Vol. 80 Wednesday, 

No. 23 February 4, 2015 

Part II 

Department of Energy 

10 CFR Part 431 

Energy Conservation Program for Certain Industrial Equipment: Energy 

Conservation Standards for Commercial Warm Air Furnaces; Proposed 

Rule 


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6182 Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket Number EERE–2013–BT–STD– 

0021] 

RIN 1904–AD11 

Energy Conservation Program for 

Certain Industrial Equipment: Energy 

Conservation Standards for 

Commercial Warm Air Furnaces 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Notice of proposed rulemaking 

and 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 commercial warm air furnaces 

(CWAF). EPCA also requires that every 

six years, the U.S. Department of Energy 

(DOE) must consider amending its 

standards for specified types of 

commercial heating, air-conditioning, 

and water-heating equipment in order to 

determine whether more-stringent, 

amended standards would be 

technologically feasible and 

economically justified, and would save 

a significant additional amount of 

energy. DOE has tentatively concluded 

that there is sufficient record evidence 

to support more-stringent standards, so 

DOE is proposing to amend the current 

energy conservation standards for 

CWAF. DOE also announces a public 

meeting to receive comment on these 

proposed standards and associated 

analyses and results. 

DATES: Comments: DOE will accept 

comments, data, and information 

regarding this notice of proposed 

rulemaking (NOPR) before and after the 

public meeting, but no later than April 

6, 2015. See section VII, ‘‘Public 

Participation,’’ for details. 

Meeting: DOE will hold a public 

meeting on Monday, March 2, 2015, 

from 9:00 a.m. to 4:00 p.m., in 

Washington, DC. The meeting will also 

be broadcast as a webinar. See section 

VII, ‘‘Public Participation,’’ for webinar 

registration information, participant 

instructions, and information about the 

capabilities available to webinar 

participants. 

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 VII, ‘‘Public 

Participation,’’ near the end of this 

notice. 

Instructions: Any comments 

submitted must identify the NOPR for 

Energy Conservation Standards for 

Commercial Warm Air Furnaces, and 

provide docket number EE–2013–BT– 

STD–00021 and/or regulatory 

information number (RIN) number 

1904–AD11. Comments may be 

submitted using any of the following 

methods: 

1. Federal eRulemaking Portal: 

www.regulations.gov. Follow the 

instructions for submitting comments. 

2. Email: CommWarmAirFurn2013

STD0021@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. Postal Mail: Ms. Brenda Edwards, 

U.S. Department of Energy, Building 

Technologies Office, 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 Office, 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. 

No telefacsimiles (faxes) will be 

accepted. For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see section VII of this document (Public 

Participation). 

Docket: The docket is available for 

review at www.regulations.gov. All 

documents in the docket are listed in 

the www.regulations.gov index. A link 

to the docket Web page can be found at: 

http://www1.eere.energy.gov/buildings/

appliance_standards/rulemaking.aspx

?ruleid=70. This Web page contains a 

link to the docket for this notice on the 

http://www.regulations.gov site. The 

www.regulations.gov Web page contains 

simple instructions on how to access all 

documents, including public comments, 

in the docket. 

For further information on how to 

submit a comment, review other public 

comments and the docket, or participate 

in the public meeting, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: Mr. 

John Cymbalsky, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies, EE–5B, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 286–1692. Email: John.

Cymbalsky@ee.doe.gov. 

Mr. Eric Stas, U.S. Department of 

Energy, Office of the General Counsel, 

GC–71, 1000 Independence Avenue 

SW., Washington, DC 20585–0121. 

Telephone: (202) 586–9507. Email: 

Eric.Stas@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Summary of the Proposed Rule 

A. Benefits and Costs to Commercial 

Consumers 

B. Impact on Manufacturers 

C. National Benefits 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

CWAF 

III. General Discussion 

A. Compliance Date 

B. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

C. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

D. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Life-Cycle Costs 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Equipment 

e. Impact of Any Lessening of Competition 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

1. General 

2. Scope of Coverage and Equipment 

Classes 

3. Technology Options 

B. Screening Analysis 

C. Engineering Analysis 

1. Methodology 

2. Efficiency Levels 

a. Baseline Efficiency Levels 

b. Incremental and Max-Tech Efficiency 

Levels 

3. Equipment Testing and Reverse 

Engineering 


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1For editorial reasons, upon codification in the 

U.S. Code, Part C was re-designated Part A–1. 2ASHRAE Standard 90.1–2013 (i.e., the most 

recent version of ASHRAE Standard 90.1) did not 

amend the efficiency levels for CWAF. Thus, DOE 

was not triggered by the statutory provision for 

ASHRAE equipment. For more information on 

DOE’s review of ASHRAE Standard 90.1–2013, see: 

http://www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx?ruleid=108. 

4. Cost Model 

5. Manufacturing Production Costs 

6. Manufacturer Markup 

7. Shipping Costs 

D. Markups Analysis 

E. Energy Use Analysis 

F. Life-Cycle Cost and Payback Period 

Analysis 

1. Inputs to Installed Cost 

2. Inputs to Operating Costs 

a. Energy Consumption 

b. Energy Prices 

c. Maintenance and Repair Costs 

d. Other Inputs 

G. Shipments Analysis 

H. National Impact Analysis 

I. Consumer Subgroup Analysis 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

a. Government Regulatory Impact Model 

Key Inputs 

b. Government Regulatory Impact Model 

Scenarios 

c. Manufacturer Interviews 

K. Emissions Analysis 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

a. Monetizing Carbon Dioxide Emissions 

b. Development of Social Cost of Carbon 

Values 

c. Current Approach and Key Assumptions 

2. Valuation of Other Emissions 

Reductions 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Commercial Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash-Flow Analysis Results 

b. Impacts on Direct Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Subgroups of Manufacturers 

e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Commercial 

Consumer Costs and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance of 

Equipment 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

8. Summary of Other National Economic 

Impacts 

C. Proposed Standards 

1. Benefits and Burdens of Trial Standard 

Levels Considered for CWAF 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under the Regulatory Flexibility 

Act 

C. Review Under the Paperwork Reduction 

Act of 1995 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

VII. 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 

VIII. Approval of the Office of the Secretary 

I. Summary of the Proposed Rule 

Title III, Part C1 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6311–6317, as codified), added by 

Public Law 95–619, Title IV, § 441(a), 

established the Energy Conservation 

Program for Certain Industrial 

Equipment, which includes the 

commercial warm air furnaces that are 

the subject of this rulemaking. CWAF 

are a type of equipment also covered 

under the American Society of Heating, 

Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) Standard 90.1 

(ASHRAE Standard 90.1), ‘‘Energy 

Standard for Buildings Except Low-Rise 

Residential Buildings.’’ 2 Pursuant to 

recent statutory amendments to EPCA, 

DOE must conduct an evaluation of its 

standards for CWAF every six years and 

publish either a notice of determination 

that such standards do not need to be 

amended or a notice of proposed 

rulemaking including proposed 

amended standards. (42 U.S.C. 

6313(a)(6)(C)(i)) EPCA further requires 

that any new or amended energy 

conservation standard that DOE 

prescribes for covered equipment, such 

as CWAF, shall be designed to achieve 

the maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified. (42 

U.S.C. 6313(a)(6)(A)(ii)(II)) Furthermore, 

the new or amended standard must 

result in a significant additional 

conservation of energy. Id. Under the 

applicable statutory provisions, DOE 

must determine that there is clear and 

convincing evidence supporting the 

adoption of more-stringent energy 

conservation standards than the 

ASHRAE level. Id. Once complete, this 

rulemaking will satisfy DOE’s statutory 

obligation under 42 U.S.C. 6313(a)(6)(C). 

In accordance with these and other 

statutory provisions discussed in this 

notice, DOE has examined all of the 

CWAF equipment classes and has 

tentatively concluded that there is clear 

and convincing evidence to support 

more-stringent standards for both gasfired and oil-fired CWAF. Accordingly, 

DOE is proposing amended energy 

conservation standards for both gasfired and oil-fired CWAF. The proposed 

standards, which prescribe the 

minimum allowable thermal efficiency 

(TE), are shown in Table I.1. These 

proposed standards, if adopted, would 

apply to all equipment listed in Table 

I.1 and manufactured in, or imported 

into, the United States on and after the 

date three years after the publication of 

the final rule for this rulemaking. 

TABLE I.1—PROPOSED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL WARM AIR FURNACES

Equipment class Input capacity * 

(Btu/h) 

Thermal 

efficiency ** 

Gas-Fired Furnaces ........................................................................................................................................... ≥225,000 Btu/h 82% 

Oil-Fired Furnaces ............................................................................................................................................. ≥225,000 Btu/h 82% 

* In addition to being defined by input capacity, a CWAF is ‘‘a self-contained oil- or gas-fired furnace designed to supply heated air through 

ducts to spaces that require it and includes combination warm air furnace/electric air conditioning units but does not include unit heaters and duct 

furnaces.’’ CWAF coverage is further discussed in section IV.A.2, ‘‘Scope of Coverage and Equipment Classes.’’ 

** Thermal efficiency is at the maximum rated capacity (rated maximum input), and is determined using the DOE test procedure specified at 10 

CFR 431.76. 


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3All monetary values in this NOPR are expressed 

in 2013 dollars and are discounted to 2014. 

4These results include impacts on commercial 

consumers which accrue after 2048 from the 

products purchased in 2018–2047. 

5 DOE calculated emissions reductions relative to 

the Annual Energy Outlook 2013 (AEO 2013) 

Reference case, which generally represents current 

legislation and environmental regulations for which 

implementing regulations were available as of 

December 31, 2012. 

6A metric ton is equivalent to 1.1 short tons. 

Results for emissions other than CO2 are presented 

in short tons. 

7Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

8The values only include CO2 emissions; CO2

equivalent emissions from other greenhouse gases 

are not included. 

9 DOE is investigating monetization of reductions 

in SO2 and Hg emissions. 

A. Benefits and Costs to Commercial 

Consumers 

Table I.2 presents DOE’s evaluation of 

the economic impacts of the proposed 

energy conservation standards on 

commercial consumers of CWAF, as 

measured by the average life-cycle cost 

(LCC) savings and the median payback 

period (PBP). The average LCC savings 

are positive for both equipment classes, 

and the PBP is less than the average 

lifetime of the equipment, which is 

estimated to be 19 years for gas-fired 

CWAF and 26 years for oil-fired CWAF. 

TABLE I.2—IMPACTS OF PROPOSED ENERGY CONSERVATION STANDARDS ON COMMERCIAL CONSUMERS OF COMMERCIAL

WARM AIR FURNACES

Equipment class 

Average 

LCC savings 

(2013$) 

Median 

payback 

period 

(years) 

Gas-Fired Furnaces ................................................................................................................................................. 426 0.7 

Oil-Fired Furnaces ................................................................................................................................................... 164 2.8 

DOE’s analysis of the impacts of the 

proposed standards on consumers is 

described in section IV.F of this notice 

and in chapter 8 of the NOPR TSD. 

B. Impact on Manufacturers 

The industry net present value (INPV) 

is the sum of the discounted cash flows 

to the industry from the base year 

through the end of the analysis period 

(2014 to 2047). Using a real discount 

rate of 8.9 percent, DOE estimates that 

the INPV for manufacturers of CWAF is 

$74.7 million in 2013$. Under the 

proposed standards, DOE expects that 

INPV may be reduced by approximately 

$43.3 to $11.1 million, which is ¥58.0 

percent to ¥14.9 percent. 

DOE’s analysis of the impacts of the 

proposed standards on manufacturers is 

described in section IV.J of this notice. 

C. National Benefits 3

DOE’s analyses indicate that the 

proposed energy conservation standards 

for CWAF would save a significant 

amount of energy. The energy savings 

over the entire lifetime of CWAF 

equipment installed during the 30-year 

period that begins in the year of 

compliance with amended standards 

(2018–2047), relative to the base case 

without amended standards, amount to 

0.52 quadrillion Btus (quads) of fullfuel-cycle energy.4 This represents a 

savings of 1.0 percent relative to the 

energy use of this equipment in the base 

case. 

The cumulative net present value 

(NPV) of total consumer costs and 

savings of the proposed standards for 

CWAF ranges from $1.0 billion to $2.7 

billion at 7-percent and 3-percent 

discount rates, respectively. This NPV 

expresses the estimated total value of 

future operating-cost savings minus the 

estimated increased product costs for 

CWAF purchased in 2018–2047. 

In addition, the proposed standards 

would have significant environmental 

benefits.5 The energy savings would 

result in cumulative emission 

reductions of 27.9 million metric tons 

(Mt) 6 of carbon dioxide (CO2), 319.8 

thousand tons of methane (CH4), 0.1 

thousand tons of nitrous oxide (N2O), 

2.2 thousand tons of sulfur dioxide 

(SO2), 66.84 thousand tons of nitrogen 

oxides (NOX) and 0.003 tons of mercury 

(Hg). The cumulative reduction in CO2

emissions through 2030 amounts to 4.4 

Mt. 

The value of the CO2 reductions is 

calculated using a range of values per 

metric ton of CO2 (otherwise known as 

the Social Cost of Carbon, or SCC) 

developed by an interagency process.7

The derivation of the SCC values is 

discussed in section IV.L. Using 

discount rates appropriate for each set 

of SCC values, DOE estimates the 

present monetary value of the CO2

emissions reduction to be between $0.2 

billion and $2.6 billion, with a value of 

$0.8 billion using the central SCC case 

represented by $40.5/t in 2015.8

Additionally, DOE estimates the present 

monetary value of the NOX emissions 

reduction to be $34.2 million to $82.0 

million at 7-percent and 3-percent 

discount rates, respectively.9

Table I.3 summarizes the national 

economic costs and benefits expected to 

result from the proposed standards for 

CWAF. 

TABLE I.3—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION

STANDARDS FOR COMMERCIAL WARM AIR FURNACES

Category 

Present 

value 

Billion 2013$ 

Discount rate 

Benefits 

Operating Cost Savings ........................................................................................................................................... 1.052 7% 

2.721 3 

CO2 Reduction Monetized Value ($12.0/t case) ** .................................................................................................. 0.175 5 

CO2 Reduction Monetized Value ($40.5/t case) ** .................................................................................................. 0.841 3 

CO2 Reduction Monetized Value ($62.4/t case) ** .................................................................................................. 1.347 2.5 


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10 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2013, the year used for discounting the 

NPV of total consumer costs and savings, for the 

time-series of costs and benefits using discount 

rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For 

the latter, DOE used a range of discount rates, as 

shown in Table I.4. From the present value, DOE 

then calculated the fixed annual payment over a 30- 

year period (2018 through 2047) that yields the 

same present value. The fixed annual payment is 

the annualized value. Although DOE calculated 

annualized values, this does not imply that the 

time-series of cost and benefits from which the 

annualized values were determined is a steady 

stream of payments. 

11The atmospheric lifetime of CO2 is estimated of 

the order of 30–95 years. Jacobson, MZ (2005). 

‘‘Correction to ‘‘Control of fossil-fuel particulate 

black carbon and organic matter, possibly the most 

effective method of slowing global warming.’’ ’’ J. 

Geophys. Res. 110. pp. D14105. 

TABLE I.3—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION

STANDARDS FOR COMMERCIAL WARM AIR FURNACES—Continued 

Category 

Present 

value 

Billion 2013$ 

Discount rate 

CO2 Reduction Monetized Value $119/t case) ** .................................................................................................... 2.606 3 

NOX Reduction Monetized Value (at $2,684/ton) ** ................................................................................................ 0.034 7 

0.082 3 

Total Benefits † ................................................................................................................................................. 1.928 7 

3.645 3 

Costs 

Incremental Installed Costs ..................................................................................................................................... 0.036 7 

0.062 3 

Total Net Benefits 

Including Emissions Reduction Monetized Value † ................................................................................................. 1.892 7 

3.582 3 

* This table presents the costs and benefits associated with CWAF shipped in 2018–2047. These results include impacts on commercial consumers which accrue after 2048 from the products purchased in 2018–2047. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values (represented by 2015 values of 

$12.0/t, $40.5/t, and $62.4/t, in 2013$) are based on the average SCC from the integrated assessment models, at discount rates of 2.5, 3, and 5 

percent. The fourth set (represented by 2015 value of $119/t in 2013$), which represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the 

SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate an escalation factor. The value for 

NOX represents the average of the low and high NOX values considered in DOE’s analysis. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with 3-percent discount rate. 

The benefits and costs of these 

proposed standards, for products sold in 

2018–2047, can also be expressed in 

terms of annualized values. The 

annualized monetary values are the sum 

of: (1) The annualized national 

economic value of the benefits from 

consumer operation of equipment that 

meets the proposed standards 

(consisting primarily of operating cost 

savings from using less energy, minus 

increases in equipment purchase price 

and installation costs, which is another 

way of representing commercial 

consumer NPV), and (2) the annualized 

monetary value of the benefits of CO2

and NOX emission reductions.10

Although combining the values of 

operating savings and CO2 emission 

reductions provides a useful 

perspective, two issues should be 

considered. First, the national operating 

savings are domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions, whereas the 

value of CO2 reductions is based on a 

global value. Second, the assessments of 

operating cost savings and CO2 savings 

are performed with different methods 

that use different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

CWAF shipped in 2018–2047. The SCC 

values, on the other hand, reflect the 

present value of some future climaterelated impacts resulting from the 

emission of one ton of carbon dioxide in 

each year. Because CO2 emissions have 

a very long residence time in the 

atmosphere,11 the SCC values after 2050 

reflect future climate-related impacts 

resulting from the emission of CO2 that 

continue beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed standards are 

shown in Table I.4. The results under 

the primary estimate are as follows. 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate, the estimated cost of the 

proposed CWAF standards is $3.51 

million per year in increased equipment 

costs, while the estimated benefits are 

$104 million per year in reduced 

equipment operating costs, $47 million 

in CO2 reductions, and $3.38 million in 

reduced NOX emissions. In this case, the 

net benefit would amount to $151 

million per year. Using a 3-percent 

discount rate for all benefits and costs 

and the average SCC series, the 

estimated cost of the proposed CWAF 

standards is $3.48 million per year in 

increased equipment costs, while the 

estimated benefits are $152 million per 

year in reduced equipment operating 

costs, $47 million in CO2 reductions, 

and $4.57 million in reduced NOX

emissions. In this case, the net benefit 

would amount to $200 million per year. 


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12For editorial reasons, upon codification in the 

U.S. Code, Part C was re-designated Part A–1. 

TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL

WARM AIR FURNACES * 

Discount rate 

Million 2013$/year 

Primary 

estimate Low estimate High estimate 

Benefits 

Operating Cost Savings .................................................. 7% .................................................. 104 98 111 

3% .................................................. 152 143 163 

CO2 Reduction Monetized Value ($12.0/t case) ** .......... 5% .................................................. 13 13 14 

CO2 Reduction Monetized Value ($40.5/t case) ** .......... 3% .................................................. 47 45 48 

CO2 Reduction Monetized Value ($62.4/t case) ** .......... 2.5% ............................................... 69 67 72 

CO2 Reduction Monetized Value ($119/t case) ** ........... 3% .................................................. 145 140 150 

NOX Reduction Monetized Value (at $2,684/ton) ** ........ 7% .................................................. 3.38 3.28 3.49 

3% .................................................. 4.57 4.41 4.72 

Total Benefits † ......................................................... 7% plus CO2 range ....................... 120 to 253 114 to 242 128 to 264 

7% .................................................. 154 147 163 

3% plus CO2 range ....................... 169 to 302 160 to 287 181 to 318 

3% .................................................. 203 192 216 

Costs 

Incremental Equipment Costs ......................................... 7% .................................................. 3.51 3.48 3.67 

3% .................................................. 3.48 3.41 3.68 

Net Benefits 

Total † ....................................................................... 7% plus CO2 range ....................... 117 to 249 111 to 238 124 to 261 

7% .................................................. 151 143 159 

3% plus CO2 range ....................... 166 to 298 156 to 283 177 to 314 

3% .................................................. 200 189 212 

* This table presents the annualized costs and benefits associated with CWAF shipped in 2018–2047. These results include benefits to commercial consumers which accrue after 2048 from the products purchased in 2018–2047. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. Incremental equipment costs account for equipment price trends and include, beyond the reference scenario, a 

low price decline scenario used in the Low Benefits Estimate and a high price decline scenario used in the High Benefits Estimates. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values (represented by 2015 values of 

$12.0/t, $40.5/t, and $62.4/t, in 2013$) are based on the average SCC from the integrated assessment models, at discount rates of 2.5, 3, and 5 

percent. The fourth set (represented by 2015 value of $119/t, in 2013$), which represents the 95th percentile SCC estimate across all three 

models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the 

SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate an escalation factor. The value for 

NOX represents the average of the low and high values considered in DOE’s analysis. 

† Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with a 3-percent discount rate. In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values. 

DOE’s analysis of the national impacts 

of the proposed standards is described 

in sections IV.H, IV.K and IV.L of this 

notice. 

D. Conclusion 

DOE has tentatively concluded that, 

based upon clear and convincing 

evidence, the proposed standards 

represent the maximum improvement in 

energy efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy. DOE further 

notes that equipment achieving these 

standard levels is already commercially 

available for the equipment classes 

covered by this proposal. Based on the 

analyses described above, DOE has 

tentatively concluded that the benefits 

of the proposed standards to the Nation 

(energy savings, positive NPV of 

commercial consumer benefits, 

commercial consumer LCC savings, and 

emission reductions) would outweigh 

the burdens (loss of INPV for 

manufacturers and LCC increases for 

some commercial consumers). 

DOE also considered more-stringent 

energy efficiency levels as trial standard 

levels, and is still considering them in 

this rulemaking. However, DOE has 

tentatively concluded that the potential 

burdens of the more-stringent energy 

efficiency levels would outweigh the 

projected benefits. Based on 

consideration of the public comments 

DOE receives in response to this notice 

and related information collected and 

analyzed during the course of this 

rulemaking effort, DOE may adopt 

energy efficiency levels presented in 

this notice that are either higher or 

lower than the proposed standards, or 

some combination of level(s) that 

incorporate the proposed standards in 

part. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this proposal, as well as 

some of the relevant historical 

background related to the energy 

conservation standards for CWAF. 

A. Authority 

Title III, Part C12 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6311–6317, as codified), added by 

Public Law 95–619, Title IV, § 441(a), 

established the Energy Conservation 

Program for Certain Industrial 

Equipment, which includes provisions 

covering the CWAF equipment that is 


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13All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act of 

2012, Pub. L. 112–210 (enacted Dec. 18, 2012). 

14Rated maximum input means the maximum 

gas-burning capacity of a commercial warm-air 

furnace in Btu per hour, as specified by the 

manufacturer. 

the subject of this notice.13 In general, 

this program addresses the energy 

efficiency of certain types of commercial 

and industrial equipment. Relevant 

provisions of the Act specifically 

include definitions (42 U.S.C. 6311), 

energy conservation standards (42 

U.S.C. 6313), test procedures (42 U.S.C. 

6314), labeling provisions (42 U.S.C. 

6315), and the authority to require 

information and reports from 

manufacturers (42 U.S.C. 6316). 

The initial Federal energy 

conservation standards for CWAF were 

added to EPCA by the Energy Policy Act 

of 1992 (EPACT 1992), Public Law 102– 

486. (42 U.S.C. 6313(a)(4)) These types 

of covered equipment have a rated 

capacity (rated maximum input 14) 

greater than or equal to 225,000 Btu/h, 

can be gas-fired or oil-fired, and are 

designed to heat commercial buildings. 

Id. Under the Act, DOE is obligated to 

review its energy conservation 

standards for certain commercial and 

industrial equipment (i.e., specified 

heating, air-conditioning, and waterheating equipment) whenever the 

American Society of Heating, 

Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) updates the 

efficiency levels in ASHRAE Standard 

90.1, Energy Standard for Buildings 

Except Low-Rise Residential Buildings. 

DOE must either adopt the levels 

contained in ASHRAE Standard 90.1 or 

adopt levels more stringent than the 

ASHRAE levels if there is clear and 

convincing evidence in support of doing 

so. (42 U.S.C. 6313(a)(6)(A)) Such 

review is to be conducted in accordance 

with the procedures established for 

ASHRAE equipment under 42 U.S.C. 

6313(a)(6). In addition, DOE must 

periodically review and consider 

amending the energy conservation 

standards for these specified types of 

covered commercial and industrial 

equipment and publish either a notice 

of proposed rulemaking with amended 

standards or a determination that the 

standards do not need to be amended. 

(42 U.S.C. 6313(a)(6)(C)(i)) 

In amending EPCA, the American 

Energy Manufacturing Technical 

Corrections Act (AEMTCA), Public Law 

112–210 (Dec. 18, 2012), in relevant 

part, modified the manner in which 

DOE must amend the energy efficiency 

standards for certain types of 

commercial and industrial equipment, 

adding a review requirement that is 

triggered when ASHRAE adopts a 

design requirement, even if the standard 

level remains unchanged. Id. AEMTCA 

also clarified that DOE’s periodic review 

of ASHRAE equipment must occur 

‘‘[e]very six years.’’ Id. AEMTCA further 

added to this process a requirement that 

DOE must initiate a rulemaking to 

consider amending the energy 

conservation standards for any covered 

equipment for which more than 6 years 

has elapsed since the issuance of the 

most recent final rule establishing or 

amending a standard for the product as 

of the date of AEMTCA’s enactment 

(i.e., December 18, 2012), in which case 

DOE must publish either: (1) A notice of 

determination that the current standards 

do not need to be amended, or (2) a 

notice of proposed rulemaking 

containing proposed standards by 

December 31, 2013. (42 U.S.C. 

6313(a)(6)(C)(vi)) Because DOE has not 

issued a standard for commercial warm 

air furnaces in the past six years, the 

December 31, 2013 deadline for 

publication of the applicable 

rulemaking document applies. 

Pursuant to EPCA, DOE’s energy 

conservation program for covered 

equipment consists essentially of four 

parts: (1) Testing; (2) labeling; (3) the 

establishment of Federal energy 

conservation standards; and (4) 

certification and enforcement 

procedures. 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 

covered equipment. (42 U.S.C. 6314) 

Manufacturers of covered equipment 

must use the prescribed DOE test 

procedure as the basis for certifying to 

DOE that their equipment comply with 

the applicable energy conservation 

standards adopted under EPCA and 

when making representations to the 

public regarding the energy use or 

efficiency of such equipment. (42 U.S.C. 

6314(d)) Similarly, DOE must use these 

test procedures to determine whether 

the equipment comply with standards 

adopted pursuant to EPCA. The DOE 

test procedures for CWAF currently 

appear at title 10 of the Code of Federal 

Regulations (CFR) part 431.76. 

When setting standards for the 

equipment addressed by the proposed 

rule, EPCA, as amended by AEMTCA, 

prescribes specific statutory criteria for 

DOE to consider. See generally 42 

U.S.C. 6313(a)(6)(A)–(C). As indicated 

above, any amended standard for 

covered equipment more stringent than 

the level contained in ASHRAE 

Standard 90.1 must be designed to 

achieve the maximum improvement in 

energy efficiency that is technologically 

feasible and economically justified. (42 

U.S.C. 6313(a)(6)(A)(ii)(II)) Furthermore, 

DOE may not adopt any standard that 

would not result in the significant 

additional conservation of energy. Id. In 

deciding whether a proposed standard 

is economically justified, DOE must 

determine whether the benefits of the 

standard exceed its burdens. DOE must 

make this determination after receiving 

comments on the proposed standard, 

and by considering, to the maximum 

extent practicable, the following seven 

statutory factors: 

1. The economic impact of the standard on 

manufacturers and consumers of products 

subject to the standard; 

2. The savings in operating costs 

throughout the estimated average life of the 

covered products in the type (or class) 

compared to any increase in the price, initial 

charges, or maintenance expenses for the 

covered products which are likely to result 

from the standard; 

3. The total projected amount of energy 

savings likely to result directly from the 

standard; 

4. Any lessening of the utility or the 

performance of the covered products likely to 

result from the standard; 

5. The impact of any lessening of 

competition, as determined in writing by the 

Attorney General, that is likely to result from 

the standard; 

6. The need for national energy 

conservation; and 

7. Other factors the Secretary of Energy 

considers relevant. 

(42 U.S.C. 6313(a)(6)(B)(ii)) 

EPCA, as codified, also contains what 

is known as an ‘‘anti-backsliding’’ 

provision, which prevents the Secretary 

from prescribing any amended standard 

that either increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of 

a covered product. (42 U.S.C. 

6313(a)(6)(B)(iii)(I)) 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. 

6313(a)(6)(B)(iii)(II)) 

Further, under EPCA’s provisions for 

consumer products, there is a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

customer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 


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applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the applicable test procedure. (42 

U.S.C. 6295(o)(2)(B)(iii)) For this 

rulemaking, DOE considered the criteria 

for rebuttable presumption as part of its 

analysis. 

Additionally, when a type or class of 

covered equipment has two or more 

subcategories, DOE often specifies more 

than one standard level. DOE generally 

will adopt a different standard level 

than that which applies generally to 

such type or class of products for any 

group of covered products that have the 

same function or intended use if DOE 

determines that products within such 

group: (A) Consume a different kind of 

energy from that consumed by other 

covered products within such type (or 

class); or (B) have a capacity or other 

performance-related feature which other 

products within such type (or class) do 

not have and which justifies a higher or 

lower standard. In determining whether 

a performance-related feature justifies a 

different standard for a group of 

products, DOE generally considers such 

factors as the utility to the customer of 

the feature and other factors DOE deems 

appropriate. In a rule prescribing such 

a standard, DOE includes an 

explanation of the basis on which such 

higher or lower level was established. 

DOE considered these criteria for this 

rulemaking. 

Because ASHRAE did not update its 

efficiency levels for CWAF in any of its 

most recent updates to ASHRAE 

Standard 90.1 (e.g., ASHRAE Standard 

90.1–2007, ASHRAE Standard 90.1– 

2010, ASHRAE Standard 90.1–2013), 

DOE is analyzing amended standards 

consistent with the procedures defined 

under 42 U.S.C. 6313(a)(6)(C). 

Specifically, pursuant to 42 U.S.C. 

6313(a)(6)(C)(i)(II), DOE must use the 

procedures established under 

subparagraph (B) when issuing a NOPR. 

As noted above, the statutory provision 

at 42 U.S.C. 6313(a)(6)(B)(ii), recently 

amended by AEMTCA, states that in 

deciding whether a standard is 

economically justified, DOE must 

determine, after receiving comments on 

the proposed standard, whether the 

benefits of the standard exceed its 

burdens by considering, to the 

maximum extent practicable, the seven 

factors, as stated above. 

After carefully reviewing all CWAF 

equipment classes, DOE has tentatively 

concluded that following this 

rulemaking process will provide ‘‘clear 

and convincing evidence’’ that the 

proposed standards for gas-fired and oilfired CWAF which are more stringent 

than those set forth in ASHRAE 

Standard 90.1–2013, would result in 

significant additional conservation of 

energy and would be technologically 

feasible and economically justified, as 

mandated by 42 U.S.C. 6313(a)(6). 

B. Background 

1. Current Standards 

As noted above, EPACT 1992 

amended EPCA to set the current 

minimum energy conservation 

standards for CWAF. (42 U.S.C. 

6313(a)(4)(A) and (B)) These standards 

apply to all CWAF manufactured on or 

after January 1, 1994. The current 

standards are set forth in Table II.1. 

TABLE II.1—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR CWAF 

Equipment type Input capacity Thermal 

efficiency * 

Compliance 

date 

Gas-Fired Furnaces ............................................................................................................... ≥225,000 Btu/h 80% 1/1/1994 

Oil-Fired Furnaces ................................................................................................................. ≥225,000 Btu/h 81% 1/1/1994 

* At the maximum rated capacity (rated maximum input). 

2. History of Standards Rulemaking for 

CWAF 

On October 21, 2004, DOE published 

a final rule in the Federal Register 

which adopted definitions for 

‘‘commercial warm air furnace’’ and 

‘‘thermal efficiency,’’ promulgated test 

procedures for this equipment, and 

recodified the energy conservation 

standards so that the standards are 

located contiguous with the test 

procedures in the Code of Federal 

Regulations (CFR). 69 FR 61916, 61917, 

61939–41. In the same final rule, DOE 

incorporated by reference (see 10 CFR 

431.75) a number of industry test 

standards relevant to commercial warm 

air furnaces, including: (1) American 

National Standards Institute (ANSI) 

Standard Z21.47–1998, ‘‘Gas-Fired 

Central Furnaces,’’ for gas-fired CWAF; 

(2) Underwriters Laboratories (UL) 

Standard 727–1994, ‘‘Standard for 

Safety Oil-Fired Central Furnaces,’’ for 

oil-fired CWAF; (3) provisions from 

Hydronics Institute (HI) Standard BTS– 

2000, ‘‘Method to Determine Efficiency 

of Commercial Space Heating Boilers,’’ 

to calculate flue loss for oil-fired CWAF, 

and (4) provisions from the American 

Society of Heating, Refrigerating, and 

Air-conditioning Engineers (ASHRAE) 

Standard 103–1993, ‘‘Method of Testing 

for Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and 

Boilers,’’ to determine the incremental 

efficiency of condensing furnaces under 

steady-state conditions. Id. at 61940. 

