l. , IEE-RM/STD-98-440 -- / c -

EXECUTIVE ORDER 12866 SUBMISSION EE-R//SfT-' -. oD

Important

Please read the instructions on the reverse side before completing this form.

For additional forms or assistance in completing this form, contact the OIRA Docket Library, (202) 395-6880,

or your OIRA Desk Officer.

Send three copies of both this form and supporting material (four copies if Economically Significant or an

Unfunded Mandate) to:

Office of Information and Regulatorj Affairs

Office of Management and Budget

Attention: Docket Library, Room 10102

725 17th Street, N.W.

Washington, D. C. 20503

1. Agency/Subagency originating request 2. Regulation Identifier Number (RIN)

Department of Energy 1904-AA77

3. Title

Energy Efficiency Standards for Central Air Conditioners and

Heat Pumps

4. Stage of Development 5. Legal Deadline for this submission

Prerule a) DI Yes - No

X Proposed Rule

Interim Final Rule b) Date 0 / 01 / 1994

Final Rule DD MM YYYY

Final Rule - No material change c) lIl Statutory E Judicial

Notice

Other 6. Designations

a) Economically Significant (E.O. 12866)

FK Yes D No

Description of Other

b) Unfunded Mandate (2 U.S.C. 1532)

7. Agency Contact (person who can best answer questions ER Yes m No

regarding the content of this submission)

If either of the above is "Yes," submit four (4) complete

Michael E. McCabe packages to OIRA

Phone (2 0 2 586-0854

Certification for Executive Order 12866 Submissions

The authorized regulatory contact and the program official certify that the agency has complied with the requirements of

E. 0. 12866 and any applicable policy directives.

Signature of Program Official .f /Date /

t t^gt_^ tg////t )_44?D // /

Signature of AuthorizedRegula ontact / Date /

OMB 83-R I Revision: 97 (Pr ious versions obsolete)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 

EXECUTIVE ORDER 12866 SUBMISSION -4'fD ----------.~----~~~~~~ 

Important 

Please read the instructions on the reverse side before completing this form. 

For additional forms or assistance in completing this form. contact the OIRA Docket Library, (202) 395-6880. 

or your OIRA Desk Officer. . 

Send Iilrl:!e a>pies of both this form and supporting material (four copies if Economically Significant or an 

Unfunded Mandate) to: 

1. Agency/Subagency originating request 

Department of Energy 

3. Title 

Office of Information and RegulatorY Affairs 

. Office of Management and Budget 

Attention: Docket Library. Room 10102 

725 17th Street. NW. 

Washington. D. C. 20503 

2. Regulation Identifier Number (RIN) 

1904-AA77 

Energy Efficiency Standards for Central Air Conditioners and 

Heat Pumps 

4. Stage of Development 

__ Prerule 

_x_ 'Proposed Rule 

Interim Final Rule 

Final Rule 

__ Final Rule· No material change 

Notice 

Other 

Description of Other 

7. Agency Contact (person who can best answer questions 

regarding the content of this submission) 

Michael E. McCabe 

Phooe(20j 586-0854 

5. Legal Deadline for this submission 

a) IKJ Yes D No 

b) Date _OllLol.,l __ ' 01 

DO MM 

I 1994 

yyyy 

c) IX] Statutory D Judicial 

6. Designations 

a) Economically Significant (E.O. 12866) 

!XX Yes D No 

b) Unfunded Mandate (2 U.S.C. 1532) 

!XX Yes D No 

If either of the above is "Yes," submit four (4) complete 

packages to OIRA 

Certification for Executive Order 12866 Submissions 

The authorized regulatory contact and the program official certify that the agency has complied with the requirements of 

E. O. 12866 and any applicable policy directives. 
EE-RM/STD-98-440 ; 22

[6450-01-P]

DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket Number EE-RM-98-440]

RIN:1904-AA77

Energy Conservation Program for Consumer Products; Central Air Conditioners and Heat

Pumps Energy Conservation Standards

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy.

ACTION: Supplemental proposed rule; proposed withdrawal of final rule.

SUMMARY: In response to a petition for reconsideration, and as a result of review under

President Bush's Regulatory Review Plan, the Department of Energy (DOE) is proposing to

withdraw its January 22, 2001 final rule setting forth energy conservation standards for

residential central air conditioners and central air conditioning heat pumps that are not yet

effective and not enforceable until January 23, 2006. As a substitute, DOE proposes to amend

the currently enforceable standards by raising the minimum energy efficiency levels by 20

percent. DOE also invites public comment on proposed regulatory amendments to define and

implement statutory limitations on its authority to prescribe amended energy conservation

standards.

N:\wpdata\airconditionerrule.atd.wpd

1 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

[6450-01-P] 

EE-RM/STD-98-440 ~'2 3 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and Renewable Energy 

10 CFR Part 430 

[Docket Number EE-RM-98-440] 

RIN:1904-AA77 

Energy Conservation Program for Consumer Products; Central Air Conditioners and Heat 

Pumps Energy Conservation Standards 

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. 

ACTION: Supplemental proposed rule; proposed withdrawal of final rule. 

SUMMARY: In response to a petition for reconsideration, and as a result of review under 

President Bush's Regulatory Review Plan, the Department of Energy (DOE) is proposing to 

withdraw its January 22, 2001 final rule setting forth energy conservation standards for 

residential central air conditioners and central air conditioning heat pumps that are not yet 

effective and not enforceable until January 23, 2006. As a substitute, DOE proposes to amend 

the currently enforceable standards by raising the minimum energy efficiency levels by 20 

percent. DOE also invites public comment on proposed regulatory amendments to define and 

implement statutory limitations on its authority to prescribe amended energy conservation 

standards. 

1 N:lwpdatalairconditionemJle.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440o--- X33

DATES: Comments must be received on or before [INSERT DATE 75 DAYS FROM DATE

OF PUBLICATION IN THE FEDERAL REGISTER]. DOE is requesting a signed original,

a computer diskette (WordPerfect 8) and 10 copies of the written comments. DOE will also

accept e-mailed comments, but you must send a signed original. Oral views, data, and arguments

may be presented at the public hearing in Washington, D.C., beginning at 9:00 a.m. on [BR S

to insert date approximately 60 days from publication at the time the package is sent to the

Federal Register].

DOE must receive requests to speak at the public hearing and a copy of your statements

no later than 4:00 p.m., [INSERT DATE 45 DAYS FROM DATE OF PUBLICATION IN

THE FEDERAL REGISTER], and we request that you provide a computer diskette

(WordPerfect 8) of each statement at that time.

ADDRESSES: Please submit written comments, oral statements, and requests to speak at the

public hearing to: Brenda Edwards-Jones, U.S. Department of Energy, Office of Energy

Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products:

Central Air Conditioners and Heat Pumps, Docket No. EE-RM/STD-98-440, 1000 Independence

Avenue, S.W., Washington, D.C. 20585-0121. You may send emails to: brenda.edwardsjones@,ee.doe.gov.

The hearing will begin at 9:00 a.m., in Room 1E-245 at the U.S. Department of Energy,

Forrestal Building, 1000 Independence Avenue, SW, Washington DC. You can find more

N:\wpdata\airconditionerrule.atd.wpd

2 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440.-:4t ~3 

OATES: Comments must be received on or before [INSERT DATE 75 DAYS FROM DATE 

OF PUBLICATION IN THE FEDERAL REGISTER]. DOE is requesting a signed original, 

a computer diskette (WordPerfect 8) and 10 copies of the written comments. DOE will also 

accept e-mailed comments, but you must send a signed original. Oral views, data, and arguments 

may be presented at the public hearing in Washington, D.C., beginning at 9:00 a.m. on [BR S 

to insert date approximately 60 days from publication at the time the package is sent to the 

Federal Register]. 

DOE must receive requests to speak at the public hearing and a copy of your statements 

no later than 4:00 p.m., [INSERT DATE 45 DAYS FROM DATE OF PUBLICATION IN 

THE FEDERAL REGISTER), and we request that you provide a computer diskette 

(WordPerfect 8) of each statement at that time. 

ADDRESSES: Please submit written comments, oral statements, and requests to speak at the 

public hearing to: Brenda Edwards-lones, U.S. Department of Energy, Office of Energy 

Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: 

Central Air Conditioners and Heat Pumps, Docket No. EE-RMlSTD-98-440, 1000 Independence 

Avenue, S.W., Washington, D.C. 20585-0121. You may send emails to: brenda.edwardsjones@ee.doe.gov. 

The hearing will begin at 9:00 a.m., in Room lE-245 at the U.S. Department of Energy, 

Forrestal Building, 1000 Independence Avenue, SW, Washington DC. You can find more 

2 N.\wpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3.07PM) 
EE-RM/STD-98-440- c 5

information concerning public participation in this rulemaking proceeding in Section VII, "Public

Comment," of this notice of proposed rulemaking (NOPR).

You may read copies of the public comments, the Technical Support Document for

Energy Efficiency Standards for Consumer Products: Central Air Conditioners and Heat Pumps

(TSD), the transcript of the public hearing, workshop transcripts in this proceeding, the petition

for reconsideration submitted by the Air-Conditioning and Refrigeration Institute, and other postpromulgation submissions at the DOE Freedom of Information (FOI) Reading Room, U.S.

Department of Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, S.W.,

Washington, DC 20585, (202-586-3142, between the hours of 9:00 a.m. and 4:00 p.m., Monday

through Friday, except Federal holidays. You may obtain copies of the TSD and analysis

spreadsheets from the Office of Energy Efficiency and Renewable Energy's (EERE) web site at:

http://www.eren.doe.gov/buildings/codes_standards/applbrf/central_air_conditioner.html.

FOR FURTHER INFORMATION CONTACT: Dr. Michael E. McCabe, U.S. Department

of Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building, EE-41, 1000

Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586- 0854, e-mail:

ME.mccabe@ee.doe.gov, or Eugene Margolis, Esq., U.S. Department of Energy, Office of

General Counsel, Forrestal Building, GC-72, 1000 Independence Avenue, S.W., Washington,

D.C. 20585, (202) 586-9507, e-mail: eugene.margolis@hq.doe.gov.

N:\wpdata'airconditionerrue.atd wpd

3 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 ,-1(::-M 3 

information concerning public participation in this rulemaking proceeding in Section VII, "Public 

Comment," of this notice of proposed ru1cmaking lNOPR). 

You may read copies of the public comments, the Technical Support Document for 

Energy Efficiency Standards for Consumer Products: Central Air Conditioners and Heat Pumps 

(TSD), the transcript of the public hearing, workshop transcripts in this proceeding, the petition 

for reconsideration submitted by the Air-Conditioning and Refrigeration Institute, and other postpromulgation submissions at the DOE Freedom ofInformation (FOI) Reading Room, U.S. 

Department of Energy, Forrestal Building, Room lE-190, 1000 Independence Avenue, S.W., 

Washington, DC 20585, (202-586-3142, between the hours of9:00 a.m. and 4:00 p.m., Monday 

through Friday, except Federal holidays. You may obtain copies of the TSD and analysis 

spreadsheets from the Office of Energy Efficiency and Renewable Energy's (EERE) web site at: 

http://www.eren.doe.govlbuildings/codes _ standards/applbrf/central_ air _ conditioner.html. 

FOR FURTHER INFORMATION CONTACT: Dr. Michael E. McCabe, U.S. Department 

of Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building, EE-41 , 1000 

Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586- 0854, e-mail: 

ME.mccabe@ee.doe.gov, or Eugene Margolis, Esq., U.S. Department of Energy, Office of 

General Counsel, Forrestal Building, GC-72, 1000 Independence Avenue, S.W., Washington, 

D.C. 20585, (202) 586-9507, e-mail: eugene.margolis@hq.doe.gov. 

3 N:lwpdata\aircondJllonerrule.atd wpd 

June 29. 2001 (3:07PM) 
SUPPLEMENTARY INFORMATION: EE-RM/STD-98-440--~ ,>

Table of Contents

I. Introduction

II. Authority to Reconsider the January 22, 2001, Final Rule

III. Proposal to Withdraw Final Rule

A. Legal Issues

1. Failure to Obtain the Views of the Department of Justice on the Potential Anti-Competitive

Impact of 13 SEER Standards

2. Failure of the Statement of Basis for the Final Rule to Adequately Address Cumulative

Regulatory Burdens on Manufacturers

B. Policy Issues

1. Burdens on Consumers

2. Burdens on Manufacturers

a. Cumulative Regulatory Burden

b. Financial Burdens Associated with New Standards

C. Conclusion

IV. Proposed Rule

A. Background

1. Statutory Authority

2. Rulemaking History

B. Overview of the Proposed Standards

1. Central Air Conditioner and Heat Pump Features

2. Consumer Benefits

3. National Benefits

C. Technological Feasibility

D. General Discussion of Economic Justification Factors

1. Economic Impact on Manufacturers and Consumers

2. Life-Cycle Costs and Rebuttable Presumption

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

E. Methodology Used in DOE Analyses

V. Analytical Results and Conclusions

A. Overview of Analytical Results

1. General

2. Through-the-Wall Products

3. Other Space-Constrained Products

B. Re-weighting of Factors

N:\wpdata\airconditioncrrule atd wpd 4 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

SUPPLEMENTARY INFORMATION: EE-RM/STD-98-440 --::it ~ 

Table of Contents 

I. Introduction 

II. Authority to Reconsider the January 22, 2001, Final Rule 

III. Proposal to Withdraw Final Rule 

A. Legal Issues 

1. Failure to Obtain the Views of the Department of Justice on the Potential Anti-Competitive 

Impact of 13 SEER Standards 

2. Failure of the Statement of Basis for the Final Rule to Adequately Address Cumulative 

Regulatory Burdens on Manufacturers 

B. Policy Issues 

1. Burdens on Consumers 

2. Burdens on Manufacturers 

a. Cumulative Regulatory Burden 

b. Financial Burdens Associated with New Standards 

C. Conclusion 

IV. Proposed Rule 

A. Background 

1. Statutory Authority 

2. Rulemaking History 

B. Overview of the Proposed Standards 

1. Central Air Conditioner and Heat Pump Features 

2. Consumer Benefits 

3. National Benefits 

C. Technological Feasibility 

D. General Discussion of Economic Justification Factors 

1. Economic Impact on Manufacturers and Consumers 

2. Life-Cycle Costs and Rebuttable Presumption 

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 

E. Methodology Used in DOE Analyses 

V. Analytical Results and Conclusions 

A. Overview of Analytical Results 

1. General 

2. Through-the-Wall Products 

3. Other Space-Constrained Products 

B. Re-weighting of Factors 

4 N:lwpdala\aircondilionenule.ald.wpd 

June 29. 2001 (3:07PM) 
1. Re-weighting of Burdens on Consumers EE-RM/STD-98440 - , 2 3

2. Re weighting of Burdens on Manufacturers

a. Cumulative Regulatory Burden

b. Financial Burdens Associated with New Efficiency Standards

C. Conclusions Regarding Conventional Products

D. Conclusions Regarding Space-Constrained Products

VI. Procedural Issues and Regulatory Review

A. Review Under the National Environmental Policy Act

B. Review Under Executive Order 12866

C. Review Under the Regulatory Flexibility Act

D. Review Under the Paperwork Reduction Act

E. Review Under Executive Order 12988

F. Review Under Executive Order 12630

G. Review Under Executive Order 13132

H. Review Under the Unfunded Mandates Reform Act of 1995

I. Review Under the Treasury and General Government Appropriations Act, 1999

J. Review Under Executive Order 13211

VII. Public Comment

A. Written Comment Procedures

B. Public Workshop/Hearing

1. Procedure for submitting Request to Speak

2. Conduct of Hearing

I. Introduction

Pursuant to section 325 of the Energy Policy and Conservation Act (EPCA) (42 U.S.C.

6295) and the Administrative Procedure Act (APA) (5 U.S.C. 553), DOE today publishes a three

part proposal with regard to energy conservation standards for central air conditioners and central

air conditioning heat pumps. First, DOE proposes regulatory provisions to clarify that section

325(o)(1), which qualifies DOE's rulemaking authority to prescribe amended energy

conservation standards, applies as of an effective date for modifying the Code of Federal

Regulations (CFR) set forth in the notice of final rulemaking and established consistent with the

Congressional Review Act (5 U.S.C. 801-804). Second, in order to correct arguable legal errors

and policy shortcomings, DOE proposes to withdraw the final rule entitled "Energy Conservation

N:\wpdata'airconditionerrule.atd wpd

5 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 .- .J.¥, /j r) 2. 1. Re-weighting of Burdens on Consumers -:u--- ;/\c?\/ 

2. Re .. weighting of Burdens on Manufacturers 

a. Cumulative Regulatory Burden 

b. Financial Burdens Associated with New Efficiency Standards 

C. Conclusions Regarding Conventional Products 

D. Conclusions Regarding Space-Constrained Products 

VI. Procedural Issues and Regulatory Review 

A. Review Under the National Environmental Policy Act 

B. Review Under Executive Order 12866 

C. Review Under the Regulatory Flexibility Act 

D. Review Under the Paperwork Reduction Act 

E. Review Under Executive Order 12988 

F. Review Under Executive Order 12630 

G. Review Under Executive Order 13132 

H. Review Under the Unfunded Mandates Refonn Act of 1995 

I. Review Under the Treasury and General Government Appropriations Act, 1999 

J. Review Under Executive Order 13211 

VII. Public Comment 

A. Written Comment Procedures 

B. Public WorkshoplHearing 

1. Procedure for submitting Request to Speak 

2. Conduct of Hearing 

I. Introduction 

Pursuant to section 325 of the Energy Policy and Conservation Act (EPCA) (42 U.S.C. 

6295) and the Administrative Procedure Act (APA) (5 U.S.C. 553), DOE today publishes a three 

part proposal with regard to energy conservation standards for central air conditioners and central 

air conditioning heat pumps. First, DOE proposes regulatory provisions to clarify that section 

325(0)(1), which qualifies DOE's rulemaking authority to prescribe amended energy 

conservation standards, applies as of an effective date for modifying the Code of Federal 

Regulations (CFR) set forth in the notice of final rulemaking and established consistent with the 

Congressional Review Act (5 U.S.C. 801-804). Second, in order to correct arguable legal errors 

and policy shortcomings, DOE proposes to withdraw the final rule entitled "Energy Conservation 

5 N:lwpdata\aircondilionerruie.ald.wpd 

June 29. 2001 (3:07PM) 
EE-RM/STD-98-440 - ~ < -3

Program for Consumer Products; Central Air Conditioners and Heat Pump Energy Conservation

Standards" which was published in the Federal Register (FR) on January 22, 2001 (61 FR 7170).

Third, based on: (1) previous determinations regarding the significance of potential energy

savings, technological feasibility, and other factors; and (2) factual information already in the

record, DOE proposes to determine that elevation of the currently enforceable central air

conditioner and central air conditioning heat pump energy conservation standards by 20 percent

is the maximum increase that is economically justified. Consistent with that proposed

determination, DOE proposes a Seasonal Energy Efficiency Rating (SEER) of 12 with a

corresponding Heating System Performance Factor (HSPF) of 7.4 which would apply to

manufacturers in 2006.

Today's action partly is a result of DOE activities under President Bush's Regulatory

Review Plan. Pursuant to that plan, DOE conducted an internal review of the three final rules

issued under section 325 of EPCA that DOE published at the end of the Clinton Administration,

including final rules concerning energy conservation standards for clothes washers, water heaters,

and central air conditioners and central air conditioning heat pumps. Consistent with the EPCA

criteria for determining whether a standard level is economically justified under section 325 (42

U.S.C. 6295(o)(2)(B)), DOE examined each of these rules to determine, among other things,

whether the rulemaking record was complete and whether the affirmative determination of

economic justification was based on adequate findings with regard to the statutorily required

considerations that make up the test of economic justification.

N\wpdata3airconditionerruleatd.wpd 6 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

Program for Consumer Products; Central Air Conditioners and Heat Pump Energy Conservation 

Standards" which was published in the Federal Register (FR) on January 22, 2001 (61 FR 7170). 

Third, based on: (1) previous determinations regarding the significance of potential energy 

savings, technological feasibility, and other factors; and (2) factual information already in the 

record, DOE proposes to determine that elevation of the currently enforceable central air 

conditioner and central air conditioning heat pump energy conservation standards by 20 percent 

is the maximum increase that is economically justified. Consistent with that proposed 

determination, DOE proposes a Seasonal Energy Efficiency Rating (SEER) of 12 with a 

corresponding Heating System Performance Factor (HSPF) of 7.4 which would apply to 

manufacturers in 2006. 

Today's action partly is a result of DOE activities under President Bush's Regulatory 

Review Plan. Pursuant to that plan, DOE conducted an internal review of the three fmal rules 

issued under section 325 ofEPCA that DOE published at the end of the Clinton Administration, 

including final rules concerning energy conservation standards for clothes washers, water heaters, 

and central air conditioners and central air conditioning heat pumps. Consistent with the EPCA 

criteria for determining whether a standard level is economically justified under section 325 (42 

U.S.C. 6295(0)(2)(B)), DOE examined each of these rules to determine, among other things, 

whether the rulemaking record was complete and whether the affirmative determination of 

economic justification was based on adequate findings with regard to the statutorily required 

considerations that make up the test of economic justification. 

6 N.\wpdata'.airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440- # <<3.:

While DOE examined the three appliance energy conservation standards rulemakings

under the President's Regulatory Review Plan, DOE received petitions for reconsideration for

each final rule. In addition, DOE received notice that the Gas Appliance Manufacturers

Association (with regard to the water heater rule) and the Air-Conditioning and Refrigeration

Institute (ARI) (with regard to the central air conditioner rule) filed petitions for review in the

United States Court of Appeals for the Fourth Circuit.

While DOE did not seek public comment as part of the internal review conducted under

the President's Regulatory Review Plan or with regard to the petitions for reconsideration, DOE

received written statements in opposition to reconsideration of each of the three final rules. DOE

also had an informal meeting with representatives of various environmental advocacy groups

who had already filed statements opposing reconsideration of the water heater and the central air

conditioner final rules.

Ultimately, DOE decided that neither the clothes washer rule nor the water heater rule

warranted further rulemaking action and denied the related petitions for reconsideration. See 66

FR 19714 (April 17, 2001). With regard to central air conditioners and central air conditioning

heat pumps, DOE concluded that ARI had raised substantial questions as to the legal sufficiency

of the January 22, 2001 final rule and that the interests of justice therefore dictated that DOE

further postpone the rule's effective date in light of the pendency of ARI's petition for judicial

review in the Fourth Circuit and its related petition for reconsideration. 66 FR 20191 (April 20,

2001). At that time DOE indicated that it would likely resolve these issues through supplemental

N:\wpdtaa\airconditionerule.atd wpd 7 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 - if t9~~~ . 

Whde DOE examined the three appliance energy conservation standards rulemakings 

under the President's Regulatory Review Plan, DOE received petitions for reconsideration for 

each final rule. In addition, DOE received notice that the Gas Appliance Manufacturers 

Association (with regard to the water heater rule) and the Air-Conditioning and Refrigeration 

Institute (ARI) (with regard to the central air conditioner rule) filed petitions for review in the 

United States Court of Appeals for the Fourth Circuit. 

While DOE did not seek public comment as part of the internal review conducted under 

the President's Regulatory Review Plan or with regard to the petitions for reconsideration, DOE 

received written statements in opposition to reconsideration of each ofthe three final rules. DOE 

also had an informal meeting with representatives of various environmental advocacy groups 

who had already filed statements opposing reconsideration of the water heater and the central air 

conditioner final rules. 

Ultimately, DOE decided that neither the clothes washer rule nor the water heater rule 

warranted further rulemaking action and denied the related petitions for reconsideration. See 66 

FR 19714 (April 17, 2001). With regard to central air conditioners and central air conditioning 

heat pumps, DOE concluded that ARI had raised substantial questions as to the legal sufficiency 

of the January 22, 2001 final rule and that the interests of justice therefore dictated that DOE 

further postpone the rule's effective date in light of the pendency of ARI's petition for judicial 

review in the Fourth Circuit and its related petition for reconsideration. 66 FR 20191 (April 20, 

2001). At that time DOE indicated that it would likely resolve these issues through supplemental 

7 N:I .... -pdalalaircondilionerrule.atd . ....-p<! 

June 29. 2001 (3:07PM) 
ruile:aking that would be forthcoming shortly. EE-RM/STD-98-440 -if

For the reasons discussed in section III of this notice, DOE has now concluded that the

January 22, 2001 final rule should be reconsidered and therefore grants ARI's petition. In

particular, DOE is of the view that: (1) DOE should have invited the Department of Justice to

submit a supplemental determination on the potential anti-competitive impact; (2) the statement

of basis for the final rule did not sufficiently explain DOE's consideration of cumulative burden

attributable to other Federal agencies' and State regulatory actions, which was necessary to

DOE's conclusion regarding the potential impact of the final rule on manufacturers; and (3) DOE

gave inadequate weight to the potential impact of higher installation and equipment costs on

some types of consumers and to potential burdens on manufacturers.

DOE recognizes that its conclusion that the January 22, 2001 final rule was questionable

on legal and policy grounds and the initiation of litigation in the Fourth Circuit has left less than

ideal options for a rulemaking that, had it been concluded on time, would have been final on

January 1, 1994 (42 U.S.C. 6295(d)). If DOE were to allow the January 22, 2001 final rule to

become effective, there is a significant possibility of a court ordered remand for further

consideration. The length of time it would take to deal with consequences of a court ordered

remand would be substantial. It was just this sort of consideration that motivated Congress to

enact the 1987 amendments to EPCA that require this rulemaking. As the legislative history of

those amendments makes clear, an underlying legislative purpose was to cure the problem of

indefinite delay that followed the decision in Natural Resources Defense Council v. Herrington

8 N:\wpdata\airconditionerrule.atdwpd 8 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

mie(tlaking that would be forthcoming shortly. 

For the reasons discussed in section III of this notice, DOE has now concluded that the 

January 22, 2001 final rule should be reconsidered and therefore grants ARI's petition. In 

particular, DOE is of the view that: (1) DOE should have invited the Department of Justice to 

submit a supplemental determination on the potential anti-competitive impact; (2) the statement 

of basis for the final rule did not sufficiently explain DOE's consideration of cumulative burden 

attributable to other Federal agencies' and State regulatory actions, which was necessary to 

DOE's conclusion regarding the potential impact of the final rule on manufacturers; and (3) DOE 

gave inadequate weight to the potential impact of higher installation and equipment costs on 

some types of consumers and to potential burdens on manufacturers. 

DOE recognizes that its conclusion that the January 22, 2001 final rule was questionable 

on legal and policy grounds and the initiation of litigation in the Fourth Circuit has left less than 

ideal options for a rulemaking that, had it been concluded on time, would have been final on 

January 1, 1994 (42 U.S.C. 6295(d». If DOE were to allow the January 22, 2001 final rule to 

become effective, there is a significant possibility of a court ordered remand for further 

consideration. The length of time it would take to deal with consequences of a court ordered 

remand would be substantial. It was just this sort of consideration that motivated Congress to 

enact the 1987 amendments to EPCA that require this rulemaking. As the legislative history of 

those amendments makes clear, an underlying legislative purpose was to cure the problem of 

indefinite delay that followed the decision in Natural Resources Defense Council v. Herrington 

8 N:lwpdatalairconditionerrule.atd.wpd 

June 29. 2001 (3:07PM) 
EE-RM/STD-98-440 - cf3

768 F.2d 1355 (D.C.Cir. 1985) which vacated and remanded an appliance energy conservation

standards rulemaking. See S. Rep. No. 100-6, 100'h Cong, 1st Sess., 4 (1987) and H.R. Rep. No.

100-11, 100 h' Cong., 1s' Sess., 28 (1987). DOE also recognizes that, given the opposition to

reconsideration, there is a near certainty of a lawsuit challenging DOE's further rulemaking

actions. However, since litigation appears to be inevitable regardless of what option DOE

chooses, DOE has concluded that the better course is to reopen the rulemaking record on issues

regarding economic justification with the objective of publishing, after considering public

comments, a final rule, as soon as possible in 2001.

II. Authority to Reconsider the January 22, 2001, Final Rule

In reviewing the January 22, 2001 final rule under the President's Regulatory Review

Plan, and in considering ARI's petition for reconsideration and the statement in opposition to it,

DOE has had the occasion to construe and apply the provisions of section 325(o)(1) of EPCA for

the first time since they were added to EPCA by the National Appliance Energy Conservation

Act of 1987 (NAECA) (Pub.L. 100-12). In relevant part, section 325(o)(1) of EPCA provides as

follows:

The Secretary may not prescribe any amended standard which increases the

maximum allowable energy use,... or decreases the minimum required energy

efficiency, of a covered product.

42 U.S.C. 6295(o)(1).

In its petition for reconsideration, ARI said the following about section 325(o)(1):

We note that the provision in EPCA that prohibits decreasing the minimum

required energy efficiency of covered products, 42 U.S.C. 562(o)(1)[sic], is

„9 "''"""",~N:\wpdata\airconditionerrle.atd.wpd 9 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

· .'. I') ") ~ 

EE-RM/STD-98-440 - IF ~-~ 

768 F.2d 1355 (D.C.Cir. 1985) which vacated and remanded an appliance energy conservation 

standards rulemaking. See S. Rep. No. 100-6, 100th Cong, pI Sess., 4 (1987) and H.R. Rep. No. 

100-11, 100th Cong., pI Sess., 28 (1987). DOE also recognizes that, given the opposition to 

reconsideration, there is a near certainty of a lawsuit challenging DOE's further rulemaking 

actions. However, since litigation appears to be inevitable regardless of what option DOE 

chooses, DOE has concluded that the better course is to reopen the rulemaking record on issues 

regarding economic justification with the objective of publishing, after considering public 

comments, a final rule, as soon as pOssible in 2001. 

II. Authority to Reconsider the January 22, 2001, Final Rule 

In reviewing the January 22, 2001 final rule under the President's Regulatory Review 

Plan, and in considering ARI's petition for reconsideration and the statement in opposition to it, 

DOE has had the occasion to construe and apply the provisions of section 325(0)(1) of EPCA for 

the first time since they were added to EPCA by the National Appliance Energy Conservation 

Act of 1987 (NAECA) (Pub.L. 100-12). In relevant part, section 325(0)(1) of EPCA provides as 

follows: 

The Secretary may not prescribe any amended standard which increases the 

maximum allowable energy use, ... or decreases the minimum required energy 

efficiency, of a covered product. 

42 U.S.c. 6295(0)(1). 

In its petition for reconsideration, ARI said the following about section 325(0)(1): 

We note that the provision in EPCA that prohibits decreasing the minimum 

required energy efficiency of covered products, 42 U .S.C. 562(0)(1 )[sic], is 

9 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -' c,. '

inapplicable here. 10 SEER is the minimum required energy efficiency. New

efficiency minimumn would not be required under the rule until several years

from now (the rule provides for such minimums in 2006). Moreover, the

effective date of the rule has been suspended, and there is pending litigation

challenging the validity of the rule. Thus, there has been no final result related

to the rulemaking.

ARI Petition, p. 3, n. 2.

Referring to the 1987 amendments to EPCA, the environmental advocacy organizations

argued that "it is clear that, under NAECA, DOE may not amend the rule to weaken its energy

efficiency standards." After quoting from section 325(o)(1), they went on to say:

Thus DOE is statutorily precluded from amending the Final Rule to weaken its

energy efficiency standards, as ARI requests in its petition. ARI's argument

(Petition at footnote 2) that this provision is 'inapplicable' because the rule

phases in tighter energy efficiency standards over time, is incorrect ... The

timing of the phase-in of these standards is irrelevant.

Statement in Opposition, p.5.

Although the diametrically opposed conclusions reached by ARI and the environmental

advocacy organizations' response are clear enough, those conclusions are based on arguments

that are too summary to evaluate. DOE's interpretation of the statute is set forth below, and DOE

invites ARI and the environmental advocacy organizations to reexamine their respective

positions and to comment on DOE's analysis and the resulting proposed amendments to 10 CFR

Part 430.

The starting point for analysis is the text of the statute. The critical term in section

325(o)(1) is "minimum required energy efficiency." EPCA does not define this term. However,

in context, it is clear that a SEER and an HSPF are benchmarks of "minimum required energy

N:\wpdata\airconditionerule.atd wpd

1 0 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 .-J# c::<~:s 

inapplicable here. to SEER is the minimum required energy efficiency. New 

efficiency minimw11 would not be requir~d under the rule until s~vefat years 

from now (the rule provides for such minimums in 2006). Moreover, the 

effective date of the rule has been suspended, and there is pending litigation 

challenging the validity of the rule. Thus, there has been no final result related 

to the rulemaking. 

