 

energy savings represent a policy perspective in which energy savings realized farther in 

the future are less significant than energy savings realized in the nearer term. 

Table V.25 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative 

National Energy Savings for Energy Efficiency TSLs for 2016-2045 

409 
 

 

 

 

 

 

Trial Standard Level Quads 

1 0.18 

2 2.32 to 2.91 

3 2.97 to 3.84 

4* 3.20 to 4.22 

5 3.89 

6 5.91 

7 19.18 

Deleted: 167 

Deleted: 96 

Deleted: 92 

Deleted: 24 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the energy 

savings from 2015 through 2045 for central air conditioners and heat pumps, and from 2013 through 2045 

for furnaces. 

Table V.26 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative Deleted: . 

National Energy Savings for Standby Mode and Off Mode Power TSLs for 2016-

2045 

Trial Standard Level Quads 

1 0.153 

2 0.16 

3 0.186 

DOE also conducted a sensitivity analysis that reflects alternate assumptions 

regarding the market demand for split-system coil-only air conditioner replacement units 

at 15 SEER and above in the standards cases (see section IV.G.2 for details). Table V.27 

shows the NES results for this sensitivity analysis. 

Table V.27 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative 

National Energy Savings for Energy Efficiency TSLs for 2016-2045 (Alternate 

Assumptions for Split-system Coil-only Air Conditioner Replacement Market) 

Trial Standard Level Quads 

1 0.20 

2 2.34 to 2.93 

3 2.91 to 3.78 

4* 3.14 to 4.16 

5 3.83 

6 5.69 

7 19.01 

410 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the energy 

savings from 2015 through 2045 for central air conditioners and heat pumps, and from 2013 through 2045 

for furnaces. 

b. Net Present Value of Consumer Costs and Benefits 

DOE estimated the cumulative NPV to the Nation of the total costs and savings 

for consumers that would result from particular standard levels for furnaces, central air 

conditioners, and heat pumps. In accordance with the OMB’s guidelines on regulatory 

analysis,99 DOE calculated NPV using both a 7-percent and a 3-percent real discount rate. 

The 7-percent rate is an estimate of the average before-tax rate of return to private capital 

in the U.S. economy, and reflects the returns to real estate and small business capital as 

well as corporate capital. DOE used this discount rate to approximate the opportunity cost 

of capital in the private sector, since recent OMB analysis has found the average rate of 

return to capital to be near this rate. In addition, DOE used the 3-percent rate to capture 

the potential effects of standards on private consumption (e.g., through higher prices for 

products and the purchase of reduced amounts of energy). This rate represents the rate at 

which society discounts future consumption flows to their present value. This rate can be 

approximated by the real rate of return on long-term government debt, which has 

averaged about 3 percent on a pre-tax basis for the last 30 years. 

Table V.28 shows the consumer NPV for each considered energy efficiency TSL 

for furnaces, central air conditioners, and heat pumps, using both a 7-percent and a 3­

percent discount rate, and Table V.29 shows the consumer NPV results for each TSL 

99 OMB Circular A-4, section E (Sept. 17, 2003). Available at: 

http://www.whitehouse.gov/omb/circulars_a004_a-4. 

Comment [A11]: Changes recommended by 

OIRA. 

411 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

DOE considered for standby mode and off mode power. For all TSLs except TSL 4 (the 

level corresponding to the consensus agreement), the impacts cover the lifetime of 

products purchased in 2016-2045; for TSL 4, the impacts cover the lifetime of products 

purchased in 2013–2045 for furnaces and in 2015-2045 for central air conditioners and 

heat pumps. See chapter 10 of the direct final rule TSD for more detailed NPV results. 

Table V.28 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative Net 

Present Value of Consumer Benefits for Energy Efficiency TSLs for Products 

Shipped in 2016-2045 

Trial Standard Level 3-percent Discount Rate 7-percent Discount Rate 

Billion 2009$ 

1 0.76 0.23 

2 10.61 to 11.56 2.60 to 2.41 

3 13.35 to 15.29 3.36 to 3.36 

4* 14.73 to 17.55 3.93 to 4.21 

5 15.69 3.47 

6 8.18 (2.56) 

7 (45.12) (44.98) 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the 

consumer benefits for products sold in 2015-2045 for central air conditioners and heat pumps, and in 2013­

2045 for furnaces. 

Parentheses indicate negative (-) values. 

Table V.29 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative Net 

Present Value of Consumer Benefits for Standby Mode and Off Mode Power TSLs 

for Products Shipped in 2016-2045 

Trial Standard Level 3-percent Discount Rate 7-percent Discount Rate 

Billion 2009$ 

1 1.14 0.371 

2 1.18 0.373 

3 1.01 0.235 

Deleted: 62 

Deleted: 16 

Deleted: 64 

Deleted: 58 

Deleted: 42 

Deleted: 61 

Deleted: 24 

Deleted: 18 

Deleted: 301 

Deleted: 304 

Deleted: 62 

Deleted: 44 

Deleted: 86 

Deleted: 14 

Deleted: 58 

Deleted: 41 

Deleted: 7.45 

Deleted: 99 

Deleted: 44.51 

Deleted: 90 

Deleted: . 

Parentheses indicate negative (-) values. 

DOE also conducted a sensitivity analysis that reflects alternate assumptions 

regarding the market demand for split-system coil-only air conditioner replacement units 

412 
 

 

 

 

 

 

 

 

 

 

 

 

at 15 SEER and above in the standards cases (see section IV.G.2 for details). Table V.30 

shows the consumer NPV results for this sensitivity analysis. 

Table V.30 Furnaces, Central Air Conditioners, and Heat Pumps: Cumulative Net 

Present Value of Consumer Benefits for Energy Efficiency TSLs for Products 

Shipped in 2016-2045 (Alternate Assumptions for Split-system Coil-only Air 

Conditioner Replacement Market) 

Trial Standard Level 3-percent Discount Rate 7-percent Discount Rate 

Billion 2009$ 

1 0.87 0.26 

2 10.71 to 11.65 2.63 to 2.45 

3 14.32 to 16.27 3.74 to 3.75 

4* 15.71 to 18.53 4.31 to 4.59 

5 16.66 3.85 

6 10.36 (1.68) 

7 (38.87) (42.47) 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the 

consumer benefits for products sold in 2015-2045 for central air conditioners and heat pumps, and in 2013­

2045 for furnaces. 

Parentheses indicate negative (-) values. 

DOE also investigated the impact of different learning rates on the NPV for the 

seven energy efficiency TSLs. The NPV results presented in Table V.28 are based on 

learning rates of 18.1 percent for central air conditioners and heat pumps, and 30.6 

percent for furnaces, both of which are referred to as the “default” learning rates. DOE 

considered three learning rate sensitivities: (1) a “high learning” rate; (2) a “low learning” 

rate; and (3) a “no learning” rate. The “high learning”’ rates are 20.5 percent for central 

air conditioners and heat pumps and 33.3 percent for furnaces. The “low learning” rates 

are 11.5 percent for central air conditioners and heat pumps and 19.2 percent for 

furnaces. The “no learning” rate sensitivity assumes constant real prices over the entire 

forecast period. Refer to appendix 8-J of the TSD for details on the development of the 

above learning rates. 

413 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.31 provides the annualized NPV of consumer benefits at a 7-percent 

discount rate, combined with the annualized present value of monetized benefits from 

CO2 and NOX emissions reductions, for each of the energy efficiency TSLs for the 

“default” learning rate and the three sensitivity cases. (DOE’s method for annualization is 

described in section V.C.3 of this notice.) Table V.32 provides the same combined 

annualized NPVs using a 3-percent discount rate. (Section V.B.6 below provides a 

complete description and summary of the monetized benefits from CO2 and NOX 

emissions reductions.) For details on these results, see appendix 10-C of the direct final 

rule TSD. 

Table V.31 Furnaces, Central Air Conditioners, and Heat Pumps: Annualized Net 

Present Value of Consumer Benefits (7-percent Discount Rate) and Annualized 

Present Value of Monetized Benefits from CO2 and NOX Emissions Reductions** 

for Energy Efficiency TSLs for Products Shipped in 2016-2045 

Learning Rate (LR) 

Trial 

Standard 

Level 

Default: 

LRCAC-HP = 18.1% 

LRFURN = 30.6% 

High Sensitivity: 

LRCAC-HP = 20.5% 

LRFURN = 33.3% 

Low Sensitivity: 

LRCAC-HP = 11.5% 

LRFURN = 19.2% 

No Learning: 

LR = 0% 

(constant real prices) 

Billion 2009$ 

1 0.036 0.037 0.034 0.028 

2 0.304 to 0.287 0.309 to 0.294 0.285 to 0.258 0.242 to 0.195 

3 0.414 to 0.437 0.421 to 0.448 0.389 to 0.400 0.328 to 0.312 

4* 0.456 to 0.517 0.464 to 0.528 0.430 to 0.479 0.366 to 0.387 

5 0.451 0.462 0.414 0.326 

6 0.075 0.106 (0.016) (0.266) 

7 (2.497) (2.360) (2.890) (3.998) 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the 

consumer benefits for products sold in 2015-2045 for central air conditioners and heat pumps, and in 2013­

2045 for furnaces.
 

Parentheses indicate negative (-) values.
 

** The economic benefits from reduced CO2 emissions were calculated using a SCC value of $22.1/metric 

ton in 2010 (in 2009$) for CO2, increasing at 3% per year, and a discount rate of 3%. The economic 

benefits from reduced NOX emissions were calculated using a value of $2,519/ton (in 2009$), which is the 

average of the low and high values used in DOE’s analysis, and a 7-percent discount rate. 

414 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.32 Furnaces, Central Air Conditioners, and Heat Pumps: Annualized Net 

Present Value of Consumer Benefits (3-percent Discount Rate) and Annualized 

Present Value of Monetized Benefits from CO2 and NOX Emissions Reductions** 

for Energy Efficiency TSLs for Products Shipped in 2016-2045 

Learning Rate (LR) 

Trial 

Standard 

Level 

Default: 

LRCAC-HP = 18.1% 

LRFURN = 30.6% 

High Sensitivity: 

LRCAC-HP = 20.5% 

LRFURN = 33.3% 

Low Sensitivity: 

LRCAC-HP = 11.5% 

LRFURN = 19.2% 

No Learning: 

LR = 0% 

(constant real prices) 

Billion 2009$ 

1 0.057 0.058 0.055 0.048 

2 0.639 to 0.685 0.646 to 0.694 0.611 to 0.644 0.553 to 0.559 

3 0.827 to 0.950 0.837 to 0.964 0.793 to 0.898 0.711 to 0.782 

4* 0.871 to 1.049 0.880 to 1.062 0.836 to 0.998 0.755 to 0.882 

5 0.976 0.990 0.924 0.807 

6 0.704 0.745 0.580 0.255 

7 (1.152) (0.972) (1.673) (3.094) 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the 

consumer benefits for products sold in 2015-2045 for central air conditioners and heat pumps, and in 2013­

2045 for furnaces. 

Parentheses indicate negative (-) values. 

** The economic benefits from reduced CO2 emissions were calculated using a SCC value of $22.1/metric 

ton in 2010 (in 2009$) for CO2, increasing at 3% per year, and a discount rate of 3%. The economic 

benefits from reduced NOX emissions were calculated using a value of $2,519/ton (in 2009$), which is the 

average of the low and high values used in DOE’s analysis, and a 3-percent discount rate. Comment [A12]: Changes recommended by 

OIRA. 

c. Indirect Impacts on Employment 

DOE develops estimates of the indirect employment impacts of potential 

standards on the economy in general. As discussed above, DOE expects amended energy 

conservation standards for furnaces, central air conditioners, and heat pumps to reduce 

energy bills for consumers of these products, and the resulting net savings to be 

redirected to other forms of economic activity. These expected shifts in spending and 

economic activity could affect the demand for labor. As described in section IV.J, to 

estimate these effects, DOE used an input/output model of the U.S. economy. Table V.33 

presents the estimated net indirect employment impacts in 2025 and 2045 for the energy 

efficiency TSLs that DOE considered in this rulemaking. Table V.34 shows the indirect 

415 
 

 

 

 

 

 

 

 

 

 

employment impacts of the standby mode and off mode TSLs. Chapter 13 of the direct 

final rule TSD presents more detailed results. 

Table V.33 Net Increase in Jobs from Indirect Employment Effects Under Furnace, 

Central Air Conditioner, and Heat Pump Energy Efficiency TSLs 

Trial Standard Level Jobs in 2025 Jobs in 2045 

1 1,000 500 

2 3,000 2,700 

3 5,400 6,100 

4 6,000 6,300 

5 6,400 6,300 

6 16,000 18,500 

7 60,200 81,400 

Table V.34 Net Increase in Jobs from Indirect Employment Effects Under Furnace, 

Central Air Conditioner, and Heat Pump Standby Mode and Off Mode Power TSLs
 

Trial Standard Level Jobs in 2025 Jobs in 2045 

1 320 800 

2 350 860 

3 420 1,020 

The input/output model suggests that today’s standards would be likely to 

increase the net demand for labor in the economy. However, the gains would most likely 

be very small relative to total national employment. Moreover, neither the BLS data nor 

the input/output model DOE uses includes the quality or wage level of the jobs. 

Therefore, DOE has concluded that today’s standards are likely to produce employment 

benefits sufficient to fully offset any adverse impacts on employment in the 

manufacturing industry for the furnaces, central air conditioners, and heat pumps that are 

the subjects of this rulemaking. 

416 
 

 

 

 

 

 

 

 

 

 

 

4. Impact on Utility or Performance of Products 

As presented in section III.D.1.d of this notice, DOE concluded that none of the 

TSLs considered in this notice would reduce the utility or performance of the products 

under consideration in this rulemaking. Furthermore, manufacturers of these products 

currently offer furnaces, central air conditioners, and heat pumps that meet or exceed 

today’s standards. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) 

5. Impact of Any Lessening of Competition 

DOE has also considered any lessening of competition that is likely to result from 

amended standards. The Attorney General determines the impact, if any, of any lessening 

of competition likely to result from a proposed standard, and transmits such 

determination in writing to the Secretary, together with an analysis of the nature and 

extent of such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (ii)) 

DOE is publishing a NOPR containing energy conservation standards identical to 

those set forth in today’s direct final rule and has transmitted a copy of today’s direct 

final rule and the accompanying TSD to the Attorney General, requesting that the DOJ 

provide its determination on this issue. DOE will consider DOJ’s comments on the rule in 

determining whether to proceed with the direct final rule. DOE will also publish and 

respond to DOJ’s comments in the Federal Register in a separate notice. 

417 
 

 

 

 

 

 

 

6. Need of the Nation to Conserve Energy 

An improvement in the energy efficiency of the products subject to today’s direct 

final rule is likely to improve the security of the Nation’s energy system by reducing 

overall demand for energy. Reduced electricity demand may also improve the reliability 

of the electricity system. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) As a measure of this reduced 

demand, Table V.35 and Table V.36 present the estimated reduction in generating 

capacity in 2045 for the TSLs that DOE considered in this rulemaking for energy 

efficiency and standby mode and off mode power, respectively. 

Table V.35 Reduction in Electric Generating Capacity in 2045 Under Considered 

Furnace, Central Air Conditioner, and Heat Pump Energy Efficiency TSLs 

Trial Standard Level Gigawatts 

1 0.397 

2 0.646 to 1.12 

3 3.61 to 3.53 

4 3.81 to 3.69 

5 3.56 

6 10.5 

7 35.6 

Table V.36 Reduction in Electric Generating Capacity in 2045 Under Considered 

Furnace, Central Air Conditioner, and Heat Pump Standby Mode and Off Mode 

Power TSLs 

Trial Standard Level Gigawatts 

1 0.103 

2 0.110 

3 0.127 

Energy savings from amended standards for furnaces, central air conditioners, and 

heat pumps could also produce environmental benefits in the form of reduced emissions 

418 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

of air pollutants and greenhouse gases associated with electricity production, and also 

reduced site emissions. Table V.37 provides DOE’s estimate of cumulative CO2, NOX, 

and Hg emissions reductions that would be expected to result from each of the TSLs 

considered in this rulemaking for energy efficiency standards, and Table V.38 provides 

the results for each of the TSLs considered for standby mode and off mode power 

standards. In the environmental assessment (chapter 15 in the direct final rule TSD), 

DOE reports annual CO2, NOX, and Hg emissions reductions for each considered TSL. 

As discussed in section 2 emissions reductions 

from power plants, because there is uncertainty about the effect of energy conservation 

standards on the overall level of SO2 emissions in the United States due to SO2 emissions 

caps. DOE also did not include NOX emissions reduction from power plants in States 

subject to CAIR because an amended energy conservation standard would not affect the 

overall level of NOX emissions in those States due to the emissions caps mandated by 

CAIR. 

Table V.37 Cumulative Emissions Reduction for 2016-2045 Under Furnace, Central 

Air Conditioner, and Heat Pump Energy Efficiency TSLs 

Trial Standard 

Level 

CO2 

million metric tons 

NOX 

thousand tons 

Hg 

tons 

1 15.2 12.3 0.022 

2 62.8 to 61.2 55.5 to 56.7 0.011 to (0.012) 

3 97.1 to 113 83.1 to 98.5 0.086 to 0.059 

4* 105 to 134 90.1 to 117 0.097 to 0.071 

5 116 102 0.059 

6 200 168 0.270 

7 772 640 1.160 

* For TSL 4, which matches the recommendations in the consensus agreement, DOE forecasted the 

Deleted: 14.3 

Deleted: 11.56 

Deleted: 3 

Deleted: 0 

Deleted: 0 

Deleted: 4 

Deleted: 0 

Deleted: 773 emissions reductions from 2015 through 2045 for central air conditioners and heat pumps, and from 2013
 

through 2045 for furnaces.
 

Parentheses indicate a negative value.
 

419 
 

 

 

 

 

 

 

Table V.38 Cumulative Emissions Reduction for 2016-2045 Under Furnace, Central 

Air Conditioner, and Heat Pump Standby Mode and Off Mode Power TSLs 

Trial Standard 

Level 

CO2 

million metric tons 

NOX 

thousand tons 

Hg 

tons 

1 8.23 6.60 0.056 

2 8.73 7.00 0.072 

3 10.1 8.11 0.079 

DOE also estimated monetary benefits likely to result from the reduced emissions 

of CO2 and NOX that DOE estimated for each of the TSLs considered for furnaces, 

central air conditioners, and heat pumps. In order to make this calculation similar to the 

calculation of the NPV of consumer benefit, DOE considered the reduced emissions 

expected to result over the lifetime of products shipped in the forecast period for each 

TSL. 

As discussed in section IV.M, a Federal interagency group selected four SCC 

values for use in regulatory analyses, which DOE used in the direct final rule analysis. 

The four SCC values (expressed in 2009$) are $4.9/ton (the average value from a 

distribution that uses a 5-percent discount rate), $22.1/ton (the average value from a 

distribution that uses a 3-percent discount rate), $36.3/ton (the average value from a 

distribution that uses a 2.5-percent discount rate), and $67.1/ton (the 95th-percentile value 

from a distribution that uses a 3-percent discount rate). These values correspond to the 

value of CO2 emission reductions in 2010; the values for later years are higher due to 

increasing damages as the magnitude of climate change increases. For each of the four 

420 
 

 

 

 

 

 

 

cases, DOE calculated a present value of the stream of annual values using the same 

discount rate as was used in the studies upon which the dollar-per-ton values are based. 

Table V.39 presents the global values of CO2 emissions reductions at each TSL 

considered for energy efficiency. As explained in section IV.M.1, DOE calculated 

domestic values as a range from 7 percent to 23 percent of the global values, and these 

results are presented in Table V.40. Table V.41 and Table V.42 present similar results for 

the TSLs considered for standby mode and off mode power. 

421 
 

 

 

 

 

 

 

 

 

 

 e 

 ate 

422 

Table V.39 Estimates of Global Present Value of CO2 Emissions Reductions Under 

Furnace, Central Air Conditioner, and Heat Pump Energy Efficiency TSLs 

TSL 

Million 2009$ 

5% discount 

rate, 

average* 

3% 

discount 

rate, 

average* 

2.5% 

discount rate, 

average* 

3% discount 

rate, 95th 

percentile* 

1 65 332 562 1013 

2 328 to 320 

1805 to 

1757 3105 to 3021 5490 to 5344 

3 496 to 577 

2711 to 

3149 4657 to 5409 8249 to 9581 

4 530 to 672 

2860 to 

3622 4902 to 6204 8705 to 11025 

5 596 3253 5586 9897 

6 987 5326 9123 16209 

7 3926 21391 36723 65087 

* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or 

drawn from a different part of the distribution. Values presented in the table incorporate the escalation of 

the SCC over time. 

