```

[Federal Register Volume 78, Number 38 (Tuesday, February 26, 2013)]
[Proposed Rules]
[Pages 12969-12988]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04099]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 78, No. 38 / Tuesday, February 26, 2013 / 
Proposed Rules

[[Page 12969]]

DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2012-BT-STD-0022]
RIN 1904-AC78

Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Residential Water Heaters

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

ACTION: Notice of proposed rulemaking and announcement of public 
meeting.

-----------------------------------------------------------------------

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 water heaters. EPCA also requires the U.S. Department of 
Energy (DOE) to determine whether more stringent amended standards 
would be technologically feasible and economically justified, and would 
save a significant amount of energy. Accordingly, DOE established 
amended energy conservation standards for several classes of 
residential water heaters in an April 2010 final rule. Subsequent to 
the publication of that final rule, a number of utility companies 
brought forth concerns regarding the amended energy conservation 
standard levels for electric storage water heaters and the impact of 
these standards on electric thermal storage programs that utility 
companies administer to manage peak load. In this document, DOE 
proposes to establish a waiver process that will mitigate the concerns 
of utility companies regarding the implementation of the April 2010 
standard levels by allowing for the manufacture of certain large-volume 
electric storage water heaters provided that they meet a set of 
conditions discussed in this proposed rule. The document also announces 
a public meeting to receive comment on the proposed waiver process and 
criteria for obtaining a waiver.

DATES: 
    Meeting: DOE will hold a public meeting on Friday, March 15, 2013, 
from 9:00 a.m. to 1:00 p.m., in Washington, DC. The meeting will also 
be broadcast as a Webinar. For information about the public meeting and 
Webinar, see section 0, ``Public Participation.''
    Comments: DOE will accept comments, data, and information regarding 
this notice of proposed rulemaking (NPRM) before and after the public 
meeting, but no later than April 29, 2013. See section 0, ``Public 
Participation,'' for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW., 
Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at 
(202) 586-2945. For more information, refer to section 0, ``Public 
Participation.''
    Interested persons are encouraged to submit comments using the 
Federal eRulemaking Portal at www.regulations.gov. Follow the 
instructions for submitting comments. Alternatively, interested persons 
may submit comments, identified by docket number EERE-2012-BT-STD-0022 
and/or RIN 1904-AC78, by any of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: ResWaterHtrsRFI-2012-STD-0022@ee.doe.gov. Include the 
docket number and/or RIN in the subject line of the message. Submit 
electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file 
format, and avoid the use of special characters or any form of 
encryption.
    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 
compact disc (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.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
Chad_S_Whiteman@omb.eop.gov.
    Instructions: All submissions received must include the agency name 
and docket number and/or RIN for this rulemaking. No telefacsimilies 
(faxes) will be accepted. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see 
section 0 of this document (Public Participation).
    Docket: The docket is available for review at http://www.regulations.gov, including Federal Register notices, public meeting 
attendee lists and transcripts, comments, and other supporting 
documents/materials. All documents in the docket are listed in the 
http://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. A link to the docket Web page can be found at: 
http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0022. See 
section 0, ``Public Participation,'' for further information on how to 
submit comments through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Ms. Ashley Armstrong, U.S. Department 
of Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies, EE-2J, 1000 Independence Avenue SW., Washington, DC 
20585-0121. Telephone: (202) 586-6590. Email: 
Ashley.Armstrong@ee.doe.gov.
    Mr. Ari Altman, U.S. Department of Energy, Office of the General 
Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 287-6307. Email: Ari.Altman@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Proposed Rule
II. Introduction
    A. Authority
    B. Background

[[Page 12970]]

    1. Current Standards
    2. Utility Concerns with the April 2010 Final Rule for Electric 
Storage Water Heaters
    3. June 2012 Request for Information
III. Discussion
    A. Comments Received in Response to June 2012 RFI
    1. Whether DOE Should Take Action
    2. Alternatives to Large-Volume Electric Resistance Water 
Heaters to Serve the Needs of ETS Programs
    3. Potential for a Separate Product Class for ``Grid-
Interactive'' Electric Storage Water Heaters
    4. Potential for Establishing a Waiver Process
    B. Waiver Process
    1. Criteria for Obtaining a Waiver
    2. Requirements and Method for Obtaining Waiver
    3. Periodic Review of Waiver Mechanism
IV. Procedural Requirements
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    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
    V. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Requests to Speak and Prepared 
General Statements for Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VI. Approval of the Office of the Secretary

Summary of the Proposed Rule

    DOE believes that electric thermal storage (ETS) programs involving 
water heaters provide numerous benefits to consumers, utilities, and 
the Nation, and that an alternative approach to energy conservation 
standards for certain, limited electric water heaters appears to be 
warranted in order to ensure the viability of these programs. After 
considering several options, DOE determined that a waiver process is 
the most appropriate, and thus, is proposing to adopt such a process in 
this notice of proposed rulemaking (NPRM). The proposed process would 
allow any manufacturer of electric water heaters, any electric utility 
company, or a combination of the two, to request a waiver granting 
exemption from the energy conservation standards established in an 
April 16, 2010 final rule (75 FR 20112; referred to hereinafter as the 
``April 2010 final rule'') for certain electric water heaters with 
rated storage volumes greater than 55 gallons. Each waiver granted by 
the U.S. Department of Energy (DOE), would allow, for a one-year 
period, manufacturers to produce limited numbers of electric water 
heaters with rated storage volumes above 55 gallons exclusively for the 
purpose of installation in residences enrolled in a specific utility 
company ETS program. Parties would be allowed to apply for additional 
one-year waivers in subsequent years. This proposed rule, if adopted, 
or the granting of a waiver under this rule, would not amend the energy 
conservation standard otherwise applicable to electric water heaters 
with rated storage volumes above 55 gallons.
    The following sections include: (1) A description of DOE's 
statutory authority for setting energy conservation standards for 
residential water heaters; (2) a discussion of the standards 
promulgated in the April 2010 final rule and concerns of utility 
companies regarding those standards; (3) a summary of the comments 
received in response to DOE's June 13, 2012 request for information 
(RFI) on this topic (77 FR 35299; hereinafter referred to as the ``June 
2012 RFI'') and DOE's responses to those comments, including a 
discussion of the appropriate mechanism to address the concerns of 
utility companies; and (4) a description of the waiver process that DOE 
proposes to establish.

Introduction

    The following section briefly discusses the statutory authority 
underlying DOE's standards for residential water heaters and this NPRM, 
as well as some of the relevant historical background regarding the 
establishment of standards for residential water heaters.

A. Authority

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (``EPCA'' or ``the Act''), Public Law 94-163 (42 U.S.C. 6291-6309, 
as codified) sets forth a variety of provisions designed to improve 
energy efficiency and establishes the Energy Conservation Program for 
Consumer Products Other Than Automobiles,\2\ a program covering most 
major household appliances (collectively referred to as ``covered 
products''), which includes the types of residential water heaters that 
are the subject of this NPRM. (42 U.S.C. 6292(a)(4))
---------------------------------------------------------------------------

    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated as Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Independence and Security Act of 2007, 
Public Law 110-140 (Dec. 19, 2007).
---------------------------------------------------------------------------

    Under EPCA, this program generally consists of four parts: (1) 
Testing; (2) labeling; (3) establishing Federal energy conservation 
standards; and (4) certification and enforcement procedures. The 
Federal Trade Commission (FTC) is primarily responsible for labeling 
consumer products, 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, 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 residential water heaters currently appear at Title 
10 of the Code of Federal Regulations (CFR) part 430, Subpart B, 
Appendix E.
    EPCA, as codified, 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)).

B. Background

1. Current Standards
    Before being amended by the National Appliance Energy Conservation 
Act of 1987 (NAECA; Pub. L. 100-12), Title III of EPCA included 
residential water heaters as covered products. NAECA's amendments to 
EPCA established energy conservation standards for

[[Page 12971]]

residential water heaters. (42 U.S.C. 6295(e)(1); 42 U.S.C. 6295(e)(4)) 
DOE initially amended the statutorily-prescribed standards for water 
heaters in 2001 (66 FR 4474 (Jan. 17, 2001)) and amended standards for 
water heaters for a second time in the April 2010 Final Rule.
    The energy conservation standards for residential water heaters in 
the April 2010 Final Rule will apply to products manufactured on or 
after April 16, 2015. 75 FR 20112. The amended energy conservation 
standards consist of minimum energy factors \3\ (EF) that vary based on 
the rated storage volume of the water heater, the type of energy it 
uses (i.e., gas, oil, or electricity), and whether it is a storage, 
instantaneous, or tabletop model. 10 CFR 430.32(d). The currently 
applicable water heater energy conservation standards, as well as those 
that will be applicable starting April 16, 2015, are set forth in Table 
II.1 below. Of particular relevance for this NPRM, on April 16, 2015, 
electric water heaters with a rated storage volume above 55 gallons 
will be required to have an energy factor of at least 2.057 - (0.00113 
x Rated Storage Volume in gallons). Such a level is currently 
achievable only by using heat pump water heater technology and cannot 
be achieved in electric water heaters that rely solely on electric 
resistance elements.
---------------------------------------------------------------------------

    \3\ Energy factor is a measure of overall water heater 
efficiency that accounts for efficiency during active, standby, and 
cyclical operation.

 Table II.1--Energy Conservation Standards for Residential Water Heaters
------------------------------------------------------------------------
                               Energy factor as of   Energy factor as of
        Product class           January 20, 2004       April 16, 2015
------------------------------------------------------------------------
Gas-fired Water Heater......  0.67 - (0.0019 x      For tanks with a
                               Rated Storage         Rated Storage
                               Volume in gallons).   Volume at or below
                                                     55 gallons: EF =
                                                     0.675 - (0.0015 x
                                                     Rated Storage
                                                     Volume in gallons).
                                                    For tanks with a
                                                     Rated Storage
                                                     Volume above 55
                                                     gallons:
                                                    EF = 0.8012 -
                                                     (0.00078 x Rated
                                                     Storage Volume in
                                                     gallons).
Oil-fired Water Heater......  0.59 - (0.0019 x      EF = 0.68 - (0.0019
                               Rated Storage         x Rated Storage
                               Volume in gallons).   Volume in gallons).
Electric Water Heater.......  0.97 - (0.00132 x     For tanks with a
                               Rated Storage         Rated Storage
                               Volume in gallons).   Volume at or below
                                                     55 gallons: EF =
                                                     0.960 - (0.0003 x
                                                     Rated Storage
                                                     Volume in gallons).
                                                    For tanks with a
                                                     Rated Storage
                                                     Volume above 55
                                                     gallons:
                                                    EF = 2.057 -
                                                     (0.00113 x Rated
                                                     Storage Volume in
                                                     gallons).
Tabletop Water Heater.......  0.93 - (0.00132 x     EF = 0.93 - (0.00132
                               Rated Storage         x Rated Storage
                               Volume in gallons).   Volume in gallons).
Instantaneous Gas-fired       0.62 - (0.0019 x      EF = 0.82 - (0.0019
 Water Heater.                 Rated Storage         x Rated Storage
                               Volume in gallons).   Volume in gallons).
Instantaneous Electric Water  0.93 - (0.00132 x     EF = 0.93 - (0.00132
 Heater.                       Rated Storage         x Rated Storage
                               Volume in gallons).   Volume in gallons).
------------------------------------------------------------------------

2. Utility Concerns With the April 2010 Final Rule for Electric Storage 
Water Heaters
    Subsequent to the publication of the April 2010 Final Rule, several 
stakeholders (i.e., National Rural Electric Cooperative Association 
(NRECA), PJM Interconnection (PJM), American Public Power Association 
(APPA), and Steffes Corporation) indicated to DOE their concerns about 
the interaction of the amended standards in the April 2010 final rule 
and the use of electric storage water heaters with tanks having greater 
than 55 gallons of rated storage volume (referred to hereinafter as 
``large-volume'' electric storage water heaters) used in ETS programs. 
Utilities use ETS programs, sometimes also known as load shifting or 
demand response programs, to manage peak demand load by limiting the 
times when certain appliances are operated. ETS programs typically 
allow the utility to control the appliance remotely to allow operation 
of the appliance only during off-peak hours. During off-peak operation, 
the electricity consumed is stored by the appliance as thermal energy 
for use during peak hours when it is not allowed to operate. Large-
volume electric storage water heaters are a key component of utility 
ETS programs that target electric water heaters because these larger-
volume products allow for the storage of enough hot water to meet 
consumer usage during peak demand times when the water heater would not 
be allowed to turn on.
    As shown in Table II.1 and noted above, the April 2010 Final Rule 
established an energy conservation standard that would effectively 
require the use of heat pump technology to meet the minimum energy 
conservation standard for large-volume electric storage water heaters. 
Utility companies presented concerns about the feasibility of 
continuing ETS programs without the use of large-volume electric 
resistance water heaters (ERWHs). Utilities believe the practicability 
of heat pump water heaters (HPWHs) are such that HPWHs may not be able 
to fill the same role as large-volume ERWHs in ETS programs. (The 
capability of HPWHs or multiple small-volume (i.e., storage volume of 
55 gallons or less) water heaters to serve the needs of ETS programs is 
discussed further in section 0.) In light of the perceived lack of 
viable alternatives to large volume ERWHs for ETS programs, utility 
companies are concerned that participation in ETS programs may be 
reduced or eliminated after the standards take effect in 2015, which 
would eliminate the numerous benefits to consumers, utilities, and the 
Nation resulting from ETS programs. (See section 0 for discussion of 
the benefits from ETS programs.) Because of their concerns, utilities 
requested that DOE consider allowing for the manufacture of large-
volume ERWHs solely for ETS applications.

[[Page 12972]]

3. June 2012 Request for Information
    To seek feedback from interested parties related to the issues 
raised by utility companies, DOE published the June 2012 RFI. 77 FR 
35299, June 13, 2012. The RFI described utility ETS programs for water 
heaters and the utility's concerns over the amended standard levels for 
electric storage water heaters with storage volumes above 55 gallons, 
and sought comment on these topics as well as a number of related 
issues. Specifically, DOE requested comment on (1) the penetration of 
ETS programs and the impacts of such programs on consumers and the 
Nation; (2) the impacts of the April 2010 standard levels on utility 
ETS programs; (3) information on any feature or features for 
residential water heaters used in ETS programs that are unique to those 
water heaters and whether such feature(s) would justify a separate 
standard from other residential water heaters; and (4) information on 
potential solutions that would resolve the concerns of utilities that 
administer ETS programs for residential water heaters and require the 
use of large-volume electric storage water heaters, including several 
potential approaches identified in the RFI. 77 FR 35304.
