CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

2.1 INTRODUCTION ........................................................................................................... 2-1
 

2.2 BACKGROUND ............................................................................................................. 2-4
 

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-5
 

2.3.1 Market Assessment .......................................................................................................... 2-5
 

2.3.2 Technology Assessment................................................................................................... 2-5
 

2.4 SCREENING ANALYSIS .............................................................................................. 2-6
 

2.5 ENGINEERING ANALYSIS.......................................................................................... 2-6
 

2.5.1 Manufacturing Cost Assessment...................................................................................... 2-6
 

2.6 ENERGY AND WATER USE DETERMINATION...................................................... 2-7
 

2.7 MARKUPS FOR EQUIPMENT PRICE DETERMINATION....................................... 2-7
 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-7
 

2.9 SHIPMENTS ANALYSIS .............................................................................................. 2-9
 

2.10 NATIONAL IMPACT ANALYSIS ................................................................................ 2-9
 

2.10.1 National Energy Savings Analysis................................................................................... 2-9
 

2.10.2 Net Present Value Analysis ........................................................................................... 2-10
 

2.10.3 Forecasted Efficiencies .................................................................................................. 2-10
 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS .......................................................... 2-11
 

2.12 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-11
 

2.13 UTILITY IMPACT ANALYSIS................................................................................... 2-12
 

2.14 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2-12
 

2.15 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-13
 

2.16 REGULATORY IMPACT ANALYSIS ....................................................................... 2-13
 

2.17 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2-14
 

LIST OF FIGURES 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process..................................... 2-2
 

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CHAPTER 2. ANALYTICAL FRAMEWORK
 

2.1 INTRODUCTION
 

Section 6313(a)(6)(A) of 42 U.S.C. requires the U.S. Department of Energy (DOE) to set 

forth energy conservation standards that are technologically feasible and economically justified 

and would result in significant additional energy conservation. This chapter provides a 

description of the general analytical framework that DOE uses in developing such standards, and 

in particular, standards for residential dishwashers, dehumidifiers, and cooking products, and 

commercial clothes washers (“the considered products”). The analytical framework is a 

description of the methodology, the analytical tools, and relationships among the various 

analyses that are part of this rulemaking. For example, the methodology that addresses the 

statutory requirement for economic justification includes analyses of life-cycle cost (LCC); 

economic impact on manufacturers and users; national benefits; impacts, if any, on utility 

companies; and impacts, if any, from lessening competition among manufacturers. DOE will 

also solicit the views of the U.S. Department of Justice (DOJ) on any lessening of competition 

likely to result from the imposition of a proposed standard. 

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The 

focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key 

Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the 

analyses relate to each other. Key inputs are the types of data and information that the analyses 

require. Some key inputs exist in public databases; DOE collects other inputs from stakeholders 

or persons with special knowledge. Key outputs are analytical results that feed directly into the 

standards-setting process. Dotted lines connecting analyses show types of information that feed 

from one analysis to another. 

