54FR47916

FrWay

Member 17, 1989

Part III

0

Department of

Energy

Office of Conservation and Renewable

Energy

10 CFR Part 430

Energy Conservation Program for

Consumer Products: Energy Conservation

Standards for Two Types of Consumer

Products; Final Rule and Determinations

and Analyses of Competitive impacts

V

 CE-RM-87-102 COMMENT 10

54FR47916 

friday 

Noveinber 17, 1888 

Part III 

Department of 

Energy 

Office of Conservation and Renewable 

~rgy 

10 CFR Part 430 

Energy Conservation Program for 

Consumer Products: Energy Conservation 

Standards for Two Types of Consumer 

Productsj Final Rule and Determinations 

.,d Analyses of Competitive Impacts 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

DEPARTMENT OF ENERGY

Office of Conservation and

Renewable Energy

10 CFR Part 430

[Docket No. CE-RI61-87-1021

Energy Conservation Program for

Consumer Products: Energy

Conservation Standards for Two

Types of Consumer Products

AGENCY: Office of Conservation and

Renewable Energy, DOE.

ACTION: Final rule.

SUMMARY: The Energy Policy and

Conservation Act (EPCA), as amended

by the National Energy Conservation

Policy Act (NECPA), the National

Appliance Energy Conservation Act

(NAECA), and the National Appliance

Energy Conservation Amendments of

1988 (NAECA 1988), prescribes energy

conservation standards for certain

major household appliances, and

requires the Department of Energy (DOE

or Department) to administer an energy

conservation program for these

products. Among other things, NAECA

requires DOE to consider amending the

energy conservation standards for

refrigerators, refrigerator-freezers, and

freezers; and to establish standards for

small gas furnaces, and to consider

prescribing standards for television sets.

The Department of Energy has

determined that revised energy

conservation standards for refrigerators,

refrigerator-freezers and freezers would

result in significant conservation of

energy and be economically justified.

Therefore, the Department is today

amending title 10, part 430 of the Code

of Federal Regulations (part 430) to add

new standards for this product. More

stringent standards, including the

maximum technologically feasible level,

were considered by the Department, but

rejected based upon consideration of the

economic analysis.

For small gas furnaces, the

Department has determined that

standards would result in a significant

conservation of energy and be

economically justified. Therefore, the

Department is today amending part 430

to add standards for this product which

are the maximum allowable by law.

For television sets, DOE has

determined a new analysis is necessary

and is not now making a determination

on the need for standards on televisions.

EFFECTIVE DATES: This action amending

§ 430.32(a), the standards for

refrigerators, refrigerator-freezers and

freezers, is effective as of January 1,

1993.

This action amending § 430.32(e),

setting the standards for small gas

furnaces (input rate less than 45,000 Btu/

hr), is effective as of January 1, 1992.

ADDRESSES: A copy of the Technical

Support Document may be read at the

DOE Freedom of Information Reading

Room, U.S. Department of Energy,

Forrestal Building, Room 1E-190, 1000

Independence Avenue SW.,

Washington, DC 20585, (202) 586-6020,

between the hours of 9 a.m. and 4 p.m.,

Monday through Friday, except Federal

holidays. Copies of the Technical

Support Document maybe obtained

from: U.S. Department of Energy, Office

of Conservation and Renewable Energy,

Forrestal Building, Mail Station CE-132,

1000 Independence Avenue SW.,

Washington, DC 20585, (202) 586-9127.

FOR FURTHER INFORMATION CONTACT:

Michael J. McCabe, U.S. Departmentof

Energy, Office of Conservation and

Renewable Energy, Forrestal Building,

Mail Station CE-132, 1000

Independence Avenue SW.,

Washington, DC 20585, (202) 586-9127

Eugene Margolis, Esq., U.S. Department

of Energy, Office of General Counsel,

Forrestal Building, Mail Station GC12, 1000 Independence Avenue SW.,

Washington,. DC 20585, (202) 586-9507

U.S. Department of Energy, CE-43.1,

Docket No. CE-RM-87-102, Forrestal

Building, Room 6B-025, 1000

Independence Avenue SW.,

Washington, DC 20585, (202) 586-9320

SUPPLEMENTARY INFORMATION:

I. Introduction

a. Authority

b. Background

II. General Discussion

a. Maximum Technologically Feasible Levels

b. Energy Savings

c. Rebuttable Presumption

d. Economic justification

1. Economic Impact on Manufacturers and

Consumers

2. Life-Cycle Costs

3. Energy Savings

4. Lessening of Utility or Performance of

Products

5. Impact of Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

Ill. Discussion of Comments

a. General Analytical Comments

1. Energy Projections

2. Discount Rate Selection

3. Selection of Candidate Standard Levels

4. Calculation of Energy Savings

5. Reporting of the Environmental Benefits

of Standards

6. Choice of Proposed Standard Levels

b. Product-Specific Comments

1. Refrigerators

A. Engineering Analysis

B. Consumer Analysis

C. Manufacturer Analysis

2. Comments on Small Furnace Analysis

A. Engineering Analysis

'B. Consumer Analysis

C. Manufacturer Analysis

3. Comments on Utility Analysis

IV. Product-Specific Discussion

a. Refrigerators

1. Efficiency Levels Analyzed

2. Payback Period

3. Significance of Energy Savings

4. Economic Justification

A. Economic Impact on Manufacturers and

Consumers

B. Life-Cycle Cost and Net Present Value

C. Energy Savings

D. Lessening of Utility or Performance of

Products

E. Impact of Lessening of Competition

F. Need of the Nation to Save Energy

G. Other Factors

5. Conclusion

b. Small Gas Furnaces

1. Efficiency Levels Analyzed

2. Payback Period

3. Significance of Energy Savings

4. Economic Justification

A. Economic Impact on Manufacturers and

Consumers

B. Life-Cycle Cost and Net Present Value

C. Energy Savings

D. Lessening of Utility or Performance of

Products

E. Impact of Lessening of Competition

F. Need of the Nation to Save Energy

5. Conclusion

c. Television Sets

V. Environmental, Regulatory Impact,

Takings Assessment, Federalism and

Regulatory Flexibility Reviews

a. Environmental Review

b. Regulatory Impact Review

c. Federalism Review

d. Regulatory Flexibility Review

1. Introduction

a. Authority

Part B of title III of the Energy Policy

and Conservation Act (EPCA), Pub. L.

94-163, as amended by the National

Energy Conservation Policy Act

(NECPA), Pub. L. 95-519, the National

Appliance Energy Conservation Act

(NAECA), Pub. L.100-12, and the

National Appliance Energy

Conservation Amendments of 1988

(NAECA 1988), Pub. L.100_357, t created

the Energy Conservation Program for

Consumer Products other than

Automobiles. The consumer products

subject to this program (often referred to

hereafter as "covered products") are:

Refrigerators, refrigerator-freezers and

freezers; dishwashers; clothes dryers;

' Part B of title Ill of EPCA, as amended by

NECPA, NAECA, and NAECA 1988, is referred to in

this notice as the "Act." Part B of title III is codified

at 42 U.S.C. 6291 et seq. Part B of title Ill of EPCA,

as amended by NECPA only, is referred to in this

notice as NECPA.

 CE-RM-87-102 COMMENT 10

54FR47916 

47915 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

DEPARTMENT OF ENERGY 

Office of Conservation and 

Renewable Energy 

10 CFR Part 430 

[Docket No. CE-RM-S7-102] 

Energy Conservation Program for. 

Consumer Products: Energy 

Conservation Standards for Two 

Types of Consumer Products 

AGENCY: Office of Conservation and 

Renewable Energy. DOE. 

ACTION: Final rule. 

SUMMARY: The Energy Policy and 

Conservation Act (EPCA). as amended 

by the National Energy Conservation 

Policy Act fNECPA). the National 

Appliance Energy Conservation Act 

[NAECA). and the National Appliance 

Energy Conservation Amendments of 

1988 (NAECA 1988). prescribes energy 

conservation standards for certain 

major household appliances. and 

requires the Department of Energy (DOE 

or Department) t.o administer an energy 

conservation program for these 

products. Among other things. NAECA 

requires DOE to consider amending the 

energy conservation standards for 

refrigerators. refrigerator-freezers. and 

freezers; and to establish standards for 

small gas furnaces. and to consider 

prescribing standards for television sets. 

The Department of Energy has 

determined that revised energy 

conservation standards for refrigerators. 

refrigerator-freezers and freezers would 

result in significant conservation of 

energy and be economically justified. 

Therefore. the Department is today 

amending title 10. part 430 of the Code 

of Federal Regulations (part 430) to add 

new standards for this product. More 

stringent standards. including the 

maximum technologically feasible level. 

were considered by the Department. but 

rejected based upon consideration of the 

economic analysis. 

For small gas furnaces. the 

Department has determined that 

standards would result in a significant 

conservation of energy and be 

economically justified. Therefore. the 

Department is today amending part 430 

to add standards for this product which 

are the maximum allowable by law. 

For television sets, DOE has 

determined a new analysis is necessary 

and is not now making a determination 

on the need for standards on televisions. 

EFFECTIVE DATES: This action·amending 

§ 430.32(a). the standards for 

refrigerators. refrigerator-freezers and 

freezers. is effective as of January 1. 

1993. . 

This action amending § 430.32(e). 

setting the standards for small gas 

furnaces (input rate less than 45.000 Btu! 

hr). is effective as of January 1. 1992. 

ADDRESSES: A copy of the Technical 

Support Document may be read at the 

DOE Freedom of Information Reading 

Room. U.S. Department of Energy. 

Forrestal Building. Room iE-19D. 1000 

Independence Avenue SW .• 

Washington. DC 20585. (202) 586-6020. 

between the hours of 9 a.m. and 4 p.m .• 

Monday through Friday. except Federal 

holidays. Copies of the Technical 

Support Document may be obtained 

from: U.S. Department of Energy. Office 

of Conservation and Renewable Energy. 

Forrestal Building. Mail Station CE-132. 

1000 Independence Avenue SW .• 

Washington. DC 20585, (202) 586-9127. 

FOR FURTHER INFORMATION CONTACT: 

Michael J. McCabe. U.S. Departmenfof 

Energy. Office of Conservation and 

Renewable Energy. Forrestal Building. 

Mail Station CE-132. 1000 

Independence Avenue SW .• 

Washington. DC 205B5. (202) 586-9127 

Eugene Margolis. Esq .. U.S. Department 

of Energy. Office of General Counsel. 

ForrestafBuilding. Mail Station GC12.1000 Independence Avenue SW .• 

Washington. DC 20585. (202) 586-9507 

U.S. Department of Energy, CE-43.1. 

Docket No. CE-RM-87-i02. Forrestal 

Building. Room 6B-025. 1000 

Independence Avenue SW .. 

Washington. DC 20585, (202) 586-9320 

SU~PLEMENTARY INFORMATION: 

I. Introduction 

a. Authority 

b. Background 

ll. General Discussion 

a. Maximum Technologically Feasible Levels 

b. Energy Savings 

c. Rebuttable Presumption 

d. Economic Justification 

1. Economic Impact on Manufacturers and· 

Consumers 

2. Life-Cycle Costs 

3. Energy Savings 

4. Lessening of Utility or Performance of 

Products 

5. Impact of Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

III. Discussion of Comments 

a. General Analytical Comments 

1. Energy Projections 

2. Discount Rate Selection 

3. Selection of Candidate Standard Levels 

4. Calculation of Energy Savings 

5. Reporting of the Environmental Benefits 

of Standards 

6. Choice of Proposed Standard Levels 

b. Product-Specific Comments 

1. Refrigerators 

A. Engineering Analysis 

B. Consumer Analysis 

C. Manufacturer Analysis 

2. Comments on Small Furnace Analysis 

A. Engineering Analysis 

.B. Consumer Analysis 

C. Manufacturer Analysis 

3. Comments on Utility Analysis 

IV. Product-Specific Discussion 

a. Refrigerators 

1. Efficiency Levels Analyzed 

2. Payback Period 

3. Significance of Energy Savings 

4. Economic Justification 

A. Economic Impact on Manufacturers and 

Consumers 

B. Life-Cycle Cost and Net Present Value 

C. Energy Savings . 

D. Lessening of Utility or Performance of 

Products 

E. Impact of Lessening of Competition 

F. Need of the Nation to Save Energy 

G. Other Factors 

5. Conclusion 

h. Small Gas Furnaces 

1. Efficiency Levels Analyzed 

2. Payback Period 

3. Significance of Energy Savings 

4. Economic Justification 

A. Economic Impact on Manufacturers and 

Consumer.s 

B. Life-Cycle Cost and Net Present Value . C. Energy Savings 

D. Lessening of Utility or Performance of 

Products 

E. Impact of Lessening of Competition 

F. Need of the Nation to Save Energy 

5. Conclusion 

c. Television Sets 

V. Environmental, Regulatory Impact. 

Takings Assessment. Federalism and 

Regulatory Flexibility Reviews 

a. Environmental Review 

h. Regulatory Impact Review 

c. Federalism Review 

d. Regulatory Flexibility Review 

I. Introduction 

a. Authority 

Part B of title III of the Energy Policy 

and Conservation Act (EPCA). Pub. L. 

94-163. as amended by the National 

Energy Conservation Policy Act 

(NECPA). Pub. L. 95-619. the National 

Appliance Energy Conservation Act 

(NAECA). Pub. L. 100-12. and the 

National Appliance Energy 

Conservation Amendments of 1988 

(NAECA 1988). Pub. L. 100-357. 1 created 

the Energy Conservation Program for 

Consumer Products other than 

Automobiles. The consumer products 

subject to this program (often referred to 

hereafter as "covered products") are: 

Refrigerators. refrigerator-freezers and 

freezers; dishwashers; clothes dryers; 

1 Part B of title III of EPCA. as amended by 

NECPA. NAECA. and NAECA 1988. is referred to in 

this notice as the "Act." Part B of title III is codified 

at 42 U.S.C. 6291 et seq. Part B of title I!I of EPcA. 

as amended by NECPA only. is referred to in this 

notice as NECPA. 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

water heaters; central air conditioners

and central air conditioning heat pumps;

furnaces; direct heating equipment;

television sets; kitchen ranges and

ovens; clothes washers; room air

conditioners; fluorescent lamp ballasts;

and pool heaters; as well as any other

consumer product classified by the

Secretary of Energy. Section 322. To

date, the Secretary has not so classified

any additional products.

Under the Act, the program consists

essentially of three parts: testing,

labeling, and mandatory energy

conservation standards. The

Department of Energy, in consultation

with the National Institute of Standards

and Technology (NIST), is required to

amend or establish new test procedures

as appropriate for each of the covered

products. Section 323. The purpose of

the test procedures is to provide for test

results that reflect the energy efficiency,

energy use, or estimated annual

operating costs of each of. the covered

products. Section 323(b)(3). The test

procedures are an integral part-of the

energy conservation standards. The

energy performance standards, i.e.,

efficiency and consumption, are based

on the test procedures found in subpart

B to 10 CFR part 430. The test

procedures are used by manufacturers

to certify compliance with the standards

and will be used by the Department to

determine compliance with the

standards.

The Federal Trade Commission (FTC)

is required by the Act to prescribe rules.

governing the labeling of covered

products for which test procedures have

been prescribed by DOE. Section 324(a).

These rules generally require that each

particular model of a covered product

bear a label that indicates its annual

operating cost and the range of

estimated annual operating costs for

other models of that product. Section

324(c)(1). At the present time there are

FTC rules requiring labels for the

following products: Room air

conditioners, furnaces, clothes washers,

dishwashers, water heaters, freezers,

refrigerators and refrigerator-freezers,

central air conditioners and central air

conditioning heat pumps, and

fluorescent lamp ballasts. 44 FR 66475,

November19, 1979, 52 FR 46888,

December 10, 1987, and 54 FR 28031, July

5, 1989.

For each of the 12 covered products,

the Act prescribes an initial Federal

energy conservation standard. Section

325(b)-(h). The Act establishes effective

dates for the standards in 1988, 1990,

1992 or 1993, depending on the product,

and specifies that the standards are to

be reviewed by the Department within 3

to 10 years, also depending on the

product. Section 325(b)-(h). After the

specified period,. DOE may promulgate

new standards for each product;

however, the Secretary may not

prescribe any amended standard that

increases the maximum allowable

energy use, or decreases the minimum

required energy efficiency, of a covered

product. Section 325(1)(1). The

Department's first review of standards

is for refrigerators, refrigerator-freezers

and freezers.

The Act also directs DOE to prescribe

an energy conservation standard for

small gas furnaces,.i.e., gas furnaces

having an input of less than 45,000 Btu

per hour and manufactured on or after

January 1, 1992. Section 325(f)(1)(B).

With regard to another covered

product, television sets, the Act allows

the Department to prescribe an

applicable standard; however, such

standard may not become effective

before January 1, 1992. Section 325(i)(3).

Two products (refrigerators,

refrigerator-freezers, and freezers; and

small gas furnaces) are the subject of

this rulemaking. As noted below in the

product-specific. discussion, the

Department is postponing a final

decision on standards for television sets

and will conduct .a new analysis for

television sets and publish a proposed

rule based on that analysis.

Any new or amended standard is

required to be designed so as to achieve

the maximum improvement in energy

efficiency that is technologically

feasible and economically justified.

Section 325(l)(2)(A).

Section 325(l)(2)(B)(i) provides that

before DOE determines whether a

standard is economically justified, it

must first solicit comments on a

proposed standard. After reviewing

comments on the proposal, DOE must

then determine that the benefits of the

standard exceed its burdens, based, to

the greatest extent practicable, on a

weighing of the following seven factors:

(1) The economic impact of the

standard on the manufacturers and on

the consumers of the products subject to

such standard;

(2) The savings in operating costs

throughout the estimated average life of

the covered product in the type (or

class) compared to any increase in the

price of, or in the initial charges for, or

maintenance expenses of the covered

products which are likely to result

directly from the imposition of the

standard;

(3) The total projected amount of

energy savings likely to result directly

from. the imposition of the standard;

47917

(4) Any lessening of the utility or the

performance of the covered products

likely to result from the imposition of the

standard;

(5) The impact of any lessening of

competition, determined in writing by

the Attorney General, that is likely to

result from the imposition of the

standard;

(6) The need for national energy

conservation; and

(7) Other factors the Secretary

considers relevant.

In addition, section 325(1)(2)(B)(ii)

establishes a rebuttable presumption of

economic justification in instances

where the Secretary determines that

"the additional cost to the consumer of

purchasing a product complying with an

energy conservation standard level will

be less than three times the value of the

energy savings during the first year that

the consumer will receive as a result of

the standard, as calculated under the

applicable test procedure * * *"

Section 327 of the Act addresses the

effect of Federal rules concerning

testing, labeling, and standards on State.

laws or regulations concerning such

matters. Generally, all such State laws

or regulations are superseded by the

Act. Section 327(a)-(c). Exceptions to

this general rule include: (1) State

standards prescribed or enacted before

January 3, 1987, and applicable to

appliances produced before January 3,

1988, may remain in effect until the

applicable standard begins (section

327(b)(1)); (2) State procurement

standards which are more stringent than

the applicable Federal standard (section

.327 (b)(2) and (e)) and certain building

code requirements for new construction,

if certain criteria are met, are exempt

from Federal preemption (section 327

(b)(3) and (f) (1)-(4)); (3) State

regulations banning constant burning

pilot lights in pool heaters; and (4) State

standards for television sets effective on

or after January 1, 1992, may remain in

effect in the absence of a Federal

standard for such product (section

327(b)(6) and 327(c)).

Another exception to Federal

preemption -concerns standards for

refrigerators, refrigerator-freezers and

freezers. The Act specifies that if DOE

does not publish a final rule before

January 1, 1990, relating to the revision

of Federal standards for this product

category, the State of California's

December 14, 1984, standards (effective

January 1, 1992) for these products,

would become effective in California

beginning January 1, 1993, and may not

be preempted by any Federal standard.

This exemption from preemption by a

Federal standard would exist as long as

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47917 

wa ter heaters; -central air conditioners 

and central air conditioning heat pumps; 

furnaces; direct- heating equipment; 

television sets; kitchen ranges and 

ovens; clothes washers; room air 

conditioners; fluorescent lamp ballasts; 

and pool heaters; as well as any other 

consumer product 9lassified by the 

Secretary of Energy. Section 322. To 

date, the SecretarY.has not so classified 

any additional products. 

Under the Act. the program consists 

essentially of three parts: testing, 

labeling, and mandatory energy 

conservation standards. The 

Department of Energy, in consultation 

with the National Institute of Standards 

and Technology (NIST), is required to 

amend or establish new test procedures 

as appropriate for each of the covered 

products. Section 323. The purpose of 

the test procedures is to provide for test 

results that reflect the energy efficiency, 

energy use, or estimated annual 

opera ting costs of each of the covered 

products. Section 323(b)(3). The test 

procedures are an integral parLof the 

energy conservation standards. The 

energy performance standards, i.e., 

efficiency and consumption, are based 

on the test procedures found in subpart 

B to 10 CFR part 430. The test 

procedures are used by manufacturers 

to certify compliance with the standards 

and will be used by the Department to 

determine compliance with the 

standards. 

The Federal Trade Commission (FTC) 

is required by the Act to prescribe rules. 

governing the labeling of covered 

products for which test procedUres have 

been prescr-ibed by DOE. Section 324(a). 

These rules generally require that each 

particular model of a covered product 

bear a label that indicates its annual 

operating cost and .the range of 

estimated annual operating costs for 

other models of that product. Section 

324(c)(1). At the present time there are 

FTC rules requiring labels for the 

following products: Room air 

conditioners, furnaces, clothes washers. 

dishwashers, water heaters, freezers, 

refrigerators and refrige1'a tor-freezers, 

central air conditioners and central air 

conditioning heat pumps, and 

fluorescent lamp ballasts. 44 FR 68475, 

November'19, 1979,52 FR 46888, 

December 10, 1987, and 54 FR 28031, July 

5,1989. 

For each of the 12 covered products, 

the Act prescribes an initial Federal 

energy conservation standard. Section 

325(b)-(hJ. The Act establishes effective 

dates for the standards in 1988, 1990, 

1992 or 1993, depending on the product, 

and specifies that the standards are to 

be reviewed by the Department within 3 

to 10 years, also depending on the 

proQ\1ct. Section 325(b)-(h}. After the 

specified period,. DOE may promulgate 

new standards for each product; 

however, the Secretary may not 

prescribe any amended standard that 

increases the maximum allowable 

energy use, or decreases the minimum 

required energy efficiency, of a covered 

product. Section 325(lJ(lJ. The 

Department's first review of standards 

is for refrigerators, refrigerator-freezers 

and freezers. 

The Act also directs DOE to prescribe 

an energy conservation standard for 

small gas furnaces, i.e., gas furnaces 

having an input of less than 45,000 Btu 

per hour and manufactured on or after 

January 1, 1992. Section 325(f)(1)(B). 

With regard to another C01rered 

product, television sets, the Act allows 

the Department to prescribe an 

applicable standard; however, such 

standard may not become effective 

before January 1, 1992. Section 325(i)(3). 

Two products (refrigerators, 

refrigera tor-freezers, and freezers; and 

small gas furnaces) are the subject of 

this rulemaking. As noted below in the 

product-specific discussion, the 

Department is postponing a final 

decision on standards for television sets 

and will conduct a new analysis for 

television sets and publish a proposed. 

rule based on that analysis. 

Any new or amended standard is 

required to be designed so as to achieve 

the maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified. 

Section 325(1)(2)(A). 

Section 325(1)(2](B)(i) provides that 

before DOE determines whether a 

standard is economically justified, it 

must first solicit comments on a 

proposed standard. After reviewing 

comments on the proposal, DOE must 

then determine that the benefits of the 

standard exceed its burdens, based, to 

the greatest extent practicable, on a 

weighing of the following seven factors: 

(1) The economic impact of the 

standard on the manufacturers and on 

the consumers of the products subject to 

such staildard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the covered product in the type (or 

class) compared to any increase in the 

price of, or in the initial charges for. or 

maintenance expenses of the covered 

products which are likely to result 

directly from the imposition of the 

standard; 

(3) The total projected amount of 

energy savings likely to result directly 

from the imposition of the standard; 

(4} Any lesseni~g of the utility or the 

performance of the covered products 

likely to result from the imposition of the 

standard; 

(5) The impact of any lessening of 

competition, determined in writing by 

the Attorney General, that is likely to 

result from the imposition of the 

standard; 

(6) The need for national energy· 

conservation; and 

(7) Other factors the Secretary 

considers relevant. 

In addition. section 325(1)(2)(B}(ii) 

establishes a rebuttable presumption of 

economic justification in instances 

where the Secretary determines that 

"the additional cost to the consumer of 

purchasing a product complying with an 

energy conservation standard level will 

be less than three times the value of the 

energy savings during the first year that 

the consumer will receive as a result of 

the standard, as calculated under the 

applicable test procedure * * *" 

Section 327 of the Act addresses the 

effect of Federal rules concerning 

testing, labeling, and standards on State. 

laws or regulations concerning such 

matters. Generally, all such State laws 

or regulations are superseded by the 

Act. Section 327(a)-(c). Exceptions to 

this general rule include: (1) State 

standards prescribed or enacted before 

January 3, 1987, and applicable to 

appliances produced before Janual"f 3. 

1988, may remain in effect until the 

applicable standard begins (section 

327(b)(1)); (2) State procurement 

standards which are mOre stringent than 

the applicable Federal standard (section 

.327 (b)(2) and (e)) and certain building 

code requirements for new construction, 

if certain criteria are met, are exempt 

from Federal preemption (section 327 

(b)(3) and (f) (1)-(4)); (3) State 

regulations banning constant burning 

pilot lights in pool heaters; and (4) State 

standards for television sets effective on 

or after January 1. 1992, may remain in 

effect in the absence of a Federal 

standard for such product (section 

327(b)(6) and 327(c)). 

Another exception to Federal 

preemption' concerns standards for 

refrigerators, refrigerator-freezers and 

freezers. The Act specifies that if DOE 

does not publish a final rule before 

January 1,1990, relating to the revision 

of Federal standards for this product 

category. the State of California's 

December 14, 1984, standards (effective 

January 1, 1992) for these products, 

would become effective in California 

beginning January 1. 1993, and may not 

be preempted by any Federal standard. 

This exemption from preemption by a 

Federal standard would exist as long as 
54FR47916

47918 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

the California standard was not made

more stringent. Section 325(b)(3)(A)(ii)(I)

and section 327(c).

In addition, if DOE does not publish a

final rule before January 1, 1992, relating

to the revision of standards for

refrigerators, refrigerator-freezers, and

freezers, any State regulation which

applies to such products manufactured

on or after January 1, 1995, is exempt

from Federal preemption until the

effective date of a Federal standard.

Section 325(b)(A)(ii)(II).

b. Background

The purpose of this rulemaking is twofold: (1) To review the energy

conservation standards for refrigerators,

refrigerator-freezers, and freezers

(hereafter referred to as refrigerators)

,that have been established by the Act;

and, (2) to propose energy efficiency

standards which are not less than 71

percent and not more than 78 percent

AFUE (annual fuel utilization

efficiency) 2 for small gas furnaces, i.e.,

those having an input rate less than

45,000 Btu per hour.

As directed by the Act, DOE

published an. advance notice-of

proposed rulemaking, with a 60-day

comment period that ended February 5,

1988. (Hereafter referred to as the

advance notice.) 52 FR 46367, December

7, 1987. The advance notice presented

the product classes that DOE planned to

analyze, and provided a detailed

discussion of the analytical

methodology and analytical models that

the Department expected to use in

performing the analysis to support this

rulemaking. The Department invited

comments and data on the accuracy and

feasibility of the planned methodology

and encouraged interested persons to

recommend improvements or

alternatives to DOE's approach. In

addition, on January 28, 1988, a public

hearing was held on the advance notice.

On December 2,1988, DOE published

a Notice of Proposed Rulemaking

concerning refrigerators, refrigeratorfreezers, and freezers; small gas

furnaces and television sets. (Hereafter

referred to as the proposed rule.) 53 FR

48798, December 2, 1988. The

Department proposed to establish an

energy conservation standard of 78

percent AFUE for small gas furnaces

which was the highest level within the

range (71 to 78 percent AFUE) for DOE

to consider as set by the Act. For

television sets, the Department proposed

that an energy conservation standard

would not be economically justified. For

refrigerators, DOE did not propose a

specific standard level; rather, DOE

solicited comments and information

within a range of standard levels. This

range of standard levels considered is

shown in Table 1-1 below. The

standards prescribed by the Act,

effective January 1, 1990, and those

prescribed today, effective January 1,

1993, are shown in Table 1-2 below.

During the 60-day comment period

ending January 31, 1989, DOE received

120 written comments and testimony

from 33 participants at the public

hearing held in Washington, DC, on

January 12 and 13, 1989. The issues

raised are addressed in section III of this

notice.

TABLE, 1-1.-PROPOSED RANGE OF ENERGY STANDARDS EQUATIONS FOR REFRIGERATORS, REFRIGERATOR-FREEZERS, AND

FREEZERS .

Product class

1. Refrigerators and refrigerator-freezers with manual defrost ....................................................................................................................

2. Refrigerator-freezer-partial automatic defrost .........................................................................................................................................

3. Refrigerator-freezers-automatic defrost with: Top-mounted freezer without through-the-door ice service .....................................

4. Refrigerator-freezes-automatic defrost with: Side-mounted freezer without through-the-door ice service ....................................

5. Refrigerator-freezers-automatic defrost with: Bottom-mounted freezer without through-the-door ice service ...............................

6. Refrigerator-freezes-automatic defrost with: Top-mounted freezer with through-the-door ice service ..........................................

7. Refrigerator-freezers-automatic defrost with: Side-mounted freezer with through-the-door ice service .........................................

8. Upright freezers with: manual defrost .........................................................................................................................................................

.110. Chest freezers and all othertfreezes ................................................................................................. ...................................................... I

Energy standards equations (Kwh/yr)

(16.3AV+316) to (11.9AV+258)

(21.8AV +429) to (14.1AV+305)

(23.5AV+471 ) to (16.8AV+363)

(27.7AV+488) to (13.1AV+540)

(27.7AV +488) to (17.9AV+386)

(26.4AV+ 535) to (17.6AV+380)

(30.9AV+547) to (15.2AV+652)

(10,9AV+422) to (12.3AV+181)

(16.OAV+ 623) to (18.OAV+264)

(14.8AV+223) to (11 .2AV+163)

AV=Total adjusted volume, expressed in Ft.3 as determined in Appendices Al and B1 of Subpart B.

TABLE 1-2.--JANUARY 1,1990, AND JANUARY 1, 1993, ENERGY STANDARDS EQUATIONS FOR REFRIGERATORS, REFRIGERATORFREEZERS, AND FREEZERS

Energy standards quations (Kwh/yr)

Product class

Effective Jan. 1, 1990 Effective Jan. 1, 1993

1. Refrigerators and refrigerator-freezers with manual defrost ..................................................................................................... (16.3AV+316) (19.9AV+98)

2. Refrigerator-freezer-partial automatic defrost ........... ...................................................................................................... (21.BAV+429) (10.4AV+398)

3. Refrigerator-freezers-automatic defrost with: Top-mounted freezer without through-the-door ice service I ................... (23.5AV+471) (16.OAV+355)

4. Refrigerator-freezers-automatic defrost with: Side-mounted freezer without through-the-door ice service ..................... (27.7AV+488) (11.BAV+501)

5. Refrigerator-freezers-automatic defrost with: Bottom-mounted freezer without through-the-door ice service ................ (27.7AV+488) (14.2AV+364)

6. Refrigerator-freezers-automatic defrost with: Top-mounted freezer with through-the-door ice service ........................... (26.4AV+535) (17.6AV+391)

7. Refrigerator-freezers-automatic defrost with: Side-mounted freezer with through-the-door ice service .......................... (30.4AV+547) (16.3AV+527)

8. Upright freezers with: manual defrost .., ........................................... I ...................................... ................................................ .. (10.9AV+422) (10.3AV+264)

9. Upright freezers with: automatic defrost ..........................................................................................................-......................... (16.OAV+623) (14.9AV+391)

10. Chest freezers and all other freezers ........................................................................................................................................ (14.BAV+223) (12.OAV+124)

I Including all refrigerators with automatic defrost

AV=Total adjusted volume , expressed in Ft 3, as determined in appendices Al and B1 of Subpart B of this Part.

2 AFUE is the ratio of annual fuel output energy to

annual fuel input energy, expressed as a percent.

 CE-RM-87-102 COMMENT 10

54FR47916 

47918 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 /Rules and Regulations 

the California standard was not made more stringent. Section 325(b)(3)(A)(ii)(I) 

and section 327(c). 

In addition, if DOE does not publish a final rule before January 1, 1992, relating 

to the revision .of standards for 

. refrigerators, refrigerator-freezers, and 

freezers, any State regulation which 

applies to such products manufactured 

on or after January 1, 1995, is exempt 

from Federal preemption until the 

effective date of a Federal standard. 

Section 325(b )(A)(ii)(II). 

b. Background 

The purpose of this rulemaking is twofold: (1) To review the energy 

conservation standards for refrigerators, 

refrigerator-freezers. and freezers 

(hereafter referred to as refrigerators) . that have been established by the Act; 

and. (2) to propose energy efficiency 

standards which are not less t..'J.an 71 

percent and not more than 78 percent 

AFUE (annual fuel utilization 

efficiency) 2 for small gas furnaces. i.e., 

those having an input rate less than 

45,000 Btu per hour. 

As directed by the Act, DOE 

published an· advance notice· of 

proposed rulemaking, with a 60-day 

comment period that ended February 5, 

1988. (Hereafter referred to as the 

advance notice.) 52 FR 46367, December 

7, 1987. The advance notice presented 

the product classes that DOE planned to 

analyze, and provided a detailed 

discussion of the analytical 

methodology and analytical models that 

the Department expected to use in 

performing the analysis to support this 

rulemaking. The Department invited 

comments and data on the accuracy and 

feasibility of the planned methodology 

and encouraged interested persons to 

recommend improvements or alternatives to DOE's approach. In 

addition, on January 28, 1988, a public 

hearing was held on the advance notice . On December 2, 1988, DOE publis·hed 

a Notice of Proposed Rulemaking . concerning refrigerators, refrigeratorfreez.ers, and freezers; small gas 

furnaces and television sets. (Hereafter 

referred to as the proposed rule.) 53 FR 

48798, December 2, 1988. The 

Department proposed to establish an 

energy conservation standard of 78 

percent AFUE for small gas furni1ces 

which was the highest level within the 

range (71 to 78 percent AFUE) for DOE 

to consider as set by the Act. For 

television sets, the Department proposed 

that an energy conservation standard 

would not be economically justified. For 

refrigerators, DOE did not propose a 

specific standard level; rather, DOE 

solicited comments and information 

within a range of standard levels. This 

range of standard levels considered is 

shown in Table 1-1 below. The 

standards prescribed by the Act, 

effective January 1, 1990, and those 

prescribed today, effective January 1. 

1993, are shown in Table b2 below. 

During the SO-day comment period 

ending January 31. 1989, DOE received 

120 written comments and testimony 

from 33 participants at the public 

hearing held in Washington. DC, on 

January 12 and 13. 1989. The issues 

raised are addressed in section III of this 

notice. . 

TABLE.1-1.-PROPOSED .RANGE OF ENERGY STANDARDS EQUATIONS FOR REFRIGERATORS, REFRIGERATOR-FREEZERS, AND 

FREEZERS 

Product class Energy standards equations (Kwh/yr) 

1. Refrigerators and refrigerator-freezers with manual defrost .............................................. , ..................................................................... (16.3AV+316) to (11.9AV+258) 

2. Refrigerator.freezer-partial automatic defrost ........................................................................ , ................................................................ (21.8AV +429) to (14.1AV·+305) 

3. Refrigerator-freezers-automatic defrost with: Top-mounted freezer without through-the·door ice service ..................................... (23.5AV +471) to (16.8AV +363) 

4. Refrigerator-freezers-automatic defrost with: Side-mounted freazer without through-the-door ice service .................................... (27.7AV+488) to (13.IAV+540) 

5. Refrigerator-freezers-automatic defrost with: Bottom-mounted freezer without through-the-door ice service ...... ......................... (27.7 AV + 488) to (17.9AV + 386) 

6. Refrigerator-freezers-automatic defrost with: Top-mounted freezer with through-the·door ice service .......................................... (26.4AV+535) to (17.6AV+380) 

.7. Refrigerator-freezers-automatic defrost with: Side-mounted freezer with Ihrough-Ihe-door ice service ......................................... (30.9AV +547) to (15.2AV +652) 

8. Upright freezers with: manual defrost.. .......................................................................................... : ............................................................ (10.9AY+422) to (12.3AV+181) 

9. Uprighl freezers with: automatic defr05t. ........................................................................................................................... : ........................ (16.0AV+623) to (18.oAV+264) 

.10. Chest freezers and all other freezers ....................................................................................................................................................... (14.8AY+223) to (11.2AV+163) 

AY=Total adjusted volume, expressed in Fl.' as determined in Appendices Al and BI of Subpart B. 

TABLE 1-2 . ...:..JANUARY 1.·1990, AND JANUARY 1. 1993. ENERGY STANDARDS EQUATIONS FOR REFRiGERATORS, REFRIGERATORFREEZERS. AND FREEZERS 

Energy standards equations (Kwh/yr) 

Product class 

Effective Jan. I, 1990 

1. Refrigerators and refrigerator-freezers with manual defrosl.. ................................................................................................... (16.3AV+316) 

2. Refrigeralor-freezer-partial automatic defrosl .......................................................................................................................... (21.8AV+429) 

3. Refrigerator-freezers-automatic defrost with: Top-mounted freezer without through-the-door ice service 1 ................... (23.5AV+471) 

4. Refrigerator·freezers-automatic defrost with: Side-mounted freezer without through-the-door ice service ..................... (27.7AV +488) 

5. Refrigerator-freezers-automatic defrost with: Bottom-mounted freezer without through-the-door ice service ................ (27.7AY+488) 

6. Refrigerator-freezers-automatic defrost with: Top-mounted freezer wiih through-the·door ice service ........................... (26.4AV +535) 

7. Refrigeralor·freezers-automatic defrost with: Side-mounted freezer with through·the·door ice service .......................... (30.4AV+547) 

8. Upright freezers with: manual defrost ......................................................................................................................................... (10.9AV+422) 

9. Upright freezers with: automatic defrost ..................................................................................................................................... (16.0AV +623) 

10. Chest freezers and all other freezers .......................................... _ ............................................................................................. (14.8AV +223) 

1 Including all refrigerators with automatic defrost . 

AV=Total adjusted volume, expressed in Ft.'. as determined in appendices Al and 81 of Subpart 8 of this Part. 

2 AFUE is the ratio of annual fuel output energy to 

annual fuel input energy, expressed as a percent. 

Effective Jan. 1, 1993 

(19.9AY+93) 

(I0.4AV+398) 

(IS.0AV +355) 

(11.8AV+501) 

(14.2AV+364) 

(17.6AV+391) 

(16.3AV+527) 

(10.3AV +264) 

(14.9AY+391) 

(12.0AV+124) 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November-17, 1989 / Rules and Regulations 47919

II. General Discussion

a. Maximum Technological Feasible

Levels

The Act requires that, in considering

any new or amended standards, the

Department must consider those that

"shall be designed to achieve the

maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified." (Section 325

(1)(2)(A)). Accordingly, for each class of

product that was under consideration in

this rulemaking, a maximum

technologically feasible level was

identified. The maximum

technologically feasible-level is one that

can be carried out by the addition of

design options, both commercially

feasible and prototypes, to the baseline

units without affecting the product's

utility. DOE believes that the maximum

technologically feasible level must be

capable of being assembled, but not

necessarily manufactured, by the

effective date of a standard.

The maximum technologically feasible

levels were derived by adding energyconserving engineering design options to

the respective classes in order of

decreasing consumer paybacks.

Accordingly, the maximum

technologically feasible level for

refrigerator-freezers includes dual

compressors and evacuated panels. A

complete discussion of each maximum

technologically feasible level, and the

design options included in each, is found

in the Engineering Analysis. See

Technical Support Document, chapter 3.

The "max tech" levels presented in

this notice are predicated on the

assumption that CFC-11 and -12 will not

be available for refrigerator production.

In the Engineering Analysis the

Department applied a five percent

efficiency penalty for the CFC-11

substitute. See Technical Support

Document, chapter 3. If CFC-11 and -12

were available for these designs, then

the "max tech" levels could be even

more efficient. A complete set of

engineering cost-efficiency curves are

presented in the Engineering Analysis

for refrigerators, including those with

CFC-11 and -12.

Table 2-1 presents the Department's

maximum technologically.feasible levels

for the 10 refrigerator classes and 2

small gas furnace classes:

TABLE 2-1.-MAXIMUM TECHNOLOGICALLY FEASIBLE LEVELS

Products & product classes

Refrigerators:

.......... Manual defrost (17.0 Cu. ft.) 2______ .........................................................................................................................................

Partial automatic defrost (16.8 cu. ft.) ....................................................................................................................................................

Automatic defrost top mount (20.8 cu. ft.) .............................................................................................................................................

Automatic defrost side-by-side (24.1 cu. ft.) ..........................................................................................................................................

Automatic defrost side-by-side with through-the-door service features (31.9 cu. ft.) .......................................................................

Automatic defrost top mount with through-the-door service features (20.8 cu. ft.)... .................. ....................................................

Automatic defrost bottom mount (22.8 cu. ft.) ......................................................................................................................................

Freezers:

Chest, manual defrost (22.5 cu. ft.) ........................................................................................................................................................

Upright, manual defrost (26.1 cu. ft.)_ ...................................................................................................................................................

Upright, automatic defrost (25.3 cu. ft.) .................................................. ...............................................................................................

Small Gas Furnaces:

Non-weatherized (indoor) .........................................................................................................................................................................

Weatherized (outdoor) ..............................................................................................................................................................................

Unit energy consumption '

325 kWh/yr.

502 kWh/yr.

490 kWh/yr.

564 kWh/yr.

746 kWh/yr.

540 kWh/yr.

498 kWh/yr.

250 kWh/yr.

423 kWh/yr.

588 kWh/yr.

97% AFUE 3.

97% AFUE 3.

These maximum technologically feasible energy consumption levels for refrigerators/refrigerator -freezers/freezers are based on design options that use

substitutes for CFC-11 and -12.

2 Adjusted volume.

3 78 percent AFUE is the maximum standard level that is allowed by the Act for small gas furnaces.

The Department believes that these

are the maximum technologically

feasible energy conservation levels from

an engineering standpoint; with the

exception of small gas furnaces, each of

these levels was evaluated in

accordance with the economic

justification factors specified in the Act

to determine if the levels were

economically justified. The maximum

technologically feasible levels for small

gas furnaces were excluded from the

analysis, since these levels are beyond

the legislated range in which the

Department has to establish standards.

The Department evaluated each

maximum technologically feasible level

to determine if it would be economically

justified at the time of the effective date

of the standard. DOE rejected energy

conservation standards that have

unacceptable impacts on consumers or

manufacturers, e.g., unusually long

payback periods and negative impacts

on manufacturers' returns-on-equity, or

result in the changing of the utility of the

product.

b. Energy Savings

1. Determination of Savings. The

Department forecasts energy

consumption through the use of the

Lawrence Berkeley Laboratory

Residential Energy Model (UL-REM).

The LBL-REM forecasts energy

consumption over the period of analysis

(1993-2015) for candidate standards and

the base case.3 The Department

quantified the energy savings that would

be attributable to a standard as the

difference in energy consumption

between the candidate standard's case

and the base case.

3 For refrigerators, the base case represents no

standards beyond the Act's 1990 standards; for

small gas furnaces, the base case represents no

standards.

The LBL-REM is fully explained in the

Technical Support Document. Appendix

B to that document addresses the LBLREM in detail. The LBL-REM contains

algorithms to project average

efficiencies, usage behavior, and market

shares for each product.

The LBL-REM is used to project

residential energy use over the relevant

time periods. By comparing the energy

consumption projection at alternative

standards or no standards (for small

furnaces), and at alternative standard

levels or the Act's 1990 standards (for

refrigerators), the Department estimated

the amount of energy projected to be

saved during the period 1993-2015.4 The

4 t.BL-RE.M analyzed a single standard level or

alternative levels over the entire period. That is, the

fact that a standard might be revised during

subsequent rulemakings was not considered by the

model. The Department believes that it is not

possible to predict what result such reviews may

Continued

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 / Friday, November- 17, 1989 I Rules and Regulations 47919 

II. General Discussion 

a. MaxiIflum Technological Feasible 

Levels . 

The Act requires that. in considering 

any new or amendeq. standards. the 

Department must consider those that 

"shall be designed to achieve the 

maximum improvement in energy 

efficiency which the Secretary 

determines is technologically feasible 

and economically justified." (Section 325 

(1)(2)(A)). Accordingly, for each class of 

product that was under consideration in 

this rulemaking. a maximum 

technologically feasible level was identified. The maximum 

technologically feasible.level is one that 

can be carried out by the addition of 

design options. both commercially 

feasible and prototypes. to the baseline 

units without affecting the product's 

utility. DOE believes that the maximum 

technologically feasible level must be 

capable of be'ing assembled. but not 

necessarily manufactured. by the 

effective date of a standard. 

The maximum technologically feasible 

levels were derived by adding energyconserving engineering design options to 

the respective classes in order of 

decreasing consumer pay backs. 

Accordingly. the maximum 

technologically feasible .level for 

refrigerator-freezers includes dual 

compressors.and evacuated panels. A 

complete discussion of each maximum 

technologically feasible level. and the 

design options included in each. is found 

in the Engineering Analysis. See 

Technical Support Document. chapter 3. 

The "max tech" levels presented in 

this notice are predicated on the 

assumption that CFC-ll and -12 will not 

be available for refrigerator production. 

In the Engineering Analysis the 

Department applied a five percent 

efficiency pe.nalty for the CFC-ll 

substitute. See Technical Support 

Document. chapter 3. If CFC-ll and -12 

were available for these designs. then 

the "max tech" levels could be even 

more efficient. A complete set of 

engineering cost-efficiency curves are 

presented in the Engineering Analysis 

for refrigerators. including those with 

CFC-ll and -12. 