    DOE received 127 \4\ comments from interested parties, including 
109 from individual utility companies or utility associations 
(including the electric power research institute (EPRI)), 6 from 
manufacturers, 1 from an individual efficiency advocate, 1 comment from 
a trade association, 4 comments from U.S. Congressmen, and 3 joint 
comments--2 joint comments from multiple utilities, one of which also 
included a manufacturer of ETS controls (referred to as the ``Joint 
Utilities comment'') and one of which did not (referred to as the 
``Joint Utilities Supplemental comment''), 1 joint comment from several 
efficiency advocates (referred to as the ``Joint Efficiency Advocates 
comment''), and 1 joint comment from efficiency advocates and a utility 
company located in the northwestern U.S. (referred to as the 
``Northwest Advocates comment'').\5\ The utilities who responded to the 
June 2012 RFI serve approximately 5.3 million \6\ customers, of which 
approximately 1.7 million \7\ currently utilize electric resistance 
water heaters, and approximately 630,000 \8\ currently participate in 
ETS programs. The responses generally centered on recommendations for 
DOE's path forward and whether heat pump water heaters are a viable 
alternative to electric resistance water heaters for ETS programs. The 
comments helped DOE to formulate the proposals in this NPRM and are 
discussed in section A.
---------------------------------------------------------------------------

    \4\ In total there were 155 filings, but 26 comments were either 
exact duplicates or data supplements, so they are not included in 
the final count. Additionally two commenters submitted multiple 
filings with generally the same ideas expressed in each filing, and 
were only counted once in the final count.
    \5\ One joint comment was received from four utilities/
associations--PJM, NRECA, APPA, Edison Electric Institute (EEI)--as 
well as Steffes Corporation (Steffes), which manufactures thermal 
storage water heater controls. This is referred to as the ``Joint 
Utilities comment'' in this document. A supplemental comment to this 
joint comment was received from the four utilities only (i.e., PJM, 
NRECA, APPA, and EEI), which is referred to as the ``Joint Utilities 
Supplemental Comment.'' One joint comment was from three efficiency 
advocates, the American Council for an Energy Efficient Economy 
(ACEEE), Natural Resources Defense Council (NRDC), and Appliance 
Standards Awareness Project (ASAP). This comment is referred to as 
the ``Joint Efficiency Advocates comment'' in this document. One 
joint comment was from three stakeholders--Northwest Energy 
Efficiency Alliance (NEEA) and the Northwest Power and Conservation 
Council (NPCC), and the Bonneville Power Administration (BPA) 
utility. This comment is referred to as the ``Northwest Advocates 
comment'' in this document.
    \6\ In instances where both a group of cooperatives and its 
individual cooperative members gave figures, only the figures from 
the group of cooperatives were counted to avoid double counting. 
This includes figures provided by: Corn Belt, Dairyland, East River, 
ECSC, Dakota Electric Association, East Central, Federated, Goodhue, 
Kandiyohi, McLeod, Minnesota Valley, Nobles, Stearns Wright-
Hennepin, Northwest Iowa Power, Buckeye Power, Rappahannock, 
PowerSouth, Lower Valley, Wabash, Cass County, Powell Valley, Tri-
State, NOVEC, Black Hills, Verendrye, Lake Country, Mountain 
Electric, Leavenworth-Jefferson, Thumb Electric, SCIREC, Jackson 
County, Duck River, Shenandoah Valley, Adams, Tri-County Rural, 
Habersham Electric, Flint, Dakota Valley, Northern Plains, Aurelia, 
United Electric.
    \7\ In instances where both a group of cooperatives and its 
individual cooperative members gave figures, only the figures from 
the group of cooperatives were counted to avoid double counting. 
This total includes figures provided by: Farmers Electric, Midland, 
Dairyland, East River, ECSC, Great River, NIPCO, PowerSouth, Lower 
Valley, Bristol, Central Georgia EMC, Jackson County, Duck River, 
Shenandoah Valley, Adams, Shelby Electric, Flint, Aurelia.
    \8\ In instances where both the distribution cooperative and its 
individual cooperative members gave figures, only the distribution 
cooperatives figures were counted to avoid double counting. This 
number includes figures from: Farmers Electric Cooperative, Corn 
Belt, Dairyland, East River, ECSC, Connexus, Dakota Electric 
Association, East Central, Federated, Goodhue, Itasca-Mantrap, 
Kandiyohi, McLeod, Minnesota Valley, Nobles, Stearns, Wright-
Hennepin, NIPCO, Buckeye, Rappahannock, PowerSouth, Lower Valley, 
Wabash, Cass County, Bristol Tennessee Essential Services, Powell 
Valley Electric Cooperative, Central Georgia EMC, Otter Tail, Black 
Hills, Verendrye, Mountain Electric, Leavenworth-Jefferson, Thumb, 
SCIREC, Jackson County, Duck River, Shenandoah Valley, Adams, Shelby 
Electric, Habersham, Flint, Dakota Valley, Northern Plains, Aurelia, 
United Electric.
---------------------------------------------------------------------------

Discussion

A. Comments Received in Response to June 2012 RFI

    As noted, DOE received 127 unique comments in response to the June 
2012 RFI. The comments focused on four main issues: (1) whether DOE 
should take action to address the utility company concerns and the 
benefits of ETS programs; (2) the technological capability of 
alternatives to large-volume ERWHs to be utilized in ETS programs; (3) 
the potential for implementing a waiver program to allow the 
manufacture of certain water heaters specifically for use in ETS 
programs; and 4) the potential for implementing a separate product 
class for water heaters used in ETS programs (i.e., ``grid-
interactive'' water heaters). The comments and DOE responses related to 
these four topics are summarized in sections 0 through 0 immediately 
below.
1. Whether DOE Should Take Action
    Of the 127 comments received by DOE, 120 recommended that DOE 
should take some action to mitigate the issue that the April 2010 
standard would potentially cause for utility ETS programs. (See section 
2 for a brief description of the utility concerns.) (Buckeye Power, 
Inc. (Buckeye), No. 3 at p. 1; Codington-Clark Electric Cooperative 
(Codington-Clark), No. 4 at pp. 1-3; Rappahannock Electric Cooperative 
(Rappahannock), No. 5 at pp. 1-3; Northern Plains Electric Cooperative 
(Northern Plains), No. 6 at p. 1; Itasca-Mantrap Cooperative Electrical 
Association (Itasca-Mantrap), No. 7 at pp. 1-2; Northwest Iowa Power 
Cooperative (Northwest Iowa Power), No. 8 at p. 1; PowerSouth Energy 
Cooperative (Powersouth), No. 10 at pp. 1-3; Barron Electric 
Cooperative (Barron), No. 11 at p. 2; Clark Electric Cooperative 
(Clark), No. 13 at p. 1; Woodbury County Rural Electric Cooperative 
(Woodbury), No. 14 at p. 1; North West Rural Electric Cooperative 
(North West), No. 15 at p. 1; Bayfield Electric Cooperative (Bayfield), 
No. 16 at p. 2; Union County Electric Cooperative (Union County), Inc., 
No. 17 at p. 1; Allamakee-Clayton Electric Cooperative (Allamakee-
Clayton), No. 18 at p. 1; Lower Valley Energy, No. 19 at p. 1; AO 
Smith, No. 20 at p. 1; Wabash Valley Power (Wabash), No. 21 at p. 1; 
Heartland Power Cooperative (Heartland), No. 22 at p. 1; South Central 
Electric Association (South Central), No. 23 at p. 1; Cass County 
Electric Cooperative (Cass County), No. 24 at p. 1; East River Electric 
Power Cooperative (East River), No. 25 at p. 1;

[[Page 12973]]

Richland Electric Cooperative (Richland), No. 26 at p. 1; Lyon-Lincoln 
Electric Cooperative, No. 27 at pp. 1-3; Central Electric Power 
Cooperative (Central), No. 28 at p. 1; Tri-County Electric Cooperative 
(Tri-County), No. 29 at pp. 1-4; Price Electric Cooperative (Price), 
No. 30 at p. 1; Bristol Tennessee Essential Services (Bristol), No. 31 
at pp. 1-2; FEM Electric (FEM), No. 32 at p. 1; The Berkeley Electric 
Cooperative (BEC), Inc., No. 33 at p. 1; Powell Valley Electric 
Cooperative (Powell Valley), No. 34 at p. 1; Humboldt County Rural 
Electric Cooperative (Humboldt), No. 35 at p. 1; Dakota Electric, No. 
36 at p. 4; Nishnabotna Valley Rural Electric Cooperative (Nishnabotna 
Valley REC), No. 37 at p. 1; Corn Belt Power Cooperative (Corn Belt), 
No. 39 at p. 1; Clay-Union Electric Corporation (Clay-Union), No. 40 at 
p. 1; Great River Energy (Great River), No. 41 at p. 1; Central Georgia 
Electric Membership Corporation (Central Georgia EMC), No. 42 at p. 1; 
Otter Tail Power Company (Otter Tail), No. 44 at p. 1; Electric 
Cooperatives of South Carolina (ECSC), No. 45 at p. 1; Aiken Electric 
Cooperative (Aiken), Inc., No. 46 at p. 1; Connexus Energy (Connexus), 
No. 47 at p. 1; Dairyland Power Cooperative (Dairyland), No. 48 at p. 
1; Pee Dee Electric Cooperative (Pee Dee), No. 49 at p. 1; Oconto 
Electric Cooperative (Oconto), No. 50 at p. 1; Wright-Hennepin 
Cooperative Electric Association (Wright-Hennepin), No. 51 at p. 1; 
Midland Power Cooperative (Midland), No. 52 at p. 1; Lynches River 
Electric Cooperative, Inc. (Lynches), No. 53 at p. 1; Pierce Pepin 
Cooperative Services (Pierce Pepin), No. 54 at p. 1; Dunn Energy 
Cooperative (Dunn), No. 55 at p. 1; Palmetto Electric Cooperative, Inc. 
(Palmetto), No. 56 at p. 1; Horry Electric Cooperative (Horry), No. 57 
at p. 1; Joint Utilities, No. 58 at p. 4; Fairfield Electric 
Cooperative (Fairfield), No. 59 at p. 1; National Electrical 
Manufacturers Association (NEMA), No. 60 at p. 4; Tri-State Generation 
and Transmission Association (Tri-State), No. 61 at p. 1; Santee 
Electric Cooperative (Santee), No. 62 at p. 1; Cuyahoga Falls Electric 
Department (Cuyahoga Falls), No.63 at p. 1; Newberry Electric 
Cooperative, Inc. (Newberry), No. 64 at p. 1; Giant Factories, Inc. 
(Giant Factories), No. 65 at p. 2; People's Energy Cooperative 
(People's Energy), No. 66 at p. 1; Michigan Electric Cooperative 
Association (MECA), No. 67 at p. 1; Joint Efficiency Advocates, No. 68 
at p. 1; Eau Claire Energy Cooperative (Eau Clair), No. 69 at p. 1; 
Edisto Electric Cooperative (Edisto), No. 70 at p. 1; Coastal Electric 
Cooperative (Coastal), No. 71 at p. 1; Vaughn Thermal Corporation 
(Vaughn), No. 72 at p. 1; York Electric Cooperative (York), No. 73 at 
p. 1; Black River Electric Cooperative, Inc. (Black River), No. 76 at 
p. 1; Mid-Carolina Electric Cooperative, Inc. (MCEC), No. 77 at p. 1; 
Prairie Energy Cooperative (Prairie), No. 78 at p. 1; Alexandria Light 
and Power (ALP), No. 79 at p. 1; Alliance to Save Energy, No. 80 at p. 
1; Blue Ridge Electric Cooperative (Blue Ridge), No. 82 at p. 1; 
Freeborn-Mower Cooperative Services (Freeborn-Mower), No. 83 at p. 2; 
American Public Power Association (APPA), No. 84 at p. 3; Rheem 
Manufacturing Company (Rheem), No. 86 at p. 2; Heat Transfer Products, 
Inc. (HTP), No. 87 at p. 1; Nebraska Public Power District (Nebraska 
Public Power), No. 88 at p. 1; Clark Public Utilities, No. 90 at p. 1; 
Northern Virginia Electric Cooperative (NOVEC), No. 91 at p. 1; 
Congressman Todd Rokita, No. 93 at p. 1; Black Hills Electric 
Cooperative (Black Hills), No. 96 at p. 1; Verendrye Electric 
Cooperative (Verendrye), No. 97 at p. 1; Dakota Energy Cooperative 
(Dakota Energy), No. 98 at p. 1; Minnesota Rural Electric Association 
(Minnesota Rural), No. 99 at p. 1; Minnesota Valley Electric 
Cooperative (Minnesota Valley), No.101 at p. 1; McLeod Cooperative 
Power (McLeod), No.102 at p. 1; Lake Country Power (Lake Country), 
No.108 at p. 1; Mountain Electric Cooperative (Mountain Electric), 
No.109 at p. 1; Leavenworth-Jefferson Electric Cooperative 
(Leavenworth-Jefferson), No. 110 at p. 1; Riverland Energy Cooperative 
(Riverland), No. 111 at p. 1; Meeker Cooperative Light & Power 
(Meeker), No.112 at p. 1; Federated Rural Electric (Federated), No.113 
at p. 1; Iowa Lakes Electric Cooperative (Iowa Lakes), No. 114 at p. 1; 
Thumb Electric Cooperative (Thumb), No. 115 at p. 1; South Central 
Indiana Rural Electric Cooperative (South Central Indiana REC), No. 117 
at p. 1; Tri-County Electric Cooperative (Tri-County Electric), No. 118 
at p. 1; Nobles Cooperative Electric (Nobles), No. 119 at p. 1; Lake 
Region Electric Cooperative (Lake Region), No. 120 at p. 1; Congressman 
Dan Burton, No. 122 at p. 1; Sioux Valley Energy (Sioux Valley), No. 
123 at p. 1; East Central Energy (East Central), No. 124 at p. 1; 
Jackson County Rural Electric Membership Corporation (Jackson County), 
No. 126 at p. 1; Duck River Electric Membership Corporation (Duck 
River), No. 127 at p. 1; Shenandoah Valley Electric Cooperative 
(Shenandoah Valley), No. 128 at p. 1; Adams Electric Cooperative 
(Adams), No.129 at p. 1; Goodhue County Cooperative (Goodhue), No.130 
at p. 1; Adams-Columbia Electric Cooperative (Adams-Columbia), No.132 
at p. 1; Stearns Electric Association (Stearns), No.134 at p. 1; 
Senator John Thune, No. 137 at p. 1; Kandiyohi Power Cooperative 
(Kandiyohi), No.138 at p. 1; Shelby Electric Cooperative (Shelby), No. 