Table V.40 Estimates of Domestic Present Value of CO2 Emissions Reductions 

Under Furnace, Central Air Conditioner, and Heat Pump Energy Efficiency TSLs 

TSL 

Million 2009$ 

5% discount 

rate, 

average* 

3% discount 

rate, 

average* 

2.5% discount 

rate, 

average* 

3% discount 

rate, 95th 

percentile* 

1 4.6 to 15.0 23.2 to 76.4 39.3 to 129 70.9 to 233 

2 22.4 to 75.4 123 to 415 211 to 714 374 to 1263 

3 34.7 to 133 190 to 724 326 to 1244 577 to 2204 

4 37.1 to 155 200 to 833 343 to 1427 609 to 2536 

5 41.7 to 137 228 to 748 391 to 1285 691 to 2269 

6 69.1 to 227 373 to 1225 639 to 2098 1135 to 3728 

7 275 to 903 1497 to 4920 2571 to 8446 4556 to 14970 

* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or 

drawn from a different part of the distribution. Values presented in the table incorporate the escalation of 

the SCC over time. 

Deleted: 61 

Deleted: 312 

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Deleted: 65144 

Moved (insertion) [1] ...

Comment [A13]: Change recommended by ...

Moved down [2]: * Columns are labeled by th ...

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Deleted: 2100 

Deleted: 1136...135 to 3731 ...

Deleted: 904 

Deleted: 1499...497 to 4924 ...

...

...

...

Moved (insertion) [2] ...

...
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.41 Estimates of Global Present Value of CO2 Emissions Reductions Under 

Furnace, Central Air Conditioner, and Heat Pump Standby Mode and Off Mode 

Power TSLs 

TSL 

Million 2009$ 

5% discount 

rate, 

average* 

3% 

discount 

rate, 

average* 

2.5% 

discount rate, 

average* 

3% discount 

rate, 95th 

percentile* 

1 41.7 228 392 694 

2 44.3 242 417 738 

3 51.7 283 487 862 

* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or 

drawn from a different part of the distribution. Values presented in the table incorporate the escalation of 

the SCC over time. 

Table V.42 Estimates of Domestic Present Value of CO2 Emissions Reductions 

Under Furnace, Central Air Conditioner, and Heat Pump Standby Mode and Off 

Mode Power TSLs 

TSL 

Million 2009$ 

5% discount 

rate, 

average* 

3% discount 

rate, 

average* 

2.5% discount 

rate, average* 

3% discount 

rate, 95th 

percentile* 

1 2.92 to 9.59 16.0 to 52.4 27.4 to 90.2 48.6 to 159.6 

2 3.10 to 10.2 16.9 to 55.7 29.2 to 95.9 51.7 to 169.7 

3 3.62 to 11.9 19.8 to 65.1 34.1 to 112.0 60.3 to 198.3 

* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or 

drawn from a different part of the distribution. Values presented in the table incorporate the escalation of 

the SCC over time. 

DOE is well aware that scientific and economic knowledge about the contribution 

of CO2 and other GHG emissions to changes in the future global climate and the potential 

resulting damages to the world economy continues to evolve rapidly. Thus, any value 

placed in this rulemaking on reducing CO2 emissions is subject to change. DOE, together 

with other Federal agencies, will continue to review various methodologies for estimating 

the monetary value of reductions in CO2 and other GHG emissions. This ongoing review 

will consider any comments on this subject that are part of the public record for this and 

423 
 

 

 

 

 

 

 

 

other rulemakings, as well as other methodological assumptions and issues. However, 

consistent with DOE’s legal obligations, and taking into account the uncertainty involved 

with this particular issue, DOE has included in this notice the most recent values and 

analyses resulting from the ongoing interagency review process. 

DOE also estimated a range for the cumulative monetary value of the economic 

benefits associated with NOX emissions reductions anticipated to result from amended 

standards for furnaces, central air conditioners, and heat pumps. The dollar-per-ton 

values that DOE used are discussed in section IV.M. Table V.43 presents the cumulative 

present values for each TSL considered for energy efficiency, calculated using 7-percent 

and 3-percent discount rates. Table V.44 presents similar results for the TSLs considered 

for standby mode and off mode power. 

Table V.43 Estimates of Present Value of NOX Emissions Reductions Under 

Furnace, Central Air Conditioner, and Heat Pump Energy Efficiency TSLs 

TSL 

3% discount rate 

million 2009$ 

7% discount rate 

million 2009$ 

1 3.4 to 35.3 1.7 to 17.0 

2 17.9 to 188 6.8 to 72.3 

3 26.4 to 322 10.3 to 126 

4 28.5 to 380 11.9 to 160 

5 32.3 to 332 12.7 to 131 

6 52.2 to 536 21.2 to 218 

7 203 to 2082 79.8 to 820 

Deleted: 22 

Deleted: 33.1 

Deleted: 5 

Deleted: 15.9 

Deleted: 3 

Deleted: 379 

Deleted: 8 

Deleted: 130 

Deleted: 537 

Deleted: 2083 

Deleted: 821 

424 
 

 

 

 

 

 

 

 

 

 

 

 

Table V.44 Estimates of Present Value of NOX Emissions Reductions Under 

Furnace, Central Air Conditioner, and Heat Pump Standby Mode and Off Mode 

Power TSLs 

TSL 

3% discount rate 

million 2009$ 

7% discount rate 

million 2009$ 

1 2.07 to 21.3 0.793 to 8.15 

2 2.20 to 22.6 0.841 to 8.65 

3 2.56 to 26.3 0.975 to 10.0 

The NPV of the monetized benefits associated with emissions reductions can be 

viewed as a complement to the NPV of the consumer savings calculated for each TSL 

considered in this rulemaking. Table V.45 shows an example of the calculation of the 

combined NPV, including benefits from emissions reductions for the case of TSL 4 for 

furnaces, central air conditioners, and heat pumps. Table V.46 and Table V.47 present the 

NPV values that result from adding the estimates of the potential economic benefits 

resulting from reduced CO2 and NOX emissions in each of four valuation scenarios to the 

NPV of consumer savings calculated for each TSL considered for energy efficiency, at 

both a 7-percent and a 3-percent discount rate. The CO2 values used in the columns of 

each table correspond to the four scenarios for the valuation of CO2 emission reductions 

presented in section IV.M. Table V.48 and Table V.49 present similar results for the 

TSLs considered for standby mode and off mode power. 

425 
 

 

 

 

 

 

 

 

 

 

Table V.45 Adding Net Present Value of Consumer Savings to Present Value of 

Monetized Benefits from CO2 and NOX Emissions Reductions Under TSL 4 for 

Furnace, Central Air Conditioner, and Heat Pump Energy Efficiency 

Category Present Value 

billion 2009$ 

Discount 

Rate 

Benefits 

Operating Cost Savings 

10.6 to 14.0 7% 

26.3 to 34.4 3% 

CO2 Reduction Monetized Value 

(at $4.9/Metric Ton)* 0.530 5% 

CO2 Reduction Monetized Value 

(at $22.1/Metric Ton)* 2.860 3% 

CO2 Reduction Monetized Value 

(at $36.3/Metric Ton)* 4.902 2.5% 

CO2 Reduction Monetized Value 

(at $67.1/Metric Ton)* 8.705 3% 

NOX Reduction Monetized Value 

(at $2,519/Ton)* 

0.067 7% 

0.161 3% 

Total Monetary Benefits ** 

13.5 to 16.9 7% 

29.3 to 37.4 3% 

Costs 

Incremental Installed Costs 6.7 to 9.8 7% 

11.5 to 16.8 3% 

Net Benefits/Costs 

Including CO2 and NOX ** 

6.8 to 7.1 7% 

17.8 to 20.6 3% 

Deleted: 529 

Deleted: 857 

Deleted: 896 

Deleted: 696 

Deleted: 3 

Deleted: 75 

Deleted: 86 

Deleted: 7 

Deleted: 17.0 

Deleted: 78 

Deleted: 85 

* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several Deleted: 64 

scenarios. The values of $4.9, $22.1, and $36.3 per ton are the averages of SCC distributions calculated 

using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value of $67.1 per ton 

represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. See section 

IV.M for details. The value for NOX (in 2009$) is the average of the low and high values used in DOE’s 

analysis. 

** Total Monetary Benefits and Net Benefits/Costs for both the 3% and 7% cases utilize the central 

estimate of social cost of CO2 emissions calculated at a 3% discount rate, which is equal to $22.1/ton in 

2010 (in 2009$). 

Deleted: 12.26 

426 
 

 

 

 

 

 

 

Table V.46 Results of Adding Net Present Value of Consumer Savings (at 7% 

Discount Rate) to Present Value of Monetized Benefits from CO2 and NOX 

Emissions Reductions Under Furnace, Central Air Conditioner, and Heat Pump 

Energy Efficiency TSLs 

TSL 

Consumer NPV at 7% Discount Rate added to: 

SCC Value of 

$4.9/metric ton 

CO2* and Low 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$22.1/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$36.3/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$67.1/metric ton 

CO2* and High 

Value for NOX ** 

billion 2009$ 

1 0.29 0.57 0.80 1.26 

2 2.93 to 2.74 4.44 to 4.21 5.74 to 5.47 8.16 to 7.8379 

3 3.87 to 3.95 6.13 to 6.58 8.08 to 8.84 11.7 to 13.1 

4 4.47 to 4.90 6.85 to 7.92 8.89 to 10.5 12.8 to 15.4 

5 4.08 6.80 9.13 13.5 

6 (1.55) 2.89 6.69 13.9 

7 (41.0) (23.1) (7.81) 20.9 

Deleted: 220 

Deleted: 478 

Deleted: 693 

Deleted: 12 

Deleted: 94 

Deleted: 75 

Deleted: 45 

Deleted: 22 

Deleted: 75 

Deleted: 48 

Deleted: 17 

Deleted: 84 

Deleted: 81 

Deleted: 89 

Deleted: 07 

Deleted: 52 

Deleted: 01 

Deleted: 78 

Deleted: 6 

Deleted: 0 

Deleted: 40 

Deleted: 83 

Deleted: 78 

Deleted: 85 

Deleted: 82 

Deleted: 4 

Deleted: 7 

Deleted: 3 

Deleted: 02 

Deleted: 73 

Deleted: 06 

Deleted: 4 

Deleted: 98 

Deleted: 46 

Deleted: 26 

Deleted: 5 

Deleted: 40 

Deleted: 22.2 

Deleted: 6.83 

Deleted: 21 

* These label values represent the global SCC of CO2 in 2010, in 2009$. The values have been calculated
 

with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values.
 

** Low Value corresponds to $447 per ton of NOX emissions. Medium Value corresponds to $2,519 per
 

ton of NOX emissions. High Value corresponds to $4,591 per ton of NOX emissions.
 

Parentheses indicate negative (-) values.
 

427 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.47 Results of Adding Net Present Value of Consumer Savings (at 3% 

Discount Rate) to Present Value of Monetized Benefits from CO2 and NOX 

Emissions Reductions Under Furnace, Central Air Conditioner, and Heat Pump 

Energy Efficiency TSLs 

TSL 

Consumer NPV at 3% Discount Rate added to: 

SCC Value of 

$4.9/metric ton 

CO2* and Low 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$22.1/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$36.3/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$67.1/metric ton 

CO2* and High 

Value for NOX ** 

billion 2009$ 

1 0.83 1.12 1.33 1.79 

2 11.0 to 11.9 12.5 to 13.4 13.8 to 14.6 16.2 to 17.0 

3 13.9 to 15.9 16.2 to 18.6 18.1 to 20.8 21.7 to 25.0 

4 15.3 to 18.2 17.8 to 21.4 19.7 to 22.8 23.6 to 28.7 

5 16.3 19.1 21.4 25.7 

6 9.2 13.8 17.4 24.6 

7 (41.1) (22.6) (8.0) 20.8 

TSL 

Consumer NPV at 7% Discount Rate added to: 

SCC Value of 

$4.9/metric ton 

CO2* and Low 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$22.1/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$36.3/metric ton 

CO2 * and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$67.1/metric ton 

CO2* and High 

Value for NOX ** 

billion 2009$ 

1 0.413 0.603 0.767 1.072 

2 0.418 0.620 0.794 1.119 

3 0.288 0.524 0.728 1.107 

Deleted: 690 

Deleted: 0.955 

Deleted: 17 

Deleted: 61 

Deleted: 7 

Deleted: 3 

Deleted: 1 

Deleted: 8 

Deleted: 8 

Deleted: 1 

Deleted: 5 

Deleted: 0 

Deleted: 8 

Deleted: 1 

Deleted: 2 

Deleted: 1 

Deleted: 6 

Deleted: 3 

Deleted: 23 

Deleted: 8 

Deleted: 2 

Deleted: 0 

Deleted: 3 

Deleted: 8 

Deleted: 8.49 

Deleted: 1 

Deleted: 16.9 

Deleted: 2 

Deleted: 38.6 

Deleted: 20.2 

Deleted: 4.86 

Deleted: 24.5 

* The label values represent the global SCC of CO2 in 2010, in 2009$. The values have been calculated
 

with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values.
 

** Low Value corresponds to $447 per ton of NOX emissions. Medium Value corresponds to $2,519 per
 

ton of NOX emissions. High Value corresponds to $4,591 per ton of NOX emissions.
 

Parentheses indicate negative (-) values.
 

Table V.48 Results of Adding Net Present Value of Consumer Savings (at 7% 

Discount Rate) to Present Value of Monetized Benefits from CO2 and NOX 

Emissions Reductions Under Furnace, Central Air Conditioner, and Heat Pump 

Standby Mode and Off Mode Power TSLs 

* The label values represent the global SCC of CO2 in 2010, in 2009$. The values have been calculated 

with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values. 

** Low Value corresponds to $447 per ton of NOX emissions. Medium Value corresponds to $2,519 per 

ton of NOX emissions. High Value corresponds to $4,591 per ton of NOX emissions. 

428 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.49 Results of Adding Net Present Value of Consumer Savings (at 3% 

Discount Rate) to Present Value of Monetized Benefits from CO2 and NOX 

Emissions Reductions Under Furnace, Central Air Conditioner, and Heat Pump 

Standby Mode and Off Mode Power TSLs 

TSL 

Consumer NPV at 3% Discount Rate added to: 

SCC Value of 

$4.9/metric ton 

CO2* and Low 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$22.1/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$36.3/metric ton 

CO2* and Medium 

Value for NOX ** 

billion 2009$ 

SCC Value of 

$67.1/metric ton 

CO2* and High 

Value for NOX ** 

billion 2009$ 

1 1.182 1.378 1.542 1.854 

2 1.226 1.434 1.608 1.939 

3 1.069 1.312 1.516 1.903 

* The label values represent the global SCC of CO2 in 2010, in 2009$. The values have been calculated 

with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values. 

** Low Value corresponds to $447 per ton of NOX emissions. Medium Value corresponds to $2,519 per 

ton of NOX emissions. High Value corresponds to $4,591 per ton of NOX emissions. 

Although adding the value of consumer savings to the values of emission 

reductions provides a valuable perspective, two issues should be considered. First, the 

national operating savings are domestic U.S. consumer monetary savings that occur as a 

result of market transactions, while the value of CO2 reductions is based on a global 

value. Second, the assessments of operating cost savings and CO2 savings are performed 

with different methods that use quite different time frames for analysis. The national 

operating cost savings is measured for the lifetime of products shipped in the 30-year 

period after the compliance date. The SCC values, on the other hand, reflect the present 

value of future climate-related impacts resulting from the emission of one ton of carbon 

dioxide in each year. These impacts go well beyond 2100. 

7. Other Factors 

The Secretary, in determining whether a proposed standard is economically 

justified, may consider any other factors that he deems to be relevant. (42 U.S.C. 

429 
 

 

 

 

 

 

 

 

6295(o)(2)(B)(i)(VI)) In developing the proposals set forth in this notice, DOE has also 

considered the comments submitted by interested parties, including the recommendations 

in the consensus agreement, which DOE believes provides a reasoned statement by 

interested persons that are fairly representative of relevant points of view (including 

representatives of manufacturers of covered products, States, and efficiency advocates) 

and contains recommendations with respect to an energy conservation standard that are in 

accordance with 42 U.S.C. 6295(o). Moreover, DOE has encouraged the submission of 

consensus agreements as a way to get diverse stakeholders together, to develop an 

independent and probative analysis useful in DOE standard setting, and to expedite the 

rulemaking process. In the present case, one outcome of the consensus agreement was a 

recommendation to accelerate the compliance dates for these products, which would have 

the effect of producing additional energy savings at an earlier date. DOE also believes 

that standard levels recommended in the consensus agreement may increase the 

likelihood for regulatory compliance, while decreasing the risk of litigation. 

C. Conclusion 

When considering standards, the new or amended energy conservation standard 

that DOE adopts for any type (or class) of covered product shall be designed to achieve 

the maximum improvement in energy efficiency that the Secretary determines is 

technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In 

determining whether a standard is economically justified, the Secretary must determine 

whether the benefits of the standard exceed its burdens to the greatest extent practicable, 

in light of the seven statutory factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) 

430 
 

 

 

 

 

 

 

 

 

 

 

 

The new or amended standard must also “result in significant conservation of energy.” 

(42 U.S.C. 6295(o)(3)(B)) 

For today’s direct final rule, DOE considered the impacts of standards at each 

TSL, beginning with the maximum technologically feasible level, to determine whether 

that level was economically justified. Where the max-tech level was not justified, DOE 

then considered the next most efficient level and undertook the same evaluation until it 

reached the highest efficiency level that is both technologically feasible and economically 

justified and saves a significant amount of energy. 

To aid the reader as DOE discusses the benefits and/or burdens of each TSL, 

tables present a summary of the results of DOE’s quantitative analysis for each TSL. In 

addition to the quantitative results presented in the tables, DOE also considers other 

burdens and benefits that affect economic justification. These include the impacts on 

identifiable subgroups of consumers, such as low-income households and seniors, who 

may be disproportionately affected by an amended national standard. Section V.B.1 

presents the estimated impacts of each TSL for these subgroups. 

DOE also notes that the economics literature provides a wide-ranging discussion 

of how consumers trade off upfront costs and energy savings in the absence of 

government intervention. Much of this literature attempts to explain why consumers 

appear to undervalue energy efficiency improvements. This undervaluation suggests that 

regulation that promotes energy efficiency can produce significant net private gains (as 

431 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

well as producing social gains by, for example, reducing pollution). There is evidence 

that consumers undervalue future energy savings as a result of: (1) a lack of information, 

(2) a lack of sufficient salience of the long-term or aggregate benefits, (3) a lack of 

sufficient savings to warrant delaying or altering purchases (e.g., an inefficient ventilation 

fan in a new building or the delayed replacement of a water pump), (4) excessive focus 

on the short term, in the form of inconsistent weighting of future energy cost savings 

relative to available returns on other investments, (5) computational or other difficulties 

associated with the evaluation of relevant tradeoffs, and (6) a divergence in incentives 

(e.g., renter versus owner; builder versus purchaser). Other literature indicates that with 

less than perfect foresight and a high degree of uncertainty about the future, consumers 

may trade off these types of investments at a higher than expected rate between current 

consumption and uncertain future energy cost savings. 

In its current regulatory analysis, potential changes in the benefits and costs of a 

regulation due to changes in consumer purchase decisions are included in two ways. 

First, if consumers forego a purchase of a product in the standards case, this decreases 

sales for product manufacturers and the cost to manufacturers is included in the MIA. 

Second, DOE accounts for energy savings attributable only to products actually used by 

consumers in the standards case; if a regulatory option decreases the number of products 

used by consumers, this decreases the potential energy savings from an energy 

conservation standard. DOE provides detailed estimates of shipments and changes in the 

volume of product purchases under standards in chapter 9 of the TSD. However, DOE’s 

current analysis does not explicitly control for heterogeneity in consumer preferences, 

Deleted: 3) inconsistent (e.g., 

Deleted: ­

Deleted: ) 

Deleted: 4 

Deleted: 5 

Deleted: While DOE is not prepared at present to 

provide a fuller quantifiable framework for this 

discussion at this time, DOE seeks comments on 

how to assess these possibilities. 

