March 20 , 2015

VIA E

- MAIL

Ms. Brenda Edwards U.S. Department of Energy Building Technologies Program Mailstop EE

‐ 5B 1000 Independence Avenue, SW Washington, DC 20585

- 0121

RE: American Gas Association Request s Opportunity to Speak at March 27 Public Meeting ( Docket No

. EERE

– 2014

– BT

– STD

– 0031 / RIN 1904

‐ AD 20 )

Pursuant to the Department of Energy’s ( DOE ) Notice of Proposed Rulemaking and Announcement of Public Meeting regarding Energy Conservation Standards for Residential

Furnace s
, 80 Fed. Reg. 13120 ( Mar

. 12, 2015 ), the American Gas Association (AG A) respectfully requests the opportunity to make an oral statement at DOE’s March 27, 2015 public meeting

.

AGA, founded in 1918, re presents over 200 local energy companies that deliver clean natural gas throughout the United States. There are more than 70 million residential, commercial and industrial natural gas customers in the U nited States , of which 91 percent

— more than 64

million customers

— receive their gas from AGA members. 1 AGA members are directly affected by DOE

- established energy conservation standards applicable to natural gas appliances such as gas furnaces . AGA is particularly concerned about standards that could skew consumers’ choice of fuel for space heating and water heating

.

Attached, please find an advance copy of AG A’s summary st atement as requested in the

March 12 Notice

.

Please contact me if you have any questions about AG A’s request to speak at the publ ic meeting

.

Respectfully,

Vice President, Policy Strategy

American Gas Association

1 For more information, please visit www.aga.org

.Summary Statement of American Gas Association

March 27, 2015 Public Meeting Notice of Proposed Rulemaking Regarding Energy Conservation Standards for Residential Furnaces

Docket No. EERE

- 2014

- BT

- STD

- 0031

The American Gas Association (AG A) appreciates the opportunity to present its views on the Department of Energy’s (DOE) notice of proposed r ulemaking (NOPR) regarding energy

conservation standards for residential furnaces

.

AGA and its member companies are strong advocates for energy efficiency in all direct use applications of natural gas. Nationwide, natural gas utilities su pported energy efficiency programs with investments nearing $1.1 billion in 2012, and similar investments in 2013 reached $1.5 billion. Through these energy efficiency investments, AGA members helped customers save 136 trillion Btu of energy and offset 7.1 million metric tons of carbon dioxide in 2012.

AGA is concerned that DOE’s proposal to adopt a 92 percent AFUE standard will have unintended consequences , comes with significant economic burdens to American consumers , and

overestimates the associated ene rgy savings

. AGA is also deeply concerned by the Department’s

consistent lack of transparency throughout this rulemaking process

. AGA offers the following preliminary comments on the NOPR:

DOE has erred by conducting a non

- transparent process. The DOE process associated with this rulemaking has consistently obscured the assumptions, data, and methodologies contained in their technical documents in support of the rule. Despite written inquiries, questions submitted by AGA to the DOE have gone al most completely unanswered. This is particularly troubling given the immense complexity of the proposed rule and its reliance on highly sophisticated and opaque modeling methodologies. Much of the DOE analysis relies on methodologies that are proprietary or otherwise outside the public domain. Because DOE has failed to provide sufficient information needed by AGA

– or any member of the public

– to develop a clear understanding of the technical analysis supporting this rulemaking, it is impossible to asce rtain whether or not the proposed rule meets the criteria established by EPCA for establishing new

and/or amended standards.

In light of this, AGA respectfully requests that DOE provide all information requested that had previously been withheld as delibe rative information, and extend the comment period to allow for all parties to have suitable time to analyze this newly provided information.

DOE’s economic analysis underestimates the costs to consumers and other adverse impacts

that amended standards wo uld impose

. AGA is concerned that DOE’s cost and energy impact estimates do not fully reflect the costs that the proposed standard of 92 percent AFUE would impose on consumers and the nation

. I f finalized, AGA believes the rule would impose

burdensome cos ts and renovatio ns on many homeowners replacing their natural gas furnace s

.According to the Department’s own analysis, 66 percent of affected households would see no

benefit or bear higher net costs under the proposed rule. In particular, this rule will place an

undue burden on low income consumers who will be unable to overcome the initial barrier presented by the higher unit costs of condensing furnaces.

