### F IC OF EARIN Cl THE O F E H G& APPEALS 1999 fi DEPARTMENT OF ENERGY
RESPONSE OF GE APPLIANCES TO THE PETITION FILED BY AMANA APPLIANCES FOR EXCEPTION RELIEF TO THE FINAL RULE ON ENERGY CONSERVATION STANDARDS FOR REFRIGERATORS, REFRIGERATOR-FREEZERS AND FREEZERS
CASE NO. VEE-0054 MARCH 15, 1999
These comments are submitted on behalf of GE Appliances, a leading fullline manufacturer of major household appliances, including, as specifically relevant to these proceeding, refrigerator-freezers. GE Appliances, a potentially aggrieved party within the meaning of the Office of Hearings and Appeals ("OHA") regulations, has its headquarters at Appliance Park, Louisville, Kentucky. I. Introduction and Summary Amana Appliances ("Amana") has filed an application ("Application") seeking an exception to the Department of Energy's ("DOE") Final Rule on Energy Conservation Program for Consumer Products: Energy Conservation Standards for Refrigerators, Refrigerator-Freezers and Freezers, 10 C.F.R. Part 430 (Final Rule). This Final Rule, promulgated on April 23, 1997, mandates that refrigerator products manufactured after July 1, 2001, use approximately 30% less energy than such products manufactured under today's energy conservation standard. The specific relief requested by Amana is that covered products manufactured by it on or after July 1, 2001, not be required to comply with the Final Rule but be given "10% relief" until January 1, 2010. Thus, rather than manufacturing refrigerators that use 30% less energy than today's models, Amana's new products would be permitted to use 10% more energy than comparable competitive models manufactured in compliance with the more stringent standard. Moreover, Amana seeks to maintain this cost-avoidance advantage for a period of eight and one-half years. Amana offers as the basis for its Application the "uncertain future of alternative blowing agents (especially HFC-245fa)." (See Application, p.6.) It argues that the unavailability of HFC-245fa in early 1999 together with the scheduled 2003 phase-out of HCFC-141 b, the foam-blowing agent used by most of the industry, poses an insurmountable obstacle to its ability to comply with the THE OFFICE OF HEARINGS 

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## "- -4 /(). 23 RESPONSE OF GE APPLIANCES TO THE PETITION FILED BYAMANA APPLIANCES FOR EXCEPTION RELIEF TO THE FINAL RULE ON ENERGY CONSERVATION STANDARDS

FOR REFRIGERATORS, REFRIGERATOR-FREEZERS AND FREEZERS CASE NO. VEE-0054 MARCH 15, 1999

These comments are submitted on behalf of GE Appliances, a leading fullline manufacturer of major household appliances, including, as specifically relevant to these proceeding, refrigerator-freezers. GE Appliances, a potentially aggrieved partywithin the meaning of the Office of Hearings and Appeals ("OHA") regulations, has its headquarters at Appliance Park, Louisville, Kentucky. 

### I. Introduction and Summary
AmanaAppliances ("Amana") has filed an application ("Application") seeking an exception to the Department of Energy's ("DOE") Final Rule on Energy Conservation Progran:t for Consumer Products: Energy Conservation Standards for Refrigerators, Refrigerator-Freezers and Freezers, 10 C.F.R. Part 430 (Final Rule). This Final Rule, promulgated on April 23, 1997, mandates that refrigerator products manufactured afterJuly 1, 2001, use approXimately30% less energythan such products manufactured undertoday's energyconservation standard. The specific relief requested byAmana is that covered products manufactured by it on orafterJuly 1, 2001, notbe required tocomply with the Final Rule but be given "10% relief' until January 1, 2010. Thus, ratherthan manufacturing refrigerators that use 30% less energythan today's models, Amana's new productswould be permitted to use 10% more energythan comparable competitive models manufactured in compliance with the more stringent standard. Moreover, Amana seeks to maintain this cost-avoidance advantage for a period ofeight and one-half years. Amana offers as the basis for its Application the "uncertain future of alternative blowing agents (especially HFC-24Sfa)." (See Application, p.6.) It argues that the unavailability of HFC-24Sfa in early 1999togetherwith the scheduled 2003 phase-out of HCFC-141b, the foam-blowing agent used by most of the industry, poses an insurmountable obstacle to its abilityto comply with the