432 
 

 

 

 

 

 

 

 

 

 

preferences across subcategories of products or specific features, or consumer price 

sensitivity variation according to household income (Reiss and White 2004). 

While DOE is not prepared at present to provide a fuller quantifiable framework 

for estimating the benefits and costs of changes in consumer purchase decisions due to an 

energy conservation standard, DOE seeks comments on how to more fully assess the 

potential impact of energy conservation standards on consumer choice and how to 

quantify this impact in its regulatory analysis in future rulemakings. 

1. Benefits and Burdens of TSLs Considered for Furnace, Central Air Conditioner, and 

Heat Pump Energy Efficiency 

Table V.50 through Table V.54 present summaries of the quantitative impacts 

estimated for each TSL for furnace, central air conditioner, and heat pump energy 

efficiency. The efficiency levels contained in each TSL are described in section V.A. 

Comment [A15]: Changes recommended by 

OIRA. 

433 
 

 7

18

 

 

 

2

 3 to 

09

 

to 2082

 

o 

 1.4

 

 

Table V.50 Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency TSLs: National Impacts 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 

National Energy Savings (quads) 0.18 2.32 to 

2.91 

2.97 to 

3.84 

3.20 to 

4.22 

3.89 5.91 19. 

NPV of Consumer Benefits (2009$ billion) 

3% discount rate 

0.76 

10.61 to 

11.56 

13.35 to 

15.29 

14.73 to 

17.55 15.69 8.18 (45.12) 

7% discount rate 

0.23 

2.60 to 

2.41 

3.36 to 

3.36 

3.93 to 

4.21 3.47 (2.56) (44.98) 

Cumulative Emissions Reduction 

CO2 (million metric tons) 

15.2 

62.8 to 

61.2 

971.1 to 

113 105 to 134 116 200 77 

NOX (thousand tons) 12.3 55.5 to 

56.7 

83.1 to 

98.5 

90.1 to 

117 102 168 640 

Hg (tons) 0.022 0.011 to 

(0.012) 

0.086 to 

0.059 

0.097 to 

0.071 0.059 0.270 1.160 

Value of Emissions Reductions 

CO2 (2009$ billion)* 0.065 to 

1.013 

0.320 to 

5.49 

0.496 to 

9.58 

0.530 to 

11.03 

0.596 to 

9.90 

0.987 to 

16.21 

3.9 

65. 

NOX – 3% discount rate (2009$ 

million) 

3.4 to 

35.3 

17.9 to 

188 

26.4 to 

322 

28.5 to 

380 

32.3 to 

332 

52.2 to 

536 203 

NOX – 7% discount rate (2009$ 

million) 

1.7 to 

17.0 

6.8 to 

72.3 

10.3 to 

126 

11.9 to 

160 

12.7 to 

131 

21.2 to 

218 79.8 to 820 

Generation Capacity Reduction 

(GW) ** 0.397 

0.646 to 

1.12 

3.61 to 

3.53 

3.81 to 

3.69 3.56 10.5 35.6 

Employment Impacts 

Changes in Domestic Production 

Workers in 2016 (thousands) 

0.1 to 

(16.9) 

0.3 to 

(16.9) 

0.6 to 

(16.9) 

0.8 to 

(16.9) 

1 to 

(16.9) 

1.1 to 

(16.9) 

1.2 t 

(16.9) 

Indirect Domestic Jobs (thousands) ** 0.5 2.7 6.1 6.3 6.3 18.5 8 

Deleted: 167 

Deleted: 96 

Deleted: 92 

Deleted: 24 

Deleted: 62 

Deleted: 64...1 to 11.58 ...

Deleted: 24...5 to 15.18 

Deleted: 62...3 to 17.44 

Deleted: 58 

Deleted: 7.45 

Deleted: 44.51 

Deleted: 16 

Deleted: 42...0 to 2.61 

Deleted: 301...6 to 3.304 

Deleted: 86...3 to 4.14 

Deleted: 41 

Deleted: 99 

Deleted: 90 

Deleted: 14.3 

Deleted: 3 

Deleted: 97.0 

Deleted: 773 

Deleted: 11.56 

Deleted: 0... to 98.4 

Deleted: 0 

Deleted: 061...65 to 0.951 

Deleted: 328 

...

...

...

...

...

...

...

Parentheses indicate negative (-) values. 

* Range of the value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

** Changes in 2045. 

Deleted: 57 

Deleted: 529...30 to 11.02 ...

Deleted: 595...96 to 9.89 ...

Deleted: 988...87 to 16.22 ...

Deleted: 14 

Deleted: 22... to 33.1 ...

Deleted: 3 

Deleted: 379 

Deleted: 537 

Deleted: 2083 

Deleted: 5... to 15.9 ...

Deleted: 8 

Deleted: 130 

Deleted: 821 

434 
 

 

SL 7

 to 

3820)

 0) to 

45.0)

SL 7

 

 198

 181)

 

 585

 391

 272

 

 

 797

 ,182)

 

 903)

 130)

 311)

 

 

 

 477

 )

 )

 

 294)

 (25)

 106)

 

 17.1

 28.9

 

 11.5

 

Table V.51. Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency TSLs: Manufacturer Impacts 

Deleted: 63 

Deleted: 4 

Deleted: 25 

Deleted: 340 

Deleted: 93 

Deleted: 98 

Deleted: 98 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 T 

Manufacturer Impacts 

Change in Industry 

NPV (2009$ million) 

8 to 33 (324) to 

(498) 

(428) to 

(729) 

(478) to 

(900) 

(508) to 

(915) 

(680) to 

(1873) 

(1530) 

( 

Industry NPV (% 

change) 

0.4 to 0.1 (3.8) to 

(5.9) 

(5.0) to 

(8.6) 

(5.6) to 

(10.6) 

(6.0) to 

(10.8) 

(8.0) to 

(22.0) 

(18. 

( 

Deleted: 98 

Deleted: 298 

Deleted: 794 

Deleted: 91 

Deleted: 100 

Deleted: 100 

Deleted: 100 

Category TSL 1* TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 T 

Mean LCC Savings** (2009$) 

Non-Weatherized Gas Furnaces n/a 

North 215 155 155 323 323 

South n/a n/a n/a n/a n/a ( 

Mobile Home Gas Furnaces n/a 

North n/a 419 419 585 585 

South n/a n/a n/a n/a n/a 

Oil-Fired Furnaces n/a n/a 15 15 (18) (18) 

Split-System Air Conditioners (coil-only) 55 

Rest of Country (8) n/a n/a n/a (26) (1,343) 

Hot-Humid 86 93 93 93 (303) ( ) 

Hot-Dry 104 107 107 107 (468) (1 

Split-System Air Conditioners (blower-coil) 46 

Rest of Country (18) n/a n/a n/a (30) ( 

Hot-Humid 77 89 89 89 177 ( 

Hot-Dry 90 101 101 101 196 ( 

Split-System Heat Pumps 71 

Rest of Country 5 4 4 4 (89) (604) 

Hot-Humid 82 102 102 102 137 103 

Hot-Dry 148 175 175 175 274 

Single-Package Air Conditioners n/a n/a 37 37 37 (68) (492 

Single-Package Heat Pumps n/a n/a 104 104 104 15 (363 

SDHV Air Conditioners n/a 

Rest of Country n/a n/a n/a n/a (202) ( 

Hot-Humid n/a n/a n/a n/a (14) 

Hot-Dry n/a n/a n/a n/a (65) ( 

Median Payback Period (years) 

Non-Weatherized Gas Furnaces n/a 

North 7.7 10.1 10.1 9.4 9.4 

South n/a n/a n/a n/a n/a 

Mobile Home Gas Furnaces n/a 

North n/a 10.7 10.7 11.5 11.5 

Deleted: 15 

Deleted: 29 

Deleted: 899 

Deleted: 85 

Deleted: 96 

Deleted: 96 

Deleted: 96 

Deleted: 188 

Deleted: 118 

Deleted: 76 

Deleted: 93 

Deleted: 93 

Deleted: 93 

Deleted: 184 

Deleted: 323 

Deleted: 98 

Deleted: 6 

Deleted: 10 

Deleted: 10 

Deleted: 10 

Deleted: 24 

Deleted: 511 

Deleted: 97 

Deleted: 110 

Deleted: 110 

Deleted: 110 

Deleted: 199 

Deleted: 221 

Deleted: 164 

Deleted: 193 

Parentheses indicate negative (-) values. 

Table V.52. Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency TSLs: Consumer LCC Savings and Payback Period 

Deleted: 477 

Deleted: 189 

Deleted: 53 

Deleted: 193 

Deleted: 193 

Deleted: 371 

Deleted: 665 

Deleted: Rest of Country ...

...

435 
 

 

 

 100

 47

 

 

 100

 21

 

 

 

 13

 9

 46

 21

 

 75

 

 

 

 

 

 

 

Category TSL 1* TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 

South n/a n/a n/a n/a n/a 13 

Oil-Fired Furnaces n/a n/a 1.0 1.0 19.8 19.8 18.2 

Split-System Air Conditioners (coil-only) 9 

Rest of Country 23 n/a n/a n/a 33 

Hot-Humid 6 7 7 7 34 

Hot-Dry 8 10 10 10 49 71 

Split-System Air Conditioners (blowercoil) 11 

Rest of Country 26 n/a n/a n/a 28 

Hot-Humid 7 8 8 8 8 

Hot-Dry 10 11 11 11 11 31 

Split-System Heat Pumps 7 

Rest of Country 13 13 13 13 20 33 

Hot-Humid 6 6 6 6 7 

Hot-Dry 5 5 5 5 5 

Single-Package Air Conditioners n/a n/a 15 15 15 24 

Single-Package Heat Pumps n/a n/a 8 8 8 14 

SDHV Air Conditioners n/a 

Rest of Country n/a n/a n/a n/a 74 

Hot-Humid n/a n/a n/a n/a 18 17 

Hot-Dry n/a n/a n/a n/a 26 23 

Deleted: 10 

Deleted: 20 

Deleted: 34 

Deleted: 5 

Deleted: 46 

Deleted: 23 

Deleted: 6 

Deleted: 30 

Deleted: 6 

Deleted: 12 

Deleted: 12 

Deleted: 12 

Deleted: 12 

Deleted: 17 

Deleted: 28 

Deleted: 12 

Deleted: 4 

Deleted: 4 

Deleted: 4 

Deleted: 4 

Deleted: Rest of Country ...

Deleted: Rest of Country ...

Deleted: 77 

Deleted: 88 

Deleted: 17 

Deleted: 18 

Deleted: 24 

Deleted: 26 

* TSL 1 does not include regional standards.
 

** Calculation of LCC savings or payback period is not applicable (n/a) in some cases because no consumers
 

are impacted at some of the TSLs. A negative value (indicated by parentheses) means an increase in LCC by
 

the amount indicated.
 

436 
SL 7

 

 

 

99

 

90

 0

10

91

 

 

 

96

 1

3

 70

 

 

 76

 1

 23

 

 

 

13

60

 0

40

 

49

 

84

 0

16

Deleted: 13 

Deleted: 89 

Deleted: 11 

Deleted: 10 

Deleted: 95 

Deleted: 5 

Deleted: 4 

Table V.53. Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency TSLs: Distribution of Consumer LCC Impacts (Central 

Air Conditioners and Heat Pumps) 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 T Deleted: 20 

Distribution of Consumer LCC Impacts 

Split-System Air Conditioners (coil-only) 

Rest of Country 

Net Cost (%) 11* 17 0 0 0 57 

No Impact (%) 75* 75 100 100 100 27 0 

Net Benefit (%) 14* 8 0 0 0 16 1 

Hot-Humid 

Net Cost (%) 7 26 26 26 72 

No Impact (%) 75 27 27 27 16 

Net Benefit (%) 18 47 47 47 12 

Hot-Dry 

Net Cost (%) 11 37 37 37 75 

No Impact (%) 75 27 27 27 16 0 

Net Benefit (%) 14 36 36 36 10 9 

Split-System Air Conditioners (blower-coil) 

Rest of Country 

Net Cost (%) 9* 14 0 0 0 43 

No Impact (%) 82* 82 100 100 100 45 

Net Benefit (%) 9* 4 0 0 0 12 

Hot-Humid 

Net Cost (%) 6 21 21 21 24 

No Impact (%) 82 45 45 45 37 1 

Net Benefit (%) 12 34 34 34 39 29 

Hot-Dry 

Net Cost (%) 9 28 28 28 33 

No Impact (%) 82 45 45 45 37 

Net Benefit (%) 9 27 27 27 30 

Split-System Heat Pumps 

Rest of Country 

Net Cost (%) 5* 9 35 35 35 58 87 

No Impact (%) 86* 86 45 45 45 23 0 

Net Benefit (%) 9* 5 20 20 20 19 

Hot-Humid 

Net Cost (%) 4 17 17 17 29 

No Impact (%) 86 45 45 45 23 

Net Benefit (%) 10 38 38 38 48 

Hot-Dry 

Net Cost (%) 4 15 15 15 25 51 

No Impact (%) 86 45 45 45 23 0 

Net Benefit (%) 11 40 40 40 52 

Single-Package Air Conditioners (Nation) 

Net Cost (%) 0* 0 50 50 50 72 

No Impact (%) 100* 100 17 17 17 1 

Net Benefit (%) 0* 0 33 33 33 27 

Deleted: 20 

Deleted: 13 

Deleted: 35 

Deleted: 35 

Deleted: 35 

Deleted: 26 

Deleted: 26 

Deleted: 26 

Deleted: 8 

Deleted: 32 

Deleted: 32 

Deleted: 32 

Deleted: 55 

Deleted: 86 

Deleted: 87 

Deleted: 87 

Deleted: 47 

Deleted: 47 

Deleted: 47 

Deleted: 24 

Deleted: 8 

Deleted: 21 

Deleted: 21 

Deleted: 21 

Deleted: 21 

Deleted: 14 

Deleted: 15 

Deleted: 15 

Deleted: 15 

Deleted: 24 

Deleted: 57 

Deleted: 87 

Deleted: 47 

Deleted: 47 

Deleted: 47 

Deleted: 24 

Deleted: 9 

Deleted: 52 

Deleted: 20 

Deleted: 43 

Deleted: 3 

Deleted: 12 

Deleted: 12 

Deleted: 12 

437 
 

79

 0

21

 

 

 0

8

67

 0

33

 0

26

 

 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 

Single-Package Heat Pumps (Nation) 

Net Cost (%) 0* 0 29 29 29 63 

No Impact (%) 100* 100 36 36 36 2 

Net Benefit (%) 0* 0 35 35 35 35 

SDHV Air Conditioners 

Rest of Country 

Net Cost (%) 0* 0 0 0 0 95 92 

No Impact (%) 100* 100 100 100 100 0 

Net Benefit (%) 0* 0 0 0 0 5 

Hot-Humid 

Net Cost (%) 0 0 0 0 68 

No Impact (%) 100 100 100 100 0 

Net Benefit (%) 0 0 0 0 32 

Hot-Dry 

Net Cost (%) 0 0 0 0 74 74 

No Impact (%) 100 100 100 100 0 

Net Benefit (%) 0 0 0 0 26 

Deleted: ...

Deleted: 46 

Deleted: 46 

Deleted: 46 

Deleted: 86 

Deleted: 95 

Deleted: 18 

Deleted: 18 

Deleted: 18 

Deleted: 12 

Deleted: 5 

Deleted: Hot-Humid 

Deleted: 94 

Deleted: 95 

...

Deleted: 6 

Deleted: 5 

Deleted: 66 

Deleted: 69 

Deleted: 34 

Deleted: 31 

Deleted: 75 

Deleted: 25 

Rest of Country 

* Results refer to Nation for TSL 1. 

438
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.54 Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency TSLs: Distribution of Consumer LCC Impacts (Furnaces) 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 

Distribution of Consumer LCC Impacts 

Non-Weatherized Gas Furnaces 

North 

Net Cost (%) 0* 11 10 10 23 23 59 

No Impact (%) 100* 56 71 71 23 23 1 

Net Benefit (%) 0* 33 19 19 54 54 41 

South 

Net Cost (%) 0 0 0 0 0 72 

No Impact (%) 100 100 100 100 100 0 

Net Benefit (%) 0 0 0 0 0 27 

Mobile Home Gas Furnaces 

North 

Net Cost (%) 0* 0 44 44 46 46 46 

No Impact (%) 100* 100 10 10 8 8 8 

Net Benefit (%) 0* 0 47 47 46 46 46 

South 

Net Cost (%) 0 0 0 0 0 51 

No Impact (%) 100 100 100 100 100 4 

Net Benefit (%) 0 0 0 0 0 45 

Oil-Fired Furnaces (Nation) 

Net Cost (%) 0 0 10 10 35 35 51 

No Impact (%) 100 100 58 58 33 33 1 

Net Benefit (%) 0 0 32 32 33 33 48 

* Results refer to Nation for TSL 1. 

DOE first considered TSL 7, which represents the max-tech efficiency levels. 

TSL 7 would save 19.18 quads of energy, an amount DOE considers significant. Under 

TSL 7, the NPV of consumer benefit would be -$44.98 billion, using a discount rate of 7 

percent, and -$45.12 billion, using a discount rate of 3 percent. 

Deleted: 24 

Deleted: 90 

Deleted: 44.51 

The cumulative emissions reductions at TSL 7 are 772 Mt of CO2, 640 thousand 

tons of NOX, and 1.160 ton of Hg. The estimated monetary value of the cumulative CO2 

emissions reductions at TSL 7 ranges from $3.93 billion to $65.1 billion. Total generating 

capacity in 2045 is estimated to decrease by 35.6 GW under TSL 7. 

Deleted: 773 

439 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At TSL 7, the average LCC impact is a savings (LCC decrease) of $198 for nonweatherized gas furnaces in the northern region and a cost (LCC increase) of $181 in the 

southern region; a savings of $585 for mobile home gas furnaces in the northern region 

and a savings of $391 in the southern region; and a savings of $272 for oil-fired furnaces. 

For split-system air conditioners (coil-only), the average consumer LCC impact is 

a cost of $1,343 in the rest of country, a cost of $797 in the hot-humid region, and a cost 

of $1,182 in the hot-dry region. For split-system air conditioners (blower-coil), the 

Deleted: 340 

Deleted: 794 

Deleted: 189 

Deleted: 899 

Deleted: 118 

Deleted: 323 

Deleted: 511 

Deleted: 221 

Deleted: 665 

average LCC impact is a cost of $903 in the rest of country, a cost of $130 in the hothumid region, and a cost of $311 in the hot-dry region. For split-system heat pumps, the 

average LCC impact is a cost of $604 in the rest of country, a savings of $103 in the hothumid region, and a savings of $477 in the hot-dry region. For single-package air 

conditioners, the average LCC impact is a cost of $492. For single-package heat pumps, 

the average LCC impact is a cost of $363. For SDHV air conditioners, the average LCC 

impact is a cost of $294 in the rest of country, a cost of $25 in the hot-humid region, and 

a cost of $106 in the hot-dry region. 

Deleted: 836 in the rest of country, a cost of $341 

in the hot-humid region, and a cost of $541 in the 

hot-dry region 

Deleted: 794 in the rest of country, a cost of $364 

in the hot-humid region, and a cost of $294 in the 

hot-dry region. 

Deleted: 320 

Deleted: 38 

Deleted: 107 

At TSL 7, the median payback period for non-weatherized gas furnaces is 17.1 

years in the northern region and 28.9 years in the southern region; 11.5 years for mobile 

home gas furnaces in the northern region and 13 years in the southern region; and 18.2 

years for oil-fired furnaces. 

440 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For split-system air conditioners (coil-only), the median payback period is 100 

years in the rest of country, 47 years in the hot-humid region, and 71 years in the hot-dry 

region. For split-system air conditioners (blower-coil), the median payback period is 100 

Deleted: 46 

years in the rest of country, 21 years in the hot-humid region, and 31 years in the hot-dry 

region. For split-system heat pumps, the median payback period is 33 years in the rest of 

country, 13 years in the hot-humid region, and 9 years in the hot-dry region. For singlepackage air conditioners, the median payback period is 46 years. For single-package heat 

pumps, the median payback period is 21 years. For SDHV air conditioners, the median 

payback period is 75 years in the rest of country, 17 years in the hot-humid region, and 

23 years in the hot-dry region. 

Deleted: 30 

Deleted: 28 

Deleted: 12 

Deleted: 100 years in the rest of country, 31 years 

in the hot-humid region, and 

Deleted: in the hot-dry region. 