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Approaches
 

• Characterize Industry 

• Analysis of Market Data 

• Analysis of Product Data 

• Efficiency-Level Approach 

• Design Option Approach 

• Analysis of Energy Use
 

Data
 

• Define Distribution Channels 

• Economic Census Data 

Analysis 

• Retail Price Collection and 

Analysis 

• Accounting Approach 

• Backcast and Forecast 

• Market Saturation 

• Manufacturer Interviews 

• GRIM Analysis 

• NEMS-BT 

• ImSET 

• NEMS-BT 

Key Inputs
 

• Identify Firms/Products 

• Historical Shipments 

• Market Segmentation 

• Non-Regulatory Programs 

• Product Prototypes 

• Manufacturing Cost 

• Efficiency/Performance 

Energy Use
 

Markups for
 

Product Price
 

Determination
 

• Energy Prices 

• Installation Costs 

• Maintenance & Repair Costs 

• Energy-Efficiency Levels 

Shipments
 

Analysis
 

• Energy Price Forecasts 

• Site-to-Source Factors 

• Manufacturer Prices 

• Average Costs 

• Stakeholder Comments 

• Demographics 

• Manufacturer Prices 

• Average Costs 

• Manufacturer Financial Data 

• Utility Load Factors 

• National Energy Savings 

• National Energy Savings 

• National Product Costs 

• National Operating Costs 

• Emission Rates 

• National Energy Savings 

• Non-Regulatory
 

Alternatives
 

• Department of Justice Review 

• Stakeholder Comments 

Analyses	 Key Outputs 

Framework Document 

• Product Classes 

Market and Technology • Technology Options 

Assessment 

Product Classes Technology Options 

• Design Options Screening Analysis 

Design Options 

• Cost-Efficiency Relationship Engineering Analysis 

Design Energy/ Use Energy-Efficiency • Annual Energy Use (UEC) Levels 

Retail Prices 

L • Life-Cycle Costs ife-Cycle Cost and • Payback Periods Payback Period
 

Analysis
 

• Installation 

Costs Candidate • UEC 

Standard • Energy Prices • Maint Costs Levels • Repair Costs 

• National Energy Savings 

National Impact	 • Net Present Values 

Analysis 

• Conversion Capital Expenditures Preliminary • Direct Employment Impacts Manufacturer Impact
 

Analysis
 

Advance Notice of Proposed Rulemaking (ANOPR) 

Revise ANOPR • Trial Standard Levels (TSLs) 

Analyses TSLs 

• Life-Cycle Costs 

• Payback Periods Life-Cycle Cost
 

Sub-Group Analysis
 • Industry Cash Flow 

• Sub-Group Cash-Flow 

• Direct Employment Impacts 

M • Competitive Impacts anufacturer Impact • Cumulative Regulatory Burden Analysis 

Direct Employment 

U Impacts tility Impact 

Ana • Utility Impacts lysis 

Employment Impact 

A • National Employment Impacts nalysis 

Environmental • Emission Estimates 

Assessment 

• National Energy Savings Regulatory Impact • Net Present Values 

Analysis 

Notice of Proposed Rulemaking (NOPR) 

• Revised Results Revise Analyses 

Final Rule 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process
 

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The analyses performed in the advance notice of proposed rulemaking (ANOPR) stage 

and reported in this technical support document (TSD) include: 

•	 A market and technology assessment to characterize the relevant equipment markets and 

existing technology options, including prototype designs. 

•	 A screening analysis to review each technology option and determine if it is 

technologically feasible; is practical to manufacture, install, and service; would adversely 

affect equipment utility or equipment availability; or would have adverse impacts on 

health and safety. 

•	 An engineering analysis to develop cost-efficiency relationships, which are the increased 

manufacturer production cost (material, labor, and factory overhead) of more-efficient 

equipment. The increased cost to the customer is determined through an analysis of 

engineering markups, which convert manufacturer production cost to manufacturer 

selling price (MSP). 

•	 An equipment price markup analysis to determine equipment price converts the MSP 

estimates from the engineering analysis to customer prices, which are then used in the 

LCC and payback period (PBP) analyses and the manufacturer impact analysis. 

•	 An energy and water use analysis to determine the annual energy and water use of the 

considered products. 

•	 An LCC and PBP analysis to calculate, at the customer level, the discounted savings in 

operating costs (less maintenance and repair costs) throughout the estimated average life 

of the covered products, compared to any increase in the installed cost for the equipment 

likely to result directly from the imposition of the standard. 

•	 A shipments analysis forecasts product shipments, which are then used to calculate the 

national impacts of standards on energy consumption and costs, net present value (NPV), 

and future manufacturer cash flows. 

•	 A national impact analysis to assess the aggregate impacts at the national level of the 

NPV of total consumer LCC and national energy savings (NES). 

The analyses DOE performed in the subsequent notice of proposed rulemaking (NOPR) 

stage and reported in this TSD include those listed below. In addition, DOE re-analyzes the 

work done in the ANOPR stage. Because the Energy Independence and Security Act of 2007 

(Pub. L. No. 110-140) amended the Energy Policy and Conservation Act (EPCA) of 1975 (42 

U.S.C. 6291–6309) to establish revised energy conservation standards for residential 

dishwashers and dehumidifiers (42 U.S.C. 6295(g)(9) and (cc)), DOE is not proposing standards 

for these products in the NOPR and instead will codify these statutory standards in a subsequent 

final rule. Therefore, DOE did not re-analyze dishwashers and dehumidifiers for the NOPR, and 

is not reporting the results of the ANOPR analyses for these products in this TSD. 