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### Final Rule.' Thus, Amana seeks an exception to the Final Rule to permit a

reduction in the energy efficiency standard as applied to it so that more energy efficient foams can be developed. GE Appliances submits that the Application is premature and OHA should, therefore, deny the relief sought. II. Amana's Application is Premature
A. The fate of HFC-245fa is not determined As Amana acknowledges in its Application, the appliance industry, acting through the Association of Home Appliance Manufacturers ("AHAM"), has begun discussions with AlliedSignal, the only U.S. company licensed to manufacture HFC-245fa, regarding production and sale of quantities of HFC-245fa-to meet the industry's requirements. This all-industry effort was necessary to improve the chances that sufficient demand volume would be aggregated to justify construction of a new plant. The manufacturers retained AD Little to review confidentially AlliedSignal's estimates of the capital investment and operating costs to produce HFC-245fa. A report of their findings was given to participating industry members, who, based on the report's findings, are in the process of reviewing their requirements, their price sensitivity and their position on other terms and conditions offered by AlliedSignal. A new budget has been agreed to for a follow-up project, also led by AD Little, to start negotiating the terms of a possible deal. Coming as it does in the middle of the parties' extensive efforts to assure future availability of HFC-245fa, the Application'sends the wrong signal by prejudging the outcome.: It is simply too early to predict that HFC-245fa will not be available. One thing is clear, however: Granting Amana's request for relief will ensure that HFC-254fa will not be produced in the near future because any incentive for expeditious handling of the discussions with AlliedSignal will be lost.

Amana concedes, however, that the unavailability of HFC-245fa will not prevent it from manufacturing products that will meet the 2001 energy requirements

. It argues that it is nevertheless entitled to relief because available foams are less efficient, thereby requiring thicker application, which, results in less internal volume. One might view the Application as presenting this issue to OHA: Does the loss of refrigerator internal storage volume constitute a "special hardship, inequity or unfair distribution of burdens" that justifies an adjustment of the Final Rule pursuant to Section 504 of the Department of Energy Organization Act? [2 U.S.C. § 7194(a)]. We think it does not.

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Final Rule.' Thus, Amana seeks an exception tothe Final Rule to permit a reduction in the energy efficiency standard as applied to it so that more energy efficient foams can be developed. GE Appliances submits that the Application is premature and OHA should, therefore, denythe relief sought. 

### II. Amana's Application is Premature
A. Thefate of HFC·245fa is not determined As Amana acknowledges in its Application, the appliance industry, acting through the Association of Home Appliance Manufacturers ("AHAM"), has begun discussions with AlliedSignal, the only U.S. company licensed to manufacture HFC-245fa, regarding production and sale of quantities of HFC-245fa-to meetthe industry's requirements. This all-industry effort was necessaryto**improv~** the chances that sufficient demand volume would be aggregated tojustify construction ofa new plant.
The manufacturers retained AD Little to review confidentiallyAlliedSignal's estimates ofthe capital investment and operating costs to produce HFC·245fa. A report oftheirfindings was given to participating industry members, who, based on the report's findings, are in the process of reviewing their requirements, their price sensitivity and their position on otherterms and conditions offered by AlliedSignal.

. A new budget has been agreed to for a follow-up project, also led byAD Little, to start negotiating the terms ofa possible deal. Coming as it does in the middle ofthe parties' extensive efforts to assure future availability of HFC-245fa, theApplication sends the wrong signal by prejudging the outcome.

### ·It is simplytoo earlyto predictthat HFC-245fawill not be available. One thing is clear, however: Granting Amana's request for relief will ensure that HFC-254fawill not be produced in the nearfuture because any incentivefor expeditious handling ofthe discussionswith AlliedSignal will be lost.

Amana concedes, however, thatthe unavailability of HFC-245fa will not prevent it from manufacturing products thatwill meetthe 2001 energy requirements. It argues that it is nevertheless entitled to relief because availablefoams are less efficient, thereby requiring thicker application, which, results in less internal volume. One mightview the Application as presenting this issue to OHA: Does the loss of refrigerator internal storage volume constitute a "special hardship, inequity or unfair distribution of burdens"thatjustifies an adjustment ofthe Final Rule pursuant to Section 504 ofthe Department of Energy Organization Act? [2 U.S.c. § 7194(a)]. We think itdoes not.

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### B. Amana has failed to show that HFC

-245fa unavailability in 1999 is a basis for relief from the Final Rule The difficult decisions that Amana describes as necessary to achieve compliance with the Final Rule were thoroughly considered by DOE when it established the July 1, 2001 effective date. The Application asserts: "Retooling an entire refrigeration product line would take significant time, major capital, and vast human resource requirements. Insulation thickness must be defined in early 1999 such that the product can be designed to meet the 7/1/01 DOE Standards2. Amana must select an insulation of choice at that time such that the product may be optimized for internal volume." (P.2) In any event, even if it were to be established that HFC-245fa might not be available under the schedule that industry hoped would be met, it has not been demonstrated that it will not be available for use in 2003, which is the key date in the Final Rule. The argument that 1999 is critical for foam selection is appealing. Indeed, GE Appliances made similar arguments about the adverse effects of a lack of coordination between 2001 compliance and 2003 phase-out of HCFC-141 b. But DOE rejected those pleas and adopted a Final Rule that explicitly acknowledges that a double retooling might be required. DOE has already determined that the potential unavailability of HFC-245fa before 2001, although unfortunate, is irrelevant. The Application should be denied as premature. Ill. Amana has failed to demonstrate that it meets the

requirements for § 504 relief Amana is owned by Goodman Industries, Inc., a privately held company. This means that its financial resources-capital, assets, cash, indebtedness and credit worthiness-are not subject to the scrutiny of outsiders. How, then, can GE Appliances and other competitors comment on Amana's claim that it will be disadvantaged by having to invest for 2001 and 2003? We can all sympathize with this statement:

2 in 1997, AlliedSignal advised industry members that it would not have a chemical plant in place in time to produce HFC-245fa for use in meeting the July 1, 2001 DOE energy standard.