Deleted: 68 years in the rest of country, 22 years in 

the hot-humid region, and 17 years in the hot-dry 

region 

Deleted: 88 

Deleted: 18 

Deleted: 26 

At TSL 7, the fraction of consumers experiencing an LCC benefit is 41 percent 

for non-weatherized gas furnaces in the northern region and 27 percent in the southern 

region; 46 percent for mobile home gas furnaces in the northern region and 45 percent in 

the southern region; and 48 percent for oil-fired furnaces. 

For split-system air conditioners (coil-only), the fraction of consumers 

experiencing an LCC benefit at TSL 7 is 1 percent in the rest of country, 10 percent in the 

hot-humid region, and 9 percent in the hot-dry region. For split-system air conditioners 

(blower-coil), the fraction of consumers experiencing an LCC benefit is 3 percent in the 

rest of country, 29 percent in the hot-humid region, and 23 percent in the hot-dry region. 

For split-system heat pumps, the fraction of consumers experiencing an LCC benefit is 13 

percent in the rest of country, 40 percent in the hot-humid region, and 49 percent in the 

Deleted: 11 

Deleted: 4 

Deleted: 14 

Deleted: 43 

Deleted: 53 

441 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

hot-dry region. For single-package air conditioners, the fraction of consumers 

experiencing an LCC benefit is 16 percent. For single-package heat pumps, the fraction 

of consumers experiencing an LCC benefit is 21 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC benefit is 8 percent in the rest of country, 33 

percent in the hot-humid region, and 26 percent in the hot-dry region. 

Deleted: 3 

Deleted: in the rest of country, 20 percent in the 

hot-humid region, and 17 percent in the hot-dry 

region. 

Deleted: 5 percent in the rest of country, 20 

percent in the hot-humid region, and 26 percent in 

the hot-dry region 

Deleted: 5 

Deleted: 31 

Deleted: 25 

At TSL 7, the fraction of consumers experiencing an LCC cost is 59 percent for 

non-weatherized gas furnaces in the northern region and 72 percent in the southern 

region; 46 percent for mobile home gas furnaces in the northern region and 51 percent in 

the southern region; and 51 percent for oil-fired furnaces. 

For split-system air conditioners (coil-only), the fraction of consumers 

experiencing an LCC cost is 99 percent in the rest of country, 90 percent in the hot-humid 

region, and 91 percent in the hot-dry region. For split-system air conditioners (blowercoil), the fraction of consumers experiencing an LCC cost is 96 percent in the rest of 

country, 70 percent in the hot-humid region, and 76 percent in the hot-dry region. For 

Deleted: 89 

Deleted: 95 

split-system heat pumps, the fraction of consumers experiencing an LCC cost is 87 

percent in the rest of country, 60 percent in the hot-humid region, and 51 percent in the 

hot-dry region. For single-package air conditioners, the fraction of consumers 

experiencing an LCC cost is 84 percent. For single-package heat pumps, the fraction of 

consumers experiencing an LCC cost is 79 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC cost is 92 percent in the rest of country, 67 

percent in the hot-humid region, and 74 percent in the hot-dry region. 

Deleted: 86 

Deleted: 57 

Deleted: 47 

Deleted: 97 

Deleted: in the rest of country, 80 percent in the 

hot-humid region, and 83 percent in the hot-dry 

region. 

Deleted: 95 percent in the rest of country, 80 

percent in the hot-humid region, and 74 percent in 

the hot-dry region 

Deleted: 95 

Deleted: 69 

Deleted: 75 

442 
 

 

 

 

 

 

 

 

At TSL 7, the projected change in INPV ranges from a decrease of $1,530 million 

to a decrease of $3,820 million. At TSL 7, DOE recognizes the risk of large negative 

impacts if manufacturers’ expectations concerning reduced profit margins are realized. If 

the high end of the range of impacts is reached as DOE expects, TSL 7 could result in a 

net loss of 45.0 percent in INPV to furnace, central air conditioner, and heat pump 

manufacturers. 

The Secretary concludes that at TSL 7 for furnace, central air conditioner, and 

heat pump energy efficiency, the benefits of energy savings, generating capacity 

reductions, emission reductions, and the estimated monetary value of the CO2 emissions 

reductions would be outweighed by the negative NPV of consumer benefits, the 

economic burden on a significant fraction of consumers due to the large increases in 

product cost, and the capital conversion costs and profit margin impacts that could result 

in a very large reduction in INPV for the manufacturers. Consequently, the Secretary has 

concluded that TSL 7 is not economically justified. 

DOE then considered TSL 6. TSL 6 would save 5.91 quads of energy, an amount 

DOE considers significant. Under TSL 6, the NPV of consumer benefit would be -$2.56 

billion, using a discount rate of 7 percent, and $8.18 billion, using a discount rate of 3 

percent. 

Deleted: 92 

Deleted: 99 

Deleted: 7.45 

443 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The cumulative emissions reductions at TSL 6 are 200 Mt of CO2, 168 thousand 

tons of NOX, and 0.270 ton of Hg. The estimated monetary value of the cumulative CO2 

emissions reductions at TSL 6 ranges from $0.987 billion to $16.2 billion. Total 

generating capacity in 2045 is estimated to decrease by 10.5 GW under TSL 6. 

At TSL 6, the average LCC impact is a savings (LCC decrease) of $323 for nonweatherized gas furnaces in the northern region and not applicable in the south, a savings 

of $585 for mobile home gas furnaces in the northern region and not applicable in the 

south, and a cost of $18 for oil-fired furnaces. 

For split-system air conditioners (coil-only), the average LCC impact is a cost of 

Deleted: 988 

$26 in the rest of country, a cost of $303 in the hot-humid region, and a cost of $468 in 

the hot-dry region. For split-system air conditioners (blower-coil), the average LCC 

impact is a cost of $30 in the rest of country, a savings of $177 in the hot-humid region, 

and a savings of $196 in the hot-dry region. For split-system heat pumps, the average 

LCC impact is a cost of $89 in the rest of country, a savings of $137 in the hot-humid 

region, and a savings of $274 in the hot-dry region. For single-package air conditioners, 

the average LCC impact is a cost of $68. For single-package heat pumps the average 

LCC impact is a savings of $15. For SDHV air conditioners, the average LCC impact is a 

cost of $202 in the rest of country, a cost of $14 in the hot-humid region, and a cost of 

$65 in the hot-dry region. 

Deleted: 25 

Deleted: 298 

Deleted: 477 

Deleted: 29 

Deleted: 188 

Deleted: 184 

Deleted: 24 

Deleted: 199 

Deleted: 371 

Deleted: 282 in the rest of country, a savings of $7 

in the hot-humid region, and a cost of $52 in the hotdry region 

Deleted: cost of $216 in the rest of country, a cost 

of $3 in the hot-humid region, and a savings of $89 

in the hot-dry region 

Deleted: 201 

Deleted: 7 

Deleted: 49 

444 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At TSL 6, the median payback period is 9.4 years for non-weatherized gas 

furnaces in the northern region and not applicable in the south; 11.5 years for mobile 

home gas furnaces in the northern region and not applicable in the south; and 19.8 years 

for oil-fired furnaces. 

For split-system air conditioners (coil-only), the median payback period is 33 

years in the rest of country, 34 years in the hot-humid region, and 49 years in the hot-dry 

region. For split-system air conditioners (blower-coil), the median payback period is 28 

years in the rest of country, 8 years in the hot-humid region, and 11 years in the hot-dry 

region. For split-system heat pumps, the median payback period is 20 years in the rest of 

country, 7 years in the hot-humid region, and 5 years in the hot-dry region. For singlepackage air conditioners, the median payback period is 24 years. For single-package heat 

pumps, the median payback period is 14 years. For SDHV air conditioners, the median 

payback period is 74 years in the rest of country, 18 years in the hot-humid region, and 

26 years in the hot-dry region. Deleted: 17 

Deleted: 24 

At TSL 6, the fraction of consumers experiencing an LCC benefit is 54 percent 

for non-weatherized gas furnaces in the northern region and 0 percent in the south; 46 

percent for mobile home gas furnaces in the northern region and 0 percent in the south; 

and 33 percent for oil-fired furnaces. 

For split-system air conditioners (coil-only), the fraction of consumers 

experiencing an LCC benefit is 16 percent in the rest of country, 12 percent in the hot445 

Deleted: 34 

Deleted: 17 

Deleted: 100 years in the rest of country, 17 years 

in the hot-humid region, and 25 years in the hot-dry 

region. 

Deleted: 34 years in the rest of country, 

Deleted: in the hot-humid region, and 11 years in 

the hot-dry region 

Deleted: 77 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

humid region, and 9 percent in the hot-dry region. For split-system air conditioners Deleted: 10 

(blower-coil), the fraction of consumers experiencing an LCC benefit is 12 percent in the 

rest of country, 39 percent in the hot-humid region, and 31 percent in the hot-dry region. 

For split-system heat pumps, the fraction of consumers experiencing an LCC benefit is 19 

percent in the rest of country, 48 percent in the hot-humid region, and 52 percent in the 

hot-dry region. For single-package air conditioners, the fraction of consumers 

experiencing an LCC benefit is 27 percent. For single-package heat pumps, the fraction 

of consumers experiencing an LCC benefit is 35 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC benefit is 5 percent in the rest of country, 32 

percent in the hot-humid region, and 26 percent in the hot-dry region. 

At TSL 6, the fraction of consumers experiencing an LCC cost is 23 percent for 

non-weatherized gas furnaces in the northern region and 0 percent in the south; 46 

percent for mobile home gas furnaces in the northern region and 0 percent in the south; 

and 35 percent for oil-fired furnaces. 

For split-system air conditioners (coil-only), the fraction of consumers 

experiencing an LCC cost is 56 percent in the rest of country, 73 percent in the hot-humid 

region, and 75 percent in the hot-dry region. For split-system air conditioners (blowercoil), the fraction of consumers experiencing an LCC cost is 43 percent in the rest of 

country, 25 percent in the hot-humid region, and 33 percent in the hot-dry region. For 

split-system heat pumps, the fraction of consumers experiencing an LCC cost is 58 

percent in the rest of country, 29 percent in the hot-humid region, and 25 percent in the 

Deleted: 30 

Deleted: 21 

Deleted: humid region, and 58 percent in the hotDeleted: 7 

Deleted: in the rest of country, 34 percent in the 

hot-humid region, and 26 percent in the hot-dry 

region. 

Deleted: 12 percent in the rest of country, 33 

percent in the hot-humid region, and 40 percent in 

the hot-dry region 

Deleted: 6 

Deleted: 34 

Deleted: 57 

Deleted: 72 

Deleted: 24 

Deleted: 55 

Deleted: 24 

Deleted: 18 

446 
 

 

 

 

 

 

 

 

 

 

 

 

hot-dry region. For single-package air conditioners, the fraction of consumers 

experiencing an LCC cost is 72 percent. For single-package heat pumps, the fraction of 

consumers experiencing an LCC cost is 63 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC cost is 95 percent in the rest of country, 68 

percent in the hot-humid region, and 74 percent in the hot-dry region. 

Deleted: 66 

At TSL 6, the projected change in INPV ranges from a decrease of $680 million 

to a decrease of $1,873 million. At TSL 6, DOE recognizes the risk of negative impacts if 

manufacturers’ expectations concerning reduced profit margins are realized. If the high 

end of the range of impacts is reached as DOE expects, TSL 6 could result in a net loss of 

22.0 percent in INPV to furnace, central air conditioner, and heat pump manufacturers. 

The Secretary concludes that at TSL 6 for furnace and central air conditioner and 

heat pump energy efficiency, the benefits of energy savings, generating capacity 

reductions, emission reductions, and the estimated monetary value of the CO2 emissions 

reductions would be outweighed by the negative NPV of consumer benefits, the 

economic burden on a significant fraction of consumers due to the increases in installed 

product cost, and the capital conversion costs and profit margin impacts that could result 

in a very large reduction in INPV for the manufacturers. Consequently, the Secretary has 

concluded that TSL 6 is not economically justified. 

As discussed above, DOE calculated a range of results for national energy savings 

and NPV of consumer benefit under TSL 4. Because the range of results for TSL 4 

447 

Deleted: 92 

Deleted: in the rest of country, 65 percent in the 

hot-humid region, and 73 percent in the hot-dry 

region. 

Deleted: 86 percent in the rest of country, 65 

percent in the hot-humid region, and 58 percent in 

the hot-dry region 

Deleted: 94 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

overlaps with the results for TSL 5, and because TSLs 4 and 5 are similar in many 

aspects, DOE discusses the benefits and burdens of TSLs 4 and 5 together below. 

TSL 5 would save 3.98 quads of energy, an amount DOE considers significant. Deleted: 89 

TSL 4 would save 3.20 to 4.22 quads of energy, an amount DOE considers significant. 

Under TSL 5, the NPV of consumer benefit would be $3.47 billion, using a discount rate 

of 7 percent, and $15.69 billion, using a discount rate of 3 percent. Under TSL 4, the 

NPV of consumer benefit would be $3.93 billion to $4.21 billion, using a discount rate of 

7 percent, and $14.73 billion to $17.55 billion, using a discount rate of 3 percent. 

Deleted: 41 

Deleted: 58 

Deleted: 86 

Deleted: 14 

Deleted: 6 

Deleted: 4 

The cumulative emissions reductions at TSL 5 are 116 Mt of CO2, 102 thousand 

tons of NOX, and 0.059 ton of Hg. The cumulative emissions reductions at TSL 4 are 105 

to 134 Mt of CO2, 90.1 to 117 thousand tons of NOX, and 0.097 to 0.071 ton of Hg. The 

estimated monetary value of the cumulative CO2 emissions reductions at TSL 5 ranges 

from $0.596 billion to $9.90 billion. The estimated monetary value of the cumulative CO2 

emissions reductions at TSL 4 ranges from $0.530 billion to $11.0 billion. Total 

generating capacity in 2045 is estimated to decrease by 3.56 GW under TSL 5, and by 

3.81 to 3.69 GW under TSL 4. 

At TSL 5, the average LCC impact is a savings (LCC decrease) of $323 for nonweatherized gas furnaces in the northern region and not applicable in the south; a savings 

of $585 for mobile home gas furnaces in the northern region and not applicable in the 

south; and a cost of $18 for oil-fired furnaces. At TSL 4, the average LCC impact is a 

Deleted: 0 

Deleted: 595 

Deleted: 89 

Deleted: 529 

448 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

savings of $155 for non-weatherized gas furnaces in the northern region and not 

applicable in the south, a savings of $419 for mobile home gas furnaces in the northern 

region and not applicable in the south, and a savings of $15 for oil-fired furnaces. 

For central air conditioners and heat pumps, the average LCC impacts for TSL 5 

and TSL 4 are the same. For split-system air conditioners (coil-only), the average LCC 

impact is not applicable in the rest of country, but is a savings of $93 in the hot-humid 

region, and a savings of $107 in the hot-dry region. For split-system air conditioners 

Deleted: 98 

Deleted: 100 

(blower-coil), the average LCC impact is not applicable in the rest of country, but is a 

savings of $89 in the hot-humid region, and a savings of $101 in the hot-dry region. For 

split-system heat pumps, the average LCC impact is a savings of $4 in the rest of country, 

a savings of $102 in the hot-humid region, and a savings of $175 in the hot-dry region. 

For single-package air conditioners, the average LCC impact is a cost of $37. For singlepackage heat pumps, the average LCC impact is a cost of $104. For SDHV air 

conditioners, the average LCC impact is not applicable for all regions. 

At TSL 5, the median payback period is 9.4 years for non-weatherized gas 

furnaces in the northern region and not applicable in the south, 11.5 years for mobile 

home gas furnaces in the northern region and not applicable in the south, and 19.8 years 

for oil-fired furnaces. At TSL 4, the median payback period is 10.1 years for nonweatherized gas furnaces in the northern region and not applicable in the south, 10.7 

years for mobile home gas furnaces in the northern region and not applicable in the south, 

and 1.0 year for oil-fired furnaces. 

Deleted: 96 

Deleted: 93 

Deleted: 10 

Deleted: 110 

Deleted: 193 

Deleted: 85 in the rest of country, a savings of $75 

in the hot-humid region, and a savings of $61 in the 

hot-dry region 

Deleted: 26 in the rest of country, a savings of $87 

in the hot-humid region, and a savings of $164 in the 

hot-dry region 

449 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For central air conditioners and heat pumps, the median payback periods for TSL 

5 and TSL 4 are the same. For split-system air conditioners (coil-only), the median 

payback period is not applicable in the rest of country, 7 years in the hot-humid region, 

and 10 years in the hot-dry region. For split-system air conditioners (blower-coil), the 

median payback period is not applicable in the rest of country, 8 years in the hot-humid 

region, and 11 years in the hot-dry region. For split-system heat pumps, the median 

payback period is 13 years in the rest of country, 6 years in the hot-humid region, and 5 

years in the hot-dry region. For single-package air conditioners, the median payback 

period is 15 years. For single-package heat pumps, the median payback period is 8 years. 

Deleted: 12 

Deleted: 4 

Deleted: 49 

Deleted: in the rest of country, 11 years in the hothumid region, and 16 years in the hot-dry region For SDHV air conditioners, the median payback period is not applicable in all regions. 

Deleted: 18 years in the rest of country, 9 years in 

the hot-humid region, and 7 years in the hot-dry 

region 

At TSL 5, the fraction of consumers experiencing an LCC benefit is 54 percent 

for non-weatherized gas furnaces in the northern region and 0 percent in the south, 46 

percent for mobile home gas furnaces in the northern region and 0 percent in the south, 

and 33 percent for oil-fired furnaces. At TSL 4, the fraction of consumers experiencing 

an LCC benefit is 19 percent for non-weatherized gas furnaces in the northern region and 

0 percent in the south, 47 percent for mobile home gas furnaces in the northern region 

and 0 percent in the south, and 32 percent for oil-fired furnaces. 

For central air conditioners and heat pumps, at TSL 5 and at TSL 4, the fraction of 

consumers experiencing an LCC benefit is the same. For split-system air conditioners 

(coil-only), the fraction of consumers experiencing an LCC benefit is 0 percent in the rest 

450 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of country, 46 percent in the hot-humid region, and 36 percent in the hot-dry region. For Deleted: 47

split-system air conditioners (blower-coil), the fraction of consumers experiencing an 

LCC benefit is 0 percent in the rest of country, 34 percent in the hot-humid region, and 

27 percent in the hot-dry region. For split-system heat pumps, the fraction of consumers 

experiencing an LCC benefit is 20 percent in the rest of country, 38 percent in the hothumid region, and 40 percent in the hot-dry region. For single-package air conditioners, 

the fraction of consumers experiencing an LCC benefit is 33 percent. For single-package 

heat pumps, the fraction of consumers experiencing an LCC benefit is 35 percent. For 

SDHV air conditioners, no consumers experience an LCC benefit in any of the regions. 

At TSL 5, the fraction of consumers experiencing an LCC cost is 23 percent for 

non-weatherized gas furnaces in the northern region and 0 percent in the south, 46 

percent for mobile home gas furnaces in the northern region and 0 percent in the south, 

and 35 percent for oil-fired furnaces. At TSL 4, the fraction of consumers experiencing 

an LCC cost is 10 percent for non-weatherized gas furnaces in the northern region and 0 

percent in the south, 44 percent for mobile home gas furnaces in the northern region and 

0 percent in the south, and 10 percent for oil-fired furnaces. 

For central air conditioners and heat pumps, at TSL 5 and at TSL 4, the fraction of 

consumers experiencing an LCC cost is the same. For split-system air conditioners (coilonly), the fraction of consumers experiencing an LCC cost is 0 percent in the rest of 

country, 26 percent in the hot-humid region, and 37 percent in the hot-dry region. For 

split-system air conditioners (blower-coil), the fraction of consumers experiencing an 

Deleted: 35 

Deleted: 26 

Deleted: 21 

Deleted: 41 

Deleted: 12 

Deleted: in the rest of country, 41 percent in the 

hot-humid region, and 32 percent in the hot-dry 

region. 

Deleted: 18 percent in the rest of country, 34 

percent in the hot-humid region, and 38 percent in 

the hot-dry region 

451 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LCC cost is 0 percent in the rest of country, 21 percent in the hot-humid region, and 28 

percent in the hot-dry region. For split-system heat pumps, the fraction of consumers 

experiencing an LCC cost is 35 percent in the rest of country, 17 percent in the hot-humid 

region, and 15 percent in the hot-dry region. For single-package air conditioners, the 

fraction of consumers experiencing an LCC cost is 37 percent. For single-package heat 

pumps, the fraction of consumers experiencing an LCC cost is 29 percent. For SDHV air 

conditioners, no consumers experience an LCC cost in any of the regions. 