143 at p. 1; Tri-County Rural Electric Cooperative, Inc. (Tri-County 
REC), No. 144 at p. 1; Beltrami Electric Cooperative, No. 145 at p. 1 
(Beltrami); Habersham Electric Membership Cooperative (Habersham), 
No.146 at p. 1; Flint Energy Membership Corporation (Flint), No. 147 at 
p. 1; Dakota Valley and Northern Plains, No.149 at p. 1; Aurelia 
Municipal Electric (Aurelia), No. 151 at p. 1; United Electric 
Cooperative (United Electric), No. 153 at p. 1)
    The Northwest Advocates stated that action should be taken, but 
only if analysis concludes that the net benefits of resistance-only 
water heaters including load shifting and ancillary service benefits 
are greater than those of HPWHs. (Northwest Advocates, No. 89 at p. 2)
    Only two commenters--one manufacturer, General Electric (GE), and 
one utility company, Farmers Electric Cooperative--recommended that DOE 
take no action to address the utility company concerns regarding the 
April 2010 final rule energy conservation standard for large-volume 
electric water heaters. (GE, No. 85 at pp. 1-4; Farmers Electric 
Cooperative, No. 2 at p. 1) Farmers Electric Cooperative cited the 
considerable energy conservation benefits and cost savings to consumers 
from heat pump water heaters as a reason for supporting the April 2010 
standard. Farmers Electric Cooperative emphasized that HPWHs reduce 
electricity demand up to three times. GE argued that viable 
alternatives are available (including heat pump water heaters) to meet 
the needs of ETS programs (see additional discussion of alternatives in 
section 0 below). GE also stated that there is no basis for creating a 
new product class for grid interactive water heaters and that doing so 
would impede the development of the market for HPWHs (see additional 
discussion of the potential for a new product class in section 3). GE 
contended that such an approach would also create a loophole that would 
erase some of the consumer and national benefits achieved by the April 
2010 standards, which would be contrary to DOE's goals. (GE, No. 85 at 
p. 2)
    EPRI took no position on whether DOE should take action, but rather 
noted that large-volume grid interactive

[[Page 12974]]

ERWH appear to provide value to both utilities and consumers and stated 
its intent to conduct further research to quantify the value of overall 
system efficiencies of grid-interactive water heaters. (EPRI, No. 74 at 
p. 4) EPRI expressed concerns that without the continued availability 
of large volume electric water heaters beyond April 2015, the industry 
may permanently forego a potential resource to provide grid support, 
especially in light of the integration of renewable electricity 
sources. (EPRI, No. 74 at p. 5)
    The majority of the comments received in support of DOE action 
described the benefits of ETS programs for consumers, utilities, and 
the Nation as the main reason that DOE should take action to preserve 
utility ETS programs. Generally these commenters believe that DOE 
should take some action (generally either establishing a new product 
class or establishing a waiver program) to preserve the ability of 
manufacturers to produce and utility companies to use large-volume 
electric resistance storage water heaters. These stakeholders supported 
action due to the considerable benefits that they believe ETS programs 
provide to consumers, utilities and the electric grid, and due to the 
perceived lack of alternative products capable of meeting the needs of 
ETS programs for electric water heaters. In total, the utility 
respondents indicated that they realize a combined peak load reduction 
of approximately 145 MW,\9\ and a cost savings of approximately 60 
million dollars \10\ in annual savings from being able to utilize more 
efficient, less expensive energy sources. Many utility companies stated 
that participation in ETS programs allows consumers to benefit from 
discounted energy rates and financial incentives such as rebates, 
financing, or free and reduced cost repair and maintenance. (Buckeye, 
No. 3 at p. 2; Codington-Clark, No. 4 at p. 2; Rappahannock, No. 5 at 
p. 2; Northern Plains No. 6 at p. 1; Itasca-Mantrap, No. 7 at p. 1; 
Northwest Iowa Power, No. 8 at p. 2; Barron, No. 11 at p. 1; Clark, No. 
13 at p. 2; Woodbury, No. 14 at p. 2; North West, No. 15 at p. 2; 
Bayfield, No. 16 at p. 2; Union County, No. 17 at p. 3; Allamakee-
Clayton, No. 18 at p. 2; Lower Valley Energy, No. 19 at p. 2; Wabash, 
No. 21 at p. 2; Heartland, No. 22 at p. 2; South Central, No. 23 at p. 
2; Cass County, No. 24 at p. 2; East River, No. 25 at p. 2; Richland, 
No. 26 at p. 2; Lyon-Lincoln, No. 27 at p. 2; Price, No. 30 at p. 2; 
FEM, No. 32 at p. 2; BEC, No. 33 at p. 2; Powell Valley, No. 34 at p. 
2; Dakota Electric, No. 36 at p. 2; Nishnabotna Valley REC, No. 37 at 
p. 2; Iowa Lakes, No. 114 at p. 2; Corn Belt, No. 39 at p. 2; Clay-
Union, No. 40 at p. 2; Great River, No. 41 at p. 2; Central Georgia 
EMC, No. 42 at p. 2; Otter Tail, No. 44 at p. 2; ECSC, No. 45 at p. 2; 
Aiken, No. 46 at p. 1; Connexus, No. 47 at p. 1; Dairyland, No. 48 at 
p. 2; Pee Dee, No. 49 at p. 1; Oconto, No. 50 at p. 2; Wright-Hennepin, 
No. 51 at p. 1; Lynches, No. 53 at p. 2; Horry, No. 57 at p. 2; Pierce 
Pepin, No. 54 at p. 2; Palmetto, No. 56 at p. 2; Fairfield, No. 59 at 
p. 2; Tri-State, No. 61 at p. 2; Santee, No. 62 at p. 2; Newberry, No. 
64 at p. 2; People's Energy, No. 66 at p. 2; Eau Claire, No. 69 at p. 
2; Edisto, No. 70 at p. 2; Coastal, No. 71 at p. 2; Black River, No. 76 
at p. 1; MCEC, No. 77 at p. 2; Blue Ridge, No. 82 at p. 2; NOVEC, No. 
91 at p. 1; Black Hills, No. 96 at p. 2; Verendrye, No. 97 at p. 1; 
Minnesota Valley, No. 101 at p. 1; McLeod, No. 102 at p. 2; Mountain 
Electric, No. 109 at p. 1; Leavenworth-Jefferson, No. 110 at p. 2; 
Meeker, No. 112 at p. 3; Federated, No. 113 at p. 2; Thumb Electric, 
No. 115 at p. 2; South Central Indiana REC, No. 117 at p. 2; Tri-County 
Electric, No. 118 at p. 2; Nobles, No. 119 at p. 2; Lake Region, No. 
120 at p. 2; Sioux Valley, No. 123 at p. 1; East Central, No. 124 at p. 
2; Jackson County, No. 126 at p. 2; Shenandoah Valley, No. 128 at p. 2; 
Adams Electric, No. 129 at p. 1; Adams-Columbia, No. 132 at p. 1; 
Stearns, No. 134 at p. 1; Kandiyohi, No. 138 at p. 1; Habersham, No. 
146 at p. 2; Flint, No. 147 at p. 3; Dakota Valley and Northern Plains, 
No. 149 at p. 2; Aurelia, No. 151 at p. 2; United Electric, No. 153 at 
p. 2).
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    \9\ In instances where both a group of cooperatives and its 
individual members gave figures, only the figures from the group of 
cooperatives were counted to avoid double counting. This total 
includes figures provided by: Humboldt, Heartland, Dairyland, FEM, 
South Central, Federated, Itasca-Mantrap, Northern Plains, 
PowerSouth, Bristol, Otter Tail, Shelby, Habersham, and Flint.
    \10\ In instances where both a group of cooperatives and its 
individual members gave figures, only the figures from the group of 
cooperatives were counted to avoid double counting. This total 
includes figures provided by: Humbolt, Dairyland, East River, ECSC, 
Dakota Electric, ECE, Federated, Goodhue, Mcleod, NIPCO, Buckeye, 
PowerSouth, Wabash, NOVEC, Lower Valley, Cass County, Bristol, Power 
Valley, Central Georgia EMC, Pierce Pepin, Eau Claire, Black Hills, 
Verendrye, Thumb Electric, SCIREMC, Tri-County, Shenandoah Valley, 
Adams, Tri-County, Flint, Dakota Valley and Northern Plains, United 
Electric, Iowa Lakes, Itasca-Mantrap, Kandiyohi, and Minnesota 
Valley Electric.
---------------------------------------------------------------------------

    The joint utility commenters cited a survey conducted by NRECA of 
its cooperatively owned utility members which found that the average 
bill credit for participating customers per water heater is $58 a year. 
In addition to the bill credit, customers are often eligible to receive 
an upfront rebate to offset a portion of the purchase cost of certain 
eligible types of electric water heaters when the customer agrees to 
participate in the direct load control program. The average rebate 
among survey respondents that also offered the bill credits is $230. 
(Joint Utilities, No. 58 at p. 8)
    Through ETS programs for electric water heaters, utilities can 
require customers to heat and store hot water in times when overall 
electric demand and power-supply costs are low, thus lowering peak 
demand when costs are highest. Utilities contended that eliminating 
large volume electric resistance water heaters would reduce or 
eliminate ETS programs and would in turn result in higher electricity 
prices to consumers. (Buckeye, No. 3 at p. 2; Codington-Clark, No. 4 at 
p. 2; Rappahannock, No. 5 at p. 1; Itasca-Mantrap, No. 7 at p. 1; 
Northwest Iowa Power, No. 8 at p. 1; PowerSouth, No. 10 at p. 1; 
Barron, No. 11 at p. 1; Clark, No. 13 at p. 1; Woodbury, No. 14 at p. 
2; North West, No. 15 at p. 1; Bayfield, No. 16 at p. 2; Union County, 
No. 17 at p. 1; Allamakee-Clayton, No. 18 at p. 1; Lower Valley Energy, 
No. 19 at p. 2; AO Smith, No. 20 at p. 1; Wabash, No. 21 at pp.1-2; 
Heartland, No. 22 at p. 1; South Central, No. 23 at p. 2; Cass County, 
No. 24 at p. 1; East River, No. 25 at p. 1; Richland, No. 26 at p. 3; 
Lyon-Lincoln Electric Cooperative, No. 27 at pp. 1-3; Central, No. 28 
at p. 1; Tri-County, No. 29 at p. 1; Price, No. 30 at pp. 1-2; Bristol, 
No. 31 at p. 2; FEM, No. 32 at p. 1; BEC, No. 33 at p. 1; Powell 
Valley, No. 34 at p. 2; Humboldt, No. 35 at p. 1; Dakota Electric, No. 
36 at p. 1; Nishnabotna Valley REC, No. 37 at p. 1; Corn Belt, No. 39 
at p. 1; Clay-Union, No. 40 at p. 1; Great River, No. 41 at p. 1; 
Central Georgia EMC, No. 42 at p. 1; Otter Tail, No. 44 at p. 1; ECSC, 
No. 45 at p. 1; Aiken, No. 46 at p. 1; Connexus, No. 47 at p. 1; 
Dairyland, No. 48 at p. 1; Pee Dee, No. 49 at p. 1; Oconto, No. 50 at 
p. 1; Wright-Hennepin, No. 51 at p. 1; Midland, No. 52 at p. 1; 
Lynches, No. 53 at p. 1; Pierce Pepin, No. 54 at p. 2; Dunn, No. 55 at 
p. 1; Palmetto, No. 56 at p. 1; Horry, No. 57 at p. 1; Joint Utility 
Commenters, No. 58 at p. 4; Fairfield, No. 59 at p. 1; Tri-State, No. 
61 at p. 1; Santee, No. 62 at p. 1; Newberry, No. 64 at p. 1; People's 
Energy, No. 66 at p. 2; MECA, No. 67 at p. 1; Eau Claire, No. 69 at p. 
2; Edisto, No. 70 at p. 1; Coastal, No. 71 at p. 1; York, No. 73 at p. 
1; Black River, No. 76 at p. 1; MCEC, No. 77 at p. 1; Prairie, No. 78 
at p. 1; Blue Ridge, No. 82 at p. 1; Freeborn-Mower, No. 83 at p. 2; 
APPA, No. 84 at p. 3; Nebraska Public Power, No. 88 at p. 1; Clark 
Public Utilities, No. 90 at p. 1; NOVEC, No. 91 at p. 1; Black Hills, 
No. 96 at p. 1;

[[Page 12975]]

Verendrye, No. 97 at p. 1; Dakota Energy, No. 98 at p. 1; Minnesota 
Rural, No. 99 at p. 1; Minnesota Valley, No. 101 at p. 1; McLeod, No. 
102 at p. 1; Lake Country, No. 108 at p. 1; Mountain Electric, No. 109 
at p. 1; Leavenworth-Jefferson, No. 110 at p. 1; Riverland, No. 111 at 
p. 1; Meeker, No. 112 at p. 1; Federated, No. 113 at p. 1; Iowa Lakes, 
No. 114 at p. 1; Thumb Electric, No. 115 at p. 1; South Central Indiana 
REC, No. 117 at p. 1; Tri-County Electric, No. 118 at p. 1; Nobles, No. 
119 at p. 1; Lake Region, No. 120 at p. 1; Sioux Valley, No. 123 at p. 
1; East Central, No. 124 at p. 1; Jackson County, No. 126 at p. 1; Duck 
River, No. 127 at p. 1; Shenandoah Valley, No. 128 at p. 1; Adams, No. 
129 at p. 1; Goodhue, No. 130 at p. 1; Adams-Columbia, No. 132 at p. 1; 
Stearns, No. 134 at p. 1; Kandiyohi, No. 138 at p. 1; Shelby, No. 143 
at p. 1; Beltrami, No. 145 at p. 1: Habersham, No. 146 at p. 1; Flint, 
No. 147 at p. 2; Dakota Valley and Northern Plains, No. 149 at p. 1; 
Aurelia, No. 151 at p. 2; United Electric, No. 153 at p. 1)
    Many utilities stated that ETS water heating programs have become a 
popular low-cost option for their members who do not have access to 
natural gas, as it allows them to heat water using electricity at lower 
cost. (Itasca-Mantrap, No. 7 at p. 2; Northwest Iowa Power, No. 8 at p. 
2; Barron, No. 11 at p. 1; Clark, No. 13 at p. 2; Woodbury, No. 14 at 
p. 2; North West, No. 15 at p. 1; Bayfield, No. 16 at p. 2; Cass 
County, No. 24 at p. 2. Price, No. 30 at p. 2; Dakota Electric, No. 36 
at p. 5; Nishnabotna Valley REC, No. 37 at p. 2; Great River, No. 41 at 
p. 2; Otter Tail, No. 44 at p. 2; Dairyland, No. 48 at p. 2; Wright-
Hennepin, No. 51 at p. 2; Pierce Pepin, No. 54 at p. 2; Dunn, No. 55 at 
p. 2; People's Energy, No. 66 at p. 2; Eau Claire, No. 69 at p. 1; 
Freeborn-Mower, No. 83 at p. 2; Minnesota Rural, No. 99 at p. 1; 
Minnesota Valley, No. 101 at p. 1; McLeod, No. 102 at p. 1; Riverland, 
No. 111 at p. 2; Meeker, No. 112 at p. 2; Federated, No. 113 at p. 2; 
Lake Region, No. 120 at p. 1; Goodhue, No. 130 at p. 1; Stearns, No. 