Then in a final rule published in the 

Federal Register on May 16, 2012, DOE 

updated the test procedures for 

commercial warm air furnaces to match 

the procedures specified in ASHRAE 

Standard 90.1–2010, which referenced 

ANSI Z21.47–2006, ‘‘Gas-Fired Central 

Furnaces,’’ for gas-fired CWAF, and UL 

727–2006, ‘‘Standard for Safety for OilFired Central Furnaces,’’ for oil-fired 

furnaces. 77 FR 28928, 28987–88. 

As noted previously, in accordance 

with the requirements of EPCA, as 

amended by AEMTCA, DOE must 

publish either: (1) A notice of 

determination that the current standards 

do not need to be amended, or (2) a 

notice of proposed rulemaking 

containing proposed standards for 

CWAF by December 31, 2013. (42 U.S.C. 

6313(a)(6)(C)(i) and (vi)) Consequently, 

DOE initiated this rulemaking to 

determine whether to amend the current 

standards for CWAF. 

On May 2, 2013, DOE published a 

request for information (RFI) and notice 

of document availability for CWAF. 78 

FR 25627. The notice solicited 

information from the public to help 

DOE determine whether more-stringent 

energy conservation standards for 

CWAF would result in a significant 

additional amount of energy savings and 

whether those standards would be 

technologically feasible and 

economically justified. 

DOE received a number of comments 

from interested parties in response to 

the RFI. These commenters are 

identified in Table II.2. DOE considered 

these comments in the preparation of 

the NOPR. Relevant comments, and 

DOE’s responses, are provided in the 

appropriate sections of this notice. 


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15 In the past DOE presented energy savings 

results for only the 30-year period that begins in the 

year of compliance. In the calculation of economic 

impacts, however, DOE considered operating cost 

savings measured over the entire lifetime of 

products purchased in the 30-year period. DOE has 

chosen to modify its presentation of national energy 

savings to be consistent with the approach used for 

its national economic analysis. 

TABLE II.2—INTERESTED PARTIES PROVIDING WRITTEN COMMENTS ON THE CWAF RFI 

Name Abbreviation Commenter 

type * 

Air-Conditioning, Heating and Refrigeration Institute ..................................................... AHRI .......................................................... IR. 

Appliance Standards Awareness Project, American Council for an Energy-Efficient 

Economy, Natural Resources Defense Council.

ASAP, ACEEE, NRDC (Joint Efficiency 

Advocates).

EA. 

Lennox International Inc. ................................................................................................ Lennox ....................................................... M. 

UTC Climate, Controls & Security ................................................................................. Carrier ....................................................... M. 

Goodman Manufacturing Inc. ......................................................................................... Goodman ................................................... M. 

American Society of Heating, Refrigeration, and Air-Conditioning Engineers .............. ASHRAE .................................................... IR. 

* ‘‘IR’’: Industry Representative; ‘‘M’’: Manufacturer; ‘‘EA’’: Efficiency/Environmental Advocate. 

III. General Discussion 

A. Compliance Date 

As discussed in section II.A, DOE is 

analyzing amended standards pursuant 

to 42 U.S.C. 6313(a)(6)(C)(vi), which 

requires DOE to publish by December 

31, 2013, either a notice of 

determination that standards for this 

type of equipment do not need to be 

amended or a notice of proposed 

rulemaking for any equipment for which 

more than 6 years has elapsed since the 

issuance of the most recent final rule. 

EPCA requires that an amended 

standard prescribed under 42 U.S.C. 

6313(a)(6)(C) must apply to products 

manufactured after the date that is the 

later of: (1) The date 3 years after 

publication of the final rule establishing 

a new standard or (2) the date 6 years 

after the effective date of the current 

standard for a covered product. (42 

U.S.C. 6313(a)(6)(C)(iv)) For CWAF, the 

date 3 years after the publication of the 

final rule would be later than the date 

6 years after the effective date of the 

current standard. As a result, 

compliance with any amended energy 

conservation standards promulgated in 

the final rule would be required 

beginning on the date 3 years after the 

publication of the final rule. 

B. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

See chapter 3 of the NOPR TSD for a 

discussion of the list of technology 

options that were identified. DOE then 

determines which of those means for 

improving efficiency are technologically 

feasible. DOE considers technologies 

incorporated in commercially-available 

equipment or in working prototypes to 

be technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) Practicability to 

manufacture, install, and service; (2) 

adverse impacts on equipment utility or 

availability; and (3) adverse impacts on 

health or safety. 10 CFR part 430, 

subpart C, appendix A, section 

4(a)(4)(ii)–(iv). Section IV.B of this 

notice discusses the results of the 

screening analysis for CWAF, 

particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the trial 

standard levels (TSLs) in this 

rulemaking. For further details on the 

screening analysis for this rulemaking, 

see chapter 4 of the NOPR Technical 

Support Document (TSD). 

Additionally, DOE notes that these 

screening criteria do not directly 

address the proprietary status of design 

options. DOE only considers efficiency 

levels achieved through the use of 

proprietary designs in the engineering 

analysis if they are not part of a unique 

path to achieve that efficiency level (i.e., 

if there are other non-proprietary 

technologies capable of achieving the 

same efficiency). DOE believes the 

proposed standards for the equipment 

covered in this rulemaking would not 

mandate the use of any proprietary 

technologies, and that all manufacturers 

would be able to achieve the proposed 

levels through the use of nonproprietary designs. DOE seeks 

comment on this tentative conclusion 

and requests additional information 

regarding proprietary designs and 

patented technologies. 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered equipment, it must determine 

the maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such equipment. 

Accordingly, in the engineering 

analysis, DOE determined the maximum 

technologically feasible (‘‘max-tech’’) 

improvements in energy efficiency for 

CWAF, using the design parameters for 

the most efficient equipment available 

on the market or in working prototypes. 

(See chapter 5 of the NOPR TSD.) The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C.2.b of this proposed rule. 

C. Energy Savings 

1. Determination of Savings 

For each TSL, DOE projected energy 

savings from the equipment that is the 

subject of this rulemaking purchased in 

the 30-year period that begins in the 

year of compliance with potential 

amended standards (2018–2047). The 

savings are measured over the entire 

lifetime of equipment purchased in the 

30-year analysis period.15 DOE 

quantified the energy savings 

attributable to each TSL as the 

difference in energy consumption 

between each standards case and the 

base case. The base case represents a 

projection of energy consumption in the 

absence of amended mandatory 

efficiency standards, and it considers 

market forces and policies that affect 

demand for more-efficient products. 

DOE used its national impact analysis 

(NIA) spreadsheet model to estimate 

energy savings from amended standards 

for the products that are the subject of 

this rulemaking. The NIA spreadsheet 

model (described in section IV.H of this 

notice) calculates energy savings in site 

energy, which is the energy directly 


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16Primary energy consumption refers to the 

direct use at the source, or supply to users without 

transformation, of crude energy; that is, energy that 

has not been subjected to any conversion or 

transformation process. 

consumed by products at the locations 

where they are used. For CWAF, the 

energy savings are primarily in the form 

of natural gas, which is considered to be 

primary energy.16

DOE has begun to also estimate fullfuel-cycle energy savings, as discussed 

in DOE’s statement of policy and notice 

of policy amendment. 76 FR 51281 

(August 18, 2011), as amended at 77 FR 

49701 (August 17, 2012). The full-fuelcycle (FFC) metric includes the energy 

consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, 

natural gas, petroleum fuels), which 

collectively presents a more complete 

picture of the impacts of energy 

efficiency standards. DOE’s approach is 

based on calculation of an FFC 

multiplier for each of the energy types 

used by covered products and 

equipment. For more information on 

FFC energy savings, see section IV.H. 

DOE reports both primary energy and 

FFC energy savings in section V.B.3.a of 

this NOPR. 

2. Significance of Savings 

To adopt more-stringent standards for 

CWAF, DOE must determine that such 

action would result in significant 

additional conservation of energy. (42 

U.S.C. 6313(a)(6)(A)(ii)(II)) Although the 

term ‘‘significant’’ is not defined in the 

Act, the U.S. Court of Appeals, in 

Natural Resources Defense Council v. 

Herrington, 768 F.2d 1355, 1373 (D.C. 

Cir. 1985), indicated that Congress 

intended ‘‘significant’’ energy savings in 

the context of EPCA to be savings that 

were not ‘‘genuinely trivial.’’ DOE has 

tentatively concluded that the energy 

savings associated with the proposed 

standards—0.52 quads due to CWAFs 

shipped in 2018–2047—are significant. 

D. Economic Justification 

1. Specific Criteria 

As discussed above, EPCA provides 

seven factors to be evaluated in 

determining whether a potential morestringent energy conservation standard 

for CWAF is economically justified. (42 

U.S.C. 6313(a)(6)(B)(ii)(I)–(VII)) The 

following sections discuss how DOE has 

addressed each of those seven factors in 

this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of a 

potential amended standard on 

manufacturers, DOE conducts a 

manufacturer impact analysis (MIA), as 

discussed in section IV.J. (42 U.S.C. 

6313(a)(6)(B)(ii)(I)) DOE first uses an 

annual cash-flow approach to determine 

the quantitative impacts. This step 

includes both a short-term assessment— 

based on the cost and capital 

requirements during the period between 

when a regulation is issued and when 

entities must comply with the 

regulation—and a long-term assessment 

over a 30-year period. The industrywide impacts analyzed include: (1) 

Industry net present value (INPV), 

which values the industry on the basis 

of expected future cash flows; (2) cash 

flows by year; (3) changes in revenue 

and income; and (4) other measures of 

impact, as appropriate. Second, DOE 

analyzes and reports the impacts on 

different subgroups of manufacturers, 

including impacts on small 

manufacturers. Third, DOE considers 

the impact of standards on domestic 

manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

For individual consumers, measures 

of economic impact include the changes 

in life-cycle cost (LCC) and payback 

period (PBP) associated with new or 

amended standards. The LCC is 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the economic impacts 

applicable to a particular rulemaking. 

DOE also evaluates the LCC impacts of 

potential standards on identifiable 

subgroups of consumers that may be 

affected disproportionately by a national 

standard. 

b. Life-Cycle Costs 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product compared to any increase in the 

price of the covered product that are 

likely to result from the imposition of 

the standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(II)) DOE conducts this 

comparison in its LCC and PBP analysis. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating expense 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the product. The LCC 

analysis requires a variety of inputs, 

such as product prices, product energy 

consumption, energy prices, 

maintenance and repair costs, product 

lifetime, and consumer discount rates. 

To account for uncertainty and 

variability in specific inputs, such as 

product lifetime and discount rate, DOE 

uses a distribution of values, with 

probabilities attached to each value. For 

the LCC analysis, DOE assumes that 

consumers will purchase the covered 

products in the first year of compliance 

with amended standards. 

The LCC savings and the PBP for the 

considered efficiency levels are 

calculated relative to a base case that 

reflects projected market trends in the 

absence of amended standards. DOE 

identifies the percentage of consumers 

estimated to receive LCC savings or 

experience an LCC increase, in addition 

to the average LCC savings associated 

with a particular standard level. DOE’s 

LCC and PBP analysis is discussed in 

further detail in section IV.F. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(III)) As discussed in 

section IV.H, DOE uses the NIA 

spreadsheet to project national energy 

savings. 

d. Lessening of Utility or Performance of 

Equipment 

In establishing classes of equipment, 

and in evaluating design options and 

the impact of potential standard levels, 

DOE must consider any lessening of the 

utility or performance of the considered 

products likely to result from the 

standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(IV)) Based on data 

available to DOE, the proposed 

standards would not reduce the utility 

or performance of the products under 

consideration in this rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider the 

impact of any lessening of competition, 

as determined in writing by the 

Attorney General, that is likely to result 

from a proposed standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(V)) DOE will transmit a 

copy of the proposed rule to the 

Attorney General with a request that the 

Department of Justice (DOJ) provide its 

determination on this issue. DOE will 

publish and respond to the Attorney 

General’s determination in the final 

rule. 


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17For more information on NEMS, refer to the 

U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary 

is National Energy Modeling System: An Overview 

2003, DOE/EIA–0581(2003) (March, 2003). 

f. Need for National Energy 

Conservation 

In evaluating the need for national 

energy conservation, DOE expects that 

the energy savings from the proposed 

standards are likely to provide 

improvements to the security and 

reliability of the nation’s energy system. 

(42 U.S.C. 6313(a)(6)(B)(ii)(VI)) 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how standards may affect the 

nation’s needed power generation 

capacity, as discussed in section IV.M. 

The proposed standards also are 

likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases associated with energy 

production. DOE reports the emissions 

impacts from the proposed standards, 

and from each TSL it considered, in 

section IV.K of this notice. DOE also 

reports estimates of the economic value 

of some of the emissions reductions 

resulting from the considered TSLs, as 

discussed in section IV.L. 

g. Other Factors 

EPCA allows the Secretary of Energy, 

in determining whether a standard is 

economically justified, to consider any 

other factors that the Secretary deems to 

be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) DOE did not 

consider other factors for this notice. 

2. Rebuttable Presumption 

EPCA creates a rebuttable 

presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effects that proposed 

energy conservation standards would 

have on the payback period for 

consumers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the Nation, and the environment. The 

results of this analysis serve as the basis 

for DOE’s evaluation of the economic 

justification for a potential standard 

level (thereby supporting or rebutting 

the results of any preliminary 

determination of economic 

justification). The rebuttable 

presumption payback calculation is 

discussed in section IV.F of this 

proposed rule. 

IV. Methodology and Discussion of 

Related Comments 

DOE used four analytical tools to 

estimate the impact of the proposed 

standards for CWAF. The first tool is the 

LCC spreadsheet, a spreadsheet that 

calculates LCCs and PBPs of potential 

new energy conservation standards, and 

the second tool, the LCC inputs 

spreadsheet, is a spreadsheet that 

provides detailed inputs to the LCC 

spreadsheet. The third tool, the NIA 

spreadsheet, is a spreadsheet that 

calculates national energy savings and 

net present value resulting from 

potential amended energy conservation 

standards. The fourth spreadsheet tool, 

the Government Regulatory Impact 

Model (GRIM), helped DOE to assess 

manufacturer impacts. 

Additionally, DOE used a variant of 

EIA’s National Energy Modeling System 

(NEMS) for the utility and emissions 

analyses. NEMS is a public domain, 

multi-sectored, partial equilibrium 

model of the U.S. energy sector that EIA 

uses NEMS to prepare its Annual 

Energy Outlook (AEO), a widely known 

energy forecast for the United States.17

A. Market and Technology Assessment 

1. General 

For the market and technology 

assessment for CWAF, DOE developed 

information that provided an overall 

picture of the market for the equipment 

concerned, including the purpose of the 

equipment, the industry structure, 

market characteristics, and the 

technologies used in the equipment. 

This activity included both quantitative 

and qualitative assessments, based 

primarily on publicly-available 

information. The subjects addressed in 

the market and technology assessment 

for this rulemaking include scope of 

coverage, equipment classes, types of 

equipment sold and offered for sale, 

manufacturers, and technology options 

that could improve the energy efficiency 

of the equipment under examination. 

The key findings of DOE’s market and 

technology assessment are summarized 

below. For additional detail, see chapter 

3 of the NOPR TSD. 

2. Scope of Coverage and Equipment 

Classes 

The proposed energy conservation 

standards in the NOPR cover 

commercial warm air furnaces, as 

defined by EPCA and DOE. EPCA 

defines ‘‘warm air furnace’’ as meaning 

‘‘a self-contained oil- or gas-fired 

furnace designed to supply heated air 

through ducts to spaces that require it 

and includes combination warm air 

furnace/electric air conditioning units 

but does not include unit heaters and 

duct furnaces.’’ (42 U.S.C. 6311(11)(A)) 

DOE defines ‘‘commercial warm air 

furnace’’ as meaning ‘‘a warm air 

furnace that is industrial equipment, 

and that has a capacity (rated maximum 

input) of 225,000 Btu per hour or more.’’ 

10 CFR 431.72. Accordingly, this 

rulemaking covers equipment in these 

categories having a rated capacity of 

225,000 Btu/h or higher and that are 

designed to supply heated air in 

commercial buildings via ducts 

(excluding unit heaters and duct 

furnaces). 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered equipment into 

equipment classes based on the type of 

energy used or by capacity or other 

performance-related features that would 

justify having a higher or lower standard 

from that which applies to other 

equipment classes. In determining 

whether a performance-related feature 

would justify a different standard, DOE 

considers such factors as the utility to 

the consumer of the feature and other 

factors DOE determines are appropriate. 

The current equipment classes for 

CWAF were defined in the EPACT 1992 

amendments to EPCA, and divide this 

equipment into two classes based on 

fuel type (i.e., one for gas-fired units, 

and one for oil-fired units). Table IV.1 

shows the current equipment class 

structure for CWAF. 

TABLE IV.1—CURRENT CWAF 

EQUIPMENT CLASSES

Fuel type 

Heating 

capacity 

(Btu/h) 

Thermal 

efficiency 

(%) 

Gas-fired ............... ≥225,000 80 

Oil-fired ................. ≥225,000 81 

In the May 2, 2013 RFI, DOE stated 

that it planned to use the existing 

CWAF equipment classes for its analysis 

of amended energy conservation 

standards. DOE requested feedback on 

the current equipment classes and 

sought information regarding other 

equipment classes it should consider for 


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inclusion in its analysis. 78 FR 25627, 

25629–31. 

One particular issue on which DOE 

sought comment was the need for 

separate equipment classes for units 

designed to be installed indoors (i.e., 

‘‘non-weatherized’’ units) and units 

designed to be installed outdoors (i.e., 

‘‘weatherized’’ units). High efficiency, 

condensing CWAF produce acidic 

condensate during operation due to the 

cooling of flue gasses below their dew 

point. Condensate is more difficult to 

manage in weatherized CWAF than in 

non-weatherized CWAF, due to the risk 

of the condensate freezing after exiting 

the furnace. For gas-fired models, which 

represent the large majority of CWAF on 

the market, most of the models on the 

market are weatherized units, and a 

small number are non-weatherized. For 

oil-fired units, which make up a very 

small percentage of the CWAF models 

on the market, all models that DOE 

identified during the market assessment 

are non-weatherized. 

In response to the RFI, Carrier 

supported the idea of separate product 

classes for weatherized and nonweatherized commercial warm air 

furnaces and stated that unit heaters and 

duct heaters could potentially fall into 

these two classifications. (Carrier, No. 2 

at p. 1) AHRI asserted that it believes 

that separate classes are needed for nonweatherized and weatherized CWAF 

due to issues related to condensate 

management, but noted that creating 

separate equipment classes would not 

lead to any significant energy savings 

because a majority of the commercial 

warm air furnace market consists of 

non-condensing weatherized 

equipment. (AHRI, No. 7 at p. 4) 

Similarly, Goodman commented that 

there is a very small segment of the 

commercial warm air furnace market 

that consists of units installed indoors, 

which would indicate that the costs 

would far outweigh the benefits of 

having separate equipment classes 

(indoor/outdoor). (Goodman, No. 6 at p. 

2) 

DOE considered these comments and 

has tentatively decided to continue the 

use of the existing equipment classes. 

DOE agrees with AHRI that 

differentiating between weatherized and 

non-weatherized CWAF for establishing 

product classes would provide little 

opportunity for additional energy 

savings or benefits as compared to the 

current equipment class structure. 

Therefore, DOE is not proposing to 

adopt separate equipment classes for 

weatherized and non-weatherized 

equipment. As to Carrier’s assertion that 

unit heaters and duct heaters could fall 

into the classification of commercial 

warm air furnaces, DOE notes that the 

definition of ‘‘warm air furnace’’ in 

EPCA explicitly excludes such 

equipment as it defines a warm air 

furnace as: ‘‘a self-contained oil- or gasfired furnace designed to supply heated 

air through ducts to spaces that require 

it and includes combination warm air 

furnace/electric air conditioning units 

but does not include unit heaters and 

duct furnaces.’’ (42 U.S.C. 6311(11)(A)) 

Another specific issue identified in 

the May 2, 2013 RFI was the potential 

gap in coverage of DOE’s regulations for 

three-phase commercial furnaces with 

an input rating below 225,000 Btu/h. 78 

FR 25627, 25630–31. Current Federal 

energy conservation standards for 

CWAF only cover equipment with an 

input rating at or above 225,000 Btu/h, 

and Federal energy conservation 

standards for residential furnaces cover 

products with input ratings below 

225,000 Btu/h, but only for single-phase 

products. Thus, there are no Federal 

standards for furnaces with an input 

rating below 225,000 Btu/h that use 3- 

phase electric power. 

Carrier stated that weatherized and 

non-weatherized product classes should 

be created to cover three-phase 

commercial warm air furnaces with 

input ratings below 225,000 Btu/h, and 

that DOE should adopt the current 

levels in ASHRAE Standard 90.1 for 

these products. However, Carrier stated 

that there would be limited energy 

savings for new 3-phase, less than 

225,000 Btu/h product classes because 

many of those products share designs 

with current covered products that 

already meet efficiency levels set forth 

in ASHRAE Standard 90.1. (Carrier, No. 

2 at p. 2) Lennox supported regulation 

of three-phase commercial warm air 

furnaces with input ratings below 

225,000 Btu/h, stating that closing this 

gap would prevent a manufacturer from 

entering the market with a cost 

advantage. (Lennox, No. 3 at p. 2) 

Conversely, AHRI stated that creating an 

equipment class for three-phase 

commercial warm air furnaces with an 

input rating below 225,000 Btu/h would 

not lead to any additional energy 

savings since they share the same design 

as their single-phase counterparts, and 

consequently have similar thermal 

efficiencies. (AHRI, No. 7 at p. 4) 

Goodman reiterated this point, stating 

that most manufacturers have the same 

basic design for single- and three-phase 

products and added that the efficiency 

of three-phase equipment with an input 

rating below 225,000 Btu/h generally 

meet the requirements of single-phase 

products. Therefore, Goodman argued 

that any additional regulations would be 

duplicative and burdensome. 

(Goodman, No. 6 at p. 3) 

Upon considering the comments in 

response to the RFI on the potential for 

a new equipment class for three-phase 

commercial warm air furnaces with an 

input capacity less than 225,000 Btu/h, 

DOE has tentatively decided not to 

extend coverage to this equipment at 

this time. DOE agrees with commenters 

who pointed out the limited potential 

for energy savings due to the fact that 

equipment with these characteristics 

already meets efficiency levels specified 

by ASHRAE Standard 90.1. In its review 

of the market, DOE did not identify any 

equipment not meeting or exceeding the 

ASHRAE Standard 90.1 levels, and thus, 

has tentatively concluded that a 

separate equipment class and standard 

for this equipment may be unnecessarily 

duplicative and provide little 

opportunity for energy savings. Further, 

three-phase commercial warm air 

furnaces with input ratings below 

225,000 Btu/h typically achieve the 

same efficiency as their single-phase 

residential counterparts. Thus, the 

efficiency of this equipment could be 

expected to be consistent with 

residential furnace energy conservation 

standards. 

Lastly, in response to the RFI, several 

commenters suggested that DOE should 

adopt an upper limit to the input 

capacity of covered commercial warm 

air furnaces. Carrier recommended that 

DOE should consider an upper limit for 

weatherized furnaces corresponding to 

DOE’s upper limit of 760,000 Btu/h of 

cooling capacity for commercial air 

conditioners, and noted that for 760,000 

Btu/h air conditioners, the maximum 

heat input of equipment in their product 

offering is 1.2 million Btu/h. (Carrier, 

No. 2 at p. 2) AHRI also recommended 

an upper limit on input capacity and 

suggested that the limit be 2,000,000 

Btu/h. According to AHRI, this is the 

maximum input capacity associated 

with a commercial warm air furnace 

that is paired with an air conditioner 

having a cooling capacity of 760,000 

Btu/h. (AHRI, No. 7 at p. 5) 

DOE notes that neither the statute nor 

DOE’s existing regulations for CWAF 

specify an upper limit to the input 

rating of covered equipment. 

Establishing an upper limit as suggested 

by interested parties would potentially 

remove coverage of models that would 

have otherwise been covered by DOE 

regulations. As such, DOE sees 

advantage to leaving the upper end of 

the range open, such that the standard 

can accommodate any very large CWAF 

which may come on the market in the 

future. Therefore, DOE has tentatively 


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18This design option includes a larger 

combustion inducer (to overcome the pressure drop 

of the increased HX area). The larger combustion 

inducer does not directly lead to a higher thermal 

efficiency, but would allow the implementation of 

other technologies (i.e., HX improvements) that 

would cause the furnace to operate more efficiently. 

19This design option includes a larger 

combustion inducer fan, upgraded housing for 

combustion blowers, stainless steel impellers, 

condensate heater, and condensate drainage system 

that would be required for condensing operation. 

Although these design changes do not directly lead 

to a higher thermal efficiency, they allow the 

implementation of condensing operation, which 

causes the furnace to operate more efficiently. 

decided not to establish an upper limit 

on the input capacity of covered CWAF. 

DOE requests comment on the 

proposed scope of coverage and 

equipment classes for this rulemaking. 

3. Technology Options 

As part of the market and technology 

assessment, DOE uses information about 

existing and past technology options 

and prototype designs to help identify 

technologies that manufacturers could 

use to improve CWAF energy efficiency. 

Initially, these technologies encompass 

all those that DOE believes are 

technologically feasible. Chapter 3 of 

the NOPR TSD includes the detailed list 

and descriptions of all technology 

options identified for this equipment. 

In the May 2, 2013 RFI, DOE 

requested comment on technology 

options that could be used to improve 

the thermal efficiency of CWAF. 78 FR 

25627, 25631. The comments generally 

centered on how to improve the 

efficiency of non-condensing CWAF 

while still achieving efficiencies in the 

non-condensing range (i.e., less than 90 

percent thermal efficiency), and on how 

to improve the efficiency of noncondensing CWAF by utilizing 

condensing operation (which would 

achieve a thermal efficiency greater than 

90 percent). 

Carrier stated that raising the thermal 

efficiency from 80 to 82 percent requires 

more heat transfer surface. (Carrier, No. 

2 at p. 3) Lennox commented that all 

their warm air furnaces are rated at 80 

percent thermal efficiency and are 

constructed with induced draft 

combustion system with multiple 

burners firing into aluminized steel 

tubes. Lennox explained that these 

tubes are enhanced on the flue portion 

to improve heat transfer and balance 

flow between the parallel flow paths. 

Further, Lennox expounded that heat 

exchanger tubes are arranged below or 

beside the supply blower for optimal 

coverage of the tube surface area, and 

the tubes are sloped from the flue outlet 

back to the burner area to allow any 

condensate produced by the heat 

exchanger to drain out in order to 

prevent heat exchanger corrosion. 

Lennox stated that 82-percent thermal 

efficiency furnaces are similar to 80- 

percent furnaces except that more heat 

transfer surface is needed, and the 

amount of excess air required to support 

complete combustion has to be reduced, 

and the commenter asserted that the 

additional flue side pressure drop 

requires a more powerful combustion 

inducer (which would draw more 

electricity). Lennox stated that the lower 

excess air would reduce the ability for 

the furnace to operate without derating 

at high-altitude conditions, and 

expressed its belief that there would be 

a risk of corrosion and heat exchanger 

failure at 82 percent for a very small 

benefit. (Lennox, No. 3 at p. 4) 

To reach 90 percent thermal 

efficiency, Carrier stated that a 

secondary heat exchanger is required 

along with a reliable condensate 

management system. Carrier described 

the challenges for achieving thermal 

efficiencies of greater than 82 percent, 

including dealing with condensate 

freezing and disposal of acidic 

condensate. (Carrier, No. 2 at p. 2) AHRI 

stated that in order to increase the 

efficiency of a commercial gas warm air 

furnace to a condensing level, the heat 

exchanger surface area must be 

increased. AHRI further explained that 

handling acidic condensate would 

require condensate disposal lines, 

which cannot be drained on ground or 

on the roof. (AHRI, No. 7 at p. 3) Lennox 

commented that condensing furnaces 

would necessitate a secondary heat 

exchanger, which would require a much 

more expensive corrosion-resistant 

material. Further, Lennox explained that 

combustion blowers with upgraded 

housing and stainless steel impellers to 

protect against corrosion would be 

required. Lennox reported that it 

participated in a 1988 Gas Research 

Institute study on the feasibility of a 90+ 

percent gas furnace, where condensate 

was managed by draining it into the 

building; Lennox explained that 

incremental product costs were high 

due to use of a stainless steel secondary 

heat exchanger, a larger combustion 

inducer, piping, and thermostaticallycontrolled heat tape, and that the 

additional energy used to overcome the 

pressure drop offset the gas savings. 

Lennox added that a 90-percentefficiency gas furnace would have even 

more barriers in horizontal applications 

(which make up approximately 15 to 20 

percent of the market) because the 

condensate would have to be pumped 

into the building. (Lennox, No. 3 at p. 

5) Goodman stated that while 

technology exists that allows 

condensing operation of commercial 

warm air furnaces, the application 

requirements are very onerous, costly, 

and potentially dangerous. Goodman 

further stated that many condensate 

lines today are exposed to extreme 

weather conditions and are apt to crack 

or fail at joints, and such a failure would 

then leak acidic condensate directly 

onto the building rooftop with a high 

risk of causing holes in the roof surface. 

(Goodman, No. 6 at p. 3) 

After considering the comments, 

discussing approaches for improving 

efficiency with manufacturers during 

interviews, and reviewing the market for 

CWAF, DOE primarily considered the 

following technology options for 

improving the rated thermal efficiency 

of CWAF in the development of this 

NOPR: 

• Increased heat exchanger (HX) surface 

area 18

• Improved flue side HX enhancements 

(e.g., dimples, turbulators) 

• Secondary HX (stainless steel) 19

DOE notes that many commenters 

acknowledged that a secondary heat 

exchanger for condensing operation is a 

possible technology option for CWAF, 

but also that that technology has 

considerable issues to overcome when 

used in weatherized equipment. These 

issues relate specifically to the handling 

of acidic condensate produced by a 

condensing furnace in the secondary 

heat exchanger. Condensate must be 

drained from the furnace to prevent 

build-up in the secondary heat 

exchanger, and properly disposed of 

after exiting into the external 

environment. Some building codes limit 

the disposal of condensate into the 

municipal sewage system, so the 

condensate must be passed through a 

neutralizer to reduce its acidity to 

appropriate levels prior to disposal. In 

weatherized installations, it is more 

difficult to access the municipal sewage 

system than in non-weatherized 

installations. Condensate produced by a 

weatherized condensing furnace must 

flow naturally or be pumped through 

pipes to the nearest disposal drain, 

which may not be in close proximity to 

the furnace. In cold environments, there 

is a risk of the condensate freezing as it 

flows through these pipes, which can 

cause an eventual back-up of 

condensate into the heat exchanger, 

resulting in significant damage to the 

furnace. 

Despite these issues, DOE found in its 

review of the market that multiple 

manufacturers offer weatherized HVAC 

equipment with a condensing furnace 

heating section. DOE believes that this 

indicates that many of the issues 

explained by the commenters can be 


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overcome, and thus, DOE considered a 

secondary condensing heat exchanger as 

a technology option. As discussed in 

section IV.B and IV.C.2.b, this 

technology was ultimately passed 

through the screening analysis and 

considered in the engineering analysis. 

Regarding condensate disposal, DOE 

included the cost of a condensate 

disposal lines for all condensing 

installations. For more details, see 

section IV.F.1. 

DOE also identified the following 

technology options for improving the 

efficiency of CWAF, which were either 

removed from the analysis because they 

were screened out (see section IV.B) or 

because they did not improve the rated 

thermal efficiency as measured by the 

DOE test procedure. 

• Pulse combustion 

• Low NOX premix burners 

• Low pressure, air-atomized burners 

• Burner derating 

• Two-stage or modulating burners 

DOE requests comment on the 

technologies identified in this 

rulemaking, as well as the technologies 

which were primarily considered as the 

methods for increasing thermal 

efficiency of commercial warm air 

furnaces. 

B. Screening Analysis 

After DOE identified the technologies 

that might improve the energy efficiency 

of CWAF, DOE conducted a screening 

analysis. The purpose of the screening 

analysis is to determine which options 

to consider further and which to screen 

out. DOE consulted with industry, 

technical experts, and other interested 

parties in developing a list of design 

options. DOE then applied the following 

set of screening criteria to determine 

which design options are unsuitable for 

further consideration in the rulemaking: 

• Technological Feasibility: DOE will 

consider only those technologies 

incorporated in commercial equipment 

or in working prototypes to be 

technologically feasible. 

• Practicability to Manufacture, 

Install, and Service: If mass production 

of a technology in commercial 

equipment and reliable installation and 

servicing of the technology could be 

achieved on the scale necessary to serve 

the relevant market at the time of the 

effective date of the standard, then DOE 

will consider that technology 

practicable to manufacture, install, and 

service. 

• Adverse Impacts on Equipment 

Utility or Equipment Availability: DOE 

will not further consider a technology if 

DOE determines it will have a 

significant adverse impact on the utility 

of the equipment to significant 

subgroups of customers. DOE will also 

not further consider a technology that 

will result in the unavailability of any 

covered equipment type with 

performance characteristics (including 

reliability), features, sizes, capacities, 

and volumes that are substantially the 

same as equipment generally available 

in the United States at the time. 