At TSL 5, the projected change in INPV ranges from a decrease of $508 million 

to a decrease of $915 million. At TSL 5, DOE recognizes the risk of negative impacts if 

manufacturers’ expectations concerning reduced profit margins are realized. If the high 

end of the range of impacts is reached as DOE expects, TSL 5 could result in a net loss of 

10.8 percent in INPV to furnace, central air conditioner, and heat pump manufacturers. 

At TSL 4, the projected change in INPV ranges from a net loss of $478 million to a net 

loss of $900 million. At TSL 4, DOE recognizes the risk of negative impacts if 

manufacturers’ expectations concerning reduced profit margins are realized. If the high 

end of the range of impacts is reached as DOE expects, TSL 4 could result in a net loss of 

10.6 percent in INPV to furnace, central air conditioner, and heat pump manufacturers. 

The Secretary concludes that at TSL 5 for furnace and central air conditioner and 

heat pump energy efficiency, the benefits of energy savings, positive NPV of consumer 

benefits, generating capacity reductions, emission reductions, and the estimated monetary 

value of the CO2 emissions reductions are outweighed by the economic burden on some 

Deleted: 20 

Deleted: 32 

Deleted: humid region, and 12 percent in the hotDeleted: 71 

Deleted: in the rest of country, 41 percent in the 

hot-humid region, and 51 percent in the hot-dry 

region. 

Deleted: 46 percent in the rest of country, 30 

percent in the hot-humid region, and 26 percent in 

the hot-dry region 

452 
 

 

 

 

 

consumers due to large increases in installed cost, and the capital conversion costs and 

profit margin impacts that could result in a large reduction in INPV for the 

manufacturers. Consequently, the Secretary has concluded that TSL 5 is not 

economically justified. 

The Secretary concludes that at TSL 4 for furnace and central air conditioner and 

heat pump energy efficiency, the benefits of energy savings, positive NPV of consumer 

benefits, generating capacity reductions, emission reductions, and the estimated monetary 

value of the CO2 emissions reductions would outweigh the economic burden on some 

consumers due to increases in installed cost, and the capital conversion costs and profit 

margin impacts that could result in a moderate reduction in INPV for the manufacturers. 

TSL 4 may yield greater cumulative energy savings than TSL 5, and also a higher NPV 

of consumer benefits at both 3-percent and 7-percent discount rates. 

In addition, the efficiency levels in TSL 4 correspond to the recommended levels 

in the consensus agreement, which DOE believes sets forth a statement by interested 

persons that are fairly representative of relevant points of view (including representatives 

of manufacturers of covered products, States, and efficiency advocates) and contains 

recommendations with respect to an energy conservation standard that are in accordance 

with 42 U.S.C. 6295(o). Moreover, DOE has encouraged the submission of consensus 

agreements as a way to get diverse stakeholders together, to develop an independent and 

probative analysis useful in DOE standard setting, and to expedite the rulemaking 

process. In the present case, one outcome of the consensus agreement was a 

453 
 

 

 

 

 

 

 

 

recommendation to accelerate the compliance dates for these products, which would have 

the effect of producing additional energy savings at an earlier date. DOE also believes 

that standard levels recommended in the consensus agreement may increase the 

likelihood for regulatory compliance, while decreasing the risk of litigation. 

After considering the analysis, comments to the furnaces RAP and the preliminary 

TSD for central air conditioners and heat pumps, and the benefits and burdens of TSL 4, 

the Secretary has concluded that this trial standard level offers the maximum 

improvement in efficiency that is technologically feasible and economically justified, and 

will result in significant conservation of energy. Therefore, DOE today adopts TSL 4 for 

furnaces and central air conditioners and heat pumps. Today’s amended energy 

conservation standards for furnaces, central air conditioners, and heat pumps, expressed 

in terms of minimum energy efficiency, are shown in Table V.55. 

454 
 

 

 

 

 

 

 

 

 

 

 

 

 

Table V.55 Amended Standards for Furnace, Central Air Conditioner, and Heat 

Pump Energy Efficiency 

Residential Furnaces* 

Product Class National Standards Northern Region** Standards 

Non-weatherized gas AFUE = 80% AFUE = 90% 

Mobile home gas AFUE = 80% AFUE = 90% 

Non-weatherized oil-fired AFUE = 83% AFUE = 83% 

Weatherized gas AFUE = 81% AFUE = 81% 

Mobile home oil-fired‡‡ AFUE = 75% AFUE = 75% 

Weatherized oil-fired‡‡ AFUE = 78% AFUE = 78% 

Electric‡‡ AFUE = 78% AFUE = 78% 

Central Air Conditioners and Heat Pumps†

Product Class National 

Standards 

Southeastern 

Region†† Standards 

Southwestern Region‡

Standards 

Split-system air 

conditioners 

SEER = 13 SEER = 14 SEER = 14 

EER = 12.2 (for units with a 

rated cooling capacity less 

than 45,000 Btu/h) 

EER = 11.7 (for units with a 

rated cooling capacity equal 

to or greater than 45,000 

Btu/h) 

Split-system heat pumps SEER = 14 

HSPF = 8.2 

SEER = 14 

HSPF = 8.2 

SEER = 14 

HSPF = 8.2 

Single-package air 

conditioners‡‡

SEER = 14 SEER = 14 SEER = 14 

EER = 11.0 

Single-package heat pumps SEER = 14 

HSPF = 8.0 

SEER = 14 

HSPF = 8.0 

SEER = 14 

HSPF = 8.0 

Small-duct, high-velocity 

systems 

SEER = 13 

HSPF = 7.7 

SEER = 13 

HSPF = 7.7 

SEER = 13 

HSPF = 7.7 

Space-constrained products 

– air conditioners‡‡

SEER = 12 SEER = 12 SEER = 12 

Space-constrained products 

– heat pumps‡‡

SEER = 12 

HSPF = 7.4 

SEER = 12 

HSPF = 7.4 

SEER = 12 

HSPF = 7.4 

* AFUE is Annual Fuel Utilization Efficiency.
 

** The Northern region for furnaces contains the following States: Alaska, Colorado, Connecticut, Idaho, 

Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, 

Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode 

Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.
 † SEER is Seasonal Energy Efficiency Ratio; EER is Energy Efficiency Ratio; HSPF is Heating Seasonal 

Performance Factor; and Btu/h is British Thermal Units per hour. 

†† The Southeastern region for central air conditioners and heat pumps contains the following States: 

Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, 

North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia, and the District of Columbia. 

‡

The Southwestern region for central air conditioners and heat pumps contains the States of Arizona, 

California, Nevada, and New Mexico. 

DOE is not amending energy conservation standards for these product classes in this direct final rule. 

455 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Benefits and Burdens of TSLs Considered for Furnace, Central Air Conditioner, and 

Heat Pump Standby Mode and Off Mode Power 

Table V.56 through Table V.58 present a summary of the quantitative impacts 

estimated for each TSL considered for furnace, central air conditioner, and heat pump 

standby mode and off mode power. The efficiency levels contained in each TSL are 

described in section V.A. 

Table V.56 Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Standby Mode and Off Mode Power TSLs: National Impacts 

Category TSL 1 TSL 2 TSL 3 

National Energy Savings (quads) 0.153 0.16 0.186 

NPV of Consumer Benefits (2009$ billion) 

3% discount rate 1.14 1.18 1.01 

7% discount rate 0.371 0.373 0.235 

Cumulative Emissions Reduction 

CO2 (million metric tons) 8.23 8.73 10.1 

NOX (thousand tons) 6.60 7.00 8.11 

Hg (ton) 0.056 0.072 0.079 

Value of Emissions Reductions 

CO2 (2009$ million)* 41.7 to 694 44.3 to 738 51.7 to 862 

NOX – 3% discount rate (2009$ 

million) 

2.07 to 21.3 2.20 to 22.6 2.56 to 26.3 

NOX – 7% discount rate (2009$ 

million) 

0.793 to 8.15 0.841 to 8.65 0.975 to 10.0 

Generation Capacity Reduction (GW) ** 0.103 0.110 0.127 

Employment Impacts 

Total Potential Change in Domestic 

Production Workers in 2016 (thousands) negligible negligible negligible 

Indirect Domestic Jobs (thousands)** 0.8 0.86 1.02 

Parentheses indicate negative (-) values. 

* Range of the value of CO2 reductions is based on estimates of the global benefit of reduced CO2
 

emissions.
 

** Changes in 2045.
 

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Table V.57 Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Standby Mode and Off Mode Power TSLs: Manufacturer and Consumer 

Impacts 

Category TSL 1 TSL 2 TSL 3 

Manufacturer Impacts 

Change in Industry NPV (2009$ million) 4 to (253) 5 to (253) 23 to (255) 

Industry NPV (% change) .05 to (2.91) .06 to (2.91) 0.26 to (2.93) 

Consumer Mean LCC Savings* (2009$) 

Non-Weatherized Gas Furnaces 2 2 0 

Mobile Home Gas Furnaces 0 0 (1) 

Oil-Fired Furnaces 1 1 1 

Electric Furnaces 0 0 (1) 

Split-System Air Conditioners (coil-only) 84 84 84 

Split-System Air Conditioners (blower-coil) 84 40 35 

Split-System Heat Pumps 9 9 (1) 

Single-Package Air Conditioners 84 41 36 

Single-Package Heat Pumps 9 9 (1) 

SDHV Air Conditioners 84 37 32 

Space-Constrained Air Conditioners 84 42 37 

Space-Constrained Heat Pumps 9 9 (1) 

Consumer Median PBP (years) 

Non-Weatherized Gas Furnaces 11 11 16 

Mobile Home Gas Furnaces 12 12 18 

Oil-Fired Furnaces 8 8 12 

Electric Furnaces 10 10 16 

Split-System Air Conditioners (coil-only) 1 1 1 

Split-System Air Conditioners (blower-coil) 1 6 7 

Split-System Heat Pumps 4 4 5 

Single-Package Air Conditioners 1 6 7 

Single-Package Heat Pumps 4 4 5 

SDHV Air Conditioners 1 7 7 

Space-Constrained Air Conditioners 1 6 7 

Space-Constrained Heat Pumps 4 4 5 

* Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the 

amount indicated. 

457 
 

 

Table V.58 Summary of Results for Furnace, Central Air Conditioner, and Heat 

Pump Standby Mode and Off Mode Power TSLs: Distribution of Consumer 

Impacts 

Category TSL 1 TSL 2 TSL 3 

Distribution of Consumer LCC Impacts 

Non-Weatherized Gas Furnaces 

Net Cost (%) 9 9 17 

No Impact (%) 72 72 72 

Net Benefit (%) 18 18 11 

Mobile Home Gas Furnaces 

Net Cost (%) 6 6 8 

No Impact (%) 91 91 91 

Net Benefit (%) 4 4 2 

Oil-Fired Furnaces 

Net Cost (%) 1 1 4 

No Impact (%) 91 91 91 

Net Benefit (%) 8 8 6 

Electric Furnaces 

Net Cost (%) 4 4 7 

No Impact (%) 90 90 90 

Net Benefit (%) 5 5 3 

Split-System Air Conditioners (coil-only) 

Net Cost (%) 0 0 0 

No Impact (%) 94 94 94 

Net Benefit (%) 6 6 6 

Split-System Air Conditioners (blower-coil) 

Net Cost (%) 0 3 3 

No Impact (%) 94 91 91 

Net Benefit (%) 6 6 6 

Split-System Heat Pumps 

Net Cost (%) 0 0 19 

No Impact (%) 67 67 57 

Net Benefit (%) 33 33 24 

Single-Package Air Conditioners 

Net Cost (%) 0 3 3 

No Impact (%) 94 91 91 

Net Benefit (%) 6 6 6 

Single-Package Heat Pumps 

Net Cost (%) 0 0 19 

No Impact (%) 66 66 57 

Net Benefit (%) 34 34 24 

SDHV Air Conditioners 

Net Cost (%) 0 3 3 

No Impact (%) 94 91 91 

Net Benefit (%) 6 6 6 

Space-Constrained Air Conditioners 

Net Cost (%) 0 3 3 

No Impact (%) 94 91 91 

Net Benefit (%) 6 6 6 

458 
 

 

 

 

 

 

 

 

 

 

 

Space-Constrained Heat Pumps 

Net Cost (%) 0 0 19 

No Impact (%) 67 67 58 

Net Benefit (%) 33 33 23 

Values in the table are rounded off, and, thus, sums may not equal 100 percent in all cases. 

DOE first considered TSL 3, which represents the max-tech efficiency levels. 

TSL 3 would save 0.186 quads of energy, an amount DOE considers significant. Under 

TSL 3, the NPV of consumer benefit would be $0.235 billion, using a discount rate of 7 

percent, and $1.01 billion, using a discount rate of 3 percent. 

The cumulative emissions reductions at TSL 3 are 10.1 Mt of CO2, 8.11 thousand 

tons of NOX, and 0.079 ton of Hg. The estimated monetary value of the cumulative CO2 

emissions reductions at TSL 3 ranges from $51.7 million to $862 million. Total 

generating capacity in 2045 is estimated to decrease by 0.127 GW under TSL 3. 

At TSL 3, the average LCC impact is a cost (LCC increase) of $0 for nonweatherized gas furnaces, a cost of $1 for mobile home gas furnaces, a savings of $1 for 

oil-fired furnaces, and a cost of $1 for electric furnaces. For split-system air conditioners 

(coil-only), the average LCC impact is a savings (LCC decrease) of $84. For split-system 

air conditioners (blower-coil), the average LCC impact is a savings of $35. For splitsystem heat pumps, the average LCC impact is a cost of $1. For single-package air 

conditioners, the average LCC impact is a savings of $36. For single-package heat 

pumps, the average LCC impact is a cost of $1. For SDHV air conditioners, the average 

LCC impact is a savings of $32. For space-constrained air conditioners, the average LCC 

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impact is a savings of $37. For space-constrained heat pumps, the average LCC impact is 

a cost of $1. 

At TSL 3, the median payback period is 16 years for non-weatherized gas 

furnaces; 18 years for mobile home gas furnaces; 12 years for oil-fired furnaces; and 16 

years for electric furnaces. For split-system air conditioners (coil-only), the median 

payback period is 1 year. For split-system air conditioners (blower-coil), the median 

payback period is 7 years. For split-system heat pumps, the median payback period is 5 

years. For single-package air conditioners, the median payback period is 7 years. For 

single-package heat pumps, the median payback period is 5 years. For SDHV air 

conditioners, the median payback period is 7 years. For space-constrained air 

conditioners, the median payback period is 7 years. For space-constrained heat pumps, 

the median payback period is 5 years. 

At TSL 3, the fraction of consumers experiencing an LCC benefit is 11 percent 

for non-weatherized gas furnaces, 2 percent for mobile home gas furnaces, 6 percent for 

oil-fired furnaces, and 3 percent for electric furnaces. For split-system air conditioners 

(coil-only), the fraction of consumers experiencing an LCC benefit is 6 percent. For splitsystem air conditioners (blower-coil), the fraction of consumers experiencing an LCC 

benefit is 6 percent. For split-system heat pumps, the fraction of consumers experiencing 

an LCC benefit is 24 percent. For single-package air conditioners, the fraction of 

consumers experiencing an LCC benefit is 6 percent. For single-package heat pumps, the 

fraction of consumers experiencing an LCC benefit is 24 percent. For SDHV air 

460 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

conditioners, the fraction of consumers experiencing an LCC benefit is 6 percent. For 

space-constrained air conditioners, the fraction of consumers experiencing an LCC 

benefit is 6 percent. For space-constrained heat pumps, the fraction of consumers 

experiencing an LCC benefit is 23 percent. 

At TSL 3, the fraction of consumers experiencing an LCC cost is 17 percent for 

non-weatherized gas furnaces, 8 percent for mobile home gas furnaces, 4 percent for oilfired furnaces, and 7 percent for electric furnaces. For split-system air conditioners (coilonly), the fraction of consumers experiencing an LCC cost is 0 percent. For split-system 

air conditioners (blower-coil), the fraction of consumers experiencing an LCC cost is 3 

percent. For split-system heat pumps, the fraction of consumers experiencing an LCC 

cost is 19 percent. For single-package air conditioners, the fraction of consumers 

experiencing an LCC cost is 3 percent. For single-package heat pumps, the fraction of 

consumers experiencing an LCC cost is 19 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC cost is 3 percent. For space-constrained air 

conditioners, the fraction of consumers experiencing an LCC cost is 3 percent. For spaceconstrained heat pumps, the fraction of consumers experiencing an LCC cost is 19 

percent. 

At TSL 3, the projected change in INPV ranges from an increase of $23 million to 

a decrease of $255 million. The model anticipates impacts on INPV to range from 0.26 

percent to -2.93 percent. In general, the cost of standby mode and off mode features is not 

461 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

expected to significantly affect manufacturer profit margins for furnace, central air 

conditioner, and heat pump products. 

The Secretary concludes that at TSL 3 for furnace and central air conditioner and 

heat pump standby mode and off mode power, the benefits of energy savings, positive 

NPV of consumer benefits at 3-percent discount rate, generating capacity reductions, 

emission reductions, and the estimated monetary value of the CO2 emissions reductions 

would be outweighed by the negative NPV of consumer benefits at 7 percent and the 

economic burden on some consumers due to the increases in product cost. Of the 

consumers of furnaces and heat pumps who would be impacted, many more would be 

burdened by standards at TSL 3 than would benefit. Consequently, the Secretary has 

concluded that TSL 3 is not economically justified. 

DOE then considered TSL 2. TSL 2 would save 0.16 quads of energy, an amount 

DOE considers significant. Under TSL 2, the NPV of consumer benefit would be $0.373 

billion, using a discount rate of 7 percent, and $1.18 billion, using a discount rate of 3 

percent. 

The cumulative emissions reductions at TSL 2 are 8.73 Mt of CO2, 7.00 thousand 

tons of NOX, and 0.072 tons of Hg. The estimated monetary value of the cumulative CO2 

emissions reductions at TSL 2 ranges from $44.3 million to $738 million. Total 

generating capacity in 2045 is estimated to decrease by 0.11 GW under TSL 2. 

462 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At TSL 2, the average LCC impact is a savings (LCC decrease) of $2 for nonweatherized gas furnaces, a savings of $0 for mobile home gas furnaces, a savings of $1 

for oil-fired furnaces, and a savings of $0 for electric furnaces. For split-system air 

conditioners (coil-only), the average LCC impact is a savings of $84. For split-system air 

conditioners (blower-coil), the average LCC impact is a savings of $40. For split-system 

heat pumps, the average LCC impact is a savings of $9. For single-package air 

conditioners, the average LCC impact is a savings of $41. For single-package heat 

pumps, the average LCC impact is a savings of $9. For SDHV air conditioners, the 

average LCC impact is a savings of $37. For space-constrained air conditioners, the 

average LCC impact is a savings of $42. For space-constrained heat pumps, the average 

LCC impact is a savings of $9. 

At TSL 2, the median payback period is 11 years for non-weatherized gas 

furnaces; 12 years for mobile home gas furnaces; 8 years for oil-fired furnaces; and 10 

years for electric furnaces. For split-system air conditioners (coil-only), the median 

payback period is 1 year. For split-system air conditioners (blower-coil), the median 

payback period is 6 years. For split-system heat pumps, the median payback period is 4 

years. For single-package air conditioners, the median payback period is 6 years. For 

single-package heat pumps, the median payback period is 4 years. For SDHV air 

conditioners, the median payback period is 7 years. For space-constrained air 

conditioners, the median payback period is 6 years. For space-constrained heat pumps, 

the median payback period is 4 years. 

463 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At TSL 2, the fraction of consumers experiencing an LCC benefit is 18 percent 

for non-weatherized gas furnaces, 4 percent for mobile home gas furnaces, 8 percent for 

oil-fired furnaces, and 5 percent for electric furnaces. For split-system air conditioners 

(coil-only), the fraction of consumers experiencing an LCC benefit is 6 percent. For 

split-system air conditioners (blower-coil), the fraction of consumers experiencing an 

LCC benefit is 6 percent. For split-system heat pumps, the fraction of consumers 

experiencing an LCC benefit is 33 percent. For single-package air conditioners, the 

fraction of consumers experiencing an LCC benefit is 6 percent. For single-package heat 

pumps, the fraction of consumers experiencing an LCC benefit is 34 percent. For SDHV 

air conditioners, the fraction of consumers experiencing an LCC benefit is 6 percent. For 

space-constrained air conditioners, the fraction of consumers experiencing an LCC 

benefit is 6 percent. For space-constrained heat pumps, the fraction of consumers 

experiencing an LCC benefit is 33 percent. 