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•	 An LCC subgroup analysis to evaluate variations in customer characteristics that might 

cause a standard to impact particular customer sub-populations differently than the 

overall population. 

•	 A manufacturer impact analysis to estimate the financial impact of standards on 

manufacturers and to calculate impacts on competition, employment, and manufacturing 

capacity. 

•	 A utility impact analysis to estimate effects of proposed standards on electric and gas 

utilities. 

•	 An employment impact analysis to assess the aggregate impacts of standards on national 

employment. 

•	 An environmental assessment to provide estimates of the effects of standards on three 

pollutants—sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury—as well as carbon 

emissions. 

•	 A regulatory impact analysis to present major alternatives to proposed standards that 

could achieve energy savings at a lower cost. 

After the publication of the NOPR, DOE reviews stakeholder comments and revises its 

analyses as appropriate before issuing the final rule. 

2.2 BACKGROUND 

As described in chapter 1, the Process Rule outlined procedural improvements to the 

standards rulemaking process which included a review of the following elements used in the 

rulemaking process: (1) economic models; (2) analytical tools; (3) methodologies; (4) nonregulatory approaches; and (5) prioritization of future rules. See appendix A to subpart C of 

Title 10 Code of Federal Regulations Part 430 (10 CFR Part 430). 

DOE developed this analytical framework for the rulemaking on the considered products 

under the Process Rule. DOE documented this analytical framework in the Rulemaking 

Framework for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and 

Cooking Products (March 15, 2006), and presented the analytical approach to stakeholders 

during a public meeting held on April 30, 2006. The Framework Document is available at 

http://www.eere.energy.gov/buildings/appliance_standards/pdfs/home_appl_framework_31506.pdf. The 

following sections provide a general description of the different analytical components of the 

rulemaking framework. 

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2.3 MARKET AND TECHNOLOGY ASSESSMENT
 

The market and technology assessment characterizes the relevant product markets and 

existing technology options, including prototype designs, for the considered products. 

2.3.1 Market Assessment 

When initiating a standards rulemaking, DOE develops information on the present and 

past industry structure and market characteristics for the equipment concerned. This activity 

assesses the industry and equipment, both quantitatively and qualitatively, based on publicly 

available information. As such, for the considered products, DOE addressed the following: (1) 

manufacturer market share and characteristics; (2) existing regulatory and non-regulatory 

equipment efficiency improvement initiatives; and (3) trends in product characteristics and retail 

markets. This information serves as resource material throughout the rulemaking. 

DOE reviewed existing literature and interviewed manufacturers to get an overall picture 

of the markets for the considered products in the United States. Industry publications and trade 

journals, government agencies, and trade organizations provided the bulk of the information, 

including information on: (1) manufacturers and their market share; (2) shipments by capacity; 

and (3) market saturation. The appropriate sections of this TSD describe the resulting 

information as DOE used it in the analysis. 

DOE has used and will use the most reliable and accurate data available at the time of 

each analysis in this rulemaking. All data will be available for public review. DOE welcomes 

and will consider any recommendations of additional data. 

2.3.2 Technology Assessment 

DOE typically uses information relating to existing and past technology options and 

prototype designs as inputs to determine what technologies manufacturers use to attain higher 

performance levels. In consultation with stakeholders, DOE develops a list of technologies for 

consideration. Initially, these technologies encompass all those it believes are technologically 

feasible. 

DOE developed its list of technologically feasible design options for the considered 

products through consultation with manufacturers of components and systems, and from trade 

publications and technical papers. Since many options for improving product efficiency are 

available in existing equipment, product literature and direct examination provided additional 

information. 