• Adverse Impacts on Health or 

Safety: DOE will not further consider a 

technology if DOE determines that the 

technology will have significant adverse 

impacts on health or safety. 

(10 CFR part 430, subpart C, appendix 

A, 4(a)(4) and 5(b)) 

Additionally, DOE notes that these 

screening criteria do not directly 

address the propriety status of design 

options. DOE only considers efficiency 

levels achieved through the use of 

proprietary designs in the engineering 

analysis if they are not part of a unique 

path to achieve that efficiency level (i.e., 

if there are other non-proprietary 

technologies capable of achieving the 

same efficiency). DOE believes the 

proposed standards for the CWAF 

equipment covered in this rulemaking 

would not mandate the use of any 

proprietary technologies, and that all 

manufacturers would be able to achieve 

the proposed levels through the use of 

non-proprietary designs. DOE seeks 

comment on this tentative conclusion 

and requests additional information 

regarding proprietary designs and 

patented technologies. 

Technologies that pass through the 

screening analysis are referred to as 

‘‘design options’’ and are subsequently 

examined in the engineering analysis for 

consideration in DOE’s downstream 

cost-benefit analysis. In view of the 

above factors, DOE screened out the 

following design options listed below in 

Table IV.2. 

TABLE IV.2—SCREENED TECHNOLOGY OPTIONS

Technology option Reason for screening out 

Pulse Combustion .................................................................................... Adverse impact on utility; potential for adverse impact on safety. 

Low NOX Premix Burner .......................................................................... Technological feasibility. 

Burner Derating ........................................................................................ Adverse impact on utility. 

Low Pressure, Air-Atomized Burner ......................................................... Technological Feasibility. 

Based on the screening analysis, DOE 

identified the following seven design 

options for further consideration in the 

engineering analysis: 

• Condensing secondary heat exchanger 

• Increased heat exchanger surface area 

• Incorporation of heat exchanger 

surface features (e.g., dimples) 

• Use of heat exchanger baffles and 

turbulators 

• Use of concentric venting of flue gases 

• Improved combustion air flow (oilfired) 

• High-static oil burner 

A full description of each technology 

option is included in chapter 3 of the 

TSD, and additional discussion of the 

screening analysis is included in 

chapter 4 of the TSD. 

C. Engineering Analysis 

The engineering analysis establishes 

the relationship between an increase in 

energy efficiency of the equipment and 

the increase in manufacturer selling 

price (MSP) associated with that 

efficiency level. This relationship serves 

as the basis for the cost-benefit 

calculations for commercial consumers, 

manufacturers, and the Nation. In 

determining the cost-efficiency 

relationship, DOE estimates the increase 

in manufacturer cost associated with 

increasing the efficiency of equipment 

above the baseline up to the maximum 

technologically feasible (‘‘max-tech’’) 

efficiency level for each equipment 

class. 

1. Methodology 

DOE typically structures its 

engineering analysis using one or more 

of three identified basic methods for 

generating manufacturing costs: (1) The 

design-option approach, which provides 

the incremental costs of adding 

individual technology options (from the 

market and technology assessment) that 

can be added alone or in combination to 

a baseline model in order to improve its 

efficiency (i.e., lower its energy use); (2) 

the efficiency-level approach, which 

provides the incremental costs of 

moving to higher energy efficiency 

levels, without regard to the particular 

design option(s) used to achieve such 

increases; and (3) the reverseVerDate Sep<11>2014 19:26 Feb 03, 2015 Jkt 235001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 E:\FR\FM\04FEP2.SGM 04FEP2

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20For more information see: http://

cafs.ahrinet.org/gama_cafs/sdpsearch/

search.jsp?table=CFurnace. 

21Makeup air applications require fresh outdoor 

air that is brought into a building through the 

ventilation system, and do not allow air to be 

recirculated through the building. 

engineering (or cost-assessment) 

approach, which provides ‘‘bottom-up’’ 

manufacturing cost assessments for 

achieving various levels of increased 

efficiency, based on teardown analyses 

(or physical teardowns) providing 

detailed data on costs for parts and 

material, labor, shipping/packaging, and 

investment for models that operate at 

particular efficiency levels. A 

supplementary method called a catalog 

teardown uses published manufacturer 

catalogs and supplementary component 

data to estimate the major physical 

differences between a piece of 

equipment that has been physically 

disassembled and another piece of 

similar equipment for which catalog 

data are available to determine the cost 

of the latter equipment. 

In the RFI, DOE stated that in order 

to create the cost-efficiency relationship 

for CWAF, it anticipated having to 

structure its engineering analysis using 

the reverse-engineering approach, 

potentially including physical and 

catalog teardowns. DOE requested 

comments on the approach outlined in 

the RFI and on the appropriate 

representative capacities for each 

equipment class. 78 FR 25627, 25631 

(May 2, 2013). 

In response to the RFI, Carrier stated 

that equipment is available for teardown 

analysis to develop a cost-efficiency 

relationship between 80 percent and 82 

percent, but noted that it may be 

difficult to draw clear conclusions from 

the data. However, Carrier added that it 

was unclear how to analyze a 90-percent 

efficiency level through a teardown 

analysis. 

For this NOPR, DOE conducted the 

engineering analysis using the reverseengineering approach to estimate the 

costs of achieving various efficiency 

levels. DOE selected two gas-fired 

CWAF in the non-condensing efficiency 

range for physical teardowns at an input 

rating of 250,000 Btu/h, which was 

considered to be the representative 

input rating for analysis. DOE also 

performed a physical teardown of an 

oil-fired CWAF at 81-percent thermal 

efficiency at an input rating of 400,000 

Btu/h, which was subsequently scaled 

down via cost modeling techniques to 

represent a unit of the representative 

250,000 Btu/h input rating. DOE seeks 

comment regarding the applicability of 

these teardown units to represent the 

range of potential input capacities on 

the market. Additional detail on the 

teardowns performed is provided in 

chapter 5, section 5.6.2, of the proposed 

rule TSD. In addition, DOE used catalog 

data and information from physical 

teardowns to virtually model a gas-fired 

unit at the max-tech 92-percent thermal 

efficiency level, as well as two oil-fired 

furances (at 82 percent and the max-tech 

92 percent thermal efficiency). 

2. Efficiency Levels 

a. Baseline Efficiency Levels 

The baseline model is used as a 

reference point for each equipment class 

in the engineering analysis and the lifecycle cost and payback-period analyses, 

which provides a starting point for 

analyzing potential technologies that 

provide energy efficiency 

improvements. Generally, DOE 

considers ‘‘baseline’’ equipment to refer 

to a model or models having features 

and technologies that just meet, but do 

not exceed, the minimum energy 

conservation standard. In establishing 

the baseline efficiency level for this 

analysis, DOE used the existing 

minimum energy conservation 

standards for CWAF to identify baseline 

units. The baseline thermal efficiency 

levels for each equipment class are 

presented below in Table IV.3. 

TABLE IV.3—BASELINE THERMAL

EFFICIENCY LEVELS FOR CWAF 

Equipment class 

Baseline 

efficiency 

level 

(%) 

Gas-fired Commercial Warm 

Air Furnace ........................... 80 

Oil-fired Commercial Warm Air 

Furnace ................................. 81 

b. Incremental and Max-Tech Efficiency 

Levels 

For each equipment class, DOE 

analyzes several efficiency levels and 

determines the incremental cost at each 

of these levels. For this NOPR, DOE 

developed efficiency levels based on a 

review of available equipment. DOE 

compiled a database of the CWAF 

market to determine what types of 

equipment are currently available to 

commercial consumers. At each 

representative capacity, DOE surveyed 

various manufacturers’ equipment 

offerings to identify the commonlyavailable efficiency levels. By 

identifying the most prevalent energy 

efficiencies in the range of available 

equipment, DOE can establish a 

technology path that manufacturers 

would typically use to increase the 

thermal efficiency of a CWAF and 

corresponding efficiency levels along 

that technology path. 

DOE established incremental thermal 

efficiency levels for each equipment 

class. The incremental thermal 

efficiency levels are representative of 

efficiency levels along the technology 

paths that manufacturers of CWAF 

commonly use to maintain cost-effective 

designs while increasing the thermal 

efficiency. DOE reviewed AHRI’s 

Directory of Certified Product 

Performance,20 manufacturer catalogs, 

and other publicly-available literature to 

determine which thermal efficiency 

levels are the most prevalent for each 

representative equipment class. For gasfired CWAF, DOE chose two efficiency 

levels between the baseline and maxtech for analysis (see Table IV.4). For 

oil-fired CWAF, DOE chose one thermal 

efficiency level between the baseline 

and max-tech for analysis (see Table 

IV.5). 

Carrier stated that in the current 

market, the max-tech efficiency level for 

gas-fired weatherized furnaces is 81- 

percent to 82-percent thermal efficiency, 

pointing out that no AHRI member 

makes a more efficient gas-fired furnace, 

and asserting that 90 percent is not 

currently feasible. (Carrier, No. 2 at p. 2) 

Lennox described how an 82-percent 

gas-fired commercial furnace could be 

designed, but then expressed significant 

concerns about trying to develop 

furnaces at 82-percent thermal 

efficiency. The commenter asserted that 

there would be an undue risk of 

corrosion and heat exchanger failure for 

a very small benefit in gas consumption 

at this efficiency level. Lennox also 

commented that the two gas-fired 90- 

percent thermal efficiency model lines 

available on the market currently are for 

makeup air applications,21 which is a 

niche market. (Lennox, No. 3 at pp. 4– 

5) AHRI stated that since January 1, 

1994, the efficiency trends for gas-fired 

commercial warm air furnaces have 

stayed near a thermal efficiency of 80 

percent. As discussed previously in 

section IV.A.3, many of the commenters 

also noted concerns regarding issues 

with condensate management in 

weatherized furnaces with thermal 

efficiencies at or above 90 percent. 

DOE considered these comments in 

conjunction with its review of the 

market. DOE found several 

manufacturers that offer gas-fired 

equipment at 81-percent thermal 

efficiency. In addition, although only 

one manufacturer has gas-fired 

equipment rated at 82-percent thermal 

efficiency, there is equipment available 

across a wide range of input capacities 

indicating that the entire product family 

would be capable of meeting 82-percent 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
6196 Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 

22Available at: https://www.ahridirectory.org/

ahridirectory/pages/home.aspx. 

23Available at: http://

www.appliances.energy.ca.gov/Default.aspx. 

thermal efficiency. DOE acknowledges 

the concerns raised regarding the nearcondensing operation at 82-percent 

thermal efficiency, but believes that the 

presence of models across a broad range 

of input ratings demonstrates the 

feasibility of this efficiency level. Thus, 

DOE considered 81-percent and 82- 

percent as incrementally higher thermal 

efficiency levels for the gas-fired 

commercial furnace analysis. DOE also 

considered the max-tech level, which 

was identified as 92-percent thermal 

efficiency. The max-tech level is based 

on a dedicated outdoor air system with 

a condensing furnace section, which 

proves the technical feasibility of a 

weatherized condensing furnace. For 

oil-fired furnaces, which are typically 

installed indoors, DOE surveyed the 

market and found non-condensing 

equipment with thermal efficiencies in 

the range of 81 to 82 percent, as well as 

a condensing model with a thermal 

efficiency of 92 percent. Therefore, DOE 

analyzed those three levels in this 

NOPR analysis. The efficiency levels 

DOE considered for each equipment 

class during the NOPR analyses 

(including the baseline levels) are 

presented in Table IV.4 and Table IV.5. 

TABLE IV.4—EFFICIENCY LEVELS FOR

GAS-FIRED CWAF 

Efficiency level 

Gas-fired 

CWAF 

(%) 

EL0 (Baseline) .......................... 80 

EL1 ........................................... 81 

EL2 ........................................... 82 

Max-Tech .................................. 92 

TABLE IV.5—EFFICIENCY LEVELS FOR

OIL-FIRED CWAF 

Efficiency level 

Oil-fired 

CWAF 

(%) 

EL0 (Baseline) .......................... 81 

EL1 ........................................... 82 

Max-Tech .................................. 92 

DOE requests comment on the 

efficiency levels analyzed for gas-fired 

and oil-fired commercial warm air 

furnaces. In particular, DOE is 

interested in the feasibility of the maxtech efficiency levels, as well as the 82- 

percent thermal efficiency level for gasfired commercial warm air furnaces. 

3. Equipment Testing and Reverse 

Engineering 

As discussed above, for the 

engineering analysis, DOE analyzed a 

representative input capacity of 250,000 

Btu/h for the gas-fired and oil-fired 

CWAF equipment classes to develop 

incremental cost-efficiency 

relationships. The models were selected 

to represent the efficiency levels 

available on the market, ranging from 

the baseline 80-percent thermal 

efficiency for gas-fired units, and 

baseline 81-percent thermal efficiency 

for oil-fired units, up to the max-tech 

92-percent thermal efficiency for gasfired units, and 92-percent thermal 

efficiency for oil-fired units. DOE based 

the selection of units for testing and 

reverse engineering on the efficiency 

data available in the AHRI certification 

database 22 and the CEC equipment 

database.23 Details of the key features of 

the tested units are presented in chapter 

5 of the NOPR TSD. 

DOE conducted physical or virtual 

teardowns on each test unit to develop 

a manufacturing cost model and to 

evaluate key design features (e.g., heat 

exchangers, blower and inducer fans/fan 

motors, control strategies). 

For gas-fired commercial warm air 

furnaces, DOE performed two teardowns 

on weatherized furnaces at noncondensing efficiency levels. Prior to 

teardown, the units were tested by a 

third-party test lab and achieved a 

thermal efficiency of 82 percent. The 

units were from the same manufacturer 

and had nearly identical furnace 

sections with different air conditioner 

sections. DOE assumed that the 

repeatability of the test result on both 

units indicated that the furnace design 

that was torn down is representative of 

equipment that would achieve 82- 

percent thermal efficiency. Using the 

cost-assessment methodology, DOE 

determined the cost of the furnace 

components through reverseengineering of the furnace section of the 

weatherized packaged units. Based on 

discussions with manufacturers, a 

review of product literature, and 

experience obtained from examining 

residential weatherized furnaces, DOE 

made assumptions regarding how the 

heat exchanger size would vary between 

units with 82-percent thermal efficiency 

and at the baseline (80-percent thermal 

efficiency) and the 81-percent thermal 

efficiency intermediate level. At the 80- 

percent and 81-percent thermal 

efficiency levels, DOE scaled down the 

size of the heat exchanger and related 

components (e.g., inducer fan, cabinet 

panels, insulation), as applicable, to 

generate an estimate of the cost to 

manufacture equipment at those levels. 

Thus, DOE obtained an estimate of the 

differential cost of manufacturing a 

commercial gas furnace section at the 

baseline (80-percent), 81-percent, and 

82-percent thermal efficiency. To 

develop an estimate of the cost of a maxtech unit at 92-percent thermal 

efficiency, DOE obtained a sample of 

commercial HVAC equipment that 

utilizes a condensing furnace section for 

analysis, and also used information 

gathered from a teardown of a 

condensing weatherized residential 

furnace. DOE examined the heat 

exchanger, inducer fan, condensate 

management system, and other aspects 

of the furnace section in the commercial 

equipment sample to develop a cost 

estimate to manufacture a condensing 

commercial furnace. DOE then used 

information from the residential 

condensing weatherized furnace 

teardown to refine estimates of the costs 

of the exhaust assembly, inducer fan 

assembly, and condensate management 

system to model the cost of a 92-percent 

efficient CWAF that is designed for 

implementation on a broad scale. 

For oil-fired commercial furnaces, 

DOE performed a teardown of a nonweatherized furnace at 81-percent 

thermal efficiency. DOE used this 

teardown, along with product literature, 

prior industry experience, manufacturer 

feedback, and analysis previously 

performed on residential furnaces to 

develop cost estimates at the 82-percent 

and 92-percent thermal efficiency 

levels. 

In a previous analysis of residential 

non-weatherized oil-fired furnaces, DOE 

developed an estimate of the costefficiency relationship across a range of 

efficiency levels. In examining product 

literature for commercial oil-fired 

furnaces, DOE found that commercial 

units are very similar to residential 

units, except with higher input ratings 

and overall larger size. Based on 

information obtained from the physical 

teardown of the 81-percent thermal 

efficiency oil furnace, in addition to the 

information gained from the residential 

furnace analysis and product literature, 

DOE was able to conduct a virtual 

teardown at the 82-percent thermal 

efficiency level. Key to this model was 

the growth in heat exchanger size 

necessary for a 1-percent increase in 

thermal efficiency, which necessitates a 

larger cabinet to accommodate it. Sheet 

metal and other components sensitive to 

size changes were scaled in order to 

match the larger size of the unit, while 

components that are not sensitive to 

heat exchanger size changes remained 

unchanged. 

Similarly, DOE relied on the physical 

teardown at the 81-percent thermal 

efficiency level, as well as prior 


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comparisons of residential oil-fired 

furnaces at condensing and noncondensing efficiency levels, to conduct 

a virtual teardown at the 92-percent 

thermal efficiency level. At 92-percent 

thermal efficiency, a secondary 

condensing heat exchanger made from a 

high-grade stainless steel was added in 

order to withstand the formation of 

condensate from the flue gases coupled 

with increased heat extraction into the 

building airstream (and, thus, higher 

thermal efficiency). This additional heat 

exchanger was appropriately sized 

based on information gathered from the 

residential furnaces teardowns. To 

accommodate the secondary heat 

exchanger, the cabinet was increased in 

size, and all associated sheet metal, 

wiring, and other components sensitive 

to cabinet size changes were also scaled 

as a result. In addition, the size of the 

blower fan blade was increased 

appropriately to account for the 

additional airflow needed over the 

secondary heat exchanger (however, 

based on observations in product 

literature, the rated fan power was 

unchanged). The manufacturing costs 

obtained from these physical and virtual 

teardowns served as the basis for the 

cost-efficiency relationship for this 

equipment class. The teardown analyses 

are described in further detail in section 

5.6 of the proposed rule TSD. 

4. Cost Model 

DOE developed a manufacturing cost 

model to estimate the manufacturing 

production cost of CWAF. The cost 

model is a spreadsheet model that 

converts the materials and components 

in the bills of materials (BOMs) into 

dollar values based on the price of 

materials, average labor rates associated 

with fabrication and assembling, and 

the cost of overhead and depreciation, 

as determined based on manufacturer 

interviews and DOE expertise. To 

convert the information in the BOMs 

into dollar values, DOE collected 

information on labor rates, tooling costs, 

raw material prices, and other factors. 

For purchased parts, the cost model 

estimates the purchase price based on 

volume-variable price quotations and 

detailed discussions with manufacturers 

and component suppliers. For fabricated 

parts, the prices of raw metal materials 

(e.g., tube, sheet metal) are estimated on 

the basis of five-year averages. The cost 

of transforming the intermediate 

materials into finished parts is 

estimated based on current industry 

pricing. Additional details on the cost 

model are contained in chapter 5 of the 

NOPR TSD. 

5. Manufacturing Production Costs 

Once the cost estimates for all the 

components in each teardown unit were 

finalized, DOE totaled the cost of 

materials, labor, and direct overhead 

used to manufacture each type of 

equipment in order to calculate the 

manufacturing production cost. The 

total cost of the equipment was broken 

down into two main costs: (1) The full 

manufacturing production cost, referred 

to as MPC; and (2) the non-production 

cost, which includes selling, general, 

and administration (SG&A) costs; the 

cost of research and development; and 

interest from borrowing for operations 

or capital expenditures. DOE estimated 

the MPC at each efficiency level 

considered for each equipment class, 

from the baseline through the max-tech 

level. After incorporating all of the 

assumptions into the cost model, DOE 

calculated the percentages attributable 

to each element of total production costs 

(i.e., materials, labor, depreciation, and 

overhead). These percentages are used 

to validate the assumptions by 

comparing them to manufacturers’ 

actual financial data published in 

annual reports, along with feedback 

obtained from manufacturers during 

interviews. DOE uses these production 

cost percentages in the MIA. 

Based on the analytical methodology 

discussed in the sections above, DOE 

developed the cost-efficiency results 

shown in Table IV.6 for each thermal 

efficiency level analyzed. The results 

shown in Table IV.6 represent the 

incremental increase in manufacturing 

cost, relative to the baseline 

manufacturing cost, needed to produce 

equipment at each efficiency level above 

baseline. Details of the cost-efficiency 

analysis, including descriptions of the 

technologies DOE analyzed for each 

thermal efficiency level to develop 

incremental manufacturing costs, are 

presented in chapter 5 of the NOPR 

TSD. DOE seeks comment on the results 

of the engineering analysis at each 

efficiency level considered. 

TABLE IV.6—INCREMENTAL MANUFACTURING COST INCREASES * 

Equipment type EL0 

(baseline) EL1 

EL2 

(oil-fired 

max-tech) 

EL3 

(gas-fired 

max-tech) 

Gas-fired CWAF .............................................................................................................. .................... $5 $10 $613 

Oil-fired CWAF ................................................................................................................. .................... 24 660 ....................

* DOE structures proposed standards in terms of TSLs and analyzed five TSLs for this NOPR. TSL 1 includes EL1 for gas-fired CWAF and 

EL0 for oil-fired CWAF, TSL 2 includes EL1 for both equipment classes, TSL 3 includes EL2 for gas-fired CWAF and EL0 for oil-fired CWAF, 

TSL 4 includes EL2 for gas-fired CWAF and EL1 for oil-fired CWAF, and TSL 5 includes EL3 for gas-fired CWAF and EL2 for oil-fired CWAF. 

For more information on the TSL structure, see section V.A of this NOPR. 

6. Manufacturer Markup 

To account for manufacturers’ nonproduction costs and profit margin, DOE 

applies a non-production cost multiplier 

(the manufacturer markup) to the full 

MPC. The resulting manufacturer selling 

price (MSP) is the price at which the 

manufacturer can recover all production 

and non-production costs and earn a 

profit. To meet new or amended energy 

conservation standards, manufacturers 

often introduce design changes to their 

equipment lines that result in increased 

MPCs. Depending on the competitive 

pressures, some or all of the increased 

production costs may be passed from 

manufacturers to retailers and 

eventually to customers in the form of 

higher purchase prices. As production 

costs increase, manufacturers typically 

incur additional overhead. The MSP 

should be high enough to recover the 

full cost of the equipment (i.e., full 

production and non-production costs) 

and yield a profit. The manufacturer 

markup has an important bearing on 

profitability. A high markup under a 

standards scenario suggests 

manufacturers can readily pass along 

the increased variable costs and some of 

the capital and product conversion costs 

(the one-time expenditure) to customers. 

A low markup suggests that 

manufacturers will not be able to 

recover as much of the necessary 

investment in plant and equipment. 

DOE developed the manufacturer 

markup through an examination of 

corporate annual reports and Securities 

and Exchange Commission (SEC) 10–K 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
6198 Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 

24U.S. Securities and Exchange Commission, 

Annual 10–K Reports (Various Years) (Available at: 

http://www.sec.gov/edgar/searchedgar/ companysearch.html) (Last Accessed Dec. 13, 

2013). 

reports.24 Additional information is 

contained in chapter 5 of the TSD. 

7. Shipping Costs 

Manufacturers of heating, ventilation, 

and air-conditioning (HVAC) equipment 

typically pay for shipping to the first 

step in the distribution chain. Freight is 

not a manufacturing cost, but because it 

is a substantial cost incurred by the 

manufacturer, DOE is accounting for 

shipping costs of CWAF separately from 

other non-production costs that 

comprise the manufacturer markup. To 

calculate the MSP for CWAF, DOE 

multiplied the MPC at each efficiency 

level by the manufacturer markup and 

added shipping costs for equipment at 

the given efficiency level. More 

specifically, DOE calculated shipping 

costs at each efficiency level based on 

the average outer dimensions of 

equipment at the given efficiency and 

assuming the use of a typical 53-foot 

straight-frame trailer with a storage 

volume of 4,240 cubic feet. Gas-fired 

CWAF equipment is almost exclusively 

enclosed within a cabinet that also 

contains a commercial unitary air 

conditioner (CUAC). Thus, the CUAC 

components are significant factor in 

driving the overall cabinet dimensions. 

DOE found that the changes in CWAF 

component sizes necessary to achieve 

the 81 percent and 82 percent thermal 

efficiency levels are not large enough to 

add any size to the cabinet, which is 

driven primarily by the size of the 

CUAC components. The shipping costs 

calculated for each efficiency level are 

shown in Table IV.7. Due to the noted 

dependence on CUAC components of 

the overall shipping cost for gas-fired 

CWAF, DOE presents only the 

incremental cost change due to 

increased CWAF efficiency for that 

equipment. For oil-fired CWAF, DOE 

presents the full cost of shipping, since 

this equipment is not packaged with 

CUAC components, and thus, the 

shipping cost represents only the oilfired CWAF. Chapter 5 of the NOPR 

TSD contains additional details about 

DOE’s shipping cost assumptions and 

DOE’s shipping cost estimates. 

TABLE IV.7—CWAF SHIPPING COST ESTIMATES

CWAF equipment class Thermal efficiency 

(%) 

Shipping costs * 

(2013$) 

Gas-Fired CWAF ......................................................................................................................................... 80 

81 

$0 

0 

82 0 

92 39.64 

Oil-Fired CWAF ........................................................................................................................................... 81 

82 

63.78 

69.60 

92 76.53 

* Because gas-fired CWAF are weatherized and are typically included in a cabinet with a commercial unitary air conditioner which affects the 

shipping cost, the shipping costs for gas-fired CWAF are shown in terms of the incremental increase from the baseline level. Since oil-fired 

CWAF are normally self-contained non-weatherized units, the shipping costs for oil-fired CWAF are representative of the entire cost to ship the 

unit. 

D. Markups Analysis 

The markups analysis develops 

appropriate markups in the distribution 

chain to convert the estimates of 

manufacturer selling price derived in 

the engineering analysis to commercial 

consumer prices. (‘‘Commercial 

consumer’’ refers to purchasers of the 

equipment being regulated.) DOE 

develops baseline and incremental 

markups based on the equipment 

markups at each step in the distribution 

chain. The markups are multipliers that 

represent increases above equipment 

purchase costs for CWAF equipment. 

The incremental markup relates the 

change in the manufacturer sales price 

of higher-efficiency models (the 

incremental cost increase) to the change 

in the customer price. 

In the RFI, DOE characterized two 

distribution channels to describe how 

CWAF equipment passes from the 

manufacturer to the commercial 

consumer. 78 FR 25627, 25632 (May 2, 

2013). The first distribution channel is 

characterized as follows: 

Manufacturer ‰ Wholesaler ‰ 

Mechanical Contractor ‰ General 

Contractor ‰ Consumer 

In the second distribution channel, 

the manufacturer sells the equipment 

directly to the customer through a 

national account: 

Manufacturer ‰ Consumer (National 

Account) 

Carrier stated that the distribution 

channels outlined in the RFI are 

relevant for commercial warm air 

furnaces. Carrier added that in addition 

to the two channels described, for very 

large air-cooled equipment, there is an 

additional channel that consists of 

factory employees selling direct to end 

customers/mechanical contractors. 

(Carrier, No. 2 at p. 3) Lennox stated 

that the first example of distribution 

channels provided by DOE 

(manufacturer to wholesaler to 

mechanical contractor to general 

contractor to customer) is a typical 

distribution approach. Lennox stated 

that the second example (where a 

manufacturer would sell directly to a 

customer) is not a typical distribution 

approach, but rather the distribution 

channel should include the contractor, 

who must set up and install the system 

at the building site. (Lennox, No. 3 at p. 

6) Goodman stated that the distribution 

channels should not be significantly 

different from the analysis performed 

for the same products being considered 

for the cooling mode. (Goodman, No. 6 

at p. 3) 

In response to these comments, DOE 

modified the second distribution 

channel to include a wholesaler who 

purchases the equipment and sells it to 

the customer. DOE’s understanding of 

this channel is that the contractor who 

installs the system generally does not 

purchase and mark up the equipment. 

Rather, the building owner purchases 

the equipment and hires the contractor. 

Thus, for the purposes of DOE’s 

analysis, it would not be appropriate to 

include the contractor in the 

distribution channel. 

DOE also sought input on the 

percentage of equipment being 

distributed through the various types of 

distribution channels. Carrier stated that 

approximately 70 percent of equipment 

flows through the first distribution 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 6199 

25Heating, Air Conditioning & Refrigeration 

Distributors International 2012 Profit Report 

(Available at: http://www.hardinet.org/ProfitReport) (Last accessed April 10, 2013). 

26Air Conditioning Contractors of America 

(ACCA), Financial Analysis for the HVACR 

Contracting Industry: 2005 (Available at: https://

http://www.acca.org/store/product.php?pid=142) 

(Last accessed April 10, 2013). 

27U.S. Census Bureau, 2007 Economic Census 

Data (2007) (Available at: http://www.census.gov/

econ/) (Last accessed April 10, 2013). 

28Sales Tax Clearinghouse Inc., State Sales Tax 

Rates Along with Combined Average City and 

County Rates, 2013 (Available at: http://thestc.com/ 

STrates.stm) (Last accessed Sept. 11, 2013). 

29Energy Information Administration (EIA), 2003 

Commercial Building Energy Consumption Survey 

(Available at: http://www.eia.gov/consumption/

commercial/) (Last accessed April 10, 2013). Note: 

CBECS 2012 is currently in development but was 

not available in time for this rulemaking. 

30 Definitions of CBECS building types can be 

found at: http://www.eia.gov/emeu/cbecs/building_

types.html. 

31EIA, 2009 Residential Energy Consumption 

Survey (Available at: http://www.eia.gov/

consumption/residential/) (Last accessed April 10, 

2013). 

32 Deru, M., K. Field, D. Studer, K. Benne, B. 

Griffith, P. Torcellini, B. Liu, M. Halverson, D. 

Winiarski, M. Rosenberg, M. Yazdanian, J. Huang, 

and D. Crawley, U.S. Department of Energy 

Commercial Reference Building Models of the 

National Building Stock, 2011 (Available at 

http://www.nrel.gov/docs/fy11osti/46861.pdf) (Last 

accessed December 6, 2013). 

33AHRI, 2013 AHRI Certification Directory for 

Commercial Furnaces (Available at: http://

www.ahridirectory.org/ahridirectory/pages/

home.aspx). 

channel described in the RFI, with the 

remainder split among the other 

channels. (Carrier, No. 2 at p. 4) Lennox 

stated that the first distribution 

approach discussed is the typical 

approach to equipment sales, 

accounting for approximately 90–95 

percent of sales. (Lennox, No. 3 at p. 6) 

DOE assumes that the above 

responses reflect each company’s 

experience, rather than a 

characterization of the industry overall. 

For this NOPR, DOE estimated that the 

first distribution channel accounts for 

83 percent of shipments, and the second 

distribution channel accounts for 17 

percent. 

To develop markups for the parties 

involved in the distribution of the 

equipment, DOE utilized several 

sources, including: (1) The Heating, AirConditioning & Refrigeration 

Distributors International (HARDI) 2012 

Profit Report 25 to develop wholesaler 

markups; (2) the 2005 Air Conditioning 

Contractors of America’s (ACCA) 

financial analysis for the heating, 

ventilation, air-conditioning, and 

refrigeration (HVACR) contracting 

industry 26 to develop mechanical 

contractor markups, and (3) U.S. Census 

Bureau’s 2007 Economic Census data 27

for the commercial and institutional 

building construction industry to 

develop general contractor markups. For 

mechanical contractors, DOE derived 

separate markups for small and large 

contractors. 

In addition to the markups, DOE 

derived State and local taxes from data 

provided by the Sales Tax 

Clearinghouse.28 These data represent 

weighted average taxes that include 

county and city rates. DOE derived 

shipment-weighted average tax values 

for each CBECS region considered in the 

analysis. 

Chapter 6 of the NOPR TSD provides 

further detail on the estimation of 

markups. 

E. Energy Use Analysis 

The purpose of the energy use 

analysis is to assess the energy 

requirements of equipment at different 

efficiencies in several building types 

that utilize the equipment and to assess 

the energy savings potential of increased 

commercial warm air furnace efficiency. 

The annual energy consumption 

includes the natural gas and oil fuel 

types used for heating and the auxiliary 

electrical use associated with the 

furnace electrical components. 

DOE based the energy use analysis on 

Energy Information Administration’s 

2003 Commercial Building Energy 

Consumption Survey (CBECS) 29 for the 

subset that uses the type of equipment 

covered by the standards. DOE utilized 

the building types defined in CBECS 

2003.30 Each building was assigned to a 

specific location, and the approach 

captured variability in heating loads due 

to factors such as building activity, 

schedule, occupancy, local weather, and 

shell characteristics. Energy use 

estimates from 2003 CBECS were 

adjusted for average weather conditions 

and for projected improvements to the 

building shell efficiency. DOE also 

accounted for the energy use of a small 

fraction of commercial warm air 

furnaces that are installed in residential 

housing using data from the 2009 

Residential Energy Consumption Survey 

(RECS 2009).31

To determine the energy consumption 

of commercial warm air furnaces, DOE 

is using a Thermal Efficiency (TE) 

rating, along with relevant 

characteristics for each sample building. 