ARI Petition, p. 3, n. 2. 

Referring to the 1987 amendments to EPCA, the environmental advocacy organizations 

argued that "it is clear that, under NAECA, DOE may not amend the rule to weaken its energy 

efficiency standards." After quoting from section 325(0)(1), they went on to say: 

Thus DOE is statutorily precluded from amending the Final Rule to weaken its 

energy efficiency standards, as ARI requests in its petition. ARI's argument 

(Petition at footnote 2) that this provision is 'inapplicable' because the rule 

phases in tighter energy efficiency standards over time, is incorrect. ... The 

timing of the phase-in of these standards is irrelevant. 

Statement in Opposition, p.5. 

Although the diametrically opposed conclusions reached by ARI and the environmental 

advocacy organizations' response are clear enough, those conclusions are based on arguments 

that are too summary to evaluate. DOE's interpretation of the statute is set forth below, and DOE 

invites ARI and the environmental advocacy organizations to reexamine their respective 

positions and to comment on DOE's analysis and the resulting proposed amendments to 10 CFR 

Part 430. 

The starting point for analysis is the text of the statute. The critical term in section 

325(0)(1) is "minimum required energy efficiency." EPCA does not define this term. However, 

in context, it is clear that a SEER and an HSPF are benchmarks of "minimum required energy 

10 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -%tt c^ 3

efficiency" for central air conditioners and central air conditioning heat pumps. See 42 U.S.C.

6295(d)(1) and (d)(2). The key question, however, is which SEER and HSPF represent the

"minimum required energy efficiency" for central air conditioners and central air conditioning

heat pumps that may not be decreased by an amended standard.

Had the new SEER and HSPF set out in the January 22, 2001 final rule been allowed to

take effect, but (as the rule set forth) been made applicable only to appliances manufactured on or

after January 23, 2006, we think this would be a close question. A reasonable argument could

be made that the new SEER and HSPF became "required" immediately as to such appliances

provided they were manufactured on or after January 23, 2006. A reasonable argument could

also be made that the new SEER and HSPF would not be "required" until January 23, 2006,

when appliances manufactured after that date would have had to comply with them. We address

this question, and other considerations bearing on the answer to it, at greater length below.

In fact, however, the January 22, 2001 final rule expressly stated that the amendments it

set out to existing standards in the Code of Federal Regulations would not take effect until 30

days after publication in the Federal Register. Well before that date arrived, on February 2, 2001,

DOE postponed that effective date for an additional 60 days. Before that 60-day period had

passed, on April 18, 2001, DOE further postponed the amendments' effective date pending the

outcome of petitions by ARI for reconsideration and for judicial review.

As a result, the new SEER and HSPF, though set out in a final rule, never in any sense

achieved the status of being the "required" "minimum energy efficiency" benchmarks. There has

never been a single moment under any understanding of the word "required" at which any central

air conditioner or central air conditioning heat pump, including one manufactured after January

N:\wpdata'airconditionerrule.atd.wpd

1 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -~~(~.3 

efficiency" for central air conditioners and central air conditioning heat pumps. See 42 V.S.C 

6295(d)(I) and (d)(2). The key question, however, is which SEER and HSPF represent the 

"minimum required energy efficiency" for central air conditioners and central air conditioning 

heat pumps that may not be decreased by an amended standard. 

Had the new SEER and HSPF set out in the January 22, 2001 final rule been allowed to 

take effect, but (as the rule set forth) been made applicable only to appliances manufactured on or 

after January 23, 2006, we think this would be a close question. A reasonable argument could 

be made that the new SEER and HSPF became "required" immediately as to such appliances 

provided they were manufactured on or after January 23, 2006. A reasonable argument could 

also be made that the new SEER and HSPF would not be "required" until January 23, 2006, 

when appliances manufactured after that date would have had to comply with them. We address 

this question, and other considerations bearing on the answer to it, at greater length below. 

In fact, however, the January 22, 2001 final rule expressly stated that the amendments it 

set out to existing standards in the Code of Federal Regulations would not take effect until 30 

days after publication in the Federal Register. Well before that date arrived, on February 2, 2001, 

DOE postponed that effective date for an additional 60 days. Before that 60-day period had 

passed, on April 18,2001, DOE further postponed the amendments' effective date pending the 

outcome of petitions by ARI for reconsideration and for judicial review. 

As a result, the new SEER and HSPF, though set out in a final rule, never in any sense 

achieved the status of being the "required" "minimum energy efficiency" benchmarks. There has 

never been a single moment under any understanding of the word "required" at which any central 

air conditioner or central air conditioning heat pump, including one manufactured after January 

11 N:lwp<iala\aircondilionerrule.ald.wpd 

June 29. 2001 (307PM) 
EE.RMWSTD-98-440 ta3

23, 2006, could even arguably have been legally required to be manufactured in conformity with

them. Hence, whatever might have been the case had the January 22 final rule been allowed to

take effect, thereby effectuating a change in the SEER and HSPF standards applicable to central

air conditioners and heat pumps manufactured after January 23, 2006, we do not see how the

publication of a final rule that would have changed those standards, but was prevented by later

agency action from doing so, could possibly establish "minimum required energy efficiency"

benchmarks.

This interpretation of "minimum required energy efficiency" is reinforced by the rest of

the sentence in section 325(o)(1) of which the phrase is a part. That sentence establishes a

limitation on the "amended standards" the Secretary may prescribe. That wording strongly

suggests that the "minimum required energy efficiency" levels bel'ow which the Secretary may

not go are the ones established by the standards being amended. Because of the various actions

postponing the effective date of the amendments to the standards it proposed, the January 22,

2001 rule never actually effectuated any amendment to the prior standards. Therefore, the

standards that we now propose to amend are not the ones that would have been in place had the

amendments set out in the January 22 rule actually been made. Rather, they are the prior

standards (SEER of 10.0 and HSPF of 6.8 for split systems manufactured after January 1, 1992,

SEER of 9.7 and HSPF of 6.6 for single package systems manufactured after January 1, 1993),

unamended until now by anything, including the never-made-effective amendments set out in the

January 22, 2001 rule.

In our view, the foregoing analysis establishes that EPCA is unambiguous on the question

of whether standards that are published in the Federal Register, but not yet effective, represent

«,-.~~ .:~N:\wodata\airconditionerruleatd ~~12 wpd

1 2 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE_RM/STD-98-440 --JF ~3 

23, 2006, could even arguably have been legally required to be manufactured in conformity with 

them. Hence, whatever might have been the case had the January 22 final rule been allowed to 

take effect, thereby effectuating a change in the SEER and HSPF standards applicable to central 

air conditioners and heat pumps manufactured after January 23, 2006, we do not see how the 

publication of a final rule that would have changed those standards, but was prevented by later 

agency action from doing so, could possibly establish "minimum required energy efficiency" 

benchmarks. 

This interpretation of "minimum required energy efficiency" is reinforced by the rest of 

the sentence in section 325(0)(1) of which the phrase is a part. That sentence establishes a 

limitation on the "amended standards" the Secretary may prescribe. That wording strongly 

suggests that the "minimum required energy efficiency" levels below which the Secretary may 

not go are the ones established by the standards being amended. Because of the various actions 

postponing the effective date of the amendments to the standards it proposed, the January 22, 

2001 rule never actually effectuated any amendment to the prior standards. Therefore, the 

standards that we now propose to amend are not the ones that would have been in place had the 

amendments set out in the January 22 rule actually been made. Rather, they are the prior 

standards (SEER of 10.0 and HSPF of 6.8 for split systems manufactured after January 1, 1992, 

SEER of9.7 and HSPF of6.6 for single package systems manufactured after January 1, 1993), 

unamended until now by anything, including the never-made-effective amendments set out in the 

January 22, 2001 rule. 

In our view, the foregoing analysis establishes that EPCA is unambiguous on the question 

of whether standards that are published in the Federal Register, but not yet effective, represent 

12 N:\wpdata\airconditionerrule.atd.wpd 

June 29. 2001 (3'07PM) 
EE-RM/STD-98-440-$A y3.

tie "minimum required energy efficiency" for central air conditioners and central air

conditioning heat pumps. Clearly, the standards set out in the January 22, 2001 notice of final

rulemaking cannot be the "minimum required energy efficiency" benchmarks for purposes of

section 325(o)(1). There remains then the question whether the term "minimum required energy

efficiency" means a final rule, prescribing an amended energy conservation standard, which is

effective under the "EFFECTIVE DATE" section of the notice of final rulemaking or a final rule

which is currently enforceable under the terms of the rule.

In DOE's view, section 325(o)(1) should be construed and applied to allow the Secretary

an opportunity promptly to correct legal and policy errors in a notice of final rulemaking and to

provide relative certainty for manufacturers who must plan and make the expenditures necessary

to comply with an amended energy conservation standard when it becomes enforceable. Prompt

correction of error will sometimes avoid litigation. Relative certainty for reliance purposes is an

important consideration because the time to develop new products is often a multi-year endeavor

and the costs are substantial.

DOE believes that this resolution of the ambiguities in the statute is consistent with the

statute's text, structure, legislative history, and the fundamental policy choices it makes. We

believe that on balance this approach better accomplishes the statute's objectives than either

reading the phrase "minimum required energy efficiency" to encompass only energy efficiency

standards as of the date upon which manufacturers have to comply with those standards or

establishing a set of procedures that will have the effect of preventing the Secretary, within a

short period after publication of a final rule that would modify such standards, from correcting

defects in them that subsequently come to his attention.

.1~~~ -~~3 ~N:\wpdata\airconditionermle atd wpd

1 3 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-1F ~~3 . 

the "minimum required energy efficiency" for central air conditioners and central air 

conditioning heat pumps. Clearly, the standards set out in the January 22, 2001 notice of final 

rulemaking cannot be the "minimum required energy efficiency" benchmarks for purposes of 

section 325(0)(1). There remains then the question whether the tenn "minimum required energy 

efficiency" means a final rule, prescribing an amended energy conservation standard, which is 

effective under the "EFFECTIVE DATE" section of the notice of final rulemaking or a final rule 

which is currently enforceable under the tenns of the rule. 

In DOE's view, section 325(0)(1) should be construed and applied to allow the Secretary 

an opportunity promptly to correct legal and policy errors in a notice of final rulemaking and to 

provide relative certainty for manufacturers who must plan and make the expenditures necessary 

to comply with an amended energy conservation standard when it becomes enforceable. Prompt 

correction of error will sometimes avoid litigation. Relative certainty for reliance purposes is an 

important consideration because the time to develop new products is often a multi-year endeavor 

and the costs are substantial. 

DOE believes that this resolution of the ambiguities in the statute is consistent with the 

statute's text, structure, legislative history, and the fundamental policy choices it makes. We 

believe that on balance this approach better accomplishes the statute's objectives than either 

reading the phrase "minimum required energy efficiency" to encompass only energy efficiency 

standards as of the date upon which manufacturers have to comply with those standards or 

establishing a set of procedures that will have the effect of preventing the Secretary, within a 

short period after publication of a final rule that would modify such standards, from correcting 

defects in them that subsequently come to his attention. 

13 N:lwpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 - cS

The former view - that a standard is only covered by section 325(o)(1) after

manufacturers are required to comply with it - does at first blush appear to be the most natural

reading of the phrase. This view, however, is in tension with the rest of the sentence, which, as

explained above, suggests that the relevant point of comparison is the standard being amended,

regardless of whether manufacturers actually have to comply with it. Moreover, if adopted, this

view would allow the Secretary to change the energy efficiency standards right up to the minute

before the compliance date. This seems to slight important reliance interests given significant

weight in other respects by EPCA's provisions on central air conditioner standards. For

example, section 325(d) provides that with respect to central air conditioners, any amended

standard contained in a final rule published on January 1, 1994 can apply only to products

manufactured on or after January 1, 1999. It similarly provides that any amended standard

contained in a final rule published between January 1, 1994 and January 1, 2001 can apply only

to products manufactured on or after January 1, 2006. The purpose of these delays is plainly to

give manufacturers a significant amount of time to develop and manufacture new products after a

new standard is adopted but before it becomes enforceable, thereby greatly diminishing the costs

imposed by new standards. These delays also strongly suggest that a change of standard on the

eve of the manufacture of a product would be quite disruptive - which stands to reason given

the lead-time necessary to be in a position to manufacture a compliant product. Thus, to allow a

standard to be blocked at the last minute before the compliance deadline would potentially leave

a rather large residual uncertainty difficult to reconcile with the central purpose of establishing a

climate of regulatory stability served by these closely related portions of EPCA.

The legislative history of section 325(o)(1), although sparse, also suggests that this

N:\wpdata\airconditionerrule.atd.wpd 14 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440- -U:-d?~ ,.3 

The fonner view - that a standard is only covered by section 325(0)(1) after 

manufacturers are required to comply with it - does at first blush appear to be the most natural 

reading of the phrase. This view, however, is in tension with the rest of the sentence, which, as 

explained above, suggests that the relevant point of comparison is the standard being amended, 

regardless of whether manufacturers actually have to comply with it. Moreover, if adopted, this 

view would allow the Secretary to change the energy efficiency standards right up to the minute 

before the compliance date. This seems to slight important reliance interests given significant 

weight in other respects by EPCA's provisions on central air conditioner standards. For 

example, section 325(d) provides that with respect to central air conditioners, any amended 

standard contained in a final rule published on January 1, 1994 can apply only to products 

manufactured on or after January 1, 1999. It similarly provides that any amended standard 

contained in a final rule published between January 1, 1994 and January 1, 2001 can apply only 

to products manufactured on or after January 1,2006. The purpose of these delays is plainly to 

give manufacturers a significant amount of time to develop and manufacture new products after a 

new standard is adopted but before it becomes enforceable, thereby greatly diminishing the costs 

imposed by new standards. These delays also strongly suggest that a change of standard on the 

eve of the manufacture of a product would be quite disruptive - which stands to reason given 

the lead-time necessary to be in a position to manufacture a compliant product. Thus, to allow a 

standard to be blocked at the last minute before the compliance deadline would potentially leave 

a rather large residual uncertainty difficult to reconcile with the central purpose of establishing a 

climate of regulatory stability served by these closely related portions ofEPCA. 

The legislative history of section 325(0)(1), although sparse, also suggests that"this 

14 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (307PM) 
EE-RM/STD-98-440-- ~ -3 " ,'

interpretation is incorrect. It suggests that section 325(o)(1) itself was in fact also intended in

significant measure to promote regulatory certainty - a goal it would not achieve very

effectively, given the importance of such certainty not only at the time of manufacture but well

before manufacture has begun, if the provision is interpreted to apply to a standard only after the

compliance date for that standard has passed.

The only significant information in section 325(o)(1)'s history appears in the committee

reports which comment on identical bill language that was ultimately enacted without change. In

the Senate bill, the language that became section 325(o)(1) was denominated new section 325(j).

The Senate report says the following about that new section:

New section 325(j) establishes the criteria by which the Secretary may

prescribe new or amended standards. The Secretary may not increase the

maximum allowable energy use or decrease the minimum required energy

efficiency of a covered product.

Senate Report No. 100-6 at p.8. That statement paraphrases the bill language without shedding

any light on what the language was supposed to mean.

By contrast, the House report does add to our understanding by identifying at least what

the House committee thought the purpose of the bill language was. In describing that language,

which appears in new section 325(1)(1) of the House bill, the House report states:

DOE may not prescribe an amended standard that increases the maximum

allowable energy use or decreases the minimum required energy efficiency

of a covered product. The purpose of this requirement is to prevent the

Secretary from weakening any energy conservation standard for a covered

product, whether established in this Act or subsequently adopted. This

serves to maintain a climate of relative stability with respect to future

planning by all interested parties...

*15 ^Is~~~~~~ N:\wpdata\aircon ditionerule atd.wpd

1 5 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440--ir cR~3 . 

interpretation is incorrect. It suggests that section 325(0)(1) itself was in fact also intended in 

significant measure to promote regulatory certainty - a goal it would not achieve very 

effectively, given the importance of such certainty not only at the time of manufacture but well 

before manufacture has begun, if the provision is interpreted to apply to a standard only after the 

compliance date for that standard has passed. 

The only significant infomlation in section 325(0)(1)'s history appears in the committee 

reports which comment on identical bill language that was ultimately enacted without change. In 

the Senate bill, the language that became section 325(0)(1) was denominated new section 3250). 

The Senate report says the following about that new section: 

New section 3250) establishes the criteria by which the Secretary may 

prescribe new or amended standards. The Secretary may not increase the 

maximum allowable energy use or decrease the minimum required energy 

efficiency of a covered product. 

Senate Report No.1 00-6 at p.8. That statement paraphrases the bill language without shedding 

any light on what the language was supposed to mean. 

By contrast, the House report does add to our understanding by identifying at least what 

the House committee thought the purpose of the bill language was. In describing that language, 

which appears in new section 325(1)(1) of the House bill, the House report states: 

DOE may not prescribe an amended standard that increases the maximum 

allowable energy use or decreases the minimum required energy efficiency 

of a covered product. The purpose of this requirement is to prevent the 

Secretary from weakening any energy conservation standard for a covered 

product, whether established in this Act or subsequently adopted. This 

serves to maintain a climate of relative stability with respect to future 

planning by all interested parties ... 

15 N:\wpdara\aircondirionerrule.ard.wpd 

June 29. 200 I (3 :07PM) 
EE-RM/STD-98-440 -#-,6 , .

House Report No. 100-11 at p. 22. Since the Senate report differs from the House report and no

conference committee report exists; the House report language does not represent the views of the

Congress as a whole. Therefore, that language should be used cautiously as a contributory factor

in construing section 325(o)(1) and framing implementing regulations.

The House report language indicates that the term "minimum required energy efficiency"

includes both the legislated standards established by Congress in 1987 and amended standards

"subsequently adopted." However, the word "adopted" is not a term that is used in EPCA or the

APA. As applied to the sequence of steps that make up the rulemaking process, it is unclear

which step is deemed to be the moment that an amended standard is "adopted."

More instructive is the sentence from the House report that states with regard to the

underlying purpose of section 325(o)(1): "This serves to maintain a climate of relative stability

with respect to future planning by all interested parties. . ." This suggests, as noted above, that

section 325(o)(1) was specifically expected, at least in the view of the House Committee, to act

harmoniously with the other provisions of EPCA discussed above in facilitating regulatory

certainty. The latter purpose is accomplished far better by construing the provision to become

applicable at a point well before the compliance date.

On the other hand, the reliance interests at stake also are not best served in the long run by

taking the opposite course and adopting the view that section 325(o)(1) becomes applicable at the

earliest possible moment. Let us imagine, for example, that DOE were routinely to make final

rules containing standards potentially subject to section 325(o)(1) effective as soon as possible

after publication. This would likely result in its making such rules effective 30 days after

«~~~ ^ ~~~16 ~N:\wpdata\airconditionemrule.atd wpd 16 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#-C?~,3 . 

House Report No. 100-11 at p. 22. Since the Senate report differs from the House report and no 

conference committee report exists; the House report language does not represent the views of the 

Congress as a whole. Therefore, that language should be used cautiously as a contributory factor 

in construing section 325(0)(1) and framing implementing regulations. 

The House report language indicates that the term "minimum required energy efficiency" 

includes both the legislated standards established by Congress in 1987 and amended standards 

"subsequently adopted." However, the word "adopted" is not a term that is used in EPCA or the 

AP A. As applied to the sequence of steps that make up the rulemaking process, it is unclear 

which step is deemed to be the moment that an amended standard is "adopted." 

More instructive is the sentence from the House report that states with regard to the 

underlying purpose of section 325(0)(1): "This serves to maintain a climate of relative stability 

with respect to future planning by all interested parties ... " This suggests, as noted above, that 

section 325(0)(1) was specifically expected, at least in the view of the House Committee, to act 

harmoniously with the other provisions of EPCA discussed above in facilitating regulatory 

certainty. The latter purpose is accomplished far better by construing the provision to become 

applicable at a point well before the compliance date. 

On the other hand, the reliance interests at stake also are not best served in the long run by 

taking the opposite course and adopting the view that section 325(0)(1) becomes applicable at the 

earliest possible moment. Let us imagine, for example, that DOE were routinely to make final 

rules containing standards potentially subject to section 325(0)(1) effective as soon as possible 

after publication. This would likely result in its making such rules effective 30 days after 

16 N:\wpdatalairconditionerrule.atd.wpd 

June 29, 2001 (307PM) 
EE-RM/STD-98-440--~ # -3

publication.' DOE also could refuse to reconsider any aspect of such a rule relevant to the

standard (unless it could complete its consideration and correct any errors within that 30-day time

period), no matter how serious or legitimate a question might be raised, since to do so effectively,

it would have to prevent the standard from going into effect.

This approach, however, would not be the best way for DOE to promote regulatory

certainty either. It is common for agencies to entertain petitions for reconsideration at least for a

short period after issuance of a final rule as well as to correct errors on their own motion during

that time. Moreover, there is good reason why agencies follow this course, since otherwise such

errors would have to await the completion of judicial review before they could be corrected,

thereby creating substantial delay and uncertainty. Accordingly, this approach too, in addition to

running counter to ordinary administrative practices that there is no reason to believe section

325(o)(1) was intended to abrogate, is not the best way to advance the regulatory stability sought

by section 325(o)(1) and the other related EPCA provisions discussed above.

This approach also would create unnecessary tension between section 325(o)(1) and the

Congressional Review Act (CRA) (5 U.S.C. 801-804) enacted in 1996. Under CRA, before a

final rule can become "effective," DOE must send a report to Congress (5 U.S.C. 801(a)(1)(A)

and (B)). With respect to a "major rule" within the meaning of 5 U.S.C. 804(2), CRA provides

for the passing of a 60-calendar-day-lie-before-the-Congress period, after submission of the

agency report, at the end of which a final rule could become effective in the absence of a

Congressional resolution of disapproval (5 U.S.C. 801(a)(3)). CRA allows for an exception to the

60-day-lie-before requirement only if the President determines that a major rule should take effect

'Under the APA in most cases it could not make them effective before then.

N:\wpdata\airconditionerrule atd wpd

17 'June 29. 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-44o-jl cR~ _3 . 

publication.' DOE also could refuse to reconsider any aspect of such a rule relevant to the 

standard (unless it could complete its consideration and correct any errors within that 30-day time 

period), no matter how serious or legitimate a question might be raised, since to do so effectively, 

it would have to prevent the standard from going into effect. 

This approach, however, would not be the best way for DOE to promote regulatory 

certainty either. It is common for agencies to entertain petitions for reconsideration at least for a 

short period after issuance of a final rule as well as to correct errors on their own motion during 

that time. Moreover, there is good reason why agencies follow this course, since otherwise such 

errors would have to await the completion of judicial review before they could be corrected, 

thereby creating substantial delay and uncertainty. Accordingly, this approach too, in addition to 

running counter to ordinary administrative practices that there is no reason to believe section 

325(0)(1) was intended to abrogate, is not the best way to advance the regulatory stability sought 

by section 325(0)(1) and the other related EPCA provisions discussed above. 

This approach also would create unnecessary tension between section 325(0)(1) and the 

Congressional Review Act (CRA) (5 U.S.c. 801-804) enacted in 1996. Under CRA, before a 

final rule can become "effective," DOE must send a report to Congress (5 U.S.c. 801(a)(1)(A) 

and (B». With respect to a "major rule" within the meaning of 5 U.S.c. 804(2), CRA provides 

for the passing of a 60-calendar-day-lie-before-the-Congress period, after submission of the 

agency report, at the end of which a final rule could become effective in the absence of a 

Congressional resolution of disapproval (5 U.S.c. 801(a)(3». CRA allows for an exception to the 

60-day-lie-before requirement only if the President determines that a major rule should take effect 

·Under the APA in most cases it could not make them effective before then. 

17 N:lwpdatalairconditionerruleatd wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440-# :-" 3 .

before the end of that period because of an imminent health or safety threat or other emergency;

because it is necessary to the enforcement of criminal laws or national security; or if it is issued

pursuant to a statute implementing an international trade agreement (5 U.S.C. 801(c)).

In DOE's view, this last set of considerations also points the way to the answer to the

question of at what time amendments to an energy-efficiency-setting-standard should best be

viewed as having set "minimum required energy efficiency" benchmarks. For the reasons

explained at the beginning of this section, that time must be after the final rule making the

amendments to the standard is in effect. But, consistent with the objective of section 325(o)(1)

and the other closely related EPCA provisions of promoting regulatory certainty, and to

harmonize section 325(o)(1) with common administrative practice and the CRA, such final rules

should ordinarily be made effective only after a reasonable hiatus after the date of publication has

elapsed, allowing for prompt use of ordinary administrative error correction procedures and

completion of congressional review under CRA. This is the earliest that manufacturer planning in

reliance on a final major rule to amend appliance energy conservation standards can realistically

be expected to begin. The certainty of the regulatory regime sought to be achieved therefore

cannot occur until that time.

Accordingly, DOE believes it should construe section 325(o)(1) as applying to standards

designed to set "minimum required energy efficiency" benchmarks at the point in time a final rule

containing such a standard becomes effective. It also believes, however, that it should take care to

select effective dates for final rules containing such standards that are consistent with the CRA

and any other applicable law. This approach will best promote the regulatory certainty sought by

section 325(o)(1) and its companion provisions and also comports well with the ordinary

N:\wpdata\airconditionerrule.atdwpd

18 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE.RM/STD.98-440-#~,~3 , 

before the end of that period because of an imminent health or safety threat or other emergency; 

because it is necessary to the enforcement of criminal laws or national security; or if it is issued 

pursuant to a statute implementing an international trade agreement (5 U.S.C. 80I(c)). 

In DOE's view, this last set of considerations also points the way to the answer to the 

question of at what time amendments to an energy-efficiency-setting-standard should best be 

viewed as having set "minimum required energy efficiency" benchmarks. For the reasons 

explained at the beginning of this section, that time must be after the final rule making the 

amendments to the standard is in effect. But, consistent with the objective of section 325(0)( 1) 

and the other closely related EPCA provisions of promoting regulatory certainty, and to 

harmonize section 325(0)(1) with common administrative practice and the CRA, such final rules 

should ordinarily be made effective only after a reasonable hiatus 'after the date of publication has 

elapsed, allowing for prompt use of ordinary administrative error correction procedures and 

completion of congressional review under CRA. This is the earliest that manufacturer planning in 

reliance on a final major rule to amend appliance energy conservation standards can realistically 

be expected to begin. The certainty of the regulatory regime sought to be achieved therefore 

cannot occur until that time. 

Accordingly, DOE believes it should construe section 325(0)(1) as applying to standards 

designed to set "minimum required energy efficiency" benchmarks at the point in time a final rule 

containing such a standard becomes effective. It also believes, however, that it should take care to 

select effective dates for final rules containing such standards that are consistent with the CRA 

and any other applicable law. This approach will best promote the regulatory certainty sought by 

section 325(0)(1) and its companion provisions and also comports well with the ordinary 

18 N:\wpdata1airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440-4 #2-,;3

understanding of when a rule containing such standards has established "require[ments]."

We note that DOE's own past practice on the selection of such effective dates has not

been consistent with this approach. But it also has not been internally consistent even very

recently, potentially creating wide variations regarding when section 325(o)(1) would become

applicable as well as running afoul of the various considerations outlined above.

Typically, DOE has not made amendments to EPCA standards contained in final rules

effective until the date on which manufacturers have had to comply with them. See 10 C.F.R.

430.32. That is the approach we followed even very recently in the case of the rules setting out

the amendments to standards for water heaters (66 FR 4474, 4497, Jan. 17, 2001, effective Jan.

20, 2004) and clothes washers (66 FR 3314, 3331, Jan. 12, 2001, effective Jan. 1, 2004). We

departed from that practice in the case of the central air conditioner rule at issue here. We did so,

however, not because we had considered the potential ramifications of our prior approach and of

the approach we were taking to this rule for purposes of the applicability of section 325(o)(1), but

rather in an effort to follow the current guidance of the Office of the Federal Register, which

distinguishes between the date on which a final rule is effective for purposes of modifying the

Code of Federal Regulations and the date on which a final rule is effective for purposes of

requiring compliance with its requirements. See National Archives and Records Administration,

Office of the Federal Register, Document Drafting Handbook, Chapter 2, p. 2-12 (October 1998).

Consistent with the recent guidance in the Document Drafting Handbook, but without taking into

account either the CRA or potential section 325(o)(1) ramifications, DOE specified a 30-dayafter-publication effective date consistent with the APA and a compliance date of January 23,

2006, consistent with EPCA.

N:\wpdata\airconditionerrule.atd.wpd

1 9 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STO-9S-440-# C:<;;2,_:S 

understanding of when a rule containing such standards has established "require[ments]." 

We note that DOE's own past practice on the selection of such effective dates has not 

been consistent with this approach. But it also has not been internally consistent even very 

recently, potentially creating wide variations regarding when section 325(0)(1) would become 

applicable as well as running afoul of the various considerations outlined above. 

Typically, DOE has not made amendments to EPCA standards contained in final rules 

effective until the date on which manufacturers have had to comply with them. See 10 C.F.R. 

430.32. That is the approach we followed even very recently in the case of the rules setting out 

the amendments to standards for water heaters (66 FR 4474,4497, Jan. 17,2001, effective Jan. 

20,2004) and clothes washers (66 FR 3314,3331, Jan. 12,2001, effective Jan. 1,2004). We' 

departed from that practice in the case of the central air conditioner rule at issue here. We did so, 

however, not because we had considered the potential ramifications of our prior approach and of 

the approach we were taking to this rule for purposes of the applicability of section 325(0)(1), but 

rather in an effort to follow the current guidance of the Office of the Federal Register, which 

distinguishes between the date on which a final rule is effective for purposes of modifying the 

Code of Federal Regulations and the date on which a final rule is effective for purposes of 

requiring compliance with its requirements. See National Archives and Records Administration, 

Office of the Federal Register, Document Drafting Handbook, Chapter 2, p. 2-12 (October 1998). 

Consistent with the recent guidance in the Document Drafting Handbook, but without taking into 

account either the CRA or potential section 325(0)(1) ramifications, DOE specified a 30-dayafter-publication effective date consistent with the AP A and a compliance date of January 23, 

2006, consistent with EPCA. 

19 N:lwpdatalairconditionenule.atd.wpd 

June 29, 2001 (3:07PM) 
EE.RM/STD-98-440 -O >

Having now considered these issues more carefully, DOE believes it should adopt the

approach outlined above which is specifically designed to accomplish the relevant EPCA policy

objectives. Accordingly, it proposes to adopt a series of amendments to the EPCA rules intended

to address these general issues. First, it proposes to define by rule the terms "maximum allowable

energy use" and "minimum required energy efficiency" as energy conservation standards

established by a final rule that has become effective in the sense that it has modified the Code of

Federal Regulations. It further proposes to include in its definition that to qualify, the final rule

has to have made that modification on a date selected consistent with the CRA and other

applicable law. Finally, in order to avoid confusion, it proposes a technical amendment adding a

definition of the EPCA term "effective date," which EPCA, inconsistently with the Office of

Federal Register guidance, treats as synonymous with "compliance date."

To that end, DOE proposes to add a new section 430.34 which tracks the language of

section 325(o)(1). It also proposes to add to the definitions section, section 430.2, new definitions

for "maximum allowable energy use" and "minimum required energy efficiency." These

definitions would treat amendments to a standard contained in a final rule as establishing

"maximum allowable energy use" and "minimum required energy efficiency" benchmarks for

purposes of section 325(o)(1) on the date such a rule made those amendments effective as to the

Code of Federal Regulations, provided that DOE sets out in the "EFFECTIVE DATE" line of a

notice of final rulemaking under section 325 a date on which the Code of Federal Regulations will

be modified that is selected consistent with the CRA and any other applicable law. In most

instances, the date selected will be 60 to 80 days after the date of publication.

Consistent with the proposed definitions to be added to section 430.34, DOE intends to

^r~~~~~~20\ N:\wpdata\airconditionerrule ad wpd

20 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -1f0?~ _-5 

Having now considered these issues more carefully, DOE believes it should adopt the 

approach outlined above which is specifically designed to accomplish the relevant EPCA policy 

objectives. Accordingly, it proposes to adopt a series of amendments to the EPCA rules intended 

to address these general issues. First, it proposes to define by rule the tenns "maximum allowable 

energy use" and "minimum required energy efficiency" as energy conservation standards 

established by a final rule that has become effective in the sense that it has modified the Code of 

Federal Regulations. It further proposes to include in its definition that to qualify, the final rule 

has to have made that modification on a date selected consistent with the CRA and other 

applicable law. Finally, in order to avoid confusion, it proposes a technical amendment adding a 

definition of the EPCA tenn "effective date," which EPCA, inconsistently with the Office of 

Federal Register guidance, treats as synonymous with "compliance date." 

