## Tuesday 

## August 30, 1983 D



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# Part IV**~-** 

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Office of Conservation and Renewable Energy

Energy Conservation Program for Consumer Products; Final Rule for 

## Refrigerators and Refriger or-Freezers, 

## Freezers, Water Heaters, Room Air Conditioners, Furnaces and Central Air Conditioners 

# prIm Energy nt 

# of

### Federal 

### Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30,**1983~** 

### / 

### Rules and Regulations

iZ 

### 39376



## DEPARTMENTOFENERGY Office of Conservation and**Ren~wable** Energy
10 CFR Part 430 [Docket No. CAS-RM-78-110l Energy Conservation Program for Consumer Products; Final Rule for Refrigerators and RefrigeratorFreezers, 

### Freezers, Water 

### Heaters, Room Air Conditioners, Furnaces and Central Air Conditioners

AGENCY: 

### Office ofConservation and Renewable Energy, Energy.

AC1·ION: 

### Final rule.

SUMMARY: 

### As a general matter, the Energy Policy and Conservation Act, as amended, requires the Department of Energy to prescribe an energy efficiency standard for each ofthirteen major household appliances, unless DOE determines by rule that a standard for a product will notresult in significant

conservation ofenergy, is not technologically feasible, or is not economicallyjustified. Under the Act,
any Federal rule, whetherprescribing a standard or determining no standard, would preempt State and local standards and any other requirements with respect to energy efficiency oruse ofthese products.

On April 2, 1982, DOE published a proposed rule that would determine that for eight products an energy efficiency standard would not result in significant

conservation ofenergy orbe economicallyjustified. The April 2' 

### proposed rule also proposed procedures governing how States could petitionfor exemption from the preemption ofState and local efficiency or energy use standards and how manufacturers could petition to preempt State orlocal efficiency or energy use standards for which there were no preempting Federal rules.

DOE published a final role on December 22, 1982, with respect to clothes dryers and kitchen ranges and
ovens, two ofthe eight products covered by the April 2notice, in which DOE determined that an energy efficiency standard for either ofthese products would not result in significant conservation ofenergy and would not be economicallyjustified. In addition, DOE adopted at that time final procedures governing State and manufacturerpetitions.

Today's final rule reflects DOE's final determinations with respect to the other six products: refrig·erators and refrigerator-freezers, freezers, water heaters, room air conditioners, fumaces and central air conditioners. For each of these products, except"central air conditioners, DOE finds that an energy efficiency standard would not result in significant conservation ofenergy and would notbe economicallyjustified. With respect to the sixth product, central air conditioners, DOE finds that

an energy efficiency standard would result in a significant conservation of
energy but would not be economically justified.

DATES: 

### Except for section 430.32, the effective date ofthis rule is September 29, 1933. 

### Section 430.32 is effective February 27, 1984, except in a State that has filed pursuant to Subpart D a notice ofpetition before October 31, 1983, and

a petition before December 28, 1983. The effective date of § 

### 430.32 for States that have filed apetition is thirty days from the date on VJhich DOE issues or denies

a final rule concerning that petition.

FOR FURTHER INFORMATION CONTACT: 

### Michael

## J. McCabe, U.S. Department of

Energy, Office ofConservation and Renewable Energy, Mail Station CE112, Room GH-068, Forrestal Building, 1000 Independence Ave., SW., Washington, D.C. 20585 (202) 252- 9127. Lona Feldman, Assistant General

Counsel for Conservation and Renewable Energy, U.S. Department ofEnergy, Mail Station GC-33, Room 6B-144, Forrestal Building, 1000 Independence Ave., SW., Y.Jashington, D.C. 20585 (202) 252-9507.

_ SUPPLEMENTARY INFORMATION:
I. 

### Introduction

Q. 

### Authority

Part B ofTitle ITI ofthe Energy Policy and Conservation Act (EPCA), 

### Pub. L. 94-163, as amended by the National Energy Conservation Policy Act (NECPA), 

### Pub. L. 95-619,1 creates the Energy Program for Consumer Products other than Automobiles. The consumer products subject to this program (often referred to hereafter as 

### "covered ..,products") are: refrigerators and refrigerator-freezers; freezers: dishwashers: clothes dryers: water heaters; room air conditioners; home heating equipment, not including furnaces: television sets; kitchen ranges and ovens; clothes washers; humidifiers and dehumidifiers; central air conditioners; and furnaces, as well as any other consumer product classified by the Secretary ofEnergy, ifthe product uses a specified minimum
amount ofenergy. See 

### section 322. The Secretary has not so classified any additional products.

1 Part BofTitle ill ofEPCA, as amended by the NECPA, is often referred to in this notice 8S the "Act." Part BofTitle III is codified at 42 U.S.C. 2691
etseq. 

### Under the Act the program consists essentially ofthree parts: testing, labeling, and mandatory minimum
energy efficiency standards. The Department ofEnergy (DOE 

### or Department), in consultation with-the National Bureau ofStandards, is required to establish test procedures 

### for each ofthe covered products. Section 323(a)(2). The purpose ofthe test procedures is to provide for test results that reflect the energy efficiency, energy use, or estimated annual operating costs

- ofeach ofthe covered products. Section 323(b)(1). All test procedures were required to be adopted not later than May 1, 

### 1978. Section323(a) (4) 

### and (6). 

### A
test procedure is notrequired ifDOE determined by rule that one could not be developed. Section 323(a)(6)(B).One hundred and eigthty days after a test procedure for a product is adopted, no manufacturer may represent the energy consumption ofor the cost ofenergy consumed by the product except as reflected in 

### a test conducted according
to the DOE procedure. Section 323(c). Test procedures have been prescribed relating to all products, but, on the basis ofcontinuing review, certain classes of products do not have currently applicable test procedures.

The Federal Trade Commission (FTC) is required by the Act to prescribe rules governing the labeling ofthe covered products for which test procedures have been prescribed by DOE. Section 324(a). These rules are to require that each particularmodel ofa covered product bear 

### a label that indicates its annual
operating cost and the range of estimated annual operating costs for other models ofthat product. Section 324(c)(1). 

### A rule is not required under section 324

### ifthe FTC determines that disclosure ofestimated annual operating
costs is not likely to assist consumers in making purchasing decisions oris not economically feasible. Section 324(c). 

### At the present time there is an FTC rule requiring labels under the Act for the following products: room air conditioners, furnaces, clothes washers, dishwashers, waterheaters, freezers, and refrigerators and refrigeratorfreezers. 44 

### FR 66475 (November 19, 

### 1979). The 

### ITC has proposed 

### a rule to require labels for central air conditioners. 45 

### FR 53340 (August 11,. 1980).

For each ofthe covered products, DOE is required to establish mandatory
energy efficiency standards that are designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. Section 325(a)(1) and (c). The Act provides, however, that

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# I Rules and 

### Regulations 39377

no standard for a productis to be established 

### ifthere is no testprocedure

.for the 

### product, or 

### ifDOE 

### determines by 

### rule eitherthat establishment ofa standard would not result in significant conservation 

### ofenergy or that establishment ofa standard is not technologically feasible oreconomically justified. Section 325{b). 

### In 

### determining whether'an 

### energy efficiency standard is 

### economicallyjustified, the Department is 

### directed to determine whether the benefits ofthe standard exceed its burdens by 

### weighir...g six 

### specific factors, '

as well as any otherfactors DOE 

### considers relevant. Section 325(

### d). The factors are:

(1) The 

### economic impact ofthe standard on the manufacturers and on 

### the consumers ofthe 

### product subjectto such 

### standard; ". (2)

### The savings in 

### operating costs throughout the estimated average life 

### of the 

### covered productin the ty-:pe (or class), compared to any increase in the 

### price 

### of, or in 

### the initial**c~arges** 

### ior, or 

### maintenance expenses ofthe covered products which are likely to result from the imposition ofthe standard;

(3) The 

### total projected amount of

"energy savings likely

### to result directly

from,the imposition ofthe standard;

(4) 

### Any lessening ofthe utility or the performance ofthe covered products likely 

### to result from the imposition of

### the standard;

(5) 

### The impact ofany lessening of 

### competition, determined in 

### writing by 

### the Attorney General, that is likely 

### to result from the imposition of

### the standard; and "

(5) The 

### need ofthe f--iaUon 

### to conserve energy.

A 

### rule establishing 

### an energy' efficiency standard for a product shall
set different levels ofefficiencies for different classes 2 

### ofthat product ifthey

use a different kind ofenergy orhave different capacity orperformance related features thatjustify different levels ofefficiencies. Section 325(f).



### The Act specifies the priorities and pr.6cedures to be followed in 

### adopting effIciency standards. Nine ofthe 13 

### coveredproducts are given priority under the Act. Section 325(g). 

### These nine products are: refrigerators and refrigerator-freezers, freezers, clothes dryers, water heaters, room air conditioners, home heating equipment (other than furnaces), kitchen ranges and ovens, central air conditioners, and furnaces.

The procedures include a requirement for an advance notice ofproposed rulernaking upon which interested

2 Each covered product category may be made up ofseveral classes, 

### persons may make written comments. Section 325{i)(1). 

### Thereafter, there is to be

## anotice 

### ofproposed rulemaking, 

### upon which interestedpersons may 

### make written and oral comments, including an opportunity to question those who make such comments with respect to disputed issues ofmaterial fact. Section 325(i)(3) and section 336(a)(1).



### Section 327 

### ofthe Act 

### addresses the effect ofFederal rules 

### concerning testing, labeling, and standards on State laws orregulations concerning such m8tters. Generally, all such State laws

orregulations are 

### supersededby**~e** 

### Federal rule. Section 327(a). A 

### rule by DOE 

### that an efficiency standard is not technologically feasible, economically justified, orlikely 

### to save significant amOlL.l"lts 

### ofenergy is a rule" that supersedes'any State standard. Section 325(b). 

### Ii, 

### because there is no Federal rule, a State 

### efficiency standard is 

### not superseded, persons subject to it may petition DOE to have it superseded on the 

### basis that t..here is no 

### significant State or local interest sufficient to justify 

### the regulation and such regulation unduly burdens interstate commerce. Section 327(b)(1). 

### A State whose energy efficiency standard is 

### -superseded may petition the Departmentfor a rule that it


### not be superseded, on the basis that there is a significant State or 

### local interest to justify 

### the standard and the State standard is a stricter standard. However, DOE 

### cannot issue the requested rule 

### ifthe State standard would unduly burden interstate

commerce. Section 327(b)(3).


### b. Background

The DOE published its advance notice ofproposed rulemaking pursuant to section 325(i) 

### for the nine first priority products onJanuary 2, 1979. 44 

### FR 29. 

### On December 13, 1979, 

### the DOE published an advance notice of proposed ru.lemaking for dishyvashers, television sets, clothes washers, and humidifiers and dehumidifiers. 44 

### FR 72276. 

### An 

### advance notice for central air conditioners (heatpumps) was published on January 23,1980.45 

### FR 5602. 

### These advance notices were designed to present a full discussion of the Department's views concerning the standards program and the process for its implementation. DOE also set forth its views concerning the eriteria for selecting classes in each product type and the maximum technologically "feasible efficiency standard for each class ofproduct. DOE 

### specifically requested comments on all matters presented in the advance notices. Public meetings were held throughout 1979 

### and 1980 

### to solicitthe views 

### ofall concerned parties

.

After'receiving comments on the advance notices, on June 30, 1980, the DOE 

### setfortll; its 

### first proposed rulemaking for the nine products, 45 

### FR 43976, 

### (hereafterreferred to as the June 1980

### proposal). The June 1980

### proposal
setforth the DOE's 

### proposal concern.ing energy efficiency standards for these coveredproducts. It 

### also proposed procedures forprocessing petitions by 

### States that soughtexemptionfor regulations subject to the general preemptionrequirements ofSection 327(a) 

### ofthe Act. The June 1980

### proposal considered comments received in 

### response to the advance notice on these nine products and made changes in 

### the DOE's 

### initial determinations concerning classes for each covered product and the methods for determining enerWj efficiency standards. The June 1930 

### proposal was based upon five technical support documents which were made available for public review.

To encourage public participation in the rulemakingprocess, the DOE 

### held a series ofpublic meetings and hearings, starting in 

### July 1980. 

### Public hearings

were conducted in Chicago and vVashington inAugust 1980. 

### As a result of,these hearings and the solicitation 

### of written comments, over 1,800 

### comments "vere received on 

### the June 1980 

### proposal. 

### These comments addressed all aspects 

### ofthe rulemaking proposal including 

### L"'1e establishment 

### ofclasses in each covered producttype, the 

### feasibility ofthe standards selected for each covered product, the validity 

### ofthe assumptions made in 

### the technical support documents. the procedure for seeking exemptions for State regulations,from preemption by 

### the Federal standard, the effective date ofa final regulation, the

_propriety ofstandards for small

businesses, whether alternatives to regulations were practical, and the proposal for certification and enforcementprocedures.

On December 17,1980, 

### the Department notified the Congress ofits inability to make a final determination

on 

### the imposition ofenergy efficiency standards on the nine covered products by the statutory deadline ofJanuary 2, 1981. 

### On February 23, 1981, 

### DOE published a notice ofits intent not to issue any energy efficiency standard until it fully studied the comments received on the June 30 

### proposal and made a thorough reassessment ofthe data supporting the proposal. 46 

### FR 13517.



### On April 2, 1982, 

### DOE issued a further notice ofproposed rulemaking with respect to thH nine priority products, 47

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### No. 169 

## I Tuesday, August 30, 1983 / 

### Rules and Regulations 39378

D±



### FR 14424 

### (hereafterreferred to as 

### the April 1982 

### proposal). With respect to eight ofthe products DOE proposed to make a determination that a standard would notresult in 

### significant conservation ofenergy and would not be economicallyjustified. 3 

### The April 1982 

### proposal also proposed rules governing petitions to DOE both.by 

### States to obtain exemption from 

### preemption ofState or 

### local energy efficiency standards as 

### well as by manufacturers to obtain preemption of State or local standards. Two technical support documents-an Economic Analysis (EcAD) and an Engineering Analysis (EnAD)-supported the proposal.

Hearings were held on the April 1982 

### proposal overthree days in Washington,' D.C., in which 39 

### persons presented
statements. Over 130 

### written comments

were received during the initial
commentperiod, and 36 

### additional written comments were made on earlier submitted comments.

In 

### October 1981, 

### the Natural Resources Defense Council (NRDC) 

### and Consumers Union 

### ofthe United States, Inc., brought suit against DOE for DOE's failure to adopt a final rule for the nine priority products by the statutory deadline ofJanuary 2, 1981. A 

### settlement agreement adopted by the parties required DOE 

### to adopt a final rule for these products (except home heating equipment, other than furnaces) by October 29, 1982. 

### The agreement provi9.ed, however, for a modification of that deadline for good cause as 

### approved by the court. Nevertheless, the 

### agreement required that, ifthe entire rule could not be adopted 

### by October 29, DOE 

### would issue 

### those portions of

### the rule for which determinations could be made.



### Consequently, on December 22, 1982, 

### DOE published a final rule in which the Departnlent deterrnined that energ'f efficiencv standards were not vlarranted for

### cloth~s dryers and kitchen ranges and ovens. 47 

### FR 57198. 

### (Hereafter referred to as the December 1982 

### final rule.) 4 At 

### that time, DOE also adopted final procedures by \!vhich States 'might obtain exemption for State orlocal efficiency standards from Federal preemption and by which manufacturers

3 The April 1982 proposal did not propose any rule with respect to the product type "home heating equipment, not including furnaces" orwith respect to that class ofthe product water heaters made up ofheat pump water heaters or with respect to those classes ofthe product central air conditioners that

are heat pumps.

.. The preamble to the December 1982 final rule is part ofthe record ofthis rulemaking, and DOE hereby incorporates it by reference. 

### might obtain preemption ofa State or local standard not otherw;se preempted.

In light ofDOE's failure to adopt 

### a final rule by October 29, 1982, the 

### NRDC filed a motion on November 29, 1982, 

### requesting the court to order DOE 

### to promulgate final rules for all eight products by January 29, 1983. 

### In this Inotion NRDC argued that, while NRDC believed the OakRidge National Laboratory Residential Energy End Use Model (ORNL Model) to be deficient, DOE 

### couldnot take additional time 

### to conduct further analyses ormake nay corrections. As DOE 

### noted in responding to the court, the ORNL 

### Model has been used since before June 1980 to 

### determine the energy savings attributable to standards, a necessary determination whether the conclusion is
to promulgate a substantive standard or

a no-standard standard. It 

### was not until the comments on the April 1982 

### proposed rule, however, that l.'.JRDC 

### and others raised. objections to the particular aspect ofthe Model that has drawn the greatest attention in this rulemaking. These objections were not dismissed out-of-hand but rather were considered and analyzed. Consequently, as noted in the December 1982 

### final rule, DOE 

### was unable to make 

### the October 29, 1982 

### deadline for a 

### final rule for all eight products.

As indicated 

### infra, DOE's analysis and 

### review of

### the ORNL Model is 

### an ongoing matter. In entering into a 

### further settlement agreement with NRDC 

### to issue these rules, DOE 

### did not mean to suggest 

### that all 

### questions would have been 

### resolved and all 

### doubts dispelled 

### concerning the Model. Forreasons discussed at length 

### infra, however, DOE concluded that within the time 

### constraints ofthe Act, as 

### enforced by f'oJHDC, 

### Consumers Union, and 

### the court, the ORNL Model 

### as used 

### in this rule is the most reliable and objective means of detern1ining energy savings attributable
to a standard. 5

(') NRDC, in a letter dated May 4, 1983, alleged that

on March 28, 1983, the Assistant Secretary for Conservation and Renewable Energy met with representatives ofthe Association o.fHome Appliance Manufacturers (AHAM) and discussed this pending rule. While a meeting did take place, the discussion did not involve this rule but rather
two aspects ofthe final rule adopted December 22, 1982-the standards upon which petitions for exemption from preemption would be judged and the precentage test for determining whether a given level ofenergy savings is significant. No change has been made in the standards or tests announced in the December 1982 final rule, nor would DOE consider any such changes without a further rulemaking on the subject. 

### II. General Discussion

a. 

### General

As indicated above, this rulemaking, begun in 

### January 1979, 

### has been a lengthy and complex process. Millions ofdollars have been spentby DOE 

### in furtherance ofthe rulemaking; manufacturers, interest groups, and States have gone to great efforts not only to make known their views on the ultimate questions but also to expand both the data base and analytical criteria upon which the rulemaking is bas-ed. Accordingly, DOE wishes to thank all those who participated in the rulemaking for their efforts. Even where
comments orrecommendations were not adopted, the comments improved the process and·assured that the final decision would be based on a full consideration ofall the relevant factors.

Some commenters expressed their beliefthat DOE had prejudged the
outcome ofthis rulemaking because of

. an inflexible policy commitmentto avoiding mandatory appliance efficiency standards. DOE 

### has acknowledged**~ts** 

### general view that the marketplace, together with accurate

consumer information, is more effective in improving appliance efficiency than

are ·mandatory appliance standards. DOE, 

### however, has confined 

### its action upon this view to support oflegislation that would repeal section 325 

### ofthe Act. DOE's consistentpolicy, moreover, JIas been that it

### must and will faithfully
execute the law in the absence ofany' such congressional action. Thus, no prejudgement has been made in this rulemaking. The decisions have been founded on the record in 

### accordance vtJith the statutory terms and requirements.

The record, however, has changed substantially from 

### the record before DOE 

### in June 1980 

### when substantive standards were proposed for all products. As comments to the June 1980 

### proposal made clear, that proposal was widely criticized. In 1980, 

### both the Justice Department and the White House's Regulatory Analysis Revievv Group severely criticized the eco:q.omic analysis that underlay thatproposed rule. The General Accounting Office has also criticized it. 

### See Improved Quality, Adequate Resources, and Consistent Oversight Needed ifRegulatory Analysis is to Belp Control Costs of Regulations (1982), 

### at 12. 

### As a result of these and other comments, a number of changes were made to both the economic and engineering analysis, changes that were fully explained in the April 1982 

### proposal and supporting documents. With few exceptions, these 

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## I Vol. 48, 

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## I Rules and 

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### 39379

changes were.not criticized in 

### the
comments

# on the April 1982 

### proposal. 6 

### As a result 

### ofcOIIL.TTl.ents 

### on the 

### April 1982

### proposal. further changes were 

### made orresponses have been made indicating why DOE did not ad'opt 

### the
comment. 7

As a result ofall of

### these changes, the 

### data generated 

### by the various models and analyses have changed 

### substantially from those inJune 1980. 

### Where required by changes in the data, ofcourse, the conclusions to 

### be drawn from 

### the data have changed as well.


### b. Maximum TechnologicalFeasibility

Some commenters criticized DOE in its selection and use ofcriteria in the &."'1gineering 

### Analysis 

### for choosing design options.and candidate standard levels. These conunenters 

### argued that the predicted energy 

### savings in the 

### standards case would have been greater had DOE 

### considered a 

### broaderrange of 

### options.

The comments on the Apri11982 

### proposal addressed three issues: that DOE limited its 

### consideration of 

### possible standards levels toefficiency levels already in the marketplace, 

### thereby ignoring 

### advaD:ced technologies that 

### were available in prototype or could be developed; thatDOE failed to 

### consider some high efficiency products 

### already in the marketplace; and that DOE 

### restricted consideration to U.S. models only.

Maintaining 

### that DOE 

### should revise its 

### criteria to include prototypes that could be 

### available by 1987, 

### NRDC, 

### the Anlerican 

### Council for an Energy EfficientEconomy (ACEEE) 

### and others contend that 

### high efficiency prototype appliances have been developed and tested that 

### substantially surpass, some by 

### 26 

### percent, the efficiency 

### levels of those currently on the market. Consumers Union 

### added that the Engineering Analysis 

### ignores the 5 year 

### period manufacturers would have to bring products into compliance.

DOE 

### has fully 

### conside.red the
comments suggesting L1.at 

### minimunl 

### energy efficiency standards should be analyzed at 

### levels in excess ofmodels available in the market, but has determined that the 

### P;.ct does not require such analyses. First, for the reasons given in the December 1982 final 

### rule,



### see 47 

### FR 57211. it 

### vlould be virtually

6 Indeed. that part of the ORNL Ivlodel most critidzed in the April 1982 proposal, the market penetration algorithm. was unchanged from the June 1980 proposal. The market penetration algorithm**V~ias** not criticized by commenters to the June 1980 proposal.

7 Depend'ing on the issue, the explanations of these**change~** or the responses may appear either in the DElcember 1982 final rule or in this rule. 

### impossibleto annalyze possible 

### standards atlevels 

### where the datato performthe analyses would be non

### existentorlargely speculative. Because 

### the Act

### requires that potential 

### standards be 

### analyzed both 

### as to the likelyenergy savings attributable 

### to them as well as 

### to theireconomicjustification, the impossibility ofmeaningful analysis effectivelybars 

### the consideration 

### of standards at such levels. Second, the Act 

### specificallyprohibits standards 

### for a 

### product (orclass ofproduct) ifthere is

no 

### applicable testprocedure for 

### which a 

### final rule is being 

### considered currently have applicable testprocedures have 

### been validated only ,vith

### respect to 

### currently marketed 

### products. Experience 

### cautions that advanced 

### technologies for appliance efficiency might vvell make


### current

### test procedures inapplicable. 8 

### Consequently, it

### VJould be 

### irnproper under

### the Act to require a 

### standard for 

### ,vhich there was an applicable

### test " procedure.

Where 

### commenters specified particularprototypes they 

### believed should be considered; DOE has addressed these particular models in the 

### product-specific discussion.

The ACEEE, National 

### Vvildlife Federation, NRDC, 

### ·the Galifornia 

### Energy Commission and others gave examples 

### ofappliances now available 

### in the marketplace that reportedly are substantially more efficient than 

### the maximum 

### lev:e1s considered by DOE.

The appliance designs 

### mentioned included condensing furnaces, heat pump water heaters, and 

### advanced designs ofrefrigerators andrefrigeratorfreezers.

A

..8 

### a general matter, 9 

### the April 198.2 proposal 

### considered a standard level for each product at 

### an efficiency 

### level equal
to the maximum efficiencv 

### ofthe product in 

### the domestic**~arket** 

### as ofthe
comments 

### on the"June 1980 

### proposal. 

### That is, the original engineering 

### analysis prepared for the June 1980 

### proposal \vas updated and 

### revised in light of 

### comments on that proposal. 

### Creating "cost books" (breakdo

...vns ofthe costs ofa given design option into its labor, purchased parts, materials, and investment 

### components, which then can 

### be used to evaluate fully 

### potential standards levels) is a cOlnplex 

### and involved affair. By 

### February 1,9B1 

### a new "cost book" had been cOlnpleted 

### lrvith respect to the eight 

### products. This was the last "cost 

### book" prepared before the'

6 Fo:' example, DOE has had to grant test procedure waivers for certain condensing furnaces.

9 Where there are specific problems involved in assessing particular design options now in the marketplace as potential standard levels, these are addressed in the product specifiG discussion. April 1982

### proposal, which was 

### expected to be issued much earlier. After the April 1982 

### proposal, itwould
not 

### have been possIble to assess new models in the market for potential standard levels, 

### change the "costbook," and then run all the computermodels**~lith** 

### this new data within a reasonable time 

### period, and certainly not wi

### thin the periods that were required by courtapproved settlements with theNRDC and Consumers Union. Moreover, had DOE 

### taken this additional time to 

### change the "costbooks" with all the 

### delay that would have entailed, by 

### the time 

### ofthe final 

### rule there would 

### undoubtedly be 

### still newer, more efficient products 

### available in the market.



### This reflects a general problem VJith 

### a rulemaking that 

### assesses the 

### effects of potential standards, 

### when over the time 'ofthe rulemaking 

### the technology and marketed products develop and 

### progress. DOE 

### has continuously attempted 

### to use 

### the most recent, reliable data, where 

### to do so \vould not inordinately 

### delay the rulemaking. 10 

### With respect to the potential standard levels, to 

### have adjusted the "cost books" in light of

### the mostrecent products 

### in the marketplace and then to 

### have conducted the analyses based upon these new 

### "costbooks" would have 

### substantially delayed this rulernaking. l1 

### Congress, in 

### establishing the 

### appliance program, a.nticipated this possibility and 

### directed the Department to 

### reevaluate standards (including a 

### no-standard standard) \"lithin five 

### years and from 

### time-to:-time 

### thereafter. 

### See Section 325{h)(1). 

### Therefore, efficiencies of products that have entered 

### the market after 1980 

### would

## be considered as potential 

### standards in that reevaluation.

The final comment 

### relating to 

### maximum technologically feasible efficiency 

### levels urged DOE to consider features currently 

### available from**fore~gn** 

### products. Consumers Union and NRDC argued that these products can be imported, 

### obtained under license, and incorporated into domestic appliances by the effective 

### date ofstandards.

DOE's 

### analysis considered only those 

### technologies available in the domestic market

### because the Department did not have detailed 

### data for foreign 

### designs

10For example. these new products 'were included

as additional points in revising and improving the**cost-~fficiency** curves in the ORNL**~Iodel.** becausf! these inclusions ,vere simple to accomplish and would not delay the rulemaking.

11 Moreover, as indicated in the product-specific discussion. the efficiencies of some ofthese most recent products are not even appropriate as standar'd levels.

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not incorporated in domestic appliances and, therefore, could not analyze properly the impacts ofstandards based

on foreign designs. Although s0Il:le
commenters criticized DOE 

### for not analyzing the impacts ofstandards using these technologies, DOE 

### received little information on 

### these designs. An additional problem with assessing foreign products was evident from the comments-disagreement and uncertainty as to the facts concerning the product. For example, 

### NRDC and Whirlpool Corporation disagreed fundamentally over the capabilities of

### a particularJapanese refrigerator.

.



### c. Energysavings

1. 