134 at p. 1; Kandiyohi, No. 138 at p. 1)
    Some utilities also stated that their ETS programs provide energy 
savings benefits because they serve as a tool to educate their members 
to help them understand and participate in programs that save energy 
and money for all members. (Union County, No. 17 at p. 1; Humboldt, No. 
35 at p. 1; Dakota Electric, No. 36 at p. 2; Corn Belt, No. 39 at p. 2; 
Oconto, No. 50 at p. 2; Lake Country, No. 108 at p. 1; Jackson County, 
No. 126 at p. 2; Duck River, No. 127 at p. 2) Utilities stated that 
their ETS programs promote energy conservation because the amount of 
energy used for domestic hot water needs is determined more by the 
amount of water used than by the efficiency of the water heater, and 
customers who know they have limits on their hot water capacity tend to 
conserve hot water. (Rappahannock, No. 5 at p. 2; Northwest Iowa Power, 
No. 8 at p. 2; Woodbury, No. 14 at p. 2; North West, No. 15 at p. 1; 
Dakota Electric, No. 36 at p. 2; Nishnabotna Valley REC, No. 37 at p. 
2;Otter Tail, No. 44 at p. 3; Dairyland, No. 48 at p. 6, Minnesota 
Valley, No. 101 at p. 2; McLeod, No. 102 at p. 2; Meeker, No. 112 at p. 
1; South Central Indiana REC, No. 117 at p. 1; Lake Region, No. 120 at 
p. 2; Goodhue, No. 130 at p. 1; Stearns, No. 134 at p. 2; Kandiyohi, 
No. 138 at p. 2; Aurelia, No. 151 at p. 2)
    Dairyland commented that studies indicate that participation in 
certain demand response programs can also result in an energy 
conservation effect. Specifically, Dairyland cited a 2005 study \11\ of 
more than 200 demand response programs which found that dynamic pricing 
programs resulted in average total energy savings of four percent. The 
study also found that programs that combine dynamic pricing with 
automated control of consumer devices produce an even greater energy 
conservation effect, because according to the study, dynamic pricing 
programs cause participants to have a higher awareness of how they use 
energy, which, in turn, results in lower consumption. (Dairyland, No. 
48 at p. 6)
---------------------------------------------------------------------------

    \11\ Chris King and Dan Delurey, Efficiency and Demand Response: 
Twins, Siblings, or Cousins? Analyzing the conservation effects of 
demand response programs. Public Utilities Fortnightly, March 2005. 
Available at: http://www.demandresponsecommittee.org/resource-1009/efficiency%20and%20demand%20response%20puf%2005%2003.pdf.
---------------------------------------------------------------------------

    Utilities also described how the utilities themselves benefit from 
an increased ability to manage peak load. Many utility companies 
indicated that the reduction or elimination of ETS programs would force 
utilities to spend more money on meeting increased peak generation 
needs. (Rappahannock, No. 5 at p. 2; PowerSouth, No. 10 at p. 1; Clark, 
No. 13 at p. 2; Bayfield, No. 16 at p. 2; Union County, No. 17 at p. 3; 
Lower Valley Energy, No. 19 at p. 2; Wabash, No. 21 at p. 2; Heartland, 
No. 22 at p. 2; Cass County, No. 24 at p. 3; East River, No. 25 at p. 
1; Central, No. 28 at p. 2; Tri-County, No. 29 at p. 2; Price, No. 30 
at p. 2; Bristol, No. 31 at p. 2; FEM, No. 32 at p. 2; BEC, No. 33 at 
p. 2; Central Georgia EMC, No. 42 at p. 2; ECSC, No. 45 at p. 2; Aiken, 
No. 46 at p. 2; Dairyland, No. 48 at pp. 2-3; Oconto, No. 50 at p. 2; 
Wright-Hennepin, No. 51 at p. 2; Lynches, No. 53 at p. 2; Pierce Pepin, 
No. 54 at p. 2; Dunn, No. 55 at p. 2; Palmetto, No. 56 at p. 2; Horry, 
No. 57 at p. 1; Fairfield, No. 59 at p. 2; Tri-State, No. 61 at p. 5; 
Santee, No. 62 at p. 2; Newberry, No. 64 at p. 2; People's Energy, No. 
66 at p. 2; Eau Claire, No. 69 at p. 2; Edisto, No. 70 at p. 2; 
Coastal, No. 71 at p. 2; York, No. 73 at p. 2; Black River, No. 76 at 
p. 2; MCEC, No. 77 at p. 2; Blue Ridge, No. 82 at p. 2; Freeborn-Mower, 
No. 83 at p. 2; APPA, No. 84 at p. 2; Clark Public Utilities, No. 90 at 
p. 1; Mountain Electric, No. 109 at p. 1; Tri-County Electric, No. 118 
at p. 2; Sioux Valley, No. 123 at p. 2; East Central, No. 124 at p. 1; 
Jackson County, No. 126 at p. 2; Habersham, No. 146 at p. 1; Flint, No. 
147 at p. 3)
    A number of utility companies also argued that ETS programs benefit 
the electric grid by improving reliability and reducing system losses. 
Commenters stated that these effects are the result of improved 
utilization of the generation and transmission system infrastructure 
and improved system load factors. (Buckeye, No. 3 at pp. 1-3; 
Codington-Clark, No. 4 at p. 1; Itasca-Mantrap, No. 7 at p. 1; 
PowerSouth, No. 10 at p. 2; Union County, No. 17 at p. 3; Allamakee-
Clayton, No. 18 at p. 2, Lower Valley Energy, No. 19 at p. 1-2; Wabash, 
No. 21 at p. 2; Heartland, No. 22 at p. 1; South Central, No. 23 at p. 
1; Cass County, No. 24 at p. 2; East River, No. 25 at p. 2; Lyon-
Lincoln, No. 27 at p. 1-2; Central, No. 28 at p. 1; Tri-County, No. 29 
at p. 2; Bristol, No. 31 at p. 2; FEM, No. 32 at p. 1; BEC, No. 33 at 
p. 1; Powell Valley, No. 34 at p. 2; Dakota Electric, No. 36 at p. 3; 
Corn Belt, No. 39 at p. 2; Dairyland, No. 48 at p. 2; Clay-Union, No. 
40 at p. 1; Great River, No. 41 at p. 1; No. 48 at p. 3; Central 
Georgia EMC, No. 42 at p. 1; Otter Tail, No. 44 at p. 2; ECSC, No. 45 
at p. 1; Aiken, No. 46 at p. 1; Connexus, No. 47 at p. 2; Pee Dee, No. 
49 at p. 1; Oconto, No. 50 at p. 2; Lynches, No. 53 at p. 1; Palmetto, 
No. 56 at p. 2; Horry, No. 57 at p. 1; Joint Utility Commenters, No. 58 
at p. 17; Fairfield, No. 59 at p. 2; NEMA, No. 60 at p. 2; Tri-State, 
No. 61 at p. 5; Santee, No. 62 at p. 2; Newberry, No. 64 at p. 1; MECA, 
No. 67 at p. 1; Edisto, No. 70 at p. 1; Coastal, No. 71 at p. 1; York, 
No. 73 at p. 1; Black River, No. 76 at p. 1; MCEC, No. 77 at p. 2; 
Prairie, No. 78 at p. 1; ALP, No. 79 at p. 1; Blue Ridge, No. 82 at p. 
2; NOVEC, No. 91 at p. 1; Wright-Hennepin, No. 51 at p. 2; Black Hills, 
No. 96 at p. 1; Verendrye, No. 97 at p. 1; Dakota Energy, No. 98 at p. 
1; Lake Country, No. 108 at p. 1; Mountain

[[Page 12976]]

Electric, No. 109 at p. 1; Meeker, No. 112 at p. 1; Federated, No. 113 
at p. 1; Iowa Lakes, No. 114 at p. 1; Thumb Electric, No. 115 at p. 1; 
South Central Indiana REC, No. 117 at p. 1; Tri-County Electric, No. 
118 at p. 1; Nobles, No. 119 at p. 1; Lake Region, No. 120 at p. 1; 
Sioux Valley, No. 123 at p. 1; Jackson County, No. 126 at p. 2; Duck 
River, No. 127 at p. 2; Shenandoah Valley, No. 128 at p. 1; Adams, No. 
129 at p. 1; Senator John Thune, No. 137 at p. 1; Shelby, No. 143 at p. 
1; Habersham, No. 146 at p. 1; Flint, No. 147 at p. 3; Dakota Valley 
and Northern Plains, No. 149 at p. 1; United Electric, No. 153 at p. 1) 
Several utilities also mentioned that their load control program can 
help facilitate the restoration of electric service during extreme 
weather emergencies. (Powell Valley, No. 34 at p. 2; Blue Ridge, No. 82 
at p. 1; NOVEC, No. 91 at p. 2; United Electric, No. 153 at p. 1)
    According to utility companies, the reduction in energy usage 
during peak times from ETS programs allows the utilities to increase 
utilization of more efficient generation facilities while 
simultaneously providing a method of integrating intermittent renewable 
energy sources into the electric grid. (Central Georgia EMC, No. 42 at 
p. 2; Codington-Clark, No. 4 at p. 2; Itasca-Mantrap, No. 7 at p. 1; 
Northwest Iowa Power, No. 8 at p. 2; Barron, No. 11 at p. 1; Clark, No. 
13 at p. 1; Woodbury, No. 14 at p. 2; North West, No. 15 at p. 2; 
Bayfield, No. 16 at p. 1; Allamakee-Clayton, No. 18 at p. 2; Lower 
Valley Energy, No. 19 at p. 2; AO Smith, No. 20 at p. 1; Wabash, No. 21 
at p. 2; South Central, No. 23 at p. 2; East River, No. 25 at p. 2; 
Richland, No. 26 at p. 3; Lyon-Lincoln Electric Cooperative, No. 27 at 
p. 2; Price, No. 30 at p. 1; BEC, No. 33 at p. 3; Humboldt, No. 35 at 
p. 1; Dakota Electric, No. 36 at p. 2; Nishnabotna Valley REC, No. 37 
at p. 2; Great River, No. 41 at p. 3; Otter Tail, No. 44 at p. 3; 
Connexus, No. 47 at p. 1; Dairyland, No. 48 at p. 3; Midland, No. 52 at 
p. 2; Pierce Pepin, No. 54 at p. 2; Dunn, No. 55 at p. 2; Tri-State, 
No. 61 at p. 2; People's Energy, No. 66 at p. 2; MECA, No. 67 at p. 1; 
Eau Claire, No. 69 at p. 1; EPRI, No. 74 at p 2-4; Prairie, No. 78 at 
p. 2; Freeborn-Mower, No. 83 at p. 2; Nebraska Public Power, No. 88 at 
p. 1; Corn Belt, No. 39 at p. 2; Clay-Union, No. 40 at p. 2; Wright-
Hennepin, No. 51 at p. 2; HTP, No. 87 at p. 1; NOVEC, No. 91 at p. 4; 
Black Hills, No. 96 at p. 2; Minnesota Rural, No. 99 at p. 1; Minnesota 
Valley, No. 101 at p. 1; McLeod, No. 102 at p. 1; Lake Country, No. 108 
at p. 1; Riverland, No. 111 at p. 1; Meeker, No. 112 at p. 2; 
Federated, No. 113 at p. 2; Nobles, No. 119 at p. 1; Lake Region, No. 
120 at p. 1; Congressman Dan Burton, No. 122 at p. 1; East Central, No. 
124 at p. 2; Goodhue, No. 130 at p. 2; Stearns, No. 134 at p. 2; 
Senator John Thune, No. 137 at p. 1; Beltrami, No. 145 at p. 1; 
Habersham, No. 146 at p. 3; Aurelia, No. 151 at p. 2)
    After considering the information presented by stakeholders 
regarding the benefits of ETS programs to consumers, utilities, and the 
Nation, DOE is persuaded by the information submitted by the utility 
companies given their expertise in administering demand response 
programs, regarding the benefits of ETS programs. DOE believes that the 
evidence presented indicates that these programs provide a number of 
valuable benefits to consumers, utilities, and the Nation. As a result, 
DOE agrees with the majority of commenters that action should be taken 
to mitigate the impacts of the April 2010 final rule standard levels on 
utility ETS programs in order to help preserve these benefits, if no 
practical alternatives exist to allow for the continuation of ETS 
programs in the absence of large-volume ERWHs. Accordingly, DOE 
considered whether practical alternatives exist that would allow the 
existing ETS programs to continue to be effective despite the potential 
unavailability of large volume ERWHs. DOE's consideration of this 
issue, as well as comments received, are discussed in section 0.
2. Alternatives to Large-Volume Electric Resistance Water Heaters To 
Serve the Needs of ETS Programs
    DOE recognizes that participants in ETS programs need more hot 
water storage capacity than they would require absent their 
participation in such programs. However, as noted in the June 2012 RFI, 
DOE believes that there are potential alternatives that may be able to 
provide a comparable amount of water storage capacity required for 
these programs. These potential alternatives include large-volume HPWHs 
and multiple (two or more) small-volume ERWHs. A number of stakeholders 
argued that heat pump water heaters and multiple small-volume water 
heaters are not well-suited for ETS programs and would not be a viable 
replacement for large-volume ERWHs in these applications. The points 
that the commenters raised are discussed below.
    Many utility company commenters emphasized that managing a load 
control program is a balance of controlling load while maintaining 
customer satisfaction. Utilities stated that large volume ERWHs are 
required to ensure ETS program participants have enough hot water and 
remain satisfied with the program. These commenters asserted that 
smaller tanks reduce the amount of storage capacity and thus require 
more recharge time between control periods to ensure customers have 
enough hot water. Conversely, large capacity water heaters allow 
consumers to have enough hot water during control periods. (Buckeye, 
Inc. No. 3 at p. 1; Codington-Clark, No. 4 at p. 2; Northwest Iowa 
Power, No. 8 at p. 2; PowerSouth, No. 10 at p. 2; Barron, No. 11 at p. 
1; Clark, No. 13 at p. 1; Woodbury, No. 14 at p. 1; North West, No. 15 
at p. 2; Bayfield, No. 16 at p. 2; Union County, No. 17 at p. 1; South 
Central, No. 23 at p. 1; Cass County, No. 24 at p. 3; East River, No. 