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2.4 SCREENING ANALYSIS
 

The screening analysis examines various technologies as to whether they: (a) are 

technologically feasible; (b) are practicable to manufacture, install, and service; (c) have an 

adverse impact on equipment utility or availability; and (d) have adverse impacts on health and 

safety. As described in section 2.3.2 above, DOE develops an initial list of efficiencyenhancement options from the technologies identified as technologically feasible in the 

technology assessment. Then DOE, in consultation with interested parties, reviews the list to 

determine if these options are practicable to manufacture, install, and service, would adversely 

affect equipment utility or availability, or would have adverse impacts on health and safety. In 

addition, DOE removed from the list technology options that lack energy consumption data as 

well as technology options whose energy consumption could not be adequately measured by 

existing DOE test procedures. In the engineering analysis, DOE further considers efficiency 

enhancement options that it did not screen out in the screening analysis. 

2.5 ENGINEERING ANALYSIS 

As presented in chapter 5, the engineering analysis establishes the relationship between 

the cost and efficiency of the considered products. This relationship serves as the basis for 

cost/benefit calculations in terms of individual consumers, manufacturers, and the nation. 

chapter 5 discusses the product classes DOE analyzed, the representative baseline units, the 

incremental efficiency levels, the methodology DOE used to develop manufacturing costs, the 

methodology it used to develop the energy consumption model, the cost-efficiency consumption 

curves, the impact of efficiency improvements on the considered products, and the methodology 

DOE used to extend the analysis to low-shipment-volume product classes. 

In determining the relationship between manufacturer selling price and energy efficiency 

for the considered products, DOE estimated the increase in manufacturer selling price associated 

with technological changes that increase the efficiency of the baseline models. DOE obtained 

cost estimates for the engineering analysis (which it also will use in the manufacturer impact 

analysis) from detailed incremental cost data supplied by manufacturers, disaggregated into the 

cost of incremental material, labor, and overhead. DOE created an industry-wide analysis based 

primarily on the manufacturer-supplied data, and supplemented this analysis with cost estimates 

of specific design options. 

For each of the product classes presented in chapter 5, DOE selected efficiency levels and 

obtained incremental cost data at each of these levels. DOE conducted the engineering analysis 

on all product classes for both products. 

2.5.1 Manufacturing Cost Assessment 

The manufacturing cost assessment estimated the manufacturing costs associated with an 

increase in energy efficiency for the considered products. This approach involved the 

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disassembly of specific units, analysis of the materials and manufacturing processes, and 

development of a spreadsheet cost model, using a clear and consistent manufacturing cost 

assessment methodology. DOE built a detailed manufacturing cost assessment model that 

accurately predicts manufacturing cost, and reports the manufacturing costs in aggregated form 

to maintain confidentiality of the data. DOE obtained input from stakeholders on the 

manufacturing cost estimates and assumptions to confirm their accuracy. 

2.6 ENERGY AND WATER USE DETERMINATION 

The energy and water use determination assessed the energy-savings potential of 

different equipment efficiencies for the considered products. For commercial clothes washers 

DOE also evaluated the water-savings potential of more-efficient products. 

As part of the energy and water use determination, DOE made certain engineering 

assumptions regarding equipment application, including how the equipment is operated and 

under what conditions. For cooking products, DOE considered the test procedures codified in 

the Code of Federal Regulations (CFR) to estimate annual energy consumption. 62 FR 51976. 

For commercial clothes washers, the test procedure codified in the CFR provides a good method 

for establishing rated efficiency—e.g., cubic feet of capacity per kilowatt-hour (kWh) per 

cycle—but does not provide an accurate means for establishing annual energy consumption 

because the test procedure is based on rating the performance of residential clothes washers. 

Thus the cycles-per-year value specified in the test procedure does not reflect commercial 

clothes washer usage, requiring DOE to conduct further research to establish the energy and 

water consumption of this equipment. 

2.7 MARKUPS FOR EQUIPMENT PRICE DETERMINATION 

For the LCC and PBP analysis and the manufacturer impact analysis, retail prices are 

required for the baseline efficiency level and all other efficiency levels under consideration. 