DOE assumed that TE is proportional to 

annual heating energy consumption for 

any given set of operating conditions. 

To calculate commercial warm air 

furnace energy consumption at each 

considered efficiency level, DOE 

determined the equipment capacity and 

the heating load in each CBECS 

building. 

In the RFI, DOE requested comment 

on its planned method to determine the 

equipment load profiles. 78 FR 25627, 

25632 (May 2, 2013). Carrier stated that 

DOE should develop equipment load 

profiles using the 16 benchmark 

buildings from Pacific Northwest 

National Laboratories (PNNL) building 

models.32 (Carrier, No. 2 at p. 4) 

In response, rather than developing 

detailed load profiles for various 

building types, DOE decided to use 

CBECS-reported heating energy use for 

each sample building. DOE assumed 

that the CBECS data are representative 

of the energy use measured in the field 

for the U.S. commercial building types. 

CBECS provides information about 

buildings with a wide range of energy 

use representing both high-energy-use 

and low-energy-use buildings. DOE has 

concluded that the selected approach 

better reflects the heating energy use of 

the commercial buildings stock in the 

U.S. in comparison to using a set of 

benchmark buildings. 

DOE’s RFI also sought input from 

stakeholders on the current distribution 

of equipment efficiencies in the 

building population. 78 FR 25627, 

25632 (May 2, 2013). Carrier stated that 

the vast majority of equipment should 

be in the 80-percent to 82-percent 

efficiency range based on the ASHRAE 

90.1 standard. (Carrier, No. 2 at p. 4) 

DOE’s approach is consistent with 

Carrier’s comment. It utilizes model 

efficiency information from the 2013 

AHRI Certification Directory for 

Commercial Furnaces.33

In the RFI, DOE requested comment 

on how equipment energy use for a 

given heating load shape scales as a 

function of capacity (i.e., whether two 

commercial furnace units of a certain 

capacity use the same total heating 

energy as one commercial furnace unit 

of twice the capacity). 78 FR 25627, 

25632 (May 2, 2013). Carrier stated that 

it would expect to see no measurable 

difference in energy use for a given load 

shape as a function of capacity. (Carrier, 

No. 2 at p. 4) DOE’s approach reflects 

the statement made by Carrier. 

Lennox stated that in its experience, 

furnaces with higher thermal efficiency 

ratings may use less gas, but they may 

use more electricity, offsetting the 

potential benefits. (Lennox, No. 3 at p. 

7) For condensing CWAF, DOE’s 

analysis accounts for the increased 

blower fan electricity use in the field in 

both heating and cooling mode due to 

the presense of the secondary heat 

exchanger. The increased electricity use 

of condensing furnaces is expected to be 

small compared to the potential savings 

in fuel use. DOE also accounts for 


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34EIA, 2009 Residential Energy Consumption 

Survey (Available at: http://www.eia.gov/

consumption/residential/) (Last accessed April 10, 

2013). 

35The DOE test procedure for commercial warm 

air furnaces a 10 CFR 431.76 does not specify a 

calculation method for determining energy use. For 

the rebuttable presumption PBP calculation, DOE 

used average energy use reported from CBECS 2003 

for this equipment. 

condensate line freeze protection or a 

condensate pump for a fraction of 

installations. Condensing CWAF 

installed outdoors that are located in 

regions with an outdoor design 

temperature of ≤32 °F were assumed to 

require condensate freeze protection. 

This applies to roughly 90 percent of 

gas-fired CWAF. All oil-fired CWAFs 

are assumed to be installed indoors so 

condensate line freeze protection was 

assumed to not be needed. 

Carrier stated that increasing plug 

loads (e.g., computers and related 

equipment) and tighter buildings with 

higher insulation values will most likely 

continue to lower the change-over 

temperature from cooling to heating in 

commercial buildings. (Carrier, No. 2 at 

p. 6) Lennox stated that commercial 

buildings are being required to have 

higher insulation levels by ASHRAE 

Standard 90.1 in the future, which will 

reduce the building load and further 

reduce the potential energy savings for 

higher-efficiency furnaces. (Lennox, No. 

3 at p. 7) DOE’s analysis accounts for 

improvements in the building shell. The 

analysis uses the AEO 2013 building 

shell efficiency index for commercial 

buildings to account for these impacts. 

Although plug loads may increase, 

decreasing the heating load, the 

efficiency of the equipment is also likely 

to improve, which would increase the 

heating load, so the net effect is 

uncertain. 

In the RFI, DOE requested comment 

on the fraction of commercial warm air 

furnaces which are used in residential 

applications such as multi-family 

buildings. 78 FR 25627, 25632 (May 2, 

2013). Carrier stated that the fraction of 

commercial furnaces applied in 

residential applications is negligible. 

(Carrier, No. 2 at p. 5) Based on RECS 

2009 data, DOE estimates that about two 

percent of commercial furnaces are used 

in residential applications.34

F. Life-Cycle Cost and Payback Period 

Analysis 

The purpose of the LCC and PBP 

analysis is to analyze the effects of 

potential amended energy conservation 

standards on commercial consumers of 

commercial furnace equipment by 

determining how a potential amended 

standard would affect their operating 

expenses (usually decreased) and their 

total installed costs (usually increased). 

The LCC is the total consumer 

expense over the life of the equipment, 

consisting of equipment and installation 

costs plus operating costs over the 

lifetime of the equipment (expenses for 

energy use, maintenance, and repair). 

DOE discounts future operating costs to 

the time of purchase using commercial 

consumer discount rates. The PBP is the 

estimated amount of time (in years) it 

takes commercial consumers to recover 

the increased total installed cost 

(including equipment and installation 

costs) of a more-efficient type of 

equipment through lower operating 

costs. DOE calculates the PBP by 

dividing the change in total installed 

cost (normally higher) due to a new or 

amended energy conservation standard 

by the change in annual operating cost 

(normally lower) that results from that 

standard. 

For any given efficiency level, DOE 

measures the PBP and the change in 

LCC relative to an estimate of the basecase efficiency level. The base-case 

estimate reflects the market in the 

absence of amended energy 

conservation standards, including 

market trends for equipment that 

exceeds the current energy conservation 

standards. 

DOE analyzed the potential for 

variability and uncertainty by 

performing the LCC and PBP 

calculations on a nationallyrepresentative sample of individual 

commercial buildings. More 

specifically, DOE utilized the sample of 

buildings developed for the energy use 

analysis. Within a given building, one or 

more commercial warm air furnace 

units may serve the building’s spaceconditioning needs, depending on the 

heating load requirements of the 

building. As a result, the Department 

also expressed the LCC and PBP results 

as the percentage of commercial warm 

air furnace customers experiencing 

economic impacts of different 

magnitudes. DOE modeled both the 

uncertainty and the variability in the 

inputs to the LCC and PBP analysis 

using Monte Carlo simulation and 

probability distributions. As a result, the 

LCC and PBP results are displayed as 

distributions of impacts compared to the 

base-case conditions. 

EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the test procedure in place for 

that standard. For each considered 

efficiency level, DOE typically 

determines the value of the first year’s 

energy savings by calculating the 

quantity of those savings in accordance 

with the applicable DOE test 

procedure,35 and multiplying that 

amount by the average energy price 

forecast for the year in which 

compliance with the amended standards 

would be required. 

DOE calculated the LCC and PBP for 

all commercial consumers of CWAF as 

if each were to purchase new equipment 

in the year that compliance with 

amended standards is required. EPCA 

directs DOE to publish a final rule 

amending the standard for the products 

covered by this NOPR not later than 2 

years after a notice of proposed 

rulemaking is issued. (42 U.S.C. 

6313(a)(6)(C)(iii)) At the time of 

preparation of the NOPR analysis, the 

expected issuance date was early 2015, 

leading to an anticipated final rule 

publication in 2015. EPCA also states 

that amended standards prescribed 

under this subsection shall apply to 

products manufactured after a date that 

is the later of—(I) the date that is 3 years 

after publication of the final rule 

establishing a new standard; or (II) the 

date that is 6 years after the effective 

date of the current standard for a 

covered product. (42 U.S.C. 

6313(a)(6)(C)(iv)) The date under clause 

(I), currently projected to be 2018, is 

later than the date under clause (II). 

Therefore, for purposes of its analysis, 

DOE used January 1, 2018 as the 

beginning of compliance with potential 

amended standards for CWAF. 

In the RFI, DOE requested comment 

from stakeholders on the overall method 

that it intended to use in conducting the 

LCC and PBP analysis for commercial 

warm air furnaces. 78 FR 25627, 25632 

(May 2, 2013). Carrier stated that DOE 

should use the procedures as developed 

by the ASHRAE 90.1 committee and 

PNNL for evaluating changes to 

ASHRAE Standard 90.1, because this 

procedure has defined buildings that 

can be used for these products. Carrier 

added that ASHRAE also has a standard 

work procedure for economic analysis 

that is similar to the LCC analysis but 

uses the Scalar Ratio as defined by the 

ASHRAE 90.1 committee with national 

average electric and gas rates. (Carrier, 

No. 2 at p. 5) 

DOE reviewed the approach suggested 

by Carrier. It did not use this approach 

because, for the reasons explained in 

section IV.E, DOE is not estimating 


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36PCU333415333415C: Warm air furnaces 

including duct furnaces, humidifiers and electric 

comfort heating (Available at: http://www.bls.gov/

ppi/). 

37RS Means, 2013 Mechanical Cost Data 

(Available at: http://rsmeans.reedconstructiondata.

com/60023.aspx) (Last accessed April 10, 2013). 

38Energy Information Administration (EIA), 

Survey form EIA–861—Annual Electric Power 

Industry Report (Available at: http://www.eia.gov/

electricity/data/eia861/index.html) (Last accessed 

April 15, 2013). 

39Energy Information Administration (EIA), 

Natural Gas Navigator (Available at: http://tonto.

eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm) 

(Last accessed April 15, 2013). 

40Energy Information Administration (EIA), State 

Energy Data System (SEDS) (Available at: http://

www.eia.gov/state/seds/) (Last accessed April 15, 

2013). 

41Energy Information Administration (EIA), 2013 

Annual Energy Outlook (AEO) Full Version 

(Available at: http://www.eia.gov/forecasts/aeo/) 

(Last accessed April 15, 2013). 

42RS Means, 2013 Facilities Maintenance & 

Repair Cost Data (Available at: http://rsmeans.reed

constructiondata.com/60303.aspx) (Last accessed 

April 10, 2013). 

energy use using whole building 

simulation, as do the procedures as 

developed by the ASHRAE 90.1 

committee. Furthermore, DOE’s 

methodology allows a better evaluation 

of variability and uncertainty in key 

variables, such as equipment lifetime 

and discount rates, that affect the LCC 

analysis. The method advocated by 

Carrier typically uses average values, 

which do not capture the range of 

equipment operation and user 

characteristics found in the field. 

Inputs to the LCC and PBP analysis 

are categorized as: (1) inputs for 

establishing the purchase expense, 

otherwise known as the total installed 

cost, and (2) inputs for calculating the 

operating expense. These key inputs are 

discussed in further detail immediately 

below. 

1. Inputs to Installed Cost 

The primary inputs for establishing 

the total installed cost are the baseline 

commercial consumer equipment price, 

standard-level customer price increases, 

and installation costs. Baseline 

customer prices and standard-level 

customer price increases were 

determined by applying markups to 

manufacturer price estimates. The 

installation cost is added to the 

customer price to arrive at a total 

installed cost. 

DOE used the historic trend in the 

Producer Price Index (PPI) for ‘‘Warm 

air furnaces’’ 36 to estimate the change in 

price for commercial warm air furnaces 

between the present and 2018. The PPI 

for ‘‘Warm air furnaces’’ shows a small 

rate of annual price decline. The price 

trend in this PPI series shows a small 

rate of annual price decline. 

In the RFI, DOE sought input on its 

planned approach and the data sources 

it intended to use to develop installation 

costs. 78 FR 25627, 25633 (May 2, 

2013). Carrier recommended that if RS 

Means Mechanical Cost Data are to be 

used to estimate installed cost, it should 

be based on unit rated cooling capacity 

for combined air conditioning and 

commercial furnace equipment. 

DOE developed installation costs for 

commercial warm air furnaces using the 

most recent RS Means Mechanical Cost 

Data.37 In estimating costs, DOE 

considered the heating and cooling 

capacity of the combined equipment. 

Carrier stated that DOE must factor in 

additional cost for condensate drainage 

and treatment if the analysis includes 

furnaces at condensing efficiencies. 

(Carrier, No. 2 at p. 5) Goodman expects 

that application costs would be very 

significant for the application of 

condensing technologies, and, therefore, 

must be thoroughly and completely 

considered. (Goodman, No. 6 at p. 4) 

DOE accounted for additional 

installation costs for condensate 

removal, which includes condensate 

drainage, freeze protection, and 

treatment for furnaces with condensing 

designs. On average, the installation 

cost for condensate removal is $389 for 

gas-fired CWAF and $180 for oil-fired 

CWAF. The details about the 

condensate removal costs are provided 

in appendix 8–D of DOE’s proposed rule 

TSD. DOE also accounted for meeting 

the venting requirements for oil-fired 

commercial warm air furnaces, as well 

as for the small fraction of gas 

commercial warm air furnaces installed 

indoors. 

2. Inputs to Operating Costs 

The primary inputs for calculating the 

operating costs are equipment energy 

consumption, equipment efficiency, 

energy prices and forecasts, 

maintenance and repair costs, 

equipment lifetime, and discount rates. 

a. Energy Consumption 

The equipment energy consumption 

is the site energy use associated with 

providing space-heating to the building. 

DOE utilized the methodology described 

in section IV.E to establish equipment 

energy use. 

Lennox cautioned DOE that, as it 

develops estimates for the operating 

costs of these systems, DOE should keep 

in mind that the systems are being 

applied in a commercial application 

where the overwhelming majority of the 

time the system is operating in 

cooling—not heating—mode. Lennox 

gave the example that when the outside 

ambient temperature is 30 °F, the 

system could be calling for cooling, 

based on the internal heat gains. 

(Lennox, No. 3 at p. 7) DOE’s analysis 

accounts for the range of CWAF 

operating conditions with respect to 

heating and cooling mode. 

b. Energy Prices 

In the RFI, DOE sought comment on 

its approach for developing energy 

prices. 78 FR 25627, 25633 (May 2, 

2013). Carrier stated that DOE’s tariffbased approach makes sense, and that 

the most recent price data available 

should be used. (Carrier, No. 2 at p. 5) 

For the NOPR, DOE determined gas, 

oil, and electricity prices based on 

recent or current tariffs from a 

representative sample of utilities, as 

well as historical State commercial 

energy price data from the Energy 

Information Administration (EIA). This 

approach calculates energy expenses 

based on actual energy prices that 

commercial consumers are paying in 

different geographical areas of the 

country. In addition to using tariffs, 

DOE used data provided in EIA’s Form 

861 data 38 to calculate commercial 

electricity prices, EIA’s Natural Gas 

Navigator 39 to calculate commercial 

natural gas prices, and EIA’s State 

Energy Data System (SEDS) 40 to 

calculate LPG and fuel oil prices. Future 

energy prices were projected using 

trends from the EIA’s 2013 Annual 

Energy Outlook (AEO 2013).41

c. Maintenance and Repair Costs 

Maintenance costs are expenses 

associated with ensuring continued 

operation of the covered equipment over 

time. In the RFI, DOE sought input on 

the approach and data sources it 

intended to use to develop maintenance 

costs. 78 FR 25627, 25633 (May 2, 

2013). Carrier stated that RS Means 

might serve as a reasonable guide to 

assist in developing maintenance costs; 

however, assuming the issues associated 

with condensing furnace technology are 

overcome, it is reasonable to expect 

increased maintenance costs for these 

higher-efficiency furnaces. Carrier 

added that, based on experience with 

residential 80-percent versus 90-percent 

AFUE furnaces, it expects the 

maintenance costs for condensing 

furnace sections to be at least two to 

three times the maintenance costs for 

current non-condensing commercial 

warm air furnaces. (Carrier, No. 2 at 

p. 5) 

DOE developed maintenance costs for 

its analysis using the most recent RS 

Means Facilities Maintenance & Repair 

Cost Data.42 DOE included increased 

maintenance costs for condensing 


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6202 Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 

43RS Means, 2013 Mechanical Cost Data 

(Available at: http://rsmeans.reedconstructiondata.

com/60023.aspx) (Last accessed April 10, 2013). 

44American Society of Heating, Refrigerating and 

Air-Conditioning Engineers, Inc. (ASHRAE), 

ASHRAE Handbook of HVAC Systems and 

Equipment (2008) p. 32.8. 

45Technical Support Document for Small, Large, 

and Very Large Commercial Package Air 

Conditioners and Heat Pumps Notice of Proposed 

Rulemaking (Available at: http://

www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx/ruleid/59). 

46Lutz, J., A. Hopkins, V. Letschert, V. Franco, 

and A. Sturges, Using national survey data to 

estimate lifetimes of residential appliances. 

HVAC&R Research (2011) 17(5): pp. 28 (Available 

at: http://www.tandfonline.com/doi/abs/10.1080/

10789669.2011.558166). 

47AHRI, 2013 AHRI Certification Directory for 

Commercial Furnaces (Available at: http://

www.ahridirectory.org/ahridirectory/pages/

home.aspx) (Last accessed Oct. 15, 2013). 

equipment. For condensing gas-fired 

commercial warm air furnaces, DOE 

added labor and material costs to 

account for checking the condensate 

withdrawal system, including 

inspecting, cleaning, and flushing the 

condensate trap and drain tubes; 

inspecting the grounding and power 

connection of heat tape; checking 

condensate neutralizer; and checking 

condensate pump for corrosion and 

proper operation. For gas-fired CWAF, 

the annualized maintenance cost is $157 

for 81- and 82-percent TE units, and 

$169 for 92 percent TE units. For oilfired CWAF, the annualized 

maintenance cost is $289 for 82-percent 

TE units, and $317 for 92 percent TE 

units. 

For condensing oil-fired commercial 

warm air furnaces, DOE added 

additional maintenance for installations 

in non-low-sulfur regions to account for 

extra cleaning of the heat exchanger for 

condensing designs, as well as checking 

of the condensate withdrawal system. 

DOE also considered the cases when the 

equipment is covered by service and/or 

maintenance agreements. 

Repair costs are expenses associated 

with repairing or replacing components 

of the covered equipment that have 

failed. In the RFI, DOE sought comment 

as to whether repair costs vary as a 

function of equipment efficiency. 78 FR 

25627, 25633 (May 2, 2013). Carrier 

stated that condensing furnace repair 

costs will be higher due to a number of 

factors including: (1) The presence of 

acidic condensate; (2) potential damage 

due to condensate expansion during 

freezing; (3) the presence of a secondary 

heat exchanger; and (4) the need to add 

a condensate pump for some 

applications. (Carrier, No. 2 at p. 6) 

Goodman stated that as a general rule, 

due to additional components and 

additional materials required to achieve 

higher efficiencies, as well as additional 

service time for analysis and actual 

repair time, repair costs will always be 

higher for higher-efficiency products. 

(Goodman, No. 6 at p. 4) 

DOE developed repair costs for its 

analysis using the most recent RS Means 

Facilities Maintenance & Repair Cost 

Data.43 It agrees with the comments and, 

therefore, included additional repair 

costs for higher efficiency levels (i.e., 

condensing furnaces). For gas-fired 

CWAF, the annualized repair cost is 

$0.57 for 81- and 82-percent TE units, 

and $1.31 for 92 percent TE units. For 

gas-fired CWAF, the annualized repair 

cost is $1.94 for 82-percent TE units, 

and $2.58 for 92 percent TE units. 

See chapter 8 of the NOPR TSD for 

more details on maintenance and repair 

costs. 

d. Other Inputs 

Equipment lifetime is the age at 

which a unit of covered equipment is 

retired from service. The average 

equipment lifetime for commercial 

warm air furnaces is estimated by 

ASHRAE to be between 15 and 20 

years.44

In the RFI, DOE requested any 

equipment lifetime data and sought 

comment on its approach of using a 

Weibull probability distribution to 

characterize equipment lifetime. 78 FR 

25627, 25633 (May 2, 2013). Carrier 

stated that a 15 to 20 year life 

expectancy for commercial warm air 

furnaces is reasonable. (Carrier, No. 2 at 

p. 6) Lennox stated that the Weibull 

analysis is the preferred method when 

evaluating product or component life. 

(Lennox, No. 3 at p. 7) 

For gas-fired commercial warm air 

furnaces, DOE used the lifetime Weibull 

probability distribution developed in 

the NOPR analysis for small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment,45 which results in a 19-year 

average lifetime. For oil-fired 

commercial warm air furnaces, DOE 

used a lifetime Weibull probability 

distribution based on a method 

described in an article in HVAC&R 

Research,46 which results in a 26-year 

average lifetime. DOE expects the 

lifetime of the equipment to not change 

due to any new energy efficiency 

standards. 

The discount rate is the rate at which 

future expenditures are discounted to 

establish their present value. DOE did 

not receive comments on discount rates. 

It derived a distribution of discount 

rates by estimating the cost of capital of 

companies that purchase commercial 

warm air furnace equipment. 

DOE measures LCC and PBP impacts 

of potential standard levels relative to a 

base case that reflects the likely 

distribution of efficiencies in the market 

in the absence of amended standards. In 

the RFI, DOE requested data on current 

efficiency market shares (of shipments) 

by equipment class, and also similar 

historic data. 78 FR 25627, 25633 (May 

2, 2013). Carrier stated that these data 

are not readily available for the industry 

as a whole. Carrier added that the vast 

majority of equipment should be in the 

80-percent to 82-percent efficiency 

range based on the standard in place 

since 1989. (Carrier, No. 2 at p. 6) 

Since shipment-weighted efficiency 

data are not available, DOE developed 

current market-share efficiency (i.e., the 

current distribution of equipment 

shipments by efficiency) for the CWAF 

equipment classes for 2013 based on the 

number of models at different efficiency 

levels from AHRI’s Certification 

Directory for Commercial Furnaces.47

These data show no market share for 

condensing CWAF. 

In the RFI, DOE also requested 

information on expected trends in 

efficiency for commercial warm air 

furnaces over the next five years. 78 FR 

25627, 25633 (May 2, 2013). Carrier 

added that while there will be 

continuing pressure on cooling 

efficiency, it expects that the resultant 

efficiency trend will be flat for 

commercial warm air furnaces 

combined in air conditioning 

equipment. (Carrier, No. 2 at p. 6) 

Lennox stated that its weatherized 

commercial furnaces are at the 80- 

percent thermal efficiency level and 

would be expected to remain there for 

the foreseeable future, as there is little 

market demand for higher-efficiency 

furnaces in the commercial sector. 

(Lennox, No. 3 at p. 7) DOE agrees with 

the comments with respect to noncondensing CWAF, and it assumed no 

change from the current distribution of 

equipment shipments by efficiency. For 

condensing gas-fired CWAF, however, 

DOE found that models are just now 

becoming available, so DOE estimated a 

market share of one percent by 2018. 

A rebound effect occurs when a piece 

of equipment that is made more efficient 

is used more intensively, such that the 

expected energy savings from the 

efficiency improvement may not fully 

materialize. In the RFI, DOE sought 

comments and data on any rebound 

effect that may be associated with moreefficient commercial warm air furnaces. 

78 FR 25627, 25633 (May 2, 2013). 

Carrier opined that any rebound effect 

associated with higher-efficiency 


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48Pacific Northwest National Laboratory (PNNL), 

Screening Analysis for EPACT-Covered Commercial 

HVAC and Water-Heating Equipment, April 2000. 

(Available at: http://www.pnl.gov/main/

publications/external/technical_reports/PNNL13232.pdf) (Last accessed April 10, 2013). 

49Air-Conditioning and Refrigeration Institute, 

Commercial Unitary Air Conditioner and Heat 

Pump Unit Shipments for 1980–2001 (Jan. 2005) 

(Prepared for Lawrence Berkeley National 

Laboratory). 

50The fraction of non-heat pump CUAC 

equipment that is packaged with commercial 

furnaces is 80 percent. 

51Air-Conditioning Heating and Refrigeration 

Institute, Furnaces Historical Data (1994–2013). 

2015. (Available at: http://www.ahrinet.org/site/

497/Resources/Statistics/Historical-Data/FurnacesHistorical-Data). (Last accessed January 7, 2015). 

52U.S. Department of Commerce—Bureau of the 

Census, New Privately Owned Housing Units 

Started: Annual Data 1959–2012 (2013) (Available 

at: http://www.census.gov/construction/mhs/

mhsindex.html) (Last accessed March 15, 2013). 

U.S. Department of Commerce—Bureau of the 

Census, Placements of New Manufactured Homes 

by Region and Size of Home: 1980–2011 (2013) 

(Available at: http://www.census.gov/construction/

mhs/pdf/placnsa_all.pdf) (Last accessed March 15, 

2013). 

53 DOE’s use of spreadsheet models provides 

interested parties with access to the models within 

a familiar context. In addition, the TSD and other 

documentation that DOE provides during the 

rulemaking help explain the models and how to use 

them, and interested parties can review DOE’s 

analyses by changing various input quantities 

within the spreadsheet. 

commercial equipment would be 

negligible for commercial buildings. 

(Carrier, No. 2 at p. 7) 

DOE found no evidence for a rebound 

effect associated with higher-efficiency 

commercial furnaces. HVAC operation 

adjustment in commercial buildings is 

not driven by the occupants but 

primarily by building managers or 

owners. In such cases, the comfort 

conditions are already established in 

order to satisfy the occupants, and they 

are unlikely to change due to 

replacement with higher-efficiency 

equipment. CWAF installed in 

residential buildings are mainly in 

situations similar to commercial 

buildings, so DOE expects there would 

be negligible rebound effect. 

G. Shipments Analysis 

DOE uses projections of product 

shipments for CWAF to calculate 

equipment stock over the course of the 

analysis period, which in turn is used 

to determine the impacts of amended 

standards on national energy savings, 

net present value, and future 

manufacturer cash flows. DOE develops 

shipment projections based on historical 

data and an analysis of key market 

drivers for each product. Historical 

shipments data are used to build up an 

equipment stock and also to calibrate 

the shipments model. 

Historical shipments data for 

commercial warm air furnace 

equipment are very limited. DOE used 

1994 shipments data from AHRI 

(previously GAMA) that were presented 

in a report from PNNL,48 and the 

historical shipments of non-heat pump 

commercial unitary air conditioners 

(CUAC),49 which are usually packaged 

together with CWAF. The ratio of the 

shipments of non-heat pump CUAC 

equipment and the shipments of gasfired commercial warm air furnaces in 

1994 was calculated.50 DOE believes 

that this ratio should be reasonably 

stable over time. Therefore, DOE 

determined the historical shipments of 

gas-fired CWAF by multiplying this 

ratio with the historical shipments of 

non-heat pump CUAC. 

Shipments data for oil-fired CWAF is 

not publically available. DOE used the 

ratio of oil-fired versus gas-fired 

residential furnace shipments from 

AHRI 51 and the historical shipments of 

gas-fired commercial furnaces to 

calculate the historical shipment of oilfired commercial furnaces. DOE 

estimated that oil-fired CWAF account 

for about 1 percent of total CWAF 

shipments. 

The CWAF shipments model 

considers two market segments: (1) new 

commercial buildings acquiring 

equipment; (2) existing buildings 

replacing old equipment. 

For new commercial buildings, DOE 

estimated shipments using forecasts of 

commercial building and residential 

housing construction and estimates of 

the saturation of CWAF equipment in 

new buildings. DOE determined new 

commercial building and residential 

housing construction starts by using 

recorded data through 2012 52 and 

projections from AEO 2013. DOE 

developed data on the historic 

saturation of CWAF equipment in new 

buildings using CBECS 2003 and RECS 

2009. To estimate future saturations in 

new commercial buildings, DOE used 

the average saturations in buildings 

built in 1990–2003 (from CBECS 2003 

data) that use each type of CWAF 

equipment. To estimate future 

saturations in residential housing, DOE 

used the average saturations in homes 

built in 1990–2009 (from RECS 2009 

data) that use each type of CWAF 

equipment. 

To estimate shipments to existing 

buildings replacing old equipment, DOE 

used a survival function to estimate the 

fraction of commercial warm air 

furnaces of a given age still in operation. 

When a furnace fails, it is removed from 

the stock or, as explained below, is 

repaired for extended use. The survival 

function uses the lifetime values from 

the LCC analysis and has the form of a 

cumulative Weibull distribution. 

For cases with potential CWAF 

standards, DOE considered whether the 

increase in price would cause some 

commercial consumers to choose to 

repair rather than replace their 

commercial furnace equipment. To 

determine whether a commercial 

consumer would choose to repair rather 

than replace their commercial warm air 

furnace equipment, the shipments 

model uses a relative price elasticity to 

account for the combined effects of 

changes in purchase price and annual 

operating cost on the purchase versus 

repair decision. Appendix 9–A of the 

NOPR TSD describes the method. DOE 

assumed that the consumers who repair 

their equipment rather than replace it 

would extend the life of the product by 

6 years. When the extended repaired 

units fail after the 6-year period, they 

will be replaced with new ones. 

The details of the shipments analysis 

can be found in chapter 9 of the NOPR 

TSD. 

H. National Impact Analysis 

The purpose of the national impact 

analysis (NIA) is to estimate aggregate 

impacts of potential energy conservation 

standards from a national perspective, 

rather than from the consumer 

perspective represented by the LCC and 

PBP analysis. Impacts that DOE reports 

include the national energy savings 

(NES) from potential standards and the 

net present value (NPV) (future amounts 

discounted to the present) of the total 

commercial consumer costs and savings 

that are expected to result from 

amended or new standards at specific 

efficiency levels. 

To make the analysis more accessible 

and transparent to all interested parties, 

DOE used a spreadsheet model to 

calculate the energy savings and the 

national commercial consumer costs 

and savings from each TSL.53 The NIA 

calculations are based on the annual 

energy consumption and total installed 

cost data from the energy use analysis 

and the LCC analysis. In the NIA, DOE 

forecasted the lifetime energy savings, 

energy cost savings, equipment costs, 

and NPV of commercial consumer 

benefits for each equipment class over 

the lifetime of equipment sold from 

2018 through 2047. 

To develop the NES, DOE calculates 

annual energy consumption for the base 

case and the standards cases. DOE 

calculates the annual energy 

consumption using per-unit annual 

energy use data multiplied by projected 

shipments. As explained in section IV.E, 


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54PCU333415333415C: Warm air furnaces 

including duct furnaces, humidifiers and electric 

comfort heating (Available at: http://www.bls.gov/

ppi/). 

55OMB Circular A–4, section E (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4). 

DOE did not incorporate a rebound 

effect for CWAF. 

To develop the national NPV of 

consumer benefits from potential energy 

conservation standards, DOE calculates 

annual energy expenditures and annual 

equipment expenditures for the base 

case and the standards cases. DOE 

calculates annual energy expenditures 

from annual energy consumption by 

incorporating forecasted energy prices, 

using shipment projections and average 

energy efficiency projections. The perunit energy savings were derived as 

described in section IV.E. To calculate 

future electricity prices, DOE applied 

the projected trend in national-average 

commercial electricity price from the 

AEO 2013 Reference case (which 

extends to 2040) to the prices derived in 

the LCC and PBP analysis. DOE used the 

trend from 2030 to 2040 to extrapolate 

beyond 2040. DOE calculates annual 

equipment expenditures by multiplying 

the price per unit times the projected 

shipments. 

DOE used the historic trend in the 

Producer Price Index (PPI) for ‘‘Warm 

air furnaces’’ 54 to estimate the change in 

price for commercial warm air furnaces 

over the analysis period. The inflationadjusted PPI for ‘‘Warm air furnaces’’ 

from 1989 to 2006 shows a small rate of 

annual price decline. DOE also 

developed a sensitivity analysis that 

considered one scenario with a lower 

rate of price decline than the Reference 

case and one scenario with a higher rate 

of price decline than the Reference case. 

The aggregate difference each year 

between energy bill savings and 

increased equipment expenditures is the 

net savings or net costs. In calculating 

the NPV, DOE multiplies the net savings 

in future years by a discount factor to 

determine their present value. DOE 

estimates the NPV using both a 3- 

percent and a 7-percent real discount 

rate, in accordance with guidance 

provided by the Office of Management 

and Budget (OMB) to Federal agencies 

on the development of regulatory 

analysis.55 The discount rates for the 

determination of NPV are in contrast to 

the discount rates used in the LCC 

analysis, which are designed to reflect a 

consumer’s perspective. 

A key component of the NIA is the 

equipment energy efficiency forecasted 

over time for the base case and for each 

of the standards cases. In the RFI, DOE 

requested information on expected 

trends in efficiency of commercial warm 

air furnaces over the long run. 78 FR 

25627, 25634 (May 2, 2013). AHRI 

stated that since January 1, 1994, the 

efficiency trends for commercial warm 

air furnaces have stayed near a thermal 

efficiency of 80 percent. AHRI expects 

that the efficiency trends for these 

products will continue to remain flat 

over the long run. (AHRI, No. 7 at p. 6) 

DOE agrees with the comment, and it 

assumed no change in efficiency in the 

base case for non-condensing CWAF. 

