### CHAPTER 12. LIFE-CYCLE COST SUBGROUP ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION

......................................................................................................... 12-1

12.2 COOKING PRODUCTS

............................................................................................... 12-1

12.2.1 Subgroup Definitions

..................................................................................................... 12-2

12.2.1.1 Senior-Only Households

.............................................................................. 12-2

12.2.1.2 Low-Income Households

............................................................................. 12-2

12.2.2 Inputs to the Subgroup Analysis for Senior-Only and Low-Income Households

......... 12-2

12.2.3 Results for Cooking Product Subgroups

........................................................................ 12-5

12.3 COMMERCIAL CLOTHES WASHERS

................................................................... 12-10

12.3.1 Subgroups Definition

................................................................................................... 12-10

12.3.2 Inputs to the Subgroup Analysis for Consumers without Municipal Water/Sewer

..... 12-10

12.3.2.2 Wastewater Prices for Consumers Using Septic Systems

......................... 12-11

12.3.3 Inputs to the Subgroup Analysis for Small Businesses

............................................... 12-11

12.3.3.1 Small Business Statistics for Commercial Laundry

................................... 12-11

12.3.3.2 Commercial Clothes Washers: Small Company Discount Rates

.............. 12-13

12.3.4 Results for Commercial Clothes Washer Subgroups

................................................... 12-15

LIST OF TABLES

Table 12.2.1 RECS 2001 Definitions of Low-Income Households

........................................ 12-2 Table 12.2.2 Electric and Gas Cooktops: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

.............. 12-3 Table 12.2.3 Electric and Gas Ovens: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

................................... 12-4 Table 12.2.4 Microwave Ovens: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

................................... 12-5 Table 12.2.5 Electric and Gas Cooktops: LCC and PBP Results for Low-Income

Households

......................................................................................................... 12-6 Table 12.2.6 Electric and Gas Cooktops: LCC and PBP Results for Senior-Only

Households

......................................................................................................... 12-6

Table 12.2.7 Electric and Gas Ovens: LCC and PBP Results for Low-Income

Households

......................................................................................................... 12-7 Table 12.2.8 Electric and Gas Ovens: LCC and PBP Results for Senior-Only

Households

......................................................................................................... 12-8

Table 12.2.9 Microwave Ovens: LCC and PBP Results for Low-Income Households

........ 12-9 Table 12.2.10 Microwave Ovens: LCC and PBP Results for Senior-Only Households

......... 12-9 Table 12.3.1 Water Price Estimation for Residential Private Well Water Supply (2004$)

.. 12-11 Table 12.3.2 Coin-operated laundries & drycleaners: Number of Establishments and Receipts by Nonemployer and Employer Status

............................................. 12-12 Table 12.3.3 Establishment and Firm Size: Legal Form of Organization

............................ 12-12

12-i

### Table 12.3.4 Establishment and Firm Size: Receipts/Revenue Size of Establishments....... 12-13

Table 12.3.5 Discount Rate Difference Between Small Company and Market Average..... 12-14

Table 12.3.6 Small Company Discount Rates and Small Cap Premium .............................. 12-15

Table 12.3.7 Top-Loading Commercial Clothes Washers: LCC and PBP Results for Non-Public Water and Sewer Supply .............................................................. 12-16

Table 12.3.8 Top-Loading Commercial Clothes Washers: LCC and PBP Results for Small Companies ............................................................................................. 12-16

Table 12.3.9 Front-Loading Commercial Clothes Washers: LCC and PBP Results for Non-Public Water and Sewer Supply .............................................................. 12-17 Table 12.3.10 Front -Loading Commercial Clothes Washers: LCC and PBP Results for Small Companies ............................................................................................. 12-17

12-ii

### CHAPTER 12. LIFE-CYCLE COST SUBGROUP ANALYSIS

12.1 INTRODUCTION

Chapter 8 describes the Life-Cycle Cost (LCC) and Payback Period (PBP) Analysis that examines impacts of energy efficiency standards on the U.S. population. In analyzing the potential impact of new or amended standards on residential and commercial consumers, DOE further evaluates the impact on identifiable groups of consumers (i.e., subgroups) that may be disproportionately affected by a national standard level. The LCC subgroup analysis evaluates impacts by analyzing the LCC and PBPs for subgroups of households or commercial consumers. For cooking products, DOE identified two consumer subgroups that warranted further study: households composed of people 65 years of age or older (senior-only) and households at or below the poverty line (low-income). For commercial clothes washers, DOE identified two other consumer subgroups: small business subgroups that own commercial laundries and consumers not served by municipal water and sewer.

DOE determined the impact on consumer subgroups for cooking products using the LCC Spreadsheet Model, which allows for the examination of particular consumer subgroups. The LCC analysis for the general population (described in Chapter 8) focuses on the households that use cooking products. DOE has the ability to use the LCC Spreadsheet Model to analyze the LCC for any subgroup by sampling only the data that apply to that subgroup. (Chapter 8 explains in detail the inputs to the model used in determining LCC and PBPs.) As described in section 12.2.2, the energy use and energy price characteristics of the two subgroups (senior-only and low-income households) are different than that for the general population.

For commercial clothes washers, DOE did not use building samples to conduct the LCC and PBP analysis. Most inputs to the analysis were characterized with probability distributions. For the small business subgroup, consumer discount rates different than the general population were used while the subgroup of consumers not served by municipal water and sewer used different water and wastewater prices than the general population. The inputs for the two subgroups are described in sections 12.3.2 and 12.3.3.