### Determination of Energy

### Savings. The determination ofthe likely energy 

### saviIlgs attributable to particular, possible appliance efficiency standards is critical in determining whether a standard would result 

### in a significant conservation ofenergy or whether a standard is economicallyjustified. 12 

### Thus, whether 

### a rule were to prescribe a standard or a no-standard standard, such a determination is a necessary element. Th

. .roughout this rulemaking proceeding 

### DOE has 

### utilized the 

### ORNL**~Iodel** 

### to form the basis for this determination. In general, 

### the ORNL**~fodel** 

### projects residential energy 

### use by

a product with and without standards

over a given period. By comparing the
energy used**wiL~out** 

### a standard during the period to the energy used with a particular standard during the same

,period, DOE is able to project the
amount ofenergy saved during that period which is attributable to the 

### standard. The energy saved is 

### expressed in Quads (quadrillion BTUs). With respect to electricity, the savings are Quads ofsource or primary energy; that is, the energy that 

### is necessary to generate and transmit electricity. The**Ofu~** 

### Model is 

### fully explaned in EcP.JJ,
at Appendix E.

.

This Model was originally developed prior to this rulemaking and the appliance efficiency program, but the 

### f,,'lodel has "been subject to continuous refinement and improvement, much ofit

as a result ofthis rulemaking. As a result ofL.'1.e June 1980 

### proposal, a number ofchanges were made to the !\·1odel 

### in light ofthe comments, 

### see

.EcAD, 29-34. 

### Similarly, as a result ofthe April 1982 

### proposal, many comments on the Model were received, and a number ofchanges subsequently made. Several ofthese comments and resulting

12Under Section 325(d), DOE is required to weigh various factors to determine whether a standard is economically justified. One ofthose factors is the projected energy savings attributable to the standard. 

### changes were described in the December 1982 

### final rule, 

### see 47 

### FR 57201-57202. 13 

### All changes to the 

### ORNL Model·since 

### the April 1982 

### proposal are described in the Supplementto Li.e Economic Analysis Document and**Engine~ring** 

### Analysis Document (hereafter "Supplement"), issued with today's rule.

As indicated in the December 1982 

### final rule, the issue with respect to the 

### ORNLl-Aodel that received 

### the greatest attention\vas 

### the Model's treatment 

### of the relationship between enerw.fprices 

### and the market's responsiveness 

### in producing and selling more energy efficient products. The Model recognizes that the,existing marketplace 

### is not perfect; that is, all manufacturers do not make 

### and all consumers do not purchase the type ofequipment that viould always be a consumer's most energy efficient choice from a life cycle
cost standpoint alone. The Model calculates the difference between the optimal and the projected average 

### life cycle costs ofequipment in a base year from actual price and 

### sales information ofequipment in that year and projected
energy prices. The difference between the optimal arid projected life cycle
costs is defined 

### as the market distortion. 14 

### In years after the base
year, the Model projects the level 

### of market distortion based on the initial level 

### as modified by the market penetration algorithm (EcAD, at 403). 

### The principal issue raised by 

### COffilnenters objecting to the ORNL

13 In the December 1982 final rule, DOE'concurred in a comment ofthe General Accounting Office in its report "Appliance Efficiency Standards: Issues Needing Resolution by DOE" (hereafter "GAO Report") that there was an inconsistency in the ORNL**~lodel's** treatment ofthe base and standards

cases. See 47 FR**57202.~At** the time ofthat final rule the computer coding had not been completed to eliminate that inconsistency. Id. The Model's calculations that form the basis for this rule reflect the changes made to eliminate that inconsistency.

14 In the April 1932 proposal, DOE referred to the implicit discount rate rather than the market distortion to describe the difference between t'te "perfect" and the existing market. In the Economic Analysis Document, DOE also used the term implicit discount rate for this purpose, (EcAD at 144-145), but the Economic ".nalysis Document, in its explanation ofhow the Model operates, made clear that itwas the difference between the optima.l and average life cycle cost (the distortion factor),
not any implicit discountrate, that actually was used in the Model (Ec

.. W at 403-405). In the December 1982 final rule, DOE clarified that implicit discount rates are neither an input to nor a formula in the ORNLModel. That is, projected energy savings are not affected by changes in the implicit discount rates. Rather the implicit discount rate'is

an output that is derived by the Model, and in the 1982 proposal was used as a shorthand method for expressing the market distortion that does in fact drive parts ofthe Model. See 47 FR 57200 n.5. For

reasons explained infra, DOE now believes it is

more accurate to.refer directly to the market distortion rather than to implicit discount rates. 

### Model is the manner in 

### which the algorithm**pr9j~cts** 

### market distortion in future years.

In general terms the algori

### t.lnn has the effect ofdiminishing the distortion

. between the optimal and,the average life costs ofequipment beLllg purchased

as 

### a function ofrising energy prices.

### ,In· other words, as the price offuel for an ' appliance rises, the market in that appliance will become more "rational," i.e., 

### the efficiency ofequipm'entbeing purchased will be closer to the optimal

, efficiency (from a life cycle cost perspective) than it 

### was when the fuel, price was lower. Under the Model's algorithm, however, distortion always remains. \Vhile higher fuel prices reduce distortion over time, 

### they can never, eliminate it altogether.

As an initial matter, several objectors took exception even to 

### L"le general concept that the market responds to higher fuel prices with more efficient equipment. For example, the f\mnC 

### maintains that "the evidence that higher price induces consumers to choose higher efficiency 

### is nonexistent: 

### all the evidence says 

### that consumers are almost totally tmresponsive to price. It 

### (NRDC, No. 2121, 

### at 24).15 

### While this objection is broader that one merely directed at the algorithm, were this' objection valid it would invalidate the algorithm.

1'0 

### the contrary, ho\vever, DOE 

### finds that there is substantial evidence that as fuel prices rise the market responds in the manufacture and sale ofmore fuel efficient equipment. For example, even " the National Academy ofSciences (NAS) study cited to DOE by the 

### NRDC
states "there is ample evidence, that
-energy conSlL111ers respond to changes in price

..." 16 

### See also Beck, Doctors, and Hammond, 

### Individual

### Energy Conservation Behaviors 1-25 (1980). 

### Most objectors conceded that there is a market response, but argued that the market was not perfect or did not respond adequately. 

### See, e.g., New York State Energy Office, 5-18/3, 

### at 7; 

### Environmental Policy Center, 5-19/13, 

### at 3-4; 

### New York State' Energy Office. No. 2180, 

### at 3. 

### lvloreover, as even many objectors noted, appliances overseas, where energy prices are higher and there are no governmental standards. tend to be more efficient than American

IS Comments on the rulemaking were given docket numbers. Citations to comments provide those docket numbers, unless the commentwas submitted as part ofan oral presentation, in which

case the citation is to the date and numerical order ofthe presentation, e.g., 5-13/3. '

16 BehavioralandSocialAspects of Energy Consumption andProduction: PreliminaryReport.' National Academy Press, at 7 (1982) (hereafter "NAS Study"). ' 

# '.

•

•

### Federal Register 

## I Vol. 48, 

### No. 169 

## I Tuesday, August 30, 

### 1983 

## I Rules. and Regulations

&& s

. 2&L;& ·#!WYfZ44J&Et:·SCd

..wza:;:;;:;;aae 3CJ .:;U;:J.&A

__ 

### 39381

,appliances. Survey data cited to DOE

### by
commenters also indicated that

consumerresponse 

### to higherfuel prices 

### would be to purchase more efficient equipment. Manufacturers supporting the rule statedtheir belief, based upon their experience in the field, that the market did respond to higher energy 

### prices in higher efficiency equipment. The fact that there'is wide-scale advertising on the basis ofefficiency,

even at the wholesale level, is evidence that manufacturers and retailers act upon that belief. Some, including trade 8ssociations, also found support for this conclusion in the generally increased efficiency ofappliances in the past ten years, a period in which energy prices have risen. '



### The objectors who denied the existence ofany evidence ofa relation between fuel prices and appliance efficiencies instead suggested that the increase in appliance efficiencies during

,the period 1972-1981 

### was caused by factors other than fuel price increases. For example, the NRDC acknovvledged that H[t]he data

... clearly show that appliance efficiences have increased noticeable over the period 1972-1981" 

### (NRDC, No. 2176, 

### at 6-7), 

### and that increased energy prices are one of

### the important chang'es that has occurred (id.), 

### but NRDC suggests that State efficiency standards, 

### ,the threat of ' Federal standards, and increases in efficiency as 8 

### by-product 

### ofother design objectiv'es, not increased fuel prices, are the more likely.explanation fpr these increased appliance

. efficiencies. DOE 

### has considered these suggestions but has conc,luded that the evidence does not support a determination that these otherfactors,



### as opposed to increased fuel prices, are responsible for increasedappliance efficiencies.

First, no commenterhas suggested that 

### an increase in efficiency in any product subject to today's rule is the'byproduct ofother design objectives.

Second, no commenters presented any evidence that the possible imposition of Federal standards had resulted in increased appliance efficiencies that would not have occurred in the absence ofsuch possible imposition.l7 

### Moreover, increases in efficiency in the 1972-1981 

### period have occurred with respect to appliances for which no proposed

I T While some manufacturers acknowledged that t.he proposed standards had affected them in the choice of a specific level ofincreased efficiency, they also indicated theirbeliefthat market
pressures were demanding more efficient equipment. See, e.g

.. Climate Control, 5-20/5. at 2-3, Thus. these statements do not establish that absent proposed standards the observed efficiency increo..8ses would not have occurred or been as great. 

### Federal standard has everbeen published.

\'V'ith respect to the suggestion that 

### State standards are responsible for increases in appliance**efficiencies~** 

### the 

### NRDC, for example, attempted to demonstrate that the mannerin which appliance efficiencies have increased is



### more indicative of**regu~ation-induced** 

### changes than changes induced by fuelprice effects (NRDC, No. 2121, 

### at 13-15; 

### NRDC, No. 2176, 

### at 10-13). 

### With respect 

### to refrigerators, 

### NRDC submitted curves representing the frequency of distribution by efficiency for two 

### classes 

### ofrefrigerator-freezerbefore 

### and after imposition ofthe California standard. See 

### NRDC, No. 2121, 

### at Appendix 

### A. NRDC interprets these curves as indicating that the increase in average efficiency is due solely to elimination of models that are prohibited

### by the standard. DOE, 

### however, believes these

curves indeed are evidence ofa,price rather than regulation effect. For. example, in the top-freezer, auto-defrost class (by far the mostpopular class) between 1975 

### and 1981 

### the entire curve shifts to the left, and the largest increases in relative frequency are at levels ofefficiency 

### in excess ofthat required by the California standard.

With respect to the other class, the efficiency ofthe most efficient model did not**incre,as~** 

### in the time period. Ho\vever, the number ofmore efficient models increased substantiallypri'or

### to the imposition ofthe 1979 

### California standards, and the trend continued after imposition ofthe standards, with a greatly increased number ofmodels at efficiency levels in excess ofthat required by the standards. Is 

### (increased efficiency) does not indicate that fuel price**fa~tors** 

### are not at work or thatthe increased efficiency is due to regulation.

The NRDC similarly clainls that the pattern ofefficiency improvements in '

room air conditioners also suggests that the lmprovements were induced by regulations rather than e:ice because the changes in efficiency allegedly occur in "quantum leaps" rather than at the

same pace as increases in fuel prices. DOE, however, has never asserted that the relationship,between fuel prices and equipment efficiencies is perfect. Nor does the ORNLModel assume a perfect relationship. Obviously, the real world marketplace is subject to fits and starts,

18 notes, moreover. that both curves have points indicating the "best Japanese modal" as exceeding the U.S. models in efficiency. Inasmuch 88 Japan does not have mandatory minimum efficiency standards for refrigerators. but does have higher electricity prices than the U.S. and an aggressive labeling program. these points on the

curves certainly do not support the absence ofa fuel price/appliance efficiency relationship. 

### such 

### as,the development ofnew technology for increased effici,ency or, sometimes more importantly, a low-cost

manner 

### ofincorporating new technology. Moreover, DOE does not

concur that data on room airconditioners indicate Uquanturn leaps" ofefficiency improvements 

### in individual
years, so as to be considered inconsistent with fuel price effects. See, 

### e.g., Association ofHome Appliance Manufacturers (AHAM), 

### No. 2105, 

### at 4.



### In sum, the evidence and arguments 

### of objectors

# is insufficient 

### to support the conclusion that fuel prices have no impact on appliance efficiencies'. 19

### This is not to say that State standards (or

even the threat ofFederal standards) have had no effect on appliance efficiencies. Rather, the weight 

### of the evidencecle4;irly supports the conclusion that**mark~t** 

### factors are responsiblefor increased efficiencies. 20



### Contrary to the NRDC's allegation. however. whatever contribution may 

### be attributable to, State standards (or 

### the threat ofFederal standards) need notbe somehow deducted 

### from the 

### ORNL Model's base case. See NRDC, 

### No, 2121.


### at 23-24.26. 

### First, the NRDC,8ssumes that all State standards will in fact be eliminated. As indicated in the December 1982 

### final rule, however, DOE 

### has reviewed existiIlgState standards and**fo~d** 

### that they would,most likely be granted an exemption from preemption. Moreover, States that feel that,standards**h~ve** 

### an impact seem likely to seek exemptions. Second, 

### the promulgation ofthis 

### rule does not eliminate the threat ofFederal standards. Under the Act, DOE 

### must leevaluate 

### a**st~ndard** 

### (including a

### 'nostandard 

### standard) within five years. Third, as even 

### NRDC concedes, fuel price rises have indirect as well as direct effects, and the indirect effects include State standards 

### and the threat 

### ofFederal standards. (NRDC, No. 2121, 

### at 24)., 

### Moreover, U[t]he 'elasticities' recorded 

### in the 

### Oak Ridge model in 

### fact reflect a number ofindirect responses to price." (Id.) 

### Indeed, the ORNLModel, by
notdistinguishing between direct and**ind~rect** 

### effects, is intended to reflect 

### all

19**~xtensiv,e** responses to certain ofthe other**argumen~8** raised by objectors are not warranted. For example, the NRDC asserted there was no relationship in the market between the price ofan**appli~nce** and its efficiency. As alleged evidence of

, this, NRDC**enclo8~d** an attachment listing various appliance models, their initial cost, and their fuel cost. DOE has reviewed this infonnation, but the information is insufficient to determine the comparal;>ilityoffeatures or amenities associated w'ith these models. so it is impossible to determine whether the infonnation stJPports NRDC's point. Consistent improvements in efficiency for appliances not eveZUJlbject to any State standards is nlerely orie indication.

### Vol. 48,. 

### No. 169

21 Several commenters who objected to the algoritt.un suggested that builders and landlords would always purchase the least expensive and hence least efficient appliances. The record does
not support auch a conclusion. For example, DOE received comments from some landlords that because they paid the fuel bills, the la.ndlords, would
pay an increased price for the more efficient equipment. See, e.g., the Robert A. IvlcNeill Corp., No. 2183. Moreover, it is not uncommon for landlords to pay fuel bins. GAMA submitted data dEa'11onstrating that landlords paid gas costs in 37 percent ofthe cases, oit coal and wood costs in 70

. percent ofthe cases, and electricit'i costs in. 21 percent ofthe cases. See Gas Appliance Manufacturers Association (GMfA), No. 2177, at 2. Wit.l) respect to builders, information submitted L'1 the rulemaking indicates thatmany builders are incorporating high efficiency HVAC equipment in the homes they build. SeeProfessioneJ Builders, October 1981 (survey sholftling 76 percent ofbuilders

are installing high efficiency equipment). Perhaps

even more importantly, survey data submitted by**C~rrier** indicated that builders were increasing the efficiency ofthe equipment they were instaliing. Carrier Corp., No. 2120. at 9-10{72 percent of builders said that they plan to build homes in 1982 with more efficient equipmentthan those built in 1981, and over 25 percent said that all their 1982 homes wouid have more efficient equipment than the 1981 homes). Because ofsome controversy over revisions to the text

### of a National Association of Home Builders·Research Foundation Survey, DOE has not relied on the text accompanying that sUa."'Vey. Nevertheless, the data, while indicating less than total commitment to energy efficiency by builders, also demonstrated that many builders and

.. subcontractors are concerned about the energy

consumption ofthe equipment**L~ey** install. Finally, 

### effects ofrising energy prices on applicance efficiencies. Consequently, DOE does not agree that 

### any effects of State 

### standards or the 

### threat ofFederal 

### standards must

### be quantified 

### and deducted from the observed increased efficiencies before DOE 

### can conclude 

### that increased 

### appliance efficiencies do resultfrom increasedfuel prices.

Concluding that 

### Llte record amply 

### supports a finding that**L.~creased** 

### '- efficiencies 

### ofappliances resultfrom

increased energy prices 

### does not,**how~ver,** 

### exhaust the inquiry. 

### As indicated above, while many objectors conceded 

### that the market worked to 

### one degree or another, these 

### objectors argued 

### thatthe ffi.arket 

### was not

### perfect, did not result in 

### optimal efficiencies, or did not adequately respond to 

### increased
energy prices. 

### See e.g., 

### New York 

### State Energy 

### Office, No. 2180, 

### at 3. Several 

### descriptions were 

### made of

### aspects of market imperfection.



### First, many appliances are purchased 

### by persons otherthan those who wHl pay L;'e 

### fuel bills, and therefore 

### they will 

### not have 

### a direct fL.,ancial incentive to lovver the life cycle 

### cost 

### ofan appliance where to do so incurs a higher

### initial purchase cost. Specific 

### examples could be 

### builders ofnew housing and 

### some landlords. See, e.g., GAO!Ei\ID-82-78,


### at 13. 

### These types ofpersons are generally referred to as Hthird-party 

### purchasers." 21 

# •

• • Rules and

25 The studv indicated that, while investment in thermal integiity in electrically heated homes sholoved little change in b:nplicH diaccunt rates over L;,e period 19i3-1S79,**L~e** L."!lpncit dier;ount rates for those investnl€ntein gas·heatedhomes declined 15
to 20 percent. Inasmuch as the real price ofgas increased aInlost five times as rapidly during the period as that ofelectricity, and the initial implicit discount rates for electricity were only a fraction of the initial implicit discount rates for gas, such a differential in changes in implicit discount rates bet'Neen ga.s and electricity is explainable. While DOE tentatively characterized this reduction in implicit discount ratee as relatively small in the Apri11982 proposal, upon further analysis DOE believes such a characterization is inapt. First, Thermal integrity improvements are almost entirely made by

..third part"j" builders ofnew nousmg, and therefore market imperfections in this type of investment would tend to be greater than for products directly purchased by the ultimate

consumer. Second, there is no labeling program for such improvements. Third, such reductions in discount rates are not inconsistent with those projected for some applicances by the ORNLModel

over the same period oftime. More importantiy,
upon reconsideration ofthe tentative conclusion to be derived form this study, expressed in the last
sentence ofpages 145 ofthe Ecft.D. DOE has determined that the results ofthe study support the concept ofthe reduction ofnlarket distortion as a result ofrising energy prices. Moreover, even the and the marketpenetration algorithm 

### ignore these possible market failures. For 

### example, several commenters seem to Euggest 

### that the 

### Model ignores 

### L'i.e effect offrJrd-party 

### purchasers. 

### See,
e.g., Consumers Union, No. 2085; GAO 

### Report, at 12-13. 

### This, hovJ"ever

### is not.

so. As 

### indicated above, the 

### lvlodel derives the 

### initial distortion factor (the difference**bet~leen** the actual 

### and optimum average life 

### cycle cost in the 

### base year) onthebasis of

### actual cost

### and shipments data. This distortion 

### factor necessarily gives effectto 

### all market

### L.11lperfections in 

### L1.e base year, ,althoughwithout**quanti~1ng** 

### the separate impact ofeach. Moreover, the 

### way the algorithm 

### is structured, the distortion factor is never eliminated; it

can 

### orJy be reduced. Thus, nothing in the Model 

### or the algorithm 

### denies the 

### existence or continuation or 

### market imperfections. Rather, the algorithm merely represents ajudgmentthat market iInperfections 

### will diminish as fuel prices rise,

Several commenters who objected to 

### the ORNL**~:lodel** 

### contested that as fuel prices rise market 

### distortion diminishes. As DOE noted in the April 1982 

### proposal, few studies have 

### been made of changes overtime ofmarket di.stortion 

### (or ofimplicit discount rates) or the relationship between market distortion and changes in 

### fuel price. The only 

### study cited to DOE, a study DOEitself identified in 

### the April 1982

### proposal, while certairJv not conclusive, does suggest that**high~r** 

### fuel prices may 

### lead
to less market distortion. See EcAD, 

### at 145.25

.

the number ofadvertisements for housing which includes claims as to the energy efficiency ofthe house indicates builder concern with efficiency, if only because ofperception ofpurchasers' concern.

22 The availability and credibility ofinformation regarding the efficiency ofappliances and the imnact ofsuch efficiencies on fuel costs are**ob~iously** very important to improving the rationality ofthe appiiance marketplace. See generallyNAS Study. No one mechanism, such as government required labeling, is determinative, but apparently multiple, reinforcing sources of information, over time, can have a synergistic effect.

23The NRDC cited the NAS Study as support of NRDe's criticism ofthe algorithm and 8S suppport for NRDC's criticism ofthe use ofanyeconometric model for projecting energy savings. See NRDC, No. 2121, at 17.

24It should be noted that these variables can have the effect ofhaving consumers value energy efficiency or conservation more lzighlythan would be indicated by a life cycle cost analysis. That is, there can be market "imperfections" that tend to overvalue energy efficiency. The NAS Study, fer example, describes the growing trend toward "voluntary simplicity." See NAS Study, at 27-29.



### Second,**tt~e** 

### ability ofconsumers 

### to make life cycle cost 

### determinations depends on**t.~eir** knowledge and the availability ofadequate LTJiormation. 

### Until the advent ofthe appliance labeling program, 

### itwouldhave been exceptionally 

### difficult for consumers to determine 

### tile relative life cycle costs of 

### competing appliances. Even now 

### there

was substantial evidence in the record L1.at the labeling program for furnaces has serious probiems. 

### Moreover, until fairly recently the energy efficiency of 

### appliance was not widely 

### advertised, so

consumers has little ability 

### in 

### ma.ny

cases to 

### distinguish higher efficiency from lower 

### efficiency appliance,22



### Third, replacement ofmany appliances may 

### occurwhen the 

### existing unitfails, and the consumermay be primarily concerned 

### about quick 

### replacelnentrather than life cycle cost.

Fourth, as noted 

### by the NAS study 

### provided by 

### the NRDC, consumer decisionmaking 

### involves Ha range of variables that may be considered 

### 'internal' to the 

### consumerincluding 

### attitudes, beliefs, uncertaL.'11y about personal futures, mode ofinformation processing, interpersonal influences, and personal norms.". (NAS Study, at 6).23 

### These variables would affect the extent
to**'~vhich** the 

### "market" operates to minimize life cycle 

### costS. 24



### DOE recognizes,that, for all its efficiencies, Ll.e 

### marketplace does not achieve absolute perfection il'1 

### minimizing life cycle costs. In the April 1982 proposal DOE ack..,.,owledged the existence ofmarket failures in the 

### appliance industry and identified several ofthe possible 

### causes that Viere also mentioned by objectors. 

### See 47 FR 14428 

### (PApril 2\ 1982). The 

### COIP..ments 

### by**objectGrs~** h0 7 

### vvever, seem to reflect 

### the

erroneous belief

### that the O&'I\J'LModel 

### Federal 39382

### Federal Register 

# I Vol. 48, 

### No. 169 

# I Tuesday, August 30, 1983 

# I Rules 

### and Regulations 39383

While this study \-vas the only empirical study ofthe effects of increased 

### fuel prices on market distortion, there is a theoretical basis for 

### the conclusion that increased fuel prices 

### will result in 

### reduced market distortion. That is, ifone considers the nature of several ofthe causes ofmarket imperfection, it appears logical that increased fuel prices 

### will reduce at least
to some degree these imperfections. The 

### NAS Study, for example, in 

### discussing the lack ofconsumer informationand

awareness as an impediment to efficient working ofthe marketplace, states: "This sort ofenergy unawareness can be reversed 

### ifprice increases or other stimuli'are strong enough to make energy salient." (NAS Study, 

### at 30). 

### And, U[e]nergy price increases will make us

more aware ofenergy flows

..." (Id., 

### at 32). 

### See also 

### Individual Energy ConservationBehaviors, Opt 

### cit., at 180- 191.**~1oreover,** 

### just as energy price increases canresult in 

### better information and awareness ofthe energy costs ofappliances, so also can such awareness become.concern, such that third party purchasers would have
to considerthe salability orrentability oftheirhousing units 

### ifthey are not energy efficient. 

### The existence ofthis theoretical and empirical evidence' ofa reduction 

### inmarket distortion. however, is notevidence ofthe' elimination of ' market distortion, noris it 

### necessarily evidence for aparticularrate of decline 

### ofmarket distortion. 2s '



### The market penetration algorith is 

### a formula for aparticularrate of decline 

### ofmarketdistortion as a function of increased fuel prices. In light ofa number ofCOII"J.ffients that there was no empirical supportfOfthe particular algorithm, DOE undertook to try 

### to test the algorithmby applying it to products in pastperiods and seeing ifit accurately projected the present. As indicated earlier,however, the way the algorithm works is t9 take a base year's actual and cptimum average life cycle
costs for an appliance from actual data

on equipmentprices, efficiencies, and shipments. Unfortunately DOE does not

authors ofthe study used itto supportfurther work
to improve market forces and reduce market imperfections, not to support mandatory efficiency standards.

28 Some commenters focussed on Table 2-2 in the EcAd to argue that. despite rising fuel prices, four of the six products subject to today's rule showed decline in efficiency between 1978, and 1980 and consequently no decrease in market distortion. As indicated in the EeAD's Table 2-2., however

.. the 1980 values were estimates basedon the engineering analysis. In the Supplement. Table 2-2 has been updated with the most recent data. and estimates have been eliminated. Thus, it shows actual measured increases in efficiency. No product declined in efficiency between the years for which data was available. 

### ha"(e sufficient data for any yearpriorto 1978 

### to enable it 

### to test the algorithm with precision. Thatis, DOEhad to estimate some ofthe data inputs for earlieryears, and it

### is not clear to what
extent these estimations could affect the validity ofthe test. In addition, the scientists who developed the test designed it 

### to measure changes in 

### implicit discountrates, rather than changes in 

### market distortion. 2T 

### In the

course ofmaking initial testruns, however, DOE discovered that under' certain circumstances relatively minor 

### char-'8es in market distortion could resultin 

### drastic changes to the implicit 

### discountrate. The clearimplication of this was 

### that implicit discount**r~tes** 

### were nota good shorthand for market distortion, and thatthe test ofthe algorithm, ifrun in this manner, would be virtually useless because major deviations in the projected implicit discount rates from "actual" rates would
not establish that the algorithm was inaccurate.28 Finally, in 

### the course of the initial test runs and a general review ofthe ORNL 

### Model,29 it 

### was determined that a problem existed,in 

### the 

### aIDa Model's life cycle cost-effici@cy curve, which has the effect oftending to exaggerate the market distortion in future years. That is, separate from the disputed formula thatreduces market distortion as a fun'ctlon ofrising energy prices, the algorithIn has 

### a bias toward a largerthan appropriate market distortion. 30



### In 

### lightofthese developments, 

### the statutory requirementfor a fmal rule by January 1981, 

### and the lawsuit described above to compel**is~uance** 

### ofstandards 

### by January 29,1983, 

### DOE determined that further adjustments ofthe ORNL

27 As indicated above, DOE had used implicit discountrates as a shorthand for measurements of market distortion, even though implicit discount
rates were not used in the algorithmorModel.

18 In Addition to this problem with the use of implicit discount rates as a shorthand for market distortion, the use ofthe term apparently confused people. Despite the claar statementin the EcAD' that the term was notused to refer to the decision criteria ofindividual consumers, but to characterize the behavior ofthe entire market (EcAd. at 144),
persona misunderstood the distinction and consequently made some comments that were non

.. ' responsive. See, e.g.• NRDC. No. 2121

.. at 10-11.