To that end, DOE proposes to add a new section 430.34 which tracks the language of 

section 325(0)(1). It also proposes to add to the definitions section, section 430.2, new definitions 

for "maximum allowable energy use" and "minimum required energy efficiency." These 

definitions would treat amendments to a standard contained in a final rule as establishing 

"maximum allowable energy use" and "minimum required energy efficiency" benchmarks for 

purposes of section 325(0)(1) on the date such a rule made those amendments effective as to the 

Code of Federal Regulations, provided that DOE sets out in the "EFFECTIVE DATE" line ofa 

notice of final rulemaking under section 325 a date on which the Code of Federal Regulations will 

be modified that is selected consistent with the CRA and any other applicable law. In most 

instances, the date selected will be 60 to 80 days after the date of publication. 

Consistent with the proposed definitions to be added to section 430.34, DOE intends to 

20 N:lwpdatalairconditionerrule.atd.wpd 

June 29. 2001 (3:07PM) 
EE-RM/STD-98-440 -' - .

make the final rule based on today's proposal effective 75 days from the date of publication.

Finally, to make the technical change referenced above, DOE proposes also to add to

section 430.2 a definition of the term "effective date" as used in EPCA and 10 CFR 430.32. This

definition clarifies that for purposes of construing the term under EPCA (but not for purposes of

determining the point at which amendments to a standard qualify for protection under section

325(o)(1)), the "effective date" is the date on which an amended energy conservation standard

becomes enforceable.

III. Proposal to Withdraw Final Rule

In this portion of the SUPPLEMENTARY INFORMATION, DOE sets forth its

conclusions with regard to the legal and policy issues that DOE considered in deciding whether to

propose withdrawal of the January 22, 2001 final rule. Included among these issues are certain

issues raised by ARI in its petition for reconsideration.

A. Legal Issues

1. Failure to Obtain the Views of the Department of Justice on the Potential Anti-Competitive

Impact of 13 SEER Standards

In its petition, ARI contends that DOE should have invited the Department of Justice to

submit a supplemental statement of its views on the potential anti-competitive impact of DOE's

final rule establishing a 13 SEER standard for central air conditioners and heat pumps (ARI

Petition Discussion, paragraph d). Although EPCA does not provide that DOE must seek

N:\wpdata\airconditionerrule aidwpd 21 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -it-~. 

make the final rule based on today's proposal effective 75 days from the date of publication. 

Finally, to make the technical change referenced above, DOE proposes also to add to 

section 430.2 a definition of the term "effective date" as used in EPCA and 10 CFR 430.32. This 

definition clarifies that for purposes of construing the term under EPCA (but not for purposes of 

determining the point at which amendments to a standard qualify for protection under section 

325(0)(1», the "effective date" is the date on which an amended energy conservation standard 

becomes enforceable. 

III. Proposal to Withdraw Final Rule 

In this portion of the SUPPLEMENTARY INFORMATION, DOE sets forth its 

conclusions with regard to the legal and policy issues that DOE considered in deciding whether to 

propose withdrawal of the January 22, 2001 final rule. Included among these issues are certain 

issues raised by ARI in its petition for reconsideration. 

A. Legal Issues 

1. Failure to Obtain the Views of the Department of Justice on the Potential Anti-Competitive 

Impact of 13 SEER Standards 

In its petition, ARI contends that DOE should have invited the Department of Justice to 

submit a supplemental statement of its views on the potential anti-competitive impact of DOE's 

final rule establishing a 13 SEER standard for central air conditioners and heat pumps CARl 

Petition Discussion, paragraph d). Although EPCA does not provide that DOE must seek 

21 N:lwpdatalairconditionerrule ald.wpd 

June 29, 2001 (307PM) 
EE-RM/STD-98-440- ' - 3

supplemental determinations from the Department of Justice on final rules, DOE concludes, for

reasons set forth below, that it should have requested supplemental views from the Department of

Justice on the effect of a uniform 13 SEER standard on competition, particularly on the question

of potential consolidation in the central air conditioning and heat pump industry.

Section 325(o)(2)(B)(i) of EPCA requires DOE to determine whether the benefits of a new

or amended energy conservation standard exceed its burdens by considering "to the greatest extent

practicable" seven factors, including: "(V) the impact of any lessening of competition, as

determined in writing by the Attorney General, that is likely to result from the imposition of the

standard" (42 U.S.C. 6295(o)(2)(B)(i)). Section 325(o) also provides that:

For purposes of clause (i)(V), the Attorney General shall make a determination

of the impact, if any, of any lessening of competition likely to result from such

standard and shall transmit such determination, not later than 60 days after the

publication of a proposed rule prescribing or amending an energy conservation

standard, in writing to the Secretary, together with an analysis of the nature and

extent of such impact. Any such determination and analysis shall be published

by the Secretary in the Federal Register.

42 U.S.C. 6295(o)(2)(B)(ii).

In context, it is clear that the term "the standard" in section 325(o)(2)(B)(i) refers to any

new or amended energy conservation standard prescribed by DOE under section 325(o) of EPCA.

Because the Department of Justice must transmit its determination to DOE within 60 days after

the publication of a proposed rule, EPCA contemplates that the Department of Justice's

determination on the anti-competitive effects of a proposed rule will enable DOE to fulfill its

substantive obligation to consider the Department's expert opinion on the anti-competitive impact

of a final standard.

DOE submitted the October 5, 2000 NOPR to the Attorney General for review pursuant to

-_~~~~~22 ~~N:\wpdata\airconditionenule.atld.pd 22 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -11 cAO? 3 

supplemental determinations from the Department of Justice on final rules, DOE concludes, for 

reasons set forth below, that it should have requested supplemental views from the Department of 

Justice on the effect of a uniform 13 SEER standard on competition, particularly on the question 

of potential consolidation in the central air conditioning and heat pump industry. 

Section 325(0 )(2)(B)(i) of EPCA requires DOE to determine whether the benefits of a new 

or amended energy conservation standard exceed its burdens by considering "to the greatest extent 

practicable" seven factor~ including: "(V) the impact of any lessening of competition, as 

determined in writing by the Attorney General, that is likely to result from the imposition of the 

standard" (42 U.S.C. 6295(0)(2)(B)(i». Section 325(0) also provides that: 

For purposes of clause (i)(V), the Attorney General shall make a determination 

of the impact, if any, of any lessening of competition likely to result from such 

standard and shall transmit such determination, not later than 60 days after the 

publication of a proposed rule prescribing or amending an energy conservation 

standard, in writing to the Secretary, together with an analysis of the nature and 

extent of such impact. Any such determination and analysis shall be published 

by the Secretary in the Federal Register. 

42 U.S.C. 6295(0)(2)(B)(ii). 

In context, it is clear that the term "the standard" in section 325(0 )(2)(B)(i) refers to any 

new or amended energy conservation standard prescribed by DOE under section 325(0) of EPCA. 

Because the Department of Justice must transmit its determination to DOE within 60 days after 

the publication of a proposed rule, EPCA contemplates that the Department of Justice's 

determination on the anti-competitive effects of a proposed rule will enable DOE to fulfill its 

substantive obligation to consider the Department's expert opinion on the anti-competitive impact 

of a final standard. 

DOE submitted the October 5, 2000 NOPR to the Attorney General for review pursuant to 

22 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 200) (307PM) 
EE-RM/STD-98-440 -L7- '

the foregoing provisions. The NOPR described the range of potential trial standards considered

by DOE, and proposed adoption of Trial Standard Level 3, i.e., a minimum SEER of 12 for

central air conditioner product classes and a SEER of 13 for central air conditioning heat pumps,

with a corresponding HSPF of 7.7. The Department of Justice, consistent with its past practice,

confined its response to the proposed standards, corresponding to Trial Standard Level 3.

The Department of Justice conveyed to DOE three concerns about the proposed rule's

potential impact on competition. First, the Department of Justice was concerned the proposed

rule would have a disproportionate impact on small manufacturers. Second, it was concerned that

the proposed standard for heat pumps, and in some instances the standard for air conditioners,

would have an adverse impact on some manufacturers of equipment to be used to retrofit existing

housing and used in manufactured housing. Third, it was concerned that the proposed 13 SEER

for central air conditioning heat pumps could cause consumers to shift from heat pumps to other

systems that include resistance heat systems, reducing the competition that presently exists

between manufacturers of air conditioning heat pumps and manufacturers of those other heating

systems. The Department of Justice urged DOE to take these concerns into account and consider

"setting a lower SEER standard for heat pumps, such as the standard included in Trial Standard

Level 2, and a lower SEER standard for air conditioners for retrofit markets where there are space

constraints and for manufactured housing." 66 FR 7200.

DOE published a final rule on January 22, 2001 adopting standards that corresponded to

Trial Standard Level 4 (the next higher level) and prescribed a minimum SEER of 13 for all the

product classes, except for niche products, with a corresponding 7.7 HSPF. The preamble to the

final rule addressed the Department of Justice's specific concerns about the October 5 proposed

N:\wpdata\airconditionerrule.atd wpd 23 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE.RM/STD-98-440 - #~;;'3 , 

the foregoing provisions. The NOPR described the range of potentia) trial standards considered 

by DOE, and proposed adoption of Trial Standard Level 3, i.e., a minimum SEER of 12 for 

central air conditioner product classes and a SEER of 13 for central air conditioning heat pumps, 

with a corresponding HSPF of 7.7. The Department of Justice, consistent with its past practice, 

confined its response to the proposed standards, corresponding to Trial Standard Level 3. 

The Department of Justice conveyed to DOE three concerns about the proposed rule's 

potential impact on competition. First, the Department of Justice was concerned the proposed 

rule would have a disproportionate impact on small manufacturers. Second, it was concerned that 

the proposed standard for heat pumps, and in some instances the standard for air conditioners, 

would have an adverse impact on some manufacturers of equipment to be used to retrofit existing 

housing and used in manufactured housing. Third, it was concerned that the proposed 13 SEER 

for central air conditioning heat pumps could cause consumers to shift from heat pumps to other 

systems that include resistance heat systems, reducing the competition that presently exists 

between manufacturers of air conditioning heat pumps and manufacturers of those other heating 

systems. The Department of Justice urged DOE to take these concerns into account and consider 

"setting a lower SEER standard for heat pumps, such as the standard included in Trial Standard 

Level 2, and a lower SEER standard for air conditioners for retrofit markets where there are space 

constraints and for manufactured housing." 66 FR 7200. 

DOE published a final rule on January 22, 2001 adopting standards that corresponded to 

Trial Standard Level 4 (the next higher level) and prescribed a minimum SEER of 13 for all the 

product classes, except for niche products, with a corresponding 7.7 HSPF. The preamble to the 

final rule addressed the Department of Justice's specific concerns about the October 5 proposed 

23 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RMISTD-98-440 _:< ._

rule (66 FR 7192-93). It also addressed the potential anti-competitive impact of the final rule's

uniform 13 SEER standard, in general terms:

We recognize that the standard levels we are adopting could accelerate the

consolidation trend among major manufacturers. However, as discussed in the

manufacturer impact analysis, we do not expect that any manufacturer or group of

manufacturers will be able to use the standards as an opportunity to consolidate

their market power. (See TSD, Chapter 8). Therefore, we believe that competition

will remain vigorous under the adopted standard, and any lessening of competition

that does occur will not result in price increases or loss of choice and utility for

consumers.

66 FR 7176. The TSD referenced chapter also concluded that, under Trial Standard Level 4,

several major companies would likely consider selling their production assets rather than make the

investment required to meet the new standard or face the loss of profits caused by the absence of

premium products in the marketplace (see, TSD 8.7.4, p. 8-64).

Thus, DOE simply relied on the manufacturer impact analysis in the TSD to support its

conclusion with respect to the potential impact on competition of the final rule's Trial Standard

Level 4 (13 SEER) standards. DOE did not have the benefit of the Department of Justice's views

on the potential anti-competitive impact of the final 13 SEER standards for both air conditioners

and heat pumps.

As the TSD shows, the central issue regarding the January 22 final rule is the potential

effect of 13 SEER standards on consolidation in the central air conditioning and heat pump

industry. DOE adverted to this in the preamble to the final rule with the statement "that the

standard levels we are adopting could accelerate the consolidation trend among major

manufacturers." 66 FR 7176. Arguably, to comply with section 325(o)(2)(B)(i), DOE should

have requested supplemental views from the Department of Justice on this issue.

24 N:\wpdata\airconditionerrule aldwpd 24 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-9S-440 -1f:c9.,.:z3 

rule (66 FR 7192-93). It also addressed the potential anti-competitive impact of the final rule's 

uniform 13 SEER standard, in general terms: 

We recognize that the standard levels we are adopting could accelerate the 

consolidation trend among major manufacturers. However, as discussed in the 

manufacturer impact analysis, we do not expect that any manufacturer or group of 

manufacturers will be able to use the standards as an opportunity to consolidate 

their market power. (See TSD, Chapter 8). Therefore, we believe that competition 

will remain vigorous under the adopted standard, and any lessening of competition 

that does occur will not result in price increases or loss of choice and utility for 

consumers. 

66 FR 7176. The TSD referenced chapter also concluded that, under Trial Standard Level 4, 

several major companies would likely consider selling their production assets rather than make the 

investment required to meet the new standard or face the loss of profits caused by the absence of 

premium products in the marketplace (see, TSD 8.7.4, p. 8-64). . 

Thus, DOE simply relied on the manufacturer impact analysis in the TSD to support its 

conclusion with respect to the potential impact on competition of the final rule's Trial Standard 

Level 4 (13 SEER) standards. DOE did not have the benefit of the Department of Justice's views 

on the potential anti-competitive impact of the final 13 SEER standards for both air conditioners 

and heat pumps. 

As the TSD shows, the central issue regarding the January 22 final rule is the potential 

effect of 13 SEER standards on consolidation in the central air conditioning and heat pump 

industry. DOE adverted to this in the preamble to the final rule with the statement ''that the 

standard levels we are adopting could accelerate the consolidation trend among major 

manufacturers." 66 FR 7176. Arguably, to comply with section 325(0)(2)(B)(i), DOE should 

have requested supplemental views from the Department of Justice on this issue. 

24 N:lwpdatalairconditionerrule.atd.wpd 

June 29. 2001 (307PM) 
EE-RM/STD-98-440- -- ,: 3' ,

2. Failure of the Statement of Basis for the Final Rule to Adequately Address Cumulative

Regulatorv Burdens on Manufacturers

To determine whether a standard is economically justified, DOE must assess the economic

impact of the standard on the manufacturers and consumers of the products subject to such

standard (42 U.S.C. 6295(o)(2)(B)(i)(I)). One aspect of manufacturer burden is the cumulative

impact of multiple DOE standards and the regulatory actions of other Federal agencies and States

that affect the manufacture of a covered product.

In its petition for reconsideration, ARI criticized DOE for not discussing information in

the TSD on the cumulative regulatory burden on the central air conditioning and heat pump

industry (ARI Petition Discussion, paragraph m). The preamble to the final rule addressed the

issue of cumulative regulatory burden in conclusory terms in two brief sentences, as follows:

"The Department has considered the manufacturer burdens as described in the manufacturer

impact analysis of the TSD in adopting the new standard. These include cumulative burdens." 66

FR 7174. The statement of basis and purpose required by the APA (5 U.S.C. 553(c)) to

accompany a final rule must establish a rational connection between the facts the agency found

and the choices it made. In light of the evidence of cumulative regulatory burdens on

manufacturers documented in the TSD, it is doubtful whether the mere assertion by DOE that it

considered the cumulative burdens on manufacturers is adequate to establish a rational basis for

DOE's determination on manufacturer impact resulting from a 13 SEER standard.

DOE's discussion and conclusions regarding the weight that should be given to cumulative

regulatory burden in this rulemaking are set forth in the "Policy Issues" discussion immediately

following this section, and in the preamble to today's proposed rule (see Section V.B.2. of this

N:\Npdata\airconditionerule atd. wpd 25 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE.RM/STD.98.440-#=-~.;?3 I 

2. Failure of the Statement of Basis for the Final Rule to Adequately Address Cumulative 

Regulatory Burdens on Manufacturers 

To determine whether a standard is economically justified, DOE must assess the economic 

impact of the standard on the manufacturers and consumers of the products subject to such 

standard (42 U.S.C. 6295(0)(2)(B)(i)(I». One aspect of manufacturer burden is the cumulative 

impact of multiple DOE standards and the regulatory actions of other Federal agencies and States 

that affect the manufacture of a covered product. 

In its petition for reconsideration, Am criticized OOE for not discussing information in 

the TSD on the cumulative regulatory burden on the central air conditioning and heat pump 

industry (ARl Petition Discussion, paragraph m). The preamble to the final rule addressed the 

issue of cumulative regulatory burden in conclusory terms in two brief sentences, as follows: 

"The Department has considered the manufacturer burdens as described in the manufacturer 

impact analysis of the TSD in adopting the new standard. These include cumulative burdens." 66 

FR 7174. The statement of basis and purpose required by the APA (5 U.S.c. 553(c» to 

accompany a final rule must establish a rational connection between the facts the agency found 

and the choices it made. In light of the evidence of cumulative regulatory burdens on 

manufacturers documented in the TSD, it is doubtful whether the mere assertion by DOE that it 

considered the cumulative burdens on manufacturers is adequate to establish a rational basis for 

DOE's determination on manufacturer impact resulting from a 13 SEER standard. 

DOE's discussion and conclusions regarding the weight that should be given to cumulative 

regulatory burden in this rulemaking are set forth in the "Policy Issues" discussion immediately 

following this section, and in the preamble to today's proposed rule (see Section V.B.2. of this 

25 N:\wpdalalaircondilionerrule.ald.wpd 

June 29, 2001 (3:07PM) 
SUPPLEMENTARY INFORMATION). EE-RM/STD-98-440-# -c 3

B. Policy Issues

DOE reviewed the basis and rationale for the January 22, 2001 final rule pursuant to the

President's Regulatory Review Plan, and it considered carefully numerous claims by ARI of error

or insufficiency in DOE's analyses and its weighing of the benefits and burdens of the final rule.

As a result of this review, DOE has decided to accord more weight to certain factors, and those

changes, which reflect the current Administration's policies, support DOE's decisions to propose

withdrawal of the January 22 final rule and to publish today's proposed rule.

1. Burdens on Consumers

During its review of the January 22 final rule, DOE reassessed its weighing of burdens and

benefits of the standards, giving particular attention to the question of whether burdens on

consumers received adequate consideration and weight.

DOE currently is particularly concerned that new standards be designed to distribute their

burdens and benefits as fairly as practical. Although some disparity is expected in any national

standard, the disparity in impacts between low-income and typical consumers is of more concern

at more stringent efficiency standards because increases in first cost are felt more sharply by lower

income consumers. The potential disparities would be diminished under the 12 SEER standard

that DOE is proposing today.

-.~~ N:\:pdata\airconditioneule ~~~~26 " .atd wpd 26 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

SUPPLEMENTARY INFORMATION). EE-RM/STD-98-440 -#:~_::s . 

B. Policy Issues 

DOE reviewed the basis and rationale for the January 22, 2001 final rule pursuant to the 

President's Regulatory Review Plan, and it considered carefully numerous claims by ARl of error 

or insufficiency in DOE's analyses and its weighing of the benefits and burdens of the final rule. 

As a result of this review, DOE has decided to accord more weight to certain factors, and those 

changes, which reflect the current Administration's policies, support DOE's decisions to propose 

withdrawal of the January 22 final rule and to publish today's proposed rule. 

1. Burdens on Consumers 

During its review of the January 22 final rule, DOE reassessed its weighing of burdens and 

benefits of the standards, giving particular attention to the question of whether burdens on 

consumers received adequate consideration and weight. 

DOE currently is particularly concerned that new standards be designed to distribute their 

burdens and benefits as fairly as practical. Although some disparity is expected in any national 

standard, the disparity in impacts between low-income and typical consumers is of more concern 

at more stringent efficiency standards because increases in first cost are felt more sharply by lower 

income consumers. The potential disparities would be diminished under the 12 SEER standard 

that DOE is proposing today. 

26 N:lwpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440-c' r-- -

DOE also has considered that the fraction of consumers who are negatively impacted by a

13 SEER standard, in terms of life-cycle cost savings versus the existing standards, is

substantially higher than the fraction who are negatively impacted in other recent DOE efficiency

rules. To illustrate, the efficiency standard for clothes washers, published in the Federal Register

on January 12, 2001 (66 FR 3314), will negatively impact 19 percent of all consumers and 19

percent of low income consumers, and the efficiency standard for gas-fired residential water

heaters, published in the Federal Register on January 17, 2001 (66 FR 4474), will result in

negative life-cycle cost impacts for 12 percent of all consumers.2 By contrast, under a 13 SEER

standard for split air conditioners, 39 percent and 50 percent of average and low income

consumers, respectively, would be negatively impacted. A 12 SEER standard would result in a

lower fraction of consumers who are negatively impacted: 25 percent and 34 percent of average

and low income consumers, respectively.

In summary, DOE has decided that, in issuing the January 22 final rule, inadequate

discussion and weight was given to the fraction of all and low income consumers who incur

negative life-cycle cost impacts as a result of the new standard.

2. Burdens on Manufacturers

a. Cumulative Regulatory Burden

In the preceding section, DOE concluded that the statement of basis and purpose for the

2

For split air conditioners and gas water heaters, the fraction provided represents those consumers who

incur an increase in life-cycle costs that exceeds 2 percent of the total life-cycle cost, with low-income data available

only for split-air conditioners. For clothes washers, the fraction represents those consumers who incur any lifecycle cost increase at all. For direct comparison with clothes washers, the fraction of all consumers incurring any

increase in life-cycle costs for gas water heaters is 22 percent and for split air conditioners is 55 percent.

-~~~~27 ~N:\wpdata\airconditionerrule.atd.wpd N_ 27 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#-a~-;? 

DOE also has considered that the fraction of consumers who are negatively impacted by a 

13 SEER standard, in terms of life-cycle cost savings versus the existing standards, is 

substantially higher than the fraction who are negatively impacted in other recent DOE efficiency 

rules. To illustrate, the efficiency standard for clothes washers, published in the Federal Register 

on January 12,2001 (66 FR 3314), will negatively impact 19 percent of all consumers and 19 

percent of low income consumers, and the efficiency standard for gas-fired residential water 

heaters, published in the Federal Register on January 17,2001 (66 FR 4474), will result in 

negative life-cycle cost impacts for 12 percent of all consumers.2 By contrast, under a 13 SEER 

standard for split air conditioners, 39 percent and 50 percent of average and low income 

consumers, respectively, would be negatively impacted. A 12 SEER standard would result in a 

lower fraction of consumers who are negatively impacted: 25 percent and 34 percent of average 

and low income consumers, respectively. 

In summary, DOE has decided that, in issuing the January 22 final rule, inadequate 

discussion and weight was given to the fraction of all and low income consumers who incur 

negative life-cycle cost impacts as a result of the new standard. 

2. Burdens on Manufacturers 

a. Cumulative Regulatory Burden 

In the preceding section, DOE concluded that the statement of basis and purpose for the 

2For split air conditioners and gas water heaters, the fraction provided represents those consumers who 

incur an increase in life-cycle costs that exceeds 2 percent of the total life-cycle cost, with low-income data available 

only for split-air conditioners. For clothes washers, the fraction represents those consumers who incur any Iifecycle cost increase at all. For direct comparison with clothes washers, the fraction of all consumers incurring any 

increase in life-cycle costs for gas water heaters is 22 percent and for split air conditioners is 55 percent. 

27 N:lwpdatalairconditionerrule.atd.wpd 

June 29. 2001 (307PM) 
EE-RM/STD-98-440 - 4-:

January 22 final rule did not adequately address the issue of cumulative regulatory burden, which

DOE recognizes is a key component of the assessment of manufacturer impact (see Process

Improvement Rule, § 10(g), codified at 10 CFR Part 430, Subpart C, Appendix A). DOE's

decision to propose

withdrawal of the January 22 final rule is based in part on DOE's current view that the preamble

to the final rule contained insufficient discussion of cumulative regulatory burdens and gave

insufficient weight to cumulative regulatory burdens.

As mentioned by ARI, DOE did have information, which was included in the TSD, of

cumulative regulatory burdens. The TSD for the final rule shows that the most significant

regulation facing the central air conditioning industry is the Environmental Protection Agency's

(EPA's) ban on new equipment utilizing a particular hydrofluorocarbon (HCFC), HCFC-22, as a

refrigerant, scheduled to take effect in January 2010. In addition, an EPA ban on use of HCFC141b as a foam blowing agent (used in water heaters, refrigerators and freezers) takes effect on

January 1, 2003. The TSD reports that companies must develop a wealth of new knowledge and

experience to replace the refrigerant HCFC-22, and it estimates the cost of converting equipment

to a substitute refrigerant to be on the order of $50 million per company. Additional regulatory

burdens on manufacturers of residential central air conditioner and heat pump products are new

DOE efficiency standards for refrigerators and freezers (effective July 1, 2001) and water heaters

(effective January 20, 2004); a Consumer Product Safety Commission voluntary standard for

flammable vapor ignitions on water heaters (under development); and EPA standards under

section 112(d) of the Clean Air Act on emissions of hazardous air pollutants from the coating of

«„~~~~~28 ~~N:\wpdata'airconditionermuleatd.wpd 28 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440- :/:to?c;:2, ,3. 

January 22 final rule did not adequately address the issue of cumulative regulatory burden, which 

DOE recognizes is a key component of the assessment of manufacturer impact (see Process 

Improvement Rule, § 10(g), codified at 10 CFR Part 430, Subpart C, Appendix A). DOE's 

decision to propose 

withdrawal of the January 22 final rule is based in part on DOE's current view that the preamble 

to the final rule contained insufficient discussion of cumulative regulatory burdens and gave 

insufficient weight to cumulative regulatory burdens. 

As mentioned by ARI, DOE did have information, which was included in the TSD, of 

cumulative regulatory burdens. The TSD for the fmal rule shows that the most significant 

regulation facing the central air conditioning industry is the Environmental Protection Agency's 

(EP A's) ban on new equipment utilizing a particular hydrofluorocarbon (HCFC), HCFC·22, as a 

refrigerant, scheduled to take effect in January 2010. In addition, an EPA ban on use of HCFC· 

141 b as a foam blowing agent (used in water heaters, refrigerators and freezers) takes effect on 

January 1,2003. The TSD reports that companies must develop a wealth of new knowledge and 

experience to replace the refrigerant HCFC·22, and it estimates the cost of converting equipment 

to a substitute refrigerant to be on the order of$50 million per company. Additional regulatory 

burdens on manufacturers of residential central air conditioner and heat pump products are new 

DOE efficiency standards for refrigerators and freezers (effective July 1,2001) and water heaters 

(effective January 20, 2004); a Consumer Product Safety Commission voluntary standard for 

flammable vapor ignitions on water heaters (under development); and EPA standards under 

section 112( d) of the Clean Air Act on emissions of hazardous air pollutants from the coating of 

28 N.lwpdata\airconditionenlJle.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440- - "-"

large appliances (expected to apply in 2004). While acknowledging that the uncertainty

surrounding DOE's estimates is high, the TSD estimates the total investment required by

manufacturers of central air conditioner and heat pumps to meet these cumulative regulatory

burdens will exceed $479 million. This estimate excludes the cost of manufacturer compliance

with DOE's amended efficiency standard for air conditioners and heat pumps, which the TSD

estimates is comparable the cost of the HCFC-22 phase-out (TSD, Section 8.6.).

b. Financial Burdens Associated with New Standards

The TSD demonstrated that the more stringent 13 SEER standards adopted in the January

22 final rule would likely cause the industry's net cash flow to drop below zero (Section 8.4.6). It

also noted that one segment of the industry (denominated "lower operating cost manufacturers" in

the analysis) would likely benefit from more stringent standards, and that another segment of the

industry (denominated "higher operating cost manufacturers") would bear nearly the total

financial burden (Section 8.5). According to the TSD, the potential outcomes of these impacts

could include accelerated consolidation and stifling of innovation. As a matter of policy, DOE

considers these outcomes to be potentially serious, and certainly material, consequences that

should be discussed when adopting new standards. DOE is proposing to withdraw the January 22

final rule, in part, to give greater weight to the negative cash flow and maldistribution of burdens

on industry of 13 SEER standards. DOE explicitly addresses these issues in the preamble to

today's proposed rule in Section V.B.2. of this SUPPLEMENTARY INFORMATION.

IV. Proposed Rule

A. Background

N \wpdala\airconditionerrule.atdwpd 29 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440- # ~_~ 

large appliances (expected to apply in 2004). While acknowledging that the uncertainty 

surrounding DOE's estimates is high, the TSD estimates the total investment required by 

manufacturers of central air conditioner and heat pumps to meet these cumulative regulatory 

burdens will exceed $479 million. This estimate excludes the cost of manufacturer compliance 

with DOE's amended efficiency standard for air conditioners and heat pumps, which the TSD 

estimates is comparable the cost of the HCFC-22 phase-out (TSD, Section 8.6.). 

b. Financial Burdens Associated with New Standards 

The TSD demonstrated that the more stringent 13 SEER standards adopted in the January 

22 final rule would likely cause the industry's net cash flow to drop below zero (Section 8.4.6). It 

also noted that one segment of the industry (denominated "lower operating cost manufacturers" in 

the analysis) would likely benefit from more stringent standards, and that another segment of the 

industry (denominated "higher operating cost manufacturers") would bear nearly the total 

financial burden (Section 8.5). According to the TSD, the potential outcomes ofthese impacts 

could include accelerated consolidation and stifling of innovation. As a matter of policy, DOE 

considers these outcomes to be potentially serious, and certainly material, consequences that 

should be discussed when adopting new standards. DOE is proposing to withdraw the January 22 

final rule, in part, to give greater weight to the negative cash flow and maldistribution of burdens 

on industry of 13 SEER standards. DOE explicitly addresses these issues in the preamble to 

today's proposed rule in Section V.B.2. of this SUPPLEMENTARY INFORMATION. 

IV. Proposed Rule 

A. Background 

29 N Iwpdala\aircondilionerrule.ald.wpd 

June 29, 2001 (3:07PM) 
EE-RM/ISTD-98-440 -44='-e"m

1. Statutory Authority

Part B of Title III of the Energy Policy and Conservation Act provides for the Energy

Conservation Program for Consumer Products other than Automobiles (42 U.S.C. 6291 et seq.).

The consumer products subject to this program (often referred to hereafter as "covered products")

include central air conditioners and heat pumps. Under the Act, the program consists essentially

of three parts: testing, labeling, and Federal energy conservation standards.

As discussed in the Introduction in Section I of this SUPPLEMENTARY

INFORMATION, NAECA prescribed initial Federal energy conservation standards for central air

conditioners and heat pumps (42 U.S.C. 6295(d)). NAECA further amended EPCA by specifying

that DOE is to review and publish amended standards by January 1, 1994 (42 U.S.C.

6295(d)(3)(A)). Under EPCA, any new or amended standard must be designed so as to achieve

the maximum improvement in energy efficiency that is technologically feasible and economically

justified (42 U.S.C. 6295(o)(2)(A)).

Section 325(o)(2)(B)(i) provides that before DOE determines whether a standard is

economically justified, it must first solicit comments on a proposed standard (42 U.S.C.

6295(o)(2)(B)(i)). That section further provides that, after reviewing the comments, DOE must

determine whether the benefits of the standard exceed its burdens, based, to the greatest extent

practicable, on a weighing of the following seven factors:

(i) The economic impact of the standard on the manufacturers and on the consumers of

the products subject to such standard;

30 une29,3N:\wpdata\airconditionemrrleatd.wpd 30 June 29. 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

1. Statutory Authority 

EE-RM/STD-98-440 -·#:--~C13 . 

Part B of Title III of the Energy Policy and Conservation Act provides for the Energy 

Conservation Program for Consumer Products other than Automobiles (42 U.S.C. 6291 et seq.). 

The consumer products subject to this program (often referred to hereafter as "covered products") 

include central air conditioners and heat pumps. Under the Act, the program consists essentially 

of three parts: testing, labeling, and Federal energy conservation standards. 

As discussed in the Introduction in Section I of this SUPPLEMENTARY 

INFORMATION, NAECA prescribed initial Federal energy conservation standards for central air 

conditioners and heat pumps (42 U.S.C. 6295(d)). NAECA further amended EPCA by specifying 

that DOE is to review and publish amended standards by January -1, 1994 (42 U.S.C. 

6295(d)(3)(A)). Under EPCA, any new or amended standard must be designed so as to achieve 

the maximum improvement in energy efficiency that is technologically feasible and economically 

justified (42 U.S.C. 6295(0)(2)(A)). 