Table 2-1 preserits the Department's 

maximum technologically feasible levels 

for the 10 refrigerator classes and 2 . 

small gas furnace classes: 

TABLE 2-1.-MAXIMUM TECHNOLOGICALLY FEASIBLE LEVELS 

Products & product classes Unit energy consumption I 

Refrigerators: 

Manual defrost (17.0 cu. ft.) 2 .................................................................................................................................................................. , 325 kWh/yr. 

Partial automatic defrost (16.8 cu. H.) ..................................................................................................................................................... 502 kWh/yr. 

Automatic defrost top mount (20.8 cu. ft.) .............................................................................................................................................. 490 kWh/yr. 

Automatic defrost side·by·side (24.1 cu. ft.) ........................................................................................................................................... 564 kWh/yr. 

Automatic defrost side-by-side with through-the-door service features (31.9 cu. ft.)........................................................................ 746 kWh/yr. 

Automatic defrost lop mount with through-the-door service features (20.8 cu. f1.)........................................................................... 540 kWh/yr. 

Automatic defrost bottom mount (22.8 cu. ft.) ....................................................................................................................................... 498 kWh/yr. 

Freezers: 

Chest. manual defrost (22.5 ClL ft.) ......................................................................................................................................................... 250 kWh/yr. 

Upright. manual defrost (26.1 cu. ft.) ............... : ......................................................................................... : ............................................. 423 kWh/yr. 

Upright, automatic defrost (25.3 cu. ft.) .................................................................................................................................................. 588 kWh/yr. 

Small Gas Furnaces: 

Non-weatherized (indoor) .......................................................................................................................................................................... 97% AFUE". 

Weatherized (outdoor) .................................................................................................................................................... : .......................... 97% AFUE". 

1 These maximum technologically feasible energy consumption levels for refrigerators/refrigerator-freezers/freezers are based on design options that use substitutes for CFC-11 and -12. . . 2 Adjusted volUme. . . 

3 78 percent AFUE is the maximum standard level that is allowed by the Act for small gas furnaces. 

The Departi'Ilent believes that these 

are the maximum technologically 

feasible energy conservation levels from 

an engineering standpOint; with the 

exception of small gas furnaces. each of 

these levels was evaluated in 

accordance with the economic 

justification factors specified in the Act 

to determine if the levels were 

economically justified. The maximum 

technologically feasible levels for small 

gas furnaces Were excluded from the 

analysis. since these levels are beyond 

the legislated range in which the 

Department has to establish standards. 

The Department evaluated each 

maximum technologically feasible level 

to determine if it would be economically 

justified at the time of the effective date 

of the standard. DOE rejected energy 

conservation standards that have 

unacceptable impacts on consumers or 

manufacturers. e.g .• unusually long 

payback periods and negative impacts 

on manufacturers' returns-an-equity. or 

result in the changing of the utility of the 

pro,duct. 

b. Energy Savings 

1. Determination of Savings. The 

Department forecasts energy 

consumption through the use of the 

Lawrence Berkeley Laboratory 

Residential Energy Model (LBL-REM). 

The LBL-'-REM forecasts energy 

consumption over the period of analysis 

(1993-2015) for candidate standards and 

the base case. 3 The Department 

quantified the energy savings that would 

be attributable to a standard as the 

difference in energy consumption 

between the candidate standard's case 

imd the base case. 

3 For refrigerators. the base case represents no 

standards beyond the Act's 1990 standards; for 

small gas furnaces. the base case represents no 

standards. 

The LBL-REM is fully explained in the 

Technical Support Document. Appendix 

B to that document addresses the LBLREM in detail. The LBt-REM contains 

algorithms to project average 

efficiencies, usage behavior. and market 

shares for each product. 

The LBt-REM is used to project 

residential energy use over the relevant 

time periods. By comparing the energy 

consumption projection at alternative 

standards or no standards (for small 

furnaces). and at alternative standard 

levels or the Act's 1990 standards (for 

refrigerators). the Department estimated 

the amount of energy projected to be 

saved during the period 1993-2015.4 The 

• LBL-REM analyzed a single standard level or a1lema live levels over the entire period. That is. the 

fact that a standard might be revised during 

subsequent rulemakings was not considered by the 

modeL The Department believes that it is not possible to predict what result such reviews may 

Continued 
54FR47916

47929 Federal Register / Vol. 54, No. 221 / Friday, November 17, 19119 / Rules and Regulations;

energy saved is expressed in Quads,, i.e.,

quadrillion Btu's. With respect to

electricity, the savings are quads of

source or primary energy, which

includes the energy necessary to

generate and transmit electricity. The

Act defines "energy use" as the quantity

of energy directly consumed by a

consumer product at point of use. This is

generally called "site" energy, as

opposed to "source" energy. There are

major differences between these types

of energy. In 1987, the amount of

electrical energy consumed at the site

was less than one-third of the amount of

source energy that was required to

generate and transmit the site electrical

energy.5 Therefore, it is important to

identify whether the electricity involved

is site or source energy.

The LBL-REM projections are.

dependent on many assumptions.

Among the most important are

responsiveness of household appliance

purchases to changes in energy prices

and consumer income, future energy

prices, future levels of housing

construction, and options that exist for

improving the energy efficiency of

appliances. As is the case with any

complicated computer model simulation,

the validity of the outputs is critically

dependent on the inputs.

Under section 325(1)(3)(B) of the Act,

the Department is prohibited from

adopting a standard for a product if that

standard would not result in

"significant" energy savings. While the

term "significant" has never been

defined in the Act, the Department

believes that a standard level option

need not meet a threshold level of

energy savings to be considered a

"significant" saver of energy. The U.S.

Court of Appeals, NRDC v. Harrington,

768 F.2d 1355 (D.C. Cir. 1985), concluded

that Congressional intent in using the

word "significant" was to mean "nontrivial." Id. at 1373. Thus, for this

rulemaking, DOE believes that each

candidate standard considered results in

significant energy savings.

c. Rebuttable Presumption

NAECA established new criteria for

determining whether a standard level is

economically justified. Section

325(1)(2)(B)(iii) states:

If the Secretary finds that the additional

cost to the consumer of purchasing a product

complying with an energy conservation

standard level will be less than three times

have. and therefore it would be speculative to

model any particular result. Therefore, for purposes

of this reulemaking, each standard level that was

analyzed was projected to have been in place from

the time of implementation to the year 2015.

s Energy Information Administration, Electric

Power Annual 1987, Tables 25 and 82, DOF.JEtA0348(87). 1088.

the value of the energy savings during the

first year that the consumer will receive as a

result of the standard, as calculated under the

applicable test procedure, there shall be a

rebuttable presumption that such standard

level is economically justified. A

determination by the Secretary that such

criterion is not met shall not be taken into

consideration in the Secretary's

determination of whether a standard is

economically justified.

If the increase in initial price of an

appliance due to a conservation

standard would repay itself to the

consumer in energy savings in less than

three years, then it can be presumed

that such standard is economically

justified.6 This presumption of economic

justification can be rebutted upon a

proper showing.

d. Economic Justification

As noted earlier, section 325(l)(2)(B)(i)

of the Act provides seven factors to be

evaluated in determining whether a

conservation standard is economically

justified.

1. Economic Impact on Manufacturers

and Consumers. The engineering

analysis identified improvements in

efficiency along with the associated

costs to manufacturers for each class of

product. For each design option, these

costs constitute the increased per unit

cost to manufacturers to achieve the

indicated energy efficiency levels.

Manufacturer, wholesaler, and retailer

markups will result in a consumer

purchase price higher than the

manufacturer cost.

To assess the likely impacts of

standards on manufacturers, and to

determine the effects of standards on

different-sized firms, the Department

used a computer model that simulated

hypothetical firms in the industries

under consideration. This model, the

Lawrence Berkeley Laboratory

Manufacturer Impact Model (LBL-MIM),

is explained fully in the Technical

Support Document. See Technical

Support Document, Appendix C. LBLMIM provides a broad array of outputs.

The outputs are shipments, price,

revenue, net income, and return-onequity (ROE). An "Output Table" lists

values for all these in the base case and

in each of the standards cases under

consideration. It also gives a range for

each of these estimates. A "Sensitivity.

Chart" shows how ROE would be

affected by a change in any one of the

model's nine control variables.

c For this calculation, cost-of-operation, i.e.,

energy saving, is derived from the DOE test

procedures. See §§ 430.22 (a) and (n). Consumers

who use the products less than the test procedure

assumes will experience a longer payback while

those who use them more than the test procedure

assumes will have a shorter payback.

For consumers, measures of economic

impact-are the changes in purchase price

and annual energy expense. The

purchase price and annual energy

expense of each standard level are

presented in Chapter 8 of the Technical

Support Document.

2. Life-Cycle Costs (LCC). One

measure of the effect of proposed

standards on consumers is the change in

life-cycle costs resulting from standards.

This is quantified by the difference in

life-cycle cost (LCC) between the base

and standards case for the appliance

classes analyzed. The LCC is the sum of

the purchase price and the operating

expense, incuding maintenance

expenditures, discounted over the

lifetime of the appliance.

The LCC was calculated for the range

of efficiencies in the Engineering

Analysis for each class of product in the

year standards are imposed. The

purchase price is based on the factory

costs in the Engineering Analysis and

includes a factory markup plus a

distributor and retailer markup. Energy

price forecasts are inputs that are taken

from the 1989 Annual Energy Outlook of

the Energy Information Administration.

Appliance usage inputs for refrigerators

are taken from the refrigerator test

procedure and for small gas furnaces are

taken from the furnace test procedure

and modified to adjust from laboratory

to field usage.

The differences in life-cycle costs

between the base case and various

levels of standards for refrigerators and

small gas furnaces are presented in

Tables 6.1-6.3 of the Technical Support

Document. These LCC's are calculated

at a seven percent discount rate; a

higher rate, e.g., ten percent, gives a

smaller difference between standards

cases and the base case, while a lower

rate, e.g., five percent, produces a

greater difference. This results because

the consumer benefits, i.e., reduced

operating expenses accrue over the life

of the appliance and are discounted

back to some base year. Therefore, the

lower the discount rate, the greater the

resulting consumer benefits after

discounting. In addition, as can be seen

in the various LCC curves, the use of a

higher discount rate results in a flatter

curve.

When the LCC numbers are plotted

graphically (on the Y axis) against unit

energy consumption ton the X axis), the

data generally produce a curve that is

concave from above in shape. This

means that at first the LCC curve will

decline as efficiency improvements are

made, will reach a minimum (which may

or may not be discrete), and then rise.

This indicates that the first efficiency

 CE-RM-87-102 COMMENT 10

54FR47916 

47920 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

energy saved is expressed in Quads .• i.e., 

quadrillionBtu·s. With respect to 

electricity. the savings are quads of 

source or primary energy. which 

includes the energy necessary to 

generate and transmit electricity. The. 

Act defines ~'energy use" as the quantIty 

of energy directly consumed by a . 

consumer product at point of use. This is 

generally called "site" energy. as 

opposeil to "source" energy. There are 

major differences between these types 

of energy. In 1987. the amount of 

electrical energy consumed at the site 

was less than one-third of the.amount of 

source energy that was required to 

generate and transmit the site electri.cal 

energy.5 Therefore, it is important to 

identify whether the electricity involved 

is site or source energy. 

The LBL-REM projections are. 

dependent on many assumptions. 

Among the most important are 

responsiveness of household appliance 

purchases to changes in energy prices 

and consumer income. future energy 

prices. future levels of housing 

construction. and options that exist for 

improving the energy efficiency of 

appliances. Asis the case with any 

complicated computer model simulation. 

the validit-y of the outputs is critically 

dependent on the inputs. 

Under section 325(l}[3)(B) of the Act. 

the Department is prohibited from 

adopting a standard for a ~roduct if that 

standard would not result 111 

"significant" energy savings. While the 

term "sipnificant" has never been· 

defined in the Act, the Department 

believes that a standard level option 

need not meet a threshold level of 

energy savings to be considered a "significant" saver of energy. The u.s. 

Court of Appeals, NRDC v. Herrington, 

768 F.2d 1355 (D.C. Cir. 1985). concluded 

that Congressional intent in using the 

word "significant" was to mean "nontrivial." Id. at 1373. Thus, for this 

rulemaking. DOE believes that each 

candidate standard considered results in 

significant energy savings. 

c. Rebuttable Presumption 

NAECA established new criteria for 

determining whether a standard level is 

economically justified. Section 

325(l)(2)(B)(iii) states: 

If the Secretary finds that the additional 

cost to the consumer of purchasing a product 

complying with an energy conservatio':! 

standard level will be less than three times 

have. and therefore it would be speculative to 

model any partkular result. Therefore. for purposes 

of this reulemaking, each standard level tha twas 

analyzed was projected to have been in place from 

the lime of implementation to the year 2015. 

~ Energy Information Administratlon. Electric 

Power Annual 1987, Tables 25 and 82. OOF./F.IA0343(87). 1988. 

the value of the energy savings during the 

first year that the consumer will receive as a 

result of the standard. as calculated under the 

applicable test procedure. there shall be a 

rebuttable presumption that such standard 

level is economically justified. A 

determination by the Secretary that such 

criterion is not met shall not be taken into 

consideration in the Secretary's 

determination of whether a standard is 

economicaliy justified. 

If the increase in initial price of an 

appliance due to a conservation 

standard would repay itself to the 

consumer in energy savings in less than 

three years. then it can be presumed 

that such standard is economically 

justified. 6 This presumption of economic 

. justification can be rebutted upon a 

proper showing. 

d. Economic Justification 

As noted earlier. section 325(l)(2)[B}{i) 

of the Act provides seven factors to be 

evaluated in determining whether a 

conservation standard is economically 

justified. 

1. Economic Impact on Manufacturers 

and Consumers. The engineering 

analysis identified improvements in 

efficiency along with the associated 

costs to manufacturers for each class of 

product. For each design option, thes.e 

costs constitute the increased per umt 

cost to manufacturers to achieve the 

indicated energy efficiency levels. 

Manufacturer, wholesaler, and retailer 

markups will result in a consumer 

purchase price higher than the 

manufacturer cost. . To assess the likely impacts of 

standards on manufacturers, and to 

determine the effects of standards on 

different-sized firms. the Department 

used a computer model that simulated 

hypothetical firms in the industries 

under consideration. This model. the 

tawrence Berkeley Laboratory 

Manufacturer Imnact Model (LBL-MIM). 

is explained fully in the Technical 

Support Document. See Technical 

Support Document. Appendix C. LBLMIM provides a broad array of outputs. 

The outputs are shipments. price. 

revenue, net income. and return-onequity (ROE). An "Output Table" lists 

values for all these in the b?se case and 

in each of the !>tandards cases under 

consideration. It also gives a range for 

each of these estimates. A "Sensitivity. 

Chart" shows how ROE would be 

affected by a change in anyone of the 

model's nine control variables. 

6 For this ~a!culalion. cost-of-operation. i.e .• 

energy saving. is derived from the DOE test 

procedures. See §§ 430.22 (a] and (n). Consume", . 

who use the products less than the test proced.ure 

assumes will experience a longer payback while 

those who use them more than the test proqedure assumes will have a shorter payback. 

For consumers, measures of economic 

impact-are the changes in purchase price 

and annual energy expense. The . 

purchase price and annual energy 

expense of each standard level are 

presented in Chapter 6 of the Technical 

Support Document. 

2. Life-Cycle Costs (LCC). One 

measure of the effect of proposed 

standards on consumers is the change in 

life-cycle costs resulting from standards. 

This is quantified by the difference in 

life-cycle cost (LCC) between the base 

and standards case for the appliance 

classes analyzed. The LCC is the sum of 

the purchase price and the operating 

expense. incuding maintenance 

expenditures. discounted over the 

lifetime of the appliance. 

The LCC was calculated for the range 

of efficiencies in the Engineering 

Analysis for each class of product in the 

year standards are imposed. The 

purchase price is based on the factory 

costs in the Engineering Analysis and 

includes a factory markup plus a 

distributor and retailer markup. Energy 

price forecasts are inputs that are taken' 

from the 1989 Annual Energy Outlook of 

the Energy Information Administration. 

Appliance usage inputs for refrigerators 

are taken from the refrigerator test 

procedure and for small gas furnaces are 

taken from the furnace test procedure 

and modified to adjust from laboratory 

to field usage. 

The differences in life-cycle costs 

between the base case and various 

levels of standards for refrigerators and 

small gas furnaces are presented in 

Tables 6.1-6.3 of the Technical Support 

Document. These LCC's are calculated 

at a seven percent discount rate; a 

higher rate, e.g .• ten percent, gives a 

smaller difference between standards 

cases and the base case. while a lower 

rate. e.g .. five percent. produces a 

greater difference. This results because 

the consumer benefits. i.e .• reduced 

operating expenses accrue. over the life. 

of the appliance and are discounted 

back ·to some base year, Therefore, the 

10weI' the discount rate. the greater the 

resulting consumer benefits after 

discounting. In addition. as can be seen 

in the various LCe curves. the use of a 

higher discount rate results in a flatter 

curve. 

When the LCC numbers are plotted 

araphically (on the Y axis) against unit _ 

~nergy consumption (on the X axis). the 

data generally produce a curve that is 

concave from above in shape. This 

means that at first the LCC curve will 

decline as efficiency improvements are 

made. will reach a minimum (which may 

or may not be discrete).and then rise. 

This indicates that the first efficiency 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations 47921

improvements will produce energy

savings, the value of which will more

than pay-for the design change. As

additional efficiency improvements are

made, it becomes increasingly costly to

save more energy, and, eventually, the,

value of the energy savings will not

cover the expenditures for the design

improvements. See Technical Support

Document, Figures 6.1-6.12.

The minimum of the LCC curve was of

particular interest in the analysis. The

minimum of the curve represents that

level of efficiency improvements that

maximizes the difference between the

value of energy saved and the additional

consumer expenditures for the relevant

efficiency improvements. Therefore,

design options that corresponded to the

minimum point were of special

consideration in establishing standard

levels.

The Department conducted a net

present value (NPV) analysis to assess

the differential economic impacts on

consumers that would occur from the

adoption of standards (for small gas

furnaces) and amended standards (for

refrigerators) compared to a base case

with no-standards (for small gas

furnaces) and the Act's 1990 standards

(for refrigerators). See Technical

Support Document, Chapter 5. The LBLREM calculates the total expenditure for

each product (discounted total value of

energy consumption from 1992 through

the last year of use for those products

purchased through the year 2015, plus

the total discounted expenses for

equipment purchased from 1992 through

2015), with and without standards (for

small furnaces), and with more stringent

standards and with the Act's 1990

standards (for refrigerators). The NPV

analysis is similar to the LCC analysis,

in that the greatest NPV should occur at

the standard level that corresponds to

the LCC minimum for the product.7 The

NPV for each product at the different

standard levels is identified in section

IV of this notice.

3. Energy Savings. While the

significant conservation of energy is a

separate statutory requirement for

imposing an energy conservation

standard, the Act requires DOE, in

determining the economic justification

of a standard, to consider the total

projected savings that are expected to

result directly from new or revised

standards. DOE used the LBL-REM

7 The net present value (NPV) of a standard, per

appliance, is calculated for all affected appliances

that are purchased in the projection period, while

the life-cycle cost (LCC) is calculated only for the

lifetime of an appliance that is purchased in the first

year of the relevant standard. Therefore. NPV and

LCC estimates, per appliance. may not correlate

exactly

results, discussed earlier, in its

consideration of total projected savings.

The savings are provided in section IV

of this notice.

4. Lessening of Utility or Performance

of Products. This factor cannot be

quantified. In establishing classes of

products and design options, the

Department tried to eliminate any

degradation of utility or performance in

the two products under consideration in

this rulemaking. That is, to the extent

that comments, or DOE's own research,

indicated that a product included a

utility or performance-related feature

that affected energy efficiency, a

separate class with a different efficiency

standard was created for this product. In

this way the Department attempted to

minimize the impact of this factor as a

result of the standards that were

analyzed. However, other factors, in

conjunction with standards, could affect

the utility or performance of products

subject to standards. For example, the

EPA limitations on chlorofluorocarbon

(CFC) production could cause

refrigerator manufacturers to adopt

alternatives to the regulated CFCs which

could affect the referigerator's utility or

performance. If this occurs, DOE is not

able to assure that utility and

performance would not be affected by

standards.

5. Impact of Lessening of Competition.

The determination of this factor is to be

made by the Attorney General. This

determination is presented for each

product in section IV of today's notice.

In addition, a copy of the Attorney

General's letter containing the findings

is published in today's Federal Register.

6. Need of the Nation to Conserve

Energy. With increasing concern about

the prospects of polluted air, acid rain

and global warming, some have argued

that-energy conservation, including more

stringent energy conservation standards,

is necessary to help alleviate those

prospects. Accordingly, results from the

environmental assessment for each

product will be reported concerning this

factor in the product specific discussion

(section IV) of this notice.

7. Other Factors. This provision

allows the Secretary of Energy, in

determining whether a standard is

economically justified, to consider any

other factors that he deems to be

relevant. The only such factor that has

been identified is the EPA regulation to

restrict the production of certain CFCs.

This factor, too, is discussed in section

IV of this notice.

III. Discussion of Comments

The Department received 120 written

comments in response to the December

1988 proposed rule, and received

testimony from 33 persons at the

January 12-13, 1989, public hearing.

These comments addressed all aspects

of the analysis, In this section, the

Department will discuss the general

analytical issues raised by the

comments; and then, the productspecific issues.

a. General Analytical Comments

1. Energy Projections

In the analysis for the proposed rule,

the Department used energy price

forecasts from the 1986 Annual Energy

Outlook of the Energy Information

Administration. The American Gas

Association (AGA) contended that these

price forecasts should be updated.

(AGA, No. 128, at 16-17).8

The Department agrees with AGA and

has updated the energy price projections

by incorporating the forecasts from the

1989 Annual Energy Outlook (DOE/EIA0383(89)).

2. Discount Rate Selection

In the Department's analysis for the

proposed rulemaking, a seven percent

discount rate was used to calculate

consumer life-cycle costs and net

present values.

The Department received numerous

comments on the choice of an

appropriate discount rate.9 Among those

supporting a lower rate, generally either

three or four percent, were the Rocky

Mountain Institute (RMI) (RMI, No. 49,

at 1), the Natural Resources Defense

Council (NRDC) (NRDC;-No. 81, at 8-9),

the Northwest Conservation Act

Coalition (NCAC) (NCAC, No. 91, at 1),

Massachusetts Executive Office of

Energy Resources (Mass) (Mass, No. 107,

at 5), the California Energy Commission

(CEC) (CEC, No. 108, at 17), Edison

Electric Institute (EEl) (EEI, No. 127, at

10), Ohio Office of the Consumer's

Counsel (Ohio) (Ohio, No. 138, at 7), and

Representative Edward J. Markey

(Markey,'No.151, at 3).

The principal argument offered in

support of a lower rate is that appliance

energy conservation'standards have

8 Comments on the proposed rule have been

assigned docket numbers and have been numbered

consecutively. Statements that were presented at

the January 12 and 13,1989, public hearing are

identified as Testimony.

9 Since the benefits of improved efficiency and

the expenses of obtaining and maintaining the more

efficient equipment accrue at different rates over

time, the values must be stated in terms of a

common point in time . Usually this common time is

the present, and the expense and benefit flows are

discounted to present values through the application

of an appropriate discount rate. This rate is

typically independent of price changes and tax

considerations; as such, it is a real, after-tax rate.

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47921 

improvements will produce energy 

savings, the value of which will more than pay,for the design change. As 

addi tional efficiency improvements are 

made, it becomes increaSingly costly to 

save more energy, and, eventually, the , value of the energy savings will not 

cover the expenditures for the design 

improvements. See Technical Support 

Document, Figures '6.1-6.12. 

The minimum of the LCC ClL"ve was of 

particular interest in the analysis. The 

minimum of the curve represents that 

level of efficiency improvements that 

maximizes the difference between the 

value of energy saved and the additional 

consumer expenditures for the relevant 

efficiency improvements. Therefore. 

design options that corresponded to the 

minimum point were of special 

consideration in establishing standard 

levels. 

The Department conducted a net 

present value (NPV) analysis to assess 

the differential economic impacts on consumers that would occur from the 

adoption of standards (for small gas 

furnaces) and amended standards (for 

refrigerators) compared to a base case with no-standards (for small gas 

furnaces) and the Act's 1990 standards 

(for refrigerators). See Technical 

Support Document, Chapter 5. The LEI..-

REM calculates the total expenditure for 

each product (discounted total value of 

energy consumption from 1992 through 

the last year of use for those products 

purchased through the year 2015, plus 

the total discounted expenses for 

equipment purchased from 1992 through 

2015), with and without standards (for 

small furnaces), and with more stringent 

standards and with the Act's 1990 

standards (for refrigerators). The NPV 

analysis is similar to the LCC analysis, 

in that the greatest NPV should occur at 

the standard level that corresponds to 

the LCC minimum for the product.7 The 

NPV for each product at the different 

standard levels is identified in section 

IV of this notice. 

3. Energy Savings. While the 

significant conserv!),tion of energy is a 

separate statutory requirement for 

imposing an energy conservation 

standard, the Act requires DOE, in 

determining the economic justification 

of a standard, to consider the total 

projected savings that are expected to 

result directly from new or revised 

standards. DOE used the LBI..-REM 

7 The net present value (NPV] of a standard. per 

appliance. is calculated for all affected appliances 

that are purchased in the projection period. while 

the life-cycle cost (Lee] is calculated only for the 

lifetime of an appliance that is purchased in the first 

year of the relevant standard. Therefore. NPVand 

Lee estimates. per appliance. may not correlate 

exactly . 

results, discussed earlier, in its 

consideration of total projected savings. 

The savings are provided in section IV 

of this notice. 

4. Lessening of Utility or Performance 

of Products. This factor cannot be 

quantified. In establishing classes of 

products and design options, the 

Department tried to eliminate any 

degradation of utility or performance in 

the two products under consideration in 

this rulemaking. That is, to the extent 

that comments, or DOE's own research, 

indicated that a product included a 

utility or performance-related feature 

that affected energy efficiency. a 

separate Class with a different efficiency 

standard was created for this product. In 

this way the Department attempted to 

minimize the impact of this factor as a re'sult of the standards that were 

analyzed. Howeyer. other factors, in 

conjunction with standards, could affect 

the utility or performance of products 

subject to standards. For example. the 

EPA limitations on chlorofluorocarbon 

(CPC) production could cause 

refrigerator manufacturers to adopt 

alternatives to the regulated CFCs which 

could affect the referigerator's utility or performance. If this occurs. DOE is not 

able to assure that utility and 

performance would not be affected by 

standards. 

5. Impact of Lessening of Competition. 

The determina lion of this factor is to be 

made by the Attorney Ge.neral. This 

determination is presented for each 

product in section IV of today's notice. 

In addition, a copy of the Attorney 

General's letter containing the findings 

is published in today's Federal Register. 

6. Need of the Nation to Conserve 

Energy. With increasing concern about 

the prospects of polluted air, acid rain 

and global warming, some have argued 

thaf'energy conservation, including more stringent energy conservation standards, 

is necessary to help alleviate those 

prospects. Accordingly, results from the 

environmental assessment for each 

product will be reported concerning this 

factor in the product specific discussion 

(section IV) of this notice. 

7. Other Factors. This prOVision 

allows the Secretary of Energy, in 

determining whether a standard is 

economically justified, to consider any 

otherfactors that he deems to be 

relevant. The only such factor that has 

been identified is the EPA regulation to 

restrict the production of certain CFCs. 

This factor, too, is discussed in section 

IV of this notice. 

III. Discussion of Comments 

The Department received 120 written 

comments in response to the December 

1988 proposed rule, and received 

testimony from 33 persons at the 

January 12-13, 1989. public hearing. 

These comments addressed all aspects 

of the analysis. In this section, the 

Department will discuss the general 

analytical issues raised by the 

comments; and then, the productspecific issues. 

a. General Analytical Comments 

1. Energy Projections 

In the analysis for the proposed rule, 

the Department used energy price 

forecasts from the 1986 Annual Energy 

Outlook of the Energy Information 

Administra tion. The American Gas 

Association (AGA) contended that these 

price forecasts should be updated. 

(AGA, No. 128, at 16-17).8 

The Department agrees with AGA and 

has updated the energy price projections 

by incorporating the forecasts from the 

1989 Annual Energy Outlook (DOE/EIA0383(89)). 

2. Discount Rate Selection 

In the Department's analysis for the 

proposed rulemaking, a seven percent 

discount rate was used to calculate consumer life-cycle costs and net , present values. ' 

The Department received numerous comments on the choice of an 

appropriate discount rate.9 Among those 

supporting a lower rate. generally either 

three or four percent, were the Rocky 

Mountain Institute (RMI) (RMI, No. 49. 

at 1), the Natural Resources Defense 

Council (NRDC) (NRDC;·No. 81, at 8-9). 

the Northwest Conservation Act 

Coalition (NCAC) (NCAC, No. 91, at 1), 

Massachusetts Executive Office of 

Energy Resources (Mass) (Mass. No. 107, 

at 5), the California Energy Commission 

(CEC) (CEC, No. 108, at 17), Edison 

Electric Institute (EEl) (EEl, No. 127, at 

10), Ohio Office of the Consumer's 

Counsel (Ohio) (Ohio, No. 138, at 7), and 

Representative Edward J. Markey 

(Markey,"No. 151, at 3). 

The principal argument offered in 

support of a lower rate is that 'appliance 

energy conservation'standards have 

• Comments on iha proposed rule have been 

assigned docket numbers and have been numbered 

consecutively. Statements that were presented at 

the January 12 and 13.1989. public hearing are 

identified as Testimony. 

9 Since the benefits of improved efficiency and 

the expenses of obtaining and maintaining the more 

efficient equipment accrue at different rates over 

time. the values must be stated in terms of a 

common point in time, Usually this common time is 

the present, and the expense and benefit flows are 

discounted to present values through the application 

of an appropriate discount rate. This rate is 

typically independent of price changes ~nd tax 

considerations; as such. it is a real. after-tax rate, 
54FR47916

47922 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

benefits that accrue to all of society, and

these positive benefits should be

accounted for by a reduction in the

discount rate for the individual

purchasers of the energy saving

appliances.

The Department agrees that all of

society benefits from energy-conserving

appliances, e.g., more energy-efficient

appliances can help reduce the need to

build additional electrical generating

plants, and thereby have positive

economic and environmental effects that

can be enjoyed by all members of

society. It is also true, however, that

most of the benefits from more efficient

appliances are realized by the individual

purchasers of those appliances, while

those benefits that are, collective in

nature and benefit all members of

society, e.g., the environmental benefits

mentioned above, are properly tallied in

the environmental assessment that the

Department must conduct for the

rulemaking, and are considered under

the economic justification factors. Such

external benefits from the purchase of

energy conserving appliances should not

be used to support a lower discount rate

for calculating the benefits to the

individual purchasers.

Social discount rates can be

appropriate in situations where there

are significant societal benefits that

cannot be estimated. However, even in

those circumstances, there is a practical

problem in determining what that rate

should be, that is, by what amount the

private discount rate should be lowered

in-order to account for the benefits that

accrue to all of society. Most of the

comments that argue for a social

discount rate suggested, as noted above,

lowering the individual purchaser's rate

to three or four percent. None of these

comments, however, offers any

theoretical or empirical basis to support

such a reduction, and the Department,

therefore, rejects such calls for lowering

the individual purchaser's discount rate.

Furthermore, as noted above, many of

the benefits that accrue to all of society

from more energy-efficient appliances

are, the Department believes,

environmental benefits, which are

calculated in the Environmental

Assessment (DOE/EA-0386). Any

additional social benefits that might

exist from an individual's purchase of

more energy-efficient appliances are,

DOE believes, not sufficiently large or

inestimable to warrant reducing the

consumer's discount rate.

The use of a three percent discount

rate has no reasoned theoretical basis. It

is not related to the-opportunity cost of

money for purchasing consumer

durables. It represents the extreme of

the calculations of the social discount:

rate in a more general context, and is

thus suspect on these grounds. Finally,

the use of a three percent discount rate

does not change the results

qualitatively. For refrigerators, as seen

in the Technical Support Document,

standard level 3 has certain positive

benefits, greater in magnitude than

results calculated at a higher discount

rate. Level 4 has even higher benefits,

but is rejected for reasons not related to

the discount rate and the calculated lifecycle-cost and net present value.

The principal exception to those who

argued for a lower discount rate was a

comment offerd by Battelle (Battelle) on

behalf of the Association of Home

Appliance Manufacturers (AHAM).

(Battelle, No. 110, at 8-18 and 32-34).

Battelle stated that consumers' past

implicit discount rates 10 for appliances

have been calculated to be in the 40 to

100 percent range. These rates are

implicit discount rates, developed from

data on past consumer purchases. Based

on these data, Battelle contends that the

discount rate, to be used in the analysis,

should be no lower than 20 percent.

DOE reviewed these comments and

found several problems with Battelle's

recommendation. First, the implicit

discount rate is a value, initially

calculated from historical data, that is

used by LBL-REM in the projection of

efficiency choices. LBL-REM uses

implicit (market) discount rates that

characterize the market-place's trade-off

of purchase price against operating

expense. For refrigerators, these values

are calculated from purchase data,

including the shipment weighted energy

factor for 1987, which was obtained

from AHAM. The implicit discount rates

used in the proposed rule were reported

for each class in table B.2 of the

Technical Support Document, and range

from 78 to 279 percent. Implicit discount

rates for the small gas furnace classes

were calculated to be 16 and 20 percent;

these were used in the proposed rule

and are also reported in Table B.2 of the

Technical Support Document.

Secondly, household appliances are

considered to be consumer durable

goods, not investment goods. This

definition has been accepted elsewhere

in the Federal government; for example,

the U.S. Department of Commerce's

Survey of Current Business reports

expenditures on appliances in this way.

A consumer durable good is one that is

expected to last more than one year. All

10 The implicit discount rate is a measure of

marketplace behavior where, using historical data,

a discount rate is calculated that would result in the

shipment weighted energy factor (SWEF) coinciding

with the minimum LCC point.

of the appliances that are covered by

the Act fall into this category.

The return to a consumer of an

appliance is the utility that is derived

from having and using the product. The

consumer will spend on appliances up to

the point that the marginal utility that he

derives is equal to the purchase price.

The idea of a monetary payback from

consuming an appliance is contrary to

economic thought. Only investment

goods are expected to yield a monetary

return, Furthermore, to calculate a rate

of return to consumers from consuming

an appliance, one would need some

cardinal measure of their individual

utility schedules, and would need to

make interpersonal comparisons of

them. Both of these concepts are

contrary to economic theory and

application.' 1

Although the concept of paybacks

from the consumption of a consumer

durable is contrary to economics, such is

the approach that has been taken by

those who argue that the "correct"

discount rates to use in consumer life--

cycle cost and net present value

calculations for the appliance standards

program are the implicit discount rates

derived from past consumer appliance

purchase data.

It has been suggested by some that,

since many of the appliances under this

program are "necessities," the average

model should be considered a consumer

durable, but that any additional price

paid for a more energy-efficient model

could be considered a consumer

investment, against which monetary

returns can be calculated. It is. then

suggested that the rate of these returns

should be used as discount rates in the

life-cycle-cost and net present value

calculations.

This approach has some conceptual

appeal; however, there would be

problems with its implementation. Such

a calculation would be appropriate

where the more energy-efficient model

differed from the average model only in

its improved energy-efficiency. If there

were other differences in features

between the two appliances, the extra

price for the more energy-conserving

model could be at least partly related to

those different features; therefore, the

extra price would not be solely for the

energy conserving aspect of the more

efficient machine, and calculating rates

of return based.on that extra price

11 See, for example . Donald Stevenson Watson.

Price Theory and Its Uses. Boston: Houghton Mifflin

Company, 1963, Chs. 4 and 5, esp. pages 59-31 and

68-71. For an additional critique of the practicality

of cardinal measurement of utility, see William S.

Vickrey, Microstatics, New York: Harcourt Bruce S

World. Incorporated, 1961, pp. 36-51.

 CE-RM-87-102 COMMENT 10

54FR47916 

47922 Federal Register / Vol. 54, N~. 221 I Friday, November 17, 1989 /Rules and Regulations 

. benefits that accrue to aU of society, and 

these positive benefits should be 

accounted for by a reduction in the 

discount rate for the individual 

purchasers of the energy saving 

appliances. 

The Department agrees that all of 

society benefits from energy-conserving 

appliances, e.g., more energy-efficient 

appliances can help reduce the need to 

build additional electrical generating 

plants, and thereby have positive 

economic and environmental effects that 

can be enjoyed by all members of 

society. It is also true, however, that 

most of the benefits from more efficient 

appliances are realized by ihe individual 

purchasers of those appliances, ... "hile 

those benefits that are collective in 

nature and benefit all members of 

society, e.g., the environmental benefits 

mentioned above, are properiy tallied in 

the environmental assessment that. the 

Department must conduct for the 

rulemaking, and are considered under 

the economic justification factors. Such 

external benefits from the purchase of 

energy conserving appliances should not 

be used to support a lower discount rate 

for calculating the benefits to the 

individual purchasers. 

Social discount rates can be 

appropriate in situations where there 

are significant societal benefits that 

cannot be estimated. However, even in 

those circumstances, there is a practical 

problem in determining what that rate 

should be, that is, by what amount the 

private discount rate should be lowered 

in. order to account for the benefits that 

accrue to all of society. Most of the 

comments that argue for a social 

discount rate suggested, as noted above, 

lowering the individual purchaser's rate 

to three or four percent. None of these 

comments, however, offers any 

theoretical or empirical basis to support 

such a reduction, and the Department, 

therefore, rejects such calls for lowering 

the individual purchaser's discount rate. 

Furthermore, as noted above, many of 

the benefits that accrue to all of society 

from more energy-efficient appliances 

are, the Department believes, 

environmental benefits, which are 

calculated in the Environmental 

Assessment (DOE/EA-Q3S6). Any 

additional social benefits that might 

exist from ap individual's purchase of more energy-efficient appliances are, 

DOE believes. not sufficiently large or 

inestimable to warrant reducing the 

consumer's discount rate. 

The use of a three percent discount 

rate has no reasoned theoretical basis. It 

is not related to the-opportunity cost of 

money for purchasing consumer durables. It represents the extreme of 

- . . 

the calculations of the social discount: 

rate in a more general context, and is 

thus suspect on these grounds. Finally, 

the use of a three percent discount rate 

does not change the results 

qualitatively. For refrigerators, as seen in the Technical Support Document, 

standard level 3 has certain positive 

benefits, greater in magnitUde than 

results calculated at a higher .discount 

rate. Level 4 has even higher benefits, 

but is rejected for reasons not related to 

the discount rate and the calculated lifecycle-cost and net present vallie. 

The principal exception to those who 

argued for a lower discount rate was a 

comment offerd by Battelle (Battelle) en 

behalf of the Association of Home 

Appliance Manufacturers (AHAM). 

(Battelle. No. 110, at 8-18 and 32-34). 

Battelle stated that consumers' past 

implicit discount rates 10 for appliances 

have been calculated to be in the 40 to 

100 percent range. These ra tes are 

implicit discount rates, developed from 

data on past consumer purchases. Based on these data, Battelle contends that the 

discount rate, to be used in the analysis, 

should be no lower than 20 percent. 

DOE reviewed these comments and 

fO!lnd several problems with Battelle's 

recommendation. First, the implicit 

discount rate is a value, initially 

calculated from historical data, that is 

used by LBL-REM in the projection of 

efficiency choices. LBL-REM uses 

implicit (market) discount rates that 

characterize the market-place's trade-off 

of purchase price against operating 

expense. For refrigerators. these values 

are calculated from purchase data, 

including the shipment weighted energy 

factor for 1987, which was obtained 

from AHAM. The implicit discount rates 

used in the proposed rule were reported 

for e?,.ch class in table B.2 of the 

Technical Support Document, and range 

from 78 to 279 percent. Implicit discount 

rates for the small gas furnace classes were calculated to be 16 and 20 percent; 

these were used in the proposed rule 

and are also reported in Table B.l of the 

Technica! Support Document. 

Secondly, household appliances are 

considered to be consumer durable 

goods, not investment goods. This 

definition has been accepted elsewhere 

in the Federal government; for example, 

the U.S. Department of Commerce's 

Survey of Current Business reports 

expenditures qn appliances in this way. 

A consumer durable good is one that is 

expected to last more than one year. All 

,0 The implicit discount rate is a measure of 

marketplace behavior where, using historical data, 

a discount rate is calculated that would result in the 

shipment weighted energy factor (SWEFJ coinciding 

with the minimum Lee point. 

of the appliances that are covered by 

the Act fall into this category. 

The return to a consumer of an 

appliance is the utility that is derived 

from having and using the product. The 

consumer will spend on appliances up to 

llJ.e pOint that the marginal utility that he 

derives is equal to the purchase price. 

The idea of a monetary payback from 

consuming an appliance is contrary to 

economic thought. Only investment 

goods are expected to yield a monetary 

return. Furthennore, to calculate a rate 

ofraturn to consumers from consuming 

an appliance, one would need some 

cardinal measure of their individual 

utility schedules. and would need to 

make interpersonal comparisons of 

them. Both of these concepts are 

contrary to economic theory and 

application. 11 

Although the concept of paybacks 

from the consumption of a consumer durable is contrary to economics. such is 

the approach that has been taken by 

those who argue that the "correct" 

discount rates to use in consumer life.- . cycle cost and net present value 

calculations for the appliance standards 

program are the implicit discount rates 

derived from past consumer a.ppliance 

purchase data. 

It has been suggested by some that, 

since many of t..~e appliances under this 

program are "necessities," the average 

m·odel should be considered a consumer 

durable, but that any additional price 

paid for a more energy-efficient model 

could be considered a consumer investment, against which monetary 

returns can be calculated. It is· then 

suggested that the ra·te ofthese returns 

should be used as discount rates in the 

life-cycle-cost and net present value 

calculations. 

This approach has some conceptual 

appeal; however, there would be 

problems with its implementation. Such a calculation would be appropriate 

where the more energy-efficient model 

differed from the average model only in 

its improved energy-efficiency. If there were other differences in features 

between the two appliances. the extra 

price for the more energy-conserving 

model could be at least partly related to 

those different features; therefore. the 

extra price would not be solely for the 

energy conserving aspect of the more 

efficient machine. and caiculating rates 

of return based.on that e~tra price 

11 See, for example. Donald Stevenson Watson. 

Price Theory and Its Uses. Boston: Houghton Mifflin 

Company, 1963. Chs. 4 and 5, esp. pages 59-61 and 

68-71. For an additional critique of the practicality 

of cardinal measurement of utility. see William S. 

Vickrey. Micros/atics. New York: Harcourt Bruce & 

World. incorporated. 1964, pp. ~i}-51. 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations 47923

would not produce a rate of return from

the aspect of investing in energyefficiency.

Finally, the proposal to use a discount

rate of 20 percent is counter to the

practice of government agencies that are

evaluating either regulatory program or

government investments. In the

evaluation of regulations, regulatory

agencies often use (real) discount rates

of three to seven percent. For example,

the Environmental Protection Agency

(EPA) in performing its regulatory

impact assessment of the Montreal

Protocol, used a 3 percent real discount

rate. DOE, in evaluating Voluntary

Energy Conservation Performance

Standards for Commercial and Multifamily High Rise Residential Buildings

used a seven percent real discount rate.

Even if the arguments for the use of a

higher discount rate were accepted, they

would not change the results of the

analysis qualitatively. For refrigerators,

at a ten percent discount rate, the level 3

standards would have some positive

benefits (although reduced from the

benefits calculated at seven percent.

The net benefits of the level 3 standards

would be higher than level 2 or level 4.

In deriving the seven percent discount

rate that was used in the proposed rule,

DOE was guided by the Court decision.

NRDC v. Herrington, supra at 110. In the

December 22, 1982, and August 1983

final rules concerning appliance energy

efficiency standards, DOE used a ten

percent discount rate. In dismissing the

ten percent discount rate, the Court

presented, without comment, a

methodology for calculating a discount

rate for consumer life-cycle cost and net

present value calculations.

The methodology was a calculation of

the interest charged on consumer loans,

minus the tax deductibility of such

interest, minus the rate of inflation; this

yields a real, after-tax, rate of interest.

The applicability of that methodology

changed considerably with passage of

the Tax Reform Act of 1986 (Pub. L. 99-

514). The Tax Reform Act phases out the

tax deductibility of interest paid on

consumer loans (the phase-out will be

complete at the end of 1990). DOE used

that methodology in calculating a . ,

discount rate for the December 1988

proposed rule. The Department

examined interest rates on consumer

loans (then about 12 percent) and

deducted the expected annual rate of

price increases (often used as a measure

of the inflation rate) in the early 1990's

(then forecasted to be around 5 percent).

With the passage of the Tax Reform

Act, the issue became more complex. To

the extent that purchases of more

efficient appliances occur along with the

sale of new homes, then the purchase

prices of those appliances are often

being financed by the interest rate on

the mortgage, which is typically lower

than interest on consumer installment

loans, and is also fully tax deductible.

Therefore, in order to derive an

appropriate discount rate for these

purchasers, it is necessary to estimate

the expected mortgage interest rates, as

well as the percentage of shipments of

refrigerators and small furnaces that are

expected to be installed in new homes.

When this rule is effective in 1993, there

are projections that the fixed contract

mortgage rate for conventional

commitments will be 10.78 percent.12

For a purchaser in a marginal tax rate

of, say, 28 percent, the after tax rate of

interest paid would be 7.76 percent

(10.78 x.72). Furthermore, it is estimated

that the annual rate of price increases in

1993 will be 4.7 percent.'3 Therefore, the

net, after tax, real rate of interest to

these consumers would be 3.06 percent

(7.76-4.70).