28 In light ofthe many negative comments on the O&.1\fL Model in the rulemaking proCeeding DOE assembled a taskforce ofthree persons who had

neverbeen associated or involved with the appliance ruJemaking but who were at least aware, ofthe ORNL Model. The purpose was to have the**~Iodel** evaluated by technical experts who were disinterested in the rule and the Model. None ofthe
persons was employed under the Assistant Secretary for Conservation and Renewable Energy. and only one was an employee ofDOE.

ao The experts who discovered this problem estimated that perhaps eighteen months ofanalysis might be required to quantify the effects ofthis problem. 

### Model for the purposes ofthis rulemakingwould not be appropriate. Thatis, the time that would be required for the analyses, the doubtful usefulness ofthe conchlsfons that wouldbe reached, and the limited effect ofthe market penetration algorithIn itself SI 

### all counselled against delaying final rules in this proceeding pending conclusion of further analyses ofthe algorithm or the 

### Model.

Accordingly, it

### remains true that there is no specific empirical,or theoretical study to supportthe particularrate of decline ofmarket distortion as a function ofenergy prices reflected in the algorithm. On the otherhand, there, is no such study disproving the algorithm. s2



### Some, including the GAO 

### Report, made the claim that a small increase in the efficiency ofsome appliances since 1972 

### despite large energy price increases is 

### inconsistentwith the algorithm. These claims, however, misconstrue the effect ofthe algorithm. That is, large
energy price increases do not necessarily mean large increases in efficiency ofappliances in 

### the Model. The relative speed ofimprovementin efficiency for a product would depend

on its initial market distortion. Indeed. in the EcAD, it

### was apparentthat the Model projected efficiency improvements occurring at greatly differentrates among appliances. See,


### e.g., Table 3-12, 

### EcAD. Thus, it

### is simply incorrectto expect that a given increase in energy prices results in 

### a similar 

### increase in appliance efficiencies.

Several commenters argued that the algorithm was inaccurate because linearly projecting historical efficiency improvements intothe future provided differentresults from the algorithm. Such an argument, however, assumes that simply projecting past efficiency improvements into the future is a valid methodology. There is, however, no evidence in 

### the record to support such a

3 1 In the product-specific discussion the limited effect of substituting either the rate ofhistorical improvements or a constantmarket distortion is described.

a2 As indicated in the April 1982 proposal, the one study acknowledged by DOE and cited by

commenters involved thermal integrity improvements which involve circumstances

, sufficiently dissimilar from the appliance context to render that study's specific figures inconclusive in the appliance context. See also supra.

NRDC noted a paperby David Meyerthat criticizedthe Energy Productivity Center's estimates offuture electricity demand as being '·heavily dependent on over-optimistic assumptions about the future pace ofinvestment in energy efficiency." The ORNL Model's assumptions, however, are much less optimistic than those criticized and indeed produce whatMeyer termed "8 more realistic portrayal." NRDC, No. 2121. at 20.

### 39384 

### Federal 

### Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 / 

### Rules and Regulations

conclusion. 33 

### Rather, there is ample evidence to the contrary. For example,

as even NRDC notes, over the period 1948-1975 refrigerator efficiencies declined,34 NRDC, No. 2121, at 17, but thereafter they improved significantly. Moreover, as the NAS Study stated succinctly, Hlfthere is one certainty about the 

## u.s. energy system over the past 10 years, it 

### is that the recent past has not been a valid guide to the immediate future." NAS 

### Study, at 32.

In light ofall ofthe above, DOE has determined toretain the market penetration algorithm without changes. This does not reflect an arbitrary conviction by DOE that even absent validation the algorithm must be
accurate. To the contrary, DOE is continuing analyses and research into the algorithm and the ORNL f\.10del generally to validate or improve them whereverpossible. 35 

### Rather, retention ofthe algorithm is based upon DOE's conclusion that, given the current stateof-the-art, the algorithm is the best
measurement available ofthe particular relationship between rising energy prices and increased**applianc~** 

### efficiencies. OthermethodologIes suggested by commenters, such as the
rate ofpast historical improvements or freezing the current market distortion,
not only are not superior to the

..algorithm, but also on the basis ofthe record are clearly worse. 36

33 NRDC states that "[o]ne assumption consistent with the data is that appliance efficiencies will generally continue to increase at the same rate that they have increased historicaly, absent standards." NRDC, No. 2121, at 16. At best, this is a tautologyifone assumes that the future will reproduce the past, then data as to the past is consistent with the assumption. At.the worst, it is simply incorrect. See infra.

34 Over this period, it should be noted, real electricity prices declined. The algorithm would accordingly project lower efficiencies.

3:» Subsequent to the public comment period and
to DOE's anqlysis ofthe ORNL Model and the algorithm described above, as an outgrowth DOE's continuing efforts to improve the ORNL Model as both a research and regulatory tool, a preliminary report ofan attempt to test the algorithm was submitted to DOEby contract personnel. That preliminary report has not been documented, 80 DOE does notbelieve that decisions should be based upon it. Nevertheless, its preliminary, undocumented results indicate that with respect to

.three offive appliances using electricity, the algorithm's projection from a 1972**ba~e** yearofthe 1980market distortion (as measured In dollars difference between the optimal and average life cycle costs) was within $10 oft'1e**"~ct?al"** 1980 market distortion. Although the prelIminary report only used electricity prices, it appears to indicate, however, thatmarket distortion increased for furnaces and waterheaters during the period 1972 to 1980, which would be inconsistent with the algorithm's projections.

36 By using these two othermethodol?gies as sensitivity analyses in the product speCIfic discussion, DOE does not intent to suggest that there is any basis for using such methodologies in place ofthe algorithm. 

### The ORNLModel with the algorithm has been studied by independent organizations separate from the rulemaking and found to be a useful and

a

### ppropriate model for analyzing energy policy choices in general and appliance efficiency standards in particular. For example, in April 1981, a draft report for the Electric PowerResearch Institute by the Energy Laboratory ofthe Massachusetts Institute ofTechnology concluded, "[t]he end use detail ofthe model and its ability to capture the dynamics ofapplicance acquisition make it particularly suitable for**analy~ing** the 

### impacts ofpolicies which affect specific appliances. * * * 

### The ORNLmodel is well-suited for forecasting the impacts ofmandatory standards."

### An Evaluation ofthe ORNL ResidentialEnergy Use Model, MIT (April 1981), at 95,101. A 

### report by the Energy and Resources Group ofthe IJniversity ofCalifornia at Berkeley compared the ORNL Model with the California Energy Commission (CEC) model. That report concluded that the ORNLModel was not appropriate for
energy use forecasts at the level ofa utility company's service area, but that it was appropriate to use the ORNL Model "to estimate the comparative impact ofnew policy initiatives on the national level." 

### AnAssessmentof ResidentialEnergy Consumption Data and Their Use in Forecasting Models, Volume I: Overview, Energy and Resources Group, Berkeley, California (September 1981), at ii-iv, 43-45. 

### Indeed, thatreport concluded that the ORNL Model represented "the state-of-the-art in demand forecasting of

### a mechanistic nature." 

### Id., at 18. And the report also found that the CEC Model should

### not.be used to estimate energy savings resulting from imposition ofappliance standards. 

### Id., at iii-iv. The Energy**~lodeling** 

### Forum in 1979 compared the electric load forecasting often different models. The ORNLModel was singled
outas the only model that separated the effects that would occurnormally in
response to higherprices, which the report stated was necessary for an accurate estimation ofthe effects of standards. 

### ElectricLoadForecasting: Probing the Issues withModels, Vol. I, Energy Modeling Forum (April 1919), at 28-29. These reports all dealt with earlier versions ofthe ORNL Model, and

some ofthe reports naturally contained recommended improvements to the Model, many ofwhich have been made.

.The importance ofthese reports, however, is that notwithstanding the limitations ofthe Model it was determined by independent scientists to be an appropriate, and when compared to other models the most appropriate, • model for assessing the impacts of

. appliance efficiency standards.

It is appropriate to note again that the algorithm was developed before and without**r~gard** 

### to the appliance efficiency program, by scientists attempting in good faith to model in the'
most accurate fashion changes in residential energy use. The very questions emphasized by commenters critical ofthe April 1982 proposal were in fact first raised by DOE as a result of its own research and identified as questions in the April 1982 proposal. The existence ofunresolved questions, however, is not a ground for replacing the algorithm, especially when the only presently known possible replacements have established deficiencies.3'7 

### As indicated earlier, DOE has made changes to the ORNL Model's methodology and inputs where the record supports changes. With respect to changes to the algorithm, however, DOE concludes that such record support does not exist.

As the above discussion suggests; DOE's review ofthe ORNL Model generally, including the algorithm, is 

### a continuing affair, and is not dependent .•
on the existence ofa particular rulemaking. Consequently, DOE is now considering and continues to search for possible improvements to the Model..If, in the course ofsuch on-going studies, it is found tha.t improvements to the ORNL Model or ofany ofthe other models or analyses are ofa magnitude that might affect the determinations made in today's rule, DOE intends to begin a

new proceeding at that time without waiting for the beginning ofthe statutorily required five year review.

2. 

### Significance of Savings. As indicated above, the Act prohibits DOE from adopting an energy efficiency standard for a product'unless the standard would result in a significant conservation ofenergy. In the Apri11982 proposal, DOE noted that the Act did
not define the term "significant." Thus, DOE indicated its view that Congress used such a term with the intent that DOE would, in the exercise ofits informed judgment, determine what

I? Not all ofthe questions, moreover, would have the effect ofdiminishing the effects ofthe algorithm. In the April 1982proposal, for instance, DOE indicated its beliefthat the algorithm might well understate the speed at which efficiency improvements mightbe made. 47 FR 14428. • Moreover, the rulemaking record provided some support for this belief. Nonetheless, DOE has concluded, in agreement with objectors, that it would be inappropriate to alter the algorithm in this respect in the absence ofdata or validation to support such a change.

### Federal Register / Vol. 48, 

### No. 169 

# I Tuesday, August 30, '1983 

# I Rules and Regulations 39385

level ofsavings would be significant and

,under 

### what circumstances

.. Accordingly, in,that proposal DOE proposed three 

### different tests 

### for significance, anyone ofwhich, 

### ifmet

### by

a potential 

### standard, vvould justify a 

### finding by DOE 

### that a significant Con$ervation 

### ofenergy was attributable 

### tothe 

### standard. In the December 1982 final 

### rule, DOE treated at 

### some length the various comments on the three proposed tests and concluded that with certain changes the three tests were appropriate. See 47 FR 57202-57209. 

### As indicated in the preamble 

### to that 

### rule, 

### the three tests 

### tobe utilized are:

(1) 

### If

### the standard 

### \vould result in the saving of 10,000 

### bpd 

### ofoil or the saving of58

153'0

### mefper day ofnatural 

### gas38



### over the period of 

### the average life ofthe product in question beginning with the
year 1987;

,

(2) 

### Ifthe standard would result in the saving ofone percent ofnational ' electricity use over the period ofthe
average 

### life- ofthe product

### in question beginning 

### with the year 1987;

(3) 

### Ifthe savings attributable to a standard 

### for a productwere equal to 16.67 

### percent ofthe energy that

### \t'iould be used by 

### that product in the B:bseuce of"a 

### standard, measured over the one 

### year period fonowing 

### the period ofthe


### average life ofthe product purchased in
1986.



### In the December 1982

### final rule, 

### DOE indicated that it 

### had not yet concluded its consideration on the issue of electricity peak load demand savings

.. A number of

### commenters on the April 1982 

### propo'salhad criticized DOE's electricity savings significance test becaUSE it allegedly ignore.d the 

### effects of standards on peak load savings. Because the December 1982 

### final rule did not deal with air conditioning equipment, the products most cited to DOE b\r 

### commenters as those for which 

### peak**l~ad** 

### analysis 

### vvas most important, and in light 

### ofthe importance ofpeak load savings, DOE deferred a decision

on this issue and stated that itwas continuing to study the issue toward the end ofperhaps adopting an additional

, test ofsignificance in tbJs rule. 

### See 47 

### FR 57207-57208.

A 

### number ofmethodologies can be used to determine peakload savings attributable to a standard 

### in a

### particular utilityservice area. See, 

### e.g., New York City Energy Office, No. 2141, 

### at Appendix C; ACEEE, No. 2173, 

### at 3-4. 39

38 58,530 mcfofnatural gas contain the. same BTUs as 10,000barrels ofoil.

39 DOE is in the process ofdeveloping a computer model that can be integrated with the ORNL Model that simulates disaggregated hourly residential electricity demand for electric utility service areas. 

### Each ofthese methodologies requires data specific to the 

### utility service area

as to peak and average loads (which is generally available) and as to the contribution ofthe particularproduct in

, queslion to those peak and average

loads (which is generally not available, although it 

### is available 

### for some utilities). The primary difficulty, however, is in making determinations on


### a national basis. 'First, it is simply not possible, for data .and 

### resource reasons, to determine the 

### effect ofa 

### standard for

a product on the peak load for each of the 

### utilities in the United 

### States and then simply add them. Second, it would be inaccurate in 

### this instance simply 

### to generalize to all utilities the impacts ofa standard on the peak loads ofa small number ofparticularutiIities.40 

### Third, it 

### is methodologically inaccurate to derive national peak load savings 

### bybacking
out 

### ofaggregated national data regarding peak loads the demand reduction attributable to a standard for

a product.41 

### The present inability to determine even order-of-magnitude national peak load savings attributable
to a standard for any product, especially air conditioning equipment, makes impossible a 

### specific test of

### the significance ofenergy savings based on peak load 

### savings.



### d. Economic]ustljication

As indicated above, Section 325(b) 

### of the 

### Act

### prohibits a 

### standard for a 

### product 

### ifDOE 

### by rule determines that the standard is not economically justified. Thus, even ifa standard would

40 As indicated in.the December1982 final rule, the nature ofa utility's peak load is highly regional. ifnot local. The New York City Energy Office. for**example~** stated that its demand curve was unusual. No. 2141, at 6.**~Ioreover,** whereas 19 percent ofthe peak demand "'-Nas attributable to room air conditioners, less than 2percent was attributable to central ,air conditioners. Id., at Appendix C.

41 This was essentially the methodology used by ACEEE to estimate national impacts. Theprimary problem with this methodology is that it assumes that all reduction in demand is a reduction ofpeak demand. There simply is no such coincidence. For example, the overall savings in demand attributable
to a standard would not reduce the utility's peak demand by that amount because not all units ofthe product would be used at the peak load period. In New York City, for example, the percentage of conincident usage ofair conditioning equipment at

summerpeak is only 47 percent. New York Gity Energy Office, No. 2141, atAppendix C. Other electrical products are generally considered even less coincident with the peak load. See ACEEE, No. 2173, at 4. Even more important with respect to air conditioning equipment is the fact that any demand reduction would have 110impact on the peak demand ofthe large number ofutillties that are winterpeaking. Moreover, many utilities which are

summerpeaking have summerpeaks only slightly in

excess oftheir winter peaks, with the result that air conditioner demand reduction might turn them into winterpeaking utilities rather than reducing their overall peak by the amount ofthe summer peak reduction. 

### result in a "significant" conservation of
energy, the standard 

### would be prohibited 

### ifit were 

### not economically justified. Section 325(

## dJofthe Act addresses how DOEis to determine economicjustification. 42 

### It states that a standard is,economicallyjustified only if the benefits of

### the standard outweigh its burdens. 

### L'i. weighing 

### the benefits and burdens, DOE

### is required to consider 

### six specified factors, as 

### well as any other factors DOE considers 

### relevant. In the April 1982 

### proposal, DOE indicated that, in 

### light of

### the Regulatory Flexihility 

### Act, it 

### would consider as an additional, 

### relevant factor 

### the impact ofa standard

on small businesses. 

### See 47 

### FR 14434-5. DOE 

### asked for 

### comments on 

### what other, additional factors 

### DOE should consider. DOE did not 

### receive any suggestions for additional factors. Each factor is separately discussed below.

Certain of

### these factors can be 

### quantified, albeit through projections and computer models; others are not quantifiable. Congress recogniz.ed this and indicated that greater weight should

.. not be given to a factor 

### because it was quantifiable. See H.R. Rep. No. 95-1751, 95th 

### Cong., 

### zd. Sess. 116 (1978)

..



### 1. Economic

### Impact onA1anufacturers 

### and Consumers (Section 325{d){l)). A. 

### Manufacturers. In the 

### April 1982 

### proposal, in order to quantify a number of

### impacts on manufacturersLDOE

### used

a computer model, the Financial Impacts Model (FIM), 

### to simulate the effects of 

### standards on different-sized firms in the appliance industry. The Fli\1 is fully explained in the 

### EcAD. 

### See especially Appendix A. In general, the FIM compared the projected financial records ofprototypical firms over a twelve year period-1980 

### through 1991- 

### under a base case and two standards

cases (levels 2 

### and 3). 

### The FIM then provides four outputs: the increased risk
to a firm ofnot making a profit in the maufacture and sale of

### a given product subject to a given standard**co~pared** 

### to the base case, and the relative profitability, debt/equity and "quick" ratios 43 

### offirms in the base case and with standards. See

### EcAD, 

### at § 4.5. 

### These impacts, as**~elevant,** are

42 The NRDC suggested that because Section 325(d) by its terms only refers to Section 325(c), not Section 325(b), DOE should not determine economic justification underSection 325{d). As indicated in the December 1982 final nlla, DOE believes the test ofeconomicjustification in Section 325(d) is appropriate for the determinations required by Section 325(b). See 47 FR 57209 n.20.

43 The quick ratio is a measure ofa firlil's ability
to withstand short-term downturns in business activity. Also called the acid test ratio

.. it is defined

as current assets. less inventorv. divided bv current liabilities

### Federal Register 

## I Vol. 48, 

### No. 169 

## I Tuesday, August 30, 1983 

## I Rules and Regulations 39386

described in the product-specific discussion.

DOE also conducted for the April 1982 proposal a sensitivity analysis ofthe risk analysis in the FIM to determine how changing certain variables would affectthe output. As indicated in the Apri11982 proposal, changing the level ofproducts shipped had a substantial impact on the model's outputof increased risk. Where appropriate, these impacts are shown in the productspecific discussion.

Manufacturers and their trade associations were generally ofthe view that the FIM understated the negative impacts ofstandards on firms. Ivlost of these comments, however, did not make suggestions as to how to improve the FIM. Perhaps most importantly, the
commenters supported DOE's tentative conclusion in the p

...pril 1982 proposal that the FIM understated the negative impacts on small businesses, see 47 

### FR 14435. This is discussed in more detail, 

### infra.

,

A few commenters suggested that the FIM's methodology resulted in an overstatement ofthe negative jm.pacts of standards on firms. These commenters noted that the FIM analysis assum.ed that the entire investment necessary to raise 1978 efficiencies to standards levels was attributable to the standards, whereas the 

### ORNL Model projected that absent standards efficiencies would increase substantially from 1978 to 1987, suggesting that at least some investments to raise efficiencies were not attributable to standards. 

### See, e.g., GAO Report, at 14; 

### ACEEE, 5-19/4, at 10.

This Ihnltation 

### ofthe 

### FIM, however, had been 

### fully recognized by DOE in the 

### April 1982 proposal. 

### See 47 

### FR 14431 n.18. Consequently, in order to determine only the impacts on firms attributable to standards, 

### DOE reduced the Fltvl's projected impacts 

### by a percentage equal to the**ORr'~L** model's projected increase in the efficiency of

### a product between 1978 and 1987. 

### See 47 FR 14437 n.31, 14439 n.38, 14443 n.49, 14446 n.59, 14451 0.71, 14454 n.76. t-Jo
commenter criticized this methodology for adjusting the impacts projected by the FIM.

For the rule today, DOE updated the imputs to the FIM. See Supplement. In addition,.DOE altered slightly the methodology for adjusting the impacts of the FIM. That is, as indicated in the April 1982 proposal, to reduce the FIM impacts by a percentage equal to the percentage increase in efficiency ofa product between 1978 and 1987
presumes that investment occurs at the

same rate as increases in efficiency. In fact, however, .initial increases in

. efficiency cost less than later increases in efficiency. That is, the most costeffective investments in increased efficiency are made first. Therefore, DOE has altered its methodology to account for this situation. The EnAD provides a basis for constructing costefficiency curves that correlate increases in efficiency to levels of**investment~** DOE has, accordingly, determined the percentage ofinvestment that would be made between 1978 and 1987 in 

### the base case and decreased the impacts ofthe 

### FIM by that percentage. Because the limitation ofthe FIM relates
to its failure to incorporate investments in more efficient products made in the base case between 1978 and 1987, to**redu~e** the impacts ofthe FIM by the percentage ofinvestments projected for that period will bettertake account 

### of that limitation.

A few 'commenters suggested that the negative impacts projected by the FIM

were insignificant. A number of manufacturers, however, not only felt that the negative impacts were understated but that they were significant, especially for small businesses. The specific impacts projected by the FIM for each product

are indicated in the product-specific discussion, including DOE's conclusion whether the impact is.meaningful. As a general matter, however, there can be little doubt that a negative impact on manufacturers attributable to a standard is, no matter how small, a burden to be weighed in assessing the economic justification ofa possible standard. The snlaller the negative impact, ofcourse, the smaller is the 

### weight to be attributed
to it.

Finally, with respect to the 

### FIM, some comrnenters questioned how it was that DOE projected very small energy savings attributable to standards but substantial negative impacts on nlanufacturers. These commenters suggested such conclusions were contradictory. See, e.g., Minnesota Department ofEnergy, No. 2133, at 3. There is no such contradiction, because

a small energy savings attributable to standards does not necessarily mean that the investment and other manufacturing resources to obtain that savings are small. Moreover, the FL\1's prototypical firms were based on the financial and operating characteristics offirms making the particular appliance, and some sectors ofthe industry may be highly susceptible to negative impacts because oftheir particular market peculiarities. No data or analysis was provided by these c.ommenters to suggest a different way ofmeasuring the impacts. In the April 1982 proposal, DOE noted that in addition to the quantified impacts on**manufactu~ers** measured by the FIM there**w~re** certain unquantified impacts. DOE specifically mentioned that to the extent that expenditures by manufacturers on energy efficiency improvements to appliances are dictated by standards rather than economics,

more appropriate investments may be forgone. DOE indicated that**th~** foregone investments could include investments in increased productivity, increased energy efficiency 

### in the manufacturing sector, or new utility or performance features. See47 

### FR 14431- 32. Manufacturers generally supported this conclusion. Cornmenters who objected to the conclusion generally did
not offer arguments to the contrary, but rather suggested that**DOE~had** no data
to support such a conclusion.

,DOE does not believe that data is
necessary to support a conclusion that is

" othervvise supported by generally

accepted economic theory. Moreover, Congress has indicated that merely because a factor cannot be quantified should not affect its consideration in the weighing ofburdens and benefits ofa possible standard. However, as was also indicated in the April 1982,

. proposal, 

### see 47 FR 14432, 14435, this particular type ofburden is essentially inherent in any appliance efficiency standard and might be characterized 

### as

a generic burden of

### a government standard. 

### As such, in the absence of evidence ofa particularized negative impact, this burden alone clearly cannot be enough to outweigh all the potential benefits ofa standard, because it would make the remaining economic justification factors superfluous. Thus, while DOE does consider this unquantified burden in weighing the burdens and benefits ofstandards, DOE 

### does not assign it 

### great weight in the



### absence 

### ofevidence ofparticularized
negative impact with respect 

### to a given product.

In addition to this unquantified burden on manufacturers, several
commenters suggested others. 

### Of primary concern was the effect of standards on U.S. exports 

### ofappliances. Manufacturers and trade groups generally expressed the view that the
current U.S. 20 percent share ofthe world appliance market would be reduced because, as a result of standards, the U.S. products would be

more expensive. DOE has considered this comment but does not believe there is sufficient evidence to conclude that, overall, standards would have a negative effect on

# u.s. exports of appliances. First, the Act expressly 

# •

•

•

### Federal Vol. 48, 

### No. 169 

### Rules and 39387

exempts exports from any efficiency 

### standard. Section 330. Second, 

### while it might raise export unit costs 

### tq create

new. separate domestic and exports lines, there is insufficient evidence why

new separate lines would have to,be 

### created. That 

### is, production 

### lines currently producing 

### any noncomplying models could become the exnort lines. 

### Third. it 

### has not been established that

more expensive but more efficient 

### U.S. appliances**woul~** not compete as well abroad as less**expensi~e** and less efficient U.S. appliances.

Commenters v.;ho opposed the April 1982 proposal raised some nonquantifiable impacts on manufacturers that they suggested either mitigated the burden 

### ofstandards 

### on manufacturers

or might make a standard more beneficial for 

### manufacturers than a nostandard determination. One ofthese impacts was the mandatory elimination ofvarious product lines (because they would not meet the standard's requirement) which#supposedly would reduce costs to manufacture,fs. See, e.g

.. Carrier**Corp~,** 5-18/7, at 7.

While 

### it 

### might be true for large manufacturers that compete across the entire product spectrum that there would be 

### costsavings 

### in reducing the, number ofproduct lines, especially 

### if they already had sufficient product lines meeting standards levels, DOE notes 

### that whether elimination ofproduct linea is 

## abenefit or a burden to a manufacturer would depend largely on its specific product line mix 

### and position' in that product 

### market. Consequently. DOE does not believe it would be appropriate to consider these alleged
cost savings as a general, if unquantifiable, benefit to manufacturers attributable to standards.



### Another comment suggesting an unquantified benefit for manufacturers resulting from standards was that 

### if standards were imposed, U.S. manufacturers would be less vulnerable'
to competition from imported 

### appliances, especially from Japan. 

### See,

€.g., Carrier Corp., 5-18/7, at 7. DOE 

### believes there is no basis for concluding 

### that standards \AJQuld insulate**doml:~stic** manufacturers frorr! foreign competition. Indeed, a substantial case'could be made that efficiency standards for appliances 

### vvould benefit foreign competitors at the expense ofdomestic manufacturers. These 

### commenters first rnaintain that the marketplace will not result in more efficientproducts being 

### built, because 

### "-getting people too 

### buy higher efficiency equipment is [a problem]." 

### Id., at 6. These commenters, however, do not explain 

### l/Vhy more efficient foreign equipment would then be successful in the U.S. market, where U.S. equipment supposedly is not. Efficient foreign equipment will only find a market in the U.S. 

### ifthere is a 

### demand for more efficient equipment. 

### If that demand is artificially created 

### by government regulation before the marketplace 

### V'lould create the demand, foreign competitors 

### 'wo\lld gain an advantage, because they have already developed the more efficient lines. No ne1ftJ investments, for them would be
necessary; no**~ange-over** costs would 

### -be incurred. Consequently, 

### DOE concludes that the negative impacts on manufacturers from foreign competition

are not lessened by**stand~rds,** but, 

### if anything, 

### are increased.



### B. Consumers. One measure of

### the economic impact on consumers attributable to standards is through a life cycle cost analysis. Under Section 325 

### ofthe Act, however, 

### the life cycle
cost impact ofstandards is 

### a separate factor to be considered. See Section 325(d){2). 'Accordingly, the life cycle cost impacts are discussed 

### infra.

Nevertheless, 

### increased

### first costs can also impact consumers. 

### That is, as suggested in the 

### April19S2 proposal, as

a result ofincreased first costs, 

### certain

consumers may retain products longer than 

### they otherwise would, even beyond their normal life. Other consumers might purchase second-hand, rather than new 

### appliances, again generally resulting 

### in

an 

### aging ofthe 

### existing stock 

### of appliances beyond that 

### which '\tvould exist absent standards. '

Some manufacturers and trade associations submitted data indicating reduced sales ofcertain appliances in ,States after the imposition ofState standards. This 

### data, 

### they said, supported the conclusion that imposition 

### ofstandards, with resulting first-cost-- increases, would 

### result in reduced sales. 

### California, in'particular, however. submitted data in 

### response to comments, suggesting that the indicated decrease in sales was unrelated 

### to the imposition ofstandards. DOE has reviewed all these 

### COIr.t111ents and concludes that there is no substantial evidence that the imposition ofState standards has resulted in any significant reduction in sales ofproducts subject to the standards. Similarlv. DOE 

### does not believe there is

### substa~tial evidence that imposition of

### any ofthe potential 

### national standards analyzed 

### would result in any significant reduc,tion in sales ofproducts subject to such standards.44 That is, while increased

44 DOE updated an analysis contained in Appendix

### Jofthe Ec..o\D. See EcAD

, at 595. This analysis proj"ects the number ofappliance purchases forgone as a result ofstandards by various income first costs attributable to standards might still result in certain 'consumers
not purchasing products, whereas without standards they might h'ave. the number 50**a~fected** is not large enough
to impact significantly overall sales figures.