25 at p. 2; Richland, No. 26 at p. 1; Lyon-Lincoln Electric 
Cooperative, No. 27 at p. 2; Price, No. 30 at p. 1; Bristol, No. 31 at 
p. 2; FEM, No. 32 at p. 2; Nishnabotna Valley REC, No. 37 at p. 2; Corn 
Belt, No. 39 at pp. 2-3; Clay-Union, No. 40 at p. 2; Great River, No. 
41 at p. 1; Central Georgia EMC, No. 42 at p. 2; Otter Tail, No. 44 at 
p. 2; Wright-Hennepin, No. 51 at p. 1; Pierce Pepin, No. 54 at p. 2; 
Dunn, No. 55 at p. 1; Horry, No. 57 at p. 2; Fairfield, No. 59 at p. 2; 
Tri-State, No. 61 at p. 3; People's Energy, No. 66 at p. 2; Eau Claire, 
No. 69 at p. 1; Prairie, No. 78 at p. 2; Freeborn-Mower, No. 83 at p. 
2; Black Hills, No. 96 at p. 2; Riverland, No. 111 at p. 1; Meeker, No. 
112 at p. 1; Tri-County Electric, No. 118 at p. 2; Nobles, No. 119 at 
p. 2; Sioux Valley, No. 123 at p. 2; East Central, No. 124 at p. 2; 
Jackson County, No. 126 at p. 1; Goodhue, No. 130 at p. 1;Aurelia, No. 
151 at p. 2; United Electric, No. 153 at p. 2)
    A number of parties stated that the heat pump unit is, by itself, 
incapable of heating water to the temperatures needed for ETS programs. 
(PowerSouth, No. 10 at p. 3; Barron, No. 11 at p. 2; Clark, No. 13 at 
p. 2; Bayfield, No. 16 at p. 2; Allamakee-Clayton, No. 18 at p. 2; A. 
O. Smith, No. 20 at p. 2; Richland, No. 26 at p. 3; Price, No. 30 at p. 
2; Bristol, No. 31 at p. 1; Great River, No. 41 at p. 4; Dairyland, No. 
48 at p. 4; Pierce Pepin, No. 54 at p. 2; Dunn, No. 55 at p. 2; Joint 
Utilities, No. 58 at p. 13; People's Energy, No. 66 at p. 2; Eau 
Claire, No. 69 at p. 2; Vaughn, No. 72 at p. 6; ALP, No. 79 at p. 1; 
Freeborn-Mower, No. 83 at p. 2; APPA, No. 84 at p. 2; Clark Public 
Utilities, No. 90 at p. 1; NOVEC, No. 91 at p. 4; Riverland, No. 111 at 
p. 2; Adams-Columbia, No. 132 at p. 2; Habersham, No. 146 at p. 3)
    GE and the Northwest Advocates comment noted that using the 
electric resistance elements of an HPWH, it is possible to reach higher 
temperatures as

[[Page 12977]]

well as heat the water faster. (GE, No. 85 at p. 3; Northwest 
Advocates, No. 89, at p. 4) AO Smith commented that not all HPWHs have 
electric resistance elements that are large enough to allow them to 
achieve the necessary temperatures for ETS programs. But AO Smith also 
stated that even for HPWHs that do have a resistance element that is 
large enough to achieve the needed tank temperature, the unit would be 
operating like a very expensive ERWH. (Rappahannock, No. 5 at p. 2; A. 
O. Smith, No. 20 at p. 2; Great River, No. 41 at p. 4; Dairyland, No. 
48 at p. 4; Joint Utilities, No. 58 at p. 16; NEMA, No. 60 at p. 4; 
EPRI, No. 74 at p. 3; NOVEC, No. 91 at p. 4; Adams-Columbia, No. 132 at 
p. 2; Habersham, No. 146 at p. 3; Dakota Valley and Northern Plains, 
No. 149 at p. 1; ECE, No. 124 at p. 3)
    DOE believes that most HPWHs are technically capable of heating 
water to the temperatures needed for ETS programs, but would need to 
use the electric resistance elements in order to heat the tank to 
temperatures above the maximum temperature limits of current HPWH 
refrigerants. The need to use the electric resistance element would 
lower overall efficiency and reduce the energy and cost savings that 
would otherwise result from the use of a HPWH. DOE has not attempted to 
quantify such energy and cost savings differences in this NPRM, but 
could do so in evaluating specific waiver requests.
    Several interested parties noted that use of HPWHs in ETS programs 
would lead to deterioration of the compressor due to frequent on/off 
cycling for demand response purposes, and the frequent on/off cycle 
would also reduce the efficiency of the HPWH. (PowerSouth, No. 10 at p. 
3; Barron, No. 11 at p. 2; Clark, No. 13 at p. 2; Bayfield, No. 16 at 
p. 2; Allamakee-Clayton, No. 18 at p. 2; Richland, No. 26 at p. 3; Tri-
Country, No. 29 at p. 2; Price, No. 30 at p. 2; Powell Valley, No. 34 
at p. 3; Great River, No. 41 at p. 3; Dairyland, No. 48 at p. 4; Pierce 
Pepin, No. 54 at p. 2; Dunn, No. 55 at p. 2; Joint Utilities, No. 58 at 
p. 14; NEMA, No. 60 at p. 3; People's Energy, No. 66 at p. 2; Eau 
Claire, No. 69 at p. 2; EPRI, No. 74 at p. 3; ALP, No. 79 at p. 1; 
Freeborn-Mower, No. 83 at p. 2; APPA, No. 84 at p. 2; Clark Public 
Utilities, No. 90 at p. 1; NOVEC, No. 91 at p. 4; Riverland, No. 111 at 
p. 2; Federated, No. 113 at p. 2; Habersham, No. 146 at p. 3) EPRI 
stated that using variable speed compressors in HPWHs is a solution to 
the start-stop operation problem, but additional research is needed in 
order to understand whether this HPWH design can yield efficiency gains 
and emerge as a cost-effective solution for customers and the grid. 
(EPRI, No. 74 at p. 3)
    DOE understands that while a HPWH might cycle frequently in some 
ETS applications, the minimum run times for existing HPWHs are 
sufficiently long (30 minutes) that on/off cycling is unlikely to lead 
to deterioration of the compressor. DOE agrees that variable speed 
compressors may be useful, but notes that the benefits of this 
technology have not yet been demonstrated and the cost of this option 
is still uncertain.
    Several stakeholders stated that using a vapor-compression cycle to 
heat water increases operating time compared to electric resistance 
heating, so there would be a smaller time window for load reduction and 
less opportunity for load shifting. (Buckeye, No. 3 at p. 2; Codington-
Clark, No. 4 at p. 2; Bayfield, No. 16 at p. 2; Union County, No. 17 at 
p. 3; A. O. Smith, No. 20 at p. 4; Cass County, No. 24 at p. 4; East 
River, No. 25 at p. 2; Richland, No. 26 at p. 3; Lyon-Lincoln, No. 27 
at p. 2; Corn Belt, No. 39 at p. 3; Clay-Union, No. 40 at p. 2; Great 
River, No. 41 at p. 3; ECSC, No. 45 at p. 3; Dairyland, No. 48 at p. 4; 
Pee Dee, No. 49 at p. 2; Lynches, No. 53 at p. 3; Pierce Pepin, No. 54 
at p. 2; Palmetto, No. 56 at p. 2; Joint Utilities, No. 58 at p. 16; 
Fairfield, No. 59 at p. 3; NEMA, No. 60 at p. 3; York, No. 73 at p. 4; 
EPRI, No. 74 at p. 4; Black River, No. 76 at p. 2; Prairie, No. 78 at 
p. 2; ALP, No. 79 at p. 1; Blue Ridge, No. 82 at p. 2; Freeborn-Mower, 
No. 83 at p. 2; APPA, No. 84 at p. 2; Clark Public Utilities, No. 90 at 
p. 1; NOVEC, No. 91 at p. 4; Nobles, No. 119 at p. 2; Adams-Columbia, 
No. 132 at p. 2; Habersham, No. 146 at p. 3; ECE, No. 124 at p. 2; FEM, 
No. 32 at p. 2; Iowa Lakes, No. 114 at p. 3; Aiken, No. 46 at p. 2; 
Itasca-Mantrap, No. 7 at p. 2)
    DOE agrees that HPWHs have slower recovery when operating in heat 
pump only mode, but believes that this issue could be overcome by 
utilizing the backup electric resistance elements or by using water 
heaters with even larger rated volumes than currently used in ETS 
programs. However, DOE notes that if prolonged operation using electric 
resistance elements is required, the overall efficiency of the water 
heater will be lowered.
    Several parties stated that HPWHs have additional total installed 
cost, which makes them less economically feasible for ETS programs. 
(PowerSouth, No. 10 at p. 3; Bayfield, No. 16 at p. 2; Cass County, No. 
24 at p. 5; East River, No. 25 at p. 2; Richland, No. 26 at p. 2; Tri-
Country, No. 29 at p. 3; BEC, No. 33 at p. 3; Dakota Electric, No. 36 
at p. 4; Otter Tail, No. 44 at p. 3; ECSC, No. 45 at p. 3; Connexus, 
No. 47 at p. 1; Dairyland, No. 48 at p. 5; Pee Dee, No. 49 at p. 2; 
Wright-Hennepin, No. 51 at p. 1; Lynches, No. 53 at p. 3; Palmetto, No. 
56 at p. 2; Horry, No. 57 at p. 4; Joint Utilities, No. 58 at p. 14; 
Fairfield, No. 59 at p. 3; Newberry, No. 64 at p. 3; Edisto, No. 70 at 
p. 3; Coastal, No.71 at p. 3; Vaughn, No. 72 at p. 2 to 3; York, No. 73 
at p. 2; Black River, No.76 at p. 3; MCEC, No. 77 at p. 2; Blue Ridge, 
No. 82 at p. 2; Clark Public Utilities, No. 90 at p. 1; NOVEC, No. 91 
at p. 4; Verendrye, No. 97 at p. 1; Dakota Energy, No. 98 at p. 1; 
Minnesota Rural, No. 99 at p. 1; Mountain Electric, No. 109 at p. 1; 
Leavenworth-Jefferson, No. 110 at p. 1; Meeker, No. 112 at p. 2; Iowa 
Lakes, No. 114 at p. 2; Federated, No. 115 at p. 2; Thumb Electric, No. 
115 at p. 1; SCI REMC, No. 117 at p. 1; Tri-County, No. 118 at p. 1; 
Nobles, No. 119 at p. 1; LREC, No. 120 at p. 1; Sioux Valley, No. 123 
at p. 1; Jackson County, No. 126 at p. 2; Adams-Columbia, No. 132 at p. 
2; People's Energy, No. 142 at p. 1; Beltrami, No. 145 at p. 1; 
Habersham, No. 146 at p. 3; Flint, No. 147 at p. 1; Aurelia, No. 151 at 
p. 1; United Electric, No. 153 at p. 1; ECE, No. 124 at p. 2; Iowa 
Lakes, No. 114 at p. 3; Aiken, No. 46 at p. 2; Santee, No. 62 at p. 1)
    DOE agrees that a large HPWH would have much higher installed cost 
than a large ERWH. The extent to which this would be balanced by lower 
operating costs would vary among ETS programs. DOE notes this increase 
in first installed cost could have an adverse impact on utility ETS 
programs, in which customer participation is voluntary, because a 
utility customer may be less willing to take on the additional 
installed cost of a HPWH to participate in the program.
    Several of the interested parties stated that HPWHs require larger 
installation space and larger surrounding air volume. Some of the 
parties also stated that such requirements could force the consumer to 
switch to two smaller ERWHs, which would lead to increased costs for 
purchase and maintenance (as compared to a large-volume ERWH) and lower 
efficiency. (Rappahannock, No. 5 at p. 2; PowerSouth, No. 10 at p. 3; 
Woodbury, No. 14 at p. 1; North West, No. 15 at p. 1; Bayfield, No. 16 
at p. 2; Union County, No. 17 at p. 3; Cass County, No. 24 at p. 3; 
Lyon-Lincoln, No. 27 at p. 2; Tri-Country, No. 29 at p. 4; Price, No. 
30 at p. 2; Bristol, No. 31 at p. 1; BEC, No. 33 at p. 2; Dakota 
Electric, No. 36 at p. 2; Corn Belt, No. 39 at p. 3; Clay-Union, No. 40 
at p. 2; Otter Tail, No. 44 at p. 3; ECSC, No. 45 at p. 3; Connexus, 
No. 47 at p. 1; Pee Dee, No. 49 at p. 2; Lynches, No. 53 at p. 3; Dunn, 
No. 55 at p. 2; Palmetto, No.

[[Page 12978]]

56 at p. 2; Horry, No. 57 at p. 4; Joint Utilities, No. 58 at p. 19; 
Fairfield, No. 59 at p. 3; NEMA, No. 60 at p. 4; Newberry, No. 64 at p. 
2; Eau Claire, No. 69 at p. 3; Edisto, No. 70 at p. 3; Coastal, No. 71 
at p. 3; Vaughn, No. 72 at p. 5; York, No. 73 at p. 2; Black River, No. 
76 at p. 3; MCEC, No. 77 at p. 2; Blue Ridge, No. 82 at p. 2; Freeborn-
Mower, No. 83 at p. 2; APPA, No. 84 at p. 2; Clark Public Utilities, 
No. 90 at p. 1; NOVEC, No. 91 at p. 5; Minnesota Valley, No. 101 at p. 
1; Federated, No. 113 at p. 2; Tri-County, No. 118 at p. 2; Nobles, No. 
119 at p. 2; Shenandoah Valley, No. 128 at p. 2; Goodhue, No. 130 at p. 
1; Adams-Columbia, No. 132 at p. 2; Stearns, No. 134 at p. 1; 
Habersham, No. 146 at p. 3; Flint, No. 147 at p. 1; Aurelia, No. 151 at 
p. 1; McLeod, No. 102 at p. 1; ECE, No. 124 at p. 2; Kandiyohi, No. 
138-141 at p. 1; FEM, No. 32 at p. 2; Nishnabotna Valley REC, No. 37 at 
p. 1; Iowa Lakes, No. 114 at p. 3; Aiken, No. 46 at p. 2; Santee, No. 
62 at p. 2) AO Smith stated that using two smaller water heaters in 
place of one large water heater for ETS programs is technologically 
achievable, but it would increase the complexity and cost of the 
control scheme and installation. (AO Smith, No. 20 at p. 3) Several 
utilities noted that a large portion of consumers enrolled in their ETS 
programs live in mobile homes, which are particularly challenging to 
retrofit with HPWHs due to space constraints. (Tri-Country, No. 29 at 
p. 2; BEC, No. 33 at p. 3; ECSC, No. 45 at p. 3; Pee Dee, No. 49 at p. 
2; Lynches, No. 53 at p. 3; Palmetto, No. 56 at p. 2; Fairfield, No. 59 
at p. 3; Newberry, No. 64 at p. 3; Edisto, No. 70 at p. 3; Coastal, No. 