DOE derived retail prices by applying manufacturer-to-customer markups to the manufacturerselling-price estimates. To develop markups, DOE identified distribution channels (i.e., how the 

equipment is distributed from the manufacturer to the customer.) Once it established proper 

distribution channels for each of the product classes, DOE relied on economic census data from 

the U.S. Census Bureau and input from the industry to define how products are marked up from 

the manufacturer to the customer. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

The effects of new energy conservation standards on equipment result in changes in 

operating expenses—usually a decrease—and changes in customer price—usually an increase. 

DOE analyzed the net effect of new standards on customers by evaluating the net LCC using the 

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cost-efficiency relationship derived in the engineering analysis, as well as the energy costs 

derived from the energy and water use determination. Inputs to the LCC calculation include the 

installed cost to the customer (customer price plus installation cost), operating expenses (energy 

expenses and maintenance costs), the lifetime of the appliance, and a discount rate. 

The installed and operating costs of equipment typically change in response to new 

standards (installed cost typically increases while operating cost typically decreases.) Thus, 

there is a specific time in the life of higher-than-baseline efficiency equipment when the net 

operating cost benefit (in dollars) from the time of purchase is equal to the incremental first cost 

of purchasing the higher efficiency equipment. The length of time required for equipment to 

reach this cost-equivalence point is known as the payback period. 

For the ANOPR, DOE conducted the LCC and PBP analysis using typical values to 

reflect the conditions in the field for equipment life, equipment retail price, national or regional 

energy costs, energy consumption, and discount rates. DOE subsequently conducted the LCC 

subgroup analysis for the NOPR and included an assessment of impacts on subgroups of 

consumers. 

To estimate the LCC for each of the considered products, DOE had to determine several 

input values, including retail prices; electricity and natural gas prices; discount rates; 

maintenance, service, and installation costs; and equipment lifetimes. DOE reviewed the Energy 

Information Administration (EIA)’s energy price data to establish electricity and natural gas 

prices for residential and commercial customers. DOE used EIA’s Annual Energy Outlook 

(AEO) as the default source of projections of future energy prices in its LCC and PBP analysis. 

DOE developed discount rates separately for residential consumers and for companies 

that purchase commercial clothes washers. It derived the discount rates from estimates of the 

interest or “finance cost” to purchase residential products. Following financial theory, the 

finance cost of raising funds to purchase these products can be interpreted as: (1) the financial 

cost of any debt incurred to purchase products, principally interest charges on debt, or (2) the 

opportunity cost of any equity used to purchase products, principally interest earnings on 

household equity. 

DOE considered expected changes to maintenance, repair, and installation costs for the 

equipment covered in this rulemaking. Typically, small incremental changes in equipment 

efficiency incur no, or only very small, changes in repair and maintenance costs over baseline 

efficiency products. There is a greater probability that equipment with efficiencies that are 

significantly greater than the baseline will incur increased repair and maintenance costs since 

such equipment is more likely to incorporate technologies that are new to the industry and not 

widely available. DOE relied on input from manufacturers and other stakeholders in developing 

appropriate repair and maintenance costs. 

DOE used information from various literature sources (e.g., Appliance Magazine) and 

input from manufacturers and other stakeholders to establish average equipment lifetimes for use 

in the LCC and subsequent analyses. 

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2.9 SHIPMENTS ANALYSIS
 

Shipment forecasts are required to calculate the national impacts of standards on energy, 

NPV, and future manufacturer cash flows. DOE developed shipment forecasts using historical 

data as a basis for projecting future shipments of the appliance products that are the subject of 

this rulemaking. In projecting shipments, DOE accounted for three market segments: (1) new 

construction; (2) existing buildings (i.e., replacing failed equipment); and (3) early replacements 

(for cooking products) and retired units not replaced (i.e., non-replacements for CCWs.) DOE 

used the early replacement and non-replacement market segments to calibrate the Shipments 

Model to historical shipments data. For purposes of estimating the impacts of prospective 

standards on product shipments (i.e., forecasting standards-case shipments,) DOE accounted for 

the combined effects of changes in purchase price, annual operating cost, and household income 

on the consumer purchase decision. 