At TSL 2, the fraction of consumers experiencing an LCC cost is 9 percent for 

non-weatherized gas furnaces, 6 percent for mobile home gas furnaces, 1 percent for oilfired furnaces, and 4 percent for electric furnaces. For split system air conditioners (coilonly), the fraction of consumers experiencing an LCC cost is 0 percent. For split-system 

air conditioners (blower-coil), the fraction of consumers experiencing an LCC cost is 3 

percent. For split-system heat pumps, the fraction of consumers experiencing an LCC 

cost is 0 percent. For single-package air conditioners, the fraction of consumers 

experiencing an LCC cost is 3 percent. For single-package heat pumps, the fraction of 

464 
 

 

 

 

 

 

 

 

 

 

 

 

consumers experiencing an LCC cost is 0 percent. For SDHV air conditioners, the 

fraction of consumers experiencing an LCC cost is 3 percent. For space-constrained air 

conditioners, the fraction of consumers experiencing an LCC cost is 3 percent. For spaceconstrained heat pumps, the fraction of consumers experiencing an LCC cost is 0 percent. 

At TSL 2, the projected change in INPV ranges from an increase of $5 million to 

a decrease of $253 million. The modeled impacts on INPV range from 0.06 percent to ­

2.91 percent. In general, the incremental cost of standby mode and off mode features are 

not expected to significantly affect INPV for the furnace, central air conditioner, and heat 

pump industry at this level. 

The Secretary concludes that at TSL 2 for furnace, central air conditioner, and 

heat pump standby mode and off mode power, the benefits of energy savings, positive 

NPV of consumer benefits at both 7-percent and 3-percent discount rates, generating 

capacity reductions, emission reductions, and the estimated monetary value of the CO2 

emissions reductions would outweigh the economic burden on a small fraction of 

consumers due to the increases in product cost. With the exception of consumers of 

mobile home gas furnaces (whose mean LCC impact is zero), the majority of the 

consumers that would be affected by standards at TSL 2 would see an LCC benefit. 

Consequently, the Secretary has concluded that TSL 2 is economically justified. 

After considering the analysis and the benefits and burdens of TSL 2, the 

Secretary has concluded that this trial standard level offers the maximum improvement in 

465 
 

 

 

 

 

 

 

energy efficiency that is technologically feasible and economically justified, and will 

result in the significant conservation of energy. Therefore, DOE today adopts TSL 2 for 

furnace, central air conditioner, and heat pump standby mode and off mode. Today’s 

amended energy conservation standards for standby mode and off mode, expressed as 

maximum power in watts, are shown in Table V.59. 

Table V.59 Standards for Furnace, Central Air Conditioner, and Heat Pump 

Standby Mode and Off Mode* 

Residential Furnaces** 

Product Class Standby Mode and Off Mode Standard 

Levels 

Non-Weatherized Gas PW,SB = 10 watts 

PW,OFF = 10 watts 

Mobile Home Gas PW,SB = 10 watts 

PW,OFF = 10 watts 

Non-Weatherized Oil-Fired PW,SB = 11 watts 

PW,OFF = 11 watts 

Mobile Home Oil-Fired PW,SB = 11 watts 

PW,OFF = 11 watts 

Electric PW,SB = 10 watts 

PW,OFF = 10 watts 

Central Air Conditioners and Heat Pumps†

Product Class Off Mode Standard Levels††

Split-system air conditioners PW,OFF = 30 watts 

Split-system heat pumps PW,OFF = 33 watts 

Single-package air conditioners PW,OFF = 30 watts 

Single-package heat pumps PW,OFF = 33watts 

Small-duct, high-velocity systems PW,OFF = 30 watts 

Space-constrained air conditioners PW,OFF = 30 watts 

Space-constrained heat pumps PW,OFF = 33 watts 

466 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*PW,SB is standby mode electrical power consumption, and PW,OFF is off mode electrical power
 

consumption for furnaces.
 

** Standby mode and off mode energy consumption for weatherized gas and oil-fired furnaces is regulated
 

as a part of single-package air conditioners and heat pumps, as discussed in section III.E.1.
 † PW,OFF is off mode electrical power consumption for central air conditioners and heat pumps. 

†† DOE is not adopting a separate standby mode standard level for central air conditioners and heat pumps, 

because standby mode power consumption for these products is already regulated by SEER and HSPF. 

3. Annualized Benefits and Costs of Standards for Furnace, Central Air Conditioner, and 

Heat Pump Energy Efficiency 

The benefits and costs of today’s standards can also be expressed in terms of 

annualized values over the analysis period. The annualized monetary values are the sum 

of: (1) the annualized national economic value (expressed in 2009$) of the benefits from 

operating products that meet the standards (consisting primarily of operating cost savings 

from using less energy, minus increases in equipment purchase costs, which is another 

way of representing consumer NPV); and (2) the monetary value of the benefits of 

emission reductions, including CO2 emission reductions.100 The value of the CO2 

reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated using a 

range of values per metric ton of CO2 developed by a recent Federal interagency process. 

The monetary costs and benefits of cumulative emissions reductions are reported in 

2009$ to permit comparisons with the other costs and benefits in the same dollar units. 

100 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized 

values. First, DOE calculated a present value in 2011, the year used for discounting the NPV of total 

consumer costs and savings, for the time-series of costs and benefits using discount rates of three and 

seven percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a 

range of discount rates, as shown in Table I.3. From the present value, DOE then calculated the fixed 

annual payment over a 32-year period, starting in 2011 that yields the same present value. The fixed annual 

payment is the annualized value. Although DOE calculated annualized values, this does not imply that the 

time-series of cost and benefits from which the annualized values were determined would be a steady 

stream of payments. 

467 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Although combining the values of operating savings and CO2 reductions provides 

a useful perspective, two issues should be considered. First, the national operating 

savings are domestic U.S. consumer monetary savings that occur as a result of market 

transactions, while the value of CO2 reductions is based on a global value. Second, the 

assessments of operating cost savings and CO2 savings are performed with different 

methods that use quite different time frames for analysis. The national operating cost 

savings is measured for the lifetime of products shipped in 2013–2045 for furnaces and 

2015-2045 for central air conditioners and heat pumps. The SCC values, on the other 

hand, reflect the present value of future climate-related impacts resulting from the 

emission of one metric ton of carbon dioxide in each year. These impacts continue well 

beyond 2100. 

Estimates of annualized benefits and costs of today’s standards for furnace, 

central air conditioner, and heat pump energy efficiency are shown in Table V.60. The 

results under the primary estimate are as follows. Using a 7-percent discount rate and the 

SCC value of $22.1/ton in 2010 (in 2009$), the cost of the energy efficiency standards in 

today’s direct final rule is $527 million to $773 million per year in increased equipment 

installed costs, while the annualized benefits are $837 million to $1106 million per year 

in reduced equipment operating costs, $140 million to $178 million in CO2 reductions, 

and $5.3 million to $6.9 million in reduced NOX emissions. In this case, the net benefit 

Deleted: 533 

Deleted: 780 

Deleted: 839 

Deleted: 1107 

amounts to $456 million to $517 million per year. DOE also calculated annualized net Deleted: 451 million to $512 million per year. 

benefits using a range of potential electricity and equipment price trend forecasts. Given 

the range of modeled price trends, the range of net benefits using a 7-percent discount 

468 
 

 

 

 

 

 

 

 

 

 

 

 

rate is from $295 million to $623 million per year. The low estimate corresponds to a 

scenario with a low electricity price trend and a constant real price trend for equipment. 

Using a 3-percent discount rate and the SCC value of $22.1/metric ton in 2010 (in 

2009$), the cost of the energy efficiency standards in today’s direct final rule is $566 

million to $825 million per year in increased equipment installed costs, while the benefits 

are $1289 million to $1686 million per year in reduced operating costs, $140 million to 

$178 million in CO2 reductions, and $7.9 million to $10.2 million in reduced NOX 

emissions. In this case, the net benefit amounts to $871 million to $1049 million per year. 

DOE also calculated annualized net benefits using a range of potential electricity and 

equipment price trend forecasts. Given the range of modeled price trends, the range of net 

benefits using a 3-percent discount rate is from $601 million to $1,260 million per year. 

The low estimate corresponds to a scenario with a low electricity price trend and a 

constant real price trend for equipment. 

Comment [A16]: Change recommended by 

OIRA. 

Deleted: 573 

Deleted: 832 

Deleted: 1290 

Deleted: 1687 

Deleted: 865 million to $1043 million per year 

Comment [A17]: Change recommended by 

OIRA. 

469 
 

 

 

 

 

470 

Table V.60 Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Energy Efficiency (TSL 4) 

Discount Rate 

Primary 

Estimate* Low Estimate* High Estimate* 

Monetized (million 2009$/year) 

Benefits 

Operating Cost Savings 

7% 837 to 1,106 723 to 959 955 to 1,258 

3% 1,289 to 1,686 1,083 to 1,422 1,493 to 1,948 

CO2 Reduction at $4.9/t** 5% 34 to 43 34 to 43 34 to 43 

CO2 Reduction at $22.1/t** 3% 140 to 178 141 to 178 140 to 178 

CO2 Reduction at $36.3/t** 2.5% 224 to 284 225 to 285 224 to 284 

CO2 Reduction at $67.1/t** 3% 427 to 541 428 to 543 427 to 541 

NOX Reduction at 

$2,519/ton** 

7% 5.3 to 6.9 5.3 to 7.0 5.3 to 6.9 

3% 7.9 to 10.2 7.9 to 10.3 7.9 to 10.2 

Total† 

7% plus CO2 

range 

876 to 1,653 762 to 1,509 994 to 1,805 

7% 983 to 1,290 869 to 1,144 1,100 to 1,442 

3% 1,437 to 1,874 1,232 to 1,611 1,641 to 2,136 

3% plus CO2 

range 

1,330 to 2,237 1,125 to 1,975 1,535 to 2,499 

Costs 

Incremental Product Costs 

7% 527 to 773 574 to 840 555 to 819 

3% 566 to 825 630 to 916 599 to 876 

Net Benefits/Costs 

Total† 

7% plus CO2 

range 

349 to 880 188 to 669 438 to 986 

7% 456 to 517 295 to 305 545 to 623 

3% 871 to 1,049 601 to 695 1,042 to 1,260 

3% plus CO2 

range 

764 to 1,412 494 to 1,059 935 to 1,623 

* The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 

2015-2045 for the central air conditioner and heat pump standards. 

Formatted Table ...

Deleted: 839...37 to 1,107 ...

Deleted: 722...23 to 955 ...

Deleted: 958...55 to 1,261 ...

Deleted: 290...89 to 1,687 ...

Deleted: 081...83 to 1,416 ...

Deleted: 496...93 to 1,951 ...

Deleted: 33...4 to 42 ...

Deleted: 33...4 to 42 ...

Deleted: 33...4 to 42 ...

Deleted: 140 

Deleted: 224...25 to 284 ...

Deleted: 540 

Deleted: 427...28 to 540 ...

Deleted: 540 

Deleted: 6.9 

Deleted: 2 

Deleted: 877...76 to 1,655 ...

Deleted: 760...62 to 1,502 ...

Deleted: 996...94 to 1,808 ...

Deleted: 984...83 to 1,292 ...

Deleted: 867...69 to 1,140 ...

Deleted: 103...00 to 1,445 ...

Deleted: 438...37 to 1,875 ...

Deleted: 229...32 to 1,604 ...

Deleted: 644...41 to 2,139 ...

Deleted: 331...30 to 2,238 ...

Deleted: 122...25 to 1,967 ...

Deleted: 538...35 to 2,502 ...

Formatted Table ...

Deleted: 533...27 to 780 ...

Deleted: 496...74 to 722 ...

Deleted: 572...55 to 839 ...

Deleted: 573...66 to 832 ...

Deleted: 528...30 to 764 ...

Deleted: 619...99 to 901 ...

Formatted Table ...

Deleted: 344...49 to 875 ...

Deleted: 265...88 to 781 ...

Deleted: 424...38 to 968 ...

Deleted: 451...56 to 512 ...

Deleted: 371...95 to 418 ...

Deleted: 531...45 to 606 ...

Deleted: 865...71 to 1,043 ...

Deleted: 701...01 to 840 ...

Deleted: 025...42 to 1,239 ...

Deleted: 758...64 to 1,406 ...

Deleted: 594...94 to 1,203 ...

Deleted: 919...35 to 1,601 ...

Deleted: * 

Comment [A18]: Change recommended by ...
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the 

AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In 

addition, the low estimate uses incremental product costs that reflects constant prices (no learning rate) for 

product prices, and the high estimate uses incremental product costs that reflects a declining trend (high 

learning rate) for product prices. The derivation and application of learning rates for product prices is 

explained in section IV.F.1. 

† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 

under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC 

distributions calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value 

of $67.1 per ton represents the 95th percentile of the SCC distribution calculated using a 3-percent discount 

rate. The value for NOX (in 2009$) is the average of the low and high values used in DOE’s analysis. 

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 

3-percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” 

and “3% plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount 

rate, and those values are added to the full range of CO2 values. 

4. Annualized Benefits and Costs of Standards for Furnace, Central Air Conditioner, and 

Heat Pump Standby Mode and Off Mode Power 

As explained in detail above, the benefits and costs of today’s standards for 

standby mode and off mode power can also be expressed in terms of annualized values. 

The annualized monetary values are the sum of: (1) the annualized national economic 

value (expressed in 2009$) of the benefits from operating products that meet the 

standards (consisting primarily of operating cost savings from using less energy, minus 

increases in equipment purchase costs, which is another way of representing consumer 

NPV); and (2) the monetary value of the benefits of emission reductions, including CO2 

emission reductions. 

Estimates of annualized benefits and costs of today’s standards for furnace, 

central air conditioner, and heat pump standby mode and off mode power are shown in 

Comment [A19]: Change recommended by 

OIRA. 

471 
 

 

 

 

 

 

 

 

 

 

Table V.61. The results under the primary estimate are as follows. Using a 7-percent 

discount rate and the SCC value of $22.1/ton in 2010 (in 2009$), the cost of the standby 

mode and off mode standards in today’s direct final rule is $16.4 million per year in 

increased equipment costs, while the annualized benefits are $46.5 million per year in 

reduced equipment operating costs, $12.4 million in CO2 reductions, and $0.4 million in 

reduced NOX emissions. In this case, the net benefit amounts to $42.8 million per year. 

Using a 3-percent discount rate and the SCC value of $22.1/ton in 2010 (in 2009$), the 

cost of the standby mode and off mode standards in today’s direct final rule is $19.1 

million per year in increased equipment costs, while the benefits are $79.3 million per 

year in reduced operating costs, $12.4 million in CO2 reductions, and $0.6 million in 

reduced NOX emissions. In this case, the net benefit amounts to $73.2 million per year. 

472 
 

 

 

 

Table V.61 Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode Power (TSL 2) 

Discount Rate 

Primary 

Estimate* Low Estimate* High Estimate* 

Monetized (million 2009$/year) 

Benefits 

Operating Cost Savings 

7% 46.5 40.4 52.8 

3% 79.3 67.9 90.8 

CO2 Reduction at $4.9/t** 5% 2.9 2.9 2.9 

CO2 Reduction at $22.1/t** 3% 12.4 12.4 12.4 

CO2 Reduction at $36.3/t** 2.5% 19.9 19.9 19.9 

CO2 Reduction at $67.1/t** 3% 37.6 37.6 37.6 

NOX Reduction at 

$2,519/ton** 

7% 0.4 0.4 0.4 

3% 0.6 0.6 0.6 

Total† 

7% plus CO2 

range 

49.7 to 84.5 43.6 to 78.4 56.1 to 90.8 

7% 59.2 53.1 65.5 

3% 92.3 80.9 103.8 

3% plus CO2 

range 

82.8 to 117.5 71.4 to 106.2 94.3 to 129.1 

Costs 

Incremental Product Costs 

7% 16.4 15.2 17.7 

3% 19.1 17.6 20.6 

Net Benefits/Costs 

Total† 

7% plus CO2 

range 

33.3 to 68.1 28.5 to 63.2 38.4 to 73.1 

7% 42.8 38.0 47.9 

3% 73.2 63.3 83.2 

3% plus CO2 

range 

63.7 to 98.4 53.8 to 88.5 73.7 to 108.5 

Deleted: * * The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 

2015-2045 for the central air conditioner and heat pump standards. 

473 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the 

AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In 

addition, the low estimate uses incremental product costs that reflects constant prices (no learning rate) for 

product prices, and the high estimate uses incremental product costs that reflects a declining trend (high 

learning rate) for product prices. The derivation and application of learning rates for product prices is 

explained in section IV.F.1. 

† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 

under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC 

distributions calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value 

of $67.1 per ton represents the 95th percentile of the SCC distribution calculated using a 3-percent discount 

rate. The value for NOX (in 2009$) is the average of the low and high values used in DOE’s analysis. 

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 

3-percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” 

and “3% plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount 

rate, and those values are added to the full range of CO2 values. 

5. Certification Requirements 

In today’s direct final rule, in addition to proposing amended energy conservation 

standards for the existing AFUE levels (for furnaces) and SEER and HSPF levels (for 

central air conditioners and heat pumps), DOE is setting new requirements for standby 

mode and off mode energy consumption for residential furnaces and off mode energy 

consumption for central air conditioners and heat pumps. Additionally, DOE is adopting 

new requirements for EER for States in the hot-dry, southwestern region for central air 

conditioners. Because standby mode and off mode for furnaces, off mode for central air 

conditioners and heat pumps, and EER for central air conditioners have not previously 

been regulated, DOE does not currently require certification for these metrics. DOE 

notes, however, that determining compliance with the standards in today’s direct final 

rule will likely require manufacturers to certify these ratings (i.e., PW,OFF and PW,SB for 

furnaces, PW,OFF for central air conditioners and heat pumps, and EER for central air 

conditioners sold in the southwestern region (Arizona, California, Nevada, and New 

Mexico)). DOE has decided that it will address these certification requirements in a 

Comment [A20]: Change recommended by 

OIRA. 

Deleted: ** 

474 
 

 

 

 

 

 

 

 

 

 

 

separate certification and enforcement rulemaking, or in a rulemaking to determine the 

enforcement mechanism for regional standards. 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Order 12866 and 13563 Comment [A21]: Change recommended by 

OIRA. 

Section 1(b)(1) of Executive Order 12866, “Regulatory Planning and Review,” 58 

FR 51735 (Oct. 4, 1993), requires each agency to identify the problem that it intends to 

address, including, where applicable, the failures of private markets or public institutions 

that warrant new agency action, as well as to assess the significance of that problem. The 

problems that today’s standards address are as follows: 

(1)	 There is a lack of consumer information and/or information processing capability 

about energy efficiency opportunities in the furnace, central air conditioner, and 

heat pump market. 

(2)	 There is asymmetric information (one party to a transaction has more and better 

information than the other) and/or high transactions costs (costs of gathering 

information and effecting exchanges of goods and services). 

(3)	 There are external benefits resulting from improved energy efficiency of 

furnaces, central air conditioners, and heat pumps that are not captured by the 

users of such equipment. These benefits include externalities related to 

environmental protection and energy security that are not reflected in energy 

prices, such as reduced emissions of greenhouse gases. 

In addition, DOE has determined that today’s regulatory action is an 

475 
 

 

 

 

 

 

 

 

 

“economically significant regulatory action” under section 3(f)(1) of Executive Order 

12866. Accordingly, section 6(a)(3) of the Executive Order requires that DOE prepare a 

regulatory impact analysis (RIA) on today’s rule and that the Office of Information and 

Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) review this 

rule. DOE presented to OIRA for review the draft rule and other documents prepared for 

this rulemaking, including the RIA, and has included these documents in the rulemaking 

record. The assessments prepared pursuant to Executive Order 12866 can be found in the 

technical support document for this rulemaking. They are available for public review in 

the Resource Room of DOE’s Building Technologies Program, 950 L’Enfant Plaza, SW., 

Suite 600, Washington, DC 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., 

Monday through Friday, except Federal holidays. 