71 at p. 3; York, No. 73 at p. 2; Black River, No. 76 at p. 3; MCEC, 
No. 77 at p. 3; Blue Ridge, No. 82 at p. 2; Adams-Columbia, No. 132 at 
p. 2; Aiken, No. 46 at p. 2; Santee, No. 62 at p. 3)
    DOE believes that the use of two smaller water heaters in place of 
one large water heater for ETS programs could be a viable option in 
some cases. However, DOE agrees that there are situations where a 
consumer in an ETS program would have difficulty physically 
accommodating a HPWH or multiple smaller water heaters, resulting in 
higher installation expenses.
    The Northwest Advocates commented that HPWHs can provide the same 
load shifting and ancillary services (load following and regulation) 
and benefits that are provided by ERWHs. They also stated that with 
additional programming (and no additional material costs) the HPWH 
controls can be adapted to provide ETS capabilities and the same 
functionality as resistance-only grid-interactive water heaters. 
(Northwest Advocates, No. 89, at p. 2) Similarly, GE argued that 
because all HPWHs use electronic controls as opposed to the 
electromechanical controls found on most standard electric water 
heaters, these products can much more easily interact with the grid and 
provide simpler ETS capability. (GE, No. 85 at p. 2) GE stated that the 
concerns that HPWHs will not be able to fill the same role as large 
volume resistance water heaters are not technologically justified. GE 
added that new larger capacity HPWH models may need to be produced, but 
there is no inherent reason why that cannot be done. (GE, No. 85 at p. 
3)
    DOE believes that from a technical perspective HPWHs could 
substitute for ERWHs in ETS programs. Future improvements in HPWH 
design such as variable speed compressors, use of higher temperature 
refrigerants and refinements to controls may improve HPWHs' suitability 
for use in ETS programs. DOE also believes that multiple smaller ERWHs 
are a feasible alternative to a large-volume ERWH, but may lower the 
system efficiency of the water heating process and may not be an option 
in space constrained installations. Additionally, DOE believes that the 
installed cost of currently available HPWH models or multiple small-
volume ERWHs instead of a single large-volume ERWH and the need to 
often operate HPWHs in electric resistance mode to serve the demands of 
ETS programs could limit the attractiveness of participation in ETS 
programs. Additional analysis and data would be needed to determine the 
precise effect of unavailability of large-volume ERWHs on participation 
in ETS programs.
    Based on the above considerations, DOE concludes that products that 
are currently available on the market that meet the April 2010 standard 
levels may not be practical to fulfill the needs of utility ETS 
programs. Therefore, as discussed immediately below, DOE considered two 
approaches--establishing a separate product class and establishing a 
waiver process. See sections 3 and 0, respectively.
3. Potential for a Separate Product Class for ``Grid-Interactive'' 
Electric Storage Water Heaters
    Twenty-three utility companies and associations, four 
manufacturers, one trade association (NEMA), and three U.S. Congressmen 
recommended that DOE establish a separate product class for grid 
interactive water heaters. (Itasca-Mantrap No. 7 at p. 2; Barron, No. 
11 at p. 2; Clark, No. 13 at p. 2; Bayfield, No. 16 at p. 2; East 
River, No. 25 at p. 3; Richland, No. 26 at p. 3; Lyon-Lincoln Electric 
Cooperative, No. 27 at p. 3; Price, No. 30 at p. 2; Dakota Electric, 
No. 36 at p. 5; Corn Belt, No. 39 at p. 3; Otter Tail, No. 44 at p. 4; 
Dairyland, No. 48 at p. 6; Pierce Pepin, No. 54 at p. 2; Dunn, No. 55 
at p. 2; Joint Utilities, No. 58 at p. 4; People's Energy, No. 66 at p. 
2; MECA, No. 67 at p. 1; Eau Claire, No. 69 at p. 3; ALP, No. 79 at p. 
1; Freeborn-Mower, No. 83 at pp. 2-3; APPA, No. 84 at p. 3; HTP, No. 87 
at p. 1; Nebraska Public Power, No. 88 at p. 1; Rheem, No. 86 at p. 2; 
Giant Factories, No. 65 at p. 2; AO Smith \12\, No. 20 at p. 2; NEMA, 
No. 60 at p. 4; Congressman Todd Rokita, No. 93 at p. 1; Riverland, No. 
111 at p. 2; Congressman Dan Burton, No. 122 at p. 1; Senator John 
Thune, No. 137 at p. 1)
---------------------------------------------------------------------------

    \12\ AO Smith's comment stated that they ``would not object to'' 
a new product class. DOE interprets this as implying support for 
this approach because AO Smith also indicated that it supports the 
continued existence of electric resistance storage water heaters 
with storage volumes above 55 gallons, disagreed with all of the 
other options listed, and did not offer an alternative.
---------------------------------------------------------------------------

    The Joint Utilities urged the Secretary to use the authority 
granted pursuant to 42 U.S.C. 6295(o)(2)(A) to develop a new standard 
for large-volume electric resistance water heaters that interact with 
the grid. Specifically, the Joint Utilities believe that the grid 
connectivity feature of certain large volume ERWHs differentiates them 
from the broader ERWH product class and warrants a separate 
classification and standard. (Joint Utilities, No. 58 at p. 4) The 
Joint Utilities further argued that grid-interactive water heaters are 
clearly distinguishable from water heaters that are not responsive to 
grid signals, and proposed a definition (discussed below) that would 
distinguish those products from other water heaters. The Joint 
Utilities also stated that grid-interactive water heaters provide 
uninterrupted hot water to consumers, large amounts of energy storage 
during times when there is an excess of unused, available renewable 
energy, the ability to reduce load on the grid to enhance reliability 
or reduce congestion on the transmission grid, and reliability services 
in the form of frequency regulation or other grid ancillary services, 
all of which make this specific group of water heaters different from 
the general class of electric water heaters, and thus deserving of a 
new classification pursuant to Section 6295 (o)(2)(A). (Joint 
Utilities, No. 58 at p. 17)
    The Joint Utilities proposed that a ``Grid-Interactive Water 
Heater'' be defined as a separate product class consisting of products 
with the following characteristics: (1) A storage

[[Page 12979]]

tank greater than 55 gallons; (2) a control device capable of receiving 
communication from a grid operator, electric utility, or other energy 
services company that provides real-time control of the heating 
element; (3) evidence that the appliance owner is enrolled in a grid 
operator, electric utility, or other energy services company program to 
provide demand response or related interactive electric grid services; 
(4) a thermostatic mixing valve if the water heater is capable of 
heating water greater than 120 degrees Fahrenheit. (Joint Utilities, 
No. 58 at pp. 17-18)
    Further, the Joint Utilities supplemental comment suggested that if 
``grid interactive water heaters'' were established as a separate 
product class and required ongoing reporting from utilities in order to 
track manufacturer sales versus utility installations, this should be 
done through the addition of a single question onto the Energy 
Information Administration (EIA) forms EIA-861 and EIA-861S in order to 
minimize burdens on utilities and DOE/EIA. The Joint Utility commenters 
proposed adding the following question: ``If you have a demand side 
management (DSM) program for grid-interactive water heaters (as defined 
by DOE), how many grid-interactive water heaters were added to your 
program this/last year?'' The Joint Utilities commented that the 
information collected by EIA could be made available to DOE for 
tracking purposes. (Joint Utilities Supplemental, No. 156 at pp. 1-2)
    Rheem commented on the four criteria of the proposed product class 
for ``grid-interactive water heater.'' Rheem expressed support for the 
first requirement proposed by the Joint Utilities in the definition of 
``grid-interactive water heater'' requiring such water heaters to have 
a storage volume of greater than 55 gallons, but noted this requirement 
may have a limiting effect on the potential application and associated 
benefits in the field. Rheem also supported the second criterion 
proposed by the Joint Utilities that a control device must be present 
with the understanding that these control devices are provided in the 
field by the utility to the consumer in support of their ETS program, 
giving the utility the ability to turn the water heater on or off. 
Rheem also agreed with the third criterion proposed by utilities (i.e., 
agreement to be enrolled in a grid operator, electric utility, or other 
energy services company program to provide demand response or other 
electric grid services) with the additional clarification that the 
agreement is a contractual arrangement between utility and consumer, 
not part of a product definition. Lastly, Rheem did not support the 
requirement of a mixing valve at 120[emsp14][deg]F, noting that almost 
all ERWHs can be adjusted to heat water to 170[emsp14][deg]F and most 
if not all manufacturers encourage use of a mixing valve. Rheem stated 
that requiring a mixing valve at 120[emsp14][deg]F for this product 
class only would be inconsistent given that other product classes and 
the majority of residential electric storage water heaters do not 
require such a device. (Rheem, No. 86 at p. 3)
    AO Smith also commented on the four criteria for defining a ``grid-
interactive water heater'' product class, as proposed by the Joint 
Utilities. AO Smith supported the first and third criteria listed above 
(i.e., that the water heater must have a storage volume greater than 55 
gallons, and that the water heater must be enrolled in a utility grid-
interactive program). However, AO Smith expressed concern with the 
criterion that the unit must be equipped with a communication-capable 
control device due to the large number of different devices currently 
in use with differing operating characteristics and communication 
protocols. AO Smith stated that unless there was a standardized 
communication protocol and operational algorithm, it would be difficult 
for water heater manufacturers to justify making a small number of 
water heaters for ETS programs with each customer (utility) requiring a 
different control device in an even smaller number of heaters. AO Smith 
stated that it would support the criterion if it were altered to 
provide as an option that the water heater may be without a control 
device if it has a provision for connection to a utility-provided 
communication device that would interact with the water heater control 
to provide equivalent grid communication. Regarding the fourth proposed 
criterion, AO Smith stated that it does not object to the inclusion of 
thermostatic mixing valve in the definition, but noted that almost all 
ERWHs can be adjusted to 170 [deg]F and commented that 120 [deg]F is 
too low for many purposes. AO Smith expressed preference for a criteria 
that specifies that since the heater will be heated to a high water 
temperature during off-peak periods, a means (such as a thermostatic 
mixing valve) should be provided to adjust the outlet water to the 
desired delivery temperature, which in most cases will be less than 
storage temperature. (AO Smith, No. 20 at p. 2)
    Contrary to the Joint Utilities' and manufacturers' position, the 
Joint Efficiency Advocates stated that a separate product class for 
grid-interactive water heaters is not appropriate. (Joint Efficiency 
Advocates, No. 68 at p. 1) The Joint Efficiency Advocates stated that 
given the novelty of grid-interactive water heaters, the variety of 
possible applications, and the variety of possible product designs and 
features, it would be unclear how to meaningfully define such a product 
class to enable the benefits while reducing risk and minimizing costs. 
(Joint Efficiency Advocates, No. 68 at p. 3) The Joint Efficiency 
Advocates were also concerned that there would be a significant risk 
that a new product class may be abused as a loophole to bypass the 
efficiency standards, rather than to deliver grid benefits. The Joint 
Efficiency Advocates pointed out that the benefits remain unquantified 
and generally unassessed, making it impossible to consider whether the 
benefits outweigh the risks and costs. Lastly, the Joint Efficiency 
Advocates stated that creating a new product class would likely run 
afoul of the ``anti-backsliding'' provision. The Joint Efficiency 
Advocates argued that all water heaters, including those that include 
grid interactive controls, are now subject to the 2010 standards, which 
prevents DOE from creating a new class with lower standards for a grid 
interactive water heater. (Joint Efficiency Advocates, No. 68 at p. 3)
    GE also argued against the creation of a product class for grid 
interactive water heaters, stating that it is not justified under DOE's 
criteria for establishing product classes since it would not preserve a 
utility that would otherwise be eliminated by the standard. (GE, No. 85 
at p. 3) GE stated that even if a certain consumer utility is at risk, 
that concern should have been raised during the rulemaking when it 
could have been thoroughly evaluated by DOE and all interested parties. 
(GE, No. 85 at p. 3) Further, GE commented that grid interactive water 
heaters do not have capacity or other performance related features that 
HPWHs do not, or could not, have, and opined that creating a separate 
product class would impede development of the market for high-
performing HPWH products. (GE, No. 85 at p. 3) GE also argued that DOE 
is prevented under the ``anti-backsliding'' provision at 42 U.S.C. 
6295(o)(1) from amending the standard to waive its requirements as 
applicable to a subset of covered products, especially if doing so 
increases maximum allowable energy use or decreases minimum energy 
efficiency. (GE, No. 85 at pp. 4)
    After considering the comments regarding the potential for 
establishing a separate product class for ``grid-

[[Page 12980]]

interactive water heaters'' as proposed by the Joint Utilities, DOE has 
tentatively concluded not to propose such an approach. In particular, 
DOE agrees with the Joint Efficiency Advocates and GE that under 42 
U.S.C. 6295(o)(1), DOE is prohibited from promulgating any standard 
that increases the maximum allowable energy use or decreases minimum 
energy efficiency of a covered product. The standards established for 
electric water heaters in the April 2010 final rule apply to all 
electric water heaters meeting the applicable regulatory definitions. 
Therefore, establishing a separate product class for a segment of 
electric storage water heaters and setting a lower energy conservation 
standard level than the required energy efficiency of such products 
would be prohibited under the ``anti-backsliding'' provision contained 
in 42 U.S.C. 6295(o)(1). Accordingly, DOE has tentatively concluded 
that it will not propose to establish a separate product class for 
``grid-interactive'' water heaters with energy conservation standards 
that are less stringent than those promulgated in the April 2010 final 
rule. However, DOE does agree with the suggestion by the Joint 
Utilities that the number of water heaters in ETS programs should be 
tracked, and that adding a question to the EIA-861 and EIA-861S forms 
are an appropriate way to achieve this goal while minimizing burdens on 
all parties. DOE's proposal in this regard is discussed further in 
section 0 below.
4. Potential for Establishing a Waiver Process
    In the June 2012 RFI, DOE also requested comment on the potential 
for establishing a waiver process that would allow for production of 
limited number of large-volume ERWHs solely for ETS programs. Both the 
joint comment received from Joint Efficiency Advocates, ACEEE, NRDC, 
and ASAP, and the joint comment received from the Northwest Advocates, 
NEEA, NPCC, and BPA, generally supported a waiver system. (Joint 
Efficiency Advocates, No. 68 at p. 1; Northwest Advocates, No. 89 at p. 
2) Several utility companies also indicated that the waiver option 
could potentially be a viable alternative, but most of the utility 
company commenters preferred the product class approach discussed 
above. (East River, No. 25 at p. 3; Lyon-Lincoln, No. 27 at p. 3; 
Bristol, No. 31 at p. 2; Corn Belt, No. 39 at p. 3; Otter Tail, No. 44 
at p. 5)
    The Joint Efficiency Advocates argued that a waiver approach is 
legal under 42 U.S.C. 7194(a) and could allow manufacturers to produce 
small quantities of large-volume ERWHs and sell them directly to 
utilities that operate such programs. (Joint Efficiency Advocates, No. 
