# Water Heater Standards Rulemaking Workshop

U.S. Department of Energy June 24,1997Topics
* Proposed rulemaking schedule * Rulemaking framework report * Issuesfor analysis * Analytical methods and tools * Data requirements and data collection methods * Industry characterization * Identification ofexperts and other interested parties * Identification ofcontractor qualifications * Other issues * Next steps

Reference NoProposed Rulemaking Schedule The Department IsCommitted to Publishingthe Final Rule by July 1999. * Isthis date realistic? * What can be done to elevatethis schedule (i.e., negotiated rulemaking)? * Isan effective date ofJuly 2002 acceptable?

Reference No 2Proposed Water Heater Rulemakings Schedule

Feb Mr Apr Ma Jn Jly Aug Sep Oct Nov Dec Jn Feb Mr Apr Ma J Jy Aug Sep Oc Nov Dec Jan Feb Mr Apr Ma Jn Jy 9'97 '97 '97'97 '97 97 '97 '97 '97 '97 '97 '98 '9 '98 98 9 89898 '98'9 '98 98 '99 '99 '99 '99 '99 '99 '99 Test Procedures
Draft Final Rule Approve Final Rule Publish FinalRule
-- Standards_ Process Workshop < Review Screening Document | Data Colection

_ Revise EngineeringAnalysis PeerReview Eng.Anal....
Comment Period SelectCandidate Sids. Lvl. Prel. National Forecasting NoiceofAvilability - - - Consume Subgroup Anal. -- - - - - - - - Manufacturer ImpactAnal. Utility/Environmental Anal

_ NoticeofAvailability
Draft Revised NOPR DOJ&OMB Review* -- - -- - - - - - - Approval of NOPR Reissue NOPR Conment Period&Hearing

... Rev. Cmnts & Revise Anal.

_ - Stakeholder Review -- - - Final RuleD Approval - - - - - OMB Review &Approval

__ ... .---- PublishFinal Rule *DOJ consultalion and OMBreview and approval. Retimncl No. 3Rulemaking Framework The Department Seeks Your Feedback on the Rulemaking Framework Report and the New Process. * The goal is to address your issues and concerns aboutthe report and the new process. * Isthe analytical framework inFigure 1ofthe rulemaking framework document appropriate forwater heaters?

Reference No 4Rulemaking Framework 1.0 Technology and Market Assessment 1.1 Market Assessment -What information should be inthe market assessment? -Should this information be distributedfor comment? -What are the existing non-regulatory efficiency improvement initiatives? 1.2 Technology Assessment -Are there additional design options that should be considered in

Appendix B? 1.3 Preliminary Baseline Shipment Forecast -What existing market-based initiatives (i.e., DSM programs, etc.) should DOE consider? -What approaches could be used to establish the base case shipment

forecast? -What information sources show past shipment data by efficiency level? -Are the data request forms inAppendix A appropriate?

Reference No 5Rulemaking Framework 2.0 Screening Analysis
2.1 Product Classes -Do you agree with the product classes specified? 2.2 Baseline Units -Are the descriptions forthe water heaters appropriate? -Are thevalues for EF and RE sound? -Willthe baseline change forgas-fired storage water heaters dueto requirements from the Consumer Product Safety Commission (CPSC)? 2.3 Design Options -Who should perform the peer review?

Reference NoRulemaking Framework 3.0 Engineering Analysis
* Should the manufacturing cost and energy-use data be updated? * How should uncertainty inthe above variables be considered? * What data collection approach should be used, design option or efficiency level (seeAppendix C)? * What engineering models (i.e., WATSIM, TANK, etc.) should be used? * What arethe relevant contractorqualifications?

Reference No 7Rulemaking Framework 4.0 Manufacturing Costs
-Is the data collectiontime frame reasonable? -Can individual manufacturers submit data (individual data are required

for GRIM analysis)? -Should athird party contractor be used to collect data? 4.1 Characterizing Uncertainty -Are there alternative approaches to characterizing uncertainty in

average manufacturing costs? 4.2 Variability inCosts Between Manufacturers -How can GRIM analysis be used and still allowfor manufacturer

confidentiality and appropriate stakeholder review.

Reference No 8Rulemaking Framework 4.0 Manufacturing Costs (cont.)
4.3 Costing Approach/Engineering Analysis -Should new data be collectedto perform an efficiency level approach? -Can manufacturer impact analysis be performed using the GRIM model ifthe design option approach is used? 4.4 Propriety Designs -The Department will consider propriety designs inthe engineering and

economicanalyses. -Which propriety designs should DOE consider? -What stage ofdevelopment arethey in? -How should DOE collect and report cost data forthese designs?

Reference No 9Rulemaking Framework 5.0 Life-Cycle Costand Payback Analysis
* Are the following variables appropriate to consider? What data sources are available?

