17

- i CHAPTER 17. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION

................................ ................................ ................................ ......... 17

- 1

17.2 METHODOLOGY

................................ ................................ ................................ ........ 17

- 1

LIST OF TABLES

Table 17.1.1 Non

- Regulatory Alternatives to Standards

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- 117

- 1 CHAPTER 17. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

Under the Process Rule ( Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products , 61 FR 36974 (July 15, 1996)), the U.S. Department of Energy (DOE) is committed to continually explore non

- regulatory alternatives to standards. DOE will prepare a draft regulatory impact analysis pursuant to E.O. 12866, “Regulatory Planning and Review,” which will be subject t o review under the Executive Order by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 51735. DOE has identified seven major alternatives to standards as representing feasible policy options to reduce consumer produ ct energy consumption . It will evaluate each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and will compare the effectiveness of each one to the effectiveness of the proposed standards rule.

The non

- regula tory means of achieving energy savings that DOE proposes to analyze are

listed in Table 17.1.1 . The technical support document (TSD) in support of DOE’s notice of

p roposed rulemaking will include a quantitative analysis of each alternative, the methodology for which is discussed briefly below.

Table 17.1.1 Non

- Regulatory Alternatives to Standards No new regulatory action

Consumer tax credits

Manufacturer tax credits

Performan ce Standards

Rebates
Voluntary energy efficiency targets
Early replacement
Bulk government purchases

17.2 METHODOLOGY

DOE will use the n ational i mpact a nalysis (NIA) s preadsheet m odel to calculate the national energy savings and the net present value (NPV) corresponding to each alternative to the proposed standards. The NIA m odel is discussed in c hapter 10 of the TSD. To compare each alternative quantitatively to the proposed energ y conservation standards, DOE will need to quantify the effect of each alternative on the purchase and use of energy efficient room air conditioners and clothes dryers . Once it has quantified each alternative, DOE will make the appropriate revisions to the inputs in the NIA m odels. Key inputs that DOE may revise in these

models are:

• Energy prices and trends ;17

- 2 • Implicit market discount rates for trading off purchase price against operating expense when choosing product efficiency;

• Consumer purchase price, oper ating cost, and income elasticities;

• Consumer price

- versus

- efficiency relationships; and

• Product stock data (purchase of new products or turnover rates for inventories).

The key measures of the impact of each alternative will be:

• National energy savings: Cumulative national energy use from the base case projection minus the alternative policy case projection.

• Net present value: The value of future operating cost savings from products bought in

a 30

- year period beginning in the effective date of the new sta ndard. DOE will calculate the NPV as the difference between the present value of product and operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy case. DOE will discount future operati ng and product expenditures using a seven

- percent and three

- percent real discount rate. It will calculate operating expenses (including energy costs) for the life of the products

.