Section 325(0)(2)(8)(i) provides that before DOE determines whether a standard is 

economically justified, it must first solicit comments on a proposed standard (42 U.S.C. 

6295(0)(2)(8)(i)). That section further provides that, after reviewing the comments, DOE must 

determine whether the benefits of the standard exceed its burdens, based, to the greatest extent 

practicable, on a weighing of the following seven factors: 

(i) The economic impact of the standard on the manufacturers and on the consumers of 

the products subject to such standard; 

30 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440- c?3:F ,

(ii) 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 from the imposition of

the standard;

(iii) The total projected amount of energy savings likely to result directly from the

imposition of the standard;

(iv) Any lessening of the utility or the performance of the covered products likely to result

from the imposition of the standard;

(v) The impact of any lessening of competition, as determined in writing by the Attorney

General, that is likely to result from the imposition of the standard;

(vi) The need for national energy conservation; and

(vii) Other factors the Secretary considers relevant.

In addition, section 325(o)(2)(B)(iii) 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 .... "

(42 U.S.C. 6295(o)(2)(B)(iii)). The rebuttable presumption test is an alternative path to

establishing economic justification.

2. Rulemaking History

~3 ~1 Jue9,3N:\w0pdata\airconditionermle.atd.wpd

31 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#c:?:;2,3 I 

(ii) 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 from the imposition of 

the standard; 

(iii) The total projected amount of energy savings likely to result directly from the 

imposition of the standard; 

(iv) Any lessening of the utility or the performance of the covered products likely to result 

from the imposition of the standard; 

(v) The impact of any lessening of competition, as determined in writing by the Attorney 

General, that is likely to result from the imposition of the standard; 

(vi) The need for national energy conservation; and 

(vii) Other factors the Secretary considers relevant. 

In addition, section 325(o)(2)(B)(iii) 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 .... " 

(42 U.S.C. 6295(o)(2)(B)(iii)). The rebuttable presumption test is an alternative path to 

establishing economic justification. 

2. Rulemaking History 

31 N:lwpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -- ' ;c- 5 .

The existing standards for residential central air conditioners and heat pumps have been in

effect since 1992. As described in the Introduction to this SUPPLEMENTARY INFORMATION,

the efficiency descriptor for air conditioner and heat pump cooling efficiency is SEER (or

Seasonal Energy Efficiency Ratio), and the descriptor for heat pump heating efficiency is HSPF

(or Heating Seasonal Performance Factor). SEER is DOE's measure of energy efficiency for the

seasonal cooling performance of central air conditioners and heat pumps. HSPF is DOE's

measure of energy efficiency for the seasonal heating performance of heat pumps. The current

central air conditioner and heat pump efficiency standards are as follows:

- Split system air conditioners and heat pumps - 10 SEER/6.8 HSPF

- Single package air conditioners and heat pumps - 9.7 SEER/6.6 HSPF

On September 8, 1993, DOE published an Advance Notice of Proposed Rulemaking

(ANOPR) announcing DOE's intention to revise the existing central air conditioner and heat

pump efficiency standard. 58 FR 47326. During a workshop on June 30, 1998, DOE presented

for comment an analytical framework for the central air conditioner and heat pump standards

rulemaking. The analytical framework described the different analyses to be conducted, the

methods for conducting them, the use of new spreadsheets, and the relationship of the various

analyses. On November 24, 1999, DOE published a Supplemental ANOPR and invited additional

comment on issues raised following publication of the original ANOPR. 64 FR 66306.

On October 5, 2000, DOE published a notice of proposed rulemaking (October 5, 2000,

NOPR). 65 FR 59590. The energy efficiency standards that DOE proposed for residential central

N:\2pdata\airconditionerrule.atd.wpd 32 June 29. 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

The existing standards for residential central air conditioners and heat pumps have been in 

effect since 1992. As described in the Introduction to this SUPPLEMENT AR Y INFORMA nON, 

the efficiency descriptor for air conditioner and heat pump cooling efficiency is SEER (or 

Seasonal Energy Efficiency Ratio), and the descriptor for heat pump heating efficiency is HSPF 

(or Heating Seasonal Performance Factor). SEER is DOE's measure of energy efficiency for the 

seasonal cooling performance of central air conditioners and heat pumps. HSPF is DOE's 

measure of energy efficiency for the seasonal heating performance of heat pumps. The current 

central air conditioner and heat pump efficiency standards are as follows: 

- Split system air conditioners and heat pumps - 10 SEER/6.8 HSPF 

- Single package air conditioners and heat pumps - 9.7 SEER/6.6 HSPF 

On September 8, 1993, DOE published an Advance Notice of Proposed Rulemaking 

(ANOPR) announcing DOE's intention to revise the existing central air conditioner and heat 

pump efficiency standard. 58 FR 47326. During a workshop on June 30, 1998, DOE presented 

for comment an analytical framework for the central air conditioner and heat pump standards 

rulemaking. The analytical framework described the different analyses to be conducted, the 

methods for conducting them, the use of new spreadsheets, and the relationship of the various 

analyses. On November 24, 1999, DOE published a Supplemental ANOPR and invited additional 

comment on issues raised following publication of the original ANOPR. 64 FR 66306. 

On October 5, 2000, DOE published a notice of proposed rulemaking (October 5, 2000, 

NOPR). 65 FR 59590. The energy efficiency standards that DOE proposed for residential central 

32 N:I"l'data\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440--:c: c..^-- 3,

air conditioners and central air conditioning heat pumps (heat pumps) were as follows:

- Split-system and single-package air conditioners -12 SEER

- Split-system and single package heat pumps - 13 SEER/7.7 HSPF

- Through-the-wall air conditioners and heat pumps - 11 SEER/7.1 HSPF.

In addition to the increase proposed in SEER and HSPF, DOE requested comments on a

proposal to adopt a standard for steady-state cooling efficiency, denominated EER (or Energy

Efficiency Ratio).3 The proposal of an EER was designed to ensure more efficient operation at

high outdoor temperature, during periods when electricity use by air conditioners is at its peak. A

public hearing was held in Washington, D.C. on November 16, 2000 to hear oral views, data and

arguments on the proposed rule.

As explained in the Introduction to this SUPPLEMENTARY INFORMATION, DOE

published a final rule on January 22, 2001 that would have required a SEER of 13 for product

classes covered by the rule with a corresponding HSPF of 7.7 for heat pumps. Subsequent events,

including notices delaying the final rule's effective date pursuant to the President's Regulatory

Review Plan, petitions for judicial review, and ARI's petition for reconsideration of the final rule,

are also discussed in the Introduction.

B. Overview of the Proposed Standards

DOE, through today's proposed rule, would amend the almost ten-year old minimum

3 EER is a steady-state measure of energy efficiency which measures efficiency at a prescribed outdoor

temperature (95T), and is one of the test conditions in DOE's test procedure used to develop the SEER.

N:\wpdata\airconditionerrule.atd.wpd

33 June 29. 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-::tt:-df~,3, 

air conditioners and central air conditioning heat pumps (heat pumps) were as follows: 

- Split-system and single-package air conditioners -12 SEER 

- Split-system and single package heat pumps - 13 SEER!7.7 HSPF 

- Through-the-wall air conditioners and heat pumps - 11 SEER!7.1 HSPF. 

In addition to the increase proposed in SEER and HSPF, DOE requested comments on a 

proposal to adopt a standard for steady-state cooling efficiency, denominated EER (or Energy 

Efficiency Ratio).3 The proposal ofan EER was designed to ensure more efficient operation at 

high outdoor temperature, during periods when electricity use by air conditioners is at its peak. A 

public hearing was held in Washington, D.C. on November 16, 2000 to hear oral views, data and 

arguments on the proposed rule. 

As explained in the Introduction to this SUPPLEMENTARY INFORMATION, DOE 

published a final rule on January 22, 2001 that would have required a SEER of 13 for product 

classes covered by the rule with a corresponding HSPF of 7.7 for heat pumps. Subsequent events, 

including notices delaying the final rule's effective date pursuant to the President's Regulatory 

Review Plan, petitions for judicial review, and ARI's petition for reconsideration of the final rule, 

are also discussed in the Introduction. 

B. Overview of the Proposed Standards 

DOE, through today's proposed rule, would amend the almost ten-year old minimum 

3 EER is a steady-state measure of energy efficiency which measures efficiency at a prescribed outdoor 

temperature (95'F), and is one of the test conditions in DOE's test procedure used to develop the SEER. 

33 N.lwpdatalairconditionerrule.atd.wpd 

June 29. 2001 (3:07PM) 
EE-RM/STD-98-440-9-- 4 , ' 3

efficiency standards for new central air conditioners and heat pumps. These amended standards

would take into account a decade of technological advancements and would save consumers and

the nation money, significant amounts of energy, and have substantial environmental and

economic benefits.

If today's proposed standards go into effect, they would essentially raise the energy

efficiency standards to 12 SEER for new central air conditioners and tol2 SEER/7.4 HSPF for

new central air conditioning heat pumps. In its petition for reconsideration, ARI argued that if a

12 SEER standard is adopted for central air conditioning heat pumps, the HSPF should be no

higher than 7.3 (Petition Discussion, paragraph n). ARI, and other persons who commented on

the October 5 proposed rule, urged DOE to revise the HSPF levels to reflect differences among

the SEER-HSPF relationships across equipment of varying capacity ratings. As DOE explained

in the preamble to the January 22, 2001 final rule, DOE established the SEER-HSPF parings in

order to maintain the offset between the minimum SEER and the minimum HSPF in the current

standards. Because heating energy is a large fraction of total heat pump energy consumption,

DOE stated it would not relax the HSPF level in the absence of sound evidence regarding the

burdens that would be mitigated (66 FR 7184). DOE continues to think an HSPF of 7.4 is the

appropriate level for 12 SEER. Data discussed in the TSD (Section 4.6.2.1) show that most

models of equipment below 3-tons meet or exceed an HSPF of 7.4, and almost a third of models

available below 20,000 BTU/hr. meet or exceed an HSPF of 7.4.

The proposed standards would apply to products manufactured for sale in the United

N:\wpdata\airconditionermle.atd .pd 34 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE·RM/STD-98-440 ~#-C:<~,--3 . 

efficiency standards for new central air conditioners and heat pumps. These amended standards' 

would take into account a decade of technological advancements and would save consumers and 

the nation money, significant amounts of energy, and have substantial environmental and 

economic benefits. 

Iftoday's proposed standards go into effect, they would essentially raise the energy 

efficiency standards to 12 SEER for new central air conditioners and to12 SEERl7.4 HSPF for 

new central air conditioning heat pumps. In its petition for reconsideration, ARI argued that if a 

12 SEER standard is adopted for central air conditioning heat pumps, the HSPF should be no 

higher than 7.3 (Petition Discussion, paragraph n). ARI, and other persons who commented on 

the October 5 proposed rule, urged DOE to revise the HSPF levels to reflect differences among 

the SEER-HSPF relationships across equipment of varying capacity ratings. As DOE explained 

in the preamble to the January 22, 2001 final rule, DOE established the SEER-HSPF parings in 

order to maintain the offset between the minimum SEER and the minimum HSPF in the current 

standards. Because heating energy is a large fraction of total heat pump energy consumption, 

DOE stated it would not relax the HSPF level in the absence of sound evidence regarding the 

burdens that would be mitigated (66 FR 7184). DOE continues to think an HSPF of 7.4 is the 

appropriate level for 12 SEER. Data discussed in the TSD (Section 4.6.2.1) show that most 

models of equipment below 3-tons meet or exceed an HSPF of 7.4, and almost a third of models 

available below 20,000 BTUIhr. meet or exceed an HSPF of 7.4. 

The proposed standards would apply to products manufactured for sale in the United 

34 N:lwpdatalairconditionemJle.atd.wpd 

June 29. 200 I (3 :07PM) 
EE-RM/STD-98-440- - 3

States, as of [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE

FEDERAL REGISTER]. The proposed standard for split-system air conditioners, the most

common type of residential air conditioning equipment, represents a 20 percent improvement in

energy efficiency. For split-system heat pumps, the new standard would represent a 20 percent

improvement in cooling efficiency and a 9 percent improvement in heating efficiency. The

standard would also increase the cooling efficiency of single-package air conditioners and singlepackage heat pumps by 24 percent and the heating efficiency of single-package heat pumps by 12

percent. Finally, DOE is proposing to adopt new standards for some products to ensure that more

efficient versions remain available for niche applications. DOE proposes to determine that the

new standards are the highest efficiency levels that are technologically feasible and economically

justified as required by law. Several aspects of today's proposed standards warrant highlighting

here, as follows:

1. Central Air Conditioner and Heat Pump Features

The proposed efficiency levels can be met by central air conditioner and heat pump

designs that are already available in the market. DOE fully expects variations of these models to

exist under the new standards, offering all the features and utility that are found in currently

available products.

2. Consumer Benefits

Table 1 summarizes the "characteristics" of today's typical central air conditioners and

heat pumps. Table 2 presents the implications for the average consumer of the standards

35 N \wpdata\airconditionerrule.atd wpd

J35 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE.RM/STD-98-440·_·1f- ~3 

States, as of [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE 

FEDERAL REGISTER]. The proposed standard for split-system air conditioners, the most 

common type of residential air conditioning equipment, represents a 20 percent improvement in 

energy efficiency. For split-system heat pumps, the new standard would represent a 20 percent 

improvement in cooling efficiency and a 9 percent improvement in heating efficiency. The 

standard would also increase the cooling efficiency of single-package air conditioners and singlepackage heat pumps by 24 percent and the heating efficiency of single-package heat pumps by 12 

percent. Finally, DOE is proposing to adopt new standards for some products to ensure that more 

efficient versions remain available for niche applications. DOE proposes to determine that the 

new standards are the highest efficiency levels that are technologically feasible and economically 

justified as required by law. Several aspects oftoday's proposed standards warrant highlighting 

here, as follows: 

1. Central Air Conditioner and Heat Pump Features 

The proposed efficiency levels can be met by central air conditioner and heat pump 

designs that are already available in the market. DOE fully expects variations of these models to 

exist under the new standards, offering all the features and utility that are found in currently 

available products. 

2. Consumer Benefits 

Table 1 summarizes the "characteristics" oftoday's typical central air conditioners and 

heat pumps. Table 2 presents the implications for the average consumer of the standards 

35 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
becoming effective in 2006. EE-RM/STD-98- 440~.--c^c.3

Table 1: Characteristics of Today's Typical Central Air Conditioners and Heat Pumps'

Split System Split System Single Package Single Package

Air Conditioner Heat Pump Air Conditioner Heat Pump

Average Installed Price $2,236 $3,668 $2,607 $3,599

Annual Utility Bill2 $189 $453 $189 $453

Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years

Energy Consumption per year 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh

'"Typical" equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively.

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump.

Table 2: Implications of New Standards for the Average Consumer

Split System Split System Single Package Single Package

Air Conditioner Heat Pump Air Conditioner Heat Pump

Year Standard Comes into Effect 2006 2006 2006 2006

New Average Installed Price $2,449 $3,812 $2,765 $3,748

Estimated Price Increase $213 $144 $158 $149

Annual Utility Bill Savings $31 $50 $31 $50

Average Net Saving over Equipment. $113 $365 $163 $421

Life

Energy Savings per Year 384 kWh 768 kWh 384 kWh 768 kWh

The most typical air conditioner (i.e., split system air conditioner which comprises

approximately 65 percent of today's central air conditioning and heat pump market) has an

installed price of $2,236 and an annual utility costs of $189. In order to meet the 2006 proposed

standard, DOE estimates that the installed price of a typical air conditioner would be $2,449, an

N:\.wpdata\'airconditionerrule atd pd 36 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

becoming effective in 2006. 

Table 1: Characteristics of Today's Typical Central Air Conditioners and Heat Pumpsl 

Split System Split System Single Package Single Package 

Air Conditioner Heat Pump Air Conditioner Heat Pump 

A verage Installed Price $2,236 $3,668 $2,607 $3,599 

Annual Utility BilF $189 $453 $189 $453 

Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years 

Energy Consumption per year 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh .. . I "TypIcal" equIpment have coolmg and heatmg efficIencIes of 10 SEER and 6.8 HSPF, respectively . 

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump. 

Table 2: Implications of New Standards for the Average Consumer 

Split System Split System Single Package Single Package 

Air Conditioner Heat Pump Air Conditioner Heat Pump 

Year Standard Comes into Effect 2006 2006 2006 2006 

New Average Installed Price $2,449 $3,812 $2,765 $3,748 

Estimated Price Increase $213 $144 $158 $149 

Annual Utility Bill Savings $31 $50 $31 $50 

Average Net Saving over Equipment. $113 $365 $163 $421 

Life 

Energy Savings per Year 384 kWh 768 kWh 384 kWh 768 kWh 

The most typical air conditioner (i.e., split system air conditioner which comprises 

approximately 65 percent of to day's central air conditioning and heat pump market) has an 

installed price of $2,236 and an annual utility costs of $189. In order to meet the 2006 proposed 

standard, DOE estimates that the installed price of a typical air conditioner would be $2,449, an 

36 N:\wpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 - .- QA

increase of $213.4 This price increase would be offset by an annual energy savings of about $31

on the utility bills. The most typical heat pump (i.e., split system heat pump) currently has an

installed price of $3,668 and annual utility costs of $453. In order to meet the 2006 proposed

standard, DOE estimates that the installed price of a typical heat pump would be $3,812, an

increase of $144.5 This price increase would be offset by an annual energy savings of about $50

on the utility bills.

DOE recognizes that most consumers pay energy prices that are higher or lower than the

"typical" consumer and operate their equipment more or less often. Consequently, DOE has

investigated the effects of the different energy prices across the nation and different airconditioning usage patterns. DOE estimates that 75 percent of all consumers purchasing a new

typical air conditioner would either save money or would be negligibly impacted as a result of the

2006 proposed standard.6 In the case of a new typical heat pump, all consumers either would save

money or be negligibly impacted.7

DOE also investigated how these standards might affect low income consumers. On

average, DOE estimates that it is likely that low income air conditioner and heat pump consumers

4 Based on estimates supplied by the industry trade association, the Air-Conditioning and Refrigeration

Institute (ARI), the installed price is estimated to be $2,510, an increase of $274.

5 Based on estimates supplied by ARI, the installed price is estimated to be $3,933, an increase of $265.

6Based on estimates supplied by ARI, 61 percent of all consumers purchasing a new typical air conditioner

will either save money or will be negligibly impacted as a result of the 2006 standard.

7 Based on estimates supplied by ARI, 97 percent of all consumers purchasing a new typical heat pump

will either save money or will be negligibly impacted as a result of the 2006 standard.

N :\wpdata\airconditionerrule.atd.wpd 37 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -'It C::<C?3 

increase of $213.4 This price increase would be offset by an annual energy savings of about $31 

on the utility bills. The most typical heat pump (i.e., split system heat pump) currently has an 

installed price of $3,668 and annual utility costs of $453. In order to meet the 2006 proposed 

standard, DOE estimates that the installed price of a typical heat pump would be $3,812, an 

increase of$144.5 This price increase would be offset by an annual energy savings of about $50 

on the utility bills. 

DOE recognizes that most consumers pay energy prices that are higher or lower than the 

"typical" consumer and operate their equipment more or less often. Consequently, DOE has 

investigated the effects of the different energy prices across the nation and different airconditioning usage patterns. DOE estimates that 75 percent of all consumers purchasing a new 

typical air conditioner would either save money or would be negligibly impacted as a result of the 

2006 proposed standard.6 In the case of a new typical heat pump, all consumers either would save 

money or be negligibly impacted.' 

DOE also investigated how these standards might affect low income consumers. On 

average, DOE estimates that it is likely that low income air conditioner and heat pump consumers 

4 Based on estimates supplied by the industry trade association, the Air-Conditioning and Refrigeration 

Institute (ARl), the installed price is estimated to be $2,510, an increase of $274. 

5 Based on estimates supplied by ARl, the installed price is estimated to be $3,933, an increase of$265. 

6Based on estimates supplied by ARl, 61 percent of all consumers purchasing a new typical air conditioner 

will either save money or will be negligibly impacted as a result of the 2006 standard. 

1 Based on estimates supplied by ARl, 97 percent of all consumers purchasing a new typical heat pump 

will either save money or will be negligibly impacted as a result of the 2006 standard. 

37 N:lwpdatalairconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -:: .3 ,

would also save money over the life of the equipment as a result of the standard.

3. National Benefits

The proposed standards would provide benefits to the nation. DOE estimates the

standards would save approximately 3 quads of energy over 25 years (2006 through 2030). This

is equivalent to all the energy consumed by nearly 17 million American households in a single

year. In 2020, the proposed standards would avoid the construction of three 400 megawatt coalfired plants and twenty-three 400 megawatt gas-fired plants. These energy savings would result in

cumulative greenhouse gas emission reductions of approximately 24 million metric tons (Mt) of

carbon, or an amount equal to that produced by approximately 2 million cars every year.

Additionally, air pollution would be reduced by the elimination of approximately 70 thousand

metric tons of nitrous oxides (NOx) from 2006 through 2030. In total, DOE estimates this

proposed standard would have a net benefit to the nation's consumers of $2 billion over the period

2006 through 2030.8

C. Technological Feasibility

There are central air conditioners and heat pumps in the market at the efficiency levels that

would be prescribed by today's proposed rule. DOE, therefore, believes all of the proposed

8

Based on estimates supplied by ARI, the standard would have a net cost to the nation's consumers of$1

billion.

N :N\'pdaltaairconditionerrule.ald.wpd 38 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-# ~~3. 

would also save money over the life of the equipment as a result of the standard. 

3. National Benefits 

The proposed standards would provide benefits to the nation. DOE estimates the 

standards would save approximately 3 quads of energy over 25 years (2006 through 2030). This 

is equivalent to all the energy consumed by nearly 17 million American households in a single 

year. In 2020, the proposed standards would avoid the construction of three 400 megawatt coalfired plants and twenty-three 400 megawatt gas-fired plants. These energy savings would result in 

cumulative greenhouse gas emission reductions of approximately 24 million metric tons (Mt) of 

carbon, or an amount equal to that produced by approximately 2 million cars every year. 

Additionally, air pollution would be reduced by the elimination of approximately 70 thousand 

metric tons of nitrous oxides (NOJ from 2006 through 2030. In total, DOE estimates this 

proposed standard would have a net benefit to the nation's consumers of $2 billion over the period 

2006 through 2030. 8 

C. Technological Feasibility 

There are central air conditioners and heat pumps in the market at the efficiency levels that 

would be prescribed by today's proposed rule. DOE, therefore, believes all of the proposed 

billion. 

8Based on estimates supplied by ARl, the standard would have a net cost to the nation's consumers of$1 

38 N: I"'pdata \airconditionerrule. atd. "''J'd June 29, 2001 (3:07PM) 
efficiency levels are technologically feasible. EE-RM/STD-98-440 - i 7 3

Pursuant to section 325(p)(2) of EPCA, and as discussed in the October 5, 2000 NOPR,

DOE determined that 18 SEER is the maximum technologically feasible level (Max Tech Level)

for cooling efficiency for all product classes and capacities covered by this rulemaking. 65 FR

59593. The Max Tech Level for heating efficiency is 9.4 HSPF, which is the highest HSPF rating

currently available in residential heat pumps.

D. General Discussion of Economic Justification Factors

As noted earlier, section 325(o)(2)(B)(i) of EPCA requires DOE to consider seven factors

in determining whether a conservation standard is economically justified.

1. Economic Impact on Manufacturers and Consumers

DOE considered the economic impact on manufacturers and consumers as discussed in the

October 5, 2000, NOPR (65 FR 59590, 59593) and the January 22, 2001 final rule (66 FR 7174-

78, 7185-7191). As explained in Section III and Section V.B. of this SUPPLEMENTARY

INFORMATION, today's proposal is based in part on changes in emphasis or weight that DOE,

as a result of its reconsideration of the rulemaking record, now gives to certain aspects of its

analysis of manufacturer and consumer impact.

N:\wpdata'airconditionermle.atd.wpd 39 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

efficiency levels are technologically feasible. EE-RM/STD-98-440 ---:/I- c:?cR 3 I 

Pursuant to section 325(p )(2) of EPCA, and as discussed in the October 5, 2000 NOPR, 

DOE detennined that 18 SEER is the maximum technologically feasible level (Max Tech Level) 

for cooling efficiency for all product classes and capacities covered by this rulemaking. 65 FR 

59593. The Max Tech Level for heating efficiency is 9.4 HSPF, which is the highest HSPF rating 

currently available in residential heat pumps. 

D. General Discussion of Economic Justification Factors 

As noted earlier, section 325(0)(2)(B)(i) of EPCA requires DOE to consider seven factors 

in detennining whether a conservation standard is economically justified. 

1. Economic Impact on Manufacturers and Consumers 

DOE considered the economic impact on manufacturers and consumers as discussed in the 

October 5,2000, NOPR (65 FR 59590,59593) and the January 22, 2001 final rule (66 FR 7174-

78, 7185-7191). As explained in Section III and Section V.B. of this SUPPLEMENTARY 

INFORMA nON, today's proposal is based in part on changes in emphasis or weight that DOE, 

as a result of its reconsideration of the rulemaking record, now gives to certain aspects of its 

analysis of manufacturer and consumer impact. 

39 N:\wpdala\aircondilionerruIe.ald.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -" c< 3

2. Life-cycle costs and Rebuttable Presumption

DOE considered life-cycle costs (LCC), as discussed in the January 22, 2001 final rule. 66

FR 7173, 7175, 7187-90. DOE calculated the installed price and operation and maintenance costs

for a range of consumers around the nation to estimate the range in life-cycle cost benefits that

consumers would expect to achieve due to new standards. DOE has made no change in its

assumptions and analysis of life-cycle costs in proposing today's rule.

As previously mentioned, NAECA established new criteria for determining whether a

standard level is economically justified. Section 325(o)(2)(B)(iii) of EPCA provides that if,

according to the applicable test procedure, 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 DOE is to presume that such standard is economically justified. This presumption of

economic justification can be rebutted upon a proper showing.

Using the reverse engineering manufacturing costs, the standards DOE proposes today for

split heat pumps and packaged heat pumps can be shown to have satisfied the rebuttable

presumption requirements in section 325(o)(2)(B)(iii). To avoid confusion, DOE points out that

the statute requires DOE to use "the applicable test procedure" to calculate the payback periods

for purposes of the rebuttable presumption. As explained in the October 5, 2000 NOPR, the

annual cooling and heating energy consumption calculations based on DOE's test procedure are

significantly greater than the weighted-average values from DOE's life-cycle cost analyses based

N :\wpdata'airconditionerrule.atd vpd 40 June 29. 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

2. Life-cycle costs and Rebuttable Presumption 

EE-RM/STD-98-440 - #--~~3 

DOE considered life-cycle costs (LCC), as discussed in the January 22, 2001 final rule. 66 

FR 7173, 7175, 7187-90. DOE calculated the installed price and operation and maintenance costs 

for a range of consumers around the nation to estimate the range in life-cycle cost benefits that 

consumers would expect to achieve due to new standards. DOE has made no change in its 

assumptions and analysis oflife-cyc1e costs in proposing today's rule. 

As previously mentioned, NAECA established new criteria for determining whether a 

standard level is economically justified. Section 325(0)(2)(B)(iii) of EPCA provides that if, 

according to the applicable test procedure, 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 DOE is to presume that such standard is economically justified. This presumption of 

economic justification can be rebutted upon a proper showing. 

Using the reverse engineering manufacturing costs, the standards DOE proposes today for 

split heat pumps and packaged heat pumps can be shO\\TI to have satisfied the rebuttable 

presumption requirements in section 325(0)(2)(B)(iii). To avoid confusion, DOE points out that 

the statute requires DOE to use "the applicable test procedure" to calculate the payback periods 

for purposes of the rebuttable presumption. As explained in the October 5, 2000 NOPR, the 

annual cooling and heating energy consumption calculations based on DOE's test procedure are 

significantly greater than the weighted-average values from DOE's life-cycle cost analyses based 

40 N:lwpdala\aircondilionerrule.ald .... pd 

June 29. 2001 (3:07PM) 
EE-RM/STD-98-440 -3.-2

on the 1997 Residential Energy Consumption Survey, used in other DOE analyses, including

evaluation of consumer impacts. 65 FR 59596. For this reason, the payback periods presented in

Section V of this portion of the preamble, entitled "Analytical Results and Conclusions," are

significantly longer than those calculated to determine whether the rebuttable presumption applies

to these products.

While the analysis requires DOE to presume that the standards adopted for split system

and single package heat pumps are economically justified, it shows that split system air

conditioners and single package air conditioners do not meet the standard for use of the rebuttable

presumption of economic justification. Therefore, DOE does not presume them to be

economically justified. If the rebuttable presumption does not apply, DOE must perform

additional analysis to determine economic justification. DOE has performed an analysis for all

classes of central air conditioner and heat pump products that shows the standards proposed today

are indeed economically justified.

3. Energy Savings

EPCA requires DOE, in determining the economic justification of a standard, to consider

the total projected energy savings that are expected to result directly from revised standards. DOE

forecasted energy savings through the use of a national energy savings (NES) spreadsheet, as

discussed in the October 5, 2000 NOPR. 65 FR 59590, 59593. DOE relies on the same

spreadsheets and assumptions for its estimate of the NES that would result from implementation

of today's proposed standards.

N: \pdata\airconditionerrule.atd wpd

41 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-~ ~.3 

on the 1997 Residential Energy Consumption Survey, used in other DOE analyses, including 

evaluation of consumer impacts. 65 FR 59596. For this reason, the payback periods presented in 

Section V of this portion of the preamble, entitled "Analytical Results and Conclusions," are 

significantly longer than those calculated to determine whether the rebuttable presumption applies 

to these products. 

While the analysis requires DOE to presume that the standards adopted for split system 

and single package heat pumps are economically justified, it shows that split system air 

conditioners and single package air conditioners do not meet the standard for use of the rebuttable 

presumption of economic justification. Therefore, DOE does not presume them to be 

economically justified. If the rebuttable presumption does not apply, DOE must perform 

additional analysis to determine economic justification. DOE has performed an analysis for all 

classes of central air conditioner and heat pump products that shows the standards proposed today 

are indeed economically justified. 

3. Energv Savings 

EPCA requires DOE, in determining the economic justification of a standard, to consider 

the total projected energy savings that are expected to result directly from revised standards. DOE 

forecasted energy savings through the use of a national energy savings (NES) spreadsheet, as 

discussed in the October 5, 2000 NOPR. 65 FR 59590, 59593. DOE relies on the same 

spreadsheets and assumptions for its estimate of the NES that would result from implementation 

of today' s proposed standards. 

41 N.lwpdalalaircondilionelTUle.ald.wpd 

June 29, 2001 (3.07PM) 
EE-RM/STD-98-440 -- a 5

As discussed in the October 5, 2000 NOPR, section 325(o)(3)(B) of EPCA prohibits DOE

from adopting a standard for a product if that standard would not result in "significant" energy

savings. The energy savings for the standard levels DOE is proposing today are non-trivial -

indeed they are substantial - and therefore we consider them "significant" within the meaning of

section 325 of the Act.

4. Lessening of Utility or Performance of Products

This factor cannot be quantified. In establishing classes of products, DOE has attempted

to eliminate any degradation of utility or performance in the products covered by today's

proposed rule. Attributes that affect utility include the product's ability to cool and dehumidify.

In some applications, noise levels may also be an aspect of utility. Product size or configuration

can also be considered utility if a change in size would cause the consumer to install the product

in a location or in a manner inconsistent with the consumer's preferences.

5. Impact of Lessening of Competition

This economic justification factor has two aspects: on the one hand, it assumes that there

could be some lessening of competition as a result of standards; on the other hand, it directs the

Attorney General to gauge the impact, if any, of that effect.

In order to assist the Attorney General in making such a determination, DOE provided the

Attorney General with copies of the October 5, 2000, NOPR and the TSD for review. The

Attorney General's determination was reprinted and discussed in the preamble to the January 22

.«~~ ~~N: ~~~42 \wpdata\airconditionerrule.atd wpd 42 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223 EE .. RM/STD .. 98-440 -:t-,1 ~ , 

As discussed in the October 5,2000 NOPR, section 325(0)(3)(8) of EPCA prohibits DOE 

from adopting a standard for a product if that standard would not result in "significant" energy 

savings. The energy savings for the standard levels DOE is proposing today are non-trivial -

indeed they are substantial - and therefore we consider them "significant" within the meaning of 

section 325 of the Act. 