2.10 NATIONAL IMPACT ANALYSIS 

The national impact analysis assesses the NPV of total customer LCC and NES. DOE 

determined both the NPV and the NES for the performance levels considered for the product 

classes it analyzed. To make the analysis more accessible and transparent to all stakeholders, 

DOE prepared an NES Spreadsheet Model in Microsoft Excel to forecast energy savings and the 

national economic costs and savings resulting from new standards. The model assessed the 

aggregate economic impacts of standards at the national level. The NES Spreadsheet Model 

does not use probability distributions for inputs or outputs. To assess the impact of input 

uncertainty on the NES and NPV results, DOE can conduct sensitivity analyses by running 

scenarios on input variables that are of interest to stakeholders. 

2.10.1 National Energy Savings Analysis 

The inputs for the determination of NES are: (1) annual energy consumption per unit; (2) 

shipments; (3) equipment stock; (4) national energy consumption; and (5) site-to-source 

conversion factors. DOE calculated the national energy consumption by multiplying the number 

of units, or stock, of equipment (by vintage) by the unit energy consumption (also by vintage).a 

DOE calculated national annual energy savings as the difference between national energy 

consumption in the base case (without new efficiency standards) and in each higher efficiency 

standards case. The analysis included estimated energy savings by fuel type used for generating 

electricity. DOE estimated energy consumption and savings based on site energy, and converted 

the electricity consumption and savings to source energy. Cumulative energy savings are the 

sum of the annual NES, which DOE determined over specified time periods. 

The stock of equipment is dependent on annual shipments and the lifetime of the 

equipment. DOE conducted shipments projections under the base efficiency case and higher 

a Vintage represents the age of the equipment. 

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efficiency standards cases for a variety of possible equipment efficiency scenarios and equipment 

efficiency trends. DOE determined that shipment projections under the higher standard 

efficiency cases were lower than those from the base efficiency case projection, because of the 

higher installed cost of the more-efficient equipment. The projections indicated that higher 

installed costs would cause some customers to forego equipment purchases. As a result, DOE 

used the higher efficiency standard case shipments projection and, in turn, the resulting stock of 

equipment under the higher efficiency standards case, to determine the NES. Calculating the 

NES in this way avoids the inclusion of savings resulting from displaced shipments. 

2.10.2 Net Present Value Analysis 

The inputs for the determination of NPV are: (1) total annual installed cost; (2) total 

annual operating cost savings; (3) discount factor; (4) present value of costs; and (5) present 

value of savings. DOE calculated NPV as the difference between the present value of operating 

cost savings and the present value of increased total installed costs. It calculated net savings 

each year as the difference between total operating cost savings (including electricity, repair, and 

maintenance cost savings) and increases in total installed costs (including equipment price and 

installation cost). DOE calculated savings over the life of the equipment, accounting for 

differences in yearly energy rates, and discounted future costs and savings to the present with a 

discount factor. 

DOE calculated increases in total installed costs as the product of the difference in the 

total installed cost between the base case and standards case and the annual shipments in the 

standards case. Because costs of the more-efficient equipment bought in the standards case are 

higher than those of equipment bought in the base case, price increases appear as negative values 

in the NPV analysis. 

DOE expressed operating cost savings as decreases in operating costs associated with the 

lower energy consumption of equipment bought in the standards case compared to the base 

efficiency case. Total operating cost savings are the product of savings per unit and the number 

of units of each vintage surviving in a particular year. 

2.10.3 Forecasted Efficiencies 

Several of the inputs for the determination of NES (e.g., the annual energy consumption 

per unit) and NPV (e.g., the total annual installed cost and the total annual operating cost 

savings) are dependent on the efficiency of the equipment. Thus, DOE forecasted efficiencies 

for the base case and standards cases. The forecasted efficiencies specify the annual shipmentweighted average equipment efficiencies for future years. 

For each of the products considered, DOE based the development of the product 

efficiencies in the base case on the assignment of equipment efficiencies in the year 2005. In 

other words, DOE determined the distribution of product efficiencies currently in the 

marketplace to develop a shipment-weighted efficiency for the year 2005. As described in 

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chapter 10, DOE assumed that forecasted efficiencies remained frozen at the efficiency level in 

the year 2005 until the end of the forecast period. 