This chapter describes the subgroup identification in further detail and gives the results of the LCC and PBP analyses for both products. Section 12.2 details the inputs and results for three types of cooking products (cooktops, ovens, and microwave ovens) and section 12.3 describes the inputs and results for commercial clothes washers.

12.2 COOKING PRODUCTS

DOE considered two subgroups for the LCC and PBP analyses for cooking products (cooktops, ovens, and microwave ovens). The two subgroups comprised: (1) households with

12-1

### senior-only occupants and (2) households with incomes at or below the poverty line. This section describes the subgroup identification process and the results of the subgroup analyses.

12.2.1 Subgroup Definitions

12.2.1.1 Senior-Only Households

Senior-only households have occupants who are all at least 65 years of age. Based on DOE’s Energy Information Administration (EIA)’s Residential Energy Consumption Survey of 2001 (RECS 2001), senior-only households comprise 18 percent of the country’s households. 1



### 12.2.1.2 Low-Income Households

As defined in DOE’s RECS 2001, 1 

### the “poverty line” varies with household size, head ofhousehold age, and family income. Table 12.2.1 summarizes the criteria given for selecting lowincome households from the RECS 2001 sample.

Table 12.2.1 RECS 2001 Definitions of Low-Income Households

Household Size Owner Age Family Income

1 65 and over less than $7,525

1 64 and under less than $8,163

2 65 and over less than $9,491

2 64 and under less than $10,507

3 Any less than $12,516

4 Any less than $16,036

5 Any less than $18,952

6 Any less than $21,389

7 Any less than $24,268

8 Any less than $27,091

9 or more Any less than $31,971



### 12.2.2 Inputs to the Subgroup Analysis for Senior-Only and Low-Income Households

DOE performed the consumer subgroup analysis by analyzing the LCC and PBP of senior-only or low-income households with the spreadsheet models used for the LCC and PBP analysis. With the exception of energy use and energy prices, DOE used the same inputs in the subgroup analysis as it used for the general population. Because the senior-only and low-income household samples are smaller than that for the general population, the energy use and energy price characteristics will be different.

12-2

### Table 12.2.2 summarizes the household population, weighted-average annual cooking energy use, and energy prices for the senior-only and low-income households analyzed in the consumer subgroup analysis for electric and gas cooktops. Each of the above values is compared to the weighted-average values for the general population. In general, the annual cooking energy use and energy prices for the two consumer subgroups are roughly the same as the general population.

Table 12.2.2	 Electric and Gas Cooktops: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

Category All Households Senior-Only Low-Income

Electric Cooktops

Household Population Data

Number of Household Records 2896 557 340

Sum of Weights (million households) 64,345,040 12,716,529 7,773,433

Percent of Household Population

- 19.8% 12.1%

Weighted-Average Annual Cooking Energy Use

Electricity (kWh/year) 128.2 127.7 132.3
Weighted-Average Energy Prices (2006$)

Electricity Price (¢/kWh) 10.6 11.7 10.2

Gas Cooktops

Household Population Data

Number of Household Records 1598 218 289

Sum of Weights (million households) 36,557,346 5,040,286 6,261,018

Percent of Household Population

- 13.8% 17.1%

Weighted-Average Annual Cooking Energy Use

Natural Gas (MMBtu/year) 0.724 0.718 0.779
Weighted-Average Energy Prices (2006$)

Natural Gas Price ($/therm) 14.23 14.43 14.25



### Table 12.2.3 summarizes the household population, weighted-average annual cooking energy use, and energy prices for the senior-only and low-income households analyzed in the consumer subgroup analysis for electric and gas ovens. Each of the above values is compared to the weighted-average values for the general population. In general, the energy prices for the two consumer subgroups are roughly the same as the general population but there are significant differences in some of the annual cooking energy use values.

12-3

### Table 12.2.3 Electric and Gas Ovens: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

Category All Households Senior-Only Low-Income

Electric Standard Ovens

Household Population Data

Number of Household Records 1460 267 247

Sum of Weights (million households) 32,392,395 5,963,913 5,533,775

Percent of Household Population

- 18.4% 17.1%

Weighted-Average Annual Cooking Energy Use

Electricity (kWh/year) 132.4 100.6 131.5
Weighted-Average Energy Prices (2006$)

Electricity Price (¢/kWh) 10.5 10.4 10.2

Electric Self-Cleaing Ovens

Household Population Data

Number of Household Records 1302 254 72

Sum of Weights (million households) 28,637,032 5,781,754 1,707,285

Percent of Household Population

- 20.2% 6.0%

Weighted-Average Annual Cooking Energy Use

Electricity (kWh/year) 116.6 120.8 133.9
Weighted-Average Energy Prices (2006$)

Electricity Price (¢/kWh) 10.7 11.0 10.0

Gas Standard Ovens

Household Population Data

Number of Household Records 1082 121 233

Sum of Weights (million households) 24,414,838 2,760,101 5,053,019

Percent of Household Population

- 11.3% 20.7%

Weighted-Average Annual Cooking Energy Use

Gas (MMBtu/year) 0.82 0.66 0.77
Weighted-Average Energy Prices (2006$)