4. Lessening of Utility or Performance of Products 

This factor cannot be quantified. In establishing classes of products, DOE has attempted 

to eliminate any degradation of utility or performance in the products covered by today's 

proposed rule. Attributes that affect utility include the product's ability to cool and dehumidify. 

In some applications, noise levels may also be an aspect of utility. Product size or configuration 

can also be considered utility if a change in size would cause the consumer to install the product 

in a location or in a manner inconsistent with the consumer's preferences. 

5. Impact of Lessening of Competition 

This economic justification factor has two aspects: on the one hand, it assumes that there 

could be some lessening of competition as a result of standards; on the other hand, it directs the 

Attorney General to gauge the impact, if any, of that effect. 

In order to assist the Attorney General in making such a determination, DOE provided the 

Attorney General with copies of the October 5, 2000, NOPR and the TSD for review. The 

Attorney General's determination was reprinted and discussed in the preamble to the January 22 

42 N:lwpdata\aircondilionerrule.atd.wpd 

June 29. 2001 (3:07PM) 
final rule. 66 FR 7176, 7199-200. EE-RM/STD-98-440 - c%,:Z3

DOE, as part of its review of this rulemaking, invited the Attorney General to submit

supplemental views on the January 22 final rule. The Department of Justice provided brief

written comments as to whether the final rule effectively removed their concerns regarding

possible lessening of competition that could result from the October 5 proposed standards.

The Department of Justice concluded that the 13 SEER standards for heat pumps and air

conditioners still presented anti-competitive concerns. More specifically, the Department of

Justice concluded that while the final rule's exclusion of niche products might alleviate

competitive problems for manufacturers of those products, the Department of Justice remained

concerned about the impact of the final rule on manufacturers of standard equipment who could

not make 13 SEER equipment that would fit into space-constrained sites. The Department of

Justice also concluded the final rule would have a disproportionate impact on smaller

manufacturers of heat pumps. In a footnote, the Department of Justice stated that for some small

manufacturers of both heat pumps and air conditioners, 100 percent of their product lines would

fail to meet the 13 SEER standard. Finally, the Department of Justice opined that the 13 SEER

standard for air conditioners presents the same kinds of anti-competitive problems as the 13 SEER

standard for heat pumps, and urged DOE to adopt a 12 SEER standard for all products covered by

the rule.

The Department of Justice's comments do not provide sufficient information to permit

N:\wpdata'aircondiioncrmle atd wpd 43 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

[mal rule. 66 FR 7176, 7199-200. EE-RM/STD-98-440 - it- e:< ~~ 

DOE, as part of its review of this rulemaking, invited the Attorney General to submit 

supplemental views on the January 22 final rule. The Department of Justice provided brief 

written comments as to whether the final rule effectively removed their concerns regarding 

possible lessening of competition that could result from the October 5 proposed standards. 

The Department of Justice concluded that the 13 SEER standards for heat pumps and air 

conditioners still presented anti-competitive concerns. More specifically, the Department of 

Justice concluded that while the final rule's exclusion of niche products might alleviate 

competitive problems for manufacturers of those products, the Department of Justice remained 

concerned about the impact of the final rule on manufacturers of standard equipment who could 

not make 13 SEER equipment that would fitinto space-constrained sites. The Department of 

Justice also concluded the final rule would have a disproportionate impact on smaller 

manufacturers of heat pumps. In a footnote, the Department of Justice stated that for some small 

manufacturers of both heat pumps and air conditioners, 100 percent of their product lines would 

fail to meet the 13 SEER standard. Finally, the Department of Justice opined that the 13 SEER 

standard for air conditioners presents the same kinds of anti-competitive problems as the 13 SEER 

standard for heat pumps, and urged DOE to adopt a 12 SEER standard for all products covered by 

the rule. 

The Department of Justice's comments do not provide sufficient information to permit 

43 N:lwpdata\airconditionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440- t- o 3 .

DOE to validate their concerns about the potential anti-competitive effects of the January 22 final

rule. For example, it appears that the Department of Justice is drawing a technical distinction

between "niche" products and "space-constrained" products. DOE does not draw the same

distinction. Therefore, the Department of Justice comment does not explain why the provision in

the January 22 final rule that deferred setting standards on space-constrained products would not

satisfy their concerns about impacts on the manufacturers of niche products. With respect to the

potential disproportionate impact of the final rule on small manufacturers, we agree that there are

some small manufacturers who currently have no conventional (i.e. not space-constrained)

products that would meet the standards proposed in the January 22 final rule. That factor would

add to the disproportionate impact on those manufacturers. However, we are unable to construe

from the Department of Justice comment to what extent and by what mechanism the

disproportionate impact would necessarily lead to any noticeable lessening of competition. See

also Section VI.C. for further discussion of DOE's assessment of impacts on small manufacturers

in the January 22 final rule.

DOE will submit this proposed rule to the Department of Justice for comment, and, at the

same time, invite the Department of Justice to address several questions DOE has regarding the

Department's interpretation of the final rule and how it would affect manufacturers. DOE invites

the public to submit views and information regarding the potential anti-competitive impact of

today's proposed rule.

N:\wpdala\airconditioncrrule.atd wpd

44 June 29, 2001 (3 07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440- it- o{OZ3 . 

DOE to validate their concerns about the potential anti-competitive effects of the January 22 final 

rule. For example, it appears that the Department of Justice is drawing a technical distinction 

between "niche" products and "space-constrained" products. DOE does not draw the same 

distinction. Therefore, the Department of Justice comment does not explain why the provision in 

the January 22 final rule that deferred setting standards on space-constrained products would not 

satisfy their concerns about impacts on the manufacturers of niche products. With respect to the 

potential disproportionate impact of the final rule on small manufacturers, we agree that there are 

some small manufacturers who currently have no conventional (i.e. not space-constrained) 

products that would meet the standards proposed in the January 22 final rule. That factor would 

add to the disproportionate impact on those manufacturers. However, we are unable to construe 

from the Department of Justice comment to what extent and by what mechanism the 

disproportionate impact would necessarily lead to any noticeable lessening of competition. See 

also Section VI.c. for further discussion of DOE's assessment of impacts on small manufacturers 

in the January 22 final rule. 

DOE will submit this proposed rule to the Department of Justice for comment, and, at the 

same time, invite the Department of Justice to address several questions DOE has regarding the 

Department's interpretation of the final rule and how it would affect manufacturers. DOE invites 

the public to submit views and information regarding the potential anti-competitive impact of 

today's proposed rule. 

44 N: Iwpdalalaircondilioncrrulc .ald. wpd 

June 29. 2001 (307PM) 
EE-RM/STD-98-440 -_ , ,

6. Need of The Nation to Conserve Energy

The Department recognizes that energy conservation benefits the nation in several

important ways. Enhanced energy efficiency improves the nation's energy security, strengthens

the economy, and reduces the environmental impacts of energy production. As part of the analysis

supporting today's proposed rule, DOE estimated energy savings and the national consumer

benefits and estimated reduction in emissions of pollutants and greenhouse gases resulting from

those energy savings. See the October 5, 2000 NOPR for a discussion of how these standards

affect energy savings and those benefits. 65 FR 59622-3. The amount of energy savings

ultimately associated with a particular standard level is also affected by the effect of a given

standard on competition and consumer cost. Selecting a standard level should take into account

manufacturer - and therefore inevitably consumer - costs, in order to encourage robust

competition and heightened introduction of newer, more efficient units into the inventory of units

available for purchase and use by consumers.

7. Other Factors

Section 325(o) of EPCA allows the Secretary of Energy, in determining whether a

standard is economically justified, to consider any other factors that the Secretary deems to be

relevant (42 U.S.C. 6295(o)(2)(B)(i)(VI)). Under this provision, DOE considered the potential

improvement to the reliability of the electrical system and health effects caused by foregone air

conditioner purchases. These issues are discussed in Sections IV.B.3. above, as well as in the

October 5, 2000 NOPR (65 FR 59605) and the January 22 final rule (66 FR 7195). The Utility

.~~~~~45 r N:\wpdata\aircondiionerrule atd. pd 45 ,June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 - ~~3 . 

6. Need of The Nation to Conserve Energy 

The Department recognizes that energy conservation benefits the nation in several 

important ways. Enhanced energy efficiency improves the nation's energy security, strengthens 

the economy, and reduces the environmental impacts of energy production. As part of the analysis 

supporting today's proposed rule, DOE estimated energy savings and the national consumer 

benefits and estimated reduction in emissions of pollutants and greenhouse gases resulting from 

those energy savings. See the October 5, 2000 NOPR for a discussion of how these standards 

affect energy savings and those benefits. 65 FR 59622-3. The amount of energy savings 

ultimately associated with a particular standard level is also affected by the effect of a given 

standard on competition and consumer cost. Selecting a standard level should take into account 

manufacturer - and therefore inevitably consumer - costs, in order to encourage robust 

competition and heightened introduction of newer, more efficient units into the inventory of units 

available for purchase and use by consumers. 

7. Other Factors 

Section 325(0) ofEPCA allows the Secretary of Energy, in determining whether a 

standard is economically jus~ified, to consider any other factors that the Secretary deems to be 

relevant (42 U.S.C. 6295(0)(2)(B)(i)(VI». Under this provision, DOE considered the potential 

improvement to the reliability of the electrical system and health effects caused by foregone air 

conditioner purchases. These issues are discussed in Sections IV.B.3. above, as well as in the 

October 5,2000 NOPR (65 FR 59605) and the January 22 final rule (66 FR 7195). The Utility 

45 N:lwpdatalairconditionenule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 -4-I.

Impacts Analysis in Chapter 11 of the TSD also provides the technical analysis estimating the

effects of adopting new efficiency standards on installed generation capacity.

E. Methodology Used in DOE Analyses

For this proposed rule, the methodologies used to evaluate the seven factors described

above are unchanged from those used in the analyses that DOE relied on for the October 5

proposed rule and the January 22 final rule. DOE's methodology is discussed in the October 5,

2000 NOPR (65 FR 59594-97) and the January 22 final rule (66 FR 7173-74). Additionally, the

TSD that accompanies this rulemaking provides a detailed description of every aspect of the

various analytical methodologies used.

V. Analytical Results and Conclusions

A. Overview of Analytical Results

1. General

Although DOE has accorded different weight to certain factors in proposing this rule, the

underlying analyses, and the results derived from those analyses, are unchanged from those

presented in the January 22 final rule. Briefly, DOE examined five standard levels. Table 3

presents the trial standards levels analyzed and the corresponding efficiency level for each class of

product. Trial Standard Level 5 is the Max Tech Level for each class of product. Trial Standard

Level 4 was the one DOE adopted for the standards set forth in the January 22 final rule. Trial

Standard Level 2 is the one DOE is now proposing.

N:\wpdata\airconditionerruleatd.w pd 46 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#0<43. 

Impacts Analysis in Chapter 11 of the TSD also provides the technical analysis estimating the 

effects of adopting new efficiency standards on installed generation capacity. 

E. Methodology Used in DOE Analyses 

For this proposed rule, the methodologies used to evaluate the seven factors described 

above are unchanged from those used in the analyses that DOE relied on for the October 5 

proposed rule and the January 22 fInal rule. DOE's methodology is discussed in the October 5, 

2000 NOPR (65 FR 59594-97) and the January 22 final rule (66 FR 7173-74). Additionally, the 

TSD that accompanies this rulemaking provides a detailed description of every aspect of the 

various analytical methodologies used. 

v. Analytical Results and Conclusions 

A. Overview of Analvtical Results 

1. General 

Although DOE has accorded different weight to certain factors in proposing this rule, the 

underlying analyses, and the results derived from those analyses, are unchanged from those 

presented in the January 22 final rule. Briefly, DOE examined five standard levels. Table 3 

presents the trial standards levels analyzed and the corresponding efficiency level for each class of 

product. Trial Standard LevelS is the Max Tech Level for each class of product. Trial Standard 

Level 4 was the one DOE adopted for the standards set forth in the January 22 final rule. Trial 

Standard Level 2 is the one DOE is now proposing. 

46 N:\"p<iala'.aircondilionerrule.atd.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440-- # c:>3 ? .

Table 3: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER)

Trial Standard Split Air Packaged Air Split Heat Packaged

Level Conditioners Conditioners Pumps Heat Pumps

1 11 11 11 11

2 12 12 12 12

3 12 12 13 13

4 13 13 13 13

5 18 18 18 18

For each trial standard examined, several different scenarios were analyzed consisting of

variations on: (1) electricity price and housing projections; (2) equipment efficiency distributions;

(3) manufacturer cost estimates; and (4) societal discount rate. Electricity price and housing

projections were based on three different forecasts from the Energy Information Agency's 2000

Annual Energy Outlook (AEO): (1) Reference Case, (2) High Growth Case, and (3) Low Growth

Case. DOE analyzed three efficiency scenarios, each of which assumed a different efficiency

distribution after new standards would take effect: (1) NAECA scenario, (2) Roll-up scenario,

and (3) Shift scenario. See October 5, 2000, NOPR for an explanation of the three scenarios. 65

FR 59596 (footnotes 10 through 12 and accompanying text). Under the standard levels in today's

proposed rule, DOE believes that the NAECA scenario most closely represents the likeliest

impact of the new standards, as explained in Chapter 8 of the TSD. DOE analyzed two

manufacturer cost scenarios: (1) based on reverse engineering estimates, and (2) based on ARIprovided mean cost estimates. For the reasons expressed in the preamble to the January 22 final

rule, DOE expects manufacturer costs under the proposed standards will lie closer to the estimates

produced through DOE's reverse engineering analysis, which lie between ARI's minimum and

N :\wpdata'airconditionenule atd.wpd

47 June 29, 2001 (3:07PM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 _ #- C::::?~3 . 

Table 3: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER) 

Trial Standard Split Air Packaged Air Split Heat Packaged 

Level Conditioners Conditioners Pumps Heat Pumps 

I 11 11 1l )] 

2 12 12 12 12 

3 12 ]2 13 13 

4 13 13 13 13 

S 18 18 ]8 18 

For each trial standard examined, several different scenarios were analyzed consisting of 

variations on: (1) electricity price and housing projections; (2) equipment efficiency distributions; 

(3) manufacturer cost estimates; and (4) societal discount rate. Electricity price and housing 

projections were based on three different forecasts from the Energy Information Agency's 2000 

Annual Energy Outlook (AEO): (1) Reference Case, (2) High Growth Case, and (3) Low Growth 

Case. DOE analyzed three efficiency scenarios, each of which assumed a different efficiency 

distribution after new standards would take effect: (1) NAECA scenario, (2) Roll-up scenario, 

and (3) Shift scenario. See October 5, 2000, NOPR for an explanation of the three scenarios. 65 

FR 59596 (footnotes 10 through 12 and accompanying text). Under the standard levels in today's 

proposed rule, DOE believes that the NAECA scenario most closely represents the likeliest 

impact of the new standards, as explained in Chapter 8 of the TSD. DOE analyzed two 

manufacturer cost scenarios: (1) based on reverse engineering estimates, and (2) based on ARIprovided mean cost estimates. For the reasons expressed in the preamble to the January 22 final 

rule, DOE expects manufacturer costs under the proposed standards will lie closer to the estimates 

produced through DOE's reverse engineering analysis, which lie between ARI's minimum and 

47 N:\wpdala\aircondilionelT\lle.ald.wpd 

June 29, 2001 (3:07PM) 
EE-RM/STD-98-440 --. t c,3

ARI's mean cost values. 66 FR 7177-78. DOE assumed a societal discount rate of 7 percent for

calculating net present value (NPV). However, a 3 percent value was investigated as an

alternative scenario in accordance with the Office of Management and Budget's (OMB)

Guidelines to Standardize Measures of Costs and Benefits and the Format of Accounting

Statements.

2. Through-the-Wall Products

In the October 5 proposed rule, DOE proposed to establish a separate product class for

through-the-wall (TTW) products with a minimum I I SEER for air conditioners and 7.1 HSPF

for heatpumps, noting that they face particularly acute size constraints that make increasing their

efficiency more difficult compared to conventional products, or even other space-constrained

products. In comments received responding to the proposed standards, Carrier suggested that

such a differential could open a loophole and cause TTW products to be broadly applied in

traditionally non-TTW applications. (Carrier #92 at p.9). National Comfort Products suggested

that they did not believe that their product could attain even the proposed 11 SEER standard and

that the DOE did not conduct sufficient analysis to support the proposed level. (NCP #77 at p.3,

4). However, Armstrong commented that they did believe their TTW products could attain

11 SEER, although they had concerns about their larger capacity products. (Armstrong #86 at p.

3).

In response to the comments, DOE conducted additional analysis on the cost and technical

issues related to TTW products. The analysis is described in detail in Appendix L of the TSD and

is summarized here.

C \WINDOWS'TEMP\airconditionermle atd pd

48 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -:it ~.q3 

ARl's mean cost values. 66 FR 7177-78. DOE assumed a societal discount rate of7 percent for 

calculating net present value (NPV). However, a 3 percent value was investigated as an 

alternative scenario in accordance with the Office of Management and Budget's (OMB) 

Guidelines to Standardize Measures of Costs and Benefits and the Format of Accounting 

Statements. 

2. Through-the-Wall Products 

In the October 5 proposed rule, DOE proposed to establish a separate product class for 

through-the-wall (TTW) products with a minimum ]] SEER for air conditioners and 7.1 HSPF 

for heatpumps, noting that they face particularly acute size constraints that make increasing their 

efficiency more difficult compared to conventional products, or even other space-constrained 

products. In comments received responding to the proposed standards, Carrier suggested that 

such a differential could open a loophole and cause TTW products to be broadly applied in 

traditionally non-TTW applications. (Carrier #92 at p.9). National Comfort Products suggested 

that they did not believe that their product could attain even the proposed 11 SEER standard and 

that the DOE did not conduct sufficient analysis to support the proposed level. (NCP #77 at p.3, 

4). However, Armstrong commented that they did believe their TTW products could attain 

I I SEER, although they had concerns about their larger capacity products. (Armstrong #86 at p. 

3). 

In response to the comments, DOE conducted additional analysis on the cost and technical 

issues related to TTW products. The analysis is described in detail in Appendix L of the TSD and 

is summarized here. 

48 C \WINDOWS\TEMPlairconditionerrule.3td wpd 

July 2. 2001 (1I14AM) 
EE-RM/STD-98-440 -- 'c~3

DOE performed a design assessment on two split TTW systems and one packaged TTW

system. All systems are designed primarily for the replacement market and fit the physical

definition of TTW equipment proposed in the October 5 proposed rule. The design assessment

sought to identify the cost and efficiency impacts of employing commonly applied techniques to

improve efficiency including reduction of air leakage and improvement in airflow, utilizing more

efficient compression and fan motors, and increasing heat exchanger surface area. Emerging

technologies and modulating technologies were not considered since they are not likely to be

applied in conventional baseline equipment.

The cost estimation for the analysis was based on a modified version of the reverse

engineering cost models developed as part of this rulemaking for conventional products. The

performance impacts of employing various design options were estimated utilizing a spreadsheet

model populated with actual performance data and engineering heuristics.

The analysis concluded that utilizing commonly applied technologies and designs, the

most constrained TTW split-system analysis could increase its SEER rating from 10.0 SEER to as

high as 11.4 SEER, and the packaged system analysis could increase its SEER rating from 9.7

SEER to 10.6 SEER. Employing all improvements would add $106 and $129 to the retail price of

the equipment, respectively, comparable to the increases expected in conventional equipment

moving to a 12 SEER standard.

3. Other Space-Constrained Products

Some products, other than through-the-wall products, face space-constraints. However, as

discussed in the October 5 NOPR, DOE proposed to conclude that it is economically justified and

.~49 c„ 'WINDOWS'TEMPNaircondilionerrule.atd.wpd WC 

49 uJuly 2,2001 (11: 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 - -:tI=-c:l,~ 

DOE perfonned a design assessment on two split TTW systems and one packaged TTW 

system. All systems are designed primarily for the replacement market and fit the physical 

definition of TTW equipment proposed in the October 5 proposed rule. The design assessment 

sought to identify the cost and efficiency impacts of employing commonly applied techniques to 

improve efficiency including reduction of air leakage and improvement in airflow, utilizing more 

efficient compression and fan motors, and increasing heat exchanger surface area. Emerging 

technologies and modulating technologies were not considered since they are not likely to be 

applied in conventional baseline equipment. 

The cost estimation for the analysis was based on a modified version of the reverse 

engineering cost models deve10ped as part of this rulemaking for conventional products. The 

perfonnance impacts of employing various design options were estimated utilizing a spreadsheet 

model populated with actual perfonnance data and engineering heuristics. 

The analysis concluded that utilizing commonly applied technologies and designs, the 

most constrained TTW split-system analysis could increase its SEER rating from 10.0 SEER to as 

high as 11.4 SEER, and the packaged system analysis could increase its SEER rating from 9.7 

SEER to 10.6 SEER. Employing all improvements would add $106 and $129 to the retail price of 

the equipment. respectively, comparable to the increases expected in conventional equipment 

moving to a 12 SEER standard. 

3. Other Space-Constrained Products 

Some products, other than through-the-wall products, face space-constraints. However, as 

discussed in the October 5 NOPR, DOE proposed to conclude that it is economically justified and 

49 C 'WfNDOWS'TEMPlaircondilionerrule.atd.wpd 

July 2. 2001 (II I 4 AM) 
EE-RM/STD-98-440 - --- 3

technologically feasible for all of those products to comply with the same efficiency requirements

as conventional products. Comments received in response to that proposal focused mainly on the

13 SEER heat pump requirement. After reviewing the comments; DOE again proposes to

conclude that a 12 SEER requirement is the maximum technologically feasible and economically

justified level for all space-constrained products except through-the-wall products. DOE is

interested inreceiving further comment on this issue.

B. Re-weighting of Factors

1. Re-weighting of Burdens on Consumers

The record associated with this rulemaking includes numerous examples of discussions of

the distributions, extent, and type of burdens on the typical consumer as well as on low-income

consumers. 65 FR 59623-59624 and 66 FR 7189-7190. In the January 22 notice of final

rulemaking, DOE determined that most consumers, including low-income consumers, would

likely benefit financially over the life of the equipment, but that all consumers would bear higher

initial costs, and low-income consumers would not benefit financially as much as would the

average consumer. DOE also recognized that the payback periods associated with the January 22

final rule are long, and that many consumers, though not the majority, would never recover the

higher first costs in the form of savings in their utility bills. However, the previous

Administration concluded that the national energy savings and the slight financial benefit to the

typical consumer overrode any negative and maldistributed consumer impacts.

C:\WINDOWS TEMPairconditionerrule.atdwpd

50 July 2, 2001 ( :14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -~~3 

technologically feasible for all of those products to comply with the same efficiency requirements 

as conventional products. Comments received in response to that proposal focused mainly on the 

13 SEER heat pump requirement.. After reviewing the comments; DOE again proposes to 

conclude that a J 2 SEER requirement is the maximum technologically feasible and economically 

justified level for all space-constrained products except through-the-~all products. DOE is 

interested in receiving further comment on this issue. 

B. Re-weighting of Factors 

1. Re-weighting of Burdens on Consumers 

The record associated with this ruJemaking includes numerous examples of discussions of 

the distributions, extent, and type of burdens on the typical consumer as well as on low-income 

consumers. 65 FR 59623-59624 and 66 FR 7189-7190. In the January 22 notice of final 

rulemaking, DOE determined that most consumers, including low-income consumers, would 

likely benefit financially over the life of the equipment, but that all consumers would bear higher 

initial costs, and low-income consumers would not benefit financially as much as would the 

average Consumer. DOE also recognized that the payback periods associated with the January 22 

final rule are long, and that many consumers, though not the majority, would never recover the 

higher first costs in the form of savings in their utility bills. However, the previous 

Administration concluded that the national energy savings and the slight financial benefit to the 

typical consumer overrode any negative and maldistributed consumer impacts. 

50 C.\ WINDOWS TEMP .a.rconditionerrule.atd.wpd 

July 2. 2001 (II: 14AM) 
EE-RM/STD-98-440 -= c=

Energy conservation is an important part of the Bush Administration's energy policy, but

this Administration is particularly sensitive to burdens, and potential burdens, on consumers. The

benefits of the standards adopted in the January 22 final rule would accrue to a much smaller

fraction of consumers than is the case for recent standards for other products, particularly low

income consumers. Today's proposed rule attempts to mitigate those burdens by reducing the

increase in equipment cost compared to the 13 SEER requirements issued on January 22. Overall,

the proposed standards would reduce the burdens on consumers while still providing substantial

benefit to the nation in the form of energy savings.

2. Re-weighting of Burdens on Manufacturers

a. Cumulative Regulatory Burden

Although DOE included information on the cumulative burden of Federal and State

regulations on air conditioner manufacturers in the TSD, DOE did not fully explain how it

considered the results of its study in the preamble statement of basis for the January 22 final rule.

See discussion in Section III of this SUPPLEMENTARY INFORMATION. DOE considers that a

proposed standard is not economically justified if it contributes to an unacceptable cumulative

regulatory burden. Section III.B.2.a. above provides a summary of the cumulative regulatory

burden analysis contained in Section 8.6 of the TSD. DOE concluded that the burden on

manufacturers due to all other recent or imminent federal regulations exceeds $479 million.

Revising the standard for air conditioner and heat pump efficiency would contribute up to an

additional $300 million, bringing the total cumulative regulatory burden to as high as $779

million. In light of that heavy burden, DOE today is proposing standards that would reduce the

expected financial burden on manufacturers from all new Federal and State regulations by $144

C:\WINDO'S'.TE MPaircondilionerrule atd wpd

51 Jul! 2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE·RM/STD-98-440 -~ ~~ 

Energy conservation is an important part of the Bush Administration's energy policy, but 

this Administration is partiwlarly sensitive to burdens, and potential burdens, on wnsumers. The 

benefits of the standards adopted in the January 22 final rule would accrue to a much smaller 

fraction of consumers than is the case for recent standards for other products, particularly low . 

income consumers. Tooay's proposed rule attempts to mitigate those burdens by reducing the 

increase in equipment cost compared to the 13 SEER requirements issued on January 22. Overall, 

the proposed standards would reduce the burdens on consumers while still providing substantial 

benefit to the nation in the fonn of energy savings. 

2. Re-weighting of Burdens on Manufacturers 

a. Cumulative RegulatoD' Burden 

Although DOE included infonnation on the cumulative burden of Federal and State 

regulations on air conditioner manufacturers in the TSD, DOE did n~t fully explain how it 

considered the results of its study in the preamble statement of basis for the January 22 final rule. 

See discussion in Section III of this SUPPLEMENTARY INFORMATION. DOE considers that a 

proposed standard is not economically justified if it contributes to an unacceptable cumulative 

regulatory burden. Section III.B.2.a. above provides a summary of the cumulative regulatory 

burden analysis contained in Section 8.6 of the TSD. DOE concluded that the burden on 

manufacturers due to all other recent or imminent federal regulations exceeds $479 million. 

Revising the standard for air conditioner and heat pump efficiency would contribute up to an 

additional $300 million, bringing the total cumulative regulatory burden to as high as $779 

million. In light of that heavy burden, DOE today is proposing standards that would reduce the 

expected financial burden on manufacturers from all new Federal and State regulations by $144 

51 C:IWINDOWS'.TEMP·.aJrcondllionerrule.ald.wpd 

July 2. 2001 (11 14AM) 
EE-RM/STD-98-440' 0 3

million compared to the 13 SEER final rule of January 22.

b. Financial Burdens Associated with New Efficiency Standards

In addition to cumulative regulatory burden, both the TSD and public comments warn that

too stringent efficiency standards would result in unacceptable financial burdens for some major

manufacturers and could accelerate consolidation in the central air conditioning and heat pump

industry. As explained in Section III.B.2.b. of this SUPPLEMENTARY INFORMATION, the 13

SEER standards in the January 22 final rule are projected by the TSD to result in a negative cash

flow for the industry in the year preceding the new standards' enforcement. However, the

standards would impose far greater financial burdens on manufacturers whose operating costs

exceed the industry average. Those manufacturers typically engage in more research and

development or provide additional sales or service support than do their lower operating cost

competitors. The 12 SEER standard that DOE proposes today would reduce the maldistribution

of financial impacts on manufacturers and would allow manufacturers to maintain a positive cash

flow.

c. Conclusions Regarding Conventional Products

EPCA specifies that any new or amended energy conservation standard for any type (or

class) of covered product shall be designed to achieve the maximum improvement in energy

efficiency which the Secretary determines is technologically feasible and economically justified

(42 U.S.C. 6295(o)(2)(A)). In determining whether a standard is economically justified, the

Secretary must determine whether the benefits of the standard exceed its burdens (42 U.S.C.

6295(o)(2)(B)(i)). The amended standard must "result in significant conservation of energy".

C:\WINDOWS'.TEMPairconditionerrmle.atd wpd 52 July 2 ,2001 (1:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 - :/P-C:< ~3 · 

million compared to the 13 SEER final rule of January 22. 

b. Financial Burdens Associated with New Efficiency Standards 

In addition to cumulative regulator:' burden, both the TSD and public comments warn that 

too stringent efficiency standards would result in unacceptable financial burdens for some major 

manufacturers and could accelerate consolidation in the central air conditioning and heat pump 

industry. As explained in Section JII.B.2.b. of this SUPPLEMENTARY INFORMATION, the 13 

SEER standards in the January 22 final rule are projected by the TSD to result in a negative cash 

flow for the industry in the year preceding the new standards' enforcement. However, the 

standards would impose far greater financial burdens on manufacturers whose operating costs 

exceed the industry average. Those manufacturers typically engage in more research and 

development or provide additional sales or service support than do their lower operating cost 

competitors. The 12 SEER standard that DOE proposes today would reduce the maldistribution 

of financial impacts on manufacturers and would allow manufacturers to maintain a positive cash 

flow. 

c. Conclusions Reearding Conventional Products 

EPCA specifies that any new or amended energy conservation standard for any type (or 

class) of covered product shall be designed to achieve the maximum improvement in energy 

efficiency which the Secretary determines is technologically feasible and economically justified 

(42 U.S.c. 6295(0)(2)(A». In determining whether a standard is economically justified, the 

Secretary must determine whether the benefits of the standard exceed its burdens (42 U.S.C. 

6295(0)(2)(B)(i». The amended standard must "result in significant conservation of energy". 

52 C IWINDOWS\TEMPlairconditionerrule.atd.wpd 

July 2. 2001 (11:l4AM) 
(42 U.S.C. 6295(o)(3)(B)). EE-RM/STD-98-440 - $ 3 >

In conducting its analysis, DOE considers the impacts of standards beginning with the

.Max Tech Level, i.e., Trial Standard Level 5 in this rulemaking. DOE then considers less

efficient levels until it reaches the level which is technologically feasible and economically

justified.

To aid the reader in the discussion of the benefits and burdens of the trial standard levels,

DOE includes a summary of the analysis results for all of the levels in Table 4.9 Table 4

presents a summary of quantitative analysis results for each trial standard level based on the

assumptions DOE considers most plausible. These include manufacturing cost estimates from the

reverse engineering, an 18.4-year equipment lifetime with one compressor replacement at 14

years, and electricity prices based on the AEO2000 Reference Case.

All cumulative effects that are not monetary are not discounted Monetary effects are discounted to 1998 dollars

C :\INDOWS &TEMP'airconditionerrule.atd lpd

53 Jul. 2.2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

(42 U.S.c. 6295(0)(3)(B». EE-RM/STD-98-440 -::tt e:? t:R:3 . 

In conducting its analysis, DOE considers the impacts of standards beginning with the 

.Max Tech Level, i.e., Trial Standard Level 5 in this rulemaking. DOE then considers less 

efficient levels until it reaches the level which is technological1y feasible and economically 

justified. 

To aid the reader in the discussion of the benefits and burdens of the trial standard levels, 

DOE includes a sununary of the analysis results for all of the levels in Table 4.9 Table 4 

presents a summary of quantitative analysis results for each trial standard level based on the 

assumptions DOE considers most plausible. These include manufacturing cost estimates from the 

reverse engineering, an l8.4-year equipment lifetime with one compressor replacement at 14 

years, and electricity prices based on the AE02000 Reference Case. 