DOE has also reviewed this regulation pursuant to Executive Order 13563, issued 

on January 18, 2011 (76 FR 3281, Jan. 21, 2011). EO 13563 is supplemental to and 

explicitly reaffirms the principles, structures, and definitions governing regulatory review 

established in Executive Order 12866. To the extent permitted by law, agencies are 

required by Executive Order 13563 to: (1) propose or adopt a regulation only upon a 

reasoned determination that its benefits justify its costs (recognizing that some benefits 

and costs are difficult to quantify); (2) tailor regulations to impose the least burden on 

society, consistent with obtaining regulatory objectives, taking into account, among other 

things, and to the extent practicable, the costs of cumulative regulations; (3) select, in 

choosing among alternative regulatory approaches, those approaches that maximize net 

benefits (including potential economic, environmental, public health and safety, and other 

476 
 

 

 

 

 

 

 

 

 

 

 

 

advantages; distributive impacts; and equity); (4) to the extent feasible, specify 

performance objectives, rather than specifying the behavior or manner of compliance that 

regulated entities must adopt; and (5) identify and assess available alternatives to direct 

regulation, including providing economic incentives to encourage the desired behavior, 

such as user fees or marketable permits, or providing information upon which choices can 

be made by the public. 

We emphasize as well that Executive Order 13563 requires agencies “to use the 

best available techniques to quantify anticipated present and future benefits and costs as 

accurately as possible.” In its guidance, the Office of Information and Regulatory Affairs 

has emphasized that such techniques may include “identifying changing future 

compliance costs that might result from technological innovation or anticipated 

behavioral changes.” For the reasons stated in the preamble, DOE believes that today’s 

direct final rule is consistent with these principles, including that, to the extent permitted 

by law, agencies adopt a regulation only upon a reasoned determination that its benefits 

justify its costs and select, in choosing among alternative regulatory approaches, those 

approaches that maximize net benefits. 

B. Review Under the Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of 

a final regulatory flexibility analysis (FRFA) for any rule that by law must be 

proposed for public comment, unless the agency certifies that the rule, if 

promulgated, will not have a significant economic impact on a substantial number 

Comment [A22]: Change recommended by 

OIRA. 

477 
 

 

 

 

 

 

 

 

 

 

 

of small entities. As required by Executive Order 13272, “Proper Consideration of 

Small Entities in Agency Rulemaking” 67 FR 53461 (August 16, 2002), DOE 

published procedures and policies on February 19, 2003, to ensure that the potential 

impacts of its rules on small entities are properly considered during the rulemaking 

process. 68 FR 7990. DOE has made its procedures and policies available on the 

Office of the General Counsel’s website (www.gc.doe.gov). 

DOE reviewed the standard levels considered in today’s direct final rule 

under the provisions of the Regulatory Flexibility Act and the procedures and 

policies published on February 19, 2003. 68 FR 7990. As a result of this review, 

DOE prepared a FRFA in support of today’s standards, which DOE will transmit to 

the Chief Counsel for Advocacy of the SBA for review under 5 U.S.C 605(b). As 

presented and discussed below, the FRFA describes potential impacts on small 

residential furnace, central air conditioner, and heat pump manufacturers associated 

with today’s direct final rule and discusses alternatives that could minimize these 

impacts. A description of the reasons why DOE is adopting the standards in today’s 

rule and the objectives of and legal basis for the rule are set forth elsewhere in the 

preamble and not repeated here. 

1. Description and Estimated Number of Small Entities Regulated 

For the manufacturers of residential furnaces, central air conditioners, and 

heat pumps, the Small Business Administration (SBA) has set a size threshold, 

which defines those entities classified as “small businesses” for the purposes of the 

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statute. DOE used the SBA’s small business size standards to determine whether 

any small entities would be subject to the requirements of the rule. 65 FR 30836, 

30848 (May 15, 2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and 

codified at 13 CFR part 121. The size standards are listed by North American 

Industry Classification System (NAICS) code and industry description and are 

available at: 

http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf 

.pdf. Residential furnace and central air conditioning (including heat pumps) 

manufacturing is classified under NAICS 333415, “Air-Conditioning and Warm Air 

Heating Equipment and Commercial and Industrial Refrigeration Equipment 

Manufacturing.” The SBA sets a threshold of 750 employees or less for an entity to 

be considered as a small business for this category. 

During its market survey, DOE used all available public information to 

identify potential small manufacturers. DOE’s research involved industry trade 

association membership directories (including AHRI), public databases (e.g., AHRI 

101 102 Directory , the SBA Database ), individual company websites, and market 

103 104 research tools (e.g., Dunn and Bradstreet reports and Hoovers reports ) to create 

a list of companies that manufacture or sell products covered by this rulemaking. 

DOE also asked stakeholders and industry representatives if they were aware of any 

other small manufacturers during manufacturer interviews and at DOE public 

101 See http://www.ahridirectory.org/ahriDirectory/pages/home.aspx. 102 See http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
 103 See http://www.dnb.com/
 104 See http://www.hoovers.com/. 

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meetings. DOE reviewed publicly-available data and contacted select companies on 

its list, as necessary, to determine whether they met the SBA’s definition of a small 

business manufacturer of covered residential furnaces, central air conditioners, and 

heat pumps. DOE screened out companies that do not offer products covered by this 

rulemaking, do not meet the definition of a “small business,” or are foreign owned 

and operated. 

For central air conditioners, DOE initially identified 89 distinct brands sold 

in the U.S. Out of these 89 brands, DOE determined that 18 brands are managed by 

small businesses. While identifying the parent companies of the 18 brands, DOE 

determined that only four companies are domestic small business manufacturers of 

central air conditioning products. Three of these small businesses produce spaceconstrained products and one produces small-duct, high-velocity products. None of 

the small businesses produced split-system air conditioning, split-system heat 

pumps, single-package air conditioning, or single-package heat pump products, 

which together make up 99 percent of industry air conditioner and heat pump 

shipments. 

For residential furnaces, DOE initially identified at least 90 distinct brands 

sold in the U.S. Out of these 90 brands, DOE determined that 14 were managed by 

small businesses. When identifying the parent companies of the 14 brands, DOE 

determined that only five companies are domestic small business manufacturers of 

furnace products. All five small businesses manufacture oil furnaces as their 

480 
 

 

 

 

 

 

 

 

primary product line. One of the small businesses also produces mobile home 

furnaces as a secondary product offering. DOE did not identify any small 

manufacturers producing non-weatherized gas furnaces or weatherized gas furnaces, 

which together make up over 95 percent of residential furnace shipments. DOE also 

did not identify any small manufacturers of electric furnaces affected by this 

rulemaking. 

Next, DOE contacted all of the identified small business manufacturers 

listed in the AHRI directory to request an interview about the possible impacts of 

amended energy conservation standards on small manufacturers. Not all 

manufacturers responded to interview requests; however, DOE did interview three 

small furnace manufacturers and two small central air conditioning and heat pump 

manufacturers. From these discussions, DOE determined the expected impacts of 

the rule on affected small entities. 

2. Description and Estimate of Compliance Requirements 

After examining structure of the central air conditioner and heat pump and 

furnace market, DOE determined it necessary to examine impacts on small 

manufacturers in two broad categories: (1) manufacturers of central air conditioners 

and heat pumps and (2) manufacturers of furnaces. 

481 
 

 

 

 

 

 

 

 

 

 

 

a. Central Air Conditioning and Heat Pumps 

As discussed above, no small manufacturers for split-system air 

conditioning, split-system heat pump, single-package air conditioning, or singlepackage heat pump products were identified. DOE identified four domestic small 

business manufacturers of central air conditioner and heat pump products. All four 

small businesses manufacture niche products; three produce space-constrained 

products, and one produces SDHV products. 

With regard to the space-constrained market, the three small business 

manufacturers identified by DOE make up the vast majority of shipments of these 

products in the United States. DOE did not identify any competing large 

manufacturers in this niche market. Supporting this finding, no large manufacturers 

listed through-the-wall, or space-constrained, products in the AHRI directory. 

According to manufacturer interviews, no manufacturers have entered or exited the 

space-constrained market in the past decade. Furthermore, based on the screening 

analysis, teardown analysis, and market research, DOE has determined that the 

current energy conservation standard applicable to these products is equal to the 

max-tech efficiency level. In other words, DOE has determined it is unable to raise 

the energy conservation standards applicable to space-constrained products due to 

the state of technology and the design constraints inherent to these products. 

Therefore, because the efficiency level to which these three small manufacturers are 

subject will not change, DOE does not anticipate that the rule would adversely 

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affect the small businesses manufacturing space-constrained air conditioning 

products. 

With respect to SDHV products, DOE identified one company as a small 

domestic manufacturer. The company’s primary competitors are a small 

manufacturer based in Canada and a domestic manufacturer that does not qualify as 

a small business due to its parent company’s size. These three manufacturers 

account for the vast majority of the SDHV market in the U.S., which makes up less 

than 1 percent of the overall domestic central air conditioning and heat pumps 

market. 

The current energy conservation standard for SDHV is 13 SEER. In today’s 

notice, DOE is not amending that level. Therefore, because the efficiency level to 

which the manufacturers are subject will not change, DOE does not anticipate that 

the standard level would adversely affect the manufacturers of SDHV products. 

It should be noted that this rulemaking adopts a separate standard for the 

SDHV product class. As a result, exception relief granted in 2004 under the 

condition that “exception relief will remain in effect until such time as the agency 

modifies the general energy efficiency standard for central air conditioners and 

establishes a different standard for SDHV systems that comports with the EPCA105” 

will expire. Large and small SDHV manufacturers operating under exception relief 

105 Department of Energy: Office of Hearings and Appeals, Decision and Order, Case #TEE 0010 (2004) 

(Available at: http://www.oha.doe.gov/cases/ee/tee0010.pdf) (last accessed September 2010). 

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will be required to either comply with the standard or re-apply for exception relief 

ahead of the compliance date. 

b. Residential Furnaces 

DOE identified five domestic small business manufacturers of residential 

furnace products. All five produce oil furnaces as their primary product line. Oil 

furnaces make up less than 3 percent of residential furnace shipments. One of the 

small businesses also produces mobile home furnaces as a secondary product line. 

No additional small manufacturers of mobile home furnaces were identified. 

The five small business manufacturers of residential furnace products 

account for 22 percent of the 1,207 active oil furnace product listings in the AHRI 

Directory (data based on information available from the AHRI Directory in 

September 2010). Ninety-nine percent of the small oil furnace manufacturer product 

listings were above the base standard of 78-percent AFUE. Seventy-seven percent 

of the small oil furnace manufacturer product listings had efficiencies equal to or 

above 83-percent AFUE, the efficiency level for oil furnaces adopted in today’s 

notice. All small business manufacturers of residential furnace products have 

product lines that meet the efficiency level adopted in today’s notice. 

In interviews, several small manufacturers noted that the majority of their 

businesses’ sales are above 83-percent AFUE today. According to interviews, the 

small manufacturers focus on marketing their brands as premium products in the 

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replacement market, while the major manufacturers tend to sell their products at 

lower cost and lower efficiency. For this reason, a higher standard is unlikely to 

require investments in research and development by small manufacturers to catch 

up to larger manufacturers in terms of technology development. However, in 

interviews, small oil furnace manufacturers did indicate some concern if the energy 

conservation standard were to be raised to 85 percent, which is the efficiency level 

just below max-tech, or above. At these efficiency levels, according to 

manufacturers, the installation costs for oil furnaces could significantly increase due 

to the need for chimney liners, which are necessary to manage the acidic condensate 

that results from the high sulfur content of domestic heating oil. Small oil furnace 

manufacturers expressed concern that the additional installation costs of a chimney 

liner would deter home owners from purchasing new oil furnaces and accelerate the 

contraction of an already-shrinking oil furnace market. Additionally, small 

manufacturers were concerned that a high standard would leave little opportunity to 

differentiate their oil furnaces as premium products through higher efficiencies. If 

the amended standards were sufficiently stringent as to leave little room for small 

manufacturers to offer higher-efficiency products, it would become more difficult to 

for them to justify their premium positioning in the marketplace. However, 

manufacturers indicated that the change in the efficiency level corresponding to that 

adopted by today’s notice would not significantly alter that premium pricing 

dynamic. 

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For oil furnaces, the majority of both small business product lines and sales 

are at efficiencies equal to or above 83-percent AFUE. Oil furnace manufacturers 

do not expect to face significant conversion costs to reach the adopted level. Based 

on manufacturer feedback, DOE estimated that a typical small oil furnace 

manufacturer would need to invest $250,000 to cover conversion costs, including 

both capital and product conversion costs such as investments in production lines, 

R&D and engineering resources, and product testing, to meet the standard. 

However, any relatively fixed costs associated with R&D, marketing, and testing 

necessitated by today’s direct final rule would have to be spread over lower 

volumes, on average, as compared to larger manufacturers. DOE believes this 

disproportionate adverse impact on small manufacturers is somewhat mitigated by 

an industry trend toward large manufacturers outsourcing their oil furnace 

production to small manufacturers, which has increased the sales of both domestic 

and Canadian small manufacturers. Interviewed small manufacturers indicated that 

larger manufacturers are becoming less willing to allocate resources to the shrinking 

oil furnace market, yet still want to maintain a presence in this portion of the market 

in order to offer a full product line. In turn, market share in oil furnace production is 

shifting to small manufacturers. For all of the foregoing reasons, DOE does not 

believe today’s direct final rule jeopardizes the viability of the small oil furnace 

manufacturers. 

As noted above, DOE identified one small manufacturer of mobile home 

furnaces. This manufacturer primarily produces and sells oil furnaces, but it also 

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produces mobile home furnaces as a secondary product offering. The standard 

promulgated in today’s notice would require 90-percent AFUE in the North and 80­

percent AFUE in the South. DOE believes the adopted standard level would be 

unlikely to cause the small manufacturer to incur significant conversion costs 

because their current product offering already meets it, as illustrated by the listings 

in the AHRI directory. 

In multiple niche product classes, larger manufacturers could have a 

competitive advantage due to their size and ability to access capital that may not be 

available to small businesses. Additionally, in some market segments, larger 

businesses have larger production volumes over which to spread costs. 

3. Duplication, Overlap, and Conflict With Other Rules and Regulations 

DOE is not aware of any rules or regulations that duplicate, overlap, or 

conflict with the rule being promulgated today. 

4. Significant Alternatives to the Rule 

The discussion above analyzes impacts on small businesses that would result 

from DOE’s rule. In addition to the other TSLs being considered, the direct final 

rule TSD includes a regulatory impact analysis (RIA). For residential furnaces, 

central air conditioners, and heat pumps, the RIA discusses the following policy 

alternatives: (1) no change in standard; (2) consumer rebates; (3) consumer tax 

credits; (4) manufacturer tax credits; and (5) early replacement. While these 

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alternatives may mitigate to some varying extent the economic impacts on small 

entities compared to the amended standards, DOE determined that the energy 

savings of these regulatory alternatives are at least 10 times smaller than those that 

would be expected to result from adoption of the amended standard levels. Thus, 

DOE rejected these alternatives and is adopting the amended standards set forth in 

this rulemaking. (See chapter 16 of the direct final rule TSD for further detail on the 

policy alternatives DOE considered.) 

C. Review Under the Paperwork Reduction Act of 1995 

Manufacturers of residential furnaces, central air conditioners, and heat pumps 

must certify to DOE that their products comply with any applicable energy conservation 

standard. In certifying compliance, manufacturers must test their products according to 

the DOE test procedures for furnaces, central air conditioners, and heat pumps, as 

applicable, including any amendments adopted for those particular test procedures. DOE 

has proposed regulations for the certification and recordkeeping requirements for all 

covered consumer products and commercial equipment, including residential furnaces, 

central air conditioners, and heat pumps. 75 FR 56796 (Sept. 16, 2010). The collectionof-information requirement for the certification and recordkeeping is subject to review 

and approval by OMB under the Paperwork Reduction Act (PRA). (44 U.S.C. 3501 et 

seq.) This requirement has been submitted to OMB for approval. Public reporting burden 

for the certification is estimated to average 20 hours per response, including the time for 

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reviewing instructions, searching existing data sources, gathering and maintaining the 

data needed, and completing and reviewing the collection of information. 

Notwithstanding any other provision of the law, no person is required to respond 

to, nor shall any person be subject to a penalty for failure to comply with, a collection of 

information subject to the requirements of the PRA, unless that collection of information 

displays a currently valid OMB Control Number. 

D. Review Under the National Environmental Policy Act of 1969 

DOE has prepared an environmental assessment (EA) of the impacts of the direct 

final rule pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 

seq.), the regulations of the Council on Environmental Quality (40 CFR parts 1500– 

1508), and DOE’s regulations for compliance with the National Environmental Policy 

Act of 1969 (10 CFR part 1021). This assessment includes an examination of the 

potential effects of emission reductions likely to result from the rule in the context of 

global climate change, as well as other types of environmental impacts. The EA has been 

incorporated into the direct final rule TSD as chapter 15. 

E. Review under Executive Order 13132 

Executive Order 13132, “Federalism,” 64 FR 43255 (Aug. 10, 1999) imposes 

certain requirements on Federal agencies formulating and implementing policies or 

regulations that preempt State law or that have Federalism implications. The Executive 

Order requires agencies to examine the constitutional and statutory authority supporting 

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any action that would limit the policymaking discretion of the States and to carefully 

assess the necessity for such actions. The Executive Order also requires agencies to have 

an accountable process to ensure meaningful and timely input by State and local officials 

in the development of regulatory policies that have Federalism implications. On March 

14, 2000, DOE published a statement of policy describing the intergovernmental 

consultation process it will follow in the development of such regulations. 65 FR 13735. 

EPCA governs and prescribes Federal preemption of State regulations as to energy 

conservation for the products that are the subject of today’s direct final rule. States can 

petition DOE for exemption from such preemption to the extent, and based on criteria, set 

forth in EPCA. (42 U.S.C. 6297) No further action is required by Executive Order 

13132. 

F. Review Under Executive Order 12988 

With respect to the review of existing regulations and the promulgation of new 

regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” imposes on 

Federal 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. 61 FR 4729 (Feb. 7, 1996). 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 

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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 has completed the required review and determined that, 

to the extent permitted by law, this direct final rule meets the relevant standards of 

Executive Order 12988. 

G. Review Under the Unfunded Mandates Reform Act of 1995 

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each 

Federal agency to assess the effects of Federal regulatory actions on State, local, and 

Tribal governments and the private sector. Pub. L. 104-4, sec. 201 (codified at 2 U.S.C. 

1531). For a regulatory action likely to result in a rule that may cause the expenditure by 

State, local, and Tribal governments, in the aggregate, or by the private sector of $100 

million or more in any one year (adjusted annually for inflation), section 202 of UMRA 

requires a Federal agency to publish a written statement that estimates the resulting costs, 

benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA 

also requires a Federal agency to develop an effective process to permit timely input by 

elected officers of State, local, and Tribal governments on a “significant 

intergovernmental mandate,” and requires an agency plan for giving notice and 

opportunity for timely input to potentially affected small governments before establishing 

any requirements that might significantly or uniquely affect small governments. On 

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March 18, 1997, DOE published a statement of policy on its process for 

intergovernmental consultation under UMRA. 62 FR 12820. DOE’s policy statement is 

also available at http://www.gc.doe.gov. 

Although today’s rule does not contain a Federal intergovernmental mandate, it 

may impose expenditures of $100 million or more on the private sector. Specifically, the 

final rule could impose expenditures of $100 million or more. Such expenditures may 

include: (1) investment in research and development and in capital expenditures by 

furnace, central air conditioner, and heat pump manufacturers in the years between the 

final rule and the compliance date for the new standards, and (2) incremental additional 

expenditures by consumers to purchase higher-efficiency furnace, central air conditioner, 

and heat pump products, starting at the compliance date for the applicable standard. 

Section 202 of UMRA authorizes a Federal agency to respond to the content 

requirements of UMRA in any other statement or analysis that accompanies the 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 direct final rule and the 

“Regulatory Impact Analysis” section of the TSD for this direct final rule respond to 

those requirements. 

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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. 2 U.S.C. 1535(a). 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 

42 U.S.C. 6295(d), (f) and (o), today’s rule would establish amended energy conservation 

standards for residential furnaces, central air conditioners, and heat pumps that are 

designed to achieve the maximum improvement in energy efficiency that 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” chapter of the TSD for today’s direct final rule. 