Natural Gas Price ($/therm) 14.27 14.80 14.35

Gas Self-Cleaning Ovens

Household Population Data

Number of Household Records 373 56 29

Sum of Weights (million households) 8,709,722 1,369,743 635,749

Percent of Household Population

- 15.7% 7.3%

Weighted-Average Annual Cooking Energy Use

Gas (MMBtu/year) 0.68 0.50 0.54
Weighted-Average Energy Prices (2006$)

Natural Gas Price ($/therm) 14.24 14.23 14.37

12-4

### Table 12.2.4 summarizes the household population, weighted-average annual cooking energy use, and energy prices for the senior-only and low-income households analyzed in the consumer subgroup analysis for microwave ovens. Each of the above values is compared to the weighted-average values for the general population. In general, the energy prices for the two consumer subgroups are roughly the same as the general population. The annual cooking energy use for the low-income subgroup is significantly greater than the general population.

Table 12.2.4	 Microwave Ovens: Comparison of Input Values for All Households, Senior-Only Households, and Low-Income Households

Category All Households Senior-Only Low-Income

Household Population Data

Number of Household Records 4150 689 496

Sum of Weights (million households) 92,147,608 15,533,938 11,013,087

Percent of Household Population

- 16.9% 12.0%

Weighted-Average Annual Cooking Energy Use

Electricity (kWh/year) 131.0 128.5 149.2
Weighted-Average Energy Prices (2006$)

Electricity Price (¢/kWh) 10.9 10.8 10.5



### 12.2.3 Results for Cooking Product Subgroups

Tables 12.2.5 through 12.2.10 below summarize the LCC results for low-income and senior-only households for each of the three products: cooktops, ovens, and microwave ovens. For each product two tables are displayed and candidate standard levels (CSL) and trial standard levels (TSL) are listed. The LCC results provide the average or mean LCC, the relative LCC savings or costs, and the percentage of consumers that are burdened with net costs, realize net savings, or incur no impact.

12-5

### Table 12.2.5 Electric and Gas Cooktops: LCC and PBP Results for Low-Income

Households

CSL TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Electric – Open Coil Elements

Baseline 1 $272 $169 $441

- - - - - -

1 

### 2, 3, 4 $276 $162 $437 $4 33.9% 0.0% 66.2% 7.3 23.6

Electric – Smooth Elements

Baseline 1, 2, 3 $309 $169 $478

- - - - - -

1 

### 4 $550 $166 $716 -$238 100% 0.0% 0.0% 1,505.0 4,896.4

Gas Cooktops

Baseline

- $310 $513 $823

- - - - - -

1 

### 1, 2, 3 $335 $232 $567 $18 0.3% 90.2% 9.5% 4.7 3.8

2 

### 4 $364 $226 $590 -$5 91.0% 0.0% 9.0% 67.2 159.9

* “No impact” means that the base case forecast cooktop assigned to the household has greater efficiency than the level indicated, so the household is not affected.

**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.



### Table 12.2.6	 Electric and Gas Cooktops: LCC and PBP Results for Senior-Only

Households

CSL TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Electric – Open Coil Elements

Baseline 1 $273 $141 $414

- - - - - -

1 2, 3, 4 $276 $135 $411 $3 43.6% 0.0% 56.4% 8.8 20.5

Electric – Smooth Elements

Baseline 1, 2, 3 $309 $141 $450

- - - - - -

1 4 $551 $139 $690 -$239 100.0% 0.0% 0.0% 1834.0 4242.3

Gas Cooktops

Baseline

- $310 $510 $820

- - - - - -

1 1, 2, 3 $332 $225 $557 $14 0.1% 93.6% 6.3% 4.3 3.1

2 4 $361 $219 $580 -$10 93.9% 0.0% 6.1% 73.6 154.0

* “No impact” means that the base case forecast cooktop assigned to the household has greater efficiency than the level indicated, so the household is not affected.

**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.

12-6

### Table 12.2.7 Electric and Gas Ovens: LCC and PBP Results for Low-Income

Households

CSL TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Electric – Standard Oven

Baseline 1 $414 $212 $625

- - - - - -

1

- $416 $204 $620 $6 40.8% 0.0% 59.2% 7.7 47.4

2 2, 3 $421 $196 $616 $9 49.4% 0.0% 50.7% 11.6 71.5

3

- $426 $193 $619 $6 55.4% 0.0% 44.6% 17.5 108.1

4

- $484 $190 $673 -$48 93.7% 0.0% 6.3% 83.1 513.6

5 4 $489 $189 $678 -$52 94.4% 0.0% 5.6% 87.2 538.9

Electric – Self-cleaning Oven

Baseline 1, 2, 3 $484 $234 $718

- - - - - -

1

- $490 $233 $723 -$98 74.2% 0.0% 25.8% 154.1 1,020.8

2 4 $548 $229 $777 -$151 79.8% 0.0% 20.2% 208.9 1,384.0

Gas Standard Oven

Baseline

- $430 $368 $799

- - - - - -

1a

- $465 $243 $709 $6 7.2% 82.3% 10.6% 9.8 7.7

1

- $461 $478 $939 -$35 17.7% 82.3% 0.0% 11.4 9.5

2

- $466 $470 $936 -$52 71.0% 0.0% 29.0% 14.8 78.0

3

- $468 $469 $937 -$53 72.3% 0.0% 27.7% 15.0 87.0

4

- $500 $466 $966 -$82 93.8% 0.0% 6.3% 25.4 1,061.3

5 4 $502 $466 $968 -$84 93.9% 0.0% 6.1% 26.4 642.6

6 1, 2, 3 $508 $465 $972 -$88 94.4% 0.0% 5.1% 27.7 866.0

Gas Self-Cleaning Oven

Baseline 1, 2 $551 $568 $1,119

- - - - - -

1 3 $567 $556 $1,123 -$4 69.0% 0.0% 31.0% 16.2 231.0

2

- $574 $556 $1,129 -$10 75.6% 0.0% 24.4% 23.3 452.9

3 4 $575 $555 $1,130 -$11 76.4% 0.0% 23.6% 26.0 297.9

* “No impact” means that the base case forecast cooktop assigned to the household has greater efficiency than the level indicated, so the household is not affected.