However, only a fraction of the units

are expected to be installed in new

homes and, thus, qualify for such a

favorable interest rate. According to

projections in the LBL-REM, around 60

percent of the small furnace shipments,

and more than 30 percent of refrigerator

shipments in 1993 are expected to be

installed in new homes.

Presumably, then, 40 percent of small

furnace shipments and 70 percent of

refrigerator shipments in 1993 will be

purchased as replacements and installed

in existing homes. How these units are

purchased would indicate an

appropriate discount rate. For example,

some replacement purchases could be

made through home equity loans, the

interest for which would be fully tax

deductible. Many other replacements

will be bought with cash that is

withdrawn from savings or by an

unsecured, personal loan.

For cash purchases, the relevant

interest expense is the foregone interest

that those savings could have earned. In

1993, time deposits, i.e., savings

accounts, are expected to be earning

between 7.72 and 7.79 percent interest."

Since such interest, if earned, would be

fully taxable, the net, after tax earnings

that are foregone are between 5.55 and

5.61 percent for an individual in a 28

percent marginal tax bracket.

Subtracting the expected rate of price

increases (4.7 percent), one obtains a

resulting discount rate of 0.85 to 0.91

percent.

12 DRI/McGraw-Hill,. U.S. Long-Term Review,

Winter 1988-89, Table 6.

13 Idid., Table 1.

14 Ibid., Table 23.

Many consumers, however, will

purchase their appliances by taking out

unsecured, personal loans, which are

likely to carry interest rates of 18 to 20

percent; these interest payments would

not be tax deductible. The discount rate

for this group of purchasers would be as

high as 13.3 to 15.3 percent.

As the foregoing discussion indicates,

there is a wide range of possible

discount rates to be used in calculating

life-cycle costs and net present values.

The range is from approximately 1

percent to slightly more than 15 percent.

Although many of the purchasers of

these appliances should have real, after

tax interest payments below 7 percent,

many will have payments in excess of

15 percent; thus it would appear that the

use of a seven percent rate in the

consumer life-cycle cost and net present

value calculations is justified. Since one

discount rate is to apply in all the

calculations, the Department used a rate

approximately at the mid-point of the

potential consumer discount rates.

This approach has several

advantages. First, it has a reasoned

theoretical justification in that it is

related to the opportunity cost of money

for purchasing consumer durables; as

such, it is justified in terms of the

alternate consumer investment

opportunities that are forgone in order to

finance the purchases of the appliances.

Secondly, use of a higher rate would

arbitrarily bias the LCC results upward,

while a lower rate would create biases

in the opposite direction.

3. Selection of Candidate Standard

Levels

In the proposed rifle, the Department

indicated that its selection of candidate

standard levels was dependent on the

consumer life-cycle cost curves that

were developed in the analysis. These

curves were calculated by estimating

the expected initial price increase that

such additional design options would

cause, adding the discounted value of

maintenance and operating expenses,

and comparing them to the discounted

value of energy savings that would

result from those design options. The

selection criteria were to consider as

possible standard levels as many points

from the curves as would be practical.

Two levels that were considered as

standards were the maximum

technologically feasible levels, as

required by the Act, and the LCC

minima which, at least theoretically,

should maximize the benefits to the

consumer. In addition, in the case of

classes of refrigerators, the Department

considered, as candidate standard

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47923 

--

would not produce a rate of return from 

the aspect of investing in energyefficiency. 

. Finally. the proposal to use a discount 

rate of 20 percent is counter to the 

practice of government agencies that are 

evaluating either regulatory program or 

government investments. In the 

evaluation of regulations, regulatory . 

agencies often use (real) discount rates 

of three to seven percent. For example. . the Environmental Protection Agency 

(EPA) in performing its regulatory 

impact assessment of the Montreal 

Protocol. used a 3 percent real discount 

rate. DOE, in evaluating Voluntary 

Energy Conservation Performance 

Standards for Commercial and Multifamily High Rise Residential Buildings 

used a seven percent real discount rate. 

Even if the arguments for the use of a 

high~r discount rate were accepted, they 

would not change the results of the 

analysis qualitatively. For refrigerators. 

at a ten percent discount rate, the level 3 

standards would have some positive 

benefits (although reduced from the 

benef;i.ts calculated at seven percent. 

The net benefits of the level 3 standards 

would be higher than level 2 or level 4. 

In deriving the seven percent discount 

rate that was used in the proposed rule. 

DOE was guided by the Court decision. 

NRDC v. Herrington, supra at 110. In the 

December 22. 1982, and August 1983 

final rules concerning appliance energy 

efficiency standards, DOE used a ten 

percent discount rate. In dismissing the 

ten percent discount rate. the Court 

presented. without comment. a )llethodology for calculating a discount 

rate for consumer life-cycle cost and net 

present value calculations. - The methodology was a calculation of 

the interest charged on consumer loans. 

minus the tax deductibility of such 

interest, minus the rate of inflation; this 

yields a real, after-tax. rate of interest. 

The applicability of that methodology 

changed considerably with passage of 

the Tax Reform Act of 1986 (Pub. L. 99-

514). The Tax Reform Act phases out the 

tax deductibility of interest paid on consumer loans (the phase-out will be 

complete at the end of 1990). DOE used 

that methodology in calculating a. discount rate for the December 1988· 

proposed rule. The Department . 

examined interest rates on consumer loans (then about 12 percent) and 

deducted the expected annual rate of 

price increases (often used as a measure of the inflation rate) in the early 1990's 

(then forecasted to be around 5 percent). 

With the passage of the Tax Reform 

Act, the issue became more complex. To 

the extent that purchases of more efficient appliances occur along with the . 

sale of new home~, then the purchase 

prices of those appliances are often 

being financed by the interest rate on 

the mortgage, which is typically lower 

than interest on consumer installment 

loans, and is also fully tax deductible. 

Therefore. in order to derive an 

appropriate discount rate for these 

purchasers, it is necessary to estimate 

the expected mortgage interest rates, as 

well as the percentage of shipments of 

refrigerators and small furnaces that are 

expected to be installed in new homes. 

When this rule is effective in 1993, there 

are projections that the fixed contract 

mortgage rate for conventional 

commitments will be 10.78 percent,12 

For a purchaser in a marginal tax rate 

of, say, 28 percent. the after tax rate of 

interest paid would be 7.76 percent 

(10.78 x .72). Furthermore. it is estimated 

that the annual rate of price increases in 

1993 will be 4.7 percent,13 Therefore, the 

net, after tax, real rate of interest to 

these consumers would be 3.06 percent 

(7.76-4.70). 

However, only a fraction.of the units are expected to be installed in new 

homes and. thus, qualify for such a 

favorable interest rate. According to 

projections in the LBL-REM. around 60 

percent of the small furnace shipments, 

and more than 30 percent of refrigerator 

shipments in 1993 are expected to be 

installed in new homes. 

Presumably, then. 40 percent of small 

furnace shipments and 70 percent of 

refrigerator shipments in 1993 will be 

purchased as replacements and installed 

in existing homes. How these units are purchased would indicate an appropriate discount rate. For example. 

some replacement purchases could be 

made through home equity loans. the 

interest for which would be fully tax 

deductible. Many other replacements 

wi!! be bought with cash that is 

withdrawn from savings or by an 

unsecured. personal loan. 

For cash purchases. the relevant 

interest expense is the foregone interest 

that those savings could have earned. In 

1993. time deposits, i.e .• savings 

accounts, are expected to be earning 

between 7.72 and 7.79 percent interest. 14 

Since such interest. if earned. would be 

fully taxable. the net. after tax earnings 

that are foregone are between 5.55 and 

5.61 percent for an individual in a 28 

percent marginal tax bracket. 

Subtracting the expected rate of price 

increases (4.7 percent). one obtains a resulting discount rate of 0.85 to 0.91 

percent. 

,. DRI/McGraw-HiII •. u.s. Long-Term Review; 

Winter 1988-8f}, Table 6. 

10 Idid. Table 1. 

.. Ibid .• Table 23. 

Many consumers. however, will 

purchase their appliances by taking out 

unsecured, personal loans, which are 

likely to carry interest rates of 18 to 20 

percent; these interest payments would 

not be tax deductible. The discount rate 

for this group of purchasers would be as 

high as 13.3 to 15.3 percent. 

As the foregOing discussion indicates. 

there is a wide range of possible 

discount rates to be used in calculating 

life-cycle costs and net present values. 

The range is from approximately 1 

percent to slightly more than 15 percent. 

Although many of the purchas.ers of 

these appliances should have real. after 

tax interest payments below 7 percent, 

many will have payments in excess of 

15 percent; thus it would appear that the 

use of a seven percent rate in the consumer life-cycle cost and net present 

value calculations is justified. Since one 

discount rate is to apply in all the 

calculations, the Department used a rate 

approximately at the mid-point of the 

potential consumer discount rates. 

This approach has several 

advantages. First, it has a reasoned 

theoretical justification in that it is 

related to the opportunity cost of money 

for purchasing consumer durables; as 

such. it is justified in terms of the 

alternate consumer investment 

opportunities that are forgone in order to 

finance the purchases of the appliances. 

Secondly. use of a higher rate would 

arbitrarily bias the LCC results upward, 

while a lower rate would create biases 

in the opposite direction. 

3. Selection of Candidate Standard 

Levels 

In the proposed nile, the Department 

indicated that its selection of candidate 

standard levels was dependent on the 

consumer life-cycle cost curves that were developed in the analysis. These 

curves were calculated by estimating 

the expected initial price increase that 

such additional design options would 

cause, adding the discounted value of 

maintenance and operating expenses. 

and comparing them to the discounted 

value of energy savings that would 

result from those design options. The 

selection criteria were to consider as 

possible standard levels as many points 

from the curves as would be practical. 

Two levels that were considered as 

standards were the maximum 

technologically feasible levels. as 

required by the Act. and the LCC 

minima which. at least theoretically. 

should maximize the benefits to the 

consumer. In addition. in the case of 

classes of refrigerators. the Department 

considered. as candidate standard 
54FR47916

47924 Federal Register / 'Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

levels, up to three points less efficient

than the LCC minima.

NCAC and Ohio suggested that LCC

points occurring between the LCC

minima and the maximum

technologically feasible should be

considered as viable candidate levels.

(NCAC, No. 91, at 2; Ohio, No. 138, at 3).

DOE disagrees with the comment. The

Department analyzed the LCC minima

and maximum technologically feasible

levels for refrigerators, and found both

levels not to be economically justified.

While there is an engineering design

that falls between the LCC minima and

the maximum technologically feasible,

the Department believes that if two

standard levels are found not to be

economically justified, the levels

between them are also not economically

justified.

The CEC said that the establishment

of a revised standard that is less

efficient than the lowest LCC point is

not economically justified. (CEC, No.

108, at 30).

The Department disagrees with the

CEC's statement; the standards decision

is based on a review of the analytical

results, after taking all seven factors of

economic justification into

consideration. The LCC results are just

one of the factors that is considered.

)on Leber (Leber), a professional

engineer, noted that DOE incorrectly

stated that "at efficiency levels beyond

the LCC minima, the incremental first

cost of the product exceeds the value of

the energy savings such that the average

consumer does not realize a benefit from

the investment " DOE agrees; Mr. Leber

correctly notes that, in such a situation,

"The consumers will still realize a

benefit from the investment but the ratio

of the benefit to the cost will now be

less than one." (Leber, No. 155, at 1).

Ohio maintained that Congress clearly

did not intend for DOE to exclude

considering the benefits of energy

efficiency that go beyond those that are

represented in a life-cycle cost

comparison. (Ohio, No. 138, at 7).

The Department agrees with Ohio,

and notes that the LCC comparison was

just one of the seven factors of economic

justification that was consider.

4. Calculation of Energy Savings

Some comments questioned the

Department's calculations of energy

savings. The CEC contended that

historically the average efficiency

resulting from a new standard has

overshot the theoretical market

minimum by five to ten percent, and that

DOE has underestimated the actual

energy savings and economic benefits

that will accrue from standards by at

least that amount. (CEC, Testimony,

January 12, 1989).

The Department notes overshoot

means the positive difference between

maximum unit energy consumption

standard levels, and the average unit

energy consumption actually attained by

models sold after standards are

implemented. For example, actual unit

energy consumption may be five percent

or more lower than standard levels.

DOE did not assume an overshoot, but

adhered to its. methodology, that, in the

base case, the market will demand a

range of efficiencies such that the SWEF

exceeds the 1990 standard (in the case

of refrigerators). In the standards cases,

designs which met or went beyond the

standard were considered to be

available for purchase and were used to

calculate a new SWEF. While no

arbitrary overshoot was assumed, the

average efficiency projected after

standards by this method is allowed to

go beyond the standard by an amount

depending upon the base case

distribution of efficiencies. In looking at

the SWEF under each standard level,

the Department is confident that it has

captured all of the energy savings that

each candidate standard level could

generate.

It should be noted that the more

stringent the standard level, the closer

that the SWEF will be to the standard

level, and the lower that the overshoot

will be. LBL-REM SWEF projections are

found in Tables 5.6, 5.7, and 5.16 of the

Technical Support Document.

5. Reporting of the Environmental

Benefits of Standards

In reporting the results of the analysis

in the proposed rule, the Department

presented the environmental effects of

standards only in the Environmental

Assessment (DOE/EA-0372, November

1988). The Solar Energy Association of

Oregon (SEAO) commented that, in

determining the economic justification

of candidate standards, the Department

should consider the environmental

benefits that it calculates would result

from candidate standards. (SEAO, No.

44, at 2). In addition, Representative

Markey commented that mitigating

global warming and pollution are

important for our national security.

(Markey, No. 151, at 2).

Under the economic justification

factor, Need of the Nation to Conserve

Energy, as discussed above, the

Department considered the

environmental effects that are expected

to result from standards. These effects

are reported for each product in section

IV of this notice.

6. Choice of Proposed Standard Levels

In the proposed rule, the Department

proposed a range of refrigerator

standards, from not amending the 1990

standards through standard level 3. All

of these possible standards were found

to save a significant amount of energy,

be technologically feasible, and be--

economically justified.

RMI commented that although the

Department found that standard levels 4

and 5 also satisfied those requirements,

it did not propose either, thereby

"violating the law." (RMI, No. 49, at 2).

The Department notes that RMI is

mistaken; in fact, in the proposed rule,

the Department said that both standard

levels 4 and 5 would be technologically

feasible and would result in a significant

conservation of energy, but that the

Department found that they were not

economically justified.

GE and AHAM commented that the

Department should not adopt

refrigerator standards that are based on

the scenario used for the proposed rule

(in which it was assumed tha t CFC-11

and -12 would be available for

refrigerator production), since that

analysis did not consider the phase-out

of CFCs. (GE, No. 125, at 7; and AHAM,

No. 137, at 2).

While there is much speculation and

many proposals. concerning the phaseout of CFC-11 and -12, the Montreal

Protocol calls for an immediate rollback

of production to 1986 levels with a 50

percent cut of those levels by 1998. As a

result, various chemical companies and

laboratories are doing research on

finding replacement chemicals.

However, the record is fairly clear that

replacement chemicals will not be

available by 1993 when these standards

go into effect.

DOE believes that CFC-11 and -12

will be available to refrigeration

manufacturers in 1993 and probably will

still be available in 1997, although at

higher prices. The Department believes

that, short of some new treaty or

legislation, any transition from CFC-11

and -12 over the 1993 to 1998 time span

will occur voluntarily. However, DOE

believes that such a transition would

likely occur; therefore, the analysis was

modified to include the possibility that it

occurs before 1998. To accomplish this,

the analysis was divided into two parts.

For the period 1993 through 1995, it was

assumed that CFC-11 and -12 are

available, and for the period 1996 and

beyond, it was assumed they are

replaced.

For this later time period, the

engineering analysis was modified as

discussed, supra, in the "Product-

 CE-RM-87-102 COMMENT 10

54FR47916 

47924 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

levels, up to three points less efficient 

than the LCC minima. 

NCAC and Ohio suggested that LeC 

points occurring between the LCe 

minima and the maximum 

technologically feasible should be 

considered as viable candidate levels. 

(NCAC, No. 91, at 2; Ohio, No. 138, at 3). 

DOE disagrees with. the comment. The 

Department analyzed the LCC minima 

and maximum technologically feasible 

levels for refrigerators, and found both 

levels not to be economically justified. 

While there is an engineering design 

that falls between the LCC minima and 

the maximum technologically feasible, 

the Department believes that if two 

standard levels are found not to be 

economically justified, the levels 

between them are also not economically 

justified. 

The CEC said that the establishment 

of a revised standard that is less 

efficien.t than the lowest LCC point is 

not economically justified. (CEC, No. 

108, at 30). 

The Department disagrees with the 

CEC's statement; the standards decision 

is based on a review of the analytical 

results, after taking all seven factors of 

economic justification into 

consideration. The LCC results are just 

one of the factors that is considered. 

Jon Leber (Leber), a professional 

engineer, noted that DOE incorrectly 

stated that "at efficiency levels beyond 

the LCC minima, the incremental first 

cost of the product exceeds the value of 

the energy savings such that the average 

consumer does not realize a benefit from 

the investment." DOE agrees; Mr. Leber 

correctly notes that, in such a situation. 

"The consumers will still realize a 

benefit from the investment but the ratio 

of the benefit to the cost will now be 

less than one." (Leber, No. 155, at 1). 

Ohio maintained that Congress clearly 

did not intend for DOE to exclude 

considering the benefits of energy 

efficiency that go beyond those' that are 

represented in a life-cycle cost 

comparison. (Ohio, No. 138. at 7). 

The Department agrees with Ohio, 

and notes that the LCC comparison was 

just one of the seven factors of economic 

justification that was consider. 

4. Calculation of Energy Savings 

Some comments questioned the 

Department's calculations of energy 

savings. The CEC contended that 

historically the average efficiency 

resulting from a new standard has 

overshot the theoretical market 

minimum by five to ten percent. and that 

DOE has underestimated the actual 

energy savings and economic benefits 

that will accrue from standards by at 

least that amount. (CEC, Testimony, 

January 12, 1989). 

The Department notes overshoot 

means the positive difference between 

maximum unit energy consumption 

standard levels, and the average unit 

energy consumption actually attained by 

models sold after standards are 

implemented. For example, actual unit 

energy consumption may be five percent 

or more lower than standard levels. 

DOE did not assume an overshoot, but 

adhered to its. methodology, that, in the 

base case, the market will demand a 

range of efficiencies such that the SWEF 

exceeds the 1990 standard (in the case 

of refrigerators). In the standards cases, 

designs which met or went beyond the 

standard were considered to be 

available for purchase and were used to 

calculate a new SWEF. While no 

arbitrary overshoot was assumed, the 

average efficiency projected after 

standards by this method is allowed to 

go beyond the standard by an amount 

depending upon the base case 

distribution of efficiencies. In looking at 

the SWEF under each standard level, 

the Department is cOl;lfident that it has 

captured all of the energy savings that 

each candidate standard level could 

generate. 

It should be noted that the more 

stringent the standard level, the closer 

that the SWEF will be to the standard 

level, and the lower that the overshoot 

will be. LBL-REM SWEF projections are 

found in Tables 5.6, 5.7, and 5.16 of the 

Technical Support Document. 

5. Reporting of the Environmental 

Benefits of Standards 

In reporting the results of the analysis 

in the proposed rule, tlle Department 

presented the environmental effects of 

standards only in the Environmental 

Assessment (DOE/EA-0372, November 

1988). The Solar Energy Association of 

Oregon (SEAO) commented that, in 

determining the economic justification 

of candidate standards, the Department 

should consider the environmental 

benefits that it calculates would result 

from candidate standards. (SEAO. No. 

44, at 2). In addition, Representative 

Markey commented that mitigating 

global warming and pollution are 

important for our national security. 

(Markey, No. 151, at 2). 

Under the economic justification 

factor. Need of the Nation to Conserve 

Energy, as discussed above, the 

Department considered the 

environmental effects that are expected 

to result from standards. These effects are reported for each product in section .;, 

IV of this notice. 

6. Choice of Proposed Standard Levels 

In the proposed rule, the Department 

proposed a range ofrefrigerator 

standards, from not amending the 1990 

standards through standard level 3. All 

of these possible standards were found 

to save a significant amount of energy, 

be technologically feasible, and be--

economically justified. 

RMI commented tha t although the 

Department found that standard levels 4 

and 5 also satisfied those requirements, 

it did not propose either, thereby 

"violating the law." (RMI. No. 49, at 2). 

The Department notes that RMI is 

mistaken; in fact, in the proposed rule. 

the Department said that both standard 

levels 4 and 5 would be technologically 

feasible and would result in a significant 

conservation of energy, but that the 

Department found that they were not 

economically justified. 

GE and AHAM commented that the 

Department should not adopt 

refrigerator standards that are based on 

the scenario used for the proposed rule 

(in which it was assumedlhat CFC-11 

and-12 would be available for 

refrigerator production 1. since that 

analysis did not consider the phase-out 

of CFCs. (GE, No. 125, at 7; and AHM1, 

No. 137, at 4). 

While there is much speculation and 

many proposals. concerning the phaseout of CFC-ll and -12, the Montreal 

Protocol calls for an immediate rollback 

of production to 1986 levels with a 50 

percent cut of those levels by 1998. As a 

result, various chemical companies and 

laboratories are doing research on 

finding replacement chemicals. 

However, the record is fairly clear that 

replacement chemicals will not be 

available by 1993 when L'1ese standards 

go into effect. 

DOE believes that CFC-ll and -12 

will be available to refrigera Han 

manufacturers in 1993 and probably wiiI 

still be available in 1997, although at 

higher prices. The Department believes 

that, short of some new treaty or 

legislation, any transition from CFC-l1 

and -12 over the 1993 to 1998 time span 

will occur voluntarily. However, DOE 

believes that such a transition would 

likely occur; therefore, the analysis was 

modified to include the possibility that it 

occurs before 1998. To accomplish this, 

the analysis was divided into two parts. 

For the period 1993 t.~rough 1995, it was 

assumed that CFC-ll and -12 are 

available. and for the period 1996 and 

beyond, it was assumed they are 

replaced. 

For this later time period, the 

engineering analysis was modified as 

discussed, supra, in the "Product-
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

Specific Analytical Comments for

Refrigerators" to include features such

as enhanced heat transfer for

evaporators and dual compressors.

Other features, such as the 5.3 EER

compressor and enhanced performance

foam insulation (k=.10), were deleted,

since such designs are not likely to be

achievable without'CFCs. A 5.3 EER

compressor needs CFC-12 as a working

fluid to achieve its maximum efficiency.

Based on announcements from Dupont,

it was assumed that a replacement for

CFC-12 becomes available with no

performance penalty. in-addition, based

on results of tests conducted by the

Mobay Corporation's, it was assumed

that the replacement for CFC-11 will

have a five percent penalty in insulation

performance. The thermal conductivity

of 0.1275 Btu-in/hr°F ft 2 was used in the

analysis for today's final rule.

In addition to a performance penalty

for the CFC-11 substitute; the

Department also assumed a price

penalty for both CFC-11 and CFC-12

substitutes. This penalty was to assume

a three-fold increase in price.

The engineering analysis presented in

the proposed rule is still used for the

earlier time period; the Department

chose to modify the engineering analysis

only slightly, because the Department

believes it still is generally

representative of the possibilities with

CFC-11 and -12 being available. The

slight modifications included increasing

the estimates of evacuated panel costs,

and, as baseline volumes were

adsjusted, recomputing the baseline cost

estimates.

All impacts of the refrigerator

standards presented today are a result

of the original engineering analysis

being used for 1993 through 1995 and the

modified engineering analysis, with its

different costs and features, being used

from 1996 and beyond. The Department

believes that this represents a

conservative but plausible scenario for

the possibility of a transition away from

the CFC-11 and -12.

Both the with- and without CFC-11

and -12 scenarios were used in the LBLREM, LBL-MIM, and in the

environmental analyses. As the

scenarios changed inputs to LBL-REM,

the LBL-REM fed into LBL-MIM and the

environmental analyses and affected

their results, also.

The Department notes that in the

above scenario the consumer paybacks

presented are based on the earlier CFC

IS Dietrich, K, W. and H. P. Doerge, "Performance

of Alternative Chlorofluorocarbons in Rigid

Urethane Appliance Foams," in Proceedings of SPl,•

31st Annual Technical/.Marketing Conference,

October 18-21.1988, pp. 141-147.

case, since the Department believes that

the Act requires those estimates to be

presented for the year in which the

standards are to be effective. The trial

standard levels, however, were based

on costs and efficiencies achievable

with alternatives to CFC-11 and -12, i.e.,

the post-1995 scenario.

b. Product-Specific Analytical

Comments

1. Refrigerators

A. Engineering Analysis: The

comments on the engineering analysis of

refrigerators dealt with a variety of

issues, ranging from the Department's

methodological approach and

assumptions to its estimates and

calculations.

Evacuated Panel Costs and Energy

Efficiency

One comment contended that, in the

analysis for the proposed rule, the

Department had underestimated the

costs and overestimated the associated

K value for evacuated panel insulation.

(Admiral, No. 135, at 2). General

Electric's (GE's) comment, however,

supported the K value (of 0.05 for a

composite of evacuated panel and foam

insulation) used by the Department. (GE,

No. 125, in Appendices 6 and 7).

With regard to the underestimation of

cost, for the analysis for the final rule,

the Department agrees that an increase

in its estimate of evacuated panel costs

is justified after receiving comments

from Admiral, who has performed

research on the development of vacuum

panels.

DOE agrees with GE that the K value

for a composite wall of foam insulation

ands an evacuated panel is correctly

represented by 0.05. The Department

realizes that Admiral's original estimate

of K value was speculative. However,

DOE is relying more on GE's comment,

since that company has actually

manufactured powder filled panels in

refrigerator-freezers, and, therefore, has

actual knowledge of what the K factor

can be.

Evacuated panel availability

Amana Refrigeration, Inc., (Amana,

No. 87, at 1-3) believes that the

arguments concerning the future

availability of evacuated panels for

industry wide use are ill-considered.

The statement identified a single, but

all-important facet of this emerging

technology; namely, the supply of ultrafine silica powders which have thus far

been the best candidates for filler

,been for two types of panels.

Amana stated that based upon the

several patents issued and other

47925

literature covering this subject area,

fumed silica and precipitated silica are

the premier candidates for filler material

in evacuated panels. When utilized in a

plastic pouch and evacuated to an

absolute pressure of approximately 0.1

Torr, the densified silica weighs

approximately 8.0 to 9.8 lbs per ft3. (This

is the powder-filled panel produced by

GE). Fumed silica tends to have a

smaller particle size (0.8 um) than the

fine precipitated silicas (1.3 to 2.0 um),

thus tending to be a more consistent

insulator.

With this information, Amana

provided a "what if" scenario, for a

hypothetical use of evacuated panels in

the industry's refrigerator and

refrigerator/freezer products. First,

Amana made several assumptions:

(1) The industry's annual production

of 6.9 million refrigerators and

refrigerator/freezers in 1988 will

continue at that level.

(2) The 18 cu. ft. top freezer model

described in the Technical Support

Document represents an "average"

model for the purpose of calculating

material requirements.

(3) That a composite insulation

structure consisting of 1/2" thick panels

(R=10) and foamed-in-place

polyurethane represents a viable

structure for consideration.

(4) That the evacuated panels should

substantially cover the entire inner

surface (5 sides) of the refrigerator outer

case to achieve the benefits of enhanced

insulation. For the assumed model

described in the Technical Support

Document engineering analysis, this

could require as much as 45 ft2 of

evacuated panel. The silica material

required then ranges from 15.5 to 18.6

lbs. per unit. (The lower number refers

to fumed silica fillers; the higher to

precipitated silica.)

DOE believes that these four

assumptions are reasonable for this

analysis. Amana's fifth and all

important assumption is that the entire

Industry has to install evacuated panels

in all its products by 1993-a purely

hypothetical scenario.

Amana, using the assumptions above,

demonstrates that industry requirements

for fumed and precipitated silica for

evacuated panel use are in the range of

from 107 to 128 million pounds,

annually. Since the entire United States'

production capability for manufacturing

these materials is estimated to be

approximately 200 million pounds

annually, the refrigeration industry's

requirements could consume over 60

percent of the entire national supply.

This would be an untenable situation,

and the suppliers of silica powders

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I friday, November 17, 1989 I Rules and Regulations 47925 

Specific Analytical Comments for 

Refrigerators" to include features such 

as enhanced heat transfer for 

evaporators and dual compressors. 

Other features, such as the 5.3 EER 

compressor and enhanced performance 

foam insulation (k=.10), were deleted. 

since such designs are not likely to be 

achievable withouf CFOs. A 5.3 EER 

compressor needs CFC-12 as a working 

fluid to achieve its maximum efficiency. 

Based on announcements from Dupont, 

it was assumed that a replacement for 

CFC-12 becomes available with no . 

performance penalty. In ·addition, based on results of tests conducted by the 

Mobay Corporation 15, it was assumed 

that the replacement for CFC-ll will 

have a five percent penalty in insulation 

performance. The thermal conductivity 

of 0.1275 Btu-in/hroF ft Z was used in the 

analysis for today's final rule. 

In addition to a performance penalty 

for the CFC-ll Bubstitute; the 

Department also assumed a price 

penalty for both CFC-ll and CFC-12 

substitutes. This penalty was to assume 

a three-fold increase in price. 

The engineering analysis presented in 

the proposed rule is still used for the 

earlier time period; the Department 

chose to. modify the engineering analysis 

only slightly, because.the Department 

believes it still is generally 

representative of the possibilities with 

CFC-ll and -12 being available. The 

slight modifications included increasing 

the estimates of evacuated panel costs, 

and, as baseline vollL1l1es were 

a.dsjusted. recomputing the baseline cost 

estimates. 

All impacts of the refrigerator 

standards presented today are a result 

·of the original engineering analysis 

being used for 1993 through 1995 and the 

modified engineering analysis. with its 

different costs and features. being used 

from 1996 and beyond. The Department 

believes that this represents a 

conservative but plausible scenario for 

the possibility of a transition away from 

the CFC-ll and -12. 

Both the with- and without CFC-ll 

and -12 scenarios were used in the LELREM, LBL-MIM. and in the 

environmental an~ses. As the 

scenarios changed inputs to LBL-REM. 

the LBL-REM fed into LBL-MIM and the 

environmental analyses and affected 

their results, also. 

The Department notes that in the 

above scenario the consumer paybacks 

presented are based on the earlier CFC 

15 Dietrich, K. w. afld H. P. Doerge. "Performance 

of Alternative Chlorofluorocarbons in Rigid 

Urethane Appliance Foams," in Proceeaings of SP]; 

31st Annual Technical/Marketing Conference. 

October 18-21.1988. pp. 141-147. 

m 

case, since the Department believes that 

the Act requires those estimates to be 

presented for the year in which the 

standards are to be effective. The trial 

standard levels, however, were based 

on costs and efficiencies achievable 

with alternatives to CFe-11 and -12, i.e .. the post-1995 scenario. 

b. Product-SpecIfic Analytical 

Comments 

1. Refrigerators 

A. Engineering Analysis: The 

comments on the engineering analysis of 

refrigerators dealt with a variety of 

issues, ranging from the Department's 

methodological approach and 

assumptions to its estimates and 

calculations. 

Evacuated Panel Costs and Energy 

Efi1ciency 

One commellt contended that. in the 

analysis for the proposed rule, the 

Department had underestL1l1ated the 

costs and overestimated the associated 

K value for evacuated panel insulation. 

(Admiral. No. 135, at 2). General 

Electric's (GE's) comment, however. 

supported the K value (of 0.05 for a composite of evacuated panel and foam 

insulation) used by the Department. (GE, 

No. 125, in Appendices 6 and 7). 

With regard to the underestimation of 

cost, for the analysis for the final rule, 

the Department agrees that an increase 

'in its estimate of evacuated panel costs 

is justified after receiving comments 

from Admiral. who has performed 

research on the development of vacuum panels. 

DOE agrees with GE that the K value 

for a composite wall of foam insulation 

ands an evacuated panel is correctly 

represented by 0.05. The Department 

realizes that Admiral's original estimate 

of K value was speculative. However, 

DOE is relying more on GE's comment. 

since that company has actually 

manufactured powder filled panels in 

refrigerator-freezers, and. therefore. has 

actual knowledge of what the K factor can be. 

Evacuated panel availability 

Amana Refrigeration, Inc .. (Amana, 

No. 87. at 1-3) believes that the 

arguments concerning the future 

availability of evacuated panels for 

industry wide use are ill-considered. 

The statement identified a single, but 

all-important facet of this emerging 

technology; namely, the supply of ultrafine silica powders which have thus far 

been the best candidates for filler 

'rnaterial for two types of panels. 

Amana stated that based upon the 

several patents issued and other 

literature covering this subject area, 

fumed silica and precipitated silica are 

the premier candidates for filler material 

in evacuated panels. When utilized in a 

plastic pouch and evacuated to an 

absolute pressure of approximately 0.1 

Torr, the densified silica weighs 

approximately 8.0 to 9.8 Ibs per ~t3. (This . is the powder-filled panel produced by 

GE). Fumed silica tends to have a 

smallEir particle size (0.8 urn) than the 

fine precipitated silicas (1.3 to 2.0 urn), 

thus tending to be a more consistent 

insulator. 

With this information, Amana 

provided a "what if" scenario. for a 

hypothetical use of evacuated panels in 

the industry's refrigerator and 

refrigerator/freezer products. First. 

Amana made several assumptions: 

(1) The industry'S annual production 

of 6.9 million refrigerators and 

refrigerator/freezers in 1988 will 

continue at that level. 

(2) The 18 cu. ft. top freezer model 

described in the Technical Support 

Document represents an "average" 

model for the purpose of calculating 

material requirements. 

(3) That a composite insulation 

structure consisting of %" thick panels 

(R=10) and foamed-in-place 

polyurethane represents a viable 

structure for consideration. 

(4) That the evacuated panels should 

substantially cover the entire inner 

surface (5 sides) of the refrigerator outer 

case to achieve the benefits of enhanced 

insulation. For the assumed model 

described in the Technical Support 

Document engineering analysis. this 

could require as much as 45 ft2 of 

evacuated panel. The silica material 

required then ranges from 15.5 to 18.6 

lbs. per unit. (The lower number refers 

to fumed silica fillers; the higher to 

precipitated silica.) 

DOE believes that these four. 

assumptions are reasonable for this 

analysis. Amana's fifth and all 

important assumption is that the entire 

Industry has to install evacuated panels 

in all fis products by 1993-a purely 

hypothetical scenario. 

Amana, using the assumptions above. 

demonstrates that industry requirements 

for fumed and precipitated silica for 

evacuated panel use are in the range of 

from 107 to 128 million pounds. 

annually. Since the entire United States' 

production capability for manufacturing 

these materials is estimated to be 

approximately 200 million pounds 

annually, the refrigeration industry's 

requirements could consume over 60 

percent of the entire national supply. 

This would be an untenable situation, 

and the suppliers of silica powders 
54FR47916

47926 Federal . Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

would need to enhance their productive

capability significantly.

A fumed silica manufacturing plant

with an annual capacity of 11 million

pounds represents a $40 million

investment, not including the siting and

environmental protection costs. To meet

the hypothetical demand noted above,

ten such plants would be needed.

Erection and prove-out time'

requirements would range from 3 to 4

years after site selection, zoning

approvals, environmental impact

statements, and other preliminary

procedures were completed.

Quantum Optics testified that

"Aerogels are now available only in

limited quantities, but several projects

are underway that could lead to

production for the entire refrigerator

industry by 1993 if adequate investment

capital is committed." (Quantum Optics,

Testimony, January 12, 1989).

DOE has reviewed the comments, and

believes that the chemical industry will

not be able to make sufficient quantities

of silica commercially available by 1993;

and, therefore rejects this technology as

being economically justified.

Additivity of Energy Impacts of Design

Options

White Consolidated Industries (WCI)

stated that the analysis was "not

adequate for standard setting. Often

various design changes interact with

each other or with existing systems. The

results are rarely additive as

simplistically assumed by (the

Department's) analysis." (WCI, No. 78,

at 5).

The Department agrees that because

designs can interact, the energy impacts

are not necessarily additive. That is why

the Department computed

independently the energy impacts of

each combination of designs.

Simulations were run for each

combination of design options as shown

in the Technical Support Document.

Interactions among design options were

accounted for as part of the simulation

model.

Estimates of Improved Thermal

Conductivity Values

WCI stated that the Department's

analysis of improved insulations goes

"far beyond anything we believe will be

available." (WCI, No. 78, at 6).

Specifically, WCI argued that the

assumption that .11 and.10 K values can

be achieved with MDI foam is not valid.

In response, the Department notes

that GE testified that it presently

achieves a K value equal to 0.11. (GE,

Testimony, January 12, 1989). Since a K

value equal to 0.11 is available now, the

Department has no reason to believe

that it will not still be available in 1993,

when this rule will be in effect. On the

other hand, because of the expected

product development, e.g., drying,

rigidity, and other implementation

issues, that the Department expects will

be needed to achieve the availability of

.10 foam, DOE agrees with WCI that

such foam is not likely to be available,

in necessary quantities, in 1993.

Therefore, in its analysis for this final

rule, the Department limited its

consideration of a maximum

improvement in thermal conductivity

value to 0.11.

Substitution of Foam Insulation for

Fiberglass

In the proposed rule, the Department

reported that it had estimated a 12

percent reduction in energy-use as a

result of substituting foam for fiberglass

under the lid of a chest freezer. WCI

argued, however, that when it made a

similar substitution, there were zero

energy savings. (WCI, No. 78, at 5).

The Department's estimate of energy

savings from foaming the lid of a chest

freezer was obtained from an analysis

of K factors for fiberglass and foam

insulation. With the area and

temperature difference being equal, the

Department believes that the superior K

factor of foam should provide a

noticeable savings.

Furthermore, even assuming a penalty

for the replacement of CFC-11, the

Department estimated that foaming the

lid of a chest freezer would still result in

an 8.6 percent reduction in energy-use

for this design option.

In addition, the substitution of foam

for fiberglass should provide superior

insulating qualities, at least

theoretically, and, therefore, provide

some energy savings. Empirically, such

substitutions have produced energy

savings in other refrigeration

applications. The Department, therefore,

does not understand why WCI's

substitution of foam for fiberglass in a

chest freezer lid produced no energy

savings.

Energy Savings With the 5.0 EER

Compressor

In the proposed rule, the Department

reported that its energy model predicted

an 11.2 percent energy reduction when a

5.0 EER compressor was substituted for

a 4.5 EER compressor in the case of an

18 cubic foot, top-mount, automatic

defrost refrigerator-freezer. Admiral,

however, commented that its simulation

model "predicts a 7.1 percent energy

reduction for the same change."

(Admiral, No. 123, at 7).

The Department's simulations

modeled actual compressors with data

supplied by compressor manufacturers.

The 5.0 EER compressor that was

modeled was actually a 5.05 EER

compressor at the standard rating

conditions (130°F condensing

temperature and -10°F evaporator

temperature). The Department has

changed its designation of the 5;0 EER

compressor to a 5.05 EER compressor in

the substitute CFC analysis. The 4.5 EER

compressor is actually a 4.3 EER

compressor at the rating point. If both

compressors operated at the same

standard conditions, the efficiency

improvement for the refrigeration

system would be (5.05--4.3)/4.3 =17.4

percent. The energy reduction,

(assuming no auxiliary electric energy

use) would be 14.8 percent. However,

since only about 75 percent of the total

energy use for the top-mount automatic

defrost refrigerator-freezer is for the

compressor, the efficiency improvement

would be only 11.1 percent (.75 (14.8

percent)). Therefore, if the evaporator

and condenser temperatures were at

-10°F and 130°F, respectively, 11.1

percent would be the expected energy

savings. The Department had an 11.2

percent energy savings. It should be

noted that the simulation model solves

iteratively for the condenser and

evaporator temperatures. Therefore, the

actual compressor EER is rarely equal to

the nominal value.

Baseline Model

A number of comments claimed that

the baseline models are inaccurate; that

is, they do not properly represent the

features of average models to be sold in

1990. These comments also, stated that

the average unit represented by the

shipment-weighted energy factor

(SWEF) would be substantially higher,

i.e.; more efficient, than the 1990

standard. (AHAM, No. 137, at 3 and 16;

GE, No. 125, at 22-24. Battelle, No. 110,

at 1, and Testimony, January 13,1989;

and Admiral, No. 123, at 7).

In response, the Department notes

that the purpose of the baseline models

is to provide a basis for estimating

changes in unit energy consumption and

production costs associated with

implementing engineering design

changes. The baseline models in the

analysis for today's final rule are

generally representative of units that

marginally comply with the 1990

standard. In the proposed rule, DOE

stated that the baseline models for

refrigerators, refrigerator-freezers, and

freezers "represent.a typical model

within an appliance class that will be

sold during 1990, the year NAECA

standards first take effect."

 CE-RM-87-102 COMMENT 10

54FR47916 

47926 Federal.Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

would need to enhance their productive 

capability significantly. 

A fumed silica manufacturing plant 

with an ann:ual capacity of 11 million 

pounds represents a $40 million 

investment, not includIng the siting and 

environmental protection costs. To meet 

the hypothetical demand noted above, 

ten such plants would be needed. 

Erection and prove-out time· 

requirements would range from 3 to 4 

years after site selection, zoning 

approvals, environmental impact 

statements, and other preliminary 

procedures were completed. 

Quantum Optics testified that 

"Aerogels are now available only in 

limited quantities, but several projects are underway that could lead to . 

production for the entire refrigerator 

industry by 1993 if adequate investment 

capital is committed." (Quantum Optics, 

Testimony, January 12, 1989). 

DOE has reviewed the comments, and 

believes that the chemical industry will 

not be able to make sufficient quantities 

of silica commercially available by 1993; 

and, therefore rejects this technology as being economically justified. 

Additivity of Energy Impacts of Design 

Options 

White Consolidated Industries (WCI) 

stated that the analysis was "not 

adequate for standard setting. Often 

various design changes interact with 

each other or with existing systems. The 

results are rarely additive as simplistically assumed by (the 

Department's) analysis." (WCI, No. 78, 

at 5). 

The Department agrees that because 

designs can interact, the energy impacts 

are not necessarily additive. That is why 

the Department computed 

independently the energy impacts of 

each combination of designs. 

Simulations were run for each 

combination of design options as shown 

in the Technical Support Document. 

Interactions among design options were 

accounted for as part of the simulation 

model. 

Estimates of Improved Thermal 

. Conductivity Values 

WCI stated that the Department's 

analysis of improved insulations goes 

"far beyond anything we believe will be 

available." (WCI, No. 78, at 6). 

Specifically, WCI argued that the 

assumption that .11 and ·.10 K values can be achieved with MDI foam is not valid. 

In response, the Department notes 

that GE testified that it presently 

achieves a K value equal to 0.11. (GE, 

Testimony, January 12, 1989). Since a K 

value equal to 0.11 is available now, the 

Department has no reason to believe 

that it will not still be available in 1993, 

when this rule will be in effect. On the 

other himd, because of theexpect~d 

product development, e.g., drying, 

rigidity, and other implementation . 

issues, that the Department expects will 

be needed to achieve the availability of 

.10 foam, DOE agrees with WCI that 

such foam is not likely to be available, 

in necessary quantities, in 1993. 

Therefore, in its analysis for this final 

rule, the Department limited its 

consideration of a maximum . 

improvement in thermal conductivity 

·value to 0.11. 

Substitution of Foam Insulation for 

Fiberglass 

In the proposed rule, the Department 

reported that it had estimated a 12 

percent reduction in energy-use as a result of substituting fOilm for fiberglass 

under the lid of a chest freezer. WCI 

argued, however, that when. it made a similar substitution, there were zero energy savings. (WCI, No. 78, at 5). 

The Department's estimate of energy 

savings from foaming the lid of a chest 

freezer was obtained from an analysis 

of K factors for fiberglass and foam 

insulation. With the area and 

temperature difference being equal, the 

Department believes that the superior K 

factor of foam should provide a 

noticeable savings. 

Furthermore, even assuming a penalty 

for the replacement of CFC-ll, the 

Department estimated that foaming t.~e 

lid of a chest freezer would still result in an 8.6 percent reduction in energy-use 

for this design option. . 

In addition, the substitution of foam 

for fiberglass should provide superior 

insulatitlg qualities, at least 

theoretically, and, therefore, provide 

some energy savings. Empirically, such 

substffutions have produced energy 

savings in other refrigeration 

applications. The Department, therefore, 

does not understand why WCI's 

substitution of foam for fiberglass in a 

chest freezer lid produced no energy 

savings. 

Energy Savings With the 5.0 EER 

Compressor 

In the proposed rule, the Department 

reported that its energy model predicted 

an 11.2 percent energy reduction when a 5.0 EER compressor was substituted for 

a 4.5 EER compressor in the case of an 18 cubic foot, top-mount, automatic 

defrost refrigerator-freezer. Admiral, 

however, commented that its simulation 

model "predicts a 7.1 percent energy 

reduction for the same change." 

(Admiral, No. 123, at 7). 

The Department's simulations 

modeled actual compressors with data 

supplied by compressor manufacturers. 

The 5.0 EER compressor that was 

modeled was actually a 5.05 EER 

compressor at the standard rating 

conditions (130°F condensing 

temperature and -10°F evaporator 

temperature). The Department has 

changed its designation of the 5;0 EER 

compressor to a 5.05 EER compressor in 

the substitute CFC analysis. The 4.5 EER 

compressor is actually a 4.3 EER 

compressor at the rating pOint. If both 

compressors operated at the same 

standard conditions, the efficiency 

improvement for the refrigeration 

system would he (5.05·-4.3)/4.3=17.4 

percent. The energy reduction, 

(assuming no auxiliary electric energy 

use) would be 14.8 percent. However, . 

since only about 75 percent of the total 

energy use for the top-mount automatic 

defrost refrigerator-freezer is for the 

compressor, the efficiency improvement 

would be only 11.1 percent (.75 (14.8 

percent)). Therefore. if the evaporator 

and condenser temperatures were at 

-10°F and 130°F, respectively, 11.1 

percent would be the expected energy 

savings. The Department had an 11.2 . percent energy savings. It should be 

noted that the simulation model solves 

iteratively for the condenser and 

evaporator temperatures. Therefore, the 

actual compressor EER is rarely equal to 

the nominal value. . 