For condensing gas-fired CWAF, 

however, it estimated that market 

interest in efficiency would lead to a 

modest growth in market share (from 

one percent in 2018 to five percent in 

2047). In addition, for each standards 

case, DOE assumed no change in 

efficiency over time, given this longterm efficiency trend. 

To estimate the impact that amended 

energy conservation standards may have 

in the year compliance becomes 

required, DOE uses ‘‘roll-up’’ or ‘‘shift’’ 

scenarios in its standards rulemakings. 

Under the ‘‘roll-up’’ scenario, DOE 

assumes equipment efficiencies in the 

base case that do not meet the new or 

amended standard level under 

consideration would ‘‘roll up’’ to meet 

that standard level, and equipment 

shipments at efficiencies above the 

standard level under consideration 

would not be affected. Under the ‘‘shift’’ 

scenario, DOE retains the pattern of the 

base-case efficiency distribution but reorients the distribution at and above the 

new or amended minimum energy 

conservation standard. 

In the RFI, DOE requested comment 

on whether it should pursue a roll-up or 

shift approach for potential commercial 

warm air furnace standards in the NIA. 

78 FR 25627, 25634 (May 2, 2013). 

Lennox stated that given that virtually 

all commercial warm air furnaces are at 

or just above the current minimum 

efficiency requirement, the roll-up 

approach is the more appropriate 

choice. (Lennox, No. 3 at p. 8) DOE 

concurs with the comment, and it used 

the roll-up approach for the standards 

cases. 

Based on the user samples in the LCC 

and PBP analysis, DOE estimated that a 

small fraction of commercial warm air 

furnaces (1–3 percent) is installed in 

residential buildings. The national 

energy savings in the standard cases 

includes the savings from both 

commercial and residential furnace 

users. 

DOE has historically presented NES 

in terms of primary energy savings. In 

response to the recommendations of a 

committee on ‘‘Point-of-Use and FullFuel-Cycle Measurement Approaches to 

Energy Efficiency Standards’’ appointed 

by the National Academy of Sciences, 

DOE announced its intention to use fullfuel-cycle (FFC) measures of energy use 

and greenhouse gas and other emissions 

in the national impact analyses and 

emissions analyses included in future 

energy conservation standards 

rulemakings. 76 FR 51281 (August 18, 

2011). After evaluating the approaches 

discussed in the August 18, 2011 notice, 

DOE published a statement of amended 

policy in the Federal Register in which 

DOE explained its determination that 

NEMS is the most appropriate tool for 

its FFC analysis and its intention to use 

NEMS for that purpose. 77 FR 49701 

(August 17, 2012). The method used to 

derive the FFC measures is described in 

appendix 10–B of the NOPR TSD. 

I. Consumer Subgroup Analysis 

In analyzing the potential impacts of 

new or amended standards on 

commercial consumers, DOE evaluates 

impacts on identifiable groups (i.e., 

subgroups) of consumers that may be 

disproportionately affected by a national 

standard. DOE believes that small 

businesses could be such a subgroup. 

Accordingly, for the NOPR, DOE 

evaluated impacts on a small business 

subgroup using the LCC and PBP 

spreadsheet model. To the extent 

possible, it utilized inputs appropriate 

for this subgroup. The commercial 

consumer subgroup analysis is 

discussed in detail in chapter 11 of the 

NOPR TSD. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed a manufacturer 

impact analysis (MIA) to estimate the 

financial impact of amended energy 

conservation standards on 

manufacturers of CWAF and to calculate 

the potential impact of such standards 

on employment and manufacturing 

capacity. The MIA has both quantitative 

and qualitative aspects. The quantitative 

part of the MIA primarily relies on the 

Government Regulatory Impact Model 

(GRIM), an industry cash-flow model 

with inputs specific to this rulemaking. 

The key GRIM inputs are data on the 

industry cost structure, equipment 

costs, shipments, and assumptions 

about markups and conversion 

expenditures. The key output is the 

industry net present value (INPV). 

Different sets of assumptions (markup 

scenarios) will produce different results. 

The qualitative part of the MIA 

addresses factors such as equipment 

characteristics, impacts on particular 

subgroups of firms, and important 

industry, market, and equipment trends. 


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56U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries (Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?refresh=t). 

57Hoovers Inc., Company Profiles, Various 

Companies (Available at: http://www.hoovers.com). 

Last Accessed December 13, 2013. 

The complete MIA is outlined in 

chapter 12 of the NOPR TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In Phase 1 

of the MIA, DOE prepared a profile of 

the CWAF industry that includes a topdown manufacturer cost analysis that 

DOE used to derive preliminary 

financial inputs for the GRIM (e.g., 

sales, general, and administration 

(SG&A) expenses; research and 

development (R&D) expenses; and tax 

rates). DOE used public sources of 

information, including company 

Securities and Exchange Commission 

(SEC) 10–K filings, corporate annual 

reports, the U.S. Census Bureau’s 

Economic Census,56 and Hoover’s 

reports.57

In Phase 2 of the MIA, DOE prepared 

an industry cash-flow analysis to 

quantify the potential impacts of an 

amended energy conservation standard. 

In general, new or more-stringent energy 

conservation standards can affect 

manufacturer cash flow in three distinct 

ways: (1) Create a need for increased 

investment; (2) raise production costs 

per unit; and (3) alter revenue due to 

higher per-unit prices and possible 

changes in sales volumes. 

In Phase 3 of the MIA, DOE 

conducted structured, detailed 

interviews with a representative crosssection of manufacturers. During these 

interviews, DOE discussed engineering, 

manufacturing, procurement, and 

financial topics to validate assumptions 

used in the GRIM and to identify key 

issues or concerns. See section IV.J.2.c 

for a description of the key issues 

manufacturers raised during the 

interviews. 

Additionally, in Phase 3, DOE 

evaluated subgroups of manufacturers 

that may be disproportionately 

impacted by new standards or that may 

not be accurately represented by the 

average cost assumptions used to 

develop the industry cash-flow analysis. 

For example, small manufacturers, 

niche players, or manufacturers 

exhibiting a cost structure that largely 

differs from the industry average could 

be more negatively affected. DOE 

identified one subgroup (i.e., small 

manufacturers) for a separate impact 

analysis. 

DOE applied the small business size 

standards published by the Small 

Business Administration (SBA) to 

determine whether a company is 

considered a small business. 65 FR 

30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. To be categorized as a small 

business under North American 

Industry Classification System (NAICS) 

code 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing,’’ a CWAF 

manufacturer and its affiliates may 

employ a maximum of 750 employees. 

The 750-employee threshold includes 

all employees in a business’s parent 

company and any other subsidiaries. 

Based on this classification, DOE 

identified two manufacturers that 

qualify as small businesses under the 

SBA definition. The CWAF small 

manufacturer subgroup is discussed in 

chapter 12 of the NOPR TSD and in 

sections V.B.2.d and VI.B of this notice. 

2. Government Regulatory Impact Model 

DOE uses the GRIM to quantify the 

changes in cash flow due to new 

standards that result in a higher or 

lower industry value. The GRIM 

analysis uses a standard, annual, 

discounted cash-flow methodology that 

incorporates manufacturer costs, 

markups, shipments, and industry 

financial information as inputs. The 

GRIM models changes in costs, 

distribution of shipments, investments, 

and manufacturer margins that could 

result from an amended energy 

conservation standard. The GRIM 

spreadsheet uses the inputs to arrive at 

a series of annual cash flows, beginning 

in 2014 (the base year of the analysis) 

and continuing to 2047. DOE calculated 

INPVs by summing the stream of annual 

discounted cash flows during this 

period. For CWAF manufacturers, DOE 

used a real discount rate of 8.9 percent, 

which was derived from industry 

financials and then modified according 

to feedback received during 

manufacturer interviews. 

The GRIM calculates cash flows using 

standard accounting principles and 

compares changes in INPV between a 

base case and each standards case. The 

difference in INPV between the base 

case and a standards case represents the 

financial impact of the amended energy 

conservation standard on 

manufacturers. As discussed previously, 

DOE collected this information on the 

critical GRIM inputs from a number of 

sources, including publicly-available 

data and interviews with a number of 

manufacturers (described in the next 

section). The GRIM results are shown in 

section V.B.2. Additional details about 

the GRIM, the discount rate, and other 

financial parameters can be found in 

chapter 12 of the NOPR TSD. 

a. Government Regulatory Impact Model 

Key Inputs 

Manufacturer Production Costs 

Manufacturing higher-efficiency 

equipment is typically more expensive 

than manufacturing baseline equipment 

due to the use of more complex 

components, which are typically more 

costly than baseline components. The 

changes in the manufacturer production 

cost (MPC) of the analyzed equipment 

can affect the revenues, gross margins, 

and cash flow of the industry, making 

these equipment cost data key GRIM 

inputs for DOE’s analysis. 

In the MIA, DOE used the MPCs for 

each considered efficiency level 

calculated in the engineering analysis, 

as described in section IV.C and further 

detailed in chapter 5 of the NOPR TSD. 

In addition, DOE used information from 

its teardown analysis, described in 

chapter 5 of the TSD, to disaggregate the 

MPCs into material, labor, and overhead 

costs. To calculate the MPCs for 

equipment above the baseline, DOE 

added the incremental material, labor, 

and overhead costs from the engineering 

cost-efficiency curves to the baseline 

MPCs. These cost breakdowns and 

equipment markups were validated and 

revised based on manufacturer 

comments received during MIA 

interviews. 

Shipments Forecasts 

The GRIM estimates manufacturer 

revenues based on total unit shipment 

forecasts and the distribution of these 

values by equipment class and 

efficiency level. Changes in sales 

volumes and efficiency mix over time 

can significantly affect manufacturer 

finances. For this analysis, the GRIM 

uses the NIA’s annual shipment 

forecasts derived from the shipments 

analysis from 2014 (the base year) to 

2047 (the end year of the analysis 

period). The NIA shipments forecasts 

are, in part, based on a roll-up scenario. 

The forecast assumes that product in the 

base case that does not meet the 

standard under consideration would 

‘‘roll up’’ to meet the new standard 

beginning in the compliance year of 

2018. See section IV.G. above and 

chapter 9 of the NOPR TSD for 

additional details. 

b. Government Regulatory Impact Model 

Scenarios 

Markup Scenarios 

As discussed above, MSPs include 

direct manufacturing production costs 

(i.e., labor, materials, and overhead 


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estimated in DOE’s MPCs) and all nonproduction costs (i.e., SG&A, R&D, and 

interest), along with profit. To calculate 

the MSPs in the GRIM, DOE applied 

non-production cost markups to the 

MPCs estimated in the engineering 

analysis for each equipment class and 

efficiency level. Modifying these 

markups in the standards case yields 

different sets of impacts on 

manufacturers. For the MIA, DOE 

modeled two standards-case markup 

scenarios to represent the uncertainty 

regarding the potential impacts on 

prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) A 

preservation of gross margin percentage 

markup scenario; and (2) a preservation 

of per-unit operating profit markup 

scenario. These scenarios lead to 

different markups values that, when 

applied to the inputted MPCs, result in 

varying revenue and cash flow impacts. 

Under the preservation of gross 

margin percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ markup across all efficiency 

levels, which assumes that 

manufacturers would be able to 

maintain the same amount of profit as 

a percentage of revenues at all efficiency 

levels within an equipment class. As 

production costs increase with 

efficiency, this scenario implies that the 

absolute dollar markup will increase as 

well. Based on publicly-available 

financial information for manufacturers 

of CWAF as well as comments from 

manufacturer interviews, DOE assumed 

the average non-production cost 

markup—which includes SG&A 

expenses, R&D expenses, interest, and 

profit—to be the following for each 

CWAF equipment class: 

TABLE IV.8—MANUFACTURER MARKUP

FOR BASELINE EQUIPMENT IN THE

BASE CASE

Equipment Markup 

Gas-fired Commercial Warm Air 

Furnaces ≥225,000 Btu/h ........... 1.31 

Oil-fired Commercial Warm Air Furnaces ≥225,000 Btu/h ................. 1.28 

Because this markup scenario 

assumes that manufacturers would be 

able to maintain their gross margin 

percentage markups as production costs 

increase in response to an amended 

energy conservation standard, it 

represents a high bound to industry 

profitability. 

In the preservation of operating profit 

scenario, manufacturer markups are set 

so that operating profit one year after 

the compliance date of the amended 

energy conservation standard is the 

same as in the base case. Under this 

scenario, as the costs of production 

increase under a standards case, 

manufacturers are generally required to 

reduce their markups to a level that 

maintains base-case operating profit. 

The implicit assumption behind this 

markup scenario is that the industry can 

only maintain its operating profit in 

absolute dollars after compliance with 

the new or amended standard is 

required. Therefore, operating margin in 

percentage terms is reduced between the 

base case and standards case. DOE 

adjusted (i.e., lowered) the manufacturer 

markups in the GRIM at each TSL to 

yield approximately the same earnings 

before interest and taxes in the 

standards case as in the base case. This 

markup scenario represents a low bound 

to industry profitability under an 

amended energy conservation standard. 

TABLE IV.9—MARKUPS FOR BASELINE

EQUIPMENT AT THE PROPOSED

STANDARD LEVELS

Equipment Markup 

Gas-fired Commercial Warm Air 

Furnaces ≥225,000 Btu/h ........... 1.30 

Oil-fired Commercial Warm Air Furnaces ≥225,000 Btu/h ................. 1.28 

Conversion Cost Scenarios 

An amended energy conservation 

standard would cause manufacturers to 

incur one-time conversion costs to bring 

their production facilities and 

equipment designs into compliance. 

DOE evaluated the level of conversionrelated expenditures that would be 

needed to comply with each considered 

efficiency level in each equipment class. 

For the MIA, DOE classified these 

conversion costs into two major groups: 

(1) Product conversion costs; and (2) 

capital conversion costs. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with the 

amended energy conservation standard. 

Capital conversion costs are one-time 

investments in property, plant, and 

equipment necessary to adapt or change 

existing production facilities such that 

equipment with new, compliant designs 

can be fabricated and assembled. 

DOE based its estimates of the 

conversion costs for each efficiency 

level on information obtained from 

manufacturer interviews and the design 

pathways analyzed in the engineering 

analysis. Two methodologies were used 

to develop conversion cost estimates: (1) 

A Top-Down approach using feedback 

from manufacturer interviews to gather 

data on the level of costs expected at 

each efficiency level, and (2) a BottomUp approach using engineering analysis 

inputs derived from the equipment 

teardown analysis and engineering 

model described in chapter 5 of the TSD 

to evaluate the investment required to 

design, manufacturer, and release 

equipment that meets a higher energy 

conservation standard. 

For estimating capital conversion 

costs, the Top-Down approach took 

available feedback from manufacturers 

and market share weighted the 

responses to arrive at an approximation 

representative of the industry as a 

whole. Responses from manufacturers 

with the greatest market share were 

given the greatest weight, while 

responses from manufacturers with the 

lowest market share were given the 

lowest weight. The Bottom-Up approach 

took capital conversion costs from the 

engineering analysis on a permanufacturer basis to develop an 

industry-wide cost estimate. This 

analysis included the expected 

equipment, tooling, conveyor, and plant 

costs associated with CWAF production, 

as estimated by DOE based on product 

tear-down and manufacturers’ plant 

tours. The results of the two 

methodologies were integrated to create 

high and low capital conversion cost 

scenarios. 

Product conversion costs for CWAFs 

are primarily driven by re-development 

and testing expenses. As the standard 

increases, increasing levels of redevelopment effort would be required to 

meet the efficiency requirements, as 

more equipment models would require 

redesign. Additionally, expected 

product conversion costs would ramp 

up significantly where DOE expects 

condensing technology to be necessary 

to meet a revised energy conservation 

standard. 

To estimate costs for product R&D, the 

Top-Down approach developed average 

costs per product platform based on 

feedback from manufacturers. 

Manufacturer feedback focused on the 

human capital investments, such as 

engineering and lab technician time 

necessary to update designs. In the 

Bottom-Up approach, DOE used vendor 

quotes, industry product information, 

and engineering cost model data to 

estimate the expenses associated with 

thermal efficiency testing, heat limit 

testing, product safety testing, reliability 

testing, and engineering effort. The 

results of the two methodologies were 

integrated to create high and low 

product conversion cost scenarios. 


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In general, DOE assumes that all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

amended standard. The conversion cost 

figures used in the GRIM can be found 

in section V.B.2.a of this notice. For 

additional information on the estimated 

product and capital conversion costs, 

see chapter 12 of the NOPR TSD. 

DOE requests comment on the 

product and capital conversion costs 

required to meet the range of energy 

conservation standard levels being 

considered by DOE. 

c. Manufacturer Interviews 

DOE interviewed manufacturers 

representing over 80 percent of the 

domestic CWAF market by revenue in 

order to discuss the potential impacts of 

amended energy conservation standards 

on the industry. The information 

gathered during these interviews 

enabled DOE to tailor the GRIM to 

reflect the unique financial 

characteristics of the CWAF industry. In 

interviews, DOE asked manufacturers to 

describe their major concerns with the 

rulemaking involving CWAF 

equipment. This section (IV.J.2.c) 

highlights manufacturers’ interview 

statements that helped shaped DOE’s 

understanding of the potential impacts 

of an amended standard on the industry. 

Manufacturers raised a range of general 

issues to consider (but did not 

necessarily provide a specific 

recommendation), including condensate 

disposal concerns, increased operating 

risks for end-users, and a change in the 

repair rate of older units. Below, DOE 

summarizes these issues, which were 

informally raised in manufacturer 

interviews, in order to obtain public 

comment and related data. 

Condensate Disposal 

The primary concern among the 

interview participants centered on 

condensate formation at efficiency 

levels above 81 to 82 percent. Nearly all 

interviewed CWAF manufacturers 

raised this issue as a serious problem for 

both the industry and customers in 

terms of cost and implementation. The 

major drawbacks mentioned relate to 

the management and disposal of acidic 

condensate created by high-efficiency 

furnaces. In most commercial rooftop 

units, condensate would need to be 

removed in electrically-heated piping or 

channeled directly into the building to 

avoid freezing. Manufacturers argued 

that such infrastructure would be 

required for condensing furnaces to 

safely dispose of the acidic runoff in 

both cold and warm climates. Solutions 

for condensate management systems 

would be a separate and additional cost 

to the consumer beyond the cost of the 

higher-efficiency furnace. 

Manufacturers stated that a simple, 

packaged solution for disposal of acidic 

condensate is not available and that the 

design of the condensate management 

system will be highly dependent on the 

design of the building, local building 

codes, waste water disposal 

requirements, and the expertise of the 

installer. 

DOE agrees with manufacturers that 

the formation and disposal of corrosive 

condensate is a concern for CWAF 

achieving efficiencies greater than 82- 

percent. DOE considered this factor in 

its engineering analysis and when 

developing the installation costs for the 

LCC analysis. See sections IV.C and IV.F 

of this NOPR for more information 

about how DOE addressed these 

concerns. 

Increased Operating Risks for the End 

User 

Many interview participants 

expressed concerns about risk 

associated with installation and 

equipment for reliable management of 

caustic effluent from condensing CWAF. 

They believe there are risks in 

installation, as condensate management 

systems must often be installed around 

other rooftop equipment and contractor 

ability varies widely. They cited 

problems with power outages, which 

tend to happen during winter and can 

impair even well-designed effluent 

management systems. Manufacturers 

stated than any leak or failure of the 

condensate management system could 

result in costly roofing repairs for the 

end user. The interview participants 

were of the opinion that effluent 

management would be a significant 

expense for end-users and that the risk 

and cost of roof damage would outweigh 

any benefits of high-efficiency 

condensing units. 

DOE acknowledges the potential 

issues that could be associated with an 

improperly installed condensing rooftop 

furnace, which could cause reliability 

issues for end-users of this equipment. 

DOE believes that the technical 

challenges of installing a condensing 

rooftop furnace can be overcome, and 

this has been demonstrated by the 

dedicated outdoor air systems that are 

currently on the market, which are 

installed on rooftops and have reliable 

condensate management systems. 

Nevertheless, DOE believes significant 

installer training and education would 

be required to ensure reliable 

installation of outdoor furnaces using 

condensing technology. 

Repair and Replacement Rates 

During interviews, most 

manufacturers expressed concerns that 

an increase in energy conservation 

standards for CWAF may make 

customers more likely to repair an old 

unit rather than replace it. According to 

manufacturers, the main reason an 

amended standard may lead to a drop in 

shipments is the price sensitivity of end 

users. Manufacturers added that some 

customers would need to make 

significant alterations to the layout of 

rooftop equipment in order to 

accommodate larger CWAF units and 

condensate management systems. The 

higher total installed cost of moreefficient CWAF units and the possible 

risk of damage to existing roofing could 

deter customers from purchasing new 

units. The lower cost of fixing an old 

unit may become a more attractive 

option. Furthermore, manufacturers 

indicated that there could be a 

reduction in national energy savings 

from a higher standard due to an 

increased number of older, less-efficient 

units that are repaired rather than 

replaced with newer, more-efficient 

units. Manufacturers expressed concern 

over a potential contraction in the 

overall market size resulting from 

amended standards, because 

commercial consumers may decide to 

turn to other space-conditioning options 

entirely. 

DOE agrees with manufacturers that 

for certain equipment, such as CWAF, 

the higher total installed cost of moreefficient equipment may lead end-users 

to delay purchasing new equipment and 

to repair rather than to replace this 

equipment. DOE accounts for this effect 

at higher efficiency levels in the 

shipments analysis by examining the 

cost of higher-efficiency equipment as 

compared to the operating savings, and 

this is discussed further in chapter 9 of 

the TSD (shipments analysis). 

K. Emissions Analysis 

In the emissions analysis, DOE 

estimates the reduction in power sector 

emissions of carbon dioxide (CO2), 

nitrogen oxides (NOX), sulfur dioxide 

(SO2), and mercury (Hg) from potential 

energy conservation standards for 

CWAF. In addition, DOE estimates 

emissions impacts in production 

activities (extracting, processing, and 

transporting fuels) that provide the 

energy inputs to power plants. These are 

referred to as ‘‘upstream’’ emissions. 

Together, these emissions account for 

the full-fuel-cycle (FFC). In accordance 

with DOE’s FFC Statement of Policy (76 

FR 51281 (Aug. 18, 2011)), the FFC 

analysis includes impacts on emissions 


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58Note that in these cases the reduction in site 

emissions of CO2, NOX, and SO2 is larger than the 

increase in power sector emissions. 

59See http://www.epa.gov/climateleadership/

guidance/ghg-emissions.html. 

60U.S. Environmental Protection Agency, 

Compilation of Air Pollutant Emission Factors, AP– 

42, Fifth Edition, Volume I: Stationary Point and 

Area Sources (1998) (Available at: http://

www.epa.gov/ttn/chief/ap42/index.html). 

61Forster, P., V. Ramaswamy, P. Artaxo, T. 

Berntsen, R. Betts, D.W. Fahey, J. Haywood, J. Lean, 

DC Lowe, G. Myhre, J. Nganga, R. Prinn,G. Raga, M. 

Schulz and R. Van Dorland. 2007: Changes in 

Atmospheric Constituents and in Radiative Forcing. 

In Climate Change 2007: The Physical Science 

Basis. Contribution of Working Group I to the 

Fourth Assessment Report of the Intergovernmental 

Panel on Climate Change. S. Solomon, D. Qin, M. 

Manning, Z. Chen, M. Marquis, K.B. Averyt, 

M.Tignor and H.L. Miller, Editors. 2007. Cambridge 

University Press, Cambridge, United Kingdom and 

New York, NY, USA. p. 212. 

62See North Carolina v. EPA, 550 F.3d 1176 (D.C. 

Cir. 2008); North Carolina v. EPA, 531 F.3d 896 

(D.C. Cir. 2008). 

63See EME Homer City Generation, LP v. EPA, 

696 F.3d 7, 38 (D.C. Cir. 2012). 

64On April 29, 2014, the U.S. Supreme Court 

reversed the judgment of the DC Circuit and 

remanded the case for further proceedings 

consistent with the Supreme Court’s opinion. The 

Supreme Court held in part that EPA’s methodology 

for quantifying emissions that must be eliminated 

in certain states due to their impacts in other 

downwind states was based on a permissible, 

workable, and equitable interpretation of the Clean 

Air Act provision that provides statutory authority 

for CSAPR. See EPA v. EME Homer City Generation, 

No 12–1182, slip op. at 32 (U.S. April 29, 2014). 

Because DOE is using emissions factors based on 

AEO 2013 for NOPR, the analysis assumes that 

CAIR, not CSAPR, is the regulation in force. The 

difference between CAIR and CSAPR is not relevant 

for the purpose of DOE’s analysis of SO2 emissions. 

of methane (CH4) and nitrous oxide 

(N2O), both of which are recognized as 

greenhouse gases. 

The proposed standards would reduce 

use of fuel at the site and slightly reduce 

electricity use, thereby reducing power 

sector emissions. However, the highest 

efficiency levels (i.e., the max-tech 

levels) considered for CWAF would 

increase the use of electricity by the 

furnace. For the considered TSLs, DOE 

estimated the change in power sector 

and upstream emissions of CO2, NOX, 

SO2, and mercury (Hg).58

DOE primarily conducted the 

emissions analysis using emissions 

factors for CO2 and most of the other 

gases derived from data in EIA’s Annual 

Energy Outlook 2013 (AEO 2013). 

Combustion emissions of CH4 and N2O 

were estimated using emissions 

intensity factors published by the 

Environmental Protection Agency (EPA) 

through its GHG Emissions Factors 

Hub.59 Site emissions of CO2 and NOX

were estimated using emissions 

intensity factors from an EPA 

publication.60 DOE developed separate 

emissions factors for power sector 

emissions and upstream emissions. The 

method that DOE used to derive 

emissions factors is described in chapter 

13 of the NOPR TSD. 

For CH4 and N2O, DOE calculated 

emissions reduction in tons and also in 

terms of units of carbon dioxide 

equivalent (CO2eq). Gases are converted 

to CO2eq by multiplying by the gas’ 

global warming potential (GWP) over a 

100-year time horizon. Based on the 

Fourth Assessment Report of the 

Intergovernmental Panel on Climate 

Change,61 DOE used GWP values of 25 

for CH4 and 298 for N2O. 

EIA prepares the Annual Energy 

Outlook using NEMS. Each annual 

version of NEMS incorporates the 

projected impacts of existing air quality 

regulations on emissions. AEO 2013 

generally represents current legislation 

and environmental regulations, 

including recent government actions, for 

which implementing regulations were 

available as of December 31, 2012. 

Because the on-site operation of 

CWAF requires use of fossil fuels and 

results in emissions of CO2, NOX, and 

SO2 at the sites where these appliances 

are used, DOE also accounted for the 

reduction in these site emissions and 

the associated upstream emissions due 

to potential standards. 

SO2 emissions from affected electric 

generating units (EGUs) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (DC). SO2 emissions from 28 

eastern States and DC were also limited 

under the Clean Air Interstate Rule 

(CAIR; 70 FR 25162 (May 12, 2005)), 

which created an allowance-based 

trading program that operates along 

with the Title IV program. CAIR was 

remanded to the U.S. Environmental 

Protection Agency (EPA) by the U.S. 

Court of Appeals for the District of 

Columbia Circuit, but it remained in 

effect.62 In 2011 EPA issued a 

replacement for CAIR, the Cross-State 

Air Pollution Rule (CSAPR). 76 FR 

48208 (August 8, 2011). On August 21, 

2012, the DC Circuit issued a decision 

to vacate CSAPR.63 The court ordered 

EPA to continue administering CAIR. 

The emissions factors used for the 

NOPR, which are based on AEO 2013 

assume that CAIR remains a binding 

regulation through 2040.64

The attainment of emissions caps is 

typically flexible among EGUs and is 

enforced through the use of emissions 

allowances and tradable permits. Under 

existing EPA regulations, any excess 

SO2 emissions allowances resulting 

from the lower electricity demand 

caused by the adoption of an efficiency 

standard could be used to permit 

offsetting increases in SO2 emissions by 

any regulated EGU. In past rulemakings, 

DOE recognized that there was 

uncertainty about the effects of 

efficiency standards on SO2 emissions 

covered by the existing cap-and-trade 

system, but it concluded that negligible 

reductions in power sector SO2

emissions would occur as a result of 

standards. 

Beginning in 2015, however, SO2

emissions will decline significantly as a 

result of the Mercury and Air Toxics 

Standards (MATS) for power plants. 77 

FR 9304 (Feb. 16, 2012). In the final 

MATS rule, EPA established a standard 

for hydrogen chloride as a surrogate for 

acid gas hazardous air pollutants (HAP), 

and also established a standard for SO2

(a non-HAP acid gas) as an alternative 

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions will be reduced as 

a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. AEO 2013 assumes that, in 

order to continue operating, coal plants 

must have either flue gas 

desulfurization or dry sorbent injection 

systems installed by 2015. Both 

technologies, which are used to reduce 

acid gas emissions, also reduce SO2

emissions. Under the MATS, NEMS 

shows a reduction in SO2 emissions 

when electricity demand decreases (e.g., 

as a result of energy efficiency 

standards). Emissions will be far below 

the cap established by CAIR, so it is 

likely that excess SO2 emissions 

allowances resulting from the lower 

electricity demand would be needed or 

used to permit offsetting increases in 

SO2 emissions by any regulated EGU. 

Therefore, DOE believes that energy 

efficiency standards will reduce SO2

emissions in 2015 and beyond. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia. Energy 

conservation standards are expected to 

have little effect on NOX emissions in 

those States covered by CAIR because 

excess NOX emissions allowances 

resulting from the lower electricity 

demand could be used to permit 

offsetting increases in NOX emissions. 

However, standards would be expected 

to reduce NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions reductions 

from the standards considered in the 

NOPR for these States. 

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps and, as such, 

DOE’s energy conservation standards 


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would likely reduce Hg emissions. DOE 

estimated mercury emissions reduction 

using emissions factors based on AEO 

2013, which incorporates the MATS. 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

As part of the development of this 

proposed rule, DOE considered the 

estimated monetary benefits from the 

reduced emissions of CO2 and NOX that 

are expected to result from each of the 

TSLs considered. In order to make this 

calculation similar to the calculation of 

the NPV of consumer benefit, DOE 

considered the reduced emissions 

expected to result over the lifetime of 

equipment shipped in the forecast 

period for each TSL. This section 

summarizes the basis for the monetary 

values used for each of these emissions 

and presents the values considered in 

this rulemaking. 

For this NOPR, DOE is relying on a set 

of values for the social cost of carbon 

(SCC) that was developed by an 

interagency process. A summary of the 

basis for these values is provided below, 

and a more detailed description of the 

methodologies used is provided as an 

appendix to chapter 14 of the NOPR 

TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of carbon dioxide. A domestic SCC 

value is meant to reflect the value of 

damages in the United States resulting 

from a unit change in carbon dioxide 

emissions, while a global SCC value is 

meant to reflect the value of damages 

worldwide. 

Under section 1(b)(6) of Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs. The 

purpose of the SCC estimates presented 

here is to allow agencies to incorporate 

the monetized social benefits of 

reducing CO2 emissions into costbenefit analyses of regulatory actions. 

The estimates are presented with an 

acknowledgement of the many 

uncertainties involved and with a clear 

understanding that they should be 

updated over time to reflect increasing 

knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed the SCC estimates, technical 

experts from numerous agencies met on 

a regular basis to consider public 

comments, explore the technical 

literature in relevant fields, and discuss 

key model inputs and assumptions. The 

main objective of this process was to 

develop a range of SCC values using a 

defensible set of input assumptions 

grounded in the existing scientific and 

economic literatures. In this way, key 

uncertainties and model differences 

transparently and consistently inform 

the range of SCC estimates used in the 

rulemaking process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of carbon 

dioxide emissions, the analyst faces a 

number of challenges. A recent report 

from the National Research Council 

points out that any assessment will 

suffer from uncertainty, speculation, 

and lack of information about: (1) 

Future emissions of greenhouse gases; 

(2) the effects of past and future 

emissions on the climate system; (3) the 

impact of changes in climate on the 

physical and biological environment; 

and (4) the translation of these 

environmental impacts into economic 

damages. As a result, any effort to 

quantify and monetize the harms 

associated with climate change will 

raise questions of science, economics, 

and ethics and should be viewed as 

provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing carbon 

dioxide emissions. The agency can 

estimate the benefits from reduced 

emissions in any future year by 

multiplying the change in emissions in 

that year by the SCC value appropriate 

for that year. The net present value of 

the benefits can then be calculated by 

multiplying the future benefits by an 

appropriate discount factor and 

summing across all affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits from reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits are evaluated across 

agencies, the Administration sought to 

develop a transparent and defensible 

method, specifically designed for the 

rulemaking process, to quantify avoided 

climate change damages from reduced 

CO2 emissions. The interagency group 

did not undertake any original analysis. 

Instead, it combined SCC estimates from 

the existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim values: global SCC 

estimates for 2007 (in 2006$) of $55, 

$33, $19, $10, and $5 per metric ton of 

CO2. These interim values represented 

the first sustained interagency effort 

within the U.S. government to develop 

an SCC for use in regulatory analysis. 