### In the P",pril1982 proposal, 

### DOE indicated 

### thatthe group most likely to be affected the greatest 

### by increased first costs vV'ould be lower income
persons. Commenters 

### on the 

### proposal did not generally argu'e 

### with this conclusion. 45

The EcAD, at 595, indicated for certain products the projected number of purchases forgone as 

### a result of increased first costs attributable to 

### standards set at the June 1980 proposed level. 1;0 the Supplement, DOE has improved and updated the analysis of 

### appliance purchases 

### forgone as a result ofincreased first costs attdbutable to standards. Both analyses confirm the disparate first-cost impact on lower income persons. As a result, some lower income persons may in effect be forced
to retain products 

### past their normal life

or purchase older, used appliances. These oIde,r.products are generally less efficient than newer models to begin 

### with, and for some 

### appliances initial**eff~ciencies** are likely to deteriorate over 

### time, especially 

### ifthey are retained beyond their normal1ife or are not properly maintained. 46 Thus, some lower income persons might, because of standards. 

### be forced to 

### live with less efficient products 

### and thus use more energy. Or the person migpt simply be forced to 

### do \vithout that type of product. However, 

### ifno standards 'were imposed, 

### it 

### \tvould be possible for a ' 

### lower income person 

### to purchase 

### a new product VIith a higher efficiency 

### than the model it was replacing, albeit at an efficiency less than might be available under standards.47

groups. While this analysis and its update indicate that lower income persons are most negatively impacted by increased first costs, they'also indicate that the absolute number ofappliance purchases forgone are not significant as a percent oftotal sales. See Supplement.

4i) As indicated infra, however, a number of
commenters disagreed with DOE's ultimate conclusion that lower inCOlne persons would be harmed by the imposition ofstandards.

46 Comments were received with respect to decreased efficiencies over time for room air conditioners, and refrigerators.

47 Both analyses indicate that the total number of lower income persona affected in this way is too small to impact national energy use. Thus. the bu.rden ofthis impact ofa standard is not its effect

on national energy use, but the imposition ofa burden on the lower income persons effectively precluded from purchasing a deBirBd appliance. See infra.

### Federal Register 

## I Vol. 48, 

### No. 169 

## I Tuesday, August 30, 1983 

## I Rules and Regulations 39388



### =

In the April 1982 proposal, DOE indicated that'it believed that effectively precluding some persons, especially lower income persons, 

### frf;Jm purchasing

a new appliance would be a significant. burden to 

### be attributed to standards,

even ifthe number ofpersons affected

was small. The burden is significant because some persons are effectively precluded from obtaining the appliance
at all and others are forced to retain or obtain an older appliance that may result in their having increased energy

use and costs.**~1oreover,** some

consumers may not

### be' able to purchase the appliances they desire, either because ofthe government standard or because 

### ofthe increased cost ofthe appliance attributable to standards. Thus, this burden has both an economic and an unquantifiable social cost involving the effective loss ofsome ecbnOlnic freedom. 48

Several consumer-oriented interest
groups argued,llowever, that many lower income persons are renters, whose landlords \vould purchase the 

### least expensive and least efficient products. 

### See, 

### e.g.,**Consum~rs** Union, No. 2085, at 8. Such lowerincome
persons, it was suggested, would benefit from standards because standards would force landlords, over time, to upgrade the efficiency oftheir appliances to the benefit ofthe-lower income renters that would pay the fuel bills. However, little data \'\las submitted

on the issue. Although, it would appear that landlords whose rental units remain affordable to lower income persons are not likely to be in a position to invest in the improved energy efficiency oftheir units, no evidence has been presented to specifically support this position. t·!1oreovef, iflandlords oflower income
persons Vlere required to buy more expensive, albeit, more efficient appliances, as a result ofstandards, the landlords '\-vould probably recover the increased first cost through higher rents

or through a reduction in services. Thus, it is not clear that standards requiring higher efficiency products would generally benefitlo\ver income renters.

Moreover, it would be difficult to quantify an economic benefit of standards for lower income persons. For example, while a large percentage of

.8A number ofcommenters on the April 1982 proposal noted that Appendix

### Jofthe EcAD was primarily concerned with measuring the impacts of standards on income inequality in the United States. The conclusion ofthat analysis in Appendix

### Jwas that**effic~ency** standards would have no significant impact on income inequality. DOE did not mean to suggest otherwise, and no commenter disputed that conclusion. so DOE has not updated that analysis. ' The income inequality analysis. however. based on life cycle costs is different from the analysis ofthe impacts ofincreased first costs. lower income persons ar'e renters, rather than owners oftheir dwellings, 49the largest energy using products (furnaces,
water heaters, and central air conditioners) in multi-family, rental buildings are often, ifnot usually, not



### consumerappliances under the Act and therefore vvould not be subject to possible standards. 50Room air conditioners, moreover, often are not and freezers are almost never provided



### as equipment in lower cost rental units, but must be bought by the lower iI?-come
renter. Thus, the potential"benefits to lower income renters would primarily be with respect to refrigerators and refrigerator-freezers. Even here, however, 

### ifa landlord provides the cheapest equipment, it would likely be a manual defrost refrigerator, which even

now uses less,energy than almost all other refrigerator-freezers lf/ould under' the most stringent standard. Finally,

. some lower income renters will have their utility costs included in the rent, so that the landlord, rather than th.e renter, would be faced with the fuel costs. 51 In addition, some landlords might pass through any increase in first cost for equipment in the rent, or might diminish services in order to recover the cost of the equipment. Thus, DOE believes that lovver income renters \AJould as a group generally neither benefit from an energy efficiency standard. nor be harmed by a standard. ffowever, individual renters couldface reduced housing choices if landlords are required to install more expensive equipment as a result of appliance efficiency standards.

In weighing the impact ofa standard

on lo"'vver income purchasers of appliances against the impact ofa standard on 

### IO'vver income renters, DOE is a\rvare that in a sense it is weighing unlike 

### impacts. Thus, it would be

,T"::""

..............,._•• "..,

..... - to weigh the number of 'persons benefited against the persons burdened or the dollars ofeconorrlic burden against the dollars ofeconomic benefit. In the product-specific discussion, the vveighing in terms ofthe particular product is addressed.

49Almost sixty percent oflower income households rent. rather than OVV'll. their homes. See Housing Characteristics, 1980, DOE/EIA-0314 (1982], at Table 5.

st>Over 5 million households live in buildings With five or more units with a central heating system. Over 11 million households live in buildings with
two or more units with a central hot water system. Over 1 million households live in buildings with five

or more units with a central air conditioning system. See Housing Characteristics, 1980, DOE/EIA-0314 (1982). at Table 19.

51 Only 55 percent ofrenters pay all their utilities themselves. Over 15 percent ofrenters have all their utilities paid by their landlord; that is, their utilities

are included in the rental cost. Housing

. Characteristics. 1980, DOE/EIA-0314 (1982), at Table 3. 2. 

### Life Cycle Cost. Section

# 32~(d](2) of • the Act requires DOE, in weighing the benefits and burd.ens ofpossible appliance standards, to consider**'~the** savings 

### in operating costs" over the life ofproduct compared to any increase in the price and maintenance**expense~** ofa product resulting from the imposition of·'

a standard. In other words, DOE 

### is to consider the effect on life cycle costs to

a consumer that would result from standards.**Th~** Net Present Value (NPV) analysis is a measurement ofthe difference between a standards case and the base

case for all the units ofa product purchased over a given period 52 

### in

terms 

### ofa dicounted present value of the life cycle costs ofthose units. 

### See EcAD, at 14. This measurementis 'made-' by the ORNL Model.

A positive NPV for a product**~t** a . given.standard level indicates**that~** if

. that standard 

### were adopted, consumers ofthat product 

### as a '\tvhole would save that much more money in fuel costs over the lifetime ofthe product, discounted to 1980, than they would payin increase-d ' first costs for more efficient products, discounted to 1980 compared to the situation vvhere no standard is • adopted. 53 A positive t.JPV does not signify that the economy as whole benefits (as opposed to consumers of that product). The NPV analysis oQ.ly
compares consumer fuel cost savings against increases in product prices to

consumers. For example, the government costs in maintaining and enforcing a particularproduct standard

are not subtracted from the net present value. The NP"\r analvsis is similar to the Life Cycle Cost 

## (Lee) analysis, 

### see infra, and the greatest

## r.Jpv generally should occur at the standard level set at the 

### Lce mInimum for the product. 54The

S2In the April 1982 proposal all NPV calculations

were made for purchases over the period 1987-2005. While the time period for measuring energy savings has generally been changed from the period 1987- 2005 in the April 1982 proposal, to the period ofthe

average life ofthe product in question. see 47 FR 57203, DOE has not changed the time period for the NPV calculations. This is due to DOE'S determination that there would be no substantial change in the results ofthe NPV analysis as a consequence ofchanging the time period. and the coding changes would have been both expensive and time consuming.

53All NPV's in the analysis overstate the benefit of standards to some degree because the base case analysis did not subtract manufacturer compliance
costs. e.g.• certification and testing. from the base •
case product prices. This overstatement. however, is minor.

54Because the NPV analysis is done using the ORl'PLtModel and the LCC analysis is done through its own model. this direct correlation may not exist between the two models' data.

,__ u 

### Federal 

### Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 

## I Rules and Regulations

. 5 _

,**_~...** _.awu&iJ

..**~~.** 

## == ,_ ca::;:z;aa.;**~.i&iP** ... 

### 39389

ts

1. 

### Technicallssues. The industry Dlembets who commented on the engineering analysis for refrigerators and refrigerator-freezers were'generally in agreement that the specific design options considered by 

### DOE for first cost increase to achieve that affect the life cycle cost minimum for a efficiency may be greater than the product. discounted value ofthe energy saved. As part ofthis final rule DOE Thus, it is possible for a mandatory conducted a regional sensitivity analysis efficiency standard to eliminate from the to determine with respect to**~ach** State market the most cost-effective product (and in some cases, portions ofStates) for 

### a particular consumer and what the life cycle cost minimum was consequently penalize that consumer. for certain classes ofproducts. In this lvloreover, an energy efficiency standard 

### way the effect ofcombinations ofusage

. could also result in the elimination from and fuel price differenc,es from the the marketplace ofthe most cost- national average could be tested in effective product for the average terms ofactual.impacts ofpossible

consumer. standards. That is', rather than reflecting

In the April 1982 propos,al DOE whether a standard**~"ould** or would not indicated its view that, if

### a standard ban the most cost-effective model for would have the effect ofeliminating some theoretical consumer with from the market an existing appliance particular usage and fuel price thatwould have a lower life cycle cost characteristics, this analysis shows in
to the average consunler than the what States, ifany; the most coststandard level, 

### DOE would consider'that effective model would 'be banned by a

a substantial burden in assessing the' particular standard. The results ofthe benefits and burdens 

### ofa standard to analysis, as appropriate, are discussed' determine its economic justification. 

### See in the product-specific discussion.
47 

### FR 14432. 

### No commenter took**i~sue** 

### In the Apri11982 proposal, 

### DOE with this view. 56 compared the life cycle cost ofthe



### Ifa particular standard analyzed average product in 1978 to the 

### life cycle livould have the effect ofbarring the cost 

### of a product meeting 

### the various
most cost-effective model ofa product possible standards levels. In most cases from the marketplace, this is raised in the 

### life cycle cost 

### ofa product meeting the product-specific discussion. the standard level was less than the life



### In both the Apri11982 proposal and cycle cost ofthe average 1978 product. the comments thereon, it was noted that This comparison, however, it was noted,

, was not particularly meaningful. 

### See 47 the Lce analysis was based on the FR 14432. While this analysis has been 

### average consumer in

### term~ ofboth updateq., 

### see Supplement, 

### DOE has also
energy prices and usage. 

### It was also compared the life cycle cost ofthe noted that consumers with below projected ayerage product in 1987 (the
average energy prices or usage might be year standards would 

### apply to 'the life penalized even if,a standard did not cycle cost ofproducts at the various penalize the average consumer. In the standard levels. This analysis 

### mO,re April 1982 proposal, 

### DOE conducted a appropriately reflects the dollar' sensitivity analysis to assess to what difference in the average product's life
extent this might be true. With the cycle cost in a no-standard environment exception ofcertain classesofcentral and a standard environm,ent. The results and room air conditioners, however, the ofthis analysis are reflected in the sensitivity analysis discerned no product specific discussion. difference in the life cycle cost minirna Some manufacturers complained that for the products analyzed at the DOE did not include increased differentusage and fuel prices analyzed. nlaintenance costs as part ofthe life The April 1982 proposal acknowledged cycle cost analysis eX,cept with respect that the s.ensitivity analyses vvere to the product furnaces. 

### DOE has limited,

### espec~ally in variations on fuel considered theae comments, but there is prices 57 and the fact that there was no insufficient evidence ofincreased analysis ofcombinations of 10v'/ prices maintenance,costs occurring as a and low usage. Many commenters function ofhicreased efficiency of stressed that these limitations appliances to justify any change in the undermined the conclusion ofthe 

## Lee analysis. sensitivity analysis that in most cases variaHons from the average did not III. Product Specific 

### Discussion 

### a.Refrigerators andRefrigeratorFreezers 56 In the December 1982 final rule, DOE found that the only standard levels that would save any energy would penalize the average consumer by prohibiting the most cost effective models ofthe products in question. See 47 FR 57211-57213.**~'T** The April 1982 proposal's sensitivity analysis only varied fuel prices by less than 5 percent from the average price. whereas differences in electricity prices in the U.S. can vary 80 percent from the national**ave~age.** See 47 FR 14433. ".Obviously, where different models have different features, the consumer may make purchasing decisions based on thevalue which the

consumer places on a**particula~** feature.**~ower** energy use which would result In**l~wer** hfe cycle
costs is only one feature ofan apphance, and would be subject to the same type, ofconsumer decisionmaking 86 would other fea**tur~5.** 

### NPV for each product at the different standard levels 

### is identified in the product-specific analysis.

The only comments directly concemino the 

### NPV analysis were those ofthe 

### NRDC and the California Energy Commission (eEe), criticizing the DOE's

use ofthe 10 percent discount rate indicated in OMB Circular A-94 for discounting future energy cO,st savings 

### to 1980. Essentially, these commenters complained that Circular A-94 did not apply to regula**to~y** programs but**o~Jy** to Government investments, and that a iower discount rate was more appropriate. Nothing in Circular A-94 

### limits its applicatiC?n to consideration 

### of Government investments or excludes regulatory programs. Even if.there were. ifa 10 percent discount rate IS an appropriate basis for measuring the present value to the Government of future savings the commeJ}ters have not sufficiently established why the present value to consumers from the same future savings**shou~d** be different. :tY!oreover, 

### DOE believes a 3-6 percent dIscount rate, suggested by the commenters, is inappropriately low. 

### See GEC, No. 2097, Comments 'ofthe Staffof the Conservation Division ofthe GEG, at l' (assuming 40 percent marginal tax rate 

### for consumer).

Separate from the NPV analysis, DOE also conducted an LGe analysis of individual products and classes of ' products to assess the life cyc.le cost minima for the various classes and products. 

### See EcAD, at .i\ppendix G. The 

## Lee analysis, therefore, is useful in identifying those energy efficiency levels
at which the average consumer's economic benefits are maximized and his burdens minimized.

. In the absence ofmandatory government standards, a consumer purchasing an applicance has**t~e** freedom ofchoosing among varIOUS models ofa product and, with sufficient informaHon, can choose the model 

### ltvhich offers the features which the

consumer requires, including the lowest life cvcle cost. This would enable the consGmer to purchase the most costeffective product.55 Depending upon the level at \vhich a mandatory efficiency

5tandard is set, a consunler ITlay be deprived ofthe freedom to purcha.se .the
most cost-effective product. That IS, If the minimum energy efficiency standard is sufficiently demanding, the resulting

### / Vol. 48, 

### No. 169



# • •• Rules and

..."

..... ,r.;,""lJ.U.LJ.V.U.D

59 DOE ran two sensitivity analyses ofthe ORNL Model projections ofenergy savings. One substituted a constant distortion rate for the algorithm; the other substituted the historical rate of increased efficiency for that derived by the ORNL Model. At level 3 the results were 2.03 Quads and 0.27 Quads, respectively. Neither amounts would satisfy the first two tests ofsignificance. , As discussed 

### supra, DOE did not update the standard levels for refrigerators because ofserious tin1e' cons'"traints. DOE could not assess· all ne'''' models now available in the marketplace, alter the "cost books" for these products, and rerun all its compliter rnodels in a reasonable time franle

s especially in light ofthe court- -approved deadlines set by a settlement agreement with Consumers Union and NRDC. Moreover, because ofthe changing nature ofrefrigerators, which have sho"Vvn substantial energy improvements over the last several
years, any additional delay t9 increase standard levels would not guarantee inclusion ofthe most efficient model as

a startdard level by the date ofissuance ofthe final rule. However, within the, time available DOE did analyse two additional**des~gn** options for refrigerators and**refr~gerator-freezers** which are recently available in the market. They are high-efficiency
compressors and separate evapqrator coils for the freezer and the fresh food compartment. As a result ofthe analysis ofthese additional design options, DOE established one additional costefficiency data point for each ofthe

seven classes .ofrefrigerators and refrigerator-freezers. In each case, the ne\¥ efficiency data poin.t was higher than the highest one previously considered. Moreover, vv-hile DOE did
not consider the Toshiba refrigerator model in its engineering analysis, the analysis ofthe partial automatic defrost class included an a.dditional design option ofa high efficiency compressor ""hich raised the highest efficiency level analyzed to an energy factor of 12.3. The Toshiba unit has a lower energy factor which \41aS not considered in the analysis. All ofthe 

### nevv data points

were included in the ORNL Model, improving the cost**effic~ency** curves and the ORNL 1\o1odel's life cycle cost curve

at the higher efficiency levels.

2. 

### Significance of Energy Savings. The table below reflects the energy savings projected by the ORNL model attributable to a standard for refrigerators and refrigerator-freezers at each ofthe three standard levels analyzed over the period 1983-2005.
Levell-D.25 Quads Level 2-0.85 Quads Level 3-1.65 Quads 59

S8 The depth ofunits is increased 0.5 inches in

some design options for some classes and the width increased 1 inch in some design options ofsome classes. The interior volume is decreased 0.4 cubic feet in some design options ofsome classes. VJould be too wide or too high to fit into the space occupied by the existing refrigerator.

The EnAD identifies several design options that either increase the exterior dimensions ofsome classes of refrigerators and refrigerator-freezers or decrease the interior" voiume. S8 Such increases in exterior dimensions or decreases in interior volume, DOE
agrees, "V'Jould reduce utility. In the Supplement, 

### see infra, DOE has

. analyzed the effects ofhigh-efficiency

compressors and separate evaporator. coils for refrigerator-freezers. While the analysis did not specifically address use ofsuch oDtions

## to achieve levels of efficiency without any

### in~rease in interior dimensions or decrease in interior volume ofrefrigerator-freezers, DOE believes the efficiency levels analyzed as possible standards levels could, viith these advanced design options, be reeched without changes in exterior or interior dimensions, because the advanced design options ¥lould increase the efficiency ofstandard size units sufficienty to meet the standard levels.

Both the CEC and the**~JRDC** commented that the highest efficiency level "vhich DOE evaluated in its engineering analysis is below that which is technically feasible utilizing available technology. In addition 

### I'JRDC and the City ofNew York alleged that a Japanese manufacturer, Toshiba, currently markets in Japan a high efficiency refrigerator, model GR-411, which consumes much less energy than the highest efficiency unit ofcomparable size manufactured in the United States.**P~nnual** energy consumption for the Toshiba GR-411 unit was said to be 550 k

### vVI-I per year and its energy factor, 11.5. In response to these comments to the P!.ssociation ofHome i\ppliance**~~/Ianufactllrers** and Whirlpool Corporation asserted that NRDC and the City ofNew York were in errorin describing the Toshiba unit as a "frost free" design. According to Whirlpool Corporation, the unit is a "cycle defrost" mode with an manual defrost freezer compartment. VVhirlpool remarked that the comparison made by the City of New York betV'Jeen the energy consumption ofthe Toshiba unit and that ofthe highest efficiency domestic unit ofcomparable size should reflect

some difference in energy consumption since the domestic unit is a "no-frost" model. 

### Federal

improving the efficiency ofthis product

are appropriate. However, the General, Electric Company (GE) questioned the cost-effectiveness oftwo ofthese design options. GE stated that the double door gasket design 

### option is cost-effective only on automatic defrost models. For manual defrost and for partial automatic defrost models, GE contended that there. is little improvement in efficiency

, associated with,a second door seaL The second design option GE questioned

was reducing the heat load ofthroughthe-door service features. GE contested using foam insulation to reduce the heat load in through-the-door service as a cost-effective design option. GE did not provide any test data in support ofits position nor any energy savings versus cost estimates to demonstrate that either ofthese design options are not costefi.ective. In its own investigation ofthis issue, DOE has not found evidence in the public -record or in any substantiated technical literature to suggest that the
cost and efficiency values developed for these design options are inaccurate. Therefore, DOE has made no change to its engineering analysis regarding these design options.

Whirlpool Corporation expressed

concern that \'vhile the efficiency levels VJhich DOE evaluated in its engineering analysis nlay be technologically feasible, in many cases they can only be attained by sacrificing product utility. Whirlpool set forth several factors, which are considered in developing a

new refrigerator or freezer design, and stated that no single factor can be maximized without creating quality or 'performance problems that consumers would find unacceptable. An example cited by Whirlpool concerned the efficiency improvernent associated with the direct**replaceme~t** offiberglass insula.tion with foam insulation in existing refrigerator and freezer designs,

a design change that has already been effected by some manufacturers. Whirlpool stated that such design change has generally been applied to units that already have relatively thick wall cavities. Whirlpool asserted that if DOE were to issue a standard for a particular class ofproduct based on the efficiency ofsuch units, it could have,the adverse impact ofeliminating designs which incorporate thinner walls to offer

consumers the special utility of maximum internal volume for a given external size. Whirlpool alleged that this could adversely impact consumers in

cases where a consumer's space is limited, resulting in the possible replacement ofexisting larger capacity refrigeraiors with units ofsma'ller storage capacity because the t:Iew units

### Federal Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 / 

### Rules and Regulations 39391

1M XL

DOE projects that a savings of1.65 Quads ofelectricity would not save

more than 0.044 Quads of

### oil and 0.101 Quads 

### ofnatural gas over the 19-year period 60 which averages to 1,084 barrels
per day ofoil savings and 14,227 mcfper day ofnatural gas savings. This 

### is only 11 and 25 percent, respectiv,ely, ofthe
amount DOE·deems significant.

The maximum savings attributable to standards would constitute less than 0.22 percent ofthe electricity used in the Nation over the 19-yearperiod.S ! This is only 0.22 percent ofthe one percent savings that DOE deems significant.

For the year 2006, the highest level of savings attributable to standards would constitute 14.59 percent ofthe enetgy that would have been consumed by refrigerators and refrigerator-freezers in the absence ofstandards, which is less than the 16.67 percent that D'OE would deem significant. 62

On the basis ofthe above, DOE concludes that standards for refrigerators and refrigerator-freezers would not result in a significant conservation ofenergy.



### 3. Economicjustlfication. A. 

### EconomicImpactManufacturers. In the EnAD accompanying the April 1982 proposal, the DOE indicated that the
cost for the most prevalent class of product, the automatic-defrost refrigerator-freezer with top mounted freezer, increases less than $10.00 or 5 percent over the baseline unit. Other models, however, especially the lo'v'lest priced classes ofproduct, had increased
costs ofup to 10 percent. 

### See EnAD, Tables 1.15 and 1.16. None ofthese figures was disputed in the comments received on refrigerators.

The effects ofthese increased costs on medium-sized firms is reflected in the**FI~v1.** The 

### FIM predicts that a prototypical medium-sized manufacturer would suffer a 15 percent increase in 'business risk at level 3 and a 25 percent increase in business risk at the next lowest level. 

### See Supp. to EcAD, Table

eoThis assumes that oil constitutes 2.65 percent a,nd gas 6.15 percent ofthe energy used to generate electricity over this time period. These percentages

are the average ofthe projected proportions for.the
years 1990 and 1995. In the absence ofspecific data for each ofthe years 1987-2005, DOE used these
years. which it believes is a conservative choice. See 1981 Annual Report to Congress, Volume 3: Forecasts, DOE/EIA 0173 (81J/3, February 1982.

.1 Electricity used over the period 1987-2005 is estimated to be 756.6 Quads. It is derived through linear extrapolation ofthe estimate made for the
years 1985. 1990 and 2000. U.S. Department of Energy, July 1981, "The National Energy Policy Plan," Table 1.'

.

62As indicated above, DOE ran-two sensitivity analyses ofthe level 3 savings. Under the constant distortion rate the percentage savings are 15.94 percent. Under the historical trend analysis the percentage savings projp.cted would be 1.65 percent A.4-1. By 1991 (the last year ofthe analysis), the FIM predicts that the prototypical medium-sized manufacturer would have a 94 percent decrease in profitability, while the large and small manufacturers would have a 5 and 11 percent decrease, respectively. 

### See Id., l"able .l\.4-2. At the standard level that would save the greatest energy, the prototypical small firm's debt/equity ratio deteriorates by almost 50 percent. 

### See Id., Table A.4-8.

As indicated in the General Discussion section, the FIM impacts are. fully accurate only to the extent that the prototypical firm did not make investments in improving appliance efficiency as part ofits historically indicated investments. 6sIn the case of refrigerators and refrigerator-freezers, in the base case by 1987 the ORNL**~10del** projects that the SWEFwill be 6.62 EF (Energy Factor). From the EnAD this would indicate that 52 percent ofthe
necessary investment to achieve the highest standard level would be made

as part ofhistorically indicated investments. Thus,**~he** FIM negative impacts actually attributable to the highest standard level should be reduced by about 52 percent. Even with this reduction, the negative impacts of standards for refrigerator-freezers remain substantial for medium-sized firms.

, In addition to the above mentioned quantified impacts on rnanufacturers, an effect ofa standard, as indicated previously, would be to require certain investments to 

### be made that might not otherwise have been made. These required investments may result in the forgoing ofcertain other investments which would be more beneficial to the manufacturer. Commenters who addressed this point generally supported this conclusion.



### B. 

### EconomicImpacton Consumers. As indicated above, and in 

### ihe April 1982 proposal, DOE found that the greatest increased costs to consumers for refrigerators and refrigeratorfreezers are in the lowest priced classes ofproducts. EnAD, Table 1.16. Nevertheless, DOE's analysis of appliance purchases forgone as a result ofincreased price indicates that the income elasticity of·refrigerators is extremely low, suggesting that hardly
any refrigerator purchases.would be forgone as a result ofefficiency standards. Since In.any lower income

63This conclusion, however, applies only to the "average" (in terms ofthe shipment weighted efficiency ofits product) prototypical firm. The negative impacts ex.perienced by a firm that had made limited or no investments in improved product efficiency would still approach or be those reflected by the FIM. consumers renthousing that includes refrigerators and refrigerator-freezers, the imposition ofstandards on these products could positively benefit these

consumers by lowering electricity costs. Although, on the other hand, iflandlords furnish rnore efficient units it is quite

.probable that they would recover the increased first cost through increased
rents orthrough reduced services. On this basis, DOE concludes that the total impact ofstandards for refrigerators and refrigerator-freezers on lower-income

consumers is slightly positive. DOE 

### is unableto qualify this benefit but given the relativity small life 

### cycle cost savings for the least expensive classes**('~vhich** low income renters would most likely be provided by landlords)

.and the number oflow income persons' who both
rent and pay'all their utilities, DOE believes the benefit to low income

consumers 

### as a class is 

### slight.

C. 