Baseline Mpdel 

A number of comments claimed that 

the baseline models are inaccurate; that 

is, they do not properly represent the 

features of average models to be sold in 

1990. These comments also· stated that 

the average unit represented by the 

shipment-weighted energy factor 

(SWEF) would be substantially higher, 

i.e.; more efficient, than the 1990 

standard. (AHAM, No. 137, at 3 and 16; 

GE, No. 125, at 22-24. Battelle, No. 110, 

at 1, and Testimony, January 13, 1989; 

and Admiral, No. 123, at 7). 

In response, the Department notes 

that the purpose of the baseline models 

is to provide a basis for estimating 

changes in unit ellergy consumption and 

production costs associated with - implementing engineering design 

changes. The baseline models in the 

analysis for today's final rule are 

generally representative of units that 

marginally comply with the 1990 

standard. In the proposed rule, DOE 

stated that the baseline models for 

refrigerators, refrigerator-freezers. and 

freezers "represent. a typical model 

within an appliance class that will be 

sold during 1990, the year NAECA 

standards first take effect." 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

The Department's baseline unit

contained designs that were meant to

represent only one combination that can

be used to meet the 1990 standard. The

baseline description should not be

interpreted as being unique. Indeed,

there are many ways to achieve a

particular energy-use. The baselines that

were chosen represent one set of

descriptions for units close to the 1990

standards. Where the baseline

consumption was greater than the

expected 1993 SWEF, an adjusted

baseline (from the cost-efficiency curve)

was established with which to calculate

economic quantities such as payback

periods. The Department believes that it

is reasonable to expect that the baseline

unit should have characteristics that are

similar to marginally compliant units

that, will be produced in 1990. The

.Department believes that recent

manufacturer data submitted to the

Department by. Battelle show that

objective was accomplished. (Battelle,

No. 110). .

The Department has responded to

Battelle's comment by adding a point in

the engineering analysis' cost-efficiency

curves that reflects the BEM, and has

used that information in the LBL-REM.

This point was used as the 1990 SWEF,

from which calculations of energy

savings were made. In addition, its use

in the LBL-REM influenced the other

parts of the analysis that use LBL-REM

output as input, e.g., the LBL-MIM, .

environmental analysis payback

calculations.

In selecting a baseline unit, the

Department chose units that had

adjusted volumes that are

representative of the different models

sold. Comments that the baselines

chosen had adjusted volumes that

differed from the industry averages,

which were provided by Battelle, are not

relevant. That is because energy

standards are not in terms of a single

maximum allowable energy

consumption regardless of size, but,

rather, the standards are equations that

relate energy-use to adjusted volume.

Therefore, differently sized units of the

same class have different maximum

allowable levels of energy consumption.

According to data submitted by

Battelle, in many cases, the industry has

planned design changes to meet the 1990

standards which differ from those

characterized by the DOE baseline

model. DOE recognizes the diverse

methods by which industry can meet the

1990 standards, and is not implying that

a specific design will be `adopted by all

manufacturers. For some classes, the

DOE baseline units do not meet the 1990

standards. In those classes, a design

.option is identifiable which will meet

the 1990 standard. DOE assumes that

the most cost-effective designs will be

incorporated first.

Compressor Efficiencies for Smaller

Capacity Units

WCI contended that the proposed rule

failed "to take into account the very

important difference that size makes in

compressor efficiency." (WGI, No. 78, at

5).

Specifically, WCI pointed out that in

smaller refrigerators, the

correspondingly smaller compressors

are less energy-efficient.

This point was also raised at the

hearing in testimony offered by Mr.

Hardt of the Embraco Corporation.

(Hardt, Testimony, January 12, 1989).

After extensive review of the subject,

the Department agrees with WCI's and

Embraco's contention. As a result, the

analysis for this rulemaking limited its

evaluation of the maximum feasible

compressor efficiency to 4.0 EER for the

very small refrigerator-freezers. This

consideration was applied only to the

manual defrost refrigerator class, since

that is the class in which virtually all of

the relevant smaller units fall.

Accuracy of the Simulation Model

GE stated that "using the simulation

program that GE normally uses for

design guidance, the results showed the

baseline model would use 1016 kWh/yr.,

compared with 947 kWh/yr. as shown in

the TSD." (GE, No. 125, at 21).

In response, the Department notes

that it is difficult to compare two

simulation programs without knowing

all the details about them. However,

there is a very important difference

between GE's baseline unit and DOE'S.

The Department's description of the

schematic drawing of its baseline in

Appendix A of the proposed rule's

Technical Support Document was in

error. It describes a 20 ft3, rather than an

18.0 ft3 top-mount automatic defrost

refrigerator-freezer. The simulations

were done for an 18.0 ft3 unit as

described in the proposed rule. The

Department, however, placed the wrong

schematic in the appendix. Therefore,

GE would be expected to obtain a higher

energy consumption for its baseline than

the Department did. The adjustedvolume for the unit pictured in Appendix

A is actually 23.4 ft3 rather than 20.8, a

2.6 ft3 increase over the baseline

adjusted volume. DOE believes that the

difference in adjusted volume accounts

for the higher energy use of GE's

baseline unit.

47927

Analysis of Several Refrigerator Design

Options

Several comments contended that the

Department had failed to analyze

properly several significant design

options. These included dual

compressor units; two-stage, twoevaporator systems; hybrid evaporators;

variable-speed compressors; and, silica

aerogel insulation. (American Council

for an Energy-Efficiency Economy

(AGEEE), ACEEE, No. 77, at 1-4; NRDC,

No. 81, at 38-55; NYSEO, No. 156, at 125;

CEC, No. 108, at 10; and RMI, No. 49, at

3-5). Each of these will be discussed,

There are at least three variants of

two-evaporator systems. These are the

two-stage, two-evaporator system, e.g.,

the LaBrecque cycle; the twocompressor, two-evaporator system; and

the hybrid evaporator system. The

energy savings arise by having the

refrigerator evaporator operate at a

higher (about 20 °F) temperature than

the freezer evaporator (about -13 °F). A

reduction in defrost energy is also

possible since there is less condensation

of moisture from food in the refrigerator

at the higher evaporator temperature.

Food will also keep longer because it

will not get as dehydrated,

The two-stage, two-evaporator

LaBrecque cycle refrigerator-freezer is

being developed. Theoretical estimates

are that this design can save 20-25

percent of compressor energy currently

consumed.

The hybrid evaporator is a twoevaporator system with one compressor.

A valve controls the flow-of refrigerant

to the two evaporators. Two companies

have commented that it did not perform

well. Amana stated that "variations in

the temperatures had a marked effect on

the compressor cycling pattern and on

thermal performance of the unit."

(Amana, Testimony, January 13, 1989).

The two-compressor, two-evaporator

system received much attention in the

comments (ACEEE, No.' 77, at 3; RMI,

No. 49, at 4; NRDC, No. 81, at 49-53).

These comments identified the Norgard

prototype as a low energy prototype that

uses this technology. It must be noted

that the Norgard prototype also uses

thicker insulation than is normal for

similarly sized U.S. refrigerator-freezers.

There are no anti-sweat heaters and no

condenser fan. The Norgard paper 16

16 Per Henrik Pedersen, Jorgen Schiaer-Jacobsen,

and Jargon S. Norgard, Reducing Electricity

Consumption in American Type Combined

Refrigerator/freezer, paper presented at 37th

Annual International Appliance Technical

Conference , Purdue University, May 6-7,1986.

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47927 llLW . SWL2 

The Department's baseline j.ll1it 

contained designs that were meant to 

represent only one combination that can 

be used to meet the 1990 standard. The 

baseline description should not be 

interpreted as being unique. Indeed, 

there are many ways to achieve a 

particular energy-use. The baselines that 

were chosen represent one set of 

descriptions for units close to the 1990 

standards. Where the baseline 

consumption' was greater than the 

expected 1993 SWEF, an adjusted 

baseline (from the cost-efficiency curve) 

was established with which to calculate 

economic quantities such ,as payback 

periods. The Department believes that it 

is reasonable to expect that the baseline 

unit should have characteristics that are similar to marginally compliant units 

that will be produced in 1990. The 

.Department believes that recent 

manufacturer data submitted to the 

Departmep.t by Battelle show that 

objective was accomplished, (Battelle, 

No. 1.10). 

The Department has responded to 

Battelle's comment by adding a point in 

the engineeriIlg analysis' cost-efficiency curves that reflects the BEM, and has 

used that information in the LBL-REM, 

This point was used as the 1990 SWEF, 

from which calculations of energy 

savings were made. In addition, its use 

in the LBL-REM influenced the other 

parts of the analysis that use LBL-REM 

output as input, e.g., the LBL-MIM, . 

environmental analysis payback 

calcula tions. 

In selecting a baseline unit, the 

Department chose units that had 

adjusted volumes that are representative of the different models 

. sold, Comments that the baselines 

chosen had adjusted volumes that 

differed from the industry averages, 

which were provided by BaHelle, are not 

relevant. That is because energy 

standards are not in terms of a sinale 

maximum allowable energy 0 

consumption regardless of size, but, 

rather, the standards are equations that 

relate energy-use to adjusted volume. 

Therefore, differently sized Ullits of the same class have different maximum 

allowable levels of energy consumption. 

According to data submitted by 

Battelle, in many cases, the industry has 

planned design changes to meet the 1990 

standards which differ from those 

characterized by the DOE baseline 

model. DOE recognizes the diverse 

methods by which industry can meet the 

1990 standards, and is not implying that 

a specific design will be 'adopted by all 

manufacturers. For some classes, the 

DOE baseline units do not meet the 1990 

standarqs, In those classes, a design 

.option is identifiable which will meet 

the 1990 standard. DOE assumes that 

the most cost-effective designs will be 

incorp?ra ted first. 

Compressor Efficiencies for Smaller 

Capacity Units 

WCI c·ontended that the proposed rule 

failed "to take into account the very 

important difference that size makes in 

compressor efficiency," (WCI, No. 78, at 

5). 

Specifically, WCI pointed out that in 

smaller refrigerators, the 

correspondingly smaller compressors 

are less energy-efficient. 

This point was also raised at the 

hearing in testimony offered by Mr, 

Hardt of the Embraco Corporation. 

(Hardt, Testimony, January 12, 1989), 

After extensive· review of the subject, 

the Department agrees with WCI's and 

Embraco's contention. As a result, the 

analysis for this rulemaking limited its 

evaluation of the maximum feasible 

compressor efficiency to 4.0 EER for the 

very small refrigerator-freezers. This 

consideration was applied only to the 

manual defrost refrigerator class, since 

that is the class in which virtually all of 

the relevant smaller units fall. 

Accuracy of the Simulation Model 

GE stated that "using the simulation 

program that GE normally uses for 

design guidance, the results showed the 

baseline model would use 1016 kWh/yr" 

compared with 947 kWh/yr. as shown in 

the TSD." (GE, No. 125, at 21), 

In response, the Department notes 

that it is difficult to compare two 

simulation programs without knowing 

all the details about them. However, 

there is a very important difference 

between GE's baseline unit and DOE's. 

The Department's description of the 

schematic drawing of its baseline in 

Appendix A of the proposed rule's 

Technical Support Document was in 

error. It describes a 20 ft3, rather than an 

18.0 fts, top-mount automatic defrost· 

refrigerator-freezer. The simul-ations 

were done for an 18.0 fP unit as 

described in the proposed rule. The 

Department, however, placed the wrong 

schematic in the appendix. Therefore, 

GE would be expected to obtain a higher 

energy consumption for its baseline than 

the Department did, The adjusted· 

volume for the unit pictured in Appendix 

A is actually 23.4 fP rather than 20.8, a 

2.6 fP increase over the baseline 

adjusted volume~ DOE believes that the 

difference in adjusted volume accounts 

for the higher energy use of GE's 

baseline unit. 

Analysis of Several Refrigerator Design 

Options ' 

Several comments contended that the 

Department had failed to analyze 

properly several significant design 

options, These included dual 

compressor units; two-stage, twoevaporator systems; hybrid evaporators; 

variable-speed compressors; and, silica 

aerogel insulation. (American Council 

for an Energy-EffiCiency Economy 

(ACEEE), ACEEE, No. 77, at 1-4; NRDC, 

No. 81, at 38-55; NYSEO, No, 156, at 125; 

CEC, No, 108, at 10; and RMI, No. 49, at 

3-5), Each of these will be discussed, 

There are at least three variants of 

two-evaporator systems, These are the 

two-stage, two-evaporator system, e.g" 

the LaBrecque cycle; the two- . 

compressor, two-evaporator system; and 

the hybrid evaporator system. The 

energy savings arise by having the 

refrigerator evaporator operate at a 

higher (about 20 OF) temperature than 

the freezer evaporator (about -13 OF), A 

reduction in defrost energy is also 

possible since there is less condensation 

of moisture from food in the refrigerator 

at the higher evaporator temperature. 

Food will also keep longer because it 

will not get as dehydrated. 

The two-stage, two-evaporator 

LaBrecque cycle refrigerator-freezer is 

being developed, Theoretical estimates 

are that this design can save 20-25 

percent of compressor energy currently 

consumed. 

The hybrid evaporatQ.r is a twoevaporator system with one compressor. 

A valve controls the flow'of refrigerant 

to the two evaporators, Two companies 

have commented that it did not perform 

welL Amana stated that "variations in 

the temperatures had a marked effect on 

the compressor cycling pattern and on 

thermal performance of the unit." 

(Amana, Testimony, January 13,1989), 

The two-compressor, two-evaporator 

system received much attention in the 

comments (ACEEE, No. 77, at 3; RMI, 

No. 49,.at 4; NRDC, No, 81, at 49-53), 

These comments identified the Norgard 

prototype as a low energy prototype that 

uses L1.is technology. It must be noted 

that the Norgard prototype also uses 

thicker insulation than is normal for 

similarly sized U.S. refrigerator-freezers, 

There are no anti-sweat heaters and no 

condenser fan. The Norgard paper 16 

,. Per Henrik Pedersen, lorgen Schjaer-!acobsen, 

and lorgen S. Norgard, Reducing Electricity 

Consumption in American Type Combined 

Refrigerator/freezer, paper presented at 37th 

Annual International Appliance Technical 

Conference, Purdue University, May 6-7, 1986. 
54FR47916

47928 Federal Register / Vol. 54, No. 221 / Friday, November-17, 1989 / Rules and Regulations

estimates about 20 percent energy

savings for the refrigeration system.

Using the Norgard equations and the

Department's data results in a 17

percent energy savings for the

compressor. Norgard does not provide

data on the compressor EERs or

additional cost for the refrigeration

system. One comment stated that the

Norgard prototype can be built for $150-

$200 more than conventional models,

and the price premium would fall with

increased production. (RMI, No. 49, at 4).

This price increase is supposed to cover

all changes in the prototype relative to

the conventional model. Twocompressor, two-evaporator system

models are built by Sub-Zero in the U.S.

and by Bosch in Germany.

After analyzing the three different

two-evaporator systems, the Department

has added such a design option to the

analysis. DOE selected the twoevaporator, two-compressor system for

the analysis.

The Department attempted to obtain

data on variable-speed compressors

from refrigerator and compressor

manufacturers, but was unable to. In the

future, manufacturers may go to this

technology to match loads better to

compressor capacity. This will reduce

cycling losses and allow for higher

evaporator temperatures in the

refrigerator compartment. The cost of

such a system and the performance are

not yet known. This design could

eventually be considered as another

alternative for the two-evaporator

system; that is, a variable-speed

compressor could operate with an

electronically controlled valve and two

evaporators to supply refrigerant to the

cabinet that requires it.

Since the Department's original

analysis, aerogel insulation has been

more seriously considered as a

replacement for foam insulation in

refrigerators and freezers. A prototype is

being constructed by a manufacturer in

concert with Quantum Optics, Inc.

(Quantum) (Quantum, Testimony,

January 12, 1989). DOE performed some

analysis of this design option, e.g., the

development of cost-efficiency data, but

chose instead to let powder-filled panels

be the representative for evacuated

panel insulation. Powder-filled

evacuated panels have been used in

some refrigerators marketed in the

United States, and the Department

believes that the data on their cost and

performance characteristics are more

reliable for use in modeling the energyconserving possibilities of evacuated

panels.

Two comments argued that the

Department's analysis was insufficient

in treating alternative refrigerants,

condenser gas heating, and improved

gaskets. (NRDC, No. 81, at 44-55; and

CEC, No. 108, at 10).

Improved gaskets reduce heat leakage

and thus reduce compressor energy use.

This can be done by improving single

gasket designs or changing to a double

gasket design. NRDC commented that

improved single gaskets should be

considered. (NRDC, No. 81, at 57). The

Department's proposed rule assumed a

10 percent improvement in gasket heat

leakage for its baseline models. The

Department does not see that further

improvements can be made. Therefore,

for the final rule, the Department

continued to assume a 10 percent

improvement in gasket heat leakage for.

the baseline models.

Since the proposed rule was prepared,

new research has been performed on

alternative refrigerants. Alternatives,

such as HFC-134a and HCFC-22, and

mixtures have been considered. The

former will not provide an efficiency as

high as that of CFC-12, although both

HFC-134a has the advantage of no

ozone depleting potential (ODP) and

HCFC-22 a much lower ODP than that

of CFC-12. For mixtures, such as CFC12 and DME, preliminary Oak Ridge

National Laboratory (ORNL) data show

an improvement in efficiency relative to

that of CFC-12 alone. However, the

work at ORNL is only preliminary and

more testing is necessary. The Dupont

mixture, consisting of HCFCs-22 and

-124, and HFC-152a, is reported to be

approximately equal to CFC-12 in

efficiency. The new blend is reported to

be a drop-in, and oil compatibility is not

reported to be a problem. The ODP is

very low (0.03) relative to CFC-12 (1.0).

Toxicity testing is needed for HCFC-124.

Only limited commercial quantities

could be provided before 1993-94

(Dupont, No. 113, at 2).

Two comments contended that

substitution of condenser gas heating for

anti-sweat heaters around the doors of

refrigerators and freezers will save

energy because the electric energy use

of the heaters is saved. (NR.DC, No. 81,

at 56; and RMI, No. 49, at 5). This is a

controversial issue. It is not clear if the

heat flowing into the cabinets due to the

increased wall temperature would be

greater than that provided by the

electric heaters. Since any additional

internal heat would have to be removed

by the refrigeration system, condenser

gas heating may not be more energy

efficient than electric anti-sweat

heating. One participant at the hearing

stated that it is unclear whether using

condenser gas heating saves energy.

(Sub-Zero Freezer Company, Inc. (SubZero), Testimony, January 12, 1989).

NRDC assumes that condenser gas -

heating will save energy because most

of the heat energy will flow outwards

(due to the higher R-value of the walls).

However, DOE believes this may not

occur since the wall temperature may

still be higher than without condenser

gas heating. Therefore, DOE rejects

condenser gas heating as an energy

saving design.

Natural Convection in Lieu of Fans

RMI commented that the Department

should have included the use of natural

convection currents instead of fans in

some situations. (RMI, No. 49, at 5).

The Department notes that it may be

possible to remove fans in a twoevaporator design where air need not be

circulated from the freezer to the

refrigerator compartment. The Norgard

design uses one fan in the freezer

compartment, and none in the

refrigerator cabinet. Sub-Zero's design,

on the other hand, uses fans in each

cabinet.

Where two-evaporator systems were

studied, the Department's analysis

included a four watt evaporator fan in

the freezer compartment, and no fan in

the refrigerator compartment. By

modeling this design, which is similar to

the Norgard one, the Department's

analysis does address the savings

potential of natural convection currents.

Inclusion of Enhanced Heat Transfer fox

Evaporators

Two comments stated that DOE

should have included in its analysis

enhanced heat transfer for evaporators.

Heat exchanger heat transfer can be

improved by increased area, increased

air flow over the refrigerant tubes or

other heat transfer enhancement.

(.ACEEE, No. 77, at 4; and CEC, at 10).

All of these approaches allow the

evaporator temperature to be increased,

which results in less compressor energy

use. Heat exchanger area can be

increased by increasing face area or

adding more rows of refrigerant tubes.

Increased area will result in increased

evaporator heat transfer effectiveness.

Increasing the volume occupied by the

heat exchanger will reduce the internal

volume since evaporators are located

inside the cabinets. Simulations with the

top-mount, automatic defrost

refrigerator-freezer indicate that an

increase in evaporator "heat transferarea product" of 10 percent will-result in

a 1.1 percent energy use' decrease.

DOE added this design option to the

analysis.

Another alternative is to add fins or

redesign the fins so as to, increase the

rate of heat transfer. For example, the

 CE-RM-87-102 COMMENT 10

54FR47916 

47928 Federal Register I Vol. 54. No. 221 I Friday, Noveinber17, 1989 I Rules and Regulations 

estimates about 20 percent energy , 

savings for the refrigeration system. 

Using the Norgard equations and the 

Department's data results in a 17 

percent energy savings for the 

compressor. Norgard does not provide 

data on the compressor EERs or 

additional cost for the refrigeration 

system. One comment stated that the 

Norgard prototype can be built for $150-

$200 more than conventional models. 

and the price premium would fall with 

increased production. (RMI. No. 49. at 4). 

This price increase is supposed to cover 

all changes in the prototype relative to 

the conventional model. Two- ' 

compressor. two-evaporator system 

models are built by Sub-Zero in the U.S. 

and by Bosch in Germany. ' 

After analyzing the three different 

two-evaporator Systems, the Department 

has added such a design option to the 

analysis. DOE selected the twoevaporator. two-compressor system for 

the analysis. 

The Department attempted to obtain 

data on variable-speed compressors , 

from refrigerator and compressor 

manufacturers, but was uIlable to. In t.l-te 

future. manufacturers may go to this 

technology to match loads better to 

compressor capacity. This will reduce 

cycling losses and allow for higher 

evaporator temperatures in the 

refrigerator compartment. The cost of 

such a system and the performance are 

not yet known. This design could 

eventually be considered as another 

alternative for the two-evaporator 

system; that is. a variable-speed 

CO!11pressor could operate with an 

electronically controlled valve and two 

evaporators to supply refrigerant to the 

cabinet that requires it. 

Since the Department's original 

analysis, aerogel insulation has been 

more seriouslv considered as a 

replacement for foam insulation in 

refrigerators and freezers. A prototype is 

being constructed by a manufacturer in 

concert with Quantum Optics, Inc. 

(Quantum) (Quantum. Testimony. 

January 12. 1989). DOE performed some analysis of this design option. e.g .• the 

development of cost-efficiency data, but 

chose instead to let powder-filled panels 

be the representative for evacuated 

panel insulation. 'Powder-filled 

evacuated panels have been used in 

some refrigerators marketed in the 

United States. and the Department 

believes that the data on their cost and 

performance characteristics are more 

reliable for use in modeling the energyconserving possibilities of evacuated 

panels. 

Two comments argued that the 

Department's analysis was insufficient 

in treating alternative refrigerants, , 

condenser gas heating, and improved 

gaskets. (NRDG. No. 81. at 44-55; and 

GEG. No. 108, at 10}. 

Improved gaskets reduce heat leakage 

and thus reduce compressor energy use. 

This can be' done by improving single 

gasket designs or changing to a double 

gasket design. NRDG commented that 

improved single gaskets should be 

considered. (NRDG, No. 81. at 57). The 

Department's proposed rule assumed a 

10 percent improvement in gasket heat 

leakage for its baseline model.s. The 

Department does not see that further 

improvements can be made. Therefore. 

for the final rule, the Department 

continued to assume a 10 percent 

improvement in gasket heat leakage for 

the baseline models., 

Since the proposed rule was prepared. 

new research has been performed on 

alterna tive refrigerants. Alternatives. 

such as HFG-134a and HCFG-22. and 

mixtures have been considered. The 

former will not provide an efficiency as high as that of CFC-12, although both 

HFG-134a has the advantage of no 

ozone depleting potential (ODP) and 

HCFC-22 a much lower ODP than that 

of CFC-12. For mixtures, such as CFC12 and DME. preliminary Oak Ridge 

National Laboratory (ORNL) data show 

an improvement in efficiency relative to 

that of CFG-12 alone. However. the 

work at ORNL is only preliminary and 

more testing is necessary. The Dupont 

mixture, consisting ofHCFCs-22 and 

-124. and HFG-152a. is reported to be 

approximately equal to CFC-12 in 

efficiency. The new blend is reported to 

be a drop-in. and oil compatibility is not 

reported to be a problem. The ODP is 

very low (0.03) relative to CFC-12 (1.0). 

Toxicity testing is needed for HCFG-124. 

Only limited commercial quantities 

could be provided before 1993-94 

(Dupont, No. 113, at 2). 

Two comments contended that 

substitution of condenser gas heating for 

anti-sweat heaters around the doors of 

refri.gerators and freezers will save 

energy because the .electric energy use 

of the heaters is saved. (NHDC. No. 81, 

ai: 56; and RMr, No. 49, at 5). This is a 

controversial issue. It is not clear if the 

heat flowing into the cabinets due to the 

increased wall tenlperature would be 

'greater than that provided by the 

electric heaters. Since any additional 

internal heat would have to be removed 

by the refrigeration system. condenser 

gas heating may not be more energy 

efficient than electric anti-sweat 

heating. One participant at the hearing 

stated that it is unclear whether using 

condenser gas heating saves energy. 

(Sub-Zero Freezer Company, Inc. (SubZero), Testimony. January 12.1989). 

NRDCassumes that condenser gas 

heating will save energy because most 

of the heat energy will flow outwards 

(due to the higher R-value of the walls). 

However. DOE believes this may not 

, occur since the wall temperature may 

still be higher than without condenser 

gas hea ting. Therefore, QOE rejects 

condenser gas heating as an energy 

saving design. 

Natural Convection in Lieu of Fans 

RMI commented that the Department 

, should have included the use of natural 

convection currents instead of fans in 

some situations. (RMI. No. 49. at 5). 

The Department notes that it may be 

possible to remove fans in a twoevaporator design where air need not be 

circulated from the freezer to the 

refrigerator compartment. The Norgard 

design uses one fan in the freezer 

compartment, and'none in the 

refrigerator cabinet. Sub-Zero's design. 

on the other hand. uses fans in each 

cabinet. 

Where two-evaporator systems were 

studied, the Department's analysis 

included a four watt evaporator fan in 

the freezer compartment, and no fan in 

the refrigerator compartment. By 

modeling this design, which is similar to 

the Norgard one. the Department's 

analysis does address the savings 

potential of natural convection currents. 

Inclusion of Enhanced Heat Transfer fOI 

Evaporators 

Two comments stated that DOE 

should have included in its amilysis 

enhanced heat transfer for evaporators. 

Heat exchanger heat transfer can be 

improved by increased area. increased 

ail' flow over the refrigerant tubes or 

other heat transfer enhancement. 

(ACEEE. No. 77, at 4; and CEG, at 10). 

All of these approaches allow the 

evaporator temperature to be increased, 

which results in less compressor energy 

use. Heat exchanger area can be 

increased by increasing face area or 

adding more rows of refrigerant tubes. 

Increased area will result in mcreased 

evaporator heat transfer effectiveness. 

Increasing the volume occupied by the 

heat exchanger will reduce the internal 

volume since evaporators are located 

inside the cabinets. Simulations with the 

top-mount, automatic defrost 

refrigerator-freezer indicate that an 

increase in evaporator "heat transferarea product" of 10 percent will-result in 

a 1.1 percent energy use'decrease. 

DOE added this design option to the 

analysis. 

Another alternative is to add fins or 

redesign the fins so as to, increase the 

rate of heat transfer. For example. the 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations 47929

amount of material used in the fins

could be kept constant while changing

the shape of the fins, and possibly

increasing their density. Alternate

materials could be used that have higher

rates of heat transfer to the surrounding

air. The heat transfer on the interior of

the heat .exchanger tubes can also be

enhanced by adding grooves or other

modifications. Data provided by coil

manufacturers to the Department

indicate that an energy savings of 1.5-

2.0 percent is possible for enhanced

evaporator heat transfer for an

additional cost of $1.225 million (all

tooling and expenses, covering all

applicable refrigerator and freezer

classes). Although there is no

confirmation of this cost estimate, DOE

has converted this tooling cost into a per

unit cost.

The ACEEE further stated that a

paper by Mr. Bohman of Amana

discusses the potential savings with

improved evaporator heat transfer. In

that paper, an example was given where

the uA value 17 for the evaporator is

increased from 65 to 113, and the

compressor can operate at -10 °F rather

than -15 F. This results in an energy

savings of 7.5 percent for a 74 percent

increase in heat transfer effectiveness.

This is similar to the simulation results

cited above. The analysis is oversimplified since space limitations and

other factors must still be considered.

Costs of such an improvement were not

provided in any comments received.

Therefore, DOE is using the data that

was used previously to estimate energy

savings and costs for enhanced

evaporator heat transfer.

Improved Expansion Valves and Fluid

Control Valves

One comment states that data should

be gathered on improved expansion

valves and fluid control valves, since

fluid control valves could be used to

reduce off-cycle refrigerant movement.

(CEC, No. 108, at 10). Fluid control

valves would cause a compressor to

start against an unequalized pressure

condition. This has been accomplished

for rotary, but not for reciprocating

compressors. Fluid control valves have -

been forthcoming. As stated in the

proposed rule, it is expected that some

energy savings would be possible from

this design option in the non steadystate mode. Another complication is that

the test procedure may not be suitable

to demonstrate the savings from this

design option. Additional information

from the laboratory as well as in-use

data are needed to evaluate this design

accurately.

There were no new data submitted on

either of these design options.

B. Consumer Analysis: The comments

on the consumer analysis of

refrigerators dealt with a number of

issues including the baseline models and

efficiencies for 1990 and the

Department's projections. of no

improvement in energy use and

efficiency levels for refrigerators.

Energy Use Projections

Battelle submitted data that support

the energy consumption estimates that

had been attributed to specific designs

by the Department. These data indicate

that manufacturers plan to exceed the

1990 standards. Battelle did not criticize

the costs associated with the design

options.

DOE continues to calculate energy

savings and net present value of

proposed standards by comparing the

trial standards cases to the base case,

which includes the 1990 standards. DOE

welcomes the AHAM data submitted by

Battelle, since it is useful for calibrating

the base case in 1990, as noted above.

Based on revisions to the engineering

data and modeling inputs, e.g., energy

price projections and heat pump

shipments, the Department has

calculated a new projection of

efficiencies for refrigerators. These

revised projections are reported in the

Technical Support Document

accompanying today's final rule. See

Technical Support Document,

Appendices A and B.

NYSEO criticized the Department's

questioning of its own projection that, in

the absence of more stringent

refrigerator standards, no improvement

in refrigerator efficiency would be likely.

NYSEO characterized the Department's

period (1993-2015). The Department

finds that the improvement in efficiency

which has occurred and the

improvements that are possible, as

shown in the engineering analysis, make

it highly unlikely that, on average, there

will be no improvement in refrigerator

efficiency over the next 25 years.

Shipments

One comment on the proposed rule

suggested that the Department's

projections of refrigerator shipments

under the different standards cases

were too high. (Battelle, No. 110, at 2,

23). Battelle not only does not expect

shipments to increase in the standards

cases, as DOE had projected in the

proposed rule, but expects instead that

shipments would decline under

standards, at least in the short term.

(Battelle, No.'110, at 21).

DOE agrees with comments raised by

Battelle.

DOE obtained the results of increasing

shipments in the standards' cases

primarily because of the operating

expense elasticities in the LBL-REM,

which were based on a cross-sectional

analysis that was done in 1976. In

response-to Battelle's comments, the

Department has revised, but not

eliminated, operating expense

elasticities, in order to prevent

refrigerator sales from increasing in the

standards' cases. Values of the

operating cost elasticities for

refrigerators and for freezers-are

presented in the Technical Support

Document.

Battelle also contended that

"consumers switching to efficient

models only steal sales from inefficient

models." (Battelle, No. 110, at 22).

The Department believes that this

view is unsupported. Although

effectively all households in the U.S.

now own a refrigerator, the saturation

did not stop at 100 percent. In fact, many

households now own two, and in some

cases three, refrigerators. If the

operating expense of an appliance

decreases, it could become more

attractive to a larger population.

Maintenance Expenses

Another. critique of the consumer

analysis of refrigerators was that the

Department did not include additional

maintenance expenses that would be

associated with more efficient

refrigerator designs. Battelle suggested,

in fact, that more efficient designs

impose an incremental maintenance

expense equal to five percent of the

incremental price. (Battelle, No.110, at

16). In addition, while not suggesting a

specific amount, GE also complained

not been effective with reciprocating statement as a "turnaround" for which

compressors; and, it was reciprocating ./ DOE had provided no justification.

compressors that the Department (NYSEO, No. 156, at 20).

simulated in its analysis. Therefore, the While the Department believes that

Department has not modeled any energy conservation improvements in

savings from the-use of fluid control refrigerators will occur, nevertheless,

valves with reciprocating compressors. the analysis for the final rule continues

Although DOE has comments to project that in the absence of more

requesting an evaluation of improved stringent standards, there would be no

expansion valves, no new data have improvement in refrigerator energy

efficiency. The Department continues to

uA is the engineering factor for heat transfer- question the LBL-REM's forecast of no

area usually given in units of Btus/hr/'F. improvement in SWEF over the analysis

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and RegulatiOIis 47929 

amount of material used in the fins 

could be kept constant while changing 

the shape 'of the fins, and possibly 

increasing their density. Alternate 

materials could be used that have higher 

rates of heat transfer to the surrounding 

air. The heat transfer on the interior of 

the heat exchanger: tubes can also be 

enhanced by adding grooves or other 

modifications. Data provided by coil 

manufacturers to the Department 

indicate that an energy savings of 1.5-

2.0 percent is possible for enhanced 

eyaporator heat transfer for an 

additional cost of $1.225 million (all 

tooling and expenses, covering all 

applicable refrigerator and freezer 

classes). Although there is no 

confirmation of this cost estimate, DOE 

has converted this tooling cost into a per 

unit cost. 

The ACEEE further stated that a paper by Mr. Bohman of Amana 

discusses the potential savings with 

improved evaporator heat trapsfer. In 

that paper, an example was given where 

the uA value 17 for the evaporator is 

increased from 65 to 113, and the 

compressor can operate at -10 OF rather 

than -15 OF. This results in an energy 

savings of 7.5 percent for a 74 percent 

increase in heat transfer effectiveness. 

This is similar to the simulation results 

cited above. The analysis is over- simplified since space limitations and 

other factors must still be considered. 

Costs of such an improvement were not 

provided in any comments received. 

Therefore, DOE is using the data that was used previously to estimate energy 

savings and costs for enhanced . evaporator heat transfer. 

Improved Expansion Valves and Fluid 

Control Valves 

One comment states that data should 

be gathered on improved expansion . 

valves and fluid control valves, since 

fluid control valves could be used to 

reduce off-cycle refrigerant movement. 

(CEC, No. 108, at 10). Fluid control 

valves would cause a compressor to 

been forthcoming. As stated in the 

proposed rule, it is expected that some energy savings would be possible from 

this design option in the non steadystate mode. Another complication is that 

the test procedure may not be suitable 

to demonstrate the savings from this 

design option. Additional information 

from the laboratory a~ well as in-use 

data are needed to evaluate this design 

accurately. . There were no new data submitted on either of these design options. , B. Consumer Analysis: The comments 

on the consumer analysis of 

refrigerators dealt with a mimber of 

issues including the baseline models and 

efficiencies for 1990 and the 

Department's projections of no improvement in energy use and 

efficiency levels for refrigerators. 

Energy Use Projections 

Battelle submitted data that support 

the energy consumption estimates that 

had b(;len attributed to specific designs 

by the Department. These data indicate 

that manufacturers plan to exceed the 

1990 standards. Battelle did not criticize 

the costs associated with the design options. . 

DOE continues to calculate energy 

savings and net present value of 

proposed standards by comparing the 

trial standards cases to the base case, 

which includes the 1990 standards. DOE 

welcomes the AHAM data submitted by 

Battelle, since it is useful for calibrating 

the base case in 1990, as noted above. 

Based on revisions to the engineering 

data and modeling inputs, e.g., energy 

price projections and heat pump 

shipments, the Department has 

calculated a new projection of 

efficiencies for refrigerators. These 

revised projections are reported in the 

Tecl:!nical Support Document 

accompanying today's final rule. See 

Technical Support Document, 

Appendices A and B. 

NYSEO criticized the Department's 

questioning of its own projection that, in 

the absence of more stringent 

refrigerator standards, rio improvement 

in refrigerator efficiency would be likely. 

NYSEO characterized the Department's 

statement as a "turnaround" for which 

start against an unequalized pressure 

condition. This has been accomplished 

for rotary, but not for reciprocating 

compressors. Fluid control valves have' 

not been effective with r.eciprocating 

compressors; and, it was reciprocating 

compressors that the Department 

simulated in its analysis. Therefore, the 

Department has not modeled any energy 

savings from the-use of fluid control 

valves with reciprocating compressors. 

./ DOE had provided no justification. 

(NYSEO, No. 156, at 20). 

Although DOE has comments 

requesting an evaluation of improved 

expansion valves, no new data have 

11 uA is the engineering factor for heat transfer-

/lrea usually given in units of Btus/hrI'F. 

While the Department believes that 

conservation improvements in 

refrigerators will occur, nevertheless, 

the analysis for the final rule continues 

to project that in the absence of more 

stringent standards, there would be no improvement in refrigerator energy 

efficiency. The Department continues to 

question the LBL-REM's forecast of no improvement in SWEF over the analysis 

period (1993-2015). The Department 

finds that the improvement in efficiency 

which has occurred and the 

imp~ovements that are possible, as 

shown in the engineering analysis, make 

it highly unlikely that, on average, there 

will be no improvement in refrigerator 

efficiency over the next 25 years. 

Shipments 

One comment on the proposed rule 

suggested that the Department's 

projections of refrigerator shipments 

under the different standards cases 

were too high. (Battelle, No. 110, at 2. 

23). Battelle not only does not expect 

shipments to increase in the standards 

cases, as DOE had prOjected in the 

proposed rule, but expects instead that 

shipments would decline under 

standards, at least in the short term. 

(Battelle, No:110, at 21). 

DOE agrees with comments raised by 

Battelle. 

DOE obtained the results of increasing . 

shipments in the standards' cases 

primarily because of the operating 

expense elasticities in the LBL-REM, 

which were based on a cross-sectional 

analysis that was done in 1976: In 

response·to Battelle's comments, the 

Department has revised. but not 

eliminated, operating expense 

elasticities, in order to prevent 

refrigerator sales from increasing in the 

standards' cases. Values of the 

operating cost elasticities for 

refrigerators and for freezers_are 

presented in the Technical Support 

Document. . 

Battelle also contended that 

"consumers switching to efficient 

models only steal sales from inefficient 

models." (Battelle, No. 110, at 22). 

The Department believes that this 

view is unsupported~ Although 

effectively all households in the U.S: 

now own a refrigerator, the saturation 

did not stop at 100 percent. In fact, many 

households now own two, and in some cases three, refrigerators. If the 

operating expense of an appliance 

decreases, it could become more 

attractive to a larger population. 

Maintenance Expenses 

Another. critique of the consumer 

analysis of refrigerators was that the 

Department did not include additional 

maintenance expenses that would be 

associated with more efficient 

refrigerator designs. Battelle suggested, 

in fact, that more efficient designs 

impose an incremental maintenance 

expense equal to five percent of the 

incremental price. (Battelle, No:110, at 

16). In addition, while not suggesting a specific amount, GE also complained· 
54FR47916

47930 Federal Register / Val. 54, No. 221 / Friday, November 17, 19989 / Rules and Regulations

that the economic analysis that was

reported in the proposed rule did not

consider maintenance expenses. (GE,

No. 125, at 34).

In the proposed rule, DOE assumed

that there would be no incremental

maintenance expenses for the

refrigerator, refrigerator-freezer, and

freezer design options considered. The

Department does not believe that

incremental maintenance expenses are

accurately represented by simply taking

five percent of the incremental price as

proposed by Battelle. The information

presented is insufficient to justify

including such expenses as proportional

to equipment prices. In addition, the

Department does not believe that the

designs under consideration, e.g., more

efficient compressors and improved

gaskets, would be sufficiently different

in design from their less energyconserving counterparts that their

estimated reliability should be lower.

The-Department, therefore, continued to

assume no incremental maintenance

expenses in its analysis for the final

rule.

C. Manufacturer Analysis: The

comments on the proposed rule's

analysis of impacts on refrigerator

manufacturers dealt with four areas: the

markups used in the analysis;

profitability questions; the discount rate

from the manufacturers' perspective;

and, the "-worst case" refrigerator

sensitivity scenario. Each of these are

discussed, below:

Markup

CEC and NRDC argued that the

constant markup assumption in the

manufacturers' impact model (LBLMIM) was unrealistically high, and they

requested documentation of its origin.

(CEC, No. 108, at 14-16; and NRDC, No.

81, at 111-113).

The Department notes that the

Manufacturer Analysis uses a

manufacturer markup, which varies with

the product class, and a retail markup

which is constant. To arrive at the retail

price, the manufacturer's cost is

multiplied by the manufacturer markup

and the retail markup.

The LBL-MIM computes a set of

manufacturer markups based on

estimates of the average markup and the

ratio of the highest to the lowest

markup, and on the assumption that

markup is linearly related to the price of

the appliance class, that is, the greater

the price, the greater the markup that is

contained within that price. These three

pieces of information completely define

the manufacturer markup for each

appliance class.

The first use of these markups is to

estimate the unit variable cost in the

calibration, or present-day, case. This is

done by taking the retail prices for

calibration-case appliance models, and

dividing, first, by a constant retail

markup, and then by the manufacturer

markup for the appropriate class.

The central economic calculations of

the LBL-MIM (found in the long-run

module) divides the cost of a baseline

(calibration) unit into fixed and variable

components. It is assumed that fixed

costs cannot be marked up, but that

variable costs are. From this

assumption, a markup for variable cost

is computed; this markup reproduces the

estimate of the industry's average ROE.

This markup is then applied to the longrun variable cost component of all cost

increases, and is constant over all

design options. At this stage of the

model, classes are not considered.

The manufacturer analysis is based

on manufacturer price, which is

calculated as just described. In addition,

one final calculation using markups is

made for the benefit of other parts of the

analysis. That is the calculation of retail

prices for the individual classes. This

begins with the manufacturing price in

the calibration case, and adds to this the

change in long-run variable cost times

the manufacturer markup for the

particular class under consideration.

(This is the markup described above; it

varies from class to class.) These new

prices are then all multiplied by a factor

(near one in value) which is designed to

ensure that the average price, when

computed by weighing all classes by

their shipments, is the same as the price

that is computed by the long-run

module, and is used in the LBL-MIM

analysis.

The comments requested

documentation to validate these

markups. There are no "real market

data", on markups at either the

manufacturer or retail level, since these

data are highly confidential. The

manufacturer markups used in the

analysis were developed for the

proposed rule from data and information

collected from refrigerator

manufacturers.

The retail markup is an average retail

markup that covers a range of actual

markups and it is not meant to represent

any one type of retail distribution

channel. NRDC asserts that the retail

markup will decrease rather than stay

constant as standards impose a higher

first cost of refrigerators. (NRDC, No. 81,

at 111). However, NRDC does not

provide any data to support its claim or

to show how much the markup should

decrease. There is no reason to believe

that retailers will not mark up cost

increases induced by standards. The

Department did not use any data to

arrive at the constantness of the retail

markup assumption. because no data

exist, but believes that assumption is

more plausible than any alternative.

Profitability

The questions about refrigerator

manufacturers' profitability involved

projections about profitability in the

short- and Ion. --run. as well as the

projected differences in forecasted

profitability under five standards cases.

In commenting on the likely short-run

profitability results, Battelle stated, "the

cost increases that will accompany more

stringent standards will not be fully

recovered or immediately reflected in

higher prices, resulting in lower profits

and returns in the short run." (Battelle,

No. 110, at 22).

In response, it must be noted that if

standards lead to a decrease in

shipments, the LBL-MINI does predict a

short-run fall in profits. LBL-MIM

predicts, however, that there will not be

a decline in shipments or profits in the

short run for refrigerator manufacturers,

Nevertheless, the dynamic process of

adapting to a new situation-the

process of reaching a new equilibrium of

demand and supply-is.difficult to

model. It is difficult to predict what

production, marketing, and pricing

strategies different manufacturers would

choose in adapting to more stringent

standards, and it is possible that-some

manufacturers would make choices that

would result in lower profits in the short

run until they learn how to operate in

the new environment.

On the issue of long-run profitability,

Battelle contends that, under revised

standards. refrigerator and freezer

shipments will decrease rather than

increase (as the Department had

projected in the proposed rule), and,

therefore, profits will decrease. In

addition, for any chance for profits to

increase, shipments would need to

increase. (Battelle, No. 110, at 22). The

Department of justice (DO)) also

questions the conclusion that the

proposed refrigerator standards could

increase profits. (DO), No. 162, at 4).

The Department notes that for

improved profitability, it is not

necessary for shipments to increase

under revised standards. If a

manufacturer sells fewer units that are

higher priced or that have higher profit

margins, it is possible that profits would

increase.

Battelle does state that "because cost

increases cannot be passed on,

immediately or completely in this price

competitive market, profits and ROE

(return-on-equity) cannot increase."

(Battelle, No. 110, at 22).

 CE-RM-87-102 COMMENT 10

54FR47916 

47930 Federal Register I Vol. 54, No. 221 I Friday, November 17, 19S9 I Rules and Regulations .,. i ..... I2iWd2liZG&it!!Fii4i "'H0 .2.. 'l, If ""£?i'9iWiIM .,.~ £ ",~ 

that the economic analysis that was 

reported in the proposed rule did not 

consider maintenance expenses. (GE, 

No. 125, at 34). 