The results of this preliminary effort 

were presented in several proposed and 

final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specifically, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: the FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change. Each model was given equal 

weight in the SCC values that were 

developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models while respecting the different 

approaches to quantifying damages 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 


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65Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866, Interagency 

Working Group on Social Cost of Carbon, United 

States Government (February 2010) (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/

inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf). 

66 Id. 

67Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

In 2010, the interagency group 

selected four sets of SCC values for use 

in regulatory analyses.65 Three sets of 

values are based on the average SCC 

from three integrated assessment 

models, at discount rates of 2.5 percent, 

3 percent, and 5 percent. The fourth set, 

which represents the 95th-percentile 

SCC estimate across all three models at 

a 3-percent discount rate, is included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The values 

grow in real terms over time. 

Additionally, the interagency group 

determined that a range of values from 

7 percent to 23 percent should be used 

to adjust the global SCC to calculate 

domestic effects, although preference is 

given to consideration of the global 

benefits of reducing CO2 emissions. 

Table IV.10 presents the values in the 

2010 interagency group report,66 which 

is reproduced in appendix 14–A of the 

NOPR TSD. 

TABLE IV.10—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th Percentile 

2010 ................................................................................................................. 4.7 21.4 35.1 64.9 

2015 ................................................................................................................. 5.7 23.8 38.4 72.8 

2020 ................................................................................................................. 6.8 26.3 41.7 80.7 

2025 ................................................................................................................. 8.2 29.6 45.9 90.4 

2030 ................................................................................................................. 9.7 32.8 50.0 100.0 

2035 ................................................................................................................. 11.2 36.0 54.2 109.7 

2040 ................................................................................................................. 12.7 39.2 58.4 119.3 

2045 ................................................................................................................. 14.2 42.1 61.7 127.8 

2050 ................................................................................................................. 15.7 44.9 65.0 136.2 

The SCC values used for this NOPR 

were generated using the most recent 

versions of the three integrated 

assessment models that have been 

published in the peer-reviewed 

literature.67 Table IV.11 shows the 

updated sets of SCC estimates from the 

2013 interagency update in five-year 

increments from 2010 to 2050. 

Appendix 14–B of the NOPR TSD 

provides the full set of values. The 

central value that emerges is the average 

SCC across models at 3-percent discount 

rate. However, for purposes of capturing 

the uncertainties involved in regulatory 

impact analysis, the interagency group 

emphasizes the importance of including 

all four sets of SCC values. 

TABLE IV.11—ANNUAL SCC VALUES FROM 2013 INTERAGENCY UPDATE, 2010–2050 

[in 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th Percentile 

2010 ................................................................................................................. 11 32 51 89 

2015 ................................................................................................................. 11 37 57 109 

2020 ................................................................................................................. 12 43 64 128 

2025 ................................................................................................................. 14 47 69 143 

2030 ................................................................................................................. 16 52 75 159 

2035 ................................................................................................................. 19 56 80 175 

2040 ................................................................................................................. 21 61 86 191 

2045 ................................................................................................................. 24 66 92 206 

2050 ................................................................................................................. 26 71 97 220 

It is important to recognize that a 

number of key uncertainties remain, and 

that current SCC estimates should be 

treated as provisional and revisable 

since they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The National Research 

Council report mentioned above points 

out that there is tension between the 

goal of producing quantified estimates 

of the economic damages from an 

incremental ton of carbon and the limits 

of existing efforts to model these effects. 

There are a number of analytical 

challenges that are being addressed by 

the research community, including 


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68The post-2050 annual growth rates for the four 

SCC cases are 2.6%, 1.6%, 1.3%, and 1.5%. 

69U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities, Washington, DC. 

70See Bureau of Economic Analysis, ‘‘Regional 

Multipliers: A Handbook for the Regional InputOutput Modeling System (RIMS II),’’ U.S. 

Department of Commerce (1992). 

71M.J. Scott, O.V. Livingston, P.J. Balducci, J.M. 

Roop, and R.W. Schultz, ImSET 3.1: Impact of 

Sector Energy Technologies, PNNL–18412, Pacific 

Northwest National Laboratory (2009) (Available at: 

www.pnl.gov/main/publications/external/

technical_reports/PNNL-18412.pdf). 

research programs housed in many of 

the Federal agencies participating in the 

interagency process to estimate the SCC. 

The interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions, DOE used the 

values from the 2013 interagency report, 

adjusted to 2013$ using the Gross 

Domestic Product price deflator. For 

each of the four SCC cases specified, the 

values used for emissions in 2015 were 

$12.0, $40.5, $62.4, and $119 per metric 

ton avoided (values expressed in 

2013$). For the years after 2050, DOE 

applied the average annual growth rate 

of the SCC estimates in 2040¥2050 

associated with each of the four sets of 

values.68

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SCC values in each case. 

2. Valuation of Other Emissions 

Reductions 

As noted above, DOE has taken into 

account how amended energy 

conservation standards would reduce 

site NOX emissions nationwide and 

increase power sector NOX emissions in 

those 22 States not affected by the CAIR. 

DOE estimated the monetized value of 

net NOX emissions reductions resulting 

from each of the TSLs considered for 

this NOPR based on estimates found in 

the relevant scientific literature. 

Estimates of monetary value for 

reducing NOX from stationary sources 

range from $476 to $4,893 per ton in 

2013$.69 DOE calculated monetary 

benefits using a medium value for NOX

emissions of $2,684 per short ton (in 

2013$), and NOX real discount rates of 

3 percent and 7 percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. It has not 

included monetization in the current 

analysis. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

several effects on the electricity 

generation industry that would result 

from the adoption of amended energy 

conservation standards. In the utility 

impact analysis, DOE analyzes the 

changes in installed electricity capacity 

and generation that would result for 

each trial standard level. The utility 

impact analysis used a variant of NEMS. 

The analysis consists of a comparison 

between model results for the most 

recent AEO Reference Case and for cases 

in which energy use is decremented to 

reflect the impact of potential standards. 

The energy savings inputs associated 

with each TSL come from the NIA. 

Chapter 15 of the NOPR TSD describes 

the utility impact analysis in further 

detail. 

N. Employment Impact Analysis 

Employment impacts from new or 

amended energy conservation standards 

include direct and indirect impacts. 

Direct employment impacts are any 

changes in the number of employees of 

manufacturers of the equipment subject 

to standards; the MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient equipment. Indirect 

employment impacts from standards 

consist of the jobs created or eliminated 

in the national economy, other than in 

the manufacturing sector being 

regulated, due to: (1) Reduced spending 

by end users on energy; (2) reduced 

spending on new energy supply by the 

utility industry; (3) increased consumer 

spending on the purchase of new 

equipment; and (4) the effects of those 

three factors throughout the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.70 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

sector (i.e., the utility sector) to more 

labor-intensive sectors (e.g., the retail 

and service sectors). Thus, based on the 

BLS data alone, DOE believes net 

national employment may increase 

because of shifts in economic activity 

resulting from amended standards for 

CWAF. 

For the amended standard levels 

considered in the NOPR, DOE estimated 

indirect national employment impacts 

using an input/output model of the U.S. 

economy called Impact of Sector Energy 

Technologies, Version 3.1.1 (ImSET).71

ImSET is a special-purpose version of 

the ‘‘U.S. Benchmark National InputOutput’’ (I–O) model, which was 

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer-based I–O 

model having structural coefficients that 

characterize economic flows among the 

187 sectors. ImSET’s national economic 

I–O structure is based on a 2002 U.S. 

benchmark table, specially aggregated to 

the 187 sectors most relevant to 

industrial, commercial, and residential 

building energy use. DOE notes that 

ImSET is not a general equilibrium 

forecasting model, and understands the 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run. For the NOPR, DOE 

used ImSET only to estimate short-term 

(through 2023) employment impacts. 

For more details on the employment 

impact analysis, see chapter 16 of the 

NOPR TSD. 

V. Analytical Results and Conclusions 

The following section addresses the 

results from DOE’s analyses with 

respect to potential amended energy 

conservation standards for CWAF in 

this rulemaking. It addresses the trial 


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standard levels (TSLs) examined by 

DOE, the projected impacts of each of 

these levels if adopted as energy 

conservation standards for CWAF, and 

the proposed standard levels that DOE 

sets forth in the NOPR. Additional 

details regarding DOE’s analyses are 

contained in the TSD supporting this 

notice. 

A. Trial Standard Levels 

At the NOPR stage, DOE develops 

TSLs for consideration. TSLs are formed 

by grouping different efficiency levels, 

which are potential standard levels for 

each equipment class. DOE analyzed the 

benefits and burdens of the TSLs 

developed for this proposed rule. Table 

V.1 presents the TSLs analyzed and the 

corresponding efficiency level for each 

CWAF equipment class. TSL 5 

represents the max-tech efficiency 

levels, which use condensing 

technology. For non-condensing 

efficiency levels, DOE considered all 

gas-fired and oil-fired efficiency level 

combinations as part of the TSL 

structure. 

TABLE V.1—SUMMARY OF TRIAL STANDARD LEVELS FOR COMMERCIAL WARM AIR FURNACES

Equipment class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Thermal efficiency (TE) 

Gas-fired Furnaces .................................................................................. 81% 81% 82% 82% 92% 

Oil-fired Furnaces .................................................................................... 81% 82% 81% 82% 92% 

B. Economic Justification and Energy 

Savings 

As discussed in section II.A, EPCA 

provides seven factors to be evaluated in 

determining whether a more-stringent 

standard for CWAF is economically 

justified. (42 U.S.C. 6313(a)(6)(B)(ii)) 

The following sections generally discuss 

how DOE is addressing each of those 

factors in this rulemaking. 

1. Economic Impacts on Individual 

Commercial Consumers 

DOE analyzed the economic impacts 

on CWAF consumers by looking at the 

effects standards would have on the 

LCC and PBP. DOE also examined the 

impacts of potential standards on 

commercial consumer subgroups. These 

analyses are discussed below. 

a. Life-Cycle Cost and Payback Period 

To evaluate the net economic impact 

of potential amended energy 

conservation standards on commercial 

consumers of CWAF, DOE conducted 

LCC and PBP analyses for each TSL. In 

general, higher-efficiency equipment 

would affect customers in two ways: (1) 

Annual operating expense would 

decrease, and (2) purchase price would 

increase. Inputs used for calculating the 

LCC and PBP include total installed 

costs (i.e., equipment price plus 

installation costs), operating costs (i.e., 

annual energy savings, energy prices, 

energy price trends, repair costs, and 

maintenance costs), equipment lifetime, 

and discount rates. 

The key outputs of the LCC analysis 

are a mean LCC savings (or cost) and a 

median PBP relative to the base case for 

each equipment class, as well as the 

percentage of consumers for which the 

LCC under an amended standard would 

decrease (net benefit), increase (net 

cost), or exhibit no change (no impact) 

relative to the base-case equipment 

forecast. No impacts occur when the 

base-case efficiency equals or exceeds 

the efficiency at a given TSL. 

DOE also performed a PBP analysis as 

part of the consumer impact analysis. 

The PBP is the number of years it would 

take for the consumer of this 

commercial equipment to recover the 

increased costs of higher-efficiency 

equipment as a result of energy savings 

based on the operating cost savings. The 

PBP is an economic benefit-cost 

measure that uses benefits and costs 

without discounting. Chapter 8 of the 

NOPR TSD provides detailed 

information on the LCC and PBP 

analyses. 

Table V.2 and Table V.3 show the key 

LCC and PBP results for each equipment 

class. 

TABLE V.2—SUMMARY LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR GAS-FIRED COMMERCIAL WARM AIR

FURNACES

Trial 

standard 

level 

Thermal 

efficiency 

Life-cycle cost 2013$ Life-cycle cost savings 

Median 

payback 

period 

years 

Total 

installed 

cost 

Discounted 

operating 

cost 

LCC 

Average 

savings 

2013$* 

% of Customers that experience 

Net cost No impact Net 

benefit 

Baseline ... 80% $2,262 $26,623 $28,885 NA 0% 100% 0% NA 

1, 2 ........... 81% 2,271 26,343 28,613 $186 1% 33% 66% 0.6 

3, 4 ........... 82% 2,280 26,069 28,349 $426 2% 10% 88% 0.7 

5 ............... 92% 3,848 23,898 27,746 $1,025 48% 1% 51% 12.2 

* Rounding may cause some items to not total 100 percent. 


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TABLE V.3—SUMMARY LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR OIL-FIRED COMMERCIAL WARM AIR

FURNACES

Trial 

standard 

level 

Thermal 

efficiency 

Life-cycle cost 2013$ Life-cycle cost savings 

Median 

payback 

period 

years 

Total 

installed 

cost 

Discounted 

operating 

cost 

LCC 

Average 

savings 

2013$* 

% of Customers that experience 

Net cost No impact Net 

benefit 

Baseline, 

1, 3 ....... 81% $6,504 $67,313 $73,817 NA 0% 100% 0% NA 

2, 4 ........... 82% 6,556 73,310 73,310 $164 8% 69% 23% 2.8 

5 ............... 92% 8,008 62,187 70,195 $3,278 47% 0% 53% 7.5 

* Rounding may cause some items to not total 100 percent. 

b. Consumer Subgroup Analysis 

In the consumer subgroup analysis, 

DOE estimated the impacts of the 

considered TSLs on small business 

consumers. The LCC savings and 

payback periods for small business 

consumers are shown in Table V.4. 

Chapter 11 of the NOPR TSD presents 

detailed results of the commercial 

consumer subgroup analysis. 

TABLE V.4—SUMMARY CONSUMER SUBGROUP (SMALL BUSINESS CONSUMERS) RESULTS FOR COMMERCIAL WARM AIR

FURNACES

Trial standard level 

Gas-fired Oil-fired 

Average 

LCC 

savings* 

Median PBP 

Average 

LCC 

savings* 

Median PBP 

1 ....................................................................................................................................... $158 0.6 NA NA 

2 ....................................................................................................................................... 158 0.6 $132 2.3 

3 ....................................................................................................................................... 365 0.7 NA NA 

4 ....................................................................................................................................... 365 0.7 $132 2.3 

5 ....................................................................................................................................... 708 12.6 $2,454 8.8 

* LCC savings are net savings (i.e., savings over the life time net of any costs incurred). 

c. Rebuttable Presumption Payback 

As discussed in section III.C.2, EPCA 

establishes a rebuttable presumption 

that an energy conservation standard is 

economically justified if the increased 

purchase cost for equipment that meets 

the standard is less than three times the 

value of the first-year energy savings 

resulting from the standard. DOE 

calculated a rebuttable-presumption 

PBP for each TSL to determine whether 

DOE could presume that a standard at 

that level is economically justified. 

DOE based the calculations on 

average usage profiles. As a result, DOE 

calculated a single rebuttablepresumption payback value, and not a 

distribution of PBPs, for each TSL. 

Table V.5 shows the rebuttablepresumption PBPs for the considered 

TSLs. The rebuttable presumption is 

fulfilled in those cases where the PBP is 

three years or less. However, DOE 

routinely conducts an economic 

analysis that considers the full range of 

impacts to the customer, manufacturer, 

Nation, and environment, as required by 

EPCA. The results of that analysis serve 

as the basis for DOE to definitively 

evaluate the economic justification for a 

potential standard level (thereby 

supporting or rebutting the results of 

any three-year PBP analysis). Section 

V.C addresses how DOE considered the 

range of impacts to select these 

proposed standards. 

TABLE V.5—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR COMMERCIAL WARM AIR FURNACES* 

Equipment class 

Trial standard level 

1 2 3 4 5 

Gas-fired .................................................................................................. 0.02 0.02 0.02 0.02 0.44 

Oil-fired .................................................................................................... .................... 0.14 .................... 0.14 0.63 

* The rebuttable PBP is based on DOE’s test procedure and uses single-point values, while the LCC analysis presented in Table V.2 and 

Table V.3 reflects energy use under actual field conditions and uses a distribution of values. 

2. Economic Impacts on Manufacturers 

As noted above, DOE performed an 

MIA to estimate the impact of amended 

energy conservation standards on 

manufacturers of CWAF. The following 

section describes the expected impacts 

on manufacturers at each considered 

TSL. Chapter 12 of the NOPR TSD 

explains the analysis in further detail. 

a. Industry Cash-Flow Analysis Results 

Table V.6. and Table V.7 depict the 

estimated financial impacts (represented 

by changes in INPV) of amended energy 

standards on manufacturers of CWAF, 

as well as the conversion costs that DOE 

expects manufacturers would incur for 

all equipment classes at each TSL. To 

evaluate the range of cash flow impacts 

on the CWAF industry associated with 


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potential amended energy conservation 

standards, DOE modeled two different 

mark-up scenarios and two different 

conversion cost scenarios, as described 

in section IV.J.b (Government 

Regulatory Impact Model Scenarios). 

The combination of markup scenarios 

and conversion costs scenarios results 

in 4 sets of results: (1) Preservation of 

Gross Margin Percentage and Low 

Conversion Costs scenario, (2) 

Preservation of Gross Margin Percentage 

and High Conversion Costs scenario, (3) 

Preservation of Operating Profit and 

Low Conversion Costs scenario, (4) 

Preservation of Operating Profit and 

High Conversion Costs scenario. Each of 

the modeled scenarios results in a 

unique set of cash flows and 

corresponding industry values at each 

TSL. DOE presents the highest and 

lowest INPV results from the combined 

scenarios to portray the range of 

potential impacts on the industry. The 

low end of the range of impacts is the 

Preservation of Gross Margin Percentage 

and Low Conversion Costs scenario. The 

high end of the range of impacts is the 

Preservation of Operating Profit and 

High Conversion Costs scenario. 

In the following discussion, the INPV 

results refer to the difference in industry 

value between the base case and each 

standards case that results from the sum 

of discounted cash flows from the base 

year 2014 through 2047, the end of the 

analysis period. To provide perspective 

on the short-run cash flow impact, DOE 

includes in the discussion of the results 

below a comparison of free cash flow 

between the base case and the standards 

case at each TSL in the year before new 

standards would take effect. This figure 

provides an understanding of the 

magnitude of the required conversion 

costs relative to the cash flow generated 

by the industry in the base case. 

The set of results below shows 

potential INPV impacts for CWAF 

manufacturers; Table V.6. reflects the 

lower bound of impacts, and Table V.7 

represents the upper bound. 

TABLE V.6—MANUFACTURER IMPACT ANALYSIS FOR CWAF—PRESERVATION OF GROSS MARGIN PERCENTAGE/LOW

CONVERSION COST SCENARIO SCENARIO* 

Units Base case 

Trial standard level 

1 2 3 4 5 

INPV ......................................................... 2013$ M 74.67 67.9 67.5 64.0 63.5 89.4 

Change in INPV ....................................... 2013$ M .................... (6.7) (7.2) (10.7) (11.1) 14.8 

% .................... ¥9% ¥10% ¥14% ¥15% ¥20% 

Product Conversion Costs ....................... 2013$ M .................... 11.1 11.5 18.0 18.4 28.2 

Capital Conversion Costs ........................ 2013$ M .................... 0.6 0.9 1.2 1.5 61.3 

Total Conversion Costs ........................... 2013$ M .................... 11.7 12.4 19.2 19.9 89.4 

Free Cash Flow ....................................... 2013$ M 6.3 2.4 2.2 (0.1) (0.3) (31.3) 

Change in Free Cash Flow ...................... 2013$ M .................... 3.9 4.1 6.4 6.7 37.6 

% Change .................... 61.4 65.6 101.4 105.5 596.0 

* Parentheses indicate negative values. 

TABLE V.7—MANUFACTURER IMPACT ANALYSIS FOR CWAF—PRESERVATION OF OPERATING PROFIT SCENARIO/HIGH

CONVERSION COSTS SCENARIO: CHANGES SCENARIO* 

Units Base case 

Trial standard level 

1 2 3 4 5 

INPV ......................................................... 2013$ M 74.67 64.2 60.1 36.7 31.4 (23.7) 

Change in INPV ....................................... 2013$ M .................... (10.5) (14.5) (38.0) (43.3) (98.3) 

% .................... 14% 19% 51% 58% 132% 

Product Conversion Costs ....................... 2013$ M .................... 11.3 17.2 48.8 54.7 81.0 

Capital Conversion Costs ........................ 2013$ M .................... 4.4 5.0 4.5 5.0 71.5 

Total Conversion Costs ........................... 2013$ M .................... 15.7 22.2 53.2 59.7 152.5 

Free Cash Flow ....................................... 2013$ M 6.3 0.7 (1.5) (14.8) (17.7) (59.2) 

Change in .................................................

Free Cash Flow ....................................... 2013$ M .................... 5.7 7.8 21.1 24.0 65.5 

% Change .................... 89.6 124.3 334.7 380.4 1038.6 

* Parentheses indicate negative values. 

As noted in section IV.J.a 

(Government Regulatory Impact Model 

Key Inputs), the MIA uses the 

Engineering Analysis’s manufacturer 

production costs and the Shipments 

Analysis’s sales forecasts as inputs. Two 

key trends in these inputs help drive the 

MIA results. First, the increase in 

efficiency at TSLs below max-tech can 

be accomplished with very little 

incremental production cost. This is 

highlighted in Table IV.6. At levels 

below TSL 5, gas-fired equipment MPCs 

increase by 4% at most and oil-fired 

MPC increase by 1% at most. 

Furthermore, at levels below TSL 5, 

total industry shipments over the 

analysis period remain the same across 

TSLs. Since DOE’s analysis indicates 

there are no significant changes to 

variable production costs and no 

significant changes in total shipments 

below max-tech, manufacturer markups 

are also unlikely to vary significantly at 

those TSLs and have limited impact on 

the change in industry value between 

the base case and standards cases. 

However, anticipated conversion 

costs provided by manufacturers in 

interviews were quite high relative to 

industry value. As a result, conversion 

costs would have a significant impact 

on industry value. In particular, product 

conversion costs and time requirements 

were a concern for the industry. 

Manufacturer input during interviews 

indicated higher product conversion 

costs than initially expected by DOE. As 

a result, the Department modeled a 

sensitivity related to conversion costs. 

DOE applied two different 


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72 ‘‘Annual Survey of Manufactures (ASM),’’ U.S. 

Census Bureau (2011) (Available at: http://

www.census.gov/manufacturing/asm/). 

methodologies to estimate conversion 

costs. A Top-Down methodology relied 

on manufacturer feedback, AHRI listing 

data, and market share estimates. A 

Bottom-Up methodology was also used 

to estimate industry conversion costs, 

under which DOE relied on test lab 

pricing quotes, industry product 

literature, and the engineering cost 

model data to estimate the expenses 

associated with thermal efficiency 

testing, heat limit testing, product safety 

testing, reliability testing, and 

engineering effort. DOE assumed these 

items comprised the bulk of product 

conversion costs. 

In its analysis, DOE ran 4 scenarios 

based on combinations from 2 markup 

scenarios and 2 conversion cost 

scenarios. The results presented below 

represent the upper-bound and lowerbound of results from those scenarios. 

TSL 1 represents EL 1 (81 percent) for 

gas-fired CWAF and baseline (81 

percent) for oil-fired CWAF. At this 

level, DOE estimates 54% of the 

industry platforms would require 

redesign at a total industry conversion 

cost of $11.7 million to $15.7 million. 

DOE estimates impacts on INPV for 

CWAF manufacturers to range from a 

change in INPV of ¥14.0 percent to 

¥9.0 percent, or $10.5 million to ¥$6.7 

million. At this potential standard level, 

industry free cash flow is estimated to 

decrease by as much as 89.6 percent to 

¥$0.7 million, compared to the basecase value of $6.3 million in 2017, the 

year before the compliance date (2018). 

TSL 2 represents EL 1 (81 percent for 

gas-fired and 82 percent for oil-fired) 

across all equipment classes. At this 

level, DOE estimates 60% of the 

industry platforms would require 

redesign at a total industry conversion 

cost of $12.4 million to $22.2 million. 

DOE estimates impacts on INPV for 

CWAF manufacturers to range from a 

change in INPV of ¥19.5 percent to 

¥9.6 percent, or a change of ¥$14.5 

million to ¥$7.2 million. At this 

potential standard level, industry free 

cash flow is estimated to decrease by as 

much as 124.3 percent to ¥$1.5 million, 

compared to the base-case value of $6.3 

million in the year before the 

compliance date (2018). 

TSL 3 represents EL 2 (82 percent) for 

gas-fired CWAF and baseline (81 

percent) for oil-fired CWAF. At this 

level, DOE estimates 77% of the 

industry platforms would require 

redesign at a total industry conversion 

cost of $19.2 million to $53.2 million 

DOE estimates impacts on INPV for 

CWAF manufacturers to range from a 

change in INPV of ¥50.8 percent to 

¥14.3 percent, or ¥$38.0 million to 

¥$10.7 million. At this potential 

standard level, industry free cash flow 

is estimated to decrease by as much as 

334.7 percent to ¥$14.8 million, 

compared to the base-case value of $6.3 

million in the year before the 

compliance date (2018). 

TSL 4 represents EL 2 (82 percent) for 

gas-fired CWAF and EL 1 (82 percent) 

for oil-fired CWAF. At this level, DOE 

estimates 83% of the industry platforms 

would require redesign at a total 

industry conversion cost of $19.9 

million to $59.7 million. DOE estimates 

impacts on INPV for CWAF 

manufacturers to range from a change in 

INPV of ¥58.0 percent to ¥14.9 

percent, or ¥$43.3 million to ¥$11.1 

million. At this potential standard level, 

industry free cash flow is estimated to 

decrease by as much as 380.4 percent to 

¥$17.7 million, compared to the basecase value of $6.3 million in the year 

before the compliance date (2018) 

TSL 5 represents max-tech across all 

equipment classes (i.e., EL 3 (92 

percent) for gas-fired CWAF and EL 2 

(92 percent) for oil-fired CWAF). At this 

level, DOE estimates 92% of the 

industry platforms would require 

redesign at a total industry conversion 

cost of $89.4 million to $152.5 million. 

Conversion costs more than double from 

TSL 4 to TSL 5. The vast majority of the 

industry does not offer condensing 

commercial furnaces today and would 

need to develop condensing technology 

for commercial applications. 

Implementing a condensing commercial 

furnace would likely have design 

implication for the cooling side of the 

HVAC product and for the chassis that 

houses both the cooling and heating 

components. DOE estimates impacts on 

INPV for CWAF manufacturers to range 

from a change in INPV of ¥131.7 

percent to 19.8 percent, or ¥$98.3 

million to $14.8 million. The loss of 

more than 100% of INPV reflects the 

fact that conversion expenses extend 

beyond the commercial furnace and 

affect commercial air conditioners and 

heat pumps, which tend to be the more 

expensive and complex component of 

commercial HVAC products. At this 

potential standard level, industry free 

cash flow is estimated to decrease by as 

much as 1,038.6 percent to ¥$59.2 

million relative to the base-case value of 

$6.3 million in the year before the 

compliance date (2018). 

b. Impacts on Direct Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment in the CWAF industry, 

DOE used the GRIM to estimate the 

domestic labor expenditures and 

number of employees in the base case 

and at each TSL from 2014 through 

2047. DOE used statistical data from the 

U.S. Census Bureau’s 2011 Annual 

Survey of Manufacturers (ASM),72 the 

results of the engineering analysis, and 

interviews with manufacturers to 

determine the inputs necessary to 

calculate industry-wide labor 

expenditures and domestic employment 

levels. Labor expenditures related to 

manufacturing of the product are a 

function of the labor intensity of the 

product, the sales volume, and an 

assumption that wages remain fixed in 

real terms over time. The total labor 

expenditures in each year are calculated 

by multiplying the MPCs by the labor 

percentage of MPCs. DOE estimates that 

99 percent of CWAF units are produced 

domestically. 

The total labor expenditures in the 

GRIM were then converted to domestic 

production employment levels by 

dividing production labor expenditures 

by the annual payment per production 

worker (production worker hours times 

the labor rate found in the U.S. Census 

Bureau’s 2011 ASM). The estimates of 

production workers in this section cover 

workers, including line-supervisors who 

are directly involved in fabricating and 

assembling a product within the 

manufacturing facility. Workers 

performing services that are closely 

associated with production operations, 

such as materials handling tasks using 

forklifts, are also included as production 

labor. DOE’s estimates only account for 

production workers who manufacture 

the specific products covered by this 

rulemaking. The total direct 

employment impacts calculated in the 

GRIM are the changes in the number of 

production workers resulting from the 

amended energy conservation standards 

for CWAF, as compared to the base case. 

In general, more-efficient equipment is 

larger, more complex, and more laborintensive to build. Per unit labor 

requirements and production time 

requirements increase with a higher 

energy conservation standard. As a 

result, the total labor calculations 

described in this paragraph are 

considered an upper bound to direct 

employment forecasts. 

Using the GRIM, DOE estimates that 

in the absence of amended energy 

conservation standards, there would be 

235 domestic production workers for 

CWAF equipment. DOE estimates that 

99 percent of CWAF units sold in the 

United States are manufactured 

domestically. The employment impact 

estimates in Table V.8 below show a 


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range of potential production 

employment levels that could exist 

following the compliance date of 

amended energy conservation 

standards. These direct employment 

impacts shown are independent of the 

employment impacts to the broader U.S. 

economy, which are documented in the 

section IV.N (Employment Impact 

Analysis) and chapter 13 of the NOPR 

TSD. 

TABLE V.8—RANGE OF POTENTIAL CHANGES IN CWAF PRODUCTION WORKERS IN 2018 

Trial standard level 

1 2 3 4 5 

Total Number of Domestic Production Workers in 2018 (no production 

location change) ................................................................................... 235 to 190 235 to 189 235 to 142 235 to 141 521 to 136 

Change from Base Case Estimate of 235 Domestic Production Workers in 2018 ........................................................................................... 0 to (45) 0 to (46) 0 to (93) 0 to (94) 286 to (99) 

The upper bound of the range 

assumes that manufacturers would 

continue to produce the same scope of 

covered equipment within the United 

States, and assumes that domestic 

production would not shift to countries 

with lower labor costs. At TSL 1 

through 4, the upper bound shows no 

change in employment from the 

baseline due to a constant level of 

production labor expenditure. The 

major costs and changes for increasing 

product efficiency at lower levels would 

be for capital, not labor. On the other 

hand, the max-tech level at TSL 5 would 

require significant increases in both 

capital and labor expenditure due to 

increased complexity and size of 

condensing furnaces. 

The lower bound assumes that as the 

standard increases, manufacturers 

choose to retire sub-standard product 

lines rather than invest in 

manufacturing facility conversions and 

product redesigns. DOE assumes 

manufacturers take the lowest 

investment option and do not relocate 

any production facilities to lower-cost 

countries. In this scenario, there is a loss 

of employment because manufacturers 

consolidate and operate fewer 

production lines. Since this is intended 

to be a worst-case scenario for 

employment, there is no consideration 

given to the fact that there may be 

employment growth in higher-efficiency 

lines. 

c. Impacts on Manufacturing Capacity 

According to the certain CWAF 

manufacturers interviewed, amended 

energy conservation standards could 

lead to decreased production capacity. 

Most manufacturers indicated there 

would be little to no production 

capacity decrease at 81-percent and 82- 

percent efficiency levels, but at 91- 

percent and 92-percent levels, there 

would be significant capacity shortfall. 

This feedback is consistent with the 

engineering analysis, which found there 

would be sufficient capacity at current 

levels to meet slightly higher efficiency 

standards, but that significant 

investment would be required to 

support production of higher-efficiency, 

condensing furnace standards. 

d. Impacts on Subgroups of 

Manufacturers 

Small manufacturers, niche 

equipment manufacturers, and 

manufacturers exhibiting a cost 

structure substantially different from the 

industry average could be affected 

disproportionately. For CWAF, DOE 

identified and evaluated the impact of 

amended energy conservation standards 

on one subgroup: small manufacturers. 

The Small Business Administration 

(SBA) defines a ‘‘small business’’ as 

having 750 employees or less for NAICS 

333415, ‘‘Air-Conditioning and Warm 

Air Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

definition, DOE identified 2 

manufacturers in the CWAF industry 

that are small businesses. 

As discussed in section IV.J, using 

average cost assumptions to develop an 

industry cash-flow estimate is 

inadequate to assess differential impacts 

among manufacturer subgroups. 

Therefore, for a more detailed 

discussion of DOE’s assessment of the 

impacts on the small manufacturer 

subgroup, see the regulatory flexibility 

analysis in section VI.B of this notice 

and chapter 12 of the NOPR TSD. DOE 

requests stakeholder input on the 

number of small business CWAF 

manufacturers and the potential for 

disproportionate impacts to those small 

manufacturers. 

e. Cumulative Regulatory Burden 

While any one regulation may not 

impose a significant burden on 

manufacturers, the combined effects of 

recent or impending regulations may 

have serious consequences for some 

manufacturers, groups of manufacturers, 

or an entire industry. Assessing the 

impact of a single regulation may 

overlook this cumulative regulatory 

burden. In addition to energy 

conservation standards, other 

regulations can significantly affect 

manufacturers’ financial operations. 

Multiple regulations affecting the same 

manufacturer can strain profits and lead 

companies to abandon product lines or 

markets with lower expected future 

returns than competing products. For 

these reasons, DOE conducts an analysis 

of cumulative regulatory burden as part 

of its rulemakings pertaining to 

appliance efficiency. 