9 . All cumulallve effects that are not monetary are not discounted Monetary effects are discounted \0 1998 dollars 

53 CIWlNDOW$.TEMP\airconditionerrule.atd.wpd 

July 2, 2001 (11I4AM) 
EE-RM/STD-98-440-* o7 '

Table 4: Summary of Quantitative Results'

Trial Std 1 Trial Std 2 Trial Std 3 Trial Std 4 Trial Std 5

Primary Energy Saved (quads) 1.7 3.0 3.5 4.2 8.8

Generation Capacity Offset (GW) 2 6.5 10.6 12.4 15.5 28.8

NPV ($billion)

7% Discount Rate | 2 2 | 1 | 1 (10)

Industry Impacts (million S)3 5

Cumulative Change in Industry (62) (179) (199) (300) -

NPV

Differential impact between

Industry Sub-groups4 7 5 2 3 8 2 6 1 4 2 9

Cumulative Regulatory Burden on ( (>541) (>658) (>678) (>779) Industry '

Minimum net cash flow 62 31 18 (3)

Life-Cycle Cost Savings ($)5

Split AC 75 113 13 113 (137)

Packaged AC 78 163 163 29 (276)

Split HP 209 365 372 372 (41)

Packaged HP 207 421 353 353 166

Equipment Price Increase ($)

Split AC 91 213 213 335 754

Packaged AC 89 158 158 425 859

Split HP 55 144 332 332 1039

Packaged Heat Pump 92 149 435 435 985

Fraction of all Consumers with Net LCC Losses >2% (%)

Split AC 2 25 25 39 68

Packaged AC 1 9 9 52 73

Split HP 0 0 6 6 57

Packaged Heat Pump 0 0 12 12 48

Fraction of Low Income Consumers with Net LCC Losses >2% (%)

Split AC 5 34 34 50 77

Packaged AC 2 14 14 61 80

Split HP 0 0 12 12 75

Packaged Heat Pump 0 0 20 20 66

Parentheses indicate negative (-) values. Unless otherwise noted, Trial Standard Levels I - 3 refer to the NAECA efficiency

scenario, and Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario.

2 Values based on NAECA efficiency scenario.

3Not calculated at Trial Standard Level 5.

4 The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup

5Negative values indicate LCC increases.

In addition to the quantitative results, DOE also considers other burdens and benefits that

54 C\WINDOWS'TENM'airconditionerrule ad.wpd

-~~5 ) ~~~~~~~4 ~Jul] 2.2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440--:Jr :2.. ~ 3 · 

Table 4: Summary of Quantitative Results I 

Trial Std J Trial Std 2 Trial Std 3 Trial Std 4 Trial Std 5 

Primary Energy Saved (quads) 1.7 3.0 3.5 4.2 8.8 

Generation Capacity Offset (GW)2 6.5 10.6 12.4. 15.5 28.8 

NPV ($billion) 

7% Discount Rate 2 2 1 1 (10) 

Industry Impacts (million S)J·s 

Cumulative Change in Industry (62) (119) (199) (300) - NPV 

Differential impact between 75 238 261 429 - Industry Suh-~roups4 

Cumulative Regulatory Burden on (>541) (>658) (>678) (>779) - Industry 

Minimum net cash flow 62 31 18 (3) - Life-Cycle Cost Savings ($)s 

Split AC 75 113 H3 113 (137) 

Packaged AC 78 163 163 29 (276) 

Split HP 209 365 372 372 (41) 

Packaged HP 207 421 353 353 166 

Equipment Price Increase ($) 

Split AC 91 213 113 335 754 

Packaged AC 89 158 158 425 859 

Split HP 55 144 332 332 1039 

Packaged Heat Pump 92 149 435 435 985 

Fraction of all Consumers with Net LCC Losses >2% (%) 

Split AC 2 25 25 39 68 

Packaged AC I 9 9 52 73 

Split HP 0 0 6 6 57 

Packaged Heat Pump 0 0 12 12 48 

Fraction of Low Income Consumers with Net LCC Losses >2% (%) 

Split AC 5 34 34 50 77 

Packaged AC 2 14 14 61 80 

Split HP 0 0 12 12 75 

Packaged Heat Pump 0 0 20 20 66 

I Parentheses mdlcate negatlve (-) values. Unless otherwIse noted, Tnal Standard Levels I - 3 refer to the NAECA effiCIency 

scenario, and Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario. 

2 Values based on NAECA efficiency scenario. 

J Not calculated at Trial Standard Level 5. 

4 The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup 

S Negative values indicate LCC increases. 

In addition to the quantitative results, DOE also considers other burdens and benefits "that 

54 C·\WlNOOWS·TEI>IP'.aircond,lionerrule.atd.wpc! 

Jul) 2.2001 (l1:l4AM) 
EE-RM/STD-98-440_- ::°',,

affect economic justification. The potential to improve the reliability of the electricity system is

the major benefit DOE has not quantified explicitly. In areas where the occurrence of blackouts

(and brownouts) can be reduced through expansion of system capacity, the economic value of

avoided blackouts associated with reductions in peak load cannot exceed the value of the avoided

capacity expansion. That value is already captured in DOE's analysis as savings in consumer

utility bills. However, in areas that do not expect to be able to maintain adequate capacity

reserves, the value of avoided blackouts associated with reductions in peak demand can far exceed

the normal costs of capacity expansion.' 0

DOE also recognizes that the adopted standards could result in additional unquantifiable

burdens. These include a possible increase in health problems caused by consumers foregoing air

conditioner purchases, a possible reduction in the ability of the product to dehumidify, a possible

lessening of competition, and possible difficulty in installing the new baseline products into

replacement applications. Section IV of the preamble to the January 22 final rule discusses

DOE's response to comments regarding benefits and burdens.

First DOE considered Trial Standard Level 5, the Max Tech Level for each of four classes

of products, representing uniform 18 SEER requirements. The manufacturing cost DOE assumes

for Trial Standard Level 5 is equal to 15 SEER equipment, although DOE would expect that

'0 For instance, if capacity-related blackouts cost a region S1 billion, society would be willing to pay up to

$1 billion to prevent them. If those blackouts can be prevented through either a capacity expansion or a reduction in

peak demand, and the new capacity would cost $100 million, the value of the reduction in peak demand can be no

more than $100 million. If the region is short on capacity and cannot add new capacity quickly, however, the same

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible

alternative.

.~~55 -C:\WINDOWS\TEMP'aircondl ionerrule.aidwpd

55 .Iulyu 2 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 - 4r--~ ~3 . 

affect economic justification. The potential to improve the reliability of the electricity system is 

the major benefit DOE has not quantified explicitly. In areas where the occurrence of blackouts 

(and brownouts) can be reduced through expansion of system capacity, the economic value of 

avoided blackouts associated with reductions in peak load cannot exceed the value of the avoided 

capacity expansion. That value is already captured in DOE's analysis as savings in consumer 

utility bills. However, in areas that do not expect to be able to maintain adequate capacity 

reserves, the value of avoided blackouts associated with reductions in peak demand can far exceed 

the normal costs of capacity expansion. 10 

DOE also recognizes that the adopted standards could result in additional unquantifiable 

burdens. These include a possible increase in health problems caused by consumers foregoing air 

conditioner purchases, a possible reduction in the ability of the product to dehumidify, a possible 

lessening of competition, and possible difficulty in installing the new baseline products into 

replacement applications. Section IV of the preamble to the January 22 final rule discusses 

DOE's response to comments regarding benefits and burdens. 

First DOE considered Trial Standard Level 5, the Max Tech Level for each of four classes 

of products, representing uniform 18 SEER requirements. The manufacturing cost DOE assumes 

for Trial Standard Level 5 is equal to 15 SEER equipment, although DOE would expect that 

10 For instance, if capacity-related blackouts cost a region $1 billion, society would be willing to pay up to 

$1 billion to prevent them. If those blackouts can be prevented through either a capacity expansion or a reduction in 

peak demand, and the new capacity would cost $100 million, the value of the reduction in peak demand can be no 

more than $100 million. If the region is short on capacity and cannot add new capacity quickly, however, the same 

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible 

alternative. 

55 C:IWJNDOWSITEMPlalTcond'lionerrule.ald.wpd 

July 2. 2001 (11 14AM) 
EE-RM/STD-98-440 -, c ,3? .

assumption to understate the cost and price of the product. Trial Standard Level 5 would likely

save 8.6 quads of energy which DOE considers significant. These savings would result in the

avoidance of approximately 29 gigawatts (GW) of installed generation capacity. For comparison,

the generating capacity is equivalent to roughly 77 large, 400 megawatt, power plants,"

approximately 3.7 percent of current installed generating capacity and more than 13 percent of the

anticipated growth in capacity needed by 2020. The cumulative emissions reductions through

2020 include 63.0 Mt of carbon equivalent and 184.2 thousand metric tons (kt) of NO, are also

significant.

At Trial Standard Level 5, the average consumer would experience an increase in lifecycle cost. Compared to today's standards, purchasers of split central air-conditioners, the

predominate class of central air conditioner with 65 percent of the sales of central air conditioners

and heat pumps, would most likely lose on average $137 over the life of the appliance.

Purchasers of split heat pumps, the predominate class of heat pump, would most likely lose on

average $41. Again, these results do not include the additional price the consumer would pay

over the price of a 15 SEER product, which would increase the life-cycle cost considerably.

Furthermore, for the nation as a whole, Trial Standard Level 5 would result in a net cost of $10

billion in NPV. DOE did not calculate manufacturer impacts at this trial standard level,

determining based on preliminary evaluation that they would be severe and unacceptable.

DOE estimates 10 coal-fired power plants and 67 gas-fired power plants can be avoided. See TSD, Chapter 11 and Appendix

H.

C:\W'INDOWS\TEMPN airconditionmrule atd wpd 56 July 2 2001 (1114AM)

EE-RM-STD-98-440 COMMENT 223

assumption to understate the cost and price of the product. Trial Standard Level 5 would likely 

save 8.6 quads of energy which DOE considers significant. These savings would result in the 

avoidance of approximately 29 gigawatts (GW) of installed generation capacity. For comparison, 

the generating capacity is equivalent to roughly 77 large, 400 megawatt, power plants, II 

approximately 3.7 percent of current installed generating capacity and more than 13 percent of the 

anticipated growth in capacity needed by 2020. The cumulative emissions reductions through 

2020 include 63.0 Mt of carbon equivalent and 184.2 thousand metric tons (kt) of NO x are also 

significant. 

At Trial Standard Level 5, the average consumer would experience an increase in lifecycle cost. Compared to today's standards, purchasers of split central air-conditioners, the 

predominate class of central air conditioner with 65 percent of the sales of central air conditioners 

and heat pumps, would most likely lose on average $137 over the life of the appliance. 

Purchasers of split heat pumps, the predominate class of heat pump, would most likely lose on 

average $41. Again, these results do not include the additional price the consumer would pay 

over the price of a 15 SEER product, which would increase the life-cycle cost considerably. 

Furthermore, for the nation as a whole, Trial Standard Level 5 would result in a net cost of $10 

billion in NPV. DOE did not calculate manufacturer impacts at this trial standard level, 

determining based on preliminary evaluation that they would be severe and unacceptable. 

II DOE estimates 10 coal-fired power plants and 67 gas-fired power plants can be avoided. See TSD, Chapter I I and Appendix 

H. 

56 C:I WINDOW$ITEMPlairconditionerrulc.atd wpd 

July 2, 2001 (II 14AM) 
EE-RM/STD-98-440 -3 .

DOE proposes to conclude that at Trial Standard Level 5, the benefits of energy savings,

generating capacity reductions and emission reductions would be outweighed by the negative

economic impacts to the nation, to the vast majority of consumers and to the manufacturers.

Consequently, DOE proposes to determine that Trial Standard Level 5, the Max Tech Level, is not

economically justified.

Next, DOE considered Trial Standard Level 4. This level specifies 13 SEER equipment

for all product classes. In considering Trial Standard Level 4, DOE assumed the Roll-up

efficiency scenario and reverse engineering cost estimates to be the most probable. (See Section

8.4.8 of the TSD for the reasons DOE considers the Roll-up efficiency scenario most probable

above Trial Standard Level 3 and the NAECA efficiency scenario most probable at Trial Standard

Levels 1, 2, and 3.) Primary energy savings would likely be 4.2 quads, which DOE considers

significant. The estimated reduction in installed generating capacity is equivalent to avoiding the

need for 53 large 400 megawatt power plants, and reduced emissions would range up to 33 Mt of

carbon equivalent and up to 85 kt of NO,.' 2

At this standard level, the average purchaser of a split system air conditioner, the

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2571, an increase of $335. Lower utility bills from the energy savings would repay this increase

in 1 1.3 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

12 Generating capacity, carbon, and NO, reductions based on NAECA efficiency scenario.

_ ~~57_ C:\WINDOWS'TEMP'airconditionerrule.atdlwpd

57 /July 2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -4t=c:z..~3 . 

DOE proposes to conclude that at Trial Standard Level 5, the benefits of energy savings, 

generating capacity reductions and emission reductions would be outweighed by the negative 

economic impacts to the nation, to the vast majority of consumers and to the manufacturers. 

Consequently, DOE proposes to detennine that Trial Standard Level 5, the Max Tech Level, is not 

economically justified. 

Next, DOE considered Trial Standard LevelA. This level specifies 13 SEER equipment 

for all product classes. In considering Trial Standard Level 4, DOE assumed the Roll-up 

efficiency scenario and reverse engineering cost estimates to be the most probable. (See Section 

8.4.8 of the TSD for the reasons DOE considers the Roll-up efficiency scenario most probable 

above Trial Standard Level 3 and the NAECA efficiency scenario most probable at Trial Standard 

Levels 1,2, and 3.) Primary energy savings would likely be 4.2 quads, which DOE considers 

significant. The estimated reduction in installed generating capacity is equivalent to avoiding the 

need for 53 large 400 megawatt power plants, and reduced emissions would range up to 33 Mt of 

carbon equivalent and up to 85 kt ofNOx•

12 

At this standard level, the average purchaser of a split system air conditioner, the 

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to 

$2571, an increase of$335. Lower utility bills from the energy savings would repay this increase 

in 11.3 years and produce a total saving with a net present value of $113 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

12 Generating capacity, carbon, and NO. reductions based on NAECA efficiency scenario. 

57 C.IWINDOWS"TEMP'.aircondilionenule.ald.wpd 

Jul)' 2.2001 (l1.14AM) 
EE.RM/STD-98-440- - cH -

percent of all shipments, would see the average installed price of $2607 rise to $3032, an increase

of $425. Lower utility bills from the energy savings would repay this increase in 14.5 years and

produce a total saving with a net present value of $29 over the 18.4 year life of the product.

The average purchaser of a split system heat pump, which represents 22 percent of all

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332.

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a

total saving with a net present value of $372 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from

the energy savings would repay this increase in 8.4 years and produce a total saving with a net

present value of $353 over the 18.4 year life of the product. Trial Standard Level 4 would lower

peak electricity demand compared to the base case. That would allow utility service areas to

either avoid new capacity or, to the extent that peak loads contribute to reliability problems,

improve system reliability. The increase in national net present value is expected to be $1 billion.

Since DOE expects the Roll-up efficiency scenario to result from standards adopted at

Trial Standard Level 4, the burdens of Trial Standard Level 4 on manufacturers are likely to be

severe. Not only does DOE expect the average loss in industry NPV to be around 20 percent, but

impacts on most manufacturers would reach almost 30 percent. Their long term drop in return on

investment and short term drop in cash flow suggest that standards adopted at Trial Standard

Level 4 could accelerate the consolidation trend, possibly resulting in fewer choices for consumers

-58 JUOC:\WINDOWS',TENP\aircondtionerrule atd wpd 58 Jul. 2, 2001 (11 :14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 --=IF ;<~3 . 

percent of all shipments, would see the average installed price of $2607 rise to $3032, an increase 

of $425. Lower utility bills from the energy savings would repay this increase in 14.5 years and 

produce a total saving with a net present value of $29 over the 18.4 year life of the product. 

The average purchaser of a split system heat pump, which represents 22 percent of all 

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332. 

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a 

total saving with a net present value of $372 over the 18.4 year life ofthe product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from 

the energy savings would repay this increase in 8.4 years and produce a total saving with a net 

present value of $353 over the] 8.4 year life of the product. Trial Standard Level 4 would lower 

peak electricity demand compared to the base case. That would allow utility service areas to 

either avoid new capacity or, to the extent that peak loads contribute to reliability problems, 

improve system reliability. The increase in national net present value is expected to be $] billion. 

Since DOE expects the Roll-up efficiency scenario to result from standards adopted at 

Trial Standard Level 4, the burdens of Trial Standard Level 4 on manufacturers are likely to be 

severe. Not only does DOE expect the average loss in industry NPV to be around 20 percent, but 

impacts on most manufacturers would reach almost 30 percent. Their long term drop in return on 

investment and short term drop in cash flow suggest that standards adopted at Trial Standard 

Level 4 could accelerate the consolidation trend, possibly resulting in fewer choices for consumers 

58 C·\WINDOWS\TEr.1P'Iaircond,I,onerrule ald.wpd 

July 2. 2001 (1I14AM) 
EE-RM/STD-98-440 -- ' ~

and in a slowing of the pace of innovation well into the future. Furthermore, the cumulative

impact on the industry of all new Federal and State regulations would exceed $779 million.

While the average consumer purchasing a 13 SEER air conditioner or heat pump would

experience a net saving over the lifetime of the product, some households would experience net

costs exceeding 2 percent of the total life-cycle cost of today's baseline units. Thus, 39 percent of

the households with split system air conditioners, 52 percent with single package air conditioners,

6 percent with split system heat pumps and 12 percent with single package heat pumps would

experience a net cost. The percentage of low-income consumers who would experience net costs

exceeding 2 percent of the total life-cycle cost of today's baseline units is greater than that of the

average household. Thus, 50 percent of low-income households with split system air

conditioners, 61 percent with single package air conditioners, 12 percent with split system heat

pumps and 20 percent with single package heat pumps would experience a net cost. Also, the

possibility that consumers would incur substantial installation costs is great because 13 SEER

equipment is not likely to fit in the same space as current 10 SEER equipment. In light of the

higher purchase cost increase experienced by all consumers, the percentage of households, in

particular low-income households, which experience life-cycle cost increases, consumer burdens

are particularly acute under Trial Standard Level 4.

DOE proposes to conclude that at Trial Standard Level 4, the benefits of energy savings,

generating capacity and emission avoidance, possible improvements in electric system reliability,

and net benefit to the nation's consumers would be outweighed by the maldistribution of

consumer benefits, the potential increase in installation costs for some consumers related to

59-„jg~ ~C:\WINDOWS',TEMP.airconditionerrule atdwpd

59 Jul) 2,200(1 ( 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -::tF-~~ . 

and in a slowing of the pace of innovation well into the future. Furthennore, the cumulative 

impact on the industry of all new Federal and State regulations would exceed $779 million. 

While the average consumer purchasing a 13 SEER air conditioner or heat pump would 

experience a net saving over the lifetime of the product, some households would experience net 

costs exceeding 2 percent of the totallife-cycIe cost oftoday's baseline units. Thus, 39 percent of 

the households with split system air conditioners, 52 percent with single package· air conditioners, 

6 percent with split system heat pumps and 12 percent with sjngle package heat pumps would 

experience a net cost. The percentage of low-income consumers who would experience net costs 

exceeding 2 percent of the totallife-cyc1e cost oftoday's baseline units is greater than that of the 

average household. Thus, 50 percent of low-income households with split system air 

conditioners, 61 percent with single package air conditioners, 12 percent with split system heat 

pumps and 20 percent with single package heat pumps would experience a net cost. Also, the 

possibility that consumers would incur substantial installation costs is great because 13 SEER 

equipment is not likely to fit in the same space as current 10 SEER equipment. In light of the 

higher purchase cost increase experienced by all consumers, the percentage of households, in 

particular lo\v-income households, which experience life-cycle cost increases, consumer burdens 

are particularly acute under Trial Standard Level 4. 

DOE proposes to conclude that at Trial Standard Level 4, the benefits of energy savings, 

generating capacity and emission avoidance, possible improvements in electric system reliability, 

and net benefit to the nation's consumers would be outweighed by the maldistribution of 

consumer benefits, the potential increase in installation costs for some consumers related to 

59 C:IWlNDOWS\TEMP\a,rcond,t,onerrule atd.wpd 

Jul) 2.2001 (II 14AM) 
EE-RM/STD-98-440 -- -c;'3

installing potentially larger equipment, and the cost to manufacturers taking into account the

cumulative regulatory burden. In short, the large financial burdens of Trial Standard Level 4 are

not outweighed by the expected financial benefits. Other potential burdens include possible health

effects caused indirectly by foregone air conditioning purchases and possible lessening of

competition. Consequently, DOE proposes to determine that Trial Standard Level 4 is not

economically justified.

Next, DOE considered Trial Standard Level 3. This level specifies 12 SEER equipment

for air conditioners and 13 SEER equipment for heat pumps. In considering Trial Standard Level

3, DOE assumed the NAECA efficiency scenario and reverse engineering cost estimates to be the

most probable. (See Section 8.4.8 of the TSD for the reasons DOE considers the Roll-up

efficiency scenario most probable at Trial Standard Levels 4 and 5 and the NAECA efficiency

scenario most probable at Trial Standard Levels 1, 2, and 3.) Primary energy savings would likely

be 3.5 quads, which DOE considers significant. The estimated reduction in installed generating

capacity is equivalent to avoiding the need for 37 large 400 megawatt power plants, and reduced

emissions would range up to 28 Mt of carbon equivalent and up to 84 kt of NO,.' 3

At this standard level, the average purchaser of a split system air conditioner, the

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2449, an increase of $213. Lower utility bills from the energy savings would repay this increase

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase

13 Generating capacity, carbon, and NO, reductions based on NAECA efficiency scenario.

C:\WINDOWS\TEMP\airconditionerule aidwpd 60 Jul. 2, 2001 (11 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#C;;{~3 . 

installing potentially larger equipment, and the cost to manufacturers taking into account the 

cumulative regulatory burden. In short, the large financial burdens of Trial Standard Level 4 are 

not outweighed by the expected financial benefits. Other potential burdens include possible health 

effects caused indirectly by foregone air conditioning purchases and possible lessening of 

competition. Consequently, DOE proposes to detennine that Trial Standard Level 4 is not 

economically justified. 

Next, DOE considered Trial Standard Level 3. This level specifies 12 SEER equipment 

for air conditioners and 13 SEER equipment for heat pumps. ln considering Trial Standard Level 

3, DOE assumed the NAECA efficiency scenario and reverse engineering cost estimates to be the 

most probable. (See Section 8.4.8 of the TSD for the reasons DOE considers the Roll-up 

efficiency scenario most probable at Trial Standard Levels 4 and 5 and the NAECA efficiency 

scenario most probable at Trial Standard Levels 1,2, and 3.) Primary energy savings would likely 

be 3.5 quads, which DOE considers significant. The estimated reduction in installed generating 

capacity is equivalent to avoiding the need for 37 large 400 megawatt power plants, and reduced 

emissions would range up to 28 Mt of carbon equivalent and up to 84 kt ofNOx•

13 

At this standard level, the average purchaser of a split system air conditioner, the 

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to 

$2449, an increase of $213. Lower utility bills from the energy savings would repay this increase 

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase 

13 Generating capacity, carbon, and NO. reductions based on NAECA efficiency scenario. 

60 C:IWJNDOWSITEMP\aircondlllonenule ald .... pet 

July 2. 2001 (l1l4AM) 
EE-RM/STD-98-440 - .t23 .

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and

produce a total saving with a net present value of $163 over the 18.4 year life of the product.

The average purchaser of a split system heat pump, which represents 22 percent of all

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332.

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a

total saving with a net present value of $372 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from

the energy savings would repay this increase in 8.4 years and produce a total saving with a net

present value of $353 over the 18.4 year life of the product. Trial Standard Level 3 would lower

peak electricity demand compared to the base case. That would allow utility service areas to

either avoid new capacity or, to the extent that peak loads contribute to reliability problems,

improve system reliability. The increase in national net present value is expected to be $1 billion.

Since DOE expects the NAECA efficiency scenario to result from standards adopted at

Trial Standard Level 3, the burdens of Trial Standard Level 3 on manufacturers are likely to be

less severe than at Trial Standard Level 4. DOE expects the average loss in industry NPV to be

around 11 percent, but impacts on most manufacturers would be around 17 percent. Their long

term drop in return on investment and short term drop in cash flow suggest that standards adopted

at Trial Standard Level 3 could accelerate the consolidation trend, possibly resulting in fewer

choices for consumers and in a slowing of the pace of innovation well into the future.

Furthermore, the cumulative impact on the industry of all new Federal and State regulations

would exceed $678 million.

C:\WNDOWS\TEMP\airconditionerrule atd wpd

61 July 2, 2001 (11 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 4-~~. 

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and 

produce a total saving with a net present value 0[$163 over the 18.4 year life of the product. 

The average purchaser of a split system heat pump, which represents 22 percent of all 

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332. 

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a 

total saving with a net present va1ue of $372 01'C'l the 18.4 year life of the product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from 

the energy savings \vould repay this increase in 8.4 years and produce a total saving with a net 

present value of $353 over the 18.4 year life of the product. Trial Standard Level 3 would lower 

peak electricity demand compared to the base case. That would allow utility service areas to 

either avoid new capacity or, to the extent that peak loads contribute to reliability problems, 

improve system reliability. The increase in national net present value is expected to be $1 billion. 

Since DOE expects the NAECA efficiency scenario to result from standards adopted at 

Trial Standard Level 3, the burdens of Trial Standard Level 3 on manufacturers are likely to be 

less severe than at Trial Standard Level 4. DOE expects the average loss in industry NPV to be 

around 11 percent, but impacts on most manufacturers would be around 17 percent. Their long 

term drop in return on investment and short term drop in cash flow suggest that standards adopted 

at Trial Standard Level 3 could accelerate the cons01idation trend, possibly resulting in fewer 

choices for consumers and in a slowing of the pace of innovation well into the future. 

Furthennore, the cumulative impact on the industry of all new Federal and State regulations 

would exceed $678 million. 

61 C:IWINDOWSITEMP\airconditioncrrulc atd.wpd 

July 2.2001 (II 14AM) 
EE-RM/STD-98-440--:G *~ -

Trial Standard Level 3 introduces the serious concern that prospective owners of air

conditioning heat pump systems would instead purchase less costly air conditioner resistance

heater combinations because of the lower standards for air conditioners compared to heat pumps

at this standard level. As discussed in the January 22 notice of final rulemaking (66 FR 7196), the

energy savings from the more efficient heat pumps would be eliminated if only a small fraction of

heat pump owners (4 percent) switched to resistance heating. Trial Standard Level 3 also poses a

serious concern regarding potential anti-competitive effects in the heat pump market.

DOE proposes to conclude that, at Trial Standard Level 3, the benefits of energy savings,

generating capacity and emission avoidance, possible improvements in electric system reliability,

and net benefit to the nation's consumers would be outweighed by the maldistribution of

consumer benefits and manufacturer costs, the likelihood of higher installation costs resulting

from potentially larger equipment, and the net impact on the industry in light of the cumulative

regulatory burden. The most serious concern is the possibility of equipment switching that would

likely substantially reduce the calculated energy savings, drastically reducing the potential

benefits. Other possible burdens include lessening of competition and health effects caused by

forgone air conditioner purchases. Consequently, DOE proposes to determine that Trial Standard

Level 3 is not economically justified.

Next, DOE considered Trial Standard Level 2. This level specifies 12 SEER equipment

for all product classes. In considering Trial Standard Level 2, DOE assumed the NAECA

C \WINDOWS\TEMPaircondiondinerrule.atdwpd 62 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-:1PM3 '. 

Trial Standard Level 3 introduces the serious concern that prospective owners of air 

conditioning heat pump systems would instead purchase less costly air conditioner resistance 

heater combinations because of the lower standards for air conditioners compared to heat pumps 

at this standard level. As discussed in the January 22 notice of final rulemaking (66 FR 7196), the 

energy savings from the more efficient heat pumps would be eliminated if only a small fraction of 

heat pump owners (4 percent) S\\itched to resistance heating. Trial Standard Level 3 also poses a 

serious concern regarding potential anti-competitive effects in the heat pump market. 

DOE proposes to conclude that, at Trial Standard Level 3, the benefits of energy savings, 

generating capacity and emission avoidance, possible improvements in electric system reliability, 

and net benefit to the nation's consumers would be outweighed by the maldistribution of 

consumer benefits and manufacturer costs, the likelihood of higher installation costs resulting 

from potentially larger equipment, and the net impact on the industry in light of the cumulative 

regulatory burden. The most serious concern is the possibility of equipment switching that would 

likely substantially reduce the calculated energy savings, drastically reducing the potential 

benefits. Other possible burdens include lessening of competition and health effects caused by 

forgone air conditioner purchases. Consequently, DOE proposes to determine that Trial Standard 

Level 3 is not economically justified. 

Next, DOE considered Trial Standard Level 2. This level specifies 12 SEER equipment 

for all product classes. In considering Trial Standard Level 2, DOE assumed the NAECA 

62 C·IWlNDOWSITEMP\aircondilionenule.3Id.wpd 

July 2. 2001 (III4AM) 
EE-RM/STD-98-440, A:: ? .

efficiency scenario and reverse engineering cost estimates to be the most probable. Primary

energy savings would likely be 3 quads, which DOE considers significant. The estimated

reduction in installed generating capacity is equivalent to avoiding the need for 27 large 400

megawatt power plants, and reduced emissions would range up to 24 Mt of carbon equivalent and

up to 73 kt of NO,. '4

At this standard level, the average purchaser of a split system air conditioner, the

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2449, an increase of $213. Lower utility bills from the energy savings would repay this increase

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and

produce a total saving with a net present value of $163 over the 18.4 year life of the product.

The average purchaser of a split system heat pump, which represents 22 percent of all

shipments, would see the average installed price of $3668 rise to $3812, an increase of $144.

Lower utility bills from the energy savings would repay this increase in 3.9 years and produce a

total saving with a net present value of $365 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $3748, an increase of $149. Lower utility bills from

the energy savings would repay this increase in 4 years and produce a total saving with a net

present value of $421 over the 18.4 year life of the product. Trial Standard Level 2 would lower

14 Generating capacity, carbon, and NO, reductions based on NAECA efficiency scenario.

C:\WINDOWS\TEhMPlairconditionerrumle ad wpd 63 July 2, 2001 (11 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440_.1F' ~~ • 

efficiency scenario and reverse engineering cost estimates to be the most probable. Primary 

energy savings would likely be 3 quads, which DOE considers significant. The estimated 

reduction in installed generating capacity is equivalent to avoiding the need for 27 large 400 

megawatt power plants, and reduced emissions would range up to 24 Mt of carbon equivalent and 

up to 73 kt of NOli' 14 

At this standard level, the average purchaser of a split system air conditioner, the 

predominate class with 65 percent of all shipments, would see the installed price of $2236 rise to 

$2449, an increase of$213. Lower utility bms from the energy savings would repay this increase 

in 9.8 years and produce a total saving with a net present value of $1] 3 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase 

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and 

produce a total saving with a net present value of $163 over the 18.4 year life ofthe product. 

The average purchaser of a split system heat pump, which represents 22 percent of all 

shipments, would see the average installed price of$3668 rise to $3812, an increase of$144. 

Lower utility bills from the energy savings would repay this increase in 3.9 years and produce a 

total saving with a net present value of $365 over the 18.4 year life of the product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of$3599 rise to $3748, an increase of$149. Lower utility bills from 

the energy savings would repay this increase in 4 years and produce a total saving with a net 

present value of $421 over the 18.4 year life of the product. Trial Standard Level 2 would lower 

14 Generating capacity, carbon, and NO, reductions based on NAECA efficiency scenario. 

63 C:\ WINDOWS\ TEMPlalfconditionclTUle .atd wpd 

July 2. 2001 (II 14AM) 
EE-RM/STD-98-440 -i c;?e-3

peak electricity demand compared to the base case. That would allow utility service areas to

either avoid new capacity or, to the extent that peak loads contribute to reliability problems,

improve system reliability. The increase in national net present value is.expected to be $2 billion.

Since DOE expects the NAECA efficiency scenario to result from standards adopted at

Trial Standard Level 2, the burdens of Trial Standard Level 2 on manufacturers are likely to be

moderate. DOE expects the average loss in industry NPV to be around 10 percent, with impacts

on most manufacturers around 16 percent. Their long term drop in retum on investment and short

term drop in cash flow are moderate, suggesting that standards adopted at Trial Standard Level 2

would not accelerate the consolidation trend, and could result in more choices for consumers and

raise the pace of innovation. The cumulative impact on the industry of all new Federal and State

regulations would exceed $658 million.