**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.

12-7

### Table 12.2.8 Electric and Gas Ovens: LCC and PBP Results for Senior-Only

Households

CSL TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Electric – Standard Oven

Baseline 1 $413 $180 $594

- - - - - -

1

- $416 $174 $590 $4 45.0% 0.0% 55.0% 10.7 47.8

2 2, 3 $420 $167 $588 $6 54.9% 0.0% 45.1% 16.1 72.1

3

- $426 $165 $591 $3 62.3% 0.0% 37.8% 24.3 108.9

4

- $483 $162 $646 -$52 96.7% 0.0% 3.4% 115.7 517.4

5 4 $488 $162 $651 -$57 97.2% 0.0% 2.8% 121.4 542.9

Electric – Self-cleaning Oven

Baseline 1, 2, 3 $484 $253 $737

- - - - - -

1

- $491 $252 $743 -$149 80.8% 0.0% 19.2% 153.4 1,150.8

2 4 $548 $248 $796 -$202 86.0% 0.0% 14.0% 208.0 1,560.3

Gas Standard Oven

Baseline

- $431 $367 $798

- - - - - -

1a

- $464 $237 $701 $6 5.9% 84.2% 10.0% 9.8 7.3

1

- $459 $464 $923 -$29 15.8% 84.2% 0.0% 10.9 8.3

2

- $464 $457 $921 -$46 71.6% 0.0% 28.4% 15.7 92.5

3

- $466 $456 $922 -$47 72.8% 0.0% 27.2% 17.3 103.3

4

- $498 $452 $951 -$76 94.0% 0.0% 6.0% 30.4 456.5

5 4 $501 $452 $953 -$77 94.3% 0.0% 5.7% 31.3 581.1

6 1, 2, 3 $506 $451 $957 -$82 95.2% 0.0% 4.8% 34.0 434.3

Gas Self-Cleaning Oven

Baseline 1, 2 $551 $563 $1,113

- - - - - -

1 3 $567 $550 $1,117 -$4 73.5% 0.0% 26.5% 35.3 533.4

2

- $573 $550 $1,123 -$10 78.7% 0.0% 21.3% 48.3 249.5

3 4 $575 $549 $1,125 -$11 79.4% 0.0% 20.6% 50.9 1,561,3

* “No impact” means that the base case forecast cooktop assigned to the household has greater efficiency than the level indicated, so the household is not affected.

**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.

12-8

### Table 12.2.9 Microwave Ovens: LCC and PBP Results for Low-Income Households

CSL /

TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Baseline $220 $138 $358

- - - - - -

1a $233 $133 $365 -$3 41.3% 53.4% 5.3% 28.7 150.6

2a $246 $132 $379 -$9 44.8% 53.4% 1.9% 55.7 292.4

3a $267 $131 $398 -$19 45.9% 53.4% 0.7% 79.5 416.9

4a $294 $130 $424 -$31 46.6% 53.4% 0.1% 111.9 587.2

1b $220 $125 $346 $6 0.0% 53.4% 46.6% 0.3 0.3

2b $221 $122 $343 $12 0.0% 19.5% 80.5% 0.6 0.8

3b $222 $113 $341 $17 0.0% 0.0% 100.0% 1.5 1.7

4b $228 $113 $341 $18 0.0% 0.0% 100.0% 3.1 3.6

* “No impact” means that the base case forecast cooktop assigned to the household has greater eff iciency than the level indicated, so the household is not affected.

**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.



### Table 12.2.10 Microwave Ovens: LCC and PBP Results for Senior-Only Households

CSL /

TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operating

Cost Average

LCC Average Savings Households with

Median Average Net

Cost No Impact* Net

Benefit

Baseline $220 $127 $347

- - - - - -

1a $232 $122 $355 -$4 42.6% 53.4% 4.0% 28.3 117.5

2a $246 $122 $368 -$10 45.7% 53.4% 1.0% 55. 0 228.0

3a $267 $120 $387 -$19 46.3% 53.4% 0.3% 78.4 325.2

4a $294 $120 $414 -$31 46.5% 53.4% 0.1% 110.4 457.9

1b $220 $114 $334 $6 0.0% 53.4% 46.6% 0.3 0.3

2b $221 $110 $331 $13 0.0% 19.5% 80.5% 0.6 0.8

3b $222 $100 $329 $18 0.0% 0.0% 100.0% 1.3 1.6

4b $228 $100 $328 $19 0.0% 0.0% 100.0% 2.8 3.5

* “No impact” means that the base case forecast cooktop assigned to the household has greater efficiency than the level indicated, so the household is not affected.

** Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.



### The low-income and senior-only consumer subgroups show the same trend in average LCC differences and consumer impacts (i.e., percentage of consumers significantly or insignificantly impacted) as the overall sample. For all three cooking products, the average LCC

12-9

### costs, savings and payback periods for low-income and senior-only households mirror the savings for the general population.

12.3 COMMERCIAL CLOTHES WASHERS

DOE considered two subgroups for the LCC and PBP analyses for commercial clothes washers: (1) consumers using well water and septic systems for wastewater and (2) small commercial clothes washing enterprises. This section describes the subgroup identification process and the results of the subgroup analyses.

12.3.1 Subgroups Definition

For commercial clothes washers, DOE analyzed the potential effects of standards on two subgroups: consumers not served by municipal water and sewer providers and small commercial clothes washer businesses. For consumers not served by water and sewer, DOE analyzed the potential impacts of standards by conducting the analysis with well water and septic system prices, rather than water and wastewater prices based on data from Raftelis Financial Consultants

and the American Water Works Association. 2 

### For small commercial clothes washer businesses, DOE analyzed the potential impacts of standards by conducting the analysis with different discount rates, as small businesses do not have the same access to capital as larger businesses. As described below, DOE estimated that for businesses purchasing commercial clothes washers, small companies have an average discount rate which is 3.5 percent higher than the industry

average.

12.3.2 Inputs to the Subgroup Analysis for Consumers without Municipal Water/Sewer

In 1950, 62 percent of the population received water from public supplies. 3 

### By 2000, the percentage of people receiving water from public supply rose to 85 percent. As evidenced by the numbers, the trend is away from privately owned wells. However currently in the United States, more than 44 million American residents still use privately owned individual wells to pump household water used. The National Groundwater Association (NGWA) estimates that more than 15 million American households are served by privately owned individual wells. The NGWA estimates that the annual economic value of the privately owned pumped water is $3.09 billion and the value of the installed well/pump infrastructure is $64.3 billion. 3



### DOE considered several factors for developing consumer prices for private well supplied water. Initial costs to install a well for water includes well siting, well drilling, pump purchase and installation, water testing, and a water treatment system (if necessary). Ongoing costs include pump maintenance and pump operating fuel to lift water to surface and to the point of use. However, DOE’s calculations for the water price to consumers using private wells are based only on the volumetric charge to calculate water prices, since only this charge would be affected by a change in water consumption. Including the fixed charge in the average would lead

12-10

### to a higher water price and would not capture the impacts of product efficiency changes. Information about frequency of need and cost of water treatment was unavailable.

The calculation of average per-unit-volume prices proceeds in three steps: (1) for each consumer, divide the total annual economic value of pumped water by the number of people using private well water (divide by 360 for a daily economic value by person); (2) calculate a value per gallons by assuming a daily person water usage of 100 gallons; and (3) calculate a value per thousand gallons to compare with public supply values.

Table 12.3.1 shows a summary of the values used to determine a $1.93 per thousand gallons of private well water for residential consumers.

Table 12.3.1	 Water Price Estimation for Residential Private Well Water Supply (2004$)
Annual Economic Value Of Pumped Water $ 3,090,000,000
Annual Economic Value By Person $ 69.64
Daily Economic Value By Person $ 0.19
Gallons Of Water Person Uses Daily 100

Value Per Gallon $ 0.002

Value Per Thousand Gallons $ 1.93

Source: National Ground Water Association



### 12.3.2.2 Wastewater Prices for Consumers Using Septic Systems

The National Onsite Wastewater Recycling Association (NOWRA) collects national cost data on residential septic systems from states willing to share it. To date, only Ohio has sent NOWRA a complete cost accounting for its state’s residences using septic. 4 

### Using the Ohio data and anecdotal information from NOWRA, “annual system costs (system installation plus operation and maintenance) amortized over 30 years were calculated and ranged from $336 (conventional system) to $1,172 (drip distribution) which is very similar to the state average sewer rate costs of $442 annually, and 30 year annual costs of $504 to 1,272 with the addition of

connection fees and costs.” 5 

### Given the similarity in operating costs between septic systems and sewer usage and due to the lack of national data, DOE recommends for septic system using consumers the wastewater price calculated for consumers on publicly owned treatment facilities of $2.57 per thousand gallons (2007$).

12.3.3 Inputs to the Subgroup Analysis for Small Businesses

12.3.3.1 Small Business Statistics for Commercial Laundry

The small business administration (SBA) defines a small business by its annual receipts or its number of employees. Coin-operated laundries and drycleaners are considered small if its annual revenue is less than $6.5 million. 6

12-11

### This industry is comprised of: (1) establishments primarily engaged in operating facilities with coin-operated or similar self-service laundry and dry-cleaning equipment for customer useon the premises and (2) establishments primarily engaged in supplying and servicing coinoperated or similar self-service laundry and drycleaning equipment for customer use in places of business operated by others, such as apartments and dormitories. Table 12.3.2 provides the statistics on coin-operated lanudromats and drycleaners. 7



### Table 12.3.2	 Coin-operated laundries & drycleaners: Number of Establishments and Receipts by Nonemployer and Employer Status

All Firms Nonemployers* Employers

Establishments Receipts ($1,000) Establishments Receipts ($1,000) Establishments Receipts ($1,000)

26,906 4,216,696 14,707 758,447 12,199 3,458,255

* Nonemployers are businesses with no paid employees

Source: U.S. Census Bureau, 2002.