H. Review Under the Treasury and General Government Appropriations Act, 1999 

Section 654 of the Treasury and General Government Appropriations Act, 1999 

(Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment 

for any rule that may affect family well-being. This rule would not have any impact on 

the autonomy or integrity of the family as an institution. Accordingly, DOE has 

concluded that it is not necessary to prepare a Family Policymaking Assessment. 

I. Review Under Executive Order 12630 

DOE has determined, under Executive Order 12630, “Governmental Actions and 

Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (Mar. 18, 

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1988), that this regulation would not result in any takings which might require 

compensation under the Fifth Amendment to the U.S. Constitution. 

J. Review Under the Treasury and General Government Appropriations Act, 2001 

Section 515 of the Treasury and General Government Appropriations Act, 2001 

(44 U.S.C. 3516, note) provides for Federal agencies to review most disseminations of 

information to the public under guidelines established by each agency pursuant to general 

guidelines issued by OMB. OMB’s guidelines were published at 67 FR 8452 (Feb. 22, 

2002), and DOE’s guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has 

reviewed today’s notice under the OMB and DOE guidelines and has concluded that it is 

consistent with applicable policies in those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, “Actions Concerning Regulations That Significantly 

Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires 

Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects 

for any significant energy action. A “significant energy action” is defined as any action 

by an agency that promulgates or is expected to lead to promulgation of a final rule, and 

that: (1) is a significant regulatory action under Executive Order 12866, or any successor 

order; and (2) is likely to have a significant adverse effect on the supply, distribution, or 

use of energy, or (3) is designated by the Administrator of OIRA as a significant energy 

action. For any significant energy action, the agency must give a detailed statement of 

any adverse effects on energy supply, distribution, or use should the proposal be 

494 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

implemented, and of reasonable alternatives to the action and their expected benefits on 

energy supply, distribution, and use. 

DOE has concluded that today’s regulatory action, which sets forth energy 

conservation standards for furnaces, central air conditioners, and heat pumps, is not a 

significant energy action because the amended standards are not likely to have a 

significant adverse effect on the supply, distribution, or use of energy, nor has it been 

designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a 

Statement of Energy Effects on the direct final rule. 

L. Review Under the Information Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in consultation with the Office of Science and 

Technology Policy (OSTP), issued its Final Information Quality Bulletin for Peer Review 

(the Bulletin). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain 

scientific information shall be peer reviewed by qualified specialists before it is 

disseminated by the Federal Government, including influential scientific information 

related to agency regulatory actions. The purpose of the bulletin is to enhance the quality 

and credibility of the Government’s scientific information. Under the Bulletin, the energy 

conservation standards rulemaking analyses are “influential scientific information,” 

which the Bulletin defines as “scientific information the agency reasonably can determine 

will have, or does have, a clear and substantial impact on important public policies or 

private sector decisions.” Id. at 2667. 

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In response to OMB’s Bulletin, DOE conducted formal in-progress peer reviews 

of the energy conservation standards development process and analyses and has prepared 

a Peer Review Report pertaining to the energy conservation standards rulemaking 

analyses. Generation of this report involved a rigorous, formal, and documented 

evaluation using objective criteria and qualified and independent reviewers to make a 

judgment as to the technical/scientific/business merit, the actual or anticipated results, 

and the productivity and management effectiveness of programs and/or projects. The 

“Energy Conservation Standards Rulemaking Peer Review Report” dated February 2007 

has been disseminated and is available at the following Web site: 

http://www1.eere.energy.gov/buildings/appliance_standards/peer_review.html. 

M. Congressional Notification 

As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of 

this rule prior to its effective date. The report will state that it has been determined that 

the rule is a “major rule” as defined by 5 U.S.C. 804(2). DOE also will submit the 

supporting analyses to the Comptroller General in the U.S. Government Accountability 

Office (GAO) and make them available to each House of Congress. 

VII. Public Participation 

A. Submission of Comments 

DOE will accept comments, data, and information regarding this direct final rule 

no later than the date provided in the DATES section at the beginning of this direct final 

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rule. Interested parties may submit comments, data, and other information using any of 

the methods described in the ADDRESSES section at the beginning of this notice. 

Submitting comments via regulations.gov. The regulations.gov web page will 

require you to provide your name and contact information. Your contact information will 

be viewable to DOE Building Technologies staff only. Your contact information will not 

be publicly viewable except for your first and last names, organization name (if any), and 

submitter representative name (if any). If your comment is not processed properly 

because of technical difficulties, DOE will use this information to contact you. If DOE 

cannot read your comment due to technical difficulties and cannot contact you for 

clarification, DOE may not be able to consider your comment. 

However, your contact information will be publicly viewable if you include it in 

the comment itself or in any documents attached to your comment. Any information that 

you do not want to be publicly viewable should not be included in your comment, nor in 

any document attached to your comment. Otherwise, persons viewing comments will see 

only first and last names, organization names, correspondence containing comments, and 

any documents submitted with the comments. 

Do not submit to regulations.gov information for which disclosure is restricted by 

statute, such as trade secrets and commercial or financial information (hereinafter 

referred to as Confidential Business Information (CBI)). Comments submitted through 

regulations.gov cannot be claimed as CBI. Comments received through the website will 

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waive any CBI claims for the information submitted. For information on submitting CBI, 

see the Confidential Business Information section below. 

DOE processes submissions made through regulations.gov before posting. 

Normally, comments will be posted within a few days of being submitted. However, if 

large volumes of comments are being processed simultaneously, your comment may not 

be viewable for up to several weeks. Please keep the comment tracking number that 

regulations.gov provides after you have successfully uploaded your comment. 

Submitting comments via email, hand delivery/courier, or mail. Comments and 

documents submitted via email, hand delivery, or mail also will be posted to 

regulations.gov. If you do not want your personal contact information to be publicly 

viewable, do not include it in your comment or any accompanying documents. Instead, 

provide your contact information in a cover letter. Include your first and last names, 

email address, telephone number, and optional mailing address. The cover letter will not 

be publicly viewable as long as it does not include any comments 

Include contact information each time you submit comments, data, documents, 

and other information to DOE. Email submissions are preferred. If you submit via mail or 

hand delivery/courier, please provide all items on a CD, if feasible. It is not necessary to 

submit printed copies. No facsimiles (faxes) will be accepted. 

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Comments, data, and other information submitted to DOE electronically should 

be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) 

file format. Provide documents that are not secured, that are written in English, and that 

are free of any defects or viruses. Documents should not contain special characters or any 

form of encryption and, if possible, they should carry the electronic signature of the 

author. 

Campaign form letters. Please submit campaign form letters by the originating 

organization in batches of between 50 to 500 form letters per PDF or as one form letter 

with a list of supporters’ names compiled into one or more PDFs. This reduces comment 

processing and posting time. 

Confidential business information. According to 10 CFR 1004.11, any person 

submitting information that he or she believes to be confidential and exempt by law from 

public disclosure should submit via email, postal mail, or hand delivery/courier two wellmarked copies: one copy of the document marked confidential including all the 

information believed to be confidential, and one copy of the document marked nonconfidential with the information believed to be confidential deleted. Submit these 

documents via email or on a CD, if feasible. DOE will make its own determination about 

the confidential status of the information and treat it according to its determination. 

Factors of interest to DOE when evaluating requests to treat submitted 

information as confidential include: (1) A description of the items; (2) whether and why 

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such items are customarily treated as confidential within the industry; (3) whether the 

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

information has previously been made available to others without obligation concerning 

its confidentiality; (5) an explanation of the competitive injury to the submitting person 

which would result from public disclosure; (6) when such information might lose its 

confidential character due to the passage of time; and (7) why disclosure of the 

information would be contrary to the public interest. 

It is DOE’s policy that all comments may be included in the public docket, 

without change and as received, including any personal information provided in the 

comments (except information deemed to be exempt from public disclosure). 

VIII. Approval of the Office of the Secretary 

The Secretary of Energy has approved publication of today’s direct final rule. 

List of Subjects in 10 CFR Part 430 

Administrative practice and procedure, Confidential business information, Energy 

conservation, Household appliances, Imports, Intergovernmental relations, Reporting and 

recordkeeping requirements, and Small businesses. 

Issued in Washington, DC, on 

500 
________________________________ 

 

Henry Kelly 

Acting Assistant Secretary 

Energy Efficiency and Renewable Energy 

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For the reasons set forth in the preamble, DOE amends part 430 of chapter II, 

subchapter D, of title 10 of the Code of Federal Regulations, to read as set forth below: 

PART 430 - ENERGY CONSERVATION PROGRAM FOR CONSUMER 

PRODUCTS 

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

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note. 

2. Section 430.23 is amended by: 

a. Redesignating paragraphs (m)(4), (m)(5), and (n)(5) as paragraphs (m)(5), 

(m)(6), and (n)(6), respectively; 

b. Adding new paragraphs (m)(4) and (n)(5); and 

c. Revising paragraph (n)(2).
 

The additions and revision read as follows:
 

§430.23 Test procedures for the measurement of energy and water consumption. 

* * * * * 

(m) Central air conditioners and heat pumps. * * * 

* * * * * 

(4) The average off mode power consumption for central air conditioners and central air 

conditioning heat pumps shall be determined according to appendix M of this subpart. 

Round the average off mode power consumption to the nearest watt. 

* * * * * 

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(n) Furnaces. * * * 

* * * * * 

(2) The annual fuel utilization efficiency for furnaces, expressed in percent, is the ratio of 

the annual fuel output of useful energy delivered to the heated space to the annual fuel 

energy input to the furnace determined according to section 10.1 of appendix N of this 

subpart for gas and oil furnaces and determined in accordance with section 11.1 of the 

American National Standards Institute/American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ANSI/ASHRAE) Standard 103-1993 (incorporated by 

reference, see §430.3) for electric furnaces. Round the annual fuel utilization efficiency 

to the nearest whole percentage point. 

* * * * * 

(5) The average standby mode and off mode electrical power consumption for furnaces 

shall be determined according to section 8.6 of appendix N of this subpart. Round the 

average standby mode and off mode electrical power consumption to the nearest watt. 

* * * * * 

3. Appendix M to subpart B of part 430 is amended by adding a note after the heading 

that reads as follows: 

Appendix M to Subpart B of Part 430— Uniform Test Method for Measuring the 

Energy Consumption of Central Air Conditioners and Heat Pumps 

Note: The procedures and calculations that refer to off mode energy consumption (i.e., 

sections 3.13 and 4.2.8 of this appendix M) need not be performed to determine 

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compliance with energy conservation standards for central air conditioners and heat 

pumps at this time. However, any representation related to standby mode and off mode 

energy consumption of these products made after corresponding revisions to the central 

air conditioners and heat pumps test procedure must be based upon results generated 

under this test procedure, consistent with the requirements of 42 U.S.C. 6293(c)(2). For 

residential central air conditioners and heat pumps manufactured on or after January 1, 

2015, compliance with the applicable provisions of this test procedure is required in order 

to determine compliance with energy conservation standards. 

* * * * * 

4. Appendix N to subpart B of part 430 is amended by: 

a. Removing all references to “POFF ” and adding in their place “PW,OFF ” in 

sections 8.6.2, 9.0, and 10.9; 

b. Removing all references to “PSB ” and adding in their place “PW,SB ” in sections 

8.6.1, 8.6.2, 9.0, and 10.9; and 

c. Revising the note after the heading.
 

The revision reads as follows:
 

Appendix N to Subpart B of Part 430— Uniform Test Method for Measuring the 

Energy Consumption of Furnaces and Boilers 

Note: The procedures and calculations that refer to off mode energy consumption (i.e., 

sections 8.6 and 10.9 of this appendix N) need not be performed to determine compliance 

with energy conservation standards for furnaces and boilers at this time. However, any 

representation related to standby mode and off mode energy consumption of these 

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products made after April 18, 2011 must be based upon results generated under this test 

procedure, consistent with the requirements of 42 U.S.C. 6293(c)(2). For furnaces 

manufactured on or after May 1, 2013, compliance with the applicable provisions of this 

test procedure is required in order to determine compliance with energy conservation 

standards. For boilers, the statute requires that after July 1, 2010, any adopted energy 

conservation standard shall address standby mode and off mode energy consumption for 

these products, and upon the compliance date for such standards, compliance with the 

applicable provisions of this test procedure will be required. 

* * * * * 

5. Section 430.32 is amended by: 

a. Adding in paragraph (c)(2) the words “and before January 1, 2015,” after 

“2006,”; 

b. Revising the note to the table in paragraph (c)(2); 

c. Adding new paragraphs (c)(3), (c)(4), (c)(5), (c)(6), (e)(1)(iii), and (e)(1)(iv); 

Deleted: Adding new paragraphs (c)(3), (c)(4), 

(c)(5), (c)(6), (e)(1)(iii), and (e)(1)(iv); and 

Deleted: c. 

and 

d. Revising paragraphs (e)(1)(i) and (e)(1)(ii).
 

The additions and revisions read as follows:
 

§430.32 Energy and water conservation standards and their effective dates. 

* * * * * 

(c) Central air conditioners and heat pumps. * * * 

* * * * * 

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(2) Central air conditioners and central air conditioning heat pumps manufactured on or 

after January 23, 2006, and before January 1, 2015, shall have Seasonal Energy 

Efficiency Ratio and Heating Seasonal Performance Factor no less than: 

Product class Seasonal energy efficiency Heating seasonal 

ratio (SEER) performance factor (HSPF) 

(i) Split-system air 13
 

conditioners
 

(ii)Split-system heat pumps
 13 7.7 

(iii) Single-package air 13
 

conditioners
 

(iv) Single-package heat 13 7.7
 

pumps
 

(v)(A) Through-the-wall air 10.9 7.1
 

conditioners and heat 

pumps-split system1
 

(v)(B) Through-the-wall air
 10.6 7.0
 

conditioners and heat 

pumps-single package1
 

(vi) Small-duct, high­ 13 7.7
 

velocity systems
 

(vii)(A) Space-constrained
 12
 

products – air conditioners
 

(vii)(B) Space-constrained 12 7.4
 

products – heat pumps
 1 The “through-the-wall air conditioners and heat pump – split system” and “through-the-wall air
 

conditioner and heat pump – single package” product classes only applied to products manufactured prior 

to January 23, 2010. Products manufactured as of that date must be assigned to one of the remaining 

product classes listed in this table. The product class assignment depends on the product’s characteristics. 

Product class definitions can be found in 10 CFR 430.2 and 10 CFR part 430, subpart B, appendix M. 

DOE believes that most, if not all, of the historically-characterized “through-the-wall” products will be 

assigned to one of the space-constrained product classes. 

(3) Central air conditioners and central air conditioning heat pumps manufactured on or 

after January 1, 2015, shall have a Seasonal Energy Efficiency Ratio and Heating 

Seasonal Performance Factor not less than: 

Moved (insertion) [3] 

Product class1 Seasonal energy efficiency 

ratio (SEER) 

Heating seasonal 

performance factor (HSPF) 

(i) Split-system air 

conditioners 

13 

(ii)Split-system heat pumps 14 8.2 

506 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(iii) Single-package air 14 

conditioners 

(iv) Single-package heat 14 8.0 

pumps 

(v) Small-duct, high­ 13 7.7 

velocity systems 

(vi)(A) Space-constrained 12 

products – air conditioners 

(vi)(B) Space-constrained 12 7.4 

products – heat pumps 

Moved up [3]: (vii)(B) Space-constrained 

products – heat pumps 

Deleted: –¶ 

1 The “through-the-wall air conditioners and heat pump – split system” and “through-the-wall air 

conditioner and heat pump – single package” product classes only applied to products manufactured prior Deleted: class 

Deleted: certain to January 23, 2010. Products manufactured as of that date must be assigned to one of the remaining 

product classes listed in this table. The product class assignment depends on the product’s characteristics. 

Product class definitions can be found in 10 CFR 430.2 and 10 CFR part 430, subpart B, appendix M. 

DOE believes that most, if not all, of the historically-characterized “through-the-wall” products will be 

assigned to one of the space-constrained product classes. 

(4) In addition to meeting the applicable requirements in paragraph (c)(3) of this section, 

products in product class (i) of that paragraph (i.e., split-system air conditioners) that are 

Deleted: Any such product, when 

Deleted: after 

Deleted: , falls into 

Deleted: class a particular 

Deleted: is part of 

Deleted: the 

Deleted: are in 

Deleted: classes of “Space 

Deleted: products.” manufactured on or after January 1, 2015, and installed in the States of Alabama, 

Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, 

Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, or Virginia, 

or in the District of Columbia, shall have a Seasonal Energy Efficiency Ratio not less 

than 14. 

(5) In addition to meeting the applicable requirements in paragraphs (c)(3) of this section, 

products in product classes (i) and (iii) of paragraph (c)(3) (i.e., split-system air 

conditioners and single-package air conditioners) that are manufactured on or after 

January 1, 2015, and installed in the States of Arizona, California, Nevada, or New 

Mexico shall have a Seasonal Energy Efficiency Ratio not less than 14 and have an 

Energy Efficiency Ratio (at a standard rating of 95 °F dry bulb outdoor temperature) not 

less than the following: 

507 
 

 

 

 

 

 

 

 

Product class Energy efficiency ratio (EER) 

(i) Split-system rated cooling capacity less 

than 45,000 Btu/hr 

12.2 

(ii) Split-system rated cooling capacity 

equal to or greater than 45,000 Btu/hr 

11.7 

(iii) Single-package systems 11.0 

(6) Central air conditioners and central air conditioning heat pumps manufactured on or 

after January 1, 2015, shall have an average off mode electrical power consumption not 

more than the following: 

Product Class Average off mode power consumption 

PW,OFF (watts) 

(i) Split-system air conditioners 30 

(ii) Split-system heat pumps 33 

(iii) Single-package air conditioners 30 

(iv) Single-package heat pumps 33 

(v) Small-duct, high-velocity systems 30 

(vi) Space-constrained air conditioners 30 

(vii) Space-constrained heat pumps 33 

* * * * * 

(e) Furnaces and boilers. 

(1) Furnaces. 

(i) The Annual Fuel Utilization Efficiency (AFUE) of residential furnaces shall not be 

less than the following for non-weatherized furnaces manufactured before May 1, 2013, 

and weatherized furnaces manufactured before January 1, 2015: 

508 
 

 

 

 

 

 

 

 

Product class AFUE (percent)1 

(A) Furnaces (excluding classes noted 

below) 

78 

(B) Mobile Home furnaces 75 

(C) Small furnaces (other than those 

designed solely for installation in mobile 

homes) having an input rate of less than 

45,000 Btu/hr 

(1) Weatherized (outdoor) 78 

(2) Non-weatherized (indoor) 78 

1 Annual Fuel Utilization Efficiency, as determined in §430.23(n)(2) of this part. 

(ii) The AFUE of residential non-weatherized furnaces manufactured on or after May 1, 

2013, and weatherized gas and oil-fired furnaces manufactured on or after January 1, 

2015 shall be not less than the following: 

Product class AFUE (percent) 1 

(A) Non-weatherized gas furnaces (not 

including mobile home furnaces) 

80 

(B) Mobile Home gas furnaces 80 

(C) Non-weatherized oil-fired furnaces (not 

including mobile home furnaces) 

83 

(D) Mobile Home oil-fired furnaces 75 

(E) Weatherized gas furnaces 81 

(F) Weatherized oil-fired furnaces 78 

(G) Electric furnaces 78 

1 Annual Fuel Utilization Efficiency, as determined in §430.23(n)(2) of this part. 

(iii) In addition to meeting the applicable requirements in paragraph (e)(1)(ii) of this 

section, products in product classes (A) and (B) of that paragraph (i.e., residential nonweatherized gas furnaces (including mobile home furnaces)) that are manufactured on or 

after May 1, 2013, and installed in the States of Alaska, Colorado, Connecticut, Idaho, 

Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, 

Montana, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, 

509 
 

 

 

Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Washington, West 

Virginia, Wisconsin, and Wyoming, shall have an AFUE not less than 90 percent. 

(iv) Furnaces manufactured on or after May 1, 2013, shall have an electrical standby 

mode power consumption (PW,SB) and electrical off mode power consumption (PW,OFF) 

not more than the following: 

Product class Maximum standby mode 

electrical power 

consumption, PW,SB (watts) 

Maximum off mode 

electrical power 

consumption, PW,OFF 

(watts) 

(A) Non-weatherized gas 

furnaces (including mobile 

home furnaces) 

10 10 

(B) Non-weatherized oilfired furnaces (including 

mobile home furnaces) 

11 11 

(C) Electric furnaces 10 10 

* * * * * 

510