CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

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

2.2 BACKGROUND ............................................................................................................. 2-5 

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

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

2.3.2 Technology Assessment................................................................................................... 2-6 

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

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

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

2.7 MARKUPS FOR PRODUCT 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........................................................................ 2-14 

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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EERE-2006-STD-0127 COMMENT 64.2
CHAPTER 2. ANALYTICAL FRAMEWORK 

2.1 INTRODUCTION 

Sections 6295(o)(2)(A) and 6316(a) of 42 U.S.C. require 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, 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 has 

also solicited 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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EERE-2006-STD-0127 COMMENT 64.2
Notice of Proposed Rulemaking (NOPR)

Final Rule

Framework Document

Advance Notice of Proposed Rulemaking (ANOPR)

Utility Impact 

Analysis 

Approaches Key Inputs Analyses Key Outputs 

Market and Technology 

Assessment 

Screening Analysis 

Engineering Analysis 

Markups for 

Product Price 

Determination Life-Cycle Cost and 

Payback Period 

Analysis 

National Impact 

Analysis 

Energy Use 

Revise ANOPR 

Analyses 

Life-Cycle Cost 

Sub-Group Analysis 

Manufacturer Impact 

Analysis 

Shipments 

Analysis 

Employment Impact 

Analysis 

Revise Analyses 

• Product Classes 

• Technology Options 

• Industry Cash Flow 

• Sub-Group Cash-Flow 

• Direct Employment Impacts 

• Competitive Impacts 

• Cumulative Regulatory Burden 

• Cost-Efficiency Relationship 

• Life-Cycle Costs 

• Payback Periods 

• National Energy Savings 

• Net Present Values 

• National Employment Impacts 

• Revised Results 

• rize Industry 

• Market Segmentation 

• Non-Regulatory Programs 

• iciency-Level Approach 

• Design Option Approach 

• Energy Prices 

• Installation Costs 

• Maintenance & Repair Costs 

• Accounting Approach 

• Backcast and Forecast 

• Market Saturation 

• Stakeholder Comments 

• Demographics 

• Manufacturer Interviews 

• GRIM Analysis 

• Emission Rates 

• National Energy Savings 

• Stakeholder Comments 

• irms/Products 

• Historical Shipments 

• efine Distribution Channels 

• Economic Census Data 

Analysis 

• Retail Price Collection and 

Analysis 

• Manufacturer Prices 

• Average Costs 

• anufacturer Financial Data 

Design Options 

Product Classes 

Retail Prices 

D ign Energy/ Use 

• fficiency/Performance 

• Manufacturing Cost 

Candidate 

Standard 

Levels 

• lysis of Energy Use 

Data 

Environmental 

Assessment 

Regulatory Impact 

Analysis 

Te y Options 

• 

tility Load Factors 

• National Energy Savings 

• on-Regulatory 

Alternatives 

• NEMS-BT 

• I SET 

• NEMS-BT 

Energy Price Forecasts 

• Site-to-Source Factors 

nergy-Efficiency Levels 

D ent 

Impacts 

• National Energy Savings 

• National Product Costs 

• National Operating Costs 

• tility Impacts 

nalysis of Market Data 

• Analysis of Product Data 

• Life-Cycle Costs 

• Payback Periods 

• Installation 

Costs 

• Maint Costs 

• Repair Costs 

• UEC 

• Energy Prices 

• Annual Energy Use (UEC) 

Pr iminary 

Manufacturer Impact 

Analysis 

• rices 

• Average Costs 

• onversion Capital Expenditures 

• Direct Employment Impacts 

• National Energy Savings 

• Net Present Values 

ial Standard Levels (TSLs) 

TSLs 

• duct Prototypes 

En -Efficiency 

Levels 

• Department of Justice Review 

Utility Impact

Analysis 

Notice of Proposed Rulemaking (NOPR) 

Final Rule 

A

Characte

Eff

Identify F

D

M

es

E

Ana

chnolog

Emission Estimates 

• U

N

m

• Design Options 

• 

• E

irect Employm

U

• A

Manufacturer P el C

• Tr

Pro

ergy

pproaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups for

Product Price

Determination Life-Cycle Cost and 

Payback Period

Analysis

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost

Sub-Group Analysis

Manufacturer Impact

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Cost-Efficiency Relationship

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

Framework Document 

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products

• Historical Shipments

• Define Distribution Channels

• Economic Census Data

Analysis

• Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail Prices

Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR) 

• Efficiency/Performance

• Manufacturing Cost

Candidate

Standard 

Levels

• Analysis of Energy Use

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

• Annual Energy Use (UEC)

Preliminary

Manufacturer Impact

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency

Levels

• Department of Justice Review

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process 

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EERE-2006-STD-0127 COMMENT 64.2
The analyses performed in the advance notice of proposed rulemaking (ANOPR)a

 stage 

and reported in the ANOPR technical support document (TSD) include: 

• A market and technology assessment to characterize the relevant product 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 product utility or product 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 

products. 