### The following two tables provide further detail on the establishment firm size and receipts and revenues. Table 12.3.3 provides the establishment firm size by the type of legal organization. 8 

### Table 12.3.4 provides the firm size by the amount of sales per year. 9



### Table 12.3.3	 Establishment and Firm Size: Legal Form of Organization

Legal form of organization Number of

Establishments Receipts/Revenue ($1,000) Number of employees

All establishments 12,199 3,458,255 46,198
Corporations 7,527 2,608,061 31,233
Individual proprietorships 3,323 480,869 9,571
Partnerships 1,347

- - Other legal forms of organization 2

- - Source: U.S. Census Bureau, 2002.

12-12

### Table 12.3.4 Establishment and Firm Size: Receipts/Revenue Size of Establishments

Meaning of sales/receipts/revenue size categories or establishments operated the entire year Number of

establishments Receipts/

Revenue ($1,000) Number of employees

All establishments 12,199 3,458,255 46,198
Establishments operated for the entire year 10,084 3,263,919 43,326
Less than $10,000 35 163 29
$10,000 to $24,999 164 2,930 217
$25,000 to $49,999 685 26,473 1,103
$50,000 to $99,999 2,442 183,436 5,451
$100,000 to $249,999 4,486 709,913 14,986
$250,000 to $499,999 1,604 547,125 10,122
$500,000 to $999,999 433 285,424 4,759
$1,000,000 to $2,499,999 124 188,512 2,131
$2,500,000 to $4,999,999 40 143,843 730
$5,000,000 to $9,999,999 32 217,821 738
$10,000,000 or more 39 958,279 3,060

Source: U.S. Census Bureau, 2002.



### Based on the data in Table 12.3.4, over 99 percent of establishments (operated for the entire year) have receipts/revenues of less than $5 million. But only 64 percent of industry receipts/revenues are earned by establishments that make less than $5 million. Therefore, even though almost all establishments are small, a significant percent of the revenues are captured by large establishments (i.e., those that earn at least $5 million). Because small establishments capture less than 70 percent of total industry revenues, small establishments do not represent the entire industry and should be analyzed as a subgroup.

12.3.3.2 Commercial Clothes Washers: Small Company Discount Rates

To calculate discount rates for small companies that purchase commercial clothes washers, DOE used the same methodology as the general population of commercial clothes washer consumers as presented in Chapter 8, section 8.2.4.3. Although the methodology is appropriate, the capital asset pricing model (CAPM) a 

### used in section 8.2.4.3 for the general population underestimates the cost of capital for small companies. In CAPM, the risk premium β is used to account for the higher returns associated with greater risk. However, for small companies, particularly very small companies, historic returns have been significantly higher than the CAPM equation predicts. This additional return can be accounted for by adding a size premium to the cost of equity for small firms:

k

e 

### = R f 

### + 

# ( β × ERP 

# ) + S

k

e 

### = Cost of equity,

a See 8.2.4.3 for more extensive description of CAPM and its parameters.

12-13

### R f 

### = Expected return on risk-free assets, β = Risk coefficient of the firm,

ERP 

### = Equity risk premium, and

S 

### = Size Premium.

DOE obtained size premium data from Ibbotson Associates’ Stocks, Bonds, Bills, and Inflation 2007 Yearbook



### . 10 

### For the period of 1926–2006, the average size premium for the smallest companies in all industries is 6.27 percent, implying that on average, historic performance of small companies has been 6.27 percent higher than the CAPM estimate of the small company cost of equity. b



### To estimate the difference in discount rate between small companies and the industry average, DOE calculated the average discount rate for small companies in industries that purchase commercial clothes washers and also for all companies in those industries. DOE calculated the real weighted average cost of capital as described in section 8.2.4.3, using the cost of equity including a size premium for small companies instead of the CAPM cost of equity. c 

### DOE also performed these calculations for companies in all industries. Discount rate estimates are presented below in Table 12.3.5.

Table 12.3.5 Discount Rate Difference Between Small Company and Market Average

Discount Rate

Sector Average Std Dev Difference

Select Industries 5.8% 1.7%

-­ Select Industries, Small 9.3% 3.0% 3.5%

Entire Market 6.3% 2.3%

-­ Entire Market, Small 10.2% 3.3% 3.8%



### DOE estimates that in industries that purchase commercial clothes washers, small companies have an average discount rate 3.5 percent higher than the industry average d 

### . This conclusion is supported by the similar difference (3.8 percent) between small and average company discount rates for the entire market based on data from Damodaran. e, 11



### In Chapter 8, section 8.2.4.3, DOE estimated average discount rate for Personal Services, Educational Services, Hotels/Gaming, and REIT to be 5.7 percent. Applying the additional small capitalization (small cap) discount rate premium of 3.5 percent presented above (in Table 12.3.5)

b In this calculation, small companies are defined as companies with market capitalization of less than or equal to

$84.5 million, the Ibbotson Associates’ definition of Decile 10 companies.
As in 8.2.4.3, this calculation uses financial data from Damodaran Online, for the Educational Services, Hotels/Gaming, and REIT sectors. Damodaran Online does not include data for the Personal Services industry, so

DOE is unable to include it in this calculation.

d This 3.5% discount rate premium is an average across all companies in the three select industries, giving equal

weighting to each company.

e The group of select industries includes 146 companies total, 51 of which are small companies. The Damodaran

database for the entire market includes 6559 companies total, 2605 of which are small companies.