DOE based its standards case forecasts (i.e., forecasts of efficiency trends after standards 

take effect) on the use of a roll-up efficiency scenario. Under a roll-up scenario, all equipment at 

performance levels below a prospective standard are moved, or rolled up, to the minimum 

performance level allowed under the new standard. The distribution of equipment at efficiency 

levels above the new minimum standard levels is unaffected (i.e., this equipment remains at its 

pre-standard performance levels.) The roll-up efficiency scenario dictates how DOE determined 

efficiency distributions in the first year a new standard takes effect, but does not define how 

equipment efficiency will be distributed in the future. As was done for the base case, DOE 

assumed that forecasted efficiencies under the standards case remained frozen at the level in the 

year that standards became effective until the end of the forecast period. 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS 

The LCC subgroup analysis evaluates economic impacts of standards on any identifiable 

groups of customers who might be disproportionately affected by a change in the national energy 

efficiency standard levels for the considered products. During the NOPR stage of the 

rulemaking, DOE evaluated the impacts of particular subgroups of customers in part by using the 

LCC Spreadsheet Model to analyze the LCC and PBP for these particular customers. 

In the case of cooking products, DOE analyzed as subgroups: (1) low-income 

households; (2) households occupied by senior citizens; and (3) households with gas cooking 

products that do not have electricity. In the case of commercial clothes washers, DOE 

considered: (1) consumers not served by municipal water and sewer providers; and (2) small 

businesses. 

2.12 MANUFACTURER IMPACT ANALYSIS 

The manufacturer impact analysis (MIA) assesses the impacts of new energy efficiency 

standards on manufacturers of the considered products. Potential impacts include financial 

effects, both quantitative and qualitative, that might lead to changes in the manufacturing 

practices for these products. DOE identified these potential impacts through interviews with 

manufacturers and other stakeholders. 

DOE conducted the MIA in three phases, and further tailored the analytical framework 

based on stakeholder comments. In Phase I, an industry profile was created to characterize the 

industry, and a preliminary MIA was conducted to identify important issues that required 

consideration. In Phase II, an industry cash flow model and an interview questionnaire were 

prepared to guide subsequent discussions. In Phase III, manufacturers were interviewed, and the 

impacts of standards were assessed both quantitatively and qualitatively. Industry and sub-group 

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cash flow and NPV were assessed through use of the Government Regulatory Impact Model 

(GRIM). Then impacts on competition, manufacturing capacity, employment, and cumulative 

regulatory burden were assessed based on manufacturer interview feedback and discussions. 

2.13 UTILITY IMPACT ANALYSIS 

The utility impact analysis assessed the impact of higher efficiency standards on the 

electric and gas utility industries. To carry out this analysis, DOE used a variant of the EIA’s 

National Energy Modeling System (NEMS). NEMS is a large, multi-sectoral, partialequilibrium model of the United States energy sector that EIA has developed over the past 

decade, primarily for the purpose of preparing the AEO. DOE used a variant known as NEMSBT to provide key inputs to the analysis.b 

NEMS produces a widely recognized baseline energy forecast for the United States 

through the year 2030, and is available in the public domain. The typical NEMS outputs include 

forecasts of electricity sales, price, and avoided electric generating capacity. DOE conducted the 

utility impact analysis as a scenario departing from the latest AEO reference case. In other 

words, DOE modeled the energy savings impacts from amended energy conservation standards 

using NEMS-BT to generate forecasts that deviate from the AEO reference case. 

2.14 EMPLOYMENT IMPACT ANALYSIS 

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the plants that produce the 

covered equipment, and at the affiliated distribution and service companies, resulting from the 

imposition of new standards. DOE evaluated direct employment impacts in the manufacturer 

impact analysis. Indirect employment impacts may result from expenditures shifting between 

goods (the substitution effect) and changes in income and overall expenditure levels (the income 

effect) that occur due to the imposition of standards. DOE investigated the combined direct and 

indirect employment impacts using the Pacific Northwest National Laboratory (PNNL)’s 

