CHAPTER 17. REGULATORY IMPACT ANALYSIS FOR 

REFRIGERATED BEVERAGE VENDING MACHINES
 

TABLE OF CONTENTS
 

17.1 INTRODUCTION ............................................................................................................ 17-1 

17.2 MAJOR POLICY ALTERNATIVES............................................................................... 17-2 

17.2.1 No New Regulatory Action ............................................................................... 17-2 

17.2.2 Tax Credits, Rebates, and Other Financial Incentives ....................................... 17-2 

17.2.3 Revisions to Voluntary Energy Efficiency Targets ........................................... 17-4 

17.2.4 Bulk Government Purchases and Early Replacement Incentive Programs ....... 17-4 

17.2.5 Prescriptive Standards that Would Mandate Design Requirements .................. 17-5 

17.2.6 Performance Standards ...................................................................................... 17-5 

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CHAPTER 17. REGULATORY IMPACT ANALYSIS FOR REFRIGERATED 

BEVERAGE VENDING MACHINES
 

17.1 INTRODUCTION 

Under the Process Rule, the U.S. Department of Energy (DOE) is committed to exploring 

non-regulatory alternatives to energy conservation standards. DOE prepared this regulatory 

impact analysis under Executive Order 12866, “Regulatory Planning and Review,” which will be 

subject to review by the Office of Information and Regulatory Affairs (OIRA). 

Executive Order 12866 §1(b)(1) requires that each agency identify in writing the specific 

market failure or other problem that warrants new agency action as well as assess the 

significance of that problem to determine whether any new regulation is necessary. 

DOE has determined that today’s regulatory action is not an “economically significant” 

action under §3(f)(1) of Executive Order 12866. 

In the notice of proposed rulemaking (NOPR) for this rulemaking, DOE requested 

feedback and data on a number of issues related to Executive Order 12866 and the existence of a 

market failure in the beverage vending machine industry. In this request, DOE sought: 

	 data on the efficiency levels of existing beverage vending machines in use by owner (i.e., 

site owner or machine operator), electricity price, equipment class (Class A or B 

machines) and installation type (i.e., indoors or outdoors); 

	 comment on the availability of energy efficiency information to end users and the extent 

to which the information leads to informed choices, specifically given how such 

equipment is purchased; 

	 data on the distribution of energy efficiency levels for both the new site owner and 

equipment operator markets; 

	 data on and suggestions for the existence and extent of potential market failures to 

complete an assessment of the significance of these failures and, thus, the net benefits of 

regulation; and 

	 comment on the weight that should be given to “external” benefits resulting from 

improved energy efficiency of beverage vending machines not captured by the users of 

such equipment. These benefits include both environmental and energy security-related 

externalities that are not reflected in energy prices, such as reduced emissions of 

greenhouse gases and reduced use of natural gas and oil for electricity generation. 

DOE prepared a regulatory impact analysis (RIA) for this rulemaking, subject to the 

OIRA review in the Office of Management and Budget (OMB). The RIA consists of: 

	 a statement of the problem addressed by this regulation and the mandate for Government 

action; 

	 a description and analysis of policy alternatives to this regulation; 

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	 a qualitative review of the potential impacts of the alternatives; and 

	 the national economic impacts of the proposed standard. 

The RIA assesses the effects of feasible policy alternatives to beverage vending machine 

standards and provides a comparison of the impacts of the alternatives. DOE evaluated the 

alternatives in terms of their ability to achieve significant energy savings at reasonable cost and 

compared it with the effectiveness of the proposed rule. DOE analyzed these alternatives 

qualitatively with reference to the particular market dynamics of the beverage vending industry. 

17.2 MAJOR POLICY ALTERNATIVES 

DOE identified the following major policy alternatives for achieving increased beverage 

vending machine energy efficiency: 

	 no new regulatory action; 

	 financial incentives, including tax credits and rebates; 

	 revisions to voluntary energy efficiency targets (e.g., ENERGY STAR program 

criteria); 

	 early replacement; 

	 bulk government purchases; and 

	 prescriptive standards that would mandate design requirements (e.g., lighting and 

refrigeration controls). 

DOE qualitatively evaluated each alternative’s ability to achieve significant energy 

savings at reasonable cost and compared it with the effectiveness of the proposed rule. The 

policy alternatives are discussed in the following sections. 

17.2.1 No New Regulatory Action 

The case in which no regulatory action is taken for beverage vending machines 

constitutes the base case (or No Action) scenario. By definition, no new regulatory action yields 

zero energy savings and a net present value of zero dollars. 