3 B. Amana has failed to showthat HFC-245fa unavailability in 1999 is a basis for relieffrom the Final Rule The difficult decisions that Amana describes as necessaryto achieve compliance with the Final Rule were thoroughly considered by DOE when it established the July 1, 2001 effective date. The Application asserts: "Retooling an entire refrigeration product line would take significanttime, major capital, and vast human resource requiremerits. Insulation thickness must be defined in early 1999 such that the product can be designed to meet the 7/1/01 DOE Standards2• Amana must select an insulation of choice at that time such that the product may be optimized for internal volume." (P.2)
In any event, even if it were to be established that HFC-245fa might not be available underthe schedule that industry hoped would be met, it has not been demonstrated that itwill not be available for use in 2003, which is the key date in the Final Rule. The argumentthat 1999 is critical forfoam selection is appealing. Indeed, G EAppliances made similar**~rguments** about the adverse effects of a lackof coordination between 2001 compliance and 2003 phase-out of HCFC-141b. But DOE rejected those pleas and adopted a Final Rule that explicitlyacknowledges that a double retooling might be required. DOE has already determined that the potential unavailability of HFC-245fa before 2001, although unfortunate, is irrelevant. The Application should be denied as premature. III. Amana hasfailed to demonstratethat it meetsthe requirementsfor § 504 relief
Amana is owned by Goodman Industries, Inc., a privately held company. This meansthat its financial resources-capital, assets, cash, indebtedness and credit worthiness-are notsubjectto the scrutiny of outsiders. How, then, can GE Appliances and othercompetitors comment on Amana's claim that itwill be disadvantaged by having to investfor 2001 and 2003? We can all sympathize with this statement:

21n 1997, AlliedSignal advised industry members that it would not have a chemical plant in place in time to produce HFC-24Sfa for use in meeting theJuly 1, 2001 DOE energystandard.

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### "Amana does not want to retool an entire line of refrigerators within an 18-

month period due to the uncertainly of the foam-blowing agent, and therefore, the uncertainty of the energy consumption of the refrigerator itself." Without the ability to scrutinize Amana's financial situation, there is no basis to conclude that retooling "within an 18-month period" constitutes a "special hardship, inequity or unfair distribution of burdens" that justifies an adjustment of the Final Rule pursuant to Section 504 of the Department of Energy Organization Act.
Nor is there evidence that Amana's situation is different from that of other manufacturers. It cites the joint venture operations of GE Appliances and Whirlpool in Mexico, where HCFC-141 b use will be lawful beyond 2003, as evidencezof potential competitive disadvantage (see Application, p. 4.) This is a red herring. Amana has cited no plans by either company to alter import patterns post-2003. If such factors are relevant to ruling on this Application then other factors affecting the ability of the manufacturers to achieve compliance, including financial resources, technical competence and many others, should be examined by OHA in public hearings so that a full record can be developed. This is the only way that a decision could withstand attack by adversely affected parties.

IV. Conclusion For all the above reasons, GE Appliances respectfully requests that OHA deny the relief sough by Amana's Application. Please contact the undersigned if you require additional information. By my signature below I certify that I have complied with the requirements of the OHA regulation, 10 C.F.R. § 1003.23(d).

cc: Alan F. Kessler, Amana Appliances

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"Amana does not want to retool an entire line of refrigerators within an 18- month period due to the uncertainly of the foam-blowing agent, and therefore, the uncertainty ofthe energy consumption ofthe refrigerator itself." Without the abilityto scrutinize Amana's financial situation, there is no basis to conclude that retooling "within an 18-month period" constitutes a "special hardship, inequity or unfairdistribution of burdens" thatjustifies an adjustment of the Final Rule pursuantto Section 504 ofthe Department of Energy Organization Act. Nor is there evidence thatAmana's situation is differentfrom that ofother manufacturers.
It cites tflejointventure operations of GE Appliances and Whirlpool in Mexico, where HCFC-141b usewill be lawful beyond 2003, as evidence'of potential competitive disadvantage (see Application, p. 4.) This is a red herring. Amana has cited no plans by eithercompany to alter import patterns post-2003. If such factors are relevantto ruling on this Application then otherfactors affecting the ability ofthe manufacturers to achieve compliance, including financial resources, technical competence and manyothers, should be examined by OHA in public hearings sothat a full record can be developed. This is the only way that a decision could withstand,?ttack by adversely affected parties.



### IV. Conclusion
For all the above reasons, GE Appliances respectfully requests that OHA denythe relief sough byAmana's Application.
Please contactthe undersigned if you require additional information. By mysignature below I certifythat I have complied with the requirements of**~the** OHA regulation, 10 C.F.R. 

### § 1003.23(d).

ully submitted

cc: Alan F. Kessler, Amana Appliances

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