For the cumulative regulatory burden 

analysis, DOE looks at other regulations 

that could affect CWAF manufacturers 

that will take effect approximately three 

years before or after the 2018 

compliance date of amended energy 

conservation standards for these 

products. In interviews, manufacturers 

cited Federal regulations on equipment 

other than CWAF that contribute to 

their cumulative regulatory burden. The 

compliance years and expected industry 

conversion costs of relevant amended 

energy conservation standards are 

indicated in Table V.9 below. 


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73 ‘‘Montreal Protocol,’’ United Nations 

Environment Programme, Web. 26 (August 2010) 

(Available at: http://ozone.unep.org/new_site/en/

montreal_protocol.php) (Last accessed 12/13/13). 74See Arkema v. EPA, 618 F.3d 1 (D.C. Cir. 2010). 

TABLE V.9—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING CWAF MANUFACTURERS

Federal energy conservation standards 

Approximate 

compliance 

date 

Estimated total 

industry 

conversion 

expense 

2007 Residential Furnaces & Boilers *—72 FR 65136 (Nov. 19, 2007) ................................................................. 2015 $88M 

(2006$) 

2011 Residential Furnaces **—76 FR 37408 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011) .............................. 2015 $2.5M 

(2009$) 

2011 Residential Central Air Conditioners and Heat Pumps **—76 FR 37408 (June 27, 2011); 76 FR 67037 

(Oct. 31, 2011) ..................................................................................................................................................... 2015 $26.0M 

(2009$) 

2010 Gas Fired and Electric Storage Water Heaters—75 FR 20112 (April 16, 2010) .......................................... 2015 $95.4M 

(2009$) 

2014 Walk-in Coolers and Freezers—79 FR 32049 (June 3, 2014) ...................................................................... 2017 $35.2M 

(2012$) 

Commercial Packaged Air-Conditioning and Heating Equipment †—79 FR 58948 (September 30, 2014) ........... 2018 $226.4M 

(2013$) 

Commercial and Industrial Fans and Blowers †—2014 Furnace Fans—79 FR 37937 (July 3, 2014) .................. 2018 

2019 

TBD 

$40.6M 

(2013$) 

Packaged Terminal Air Conditioners and Heat Pumps †—79 FR 55538 (September 16, 2014). ......................... 2019 $7.6M 

(2013$) 

Single Package Vertical Units †—79 FR 78614 (December 30, 2014) .................................................................. 2019 $16.1M 

(2013$) 

Residential Boilers † ................................................................................................................................................ 2019 TBD 

Commercial Boilers † ............................................................................................................................................... 2019 TBD 

* Conversion expenses for manufacturers of oil-fired furnaces and for manufacturers of gas-fired and oil-fired boilers associated with the November 2007 final rule for residential furnaces and boilers are excluded from this figure. With regard to oil-fired furnaces, the 2011 direct final 

rule for residential furnaces sets a higher standard and earlier compliance date for oil-fired furnaces than the 2007 final rule. As a result, manufacturers will be required to design to the 2011 direct final rule standard. The conversion costs associated with the 2011 direct final rule are listed 

separately in this table. With regard to gas-fired and oil-fired boilers, EISA 2007 legislated higher standards and earlier compliance dates for residential boilers than were in the November 2007 final rule. As a result, gas-fired and oil-fired boiler manufacturers were required to design to the 

EISA 2007 standard beginning in 2012. 

** Estimated industry conversion expense and approximate compliance date reflect a court-ordered May 1, 2013 stay of the residential nonweatherized and mobile home gas furnaces standards set in the 2011 Energy Conservation Standards for Residential Furnaces and Residential 

Central Air Conditioners and Heat Pumps. 

† The final rule for this energy conservation standard has not been published. For energy conservation standards which have published a 

NOPR, DOE lists the compliance date and conversion costs for the proposed standard level. However, standard level and analytic results are not 

finalized until the publication of the final rule. For energy conservation standards which have not yet reached the NOPR publication phase of the 

rulemaking, information is not yet available. 

In addition to Federal energy 

conservation standards, DOE identified 

other Federal regulatory burdens that 

would affect manufacturers of CWAF: 

EPA Phase-out of 

Hydrochlorofluorocarbons (HCFCs) 

The U.S. is obligated under the 

Montreal Protocol to limit production 

and consumption of HCFCs through 

incremental reductions, culminating in 

a complete phase-out of HCFCs by 

2030.73 On December 15, 2009, the U.S. 

Environmental Protection Agency (EPA) 

published a final rule commonly 

referred to as the ‘‘2010 HCFC 

Allocation Rule,’’ which allocates 

production and consumption 

allowances for HCFC–22 for each year 

between 2010 and 2014. 74 FR 66412. 

On January 4, 2012, EPA published the 

‘‘2012 HCFC Allocation Proposed Rule,’’ 

which proposes to lift the regulatory ban 

on the production and consumption of 

HCFC–22 (following a court decision 74

in August 2010 to vacate a portion of the 

‘‘2010 HCFC Allocation Rule’’) by 

establishing company-by-company 

HCFC–22 baselines and allocating 

allowances for 2012–2014. 77 FR 237. 

HCFC–22, which is also known as R– 

22, is a popular refrigerant that is 

commonly used in air-conditioning 

products. Many manufacturers of CWAF 

also manufacture air-conditioning 

products, and would be impacted by the 

HCFC phase-out. Manufacturers of 

CWAF that make air-conditioning 

equipment must comply with the 

allowances established by the allocation 

rule, thereby facing a cumulative 

regulatory burden. 

DOE requests comment on the 

cumulative regulatory burden that may 

be imposed on industry by regulations 

that go into effect in the 3 years before 

and the 3 years after the proposed 

CWAF standards year of 2018. 

3. National Impact Analysis 

a. Significance of Energy Savings 

For each TSL, DOE projected energy 

savings for CWAF purchased in the 30- 

year period that begins in the year of 

anticipated compliance with amended 

standards (2018–2047). The savings are 

measured over the entire lifetime of 

equipment purchased in the 30-year 

period. DOE quantified the energy 

savings attributable to each TSL as the 

difference in energy consumption 

between each standards case and the 

base case. Table V.10 presents the 

estimated primary energy savings for 

each considered TSL, and Table V.11 

presents the estimated FFC energy 

savings for each TSL. The approach for 

estimating national energy savings is 

further described in section IV.H. 


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75OMB, Circular A–4: Regulatory Analysis (Sept. 

17, 2003). 

76EPCA requires DOE to review its energy 

conservation standards at least once every 6 years, 

and requires, for certain products, a 3-year period 

after any new standard is promulgated before 

compliance is required, except that in no case may 

any new standards be required within 6 years of the 

compliance date of the previous standards. (42 

U.S.C. 6313(a)(6)(C)(iv)) While adding a 6-year 

review to the 3-year compliance period adds up to 

9 years, DOE notes that it may undertake reviews 

at any time within the 6 year period and that the 

3-year compliance date may yield to the 6-year 

backstop. A 9-year analysis period may not be 

appropriate given the variability that occurs in the 

timing of standards reviews and the fact that for 

some consumer products, the compliance period is 

5 years rather than 3 years. 

77OMB Circular A–4, section E (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4). 

TABLE V.10—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR COMMERCIAL WARM AIR FURNACE TRIAL

STANDARD LEVELS FOR UNITS SOLD IN 2018–2047 * 

Equipment class 

Trial standard level 

1 2 3 4 5 

quads 

Gas-fired Furnaces .................................................................................. 0.203 0.203 0.471 0.471 3.040 

Oil-fired Furnaces .................................................................................... 0.000 0.001 0.000 0.001 0.031 

Total All Classes ............................................................................... 0.203 0.204 0.471 0.472 3.071 

* Note: Components may not sum due to rounding. 

TABLE V.11—CUMULATIVE NATIONAL FULL-FUEL-CYCLE ENERGY SAVINGS FOR COMMERCIAL WARM AIR FURNACE TRIAL

STANDARD LEVELS FOR UNITS SOLD IN 2018–2047 * 

Equipment class 

Trial standard level 

1 2 3 4 5 

quads 

Gas-fired Furnaces .................................................................................. 0.222 0.222 0.516 0.516 3.338 

Oil-fired Furnaces .................................................................................... 0.000 0.001 0.000 0.001 0.036 

Total All Classes ............................................................................... 0.222 0.223 0.516 0.517 3.374 

* Note: Components may not sum due to rounding. 

Circular A–4 75 requires agencies to 

present analytical results, including 

separate schedules of the monetized 

benefits and costs that show the type 

and timing of benefits and costs. 

Circular A–4 also directs agencies to 

consider the variability of key elements 

underlying the estimates of benefits and 

costs. For this rulemaking, DOE 

undertook a sensitivity analysis using 

nine, rather than 30, years of equipment 

shipments. The choice of a nine-year 

period is a proxy for the timeline in 

EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

revised standards.76 The review 

timeframe established in EPCA is 

generally not synchronized with the 

equipment lifetime, equipment 

manufacturing cycles, or other factors 

specific to CWAF. Thus, this 

information is presented for 

informational purposes only and is not 

indicative of any change in DOE’s 

analytical methodology. The NES 

results based on a nine-year analytical 

period are presented in Table V.12. The 

impacts are counted over the lifetime of 

CWAF purchased in 2018–2026. 

TABLE V.12—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR COMMERCIAL WARM AIR FURNACE TRIAL

STANDARD LEVELS FOR UNITS SOLD IN 2018–2026 

Equipment class 

Trial standard level 

1 2 3 4 5 

quads 

Gas-fired Furnaces .................................................................................. 0.059 0.059 0.136 0.136 0.937 

Oil-fired Furnaces .................................................................................... 0.000 0.000 0.000 0.000 0.013 

Total All Classes ............................................................................... 0.059 0.059 0.136 0.137 0.950 

b. Net Present Value of Commercial 

Consumer Costs and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for 

commercial consumers that would 

result from the TSLs considered for 

CWAF. In accordance with OMB’s 

guidelines on regulatory analysis,77

DOE calculated the NPV using both a 7- 

percent and a 3-percent real discount 

rate. The 7-percent rate is an estimate of 

the average before-tax rate of return on 

private capital in the U.S. economy, and 

reflects the returns on real estate and 

small business capital as well as 

corporate capital. This discount rate 

approximates the opportunity cost of 

capital in the private sector (OMB 

analysis has found the average rate of 

return on capital to be near this rate). 


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The 3-percent rate reflects the potential 

effects of standards on private 

consumption (e.g., through higher prices 

for equipment and reduced purchases of 

energy). This rate represents the rate at 

which society discounts future 

consumption flows to their present 

value. It can be approximated by the 

real rate of return on long-term 

government debt (i.e., yield on United 

States Treasury notes), which has 

averaged about 3 percent for the past 30 

years. 

Table V.13 shows the commercial 

consumer NPV results for each TSL 

considered for CWAF. In each case, the 

impacts cover the lifetime of equipment 

purchased in 2018–2047. 

TABLE V.13—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR COMMERCIAL WARM AIR FURNACE TRIAL

STANDARD LEVELS FOR UNITS SOLD IN 2018–2047 

Equipment class 

Discount 

rate 

(percent) 

Trial standard level 

1 2 3 4 5 

 billion 2013$ 

Gas-fired Furnaces .................................................................................. 1.1391 1.1391 2.6432 2.6432 10.0083 

Oil-fired Furnaces .................................................................................... 3 0.0000 0.0157 0.0000 0.0157 0.3756 

Total All Classes * ............................................................................. 1.1391 1.1548 2.6432 2.6589 10.3839 

Gas-fired Furnaces .................................................................................. 0.4361 0.4361 1.0111 1.0111 2.7799 

Oil-fired Furnaces .................................................................................... 7 0.0000 0.0057 0.0000 0.0057 0.1220 

Total All Classes * ............................................................................. 0.4361 0.4417 1.0111 1.0168 2.9019 

* Note: Components may not sum due to rounding. 

The NPV results based on the 

aforementioned nine-year analytical 

period are presented in Table V.14. The 

impacts are counted over the lifetime of 

equipment purchased in 2018–2026. As 

mentioned previously, this information 

is presented for informational purposes 

only and is not indicative of any change 

in DOE’s analytical methodology or 

decision criteria. 

TABLE V.14—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR COMMERCIAL WARM AIR FURNACE TRIAL

STANDARD LEVELS FOR UNITS SOLD IN 2018–2026 

Equipment class 

Discount 

rate 

(percent) 

Trial standard level 

1 2 3 4 5 

 billion 2013$ 

Gas-fired Furnaces .................................................................................. 0.366 0.366 0.849 0.849 2.978 

Oil-fired Furnaces .................................................................................... 3 0.000 0.007 0.000 0.007 0.177 

Total All Classes ............................................................................... 0.366 0.373 0.849 0.856 3.156 

Gas-fired Furnaces .................................................................................. 0.199 0.199 0.461 0.461 1.139 

Oil-fired Furnaces .................................................................................... 7 0.000 0.003 0.000 0.003 0.073 

Total All Classes ............................................................................... 0.199 0.202 0.461 0.464 1.212 

The above results reflect the use of the 

historic trend in the inflation-adjusted 

PPI for ‘‘Warm air furnaces’’ to estimate 

the change in price for CWAF over the 

analysis period (see section IV.H). The 

trend shows a small rate of annual price 

decline. DOE also developed sensitivity 

analyses using two price trends that 

have rates of price decline that are less 

than and greater than the Reference 

trend. The results of these alternative 

cases are presented in appendix 10–C of 

the NOPR TSD. 

c. Indirect Impacts on Employment 

DOE expects that amended energy 

conservation standards for CWAF 

would reduce energy costs for 

equipment owners, with the resulting 

net savings being redirected to other 

forms of economic activity. Those shifts 

in spending and economic activity 

could affect the demand for labor. As 

described in section IV.N, DOE used an 

input/output model of the U.S. economy 

to estimate indirect employment 

impacts of the TSLs that DOE 

considered in this rulemaking. DOE 

understands that there are uncertainties 

involved in projecting employment 

impacts, especially changes in the later 

years of the analysis. Therefore, DOE 

generated results for near-term time 

frames (2018¥2023), where these 

uncertainties are reduced. 

The results suggest that the proposed 

standards would be likely to have a 

negligible impact on the net demand for 

labor in the economy. The net change in 

jobs is so small that it would be 

imperceptible in national labor statistics 

and might be offset by other, 

unanticipated effects on employment. 

Chapter 16 of the NOPR TSD presents 

detailed results regarding indirect 

employment impacts. 

4. Impact on Utility or Performance of 

Equipment 

DOE has tentatively concluded that 

the amended standards it is proposing 

in the NOPR would not lessen the 

utility or performance of CWAF. 

5. Impact of Any Lessening of 

Competition 

DOE considers any lessening of 

competition that is likely to result from 

new or amended standards. The 

Attorney General determines the 


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impact, if any, of any lessening of 

competition likely to result from a 

proposed standard, and transmits such 

determination in writing to the 

Secretary, together with an analysis of 

the nature and extent of such impact. 

To assist the Attorney General in 

making such determination, DOE has 

provided DOJ with copies of this NOPR 

and the TSD for review. DOE will 

consider DOJ’s comments on the 

proposed rule in preparing the final 

rule, and DOE will publish and respond 

to DOJ’s comments in that document. 

6. Need of the Nation to Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

Nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts (costs) of energy 

production. Energy savings from 

amended standards for the CWAF 

equipment classes covered in today’s 

NOPR could also produce 

environmental benefits in the form of 

reduced emissions of air pollutants and 

greenhouse gases associated with 

electricity production. Table V.15 

provides DOE’s estimate of cumulative 

emissions reductions projected to result 

from the TSLs considered in this 

rulemaking. This table includes both 

site and upstream emissions. DOE 

reports annual emissions reductions for 

each TSL in chapter 13 of the NOPR 

TSD. 

TABLE V.15—CUMULATIVE EMISSIONS REDUCTION ESTIMATED FOR COMMERCIAL WARM AIR FURNACE TRIAL STANDARD

LEVELS

Trial standard level 

1 2 3 4 5 

Site and Power Sector Emissions* 

CO2 (million metric tons) .......................................................................... 10.7 10.8 24.8 24.9 162.8 

SO2 (thousand tons) ................................................................................ 0.9 0.9 2.2 2.2 4.6 

NOX (thousand tons) ............................................................................... 9.2 9.3 21.3 21.4 141.9 

Hg (tons) .................................................................................................. 0.001 0.001 0.003 0.003 0.005 

CH4 (thousand tons) ................................................................................ 0.3 0.3 0.6 0.6 3.7 

N2O (thousand tons) ................................................................................ 0.033 0.035 0.077 0.079 0.435 

Upstream Emissions 

CO2 (million metric tons) .......................................................................... 1.3 1.3 3.0 3.0 19.8 

SO2 (thousand tons) ................................................................................ 0.0 0.0 0.0 0.0 0.2 

NOX (thousand tons) ............................................................................... 19.5 19.6 45.3 45.4 302.3 

Hg (tons) .................................................................................................. 0.000 0.000 0.000 0.000 0.000 

CH4 (thousand tons) ................................................................................ 137.4 137.5 319.0 319.2 2107.1 

N2O (thousand tons) ................................................................................ 0.002 0.003 0.006 0.006 0.038 

Total Emissions 

CO2 (million metric tons) .......................................................................... 12.0 12.1 27.8 27.9 182.5 

SO2 (thousand tons) ................................................................................ 0.9 1.0 2.2 2.2 4.8 

NOX (thousand tons) ............................................................................... 28.7 28.9 66.6 66.8 444.1 

Hg (tons) .................................................................................................. 0.001 0.001 0.003 0.003 0.005 

CH4 (thousand tons) ................................................................................ 137.6 137.8 319.7 319.8 2110.8 

N2O (thousand tons) ................................................................................ 0.036 0.038 0.083 0.085 0.472 

CH4 (million tons CO2eq) ** ..................................................................... 3.4 3.4 8.0 8.0 52.8 

N2O (thousand tons CO2eq) ** ................................................................. 10.6 11.2 24.7 25.2 140.7 

* Primarily site emissions. Values include the increase in power sector emissions from higher electricity use at TSL 5. 

** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

As part of the analysis for this 

proposed rule, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of CO2 and NOX that 

DOE estimated for each of the TSLs 

considered for CWAF. As discussed in 

section IV.L, DOE used the most recent 

values for the SCC developed by an 

interagency process. The four sets of 

SCC values for CO2 emissions 

reductions in 2015 resulting from that 

process (expressed in 2013$) are 

represented by $12.0/metric ton (the 

average value from a distribution that 

uses a 5-percent discount rate), $40.5/

metric ton (the average value from a 

distribution that uses a 3-percent 

discount rate), $62.4/metric ton (the 

average value from a distribution that 

uses a 2.5-percent discount rate), and 

$119/metric ton (the 95th-percentile 

value from a distribution that uses a 3- 

percent discount rate). The values for 

later years are higher due to increasing 

damages (emissions-related costs) as the 

projected magnitude of climate change 

increases. 

Table V.16 presents the global value 

of CO2 emissions reductions at each 

TSL. For each of the four cases, DOE 

calculated a present value of the stream 

of annual values using the same 

discount rate as was used in the studies 

upon which the dollar-per-ton values 

are based. DOE calculated domestic 

values as a range from 7 percent to 23 

percent of the global values, and these 

results are presented in chapter 14 of 

the NOPR TSD. 


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TABLE V.16—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION UNDER COMMERCIAL WARM AIR

FURNACE TRIAL STANDARD LEVELS

TSL 

SCC case * 

5% Discount rate, 

average 

3% Discount rate, 

average 

2.5% Discount rate, 

average 

3% Discount rate, 95th 

percentile 

Million 2013$ 

Site and Power Sector Emissions ** 

1 ....................................................... 67.3 323 517 1,000 

2 ....................................................... 67.7 325 520 1,007 

3 ....................................................... 156 750 1,200 2,322 

4 ....................................................... 157 752 1,204 2,329 

5 ....................................................... 1,032 4,932 7,890 15,271 

Upstream Emissions 

1 ....................................................... 7.99 38.4 61.4 119 

2 ....................................................... 8.06 38.7 62.0 120 

3 ....................................................... 18.6 89.1 143 276 

4 ....................................................... 18.6 89.4 143 277 

5 ....................................................... 125 598 957 1,852 

Total Emissions 

1 ....................................................... 75.2 361 578 1,119 

2 ....................................................... 75.8 364 582 1,127 

3 ....................................................... 175 839 1,343 2,598 

4 ....................................................... 175 841 1,347 2,606 

5 ....................................................... 1,157 5,530 8,847 17,123 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$). 

** Includes the increase in power sector emissions from higher electricity use at TSL 5. 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other 

greenhouse gas (GHG) emissions to 

changes in the future global climate and 

the potential resulting damages to the 

world economy continues to evolve 

rapidly. Thus, any value placed on 

reducing CO2 emissions in this 

rulemaking is subject to change. DOE, 

together with other Federal agencies, 

will continue to review various 

methodologies for estimating the 

monetary value of reductions in CO2

and other GHG emissions. This ongoing 

review will consider the comments on 

this subject that are part of the public 

record for this and other rulemakings, as 

well as other methodological 

assumptions and issues. However, 

consistent with DOE’s legal obligations, 

and taking into account the uncertainty 

involved with this particular issue, DOE 

has included in this proposed rule the 

most recent values and analyses 

resulting from the interagency process. 

DOE also estimated the cumulative 

monetary value of the economic benefits 

associated with NOX emissions 

reductions anticipated to result from 

amended standards for the CWAF 

equipment that is the subject of this 

notice. The dollar-per-ton values that 

DOE used are discussed in section IV.L. 

Table V.17 presents the cumulative 

present values for NOX emissions 

reductions for each TSL calculated 

using the average dollar-per-ton values 

and seven-percent and three-percent 

discount rates. 

TABLE V.17—ESTIMATES OF PRESENT VALUE OF NOX EMISSIONS REDUCTION UNDER COMMERCIAL WARM AIR FURNACE

TRIAL STANDARD LEVELS

TSL 3% Discount rate 7% Discount rate 

Million 2013$ 

Site and Power Sector Emissions * 

1 ............................................................................................................................................... 11.3 4.72 

2 ............................................................................................................................................... 11.4 4.76 

3 ............................................................................................................................................... 26.2 11.0 

4 ............................................................................................................................................... 26.3 11.0 

5 ............................................................................................................................................... 176 74.9 

Upstream Emissions 

1 ............................................................................................................................................... 23.9 9.98 

2 ............................................................................................................................................... 24.1 10.0 

3 ............................................................................................................................................... 55.5 23.2 

4 ............................................................................................................................................... 55.7 23.2 


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TABLE V.17—ESTIMATES OF PRESENT VALUE OF NOX EMISSIONS REDUCTION UNDER COMMERCIAL WARM AIR FURNACE

TRIAL STANDARD LEVELS—Continued 

TSL 3% Discount rate 7% Discount rate 

Million 2013$ 

5 ............................................................................................................................................... 375 159 

Total Emissions 

1 ............................................................................................................................................... 35.2 14.7 

2 ............................................................................................................................................... 35.4 14.8 

3 ............................................................................................................................................... 81.7 34.1 

4 ............................................................................................................................................... 82.0 34.2 

5 ............................................................................................................................................... 551 234 

* Includes the increase in power sector emissions from higher electricity use at TSL 5. 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) No other factors 

were considered in this analysis. 

8. Summary of Other National Economic 

Impacts 

The NPV of the monetized benefits 

associated with emissions reductions 

can be viewed as a complement to the 

NPV of the commercial consumer 

savings calculated for each TSL 

considered in this rulemaking. Table 

V.18. presents the NPV values that 

result from adding the estimates of the 

potential economic benefits resulting 

from reduced CO2 and NOX emissions 

in each of four valuation scenarios to 

the NPV of commercial consumer 

savings calculated for each TSL 

considered in this rulemaking, at both a 

seven-percent and three-percent 

discount rate. The CO2 values used in 

the columns of each table correspond to 

the four sets of SCC values discussed 

above. 

TABLE V.18—CWAF TSLS: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH PRESENT VALUE OF

MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS

TSL 

Consumer NPV at 3% discount rate added with: 

SCC Case $12.0/metric 

ton CO2 * and medium 

value for NOX

SCC Case $40.5/metric 

ton CO2 * and medium 

value for NOX

SCC Case $62.4/metric 

ton CO2 * and medium 

value for NOX

SCC Case $119/metric 

ton CO2 * and medium 

value for NOX

Billion 2013$ 

1 ....................................................... 1.2 1.5 1.8 2.3 

2 ....................................................... 1.3 1.6 1.8 2.3 

3 ....................................................... 2.9 3.6 4.1 5.3 

4 ....................................................... 2.9 3.6 4.1 5.3 

5 ....................................................... 12.1 16.5 19.8 28.1 

Consumer NPV at 7% discount rate added with: 

TSL SCC Case $12.0/metric 

ton CO2 * 

SCC Case $40.5/metric 

ton CO2 * 

SCC Case $62.4/metric 

ton CO2 * 

SCC Case $119/metric 

ton CO2 * 

Billion 2013$ 

1 ....................................................... 0.5 0.8 1.0 1.5 

2 ....................................................... 0.5 0.8 1.0 1.6 

3 ....................................................... 1.2 1.9 2.4 3.6 

4 ....................................................... 1.2 1.9 2.4 3.7 

5 ....................................................... 4.3 8.7 12.0 20.3 

* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium value, which corresponds 

to $2,684 per ton. 

Although adding the value of 

consumer savings to the values of 

emission reductions provides a valuable 

perspective, two issues should be 

considered. First, the national operating 

cost savings are domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions, while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and the SCC are 

performed with different methods that 

use different time frames for analysis. 

The national operating cost savings is 

measured for the lifetime of equipment 

shipped in 2018–2047. The SCC values, 

on the other hand, reflect the present 

value of future climate-related impacts 

resulting from the emission of one 

metric ton of CO2 in each year. These 

impacts continue well beyond 2100. 

C. Proposed Standards 

To adopt national standards more 

stringent than the current standards for 

CWAF, DOE must determine that such 

action would result in significant 

additional conservation of energy and is 

technologically feasible and 


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economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)) As discussed 

previously, EPCA provides seven factors 

to be evaluated in determining whether 

a more-stringent standard for CWAF is 

economically justified. (42 U.S.C. 

6313(a)(6)(B)(ii)(I)–(VII)) 

For this NOPR, DOE considered the 

impacts of amended standards for 

CWAF at each TSL, beginning with the 

maximum technologically feasible level, 

to determine whether that level was 

economically justified. Where the maxtech level was not justified, DOE then 

considered the next most efficient level 

and undertook the same evaluation until 

it reached the highest efficiency level 

that is both technologically feasible and 

economically justified and saves a 

significant additional amount of energy. 

To aid the reader in understanding 

the benefits and/or burdens of each TSL, 

tables in this section summarize the 

quantitative analytical results for each 

TSL, based on the assumptions and 

methodology discussed herein. The 

efficiency levels contained in each TSL 

are described in section V.A. In addition 

to the quantitative results presented in 

the tables, DOE also considers other 

burdens and benefits that affect 

economic justification. These include 

the impacts on subgroups of consumer 

who may be disproportionately affected 

by a national standard (see section 

V.B.1.b), and impacts on employment. 

DOE discusses the impacts on direct 

employment in CWAF manufacturing in 

section V.B.2.b, and discusses the 

indirect employment impacts in section 

V.B.3.c. 

1. Benefits and Burdens of Trial 

Standard Levels Considered for CWAF 

Table V.19 and Table V.20 summarize 

the quantitative impacts estimated for 

each TSL for CWAF. The national 

impacts are measured over the lifetime 

of CWAF purchased in the 30-year 

period that begins in the year of 

compliance with amended standards 

(2018–2047). The energy savings, 

emissions reductions, and value of 

emissions reductions refer to full-fuelcycle results. 

TABLE V.19—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL WARM AIR FURNACES: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

National FFC Energy Savings (quads) 

0.22 0.22 0.52 0.52 3.37 

NPV of Consumer Benefits (2013$ billion) 

3% discount rate .................................................................. 1.1 1.2 2.6 2.7 10.4 

7% discount rate .................................................................. 0.4 0.4 1.0 1.0 2.9 

Cumulative Emissions Reduction (Total FFC Emissions) * 

CO2 (million metric tons) ...................................................... 12.0 12.1 27.8 27.9 182.5 

SO2 (thousand tons) ............................................................ 0.9 1.0 2.2 2.2 4.8 

NOX (thousand tons) ........................................................... 28.7 28.9 66.6 66.8 444.1 

Hg (tons) .............................................................................. 0.001 0.001 0.003 0.003 0.005 

CH4 (thousand tons) ............................................................ 137.6 137.8 319.7 319.8 2110.8 

N2O (thousand tons) ............................................................ 0.04 0.04 0.08 0.08 0.47 

CH4 (million tons CO2eq**) .................................................. 3.4 3.4 8.0 8.0 52.8 

N2O (thousand tons CO2eq**) ............................................. 10.6 11.2 24.7 25.2 140.7 

Value of Emissions Reduction (Total FFC Emissions) 

CO2 (2013$ billion) † ............................................................ 0.1 to 1.1 0.1 to 1.1 0.2 to 2.6 0.2 to 2.6 1.2 to 17.1 

NOX¥3% discount rate (2013$ million) .............................. 35.2 35.4 81.7 82.0 550.9 

NOX¥7% discount rate (2013$ million) .............................. 14.7 14.8 34.1 34.2 234.3 

* Includes the increase in power sector emissions from higher electricity use at TSL 5. 

** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). † Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

TABLE V.20—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL WARM AIR FURNACES: MANUFACTURER AND

CONSUMER IMPACTS* 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Manufacturer Impacts 

Industry NPV (2013$ million) ............................................... 64.2 to 67.9 60.1 to 67.5 36.7 to 64.0 31.4 to 63.5 (23.7) to 89.4 

Change in Industry NPV (%) † ............................................. (14.0) to (9.0) (19.5) to (9.6) (50.8) to (14.3) (58.0) to (14.9) (131.7) to 

19.8 ††

Commercial Consumer Mean LCC Savings (2013$) 

Gas-fired Furnaces .............................................................. $186 $186 $426 $426 $1,025 

Oil-fired Furnaces ................................................................ NA $164 NA $164 $3,278 

Commercial Consumer Median PBP (years) 

Gas-fired Furnaces .............................................................. 0.6 0.6 0.7 0.7 12.2 

Oil-fired Furnaces ................................................................ NA 2.8 NA 2.8 7.5 

Distribution of Commercial Consumer LCC Impacts 

Gas-fired Furnaces ** 

Customers with Net Cost (%) .............................................. 1% 1% 2% 2% 48% 


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78 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2013, the year used for discounting the 

NPV of total customer costs and savings, for the 

time-series of costs and benefits using discount 

rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For 

the latter, DOE used a range of discount rates. From 

the present value, DOE then calculated the fixed 

annual payment over a 30-year period (2018 

through 2047) that yields the same present value. 

The fixed annual payment is the annualized value. 

Although DOE calculated annualized values, this 

does not imply that the time-series of cost and 

TABLE V.20—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL WARM AIR FURNACES: MANUFACTURER AND

CONSUMER IMPACTS*—Continued 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Customers with Net Benefit (%) .......................................... 66% 66% 88% 88% 51% 

Customers with No Impact (%) ............................................ 33% 33% 10% 10% 1% 

Oil-fired Furnaces ** 

Customers with Net Cost (%) .............................................. 0% 8% 0% 8% 47% 

Customers with Net Benefit (%) .......................................... 0% 23% 0% 23% 53% 

Customers with No Impact (%) ............................................ 100% 69% 100% 69% 0% 

* Weighted by shares of each equipment class in total projected shipments in 2018. 

** Rounding may cause some items to not total 100 percent. 

†Parentheses indicate negative values. 

††At max tech, the standard will likely require commercial furnace manufacturers to make design changes to the cooling components of commercial HVAC products and to the chassis that houses the heating and cooling components. Since these cooling system changes are triggered 

by the CWAF standard, they are taken into account in the MIA’s estimate of conversion costs. The additional expense of updating the commercial cooling product contributes to an INPV loss that is greater than 100%. 

First, DOE considered TSL 5, the most 

efficient level (max-tech), which would 

save an estimated total of 3.37 quads of 

energy, an amount DOE considers 

significant. TSL 5 has an estimated NPV 

of commercial consumer benefit of $2.9 

billion using a 7-percent discount rate, 

and $10.4 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 5 are 182.5 million metric tons 

of CO2, 444.12 thousand tons of NOX, 

4.80 thousand tons of SO2, and 0.005 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 5 ranges from $1.2 billion to $17.1 

billion. 

At TSL 5, the average LCC savings are 

$1025.2 for gas-fired CWAF and $3278.3 

for oil-fired CWAF. The median PBP is 

12.2 years for gas-fired CWAF and 7.5 

years for oil-fired CWAF. The share of 

commercial consumers experiencing a 

net LCC benefit is 51 percent for gasfired CWAF and 53 percent for oil-fired 

CWAF. 

At TSL 5, the projected change in 

INPV ranges from a decrease of $98.3 

million to an increase of $14.8 million, 

depending on the manufacturer markup 

scenario. If the larger decrease is 

realized, TSL 5 could result in a net loss 

of 131.7 percent in INPV to 

manufacturers of covered CWAF. 