“Impact of Sector Energy Technologies” (ImSET) model. PNNL developed the ImSET model 

for DOE’s Office of Planning, Budget, and Analysis. The model estimates the employment and 

income effects of energy-saving technologies in buildings, industry, and transportation. In 

comparison with simple economic multiplier approaches, ImSET allows for more complete and 

automated analysis of the economic impacts of energy conservation investments. 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000, 

DOE/EIA-0581(2000), March 2000. EIA approves use of the name NEMS to describe only an official version of 

the model without any modification to code or data. Because this analysis entails some minor code modifications 

and the model is run under various policy scenarios that are variations on EIA assumptions, DOE refers to the model 

by the name NEMS-BT (BT is DOE’s Building Technologies Program, under whose aegis this work has been 

performed). NEMS-BT was previously called NEMS-BRS. 

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2.15 ENVIRONMENTAL ASSESSMENT 

The environmental assessment estimates the impact of possible standards on three 

energy-related pollutants—oxides of nitrogen (NOx), sulfur dioxide (SO2), and mercury (Hg)— 

as well as carbon dioxide (CO2) emissions. The primary environmental effects of energy 

conservation standards for the considered products will be reduced emissions resulting from 

reduced electricity and natural gas consumption. For power sector CO2 emissions, DOE based 

these calculations on the NEMS-BT modeling work used for the utility impact analysis. NEMSBT tracks CO2 emissions using a detailed module that produces robust results because of its 

broad coverage of all sectors and inclusion of interactive effects. This approach has the 

advantage of examining the marginal impact of higher efficiency standards for the considered 

products on the utility generation mix and the subsequent environmental emissions. Two rules 

regulating SO2, NOx, and Hg emission, the Clean Air Intestate Rule (CAIR) and the Clean Air 

Mercury Rule (CAMR), were recently vacated by federal courts. As a result, for power sector 

NOx and Hg emissions, DOE estimated and utilized a range of NOx and Hg emission rates to 

estimate the power sector emission reductions due to standards. 

Because residential cooking products and commercial clothes washers have an impact on 

household and commercial building CO2 and NOx emissions, respectively, at the site, DOE 

estimated the reduction in these building emissions due to standards. 

DOE also estimated the economic value of CO2, NOx, and Hg emission reductions. DOE 

used several sources to estimate a range in the possible economic value. Emissions of SO2 are 

capped and, as a result, simulation of SO2 trading tends to imply that physical emissions effects 

will be zero. However, there is an SO2 benefit from conservation in the form of a lower 

allowance price. DOE used NEMS-BT to estimate the impact of standards on SO2-allowance 

trading and forecasts of SO2-allowance prices. 

2.16 REGULATORY IMPACT ANALYSIS 

In the NOPR stage, DOE prepared a regulatory impact analysis (RIA) under Executive 

Order 12866, “Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, which was 

subject to review under the Executive Order by the Office of Information and Regulatory Affairs 

(OIRA) at the Office of Management and Budget. The RIA evaluated non-regulatory 

alternatives to standards, in terms of their ability to achieve significant energy savings in the 

considered products at a reasonable cost, and compared the effectiveness of each one to the 

effectiveness of the proposed standards rule. 

DOE recognizes that voluntary or other non-regulatory efforts by manufacturers, utilities, 

and other interested parties can result in substantial improvements to energy efficiency or 

reductions in energy consumption. DOE considered the likely effects of non-regulatory 

initiatives on product energy use, consumer utility, and LCC. DOE based its assessment on the 

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actual impacts of any such initiatives to date, but also considered information presented 

regarding the impacts that any existing initiative might have in the future. 

2.17 DEPARTMENT OF JUSTICE REVIEW 

EPCA states that before the Secretary of Energy may prescribe a new or amended energy 

conservation standard, the Secretary shall ask the U.S. Attorney General to make a determination 

of “the impact of any lessening of competition...that is likely to result from the imposition of the 

standard.” (42 U.S.C. 6295(o)) Pursuant to this requirement, DOE will solicit the views of the 

DOJ on any lessening of competition likely to result from the imposition of a proposed standard. 

DOE will give the views provided full consideration in assessing economic justification of a 

proposed standard. In addition, DOE may consult with DOJ at earlier stages in the standards 

development process to obtain preliminary views on competitive impacts. 

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