17.2.2 Tax Credits, Rebates, and Other Financial Incentives 

DOE considered the impact of various financial incentives at both the ENERGY STAR 

Tier 2 level and higher efficiency levels and examined the likelihood of an increase in customers 

purchasing high-efficiency equipment because of these financial incentives. See a discussion of 

the ENERGY STAR voluntary program below in section 17.2.3. 

In considering the impact of financial incentives, DOE reviewed existing rebate programs 

for beverage vending machines. Most existing rebate programs are utility-sponsored programs 

that provide incentives for incorporating lighting and temperature controllers. Also, similar 

rebates for other technologies (e.g., electronically commutated motors for evaporator fans) are 

provided in other industries, such as in the food sales industry for commercial refrigerated 

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display cases, and could theoretically be adapted for beverage vending machines. However, 

utility rebate programs are aimed at the site of installation and not at the manufacturers or 

purchasers of the machines (as most of the controllers covered by the rebate are add-on devices), 

and utility rebates are only provided for reduction of electricity at sites served by the utility. 

Because beverage vending machines purchased by large scale bottlers may not remain on a given 

site, tracking the location of rebated equipment could be an issue for utilities. Also, because most 

utility rebate programs are not aimed at the purchasers of the machines, they do not provide an 

incentive for the large bottlers who purchase the vast majority of the machines to choose highefficiency equipment. 

Besides utility-sponsored rebate programs, other programs possibilities include national 

manufacturer rebates, purchaser rebates, or tax incentives. Typically, these programs are 

advocated as a means to encourage households or organizations that are sensitive to the first cost 

of equipment to purchase or manufacture more-costly efficient equipment that has an ultimate 

favorable life cycle cost payoff either to the purchaser, to society, or both. The incentive can be 

given to the buyer of the equipment, the rate payer, or the manufacturer, depending on which 

method is considered to be most administratively effective. However, the nature of the beverage 

vending machine industry and market makes this approach largely ineffective. 

Two companies (PepsiCo and Coca-Cola) and their affiliated bottlers and distributors 

purchase at least 75 percent of beverage vending machines. In the ANOPR public meeting, 

representatives of PepsiCo stated that all company-purchased beverage vending machines are 

required to meet ENERGY STAR Tier 2 levels. Representatives of Coca-Cola stated that by 

2010, the company-purchased beverage vending machines would use half as much energy as 

they do now, which would meet at least ENERGY STAR Tier 1 levels. These companies 

purchase ENERGY STAR equipment despite the first-cost increase because it improves their 

public image, which results in higher sales in the long run. Direct compensation for the energy 

savings is not guaranteed but comes only through a negotiation with the site. Because the driving 

economic force for these companies is product sales and not equipment purchases, lowering the 

purchase price of equipment would make no significant difference in market behavior, and the 

program would simply transfer the amount of tax credit or rebate to the rebated entity without 

having induced extra purchases of efficient beverage vending machines. 

With regard to the use of rebates or other incentives beyond ENERGY STAR Tier 2 

efficiency levels, it is not clear how the buying policy of Coca-Cola and PepsiCo would be 

influenced by tax credits or rebates. However, the companies are large enough to finance 

successfully the higher costs of beverage vending machines more efficient than Tier 2 with or 

without tax credits or rebates. In addition, at the NOPR public meeting, Dixie-Narco, a major 

beverage vending machine manufacturer, stated that it will be able to achieve the proposed 

standard for Class B machines without investing significant costs that would need to be passed 

on to its customers. Dixie-Narco noted that it achieved the TSL 6 energy consumption level with 

one of its Class A vending machines this year, using a lighting management system. Royal 

Vendors, also a major manufacturer, stated that it could meet TSL 6 for Class A machines at 

relatively minor cost if it were not precluded by proprietary design restrictions from adopting a 

lighting management system similar to Dixie-Narco’s. Royal Vendors also stated that 

implementing an energy management system is not an expensive addition to the machine and 

that it can be passed on at essentially no additional cost. 

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While rebates or tax credits may affect small purchasers, their influence over the 

marketplace for beverage vending machines is marginal. In addition, because of the existing 

market dynamics, any economic incentive paid for the purchase of Tier 2 efficiency equipment 

faces the possibility of a significant proportion of the rebates being free riders. This is 

particularly true of rebates paid to manufacturers. Rebates to purchasers would necessarily have 

to be limited to small volumes of purchases by individual rebatees to avoid this and target nonbottler, site-owned equipment. Tax credits to purchasers face similar issues. Based on a survey of 

available rebate programs including a data base maintained by DOE (www.dsireusa.org), no 

national manufacturer rebates, purchaser rebates, or tax incentives are currently available for 

enhancement of beverage vending machine efficiency. 