68 at p. 4) The Joint Efficiency Advocates stated that a waiver program 
has precedent and cited the waivers granted for small-duct, high-
velocity central air conditioners from the standards for residential 
central air conditioners as an example. The Joint Efficiency Advocates 
stated that a waiver system would add flexibility and reduce the 
likelihood of loopholes, and would facilitate ongoing creativity and 
dynamism from the utility and manufacturing industries, given the 
ability to revisit waiver conditions. The Joint Efficiency Advocates 
argued that a waiver system would also encourage and facilitate ongoing 
assessment by DOE, industry, and other stakeholders, leading to greatly 
improved understanding of the benefits and costs of grid-interactive 
water heaters, and form the basis for well-informed future decisions of 
a more permanent nature. (Joint Efficiency Advocates, No. 68 at p. 4)
    The Joint Efficiency Advocates stated that any waiver would need to 
be limited to cover units sold to utilities that actually have demand 
response programs, and the utilities must be required to sell or 
provide grid-interactive water heaters only to customers who agree to 
participate in the demand response program. In addition, the Joint 
Efficiency Advocates suggested that any application for waiver should 
have to demonstrate that it is impossible to operate a demand response 
program with water heaters that meet the standard. The Joint Efficiency 
Advocates also argued that waiver applications should be made jointly 
by a manufacturer and a utility. (Joint Efficiency Advocates, No. 68 at 
p. 4)
    The Northwest Advocates stated that prior to determining whether to 
grant a waiver, DOE should determine the net economic benefits of such 
an action. (Northwest Advocates, No. 89 at p. 2) The Northwest 
Advocates also stated that the mechanism enforcing the conditions of 
any program waiver that may be established should be given very careful 
consideration because binding new homeowners to agreements made by 
previous homeowners has significant legal complications. The commenters 
also noted that the required level of program oversight and cost of 
enforcement should be considered. (Northwest Advocates, No. 89 at pp. 
4-5) Similarly, Otter Tail stated that when customers move the water 
heater stays with the home, but the new homeowner may or may not want 
to have a controlled water heater that is part of an ETS program. 
(Otter Tail, No. 44 at p. 5)
    The Joint Utilities, Rheem, and AO Smith generally opposed the 
option of establishing a waiver process. Opposition was primarily due 
to concerns about how distribution would be affected if the waiver were 
to require some control or direct distribution from a manufacturer to a 
utility program. AO Smith stated that not all water heater 
manufacturers sell directly to utilities, meaning the level of control 
DOE assumes the manufacturers possess may not exist. (AO Smith, No. 20 
at p.3) Similarly, Rheem stated that a waiver type system concept 
cannot be managed effectively by a manufacturer, since a manufacturer 
has little to no distribution control over the intended application of 
its product. (Rheem, No. 86 at p. 3) Further, AO Smith argued that 
using a waiver system would introduce a very high degree of uncertainty 
to the manufacturer (and the utility) as to their business planning for 
such water heaters and has the potential to slow down the manufacturing 
process if a waiver must be granted each time a water heater is to be 
manufactured. AO Smith added that if the intent is to allow a ``blanket 
waiver,'' DOE should establish a standing program instead as both 
actions achieve the same end. (AO Smith, No. 20 at p.3)
    The Joint Utilities comment pointed out that a number of regulatory 
proceedings at the state level led to utilities being required under 
state regulation to terminate programs where the utility was active in 
the sale of an appliance to the consumer. (Joint Utilities, No. 58 at 
p. 18) The Joint Utilities comment stated that if DOE appears to be 
reinstating utility appliance programs, it would be running afoul of 
years of state regulations and legislation, which would inevitably lead 
to litigation. (Joint Utilities, No. 58 at p. 18)
    As noted above, several utility company commenters, while 
preferring the product class approach discussed in section III.A.3, 
indicated that the waiver option could potentially be a viable 
solution. (East River, No. 25 at p. 3; Lyon-Lincoln, No. 27 at p. 3; 
Bristol, No. 31 at p. 2; Corn Belt, No. 39 at p. 3; Otter Tail, No. 44 
at p. 5) Otter Tail stated that although they are open to the concept 
of the waiver option, not all utilities' business models support the 
business of selling appliances and for the most part utilities do not 
compete with other retail businesses. (Otter Tail, No. 44 at p. 3) Two 
utilities stated that they sell water heaters directly to their 
participants. (Eau Claire, No. 69 at p. 2; Bristol, No. 31 at p. 2) 
Dakota Electric commented

[[Page 12981]]

that after unsuccessfully trying to sell small numbers of Rheem 
``Marathon'' water heaters, Dakota Electric partnered with an 
independent small business water heater distributor that handles all of 
their member-owners' water heater supply needs. Dakota Electric stated 
that returning to small volume sales and the associated internal 
overhead costs, delivery and warranty problems would drive up the price 
to member-owners. (Dakota Electric, No. 36 at p. 4)
    After considering the comments on the waiver process, DOE has 
tentatively concluded that a waiver system would achieve DOE's goal of 
mitigating the impacts of the April 2010 final rule on utility ETS 
programs, while also being allowable under EPCA. A waiver process will 
address the concerns raised by utility companies and has the added 
benefit of having the potential for frequent evaluation. Thus, DOE is 
proposing in this NPRM to establish a waiver system for large-volume 
electric storage water heaters. The waiver, if granted, would allow, 
for a one-year period, manufacturers to produce limited numbers of 
electric water heaters with storage volumes above 55 gallons 
exclusively for the purpose of installation in residences enrolled in a 
utility company electric thermal storage (ETS) program. Parties would 
be allowed to apply for additional one-year waivers in subsequent 
years. The proposed criteria and method for petitioning for a waiver, 
and the proposed requirements that any granted waivers will impose are 
discussed in section 0.
    DOE recognizes the concerns of certain stakeholders with regard to 
the establishment of a waiver program. In particular, DOE believes that 
manufacturers, the Joint Utilities, and other utility companies made 
compelling arguments regarding the lack of control of the distribution 
chain, as well as local regulations that may prevent certain utilities 
from selling water heaters directly to consumers. For these reasons, 
DOE's proposed waiver program will not include any requirements that 
the manufacturer sell directly to the utility, or that the utility sell 
the units covered under waiver directly to the consumer. Also, 
recognizing that situations may occur where new homeowners move into a 
residence with a grid-interactive water heater installed but do not 
wish to participate in an ETS program or where a consumer purchases a 
water heater for use an ETS program but later decides not to 
participate, DOE is not including in its waiver program any criterion 
that the homeowner have an agreement to be enrolled in a utility ETS 
program. Rather, DOE is including other requirements to ensure that the 
waiver program is targeted, including an annual limit on the number of 
units to which the waiver will apply and a requirement that the water 
heater be shipped with the control device that will be used for the ETS 
program. These requirements are discussed further in section III.B.2.
    In response to the comment from NEEA, NPCC, and BPA stating that 
DOE must consider the economic impacts of any waiver that is granted, 
DOE agrees that an economic analysis may provide helpful information in 
determining whether to grant a waiver, but also believes it may be 
infeasible to individually calculate the economic benefits for every 
waiver request received depending on the volume of requests.

B. Waiver Process

    Any waiver process established by DOE must include a clear 
procedure for obtaining a waiver, with guidelines for circumstances 
under which the waiver will be granted, instructions regarding how to 
apply for and document the waiver, and a description of conditions that 
must be met for the waiver to be granted. The following sections 
describe the waiver process that DOE proposes to establish, including 
the criteria necessary to obtain a waiver, the requirements that must 
be met to comply with the waiver, and a process for reviewing the 
waiver to ensure its effectiveness in addressing the issue at hand.
1. Criteria for Obtaining a Waiver
    In order to obtain a waiver that would allow for the manufacture 
and sale of limited numbers of electric water heaters with storage 
volumes above 55 gallons for a one year period exclusively for the 
purpose of installation in residences enrolled in a utility company ETS 
program, DOE proposes that manufacturers and/or utility companies, or a 
utility company and a manufacturer jointly, must request such a waiver 
from DOE. Further, the request must come from a manufacturer of water 
heaters and/or a utility company that administers an electric thermal 
storage program utilizing large-volume electric water heaters. No other 
parties may apply for a waiver. If the request is made individually by 
a manufacturer, it must identify each of the utility ETS programs for 
which the water heaters are intended to participate. Similarly, if the 
request is made by a utility, it must identify the manufacturer that 
would be responsible for producing the units.
    To request an exception from the DOE energy conservation standards 
for residential water heaters, a manufacturer and/or utility company 
must submit a letter to the Assistant Secretary for Energy Efficiency 
and Renewable Energy detailing the waiver request. Descriptions of how 
to petition for the waiver, the information that should be contained in 
the request, and additional requirements that must be met if the waiver 
is granted are discussed in section 0.
2. Requirements and Method for Obtaining Waiver
    DOE proposes that, if a manufacturer and/or utility company 
believes that it (they) can meet these requirements, in order to 
receive a waiver it (they) must first submit a letter to the Assistant 
Secretary for Energy Efficiency and Renewable Energy requesting that a 
waiver be granted. The waiver request should include the petitioning 
company contact information. If the application is filed jointly, it 
must contain contact information for all parties. If not filed jointly, 
the request must contain information about any additional entity (i.e., 
manufacturer or utility) that will be a party to the waiver.
    Second, the waiver should include the model information 
(manufacturer, brand, basic model number, rated storage volumes and 
energy factor for each basic model that the manufacturer plans to 
produce and the utility plans to use in an ETS program coinciding with 
the DOE certification record). In addition, the application must 
include a list of the utility names that administer each of the ETS 
programs for which the basic models subject to the waiver application 
will be utilized and the specific number of units for each ETS program 
which exemption from the standards is requested. The utility company 
that is a party to the request must submit information on the current 
stock of ERWHs in their ETS programs and any planned expansion of the 
programs that would justify the number of units requested to be covered 
by waiver. DOE proposes to limit the number of units for which the 
waiver would apply annually to reduce the likelihood of significant 
numbers of large-volume ERWHs being used in applications without ETS 
programs.
    The waiver request must also include a description of the control 
device that will be used to control any potentially waiver-covered 
water heaters for the ETS program. The control device must be capable 
of receiving communication from a grid operator, electric utility, or 
other energy services company that provides real-time control of the 
heating element.

[[Page 12982]]

    Upon reviewing the application, DOE will determine whether to grant 
the waiver. If such determination is positive, DOE will specify the 
residential water heater basic model (or models) that the waiver 
applies to and the number of units that are covered under the waiver, 
as well as the expiration date of that waiver. DOE will also specify an 
alternative minimum energy conservation standard that would apply to 
any models covered under waiver. DOE will notify the petitioner(s) in 
writing and the public through publication of a Federal Register notice 
once a decision is made regarding the status of a waiver request. DOE 
proposes the waiver would expire one calendar year after it is granted, 
after which time it will not be applicable. Consequently, if a 
manufacturer and/or utility company would like to continue the waiver 
for a longer period, DOE proposes that a new waiver application would 
need to be submitted each year to ensure a continued evaluation of the 
waivers.
    In addition, DOE believes that in order to effectively enforce this 
waiver program, DOE must have some means of physically distinguishing 
between water heaters for ETS programs and other electric resistance 
water heaters. In order to ensure that water heaters manufactured under 
a waiver are intended for use in ETS programs and encourage their use 
in ETS programs, DOE proposes to require that the units for which a 
waiver is granted are shipped from the manufacturer with the ETS 
control device installed on the water heater or packaged with the water 
heater. DOE is aware that currently the control mechanism is typically 
provided by a third party manufacturer (i.e., a manufacturer other than 
the water heater manufacturer) and is often installed by the utility 
company or a contractor to the utility company rather than the water 
heater original equipment manufacturer. In addition, DOE recognizes the 
concerns stated earlier in this document that there are a number of 
different control devices available, which may present difficulties to 
water heater manufacturers in installing these devices at the factory. 
However, DOE believes that without the control device being installed 
at the point of water heater manufacture, it would be difficult to 
ensure that the unit is intended for use in an ETS program. In order to 
enforce the provisions of the waiver, DOE believes that the control 
device must be present on all units subject to the waiver when they 
leave the water heater manufacturer, and thus proposes to include this 
requirement as a condition of any waivers that may be granted under 
this process. No consideration will be given to add-on control devices 
for ETS programs that are to be installed in the field as an addition 
to a traditional ERWH. DOE requests comment on this proposal, and this 
is identified as issue 1 in section V.E, ``Issues on Which DOE Seeks 
Comment.''
    In summary, to apply for a waiver, DOE proposes that a manufacturer 
and/or utility must submit a request to DOE that includes the following 
information: (1) Contact and company information for all parties 
involved in the waiver request (including both the manufacturer of the 
water heaters and the utilities administering the ETS program); (2) 
number of units of a given basic model broken down by utility for which 
the waiver is requested; (3) specific information about the water 
heaters, including manufacturer, brand, basic model number, rated 
storage volume, and energy factor; and (4) a description of the control 
device to be used on the water heaters and documentation of the 
integration of that control device into the water heater design if the 
waiver is granted. If DOE grants the waiver, as a condition of the 
waiver, DOE proposes that the covered water heaters leave the 
manufacturer with the ETS control device installed on the water heater 
or packaged with the water heater.
3. Periodic Review of Waiver Mechanism
    DOE believes that a critical component of the waiver process 
proposed in this NPRM will be periodic reviews of the waiver mechanism 
to ensure that it is achieving its goals of serving its intended 
purpose while limiting the potential for circumvention of the April 
2010 energy conservation standards for products not used in ETS 
programs. Periodic reviews will allow DOE to assess any new 
technologies that are available on the market and to evaluate whether 
the concerns of utility companies are still valid in light of any new 
information or products on the market that may become available. In 
addition, periodic reviews would account for any new technologies that 
make products meeting DOE's energy conservation standards appropriate 
for use in ETS programs.