\hile the average consumer purchasing a 12 SEER air conditioner or heat pump would

experience a net saving over the lifetime of the product, some households would experience net

costs exceeding 2 percent of the total life-cycle cost of today's baseline units. Thus, 25 percent of

the households with split system air conditioners and 9 percent with single package air

conditioners would experience a net cost. No households with heat pumps would experience a net

cost. The percentage of low-income consumers who would experience net costs exceeding 2

percent of the total life-cycle cost of today's baseline units is greater than that for an average

household. Thus, 34 percent of low-income households with split system air conditioners and 14

percent with single package air conditioners would experience a net cost. No low-income

C:\WINDOWS\TEMP\airconditionrrulc aid wpd

64 July 2, 2001 (11 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -it eX cR 3. 

peak electricity demand compared to the base case. That would allow utility service areas to 

either avoid new capacity or, to the extent that peak loads contribute to reliability problems, 

improve system reliability. The increase in national net present value iS,expected to be $2 billion. 

Since DOE expects the NAECA efficiency scenario to result from standards adopted at 

Trial Standard Level 2, the burdens of Trial Standard Level 2 on manufacturers are likely to be 

moderate. DOE expects the average loss in industry NPV lobe around 10 percent, with impacts 

on most manufacturers around 16 percent. Their long term drop in relUrn on investment and short 

tenn drop in cash flow are moderate, suggesting that standards adopted at Trial Standard Level 2 

would not accelerate the consolidatjon trend, and cou1d result in more choices for consumers and 

raise the pace of innovation. The cumulative impact on the industry of all new Federal and State 

regulations would exceed $658 million. 

While the average consumer purchasing a ]2 SEER air conditioner or heat pump would 

experience a net saving over the lifetime of the product, some households would experience net 

costs exceeding 2 percent of the total life-cycle cost oftoday's baseline units. Thus, 25 percent of 

the households with split system air conditioners and 9 percent with single package air 

conditioners would experience a net cost. No households with heat pumps would experience a net 

cost. The percentage of low-income consumers who would experience net costs exceeding 2 

percent of the total life-cycle cost of today' s baseline units is greater than that for an average 

household. Thus, 34 percent of low-income households with split system air conditioners and ] 4 

percent with single package air conditioners would experience a net cost. No low-income 

64 C:IWINDOWSITEMPlairconduionerruk,ald wpd 

Jul)' 2, 2001 (II 14AM) 
EE-RM/STD-98-440--- O 5 ,3

households with heat pumps would experience a net cost. Also, the possibility that consumers

would incur substantial installation costs is less than that with a 13 SEER standard because 12

SEER equipment is more likely to fit in the same space as current 10 SEER equipment. In light of

the moderate purchase cost increase experienced by all consumers, the percentage of households,

in particular low-income households, which experience life-cycle cost increases, consumer

burdens are less severe under Trial Standard Level 2.

After carefully reconsidering the analyses and comments, and adjusting the weight given

to consumer impacts and cumulative regulatory burden in the assessment of the benefits and

burdens, DOE is proposing to amend the energy conservation standards for central air

conditioners and central air conditioning heat pumps at Trial Standard Level 2. DOE proposes to

conclude this standard saves a significant amount of energy and is technologically feasible and

economically justified. In determining economic justification, DOE proposes to conclude that the

benefits of energy savings, the projected amount of avoided power plant capacity or improvement

in system reliability that accompanies expected reduction in peak demand, consumer life-cycle

cost savings, national net present value increase, and emission reductions resulting from the

standards outweigh the burdens. The burdens include the loss of manufacturer net present value,

taking into account the cumulative regulatory burden and annual cash flow, increases in life-cycle

cost for some users of products covered by today's proposed rule, any possible increase in health

problems caused by consumers foregoing air conditioner purchases, any possible reduction in the

ability of the product to dehumidify, any possible lessening of competition, and any possible

difficulty in installing the new baseline products into replacement applications.

C:\WINDOWS\TEMP\a>rconditionerrule.ad wpd 65 July 2, 2001 (I1 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -::IJ=: ~ c:::2.3 . 

households with heat pumps would experience a net cost. Also, the possibility that consumers 

would incur substantial installation costs is less than that with a 13 SEER standard because 12 

SEER equipment is more likely to fit in the same space as current 10 SEER equipment. In light of 

the moderate purchase cost increase experienced by all consumers, the percentage of households, 

in particular low-income households, which experience life-cycle cost increases, consumer 

burdens are less severe under Trial Standard Level 2. 

After carefully reconsidering the analyses and comments, and adjusting the weight given 

to consumer impacts and cumulative regulatory burden in the assessment of the benefits and 

burdens, DOE is proposing to amend the energy conservation standards for central air 

conditioners and central air conditioning heat pumps at Trial Standard Level 2. DOE proposes to 

conclude this standard saves a significant amount of energy and is technologically feasible and 

economically justified. In determining economic justification, DOE proposes to conclude that the 

benefits of energy savings, the projected amount of avoided power plant capacity or improvement 

in system reliability that accompanies expected reduction in peak demand, consumer life-cycle 

cost savings, national net present value increase, and emission reductions resulting from the 

standards outweigh the burdens. The burdens include the loss of manufacturer net present value, 

taking into account the cumulative regulatory burden and annual cash flow, increases in life-cycle 

cost for some users of products covered by today's proposed rule, any possible increase in health 

problems caused by consumers foregoing air conditioner purchases, any possible reduction in the 

ability of the product to dehumidify, any possible lessening of competition, and any possible 

difficulty in installing the new baseline products into replacement applications. 

65 C:I WINDOWSlTEMP'\airconditionerrule .atd wpd 

July 2, 2001 (II 14AM) 
EE-RM/STD-98-440 -'f ^^3.

D. Conclusions Regarding Space-Constrained Products

If a 12 SEER minimum requirement for air conditioners and heat pumps is implemented,

as proposed, DOE's analysis suggests that of all potential space-constrained products, only those

with through-the-wall condensers need special consideration. The TSD contains a new appendix

(Appendix L) describing the results of our recent re-evaluation of those products. The results of

that analysis are summarized in Section V.A.2 above. They demonstrate that split TTW

equipment can attain 11 SEER using designs and technologies that are commonly applied or

available, with price impacts similar to those that conventional equipment would experience in

meeting the proposed 12 SEER standard. The packaged equipment analyzed was demonstrated to

be capable of attaining only a 10.6 SEER rating, although one manufacturer of packaged TTW

equipment, Armstrong, expects their equipment to be capable of attaining 11 SEER.

Based on this evaluation, DOE is proposing to establish new product classes for products

that have through-the-wall condensers and are intended for replacement applications. The new

classes would be required to meet minimum efficiencies lower than those of the other classes: 11

SEER and 7.1 HSPF for through-the-wall air conditioner and heat pump split-systems, and 10.6

SEER and 7.0 HSPF for through-the-wall air conditioner single-package systems. DOE's

analysis suggests those products can attain these levels without substantial redesign or cost

increases that would result in a loss of market share to conventional products.

The new through-the-wall classes would consist only of products manufactured before

IINSERT DATE 9 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL

REGISTER]. See proposed definition of "through-the-wall air conditioner and heat pump."

N:\airconditionerule.atd.wpd

66 July 2,2001 (11:40AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 ..... c;r-o{cR3 . 

D. Conclusions Regarding Space-Constrained Products 

If a 12 SEER minimum requirement for air conditioners and heat pumps is implemented, 

as proposed, DOE's analysis suggests that of all potential space-constrained products, only those 

with through-the-wall condensers need special consideration. The TSD contains a new appendix 

(Appendix L) describing the results of our recent re-evaluation of those products. The results of 

that analysis are summarized in Section V.A.2 above. They demonstrate that split TTW 

equipment can attain 11 SEER using designs and technologies that are commonly applied or 

available, with price impacts similar to those that conventional equipment would experience in 

meeting the proposed 12 SEER standard. The packaged equipment analyzed was demonstrated to 

be capable of attaining only a 10.6 SEER rating, although one manufacturer of packaged TTW 

equipment, Armstrong, expects their equipment to be capable of attaining 11 SEER. 

Based on this evaluation, DOE is proposing to establish new product classes for products 

that have through-the-wall condensers and are intended for replacement applications. The new 

classes would be required to meet minimum· efficiencies lower than those of the other classes: 11 

SEER and 7.1 HSPF for through-the~wall air conditioner and heat pump split-systems, and 10.6 

SEER and 7.0 HSPF for through-the-wall air conditioner single-package systems. DOE's 

analysis suggests those products can attain these levels without substantial redesign or cost 

increases that would result in a loss of market share to conventional products. 

The new through-the-wall classes would consist only of products manufactured before 

lINSERT DATE 9 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL 

REGISTER]. See proposed definition of "through-the-wall air conditioner and heat pump." 

66 N:lairconditionelTUle.atd.wpd 

July 2, 200 I (II :40AM) 
EE-RM/STD-98-440 -- , ,

Thus, the classes would exist only for a period of four years following the establishment of the

new standards. During that time, the availability of suitable high-efficiency components will

likely increase and the manufacturers of through-the-wall products would be able to investigate

options for meeting the more stringent 12 SEER level. Both will make it easier for through-thewall products to attain the 12 SEER minimum efficiency required of other products. The sunset

provision will help to ensure that other manufacturers will not make the investment required to

market through-the-wall products heavily for conventional applications during the four year

period. It will also limit the time during which lower efficiency 1I SEER equipment is installed,

ensuring that additional energy savings associated with the 12 SEER level are realized in a certain

time period.

To further limit the application of the through-the-wall class, products in these classes may

not exceed 30,000 BTU/hr in cooling capacity, may not contain special weatherization features

that would allow them to be installed totally outdoors, and must be marked for installation only

through an exterior wall. DOE also proposes limiting the size of the area used for condenser air

exchange to attempt to limit these classes to those products intended primarily for replacement

applications.

No other new product classes are proposed since all other products types of which we are

aware have demonstrated the ability to compete in the market at the 12 SEER level.

C , WINDOWS\TENMPairconditionerule.atd wpd 67 July 2. 2001 (1 :14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440-::It' cR.:2.3 { 

Thus, the classes would exist only for a period of four years foHowing the establishment of the 

new standards. During that time, the availability of suitable high-efficiency components wi1l 

likely increase and the manufacturers of through-the-waU products would be able to investigate 

options for meeting the more stringent 12 SEER level. Both wiJ] make it easier for through-thewall products to attain the 12 SEER minimum efficiency required of other products. The sunset 

provision will help to ensure that other manufacturers will not make the investment required to 

market through-the-wall products heavily for conventional applications during the four year 

period. It will also limit the time during which lower efficiency ] 1 SEER equipment is instaUed, 

ensuring that additional energy savings associated with the 12 SEER level are realized in a certain 

time period. 

To further limit the application of the through-the-wall class, products in these classes may 

not exceed 30,000 BTUIhr in cooling capacity, may not contain special weatherization features 

that would allow them to be installed totally outdoors, and must be marked for installation only 

through an exterior wall. DOE also proposes limiting the size of the area used for condenser air 

exchange to attempt to limit these classes to those products intended primarily for replacement 

applications. 

No other new product classes are proposed since aU other products types of which we are 

aware have demonstrated the ability to compete in the market at the 12 SEER level. 

67 C 'WI NOOWSI TEMPlairconditionerrulc .atd wpd 

July 2. 2001 (1I14AM) 
EE-RM/STD-98-440 - :$4 5

VI. Procedural Issues and Regulatory Review

A. Review Under the National Environmental Policy Act

DOE prepared an Environmental Assessment (EA) (DOE/EA-1352) available from: U.S.

Department of Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building,

Mail Station EE-41, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-

0854. DOE found the environmental effects associated with various standard efficiency levels for

central air conditioners and heat pumps to be not significant, and therefore DOE is publishing,

elsewhere in this issue of the Federal Register, A Finding of No Significant Impact (FONSI)

pursuant to the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the

regulations of the Council of Environmental Quality (40 CFR Parts 1500-1508), and DOE's

regulations for compliance with NEPA (10 CFR Part 1021).

B. Review Under Executive Order 12866

Today's regulatory action has been determined to be an "economically significant

regulatory action" under Executive Order 12866, "Regulatory Planning and Review." 58 FR

51735 (October 4, 1993). Accordingly, today's action was subject to review under the Executive

Order by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management

and Budget.

The draft submitted to OIRA and other documents submitted to OIRA for review have

C:\WlNDOWS\TEMP\airconditionrrle aid wpd

68 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -::/t-~:< ~ . 

VI. Procedural Issues and Regulatory Review 

A. Review Under the National Environmental Policy Act 

DOE prepared an Environmental Assessment (EA) (DOEfEA-1352) available from: U.S. 

Department of Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building, 

Mail Station EE-41 , 1000 lndependence Avenue, SW, Washington, DC 20585-0121, (202) 586-

0854. DOE found the environmental effects associated with various standard efficiency levels for 

central air conditioners and heat pumps to be not significant, and therefore DOE is publishing, 

elsewhere in this issue of the Federal Register, A Finding of No Significant Impact (FONSI) 

pursuant to the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the 

regulations of the Council of Environmental Quality (40 CFR Parts 1500-1508), and DOE's 

regulations for compliance with NEPA (10 CFR Part 1021). 

B. Review Under Executive Order 12866 

Today's regulatory action has been determined to be an "economically significant 

regulatory action" under Executive Order 12866, "Regulatory Planning and Review." 58 FR 

51735 (October 4, 1993). Accordingly, today's action was subject to review under the Executive 

Order by the Office ofInformation and Regulatory Affairs (OIRA) of the Office of Management 

and Budget. 

The draft submitted to OIRA and other documents submitted to OIRA for review have 

68 C.IWINDOWSITEMPlairconditionclT\Ilc.atd wpd 

July 2. 2001 (1I14AM) 
EE-RM/STD-98-440-- - ,,3

been made a part of the rulemaking record and are available for public review in DOE's Freedom

of Information Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585,

between the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, telephone (202) 586-3142.

The October 5, 2000, NOPR contained a summary of the Regulatory Analysis which

focused on the major alternatives considered in arriving at the approach to improving the energy

efficiency of consumer products. 65 FR 59627-29. The alternatives considered in DOE's analysis

are consumer product labeling, consumer education, prescriptive standards, consumer tax credits,

consumer rebates, manufacturer tax credits, voluntary efficiency targets, low income subsidy,

mass government purchases, and performance standards. The reader is referred to the complete

draft "Regulatory Impact Analysis," which is contained in the TSD, available as indicated at the

beginning of this notice or from the contact person named at the beginning of this notice. The

TSD provides: (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 national

economic impacts of the proposed standard.

C. Review under the Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires that a Federal agency

prepare a regulatory flexibility analysis for any rule for which the agency is required to publish a

general notice of proposed rulemaking. Such an assessment of the impact of regulations on small

,„~~69 CWC:\WINDOWS\TEMP'airconditionerrulc.atdwpd

69 July 2, 2001 (I1:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STO-9S-440-# ~ ~ 3. 

been made a part of the rulemaking record and are available for public review in DOE's Freedom 

of Information Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585, 

between the hours of9:00 a.m. and 4:00 p.m., Monday through Friday, telephone (202) 586-3142. 

The October 5, 2000, NOPR contained a summary of the Regulatory Analysis which 

focused on the major alternatives considered in arriving at the approach to improving the energy 

efficiency of consumer products. 65 FR 59627-29. The alternatives considered in DOE's analysis 

are consumer product labeling, consumer education, prescriptive standards, consumer tax credits, 

consumer rebates, manufacturer tax credits, voluntary efficiency targets, low income subsidy, 

mass government purchases, and performance standards. The reader is referred to the complete 

draft "Regulatory Impact Analysis," which is contained in the TSD, available as indicated at the 

beginning of this notice or from the contact person named at the beginning of this notice. The 

TSD provides: (l) 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 national 

economic impacts of the proposed standard. 

C. Review under the Regulatory Flexibility Act 

The Regulatory Flexibility Act,S U.S.c. 601 et~., requires that a Federal agency 

prepare a regulatory flexibility analysis for any rule for which the agency is required to publish a 

general notice of proposed rulemaking. Such an assessment of the impact of regulations on small 

69 C:IWIJI.'DOWSITEMP\aircondilionerrule.ald.wpd 

July 2, 2001 (1I14AM) 
EE-RM/STD-98-440 -A:d .

businesses is not required if the agency certifies that the rule would not, if promulgated, have a

significant economic impact on a substantial number of small entities (5 U.S.C. 605(b)). To be

categorized as a "small" air conditioning and warm air heating equipment manufacturer, a firm

must employ no more than 750 employees.

In the October 5, 2000 NOPR, DOE discussed the potential impacts on small businesses of

the October 5 proposed rule (corresponding to Trial Standard Level 3), and certified that the

proposed standard levels would not have a significant economic impact on a substantial number

of small entities. 65 FR 59629-30. DOE reported that nearly all small businesses engaged in the

manufacture of central air conditioners and heat pumps produce products that DOE has called

"niche" products. To avoid adversely impacting manufacturers of niche products, DOE proposed

a separate product class for through-the-wall equipment, much of which is manufactured by small

manufacturers. See 65 FR 59609-11. In the preamble to the January 22 final rule, DOE addressed

comments regarding the impacts more stringent standards might have on the availability of niche

products, and although the final rule adopted the higher Trial Standard Level 4 standards, DOE

deferred setting an amended standard for niche products. 66 FR 7175, 7196-97. Because the

final rule excluded most products made by small manufacturers, DOE affirmed its certification.

Today DOE is proposing energy conservation standards for central air conditioners and

heat pumps that correspond to Trial Standard Level 2. Because of severe size constraints, DOE is

again proposing a separate product class for through-the-wall equipment, with a lower SEER. No

other provisions for niche products are being proposed.

_,70 C.WC:'WINDOWS\TEMPairconditionerrule atd pd 70 July 2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -iF-t5l..Of .3 . 

businesses is not required if the agency certifies that the rule would not, if promulgated, have a . 

significant economic impact on a substantial number of small entities (5 U.S.C. 605(b». To be 

categorized as a "small" air conditioning and warm air heating equipment manufacturer, a firm 

must employ no more than 750 employees. 

In the October 5,2000 NOPR, DOE discussed the potential impacts on small businesses of 

the October 5 proposed rule (corresponding to Trial Standard Level 3), and certified that the 

proposed standard levels would not have a significant economic impact on a substantial number 

of small entities. 65 FR 59629-30. DOE reported that nearly atl small businesses engaged in the 

manufacture of central air conditioners and heat pumps produce products that DOE has called 

'''niche'' products. To avoid adversely impacting manufacturers of niche products, DOE proposed 

a separate product class for through-the-wall equipment, much of which is manufactured by small 

manufacturers. See 65 FR 59609-11. In the preamble to the January 22 final rule, DOE addressed 

comments regarding the impacts more stringent standards might have on the availability of niche 

products, and although the final rule adopted the higher Trial Standard Level 4 standards, DOE 

deferred setting an amended standard for niche products. 66 FR 7175, 7196-97. Because the 

final rule excluded most products made by small manufacturers, DOE affirmed its certification. 

Today DOE is proposing energy conservation standards for central air conditioners and 

heat pumps that correspond to Trial Standard Level 2. Because of severe size constraints, DOE is 

again proposing a separate product class for through-the-wall equipment, with a lower SEER. No 

other provisions for niche products are being proposed. 

70 C'.WINDOWS,TEMP\aircondilionenule aId wpd 

July 2. 200 I (II. 14AM) 
EE-RM/STD-98-440- ;c^; 3 .

DOE certifies, based on its analysis and public comments, that today's proposed rule

would not have a significant impact on a substantial number of small entities. Accordingly, DOE

has not prepared a regulatory flexibility analysis. This certification is based on an assessment of

the impact the proposed standards would have on small entities that would be directly affected by

their implementation, which is all the Regulatory Flexibility Act requires. The assertion by ARI,

in its petition for consideration, that DOE is required to assess the indirect effects of proposed

standards is contrary to established case law interpreting the Act.

D. Review Under the Paperwork Reduction Act

No new information or record keeping requirements are imposed by this rulemaking.

Accordingly, no Office of Management and Budget clearance is required under the Paperwork

Reduction Act. 44 U.S.C. 3501 et seq.

E. Review Under Executive Order 12988

With respect to the review of existing regulations and the promulgation of new

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Reform," 61 FR 4729

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following

requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize

litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard

and promote simplification and burden reduction. With regard to the review required by section

3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make

every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive effect, if

C ' WINDOWS\TEMP\airconditionerrule atd wpd

71 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440_ #-~ . 

DOE certifies, based on its analysis and public comments, that today's proposed rule 

would not have a significant impact on a substantial number of small entities. Accordingly, DOE 

has not prepared a regulatory flexibility analysis. This certification is. based on an assessment of 

the impact the proposed standards would have on small entities that would be directly affected by 

theh implementation, which' is all the Regulatory Flexibility Act requires. The assertion by ARl, 

in its petition for consideration, that DOE is required to assess the indirect effects of proposed 

standards is contrary to established case law interpreting the Act. 

D. Review Under the Paperwork Reduction Act 

No new information or record keeping requirements are imposed by this rulemaking. 

Accordingly, no Office of Management and Budget clearance is required under the Paperwork 

Reduction Act. 44 U.S.c. 3501 et seq. 

E. Review Under Executive Order 12988 

With respect to the review of existing regulations and the promulgation of new 

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Reform," 61 FR 4729 

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following 

requirements: (I) eliminate drafting errors and ambiguity; (2) write regulations to minimize 

litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard 

and promote simplification and burden reduction. With regard to the review required by section 

3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make 

every reasonable effort to ensure that the regulation: (l) clearly specifies the preemptive effect, if 

71 C ·WINDOWSITEMP\airconditionerrule.atd.wpd 

July 2, 2001 (I L14AM) 
EE-RM/STD-98-440--'4 o ;c?3

any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal

standard for affected conduct while promoting simplification and burden reduction; (4) specifies

the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important

issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney

General. Section 3(c) of Executive Order 12988 requires Executive agencies to review

regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether

they are met or it is unreasonable to meet one or more of them. DOE reviewed today's proposed

rule under the standards of section 3 of the Executive Order and determined that, to the extent

permitted by law, this proposed rule meets the relevant standards.

F. Review Under Executive Order 12630

DOE has determined pursuant to Executive Order 12630, "Governmental Actions and

Interference with Constitutionally Protected Property Rights," 52 FR 8859 (March 18, 1988), that

this proposed regulation would not result in any takings that might require compensation under

the Fifth Amendment to the United States Constitution.

G. Review under Executive Order 13132

Executive Order 13132, "Federalism," 64 FR 43255 (August 4, 1999) imposes certain

requirements on agencies formulating and implementing policies or regulations that preempt State

law or that have federalism implications. Agencies are required to examine the constitutional and

statutory authority supporting any action that would limit the policymaking discretion of the

States and carefully assess the necessity for such actions. Agencies also must have an accountable

C \WINDOWS\TElP\airconditionerrle.atd wpd

72 July 2.2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE.RM/STD.98-440~~~3 . 

any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal 

standard for affected conduct while promoting simplification and burden reduction; (4) specifies 

the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important 

issues affecting cIarityand general draftsmanship under any guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 12988 requires Executive agencies to review 

regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether 

they are met or it is unreasonable to meet one or more of them. DOE reviewed today's proposed 

rule under the standards of section 3 of the Executive Order and detennined that, to the extent 

permitted by law, this proposed rule meets the relevant standards. 

F. Review Under Executive Order 12630 

DOE has determined pursuant to Executive Order 12630, "Governrnental Actions and 

Interference with Constitutionally Protected Property Rights," 52 FR 8859 (March 18, 1988), that 

this proposed regulation would not result in any takings that might require compensation under 

the Fifth Amendment to the United States Constitution. 

G. Review under Executive Order 13132 

Executive Order 13132, "Federalism," 64 FR 43255 (August 4, 1999) imposes certain 

requirements on agencies formulating and implementing policies or regulations that preempt State 

law or that have federalism implications. Agencies are required to examine the constitutional and 

statutory authority supporting any action that would limit the policymaking discretion of the 

States and carefully assess the necessity for such actions. Agencies also must have an accountable 

72 C.IWINDQWS\TEMPlaircondilionerrule.ald.wpd 

Jul)" 2.2001 (II: 14AM) 
EE-RM/STD-98-440 -" ' .3

process to ensure meaningful and timely input by State and local officials in the development of

regulatory policies that have federalism implications. DOE published its intergovernmental

consultation policy on March 14, 2000. 65 FR 13735. DOE has examined today's proposed rule

and has determined that it would not have a substantial direct effect on the States, on the

relationship between the national government and the States, or on the distribution of power and

responsibilities among the various levels of government. State regulations that may have existed

on the products that are the subject of today's proposed rule were preempted by the Federal

standards established in NAECA. States can petition DOE for exemption from such preemption

to the extent, and based on criteria, set forth in EPCA.

H. Review Under the Unfunded Mandates Reform Act of 1995

With respect to a proposed regulatory action that may result in the expenditure by State,

local and tribal governments, in the aggregate, or by the private sector of $100 million or more,

section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires a Federal agency to

publish estimates of the resulting costs, benefits and other effects on the national economy. 2

U.S.C. 1532(a), (b). UMRA also requires each Federal agency to develop an effective process to

permit timely input by state, local, and tribal governments on a proposed significant

intergovernmental mandate. DOE's consultation process is described in a notice published in the

Federal Register on March 18, 1997. 62 FR 12820. Today's proposed rule may impose

expenditures of $100 million or more on the private sector. It does not contain a Federal

intergovernmental mandate.

C:\WINDOWS\TEMPairconditionerrule.aldwpd 73 July. 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STO-98-440 --* ~;<3 . 

process to ensure meaningful and timely input by State and local officials in the development of 

regulatory policies that have federalism implications. DOE published its intergovernmental 

consultation policy on March 14,2000. 65 FR 13735. DOE has examined today's proposed rule 

and has determined that it would not have a substantial direct effect on the States, on the 

relationship between the nationaJ government and the States, or on the distribution of power and 

responsibilities among the various levels of government. State regulations that may have existed 

on the products that are the subject oftoday's proposed rule were preempted by the Federal 

standards established in NAECA. States can petition DOE for exemption from such preemption 

to the extent, and based on criteria, set forth in EPCA. 

H. Review Under the Unfunded Mandates Reform Act of 1995 

With respect to a proposed regulatory action that may result in the expenditure by State, 

local and tribal governments, in the aggregate, or by the private sector of $} 00 million or more, 

section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires a Federal agency to 

publish estimates of the resulting costs, benefits and other effects on the national economy. 2 

U.S.c. 1532(a), (b). UMRA also requires each Federal agency to develop an effective process to 

permit timely input by state, local, and tribal governments on a proposed significant 

intergovernmental mandate. DOE's consultation process is described in a notice published in the 

Federal Register on March 18, 1997. 62 FR 12820. Today's proposed rule may impose 

expenditures of$100 million or more on the private sector. It does not contain a Federal 

intergovernmental mandate. 

73 C·IWINDOWSITEMP\airconditionenule.atd.wpd 

Jul)' 2, 2001 (11I4AM) 
EE-RM/STD-98-440- $ '?

Section 202 of UMRA authorizes an agency to respond to the content requirements of

UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C. 1532(c).

The content requirements of section 202(b) of UMRA relevant to a private sector mandate

substantially overlap the economic analysis requirements that apply under section 325(o) of EPCA

and Executive Order 12866. The SUPPLEMENTARY INFORMATION section of the January

22, 2001, notice of final rulemaking and "Regulatory Impact Analysis" section of the TSD for this

proposed rule responds to those requirements.

Under section 205 of UMRA, DOE is obligated to identify and consider a reasonable

number of regulatory alternatives before promulgating a rule for which a written statement under

section 202 is required. DOE is required to select from those alternatives the most cost-effective

and least burdensome alternative that achieves the objectives of the rule unless DOE publishes an

explanation for doing otherwise or the selection of such an alternative is inconsistent with law.

As required by section 325(o) of the Energy Policy and Conservation Act (42 U.S.C. 6295(o)),

today's proposed rule would establish energy conservation standards for central air conditioners

and heat pumps that are designed to achieve the maximum improvement in energy efficiency that

DOE has determined to be both technologically feasible and economically justified. A full

discussion of the alternatives considered by DOE is presented in the "Regulatory Impact Analysis"

section of the TSD for today's proposed rule.

I. Review Under the Treasury and General Government Appropriations Act. 1999

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L.

C:\WINDOWS\TEMP\airconditionerule.atd.wpd

74 July 2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 --:It ct<cR-.3 

Section 202 of UMRA authorizes an agency to respond to the content requirements of 

UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C.1532(c). 

The content requirements of section 202(b) of UMRA relevant to a private sector mandate 

substantially overlap the economic analysis requirements that apply under section 325(0) ofEPCA 

and Executive Order 12866. The SUPPLEMENTARY INFORMATION section of the January 

22,2001, notice of final rulemaking and "Regulatory Impact Analysis" section of the TSD for this 

proposed rule responds to those requirements. 

Under section 205 of UMRA, DOE is obligated to identify and consider a reasonable 

number of regulatory alternatives before promulgating a rule for which a written statement under 

section 202 is required. DOE is required to select from those alternatives the most cost-effective 

and least burdensome alternative that achieves the objectives of the rule unless DOE publishes an 

explanation for doing othenvise or the selection of such an alternative is inconsistent with law. 

As required by section 325(0) of the Energy Policy and Conservation Act (42 U.S.C. 6295(0», 

today's proposed rule would establish energy conservation standards for central air conditioners 

and heat pumps that are designed to achieve the maximum improvement in energy efficiency that 

DOE has determined to be both technologically feasible and economically justified. A full 

discussion of the alternatives considered by DOE is presented in the "Regulatory Impact Analysis" 

section of the TSD for today's proposed rule. 

I. Review Under the Treasury and General Government Appropriations Act, 1999 

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 

74 C:IWlNOOWS\TEMPlaircondilionerrule.ald.wpd 

July 2. 2001 (I I 14AM) 
EE-RM/STD-98-440 -- ~,G .

No. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any

proposed rule or policy that may affect family well-being. Today's proposed rule would not have

any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has

concluded that it is not necessary to prepare a Family Policymaking Assessment.

J. Review Under Executive Order 13211

Executive Order 13211, "Actions Concerning Regulations That Significantly Affect Energy

Supply, Distribution, or Use," (66 FR 28355, May 22, 2001) requires Federal agencies to prepare

and submit to the Office of Information and Regulatory Affairs (OIRA), Office of Management

and Budget, a Statement of Energy Effects for any proposed significant energy action. A

"significant energy action" is defined as any action by an agency that promulgates or is expected

to lead to the promulgation of a final rule, and that: (1) is a significant regulatory action under

Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse

effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of

OIRA as a significant energy action. For any proposed significant energy action, the agency must

give a detailed statement of any adverse effects on energy supply, distribution, or use should the

proposed action be implemented, and of reasonable alternatives to the action and their expected

benefits on energy supply, distribution, and use.

Today's proposal would not have any adverse effects on the supply, distribution, or use of

energy in the near term because neither the January 22, 2001 final rule nor any final rule resulting

from this action would have any effect on the manufacture of central air conditioners and heat

C: 'WINDOWSTEMP:airconditionemule.atd.wpd

75 July2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -';]I:- ~~ -.3 . 

No.1 05-277) requires Federal agencies to issue a Family Policymaking Assessment for any 

proposed rule or policy that may affect family well-being. Today's proposed rule would not have 

any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has 

concluded that it is not necessary to prepare a Family Policymaking Assessment. 

1. Review Under Executive Order 13211 

Executive Order 13211, ··Actions Concerning Regulations That Significantly Affect Energy 

Supply, Distribution, or Use," (66 FR 28355, May 22, 2001) requires Federal agencies to prepare 

and submit to the OffIce oflnfonnation and Regulatory Affairs (OIRA), Office of Management 

and Budget, a Statement of Energy Effects for any proposed significant energy action. A 

"significant energy action" is defined as any action by an agency that promulgates or is expected 

to lead to the promulgation of a final rule, and that: (1) is a significant regulatory action under 

Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse 

effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of 

OIRA as a significant energy action. For any proposed significant energy action, the agency must 

give a detailed statement of any adverse effects on energy supply, distribution, or use should the 

proposed action be implemented, and of reasonable alternatives to the action and their expected 

benefits on energy supply, distribution, and use. 