In the proposed rule, DOE assumed 

that there would be no incremental 

maintenance expenses for the 

refrigerator, refrigerator-freezer. and 

freezer design options considered. The 

Department does not believe that 

incremental maintenance expenses are 

accurately represented by simply taking 

five percent of the incremental price as 

proposed by Battelle. The information 

presented is insufficient to justify . 

including such expenses as propor~ional 

to equipment prices. In addition, the 

Department does not believe that the 

designs under consideration, e.g .• more 

efficient compressors and improved 

gaskets. would be sufficiently different 

in design from their less energyconserving counterparts that their 

estimated reliability should be lower. 

The·Department. therefore, continued to 

assume no incremental maintenance 

. expenses in its analysis for the final 

rule. 

C. Manufacturer Analysis: The 

comments on the proposed rule's 

analysis of impacts on refrigerator 

manufacturers dealt with four areas: the 

markups used in the analysis; 

profitability questions; the discount rate 

from the manufacturers' perspective; 

and. the "worst case" refrigerator 

sensitivity scenario. Each of these are 

discussed, below: 

Markup 

CEe and NRDC argued that the 

constant markup assumption in the 

manufacturers' impact model (LBLMIM) was unrealistically high, and they 

requested documentation of its origin. 

(CEC, No. 108, at 14-16; and NRDC, No. 

81, at 111-113). -

The Department notes that the 

Manufacturer Analysis uses a 

manufacturer markup. which varies with 

the product class, and a retail markup 

which is constant. To arrive at the retail 

price, the manufacturer's cost is 

multiplied by the manufacturer markup 

and the retail markup. 

The LBL-MIM computes a set of 

manufacturer markups based on 

estimates of the average markup and the 

ratio of the highest to the lowest 

markup, and on the assumption that 

markup is linearly related to the price of 

the appliance class, that is. the greater 

the price. the greater the markup that is 

contained within that price. These three 

pieces of information completely define 

the manufacturer markup for each 

appliance class. 

The first use of these markups is to 

estimate the unit variable cost in the 

calibration, or present-day, case. This is 

done by taking the retail prices for 

calibration-case appliance models, and 

dividing, first. by a constant retaH 

markup, and then by the manufacturer 

markup for the appropriate class. 

The central economic calculations of 

the LBL-MIM (fOUL'1d in the long-run 

module) divides the cost of a baseline 

. (calibration} unit into fixed and·variable 

components. It is assumed that fixed 

costs catmot be marked up, but that 

variable costs are. From this 

assumption, a marknp for variable cost 

. is computed; this markup reproduces the 

estimate of the industry's average ROE. 

This markup is then applied to the longrun variable cost component of all cost 

increases, and is constant over aU 

design options. At this stage of the 

model, classes are not considered. 

The manufacturer analysis is based 

on manufacturer price, which is 

calculated as just described. In addition. 

one final calculation using markups is 

made for the benefit of other parts of the 

analysis. That is the calculation of retail 

prices for the individual classes. This 

begh"'1s "With the manufacturing price in 

the calibration case, and adds to this the 

change in long-run variable cost times 

the manufacturer markup for the 

particular class under consideration. 

(This is the markup described above; it 

varies from class to class.) These new 

prices are then all multiplied by a factor 

(near one h' value) which is designed to 

ensure that the average price, when 

computed by weighing all classes by 

their shipments, is the same as the price 

that is computed by the long-run 

module. and is used in the LBL-MIM 

analysis. 

The comments requested 

documentation to validate these 

markups. There are no "real market 

data" on markups at either the 

manu'facturer or retail level, since these 

data are highly confidential. The 

manufacturer markups used in the 

analysis were developed for the 

proposed rule from data and information 

collected from refrigerator 

manufacturers. 

The retail markup is an average retail 

markup that covers a range of actual 

markups and it is riot meant to represent 

anyone type of retail distribution 

channel. NRDC asserts that the retail 

markup will decrease rather than stay 

constant as standards impose a higher 

first cost of refrigerators. (NRDC. No. 81, 

at 111). However, NRDC does not 

provide any data to support its claim or 

to show how much the markup should 

decrease. There is no reason to believe 

that retailers will not mark up cost .' 

increases induced by standards. The 

Department did not use any data to 

arrive at the constantness of the retail 

markup assumption. because no data 

exist, but believes that assumption is 

more plausible than any alternative. 

Pmfitability 

The questions about refrigerator 

manufacturers' profitability involved 

projectigns about profitability in the 

short- and long-run. as well as the 

projected differences in forecasted 

profitability under five standards cases. 

In commenting on the likely short-run 

profitability results, Battelle slated. "the 

cost increases that will accompany mom 

stringent standards will no! be fully 

recovered or irr.medialely reflected in 

higher prices. resulting in lower profits 

and returns in the short run." (Battelle, 

No. 110, at 22). 

In response. it must be noled thai jf 

standards lead to a decrease jn 

shipments, the LBL-ML'v1 does predict a 

short-run fall in profits. LBL-MIM 

predicts. however. that there will not be 

a decline in shipments or profits in the 

short run for refrigerator manufacturers. 

Nevertheless, the dynamic process of . 

adapting to a new situation-the . 

process of reaching a new equilibrium of 

demand and supply-is.difficull to 

model. It is difficult to predict what. 

production, marketing, and pricing 

strategies different m~ufacturers would 

choose in adapting to more stringent 

standards, and it is possible that· some 

manufacturers would make choices t.~al 

would result in lower profits in the short 

run until they learn how to operate in 

the new environment. 

On the issue of long-run profitability, 

Battelle contends that, under revised 

standards, refrigerator and freezer 

shipments will decrease rather than 

increase (as the Department had 

projected in the proposed rule), and, 

therefore, profits will decrease. In 

addition, for any chance for profits to 

increase, shipments would need to 

increase. (Battelle, No. 110. at 22). The 

Department of Justice (DOD also 

questions the conclusion that the 

proposed refrigerator standards could 

increase profits. (DO}. No. 162, at 4). 

The Department notes that for 

improved profitability, it is not 

necessary for shipments to increase 

under revised standards. If a 

manufacturer sells fewer units that are 

higher priced or that have higher profit 

margins, it is possible that profits would 

increase. 

Battelle does state that "because cost 

increases cannot be passed on,· 

immediately or completely in this price 

competitive market. profits and ROE 

(return-an-equity) cannot increase." 

(Battelle, No. 110, at 22). 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1999 / Rules and Regulations

In response, the Department questions

the inevitability of this result, since

Battelle gives no data to support the

assertion that costs cannot be passed on

completely, nor to what extent they can

be passed on. Observation of the

marketplace strongly supports the view

that increases in variable costs

generally are passed on, often with a

markup. No single manufacturer could

independently make substantially more

efficient machines and expect an

increase in his profitability, because his

product's purchase price would be

higher to the consumer than would his

competitor's less-efficient product.

Because of that manufacturer's higher

prices, and the fact that the average

consumer does not consider life-cycle

expenses, that manufacturer, by acting

alone to produce a more energy-efficient

appliance, would likely experience

declines in profitability and ROE.

However, standards are likely to raise

the production costs of major

refrigerator manufacturers similarly,

thereby increasing the likelihood that

costs can be passed on in the form of

higher consumer prices for refrigerators.

Furthermore, the extent to which costs

are passed on is determined by the -

proportion that is variable as opposed to

fixed, as discussed under markup above.

In urging support for standard level 4,

the Oregon Department of Energy (ODE)

contended that "level 4 results in a more

positive economic impact on

manufacturers: than level 3." (ODE, No.

83, at 2). -

The Department notes that the ODE

did not describe what criteria it was

using for "positive economic impact;"

from the analytical results in support of

the proposed rule, however, the

Department consistently used ROE as

the normal measure of impact, and ROE

was reported to be 0.03 percentage point

lower at standard level 4 than at

standard level 3.

Manufacturers' discount rate

Battelle asserts that "From the

manufacturers' perspective, use of a 7

percent real discount rate is also

unsupportable" for a manufacturer

analysis. (Battelle, No. 110, at 33).

Battelle's concern appears to be that the

correct discount rate be used in

estimating the economic impacts of

energy conservation standards on

manufacturers.

In response, the Department notes

that the LBL-MIM used a real interest

rate of six percent in modeling the

interest rate paid for debt incurred by

the firm. This figure was reported on

pages C-45 and C-59 of the proposed

rule's Technical Support Document.

Battelle concurs with using this interest

rate for this part of a manufacturer's

operations. (Battelle, No. 110, at 33).

LBL-MIM uses the firm's weighted

average cost of capital (WACC) (which

includes both return-on-equity and

return on debt) in analyzing the impacts

of additional investments induced by

standards, and LBL-MIM uses a WACC

rate of 12.1 percent for refrigerator

manufacturers (See proposed rule TSD,

p. C-59). Battelle uses ROE for the

manufacturers discount rate. Although

WACC is a different measure from ROE,

the rate that is used is similar to what

Battelle suggests the analysis should

use: "Based on our knowledge and

experience, an industry like the

refrigerator/freezer industry would

likely require a return-on-equity

between 10 and 20 percent, though

probably in the mid to lower half of this

range * * * *" (Battelle, No. 110, at 33).

Thus, it seems that Battelle's

disagreement with the discount rate

used in the Manufacturers Analysis is a

result of misunderstanding what

numbers are used in what portions of

LBL-MIM.

Sensitivity Analysis

The NRDC commented that the

refrigerator sensitivity analysis that was

used in a "worst case" scenario, which

consisted of a low consumer operating

expense elasticity, was implausible and

should not be used. (NRDC, No. 81, at

113-117).

In response; the Department notes

that the NRDC correctly states that if

the operating cost elasticity is zero,

"consumers pay no attention whatever

to operating costs," but then incorrectly

concludes that "market forces will never

save a single kilowatt-hour of energy

consumption in refrigerators, but instead

that standards will be and have been

responsible for 100 percent of the

efficiency improvement that can ever

take place." (NRDC, No. 81, at 113-114).

In fact, increased efficiency is often the

by-product of technological change

driven by very different market forces.

DOE does not believe that all scenarios

are possible. This one is offered as a

way of providing a firm bound on the

estimated values. The Department

agrees with NRDC that a zero operating

cost elasticity is highly improbable, but

lacks the data to estimate that

probability.

NRDC also states that even if

consumers are totally unresponsive to

savings in operating costs, there will still

be an operating cost elasticity, because

consumers are saving money on

operating expenses, and thus will buy

more refrigerators. This is referred to as

the "income effect," which, the

Department believes, would be small in

47931

this case because: (1) The operating cost

savings in any one year are extremely

small relative to a consumer's income;

and, (2) the consumer is not restricted to

buying appliances with the money

saved-he or she can spend it in any

way desired.

Regarding the industry price elasticity,

the Department agrees with NRDC's

analysis that the data showing a price

elasticity of -1 are improbable. That

price elasticity was used, however, only

in the sensitivity analysis. Sensitivity

analyses are meant to help set upper

and lower bounds on the results of an

analysis, and as such are supposed to be

unlikely. Thus, the Department believes

that its choices of industry price

elasticity and operating cost elasticity

for the sensitivity analysis are good

choices.

2. Comments on Small Furnace Analysis

A. Engineering Analysis

The engineering comments related to

the energy use of an induced draft fan,.

the space required for induced draft fans

in narrow units, low maintenance costs,

and low installation costs. Each of these

will be addressed.

Energy Use

Lone Star Gas (LSG) correctly states

that DOE did not include the cost of

electricity to operate the induced draft

fan motor in a 78 percent AFUE small

gas furnace. (LSG, No. 130, at 9).

The Department has not included

electrical consumption in the

determination of AFUE for any gas or oil

furnaces. However, as furnaces have

become more sophisticated with items

such as induced draft fans, to include

electricity consumption in the

--determination of AFUE has become a

growing concern. While the AFUE

calculation for small gas furnaces does

not include any fan energy consumption,

the Department did include, in the

analysis for the final rule, an operating

cost for a 50W electric power demand

for the induced draft fan in the 78

percent AFUE small gas furnace.

Size

Energen and Alabama Gas

Corporation (E&AGC) state that induced

draft fan designs are currently not

available in the narrow sizes (10.5"-

12.25") that are often used in multifamily

housing. (E&AGC, No. 82, at 4).

Presently designed induced draft units

may not fit some of the narrowest

spaces now being used. DOE believes

that there are no technical reasons,

however, to preclude the design of

narrower induced draft fan units. It is

difficult for DOE to predict exactly to=hat

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1009 I Ruhls and Regulations 47931 

In response, the Department questions 

the inevitability of this result, since 

Battelle gives no data to support the 

assertion that costs cannot be passed on 

completely, nor to what extent they can 

be passed on. Observation of the 

marketplace strongly supports.the view 

that increases in variable costs 

generally are passed on, often with a 

markup. No single manufacturer .could 

independently make substantially more 

efficient machines and expect an 

increase in his profitability, because his 

product's purchase price would be 

higher to the consumer than would his 

competitor's less-efficient product. 

Because of thatmanufpcturer's higher 

prices, and the fact that the average 

consumer does not consider life-cycle 

expenses, that manufacturer, by acting 

alone to produce a more energy-efficient 

appliance, would likely experience 

declines in profitability and ROE. 

However, standar;l.s are likely to raise 

the production costs of major 

refrigerator manufacturers similarly, 

thereby increasing the likelihood that 

costs can be passed .on in the form of 

higher consumer prices for refrigerators. 

Furthermore, the extent to which costs 

are passed on is determined by the . 

proportion that is variable as opposed to 

fixed, as· discussed under markup above. 

In urging support for standard leve14.· 

the Oregon Department of Energy (ODE) 

contended that "level 4 results in a more 

positive economic impact on 

manufacturers.lhan level 3." (ODE, No. 

83, at 2). 

The Department notes that the ODE 

did not describe what criteria it was 

using for "positive economic impact;" 

from the analytical results in support of 

the proposed rule, however, the 

Department conSistently used ROE as 

the normal measure of impact, and ROE 

was reported to be 0.03 percentage point 

lower at standard level 4 than at 

standard level 3. 

Manufacturers' discount rate 

Battelle asserts that "From the 

manufacturers' perspective. use of a 7 

percent real discount rate is also 

unsupportable" for a manufacturer 

analysis. (Battelle, No. 110. at 33). 

Battelle's concern appears to be that the 

correct discount rate be used in 

estimating the economic impacts of 

energy conservation standards on 

manufacturers. 

In response, the Department n()tes 

that the LBL-MIM used a real interest 

rate of six percent in modeling the 

interest rate paid for debt incurred by 

the firm. This figure was reported on 

pages C-45 arid C-59 of the proposed 

rule'.s Technical Support Document. 

Battelle concurs with using this interest 

vs "1111~ 7 

rate for this part of a manufacturer's 

operations. (Battelle, No. 110, at 33) .. 

LBL-MIM uses the firm's weighted 

average cost of capital (W ACC) (which 

includes both return-on-equity and 

return on debt) in analyzing the impacts 

of additional investments induced by 

standards, and LBL-MIM uses a WACC 

rate of 12.1 percent for refrigerator 

manufacturers (See proposed rule TSD, 

p. C-59). Battelle uses ROE for the 

manufacturers discount rate. Although 

WACC is a different measure from ROE, 

the rate that is used is similar to what 

Battelle suggests the analysis should 

use: "Based on our knowledge and 

experience, an industry like the 

refrigerator/freezer industry would 

likely require a return-on-equity 

between 10 and 20 percent, though 

probably in the mid to lower half of this 

range " * • ." (Battelle, No. 110, at 33). 

Thus, it seems that Battelle's 

disagreement with the discount rate 

used in the Manufacturers Analysis is a 

result of misunderstanding what 

numbers are used in what portions of 

LBL-MIM. 

Sensitivity Analysis 

The NRDC commented that the 

refrigerator sensitivity analysis that was 

used in a "worst case" scenario, which 

consisted of a low consumer operating 

expense elasticity, was implausible and 

should not be used. (NRDC, No. 81, at 

113-117). 

In response; the Department notes 

that the NRDC correctly states that if 

the operating cost elasticity is zero, 

"consumers pay no attention whatever 

to operating costs," but then incorrectly 

concludes that "market forces will never 

save a single kilowatt-hour of energy 

consumption in refrigerators, but instead 

that standards will be and have been. 

resp~msible for 100 percent of the 

efficiency improvement that can ever 

take place." (NRDC, No. 81, at 113-114). 

In fact, increased efficiency is often the 

by-product of technological change 

driven by very different market forces. 

DOE does not believe that all scenarios 

are possible. This one is offered as a 

way of providing a firm bound on the 

estimated values. The Department 

agrees with NRDC that a zero operating 

cost elasticity is highly improbable, but 

lacks the data to estimate that 

probability. 

NRDC also states that even if 

consumers are totally unresponsive to 

savings in operating costs, there will still 

be an operating cost elasticity, because 

- consumers are saving money on 

operating expenses, and thus will buy 

more refrigerators. This is referred to as 

the "income effect," which, the 

Department believes, would be small in 

this case because: (1) The operating cost 

savings in anyone year are extremely 

small relative to a consumer's income; 

and, (2) the consumer is not restricted to 

buying appliances with the money 

saved-he or she can spend it in any 

way desired. 

Regarding the industry price elasticity, 

the Department agrees with NRDC's 

analysis that the data showing a price 

elasticity of -1 are improbable. That 

price elasticity was used, however, only 

in the sensitivity analysis. Sensitivity 

analyses are meant to help set upper 

and lower bounds on t..~e results of an analysis. and as such are supposed to be 

unlikely. Thus, the Department believes 

that itll choices of industry price 

elasticity and operating cost elasticity 

for the sensitivity analysis are good 

choices. 

2. Comments on Small Furndce Analysis 

A. .Engineering AnalysiS 

The engineering comments related to 

the energy use of an induced draft fan, 

the space required for induced draft fans 

in narrow units,low maintenance costs, 

and low installation costs. Each of these 

will be addressed. 

Energy Use 

Lone Star Gas (LSG) correctly states 

that DOE did not include the cost of 

electricity to operate the induced draft 

. fan motor in a 78 percent AFUE small 

gas furnace. (LSG, No. 130, at 9). 

The Department ·has not inCluded 

electrical consumption in the 

determination of AFUE for any gas or oil 

furnaces. However, as furnaces have 

become more sophisticated with items 

such as induced draft fans, to include 

electricity consumption in the 

.. determination of AFUE has become a 

growing concern. While the AFUE 

calculation for small gas furnaces does 

not include any fan energy consumption. 

the Department did include, in the 

analysis for the final rule, an operating 

cost for a 50W electric power demand 

for the induced draft fan in the 78 

percent AFUE small gas furnace. 

Size 

Energen and Alabama Gas 

CorPoration (E&AGC) state that induced 

draIt fan designs are currently not 

available in the narrow sizes (10.5"-

12.25") t.~at are often used in multifamily 

housing. (E&AGC, No. 82, at 4) .. 

Presently designed induced draft units 

may not fit some -of the narrowest 

spaces now being used. DOE believes 

. that there are no technical reasons, 

however, to preclude the design of 

narrower induced draft fan units. It is 

difficult for DOE to predict exactly what 
54FR47916

47932 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules ' and Regulations

new models will look like but the

Department does not believe that the

compact, narrow furnace market will be

abandoned. Additionally, some of the

relatively new gas units that combine

water and space heating in one unit may

be appropriate where compactness is

required.

Maintenance Costs

LSG and Southern Gas Association

(SGA) state that DOE maintenance costs

are :too low and that DOE should include

the cost of replacing a circuit board

which, they claim, is likely to fail during

the life of a small gas furnace. (LSG, No.

130, at 7; and SGA, No. 51, at 6).

DOE does not consider the control

electronics for the induced draft unit to

be basically any more complex than for

the IID design required for the 71

percent AFUE furnace. There are only

simple controls such as thermostats,

sensors and switches to test for air flow.

The Department does not expect any

increased circuit board maintenance

costs for the induced draft furnace

relative to the 71 percent AFUE design

and, therefore, the maintenace costs

have not been changed..

Installation Costs

A number of gas supply companies

stated that increased installation costs

would result from the replacement of old

furnaces with 78 percent AFUE induced

draft furnaces, because of venting

modifications to accommodate

atmospheric gas water heaters. LSG

estimated an increase of $60-$150. (LSG,

No. 30, at 6). SGA estimated an increase

of $0-$400 with an average of $175.

(SGA, No. 51, at 5). Florida Natural Gas

Association (FNG) estimated an

increase of $200. (FNG, No.115, at 3).

AGA projected an unspecified increased

cost. (AGA, No. 128, at 13).

Common venting of induced draft gas

furnaces and atmospheric water heaters

is a complex issue. Building codes vary

throughout the nation and most

localities may require some

modifications to common venting

systems, including prohibiting them.

Such modifications would be expected

to cause some increase in installation

cost. The costs would fall most heavily

on replacement furnaces in multifamily

buildings, since changes from current

venting practices can be accounted for

in designs for new construction and

single family units, where venting can

often be done directly through the

sidewall. DOE does not have any data

that provides an estimate of how

frequently additional installation costs

would be incurred. To account for these

increased costs, the final rule included a

$200 estimated extra installation cost for

all replacement furnaces in multifamily

units.

B. Consumer Analysis

There were comments on many

consumer issues dealing with small gas

furnaces. These included end-use

specific gas prices, conversion expenses,

fuel-switching, oversizing factors,

rebound effects, maintenance expenses,

heat pump shipments, fan energy

consumption, calculations of AFUE, and

the furnace-water heating fuel linkage.

Each of these will be addressed.

End-Use Gas Price

Enserch Corporation (Enserch)

commented that for the Department to

employ end-use specific electricity

prices for the analysis of those

appliances that consume electricity, and

not to employ end-use specific natural

gas prices for the small furnace analysis

is both "illogical and erroneous."

(Enserch, No. 51, at 8).

In response, the Department notes

that while it agrees in principle with

using end-use specific energy prices for

natural gas in the small furnace

analysis, neither the Energy Information

Administration, nor the AGA (in its

Home Househeating Survey) collects

direct information on natural gas prices

by end-use consumption.

The Department does not believe,

therefore, that the price of natural gas

that is utilized by small gas furnaces can

be determined from any existing data

base. Therefore, DOE continued to

assume that the price of natural gas for

small gas furnaces was the average

residential price of natural gas.

Shift to Electric Resistance Heating

The Act required that the Department

analyze the extent to which the prices

associated with conservation standards

on small gas furnaces could cause

consumers to switch from natural gas to

electric resistance heat. In the analysis

for the proposed rule, the Department

did not account for any additional

consumer expense in undertaking such a

switch. This assumption was criticized

by the Edison Electric Institute (EEI) and

by the American Electric Power System

and Southern Company (AEPSSC). (EEI,

No. 127, at 6-7; and AEPSSC, No. 136, at

10). EEI stated that this expense would

not be insignificant. According to the

1988 edition of "Means Electrical Cost

Data," EEI reported that to upgrade a

home with electrical service capacity of

60 amperes to 200 amperes would cost

the consumer $860. Even to upgrade to

150 ampere service, EEI reported, would

cost the consumer $715. (EEI, No. 127, at

6).

In response, the Department included,

in the LBL-REM modeling runs for this

final rule, expenses that could be

involved in the replacement market to

convert from gas heat to electric heat.

A number of comments were received

concerning the Department's belief that

a 78 percent AFUE standard on small

gas furnaces would not result in a

significant shift to electric resistance

heating. The Department proposed this

conclusion as a result of its estimation

of expected market shares from LBLREM. In Table 5.20 of the proposed

rule's Technical Support Document, the

Department had estimated that a 78

percent AFUE standard or small gas

furnaces would not lead to a shift to

electric resistance heat. The analysis

projects that standards would lead to an

increase in small gas furnace shipments,

compared to the base case , over the

1992-2015 time period. This increase

was expected to come at the expense of

larger gas furnaces and electric heat

pumps.A similar shift is found in this

final rule.

The small gas furnace methodology is

based on historical data on space

heating choices in new homes from

1976-79. In addition, the method

effectively assumes that the elasticities

are a function of climate, energy prices,

and other variables, and are not

constant.

As a result, the Department is

confident in its analysis of market

shares.

Nevertheless, numerous comments

suggested that a 78 percent AFUE

standard on small gas furnace would

lead to initial price increases, the result

of which would be a significant shift to

electric resistance heat, especially-in

new construction where, it is argued,

builders, who are concerned primarily

with the initial purchase price, make the

purchase decision. Among those

presenting these conclusions were

Southern Gas Company (SGC) (SGC,

No. 51, at 3 and 9); Atlantic Gas Light

Company (AGLC) (AGLC, No. 70, at 1);

Mobile Gas Service Company (MGSC)

(MGSC, No. 72, at 2); Hope Gas, Inc.

(HGI, No. 112, at 2); Florida Natural Gas

Association (FNGA) (FNGA, No. 115, at

3); Laclede Gas Company (LGC) (LGC,

No. 121, at 2-5); AGA (AGA, No. 128, at

6 and 12); Southern California Gas

Company (SCGC, No. 134, at 2 and 6);

and ENTEX and Arkansas Louisiana

Gas (ENTEX) (ENTEX, No. 161, at 3).

. A number of comments, on the other

hand, supported the Department's

conclusion that a 78 percent AFUE

standard on small gas furnaces-would

not result in a significant shift from

natural gas to electric resistance heat.

 CE-RM-87-102 COMMENT 10

54FR47916 

47932 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

new models will look like but the 

Department does not believe that the 

compact, narrow furnace market will be 

abandoned. Additionally, some of the 

relatively new gas units that combine 

water and space heating in one unit may 

be appropriate where compactness is 

required. 

Maintenance Costs 

LSG and Southern Gas Association 

(SGA) state that DOE maintenance costs are :too low and that DOE should include 

the cost of replacing a circuit board 

which. they claim. is likely to fail during 

the life of a small gas furnace. (LSG, No. 

130, at 7; and SGA, No. 51. at 6). 

DOE does not consider the control 

electronics for the induced draft unit to 

be basically any more complex than for 

the IID design required for the 71 

percent AFUE fUrnace. There are only 

simple controls such as thermostats, sensors and switches to test for air flow. 

The Department does not expect any 

increased circuit board maintenance 

costs for the induced draft furnace 

relative to the 71 percent AFUE design 

and, therefore, the maintenace costs 

have not been changed .. 

Installation 'Costs 

A number of gas supply companies 

stated that increased installation costs 

would result from the replacement of old 

furnaces with 78 percent AFUE induced 

draft furnaces, because of venting 

modifications to accommodate 

atmospheric gas water heaters. LSG 

estimated an increase of $60-$150. (LSG. 

No. 30, at 6). SGA estimated an increase 

of $0-$400 with an average of $175. 

(SGA. No. 51, at 5). Florida Natural Gas 

Association (FNG) estimated an 

increase of $200. (FNG. No. 115. at 3). 

AGA projected an unspecified increased 

cost. (AGA, No. 128, at 13). 

Common venting of induced draft gas 

furnaces and atmospheric water heaters 

is a complex issue. Building codes vary 

throughout the nation and most 

localities may require some 

modifications to common venting 

systems. including prohibiting them. 

Such modifications would be expected 

to cause some increase in installation 

cost. The costs would fall most heavily 

on replacement furnaces in multifamily 

buildings. since changes from current 

venting. practices can be accounted for 

in designs for new construction and 

single family units. where venting can often be done directly through the 

sidewall. DOE does not have any data 

that provides an estimate of how 

frequently additional installation costs 

would be incurred. To account for these 

increased costs. the final rule included a $200 estimated extra installation cost for 

all replacement furnaces in multifamily units. . 

B. Consumer Analysis 

There were comments on many 

consumer issues dealing with small gas 

furnaces. These included end-use 

specific gas prices. conversion expenses. 

fuel-switching. oversizing factors, 

rebound effects. maintenance expenses. 

heat pump shipments. fan energy 

consumption. calculations of AFUE. and 

the furnace-water heating fuel linkage. 

Each of these will be addressed. 

. End-Use Gas Price 

Enserch Corporation (Enserch) 

commented that for the Department to 

employ end-use specific electricity 

prices for the analysis of those 

appliances that consume electricity, and 

not to employ end-use specific natUl'al 

gas prices for the small furnace analysis 

is both "illogical and erroneous." 

(Enserch, No. 51, at 8). 

In response, the Department notes 

that while it agrees in principle with 

using end-use specific energy prices for 

natural gas in the small furnace 

analysis. n.either the Energy Information 

Administration. nor the AGA (in its 

Home Househeating Survey) conects 

direct information on natural gas prices 

by end-use consumption. 

The Department does not believe. 

therefore. that the price of natural gas 

that is utilized by small gas furnaces can 

be determined from any existing data 

base. Therefore. DOE continued to 

assume tnat the price of natural gas for 

small gas furnaclls was the average 

residential price of natural gas. 

Shift to Electric Resistance Heating 

The Act required that the Department 

analyze the extent to which the prices 

associated with conservation standards 

on small gas furnaces could cause consumers to switGh from natural gas to 

electric resistance heat. In the analysis 

for the proposed rule. the Department 

did not account for any additional 

consumer expense in undertaking such a switch. This assumption was criticized 

by the Edison Electric Institute (EEl) and 

by the American Electric Power System 

and Southern Company (AEPSSC). (EEl. 

No. 127, at 6-7; and AEPSSC. No. 136. at 

10). EEl stated that this expense would . not be insignificant. According to the 

1988 edition of "Means Electrical Cost 

Data," EEl reported that to upgrade a 

home with electrical service capacity of 

60 amperes to 200 amperes would cost 

-the consumer $860. Even to upgrade to 

150 ampere service. EEl reported. would 

cost the consumer $715. (EEl. No. 127. at 

6) .. 

In response. the Department included. 

in the LBL-REM modeling runs for this 

final rule. expenses that could be 

involved in the replacement market to 

convert from gas heat to electric heat. 

A number of comments were received 

concerning the Department's belief that 

a 78 percent AFUE standard on small 

gas furnaces would not result in a 

significant shift to electric resistance 

heating. The Department proposed this 

conclusion as a result of its estimation 

of expected market shares from LBLREM. In Table 5.20 of the proposed 

rule's Technical Support Document, the 

Department had estimated that a 78 . percent AFUE standard or small gas 

furnaces would not lead to a shift to 

electric resistance heat. The analysis 

projects that standards would lead to an increase in small gas furnace shipments, 

compared to the base case, over the 

1992-2015 time period. This increase was expected to come at the expense of 

larger gas furnaces and electric heat 

pumps . .A similar shift is found in this 

final rule. 

The small gas furnace methodology is 

based on historical data on space 

heating choices in new homes from 

1976-79. In addition, the method 

effectively assumes that the elasticities are a function of climate. energy prices, . 

and other variables. and are not 

constant. 

As a result. the Department is· 

confident in its analysis of market 

shares. 

Nevertheless. numerous comments 

suggested that a 78 percent AFUE 

standard on small gas furnace would 

lead to initial price increases, the result 

of which would be a significant shift to 

electric resistance heat. especially.in new construction where, it is argued. 

builders, who are concerned primarily 

with the initial purchase price. make the 

purchase decision. Among those 

presenting these conclusions were Southern Gas Company (SGC) (SGC, 

No. 51. at 3 and 9); Atlantic Gas Light 

Company (AGLC) (AGLC. No. 70, at 1); 

Mobile Gas Servic!l Company (MGSC) 

(MGSC. No. 72, at 2); Hope Gas. Inc. 

(HGI. No. 112. at 2); Florida Natural Gas 

Association (FNGA) (FNGA. No. 115. at 

3); Laclede Gas Company (LGC) (LGC. 

No. 121. at 2-5); AGA (AGA, No. 128. at 

6 and 12); Southern California Gas 

Company (SCGC. No. 134. at 2 and 6); 

and ENTEX and Arkansas Louisiana 

Gas (ENTEX) (ENTEX, No. 161. at 3). 

. A number of comments, on the other 

hand. supported the Department's 

conclusion that a 78 percent AFUE 

standard on small gas furnaces'would 

not result in a significant shift from 

natural gas to electric resistance heat. 
54FR47916

Federal Register / Vol. 54, No. 2Z1 / Friday, November 17, 1989 / Rules and Regulations

Bard Manufacturing Company (Bard) addressed fuel-switching because LBLand GAMA concluded that a 7S percent REM "does not emulate the marketplace

AFUE small furnace standard should not for furnaces in new residential

result in a loss of market share by.gas

utilities because: (1) The price

differential between a 71 percent AFUE

and a 78 percent AFUE furnace in

today's marketplace would not apply in

1992 when NAECA standards go into

effect; (2) the cost to upgrade older

homes to the 200 amp service needed for

electric heating makes it unlikely that

gas furnaces would lose market share to

electric resistance heating in

replacement markets; (3) in the new

construction market in the South, gas

furnaces compete against heat pumps,

not against electric resistance heating;

and, (4) in new construction, the cost of

venting a 78 percent AFUE fan-assisted

combustion system gas furnace through

the wall is, in most cases, less than the

cost of venting a 71 percent AFUE

atmospheric combustion gas furnace,

which would require construction of a

chimney for venting. (Bard, No. 90, at 1-

2; and GAMA, No: 229, at 3-6).

Market Share

In response to comments received

DOE revised several assumptions that

have an impact on the market shares of

gas furnaces, including: Energy price

projections, maintenance costs of

efficient gas furnaces, conversion costs

from gas to electric heat, and retrofit

costs for replacing small gas furnaces.

These changes are reported in the

Technical Support Document.

GAMA data indicate that 40 percent

of 1985 shipments of all gas warm air

central furnaces were at or above 71

percent AFUE, and that 61 percent of

small gas furnaces sold in 1985 were at

or above 71 percent AFUE. (1985 is the

most recent year for which data on

small gas furnace shipments are

available). In 1988, 52 percent of all gas

furnaces shipped were at or above 71

percent AFUE. DOE believes that the

more efficient furnaces are being bought

both for replacement and for use in new

housing. AGA data show increasing

market shares for gas heating, and a

substantial number of conversions from

electric heat to gas heat. (AGA,'No. 128,

Attachment 1, at 4 and 11). In light of the

current market for gas furnaces, DOE

does not believe that purchasers,

including builders, are sensitive only to

equipment costs. Therefore, DOE has

modeled the market decisions based

upon observed market behavior. See

Technical Support Document, Appendix

B.

Fuel Switching

In a related comment, ENTEX charged

that the Department had not adequately

construction, where builders decide on

which type of heating equipment is

installed, and are extremely sensitive to

the initial cost of the equipment."

(ENTEX, No. 181, at 3).

As described in the proposed rule,

LBL-REM had been modified for the

purpose of analyzing small gas furnaces,

to take account of the sensitivity to

initial equipment cost and other

sensitivities that have been reflected in

actual market purchases in new homes.

In addition, LBL-REM models the

sensitivity to first cost as a function of

climate, with purchasers in milder

climates more sensitive to first cost

(relative to operating cost) than

purchasers in more severe climates. This

information was reported on pages B-10

and B-11 of the proposed rule's

Technical Support Document. These

modifications were maintained in the

analysis for this final rule.

Oversizing Factor

In the analysis of small gas furnaces,

the Department assumed that furnaces

would be oversized for the expected

heating loads by a factor of 2.3. This

assumption was derived from AGA data

for existing furnaces.

Several comments suggested that,

with the trend toward less oversizing,

the Department was using an unrealistic

assumption about the future, wherein, it

is argued, smaller equipment, more

suited to actual heating loads, will be

installed. These comments contend,

therefore, that by using an

unrealistically high oversizing factor, the

Department has underestimated the size

of the future market for small gas

furnaces. (LGC, No. 121, at 4; EEI, No.

127, at 8; and NRDC. No. 81, at 92).

In response, the Department analyzed

a small gas furnace sensitivity case with

an oversizing factor of 1.3. This resulted

in much higher shipments and a,

correspondingly higher net present

value. In addition, the impacts of

standards remained small. See

Technical Support Document, Tables

5.28 and 5.31.

Rebound Effect

In the analysis for the proposed rule,

the Department assumed that

purchasers of more efficient furnaces,

with a 78 percent AFUE standard, could

utilize them more intensively than

expected, and thereby reduce the energy

savings below what the engineering

estimates would otherwise project. This

so-called "rebound effect" was assumed

to be 30 percent, so that only 70 percent

of the engineering estimates of expected

47933

savings would actually be expected to

result.

This estimate of a 30 percent rebound

effect was criticized in several

comments,. which argued that the

rebound should be lower, and perhaps

equal to zero. (AEPSSC, No. 136, at 13;

EEI, No. 127, at 9; NRDC, No. 81, at 93;

and NYSEO, No. 156, at 2 and 28-30).

In response, in a sensitivity analysis

for the final rule, the Department

removed the rebound effect with respect

to operating expense for all small

heating systems. Usage behavior,

however, was still assumed to be a

function of income..

Setting the usage elasticity with

respect to operating cost at zero was

expected to increase the energy savings

attributed to standards. Since the

rebound effect was eliminated for all

small heating systems, the impacts were

observed among other fuels, as well as

natural gas.

Other Issues

EEI commented that in the proposed

rule, the Department underestimated

heat pump shipments. (EEI, No. 127, at

9).

In the final rule, the Department

revised the heat pumps shipments to

agree with reported shipments from

1980-1987. These results are presented

in the Technical Support Document. See

Technical Support Document, Table

5.18.

Lastly, LGC commented that since the

choice of space heating fuel usually

determines the choice of water heating,

the relevant comparison is not between

a small gas furnace and electric

resistance heat, but, rather, it is between

a small gas furnace with a gas water

heater and electric resistance heat with

an electric water heater. (LGC, No. 121,

at 5).

While the Department agrees that

water heating fuel choice is usually

linked to space heating fuel in new

construction, LBL-REM treats these enduses separately. The model cannot

handle these two appliance choices

jointly, but, by modeling the results for

small furnaces vis a vis electric heat,, the

Department believes that water heater

sales are not an issue that affects the

analysis.

C. Manufacturer Analysis

There were three areas of the

manufacturer analysis for the proposed

rule that drew comments. Comments

were submitted dealing with the markup

and prices that were used, the pricing

-and production of -71 percent AFUE

furnaces after 1992, and the impacts of

standards on gas furnace manufacturers.

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47933 

Bard Manufacturing Company (Bard) 

and GAMA concluded that a 78 percent 

AFUE small furnace standard should not 

result in a loss of market share by gas 

utilities because: (1) The price 

differential between a 71 percent AFUE 

and a 78 percent AFUE furnace in 

today's marketplace would not apply in 

1992 when NAECA standards go into 

effect; (2) the cost to upgrade older 

homes to the 200 amp service needed for 

electric heating makes it unlikely that 

gas furnaces would lose market share to 

electric resistance heating in 

replacement markets: (3) in the new 

construction market in the South. gas 

furnaces compete against heat pumps, 

not against electric resistance heating; 

and. (4) in new construction. the cost of 

venting a 78 percent AFUE fan-assisted 

combustion system gas furnace through 

the wall is, in most cases, less than the 

cost of venting a 71 percent AFUE 

atmospheric combustion gas furnace, 

which would require construction of a 

chimney for venting. (Bard, No. 90. at 1-

2; and GAMA, No.·129. at 3-6). 

Market Share -,. 

In response to comments received. 

DOE revisea several assumptions that 

have an impact on the market shares of 

gas furnaces. including: Energy price 

projections, maintenance costs of 

efficient gas furnaces, conversion costs 

from gas to electric heat, and retrofit 

costs for replacing small gas furnaces. 

These changes are reported in the 

Technic.al Support Document. 

GAMA data indicate that 40 percent 

of 1985 shipments of all gas warm air 

central furnaces were at or above 71 

percent AF"uE. and that 61 percent of 

small gas furnaces sold in 1985 were at 

or above 71 percent AFUE. (1985 is the 

most recent year for which data on . 

small gas furnace shipments are 

available). In 1988, 52 percent of all gas 

furnaces shipped were at or above 71 

percent AFUE. DOE believes that the 

more efficient furnaces are being bought 

both for replacement and for use in new 

housing. AGA data show increasing 

market shares for gas heating. and a 

substantial number of conversions from 

electric heat to gas heat. (AGA, ·No. 128, 

Attachment 1, at 4 and 11). In light of the 

current market for gas furnaces. DOE 

does not believe that purchasers, . 

including builders, are sensitive only to 

equipment costs. Therefore, DOE has 

modeled the market decisions based 

upon .observed market behavior. See 

Technical Support Document. Appendix 

B. 

Fuel Switching 

In a related comment, ENTEX charged 

that the Department had not adequately 

addressed fuel-switching because LBLREM "does not emulate the marketplace 

for furnaces in new residential 

construction, where builders decide on 

which type of heating equipment is 

installed. and are extremely sensitive to 

the initial cost of the equipment." 

(ENTEX. No. 161. at 3). 

As described in the proposed rule. 

LBL-REM had been modified for the 

purpose of analyzing small gas furnaces. 

to take account of the sensitivity to 

initial equipment cost and other 

sensitivities that have been reflected in 

actual market purchases in new homes. 

In addition, LBL-REM models the 

sensitivity to first cost as a function of 

climate, with purchasers in milder 

climates more sensitive to first cost 

(relative to operating cost) than 

purchasers in more severe climates. This 

information was reported on pages B-l0 

and B-ll of the proposed rule's 

Technical Support Document. These 

modifications were maintained in the 

analysis for this final rule. 

Oversizing Factor 

In the analysis of small gas furnaces. 

the Department assumed that furnaces 

would be oversized for the expected 

heating loads by a factor of 2.3. This' 

assumption was derived from AGA data 

for existing furnaces. 

Several comments suggested that, 

with the trend toward less oversizing. 

the Department was using an unrealistic 

assumption about the future, wherein, it 

is argued. smaller equipment, more 

suited to actual heating loads, will be 

installed. These comments contend, 

therefore, that by using an 

unrealistically high oversizing factor. the 

Department has underestimated the size 

of the future market for small gas 

furnaces. (LGC. No. 121, at 4; EEl, No. 

127, at 8; and NRDC, No. 81. at 92). 

In response, the Department analyzed 

a small gas furnace sensitivity case with 

an oversizing factor of 1.3. This resulted -

in much higher shipments and a 

correspondingly higher net present 

value. In addition, the impacts of 

standards remained small. See 

Technical Support Document. Tables 

5.28 and 5.31. 

Rebound Effect 

In the analysis for the proposed rule. 

the Department assumed that 

purchasers of more efficient furnaces. 

with a 78 percent AFUE standard, could 

utilize them more intensively than 

expected, and thereby reduce the energy 

savings below what the engIneering 

estimates would otherwise project, This 

so-called "rebound effect" was assumed 

to be 30 percent, so that only 70 percent 

of the engineering estimates of expected 

liaRS 

savings would actually be expected \0 

result. 

This estimate of a 30 percent rebound 

effect was criticized in several 

comments,. which argued that the 

rebound should be lower. and perhaps 

equal to zero. (AEPSSC, No. 136, at 13~ 

EEl. No. 127, at 9; NRDC. No. 81, at 93; 

and NYSEO. No. 156. at 2 and 28-30). 

,. 

In response, in a sensitivity analysis 

for the final rule. the Department 

removed the rebound effect with respect 

to operating expense for all small 

heating systems. Usage behavior. 

however. was still assumed to ·be a 

function of income .. 

Setting the usage elasticity with 

respect to operating cost at zero was 

expected to increase the energy savings 

attributed to standards. Since the 

rebound effect was eliminated for all 

small heating systems, the impacts were 

obs~rved among other fuels. as well as 

natural gas. 

Other Issues 

EEl commented that in the proposed 

rule, the Depllrtment underestimated . 

heat pump shipments. (EEl. No. 127. at 

9). 

In the final rule, the Department 

revised the heat pumps shipments to 

agree with reported shipments from 

1980-1987. These results are presented 

in the Technical Support Document. See 

Technical Support Document, Table 

5.18. i 

Lastly, LGC commented that since the 

choice of space heating fuel usually 

determines the choice of water heating. 

the relevant comparison is not between 

a small gas furnace and electric 

resistance heat, but, rather. it is between 

a small gas furnace with a gas water 

heater and electric resistance heat with 

'an electric water heater. (LGe, No. 121, 

at 5). 

Whil~ the Department agrees that 

water heating fuel choice is t1sually 

linked to space heating fuel in new 

construction, LBL-REM treats these enduses separately. The model cannot 

handle these two appliance choices 

jointly, but, by modeling the results for 

small furnaces vis a vis electri.c heat.. the 

Department believes that water heater 

sales are not an issue t,~at affects the 

analysis. 

C. Manufacturer Analysis 

There were three areas of l~e 

manufacturer analysis for the proposed 

rule that drew comments. Comments 

were submitted dealing with the markup 

and prices that were used, the pricing 

·and production of-71 percent AFUE 

furnaces ·after 1992, and the impacts of 

standards on gas furnace manufacturers. 
54FR47916

47934 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

Markup

The Energen Corporation (Energen)

asserted that the manufacturer analysis

"was based on manufacturing cost

estimates instead of actual contractor

pricing," and it did not take into account

that higher efficiency furnaces receive

higher markups. (Energen, No. 82, at 5-

6).

In response, the Department notes

that the manufacturer analysis takes

into account, in a limited way, the fact

that higher efficiency furnaces receive

higher markups. Small gas furnaces of 90

percent AFUE, and higher, receive a

manufacturer markup of 1.3, while lower

efficiency furnaces receive a markup of

1.15. These markups are based on data

gathered from contractors by DOE for

the proposed rule. All large furnaces

receive a markup of 1.3. After 1992,

furnaces with lower than 80 percent

AFUE rating will be the least efficientfurnaces on the market, and thus will

receive the lowest manufacturer

markup. Most comments that provided

data used current price and markup

lists, but manufacturers testified that

their costs, markups, and pricing will

change when the Act's standards go into

effect. (Rheem, No. 67, at 2; and GAMA,

No. 129, at 3-4).

With regard to the-analysis

considering only "manufacturing cost

estimates instead of actual contractor

pricing," the Department has learned

through discussions with contractors

that "actual contractor pricing" is highly

variable, and that the Department's

estimates of price differences are fairly

reasonable.

The Department had estimated that

the current price difference between a

71 percent AFUE small gas furnace and

a 78 percent AFUE one to be $137.

