59550 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

DEPARTMENT OF ENERGY

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

[Docket No. EE–RM–94–403]

RIN 1904–AA67

Energy Conservation Program for

Consumer Products: Clothes Washer

Energy Conservation Standards

AGENCY: Office of Energy Efficiency and

Renewable Energy, Department of

Energy.

ACTION: Notice of proposed rulemaking

and public hearing.

SUMMARY: The Energy Policy and

Conservation Act, as amended

(hereinafter referred to as EPCA or the

Act), prescribes energy conservation

standards for certain major household

appliances, and requires the Department

of Energy (DOE, Department, or we) to

administer an energy conservation

program for these products. We

conducted several analyses regarding

the energy savings, benefits and burdens

of amended energy conservation

standards for clothes washers and have

shared the results of these analyses with

all stakeholders. Based on these

analyses, several of the major

stakeholders, including clothes washer

manufacturers and energy efficiency

advocates, submitted to the Department

a joint proposal for the highest standard

level which they believed to be

technically feasible and economically

justified. Based on our review of this

proposal, we found the proposed

standards technically feasible and

economically justified. Therefore, today

we propose to amend the energy

conservation standard for clothes

washers for residential applications as

recommended in the joint proposal and

announce a public hearing.

As part of this rulemaking in response

to the joint proposal by the clothes

washer manufacturers and energy

efficiency advocates, we have also

included revisions to the test procedure

based on issues found during this

rulemaking dealing with the energy test

cloth, remaining moisture content

(RMC), extractor testing and the

correction factor. In addition, we

incorporated minor editorial changes to

help clarify both Appendix J and J1 of

the test procedure based on the joint

proposal by stakeholders. These changes

have been included in their entirety in

this rulemaking pertaining to the test

procedure.

DATES: If you wish to submit comments

on the proposed rule, they must be

received on or before December 4, 2000

to Ms. Brenda Edwards-Jones at the

address listed below. We request 10

copies of the written comments and, if

possible, a computer disk. Oral views,

data, and arguments may be presented

at the public hearing. We will hold a

Public Hearing on November 15, 2000,

beginning at 9:00 a.m.

If you wish to speak at the hearing,

requests must be received by the

Department no later than 4:00 p.m.,

November 6, 2000. Copies of statements

to be given at the public hearing must

be received by the Department no later

than 4:00 p.m., November 6, 2000. We

will read the statements in advance of

the hearing and would appreciate the

oral presentations to be limited to a

summary of the statement. The length of

each oral presentation is limited to 5

minutes.

ADDRESSES: The hearing will be at the

U.S. Department of Energy, Forrestal

Building, Room 6E–069, 1000

Independence Avenue, SW.,

Washington, DC 20585. Written

comments, oral statements, and requests

to speak at the hearing are to be

submitted to Ms. Brenda Edwards-Jones,

U.S. Department of Energy, Office of

Energy Efficiency and Renewable

Energy, Energy Conservation Program

for Consumer Products: Clothes

Washers Energy Conservation

Standards, Docket No. EE–RM–94–403,

1000 Independence Avenue, SW.,

Washington, DC 20585–0121.

Copies of the public comments

received, the Technical Support

Document (TSD) and the transcript of

the public hearing may be read at the

DOE Freedom of Information Reading

Room, U.S. Department of Energy,

Forrestal Building, Room 1E–190, 1000

Independence Avenue, SW.,

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. Copies of the TSD

may be obtained 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–

9127. Copies of the analysis can also be

found on the Codes and Standards

Internet site at: http://

www.eren.doe.gov/buildings/

codes_standards/applbrf/clwasher.html

For more information concerning

public participation in this rulemaking

proceeding see Section VII, ‘‘Public

Comment Procedures,’’ of this Notice.

FOR FURTHER INFORMATION CONTACT:

Bryan Berringer, 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) 586–0371, E-mail:

Bryan.Berringer@EE.DOE.GOV, or

Eugene Margolis, U.S. Department of

Energy, Office of General Counsel,

Forrestal Building, Mail Station GC–72,

1000 Independence Avenue, SW,

Washington, DC 20585, (202) 586–9526,

E-mail: Eugene.Margolis@HQ.DOE.GOV.