Today's proposal would not have any adverse effects on the supply, distribution, or use of 

energy in the near term because neither the January 22, 2001 final rule nor any final rule resulting 

from this action would have any effect on the manufacture of central air conditioners and heat 

75 C 'WINDOWS'TEMPlaifCondilionerrule,atd,wpd 

July 2. 2001 (I 1:14AM) 
EE-RM/STD-98-4 4 0-_ , 7

pumps until 2006. In the longer term, beginning in 2006, the proposed rule, if implemented,

would have a positive impact on the reliability of electricity supply in the United States. The

standards that DOE is proposing would represent a 20 percent improvement in the energy

efficiency of split-system central air conditioners, and a 9 percent improvement in heating

efficiency for heat pumps. The proposed standards would improve the cooling efficiency of

single-package heat pumps by 24 percent and the heating efficiency of single-package heat pumps

by 12 percent. As explained in Section IV.B.3. of this SUPPLEMENTARY INFORMATION,

DOE estimates the standards would save approximately 3 quads of energy over 25 years (2006

through 2030). Also, in determining whether the proposed standards are economically justified,

DOE considered as a benefit the potential of the proposed standards to improve the reliability of

the electric generation and distribution system. See Section IV.D.7 ("Other Factors") and the

preamble to the January 22 final rule. 66 FR 7181-82, 7194. DOE's analysis shows the proposed

standards would result in an estimated reduction in installed generation capacity in the year 2020

of approximately 11 gigawatts. This would be the equivalent of three 400 megawatt coal-fired

plants and twenty-three 400 megawatt gas-fired plants.

DOE acknowledges that projections indicate that the standard levels set out in the January

22, 2001 rulemaking would avoid electricity consumption to an even greater extent than under the

standard level proposed in today's supplemental notice of proposed rulemaking. However,

section 325 of EPCA requires DOE to weigh all of the significant costs and benefits associated

with standard levels that are being considered and not just avoided electricity costs. DOE has set

forth its evaluation of costs and benefits elsewhere in this notice (see Section V.C.). DOE has

also considered various regulatory and non-regulatory alternatives to today's proposed standard

76 \WINDOWS'TEMP\airconditionemile J ,2001(C ald.wpd

76 Jul) 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 --:/F--c:<.::< ~. 

pumps until 2006. In the longer term, beginning in 2006, the proposed rule, if implemented, 

would have a positive impact on the reliability of electricity supply in the United States. The 

standards that DOE is proposing would represent a 20 percent improvement in the energy 

efficiency of split-system central air conditioners, and a 9 percent improvement in heating 

efficiency for heat pumps. The proposed standards would improve the cooling efficiency of 

single-package heat pumps by 24 percent and the heating efficiency of single-package heat pumps 

by 12 percent. As explained in Section IV.B.3. of this SUPPLEMENTARY INFORMATION, 

DOE estimates the standards would 5a\'e approximately 3 quads of energy over 25 years (2006 

through 2030). Also, in determining whether the proposed standards are economically justified, 

DOE considered as a benefit the potential of the proposed standards to improve the reliability of 

the electric generation and distribution system. See Section IV.b.7 ("Other Factors") and the 

preamble to the January 22 final rule. 66 FR 7181-82, 7194. DOE's analysis shows the proposed 

standards would result in an estimated reduction in installed generation capacity in the year 2020 

of approximately 11 gigawatts. This would be the equivalent of three 400 megawatt coal-fired 

plants and twenty-three 400 megawatt gas-fired plants. 

DOE acknowledges that projections indicate that the standard levels set out in the January 

22, 2001 rulemaking would avoid electricity consumption to an even greater extent than under the 

standard level proposed in today's supplemental notice of proposed rulemaking. However, 

section 325 ofEPCA requires DOE to weigh all of the significant costs and benefits associated 

with standard levels that are being considered and not just avoided electricity costs. DOE has set 

forth its evaluation of costs and benefits elsewhere in this notice (see Section V.c.). DOE has 

also considered various regulatory and non-regulatory alternatives to today's proposed standard 

76 C \WINDOWS'TEMPlalrconditionenuJe atd.wpd 

July 2.2001 (I 1:14AM) 
EE-RM/STD-98-440 -'-',3

(see Section VI.B., "Review Under Executive Order 12866," and the Regulatory Impact Analysis

portion of the TSD). DOE has concluded that the costs associated with elevating the current

standard to the standard level set forth in the January 22, 2001, final rule exceed the associated

benefits, including the benefit of avoided electricity consumption.

VII. Public Comment

A. Written Comment Procedures

DOE invites interested persons to participate in the proposed rulemaking by submitting

data, comments, or information with respect to the proposed issues set forth in today's proposed

rule to Ms. Brenda Edwards-Jones, at the address indicated at the beginning of this notice. We

will consider all submittals received by the date specified at the beginning of this notice in

developing the final rule.

According to 10 CFR 1004.11, any person submitting information that he or she believes

to be confidential and exempt by law from public disclosure should submit one complete copy of

the document and ten (10) copies, if possible, from which the information believed to be

confidential has been deleted. DOE will make its own determination with regard to the

confidential status of the information and treat it according to its determination.

Factors of interest to DOE when evaluating requests to treat as confidential information

that has been submitted include: (1) a description of the items; (2) an indication as to whether and

why such items are customarily treated as confidential within the industry; (3) whether the

C:\WINDOWS\TEMP\airconditionerrule.atd wpd

77 July 2.2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE·RM/STD·98·440 -~3 . 

(see Section Vl.B., "Review Under Executive Order 12866," and the Regulatory Impact Analysis 

portion of the TSD). DOE has concluded that the costs associated with elevating the current 

standard to the standard level set forth in the January 22, 2001, final rule exceed the associated 

benefits, including the benefit of avoided electricity consumption. 

VII. Public Comment 

A. Written Comment Procedures 

DOE invites interested persons to participate in the proposed rulemaking by submitting 

data, comments, or infonnation with respect to the proposed issues set forth in today's proposed 

rule to Ms. Brenda Edwards-Jones, at the address indicated at the beginning of this notice. We 

will consider all submittals received by the date specified at the beginning of this notice in 

developing the final ruJe. 

According to 10 CFR 1004.] ], any person submitting infonnation that he or she believes 

to be confidential and exempt by Jaw from public disclosure should submit one complete copy of 

the document and ten (l0) copies, if possible, from which the infonnation believed to be 

confidential has. been deleted. DOE will make its own detennination with regard to the 

confidential status ofthe information and treat it according to its determination. 

Factors of interest to DOE when evaluating requests to treat as confidential information 

that has been submitted include: (1) a description of the items; (2) an indication as to whether and 

why such items are customarily treated as confidential within the industry; (3) whether the 

77 C:IWINDOWSITEMPlairconditionerrule.atd.wpd 

July 2. 2001 <II :14AM) 
EE-RM/STD-98-440 --4 m 3

information is generally known by or available from other sources; (4) whether the information

has previously been made available to others without obligation concerning its confidentiality; (5)

an explanation of the competitive injury to the submitting person which would result from public

disclosure; (6) an indication as to when such information might lose its confidential character due

to the passage of time; and (7) whether disclosure of the information would be contrary to the

public interest.

B. Public Workshop/Hearing

I. Procedure for Submitting Requests to Speak

You will find the time and place of the public hearing listed at the beginning of this notice.

We invite any person who has an interest in today's notice, or who is a representative of a group

or class of persons that has an interest in these issues, to request an opportunity to make an oral

presentation. If you would like to attend the public hearing, please notify Ms. Brenda EdwardsJones at (202) 586-2945. You may hand deliver requests to speak to the address indicated at the

beginning of this notice between the hours of 8:00 a.m. and 4:00 p.m., Monday through Friday,

except Federal holidays. You may also send them by mail or E-mail to brenda.edwardsjones@ee.doe.gov.

The person making the request should state why he or she, either individually or as a

representative of a group or class of persons, is an appropriate spokesperson, briefly describe the

nature of the interest in the rulemaking, and provide a telephone number for contact. We request

each person selected to be heard to submit an advance copy of his or her statement at least two

C :\WINDOWS\TEMP\airconditionerule.atd wpd 78 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 4-AA 3. 

information is generally known by or available from other sources; (4) whether the information 

has previously been made available to others without obligation concerning its confidentiality; (5) 

an explanation ofthe competitive injury to the submitting person which would result from public 

disclosure; (6) an indication as to when such information might lose its confidential character due 

to the passage of time; and (7) whether disclosure of the information would be contrary to the 

public interest. 

B. Public WorkshoplHearing 

I. Procedure for Submitting Requests to Speak 

You will find the time and place ofthe public hearing listed at the beginning of this notice. 

We invite any person who has an interest in today's notice, or who is a representative of a group 

or class of persons that has an interest in these issues, to request an opportunity to make an oral 

presentation. If you would like to attend the public hearing, please notify Ms. Brenda EdwardsJones at (202) 586-2945. You may hand deliver requests to speak to the address indicated at the 

beginning of this notice between the hours of8:00 a.m. and 4:00 p.m., Monday through Friday, 

except Federal holidays. You may also send them by mail or E-mail to brenda. edwardsjones@ee.doe.gov. 

The person making the request should state why he or she, either individually or as a 

representative of a group or class of persons, is an appropriate spokesperson, briefly describe the 

nature of the interest in the rulemaking, and provide a telephone number for contact. We request 

each person selected to be heard to submit an advance copy of his or her statement at least two 

78 C.IWINDOWSITEMP\airconditionerrule.atd.wpd 

July 2. 2001 (1I14AM) 
EE-RM/STD-98-440--- c,-

weeks prior to the date of this hearing as indicated at the beginning of this notice. At our

discretion, we may permit any person who cannot do this to participate if that person has made

alternative arrangements with the Office of Building Research and Standards in advance. The

request to give an oral presentation should ask for such alternative arrangements.

2. Conduct of Hearing

DOE will designate a DOE official to preside at the workshop and we may also use a

professional facilitator to facilitate discussion. The workshop will not be a judicial or evidentiarytype hearing, but DOE will conduct it in accordance with 5 U.S.C. 553 and Section 336 of the Act

and a court reporter will be present to record the transcript of the workshop. We reserve the right

to schedule the presentations by workshop participants, and to establish the procedures governing

the conduct of the workshop.

DOE will permit each participant to make a prepared general statement, limited to five (5)

minutes, prior to the discussion of specific topics. DOE will permit other participants to briefly

comment on any general statements.

DOE will introduce each topic with a brief summary of the relevant parts of our analysis

and of the proposed rule, and the significant issues involved. We will then permit participants in

the hearing to make a prepared statement limited to five (5) minutes on that topic. At the end of

all prepared statements on a topic, DOE will permit each participant to briefly clarify his or her

statement and comment on statements made by others. Participants should be prepared to answer

79 C:\WINDOWS\TEMP\airconditioneIle.ald wpd 7 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

weeks prior to the date of this hearing as indicated at the beginning of this notice. At our 

discretion, we may permit any person who cannot do this to participate if that person has made 

aJternative arrangements with the Office of Building Research and Standards in advance. The 

request to give an oral presentation should ask for such alternative arrangements. 

2. Conduct of Hearing 

DOE will designate a DOE official to preside at the w\}rkshop and we may also use a 

professional facilitator to facilitate discussion. The workshop will not be a judicial or evidentiarytype hearing, but DOE will conduct it in accordance with 5 U.S.c. 553 and Section 336 of the Act 

and a court reporter will be present to record the transcript of the workshop. We reserve the right 

to schedule the presentations by workshop participants, and to establish the procedures governing 

the conduct of the workshop. 

DOE will permit each participant to make a prepared general statement, limited to five (5) 

minutes, prior to the discussion of specific topics. DOE will permit other participants to briefly 

comment on any general statements. 

DOE will introduce each topic with a brief summary of the relevant parts of our analysis 

and of the proposed rule, and the signiflcant issues involved. We will then permit participants in 

the hearing to make a prepared statement limited to five (5) minutes on that topic. At the end of 

all prepared statements on a topic, DOE will permit each participant to briefly clarify his or her 

statement and comment on statements made by others. Participants should be prepared to answer 

79 C:IWINDOWSITEMPIa"condilionerrulc.8Idwpd 

July 2, 200 I (1I14AM) 
EE-RM/STD-98-440 --. ,?3 .

questions by us and by other participants concerning these issues. Our representatives may also

ask questions of participants concerning other matters relevant to the hearing. The total

cumulative amount of time allowed for each participant to make prepared statements will be 20

minutes.

The official conducting the hearing will accept additional comments or questions from

those attending, as time permits. The presiding official will announce any further procedural

rules, or modification of the above procedures, needed for the proper conduct of the hearing.

We will make the entire record of this rulemaking, including the transcript, available for

inspection in DOE's Freedom of Information Reading Room. Any person may purchase a copy of

the transcript from the transcribing reporter.

C \WINDOWS'TEMP\airconditionerruleatd.wpd 80 Jul) 2,2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -.#-c:<,~3 . 

questions by us and by other participants concerning these issues. Our representatives may also 

ask questions of participants concerning other matters relevant to the hearing. The total 

cumulative amount of time allowed for each participant to make prepared statements will be 20 

minutes. 

The official conducting the hearing will accept additional comments or questions from 

those attending, as time permits. The presiding official will announce any further procedural 

rules, or modifIcation of the above procedures, needed for the proper conduct of the hearing. 

We will make the entire record of this rulemaking, including the transcript, available for 

inspection in DOE's Freedom ofInformation Reading Room. Any person may purchase a copy of 

the transcript from the transcribing reporter. 

80 C·\WINDOWS\TEMPlairconditionerrule.atd.wpd 

Jul) 2.2001 (II: I 4 AM) 
EE-RM/STD-98-440 - 4'/<-3

List of Subjects in 10 CFR Part 430

Administrative practice and procedure, Energy conservation, Household appliances.

Issued in Washington, D.C., on

David K. Garman

Assistant Secretary

Energy Efficiency and Renewable Energy

C:\WINDOWS',TEMP.aircdiiodionerul atd.wpd 81 Jul) 2 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -#~3 List of Subjects in 10 CFR Part 430 

Administrative practice and procedure, Energy conservation, Household appliances. 

Issued in Washington, D.C., on 

David K. Gannan 

Assistant Secretary 

Energy Efficiency and Renewable Energy 

81 C:I'W1NDOWS'.TEMP.alrconditlonerrule atd.wpd 

Jul) 2.2001 (I 1:14AM) 
EE-RM/STD-98-440 -' 3

For the reasons set forth in the preamble, Part 430 of Chapter II of Title 10, Code of

Federal Regulations is proposed to be amended, as set forth below.

PART 430 - ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

1. The authority citation for Part 430 continues to read as follows:

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

2. Section 430.2 is amended by adding definitions for "effective date," "maximum allowable

energy use," "minimum required energy efficiency," and "through-the-wall air conditioner and

heat pump" in alphabetical order to read as follows:

§ 430.2 Definitions.

Effective date means the date on and after which a manufacturer must comply with an energy

conservation standard in the manufacture of a covered product.

Maximum allowable energy use means an energy conservation standard for a covered product,

expressed in terms of a maximum amount of energy that may be consumed, which is established

by statute or by a final rule that has modified this part pursuant to a date DOE has selected

consistent with the Congressional Review Act (5 U.S.C. 801-804) and any other applicable law.

Minimum required energy efficiency means an energy conservation standard for a covered

82 ,2001(C:\WINDOWS\TEMP\airconl aid wp 82 Jul) 2,2001(11.14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -4F-~~3 . 

For the reasons set forth in the preamble, Part 430 of Chapter II of Title 10, Code of 

Federal Regulations is proposed to be amended, as set forth below. 

PART 430 - ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS 

1. The authority citation for Part 430 continues to read as follows: 

Authority: 42 U.S.C. 6291-6309; 28 V.S.C. 2461 note. 

2. Section 430.2 is amended by adding definitions for "effective date," "maximum allowable 

energy use," '"minimum required energy efficiency," and "through-the-wall air conditioner and 

heat pump" in alphabetical order to read as follows: 

§ 430.2 Defini.tions. 

* * * * * 

Effective date means the date on and after which a manufacturer must comply with an energy 

conservation standard in the manufacture of a covered product. 

* * * * * 

Maximum allowable energy use means an energy conservation standard for a covered product, 

expressed in terms of a maximum amount of energy that may be consumed, which is established 

by statute or by a final rule that has modified this part pursuant to a date DOE has selected 

consistent with the Congressional Review Act (5 V.S.c. 801-804) and any other applicable law. 

* * • * * 

Minimum required energv efficiency means an energy conservation standard for a covered 

82 C:\WINDOWSITEMP\aircond'lionerrule.ald.wpd 

July 2, 2001 (11I4AM) 
EE-RM/STD-98-440 - ; c- h , 3

product, expressed in terms a minimum efficiency quotient, which is established by statute or by a

final rule that has modified this part pursuant to a date DOE has selected consistent with the

Congressional Review Act (5 U.S.C. 801-804) and any other applicable law.

* * * * *

Through-the-wall air conditioner and heat pump means a central air conditioner or heat pump that

is designed to be installed totally or partially within a fixed-size opening in an exterior wall, and:

(1) Is manufactured prior to [INSERT DATE 9 YEARS AFTER DATE OF

PUBLICATION IN THE FEDERAL REGISTER];

(2) Is not weatherized;

(3) Is clearly and permanently marked for installation only through an exterior wall;

(4) Has a rated cooling capacity no greater than 30,000 Btu/hr;

(5) Exchanges all of its outdoor air across a single surface of the equipment cabinet;

and

(6) Has a combined outdoor air exchange area of less than 800 square inches (split

systems) or less than 1,210 square inches (single packaged systems) as measured

on the surface described in (5).

* * * * *

3. Section 430.32 of Subpart C is amended by revising paragraph (c) to read as follows:

§ 430.32 Energy and water conservation standards and effective dates.

C:\WINDOWS\TEMPN airconditionerrule atd.wpd

83 July 2, 2001 (II 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -:IF ~3 

product, expressed in tenns a minimum efficiency quotient, which is established by statute or by a 

final rule that has modified this part pursuant to a date DOE has selected consistent with the 

Congressional Review Act (5 U.S.c. 801-804) and any other applicable law . 

• • • • • 

Through-the-wall air conditioner and heat pump means a central air conditioner or heat pump that 

is designed to be installed totally or partially within a fixed-size opening in an exterior wall, and: 

(l) Is manufactured prior to (INSERT DATE 9 YEARS AFTER DATE OF 

PUBLICATION IN THE FEDERAL REGISTER]; 

(2) Is not weatherized; 

(3) Is clearly and pennanently marked for installation only through an exterior wall; 

(4) Has a rated cooling capacity no greater than 30,000 Btu/hr; 

(5) Exchanges all of its outdoor air across a single surface of the equipment cabinet; 

and 

(6) Has a combined outdoor air exchange area ofless than 800 square inches (split 

systems) or less than 1,210 square inches (single packaged systems) as measured 

on the surface described in (5). 

* * * * • 

3. Section 430.32 of Subpart C is amended by revising paragraph (c) to read as follows: 

§ 430.32 Energy and water conservation standards and effective dates. 

83 C:IWlNDOWSlTEl\I!P\airconditionerrule.atd.wpd 

July 2, 2001 (1I.14AM) 
EE-RM/STD-98-440 - <-

* * * * *

(c) Central air conditioners and central air conditioning heat pumps. (1) Split system central air

conditioners and central air conditioning heat pumps manufactured after January 1, 1992, and

before [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL

REGISTER], and single package central air conditioners and central air conditioning heat pumps

manufactured after January 1, 1993, and before [INSERT DATE 5 YEARS AFTER DATE OF

PUBLICATION IN THE FEDERAL REGISTER], shall have Seasonal Energy Efficiency

Ratio and Heating Seasonal Performance Factor no less than:

Product class Seasonal Energy Heating Seasonal

Efficiency Ratio Performance Factor

1. Split system s...................................... 10.0 .6.8

2. Single package systems ...................... 9.7 6.6

(2) Central air conditioners and central air conditioning heat pumps manufactured on or

after [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL

REGISTER], shall have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance

Factor no less than:

-~84 .C:\'WINDOWS\TEMP\airconditionerrule.atd.wpd 84 Jul) 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -tF: ~~3 . 

• • • • • 

(c) Central air conditioners and central air conditioning heat pumps. (1) Split system central air 

conditioners and central air conditioning heat pumps manufactured after January 1, 1992, and 

before [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL 

REGISTER}, and single package central air conditioners and central air conditioning heat pumps 

manufactured after January 1, 1993, and before [INSERT DATE 5 YEARS AFTER DATE OF 

PUBLICATION IN THE FEDERAL REGISTER], shall have Seasonal Energy Efficiency 

Ratio and Heating Seasonal Perfonnance Factor no less than: 

Product class Seasonal Energy Heating Seasonal 

Efficiency Ratio Performance Factor 

1. Split systems ...................................... 10.0 6.8 

2. Single package systems ...................... 9.7 6.6 

(2) Central air conditioners and central air conditioning heat pumps manufactured on or 

after [INSERT DATE 5 YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL 

REGISTER], shall have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance 

Factor no less than: 

84 C.IWlNDOWSlTEMP'Iai,condition.rrul •. atd.wpc! 

Jul)· 2. 2001 (I L14AM) 
EE-RM/STD-98-440 -f 3 .

Seasonal Energy Heating Seasonal

Product class Efficiency Ratio Performance Factor

(SEER) (HSPF)

1. Split system air conditioners................................................. 12

2. Split system heat pumps........................................................ 12 7.4

3. Single package air conditioners............................................. 12

4. Single package heat pumps.................................................. 12 7.4

5.A. Through-the-wall air conditioners and heat pumps - split

system ....... ................................................................................ 11 7.1

5.B. Through-the-wall air conditioners and heat pumps - single

package..................................................................................... 10.6 7.0

* * * e *

4. Section 430.34 is added to Subpart C to read as follows:

§ 430.34 Energy and water conservation standards amendments

The Department of Energy may not prescribe any amended standard which increases the

maximum allowable energy use or, in the case of showerheads, faucets, water closets or urinals,

water use, or which decreases the minimum required energy efficiency of a covered product.

C:\WINDOWS\TEMPaircondltionerrule atdwpd

85 Jul) 2.2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STO-98-440 --.::tt: M3 . 

Seasonal Energy Heating Seasonal 

Product class Efficiency Ratio Performance Factor 

(SEER) (HSPF) 

1. Split system air conditioners ................................................. 12 -

2. Split system heat pumps ........................................................ 12 7.4 

3. Single package air conditioners ............................................. 12 - 4. Single package heat pumps ................................................... 12 7.4 

5.A. Through-the-wall air conditioners and heat pumps - split 

system ....................................................................................... 11 7.1 

5.B. Through-the-wall air conditioners and heat pumps - single 

package ..................................................................................... 10.6 7.0 

• • • 

4. Section 430.34 is added to Subpart C to read as follows: 

§ 430.34 Energy and water conservation standards amendments 

The Department of Energy may not prescribe any amended standard which increases the 

maximum allowable energy use or, in the case of showerheads, faucets, water closets or urinals, 

water use, or which decreases the minimum required energy efficiency of a covered product. 

85 C:IWINDOWSITEMP\a,rcondltlonerrule.atd.wpd 

Jul) 2.2001 (J II 4 AM) 
Appendix EE-RM/STD-98-440 -" <: ? .

[The following letter from Department of Justice will not appear in the Code of Federal

Regulations.]

DEPARTMENT OF JUSTICE

Antitrust Division

A. DOUGLAS MELAMED

Acting Assistant Attorney General

Main Justice Building

950 Pennsylvania Avenue. N. W.

Washington, D.C. 20530-0001

(202) 514-2401/ (202) 616-2645 (f)

antitrust@justice.usdoj.gov (internet)

http://www.usdoj.gov (World Wide

Web)

December 4, 2000

Mary Anne Sullivan, General Counsel

Department of Energy

Washington, D.C. 20585

Dear General Counsel Sullivan:

I am responding to your October 16, 2000 letter seeking the views of the Attorney General

about the potential impact on competition of two proposed energy efficiency standards: one for

clothes washers and the other for residential central air conditioners and heat pumps. Your request

was submitted pursuant to Section 325(o)(2)(B)(i) of the Energy Policy and Conservation Act, 42

U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to make a determination of

the impact of any lessening of competition that is likely to result from the imposition of proposed

energy efficiency standards. The Attorney General's responsibility for responding to requests

from other departments about the effect of a program on competition has been delegated to the

Assistant Attorney General for the Antitrust Division in 28 CFR § 0.40(g).

„,~86 ~ ~C:\WINDOWS\TEMPairconditionrrule aldwpd 86 Juls 2. 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

Appendix EE-RM/STD-98-440 -~ cR~3 .. 

[The following letter from Department of Justice will not appear in the Code of Federal 

Regulations. ] 

Mary Anne Sullivan, General Counsel 

Department of Energy 

Washington, D.C. 20585 

Dear General Counsel Sullivan: 

DEPARTMENT OF JUSTICE 

Antitrust Division 

A. DOUGLAS MELAMED 

Acting Assistant Attorney General 

Main Justice Building 

950 Pennsylvania Avenue. N. W. 

Washington, D.C. 20530-0001 

(202) 514-2401/ (202) 616-2645 (f) 

antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide 

Web) 

December 4,2000 

I am responding to your October 16,2000 letter seeking the views of the Attorney General 

about the potential impact on competition of two proposed energy efficiency standards: one for 

clothes washers and the other for residential ceritralair conditioners and heat pumps. Your request 

was submitted pursuant to Section 325(0)(2)(B)(i) of the Energy Policy and Conservation Act, 42 

U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to make a determination of 

the impact of any lessening of competition that is likely to result from the imposition of proposed 

energy efficiency standards. The Attorney General's responsibility for responding to requests 

from other departments about the effect of a program on competition has been delegated to the 

Assistant Attorney General for the Antitrust Division in 28 CFR § 0.40(g). 

86 C:IWINDOWSlTEMPlaircond,l1oncrrule ald.wpd 

Jul~ 2, 200 I (II 14AM) 
EE-RMI/STD-98-44o-0 ' 3 .

We have reviewed the proposed standards and the supplementary information published in

the Federal Register notices and submitted to the Attorney General, which include information

provided to DOE of Energy by manufacturers. We have additionally conducted interviews with

members of the industries.

We have concluded that the proposed clothes washer standard would not adversely affect

competition. In reaching this conclusion, we note that the proposed standard is based on a joint -

recommendation submitted to DOE of Energy by manufacturers and energy conservation

advocates. That recommendation states that virtually all manufacturers of clothes washers who

sell in the United States participated in arriving at the recommendation through their trade

association, that the recommendation was developed in consultation with small manufacturers,

and that the manufacturers believe the new standard would not likely reduce competition. We

note further that, as the industry recommended, the proposed standard will be phased in over six

years, which will allow companies that do not already have products that meet the proposed

standard sufficient time to redesign their product lines.

With respect to the proposed residential central air conditioner and heat pump standard,

we have concluded that there could be an adverse impact on competition. The proposed standard,

Trial Standard Level 3, is expressed in terms of two industry measurements: SEER (Seasonal

Energy Efficiency Ratio) and HSPF (Heating Seasonal Performance Factor).' These standards

would change from the current central air conditioner and heat pump efficiency standards of 10

SEER/6.8 HSPF for split system air conditioners and heat pumps and 9.7 SEER/6.6 HPSF for

single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEER/7.7

HPSF for heat pumps.

We have identified three possible competitive problems presented by the proposed

standards. First, the proposed 13 SEER heat pump standard would have a disproportionate impact

on smaller manufacturers. Currently less than 20% of the total current product lines meet the

proposed standards, but for some small manufacturers, 100% of their product lines fail to satisfy

the proposed standard.

Second, the proposed standard for heat pumps, and in some instances for air conditioners,

would have an adverse impact on some manufacturers of these products (including those products

referred to in the Federal Register notice as "niche products") used to retrofit existing housing and

'The Federal Register notice also requested comments on a proposal to adopt a standard

for steady-state cooling efficiency (EER) and discussed several options DOE of Energy is

considering. The proposed rule set forth in the notice does not, however, include a provision

regarding an EER standard, and the views of Department of Justice expressed in this letter are

limited to the impact of any lessening of competition ... that is likely to result from the

imposition of the [proposed] standard," as required by EPCA. If DOE of Energy proposes a rule

in the future incorporating an EER standard, DOE will then evaluate that proposed rule and

express its views about the competitive impact of that standard.

C :\WINDOWS\TEMPairconditionerrulcaid wpd

87 July 2, 2001 (11 14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -tv' ~.a.3 . 

We have reviewed the proposed standards and the supplementary information published in 

the Federal Register notices and submitted to the Attorney General, which include information 

provided to DOE of Energy by manufacturers. We have additionally conducted interviews with 

members of the industries. 

We have concluded that the proposed clothes washer standard' would not adversely affect 

competition. In reaching this conclusion, we note that the proposed standard is based on a joint . 

recommendation submitted to DOE of Energy by manufacturers and energy conservation 

advocates. That recommendation states that virtually all manufacturers of clothes washers who 

sell in the United States participated in arriving at the recommendation through their trade 

association, that the recommendation was developed in consultation with small manufacturers, 

and that the manufacturers believe the new standard would not likely reduce competition. We 

note further that, as the industry recommended, the proposed standard will be phased in over six 

years, which will allow companies that do not already have products that meet the proposed 

standard sufficient time to redesign their product lines. 

With respect to the proposed residential central air conditioner and heat pump standard, 

we have concluded that there could be an adverse impact on competition. The proposed standard, 

Trial Standard Level 3, is expressed in terms of two industry measurements: SEER (Seasonal 

Energy Efficiency Ratio) and HSPF (Heating Seasonal Performance Factor).' These standards 

would change from the current central air conditioner and heat pump efficiency standards of 10 

SEERl6.8 HSPF for split system air conditioners and heat pumps and 9.7 SEERl6.6 HPSF for 

single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEERJ7. 7 

HPSF for heat pumps. 

We have identified three possible competitive problems presented by the proposed 

standards. First, the proposed 13 SEER heat pump standard would have a disproportionate impact 

on smaller manufacturers. Currently less than 20% of the total current product lines meet the 

proposed standards, but for some small manufacturers, 100% of their product lines fail to satisfy 

the proposed standard. 

Second, the proposed standard for heat pumps, and in some instances for air conditioners, 

would have an adverse impact on some manufacturers of these products (including those products 

referred to in the Federal Register notice as "niche products") used to retrofit existing housing and 

'The Federal Register notice also requested comments on a proposal to adopt a standard 

for steady-state cooling efficiency (EER) and discussed several options DOE of Energy is 

considering. The proposed rule set forth in the notice does not, however, include a provision 

regarding an EER standard, and the views of Department of Justice expressed in this letter are 

limited to the impact of any lessening of competition ... that is likely to result from the 

imposition of the [proposed] standard~" as required by EPCA. If DOE of Energy proposes a rule 

in the future incorporating an EER standard, DOE will then evaluate that proposed rule and 

express its views about the competitive impact of that standard. 

87 C:I\liINDOWSlTEMPlairconditionelTUle.atd.wpd 

July 2, 2001 (II 14AM) 
EE-RM/STD-98-440 -- 7 ' 3 .

used in manufactured housing. These manufacturers could not make units that comply with the

rule and fit into the available space.

Third, the proposed heat pump standard of 13 SEER could make heat pumps less

competitive with alternative heating and cooling systems. Because the standard will result in

increases in the size and cost of heat pumps, it is possible that purchasers will shift away from

heat pumps to other systems that include electric resistance heat, reducing the competition that

presently exists between heat pumps and those other systems.

Department of Justice urges DOE of Energy to take into account these possible impacts on

competition in determining its final energy efficiency standard for air conditioners and heat

pumps. DOE of Energy should consider setting a lower SEER standard for heat pumps, such as

the standard included in Trial Standard Level 2, and a lower SEER standard for air conditioners

for retrofit markets where there are space constraints (such as markets served by niche products)

and for manufactured housing.

Sincerely

A. Douglas Melamed

8 aidwpd dC:\WINDOWS\TEMPaircondit

88 July 2, 2001 (11:14AM)

EE-RM-STD-98-440 COMMENT 223

EE-RM/STD-98-440 -if 62,~3. 

used in manufactured housing. These manufacturers could not make units that comply with the . 

rule and fit into the available space. 

Third, the proposed heat pump standard of 13 SEER could make heat pumps less 

competitive with alternative heating and cooling systems. Because the standard will result in 

increases in the size and cost of heat pumps, it is possible that purchasers will shift away from 

heat pumps to other systems that inc 1 ude electric resistance heat, reducing the competition that 

presently exists between heat pwnps and those other systems. 

Department of Justice urges DOE of Energy to take into account these possible impacts on 

competition in determining its final energy efficiency standard for air conditioners and heat 

pumps. DOE of Energy should consider setting a lower SEER standard for heat pumps, such as 

the standard included in Trial Standard Level 2, and a lower SEER standard for air conditioners 

for retrofit markets where there are space constraints (such as markets served by niche products) 

and for manufactured housing. 

Sincerely 

A. Doug 1 as Melamed 

88 C:IWJNDQWSlTEMP\airconditionemJle.atd.wpd 

July 2. 200 I (I 1:14AM)