Several gas utilities, e.g., Enserch (No.

51), Energen (#82), Laclede (No. 121),

and PSCNC (No. 144), criticized that

price difference as being too low. The

submissions of those companies had

price differences ranging from $200

(Laclede) to $467 (PSCNC).

On the other hand, one gas furnace

manufacturer, Carrier Corporation

(Carrier), supported the Department's

estimate of the current price difference

between a 71 percent AFUE and 78

percent AFUE furnace:

We believe that the DOE estimate of $87

(sic) installed cost differential between

atmospheric and induced draft furnaces of

less than 45,000 BTU/H is reasonable.

Carrier's estimate of installed cost

differential-is approximately $100. In no event

would we expect the differential to exceed

$150. (Carrier, No. 143, at 1).

. While the Department does not doubt .

that the price differences submitted by

the gas utilities have occurred, Carrier's

support of DOE's estimate of the price

difference between a 71 percent AFUE

and 78 percent AFUE small furnace

gives the Department confidence that its

estimate is reasonable. In all likelihood

there is a range of price differentials. In

addition, because Carrier is a

manufacturer of these appliances, the

Department believes that its numbers

are representative. Furthermore, gas

furnace manufacturers stated in their

comments that the price difference

between 78 percent and 71 percent

furnaces would certainly decrease in

1992 when NAECA standards go into

effect. (Rheem, No. 67, at 2; Snyder

General Corporation (Snyder), No. 73, at

3; and GAMA, No. 129, at 2-4).

The proposed rule had indicated that

using current prices of those furnaces

would overstate the retail price

difference that would prevail after

standards on larger gas furnaces went

into effect 1992 because:

(1) Seventy-one percent AFUE

furnaces would become more expensive

in 1992 because they no longer would be

the standard type of furnace, but instead

would be a specialty product which

would be produced in short production

runs about twice a year, or be purchased

from another manufacturer (thus

incurring an extra level of markup).

(2) Seventy-eight percent AFUE

furnaces will become less expensive in

1992 because they will be produced in

even larger quantities then.

(3) Seventy-eight percent AFUE

furnaces will become less expensive

under a 78 percent standard because

they will then be the "bottom of the

line" furnace and receive the lowest

markup, whereas they now receive a

higher markup,

Impact on Manufacturers

Last, SCGC questions the

Department's conclusion that a 78

percent AFUE minimum energy

conservation standard on small gas

furnaces would have a minimum impact

on manufacturers. (SCGC, No. 134, at 4).

In response, the Department notes

that SCGC has reservations about the

assertion that manufacturers will be

better off manufacturing like products,

i.e., after 1992 all furnaces would be 78

percent AFUE or more, and that the

overall impact is a high return on

investment.

However, SCGC's assertion is in error.

First, the proposed rule does not

conclude that the overall impact of gas'

furnace standards is a high return on

investment for manufacturers. In fact,

LBL-MIM estimates that standards will

cause a decrease in ROE of less than

0.01 percent. Second, the SCGC doubts

that manufacturers can manufacture

high efficiency furnaces and be better

off; and then rebuts its own statement

by citing Lennox as a company that

produces high-efficiency furnaces and

does well. In addition, manufacturers

have stated that they are better off not

having to maintain a separate

production line for lower-efficiency

small gas furnaces. (Rheem, No. 67, at 2;

and GAMA, No. 129, at 2-4). Last, no gas

furnace manufacturer has commented

on the estimate that standards will have

a minimum impact on such

manufacturers.

As a result, the Department continues

to believe that a 78 percent AFUE

standard on small gas furnaces will

have a minimum impact on

manufacturers.

3. Utility Analysis

SCGC commented that the utility

analysis should have included estimates

of the lost revenues to gas utilities that

would result from a 78 percent AFUE

small gas furnace standard. (SCGC, No.

134, at 5).

In response the Department notes that

a separate analysis of impacts on the

as utilities was not performed. The

Department notes that an electric utility

impacts analysis was performed to

address significant economic impacts

from appliance efficiency standards,

based on calculations specific to the

electric utility industry. The utility.

analysis also provides inputs to the

envirpnmental analysis.

Furthermore, the Act requires that the

Department examine any possible shift

to electric resistance heating. This is

accomplished through the LBL-REM.

The electric utility analysis was

originally undertaken because: (1) The

expected economic impacts of standards

on electric utilities were expected to be

large; (2) it was important to estimate

the peak demand and capacity savings

from any standards, since electricity

cannot be stored. In addition, power

plant capacity has been increasing in

cost, and has been more difficult to site

and build in recent years; and (3) the

environmental impact analysis required

information about which generating

plants would be curtailed in response to

the changes in load brought about by

any standards.

The Department's utility analysis did

not include gas utilities because: (1) The

expected economic impacts of small gas

furnace standards on gas utilities are

 CE-RM-87-102 COMMENT 10

54FR47916 

47934 Federal Register / Vol. 54, No~ 221 / Friday, November 17, 1989 / Rules and Regulations "!IS = 

Markup 

The Energen Corporation' (Energen) 

asserted that the manufacturer analysis 

"was based on manufacturing cost 

estimates instead of actual contractor 

pricing," and it did not take into account 

that higher efficiency furnaces receive 

higher markups, (Energen, No. 8Z, at 5-

6). 

In response, the Department notes 

that the mimufacturer analysis takes 

into account, in a limited way, the fact 

that higher efficiency furnaces receive 

higher markups. Small gas furnaces of 90 

percent AFUE, and higher, receive a 

manufacturer markup of 1.3, while lower 

efficiency furnaces receive a markup of 

1.15. These markups are based on data 

gathered from contractors by DOE for 

the proposed rule. All large furnaces 

receive a markup of 1.3. After 1992, 

furnaces with lower than 80 percent 

AFUE rating will be the least efficient. 

furnaces on the market, and thus will 

receive the lowest manufacturer 

markup. Most comments that provided 

data used current price and markup 

lists, but manufacturers testified that 

their costs, markups, and pricing will 

change when the Act's standards go into 

effect. (Rheem, No. 67, at 2; and GAMA, 

No. 129, at 3-4). 

With regard to the'analysis 

considering only "manufacturing cost 

estimates instead of actual contractor 

pricing." the Department has learned 

through discussions with contractors 

that "actual contractor pricing" is highly 

variable. and that the Department's . 

, estimates of price differe'nces are fairly 

reasonable. ' 

The Department had estimated that 

the current price difference between a 

,:;" 71 percent AFUE small gas furnace and a 78 percent AFUE one to be $137. 

Several gas utilities. e.g., Enserch (No, 

51), Energen (#82), Laclede (No. 121). 

and PSCNC (No. 144). criticized that 

price difference as being too low. The 

submissions of those companies had 

price differences ranging from $200 

(Laclede) to $467 (PSCNC). 

On the other hand, one gas furnace 

manufacturer, Carrier Corporation 

(Carrier). supported the Department's 

estimate of the current price difference 

between a 71 percent AFUE and 78 

percent AFUE furnace: 

We believe that the DOE estimate of $87 

(sic) installed cost differential between 

a tmospheric and induced draft furnaces of 

less than 45,000 BTU/H is reasonable. 

Carrier's estimate of installed cost 

differentialis approximately $100. In no evenl 

would we expect the differential to exceed 

$150. (Carrier, No. 143. at 1). 

While the Department does not doubt, 

that the price differences submitted by 

the gas utilities have occurred. Carrier's 

support of DOE's estimat!'! of the price 

difference between a 71 percent AFUE 

and 78 percent AFUE small furnace 

gives the Department confidence that its 

estimate is reasonable. In all likelihood 

there is a range of price differentials. In 

addition. because Carrier is a 

manufacturer of these appliances. the 

Department believes that its numbers are representative. Furthermore, gas 

furnace manufacturers stated in their 

comments that the price difference 

between 78 percent and 71 percent 

furnaces would certainly decrease in 

1992 when NAECA standards go into 

effect. (Rheem. No. 67, at 2; Snyder 

General Corporation (Snyder), No. 73, at 

3; and GAMA, No. 129, at 2-4). 

The proposed rule had indicated that 

using current prices of those furnaces 

would overstate the retail price 

difference that would prevail after 

standards on larger gas furnaces went 

into effect 1992 because: 

(1) Seventy-one percent AFUE 

furnaces would become more expensive 

in 1992 because they no longer would be 

the standard type of furnace, but instead 

would be a specialty product which 

would be produced in short production runs about twice a year, or be purchased 

from another manufacturer [thus 

incurring an extra level of markup). 

(2) Seventy-eight percent AFUE 

furnaces will become less expensive in 

1992 because they will be produced in 

even larger quantities then, 

(3) Seventy-eight percent AFUE 

furnaces will become less expensive 

under a 78 percent standard because 

they will then be the "bottom of the 

line" furnace and receive the lowest 

markup, whereas they now receive a higher markup. 

Impact on M~nufacturers 

Last. SCGC questions the 

Department's conclusion that a 78 

percent AFUE minimum energy 

conservation standard on small gas 

furnaces would have a minimum impact on manufacturers, (SCGC, No. 134. at 4). 

In response, the Department notes 

that SCGC has reservations about the 

assertion that manufactiIrers will be 

better off manufacturing like products, 

i.e., after 1992 all furnaces would be 78 

percent AFUE or more, and that the 

overall impact is a high return on investment. 

However, SCGC's assertion is in error. 

First. the proposed rule does not 

conclude that the overall impact of gas' 

furnace standards is a high return on 

investment for manufacturers. In fact, 

LBL-MIM estimates that standards will cause a decrease in ROE of less than 

0.01 percent. Second, the SCGC doubts 

that manufacturers can manufacture 

high efficiency furnaces a~d be better 

off,' and then rebuts its own statement 

by citing Lennox as a company that 

produces high-efficiency furnaces and 

does well. In addition, manufacturers 

have stated that they are better off not 

having to maintain a separate 

production line for lower-efficiency 

small gas furnaces. (Rheem. No. 67, at 2; 

and GAMA. No. 129. at 2-4). Last. no gas 

furnace manufacturer has commented on the estimate that standards will have 

a minimum impact on such 

manufacturers. 

As a result, the Department continues 

to believe that a 78 percent AFUE 

standard on small gas furnaces will 

have a minimum impact on 

manufacturers. 

3. Utility Analysis 

SCGC commented that the utility 

analysis should have included estimates 

of the lost revenues to gas utilities that 

would result from a 78 percent AFUE 

small gas furnace standard, (SCGC. No. 

134, at 5). 

In response the Department notes that 

a separate analysis of impacts on the 

gas utilities was not performed. The 

Department ncHes that an electric utility 

impacts analysis was performed fo 

address significant economic impacts 

from appliance efficiency standards, 

based on calculations specific to'the 

electric utility industry. The utility, 

analysis also provides inputs to the 

envirpnmental analysis. 

FUrthermore, the Act requires that the 

Department examine any possible shift 

to electric resistance heating. This is 

accomplished through the LBL-REM. 

The electric utility analysis was originally undertaken because: (1) The 

expected economic impacts of standards 

on electric utilities were expected to be 

large; (2) it was important to estimate 

the peak demand and capacity savings, 

from any standards, since electricity 

cannot be stored. In addition, p,ower 

plant capacity has been increasing in 

cost. and has been more difficult to site 

and build in recent years; and (3) the 

environmental impact analysis reqiJired 

information about which generating 

plants would be curtailed in response to 

the changes in load brought about by 

any standards. 

The Department's utility analysis did 

not include gas utilities because: (1) The 

expected economic impacts of small-gas 

fl!rnace standards on gas utilities are 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations 47935

small on a national scale; (2) natural gas

can be stored, so capacity savings, fixed

costs, and the consequent potential

revenue losses are not as large a'

problem for gas utilities as for electric

ones. Gas utilities typically have 20-40

percent of their costs attributable to

fixed costs, while electric utilities

typically have upwards of 50 percent of

their costs attributable to fixed costs. In

addition, the costs of laying natural gas

transmission and distribution pipelines,

which represent the major share of the

fixed costs in the natural gas industry,

have not been increasing substantially

over time (unlike power plant capital

costs); and, (3) the environmental

analysis calculates these impacts

directly from the amount of natural gas

consumed, without the need for an

intervening utility analysis.

IV. Product Specific Discussion

a. Refrigerators

1. Efficiency Levels Analyzed

DOE examined a range of standard

levels, including the 1990 NAECA

standards. As discussed above, the

impacts of any revised standards were

compared to the 1990 NAECA

standards; therefore, the impacts of the

base case are generally not presented

because they are calculated to be zero.

Table 4-1 presents the efficiency

levels, other than the base case, selected

for analysis for 1993. Alternate levels

were selected to generate a range of

impacts for analysis. Initially, the levels

were selected for the class of top-mount,

automatic defrost refrigerator-freezer

without through-the-door ice service.

Level 5 corresponds to the highest

efficiency level considered in the

engineering analysis. This is the

maximum technologically feasible level.

It was felt that manufacturers can

assemble appliances at this efficiency.

Level 4 generally corresponds to the

minimum life-cycle cost point. Levels 1

through 3 correspond to efficiencies

lower than that of level 4. Each level

was analyzed discretely in the

engineering analysis. Standard levels for

each of the other classes of refrigerators

were based on the combination of

design options for the top-mount,

automatic defrost refrigerator-freezer

without through-the-door ice service.

The top-mount automatic defrost

refrigerator-freezer was used as the

analytical model for the analysis

because that class represents nearly 73

percent of new refrigerator and

refrigerator-freezer sales.

TABLE 4.1.-ALTERNATIVE EFFICIENCY LEVELS FOR 1993 REFRiGERATORS, REFRIGERATOR-FREEZERS AND FREEZERS

[Energy Consumption KWh/Yr.l

Level analyzed

Product class

1 2 3 4 5

Refrigerators and refrigerator-freezers with manual defrost .... 105+25.2XAV 104+23.9XAV 98+19.9xAV 70+14.7xAV 70+14.7XAV

Refrigerator-freezer-partial automatic defrost.......................... 423+11 . 9XAV 420+11 .2XAV 398+10.4xAV 383+7.1 x AV 383+7.1 XAV

Refrigerator-freezers-automatic defrost with:

Top-mounted freezer without through-the-door ice 391+18.9xAV 376+17.1X AV 355+16.0 XAV 329+11.8 XAV 290+10.4 XAV

service.

Side-mounted freezer without through-the-door ice 574+16.0xAV 539+13.7 XAV 501+11.8XAV 444+8.8XAV 377+7.5XAV

service.

Bottom-mounted freezer without through -the-door ice 397+18.0xAV 371+16.3XAV 364+14.2XAV 290+12.7XAV 248+10.9xAV

service.

Top-mounted freezer with through -the-door ice service... 431 +20.8X AV 414+ 18.8 XAV 391 +17.6XAV 363+13.0XAV 310+11.0xAV

Side-mounted freezer with through-the -door ice service .. 594+20.6XAV 571+18.OXAV 527+ 16.3XAV 408+14.7XAV 347+12.5xAV

Upright freezers with:

Manual defrost........................................................................ 286+13.1XAV 276+12.5XAV 264+10.3XAV 211+7.8XAV 211+7.8xAV

Automatic defrost ................................................................... 449+19.0XAV 425+17.6XAV 391+14.9XAV 322+10.7XAV 311+10.3XAV

Chest freezers and all other freezers ... ...................................... 140+14.2XAV 139+13.8XAV 124+12.OXAV 85+7.3XAV 85+7.3XAV

Including all refrigerators with automatic defrost.

AV = Total adjusted volume, expressed in Ft 3.

2. Payback Period

Table 4-2 presents the payback period

for the efficiency levels analyzed for the

most prevalent size (20.8 cubic foot

adjusted volume) automatic defrost

refrigerator-freezer. As noted earlier,

under "Selection of Candidate Standard

Levels," paybacks are calculated for the

1993 time period which includes the

assumption that CFC-11 and -12 are

available. '

For most classes, standard level 3

corresponds to the most stringent energy

conservation standard level at which

the additional expense of purchasing a

product at this efficiency level will be .

less than three times the value of the

energy savings that the consumer will

receive during the first year. The

payback period for refrigerators that

meet standard level 1 efficiency ranges

from a low of 0.10 year for a maituaI

defrost refrigerator to a high of 1.62

years for a partial automatic defrost

refrigerator-freezer; the payback period

for refrigerators that meet standard level

2 efficiency ranges from a low of 0.90

year for a side by side automatic defrost

refrigerator-freezer with through-thedoor service to a high of 1.73 years for a

partial automatic defrost refrigeratorfreezer; at standard level 3, the .

paybacks range from a low of 1.27 years

for an upright, manual defrost freezer to

a high of 3.65 years for a manual defrost

refrigerator; the payback period for units

that meet level 4 efficiency ranges from

3.24 years for a partial automatic defrost

refrigerator-freezer to 7.91 years for a

manual defrost chest freezer; and, the

standard level 5 paybacks range from

allow of 3.24 years for a partial

automatic defrost refrigerator-freezer to

a high of 7.91 years for a manual defrost

chest freezer. See Technical Support

Document Tables 6.3 and 6.4.

TABLE 4.2.-PAYBACK PERIOD (YEARS)

Top MOUNT AUTO DEFROST REFRIGERATOR-FREEZER, WITHOUT THROUGHTHE-DOOR FEATURES

[Adjusted Volume=20.8 Cu. Ft.]

Standard level Payback period

1 ....................................................... 0.76

2 ....................................................... 1.40

3 ......:.... ....................... ..................... 2.46

4 ....................................................... 5.99

5 ................................ ....................... 6.93

The Department has also calculated

paybacks for the later time period when,

it is assumed, CFC-11 and -12 will not

be available for. refrigerator production.

These paybacks are reported in Tables

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register J Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47935 

= i 

small on a national scale; (4) natural gas can be stored, so ca,pacity savings, fixed 

costs, and the consequent potential revenue losses are not as large a· 

problem for gas utilities as for electric 

ones. Gas utilities typically have 20-40 

percent of their costs attributable to 

fixed costs, while electric utilities 

typically have upwards of 50 percent of 

their costs attributable to fixed costs. In 

addition, the costs oflaying natural gas 

transmission and distribution pipelines. 

which represent the major share of the 

fixed costs in the natural gas industry. 

have not been increasing substantially 

over time (unlike power plant capital 

costs); and, (3) the environmental 

analysis calculates these impacts 

directly from the amount of natural gas 

consumed, without the need for an 

intervening utili~ analysis. 

IV. Product Specific Discussion 

a. Refrigerators 

1. Efficiency Levels Analyzed 

DOE examined a range of standard 

levels, including the 1990 NAECA 

standards. As discussed above, the 

impacts of any revised standards were 

compared to the 1990 NAECA 

standards; therefore, the impacts of the 

base case are generally not presented 

because they are calculated to be zero. 

Table 4-1 presents the efficiency 

levels, other than the base case, selected 

for analysis for 1993. Alternate levels 

were selected to generate a range of 

impacts for analysis. Initially, the levels 

were selected for the class of top-mount, 

automatic defrost refrigerator-freezer 

without through-the-door ice service. 

Level 5 corresponds to the highest 

efficiency level considered in the 

engineering analysis. This is the 

maximum technologically feasible level. 

It was felt that manufacturers can 

assemble appliances at this efficiency. 

Level 4 generally corresponds to the 

minimum life-cycle cost point. Levels 1 

through 3 correspond to efficiencies 

lower than that of level 4. Each level 

was analyzed discretely in the 

engineering analysis. Standard levels for 

each of the other classes of refrigerators 

were based on the combination of 

design options for the top-mount, 

automatic defrost refrigerator-freezer 

without through-the-door ice service. 

The top-mount automatic defrost 

refrigerator-freezer was used as the 

analytical model.for the analysis 

because that class represents nearly 73 

percent of new refrigerator and 

refrigerator-freezer sales. 

TABLE 4.1.-ALTERNATIVE EFFICIENCY LEVELS FOR 1993 REFRiGERATORS, REFRIGERATOR-FREEZERS AND FREEZERS 

[Energy ConSUmption KWhlYr.l ~ 

Level analyzed 

Product class 

1 2 3 4 5 

Refrigerators and refrigerator-freezers with manual defrost .... 105 + 25.2XAV 104+23.9XAV 98+19.9xAV 70+14.7xAV 70+14.7xAV 

Refrigerator-freezer-'-par;tial automatic defrost.~ ........................ 423+11.9·xAV 420+11.2XAV 398+10AxAV 383+7.1xAV 383+7.1xAV 

Refrigerator-freezers-automatic defrost with: 

Top-mounted freezer without through-the·door ice 391 +18.9xAV 376+17.1xAV 355+ 16.0XAV 329+11.8xAV 290+10AXAV . 

service.'. 

Side-mounted freezer without through-the· door ice 574+15.0xAV 539+13.7XAV 501+11.8xAV 444+8.8xAV 377+7.5xAV 

service. 

Bottom-mounted freezer without through-the-door ice 397 + 18.0XAV 371+16.3XAV 364+14.2XAV 290+ 12.7XAV 248+10.9xAV 

service. 

Top-mounted freezer with through-the-door ice service ... 431 +20.8XAV 414+ 18.8XAV 391+17.6XAV 363+ 13.0XAV 310+11.0xAV 

Side-mourited freezer with Ihrough-the·door ice service .. 594+20.6xAV 571+18.0xAV 527+ 16.3XAV 408+ 14.7XAV 347+12.5xAV 

Upright freezers with: 

Manual defrost... ..................................................................... 286+13.1XAV 276+12.5XAV 264+ 10.3XAV 211+7.8xAV " 211+7.BxAV 

Automatic defrost ................................................................... 

Chest freezers and all other fre&zers ......................................... 

449+ 19.0XAV 425+ 17.6XAV 391+ 14.9XAV 322+ 10.7XAV 311+JO.3XAV 

, Including all refrigerators with automalic defrost. 

AV = Total adjusted volume, expressed in Ft. 3. 

2. Payback Period 

Table 4-2 presents the payback period 

for the efficiency levels analyzed for the 

most previllent size (20.8 cubic foot 

adjusted volume) automatic defrost 

refrigerator-freezer. As noted earlier, 

under "Selection of Candidate Standard 

Levels," paybacks are calculated for the 

1993 time period which includes the 

assumption ·that CFC-ll and -12 are available. . 

For most classes, standard level 3 

corresponds to the most stringent energy 

conservation s~andard level at which 

the additional expense of purchasing a 

product at this efficiency level will be 

less than three times the value of the 

energy savings that the consumer will 

receive during the first year. The 

payback period for refrigerators that 

meet standardlevell efficiency ranges 

from a low of 0.10 year for a manual 

140+14.2XAV 139+13.8xAV 124+ 12.0XAV 85+7.3XAV 85+7.3XAV 

defr{)st refrigerator to a high of 1.62 

years for a partial automatic defrost 

refrigerator-freezer; the payback period 

for refrigerators that meet standard level 

2 efficiency ranges from a low of 0.90 

year for a side by side automatic defrost 

refrigerator-freezer with through-thedoor service to a high of 1.73 years for a 

partial automatic defrost refrigeratorfreezer; at standard level 3, the. 

paybacks range from a low of 1.27 years 

for an upright, manual defrost freezer to 

a high of 3.65 years for a manual defrost 

refrigerator; the payback period for units 

that meet level 4 efficiency ranges from 

3.24 years for a partial automatic defrost . refrigerator-freezer to 7.91 years for a 

manual defrost chest freezer; and, the 

standard level 5 paybacks ·range from. 

allow of 3.24 years for a partial 

automatic defrost refrigerator<freezer to 

a high of 7.91 years for a manual defrost 

chest freezer. See Technical Support 

Document Tables 6.3 and 6.4. 

TABLE 4.2.-PAYBACK PERIOD (YEARS) 

Top MOUNT AUTO DEFROST REFRIGERATOR-FREEZER, WITHOUT THROUGH, 

THE-DOOR FEATURES 

[Adjusted Volume=20.B Cu. Ft.l 

Standard level Payback period 

1....................................................... 0.76 

2.:..................................................... lAO 

3 ...... ,................................................ 2.46 

4....................................................... 5.99 

5....................................................... 6.93 

The Department has also calculated 

paybacks for the later time period when, 

it is assumed, CFc-il and -12 will not 

be available for refrigerator production. 

These paybacks are reported in Tables 
54FR47916

47936 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

6.24 and 6.25 of the Technical Support

Document.

3. Significance of Energy Savings

To estimate the base case energy

savings by the year 2015, the weighted

average energy consumption of new

refrigerators sold in the absence of

revised standards is compared to 1990

when the legislated standards become

effective. When revised energy

conservation standards are imposed, the

LBL-REM projects that over the period

1993-2015, the following savings would

be attributable to the increased

standards:

Level 1-2.4 Quads

Level 2-3.7 Quads

Level 3-5.2 Quads

Level 4-8.6 Quads

Level 5-10.8. Quads

(See Technical Support Document,

Table 5.8)

On the basis of the above, DOE believes

that each of the increased standard

levels considered for refrigerators would

result in a significant conservation of

energy.

4. Economic Justification

A. Economic Impact on

Manufacturers and Consumers. The per

unit increased cost to manufacturers to

meet the level 5 efficiency ranges from

$65.30 for a 25.3 cubic foot AV upright

automatic defrost freezer to $141.25 for a

31.9 cubic foot AV automatic defrost

refrigerator-freezer with side freezer and

through-the-door services. The cost for

the most prevalent class of product

(automatic-defrost refrigerator-freezer

with top-mounted freezer) would

increase $129.65. For level 4 efficiency,

the per unit increased cost to

manufacturers to meet that efficiency

ranges from $47.30 for a 22.5 cubic foot

chest freezer to $75.25 for a 31.9 cubic

foot automatic defrost refrigeratorfreezer with side freezer and throughthe-door services. The cost for the most

prevalent class of product (automaticdefrost refrigerator-freezer with topmounted freezer) would increase $63.65.

The per unit increased cost to

manufacturers to meet the level 3

efficiency ranges from $25.20 to $50.85,

while level 2 cost increases range from

$8.10 to $20.25. For level 1, the cost

increases are from $3.60 to $7.30. See

Technical Support Document, Tables

3.14-3.23.

In the base case, the LBL-MIM,

projects manufacturers' long-run ROE to

be 9.73 percent for refrigerators and

refrigerator-freezers and 8.60 percent for.

freezers. At level 5, the LBL-MIM

predicts that a'prototypical refrigerator

and refrigerator-freezer manufacturer

would have a gain in its ROE to 13.20

percent, a gain of 35.7 percent. The

projected ROE's at levels 3 and 4,

respectively, would be to 10.27 percent,

a gain of 5.5 percent, and to 11.85

percent, a gain of 21.8 percent. At levels

1 and 2, the refrigerator and refrigeratorfreezer manufacturers' ROE are

expected to improve respectively, to.9.95

percent (an improvement of 2.3 percent)

and to 10.24 percent (an improvement of

5.2 percent). For freezer manufacturers,

the ROE is expected to improve to 8.97

percent (an improvement of 4.3 percent)

and to 8.96 percent (an increase of 4.2

percent) for levels 1 and 2, respectively.

See Technical Support Document,

Tables 7.9 and 7.10.

The Department's characterization of

the prototypical manufacturer in the

base case assumes that manufacturers'

typical refrigerator, refrigerator-freezer

and freezer designs are based on the

combination of options presented in the

Engineering Analysis. As discussed

above, DOE revised the base case based

on the comments received. However,

manufacturers that use a different

combination of design options to comply

with the 1990 NAECA standard, may

have a different financial position than

the prototypical manufacturer in the

LBL-MIM.

The sensitivity analysis indicates the

refrigerator, refrigerator-freezer and

freezer industry is sensitive to price and

operating expense elasticities. For

example, the high price and low

operating cost scenario indicates that

the effects of standards would be to

decrease ROE for refrigerator,

refrigerator-freezer manufacturers by

nearly 3.3 percent, and 10.7 percent for

freezer manufacturers, in the base case.

See Technical Document, Tables 7.17

and 7.18.

For-consumers, standard level 5 would

cause price;increases that would range

from a low of $151.20 for-an automatic

defrost, upright freezer, to a high of

$353.14 for an automatic defrost, sideby-side refrigerator-freezer with

through-the-door services. The price

would increase for the most prevalent

class of product (automatic-defrost

refrigerator-freezer with top-mounted

freezer) by $172.34. The corresponding

range of price increases at standard

level 4 would be a low of $98.00 for a

chest freezer and a high of $189.12 for an

automatic defrost, side-by-side

refrigerator-freezer. The price for the

most prevalent class of product would

increase $134.48. The price increase to

consumers at standard level 3 ranges

from $59.23 to $16.99, while level 2 price

increases range from $19.00 to $46,36.

For level 1, the price increases range

from $8.40 to $112.10. See Technical

Support Document, Tables 3.31-3.40.

B. Life Cycle Cost and Net Present

Value. The LCC analysis indicates that,

for each possible standard level, the

increase in purchase price would be

offset by savings in operating expenses.

Standard level 4 generally corresponds

to the minimum for each of the life-cycle

cost curves. See Technical Support

Document, Figures 3.13-3.22. This

indicates that the standard level would

not cause any economic burden on the

average consumer. DOE examined the

effect of different discount rates, 5, 7

and 10 percent, on the LCC curves and

generally found little impact.

The LBL-REM employs national

average energy prices and usage rates.

The appropriateness of this approach

depends on the relationship between

energy prices and consumer choice of

efficiency levels and the relationship

between consumers' expected usage and

choice of energy efficiency level.

The NPV analysis indicates that if a

standard were adopted at level 5, there

would be an NPV of $9.3 billion from

energy savings over the period 1993- -

2015. At level 4, the corresponding NPV

would be $11.8 billion; at level 3, $9.1

billion; at level 2, $7.7 billion; and, at

level 1, the corresponding NPV would be

$6.0 billion. See Technical Support

Document, Table 5.14.

C. Energy Savings. As discussed

above, DOE concludes that standards,

at each candidate standard level, would

result in,a significant saving of energy.

D. Lessening of Utility or Performance

of Products. As indicated above, DOE

established classes of products in order

to assure that the standards analyzed

would not lessen the existing utility or

performance or refrigerators.

One of the design options, increased

foam thickness on the refrigerator walls,

could serve to reduce interior volume

slightly. It has been argued that if

manufacturers used this design option to

achieve a level of refrigerator energyefficiency, the impact on consumers

could be some small loss of utility. DOE,

however, does not believe that the small

reduction in interior volume that may be

caused by this standard will cause any

utility losses among consumers.

Furthermore, the Department notes that

manufacturers need not use this design

option, as they would be free to use

other energy-conserving design options,

e.g., dual compressors, to achieve a

standard level, even if that level had

been based on thicker sidewalls in the

analysis.

E. Impact of Lessening of Competition.

In accordance with the requirements of

the Act, the Department of Justice (DOJ)

evaluated the impacts on competition of

the proposed rule. Based on its analysis

 CE-RM-87-102 COMMENT 10

54FR47916 

47936 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

6.24 and 6.25 of the Technical Support 

Document. 

3. Significance of Energy Savings 

To estimate the base case energy 

savings by the year 2015. the weighted 

average energy consumption of new 

refrigerators sold in the absence of 

revised standards is compared to 1990 

when the legislated standards become 

effective. When revised energy 

conservation standards are imposed. the 

LBL-REM projects that ~)Ver the period 

1993-2015. the following savings would 

be attributable to the increased 

standards: 

Level 1-2.4 Quads 

Level 2-3.7 Quads 

Level 3-5.2 Quads 

Level 4--8.6 Quads 

LevelS-l0.8. Qua~s 

(See Technical Support Document. 

Table 5.8) . 

On the basis of the above. DOE believes 

that each of the increased standard 

levels considered for refrigerators would 

result in a significant conservation of 

energy. 

4. Economic Justification 

A. Economic Impact on Manufacturers and Consumers. The per 

unit increased cost to manufacturers to 

meet the levelS efficiency ranges from 

$65.30 for a 25.3 cubic foot A V upright . 

automatic defrost freezer to $141.25 for a 

31.9 cubic foot AV automatic defrost 

refrigerator-freezer with side freezer and 

through-the-door services. The cost for 

the most prevalent class of product 

(au toma tic-defrost refrigerator-freezer 

with top-rriounted freezer)would 

increase $129.65. For level 4 efficiency. 

the per unit increased cost to 

manufacturers to meet that efficiency 

ranges from $47.30 for a 22.5 cubic foot 

chest freezer to $75.25 for a 31.9 cubic 

foot automatic· defrost refrigeratorfreezer with side freezer and throughthe-door services. The cost for the most 

prevalent class of product (automaticdefrost refrigerator-freezer with topmounted freezer) would increase $63.65. 

The per unit increased cost to 

manufacturers to meet the level 3 

efficiency ranges from $25.20 to $50.85. 

while level 2 cost increases range from 

$8.10 to $20.25. For level 1. the cost 

increases are from $3.60 to $7.30. See 

Technical Support Document. Tables 

3.14-3.23. 

In the base case. the LBL-MIM, 

projects manufacturers' long-run ROE to 

be 9.73 percent for refrigerators and 

refrigerator-freezers and 8.60 percent for. 

freezers. At level 5. the LBL-MIM 

predicts tha:t a'prototypical refrigerator 

and refrigerator-freezer manufacturer 

would have a gain in its ROE to 13.20 

percent. a gain of 35.7 percent. The 

projected ROE's at levels 3 and 4. 

respectively. would be to 10.27 percent, 

a gain of 5.5 percent. and to 11.85 

percent, a gain of 21.8 percent. At levels 

1 and 2. the refrigerator and refrigeratorfreezer manufacturers' ROE are 

expected to improve' respectively. to.9.95 

percent (an improvement of 2.·3 percent) 

and to 10.24 percent (an improvement of 

5.2 percent). For freezer manufacturers. 

the .ROE is expected to improve to 8.97 

percent (an improvement of 4.3 percent) 

and to 8,96 perc'ent (an increase of 4.2 

percent) for levels 1 and 2. r~spectively, 

See. Technica] Support Document. 

Tables 7.9 and 7.10. 

The Department's characterization of 

the prototypical ma,np.facturer in the 

base case assumes that manufi:lCturers' 

typical refrigera tor. refrigerator-freezer 

and freezer designs .are based on the . combination of options presented in the 

Engineering' Analysis. As discussed 

above, DOE revised the base case based 

on the comments received. However, 

manufacturers that use a different 

combination of design options to comply 

with the 1990 NAECA standard. may 

have a different financial position than 

the prototypical manufacturer in the 

LBL-MIM. . 

The sensitivity analysis indicates the 

refrigerator. refrigerator-freezer and 

freezer industry is sensitive to price and . operating expense elasticities. For 

example. the high price and low . operating cost scenario indicates that 

the effects of standards would be to 

decrease ROE for refrigerator. 

refrigerator-freezer manufacturers by 

nearly 3.3 percent. and 10;7 percent for 

freezer manufacturers. in the base case. 

See Technical Document, Tables 7.17 

and 7.18. 

For·consumers. standard level 5 would 

cause price·increases that would range 

from a low of $151.20 for'an automatic 

defrost. upright freezer. to a high of 

$353.14 for an automatic defrost. sideby-side refrigerator-freezer with 

through-the-door services. The price 

would increase for the mast prevalent 

class of product (automatic-defrost 

refrigerator-freezer with top-mounted 

freezer) by $172.34. The corresponding 

range of price increases at standard 

level 4 would be a low of $98.00 for a 

chest freezer and a high of $189.12 for an 

automatic defrost. side-by-side 

refrigerator-freezer. The price for the 

most prevalent class of product would 

increase $134.48. The price increase to consumers at standard level 3 ranges 

from $59.23 to $16.99. while level 2 price 

increases range from $19.00 to $46·.36. 

For level 1. the price increases range 

from $8.40 to $112.10. See Technical 

Support Document. Tables 3.31-3.40. 

B. L1[e Cycle Cost and Net Present 

Value. The Lec analysis indicates that, 

for each possible standard level. the 

increase in pur.chase price would be 

offset by savings in operating expenses. 

Standard level 4 generally corresponds 

to the minimum for eac~ of the life-cycle 

cost curves. See Technical Support 

Document. Figures 3.13-3.22. This 

indicates that the standard level wbuld 

not cause any economic burden on the 

average consumer. DOE examined the 

effect of different discount rates, 5. 7 

and 10 percent. on the LCC curves and 

generally found little impact. 

The LBL-REM employs national 

average'energy prices and usage rates. 

The appropriateness of this approach 

depends on the relationship between 

energy prices and consumer choice of 

efficiency levels and the relationship . 

between consumers' expected usage and 

choice of energy efficiency level. 

The NPV analysis indicates that if a 

standard were adopted at level 5. there 

would be an NPV of $9.3 billion from 

energy savings over the period 1993- . 

2015. At level 4. the corresponding NPV 

would be $11.8 billion; at level 3. $9.1 

billion; at level 2. $7.7 billion; and. at 

level 1. the corresponding NPV would be 

$6.0 billion. See Technical Support 

Document. Table 5.14. . 

C. Energy Savings. As discussed 

above. DOE concludes that standards. 

at each candidate standard level. would, 

result in·1i. significant saving of energy. 

D. Lessening/if Utility or Performance 

of Products~ As indicated above. DOE 

established classes of produCts in order 

to assure that the standards analyzed 

would not lessen the existing utility or 

performance or refrigerators. 

One of the design optiops, increased 

foam thickness on the refrigerator walls. 

could serve to reduce interior volume 

slightly. It has been argued that if 

manufacturers usee!. this design option to 

achieve a level cifrefrigerator energyefficiency. the impact on consumers 

could be some small loss of utility. DOE, 

however. does not believe that the small 

reduction in interior volume that may be 

caused by this standard will cause any 

utility losses among consumers. 

Furthermore. the Department notes ·that 

manufacturers need not use this design 

option. as they would be free to use 

other energy-conserving design options. 

e.g., dual compressors. to achieve a 

standard level. even if that level had' 

been based on thicker sidewalls in the 

analysis. 

E. Impact of Lessening of Competition. 

In accordance with the requir~ments of 

the Act. the Department of Justice (DOn 

evaluated the impacts on competition of 

the proposed rul.e. Based on its analysis 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 J Rules and Regulations 47937

and review of the proposed rule,.DOJ

concluded that the proposed standards

(levels 1-3) would not lessen

competition in the refrigerator,

refrigerator-freezers and freezer

markets. See DOJ, No. 162.

DOJ states that for standards to affect

competition adversely, standardsinduced cost increases would have to be

sufficiently severe'and asymmetrical

that they would force from the market

one or more significant competitors. In

addition, levels of concentration. would

have to rise substantially because of

such exits. Also other market conditions

would have to be conducive to

oligopolistic pricing or price fixing. DOI

concludes, based on available evidence,

that such a lessening of competition

would not likely occur if DOE adopts

any of the proposed standards for

refrigerators, refrigerator-freezers and

freezers. DOJ did not examine the more

efficient standard levels 4 and 5. Also,

DOJ rejects the Department's assertion,

in the proposed rule, that the proposed

standards will increase profits. As

discussed above, one reason LBL-MIM

predicted an increase in ROE and

profitability, was the LBL-REM's

forecast of increased refrigerator,

refrigerator-freezer, and freezer sales.

This had been changed in the LBL-REM

in the analysis for the final rule.

The Department notes, further, that

the changes to the analysis that were

done for the final rule should not affect

the conclusions derived from the DOI

review on the proposed rule.

Therefore, based upon its review of

the DOI analysis, DOE concludes that

standard levels 1, 2 and 3 would not

adversely affect competition. However,

the Department believes that standard

levels 4 and 5 , which would require the

use of evacuated panels, could affect

competition. No U.S. manufacturer has

manufactured refrigerators with

evacuated panels on a high volume

basis. GE manufactured a limited

number, 1,000 units, by hand, and

subsequently discontinued the unit. The

Department believes that the

technological problems that exist in

mass producing evacuated panel

refrigerators are such that it is likely

that major manufacturers would

consider leaving the market. This

industry has experienced numerous

mergers.

DOE believes that one likely result of

standards at level 5 could be to increase

the rate of industry consolidation by

merger of two significant competitors,

which could result in a substantially

larger firm. DOE believes that standards

at level 5 could lessen competition by

increasing levels of concentration. The

Department further believes that

standards at level 4; which involves

efficiencies attained with evacuated

panels, could lead to some firms leaving

the industry, because of an inability to

produce or purchase sufficient numbers

of panels.

F. Need of the Nation to Save Energy.

Refrigerators use electricity as their

energy source. Nearly seven percent of

the nation's total electricity (which

required source energy of 29.5 Quads in

1988) powers refrigerators, and nearly 13

percent of that seven percent would be

saved by standards for this product at

level 3, while 21 percent of that seven

percent would be saved at level 4, and

over 26 percent of that amount would be

saved at level 5. Levels 1 and 2 would

save 6 and 9 percent, respectively. In

addition, decreasing future electricity

demand as a result of standards will

decrease air pollution. The greatest

decreases in air pollution will occur for

sulfur oxides (listed in equivalent weight

of sulfur dioxide , or SO2). For standard

level 5, in the year 2010, the estimated

SO2 reduction would be 256,933 tons.

This reduction represents 1.5 percent of

the United States SO2 emissions that are

expected to be emitted by power plants

in that year.

Standard level 5 would also result in a

decrease in nitrogen dioxide (NO2)

emissions for the year 2010 , of 173,715

tons. This decrease represents 1.7

percent of the total NO2 emissions

expected to be emitted by power plants

in that year.

Another consequence of the standards

will be the reduction of carbon dioxide

(CO2) emissions. Fossil fuel burning is

believed to elevate CO2 concentrations

in the atmosphere, which is believed to

trap heat from the sun that has been

absorbed by the Earth and would

normally be re-radiated. Although there

is substantial scientific uncertainty

concerning the magnitude and timing of

this effect, this "greenhouse effect" is

thought to raise the mean global

temperature. Standard level 5 is

estimated to reduce United States CO2

emissions by about 0.88 percent for the

year 2010.

In 2010, standard level 4 is expected

to reduce SO2, NO2 and CO2 emissions

by 1.2, 1.35, and 0.7 percent,

respectively. Standard level 3 reductions

are expected to be 0.72, 0.81, and 0.42

percent for SO2, NO2 and COs,

respectively in 2010.

Standard levels 2 and 1 would reduce

SO2 power plant emissions by 0.51 and

0.33 percent, respectively. NO2 power

plant emissions would be reduced by

0.58 and 0.38 percent for standard levels

2 and 1, respectively in 2010; CO2

emissions at standard levels 2 and 1

would be 0.3 and 0.19 percent, '

respectively of the total U.S. amount.

G. Other Factors.

Refrigerators typically use CFCs-11

and -12. Both of these refrigerants are

subject to an EPA rulemaking that

places restrictions on the manufacture of

certain CFCs. Furthermore, based on

comments in this rulemaking, DOE

believes that these CFCs would not be

available after the year 2000 , either as a

result of amendments to the Montreal'

Protocol, further EPA restrictions or

marketplace forces. DuPont, for

example., announced that it intends to

phase out production of these CFCs by

2000.

The use of CFCs in the manufacture of

refrigerators currently accounts for

approximately two percent of the

restricted CFCs. The 50 percent

reduction in CFC manufacture

prescribed by EPA, will likely result in

the use of CFCs in refrigerators to

exceed five percent of U.S. consumption.

This increase in the percentage of CFC

consumption accounted for by

refrigerators would be a result of the

CFC production restriction along with

increased CFC use to meet the legislated

1990 standards, and increased sale of

these products. Presently, DOE is

unaware of any currently available

alternatives to CFC-11 or CFC-12 that

have been demonstrated as acceptable

-replacements to the affected CFCs.

However, as discussed above, likely

alternatives have been identified. Based

upon the comments on the proposed

rule, DOE assumed that suitable

alternatives will be developed ; however,

the schedule by which these alternatives

will become available in sufficient

quantities is unknown at this time. As

discussed above, DOE's engineering

analysis is based on alternatives, and

DOE has assumed that these

alternatives will be adopted by

refrigerator manufacturers by 1996.

5. Conclusion

Section 325(1)(2)(A) of the Act

specifies that the Department must

consider, for amended standards, those

standards that "achieve the maximum

improvement in energy efficiency which

the Secretary determines is

technologically feasible and

economically justified." Accordingly, the

Department first considered the "max

tech" level of.efficiency, i.e., standard

level 5, for amended refrigerator

standards. .

Of the standard levels analyzed, level

5 saved the most energy (10.8 quads

more than the base case). In addition, it

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47937 = 

and review of the proposed rule,.DOI 

concluded that the proposed standards 

(levels 1~3) would not lessen 

competition in the refrigerator, 

refrigerator-freezers and freezer 

markets. See DOl, No. 162. 

DOl states that for standards to affect 

competition adversely, standardsinduced cost increa'ses would have to be 

sufficiently severe 'and asymmetrical 

that they would force from the market 

one or more significant competitors. In 

addition, levels of concentration would 

have to rise substantially because of 

such exits. Also other market conditions 

would have to be conducive to 

oligopolistic pricing or price fixing. DOl 

concludes, based on available evidence, 

that such a lessening of competition 

would not likely occur if DOE adopts 

any of the proposed standards for 

refrigerators, refrigerator-freezers and 

freezers. DOl did not examine the more efficient standard levels 4 and 5 . .Also, 

DOl rejects the Department's assertion, 

in the proposed rule, t11at the proposed 

standards will increase profits. As 

discussed above, one reason LBL-MIM 

predicted an increase in ROE and 

profitability, was the LBL-REM's 

forecast of increased refrigerator, 

refrigerator-freezer, and freezer sales. 

This had been changed in the LBL-REM 

in' the analysis for the final rule. 

The Department notes, further, that 

the changes to the analysis that were 

done for the final rule should not affect 

the conclusions derived from the DOl 

review on the proposed rule. 