DOE sees value in the continued use of rebates for lighting and temperature controller 

technologies, even under the new standards laid out in the final rule. Because the impact of these 

technologies is not captured in the DOE test procedure for beverage vending machines, 

employing these technologies in the field will continue to provide reductions in energy 

consumption beyond those that can be achieved by the new standards for beverage vending 

machines. The reductions will continue to accrue at the site of installation; therefore, these 

rebates, primarily for the purchase of aftermarket controller equipment, should continue to be 

provided to the installation site directly. 

17.2.3 Revisions to Voluntary Energy Efficiency Targets 

The voluntary ENERGY STAR program currently has two levels of efficiency targets: 

Tiers 1 and 2. The current ENERGY STAR program appears to have been effective at inducing 

large-scale adoption and purchase of ENERGY STAR Tier 1 equipment by the bottlers. Further, 

it is the beverage vending industry expects that the ENERGY STAR program will be highly 

effective in securing purchases of Tier 2 equipment because of the favorable response of the two 

large purchasers, PepsiCo and Coca-Cola, who essentially define the market. While it is possible 

that voluntary programs for equipment more efficient than Tier 2 would also be effective, DOE 

lacks a quantitative basis to determine how effective or ineffective such a beyond Tier 2 program 

might be. As noted previously, broader economic and social considerations are in play than 

simple economic return to the equipment purchaser. DOE lacks the data necessary to 

quantitatively project the degree to which such voluntary programs for more expensive, higher 

efficiency equipment would modify the market. 

17.2.4 Bulk Government Purchases and Early Replacement Incentive Programs 

DOE also considered but did not analyze the potential of bulk government purchases and 

early replacement incentive programs as alternatives to the proposed new standards. In the case 

of bulk government purchases, beverage vending machines are a small part of the total market 

and the volume of high-efficiency equipment purchases that the Federal Government might make 

directly (versus equipment installed by bottlers at Federal Government sites) would have very 

limited impact on improving the overall market efficiency of beverage vending machines. In the 

case of replacement incentives, several policy options exist to promote early replacement, 

including a direct national program of customer incentives, incentives paid to utilities to promote 

an early replacement program, market promotions through equipment manufacturers, and 

replacement of Federally-owned equipment. Previous DOE analyses of methods to promote early 

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replacement for other covered equipment have suggested that the energy savings realized 

through a one-time early replacement of existing stock equipment has not resulted in energy 

savings commensurate to the cost to run and administer the program. As a consequence, DOE 

did not analyze this option in detail. 

17.2.5 Prescriptive Standards that Would Mandate Design Requirements 

The Energy Policy and Conservation Act (EPCA) provides that standards regulating the 

energy use of certain equipment may be design standards, which require specific features that are 

required in the design of the equipment; or performance standards, which describe a required 

level of equipment performance (e.g., maximum kilowatt hour/year energy consumption) and 

provide a manufacturer with discretion in determining—among the many available options— 

how best to meet that performance level. However, beverage vending machines are not one of 

the specified equipment for which EPCA allows a standard to consist of a design requirement. 

Furthermore, EPCA specifically requires DOE to base its test procedure for this equipment on 

American National Standards Institute (ANSI)/American Society of Heating, Refrigerating and 

Air-Conditioning Engineers (ASHRAE) Standard 32.1-2004, Methods of Testing for Rating 

Vending Machines for Bottled, Canned or Other Sealed Beverages. The test methods in 

ANSI/ASHRAE Standard 32.1-2004 consist of means to measure energy consumption. 

For these reasons, DOE does not intend to develop design requirements for this 

equipment. Instead, DOE intends to develop new energy conservation standards such that each 

beverage vending machine would be subject to a maximum level of energy use, and 

manufacturers could meet these standards with their own choice of design methods. 

17.2.6 Performance Standards 

The difficulty in using these non-regulatory alternatives must be gauged against the more 

direct benefits calculated for the performance standards DOE has laid out in the final rule. 

Based on the qualitative review, DOE is not confident that any of the alternatives 

examined would save as much energy as today’s final rule. In particular, the financial incentives 

may engender significant free ridership issues. Also, several of the alternatives would require 

new enabling legislation because authority to carry out those alternatives does not exist. 

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