### Llfe Cycle Cost. No specific
comments were received concerning DOE's determinations on the life cycle
cost ofrefrigerators and refrigerator-

. freezers. The LeC analysis indicates

that the possible standard level with the lowest life cycle cost is level 3. 

### See Supp. to EcAD, Appendix 

### G. This indicates that the highest standard level would not cause any economic burden

on the "average" consumer.

1'he 

### NPV analySIS indicates that ifa standard were adopted at level 3 there would be a net present value of$1,961.1 million from energy savings over the period 1987-2024. Ifthe net present value were spread across the Nation, the resulting benefits would be less than 80 cents a year per household.



### D. EnergySavings. As indicated previously, the maximum savings attributable to standards for refrigerators and refrigerator-freezers under any ofthe analyses 

### would be 1.65 Quads ofelectricity.

E. 

### Lessening ofUtility 

### orPerformallce of



### Products. In the .l\pril 1982 proposal, DOE established new classes of products in order to assure that the standards analyzed would 

### not lessen the existing utility 

### or performance of refrigera

### tors and refrigerator-freezers. vVhirlpool cornmen

### ted that at level 2 standards, there is some loss 

### ofutility for most classes and 

### a significant loss 

### in

a few. 

### At level 3 standards, Vvhirlpool stated that the suggested levels would result in significant loss ofutility. The manufacturer commented that DOE did
not consider 

### exterior dimensions in 

### its analysis, 

### and that because ofspace limitations in current kitchens, manufacturers would have to sacrifice interior volume, thereby reducing the appliance's utility to the consumer. In

### Federal Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 / 

### Rules 

### and R.egulations 

# • 39392

the technical discussion section, DOE concluded that this comment had merit, but that use ofmore recent, hightechnology designs might be able to avoid this loss ofutility. There is, however, no assurance that future utility

or performance of**refrige~a** tors and refrigerator-freezers would not be lessened as a result ofdisincentives caused by standards to investments in energy-using new features.

F. 

### Impact of Lessening Competition. The Attorney General has determined that the absence ofa Federal standard for refrigerators and refrigeratorfreezers would have no in1pact on competition.

G. 

### Needto Save Energy. Refrigerators and refrigerator-freezers use electricity exclusively as their energy source. 

### \tVhile almost three percent ofthe Nation's electricity povvers refrigerators and refrigerator-freezers, less than eight percent ofthat three percent would be 

### saved by standards for this product.

H. 

### OtherFactors. The negative impacts on small manufacturers of refrigerators for this product have been' presented 

### above. Only 

### with respect to a small firm's debt to equity ratio, however, was there any significant negative impact. In the April 1982 proposal, however, DOE explained its beliefthat the 

### FIM understates the negative impact ofstandards on small firms. 

### No comments were received disputing 

### this general conclusion. Thus, DOE concludes that the negative impacts projected by the FIM (as adjusted) underst.ate the negative impact ofstandards ofsmall manufacturers of refrigerators.and refrigerator-freezers. 

### Weighing of Factors
The benefits ofa standard for refrigerators and refrigerator-freezers

are, compared to the base case ofno standards, that it would save energy, have a positive net present value and have a slightly positive impact on lowerincome consumers. At level 3 these benefits are not minimal, but over the period oftime involved and numbers of households involved, the benefits remain relatively small.

.

The burdens ofa standard are: (1) It would adversely affect the financial well-being 

### ofmedium-sized firms making refrigerators and refrigeratorfreezers, in some cases causing a significant threat to their continued existence; (2) 

### It might lessen the utility

or performance ofsome current smaller,
space constrained models and lessen the utility 

### or performance 

### ofthis product in the future by creating a disincentive
to the development ofenergy-using new features; and (3) It could cause investment resources by manufacturers ofthese products to 

### be allocated in a

manner that is not the most beneficial to the manufacturer.

In light ofall the factors DOE has determined that the burdens ofan efficiency standard for refrigerators and refrigerator

..Jreezers outweigh the benefits.


### b. Freezers

1. 

### Technical!ssues. The industry members who commented on the engineering analysis for.Jfreezers were generally in agreement that the specific design options considered by DOE for improving the efficiency ofthis product

are appropriate. However, Whirlpool Corporation expressed concern that while the efficiency levels which DOE evaluated in its engineering analysis
may be technologically feasible, in many

cases they can only be attained by

. sacrificing product utility. Whirlpool set forth several factors which are considered in developing a nevv refrigerator or freezer design and stated tha

### t no single factor can be maximized without creating quality or performance problems that consumers v\Jould find unacceptable. An example cited by Whirlpool concerned the efficiency' improvement associated with the direct replacement 

### of fiberglass insulation with foam insulation in existing refrigerator and freezer designs, a design change that has already been effected by some manufacturers. \tVhirlpool stated that design change has generally been applied to units that already have relatively thick wall cavities. Whirlpool asserted that ifDOE were to issue a standard for a particular class of product based on the efficiency ofsuch units, it could have the adverse impact ofeliminating designs which incorporate thinner walls to offer consumers the special utility ofmaximum internal volume for a given external size. \tVhirlpool alleged that this could adversely impact consumers in cases where a consumer's space is limited, resulting in the possible replacement of existing larger capacity freezers with units ofsmaller storage capacity because the new units would be too wide W too high to fit into the space occupied by the existing freezer.

Unlike refrigerators, where kitchens and kitchen-cabinetry are designed with

a standard-size refrigerator in mind, freezers do not occupy such an accustomed niche in most homes. Consequently, small increases in exterior dimensions offreezers would
not appear to have 

### as great

# an impact

on utility as similar increases in

.

.... refrigerators. Moreover, it appears that

the use ofadvanced, high efficiency
compressors not·addressed in the EnAD, 

### see infra, could allow manufacturers to reach levels ofefficiency equivalent to possible standards levels without changing any dimensions 

### ofthe freezer.

Commenters also stated that the highest freezer energy efficiency level analyzed by DOE is below that which is technically feasible utilizing available technology. As discussed 

### supra, DOE has concluded that the necessary assessment ofnew models in the market for possible standard levels, the inclusion ofthese new levels in the "cost book" and the rerunning ofall DOE's computer models would entail considerable time. As a result ofcourt approved deadlines resulting from settlements with Consumers Union and NRDC, DOE did not have sufficient time in which to conduct such an analysis. Moreover, had DOE conducted this analysis, by the time ofthe final rule,

newer, more efficient freezers would have likely appeared in the market place. However, DOE has reviewed its engineering analysis and had added an additional design option, improved
compressors, for all classes offreezers. As a result, one additional costefficiency point has been established for

# II

each ofthe three classes offreezers. In each case, the new efficiency data point

was higher than the highest one previously considered. These new data points were included in the ORNL 1\fodel, improving the cost-efficiency

curves and life cycle cost curve at higher efficiency**levels~** .

2. 

### Significance of EnergySavings. The projected energy savings attributable to Ji standard for freezers at each ofthe three standard levels considered over the period 1987-2007 are:
Levell--D.19 Quads Level 2-0.35. Quads Level 3--0.58 Quads 64

A saviI:gs of0.58 Quads 

### ofelectricity would save approximately 0.015 Quads ofoil and 0.036 Quads 

### ofnatural gas

over the 21-year period. 65 

### At most, this

64 DOE ran two sensitivity analyses ofthe ORNL Model projections ofenergy savings. One substituted a constant distortion rate for the algorithm: the other substituted the historical rate of increased efficiencjL for that derived by the ORNL Model. At level 3 the results were 0.685 Quads and 0.162 Quads. respectively. Neither amounts would satisfy the first two tests ofsignificance.

65 This assumes that oil constitutes 2.65 percent and gas 6.15 percent ofthe energy used to generate electricity over this time period. These percentages •
are the average of the projected proportions for the
years 1990 and 1995. In the absence ofspecific data for each ofthe years 1987-2007, DOE used these
years. which it believes is a conservative choice. See 1981 Annual Report to Congres8, Volume 3: Forecasts. DOE/EIA 0173 (81)/3, February 1982.

### 39394 Federal Register 

## I Vol. 48. No. 169 

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## I Rules and Regulations

would be saved by standards for this product.

H. 

### OtherFactors. The significant**neg?~tive** effects ofstandards projected
l-uY the FIM on the prototypical small manufacturer offreezers were presented above. The business risk to small manufacturers was shown to be substantial. In the April 1982 proposal. however, DOE indicated its beliefthat the methodology ofthe FIM tended to understate the negative impacts of standards on small firms. No commenter disputed this conclusion, either generally orwith respect to freezers. Thus, DOE concludes that the negative impacts ofstandards projected by the FIM (as adjusted) understate the negative impacts on small manufacturers offreezers. 

### Weighing of Factors
The benefits ofa standard for freezers
are, compared to the base case ofno standards, that it would save energy and have a positive netpresent value. These benefits, however, are minimal in
amount even under the highest standard level.

The burdens ofa standard are: (1) It would adversely affect the financial well-being ofsmall and medium-size firms making freezers, and in the case of small manufacturers. causing a significant threat to their continued existence: (2) it could lessen the utility

orperformance of.this product in the future by creating a disincentive to the development ofenergy-using new features: (3) it could cause less than optimal allocation ofinvestment

resources by manufacturers ofthese products; and (4) it couldpreclude a small number oflower income persons from purchasing new freezers.

In lightofall the factors discussed here and in the discussion section above, DOEhas determined that the burdens ofan efficiency standard for freezers outweigh the benefits.



### c. Furnaces

1. 

### TechnicalIssues. Some commenters sugoested that DOE's analysis of fur;ace standards was lacking in that high efficiency designs such as the pulse combustion/condensing furnaces currently in the marketplace were not included as possible standards. On the other hand, the furnace industry reiterated its position that DOE should
not consider standard levels that, in effect, require all designs offurnaces to operate at ornear the condensing mode. These commenters felt that prescribed minimum levels as low as 80 percent AFUE would result in corrosion

. problems in most heat exchangers. This position was taken realizing that such a level is below the 90 percentAFUE of the condensing furnace designs recently introduced into the marketplace. DOE is

aware that research and development concerning condensing furnaces is ongoing, and questions concerning product life and pollution effects are not totally resolved. In view ofthe uncertainty associated with the condensing mode ofoperation, DOE has
not analyzed standard levels that would require all future shipments to operate in the condensing mode, but realizing the availability ofrecently developed designs, DOE has included the condensing furnace designs in the engineering analyses cost efficiency relationships, in light oftheir general availability in the market

The addition ofpulse combustion/ condensingfurnaces and associated
costs results in efficiency data points that are higher than those previously included. These new data points were included in the ORNLModel which improves the accuracy ofthe cost efficiency curves and the Model's life cycle cost curve at the higher efficiency levels andimproves the Model's forecast ofenergy consumption. Today's addendum to the EnAD describes the incorporation ofthis additional data for four classes ofgas furnaces.

2. 

### Significance of EnergySavings. The projected energy savings attributable to

a standard for furnaces at each ofthe standard levels analyzed underthe ORNL Model over the period 1987-2009 is set forth in the follOWing table.



### Gas
Level 1-0 Quads Level 2-0.01 Quads Level 3-0.10 Quads. Level 4-0.09 Q-gads 

### Oil

.. Level 1-0 Quads Level 2-0 Quads Level 3-0.07 Quads Level 4-0.07 Quads 69

No analysis was conducted for electric furnaces because they operate

near 100percent efficiency since all of the electric energy is transferred into the conditioned space.

.

Over the 23-yearperiod, the greatest savings ofnatural gas under-the ORNL Model is the equivalent of11,582mcfper day or 20.5 percent ofthe amount that, DOE considers significant. The greatest

•• DOE ran two sensitivity analyses ofthe ORNL Model projections ofenergy savings. One substituted a constantdistortion rate for the algorithm; the other substituted the historical rate of increased efficiency for that derived by the ORNL Model. At level 4 for gas, the results were 0.27 Quads and 1.352 Quads, respectively. At level 4for oil. the results were 0.343 Quads and 0.916 Quads. respectively. oil savings is 1,414 barrels per day or 14.1 percent ofthe amount thatDOE considers significant.

No electricity is saved by the imposition ofstandards at any ofthe levels analyzed.

For the year 2010, the highest level of savings attributable to standards would constitute only 1.06percent ofthe energy that would have been consumed by oil furnaces in the absence of standards and 0.28 percent ofgas use, which is less than the 16.67 percent that DOE would deem significant. 70

On the basis ofthe above. DOE concludes that standards forfurnaces would not result in a significant conservation ofenergy.



### 3. EconomicJustification. A. 

### EconomicImpact on Manufacturers. The EnAD accompanying the April 1982 proposal indicated that the increased
cost to a manufacturerto meet the level
4 requirement for gas. forced air furnaces, which constitute two-thirds of the market and are the leastexpensive, would be over $100. However, the increased cost for the highest level analyzed ofoil, forced air, indoor furnace, which is the mostprevalent oil furnace; would be $13.46 per unit. EnAD, Table 4.19.

None ofthese figures was contested in the comments to the April 1982 proposal.

The impacts ofthese increased costs

are reflected in the FIM. The FIM predicts that a prototypical mediumsized manufacturer would suffer a 10 percent increase in business risk at all the efficiency levels that were studied

as a result ofstandards. 

### See Supp. to EcAD, Table A.4-1. By 1991 (the last year ofthe analysis), the FIM predicts thai the prototYiJical medium-sized manufacturer will have a 32 percent decrease in profitability, while the large and small manufacturers will have a 23 and 7 percent decrease, respectively. 

### See Id., Table A.4-6. At the standard level that would save the greatest energy, the prototypical medium firm's debt/equity ratio deteriorates by almost 200 percent. 

### See Id., Table A,4-8.

As indicated in the General Discussion section, the FIM impacts are fully accurate only to the extent that the prototypical firm did not make investments in improving appliance efficiency as part ofits historically indicated investments. 71 In the case of

'0 As indicated above, DOE ran two sensitivity analyses ofthe level 4 savings. Under the constant distortion rate the percentage savings are 1.79 percent for gas and 2.23 percent for oil. Under the historical trend analysis the percentage savings projected would be 0.69 percent for g89 and 14.SS percent for oil.

, 1 This conclusion. however. applies only to the "average" (in terms ofthe shipment weighted

### Federal Register 

## I Vol. 48, No. 169 

## I Tuesday, August 30, 1983 

## I Rules and

# Regulati~nS

furnaces inthebase caseby 1987the ORNLModelprojects,that the SWEF willbe 76.5 pereentforgas and 85.9 percentIoroll fired furnaces. 

### From the 

### EnAD this wouldindicate that61 percentofthe necessary investmentto achieve thehighest'standardlevel would bemadeas partofhistorically indicatedinvestments. Thus, theFIM negative impacts actually attributable to the higheststandardlevel shouldbe reducedby about61 pereent. Evenwith such a reduction, the negativeimpacts ofstandards forfurnaces remain substantial, especially fQl' medium-size firms. whichhave an unusual deterioration in theirdebt to equity ratio.

In addition to the above mentioned quantified impacts onmanufacturers. an effectofa standard. as indicated previotFIly, wouldbe to require certain investments to bemade thatmightnot otherwisehavebeenmade. These requiredinvestments may resultin the forgoing ofcertain otherinvestments whichwould bemore beneficial to the manufactUrer. Manufacturers generally supported this conclusion.

.



### B. EconomicImpacton Consumers. DOE indicated inthe April 1982 proposal that the price oflevel 3. gas forced airindoorfurnace. the least expensive class offurnace, increases $200 orover50percent

# to consumers. The oll forced airindoorfurnace. the
mostprevalent class ofoll furnace. increases inprice to the consumerby approximately $30.00. orabout 5.4 percent. 

### See

### EnAD Table 4.20. Themost heavily impactedgroup, however, would be lowerincome (under$7000income) households, where 0.81 percentwill not purchasenew furnaces because ofthe increasedprice resulting from standards. In additionmanylowincome

consumersrent housingin buildings where heatis providedby the landlord throughlarge, commercial units. Thus, these-**re~ters** wouldnotreceive any positivebep.efitfrom standards, since they would notbe providedby a unit 'coveredby sta.,dards. However. those lowincome consumers who renthousing in smallerbuildings andwho pay their

own utilitybHls wouldbebenefittedby standards. since theirutilitybills would be decreased. Basedonboth the positive andnegative impacts of standards on consumers, DOEhas determined that the effect ofstandards

onlowerincome consumers is ' essentiallyneutral.

efficiencyoritsproduct) prototypiCaJ finn. The negatlveImpacts suffered by 8 finn thathadmade**limil~** ornoli1veslments InImproved product

, effiCiencywould still approach Qrbe !boserenected bythe FlM.

,. ,- C. 

### Life-Cycle Cost., No specific
comments werereceived conCerning DOB's determinations on the life-cycle
cost offurnaces. TheLeC analysis indicate-s that stand8;rd levels 3 and4 have thelowestlife-cyclecost'll,5ee Supp. to

### BeAD, Appendix G. This indicates that the standard levelwould
not cause any economicburden on the "average" consumer.

TheNPV analysis indicates that 

### ifa standardwere adopted at level4 there would netpresent**val~e** ofonly $108.4DUrnOn ingas and011 savings over the period 1987-2028. 

### Iftltenetpresent value were spread across the Nation the resultingbenefits wouldbe less than 2 cents a yearperhousehold.

D. 

### EnergySavings. As indicated previously, the maximum savings attributable to standards for furnances underany ofthe analyses would be 0.17 Quads.

.



### E. LesseningofUtilityorPerformance of

Products. In theApril 1982proposal, DOEestablishednewclasses of products in orderto assure that the standards analyzed would not lessen the existingutility orperformance of furnaces. As indicatedabove, however, there is no assurancethatfuture utility

orperformance offurnaces would notbe lessened as a result ofdisincentives causedby standards to investments in energy-using new features.



### F.Impactof Lessening Competition. TheAttorney General.has determined that the absence ofa Federal standard forfurnaces wouldhave no impact on competition.

G. 

### Needto SaveEnergy. Because DOE hll,S notproposedany standardfor electric fui'ances, only oil andgas would b? savedby standards forfurnaces. The oll andgas savings from furnace standards are very small, amounting to 0.17 Quads.

H. 

### OtherFactors. The negative impacts projectedby theFIM on the prototypical small manufacturerof furnaces were presentedabove. Although these impacts were not substantial, DOEhas indicatedits belief inthe April 1982proposal that the methodology oftheFIM wouldtend to understate the negative impacts of standards on smallfirms. D,OEreceived

no comments on this factor concerning small furnace manufacture-rs, butno commenterdisputed,DOB's reasons for concludingthat

### theFIM methodology tends to understate the negative impact ofstandards on small manufacturers, ConsequentlyDOEconcludes that the negativeimpacts projectedby the

## FIM (as adjusted) understate the negative

.. For011 furnaces. the savlnllS at the twohighest standards levels are approximatelyequal. impactofstandards on small manufacturers offurnaces. 

### Weighing of Factors

Thebenefits ofa standardare compared to the base case ofno' standards, that itwould save energy and have a positivenetpresentvalue at standard levels 3 and4. The benefits however. areminimalin amount. '

The burdens ofa standard are (1) it would adversely affect the financial well-being ofallfirms makingfurnaces, especiallymedium-sized

### firms; (2) it couldlessen the utility orperformance ofthis productinthe future bycreating

a disincentive to the development of energy-using new features; and (3) it could cause manufacturers ofthese products to forgo investments that are

more beneficialto them.

In light ofallfactors, DOEhas determinedthat the burdens ofan efficiency standardforfurnaces outweigh the benefits.


### d. WaterHeaters

1. 

### TechnicalIssues. NRDC submitted the onlycomments which took exception to DOE's engineering analysis forwaterheaters. With respectto gas waterheaters, NRDC stated thatDOE didnot consider certaintechnologies currentlyin the prototype stage, such as

. prototype gas waterheaters with recovery efficiencies of87-88 percent. undergoing testing at the American Gas AssociationLaboratories. Additionally NRDC contended that DOE should

### hav~ considered inr,reasedinsulation

. thickness and intermittentignition devices in conjunctionwith stack dampers.

DOEhas consideredNRDC's
comment concerning the inclusion of prototype designs ofgas waterheaters in its analysis,buthas concludedtr.at prototype versions ofproducts that arp not available in themarketplace and

### f~r which production costestimates are not available should notgenerallybe includedas design options in the EngineeringAnalysis. Because this is a prototype. there.is no evidence thatit may be mass-produced efficiently. has general market appeal orevenwhether thishighlevel ofefficiency couldbe obtained from a mass-producedmodel.

The "increasedinsulation thickness" ?esign optionmentionedbyNRDC was mcluded in DOB's technical analysis for gas waterheaters althoughDOEused the term "improvedinsulation" since various grades offiberglass were evaluated along with polyurethane foam. DOE's analysis ofthis design option resulted in anefficiencyversus thermal resistivity curve which

### 39396



### === 

### Federar Register / 

### Vol. 48, 

### No. 169 

## :I Tuesday, August 30, 1983 

## .1 Rules,and'.Regulations

a 

### permitted DOE to predict the efficiency improvement for any increase, in thermal resistivity ofinsulating**m~terial.** 

### Therefore, DOE's 

### analysis already
accounts for increasing the thermal**re~istivity** 

### ofgas water heater insulation
up to the level mentioned by NRDC. 

### Moreover, any substantial change in the dimensions ofwater heaters as a re'sult ofthicker insulation could effectively preclude their installation in many replacement situations where the area for the waterheater is constrained.

The design option ofintermittent ignition devices (lIDs

## Jin conjunction with stack dampers 

### was rejected by DOE in its analysis because all lIDs require electrical power. Since conventional gas water heaters do not require an electrical hook-up to operate.,

a de'sign option such as this would adversely affect the utility ofgas water heaters, i.e., the capability to function without an electrical power supply. 

### See the discussion concerning separate classes ofgas kitchen ranges and ovens at47 

### FR 14447. Moreover, installation
costs would be substantially increased where there is no electrical service in the vicinity ofa conventional gas water heater in need ofreplacement.

NRDC's final comment in regard to DOE's technical analysis Jor water

.heaters was that heat pump water heaters should have been included in the analysis and should serve as the basis ofa standard for electric water heaters. DOE has not included heat
pump water heaters in its analysis because the present DOE water heater
test procedure is not valid for heat pump



### water heaters since it does not properly
account for the energy used to extract heat from the surrounding air. Section 325(b) 

### ofthe Act 

### requires tha

### tno standard shall be prescribed for a product or class ofproduct ifno final
test procedure has been prescribed. Therefore, space has been reserved for the class ofheat pump waterheaters.



### 2. Significance 

### of EnergySavings. The table below reflects the energy savings

" projected by the ORNL 

### Model attributable to a standard for water heaters at each ofthe three standard levels considered over the period 1987- 1999.



### Gas

Level 1--0.02 Quads Level 2--0.06 Quads Level 3--0.08 Quads



### Electric

Levelt--O.18 Quads Level 2--0.61 Quads**Level.3~1.18** 

### Quads 73 

### The maximum savings over the 13-
year**p~rio4~f** 

### 1.18 Quads ofefectricity**amount~** 

### to 0.073 Quads ofnatural**ga~** 

### and 0.031 Quads ofoil. 74

### Tm:s: is·the equivalent o.f15,918 mefperday or 28-' 

### percent**~of** 

### the 56,530 m'cfI3er day that DOE considers signifi.cant. The greatest oil savings is 1,135 barrels per day or 11.4 percent ofthe 10,000barrels that DOE considers significant.

The maximum savings attributable to
, standards would constitute less than 0.25 percento{ the electricity used in the Nation over the 13-yearperiod. 75

### This is only 25,percent ofthe one percent savings that DOE considers significant.

For the'year 2000, the**high~st** 

### level of savings attributable to standards would constitute only 4.9 percentofthe energy that would have been consumed by electric waterheaters in the absence of standards and 1.69 percent ofgas use, which is less .than the 16.67 percent that

, DOE would deem significant. 76 

### On the basis ofthe above, DOE concludes that standards for water heaters would notresult in a signific.ant.

conservation ofenergy.

.



### 3.EcoDomicfusb[ication.A. EconomicImpactonManufacturers. The EnAD accompanying the Apri11982 proposal indicated that the per unit increased costto manufacturers to meet the level 3 efficiencyfor water heJiters
ranges from $13.6"5 for a gas water heater made by a large manufacturer to $14.85 for an electric waterheater made by a medium-sized.manufacturer. EnAD,. Tables 3.11.

None ofthese figures were.disputed in**th~** 

### comments to the April 1982 pro-posal. The FIM predicts that a**prototyp~cal** 

### medium-sized manufacturer would incur

a 30percentincrease in business risk at

i:J DpE rantwo sensitivity analyses ofthe ORNL Model, projectior,.s ofenergy savings. One substituted aconstantdistortion rate for the algorithm; the othersubstituted the historical rate of increased efficiencyfor that derived bythe ORNL Model. At level 3. for electricitythe results were 2.00 Quads and 3.33 Quads. respectively; for gas, at level 3 forboth cases, no energywould be saved. None ofthese amounts would satisfy the first two tests ofsignificance.

74This assumes that oilconstitutes 2.65 percent and gas 6.15 percent ofthe energy used to generate electricity over this time period. These percentages·

are.the average'.ofthe projected proportions for the
years 1990 and 1995. In the absence ofspecific data 'forea'ch ofthe years 1987-1999, DOE used these years. See 1981 Annual Report to Congress, Volume 3: Forecasts, DOE/EIA 0173 (81)/3, February 1982.

75Electricity used over the period 1987-1999 is estimated to be 477.0 Quads. It is derived through linearextrapolation ofthe original estiII}ate made for the years 1985, 1990 and·2000. U.S. Department ofEnergy. Julyl981. "The National Energy Policy Plan," Table 1

..

78As indicated above, DOE ran two sensitivity analyses of the leve14 savings. Under the constant distortion rate the percentage savings are 8.95 percent. U.nderthe historical trend analysis the percentage savings projectedwould be 15.27 percent. 

### the

### efficie~cy levels thatweuld save

### $~**twohighe~t ,amo~nts**  

### .ofenergy as'a' .••••.**~esult** 

### ·ofstandards. SeeSupp.to**~cAD~** 

### Table A.4-1.By**19~~.Jtll:·e last.ye~r·of**  

### the analysis), the .AM predicts thatthe prototypical medium-sized manufacturer will have :&

### 44p,ercenldecEease in 

### profjtabilUyas .coIIlpared,to the**bas~** 

### ,case, while large and small .manufacturers will have a 49 

### and 9 percent

### ;de.crease,r~spectiv.elY.See

# Id.,.
Table A.4-5

..Atlevel 3 the .prototypical medium-sized firm',s .debtlequityratio deteriorates by.approximately 32 " percent, small manufacturers, 26 percent, and large manufa:cturers, 280 percent. 

### See Id., Table A.4-8

...

As indicated in the General Discussion section, the FIM 

### impacts are fully ,accurate only to the extent that the prototypical firm 

### did not make investments in improving appliance efficiency as partofits hfstorically indicated investments. 77 

### In the case of water-heaters, in the**base~ase** 

### by 1987

. the ,ORNL

### Model.projects that the SWEF 

### win be 64.1 EF for electric and 55.5 EF for gas w,ater heaters. From the 

### EnAD this would indicate that 19 percent,Of the. necessary investmentto achieve the highest standard**[ev~lwould** 

### be made

as part ofhistorically indicate.d investments. Thus, th'e FIM negati,ve impacts**actual~y** 

### attributable to the highest standardlevel should be reduced by 19'percent. Even with such 

### a reduction, the negative impacts of. standards for waterheaters remain substantial, with a substantial increase in business 'riskformediurn-size firms and a substantial deteriorationin the profitability.and debt/equity-:ratiofor large firms.

.

In addition to the above mentioned quantifiep'impacts on manufacturers, an effect ofa standard, as -indicated previously, wouldbe to req:uire certain investments to be madethat might not otherwise have been made. These

. re'quired investments may resultin the foregoing ofcertainother,investments which·wouldbemore beneficial to the manufacturer. Manufacturers generally .supportedthis conclusion.