12-14 c

### to the 5.7 percent discount rate for industries that purchase commercial washers, the discount rate for small companies in these industries is approximately 9.2 percent.

The small cap discount rate premium is presented by industry in Table 12.3.6, along with estimated small company discount rates by industry based on the calculations in Chapter 8, section 8.2.4.3. Because there was insufficient data to estimate it separately, DOE assumes that the small cap discount rate premium for Personal Services is the same as the average for all small companies in Educational Services, Hotels/Gaming, and REIT.

Table 12.3.6 Small Company Discount Rates and Small Cap Premium

Industry Small Cap Discount

Rate Premium Average Industry

Discount Rate* Small Company

Discount Rate

Personal Services 3.5% 4.3% 7.8%

Educational Services 3.7% 7.9% 11.6%
Hotels/Gaming 3.2% 5.8% 9.0%

REIT 4.2% 5.7% 9.9%

* From Chapter 8, Section 8.2.4.3.



### 12.3.4 Results for Commercial Clothes Washer Subgroups

Tables 12.3.7 and 12.3.8 below summarize the top-loading commercial clothes washer LCC results for multi-family households and commercial laundries that do not use public water and/or sewer supply, or are defined as a small business. Tables 12.3.9 and 12.3.10 below summarize the front-loading commercial clothes washer LCC results for multi-family households and commercial laundries that do not use public water and/or sewer supply, or are defined as a small business. For the three candidate standard levels for top-loading washers and the four candidate standard levels for front-loading washers, the LCC results provide the average or mean LCC, the relative LCC savings or costs, and the percentage of consumers that are burdened with net costs, realize net savings, or incur no impact.

12-15

### Table 12.3.7 Top-Loading Commercial Clothes Washers: LCC and PBP Results for Non-Public Water and Sewer Supply

Candidate

Standard

Level TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operati ng Cost Average

LCC Average Savings Households with

Median Average Net Cost No Impact* Net

Benefit
Multi-Family Application

Baseline

- $734 $3,062 $3,796

- - - - - - 1 1 $852 $2,962 $3,815 -$12.0 45.1% 36.3% 18.6% 10.8 15.4

2 2 $940 $2,701 $3,641 $156.5 14.3% 3.0% 82.7% 4.5 5.4

3 3, 4, 5 $963 $2,586 $3,549 $245.7 9.8% 3.0% 87.2% 3.8 4.5

Commercial Laundry Application

Baseline

- $734 $3,240 $3,974

- - - - - - 1 1 $852 $3,152 $4,004 -$19.2 52.5% 36.3% 11.3% 7.4 8.5

2 2 $940 $2,867 $3,807 $171.7 3.2% 3.0% 93.8% 2.8 2.9

3 3, 4, 5 $963 $2,755 $3,718 $258.5 1.0% 3.0% 96.0% 2.4 2.5

* “No impact” means that the base case forecast commercial clothes washer assigned to the building has greater efficiency than the level indicated, so the household is not affected.
**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.



### Table 12.3.8	 Top-Loading Commercial Clothes Washers: LCC and PBP Results for Small Companies

Candidate

Standard

Level TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Install ed

Price Average Operati ng Cost Average

LCC Average Savings Households with

Median Average Net Cost No Impact* Net

Benefit
Multi-Family Application

Baseline

- $734 $2,463 $3,197

- - - - - - 1 1 $852 $2,382 $3,234 -$23.2 51.3% 35.8% 12.9% 10.7 15.7

2 2 $940 $2,172 $3,112 $95.0 23.1% 3.1% 73.8% 4.5 5.5

3 3, 4, 5 $963 $2,079 $3,042 $163.1 15.7% 3.1% 81.2% 3.8 4.6

Commercial Laundry Application

Baseline

- $734 $2,765 $3,499

- - - - - - 1 1 $852 $2,689 $3,541 -$26.9 59.4% 35.8% 4.8% 7.4 8.5

2 2 $940 $2,447 $3,387 $122.5 7.0% 3.1% 89.9% 2.8 3.0

3 3, 4, 5 $963 $2,350 $3,313 $194.0 2.9% 3.1% 94.0% 2.4 2.5

* “No impact” means that the base case forecast commercial clothes washer assigned to the building has greater efficiency than the level indicated, so the household is not affected.
**	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.

12-16

### Table 12.3.9 Front-Loading Commercial Clothes Washers: LCC and PBP Results for Non-Public Water and Sewer Supply

Candidate

Standard

Level TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operati ng Cost Average

LCC Average Savings Households with

Median Average Net Cost No Impact* Net

Benefit
Multi-Family Application

Baseline

- $1,316 $2,688 $4,004

- - - - - - 1 1 $1,316 $2,688 $3,883 $9.2 0.0% 92.4% 7.6% 0.0 0.0

2 2, 3 $1,338 $2,567 $3,504 $55.6 0.0% 87.8% 12.2% 0.4 0.5

3 4 $1,376 $2,167 $3,418 $139.3 1.9% 3.1% 94.9% 2.8 3.0

4 5 $1,417 $2,042 $3,315 $241.3 1.2% 1.6% 97.2% 2.8 2.9
Commercial Laundry Application

Baseline

- $1,316 $1,898 $4,176

- - - - - - 1 1 $1,316 $2,860 $4,043 $10.2 0.0% 92.4% 7.6% 0.0 0.0

2 2, 3 $1,338 $2,727 $3,615 $63.1 0.0% 87.8% 12.2% 0.2 0.3

3 4 $1,376 $2,277 $3,528 $147.0 0.0% 3.1% 96.9% 1.7 1.7

4 5 $1,417 $2,152 $3,413 $260.6 0.0% 1.6% 98.4% 1.6 1.6

* “No impact” means that the base case forecast commercial clothes washer assigned to the building has greater efficiency than the level indicated, so the household is not affected. **	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.