    DOE believes that its proposal that each granted waiver will be 
applicable for only one year creates a de facto review period. As 
waivers expire and manufacturers and/or utility companies must apply 
for new waivers, DOE will re-evaluate any previous decisions made under 
this process. DOE also plans to review the waiver process each year. In 
order to conduct these evaluations, DOE is proposing to implement the 
suggestion contained in the Joint Utilities supplemental comment 
(discussed previously in section 3) that a question be added to forms 
EIA-861 and EIA-861S that tracks the number of models that are actually 
installed in utility ETS applications. (Joint Utilities Supplemental, 
No.156 at p.1) This information would allow DOE to compare the number 
of units for which a waiver is granted to the number actually installed 
in ETS applications each year to ensure that this process achieves its 
goals. DOE proposes to include with minor modifications the additional 
question on forms EIA-861 and EIA-861S suggested by the Joint 
Utilities. Rather than ask how many grid-interactive water heaters were 
added to each program this/last year, as proposed by the Joint 
Utilities, DOE proposes to include a question that asks for the total 
number of water heaters enrolled in a given ETS program. The question 
DOE proposes to add would read as follows: ``If you have a demand side 
management (DSM) program for electric storage water heaters, how many 
electric storage water heaters with storage volumes above 55 gallons 
were utilized in your program this/last year?'' DOE seeks comment on 
its proposal to add this question to forms EIA-861 and EIA-861S, and 
this is identified as issue 2 in section V.E, ``Issues on Which DOE 
Seeks Comment.''
    At the time of each review, DOE can update the waiver process, if 
necessary, through a notice and comment rulemaking to amend the 
criteria and requirements to comply with the waiver. Similarly, if new 
technologies come to market or new information comes to light that 
mitigate the concerns raised by utility companies to date (e.g., a 
product that meets DOE minimum energy conservation standards and is 
suitable for utility ETS programs), DOE could discontinue the granting 
of waivers if justified.

Procedural Requirements

A. Review Under Executive Orders 12866 and 13563

    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

[[Page 12983]]

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 home 
appliance 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 residential water heaters 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, this regulatory action is not an ``economically 
significant regulatory action'' under section 3(f)(1) of Executive 
Order 12866. Accordingly, DOE is not required under section 6(a)(3) of 
the Executive Order to prepare a regulatory impact analysis (RIA) on 
this NPRM and the Office of Information and Regulatory Affairs (OIRA) 
in the Office of Management and Budget (OMB) is not required to review 
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 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.
    DOE emphasizes 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 this NPRM is consistent with these principles, 
including the requirement that, to the extent permitted by law, 
benefits justify costs and that net benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of a regulatory flexibility analysis 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 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 Web site (http://energy.gov/gc/office-general-counsel).
    In this notice, DOE is not proposing to amend the existing energy 
conservation standards for residential water heaters to adopt more 
stringent levels, but rather is proposing a waiver process that would 
allow, for a one-year period, manufacturers to produce limited numbers 
of electric water heaters with storage volumes above 55 gallons 
exclusively for the purpose of installation in residences enrolled in a 
utility company electric thermal storage (ETS) program.
    For manufacturers of residential water heaters, the Small Business 
Administration (SBA) has set a size threshold, which defines those 
entities classified as ``small businesses'' for the purposes of the 
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. 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/sites/default/files/files/Size_Standards_Table.pdf. Residential water heater manufacturing is 
classified under NAICS 335228--``Other Major Household Appliance 
Manufacturing.'' The SBA sets a threshold of 500 employees or less for 
an entity to be considered as a small business for this category. DOE 
has identified one small business manufacturer of electric storage 
water heaters.
    DOE does not expect that this proposed rule, if adopted, would have 
a significant impact on any small business manufacturers. The proposed 
waiver process does impose several requirements, including that 
manufacturers may have to apply for the waiver (unless they are part of 
a joint application in which a utility company is submitting the 
application), and will be responsible for ensuring that the control 
device is installed on any water heaters that are manufactured under a 
waiver. DOE expects the impact of both of these requirements to be 
minimal for all manufacturers. In addition, DOE believes it is 
reasonable to assume that because the waiver process is optional, these 
potential benefits outweigh the small burdens of obtaining a waiver, as 
manufacturers would otherwise not opt to participate in the waiver 
process. Thus, DOE certifies that waiver process set forth in this 
proposed rule, if promulgated, would not have a significant economic 
impact on a substantial number of small entities. Accordingly, DOE has 
not prepared a regulatory flexibility analysis for this rulemaking. DOE 
will transmit the certification and supporting statement of factual 
basis to the Chief Counsel for Advocacy of the Small Business 
Administration for review under 5 U.S.C. 605(b).
    DOE requests comment on its above conclusions, as well as any 
information concerning small businesses that could be impacted by this 
rulemaking and the nature and extent of those potential impacts of the 
proposed waiver process on small residential water heater 
manufacturers. This is identified as issue 3 in section V.E, ``Issues 
on Which DOE Seeks Comment.''

C. Review Under the Paperwork Reduction Act

    Manufacturers of residential water heaters must certify to DOE that 
their products comply with any applicable energy conservation 
standards. In certifying compliance, manufacturers must test their 
products according to the

[[Page 12984]]

DOE test procedures for residential water heaters, including any 
amendments adopted for those test procedures. DOE has established 
regulations for the certification and recordkeeping requirements for 
all covered consumer products and commercial equipment, including 
residential water heaters. 76 FR 12422 (March 7, 2011). The collection-
of-information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). Public reporting burden for the certification is estimated to 
average 4 hours per response, including the time for 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

    Pursuant to the National Environmental Policy Act (NEPA) of 1969, 
DOE has determined that the proposed rule fits within the category of 
actions included in Categorical Exclusion (CX) B5.1 and otherwise meets 
the requirements for application of a CX. See 10 CFR Part 1021, App. B, 
B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). The proposed rule fits 
within the category of actions because it is a rulemaking that 
establishes a waiver process that would allow, for a one-year period, 
manufacturers to produce limited numbers of electric water heaters with 
storage volumes above 55 gallons exclusively for the purpose of 
installation in residences enrolled in a utility company electric 
thermal storage (ETS) program. DOE has determined that none of the 
exceptions identified in CX B5.1(b) apply. Therefore, DOE has made a CX 
determination for this rulemaking, and DOE does not need to prepare an 
Environmental Assessment or Environmental Impact Statement for this 
proposed rule. DOE's CX determination for this proposed rule is 
available at http://cxnepa.energy.gov/.

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 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 this proposed 
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 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 proposed 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. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed 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 proposed ``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 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://energy.gov/gc/office-general-counsel.
    This proposed rule does not contain a Federal intergovernmental 
mandate, and it will not require expenditures of $100 million or more 
by State, local, and Tribal governments, in the aggregate, or by the 
private sector. Accordingly, no further action is required under the 
UMRA.

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

[[Page 12985]]

and Interference with Constitutionally Protected Property Rights'' 53 
FR 8859 (Mar. 18, 1988), that this regulation would not result in any 
takings that 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 this NPRM 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 proposed 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 proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
sets forth a waiver process for energy conservation standards for 
residential water heaters, is not a significant energy action because 
the proposed waiver process is 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 proposed 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. 70 FR 2667.
    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: 
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.

Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this notice. If 
you plan to attend the public meeting, please notify Ms. Brenda Edwards 
at (202) 586-2945 or Brenda.Edwards@ee.doe.gov. As explained in the 
ADDRESSES section, foreign nationals visiting DOE Headquarters are 
subject to advance security screening procedures. Any foreign national 
wishing to participate in the meeting should advise DOE of this fact as 
soon as possible by contacting Ms. Brenda Edwards to initiate the 
necessary procedures.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: http://www1.eere.energy.gov/buildings/appliance_standards/residential/waterheaters.html. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Requests To Speak and Prepared General 
Statements for Distribution

    Any person who has an interest in the topics addressed in this 
notice, or who is representative of a group or class of persons that 
has an interest in these issues, may request an opportunity to make an 
oral presentation at the public meeting. Such persons may hand-deliver 
requests to speak to the address shown in the ADDRESSES section at the 
beginning of this notice between 9:00 a.m. and 4:00 p.m., Monday 
through Friday, except Federal holidays. Requests may also be sent by 
mail or email to: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue 
SW., Washington, DC 20585-0121, or Brenda.Edwards@ee.doe.gov. Persons 
who wish to speak should include with their request a computer diskette 
or CD-ROM in WordPerfect, Microsoft Word, PDF, or text (ASCII) file 
format that briefly describes the nature of their interest in this 
rulemaking and the topics they wish to discuss. Such persons should 
also provide a daytime telephone number where they can be reached.
    DOE requests persons scheduled to make an oral presentation to 
submit an advance copy of their statements at least one week before the 
public meeting. DOE may permit persons who cannot supply an advance 
copy of their statement to participate, if those persons have made 
advance alternative arrangements with the Building Technologies 
Program. As necessary, requests to give an oral presentation should ask 
for such alternative arrangements.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in

[[Page 12986]]

accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter 
will be present to record the proceedings and prepare a transcript. DOE 
reserves the right to schedule the order of presentations and to 
establish the procedures governing the conduct of the public meeting. 
There shall not be discussion of proprietary information, costs or 
prices, market share, or other commercial matters regulated by U.S. 
anti-trust laws. After the public meeting, interested parties may 
submit further comments on the proceedings as well as on any aspect of 
the rulemaking until the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE), 
before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to this rulemaking. The official conducting the public 
meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this NPRM and will be accessible on the DOE Web site. In addition, 
any person may buy a copy of the transcript from the transcribing 
reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
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 NPRM.
    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 Web site will 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. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No 
telefacsimiles (faxes) will be accepted.
    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. Pursuant 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 well-marked copies: 
one copy of the document marked confidential including all the 
information believed to be confidential, and one copy of the document 
marked non-confidential 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 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

[[Page 12987]]

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).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    1. DOE's proposal to require that the units for which a waiver is 
granted are shipped from the manufacturer with the ETS control device 
installed on the water heater.
    2. DOE's proposal to add a question to forms EIA-861 and EIA-861S 
that would read as follows: ``If you have a demand side management 
(DSM) program for electric storage water heaters, how many electric 
storage water heaters with storage volumes above 55 gallons were 
utilized in your program this/last year?''
    3. DOE's conclusion that the proposed waiver process will not have 
significant adverse impacts on a substantial number of small business 
manufacturers. DOE also seeks any information concerning small 
businesses that could be impacted by this rulemaking and the nature and 
extent of those potential impacts of the proposed waiver process on 
small residential water heater manufacturers.

Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

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 February 15, 2013.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.

0
For the reasons set forth in the preamble, DOE proposes to amend part 
430 of chapter II, subchapter D, of title 10 of the Code of Federal 
Regulations, as set forth below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
1. The authority citation for part 430 continues to read as follows:

    Authority:  42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

0
2. Add Sec.  430.36 to read as follows:

Sec.  430.36  Petitions for waiver for electric water heaters used in 
electric thermal storage programs.

    (a) Any manufacturer of residential water heaters or utility 
company that administers an electric thermal storage program for 
electric water heaters, or combination of these two, may submit a 
petition to allow, for a one-year period, manufacturers to produce 
limited numbers of electric water heaters with rated storage volumes 
above 55 gallons exclusively for the purpose of installation in 
residences enrolled in a utility company electric thermal storage (ETS) 
program.
    (b) A petition for waiver shall be submitted to the Assistant 
Secretary for Energy Efficiency and Renewable Energy, United States 
Department of Energy by email. Each petition for waiver shall:
    (1) Identify the company or companies, whether manufacturer or 
utility company or combination of the two, requesting the waiver, and 
provide contact information (i.e., name of company official, address 
for the applicant, phone number, and email address) for those entities. 
Note, if the manufacturer is applying for the waiver, it should include 
a list of all utility companies administering the ETS programs to which 
it plans to sell the basic models. If the utility is applying for the 
waiver, the utility should include a list of all of the manufacturers 
from which it plans to purchase electric water heaters with rated 
storage volumes above 55 gallons exclusively for the purpose of 
installation in residences enrolled in a utility company electric 
thermal storage (ETS) program.
    (2) Identify the particular manufacturer, brand, basic model(s), 
rated storage volume, and energy factor for which a waiver is 
requested.
    (3) Identify the number of units per utility program on an annual 
basis for each of the basic models for which a waiver is requested 
(i.e., total number of units per year of a given basic model that will 
be participating in an ETS program for a specific utility).
    (4) Provide information from the utility company regarding the 
current stock of electric water heaters used in the electric thermal 
storage programs at the time the waiver is submitted and any planned 
expansion of the programs for the annual period the waiver will cover 
that would justify the number of units requested to be covered by 
waiver.
    (5) Identify and describe the control device that will be installed 
on the unit. The control device must be capable of receiving 
communication from a grid operator, electric utility, or other energy 
services company that provides real-time control of the heating 
element. Provide documentation that the control device is integrated 
into the water heater design at the point of manufacture, including but 
not limited to any marketing and labeling material from the 
manufacturer describing the basic model(s) for which the waiver is 
requested.
    (6) Be signed by a company official. In accordance with the 
provisions set forth in 10 CFR 1004.11, any request for confidential 
treatment of any information contained in a petition for waiver or in 
supporting documentation must be accompanied by a copy of the petition, 
application or supporting documentation from which the information 
claimed to be confidential has been deleted. DOE shall publish in the 
Federal Register the petition and supporting documents from which 
confidential information, as determined by DOE, has been deleted in 
accordance with 10 CFR 1004.11.
    (c) The Assistant Secretary for Energy Efficiency and Renewable 
Energy shall issue a decision on the petition as soon as is practicable 
following receipt and review of the petition for waiver and other 
applicable documents. The Assistant Secretary for Energy Efficiency and 
Renewable Energy will grant a waiver upon determining that the basic 
model for which the waiver was requested is particularly well suited 
for use in the electric thermal storage program, the requester or 
combination of requesters is an appropriate party to be granted such a 
waiver, the quantity of units to be manufactured under the waiver is 
sufficiently limited, and that an appropriate control device will be 
present on any water heaters manufactured and shipped pursuant to a 
waiver. Manufacture of units authorized by a waiver granted under this 
section will not constitute violations of an applicable energy 
conservation standard, provided that the units are distributed and 
installed in accordance with the terms of the waiver.
    (d) Any granted waiver will specify the manufacturer, utilities, 
brand, basic model number, number of units of a particular basic model 
and the applicable energy conservation standard for units authorized by 
the waiver. Any

[[Page 12988]]

granted waiver will terminate 365 days after issuance.
    (e) Any basic model for which a waiver has been granted shall be 
shipped from the water heater original equipment manufacturer with a 
control device that is compatible with the utility company administered 
electric thermal storage program. Any changes to the basic model design 
which results in the unit consuming more energy or alters the control 
device from which the waiver was granted shall require a new waiver 
application. The control device must be installed on the water heater 
before it leaves the original equipment manufacturer. The control 
device must be capable of receiving communication from a grid operator, 
electric utility, or other energy services company that provides real-
time control of the heating element. The water heater must be clearly 
labeled and marketed for use exclusively in ETS programs, including a 
description of the control device integrated into the water heater, 
before it leaves the original equipment manufacturer.

[FR Doc. 2013-04099 Filed 2-25-13; 8:45 am]
BILLING CODE 6450-01-P
```