-Retail Prices -Annual HotWater Use -Energy Prices -Lifetime -Discount Rate -Maintenance, Service, and Installation Costs * Are there additional variablesto consider?

Reference No. 10Rulemaking Framework Report 6.0 Prices
6.1 Retail Prices: Life-Cycle Cost Analysis -Are the proposed processesfor generating retail prices sound? -Would interested parties bewilling to provide estimates offuture prices? -How should DOE considerthe different mark-up structures relativeto

distribution channels? 6.2 Manufacturer Prices: Industry Cashflow -What approaches could be usedto determine manufacturers prices? -Would manufacturers be willingto provide estimates offuture manufacturer prices?

Reference No. 11Rulemaking Framework 7.0 Shipments
* What approaches could be used to determine shipment forecasts? -Simple Spreadsheet -Larger Models, e.g., Residential Energy Model (REM) -Expert Judgment and Historical Trends * How will interested parties provideforecasts forvarious efficiency levels?

Reference No. 12Rulemaking Framework 8.0 PreliminaryNational Benefits Analysis 8.1 Inputs to Forecasts 8.2 Calculation of Energy.Savings -Should the Department usethe Residential Energy Model (REM)

and/orsimple spreadsheet models? 8.3 Consumer Net Present Value and Payback 8.4 Employment Impacts -Are there any methods or models which can be used to assess indirect employment impacts?

Reference No 13Rulemaking Framework 9.0 Revised Pre-ANOPR Analyses
* Forwater heaters, aworkshop will be conducted to review and comment on the analysis sections normally conducted inthe pre-ANPOR stage as specified inthe new process. *Since aNOPR has already been issued forwater heaters, a revised NOPR will be issued.

Reference No 14Rulemaking Framework 10.0 Consumer Impacts
10.1 Consumer Sub-group Analysis -How many households are not better offwith standards and by how much? * Variations in Energy Prices -Are there data sources that could be used to answer the above

questions? -Are there appropriate market segmentation and analysis methods

which can be used? -What additional variables should be considered? * Variations in Energy Use -Are there datawhich reflect variations inconsumers' water heater

operation?

Reference No 15Rulemaking Framework 10.0 Consumer Impacts (cont.) First Cost Increases

-What arethe potential impacts ofalarge first cost increase on

consumer (affordability, financing, etc.)? -What methods and data can be used inconducting this analysis? -What information exists on consumer decision-making to switchto

other product classes? 10.2 Consumer Participation -Are there any demonstration projects that should be investigated? -What consumer groups or other organizations should be contacted? -Are there other means ofobtaining increased consumer input tothe rulemaking process?

Reference No. 16Rulemaking Framework 11.0 IndustryCash Flow
* Are the financialvalues proposed inAppendix Dreasonable? * What ranges ofvalues are appropriate? * Who should collectand maintain any confidential information?

Reference No. 17Rulemaking Framework 12.0 Manufacturer Sub-group Analysis
-What are the required contractorqualifications? 12.1 Manufacturer Sub-groups -Which manufacturers should be activelysolicitedfor interviews? -When should interviews be conducted? -Is there anyvalue ingrouping water heater manufacturers into subgroups or should individual GRIM analysis be conducted for each? -What would awell executed sub-group analysis entail? 12.2 Competitive Impacts Assessment -The Department will begin consulting with the Department ofJustice in

the early stages of rulemaking.

Reference No. 18Rulemaking Framework 12.0 Manufacturer Sub-group Analysis (cont.)
12.3 Cumulative Regulatory Burden -The Department isworking with the Consumer Product Safety

Commission (CPSC) to coordinate any requirements that may arise from the flammable vapor ignition issuefor gaswater heaters. -Are there suggestions on howto resolve the issuesthat may arise

from a DOE and CPSC rulemaking? -Is the Environmental Protection Agency's (EPA) phase out ofCFCs a

factorforwater heaters? -Are there other regulations that would cause acumulative burden with

this rulemaking?

Reference No 19Rulemaking Framework 13.0 Utility Impacts
* IstheAppliance Standards Environmental and Utility Model (ASEUM)

,appropriate? * Do you have any recommendations regarding how a gas utility impact analysis should be conducted? * What elements should the Department considerto assessthe likelihood and impacts offuel switching?

Reference No 20Rulemaking Framework 14.0 Environmental Analysis
* Isthe Appliance Standards Environmental and Utility Model (ASEUM) appropriate? * Are there any additional factors the Department should consider? Ifso, how?

-Sulfur Oxides (SOx) -Nitrous Oxides (NOx) -Carbon Dioxide (CO2)

Reference No 21Other Issues Are there any other issues that need to be addressed?

Reference No 22NextSteps * Data collectionfor revised engineering analysis, ifnecessary. * Schedule plant visits and interviews. * Revise engineering analysis, ifnecessary. * Selection of peer reviewers. * Select datefor engineering analysis workshop.

Reference No. 23