Accordingly, the Secretary tentatively 

concludes that, at TSL 5 for CWAF, the 

benefits of energy savings, positive NPV 

of total commercial consumer benefits, 

commercial consumer LCC savings, 

emission reductions, and the estimated 

monetary value of the emissions 

reductions would be outweighed by the 

very large reduction in industry value at 

TSL 5, as well as the potential for loss 

of domestic manufacturing. 

Consequently, DOE has concluded that 

TSL 5 is not economically justified. 

Next, DOE considered TSL 4, which 

would save an estimated total of 0.52 

quads of energy, an amount DOE 

considers significant. TSL 4 has an 

estimated NPV of commercial consumer 

benefit of $1.0 billion using a 7-percent 

discount rate, and $2.7 billion using a 

3-percent discount rate. 

The cumulative emissions reductions 

at TSL 4 are 27.9 million metric tons of 

CO2, 66.84 thousand tons of NOX, 2.21 

thousand tons of SO2, and 0.003 tons of 

Hg. The estimated monetary value of the 

CO2 emissions reductions at TSL 4 

ranges from $0.2 billion to $2.6 billion. 

At TSL 4, the average LCC savings are 

$425.9 for gas-fired CWAF and $163.9 

for oil-fired CWAF. The median PBP is 

0.7 years for gas-fired CWAF and 2.8 

years for oil-fired CWAF. The share of 

commercial consumers experiencing a 

net LCC benefit is 88 percent for gasfired CWAF and 23 percent for oil-fired 

CWAF. 

At TSL 4, projected change in INPV 

ranges from a decrease of $43.3 million 

to a decrease of $11.1 million. If the 

larger decrease is realized, TSL 4 could 

result in a net loss of 58 percent in INPV 

to manufacturers of covered CWAF. 

After considering the analysis and 

weighing the benefits and the burdens, 

DOE has tentatively concluded that at 

TSL 4 for CWAFs, the benefits of energy 

savings, positive NPV of commercial 

consumer benefit, positive impacts on 

consumers (as indicated by positive 

average LCC savings, favorable PBPs, 

and the large percentage of commercial 

consumers who would experience LCC 

benefits), emission reductions, and the 

estimated monetary value of the 

emissions reductions would outweigh 

the potential reductions in INPV for 

manufacturers. The Secretary of Energy 

has concluded that TSL 4 would save a 

significant additional amount of energy, 

is technologically feasible and 

economically justified, and is supported 

by clear and convincing evidence. 

Based on the above considerations, 

DOE today proposes to adopt the energy 

conservation standards for CWAFs at 

TSL 4. Table V.21 presents the proposed 

energy conservation standards for 

CWAFs. 

TABLE V.21—PROPOSED ENERGY

CONSERVATION STANDARDS FOR

COMMERCIAL WARM AIR FURNACES

Equipment 

type 

Input capacity 

(Btu/h) 

Thermal 

efficiency 

Gas-fired 

Furnaces ≥225,000 82% 

Oil-fired 

Furnaces ≥225,000 82% 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

The benefits and costs of the proposed 

standards can also be expressed in terms 

of annualized values. The annualized 

monetary values are the sum of: (1) The 

annualized national economic value 

(expressed in 2013$) of the benefits 

from operation of equipment that meets 

the proposed standards (consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

equipment purchase costs, which is 

another way of representing consumer 

NPV), and (2) the annualized monetary 

value of the benefits of emission 

reductions, including CO2 emission 

reductions.78 The value of CO2


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benefits from which the annualized values were 

determined is a steady stream of payments. 

reductions, otherwise known as the 

Social Cost of Carbon (SCC), is 

calculated using a range of values per 

metric ton of CO2 developed by a recent 

interagency process. 

Although combining the values of 

operating savings and CO2 emission 

reductions provides a useful 

perspective, two issues should be 

considered. First, the national operating 

savings are domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions, while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and CO2 savings 

are performed with different methods 

that use different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

CWAF shipped in 2018 –2047. The SCC 

values, on the other hand, reflect the 

present value of some future climaterelated impacts resulting from the 

emission of one metric ton of carbon 

dioxide in each year. These impacts 

continue well beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed standards for 

CWAF are shown in Table V.22. The 

results under the primary estimate are 

as follows. Using a 7-percent discount 

rate for benefits and costs other than 

CO2 reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate, the estimated cost of the 

proposed CWAF standards is $3.51 

million per year in increased equipment 

costs, while the estimated benefits are 

$104 million per year in reduced 

equipment operating costs, $47 million 

in CO2 reductions, and $3.38 million in 

reduced NOX emissions. In this case, the 

net benefit would amount to $151 

million per year. Using a 3-percent 

discount rate for all benefits and costs 

and the average SCC series, the 

estimated cost of the proposed CWAF 

standards is $3.48 million per year in 

increased equipment costs, while the 

estimated benefits are $152 million per 

year in reduced equipment operating 

costs, $47 million in CO2 reductions, 

and $4.57 million in reduced NOX

emissions. In this case, the net benefit 

would amount to $200 million per year. 

TABLE V.22—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDARDS (TSL 4) FOR COMMERCIAL WARM AIR

FURNACES* 

Discount rate 

Million 2013 $/year 

Primary estimate Low estimate High estimate 

Benefits 

Operating Cost Savings ..................................................... 7% 104 98 111 

3% 152 143 163 

CO2 Reduction Monetized Value ($12.0/t case)** ............ 5% 13 13 14 

CO2 Reduction Monetized Value ($40.5/t case)** ............ 3% 47 45 48 

CO2 Reduction Monetized Value ($62.4/t case)** ............ 2.5% 69 67 72 

CO2 Reduction Monetized Value ($119/t case)** ............. 3% 145 140 150 

NOX Reduction Monetized Value (at $2,684/ton)** .......... 7% 3.38 3.28 3.49 

3% 4.57 4.41 4.72 

Total Benefits† ............................................................ 7% plus CO2 range 120 to 253 114 to 242 128 to 264 

7% 154 147 163 

3% plus CO2 range 169 to 302 160 to 287 181 to 318 

3% 203 192 216 

Costs 

Incremental Equipment Costs ........................................... 7% 3.51 3.48 3.67 

3% 3.48 3.41 3.68 

Net Benefits/Costs 

Total† .......................................................................... 7% plus CO2 range 117 to 249 111 to 238 124 to 261 

7% 151 143 159 

3% plus CO2 range 166 to 298 156 to 283 177 to 314 

3% 200 189 212 

* This table presents the annualized costs and benefits associated with CWAF shipped in 2018¥2047. These results include benefits to commercial consumers which accrue after 2048 from the equipment purchased in 2018¥2047. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. Incremental equipment costs account for equipment price trends and include, beyond the reference scenario, a 

low price decline scenario used in the Low Benefits Estimate and a high price decline scenario used in the High Benefits Estimates. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC 

from the three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th percentile 

SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature 

change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate 

an escalation factor. The value for NOX is the average of the low and high values used in DOE’s analysis. 

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate. In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled 

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


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6226 Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 

79Based on listings in the AHRI directory 

accessed on August 2, 2013 (Available at: https:// 

www.ahridirectory.org/ahridirectory/pages/

home.aspx). 

80Hoovers ⎢ Company Information ⎢ Industry 

Information ⎢ Lists, D&B (2013) (Available at: http:// 

www.hoovers.com/) (Last accessed April 3, 2013). 

VI. Procedural Issues and Regulatory 

Review 

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 

problem. The problems that the 

proposed standards address are as 

follows: 

(1) Insufficient information and the high 

costs of gathering and analyzing relevant 

information leads some consumers to miss 

opportunities to make cost-effective 

investments in energy efficiency. 

(2) In some cases the benefits of more 

efficient equipment are not realized due to 

misaligned incentives between purchasers 

and users. An example of such a case is when 

the equipment purchase decision is made by 

a building contractor or building owner who 

does not pay the energy costs of operating the 

equipment. 

(3) There are external benefits resulting 

from improved energy efficiency of CWAF 

that are not captured by the users of such 

equipment. These benefits include 

externalities related to public health, 

environmental protection and national 

security that are not reflected in energy 

prices, such as reduced emissions of air 

pollutants and greenhouse gases that impact 

human health and global warming. 

In addition, DOE has determined that 

this regulatory action is an 

‘‘economically significant regulatory 

action’’ under section 3(f)(1) of 

Executive Order 12866. Accordingly, 

section 6(a)(3) of the Executive Order 

requires that DOE prepare a regulatory 

impact analysis (RIA) on the rule being 

proposed and that the Office of 

Information and Regulatory Affairs 

(OIRA) in the Office of Management and 

Budget (OMB) review the rule. DOE 

presented to OIRA for review the draft 

rule and other documents prepared for 

this rulemaking, including the RIA, and 

has included these documents in the 

rulemaking record. The assessments 

prepared pursuant to Executive Order 

12866 can be found in the technical 

support document for this rulemaking. 

DOE has also reviewed this proposed 

regulation pursuant to Executive Order 

13563, issued on January 18, 2011. 76 

FR 3281 (Jan. 21, 2011). Executive Order 

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 today’s NOPR 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 an initial regulatory flexibility 

analysis (IRFA) 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). DOE has 

prepared the following IRFA for the 

products that are the subject of this 

rulemaking. 

For manufacturers of CWAF, 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. 

65 FR 30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. The size standards are listed by 

North American Industry Classification 

System (NAICS) code and industry 

description and are available at http:// 

www.sba.gov/category/navigationstructure/contracting/contractingofficials/small-business-size-standards. 

Manufacturing of CWAF is classified 

under NAICS 333415, ‘‘AirConditioning and Warm Air Heating 

Equipment and Commercial and 

Industrial Refrigeration Equipment 

Manufacturing.’’ The SBA sets a 

threshold of 750 employees or less for 

an entity to be considered as a small 

business for this category. 

1. Description and Estimated Number of 

Small Entities Regulated 

DOE reviewed the proposed energy 

conservation standards for CWAF 

considered in this notice of proposed 

rulemaking under the provisions of the 

Regulatory Flexibility Act and the 

procedures and policies published on 

February 19, 2003. 68 FR 7990. To better 

assess the potential impacts of this 

rulemaking on small entities, DOE 

conducted a more focused inquiry of the 

companies that could be small business 

manufacturers of equipment covered by 

this rulemaking. DOE conducted a 

market survey using available public 

information to identify potential small 

manufacturers. DOE’s research involved 

industry trade association membership 

directories (including AHRI 79), 

individual company Web sites, and 

market research tools (e.g., Hoovers 

reports 80) to create a list of companies 

that manufacture or sell the CWAF 

equipment covered by this rulemaking. 

DOE also asked industry representatives 

if they were aware of any other small 


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Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Proposed Rules 6227 

81The AHRI directory lists approximately 1,000 

units. Many of these units are from the same model 

line, share the same chassis, and have the same 

level of performance, but have different heating 

capacities or installed product options. DOE 

consolidated the AHRI listing of CWAF such that 

all units from the same model line and chassis are 

listed together as a single unit. 

82Simon, Ruth, and Angus Loten. ‘‘SmallBusiness Lending Is Slow to Recover.’’ Wall Street 

Journal, August 14, 2014. Accessed August 2014. 

http://online.wsj.com/articles/small-businesslending-is-slow-to-recover-1408329562. 

manufacturers during manufacturer 

interviews. DOE reviewed publiclyavailable data and contacted companies 

on its list, as necessary, to determine 

whether they met the SBA’s definition 

of a small business manufacturer of 

covered CWAF equipment. DOE 

screened out companies that do not 

offer equipment covered by this 

rulemaking, do not meet the definition 

of a ‘‘small business,’’ or are foreignowned and operated. DOE was able to 

identify two manufacturers that meet 

the SBA’s definition of a ‘‘small 

business’’ out of the 13 companies that 

manufacture products covered by this 

rulemaking. 

Before issuing this NOPR, DOE 

attempted to contact all the small 

business manufacturers of CWAF it had 

identified. None of the small businesses 

consented to formal interviews. DOE 

also attempted to obtain information 

about small business impacts while 

interviewing large manufacturers. 

2. Description and Estimate of 

Compliance Requirements 

DOE identified one small gas-fired 

CWAF manufacturer and one small oilfired CWAF manufacturer. The small 

gas-fired CWAF manufacturer accounts 

for 17 of the 250 81 gas-fired CWAF 

listings in the AHRI Directory, or 

approximately 7 percent of the listings. 

This small manufacturer offers product 

exclusively at 80-percent TE, and at the 

proposed level of TSL 4, would need to 

update its equipment offerings to meet 

a standard of 82-percent TE. However, 

this position is not unique. There are 

also some large gas-fired CWAF 

manufacturers would that would need 

to update all equipment offerings to 

meet the proposed standard. From a 

design perspective, DOE believes that 

most gas-fired equipment lines on the 

market today can be upgraded to 

achieve the proposed standard with 

increases in heat exchange surface area. 

However, based on feedback used in the 

Top-Down conversion costs analysis 

(see chapter 12 of the NOPR TSD), 

industry average conversion costs could 

reach $4.4 million per gas-fired CWAF 

manufacturer. 

TABLE VI.1—AVERAGE CONVERSION

COST PER GAS-FIRED CWAF 

MANUFACTURER* 

Bottom-up 

model 

(million $) 

Top-down 

model 

(million $) 

TSL 1 ................ 1.0 1.3 

TSL 2 ................ 1.0 1.3 

TSL 3 ................ 1.6 4.4 

TSL 4 ................ 1.6 4.4 

TSL 5 ................ 7.2 11.3 

* Additional information about industry conversion costs and the two estimation models 

can be found in section IV.J.2.B of this Notice. 

Because this is a relatively low sales 

volume market, and because the 

industry as a whole generally produces 

equipment at the baseline, DOE believes 

the average impacts will be similar for 

large and small business manufacturers. 

DOE was unable to identify any publicly 

available information that would lead to 

a conclusion that small manufacturers 

are differentially impacted, and as noted 

above, requests to conduct interviews 

with small business manufacturers were 

declined. Therefore, DOE assumed that 

small business manufacturers would 

face similar conversion costs as larger 

businesses. However, the small gas-fired 

CWAF manufacturer may need to 

allocate a greater portion of technical 

resources or may need to access outside 

capital to support the transition to the 

proposed standard. 

The small oil-fired CWAF 

manufacturer accounts for 11 of the 16 

oil-fired CWAF listings in the AHRI 

Directory. The small oil-fired furnace 

manufacturer produces some of the 

most efficient products on the market at 

82-percent TE. It would be unlikely to 

be at a technological disadvantage 

relative to its competitors at the 

proposed TSL. It is possible the small 

manufacturer would have a competitive 

advantage, given its technological lead 

and experience in the niche market of 

high-efficiency commercial oil-fired 

warm air furnaces. 

TABLE VI.2—AVERAGE CONVERSION

COST PER OIL-FIRED CWAF 

MANUFACTURER* 

Bottom-up 

model 

(million $) 

Top-down 

model 

(million $) 

TSL 1 ................ 0.0 0.0 

TSL 2 ................ 0.2 2.2 

TSL 3 ................ 0.0 0.0 

TSL 4 ................ 0.2 2.2 

TSL 5 ................ 0.9 5.5 

* Additional information about industry conversion costs and the two estimation models 

can be found in section IV.J.2.B of this Notice. 

An amended energy conservation 

standard is likely to necessitate 

conversion investment by all 

manufacturers to bring products into 

compliance. Manufacturers may choose 

to access outside capital to help fund 

the upfront, one-time costs to bring 

products into compliance. Small 

manufacturers may have greater 

difficulty securing outside capital 82

and, as a result, may face higher costs 

of capital than large competitors. 

As noted above, none of the small 

businesses consented to formal 

interviews, so information regarding the 

impacts of this proposed standard for 

small business manufacturers is limited. 

DOE seeks further information and data 

regarding the sales volume and annual 

revenues for small businesses so the 

agency can be better informed 

concerning the potential impacts to 

small business manufacturers of the 

proposed energy conservation 

standards, and would consider any such 

additional information when 

formulating and selecting TSLs for the 

final rule. 

3. Duplication, Overlap, and Conflict 

With Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with the proposed rule. 

4. Significant Alternatives to the Rule 

The discussion above analyzes 

impacts on small businesses that would 

result from DOE’s proposed rule. In 

addition to the other TSLs being 

considered, the proposed rulemaking 

TSD includes a regulatory impact 

analysis (RIA). For CWAF, the RIA 

discusses the following policy 

alternatives: (1) No change in standard; 

(2) consumer rebates; (3) consumer tax 

credits; (4) manufacturer tax credits; (5) 

voluntary energy efficiency targets; and 

(6) bulk government purchases. While 

these alternatives may mitigate to some 

varying extent the economic impacts on 

small entities compared to the 

standards, DOE did not consider the 

alternatives further because they are 

either not feasible to implement without 

authority and funding from Congress, or 

are expected to result in energy savings 

that are significantly smaller than those 

that would be expected to result from 

adoption of the proposed standard 

levels. In reviewing alternatives that 

would reduce burden on small business 

manufacturers, DOE analyzed a case in 

which the voluntary programs targeted 


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efficiencies corresponding to TSL 4. 

DOE also examined standards at lower 

efficiency levels, TSL 3, TSL 2 and TSL 

1. (See section V.C of this NOPR for a 

description of benefits and burdens at 

each TSL and discussion of DOE’s TSL 

selection process.) 

TSL 3 achieves a slightly lower level 

of energy savings as TSL 4; and it would 

not significantly reduce burden on small 

business manufacturers. TSL 3 would 

reduce the required efficiency of oilfired CWAF as compared to TSL 4, 

while leaving the standard for gas-fired 

CWAF the same. Thus, there would be 

no reduction of burden for the small 

business manufacturer of gas-fired 

CWAF. TSL 3 would marginally reduce 

the burden for the small business 

manufacturer of oil-fired CWAF, but as 

noted previously the majority of the 

small oil-fired furnace manufacturer’s 

products already meet TSL 4. The small 

oil-fired manufacturer may have a 

competitive advantage at TSL 4, given 

its technological lead and experience in 

the niche market of high-efficiency 

commercial oil-fired warm air furnaces. 

TSL 2 and TSL 1 both achieve savings 

that would be less than half of that 

achieved by TSL 4. Voluntary programs 

at these levels achieve only a fraction of 

the savings achieved by standards and 

would provide even lower savings 

benefits. To achieve substantial 

reductions in small business impacts 

would force the standard down to TSL 

2 levels, at the expense of substantial 

energy savings and NPV benefits, which 

would be inconsistent with DOE’s 

statutory mandate to maximize the 

improvement in energy efficiency that 

the Secretary determines is 

technologically feasible and 

economically justified. DOE believes 

that establishing standards at TSL 4 

provides the optimum balance between 

energy savings benefits and impacts on 

small businesses. DOE notes that it did 

not consider an alternative compliance 

date for the entire industry affected by 

this rulemaking. DOE is constrained by 

the three-year lead time required by 

statute (42 U.S.C. 6313(a)(6)(D)). 

However, certain compliance date 

alternatives may be available to 

individual manufacturers, as discussed 

below. Accordingly, DOE is declining to 

adopt any of these alternatives and is 

proposing the standards set forth in this 

rulemaking. (See chapter 17 of the 

NOPR TSD for further detail on the 

policy alternatives DOE considered.) 

The TSD considers regulatory 

alternatives that would potentially 

reduce the burden on the industry as a 

whole, including small businesses and 

the agency requests comment on this 

issue. 

Additional compliance flexibilities 

may be available through other means. 

For example, individual manufacturers 

may petition for a waiver of the 

applicable test procedure. (See 10 CFR 

431.401.) Further, EPCA provides that a 

manufacturer whose annual gross 

revenue from all of its operations does 

not exceed $8,000,000 may apply for an 

exemption from all or part of an energy 

conservation standard for a period not 

longer than 24 months after the effective 

date of a final rule establishing the 

standard. Additionally, Section 504 of 

the Department of Energy Organization 

Act, 42 U.S.C. 7194, provides authority 

for the Secretary to adjust a rule issued 

under EPCA in order to prevent ‘‘special 

hardship, inequity, or unfair 

distribution of burdens’’ that may be 

imposed on that manufacturer as a 

result of such rule. Manufacturers 

should refer to 10 CFR part 430, subpart 

E, and part 1003 for additional details. 

C. Review Under the Paperwork 

Reduction Act of 1995 

Manufacturers of CWAF must certify 

to DOE that their equipment complies 

with any applicable energy conservation 

standards. In certifying compliance, 

manufacturers must test their 

equipment according to the applicable 

DOE test procedures for CWAF, 

including any amendments adopted for 

those test procedures on the date that 

compliance is required. DOE has 

established regulations for the 

certification and recordkeeping 

requirements for all covered consumer 

products and commercial equipment, 

including CWAF. 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). This requirement 

has been approved by OMB under OMB 

control number 1910–1400. Public 

reporting burden for the certification is 

estimated to average 20 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 under CX B5.1 

because it is a rulemaking that 

establishes energy conservation 

standards for consumer products or 

industrial equipment, and for which 

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. DOE has 

examined this proposed rule and has 

tentatively determined that it would not 

have a substantial direct effect on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the products that are the subject of the 

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 


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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 (4) promote simplification 

and burden reduction. 61 FR 4729 (Feb. 

7, 1996). Regarding the review required 

by section 3(a), section 3(b) of Executive 

Order 12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE 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. Pub. L. 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 them. 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/officegeneral-counsel. 

Although today’s proposed rule, 

which proposes amended energy 

conservation standards for CWAF, does 

not contain a Federal intergovernmental 

mandate, it may require annual 

expenditures of $100 million or more by 

the private sector. Specifically, the 

proposed rule would likely result in a 

final rule that could require 

expenditures of $100 million or more. 

Such expenditures may include: (1) 

investment in research and 

development and in capital 

expenditures by CWAF manufacturers 

in the years between the final rule and 

the compliance date for the amended 

standards, and (2) incremental 

additional expenditures by commercial 

consumers to purchase higher-efficiency 

CWAF, starting at the compliance date 

for the applicable standard. 

Section 202 of UMRA authorizes a 

Federal agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. 2 U.S.C. 1532(c). The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(o) of EPCA and 

Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of 

the NOPR and the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for this 

proposed rule respond to those 

requirements. 

Under section 205 of UMRA, the 

Department is obligated to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating a rule for which a written 

statement under section 202 is required. 

2 U.S.C. 1535(a). DOE is required to 

select from those alternatives the most 

cost-effective and least burdensome 

alternative that achieves the objectives 

of the proposed rule unless DOE 

publishes an explanation for doing 

otherwise, or the selection of such an 

alternative is inconsistent with law. As 

required by 42 U.S.C. 6313(a), this 

proposed rule would establish amended 

energy conservation standards for 

CWAF that are designed to achieve the 

maximum improvement in energy 

efficiency that DOE has determined to 

be both technologically feasible and 

economically justified. A full discussion 

of the alternatives considered by DOE is 

presented in the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for today’s 

proposed rule. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights,’’ 53 FR 8859 (March 15, 1988), 

DOE has determined that this proposed 

rule 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 information quality 

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 the NOPR 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 


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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 

today’s regulatory action, which sets 

forth proposed energy conservation 

standards for CWAF, is not a significant 

energy action because the proposed 

standards are not likely to have a 

significant adverse effect on the supply, 

distribution, or use of energy, nor has it 

been designated as such by the 

Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on the 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.’’ Id. at 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. 

VII. 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. 

All participants will undergo security 

processing upon building entry. Any 

participant with a laptop computer or 

similar device (e.g., tablets), must 

undergo additional screening. Note that 

any foreign national who requests to 

participate in the public meeting is 

subject to advance security screening 

prior to the date of the public meeting, 

and such persons should contact Ms. 

Brenda Edwards as soon as possible at 

(202) 586–2945 to commence the 

necessary procedures. 

Due to the REAL ID Act implemented 

by the Department of Homeland 

Security (DHS), there have been recent 

changes regarding identification (ID) 

requirements for individuals wishing to 

enter Federal buildings from specific 

States and U.S. territories. As a result, 

driver’s licenses from the following 

States or territory will not be accepted 

for building entry, and instead, one of 

the alternate forms of ID listed below 

will be required. 

DHS has determined that regular 

driver’s licenses (and ID cards) from the 

following jurisdictions are not 

acceptable for entry into DOE facilities: 

Alaska, American Samoa, Arizona, 

Louisiana, Maine, Massachusetts, 

Minnesota, New York, Oklahoma, and 

Washington. 

Acceptable alternate forms of PhotoID include: U.S. Passport or Passport 

Card; an Enhanced Driver’s License or 

Enhanced ID-Card issued by the States 

of Minnesota, New York or Washington 

(Enhanced licenses issued by these 

States are clearly marked Enhanced or 

Enhanced Driver’s License); a military 

ID or other Federal government-issued 

Photo-ID card. 

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/rulemaking.aspx/ 

ruleid/70. 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 handdeliver 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. DOE prefers to receive 

requests and advance copies via email. 

Any person who has plans to present a 

prepared general statement may request 

that copies of his or her statement be 

made available at the public meeting. 

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 

accordance with section 336 of EPCA 

(42 U.S.C. 6306). A court reporter will 

be present to record the proceedings and 


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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 notice 

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 notice. 

Submitting comments via 

www.regulations.gov. The 

www.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 www.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 

http://www.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 www.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 www.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 

www.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 

facsimiles (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 

passage of time; and (7) why disclosure 


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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. The use of proprietary designs and 

patented technologies in CWAF, and whether 

all manufacturers would be able to achieve 

the proposed levels through the use of nonproprietary designs. (See section III.B.1 and 

chapter 3 of the NOPR TSD.) 

2. The proposed scope of coverage and 

equipment classes for this rulemaking. In 

particular DOE seeks comment on whether 

there is a need for separate equipment classes 

for units designed to be installed indoors 

(i.e., ‘‘non-weatherized’’ units) and units 

designed to be installed outdoors (i.e., 

‘‘weatherized’’ units) due to the potential 

need to manage acidic condensate and the 

potential for condensate freezing after exiting 

the furnace. (See section IV.A.2 and chapter 

3 of the NOPR TSD.) 

3. The technologies identified in this 

rulemaking, as well as the technologies 

which were primarily considered as the 

methods for increasing thermal efficiency of 

commercial warm air furnaces. (See section 

IV.A.3 and chapters 3 and 4 of the NOPR 

TSD.) 

4. The potential for lessening of product 

utility for CWAF meeting the proposed 

standards and whether the proposed 

standards would likely 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 

. (See section II.A and chapter 3 of the NOPR 

TSD.) 

5. The efficiency levels analyzed for gasfired and oil-fired commercial warm air 

furnaces. In particular, DOE is interested in 

the feasibility of the max-tech efficiency 

levels, as well as the ability of noncondensing technologies to meet the 82 

percent thermal efficiency level for gas-fired 

commercial furnaces. DOE also seeks 

comment on whether an 82 percent thermal 

efficiency standard would shift production to 

condensing technology if manufacturers, for 

example, would need to design their 

equipment to a level slightly higher than the 

DOE standard due to the margin of error 

associated with the test methodology. In 

addition, DOE is interested in whether the 

accuracy of the results from the test method 

would support measuring thermal 

efficiencies to the tenth decimal place such 

that DOE could consider 81.5 percent or 

some other fraction as a potential standard 

level as opposed to rounding the standard to 

the nearest whole number. (See section 

IV.C.2.b and chapter 5 of the NOPR TSD.) 

6. The applicability of the teardown units 

at 250,000 Btu/h and 400,000 Btu/h input 

capacities to represent the range of potential 

input capacities on the market. (See section 

IV.C.1 and chapter 5 of the NOPR TSD.) 

7. The incremental manufacturing costs 

above the baseline cost at the efficiency 

levels considered in the engineering analysis, 

which DOE estimates to be $10 for gas-fired 

CWAFs and $24 for oil-fired CWAFs at the 

proposed standard level. (See section IV.C.5 

and chapter 5 of the NOPR TSD.) 

8. The approach used to estimate the trend 

for future CWAF consumer prices. (See 

section IV.F.1 and chapter 8 of the NOPR 

TSD.) 

9. The approach of using CBECS and RECS 

data for determining the energy consumption 

of CWAF in residential and commercial 

buildings. (See section IV.E and chapter 7 of 

the NOPR TSD.) 

10. The analytical methodology to estimate 

the annual energy use for CWAF. (See section 

IV.E and chapter 7 of the NOPR TSD.) 

11. The approach and data sources used for 

assessing changes in installation costs for 

more-efficient CWAF. (See section IV.F.1 and 

chapter 8 of the NOPR TSD.) 

12. The methodology and data sources 

used for assessing changes in maintenance 

and repair costs for more-efficient CWAF. 

(See section IV.F.2.c and chapter 8 of the 

NOPR TSD.) 

13. The approach used to determine the 

lifetimes for CWAF and whether the lifetimes 

assumed in the analysis are reflective of 

CWAF equipment covered by this rule. In 

addition, the agency is seeking comment on 

whether the energy efficiency standards 

would be expected to affect the lifetime of 

the products covered by the proposed 

standards. (See section IV.F.2.d and chapter 

8 of the NOPR TSD.) 

14. The potential for a rebound effect 

associated with higher efficiency standards 

for the covered furnaces in both commercial 

and residential installations. (See section 

IV.F.2.d and chapter 8 of the NOPR TSD.) 

15. The appropriate base case distribution 

of energy efficiencies for CWAF in 2018 

(compliance year of the standard) in the 

absence of amended energy conservation 

standards. (See section IV.F.2.d and chapter 

8 of the NOPR TSD.) 

16. DOE’s methodology and data sources 

used for projecting the future shipments of 

CWAF in the absence of amended energy 

conservation standards. Specifically, DOE is 

interested in the historical data from the past 

10 years for CWAF. (See section IV.F.2.d and 

chapter 9 of the NOPR TSD.) 

17. The potential impacts of amended 

standards on product shipments, including 

impacts related to equipment switching. (See 

section IV.F.2.d and chapter 9 of the NOPR 

TSD.) 

18. The methodology used to determine 

long-term changes in CWAF energy 

efficiency independent of amending energy 

conservation standards. (See section IV.H 

and chapter 10 of the NOPR TSD.) 

19. Consumer subgroups that should be 

considered in this rulemaking. (See section 

IV.I and chapter 11 of the NOPR TSD.) 

20. The approach for conducting the 

emissions analysis for CWAF. (See section 

IV.K and chapter 13 of the NOPR TSD.) 

21. DOE’s approach for estimating 

monetary benefits associated with emissions 

reductions, including the SCC values used. 

(See section IV.L and chapter 14 of the NOPR 

TSD.) 

22. Impacts on small business 

manufacturers from the proposed standard. 

In particular, DOE seeks further information 

and data regarding the sales volume and 

annual revenues for small businesses so the 

agency can be better informed concerning the 

potential impacts to small business 

manufacturers of the proposed energy 

conservation standards, and would consider 

any such additional information when 

formulating and selecting TSLs for the final 

rule and whether any feasible compliance 

flexibilities that the agency may consider. 

(See section VI.B and chapter 12 of the NOPR 

TSD.) 

VIII. 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 431 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Reporting and recordkeeping 

requirements. 

Issued in Washington, DC, on January 16, 

2015. 

Michael Carr, 

Principal Deputy Assistant Secretary, Energy 

Efficiency and Renewable Energy. 

For the reasons set forth in the 

preamble, DOE proposes to amend part 

431 of Chapter II, Subchapter D, of Title 

10 of the Code of Federal Regulations, 

as set forth below: 

PART 431—ENERGY EFFICIENCY 

PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL 

EQUIPMENT 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 2. Section 431.77 is revised to read as 

follows: 

§ 431.77 Energy conservation standards 

and their effective dates. 

(a) Gas-fired Commercial Warm Air 

Furnaces. Each gas-fired commercial 

warm air furnace must meet the 

following energy efficiency standard 

levels: 

(1) For gas-fired commercial warm air 

furnaces manufactured on and after 

January 1, 1994, and before [date 3 years 

after publication of the energy 

conservation standards final rule], the 


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thermal efficiency at the maximum 

rated capacity (rated maximum input) 

must be not less than 80 percent; and 

(2) For gas-fired commercial warm air 

furnaces manufactured on and after 

[date 3 years after publication of the 

energy conservation standards final 

rule], the thermal efficiency at the 

maximum rated capacity (rated 

maximum input) must be not less than 

82 percent. 

(b) Oil-fired Commercial Warm Air 

Furnaces. Each oil-fired commercial 

warm air furnace must meet the 

following energy efficiency standard 

levels: 

(1) For oil-fired commercial warm air 

furnaces manufactured on and after 

January 1, 1994, and before [date 3 years 

after publication of the energy 

conservation standards final rule], the 

thermal efficiency at the maximum 

rated capacity (rated maximum input) 

must be not less than 81 percent; and 

(2) For oil-fired commercial warm air 

furnaces manufactured on and after 

[date 3 years after publication of the 

energy conservation standards final 

rule], the thermal efficiency at the 

maximum rated capacity (rated 

maximum input) must be not less than 

82 percent. 

[FR Doc. 2015–01415 Filed 2–3–15; 8:45 am] 

BILLING CODE 6450–01–P 


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