Therefore, based upon its review of 

the DOl analysis, DOE concludes that 

slandard levels 1, 2 and 3 would not 

adversely affect competition. However, 

the Department believes that standard 

levels 4 and 5, which would require the use of evacuated panels, could affect 

competition. No U.S. manufacturer has 

manufactured refrigerators with 

evacuated panels on a high volume 

basis. GE manufactured a limited 

number, 1,000 units, by hand, and 

subsequently discontinued the unit. The 

Department believes that the 

technological problems that exist in mass producing evacuated panel 

refrigerators are such that it is likely 

that major manufacturers would 

consider leaving the market. This 

industry has experfenced numerous mergers. 

DOE believes that one likely result of 

standards at level 5 could be to increase 

the rate of industry consolidation by 

merger of two significant competitors, 

which could result in a substantially 

larger firm. DOE believes that standards 

at level 5 could lessen competition by 

increasing levels of concentration. The 

Department further believes that 

standards at level 4; which involves 

efficiencies attained with evacuated 

panels, could lead to some firms leaving 

the industry, because of an inability to 

produce or purchase sufficient numbers 

of panels. 

F. Need of the Nation to Save Energy. 

Refrigerators use electricity as their 

energy source. Nearly seven percent of 

the nation's total electricity (which 

required source energy of 29.5 Quads in 

1988) powers refrigerators, and nearly 13 

percent of that seven percent would be 

saved by standards for this product at 

level 3. while 21 percent of that seven percent would be saved at level 4, and 

over 26 percent of that amount would be 

saved at levelS. Levels 1 and 2 would save 6 and 9 percent, respectively. In 

addition, decreasing future electricity . 

de"Inand as a result of standards will 

decrease air pollution. The greatest 

decreases in air pollution will occur for 

sulfur oxides (listed in equivalent weight 

of sulfur dioxide, or S02). For standard 

levelS, in the year 2010, the estimated 

S02 reduction would be 256,933 tons. 

This reduction represents 1.5 percent of 

the United States S02 emissions that are 

expected to be emitted by power plants 

in that year. 

Standard level 5 would also result in a 

decrease in nitrogen dioxide (NCh) 

emissions for the year 2010, of 173,715 

tons. This decrease represents 1.7 

percent of the total NCh emissions 

expected to be emitted by power plants 

in that year. 

Another consequence of the standards 

will be the reduction of carbon dioxide 

(C02) emissions. Fossil fuel burning is 

believed to elevate CO2 concentrations 

in the atmosphere, which is believed to 

trap heat from the sun that has been 

absorbed by the Earth and would 

normally be re-radiated. Although there 

is substantial scientific uncertainty 

concerning the magnitude and timing of 

this effect, this "greenhouse effect" is 

thought to raise the mean global 

temperature. Standard level 5 is 

estimated to reduce United States CO2 

emissions by about 0.88 percent for the 

year 2010. 

In 2010, standard level 4 is expected 

to reduce S02, NCh and CCh emissions 

by 1.2. 1.35, and 0.7 percent, 

respectively. Standard level 3 reductions 

are expected to be 0.72, 0.81, and 0.42 

percent for S02, N02 and CO2, 

respectively in 2010. 

. Standard levels 2 and 1 would reduce 

SCh power plant emissions by 0.51 and 

0.33 percent. respectively. N02 power 

plant emissions would be reduced by 

0.58 and 0.38 percent for standard levels 

2 and 1, respectively in 2010; CO2 

emissions at standard levels 2 and 1 

would be 0.3 and 0.19 percent, 

respectively of the t~tal U.S. amount. 

G. Other Factors. 

Refrigerators typically use CFCs-ll 

and -12. Both of these refrigerants are 

subject to an EPA rulemaking that 

places restrictions on the manufacture of 

certain CFCs. Furthermore. based on 

comments in this rulemaking, DOE 

believes that these CFCs would not be 

available after the year 2000, either as a 

result of amendments to the Montreal' 

Protocol, further EPA restrictions or 

marketplace forces. DuPont, for 

example .. announced that it intends to 

phase out production of these CFCs by 

2000. 

The use of CFCs in the manufacture of 

refrigerators currently accounts for 

approximately two percent of the 

restricted CFCs. The 50 percent 

reduction in CFC manufacture 

prescribed by EPA, will likely result in 

the use of CFCs in refrigerators to . 

exceed five percent of U.S. consumption. 

This increase in the percentage of CFC 

consumption accounted for by 

refrigerators would be a result of the 

CFC production restriction along with 

increased CFC use to meet the legislated 

1990 standards, and increased sale of 

these products. Presently, DOE is 

unaware of any currently available 

alternatives to CFC-ll or CFC-12 that 

have been demonstrated as acceptable 

-replacements to the affected CFCs. 

However, as discussed above, likely 

alternatives have been identified. Based 

upon the comments on the proposed 

rule, DOE assumed that suitable 

alternatives will be developed; however. 

the schedule by which these alternatives 

will become available in sufficient 

quantities is unknown at this time. As 

discussed above, DOE's engineering 

analysis is based on alternatives. and 

DOE has assumed that these 

alternatives will be adopted by 

refrigerator manufacturers by 1996. 

5. Conclusion 

Section 3Z5(1)(2)(AJ of the Act 

specifies that the Department must 

consider, for amended standards. those 

standards that "achieve the maximum 

improvement in energy efficiency which 

the Secretary determines is 

technologically feasible and 

economically justified." Accordingly, the . 

Department first considered the "max 

tech" level of efficiency. i.e" standard 

level 5, for amended refrigerator 

standards. 

Of the standard levels analyzed, level 

5 saved the most energy (10.8 quads more than the base case). In addition, it 
54FR47916

47938 Federal Register / Vol. 54, No. 221 / Friday, Novembe

had the largest positive impact on the

environment.

Two of the three technologies needed

to meet this standard level, adaptive

defrost and dual compressors, are

available now in some refrigerators;

however, the third item, evacuated

panels, is not currently available on a

mass produced basis. While some

refrigerators with hand-built evacuated

panels have been produced for sale, the

Department does not believe that : .

evacuated panels can be mass produced

by the effective date of this standard,

especially considering the need for

additional capacity to manufacture

fumed and precipitated silica, as

previously discussed in the Engineering

Analysis.

Furthermore, the cost of these three

technologies is high, producing a

relatively large increase in purchase

price. While the life-cycle cost of Level 5

is lower than that of the base case, the

purchase price pushes the payback to

6.9 years, and, by being beyond the

minimum life-cycle cost point, would

preclude consumers from buying models

with the lowest life-cycle cost. The

impact on manufacturers is expected to

be positive, producing the highest longrun increase in net income and returnon-equity of all the standard levels

analyzed. However, these results are

based on the assumption that sufficient

quantities of the necessary technologies

will be available in 1993, and as noted

above, the Department is doubtful that

one of those technologies, evacuated

panels, will be available in sufficient

quantities by then. In addition, the

Department also believes that the

required use of evacuated panels could

cause a lessening of competition.

Overall, the Department finds the

burdens, especially the technological

uncertainties of level 5, to exceed the

benefits, and, therefore, rejects level 5.

Standard level 4, also based on

evacuated panels. saves the second

greatest amount of energy, an estimated

8.7 Quads, and has the second most

positive impact on the environment.

However, the above discussion on

evacuated panels also applies to level 4.

While the purchase price is less than

that of level 5, and while life-cycle cost

is the lowest of any level analyzed, level

4 still produces a payback of 6.0 years.

The impact on manufacturers is

estimated to produce the second highest

long-run increase in net income and

return-on-equity of the standard levels

analyzed. Overall the Department finds

the burdens of level 4, especially the

technological uncertainties, to exceed

the benefits, and, therefore, rejects level

4, too.

17, 1989 / Rules and Regulations

Energy efficiencies approaching those

of level 4 could be achieved by a

reordering of the design options, e.g., by

substituting dual compressors and

adaptive defrost for evacuated panels.

As noted above, however, design

options were added on the basis of

increasing time for payback, and dual

compressors and adaptive defrost were

added last because of their relatively

long paybacks. Therefore, while a

combination of the design options in

standard level 3 with dual compressors

and adaptive defrost designs could

produce energy savings and

environmental benefits approaching

those of level 4, such a combination of

designs would also probably have much

higher consumer burdens than level 4, in

the form of higher prices and longer

paybacks. This would result because

dual compressors and adaptive defrost

have a higher initial price than

evacuated panels, and produce similar

energy savings. On balance, then, the

Department finds that the burdens of

this version of level 4 also exceed the

benefits, and, therefore, rejects all

combinations of level 4.

The next most energy-conserving

standard level is standard level 3. After

carefully considering all parts of the

analysis, the Department is amending

the NAECA-imposed 1990 standard for

refrigerators with standard level 3 for

refrigerators. The. Department concludes

that level 3 standards for refrigerators

save a significant amount of energy, are

technically feasible, and are

economically justified.

As discussed above, there would be

significant energy savings at this level of

efficiency. During the period 1993-2015,

these savings are calculated to be 5.2

Quads of primary electricity compared

to the base case. Such savings would

total nearly 13 percent of base case

electricity use. In addition, the

standards will have a positive impact on

the environment by reducing the

emissions of CO2, SO2, and NO2 by an

estimated .42,.72, and.81 percent,

respectively, by the year 2010.

The technologies that are necessary to

meet this standard are presently

available. This standard level may

initially involve the use^of additional

amounts of ozone-depleting CFCs;

however, these additional amounts will

come at the expense of other products

that presently use the restricted CFCs.

The amounts needed for refrigeration

manufacturing are relatively small and

the Department believes they will be

available, albeit at a higher price.

The Department finds the level to be

economically justified. The standard

level meets the rebuttable presumption

test for economic justification by having

a payback of 2.5 years. Furthermore, the

standard level substantially reduces

consumer life-cycle costs and only

moderately increases initial price.

Additionally, the standard is also

,expected to have a positive impact on

manufacturers by producing long-run

increases in their net income and returnon-equity of 21.8 and 5.4 percent,

respectively.

b. Small Gas Furnaces

1. Efficiency Levels Analyzed.

Table 4-3 presents the efficiency

levels selected for analysis for 1992.

These levels are the same as those

analyzed in the proposed rule. Level 3

corresponds to the highest efficiency

level provided for in the Act, while

levels 1 and 2 correspond to efficiencies

lower than level 3, with level 1 being the

lowest level provided for in the Act. The

engineering analysis considered design

options that would result in furnace

efficiencies as great as 92 percent AFUE.

As discussed in the proposed rule, more

efficient

TABLE 4-3-STANDARD LEVELS

ANALYZED FOR SMALL GAS FURNACES

Standard level

1

2

3

71

74

78

designs were not considered for

potential standards, but rather were

used as input to the LBL-REM in order

that the energy forecasting analysis

would have a complete set of data upon

which to make projections.

2. Payback Period

Table 4.4 presents the payback period

for the efficiency levels analyzed. The

payback period for units that meet level

1 efficiency ranges from 3.01 years for a

warm air indoor gas furnace to 3.21

years for a warm air outdoor gas

furnace. The payback period for units

that meet level 3 efficiency ranges from.

5.78 to 6.58 years. See Technical Support

Document, Table 6.6.

TABLE 4.4.-PAYBACK PERIODS (YEARS)

OF DESIGN OPTIONS FOR GAS FURNACES (LESS THAN 45,000 BTU/HR.)

Standard level

1

Payback periods

Warm air indoor

2

3.01

4.15

AFUE (Percent)

Warm air

outdoor

3.21

4.66

 CE-RM-87-102 COMMENT 10

54FR47916 

47938 Federal Register I Vol. 54, No. 221 I Friday, November'17, 1989 I Rules and Regulations 

had the largest positive impact on the 

environment. 

Two of the three technologies needed 

to meet this standard level, adaptive 

defrost and dual compressors, are 

available now in some refrigerators; 

however, the third item, evacuated 

panels, is not currently available on a 

, mass produced basis. While some 

refrigerators with hand-built evacuated 

panels have been produced for sale. the 

Department does not believe that 

evacuated panels can be mass produced 

by the effective date of this standard. 

especially considering the need for 

additional capacity to manufacture 

fumed and precipitated silica, as 

previously discussed in the Engineering 

Analysis. 

Furthermore, the cost of these three 

technologies is high, producing a 

relatively large increase in purchase 

price. While the life-cycle cost of Level 5 

is lower than that of the base case, the 

purchase price pushes the payback to 

6.9 years, and, by being beyond the 

minimum life-cycle cost point, would 

preclude consumers from buying models 

with the lowesi"life-cycle cost. The 

impact on manufacturers is expected to 

be positive~ producing the highest longrun increase in net income and returnon-equity of all the standard levels 

analyzed. However, these results are 

based on the assumption that sufficient 

quantities of the necessary technologies 

will be available in 1993, and as noted 

above, the Department is doubtful that 

one of those technologies, evacuated 

panels, will be available in sufficient 

quantities by then. In addition, the 

Department also believes that the 

required use of evacuated panels could 

cause a lessening of competition. 

Overall, the Department finds the 

burdens, especially the technological 

uncertainties of level 5, to exceed the 

benefits, and, therefore, rejects level 5. 

Standard level 4, also based on 

evacuated panels. saves the second 

greatest amount of energy, an estimated 

8.7 Quads, and has the second most 

positive impact on the environment. 

However, the above discussion on 

evacuated panels also applies to level 4. 

While the purchase price is less than 

that of level 5, and while life-cycle cost 

is the lowest of any level analyzed, level 

4 still produces a payback of 6.0 years. 

The impact on manufacturers is 

estimated to produce the second highest 

long-run increase in net income and 

return-on-equity of the standard levels 

analyzed. Overall the Department finds 

the burdens of level 4, especially the 

technological uncertainties, to exceed 

the benefits, and, therefore, rejects level 

4, too. 

Energy efficiencies approaching those 

of level 4 could be achieved by a 

reordering of the design options, e.g., by 

substituting dual compressors and 

adaptive defrost for evacuated panels. 

As noted above, however, design 

options were added on the basis of 

increasing time for payback, and dual 

compressors and adaptive defrost were 

added last because of their relatively 

long paybacks. Therefore, while a 

combination of the design options in 

standard level 3 with dual compressors 

and adaptive defrost designs could 

produce energy savings and 

environmental benefits approaching 

those of level 4, such a combination of 

designs would also probably have much 

higher consumer burdens than level 4, in 

the form of higher prices and longer 

paybacks. This would result because 

dual compressors and adaptive deflost 

have a higher initial price than 

evacuated panels, and produce similar 

energy savings. On balance, then, the 

Department finds that the burdens of 

this version of level 4 also exceed the 

benefits, and, therefore, rejects all 

combinations of level 4. 

The next most energy-conserving 

standard level is standard level 3. After 

carefully considering all parts of the 

analysis, the Department is amending 

the NAECA-imposed 1990 standard for 

refrigerators with standard level 3 for 

refrigerators. The, Department concludes 

that level 3 standards for refrigerators 

save a significant amount of energy, are 

technically feasible, and are 

economically justified. 

As discussed above, there would be 

significant energy savings at this level of 

efficiency. During the period 1993-2015, 

these savings are calculated to be 5.2 

Quads of primary electricity compared 

to the base case. Such savings would 

total nearly 13 percent of base case 

electricity use. In addition, the 

standards will have a positive impact on 

the environment by reducing the 

emissions of CO2 , S~, and N~ by an 

estimated .42, .72, and .81 percent, 

respectively, by the year 2010. 

The technologies that are necessary to 

meet this standard are presently 

available. This standard level may 

initially involve the use'of additional 

amounts of ozone-depleting CFCs; 

however, these additional amounts will 

come at the expense of other products 

that presently use the restricted CFCs. 

The amounts needed for refrigeration 

manufacturing are relatively small and 

the Department believes they will be 

available, albeit at a higher price. 

The Department finds the level to be 

economically justified. The standard 

level meets the rebuttable presumption 

test for economic justification by having 

a payback of 2.5 years. Furthermore, the 

standard level substantially reduces 

consumer life-cycle costs and only 

modera tely increases initial price. 

Additionally, the standard is also 

,expected to have a positive impact on 

manufacturers by producing long-run 

increases in their net income and returnon-equity of 21.8 and 5.4 percent, 

respectively. 

h. Small Gas Furnaces 

1. Efficiency Levels Analyzed. 

Table 4-3 presents the efficiency 

levels selected for analysis for 1992. 

These levels are the same as those 

analyzed in the proposed rule. Level 3 ' 

corresponds to the highest efficiency 

level provided for in the Act, while 

levels 1 iind 2 correspond to efficiencies 

lower than level 3, with level 1 being the 

lowest level provided for in the Act. The 

engineering analysis considered design 

options that would result in furnace 

efficiencies as great as 92 percent AFUE. 

As discussed in the proposed rule, mo!;,e 

efficient 

TABLE 4-3-STANDARD LEVELS 

ANALYZED FOR SMALL GAS FURNACES 

Standard level 

1 

2 

3 

AFUE (Percent) 

71 

74 

78, 

designs were not considered for 

potential standards, but rather were 

used as input to the LBL-REM in order 

that the energy forecasting analysis 

would have a complete set of data upon 

which to make projections. 

2. Payback Period 

Table 4.4 presents the payback period 

for the efficiency levels analyzed. The 

payback period for units that meet level 

1 efficiency ranges from 3.01 years for a 

warm air indoor gas furnace to 3.21 . 

years for a warm air outdoor gas 

furnace. The payback period for units 

that meet level 3 efficiency ranges from, 

5.78 to 6.58 years. See Technical Support 

Document, Table 6.6. 

TABLE 4.4.-PAYBACK PERIODS (yEARS) 

OF DESIGN OPTIONS FOR GAS FURNACES (LESS THAN 45,000 BTU/HR.) 

Payback periods 

Standard level 

Warm air indoor 

1 3.01 

2 4.15 

Warm air 

outdoor 

3.21 

4.66 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

TABLE 4.4.-PAYBACK PERIODS (YEARS)

OF DESIGN OPTIONS FOR GAS FURNACES (LESS THAN 45,000 BTU/HR.)-

Continued

Standard level

Payback periods

Warm air indoor

5.78

Warm air

outdoor

6.58

3. Significance of Energy Savings

By the year 2015, the weighted

average energy efficiency of new small

gas furnaces sold in the absence of

standards is projected tb be 79.9 percent

AFUE. Standards, at standard levels 1

and 3, are expected to increase the

average shipment weighted efficiency of

small gas furnaces to between 81.0 and

83.4 percent AFUE, respectively. See

Technical Support Document, Table

5.16. However, the aggregate annual

47939

energy consumption of small gas

furnaces is projected to increase

slightly. This is due to the increase in

the market for small gas furnaces which

comes at the expense of larger gas

furnaces, heat pumps, and central

electric furnaces. See Technical Support

Document, Table 5.18. When energy

conservation standards are imposed on

small gas furnaces, the LBL-REM

projects that, over the period 1992-2015,

the following changes in energy

consumption would occur:

TABLE 4.5.-CUMULATIVE RESIDENTIAL ENERGY CONSUMPTION OF GAS AND ELECTRICITY FOR SPACE HEATING, 1992-2015

(QUADRILLION BTU, PRIMARY)

Standard lev I

Base

1 2 3

Gas heating systems

Small gas furnaces.. .............................. ........ .. . ........... - .............. . ..... ___ ............................... .......... 1.05 1.06 1.08 1.09

All gas healing ........................................................................................................................................................................................ 91.7 91.7 91.6 91.6

Electric heating systems:

Central electric furnaces ........... ...................... ..... ..................................................................................... _.................................. 30.4 30.3 30.3 30-3

Electric heat pumps ........ ................ ........................ ........................................................................................................ ............... 14.9 14.8 14.8 14.8

Electric baseboard heat .................................. ................................................ ........................... ............_............ ................. .... ... 14.2 14.2 14.2 14.2

All electric heating ............................................................................................................................................_.........._....................... 59.5 59.3 59.3 59.3

Total gas and electric ....................................... ....................................................................................................................... 151.2 151.0 150.9 150.9

Source: Technical Support Document, Table 5.18.

As Table 4.5 shows, standard level I

would lead to an increase in small gas

furnace energy consumption of .01

Quadrillion Btu (Quads), but would

result in a net energy savings of .02

Quads. At standard levels 2 and 3, the

net energy savings would total .03

Quads.

The Department finds these net

energy savings to be significant.

4. Economic Justification

A. Economic Impact on

Manufacturers and Consumers. The per

unit increased cost to manufacturers to

meet the level 3 efficiency ranges from

$64 for an indoor gas furnace to $88 for

an outdoor gas furnace. The per unit

increased manufacturer cost to meet

levels 1 and 2 are $21 and $96,

respectively, for an indoor unit; for an

outdoor unit, the per unit cost increases

are $25 and $97 for levels 1 and 2,

respectively. See Technical Support

Document, Tables 3.24 and 3.25.

At standard level 3 of efficiency, the

price to the consumer'increases $217 for

indoor gas furnaces and $247.90 for

outdoor gas furnaces. The per unit

increased consumer price at levels 1 and

2 are $77.91 and $208.39, respectively,

for an indoor unit; for an outdoor unit,

the per unit price increases are $84.83

and $226.94 for levels 1 and 2,

respectively. See Technical Support

Document, Tables 3.41 and 3.42.

The LBL-REM results indicate that

standards at level 3 will result in nearly

a four percent improvement in average

shipment weighted efficiency when

compared to standard level 1. This

would result in a $178 drop in life-cycle

costs for an indoor, warm air, small gas

furnace; for an outdoor one, the LCC

savings would be $154.

In the LBL-MIM results for small gas

furnaces, it was found that standards

would cause manufacturers to lose even

more money on these furnaces than they

are projected to lose in the base or nostandards case. In the base case,

manufacturers' ROE are expected to be

-2.02 percent for small furnaces,

compared to an ROE of a -2.13 percent

under standard level 3 and -2.03

percent under standard level 1. See

Technical Support Document, Table

7.16.

Small gas furnaces tend to have very

low profit margins and thus they

contribute little or nothing to a gas

furnace manufacturer's profitability.

DOE believes this is because of

marketing considerations, in that

manufacturers find it important for

marketing purposes to carry a complete

line of furnace capacities. Thus,

manufacturers tend to carry small.gas

furnaces in their product lines, although

many of these firms carry only one or

two models.

LBL-MIM projects that a standard of

either 71, 74, or 78 percent AFUE for

small gas furnaces would result in lower

net income and ROE than would occur

in the absence of standards.

The LBL-MIM predicts at level 3 that

a prototypical furnace manufacturer

would experience a .001 percent

decrease in ROE. See Technical Support

Document, Table 7.23. The sensitivity

analysis, however, indicates the gas

furnace industry results are sensitive to

consumer price elasticities and unit

variable cost increases. For example,

the sensitivity analysis indicates that

the effects of standards could be to

decrease return-on-equity for small gas

furnace manufacturers by nearly 1.2

percent or to raise it by nearly the same

amount. However, there is only a one

percent chance of either of these

sensitivity results occurring.

B. Life Cycle Cost and Net Present

Value. The LCC analysis indicates that

at each possible standard level, the

increase in purchase price would be

offset by savings in operating expenses.

See Technical Support Document, Table

6.7. Also, of the three candidate

standard levels, level 3 had the lowest

consumer life-cycle cost. The decreasing

life-cycle-costs indicate that the

standard level would have the greatest

benefit to consumers.

The NPV analysis indicates that if a

standard were adopted at level 3, there

would be a net present value of $21

million to consumers. At levels I and 2,.

the respective NPV's would be $13

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47939 

TABLE 4.4.-PAYBACK PERIODS (YEARS) 

OF DESIGN OPTIONS FOR GAS FURNACES (LESS THAN 45,000 BnJ/HR.)-

Continued 

Payback periods 

Standard level 

Warm air indoor 

3. 5.78 

Warm air 

outdoor 

6.58 

3. Significance of .Energy Savings 

By the year 2015, the weighted 

average energy efficiency of new small 

gas furnaces sold in the absence of 

standards is projected fo be 79.9 percent 

AFUE. Standards, at standard levels 1 

and 3, are expected to increase the 

average shipment weighted efficiency of 

small gas furnaces to between 81.0 and 

83.4 percent AFUE. respectively. See 

Technical Support Document, Table 

5.16. However, tIle aggregate annual 

energ',{ consumption of small gas 

furnaces is projected to increase 

slightly. This is due to the increase in 

the market for small gas furnaces which 

comes at the expense of larger gas 

furnaces, heat pumps, and central 

electric furnaces. See Technical Support 

Document, Table 5.18. When energy 

conservation standards are imposed on 

small gas furnaces, the LBL-REM 

projects that, over the period 1992-2015. 

the following changes in energy 

consumption would o'ccur: 

TA!3LE 4.5.-CUMUL~TIVE RESIDENTIAL ENERGY CONSUMPTION OF GAS AND ELECTRICITY FOR SPACE HEATING, 1992-2015 

(QUADRILLION BTU, PRIMARY) 

Standard level 

Base 

2 3 

Gas heating systems: 

Small gas furnaces ....................................................................................................................................................................... .. 1.05 1.06 1.08 1.09 

All gas hea1ing .............................. , .................................. : ..................................................................................................................... . 9;.7 91.7 91.6 91.6 

Electric healing systems: 

Central electric furnaces ............................................................................................................................................................... . 30.4 30.3 30.3 SO.3 

Electric heat pumps ...................................................................................................................................................................... .. 14.9 14.8 14.8 14.8 

Electric baseboard heat ................................................................................................................................................................ . 14.2 14.2 14.2 14.2 

All electriC heating ................................................................................................................................................................................ .. 5S.5 59.3 59.3 59.3 

Total gas and electric ................................................................................................................................................................ . 151.2 151.0 150.9 150.9 

Source: Technical Support Document. Table 5.18. 

As Table 4.5 shows, standard level 1 

would lead to an increase in small gas 

furnace energy consumption of .01 

Quadrillion Btu (Quads). but would 

result in a net energy savings of .02 

Quads. At standard levels z and 3. the 

net energy savings would total .03 

Quads. 

The Department finds these net 

energy savings to be significant. 

4. Economic Justification 

A. Economic Impact on 

lvlanufacturers and Consumers. The per 

unit increased cost to manufacturers to 

meet the level 3 efficiency ranges from 

$64 for an indoor gas furnace to $85 for 

an outdoor gas furnace. The per unit 

increased manufacturer cost to meet 

levels 1 and 2 are $21 and $96. 

respectively, for an indoor unit; for an 

outdoor unit. the per unit cost increases 

are $25 and $97 for levels 1 and 2. 

respectively. See Technical Support 

Document. Tables 3.24 and 3.25. 

At £tandard level 3 of efficiencv. the 

price to the consumer"increases $217 for 

indo.or gas furnaces and $247.90 for 

outdoor gas furnaces. The per unit 

increased consumer price at levels 1 and 

2 are $77.91 and $208.39, respectively, 

for an indoor unit; for an outdoor unit, 

the per unit price increases are $84.83 

and $226.94 for levels 1 and 2. . 

r:espectively. See Technical Support 

Document. Tables 3.41 and 3.42. 

The LBL-REM results indicate that 

standards at level 3 will result in nearly 

a four percent improvement in average 

shipment weighted efficiency when 

compared to standard level 1. This 

would result in a $178 drop in life .. cycle 

costs for an indoor. warm air, small gas 

furnace; for an outdoor one. the Lee 

savings would be $154. 

In the LBL-MIM results for small gas 

furnaces, it was found that standards 

would cause manufacturers to lose even more money on these furnaces than they are projected to lose in the base or nostandards case. In the base case, 

mamiIacturers' ROE are expected to be 

-2.02 percent for small furnaces, 

compared to an ROE of a -2.13 percent 

under standard level 3 and -2.03 

percent under standard level 1. See 

Technical Support Docu.'Ilent, Table 

7.16. 

Small gas furnaces tend to have very 

low profit margins and thus they 

contribute little or nothing to a gas 

furnace manufacturer's profitability. 

DOE believes this is because of 

marketing considerations, in that 

manufacturers find it important for 

marketing purposes to carry a complete 

line of furnace capacities. Thus, 

manufacturers tend to carry small .gas 

furnaces in their prodUct lines. although 

many of these firms carry only one or two models. 

LBL-MIM projects· that a standard of 

either 71. 74. or 78 percent AFUE for 

small gas furnaces would result in lower 

net income and ROE than would occur in the absence of standards. . 

The LBL-MIM predicts at level 3 that a prototypical furnace manufacturer 

would experience a .001 percent 

decrease in ROE. See Technical Support 

Document. Table 7.23. The sensitivity 

analysis. however, indicates the gas 

furnace industry results are sensitive to consumer price elasticities and unit 

variable cost increases. For example. 

the sensitivity analysis indicates that 

the effects of standards could be to 

decrease return-on-equity for small gas 

furnace manufacturers by nearly 1.2 

percent or to raise it by nearly the same amount. However, t..~ere is· only a one percent chance of either of these 

sensitivity results occurring. 

B. Llfe Cycle Cost and Net Present 

Value. The LCe analysis indicates that 

at each possible standard level, the 

increase in purchase price would be 

offset by savings in operating expenses. 

See Technical Support Document, Table 

6.7. Also, of the three candidate 

standard levels, level 3 had the lowest consumer life-cycle cost. The decreasing 

life-cyc1e-costs indicate th'at the 

standard level would have the greatest 

benefit to consumers. ~ 

The NPV analysis indicates thC!-t if a 

standard were adopted at level 3. there 

would be a net present value of $21 

million to consumers. At levels 1 and 2 .. the respective NPV's would be $13 
54FR47916

47940 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

million and $16 million. See Technical

Support Document, Table 5.23.

C. Energy Savings. As indicated

above, standards will result in an

increase of gas consumption for small

gas furnaces, but, also, in an overall

savings of natural gas. If, however, the

marketplace continues to demand

changes in efficiency at the same rate as

historically, the LBL-REM projects that

there would be no savings from

standards over the 1992-2015 period.

This result occurs because in the base

case, the efficiency, or SWEF, of all new

small gas furnaces is projected to exceed

the 78 percent AFUE standard by the

time it would come into effect. See

Technical Support Document, Table 5.30,

Reference 10.

D. Lessening of Utility or Performance

of Products. As indicated above, DOE

established classes of products in order

to assure that the standards analyzed

would not lessen the existing utility or

performance of small gas furnaces. In

addition, DOE believes that none of the

design options considered will affect

utility.

E. Impact of Lessening of Competition.

The Department of justice concluded

that for small gas furnaces, the available

evidence affirmatively suggests that no

significant adverse competitive impact

is likely. DOE, therefore, concludes that

none of the candidate standard levels

would lessen competition.

F. Need of the Nation to Save Energy.

Small gas furnaces use natural gas as

their energy source. Nearly 0.16 percent

of the nation's natural gas consumption

is used to operate small gas furnaces,

and nearly four percent of that 0.16

percent would be saved by standards

for this product at level 3. However, the

sensitivity analysis on the LBL-REM

indicates that if consumer awareness of

and concern with appliance efficiency

continues the projected savings would

be the same as with level 3 standards.

Furthermore, the natural gas saved

would result in a cumulative CO2

emission savings in 2010 for standard

level 3 of 312,000 tons, and 98,000 tons

for level 1. Other environmental effects

from furnace standards would be

savings in 2010 of 3,822 tons of SO2 and

2,976 tons of NO2 at standard level 3; at

standard level 1, the savings would be

1,200 tons of SO2 and 927 tons of NO2.

5. Conclusion

As noted above, the Act requires that,

in establishing standards, the

Department look first at that standard

that maximizes energy savings, i.e., is

the "max tech" level of efficiency for

small gas furnaces, the "max tech" level

is at 97 percent AFUE.

It was also noted above, however,

that for this rulemaking, the Department

is restricted in its consideration to an

efficiency level between 71 percent

AFUE and 78 percent AFUE. Therefore,

the Department must begin its

consideration for a standard at that

level that is the most stringent level

allowed, i.e., 78 percent AFUE.

After careful consideration of all the

factors, the Department is establishing a

78 percent AFUE standard on small gas

furnaces. This standard for small gas

furnaces will result in a significant

conservation of energy, and it is

technologically feasible and

economically justified.

In addition to producing the maximum

unit energy savings of the candidate

standards, this standard is beneficial to

consumers and manufacturers alike.

The technology that would generally

be used to meet this level of efficiency,

i.e., induced draft combustion, is not

only presently available, but it also will

be installed on all other gas furnaces

when this standard is to be effective.

For consumers, the 78 percent AFUE

standard produces the lowest consumer

life-cycle cost of the candidate levels.

Furthermore, the standard's NPV of $21

million over the 1993-2015 period is the

highest of the standard levels analyzed.

Also, the designs necessary to achieve

that level of efficiency, i.e., induced

draft combustion, should have no effect

on utility to the consumer.

Also, the initial purchase price

increase may be lower than that which

has been estimated. This result is

possible, because the 78 percent AFUE

standard on small gas furnaces is the

same level of efficiency that the Act

imposes on larger gas furnaces, which

presently comprise more than 95 percent

of furnace sales. Therefore, to the extent

that manufacturers can produce these

small units on the same production

lines, with the same design options that

will be used for the larger furnaces,

there may be economies of scale in the

production of these units.

Small gas furnace manufacturers have

strongly supported the 78 percent AFUE

standard on their products. The analysis

indicates that such a standard should

have relatively little economic impact on

them. It is estimated that a 78 percent

AFUE standard on small gas furnaces

would cause the prototypical gas

furnace manufacturer to suffer a loss of

.1 percent in its ROE. The uniformity of

a 78 percent AFUE standard on small

furnaces and on larger units, however,

may make the production process

simpler for the manufacturers. This

occurs because, as mentioned above, a

uniform standard for all gas furnaces

could result in fewer production lines,

In addition, as noted above, the

Attorney General has determined that

this-standard should not have a

significant adverse effect on competition

among furnace manufacturers.

While the effects of a 78 percent

AFUE standard are only slightly better

than a 71 percent AFUE standard, the

Department believes that the Act

requires that the Department establish

the most stringent standard that saves a

significant amount of energy, is

technologically feasible, and is

economically justified. The 78 percent

AFUE standard meets these

requirements.

In comments on the proposed rule,

several gas utilities contended that a 78

percent AFUE standard on small gas

furnaces would cause them to lose

market share to electric resistance heat.

The analysis for this final rule, however,

indicates that such a loss of market

share is not a likely result from a 78

percent AFUE standard. The LBL-REM

projects that market share for small gas

furnaces is likely to increase as a result

of the level 3 standard. See Technical

Support Document, Table 5.20.

One drawback to the 78 percent AFUE

standard on small gas furnaces is that it

would eliminate units that may, in some

circumstances, be the most costeffective for some consumers. This is a

result that could possible occur in some

Southern-tier States, where the most

cost-effective small gas furnace could be

one that is less efficient and whose first

cost is less than that of the minimum

LCC unit. Nevertheless, while this is a

possible outcome for some purchasers in

some areas, the Department believes

that such effects, should they occur at

all, would be limited.

Another possible drawback is that

some installations, particularly of

replacement furnaces in some multifamily units could be somewhat

complicated because of space

limitations. The Department believes

that these effects, too, would be limited,

if they occur at all.

Lastly, 78 percent AFUE standards,

over the forecast period (1993-2015), are

expected to save 4,818,000 tons of CO2,

65,112 tons of SO2, and 48,393 tons of

NO2 emissions.

c. Television Sets

The Department received a number of

comments concerning the engineering

analysis for television sets. However,

none of the comments included data or

sufficient information for the

Department to consider. In order to

respond to the comments, DOE:believes

an in-depth analysis of televisions

would likely need to be performed. And,

 CE-RM-87-102 COMMENT 10

54FR47916 

47940 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

million and $16 million. See Technical 

Support Document. Table 5.23. 

C. Energy Savings. As indicated 

above. standards will result in an 

increase of gas consumption for small 

gas furnaces, but. also. in an overall 

savings of natural gas. If. however. the 

marketplace continues to demand 

changes in efficiency at the same rate as historically. the LBL-REM projects that 

there would be no savings from 

standards over the 1992-2015 period. 

This result occurs because in the base 

case. the efficienc~, or SWEF, of all ne~ 

small gas furnaces is projected to exceed 

the 78 percent AFUE standard by the 

time it would come into effect. See 

Technical Support Document, Table 5.30. 

Reference 10. 

D. Lessening of Utility or Performance 

of Products. As indicated above. DOE 

established classes of products in order 

to assure that the standards analyzed 

would not lessen the existing utility or 

performance of small gas furnaces. In 

addition. DOE believes that none of the 

design options considered will affect 

utility. 

E. Impact of Lessening of Competition. 

The Department of Justice concluded 

that for small gas furnaces. the available 

evidence affirmatively suggests that no 

significant adverse competitive impact 

is likely. DOE. therefore. concludes that 

none of the candidate standard levels 

would lessen competition. 

F. Need of the Nation to Save Energy. 

Small gas furnaces use natural gas as 

their energy source. Nearly 0.16 percent 

of the nation's natural gas consumption 

is used to operate small gas furnaces. 

and nearly four percent of that 0.16 

percent would be saved by standards 

for this product at level 3. However. the 

sensitivity analysis on the LBL-REM 

indicates that if consumer awareness of 

and concern with appliance efficiency 

continues the projected savings would 

be the same as with level 3 standards. 

Furthermore, the natural gas 'saved 

would result in a cumulative CO2 

emission savings in 2010 for standard 

level 3 of 312.000 tons. and 98.000 tons 

for level 1. Other environmental effects 

from furnace standards would be 

savings in 2010 of 3.822 tons of S02 and 

2.976 tons of N02 at standard level 3; at 

standard level 1. the savings would be 

1.200 tons of S02 and 927 tons of N02. 

5. Conclusion 

As noted above. the Act requires that. 

in establishing standards. the 

Department look first at that standard 

that maximizes energy savings. i.e .• is 

the "max tech" level of efficiency for . 

small gas furnaces. the "max tech" level 

is at 97 percent AFUE. 

It was also noted above. however. 

that for this rulemaking. the Department 

is restricted in its consideration to an efficiency level between 71 percent 

AFUE and 78 percent AFUE. Therefore. 

the Department must begin its 

consideration for a standard at that 

level that is the most stringent level 

allowed. i.e .• 78 percent AFUE. 

After careful consideration of all the 

factors, the Department is establishing a 78 percent AFUE standard on small gas 

furnaces. This standard for small gas 

furnaces will result in a significant 

conservation of energy. and it is . technologically feasible and 

economically justified. 

In addition to producing the maximum 

unit energy savings of the candidate 

standards. this standard is beneficial to consumers and manufacturers alike. 

The technology that would generally 

be used to meet this level of efficiency. 

i.e .• induced draft combustion, is not 

only presently available, but it also will 

be installed on all other gas furnaces 

when this standard is to be effective. 

For consumers. the 78 percent AFUE 

standard produces' the lowest consumer 

life-cycle cost of the candidate levels. 

Furthermore, the standard's NPV of $21 

million over tlie 1993-2015 period is the 

highest of the standard levels analyzed. 

Also. the designs necessary to achieve 

that level of efficiency. i.e .• induced 

draft combustion. should have no effect on utility to the consumer. Also. the initial purchase price 

increase may be lower than that which 

has been estimated. This result is 

possible. because the 78 percent AFUE 

standard on small gas furnaces is the 

same level of efficiency that the Act 

imposes on larger gas furnaces. which . presently comprise more than 95 percent 

of furnace sales. Therefore. to the extent 

that manufacturers can produce these 

small units on the ·same production 

lines. with the same design options that 

will be used for the larger furnaces. 

there may be economies of scale in the 

production of these units. 

Small gas furnace manufacturers have 

strongly supported the 78 percent AFUE 

standard on their products. The analysis 

indicates that such a standard should 

have relatively little economic impact on 

them. It is estimated that a 78 percent 

AFOO standard on small gas furnaces 

would cause the prototypical gas 

furnace manufacturer to suffer a loss of 

.1 percent in its ROE. The uniformity of a 78 percent AFUE standard on small 

furnaces and on larger units. however. 

may make the production process 

simpler for the manufacturers. This 

occurs because. as mentioned above. a uniform standard for all gas' furnaces 

could result in fewer production lines. 

In addition. as noted above. the 

Attorney General has determined that 

this 'standard should not have a significant adverse effect on competition 

among furnace manufacturers. 

While the effects of a 78 percent 

AFUE standard are only slightly better 

than a 71 percent AFUE standard. the 

Department believes that the Act 

requires that the Department establish 

the most stringent standard that saves a 

significant amount of energy. is 

technologically feasible. and is 

economically justified. The 78 percent 

AFUE standard meets these 

requirements. 

In comments on the proposed rule. 

several gas utilities contended that a 78 

percent AFUE standard on small gas 

furnaces would cause them to lose 

market share to electric resistance heat. 

The analysis for this final rule. however. 

indicates that such a loss of market 

share is not a likely result from a 78 

percent AFOO standard. The LBL-REM 

projects that market share for small gas 

furnaces is likely to increase as a result 

of the level 3 standard. See Technical . 

Support Document. Table 5.20. 

One drawback to the 78 percent AFUE 

standard on small gas furnaces is that it 

would eliminate units that may. in some 

circumstances. be the most costeffective for some consumers. This is a result that could possible occur in some 

Southern-tier States. where the most 

cost-effective small gas furnace could be 

one that is less efficient and whose first 

cost is less than that of the minimum 

LCC unit. Nevertheless. while this is a possible outcome for some purchasers in 

some areas. the Department believes 

that such effects. should they occur at 

all. would be limited. 

Another possible drawback is that some installations. particularly of 

replacement furnaces in some multifamily units could be somewhat 

complicated because of space 

limitations. The Department believes 

that these effects. too. would be limited. 

if they occur at all. . 

Lastly, 78 percent AFUE standards, . 

over the forecast period (1993-2015). are expectep to save 4,818.000 tons of C02. 

65.112 tons of S02, and 48.393 tons of 

N02 emissions. 

c. Television Sets 

The Department received a number of 

comments concerning the engineering 

analysis for television sets. However. 

none of the comments included data or sufficient information for the 

Department to consider. In order to 

respond to the comments. DOE:believ!'ls an in-depth analysis of televisions 

would likely need to be performed. And. 
54FR47916

Federal Register / Vol. 54, No. 221 / Friday, November 17, .1989 / Rules and Regulations 4719

since the data in a new analysis would

be new data that was-not previously

subject to comment, the Department

believes a new analysis and proposed

rule for television sets would have to be'

published.

V. Environmental, Regulatory Impact,

Takings Assessment, Federalism and

Regulatory Flexibility Reviews -

The Department has reviewed today's

final rule in accordance with the

Department's obligations under:

• The National Environmental Policy

Act of 1969 (NEPA) (42 U.S.C. 4321 et

seq.), the Council on Environmental

Quality regulations implementing the

procedural provisions of NEPA (40 CFR

part 1500 et seq.), and the Department's

own NEPA guidelines (54 FR 49667,

December 13,1987);

• Executive Order 12291 (46 FR 13193,

February 19, 1981) which pertains to

agency review of the impact of Federal

regulations;

• Executive Order 12630 (53 FR 8859,

March 18, 1988) which pertains to

agency consideration of Federal actions

that interfere with constitutionally

protected property rights;

• Executive Order 12612 (54 FR 41685,

October 30, 1987) which pertains to

agency consideration of Federal actions

that would have a substantial direct

effect on States, on the relationship

between the National Government and

the States, and on the distribution of

power and responsibility among the

various levels of government; and

• The Regulatory Flexibility Act (5

U.S.C. 601 et seq.) which requires, in

part, that an agency prepare a

regulatory flexibility analysis for any

final rule unless it determines that the

rule will not have a "significant

economic impact on a substantial

number of small entities," In the event

that such an analysis is not required for

a particular rule, the agency must

publish a certification and explanation

of that determination in the Federal

Register.

a. Environmental Review

In issuing the proposed rule, the

Department prepared an Environmental

Assessment (EA) (DOE/EA-0372) that

was published within the Technical

Support Document (DOE/CE-0239,

November 1988). The environmental

effects from different possible standard

levels were found not to be significant,

and a Finding of No Significant Impact

(FONSI) was published along with the

proposed rule. (53 FR 48826, December 2,

1988).

In conducting the analysis for the final

rule, the Department re=ordered the

refrigerator design options in order of

increasing consumer payback periods,

as noted above. As a result of this reordering, the environmental effects for

the different refrigerator standard levels

differ from those reported in the EA.. See

Technical Support Document,

Environmental Effects.

Due to this re-ordering, and to greater

efficiencies projected in the base case,

standard level 3 for refrigerators will

result in slightly lesser reductions in

carbon dioxide (CO2), sulfur dioxide

(SO2), and nitrogen dioxide (NO2) than

those projected in the EA for this level.

In the proposed rule, the forecast

period ended in the year 2010. The

emissions savings of CO2 in that year for

standard level 3 for refrigerators were

estimated to be 9.18 million tons, a

reduction in emissions that was

determined not to be significant.

For the standard level being finalized

in this rulemaking, the expected CO2

emissions savings in 2010 are 7.691

million tons, and, in the year of the

greatest savings, 2015, the emissions

reductions are expected to be 8.834

million tons. Both of these reductions in

emissions are lower than the amount

that was estimated for the proposed

rule.

For standard level 3 for refrigerators,

the proposed rule's SO2 and NO22

emissions savings in 2010 were

estimated to be 151,000 tons and 100,000

tons,. respectively. These reductions in

SO2 and NO2 emissions were

determined not to be significant.

For the standard level being finalized

in this rulemaking, the expected

reductions in SO2 and NO2 emissions In

2010 are 123,282 tons and 83,352 tons,

respectively. In 2015, the year of the

greatest expected reductions in SO2 and

NO2 emissions, the savings are expected

to total 126,365 tons and 94,624 tons,

respectively. The S02 and NO2

emissions reductions expected in 2010

and in 2015 from this final rule are lower

than the amounts that were estimated

for the proposed rule.

The Department believes that these

environmental impacts are not

sufficiently large to be considered

"significant." These impacts fall within

the range of impacts that were analyzed

in the EA that was prepared for the

proposed rule, and which were

determined not to be significant in the

FONSI that was issued for the proposed

rule. Accordingly, DOE has determined

that the impacts of re-ordering the

refrigerator engineering design options

are bounded by the analysis in the

results of the EA, and that the original

FONSI is still valid.