-



### B. 

### EconomicImpacton Consumers. In the April 1982 proposat DOE indicated

.that a level 3 

### standard for electric water heater increases' the price 

### to the

consumerby $31.30, while

# alevel 3 

### gas waterheater's price would 

### be increased by $29.90. These price increases are 19**perce~t** 

### and 15 percent greater,

.

71This conclusion, however, applies only to the' "average" (in terms ofthe shipment weighted efficiency ofits ·product)prototypical firm. The negative impacts' sufferedby a firm' thathad made limited or

### no**inv~tment81n** improved product :. efficiency wouldstill approach orbe those· reflected by the FIM.

.

### Federal 

### Registerl Vol. 48. 

### No. 169 

## I Tuesday, August 30, 1983 

## I Rules and Regulations

. 39397

respectively, than CUITentprices. 

### EnAD Table 3.12. 

### Despite these price 

### increases, DOEbelieves that thenumber ofwaterheaterpurchases forgone wouldnot

### be significant.

### See Supp. 

### to 

### BeAD, Appendix

## J. Themostheavily impactedgroup would be lowerincome households (less than $7,000

### income). However, evenin this 

### 8fOUP, less than

one percentofthose who would purchasewaterbeaters, winnot purchase them as a.result 

### ofthe increasedprices attributable to standards. 

### SeeIbid In addition, because manylowerincomerenters livein dwellings which have commercialwater heaters, ratherthan**resi~entia1-sized** 

### waterbeaters, therewouldbeno impact

onthe costto these renters ofhotwater

as a 

### result ofstandards. Accordingly, DOEconcludes thatthe effect of standards forwaterbeaters onlowerincome consumers isneutral.

C.

### Life-Cycle Cost. No specific

. comments werereceived concerning DOE's determinations on the life-cycle '
costofwaterheaters. TheLCC analysis

. indicates thatthapossible standard

level with thelowestlife cycle cost

### is level3. 

### See Supp. to

### BeAD, Appendix G. Thisindicates that the standardlevel wouldnotcause any economicburden

onthe "average" consumer.

The NPVanalysis indicates thatifa standardwere adopted atthehighest standardleveltherewouldbe a net presentvalue of$2,385.8 million ingas and electric savings overthe period 1967-2Ol8.lfthe netpresentvaluewere spread across the Nation, the resulting benefits wouldbe approximately 95 

### cents a yearper

### household.

D. Energy

### Savings. As indicated previously. themaximum savings attributable to standards for water heaters underany ofthe analyses would be 1.26**Quads~**

E.

### LesseningofUtilityorPerformance of

Products. In the April 2

### proposal. DOEestablishednewclasses 

### of products in orderto assure thatthe standards analyzedwould notlessen the existingutility orperformance of
waterheaters. However, there is no
assurance thatthefuture utilityor performance ofwaterheaters would not bereduced as a result ofdisincentives causedby standards to investments in energy-using newfeatures.



### F.

### Impactof LesseningCompetition. The Attol',:leyGeneral has determined thatthe absence 

### ofa Federal standard for waterheaters wouldhave no impact

on competition.

G. Need

### toSave Energy. 

### More energy is used topowerelectricwaterheaters thangas waterheaters. Themaximum amount

### ofelectricity thatwouldbe savedby. standards for waterheaters amounts to0.25percentofthe electricity usedintheNation duringthis period. Similarly, themaximumgas savings 

### attributableto standards forwater heaters wouldaccountfor about0.006 

### percentofnaturalgas useduringthe

sameperiod,'"

H. 

### OtherFactors. Thenegative impactsprojectedby the FIM 

### onthe prototypical small manufacturerof waterheaters werepresented above. Although theseimpacts werenot substantial. DOE 

### has indicatedits belief intheApri11982proposal that the methodologyofthe 

### FIMwould tend to understate thenegativeimpacts of standards on small firms. DOEreceived

.no comments inthis 

### area concerning small waterheatermanufacturers. but

no commenterdisputedDOE's reasons for concluding that the FJM

### methodology tends tounderstate thenegative effect ofstandards on smallmanufacturers. Consequently. DOEconcludes thatthe negativeimpacts projectedby the 

### F1M (as adjusted) understate thenegative ·impactofstandards onsmall manufacturers ofwaterheaters. 

### Weighing.of Factors
The benefits ofa standard are, comparedto thebase case ofno standards. thatit

### would save energy and have a positive netpresentvalue. While the benefits at thehighest standard level

are notminimal. given the total energy usedforwaterheaters, the savings benefitsremainrelatively small.

The burdens ofa standard 

### are: (1) It 

### would adversely affectthe financial well-being ofmedium-size firms making waterheaters byincreasingthose firms' riskofdoingbusiness and decreasing profitability; (2) 

### it would negatively impactthe debt/equityratio a,nd decrease the profitability oflarge !llanufacturers ofwaterheaters; (3) 

### it couldlessentheutility orperformance ofthis productin the,future by creating

a disincentive to the development of energy-usingnewfeatures; and (4) 

### it couldcause manufacturers ofthese products to forgo investments thatare
more beneficialto them. lightofall ofthese factors DOEhas determined thatthe burdens ofan efficiency standard forwaterheaters outweighthe benefits.



### e. RoomAirConditioners

1. TechnicalIssues. GE commented thatDOEbas overlooked the utilitarian aspects that a voltagebreakwould

1.Natural gas used overthe period 19117-19991a eslimated to be 241.8 Quads. Ilia derived through Ilnearextrapolationofthe original estimate made for theyears 1ll85. 1990and 2000. U.s. Department

. ofEnetllY.July 1llll1. "The National EnergyPolicy

Plan.» Table 1. 

### provideinthe 8,000-14,000 Btu

### perhour productclass. It

### is within this cooling capacityrange thatthe

### power supply requirement steps-upfrom 115 

### volts to 230

### volts. GEnoted thata cooling capacityof14.000

### BtuperhourC8Iwot be achievedforroom airconditioners thatoperate at 115

### volts.

DOEbas alreadydeterminedinits engineering analysis that the efficiency ofroom airconditioners is not significantlyaffectedbyvoltage. Therefore. DOEhasmade no changes to theproductclassesforroom air conditioners inresponseto 

### this
comment.

GE also took exceptionto DOE's position thatthere are no truly portable

room airconditioners. GEcotnmented thatwhile theportabilitycriteria cited by

### DOEcanbe considered a valid· general**defini~on,** 

### portabilityis best determinedby consumeruse patterrts. GEreferred toits "Carry-Cool" line as winning wide acceptance by 

### consumers due to its relativelylightweight, unique suitcase configuration, and ease of installation andremoval. GE 

### expressed

concernthatifenergy efficiency stendards were tobe establishedfor

room airconditioners then, depending

on theefficiencylevel selected 

### to apply
to the lowercooling capacityranges.

. e.g., 

### 4000to 

### 6000Btuperhour,

manufacturers couldbe forced to abandon theircurrent smaller. lighter weightcase sizes anduse the largest

case size withintheproduct class in order to accommodate the larger COUll 

### thatwouldbe necessary to achieve higherefficiencies. Moreover, the larger coils themselves would add weight. According to GE. such a change would adversely affectconsumer utility. DOE has reviewed the GE 

### submission and concludes thatitspoints are valid as to the possible effectofstandards on the portabilityofsomeroom air conditioners. See

### infra.

Both GEandWhirlpool Corporation commentedthatDOE's use ofcomputer simulation to determine the design parameters associatedwith the four levels ofefficiencyinvestigation in each product classledto erroneous results. GE andWhirlpool agreed thatDOE's computer simulationunderestimated the reql$'ed heatexchangercoil length associated with achievinghigher efficiencylevels. Whirlpool remarked thatDOE's computersimulation overestimates heatexchanger coll air 

### flow parameters. In comparing one ofits
currentmodels which matches the 8000 

### Btu per

### hourexample model atLevel 3 efficiency (8.8

### EER), Whirlpool found thatits model has 30-50

### percentmore heate<'tchangercoil at aboJltthe same

### 39398 

### Federal Register 

## I Vol. 48, 

### No. 169 

## I Tuesday, August 30, 1983 

## I Rules and Regulations

air flow as the version. GE said tb.at using 

### its computer simulation technique 

### and actual production model information, it calculated that the DOE estimates 

### ofrequired coi11ength 

### are grossly 

### underestimated.

. .

DOE agrees that differences in coil length between different designs of

room 

### air conditioners ofequal capacity and efficiency 

### can occur. There are 

### a number offactors 

### which influence coil length 

### in a room 

### air conditioner design: coil 

### fin type 

### and spacing, compressor capacity and efficiency, 

### air flow rates, fan, blower and fan motor efficiencies,
to name a few. However, nothL,g in the
comments made 

### by GE 

### orWhirlpool

was sufficiently detailed for DOE to dra\tva conclusion that the computer simulation technique it employed was faulty.

Both GE and Whirlpool also commented that DOE did not disclose the**co~pressor** specifications and performance data used in its analysis leaving them unable to comment on the desion cost 

### and efficiency improvement

### proj~ctions that DOE associated with this design option. The compressor specifications and peform!ince data used by DOE were taken directly from the 1980Tecumseh product catalog.**AHA~J,** Whirlpool and.Edison Products Company commented that reduced dehumidification capacity

occurs as room air conditioner EERs increase beyond 8.0 They cited dehumidification performance ofroom air conditioners as a consumer utility consideration. DOE used latent heat removal relations based on standard industry data for heat exchangers in the

room air conditioner analysis. Latent heat removal rates in excess of20 percent were maintained throughout the analysis as recomrnended by manufacturers during the 1980 comment period. DOE has not changed the latent heat removal values in the present analysis.

Whirlpool commented that while it is accepted engineering practice to derate COIDnressors to develop an air conditioner line with desired efficiency and capacity values, it

### is not always possible to derate to any pumping capacity. Since Whirlpool did not specifically comment that 

### the derated values used in the engineering analysis
cannot be attained, no changes have been made to the analysis regarding 

### his

comment.

NRDC commented that the DOE engineering analysis for room air conditioners does not consider currently marketed units which achieve higher efficiencies than those analyzed by DOE. DOE acknowledges the existence ofsuch high efficiency units, and DOE did, in fact, considerthe technologies incorporated in these units. However, because ofthe manner in which the engineering analysis was conducted, it did not necessarily yield efficiency values as high as can be found in the marketplace. One reason is that separate analyses were made for each· class ofroom air· conditioners and the largest capacity unit in each class was selected for assessing efficiency improvements

.**.ft~s** a result, the potential for increasing the cabinet volume of units in each class to accommodate larger coils was limited to the increase that could be made to the largest units in 

### L"'1e class such that these 

### units**v~ould** still fit in exisiting**\tvi~do\l'l** sizes or existing air conditioner sleeves. In addition, DOE imposed a minimum dehumidification performance requirement in its fu"1alysis in terms ofa latent heat removal rate 

### ofgreater than 20 percent. These parameters largely governed the highest efficiency levels which DOE analyzed. The available

room air conditioner models with EERs in excess ofthe highest efficiency levels analyzed by DOE generally are the smaller capacity units within a product class housed in the same size cabinet as the larger capacity units in the class to accommodate their larger coils. Also, these units have 

### low latent heat removal rates, perhaps lower than DOE's performance criteria. DOE considers the approach ofits engineering analysis for

room air conditioners appropriate for assessing potential efficiency improvements which do not adversely affect product utility. f'Jo changes in this

-analysis have been made in response to NRDC's comment.



### 2. Signlficance of 

### EnergySavings. The table below reflects the energy savings projected by the ORNL Model attributable to a standard for room air conditioners at each ofthe standard levels considered over the period 1987- 2001

.. Level 1--0.25 Quads Level 2-0.31 Quads Level 3-0.37 Quads Level 4-0.61 Quads 79 As indicated above, to determine the- oil and gas savings that would result from electricity savings attributable to standards for non-seasonal appliances, DOE took the average ofthe national proportions ofoil and gas projected for the years 1990 and 1995. As explained in

79 DOE ran two sensitivity analyses ofthe ORNL Model projections ofenergy savings. One substituted a constant distortion rate for the algorithm: the other substituied the historical rate of increased efficiency for that derived by the ORNL Model. At ieve14 the results were 0.63 Quads and 0.29 Quads, respectively. Neither amounts would satisfy the first tl//O tests of**signifi~ance.** the April 1982 proposal, however, 

### see 47 • 

### FR 14450, because air conditioning is used most

### iIi the SUInmer and because
gas and oil are 

### used in 

### the generation of electricity in substantially different percentages 

### in the summer than they are in the winter or on average over the
year, DOE altered 

### the percentages used for deriving oil and gas savings for nonseasonal electrical appliances. The annual use projections 

### were increased

or decreased, as appropriate, by the
current percentage variation ofthe

summer use ofoil and gas to generate electricity from the annual use./d. No
commenter criticized this methodology

or data, 

### as far 

### as it went. A few commenters, however, suggested that because air conditioning tended to be used at peak load periods and because oil and gas tended to be used as fuel to meet peak demand, 

### even a summer
I average would understate actual savings ofoil and gas attributable to standards 

### for air conditioning**equipment~** These commenters did not submit 

### data to support their claims, and DOE is unaware ofany data series that would enable it to be more specific in assessing the oil and gas used to • generate the electricity used by air conditioning equipment.

.Using the above described methodology, DOE projects that standards for room air conditioners would not save more than 438 Bpd ofoil and 7750 mefper day ofnatural gas.so I'his is only 4 and 14 percent, respectively, ofthe amount DOE deems significant.

The greatest amount of savings would constitute only 0.10 percent ofnational electricity use over the average life of

room air canditioners beginning in 1987. 81 This is only 10 percent 

### ofthe one percent savings that DOE deems significant.

For the year 2002, the highest level of savings attributable to standards for

room air conditioners 

### would constitute less than 13 percent ofthe energy used by room air conditioners in the absence

80 In these computations, DOE has reduced the percentage ofoil used to generate electricity by 14 percent and increased the percentage ofgas by 16 percent from the -average ofthe annual percentages for the years 1990 and 1995, with the result that oil represents 2.28, percent and gas 7.13 percent ofthe projected electricity savings. These percentage changes are derived from the actual percentage deviations in 1982. SeeElectric Power Monthly.
DOE/EIA-0226. •

81 Electricity used over the period 1987-2001 is estimated to be 566 Qua-ds. It is derived through linear extrapolation ofthe estimates made for the
years 1985, 1990, 2000. U.S. Department ofEnergy. July 1981. "The National Energy Policy Plan" Table 1.

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## I Rules and Regulations

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# • ofstandards, less than the amountDOE deems significant. 82



### On the basis ofthe above, DOE concludes that standards for room air conditioners would not resultin a significant conservation ofenergy.

3. 

### EconomicJustification. A. 

### EconomicImpactonManufacturers. The EnAD accompanying the April 1982 proposal indicated that the perunit increased cost to a manufacturer to meet the level 4 

### efficiency for the most prevalent class ofroom air conditioner-the below 8000 Btu/hrwith outdoor side louvers, with 44 

### percent of the market-was a mere $6.13, or less than 5percent. However, all the rest of the classes 

### ofroom air conditioners, making up 56 percent ofthe market, had significantly increased first costs, ranging from 

### 15 to 50 percent increases. f\Jso, it is noteworthy that medium-sized manufacturers had increased costs 15 to 20 

### percent higher than the large firms. Table 9.16 and Table 9.17.

None oftp.ese figures were disputed in the comments on the April 1982 proposal.

.

The negative effe'cts ofthese increased costs on medium-sized manufacturers is reflected in the FIM. It shows that the risk ofnot making a profit increases as a result ofstandards by 15 percentfor levels 1-3, and'by 20 percent at level 4. The FIM also indicates that profitability for all sizes of firms decreases under all standards levels compared to the base case. By 199i 

### (the last year ofanalysis) mediumsized firms are no longerprofitable at any standard level. In 1991 profitability for both large and small firms under level 4 

### decreases from the base case by 11 percent. The debt/equity ratio of large firms deteriorates' 70 

### percent at level 3, 

### while the debt/equity ratio of medium-size firms, already at very high levels, deteriorates by 

### over 30 percent at leve\s 2and 3.

As indicated in the General Discussion section, the FIM impacts are fully accurate only to the extent that the prototypical firm did not make investments in improving appliance efficiency as part ofits historically indicated investments. 83 

### In the case of

82 As indicated above, DOE ran two sensitivity analyses ofthe level 4 savings. Under the constant distortion rate the percentage savings are 14 percent. Under the historical trend analysis the percentage savings projected would**~~** 5 percent.

83This conclusion, however, applies only to the "average" (in terms ofthe shipment weighted efficiency ofits product) prototypical firm. The negative impacts suffered by afirm that had made limited orno investments in improved product efficiency would still approach orbe those reflected by the FIM. 

### room air conditioners, in the base case by 1987 the 

### ORNLModel projects that the SWEF will be 7.23 

### SEER. From the EnAD this would indicate that 72 percent ofthe necessary investmentto achieve the highest sJandard level \vould be made 

### as part ofhistorically indicated investments. Thus, the FIM 

### negative impacts actually attributable to the highest standard level should be reduced by about 72 percent. Even with such a reduction, the negative impacts ofstandards for room air conditioners remain substantial for medium-sized firms.

In addition to the above mentioned quantified impacts on manufacturers, an '-effect ofa standard, as indicated previously, would**b~** 

### to require certain investments to be made that might not otherwise have been made. These required investments may result in the. forgoing ofcertain other investments which would be more beneficial to the manufacturer. Manufacturers generally supported this conclusion.



### B. 

### EconomicImpacton Consumers. In the April 1982 proposal DOE indicated that at a level 4 

### standard, while the most prevalent class ofroom air conditioner increased in price only $18, 

### the next two most prevalent classes increased in price more than 25 percent. Indeed, all the remaining classes, making up 56 

### percent ofthe market, increased in price 28 percent. Notwithstanding these price increases, DOE believes the number of

room air conditionerpurchases forgone will generally be insignificant. 

### See Supplement. The mostheavily impacted group, however, would be lower income (less than $7,000 income) households, where over one percent ofthose who would purchase air conditioners will forgo purchases ofroom air conditioners because oftheir increased price·as a result ofstandards. Persons who forgo purchases ofnew room air conditioners

are likely to make do with older and

more inefficient room air conditioners or to have to go without. Because renters most likely have to purchase their own

room air conditioners, lowerincome
renters generally would not sufferfrom landlords purchasing low efficiency

room air conditioners. Standards, accordingly, would not particularly benefitrenters. Thus, while,the percentage and absolute number of lower income persons,negatively impacted by standards for room air conditioners is small, so also is the number oflower income renters who would be positively benefited. On this basis, DOE concludes that the effect of standards for room air conditioners on lower inc9me persons is essentially neutral. 

### 39399

wa



## c. Life Cycle Cost. A standard set at level 4 

### would require efficiencies for four ofthe six product classes to be at 

### a level higher than the average consumer's life cycle cost minimum. That is, ifa standard at level 4 

### were adopted, the
most cost-effective room air conditioner for the average consumer in four ofthe six product classes would be banned from the market. A 

### level 4 

### standard would actually 

### increase the life cycle
costto the average consumer ofthree of the product classes compared to 

### the 1987 SWEF in the absence ofstandards.

As indicated in the April 1982 

### proposal, DOE 

### considers the increasing oflife cycle costs to consumers andthe banning ofthe most cost-effective products from the market to be substantial negative burdens. Comrnenters either supported or did not contest this conclusion. Accordingly, DOE 

### considers that a level 4 

### standard for room air conditioners would cause 

### a substantial burden by its effect on life cycle costs for large numbers of

consumers.

The NPV for standards increases with the strlngency ofthe standard, from $359 million to $645 million over the period 1987-2020. Spread over the Nation's 80 million households, this would equate to at most less than 24 cents perhousehold per year.

D. 

### EnergySavings. As indicated above, the maximum savings attributable to standards wouldbe 0.61 Quads ofelectricity.

E. 

### Lessening ofUtility orPerformance of

Products. In the Apri11982 proposal, DOE explained that despite its best efforts to assure that the standards analyzed would not lessen the 

### existing utility orperformance ofroom air conditioners, DOE could· not assure that the future utility orperformance ofroom air conditioners would not be lessened

as a result ofdisincentives caused by 

### standards to investments in new, energy-using features. Several
commenters supported this conclusi.on, but, perhaps more importantly, some indicated that some ofthe standard levels analyzed would decrease the utility ofsome 

### existing room air conditioners. Specifically, GE maintained that in the class ofroom air

. conditioners with side louvers with capacity at orbelow 8,000 

### BTU/hr. the
necessary changes to achieve the standards levels would make otherwise portable room air conditioners too heavy or 

### Qulky to be portable. Above, in the technical discussion, DOE concluded that this comment had merit. Consequently, DOE has determined that

an energy efficiency standard for room air conditioners would cause a decrease

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## I Vol. '48, 

### No. 169 / 

### Tuesday, August 30, 1983 / 

### Rules and Regulations 

# •

55Lower dehumidification may well be appropriate in low humidity areas, e.g., New Mexico, Arizona. etc. their high efficiency at the expense of dehumidification and consequently do
not achieve 

### 20 percent dehumidification. 

### DOE indicated in the 

### EnAD that it

•believed that dehumidification below 20 percent represents a significant loss in product utility 

### in many clirnatic conditions, and in some areas. (Le., areas with high humidity and temperatures) would be totally unacceptable. This conclusion was generally supported by the commenters that addressed it. Consequently, DOE has determined that
any national standard should provide for at least a 20 percent dehumidification. 85 Other factors relate
to aspects ofthe DOE test procedure for CACs. For example, the test procedures provide for testing CACs that have or do
not have an integral fan (separate from 

### the furnace) as part 

### ofthe CAe unit. Where the CAe does not have an integral fan, the DOE test procedure assigns an electricity consumption factor for the separate furnace fan. 

### If, however. the 

### fan is integral to th-e CAG, it is to be specifically tested under the DOE procedure. Thus, 

### a firm can obtain

a higher SEER rating for the same CAe by substituting its 

### own integral fan with

a higher efficiency than the assumed • DOE 

### test procedure rating for a separate furnace fan. It would be improper, however, to set a standard premised on all CACs having their 

### own fans, because such units YJould not be compatible with the majority ofinstallations, which involve furnaces with their own fans.

Another example ofthe effect ofthe DOE test procedure on CAC SEER levels is the degradation coefficient. Under the DOE test procedure. 

### a degradation coefficient-(the measure ofthe efficiency loss due to the cycling ofthe unit) of0.25 is assigned, unless a manufacturer conducts certain additional tests, in which case the actual degradation factor
may be used. Because oftheir cost and complexity these additional tests have always been voluntary. The same GAC, however, might have its SEER increased 10 percent simply as a result of measuring 

### its degradation factor rather than using the assumed degradation factor. DOE believes it would be inappropriate to set a national standard that would in effect require all manufacturers to conduct these additional 

### tests.

While the 

### above factors are 

### indicative ofsome ofthe problems that would attend a national standard at such a level ofefficiency, DOE has nevertheless updated the cost-efficiency 84In the April 1982 propo8al DOE indicated that it had not specifically analyzed the class ofroom air conditioners that are reverse cycle air conditioners. Nevertheless. DOE indicated its beliefthat the burdens ofa standard for that class would outweigh its benefits. No commenter indicated disagreement with that conclusion. Consequently, for the reasons stated in the April 1982 proposal, DOE concludes that a standard would not be economically justified for the class ofreverse cycle room air conditioners.

The burdens ofany standard for room air conditioners are: (1) 

### It will have a negative impact on manufacturers' profitability, which is especially severe

. on medium-size manufacturers; (2) it

will create an inceased business risk to medium-size firms; (3) it will increase substantially the debt/equity ratio of large and medium-size firms; (4) it would**r~duce** the utility ofa large portion of the most popular class ofroom air conditioner by effectively making it no longerportable; (5) it would create a risk
to the utility orperformance ofroom air conditioners in the future by creating a

. disincentive to the development ofnew,

energy-using features; and (6) it would likely cause investment resources by manufacturers ofthese products to be allocated in a manner that is not the
most appropriate for the manufacturer. At level 4 the standard would impose substantial additional burdens, prohibiting 

### the**mo~t** cost-effective room, air canditioner for the average consumer in four ofthe six product classes and actually increasing the life cycle cost to the average consumer ofthree ofthe product 

### classes.



### In light 

### ofall the factors, on balance, DOE concludes the burdens 

### ofan efficiency standard for room air conditioners outweigh the benefits. 84 

## f CentralAirConditioners

1. 

### TechnicalIssues. The 

### NRDC and

some other commenters criticized DOE's analysis 

### ofthe effect ofpossible standards for CACs because the highest 

### standard level analyzed for some classes ofCACs is lower than the efficiencies claimed for several models ofsimilar sized CACs presently in the marketplace. As indicated in the General Discussion section, this is primarily the result ofchanges in the marketplace since the original engineering analysis was prepared, and the inability in the time since the April 1982 proposal to provide full Bcostbook" information on these models to enable

- full analysis ofa potential standard at such a level.

With respect to CAGs, however, there

are additional factors that make the SEER level claimed by some manufacturers in currently marketed CACs inappropriate as a national standard. For example, some currently marketed 

### high efficiency units obtain 

### 39400

_

in utility for small, portable room air conditioners, which, constitute a very large fraction ofthe entire room air conditionermarket.



### F. 

### Impact of Lessening Competition. The Attorney General has determined that the absence ofa Federal standard for room air conditioners would have no impact on competition.

G. 

### Needto SQv·e Energy. Room air conditioners use electricity exclusively



### as their energy source. The electricity that would be saved by standards for

room air conditioners would be concentrated in certain parts ofthe Nation and ,viII be concentrated during

summer

### peak load periods. While peak load savings are generally more valuable to utilities than normal load savings, the value ofthe savings

_depends greatly on the nature ofthe

particular utility's peak load and consequently is highly regional in character. Thus, although savings of electricity associated with air conditioners are potentially more valuable than other forms of electricity savings, the need for those savings is

more regional specific than is the case for other electricity savings.

H. 

### OtherFactors. The significant
negative impacts projected by the 

### FIM

on the prototypical small manufacturer ofroom air conditioners were presented above. Only with respect to profitability "vas there any significant negative impact In the April 1982 proposal, however, DOE indicated its beliefthat 

### the methodology ofthe 

### FIM would tend
to understate the negative impacts of standards on small firms. No comments

were received specific to small room air conditioner manufacturers, but no commenter disputed DOE's reasons for concluding that 

### the 

### FIM methodology tends to understate the negative effect ofstandards on small manufacturers. Consequently, DOE concludes that the negative impacts projected by the FIM (as adjusted) understate the negative impact ofstandards on small manufacturers ofroom air conditioners. 

### Weighing of Factors
The benefits of

### a standard for room air conditioners are, compared to the base case 

### ofno standards, that it would

save energy and have a positive net present value. These benefits, however,

are Ininimal in amount even at the strictest standard level. The benefits are

even less at lower levels ofmandated efficiency. While the electricity saved would generally be summer peak load and thereby more valuable than base load savings. these savings and the value ofthe peak load savings will be regional in nature, ifnot highly localized, rather than national in nature.

### Federal Register 

## I Vol. ,48, 

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### August 30, 1983 

## I Rules and Regulations 

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. 

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relationships in the EnAD to the extent possible in light ofnewly marketed products.

Accordingly, today's engineering analysis identifies units with two additional design options-two-speed compressors and all-aluminumheat exchangers. Today's engineering analysis also includes lower degradation coefficients for these two design options. The Supplement describes these additional design options. These changes lead to a higher efficiency level in the engineering analysis, which approaches the highest reports ofefficiency in the marketplace. On the basis ofthis change in the engineering analysis, a new costefficiency point was added to the determination ofthe**cost~efficiency** 

### curves ofORNLModel, thereby improving the accuracy ofthose curves and, consequently, ofthe Model's CAC life cycle cost curves.