A 92 percent AFUE standard is not cost justified. Even based on DOE’s own analysis, AGA

believes that the DOE proposal to adopt TSL 3 would be too burdensome on consumers. Under DOE’s own analysis, TSL 3 will lead to increased costs for a significant number of consumers. Specifically, according to DOE’s own analysis, 20 percent of households nation wide would see a net life cycle cost increase ; 31 percent of consumers in the South region would experience ne t life cycle cost increase. Low

- income consumers would be disproportionately affected

– 39 percent of low

- income consumers in the South would bea r net life

- cycle costs. EPCA is intended to be a pro

- consumer statute, and a proposed standard that makes many consumers

worse off

, should not be considered economically justified.

AGA has jointly, along with the American Public Gas Association (APGA), retained the Gas Technology Institute (GTI) to assist it in analyzing the NOPR, and more specifically the GTI is an independent, not

- for

- profit technology organization engaged in resea rch, development and training addressing energy and environmental challenges to enable a secure, abundant, and affordable energy future. It develops technology

- based solutions for industry, government, and

consumers. Member s of the GTI team are available to participate in this public meeting, with the goal of securing as much information as possible about the NOPR and underlying TSD, concerning which we have many unanswered questions.

Our analysis to date has identified the following key concerns:

DOE underestimates adverse impacts from fuel switching

. In particular, DOE has failed to properly estimate the economic and energy costs associated with fuel switching. For DOE’s proposed standard

– Trial Standard Level 3 (TSL 3)

– DOE ’s own analysis already acknowledges that fully 60 percent of the energy savings from reduced natural gas consumption

will be offset by increased electricity usage due to fuel switching

. DOE’s own analysis already

shows that h armful emissions associated with electricity generation will also rise as a result of fuel switching , and that nearly 3,000 megawatts of additional generation capacity

– including more than 600 megawatts of additional coal

- fired capacity

– will be required if DOE adopts its proposal

. Importantly

, AG A is concerned that , because of consumer sensitivity to first costs (particularly for income

- constrained consumers)

, DOE’s estimates of fuel switching costs are too
low.

DOE overestimates product lifetime . Although industry estimates indicate that the a verage lifetime of a non

- weatherized gas furnace is 15 or 16 years, DOE’s estimate of 21.5 years is significantly longer. DOE’s optimistic assumption has the effect of inflating DOE’s estimates of net economic benefits and energy savings to consumers, and increasing estimates of the share of consumers who exper ience life

- cycle benefits

.

DOE overestimates the size of the affected market. AGA has questions and concerns with the methodologies and data used in key components of DOE’s Life Cycle Cost analysis /model. Acritical component for identifying the potential benefits a new or amended efficiency standard

will have on the market is to determine the size of the market that will actually be affected by the new standard. Based on our technical expert’s re view of the NOPR and TSD documents for the proposed rule, there appears to be flaws in th e methodologies used by DOE that would overestimate the size of the market that would be affected by the proposed standard which would result in overstating the saving s associated with the new standard.

DOE uses unexplained and inconsistent installation costs in its Life Cycle Cost analysis. When comparing DOE’s 2011 Life Cycle Cost analysis with the Life Cycle Cost analysis used in the proposed standard, our technical experts identified a large differential in the installed cost s of a baseline 80 percent NWGF and the installed cost of condensing NWGFs . The installed cost for the 80 percent NWGF have increased while the installed costs of the condensing NWGF have

decre ased. These large, unexplained changes in installed costs have contributed to improved Life Cycle Cost savings of condensing furnaces. In addition, the installed c ost differential between the 80 percent NWGF and the condensing NWGFs in DOE LCC analysis u sed for the proposed rule is significantly less than the cost differential data A GA members have collected from a national survey of c ontractors in their market areas.

DOE uses unexplained and inconsistent payback criteria in its Life Cycle Cost analysis. Our technical experts have also identified inconsistencies in the payback criteria used in the Product Switching methodology section of the NOPR and the payback criteria used in the Life Cycle Cost analysis The Product Switching methodology assumes swit ching will not take place in

cases where a payback is less than 3.5 year s . However, in the LCC model if the payback for the specified efficiency level is less than 3.5 years, switching does take place if switching options with paybacks over 3.5 years are present.

DOE has erred in not considering the performance characteristics of non

- condensing

furnaces. EPCA precludes DOE from setting a standard if the standard will result in the unavailability of products with a particular performance characteristic. Non

- condensing gas furnaces provide consumers with performance characteristics and utility that are distinct from those of condensing furnaces, because non

- condensing furnaces can be easily vented through masonry chimneys. Consumers place significant va lue on this venting utility, in part because

non

- condensing furnaces can be installed in existing masonry chimneys found in much of the nation’s housing stock.