Furthermore, if the Clean Air Act -

Amendments that have been introduced

in Congress were to become law, the

amount of allowable powerplant

emissions of SO2 and NO2 in the year

2010 would be reduced from the amount

otherwise anticipated. The Department

expects that there would be a

corresponding drop in emissions

reductions caused by, these appliance

standards. Under those conditions, the

Department would expect that standard

level 3 for refrigerators would lead to

reductions in emissions of 64,881 tons of

SO2, and 62,013 tons of NO2. Each of

these reductions is less than what would

be expected without the Clean Air Act

Amendments, i.e., in the Department's

forecast results, presented above.

The NRDC was critical of the

Department's finding in the FONSI that

the environmental effects that could

result from appliance standards are not

signficant. The NRDC contended, in fact.

that the expected environmental .

benefits are significant, and that the

Department should have prepared an

Environmental Impact Statement.

(NRDC, No. 81, at 120-124). NRDC has

not taken exception to DOE's forecasts.

of emissions reductions.

The Department has determined that

the environmental effects described,

totaling less than 1 percent of U.S.

powerplant emissions (for SO2 and NO2)

and less than one-half of 1 percent of

U.S. emissions of CO2 in the year 2015.

are not significant, and do not require

preparation of an Environmental Impact

Statement. Nevertheless, as noted

above, the environmental effects were

considered in selecting the final

standard for refrigerators.

b. Regulatory Impact Review

Executive Order 12291 (46 FR 13193,

February 19, 1981) directs that, in issuing

a major rule,18 an agency perform a

regulatory analysis. Such an analysis

presents major alternatives to the

regulation that could substantially

achieve the same regulatory goal at

lower cost, as well as a description of

the costs and benefits (including

potential net benefits) of the proposed

approach.

DOE has determined that this rule is a

"major rule." Accordingly, a Final

Regulatory Impact Review has been

prepared and submitted to the Office of

Management and Budget (OMB). OMB

18 "Major rule" means any regutabon the! is

likely to result in: (1) An annual effect on the

economy of $100 million or more; 12) A major

increase in costs or prices for consumers, individual

Industries. Federal, State, or local government

.agencies, or geographic regions. or (3) Significant

adverse effects on competition. employment;

investment, productivity, innovation, or on the

ability of United States-based enterpr:ses to

compete with foreign-based enterprises in domestic

or export markets.

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17,1989 I Rules and Regulations 4iMl 

since the data in a new analysis would 

be new data that was' not previously 

subject to comment. the Department 

believes a new analysis and proposed 

rule for. television sets would have to be' 

published. 

V. Environmental, Regulatory Impact, 

Takings Assessment, Federalism l).ud 

Regulatory Flexibility Reviews 

The Department has reviewed today's 

final rule in accordance with the 

Department's obligations under: e. The National Environmental Policy 

Act of 1969 (NEPA) (42 U.S.C. 4321 et 

seq.). the Council on Environmental 

Quality regulations implementing the 

procedural provisions of NEPA (40 CFR 

part 1500 et seq.). and the Department's 

own NEPA guidelines (54 FR 49667. 

December 13. 1987); . 

• Executive Order 12291 (46 FR 13193. 

February 19. 1981) which pertains t.o 

agency review of the impact of Federal 

regulations; e Executive Order 12630 (53 FR 8859. 

March 18, 1988) which pertains to 

agency consideration of Federal actions 

that interfere with ctmstitutionally 

protected property rights; • Executive Order 12612 (54 FR 41685. 

October 30. 1987) which pertains to 

agency consideration of Federal actions 

that would have Ii substantial direct 

effect on States, on the relationship 

between the National Government and 

the States. and on the distribution of 

power and responsibility among the 

various levels of government; and e The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) which requires. in 

part. that an agency prepare a 

regulatory flexibility analysis for any 

final rule unless it determines that the 

rule will not have a "significant 

economic impact on a substantial 

number of small entities." In the event 

that such an analysis is not required for 

a particular rule. the agency must 

publish a certification and explanation 

of that determination in the Federal 

Register. 

a. Environmental Review 

In issuing the proposed rule. the 

Department prepared an Environmental 

Assessment (EA) (DOE/EA-0372) that 

was published within the Technical 

Support Document (DOE/CE-0239. 

November 1988). The environmental 

effects from different possible standard 

levels were found not to be significant. 

and a Finding of No Significant Impact 

fFONSI) was published along with the 

proposed rule. (53 FR 48826, December 2. 

1986), . 

In conducting the analysis for the final 

rule. the Department re~ordered the 

refrigerator design options in order of 

SLL 

increasing consumer payback periods. 

as noted above. As a result of this reordering,. the environmental effects for 

the different refrigerator standard levels 

differ from those reported in the EA .. See 

Technical Support Document. 

Environmental Effects. 

Due to this re-ordering, and to greater 

efficiencies projected in the base case. 

standard level 3 for refrigerators will 

result in slightly lesser reductions in 

carbon dioxide (C02). sulfur dioxide 

(802). and nitrogen dioxide (NO.2) than 

those projected in the EA for this level. 

In the proposed rule. the forecast 

period ended in the year 2010. The 

emissions savings of CO:z in that year for 

standard level 3 for refrigerators were 

estimated to be 9.18 million tons. a 

reduction in emissions that was 

determined not to be significant 

For the standard level being finalized 

in this rulemaking. the expected CO2 

emissions savings in 2010 are 7.691 

million tons. and. in the year of the 

greatest savings. 2015. the emissions 

. reductions are expected to be 8.834 

million tons. Both of these reductions in 

emissions are lower than the amount 

that was estimated for the proposed 

rule. 

For standard level 3 for refrigerators. 

the proposed rule's ~02 and NOl 

emissions savings in 2010 were 

estimated to be 151,000 tons and 100,000 

tons •. respectively. These reductions in 

SO:z and NOl emissions were 

determined not to be significant. 

For the standard level being finalized 

in this rulemaking. the expected . 

reductions in SO:z and N02 emissions In 

2010 are 123.282 tons and 83.352 tons. 

respectively. In 2015. the year of the 

greatest expected reductions in S02 and 

NO:z emissions. the savings are expected 

to total 126,365 tons and 94.624 tons. 

respectively. The SOl and NOl 

emissions reductions expected in 2010 

and in 2015 from this final rule are lower 

than the amounts that were estimated 

for the proposed rule. 

The Department believes that these 

environmental impacts are not 

sufficiently large to be considered 

"significant." These impacts fall within 

the range of impacts that were analyzed 

in the EA that was prepared for the 

proposed rule, and which were 

determined not to be significant in the 

FONS! that was issued for the proposed 

rule. Accordingly. DOE has determined 

that the impacts of re-ordering the 

refrigerator engineering design options 

are bounded by the analysis in the 

results of the EA. and that the original 

FONSI is still valid. . 

Furthermore, if the Clean Air Act 

Amendments that have been introduced 

in Congress were to become law. the 

amount of allowable powerplant 

emissions of S02 and NOz in the year 

2010 would be reduced from the amount 

otherwise anticipated. The Department 

expects that there would be a 

corresponding drop in emissions 

reductions caused by these appliance 

standards. Under those conditions. the 

Department would expect that standard 

level 3 for refrigerators would lead to 

reductions in emissions of 64.881 tons of 

SOl. and 62.013 tons of NOz• Each of 

these reductions is less than what would 

be expected without the Clean Air Act 

Amendm.ents. i.e .• in the Department's 

forecast results. presented above. 

The NRDC was critical of the 

Department's finding in the FONSI that 

the environmental effects that could 

result from appliance standards are not 

signficant. The NRDC contended. in fact. 

that the expected environmental 

benefits are significant. and that the. 

Department should have prepared an 

Environmental rmpact Statement. 

(NRDC. No. 81. at 120-124J. NRDC has 

not taken exception to DOE's forecasts. 

of emissions reductions. 

The Departlnent has determined that 

the environmental effects described . 

totaling less than 1 percent of U.S. 

powerplant emissions (for S02 and NOz) 

and less than one-half of 1 percent of 

U.s. emissions of CO2 in the year 2015. 

are not significant, and do not require 

preparation of an Environmental Impact 

Statement. Nevertheless. as noted 

above. the environmental effects were 

considered in selecting the final 

standard for reftigerators. 

b. Regulatory Impact Review 

Executive Order 12291 {46 FR 13193. 

February 19. 1981) directs that. in issuing a major rule. IS an agency perform a 

regulatory analysis. Such an analysis 

presents major alternatives to the . 

regulation that coUld substantially . 

achieve the same remtiatory goal at 

lower cost. as well as a description of 

the costs and benefits (including 

potential net benefits) of the proposed 

approach. 

DOE has determined that this rule is a 

"major rule." Accordingly. a Final 

Regulatory Impact Review has been 

prepared arid submitted to the Office of 

Management and Budge\ (OMB). OMB 

18 "Major rulen means any reguldtJon chat 18 

likely 10 result in: (1) An annual effec:t on the 

economy of $100 million or more: (2) A major 

increase in COSIS or prices for consumers. individual 

Industries. Federal, Siale, or !ncal government 

agencies. or geographic regions. or (3) Significant 

adverse effects on compelition: pmploymenl; 

inveslm~nt productivity, innovation, or on the 

ability of United Siaies-based entPrrr:ses 10 

compete with foreign-based enterprises in domestic 

or export markets. 
54FR47916

47942 Federal Register / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

has reviewed the Regulatory Analysis

under Executive Order 12291.

The Regulatory Analysis is

summarized below. This summary

focuses on the major alternatives

considered in arriving at the proposed

approach to improving the energy -

efficiency of consumer products. The

reader is referred to the complete final

"Regulatory Impact Analysis," which is

contained in the Technical Support

Document, available as indicated at the

beginning of this notice. It consists of:

(1) A statement of the problem

addressed by this regulation, and the

mandate for government action; (2) a

description and analysis of the feasible

policy alternatives to this regulation; (3)

a quantitative comparison of the

impacts of the alternatives; and (4) the

economic impact of the proposed

approach.

It should be noted at the outset that

none of the alternatives that were

examined for these products saved as

much energy as the rule. Also, most of

the alternatives would require that

enabling legislation be enacted, since

authority to carry out those alternatives

does not presently exist.

Alternatives for Achieving Consumer

Product Energy Conservation

Six major alternatives were identified

by DOE as representing feasible policy

alternatives.for achieving consumer

product energy efficiency. These

alternatives include:

• No New Regulatory Action

• Informational Action

-Product labeling

-Consumer education

• Prescriptive Standards

• Financial Incentives

-Tax credits

-Rebates

• Voluntary Energy Efficiency Targets

• The Proposed Approach

(Performance Standards)

Each alternative has been evaluated

in terms of its ability to achieve

significant energy savings at reasonable

costs and has been compared to the

effectiveness of the proposed approach.

If no new regulatory action were

taken, then no new standards would be

implemented for refrigerators or small

gas furnaces. This is essentially the

"base case" for each appliance. In this

case, between the years 1992 and 2015,

there would be expected energy use of

44.09 Quads of primary energy, with no

energy savings and a zero net present

value.

Several alternatives to the base case

can be grouped under the heading of

informational action. They include

consumer product labeling and DOE's

public education and information

program. Both of these alternatives are

mandated by the Act. One base case

alternative would be to estimate the

energy conservation potential of

enhancing these programs: To model

this possibility, the Department assumed

that market discount rates would be

lowered by five percent for purchasers

of these products. This resulted in no

energy savings, with expected

consumption equal to 44.09 Quads. The

net present value is estimated to be

$0.00.

Another method of setting standards

would entail requiring that certain

design options be used on each product,

i.e., prescriptive standards. For

refrigerators, this involved assuming a

1.5 inch foam door and 5.0 EER

compressor (4.0 EER compressor for

manual defrost units) and, for small gas

furnaces, a power burner. This resulted

in energy consumption, between 1992

and 2015, of 40.37 Quads, and savings of

3.71 Quads. The net present value, in

1987 dollars, was $7.79 billion.

Various financial incentive

alternatives were tested. These included

tax credits and rebates to consumers, as

well as tax credits to manufacturers.

The tax credits to consumers were

assumed to be 15 percent of the

increased cost of higher energy

efficiency features of these appliances,

while the rebates were assumed to be 15

percent of the increase in equipment

prices. The tax credits to consumers

showed almost no change from the base

case, i.e., this alternative would save

less than 0.01 Quad with a net present

value of $80 million. Consumer rebates

however, would save 0.05 Quad with a

net present value of $260 million.

The consumer rebate program and the

tax credit program, would return to the

participating consumer exactly the same

amount of money. However, it is

expected that there will be more

participants in the rebate program.

Therefore, the rebate program would

result in substantially more energy

savings than the tax credit program

would.

The most important differences to the

consumer between rebate and tax credit

programs is that a rebate can be

obtained quickly, whereas a tax credit is

delayed until income taxes are filed or a

tax refund is provided by the Internal

Revenue Service. This means that

middle- and low-income purchasers,

who generally have little ready cash to

purchase more expensive products, are

not as likely to take advantage of the

program as are upper income

purchasers..To simulate this impact,

DOE has assumed that only 60 percent

of consumers would purchase more

energy efficient products as a result of

the tax credit program.

Another financial incentive that was _

considered was tax credits to

manufacturers for the production of

energy-efficient refrigerators and small

gas furnaces. In this scenario, an

investment tax credit (ITC) of 20 percent

was assumed: The tax credits to

manufacturers had almost no effect,

since the energy consumption estimates

are 44.09 Quads with no energy savings,

and a net present value equal to $30

million.

The impact of this scenario is so small

because the ITC was applicable only to

the tooling and machinery costs of the

firms, i.e., the firms' fixed cost, and most

of the design improvements that would

likely be adopted to manufacture more

efficient versions of these products

would involve purchased parts.

Expenses for purchased parts would not

be eligible for an ITC.

Two scenarios of voluntary energy

efficiency targets were examined; in the

first one, energy conservation standards

were assumed to be adopted voluntarily

by all the relevant manufacturers in five

years, and, in the second scenario, the

standards were assumed to be adopted

in 10 years. In these scenarios, the five

year delay would result in energy

consumption by these appliances of

40.71 Quads, energy savings of 3.38

Quads, and a new present value of $5.69

billion; the 10 year delay would result in

42.27 Quads of energy being consumed,

1.82 Quads being saved, and a net

present value of $3.43 million.

These scenarios assume that there

would be universal voluntary adoption

of the energy conservation standards by

the refrigerator and small gas furnace

manufacturers, an assumption for which

there is no reasonable assurance.

Lastly, all of-these alternatives must

be gauged against the performance

standards that.are being prescribed by

this rule. Such performance standards

would result in energy consumption of

refrigerators and small gas furnaces to

total an estimated 3889 Quads of

primary energy over the 1992-2015 time

period. Savings would be 5.20 Quads,

and the net present value would be an

expected $9.18 billion.

As noted at the beginning of this

section, none of the alternatives that

were considered for refrigerators and

small gas furnace would save as much

energy as today's rule.

c. Federalism Review

Executive Order 12612 (52 FR 41685,

October 30, 1987) requires that

regulations or rules be reviewed for any

substantial direct effects on States, on

 CE-RM-87-102 COMMENT 10

54FR47916 

47942 Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

has re'viewed the Regulatory Analysis 

under Executive Order 12291. 

The Regulatory Analysis is 

fmmmarized below. This summary 

focuses on the major alternatives 

considered in arriving at the proposed 

approach to improving the energy' 

efficiency of consumer products. The 

reader is referred to the complete final 

"Regulatory Impact Analysis," which is 

contained in the Technical Support 

Document, available as indicated at the 

beginning of this notice. It consists of: 

(1) A state:nent of the problem 

addressed by this regulation, and the 

mandate for government action; (2) a description and analysis of the feasible 

policy alternatives to this regulation; (3) 

a quantitative comparison of the 

impacts of the alternatives; and (4) the 

economic impact of the proposed 

approach. 

It should be noted at the outset that none of the 'alternatives that were 

examined for these products saved as 

much energy as the rule. Also, most of 

the alternatives would require that 

enabling legisla,tion be enacted, since 

authority to carry out those alternatives 

does not presently exist. 

Alternatives for Achieving Consumer 

Product Energy Conservation 

Six major alternatives were identified 

by DOE as representing feasible policy 

alternatives.for achieving consumer 

product energy efficiency. These 

alternatives include: 

• No New Regulatory Action • Informational Action 

-Product labeling 

-Consumer education • Prescriptive Standards o Financial Incentives 

-Tax credits 

-Rebates 

• Voluntary Energy Efficiency Targets • The Proposed Approach 

(Performance Standards) 

Each alternative has been evaluated 

in terms of its ability to achieve ' 

significant energy savings at reasonable 

costs and has been compared to the 

effectiveness of the proposed approach. 

If no new regulatory action were 

t.aken, then no new standards would be 

implemented for refrigerators 'or small 

gas furnaces. This is essentially the 

"base case" for each appliance. In this 

case, between the years 1992 and 2015, 

there would be expected energy use of 

44.09 Quads of primary energy. with no energy savings and a zero net present 

value. 

Several alternatives to the base case 

can be grouped unqer the heading of 

informational action. They include consumer product labeling and DOE's 

public education and information 

program. Both of these alternatives are mandated by the Act. One base case 

alternative would be to estimate the 

energy conservation potential of 

enhancing these programs; To model 

this possibility, the Department assumed 

that market discount rates would be 

lowered by five percent for purchasers 

of these products. This resulted in no 

energy savings, with expected . 

consumption equal to 44.09 Quads. The 

net present value is estimated to be 

$0.00. 

Another method of setting standards 

would entail requiring that certain 

design options be used on each product, 

i.e., prescriptive standards. For 

refrigerators, this involved assuming a 

1.5 inch foam door and 5.0 EER 

compressor (4.0 EER compressor for 

manual defrost units) and, for small gas 

furnaces, a power burner. This resulted 

in energy consumption, between 1992 

and 2015, of 40.37 Quads, and savings of 

3.71 Quads. The net present value, in 

1987 dollars, was $7.79 billion. 

Various financial incentive 

alternatives were tested. These included 

tax credits and rebates to consumers. as well as tax credits to manufacturers. 

The tax credits to consumers were 

assumed to be 15 percent of the 

increased cost of higher energy 

efficiency features of these appliances, 

while the rebates were assumed to be 15 

percent of the increase in equipment 

prices. The tax credits to consumers 

showed almost no change from the base 

case, i.e., this alternative would save less than 0.01 Quad with a net present 

value of $80 million. Consumer rebates 

however, would save 0.05 Quad with a 

net present value of $260 million. 

. The consumer rebate program and the 

tax credit program, would return to the 

participating consumer exactly the same amount of money. However, it is 

expected that there will be more participants in the rebate program. 

Therefore, the rebate program would 

result in substantially more energy 

savings than the tax credit program 

would. 

The most important differences to the 

consumer between rebate and tax credit 

programs is that a rebate can be 

obtained quickly, whereas a tax credit is , delayed until income taxes are filed or a 

tax refund is provided by the Internal 

Revenue Service. This means that 

middle- and low-income purchasers, 

who generally have little ready cash to 

purchase more expensive products, are not as likely to take advantage of the 

program as are upper income , . purchasers.,To simulate this impact, 

DOE has assumed that only 60 percent 

of consumers would purchase more 

energy efficient products as a result of 

the tax credit program. 

le, 

Another financial incentive that was 

considered was tax credits to 

manufacturers for the production of 

energy-efficient refrigerators and small 

gas furnaces. In this scenario, an 

investment tax credit (ITC) of 20 percent 

was assumed; The tax credits to 

manufacturers had almost no effect, 

since the energy consumption estimates are 44.09 Quads with no energy savings, 

and a net present value equal to $30 

million. 

The impact of tb.is scenario is so small 

because the ITC was applicable only to 

the tooling and machinery costs of the 

firms, i.e., the firms: fixed cost, and most 

of the design improvements that would 

likely be adopted to manufacture more 

efficient versions of these products 

would involve purchased parts. 

Expenses ,for p).ll'chased parts would not 

be eligible for an ITC. 

Two scenarios of voluntary energy 

efficiency targets were examined; in the 

first one, energy conservation standards 

were assumed to be adopted voluntarily 

by all the relevant manufacturers in five 

years, and, in the second scenario, the 

standards were assumed to be adopted 

in 10 years. In these scenarios, the five 

year delay would result in energy 

consumption by these appliances of 

40.71 Quads, energy savings of 3.38 

Quads, and a new present value of $5.69 

billion; the 10 year delay would result in 

42.27 Quads of energy being consumed, 

1.82 Quads being saved, and a ,net 

present value of $3.43 million. 

These scenarios assume that there 

would be universal voluntary adoption 

of the energy conservation standards by 

the refrigerator and small gas furnace 

manufacturers, an assumption for which 

there is no reasonable assurance. 

. Lastly, all of.these alternatives must 

be gauged against the performance 

standards that.are being prescribed by 

this rule. Such performance standards 

would result in energy consumption of 

refrigerators and small gas furnaces to 

total an estimated 38:89 Quads of 

primary energy over the 1992-2015 time 

period. Savings would be 5.20 Quads, 

and the net present value would be an 

expected $9.18 billion. 

As noted at the beginning of this , section, none of the alternatives that . 

were considered for refrigerators and 

small gas furnace would save as much 

energy as today's rule. 

c. Federalism Review 

Executive Order 12612 (52 FR 41685, 

October 30, 1987) requires thar 

regulations or rules be reviewed for any 

substantial direct effects on States, on 
54FR47916

Federal Registe / Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

the relationship between the National

Government and the States, or on the

distribution of power and

`responsibilities among various levels of

government. If there are sufficient

substantial direct effects, then Executive

Order 12612 requires preparation of a

federalism assessment to be used in all

decisions involved. in promulgating and

implementing a regulation or a rule.

DOE has identified a substantial

direct effect that today's rule would

have on State governments. It would

initially preempt inconsistent State

regulations. However, DOE has

concluded that the initially preemptive

effect is not sufficient to warrant

preparation of a federalism assessment

for the following reason: the Act

provides for subsequent State petitions

for exemption, which necessarily means

that the determination as to whether a

State law prevails must be made on a

case-by-case basis using criteria set

forth in the Act. When DOE receives

such a petition, it will be appropriate to

consider preparing a federalism

assessment consistent with the criteria

in the Act.

d. Regulatory Flexibility Review

The Regulatory Flexibility Act of 1980

(Public Law 96-354) requires an

assessment of the impact-of regulations

on small businesses. Small businesses

are defined as those firms within an

industry that are privately owned and

less dominant in the market.

In this rulemaking, two different

products and, hence, industries, are

being addressed. Regulatory flexibility

issues are addressed for the two

industries for which standards are being

finalized.

First, the energy conservation

standard of 78 percent AFUE on those

small gas furnace manufacturers, who

could be considered small businesses, is

discussed. There is no indication that

the impact of standards will be directly

related to firm size. Although different

size firms have different cost structures,

industry sources indicate that, overall,.

neither large nor small firms have a cost

advantage and that neither large nor

small firms tend to have a higher

proportion of fixed cost. A corollary to

this observation is that profits are also

not correlated to firm size. Some large

firms are quite profitable, while others

earn more modest profits, and the same

is true for smaller firms.

The Engineering Analysis indicates

that the measures necessary to meet the

standards levels under consideration

involve using additional purchased parts

which do not require development costs

of the appliance manufacturer. While

larger firms may have some slight cost

advantage from buying in larger

quantites, the fact that the design

options predominantly involve

purchased parts tends to be an

equalizing factor among different-sized

firms.

Therefore, the fact that this energy

conservation standard on small gas

furnaces is not likely to "have a

significant economic impact on a

substantial number of small entities"

suggests that the provisions of section

605.(b) of the Regulatory Flexibility Act

pertain. These provisions state that

neither an initial nor a final regulatory

flexibility analysis need be performed

for a proposed or final rule "if the head

of the agency certifies that the rule will

not, if promulgated, have a significant

economic impact on a substantial

number of small entities."

Of the eight small refrigerator firms

reviewed for this analysis, three make

custom refrigerators, three make

compact units (largely for mobile homes

and recreational vehicles), and two

make 3-in-1 units with range tops and

sinks.

The analysis of combined-unit

manufacturers is straightforward. Threein-one units are not covered by the

present standards, so these

manufacturers will not be affected.

The custom refrigerator manufacturers

seem to be fairly well protected for two

reasons; they are not exposed to either

direct foreign competition or direct

competition from major domestic firms,

and because they produce custom units

they have a greater ability to make

design changes compared to a large

manufacturer. These two facts indicate

that standards will probably not hurt the

custom manufacturer's control of its

market; however, its market may shrink

due to price increases. This cannot be

estimated without engineering data and

an estimate of the elasticity of demand

in this market. One thing must be

Product class

47943

remembered when analyzing this

problem: standards will increase the

price of standard refrigerators and this

will offset (partly or more than

completely) the impact of the price

increase of custom refrigerators.

The three small manufacturers of

compact refrigerators are probably at

the greatest risk, both without standards

and from standards. They face stiff

foreign competition from large foreign

manufacturers.

In conclusion, since neither of the

standards is expected to have a

"significant economic impact on a

substantial number of small entities,"

the Department has found that it was

not necessary to prepare a regulatory

flexibility analysis.

List of Subjects in 10 CFR Part 430

Administrative practice and

procedure, Energy consideration,

Household appliances.

In consideration of the foregoing, part

430 of chapter II of title 10, Code of

Federal Regulations, is amended as set

forth below.

Issued in Washington, DC, November 13,

1989.

J. Michael Davis, P.E.,

Assistant Secretary, Conservation and

Renewable Energy.

PART 430-ENERGY CONSERVATION

PROGRAM FOR CONSUMER

PRODUCTS

1. The authority citation for part 430

continues to read as follows:

Authority: Energy Policy and Conservation

Act, title III, part B, as amended by National

Energy Conservation Policy Act, title IV, part

2, National Appliance Energy Conservation

Act of 1987, and National Appliance Energy

Conservation Amendments of 1988 (42 U.S.C.

6291-6309).

2. Section 430.32 is amended by

revising paragraph (a) as follows:

§ 430.32 [Amended]

(a) Refrigerators/refrigeratorfreezers/freezers: These standards do

not apply to refrigerator and

refrigerator-freezers with total

refrigerated volume exceeding 39 cubic

feet or freezers with total refrigerated

volume exceeding 30 cubic feet.

Energy standards equations (Kwh/yr) Effective

dates

January 1, 1990 January 1, 1993

1. Refrigerators and Refrigerator-Freezers with manual defrost ................................................................................................ (16.3AV1- 316) (19.9"+98)

2. Refrigerator-Freezer-partial automatic defrost ........................................................................................................................ (21.8AV 1 429} (10.4AV+398)

3. Refrigerator-Freezers-automatic defrost with: Top-mounted freezer without through-the -door ice service ^ ................. (23.5AV+471) (16.OAV+355)

4. Refrigerator-Freezers-automatic defrost with: Side-mounted freezer without through-the=door ice service . .................. (27.7AV+488) (11.8AV+501)

5. Refrigerator-Freezers-automatic defrost with : Bottom-mounted freezer without through=the-door ice service .............. (27.7AV+488) (14.2AV+364)

 CE-RM-87-102 COMMENT 10

54FR47916 

Federal Register I Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 47943 

the rela.tionship between the National 

Government and the Siates, or on t.~e 

distribution of power and 

··responsibilities among various levels of 

government. If there are sufficient 

substantial direct effects, then Executive 

Order 12612 requires preparation of a 

federalism assessment to be used in all 

decisions involved.in promulgating and 

implementing a regulation or a rule. 

DOE has identified a substantial 

direct effect that today's rule would 

have on State governments. It would 

initially preempt inconsistent State 

regulations. However, DOE has 

concluded that the initially preemptive 

effect is not sufficient to warrant 

preparation of a federalism assessment 

for the following reason: the Act . 

provides for subsequent State petitions 

for exemption, which necessarily means 

that the determination as to whether a 

State law prevails must be made on a 

case-by-case basis using criteria set 

forth in the Act. When DOE receives 

such a petition, it will be appropriate to 

consider preparing a federalism 

assessment consistent with the criteria 

in the Act. 

d Regu1ato.ry FlexibI1ity Review 

The R,egulatory Flexibility Act of 1980 

(Public Law 9(}"354) requires an 

assessment of the impact-of regulations 

on small businesses. Small bUSinesses 

are defined as those firms within· an 

industry that are privately owned and 

less dominant in the market. 

In·this rulemaking, two different 

products and, hence, industries, are 

being addressed. Regulatory flexibility 

issues are addressed for the two 

industries for which standards are being 

finalized. 

First, the energy conservation 

standard of 78 percent AFUE on those 

small gas furnace manufacturers, who 

could be considered small businesses, is 

discussed. There is no indication that 

the impact of standards will be directly 

related to firm size. Although different 

size firms have different cost structures, 

industry sources indicate that, overall,. 

neither large nor small firms have a cost 

advantage and that neither large nor 

small firms tend to have a higher 

proportion of fixed cost. A corollary to 

this observation is that profits are also 

not correlated to firm size. Some large 

firms are quite profitable, while others 

earn more modest profits, and the same 

is true for smaller firms. 

The Engineering Analy.sis indicates 

that the measures necessary to meet the 

standards levels under consideration 

involve using additional purchased parts 

which do not require development costs 

of the appliance manufacturer. While 

larger firms may have some slight cost 

advantage from buying in larger 

quantites, the fact that the design 

options predominantly involve 

purchased parts tends to be an 

equalizing factor among different-sized 

firms. 

Therefore, the fact that this energy 

conservation standard on small gas 

furnaces is not likely to "have a 

significant economic impact on a 

substantial number of small entities" 

suggests that the provisions of section 

605.[b) of the Regulatory Flexibility Act 

pertain. These provisions state that 

neither an initial nor a final regulatory 

flexibility analysis need be performed 

for a proposed or final rule "if the head 

of the agency certifies that the rule will 

not, if promulgated, have a significant 

economic impact on a substantial 

number of small entities." 

Of the eight small refrigerator firms 

reviewed for this analysis, three make 

custom refrigerators, three make 

compact units (largely for mobile homes 

and recreational vehicles), and two 

make 3-in-l units with range tops and 

sinks. 

The analysis of combined-unit 

manufacturers is straightforward. Threein-one units are not covered by the 

present standards, so these 

manufacturers will not be affected. 

The custom refrigerator manufacturers 

seem to be fairly well protected for two 

reasons; they are not exposed to either 

direet foreign competition or direct 

competition from major domestic firms, 

and because they produce custom units 

they have a greater ability to make 

design changes compared to a large 

manufacturer. These two facts indicate 

that standards will probably not hurt the 

custom manufacturer'S control of its 

market; however, its market may shrink 

due to priGe increases. This cannot be 

estimated without engineering data and 

an estimate of the elasticity of demand 

in this market. One thing must be 

Product class 

remembered when analyzing this 

problem: standards will increase the 

price of standard refrigerators and this 

will offset (partly or more than 

completely) the impact of the price 

increase of custom refrigerators. 

The three small manufacturers of 

compact refrigerators are probably at 

the greatest risk, both without standards 

and from standards. They face stiff 

foreign competition from large foreign 

manufacturers. 

In conclusion, since neither of the 

standards is expected to have a 

"significant economic imp~ct on a 

substantial number of small entities," 

the Department has found that it was 

not necessary to prepare a regulatory 

flexibility analysis. 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Energy consideration, 

Household appliances. 

In consideration of the foregoing, part 

430 of chapter·II of title 10, Code of 

Federal Regulations, is amended as set 

forth below. 

Issued in Washington, DC, November 13, 

1989. 

J. Michael Davis, P.E., 

Assistant Secretary. Conservation and 

Renewable Energy. 

PART 430-ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

1. The authority citation for part 430 

continues to read as foHows: 

Authority: Energy Policy and Cmi.servation 

Act, title III. part B, as amended by National 

Energy Conservation Policy Act. title IV. part 

2. National Appliance Energy Conservation 

Act of 1987. and National Appliance Energy 

Conservation Amendments of 1988 (42 U.S.C. 

6291-6309). 

2. Section 430.32 is amended by 

revising paragraph (a) as follows: 

§ 430.32 [Amended] 

(a) Refrigeratorslrefrigeratorfreezerslfr?ezers; These standards do 

not apply to refrigerator and 

refrigerator-freezers with total 

refrigerated volume exceeding 39 cubic 

feet or freezers with total refrigerated 

volume exceeding 30 cubic feet. 

Energy standards equations (Kwh/yr) Effective 

dates 

January 1, 1990 January 1, 1993 

1. Refrigerators and Refrigerator·Freezers with manual defrost .. : ................ : ........................ : .................................................... . (16.3AV+316) 

(21.8AV +429) 

(23.5AV+471) 

(27.7AV+488) 

(27.7AV+488) 

(19.9AV+98) 

(1 0.4AV +398) 

"(16.0AV+355) 

(11.8AV+501) 

(14.2AV+364) 

2. Refrigerator·Freezer-partial al..1omatic defrost ...................................................................................................... ~ ................ . 

3. Refrigerator-Freezers,-automatic defrost with: Top·mounted freezer without througlJ.the-door ice service , ................ . 

4. Refrigerator-Freezers-.-automatic defrost with: Side-mounted freezer without througlJ.thEHloor ice service .................. . 

5. Refrigerator-Freezers-automatic de(rost with: Bottom·mounted freezer without through,the·door ice service ............. . 
54FR47916

47944 Federal Register

Product class

Energy standards equa

dat

January 1. 1990

6. Refrigerator-Freezers-automatic defrost with: Top-mounted freezer with through-the-door ice service .........................

7. Refrigerator-Freezers-automatic defrost with: Side-mounted freezer with through-the-door ice service ........................

6. Upright Freezers with: Manual defrost ............................................... .._........................................ .................... ........................

9. Upright Freezers with: Automatic defrost ................. ............................. _............. ......................................................................

10. Chest Freezers and all other Freezers .......................................................... _.........................................................................

I Including all refrigerators with automatic defrost

AV=Total adjusted volume, expressed in Ft.3, as determined in Appendices Al and B1 of Subpart B of this Part.

3. Section 430.32(e) is amended by the Energy Policy and Conservation Act,

revising the Table headings and Item 3. as amended, requires the Attorney

in the table, and by adding footnote 1 to General's determinations and analyses

the table to read as follows, to be published in the Federal Register.

(e) Furnaces.

AFUEI

Product class (per- Effective date

cent)

This notice presents the determinations

and analyses.

Issued in Washington, DC, November 15,

1989.

B. Reid Detchon,

Princilial Deputy Assistant Secretary,

Conservation and Renewable Energy.

3. Small furnaces

(other than

furnaces

designed solely

for installation in

mobile homes)

having an input

rate of less than

45,000 Btu/hr

(A) Weatherized 78 January 1, 1992.

(outdoor).

(B) Non- 78 January 1, 1992.

weatherized

(indoor).

I Annual Fuel Utilization Efficiency, as determined

in § 430.22(r)(2) of this part.

(FR Doc. 89-26965 Filed 11-13-89; 3:29 pm]

BILLING CODE 6450-01-M

10 CFR Part 430

(Docket No. CE-RM-87-1021

Energy Conservation Program for

Consumer Products; Energy

Conservation Standards for Two

Types of Consumer Products

AGENCY: Office of Conservation and

Renewable Energy, DOE.

ACTION: Publication of Department of

Justice Determinations and Analyses of

Competitive Impacts.

SUMMARY: In today's Federal Register,

the preamble to the final rule on energy

conservation standards for small gas

furnaces, and refrigerators, refrigeratorfreezers and freezers presented the

Attorney General's findings on the

competitive impacts of the standards in

the final rule. Section 325(1)(2)(B)(ii) of

Vol. 54, No. 221 / Friday, November 17, 1989 / Rules and Regulations

Honorable Donna R. Fitzpatrick,

Acting Secretary of Energy, United States

Department of Energy, Forrestal Building,

1000 Independence Ave., SW., Washington,

DC 20585.

Dear Ms. Fitzpatrick: By letter dated

December 9,1988, the Department of Energy

("DOE") transmitted to the Attorney General

a Notice of Proposed Rulemaking (53 FR

48798) addressing energy standards for three

classes of household appliances. Section 325

of the Energy Policy and Conservation Act,

as amended in 1987 (42 U.S.C. 6295). requires

the Attorney General to determine the

impact, if any, of any lessening of

competition likely to result from the proposed

standards, Competitive impact is one of

seven criteria to be considered by DOE in

evaluating proposed standards. This letter

contains the competitive impact

determination of the Department of justice

("Department").

Summary

The evidence available to the Department

does not indicate that any significant

lessening of competition is likely to result

from the imposition of any of the proposed

standards contained in DOE's Notice of

Proposed Rulemaking. For small gas furnaces

and television sets, the available evidence

affirmatively suggests that no significant

adverse competitive impact is likely. In the

case of refrigerators, refrigerator-freezers,

and freezers, it is the Department's best

judgment based on the available evidence

that no significant adverse competitive

impact is likely; but, under certain limited

conditions described below, an

unquantifiable adverse competitive impact

would be possible.

Discussion

In appraising the competitive effect of the

proposed standards in the context of this

statute, the Department has examined the

relevant markets within which the standards

will operate. The Department has then

considered whether adoption of the

standards would be likely to contribute to

(26.4AV + 535)

(30.9AV + 547)

(10.9AV +422)

(16.OAV+623)

(14.BAV + 223)

ions (Kwh/yr) Effective

as

January 1. 1993

(17.6AV+391)

(16.3AV+527)

(10.3AV+264)

(14.9AV+391)

(12.OAV+124)

increased levels of concentration and, if so,

whether the resulting concentration levels

and other relevant market conditions would

facilitate either oligopolistic pricing or actual

price fixing. The Department also has

considered whether, independent of or in

conjunction with any increase in

concentration, the standards would be likely

to facilitate oligopolistic pricing or price

fixing by increasing product homogeneity.

In this instance, the Department has

utilized the HHI computations, commonly

employed in market analysis and described

in the Department's merger guidelines, as an

initial "screen." This screen has permitted the

Department to conclude that the proposed

standards are unlikely to have a significant

adverse impact on competition in two classes

of appliances: small gas furnaces and

television sets. In both instances, the DOE

technical support document provides

information that permits the Department to

calculate HHI figures for the tentatively

defined markets in question. For each

market-small gas furances, color television

sets, and black and white television sets-the

HHI figure is below 1.800. In other words,

none of these markets is highly concentrated.

At levels of concentration below 1,800,.the

number of competitors is ordinarily sufficient

to make competitive pricing likely and to

defeat oligopolistic pricing. Even if the

standards resulted in increased costs and

reduced the number of competitors, or

increased product homogeneity in some

measure, the Department would expect that

the markets in question would continue to

enjoy a substantial measure of competition.

Although price fixing can occur in less

concentrated markets, the conditions that

accompany this threat do not appear to be

present in the markets in question.

The analysis of refrigerators, refrigeratorfreezers, and freezers is more complex

because the risk of an adverse competitive

impact is not diminished by the existing

market structure as reflected in the HHI

figures. Based on data contained in the

technical support document, refrigerators and

freezers have HHI figures, respectively, of

over 2,200 and over 3,000. These figures

reflect high levels of concentration, albeit at

the lower end of the highly concentrated

range (whose maximum is 10,000). It is thus

prudent to examine more' closely the

possibility that the standards could increase

concentration within a market, increase

product homogeneity, or both.

The possibility that concentration might

increase depends primarily on whether

compliance with the standards both (1)

increases costs significantly and (2) results in

 CE-RM-87-102 COMMENT 10

54FR47916 

47944 Federal Register / Vol. 54, No. 221 I Friday, November 17, 1989 I Rules and Regulations 

Product class 

Energy standards equations (Kwhlyr) EHective 

dates 

January 1. 1990 January I. 1993 

6. Refrigerator·Freezers-automatic defrost with: Top·mounted freezer with through·the·door ice service ........................ . (26.4AV + 535) 

(30.9AV + 547) 

(10.9AV +422) 

(16.0AV +623) 

(14.8AV +223) 

(17.6AV+391) 

(16.3AV +527) 

(10.3AV +264) 

(14.9AV +391) 

(12.0AV+124) 

7. Refrigerator-Freezers-automatic defrost with: Side· mounted freezer with through·tha-door ice service ....................... . 8. Upright Freezers with: Manual defrost ...................................................................................................................................... .. 9. Upright Freezers with: Automatic defrost .................................................................................................................................. . 10. Chest Freezers and all other Freezers ........................................................ ;._ .... _ .................................................................. . 

I Including all refrigerators with automatic defrost 

AV= Total adjusted volume. expressed in Ft.'. as determined in Appendices AI and 81 of Subpart 8 of this Part. 

3. Section 430.32(e) is amended by 

revising the Table headings and Item 3. 

in the table, and by adding footnote 1 to 

the table to read as follows. 

(e) Furnaces. 

Product class 

3. Small furnaces 

(other than 

furnaces 

designed solely 

for installation in 

mobile homes) 

having an i!1put 

rate of less than 

45.000 8tu/hr 

(A) Weatherized 

(outdoor). 

(8) Non· 

weatherized 

(indoor). 

AFUE I 

(per. 

cent) 

Effective date 

78 January 1. 1992. 

78 January 1. 1992. 

I Annual Fuel Utilization Efficiency. as determined 

in § 430.22(n)(2) of this part. 

[FR Doc. 89-26965 Filed 11-13-89; 3:29 pm] 

BILLING CODE 6451>-01 .. M 

10 CFR Part 430 

[Docket No. CE-RM-87-102] 

Energy Conservation Program for 

Consumer Products; Energy 

Conservation Standards for Two 

Types of Consumer Products 

AGENCY: Office of Conservation and 

Renewable Energy. DOE. 

ACTION: Publication of Department of 

Justice Determinations and Analyses of 

Competitive Impacts. 

SUMMARY: In today's Federal Register. 

the preamble to the final rule on energy 

conservation standards for small gas 

furnaces. and refrigerators. refrigerator· 

freezers and freezers presented the 

Attorney General's findings on the 

competitive impacts of the standards in 

the final rule. Section 325(1)(2)(B)(ii) of 

the Energy Policy and Conservation Act. 

as amended. requires the Attorney 

General's determinations and analyses 

to be published in the Federal Register. 

This notice presents the determinations 

and analyses. 

Issued in Washington. DC. November 15. 

1989. 

B. Reid Detchon, 

Principal Deputy Assistant Secretary. 

Conservation and Renewable Energy. 

Honorable Donna R. Fitzpatrick, 

Acting Secretary of Energy. United States 

Department of Energy. Forrestal Building. 

1000 Independence Ave .. SW .• Washington. 

DC 20585. 

Dear Ms. Fitzpatrick: By letter dated 

December 9. 1988. the Department of Energy 

("DOE") transmitted to the Attorney General 

a Notice of Proposed Rulernaking (53 FR 

48798) addressing energy standards for three 

classes of household appliances. Section 325 

of the Energy Policy and Conservation Act. 

as amended in 1987 (42 U.S.C. 6295). requires 

the Attorney General to determine the 

impact. if any. of any lessening of 

competition likely to result from the proposed 

standards. Competitive impact is one of seven criteria to be considered by DOE in 

evaluating proposed standards. This letter 

contains the competitive impact 

determination of the Department of Justice 

("Department"). 

Summary 

The evidence available to the Department 

does not indicate that any significant 

lessening of competition is likely to result 

from the imposition of any of the proposed 

standards contained in DOE's Notice of 

Proposed Rulemaking. For small gas furnaces 

and television sets. the available evidence 

affirmatively suggests that no significant 

adverse competitive impact is likely. In the 

case of refrigerators. refrigerator·freezers. 

and freezers. it is the Department's best 

judgment based on the available evidence 

that no significant adverse competitive 

impact is likely; but. under certain limited 

conditions described below. an . 

unquantifiable adverse competitive impact 

would be possible. 

Discussion 

In appraising the competitive effect of the 

proposed standards in the context of this 

statute. the Department has examined the 

relevant markets within which the standards 

will operate. The Department has then 

considered whether adoption of the 

standards would be likely to contribute to 

increased levels of concentration and. if so. 

whether the resulting concentration levels 

and other relevant market conditions would 

facilitate either oligopolistic pricing or actual 

price fixing. The Department also has 

considered whether. independent of or in 

conjunction with any increase in 

concentration. the standards would be likely 

to facilitate oligopolistic pricing or price 

fixing by increasing product homogeneity. 

In this instance. the Department has 

utilized the HHI computations. commonly 

employed .in market analysis and described 

in the Department's merger guidelines. as an 

initial "screen." This screen has permitted the 

Department to conclude that the proposed 

standards are unlikely to have a significant 

adverse impact on competition in two classes 

of appliances: small gas furnaces and 

television sets. In both instances. the DOE 

technical support document provides 

information that pennits the Department to 

calculate HHl figures for the tentatively 

defined markets in question. For each 

market-small gas furances. color television 

sets, and black and white television sets-the 

HHI figure is below 1.800. In other words. 

none of these markets is highly concentrated. 

At levels of concentration below 1,800 •. the 

number of competitors is ordinarily sufficient 

to make competitive pricing likely and to 

defeat oligopolistic pricing. Even if the 

standards resulted in increased costs and 

reduced the number of competitors. or 

increased product homogeneity in some 

measure. the Department would expect that 

the markets in question would continue to 

enjoy a substantial measure of competition. 

Although price fixing can occur in less 

concentrated markets. the conditions that 

accompany this threat do not appear to be 

present in the markets in question. 

The analysis of refrigerators. refrigeratorfreezers. and freezers is more complex 

because the risk of an adverse competitive 

impact is not diminished by the existing 

market structure as reflected in the HHI 

figures. Based on data contained in the 

technical support document. refrigerators and 

freezers have HHI figures. respectively. of 

over 2.200 and over 3.000. These figures 

reflect high levels of concentration. albeit at 

the lower end of the highly concentrated 

range (whose maximum is 10.000). It is thus 

prudent to examine more 'closely the 

possibility that the standards could increase 

concentration within a market. increase 

product homogeneity. or both. 

The possibility that concentration might 

increase depends primarily on whether 

compliance with the standards both (1) 

increases costs significantly and (2) results in