### Table 12.3.10	 Front -Loading Commercial Clothes Washers: LCC and PBP Results for Small Companies

Candidate

Standard

Level TSL Life-Cycle Cost Life-Cycle Cost Savings Payback Period (Years)**

Average

Installed

Price Average Operati ng Cost Average

LCC Average Savings Households with

Median Average Net Cost No Impact* Net

Benefit
Multi-Family Application

Baseline

- $1,316 $2,164 $3,480

- - - - - - 1 1 $1,316 $2,164 $3,383 $6.9 0.0% 92.9% 7.1% 0.0 0.0

2 2, 3 $1,338 $2,067 $3,086 $41.5 0.0% 88.3% 11.7% 0.4 0.5

3 4 $1,376 $1,748 $3,024 $101.5 6.7% 2.9% 90.4% 2.8 3.1

4 5 $1,417 $1,648 $2,950 $174.7 5.6% 1.4% 93.1% 2.8 3.0
Commercial Laundry Application

Baseline

- $1,316 $1,533 $3,759

- - - - - - 1 1 $1,316 $2,443 $3,646 $8.0 0.0% 92.9% 7.1% 0.0 0.0

2 2, 3 $1,338 $2,330 $3,287 $50.0 0.0% 88.3% 11.7% 0.3 0.3

3 4 $1,376 $1,949 $3,219 $116.2 0.0% 2.9% 97.1% 1.7 1.8

4 5 $1,417 $1,843 $3,128 $206.2 0.0% 1.4% 98.6% 1.6 1.7

* “No impact” means that the base case forecast commercial clothes washer assigned to the building has greater efficiency than the level indicated, so the household is not affected. **	 Based on the payback calculation, a very small change in operating cost can result in a few extremely large paybacks, which will skew the average payback. In these cases, median is probably a better indicator.

12-17

### The non-public water and sewer supply users and the small company subgroups show a similar trend in average LCC differences and consumer impacts (i.e., percentage of consumers significantly or insignificantly impacted) as the overall sample. In general, the benefits of moving to a higher efficiency are less in the case of the small business subgroups.

12-18

### REFERENCES

1 

### U.S. Department of Energy-Energy Information Administration. Residential Energy Consumption Survey, 2001 Public Use Data Files 

### , 2001. Washington, DC.

< http://www.eia.doe.gov/emeu/recs/recs2001/publicuse2001.html >

2 

### Raftelis Financial Consultants, Inc. 2004 RFC/AWWA Water and Wastewater Rate Survey



### , 2004. Charlotte, NC, Kansas City, MO, and Pasadena, CA.

< http://www.raftelis.com/ratessurvey.html >

3 

### National Ground Water Association. Ground Water Use for America 

### . 2005.

4 

### Jerry Stonebridge, National Onsite Wastewater Recycling Association, January 23, 2008.

Personal communication.

5 

### Ohio Department of Health “Report to the Household and Small Flow Onsite Sewage Treatment System Study Commission.” January 1, 2008

6 

### U.S. Government Printing Office. Title 13: Business Credit and Assistance, Part 121—Small Business Size Regulations, Section 121.201—Small Business Size Standards by NAICS Industry, Subsector 812—Personal and Laundry Services, 812310—Coin-Operated Laundries and Drycleaners, 

### 2008. Washington, DC.

< http://ecfr.gpoaccess.gov/cgi/t/text/textidx?c=ecfr&sid=b6e780955530049be4cc0d0a0e391115&rgn=div5&view=text&node=13:1.

0.1.1.15&idno=13#13:1.0.1.1.15.1.264.9 >

7 

### U.S. Census Bureau, 2002 Economic Census. Industry Statistics Sampler, NAICS 812310, Coin-operated laundries and drycleaners 

### , 2002. Washington, DC.

< http://www.census.gov/econ/census02/data/industry/E812310.HTM#T2 >

8 

### U.S. Census Bureau, 2002 Economic Census. Sector 81: Other Services (Except Public Administration): Subject Series - Estab & Firm Size: Legal Form of Organization for the

United States: 2002 

### , 2005. Washington, DC.

< http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0281SSSZ7&­

NAICS2002=812310 >

9 

### U.S. Census Bureau, 2002 Economic Census. Sector 81: Other Services (Except Public Administration): Subject Series - Estab & Firm Size: Receipts/Revenue Size of Establishments for the United States: 2002 

### , 2005. Washington, DC.

< http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0281SSSZ1&­

NAICS2002=812310 >

10 

### Ibbotsons Associates. Stocks, Bonds, Bills, and Inflation 2007 Yearbook, 2007. Chicago, IL.

12-1911 

### Damodaran Online. The Data Page: Cost of Capital by Industry Sector 

### , 2006.

< http://pages.stern.nyu.edu/~adamodar/ >

12-20