The NRDC also disputed the validity ofthe cost-efficiency relationship reflected in the CAC standard level 4 

### (efficiency level 6in Table 8.14 ofthe EnAd), noting that existing CACs in the marketplace with efficiencies at or above those ofthe CAC standard level 4



### were available at prices well below those indicated in the EnAD. 

### See NRDC, No. 2121, at34-35.

### I~ light ofthe changes made to the engineering analysis described above, DOEbelieves there is substantial merit to NRDC's comment. j\"ccordingly, DOE deleted the Table 8.14's level 6 cost-efficiency data point from the determination ofthe ORNL Model's cost-efficiency curve for CACs.86

A 

### number ofcommenters indicated that both DOE's national average CAC capacity and DOE's national average annual hours ofCAC use were substantially too high. With regard to the average capacity, the ARI submitted comprehensive data concerning shipment weighted average capacities of CACs. The data indicatedthat the average capacity ofCACs sold in the last few years has decreased. Accordingly, DOE has reduced the capacities in,the analysis from 42,000

86While standard level 4 remains at the efficiency equal to that represented by the EnAD's level 6 for CACs, the cost to achieve that efficiency is less than that reflected in the EnAD's level 6. This reduced cost/price is reflected in both the ORNLModel's

.outputs and the Life Cycle CostAnalysis. It is not reflected in the FIM analysis, because DOE does, not have sufficientdata to create a full Ucost. book" for

a new design option at this efficiency level. DOE does not believe, however, that the change in cost would be substantial enough to affect the conclusions ofthe FIM. It should be noted that a lower costperse does not even necessarily mean that the negative impacts in the FIM would be reduced at all. 

### Btu/hr. to 39,000Btu/hr. to reflect these changes.

Several manufacturers provided
average annual hours ofuse for CACs that supported their contention that the usage rate in the ORNLModel was ' overstated. Specifically, some submitted field test data from various locations reporting compressorrun times that

were substantially less than would be indicated by DOE's assumed distribution ofcooling load hours, 

### see 10 

### CFR Part430, Subpart

### B, App. 

### M. § 

### 6.1.3. Other commenters submitted usage data they used in assessing proper sizing recommendations for purchasers ofthis equipment. Finally, incidental usage rates indicated by some States were lower than what DOE's distribution would predict. Indeed, all ofthe evidence available indicated that the - 1t OOO 

### hours average annual use'for CACs was substantially overstated. Although there was no clear consensus Jor the average hours ofuse ofCACs, there was general agreement that the value should be less than 1,000 hours/
year.

I

### t shouldbe noted that there is 

### a nonstochastic relationship between CAC capacities and hours otuse. The product ofaverage capacIty and average hours ofuse will always underestimate the national average cooling load and, thereby, always underestimate the national energy consumption. This is due to the general tendency that higher than average capacities are associated with higher than average hours ofuse. That is, it is likely that CAGs installed in the South will not only have higher than average capacities but also longer than average hours ofuse. This frustrates any attempt to determine a comprehensive national average hours ofuse value by simply averaging operating hours data. Accordingly, DOE has determined that the appropriate number ofhours of operation to be used in the ORNLM<;>del is not the nationalaverage butrather the number ofhours of use that when coupled with the national average capacity, yields an energy consumption estimate that is consistent with the national energy consumption attributable to GACs 

### reported by the Edison Electric Institute. Given national average capacity, national average efficiency, total households having CAGs, 

### and total national CAC energy consumption and solving for the usage yields a value approximately equal to 750 hours/year. Accordingly, the estimates ofnational energy use, energy savings, and net present value as determined by the ORNLModel, and the' life cycle cost analysis reflect the 

### 39401

change in hours ofuse from 1,000

### hours
to 750hours.

The effect on the outputs ofthe ORNL Model as a result ofthes.e changes to capacity and hours ofoperatio'n is su1?stantial and complicated. Most directly, the unit energy consumption of GACs 

### in both the base and standard

cases is substantially decreased. This has the effect ofreducing the absolute energy savings attributable to standards.s1 

### On the otherhand, the change in unit energy consumption resulting from usage and capacity changes has the effect ofchanging dramatically the CAG life cycle cost minimum in the ORNLModel.ss 

### Specifically, it 

### is**reduc~d** 

### to a level well below all 

### ofthe standards levels. Because the ORNLModel's market penetration algorithm, 

### see supra, projects that, with higher energy prices, marketplace efficiencies approach (but do not reach) the life cycle cost minimum, the effect ofthe reduced life cycle cost minimum is to reduce dramatically the projections of increased efficiencies in the base case. Moreover, because 

### the standard le·vels

are substantially higher than the life cycle cost minimum and because in the base case rational consumers would not knowingly purchase CACs at efficiency levels higher than the life cycle cost .minimum, the market-based increase in efficiency would be capped at a level well below the standard levels. Thus, standards result in substantial energy savings relative to the base case, while the absolute savings are not correspondingly large. ConsequentlYt the percentage decrease in energy use under standards compared to the base case is high. 

### See infra.

2. 

### Significance of E.nergy 

### Savings. In the April 1982proposal, DOE identified three aspects ofthe inputs to the ORNL Model peculiar to CACs that all tended
to exaggerate the energy savings

attributable to standards. These aspects

were: optimistic estimates ofreal income growth, counting heat pumps as CACs, and counting all central aIr conditioning in 

### multi-family housing as CACs subject to the 

### consumerappliance program. 

### See 47 

### FR 14449-50. The
comments on the proposal supported DOE's conclusion that these aspects did indeed exaggerate the savings attributable to standards. In the April 1982 proposal, however, DOE had been unable to quantify the effect ofany of

8'Z Another cause ofthe decrease in absolute energy savings is the elimination ofthe counting of heat pumps as CACs.

88 A similar effect can be seen in the two smallercapacity classes ofCAC as reflected in the life cycle
cost analysis.

### Federal· Register 

## j Vol. 48, 

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### Rules and Regulations 39402



# ..

these aspects, and consequently had ignored them in its measurement of energy savings. For today's rule DOE

was able to distinguish heatpumps from CACs in the ORNLModel, which has the effect ofreducing the number of CACs inboth the base and standards

cases. The estimate ofreal income growth has notbeen changed, because insufficient evidence was provided in the rulemaking to justify a change. Finally, DOE did not distinguish



### consumerCAGs subject to this ·rulemaking from large-scale central air conditioning equipment in multi-family buildings. By overcounting the number ofCACs, the Model overstates the aggregate energy saved attributable to standards. 89



### The table below reflects the energy savings projected by the ORNLModel attributable to a standard for CAGs at each ofthe standard levels considered

overthe period 1987-1998. Level 1--0.76 Quads Level 2--0.92 Quads**L~ve13-1.07** 

### Quads Level 4-1.23 Quads 80 

### As indicated. above, to determine the oil and gas savings that would result from electricity savings attributable to standards for non-seasonal appliances, DOE took the average ofthe national proportions ofoil and gas projected for the years 1990 and 1995. As explained'in the April 1982

### proposal, however, 

### see 47 

### FR 14450, because air conditioning is used most in the summer and because

aas and oil are used "in the generation of

### ~lectricity in substantially different. percentages in the summer than they are

.in the winter or on average over the year, DOE altered the percentages used for deriving oil and gas savings for Ifonseasonal electrical appliances. The annual use projections were increased

or decreased, as appropriate, by the
currentpercentage variation ofthe

summeruse ofoil and gas to generate electricity from the annual use. Id. 

### No commenter critized this methodology or data, as far as it 

### went. Afew

. commenters, hOV'lever, suggested that because air conditioning tended to be used at peak load periods and because oil and gas tended to be used as fuel to meet peak demand, even a summer

89 Over 1 million households live in buildings with 5 or more units with a central airconditioning system for the entire building. See Housing Characteristics, 1980, DOE/EIA-D314 (1982). at Table 19.

" DOE ran two sensitivity analyses ofthe ORNL Model projections ofenergy savings. One substituted a constant distortion rate for the algorithm: the other substituted the historical rate of increased efficiency for that derived by the ORNL Model. At level 4 the results 1.21 Quads and 0.80 Quads. respectively.**Neithe~** amounts would satisfy the**firs~** two tests ofsignificance.' 

### average would understate actual savings ofoil and gas· attributable to standards for air**condit~oning** 

### equipment. These commenters did not submit data to support their claims, and DOE is unaware ofany data series that would enable it 

### to be more specific in assessing the oil arid gas used to generate the electricity used by air condilioning equipment. However, it should be noted that the measurement ofpeak load savings on a national basis has little efficacy. Although many utilities are summerpeaking,.CACs
cannot be assumed to always be the major contribution to this increase in
energy use. Room air conditioners and additional consumption in the commercial and industrial sector, may also be major factors in such an increase, depending upon the utility. Utilities are generally not now able to disaggregate these otheruses from residential CAe use to determine what proportion, ifany, ofthe peak load is attributable to residential CACs.

In addition, eachutility has very different characteristics and needs. Some utilities, such as those in some Southern States peakboth in the winter and the summer, because ofthe use of electric resistance heating in the winter. Furthermore, because some utilities have excess capacity which is relatively cheap, there is very little, ifany value, in
not using that capacity. Accordingly, although DOE recognizes that the saving ofpeak load electricity can be very valuable to some utilities, DOE cannot generalize and state that such a saving would in fact assist all utilities.

.

Using the above described methodology, DOE projects that standards would save at most only 1,101 Bpd ofoil and 19,468 mcfper day of natural gas. 91 

### This is only 11 and 34 

### percent, respectively, ofthe amount DOE deems significant.

The greatest amount ofsavings would constitute only 0.28 

### percent ofnational electricity use over the average life of CAGs beginning in 1987. 92 

### This is only

91 In these computations. DOE has reduced the percentage ofoil used to generate electricity by 14 percent and increased the percentage ofgas by 16 percent from the average ofthe annual percentages for the years 1990 and 1995, see note 80, supra, with the result that oil represents 2.28 percent and gas 7.13 percent ofthe projected electricity savings. These percentage changes are derived from the actual percentage deviations in 1982. See Electric Power Monthly, DOE/EIA-{)226.

82 Electricity used over the period 1987-1998 is estimated to be 434.1 Quads. It is derived through linearextrapolation ofthe estimate made for the years 1985, 1990. and 2000. U.S. Department of Energy, July 1981.**~'The** National Energy Policy Plan:' Table 1. 28 

### percent ofthe one percent savings that DOE.deems significant.

In the year 1999,.however, the ORNL Model projects that a standard for CACs would result in the following percentage decreases in energy consumption: Level 1-15.73**Level--2~** 19.29 

### Level 3....;....22.57 Level 4-26.27 93



### Thus, energy efficiency standards for CAGs set at levels 2, 3 

### or4 

### meet DOE's
test ofsignificant energy savings. However, as discussed above, the energy savings may be either higher or lower than the savings projected by the ORNL model.

In addition, the absolute energy savings attributable to GACs couldbe further reduced ifDOE found that the usage elasticities used in the ORNL model were much greater than anticipated. The Model currently

assumes that consumers will use CACs slightly more, as efficiencies for CAGs increase.94

### .However, some studies indicate that consumers might greatly increase their usage ofCACs as efficiencies increase, so that any reduction in energy use attributable to higher efficiency units could be offset by ·this higher usage.

Moreover, the ORNLmodel does not fully explore the impact ofhigher efficiency CACs on the overall thermal integrity ofa housing unit and the efficiencies ofother appliances, such as furnaces, within the unit. Ithas been suggested that the purchase ofmore efficient CACs could result in lower investments in measures such as insulation or stormwindows, which would improve the thermOal integrity ofa house, orin more efficient furnaces. If GACs did have such an impact on these investment decisions, little ifany real energy wouldbe saved by requiring a standard for CACs.

3. 

### EconomicJustification. A. 

### Impact

on Manufacturers. In the April 1982

- proposal, DOE indicated that the per

unit increased cost to manufacturers to. meet the highest standard level of efficiency was substantial. 

### See 47 

### FR 14451. As indicated above, however, DOE has altered the cost-efficiency

curve in a manner that has the effect of reducing the cost to a manufacturer of

93 As indicated above, DOE ran two sensitivity analyses ofthe level 4 savings. Under the constant distoration rate the percentage savings projected would be 26024: under the historical trend analysis the percentage savings projected would be 16.53.

g

... The ORNL model includes a value of.2 as the
usage elasticity for CACs. This means that for every unit ofenergy saved by more efficient equipment•.2 additional units ofenergy will be'consumed due to increased usage. 

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### Federal Register / Vol. 48, 

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### Rules and RegulatIons

d "

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### meeting a level 4 

### standard compared to what was indicated in the April 1982" 

### proposal. Nevertheless, the increased
costs to manufacturers to meet 

### level 4 

### \vould remain substantial. To meet 

### even

a level 3 

### standard for the most popular class, the 39,000 BTU 

### and under split system class, as compared to the 1978 

### base line unit would require over $150


### perunit in'increased costs to a large manufacturer ofCACs. For this same class, to meet a 

### level 2 

### standard, the increased costto the manufacturer v'Jould be $134 

### perunit.

" The 

### negative impacts on manufacturers projected by the FIM 

### are smaller than 

### might be expected from these increased costs. Thus, the 

### FIM projects'no increase in 

### business risk

attributable to standards and increased profitability for large firms as 

### a result of standards. On the otherhand, profitability over the period 1987-1991 

### for a medium-size firm decreases'over

. 25 

### percent at level 4 

### and over 20 

### percent,

at both levels 2 

### and 3. 

### Similarly, profitability for small firms declines almost ,30 

### percent over the same period
at level 4 

### and over 20 

### percent at levels 2 

### and 3. The 

### effect on 

### firms' debt/equity

ratio is not pronounced.

As indicated in the General Discussion section, the 

### FIM impacts are fully accurate only to the extent that the prototypical firm did not

### make investments in improving appliance efficiency as part ofi

### t5 historically indicated investments. 95 

### In the case of CACs the 

### ORNLModel projects that 

### by 1987 

### the 

### S\t\TEFwill 

### be 7.40 

### SEERin 

### the base case. From the EnAD this vlould 

### indicate that 16 

### percent ofthe necessary investment to achieve the highest standard level 

### would be made as part of historically indicated investments. Thus, the FIM negative impacts actually attributable to the highest standard level should be reduced by about 16 

### percent. At level 3, 

### however, the EnAD indicates that 80 

### percent ofthe necessary investrnent yvould be made as part of historically indicated investment.

. Consequently, the FIl\tf 

### impacts at this level should be reduced by 80 

### percent. J1

..

### t levels 1 

### and 2 

### the EnAD indicates lhat all ofthe necessary investment would be made as part ofthe historically indicated investment. Therefore, at these levels there should be virtually no nagative impact cn manufacturers, notwithstanding the 

### large increase in costs.

95 This conclusion, however, applies only to the "average" (in terms ofthe shipmentweighted efficiency ofits product) .prototypical firm. The negativeimpacts sufferedby a

## firm that had made limited orno investments in improved product efficiencywould still app."'Oach orbe those reflected by the FIM. 

### However, some commenters stated that the FIM did 

### not fully explore the negative impacts on manufacturers. One commenter, BardManufacturing Company, No. 2117, 

### noted,that several large firms 

### have recently discontinued their CACs divisions or sold them, because ofpoorprofitability. Bard states that the DOE 

### analysis does not recognize the severe impacts that a standard level could produce on the air

.conditioning industry, arguing that some firms could be driven out ofbusiness.

In addition to the above mentioned quantified impacts on manufacturers, an effect ofa standard, as indicated previously, would be to require certain investments to be made that might not otherwise have been made. These required investments may result in the forgoing ofcertain otherinvestments which would be more beneficial to the manufacturer. Manufacturers generally supported this conclusion.



### B. 

### Impact on Consumers. At all standards levels, consumers would incur substantial increases in first costs. For example, for a split system, 39,000 BTU 

### and underunit, the mostpopular class,
at a 

### level 2 

### standard the price increase would be $366 

### or a 33 

### percent increase, and at level 3, the 

### price increase would be $414 

### or a 37 

### percent increase. For 

### a single system, 39,000 BTU 

### and under unit, at standard level 2 

### the price increase wouldbe $376 

### or 

### a 3.7 

### percent increase, and at level 3, 

### the price increase would be $442 or a 44 

### percent increase. For a split system over 39,000 BTU 

### unit, the price increase at a level 2 

### siandard would be $391 

### or a 20 

### percent. increase, and at level 3, 

### the price increase would be $411 

### or a 21 

### pe'rcent increase. For a single system over 39,000 BTU 

### unit, the price increase at a level 2 

### standard would be $383 

### or a 22 

### percent increase, and at leyel3, the price increase would be $524 

### or a 30 

### percent increase. At standard level 4, 

### the price increases would be even greater. As previously discussed, DOE 

### does not have sufficient data to create a full "cost book" for this efficiency level, therefore, DOE does not have a precise estimate of the increase in prices ofunits at this level. Even at standard levell, the price increases are not small. The most popular class at levelt would increase in price by over $319, 

### or over 28 percent, YJith 

### the prices for other classes increasing 

### by more than 

### $300.

These large price increases, especially \vhen they are not part ofa life cycle
cost decrease, 

### see infra, are likely to have an adverse impact on all income groups. Although the income elasticity for CACs was higher than for any other prod.uct measured, it is clear that such 39403

large price increases will re,sult in a change in consumerbuying patterns. Thus, DOE

### believes that because ofthe 

### size ofthe 

### price increase, there wjll 

### be a substantial impact on consumers. '. Supplement, EcAD at 582-611

.. 

### Nevertheless, the analysis indicates that less than 2 

### percent ofthe households

. with 

### an income"ofover $15,000 

### would forgo the purchase ofCACs each year as



### a ,result ofa standard set at the highest level. However, the analysis only

measures direct**purchas~s** 

### by

consumers and does not measure purchases by third parties, such as builders. ForpUfposes ofthe analysis, DOE 

### determined that only 36 

### percent 

### of CACs were purchased dirctly. 

### See Supplement, EcAD, Appendix

## Jat 584-4. 

### Thus, there could be a substantial number ofCACs that would not be purchased by builders or 

### other,third party purchasers that would not be reflected in the analysis. 96

### The impact

on lowerincome households ($15,000 

### income orles's) is greater, with over 7 

### percent ofthose who would have purchased CACs not purchasing them because ofthe increased price attributable to standard level 4. 

### In the less than $7,000 

### income range, over 14 

### percent would forgo CAe purchases each year. While the percentages of lower income households that would forgo CAC purchases are large, the absolute number ofhouseholds so impacted are small (i.e., 5843 

### lower income households per 

### year would forgo CAe purchases), since lower income households are the least 

### likely to purchaseCACs in any case. 97



### On the otherhand, households that
rent theirhousing VJill 

### probably not 

### purchase CACs in any event and must accept 

### the equipment provided by 

### .the landlord. DOE believes that with respect to lower income households, landlords

are most likely 

### to provide the least expensive CAC, ifany, and hence the least efficient. Ifsuch a landlord were to purchase'a more expensive CAC, as a result ofstandards, DOE believes that the landlord**~ill** 

### probably recover any increased costs through higherrents or through diminished services

.. DOE does
not have data as to the ntlmber of households in 

### this 

### situation-lower income renters with CACs potentially subjectto standards whose electricity bills are not paid by the landloid. As to

9fiThis analysis only measured the impact ofa standard set at level 4. Standards set at level 2 or 3 would necessarily have smaller impacts under this analysis.

1'1 Only about 14 percent ofthe lowerincome' households have CAes. See Housing Characteristics. 1980, DOE/ElA-0314 (June 1982). at Figure 9.

### Federal Register / Vol. 48, 

### No. 169 

## I Tuesday, August 30,. 1983 

## I Rules and Regulations 39404

==
these households, however, DOE believes energy efficiency standards would have no positive impact.

Considering the burdens and benefits ofpossible standards for CACs to all

consumers arid lower income persons, DOE concludes that the effects ofa standardwould be somewhat negative' because ofthe substantial increase in first cost to 

### all consumers and the possible foregone purchases of CAGs by lower income households. Moreover, since DOE's analysis does not review the 64 percent ofall CACs purchased by third parties,. it is likely that the large increase in first cost could alter the buying patterns ofthird party purchasers to the detriment 

### Qfthe ultimate user ofthe units.

C. 

### Life Cycle 

### Cost. As indicated above, DOE has made three changes to the costlefficiency curves for GAGs that affectthe life cycle cost. The first and
most significant was the change in the capacity and usage, ofthe average CAC,

. reducing substantially the life cycle cost minimum for CACs in the 

### ORNL Model. 9SAlso, DOE added a new point

on the cost-efficiency curves, representing more advanced technology than was reflected in the April 1982 proposal, and deleted the previous highest efficiency design option in the EnAD, on the basis ofcomments on the proposal independently and together, these two changes reduce the cost of

more efficient CACs on the costefficiency curve and consequently reduce the life cycle costs ofthe most efficient CACs. They are not reduced enough, however, to become life cycle
cost minima.

For the product as a whole, the life cycle cost minimum is below all the standard levels analyzed. For two classes ofCACs representing almost 75 percent ofthe market, their life cycle
cost minima are likewise well below all standards levels. For the class oflarge split systems, the life cycle cost minimum is below only the level 4 standard. For the class oflarge single package systems, the life cycle cost minimum is below both levels 3 and 4.

98The ORNL Model determines energy consumption by product. not by product**cla~s.** Therefore, the cost-efficiency curves reflected in the cost-efficiency data in the EnAD for the product classes are first recreated into a cost:..efficiency

curve for the product as a whole. A life cycle cost
curve, including the life cycle cost minimum, for the

. product a8 a whole can then be determined. The'- Life Cycle Cost Analysis. however. treats each class ofproduct separately. For CACs, ,this results in four life cycle costs curves and four life cycle coet minima. For two classes. representing almost 75 percent ofthe market, the life cycle cost minima are below'all standards levels. For the remaining two classes. the life cycle cost minima are only below a level 4 standard This indiGates that any standard for CACs a't level 2 would prohibit the manufacture and sale ofthe most costeffective model. ofCAC to an average

consumerin the classes making up 75 percent ofthe national market. Moreover,. a 'standard at level 4 would prohibit the most cost-effective model 

### of CAC to the average consumerin every class ofCAC. Finally, at level 3, a standard would prohibit the most costeffective model ofCAC to the average

consumer in three ofthe four classes, making up 84 percent ofthe market.

In the April 1982 proposal, DOE indicated that it would consider it to be

a significant burden ofa standard ifthe standard prohibited from the market the
average consumer's most cost-effective model ofan appliance. As indicated in the General Discussion, no commenter disagreed with assigning such a burden
to a standard that had such an effect.

Prohibiting the life cycle cost minimum for.an appliance denies the freedom to the consumer to purchase the product that is most cost-effective. However, even when consumers have the freedom to make such a choice, they do not always do so. As discussed in the General Discussion section, there is always some market distortion such that

- the efficiency ofthe average purchase falls short ofthe life cycle cost minimum. Thus, it is possible to prohibit the most cost-effective model ofan appliance and yet at the same time reduce the average life cycle cost for appliances ofthat type. That 

### is, a standard may result in a life cycle cost for the appliance that is higher than
necessary but still less than the life cycle cost 

### ofthe average product in the market. On the otherhand, a standard
not only may prohibit the most costeffective model ofan appliance but also actually increase the average consumer's life cycle cost. In the April 1982 proposal, DOE indicated that it would consider it a substantial burden ofa standard ifit had the effect of actually increasing consumers' life cycle
costs. No commenter contested 

### this position.

The comparison oflife cycle costs at the various standard levels to the life cycle cost ofa central air conditioner at the 1987 SWEFreveals that for the two classes of39,000

### BTU and under central 

### airconditioners that make up 75 percent ofthe market, a standard at all central air conditioner levels actually increases the average. consumer's life cycle costs. For a split system 39,000 BTU and less central 

### air conditioners, the life cycle
cost at level 1 increases by $17, at level 2, 

### by $19 at level 3, by $24, and at level 4, 

### by $153. For'a single system 39,000 BTU· and less central air conditioner,.the life' cycle cost at level 1 increases by $6.00, at level 2,.by $8.00 at level 3, by' $16,' and atlevel 4, hy $208. However,. for



### a split system•.greater than 39,000 BTU central air conditioner, the life cycle
cost decreases by $106 at level 1,.by' $154 at level 2 by $187 by level 3, and by $131 at level 4. For a single system, greater than 39,000 BTU central air conditioner, the life cycle at level 1 decreases by $164, at level 2 

### by $215, at level 3, by $169, and at level 4, 

### by $43. 

### See EcAD Supplement, Table 

### G-9.

Accordingly, a standard would prohibit the most cost-effective models and would raise life cycle costs for the
average consumer ofthe most popular classes ofCACs. However, it should be noted that the narrow differences between the negative financial impacts recorded at levels 1, 2 and 3, result from the almost flat nature ofthe life cycle
cost curves for the two most popular classes ofCAC until they reach very high efficiences. Differences in life cycle
costs between the various efficiencies below level 4 are therefore small. This is shown, for example, in the Supplement where the life cycle cost differences between the 1987 SWEF and levels 1, 2. and 3 are not more than $24 for one class and not more than $16 

### for the other.

Thus, it is appropriate to consider the 

### life cycle cost effects ofa standard for CACs at all levels to be a burden because 

### a standard would penalize.the
average consumer, rather than benefit 

### him. While the degree ofburden increases as the amount ofpenalty increases, it should be noted that at level 4 the amount ofthe penalty is very large (between $150 and $200 for the classes making up 75 percent ofthe market). 99Both the amount ofthe penalty and the fact ofthe penalty are taken'into account in weighing the benefits and burdens ofstandards.

The regional analysis ofthe life cycle
cost effects ofa standard for CACs reflects the fact that the effects ofa standard for CACs differ substa"ntially depending upon the area involved. 

### See Supplement. 100For example, in six States the combination ofclimate and electricity prices results 

### in a·life cycle
cost minimum above the 

### most stringent

"While life cycle cost penalties are measured

over the life ofthe product (12 years for CACs). the' penalties are suffered in the. year ofpurchase in the increased purchase price ofthe product that is

never recouped in discounted fuel price savings

. Life cycle cost benefits. however. are felt only over the life ofthe product. 8S fuel price savings outweigh the increased purchase price.

looThe analysis in the Supplement reflects only. the effects with regard to the most popular class of CAe. making. up 60 percent ofthe market. 