• A product price markup analysis to determine how manufacturing costs are converted to 

customer prices, which are then used in the LCC and payback period (PBP) analyses and 

the manufacturer impact analysis (MIA). 

• 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 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). 

• A preliminary MIA to identify key issues for the manufacturers and to qualitatively 

assess potential impacts of energy conservation standards. 

a

 In energy conservation standards rulemakings in the past, and for this rulemaking, DOE issued an ANOPR 

following publication of the framework document. EISA 2007 eliminated the requirement that DOE issue ANOPRs 

as part of the standards rulemaking process; see EISA 2007, at sec. 307. DOE is now using an alternative process 

known as the preliminary activities and analyses. The preliminary activities and analyses will provide the same 

information and ability for public comment as the ANOPR, but without publication of analyses in the Federal 

Register. 

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EERE-2006-STD-0127 COMMENT 64.2
The analyses DOE performed in the subsequent notice of proposed rulemaking (NOPR) 

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

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

(EISA 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 adopting standards 

for these products in the final rule and instead is codifying these statutory standards in a separate 

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. 

• 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. 

• An MIA 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 reviewed comments from interested parties and 

revised its analyses as appropriate before issuing the final rule. In addition, information DOE 

received from interested parties regarding the NOPR indicated that further analyses were 

warranted for commercial clothes washers and microwave ovens as to standby power. As a 

result, DOE is continuing the rulemaking for these products. The information DOE developed 

for commercial clothes washers and microwave ovens as part of the market and technology 

assessment is presented in chapter 3, but the details of the analyses for commercial clothes 

washers and microwave oven standby power are not included in this TSD. Discussion of the 

analyses which were conducted at the NOPR stage for these products and equipment can be 

found in the NOPR TSD for this rulemaking, and updated analyses will be provided in a separate 

TSD when final rules are published for commercial clothes washers and microwave oven 

standby power. This final rule TSD contains details of the final analyses conducted for 

residential electric and gas kitchen ranges and ovens and microwave ovens as to cooking 

efficiency. 

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EERE-2006-STD-0127 COMMENT 64.2
2.2 BACKGROUND 

As described in chapter 1, the July 15, 1996, Procedures for Consideration of New or 

Revised Energy Conservation Standards for Consumer Products (the “Process Rule”), 61 FR 

36974 (July 15, 1996) 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) non-regulatory 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 

www.eere.energy.gov/buildings/appliance_standards/. The following sections provide a general 

description of the different analytical components of the rulemaking framework. 

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 products concerned. This activity 

assesses the industry and products, 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 

product 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 the most reliable and accurate data available at the time of each analysis in 

this rulemaking. All data is available for public review. 

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EERE-2006-STD-0127 COMMENT 64.2
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 units, product literature and direct examination provided additional 

information. 

2.4 SCREENING ANALYSIS 

The screening analysis examines various technologies as to whether they: (1) are 

technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an 

adverse impact on product utility or availability; and (4) 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 product 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, and 

the cost-efficiency curves. 

In determining the relationship between manufacturer cost and energy efficiency for the 

considered products, DOE estimated the increase in manufacturer cost associated with 

technological changes that increase the efficiency of the baseline models. DOE typically obtains 

cost estimates for the engineering analysis (which it also uses in the MIA) from detailed 

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EERE-2006-STD-0127 COMMENT 64.2
incremental cost data supplied by manufacturers, disaggregated into the cost of incremental 

material, labor, and overhead. For reasons discussed in chapter 5, in this rulemaking, DOE 

created an industry-wide analysis for residential cooking products based primarily on the 

analysis developed for DOE’s 1996 TSD for cooking products. 

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

estimated incremental cost data at each of these levels based on updated values developed for the 

1996 TSD. DOE conducted the engineering analysis on all product classes. 

2.6 ENERGY AND WATER USE DETERMINATION 

The energy use determination assessed the energy-savings potential of different 

efficiencies for residential cooking products. In the NOPR, DOE also evaluated the watersavings potential of more efficient commercial clothes washers. For reasons discussed in section 

2.2, DOE is not presenting the analyses for commercial clothes washers in this final rule TSD. 

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

regarding product application, including how the product 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. 

2.7 MARKUPS FOR PRODUCT PRICE DETERMINATION 

For the LCC and PBP analysis and the MIA, 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 manufacturing cost estimates. To develop 

markups, DOE identified distribution channels (i.e., how the products are distributed from the 

manufacturer to the customer.) Once DOE established proper distribution channels for each of 

the product classes, it 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 are 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 cost-efficiency 

relationships derived in the engineering analysis, as well as the energy costs derived from the 

energy 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. 

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EERE-2006-STD-0127 COMMENT 64.2
The installed and operating costs of a product 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 a higher-than-baseline efficiency product 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 unit. The length of time required for a product 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. For the final rule, DOE updated the NOPR LCC and PBP analysis, as well as the 

LCC subgroup analysis, to reflect current energy costs. 