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### Rules and Regulations 

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### standard level-that is, the most costeffective model would

### notbe prohibited

even at the highest standard level. On the otherhand, in 23 

### States the most cost-effective CAC would be prohibited

at 

### even the lowest·standard level, because ofthose States' low electricity prices, low number ofcooling degree days, or a combination ofboth. Similarly, comparing the difference in 

### the life cycle costs between the projected 1987 

### SWEF and the 

### various standard levels, the analysis shows that States with average orbelow average CAC 

### usage and below average electricity prices are generally harmed, while States with above average CAC usage and average o'r above average electricity prices are benefited. Hovvever, it should be noted that any benefits orburdens reflected in this analysis are based upon the average consumer's usage ofCACs. To the
extent that an individual consumeruses

a 

### CAC less than average, even in a State with a positive LCC, that consumer would be 

### harmed. At level 4, 35 

### States

are h'armed, compared to 16

### benefited, but at levels 1,2, 

### and 3, 28 

### States are benefited compared to 23 

### harmed.

, rvloreover, as might be expected, those States thatbenefit generally have**h~gh**



### . levels ofCAC saturation because ofthe 

### hotter climate. The 16 

### States that benefit
at level 4 

### account for almosthalfofall the CACs in the Nation. The 28 

### States that woud be assisted by standard at levels 1, 2 

### or 3 

### account for nearly 75 

### percent ofCACs, saturation in the market.

The ORNLModel's 

### NPV output is consistent with the life cycle cost analysis. At standards levels 3 

### and 4 

### the Model projects a 

### negative 

### NPV, ranging from $85 

### million at level 3 

### to' $358 

### million at level 4 

### over the period 1987- 2017. At levels 1 

### and 2, 

### however, there

are 

### positive NPVs 

### of$153 

### million and $63 

### million, respectively. The positive NPV 

### at levels 1 

### and 2, 

### notwithstanding the small increase in life 

### cycle costs for the classes that make 

### up 75 

### percent of the market, reflects the 

### much larger decrease in life 

### cycle costs for the 

### remaining 25 

### percent ofthe market and 

### representing the larger units. None 

### of these amounts, however, are large in an absolute sense. For example, spread

over the Nation's 80 

### million households 

### the negative 

### NPV is less than $.15 

### per yearperhousehold at level 4, 

### while the 

### positive NPV 

### for CACs at 

### level 2 is 

### only $.08 

### per yearperhousehold.

The NPV's for CACs decrease as the standard requires greater efficiency. Thus, moving from a level 1 

### standard of efficiency (which does not save ' significant energy) to a level 2 

### standard (which does) results in a 

### decrease in NPV. 

### As indicated in the April ,1982 

### proposal, this reflects that such a mandated increase in efficiency of

,CACs results in anincrease in 

### the negative present values relative to the positive present values.



### D. EnergySavings. As indicated

a

### bove, overthe 12 

### years ofthe 

### average life ofa CAC, a standard for CACs would, beginning in 1987, 

### save between 0.76 

### and 1.23 

### Quads ofelectricity, 101 which 

### is an average 0£.063 

### to .103 

### Quads 

### ofelectricity peryear. This
amount ofenergy on 

### a yearly basis is
not very great.



### E. Lessening ofUtility orPerforlllanCe of

Products. Concern was expre'ssed 

### by

..some commenters that standards for CACs could result in the design ofCACs that do 

### not achieve a 20 

### percent dehumidification. Were this true DOE, 

### would agree that this would constitute·a burden attributable to standard, because dehumidifieation by 

### CACs is, 

### at least where humidity is a problem, a definite utility orperformance aspect ofCACs. As was indicated in the technical discussion, hOlllever, one ofthe reasons why DOE's highest analyzed standard level is below the efficiency claimed for

some existing models in the market is because that standard level can be 

### achieved with existing technology while retaining necessary dehumidification capabilities.

DOE is not aware ofany other factor associated with'a standard set at a level analyzed that might affectthe performance orutility ofexisting CACs. However, as was discussed above, despite DOE's best efforts to assure no negative impact on 

### performance or utility ofexisting products, there is 

### no

assurance that as a result ofstandards disincentives to investment in new performance orutility features that might reduce efficiency would lessen the utility orperformance offuture products. 

### \l\Jhile manufacturers supported 

### this conclusion in general, they gave no 

### examples specific to CACs.



### F. Impactof Lessening Competition. The Attorney General has determined 

### thatt..ite absence'of

### a Federal standard for C.l\Cs 

### would have no impact on competition. The Attorney General did
not assess the possible effect on competition attributable to a Federal

101 As described earlier, these figures actually
overstate energy savings to the extent that the ORNLModel includes central air conditioning systems not, subject to the Act, such as those systems in large buildings. DOE is not able at this time, however, to quantify the extent ofthis
overstatement. 

### 39405

standard for CACs at the levels analyzed. 1 Q2



### G. 

### Need to Save Energy. Central air conditioners use electricity exclusively

as their energy source. The electricity that would be savedby standards for CACs wouldbe concentrated in certain parts ofthe Nation and would be concentrated during summerpeak load periods. While peakload savings are generally more valuable to,utilities than normal load savings, the value ofthe savings depends greatly on the nature of the particularutility's peak load and consequently is highly regional, ifnot local, in chara,cter. Thus, although savings ofelectricity associated with CACs are more valuable than other forms ofelectricity savings, the relative value ofthose savings depends on the load characteristics ofthe particular utility.

H. 

### OtherFactors. The significant negative impacts projected by the 

### FI!v1

on the prototypical small manufacturer ofCACs 

### were presented above. Only with respect to profitability was there any significantnegative impact. Moreover, after adjusting' for investments made as part ofhistorically indicated investments, the only meaningful impact would 

### be at level 4. In 

### the April 1982 

### proposal,

.however, DOE indicated its beliefthat the methodology ofthe FIM 

### would tend to understate the negative impacts of

, standards on small firms. No comments

were received specific to small CAe manufacturers, butno commenter disputed DOE's reasons 

### for concluding that 

### the FIM 

### methodology tends to understate the negative effect of standards on small manufacturers. Consequently, DOE 

### concludes that the negative impacts projected by the 

### FIM (as adjusted) understate the negative impact ofstandards on small manufacturers ofCACs. 

### Weighing ofF-actors

The benefits ofa standard for 

### CACs

are 

### Li.at it would save electricity and have a positive net present value at levels 1 

### and 2, 

### while at levels 3 

### and 4 

### the benefit ofa standard would be that it



### saves electricity. The amount of electricity saved at each oflevels 2, 3, 

### and 4 

### is greater overthe period 1987- 2005 

### than Li.e electricity 

### saved at L1.e highest 

### standard level for any other product. Moreover, the electricity 

### sav,ed is peak load electricity, generally the

102 In 1980 the Attorney General did comment on the Ju.."le 1980proposal to set Federal standards. That COIll:nent 1I\'as highly critical ofthe**analys~s** used and conclusions reached in that proposal, to the extent that it was said that a conclusion as to the impact on competition could not be reached.

### 39406 Federal Register 

# I Vol.. 48, 

### No. 169 

## I Tuesday, August**30~** 

### 1983 / 

### Rules and Regulations.

most valuable type ofelectricity savings. While there are positive net present values at levels 1 

### and 2, they 

### are small in magnitude.

.

The burdens ofa standard for CACs depend on the level analyzed. At 

### level 4 

### there are very significant burdens. The impacts 

### on**manuf~cturers,** 

### while not overltvhelming, are negative for small and medium-size manufacturers. The 

### negative 

### life cycle cost impacts,
moreover, are substantial-eliminating from the 

### market place the fflost costeffective CAC to the average consumer in all four product classes and.raising the life cycle cost to the average

consumer by lc;irge amounts in the two classes that make up 75 

### percent ofthe market. The net present value analysis reflects these impacts with the largest negative net present value ofany product or class under any analyzed standard level. Accordingly, the negative impact on consumers at level 4 

### creates a substantial burden. In 

### addition, on a regional 

### basis, staIldards would have a negative impact on 35 

### States. Finally, to these quantified burdens must be added the smalt additional unquantified burdens reflected in the discussion. Weighing the benefits 

### ofthe 1.23 

### Quads 

### ofelectricity savings, much 

### ofwhich is peak load savings, against 

### all these burdens, 

### DOE. concludes that a standard set at level 4 

### would not be economicallyjustified.

At level 3, 

### while the electricity savings are less, so also are the burdens. The quantified negative impacts set forth in the 

### FIM on small and mediumsize manufacturers are quite small. I-Iowever, a standard set at this level could drive some manufacturers out of business. Such a result could be potentially anti-competitive. Although " the increase in life cycle cost for the t"vo
most popular classes is reduced by over 90 

### percent, the most cost-effective models ofCAGs in three classes are eliminated from the marketplace. The
net present value is also negative. The increase in first cost to consumers is

over $400 

### for all classes ofCACs. Thus, this combined**neg~tive** 

### impact on

consumers creates a substantial burden. Moreover, on a regional**basis~** 

### standards would have a 

### negative impact on 23 

### States. Finally, 

### to these quantified burdens ffiUSt 

### be added the small, additional unquantified burdens reflected in the discussion. Weighing the benefits of1.07 

### Quads ofelectricity savings, much ofwhich is peak load savings, against these burdens: DOE 

### concludes that the burdens 

### outvveigh the benefits. 103

100Since the 1.07 Quads includes savings attributable to a possible overestimation ofthe 

### At level 2, 

### the electricity savings are reduced to 0.92 

### Quads, and the burdens

are somewhatless. Notably, the
negalive impacts predicted by the 

### FIM

on manufacturers small to begin with,

are totally eliminated. However, there is always the possibility that 

### some manufacturers could be driven out of business by a standard set even at this level. This result could potentially be anti-competitive. The negative life cycle
cost impacts are again reduced, although the t\.'Vo smallest classes ofCACs which represent almost 75 

### percent ofthe market, have life 

### cycle costminima which are belov'! level 2. 

### The net present value for the product as a whole becomes. a 

### positive number however, (albeit 

### a number so small as 

### to be within the errorrange) and the 

### NPV therefore becomes a·small benefit. The increase in first cost to 

### consumers ranges from $366


### to $391, 

### depending on the class ofCAC. When all of

### these consumer impacts are considered, however, it 

### is clear that the small positive 

### NPV cannotoutweigh the
negative 

### Lce results and the large increase in first costs. Accordingly; DOE 

### has determined that these negative impacts on consumers constitute an appreciable burden. Finally, to these quantified burdens must be added the small, additional unquantified burdens reflected in the discussion. Weighing the benefits ofelectricity savings of0.92 

### Quads, much ofwhich is peak load savings, against the burdens at a level 2 

### standard, DOE 

### concludes that the burdens 

### ofa standard at level 2



### outweigh the benefits and that a standard set at level 2 

### is not economically Justified. 104

At 

### levell, the electricity savings are still less and do not meet any ofDOE's


### tests ofsignificance, and the net present value is slightly more positive. The 

### life cycle cost 

### burdens, however, remain virtually the same "as level 2. 

### While these burdens 

### are not great, neither at this level are the savings. Consequently, DOE 

### concludes that the burdens ofa standard 

### at level 1 

### outweigh the 

### benefits.

Accordingly, because of

### the significant negative impacts on "'consumers at 

### all standard levels as well



### as negative impacts on 

### some manufacturers, DOE 

### has determined that the 

### economic burdens ofany energy

number ofCACs, and real inconle growth, as well

as a possible underestimation ofincreased usage as

a result ofincreased efficiencies, any reduction of the savings figure would tend to tip the 'balance further in favor ofthe burdens outweighing the benefits.

.

104The 0.92' Quads is subject to the same reductions in savings discussed supra in note 103. Such reductions insBvings would further tend to tip the balance inf.avor ofthe burdens outweighing the benefits. 

### efficiency standard for CACs clearly • outweigh the small benefits attributable
to saving energy_



### g. flome 

### Heating Equipment(Not Including Furnaces)

The Department ofEnergy is not proposing a rule with respect to the product home heating equipment (not including furnaces) (hereafter referred to

as "home heating equipment"). At the present time,'there is no test procedure applicable to unvented oil or gas home heating equipment. "Thus, a standard would be precluded for this class, even though it 

### probably .is the largest growing class in 

### the product type. Moreover, it 

### does not appear likely that it 

### would be technologically feasible to improve the efficiency ofelectric resistance home .heating equipment for the 

### same reasons described with respect to electric furnaces, see 

### infra. Finally, DOE is proposing major modifications to the existing test procedures relating to vented home heating equipment in 

### light ofthe burden on manufacturers, as well

as concerns raised with respect to the failure ofthe existing procedure to

measure the effects ofthermal stack dampers and modulating controls on energy efficiency.

. •

In light ofthe above, DOE believes it 

### would be premature to propose any rule
at the present time with regard to home. heating equipment.



### IV. Preemption of

### State Regulations

On December 22, 1982, 

### DOE published

a final rule with respect to the procedures by which States may obtain exemptions for State or local efficiency standards that are statutorily preempted and by which manufacturers may obtain preemption ofa State or local efficiency standard for which there is no Federal final rule. 47 

### FR 57198, 57213. 

### DOE also established a rule for determining the effective dates ofa final Federal standard or no-standard determination,
upon ."vhich supersession 

### ofState and local standards would take place. The rule stated that a Federal standard or no-standard determination would be effective in a State 180 

### days after 

### publication ofthe Federal standard or determination in the 

### Federal Register, unless the State had filed a notice

# of petition wi

### thin 60 

### days and 

### a petition for



### a rule to exempt its 

### State or local standard**withi~** 120 days of

### publication. If

### a State filed such a 

### notice and petition, the State standard would not • be superseded until DOE had denied the requested 

### rule, but 

### in no event sooner than 180 

### days afterpublication ofthe standard. 

### Thus," no hiatus would occur

### when a State or local standard would

### Federal Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 / 

### Rules and' Regulations 39407

not be in effect-ifthe State obtained an exemption.

The final rule adopted today determines that an energy efficiency standard for r.efrigerators and refrigerator-freezers, freezers, water heaters, room air 

### conditioners, or furnaces would not result in a significant conservation ofenergy orbe 

### economicallyjustified, and that an energy efficiency standard for CAC's would not be economicallyjustified. Thus, any State or local appliance efficiency standard with 

### respect to these products is preempted on the effective date ofthis rule unless a StateJiles a notice ofpetition for a rulemaking within the 60 

### days and the petition within' 120 

### days.

Since publication ofthe December 1982 rule, DOE 

### has received several questions concerning the timing of preemption in 

### a State, the 

### requirements for submittal ofpetitions for exempting

a State standard from preemption, arid the criteria to be used by DOE 

### to evaluate the petitions.

The 

### California Energy Commission (CEC) specifically requested clarification 

### ofSection 430.34(b) 

### VJhich provides that the 

### final effective date for the rule may be:

With respect to a covered product in a particular State for which that State has filed

a notice ofpetition within 60 days of publication ofthat standard in the Federal ' Register, and a petition under section 327(b)(3) ofthe Act within 120 days of publication ofthat standard in the Federal**~egistert** the date upon which the Secretary issues or denies a final rule concerning that petition.

The 

### CEC asserts that because the Secretary's determination with respect to a particularpetition is a rule under section 327(b)(3) 

### ofthe Act, it 

### cannot be 

### effective upon publication ofthe rule, but 

### instead can only be 

### effective by a 

### date.at least 

### qO days afterpublication of the 

### rule. 5 

### U.S.C. 553(d). 

### Thus, there would be a 30 

### day hiatus during \vhich the Federal standard orno-standard "- determination would apply in the State and preempt the State standard, before

a rule granting an exemption from preemption would take effect.

TheCEC's commenthas substantial merit. DOE, 

### in promulgating § 430.34(b) 

### did not intend for such a hiatus to occur. Indeed, such a hiatus would directly
contravene the purposes of § 430.34(b). 

### In order to clarify DOE's intent, DOE is amending § 430.34(b) 

### to provide:**WiL~** respect to a covered product in a particular State for which that State has filed

a notice ofpetition within 60 days of publication ofthatstandard in the Federal Register, and a petition under section 327(b)(3) ofthe Act within 120 days of publication ofthat standardin the Federal Register, 30 days from the date upon which the issuance: or denial ofthe final rule concerning that petition is published.in the Federal Register.



### This minor amendment makes clear that the effective date ofa final. 

### energy efficiency standard for which a State files a 

### timely petition occurs 30 

### days from 

### publication ofthat rule in.

### theFederal Register.



### The National Conference 

### ofStates on Building Codes and Standards, Inc. (NCSBCS) expressed confusion over who may submit petitions· for 

### exemption ofSta

### te rules from preemption. In 

### order
to 

### simplify the current procedure. which requires each State to submit separate petitions for. each covered product, NCSBCS suggests a 

### uclass action" filing by 

### NCSBCS on behalfofeach concerned State that has adopted ASHRAK Standard 90A-1980 

### for particular products and that wishes to'participate in the action. NCSBCS argues thatthis approach would be less burdensome' on both the States and DOE.'



### Although DOE 

### agrees that the NCSB.CS approach would certainly be 

### less burdensome, the Actprohibits the type of "class action" submission·that NCSBCS envisions. Section 3'27(b)(3) 

### of the Act only permits States to submit petitions for exemption from 

### preemption.**~loreover,** 

### a separate determination must be made 

### by DOE with 

### respect to each petition. This is not to say, however, that DOE 

### cannot consider 

### a number 

### ofpetitions in one proceeding. Indeed, DOE 

### expects to proceed in 

### such a fashion. Except for the minimal filing requirements with respect to 

### each State's petition, 

### see 10 

### CFR 430.44(b), 

### a State may, ifit 

### wishes, rely

on NCSBCS 

### or other persons or organizations to 

### submit data or arguments in the rulemaking proceeding in support ofthe State's petition. Like
any 

### other rulemaking

, DOE will make 

### its decision on States' petitions, applying the 

### statutory tests, only after full

. 

### consideration ofthe 

### ruleniaking record.

DOE has also received comments concerning the criteria used by the Secretary for reaching a determination ofthe State petitions. As DOE discussed

a.t 

### length in 

### the December 1982 rulemakillg, 

### DOE will evaluate the petitions based upon the language ofthe
statute at Section 327(b)(3). 47 FR-57213- 4. 

### Thus, DOE**~vil1** 

### grant an exemption to

a State 

### ifthe State standard is more stringent than the DOE standard, and 

### there is a significant State orlocal interest to justify the regulation; unless DOE finds that the State standard unduly 

### burdens interstate commerce.

For a fuller discussion ofthe Department's views, and the type of State and local law that would be subject to 

### supersession, see 47 

### FR 57213.



### DOE-has incorporated into the fmal rule 

### a minor.technical change concerning the filing requirements for petitions. In § 430.42, 

### the address specified for filing petitions has been· changed to readas follows: 

## "U.S. Department ofEnergy, Section 327 

### Petition-Energy Efficiency Program for ConsumerProducts, Assistant Secretary for Conservation and 

### Renewable Energy, Mail 

### Station, CE-l, Forrestal Building, 1000 

### Independence Avenue, SW., vVashington, D.C.**20585:~~** 

## v. Procedural Matters



### a. Envil'onI[lentalIssues



### The 1980 

### environmental assessment (EA) 

### for the then propos'ed energy efficiency standards estimated that the
energy savings resulting from national standards for eight 

### appliances would be within 

### the range 

### of0.8 

### to 1.6 

### quads per year. The EA 

### then analyzed the environmental impacts ofthis change in
energy use. Based on 

### this EA, 

### a finding ofno 

### significant impact was issued concluding that this level ofchange of
energy usage would not significantly affect the quality of

### the human 

### envirOIL"llent (June 30, 1980 45 

### FR 44086). In neither 

### the June 1980 

### proposal nor the

.April 1982 

### proposal 

### was any comment received disputing the 

### conclusion that a 1.6 

### Quads peryear change in energy usage would not have a significant impact on the 

### environment.

The NRDC, 

### in commenting upon the April 1982 

### proposal, however, criticized DOE's reliance upon 

### the June 1980EA for 

### its determination**t~at** 

### the Arri11982 proposal would not have significant environmental impacts since the June 1980 EA 

### did not address the impact ofa 

### Federal·no-standard standard preempting existing State standards. NRDC 

### alleged that the effect

### -ofsuch preemption would be 

### to increase energy usage compared to the status quo

### ante ofno Federal standard but the existence ofState standards.

Initially, DOE believes that the NRDC's comment is not well-founded. As indicated in the December 1982 

### final rule, while a 

### Federal no-standard standard·would preempt State standards in the absence ofan exemption for the State standards, DOE's review ofexisting State standards makes it appear highly 

### likely that the exemptions would be granted. Both the expressed interest ofseveral States in their standards and the notices ofpetition for exemption filed with 

### respect to·the December 1982 

### final rule indicate that States will in fact 'seek

### Federal Register· / Vol. 48, 

### No. 169 / .

### Tuesday, August 30, 1983 

## I Rules 

### and Regulations 39408

exemptions. Consequently, the circumstance NRDC suggests should be analyzed-the elimination ofall 

### existing State standards-would appear to be an exceptionally improbable situation.

Nevertheless, DOE 

### has**analyz~d** 

### the impact ofsuch an improbable situation. First, a "worst casen 

### analysis \vas constructed. Under this "worst case" it



### was assumed that all States have standards as strict as California's. This, ofcourse, is factualy incorrect, however, since California has, with 

### respect to all· products, the strictest and most pervasive appliance efficiency standards ofany State. It was 

### also

I 

### assumed that all efficiency improvements that have been achieved while these standards have been in _place would be abandoned by' manufacturers and consumers, and that manufacturers at considerable investment expense would retool to make less efficient equipment than they



### are currently makin.g. Such an assumption strains credulity and is directly contrary to a determination made by 

### DOE on the record ofthe

. rulemaking that energy efficiency improvements have primarily resulted from increased energy prices, not State standards.

From these assumptions DOE took California's claimed energy savings attributable to its standards, which were criticized by some comnlenters in this rulemaking as unrealistically high, "and determined per-capita energy savings in California. These per-capita energy

savings were then applied nationwide. This results in a "worst case" ofa nostandard determination, eliminating all State standards, causing an increase in energy use of0.95 

### Quads peryearfor all appliances from 

### what vw"ould be used vlith 

### Sh.::.te standards. This 0.95 Quads im.pactper year is substantially less than the.maximum of 1.6

### quads peryear that DOE had previously determined to result in insignificant impacts on the quality ofthe human**enviroIlJ~ent.** 

### Thus, DOE has concluded that the**.&~pril1982** 

### proposal even under the most extreme unrealistic 'eVorst case analysis would clearly not result in significant environmental impacts so that neither

an EA norEIS are required.

DOE also attempted to make a more realistic appraisal ofpotential environmental impacts 

### ifall State standrds were eliminated, a situation DOE believes to be highly 

### improbable,

as discussed above. In**thi~** 

### appraisal, actual individual State standards were used instead ofCalifornia's. For the products central air conditioners, room air**condition~rs,** 

### gas furnaces, and water heaters, all sales subject to standards were assumed to be 

### made at the 

### standard level. 105

### Using the national
average SWEF

### projected by the ORNL Model in 

### the base case, plus the SWEF 

### for all 

### sales subject to standards, DOE 

### calculated a SWEF 

### ofsales not subject
to 

### standards._This SWEF

### is then applied

nationwide for all 

### sales ofthe

### Jour products to determine energy usage ifall**~tate** 

### standards were preempted. Under the methodology, elimination ofState standards would 

### have the 

### followina 

### effects: 0



### "centralair conditioners-a total of

### 1.22 Quads over the 

### period 1984-2059

room 

### air conditioners-a total of3.88

Quads 

### over the period 1984-2146
gas 

### ,vaterheaters-a total of0.407



### Quads over the period 1984-2018 electric \'Vater heaters-a total of0.321



### Quads over the period 1984-2021
gas furnaces-a total of0.001 

### Quads

over the period 1984-2011
For freezers, refrigerators, and oil furnaces there are hardly any models in

commerce that do not satisfy existing State standards, and there is no increased use ofenergy that would

occur as a result ofthe elimination of State standards.

PI. 

### copy ofthis analysis, including the methodology, is available for inspection
at the DOE Freedom of

### Information Reading Room, Room 1El90, Forrestal Building, 1000 Independence Avenue, S.W., Washington, D.C., 20585, between the hours at 8 

### a.m. and 4:00 

### p.m., Monday through Friday.

Again, for the reasons explained earlierin the preamble·and this section, DOE does not believe that-a nostandard determination would result in any

### increase in any energy usage con;pared to the base case. The figures derrved here assume total elimination of State standards with no exemptions and

assume that manufacturers and

consumers abandon the efficiencies**L~at** 

### already are in the marketplace, boL, of which assumptions are unrealistic.

Based upon the findings ofthe EA and subsequent analysis, it 

### has been determined that this rule does not constitute a UmajorFederal action significantly affecting the quality ofthe human environment" within the meaning of

### t.he National Environmental Policy Act, 42 

### U.S.C. 4321 

### etseq., and therefore an environmental impact
statement is not required by NEPA and the applicable DOE guidelines for compliance lvith NEPA.

lOS If sales, in fact, were above the standard level, then the standard was not responsible for that efficiency level. Moreover, DOE is makinQ no determination with respect to central air 0 conditioners in this final rule. 

### b. Executive Order 12291


### Executive Order 12291 requires agencies to determine 

### ifa rule is 

### a "majorrule" under 

### Lhe Order. In 

### the April 

### 1982 proposal, DOE 

### determined that 

### the rule proposed there would not be ,8 

### majorrule because, ifadopted, it, \vould not result in (1) 

### an annual effect

on the economy of$100 

### million ormore; (2) a 

### major increase in costs or prices for
consumers, individual industries, Federal, State, or local government agencies, orgeographic regions; or (3) 

### significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability ofUnited States-based enterprises to compete with foreignbased enterprises in domestic or export markets. This conclusion was not criticized in the rulemaking proceeding. The rule adopted today is a part ofthe rule proposed on Apri11982 and, accordingly, would likewise not be a majorrule under the Executive Order. Consequently, this rule has been revielved

## byo:rvrn under tJle procedures applicable to rules other than major rules.



### c. RegulatoryFlexibility

In the April 1982 proposal DOE 

### certified, pursuant to Section 605(b) 

### of the Regulatory Flexibility Act, that the proposal, ifpromulgated, would not have a significant economic impact on a substantial number ofsmall entities. While the April 1982 proposal received
commentfrom small businesses involved in the manufacture of appliances, generally supportive ofthe proposal, the commenters did not take issue with DOE's certification. Accordingly, DOE certifies that this rule will not have a significant economic impact on a substantial number ofsmall entities.

In consideration ofthe foregoing, Part 430 

### ofChapterII ofTitle 10, Code of Federal Regulations is amended as set forth 

### belo\/v.

List ofSubjects in 10 eFR 

### Part 430



### Administrative practice and procedure, Energy conservation, Household appliances.

Issued in Washington, D.C., August 25, lG83. Joseph

### J

.. Tribble, AssistantSecretar!" Conserv'ation and RenewableEnergy.

PART 430-ENERGY COi\!SERVATION PROGRAff' FOR CONSUi\1ER PRODUCTS

1. 

### Section 430.32 

### is revised to read as follows: 

# •

•

### Federal Register / Vol. 48, 

### No. 169 / 

### Tuesday, August 30, 1983 

# I Rules and Regulations 

# • § 430.32 Final energy efficiency standards.

The final energy efficiency standards for e8:ch class ofcovered products are:

(a) 

### Refrigerators andrefrigeratorfreezers. No standard for 

### all classes. (b) 

### Freezers. Nostandard for all classes.

(c) 

### Dishwashers. [Reserved] 

### (d) 

### Clothes dryers. No standard for 

### all classes.

(e) 

### v1l

### aterheaters. (1) For the classes
gas, electric, electric table top, and oil. No standard;

(2) For the class heat pump "vater heater. [Reserved]

(f) 

### Room airconditioners. No standard ofall classes.

(g) 

### Home heating equipment, not includingfurnaces. [Reserved]

(h) 

### Television sets. [Reserved] (i) 

### Kitchen ranges andovens. No standard for all classes.

(j) 

### Clothes washers. [Reserved] (k) 

### Humidifiers anddehumjdifiers. [Reserved] 

### (1) 

### Centralairconditioners-ell For the classes which include all split systems and single package units ,which do not operate with a heat pump. No standard for all classes;

(2) For the ct'asses which operate with

a he'at pump. [Reserved]

(m) 

### Furnaces. No standard for all classes.

2. Section 430.34 is revised to read as follows:

§ 430.34 Effective date.

The effective date ofa final energy efficiency standard (including a determination ofno.standard) in § 430.32 shall be the later of:

(a) 180 days after publication ofthat standard in the Federal Register, or

(b) With respect to a covered product in a particular State for which that State has filed a notice ofpetition within 60 days ofpublication ofthat standard in the Federal Register, and a petition

. under section 327(b)(3) ofthe Act within 120 days ofpublication ofthat standard 

### 39409

in the Federal Register, 30 days from the date upon which the issuance or denial ofthe final rule concerning that petition is published in the Federal Register.

3. Section 430.42(a) is revised to read

as follows:

§ 430.42 Filing requirements.

(a) A notice ofpetition or a petition for a rule under this section shall be submitted in triplicate to: U.S. Department ofEnergy, "Section 327 Petition-Energy Efficiency Program for Consumer Products," Assistant Secretary for Conservation and Renewable Energy, Mail Station, CE-l, Forrestal Building, 1000 Independence Avenue, 

### S.W., Washington, D.C. 20585.

(Part B ofTitle III, Energy Policy and Conservaton Act, Pub. L. 94-163, as amended by the National Energy Conservation Policy Act, Pub. L. 95-619, (42 U.S.C. 2691 et seq.))

[FR Doc. 83-23787 Filed 6-29-83: 8:45 am)

BtLUNG CODE 6450-01-M