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 product lifetimes. DOE reviewed the Energy 

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

prices for residential 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 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 

products covered in this rulemaking. Typically, small incremental changes in product efficiency 

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

products. There is a greater probability that units with efficiencies that are significantly greater 

than the baseline will incur increased repair and maintenance costs, since such products are more 

likely to incorporate technologies that are new to the industry and not widely available. DOE 

used input from manufacturers, installers, and servicers in developing appropriate repair and 

maintenance costs. 

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

input from manufacturers and other interested parties to establish average product lifetimes for 

use in the LCC and subsequent analyses. 

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EERE-2006-STD-0127 COMMENT 64.2
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 products); and (3) early replacements. 

DOE used the early replacement market segment 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 interested 

parties, 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. 

2.10.1 National Energy Savings Analysis 

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

shipments; (3) product 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 products (by vintage) by the unit energy consumption (also by vintage).b DOE 

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

in the base case (without new energy conservation 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. 

Product stock is dependent on annual shipments and the product lifetime. DOE 

conducted shipments projections under the base efficiency case and higher efficiency standards 

cases for a variety of possible product efficiency scenarios and trends. DOE determined that 

b

 Vintage represents the age of the product. 

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EERE-2006-STD-0127 COMMENT 64.2
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 

products. The projections indicated that higher installed costs would cause some customers to 

forego product purchases. As a result, DOE used the higher efficiency standard case shipments 

projection and, in turn, the resulting product stock 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 product price and 

installation cost). DOE calculated savings over the life of the product, 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 by multiplying the difference in the total 

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

case. Because costs of the more efficient products bought in the standards case are higher than 

those of the products 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 products bought in the standards case compared to the base 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 product efficiency. Thus, DOE forecasted efficiencies for the base 

case and standards cases. The forecasted efficiencies specify the annual shipment-weighted 

average product 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 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 chapter 11, with the 

exception of gas cooktops and gas standard ovens, DOE assumed that forecasted efficiencies 

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EERE-2006-STD-0127 COMMENT 64.2
remained frozen at the efficiency level in the year 2005 until the end of the forecast period. In the 

case of gas cooktops and gas standard ovens, DOE did forecast the market share of gas standard 

ranges equipped with standing pilots to estimate the impact of eliminating standing pilots for 

these products. 

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 products 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 products at efficiency 

levels above the new minimum standard levels is assumed to be unaffected (i.e., these products 

remain at their 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 product 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 

conservation 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. DOE 

updated these analyses for the final rule. 

For 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. 

2.12 MANUFACTURER IMPACT ANALYSIS 

The MIA assesses the impacts of new energy conservation 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 interested 

parties. 

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

based on interested parties’ 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 

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

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 energy conservation 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 U.S. energy sector that EIA has developed over the past decade, 

primarily for the purpose of preparing the AEO. DOE used a variant known as NEMS-BT to 

provide key inputs to the analysis.c 

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 

New or amended energy conservation 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 products, and at the affiliated distribution and service companies, 

resulting from the adoption of new standards. DOE evaluated direct employment impacts in the 

MIA. 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 adoption 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 

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

analysis of the economic impacts of energy conservation investments. 

2.15 ENVIRONMENTAL ASSESSMENT 

The environmental assessment estimates the impact of possible energy conservation 

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. NEMS-BT 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 energy conservation 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), had been recently vacated by federal courts at 

the time the NOPR was published. The CAIR would have permanently capped emissions of SO2 

and NOx in 28 eastern States and the District of Columbia. The CAMR is closely related to the 

CAIR and would have established standards of performance for Hg emissions from new and 

existing coal-fired electric utility steam generating units. As a result of the CAIR and the CAMR 

being vacated, for power sector NOx and Hg emissions evaluated in the NOPR, DOE estimated 

and utilized a range of NOx and Hg emission rates to estimate the power sector emission 

reductions due to standards. However, on December 23, 2008, the U.S. Court of Appeals for the 

District of Columbia Circuit decided to allow CAIR to remain in effect until it is replaced by a 

rule consistent with the court’s earlier opinion. As a result, DOE used the NEMS-BT model for 

the final rule to estimate the NOx emissions reductions due to standards. With regard to SO2 

emissions, the Clean Air Act Amendments of 1990 set an SO2 emissions cap on all power 

generation, but permitted flexibility among generators through the use of emissions allowances 

and tradable permits. This SO2 trading process (sometimes called “cap and trade”) implies that 

the standard will have no effect on total physical emissions because emissions will always be at, 

or near, the allowed emissions ceiling. Consequently, there is no direct SO2 environmental 

benefit from a reduction in electricity use due to the proposed energy conservation standards, as 

long as there is enforcement of the emissions ceiling. CAIR goes beyond the 1990 Clean Air Act 

Amendments and sets more stringent SO2 caps for 28 eastern States and the District of Columbia. 

Because residential cooking products have an impact on household CO2 and NOx 

emissions 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 

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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 

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 adopted 

standards. 

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 

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 solicited the views of the 

Department of Justice (DOJ) on any lessening of competition likely to result from the imposition 

of the standards. DOE gave full consideration to DOJ’s views in assessing economic 

justification for the standards. 

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