SUPPLEMENTARY INFORMATION:

I. Summary of Proposed Rule

II. Introduction

A. Consumer Overview

B. Authority

C. Background

1. Current Standards

2. History of Previous Rulemakings

3. Process Improvement

4. Test Procedures

III. General Discussion

A. Test Procedures

B. Technological Feasibility

1. General

2. Maximum Technologically Feasible

Levels

3. Product Classes

C. Energy Savings

1. Determination of Savings

2. Significance of Savings

D. Rebuttable Presumption

E. Economic Justification

1. Economic Impact on Manufacturers and

Consumers

2. Life-Cycle Cost (LCC)

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

IV. Methodology

A. Product Classes

B. Engineering Analysis

C. Life-Cycle Cost (LCC) Analysis

D. Payback Period Analysis

E. National Impact Analyses

1. National Energy Savings (NES)

Spreadsheet Model

2. Net National Employment

F. Consumer Analysis

G. Manufacturer Impact Analysis

H. Utility Analysis

I. Environmental Analysis

V. Analytical Results

A. Trial Standard Levels

1. Economic Impacts on Consumers

a. Life-Cycle-Cost

b. Payback Period

c. Rebuttable Presumption Payback

d. Consumer Sub-Group Analysis

2. Economic Impact on Manufacturers

B. Significance of Energy Savings

C. Lessening of Utility or Performance of

Products

D. Impact of Lessening of Competition

E. Need of the Nation to Save Energy and

Net National Employment

1. National Net Present Value

2. National Water Savings

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59551

3. Environmental Impacts

4. Net National Employment

F. Conclusion

VI. Procedural Reviews

A. Review under the National

Environmental Policy Act of 1969

B. Review under Executive Order 12866,

‘‘Regulatory Planning and Review’’

C. Review under the Regulatory Flexibility

Act of 1980

D. Review under the Paperwork Reduction

Act

E. Review under Executive Order 12988,

‘‘Civil Justice Reform’’

F. ‘‘Takings’’ Assessment Review

G. Review under Executive Order 13132,

‘‘Federalism’’

H. Review under the Unfunded Mandates

Reform Act of 1995

I. Review under the Treasury and General

Government Appropriation Act of 1999

J. Review Under the Plain Language

Directives

VII. Public Comment Procedures

A. Written Comment Procedures

B. Public Workshop (Hearing)

1. Procedure for Submitting Requests to

Speak

2. Conduct of Workshop (Hearing)

I. Summary of the Proposed Rule

The EPCA, as amended, specifies that

any new or amended energy

conservation standard the Department

prescribes shall be designed to ‘‘achieve

the maximum improvement in energy

efficiency * * * which the Secretary

determines is technologically feasible

and economically justified.’’ Section

325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A).

Furthermore, the amended standard

must ‘‘result in significant conservation

of energy.’’ Section 325(o)(2(B)(3)(B), 42

U.S.C. 6295(o)(2)(B)(3)(B).

In accordance with the statutory

criteria discussed in this notice, we are

proposing to amend the clothes washer

energy efficiency standards. The

proposed standards are based on a Joint

Stakeholders Comment

recommendation submitted to the

Department by clothes washer

manufacturers and energy conservation

advocates. (Joint Comment, No. 204).

The Joint Stakeholders consist of the

following: Alliance Laundry Systems

LLC; Amana Appliances; Asko

Incorporated; Frigidaire Home Products;

General Electric Appliances (GEA),

Maytag Corporation; Miele, Inc.; Fisher

& Paykel Ltd; Whirlpool Corporation;

Alliance to Save Energy; American

Council for an Energy Efficient

Economy (ACEEE); Appliance

Standards Awareness Project; California

Energy Commission (CEC); City of

Austin, Texas; Natural Resources

Defense Council (NRDC); Northwest

Power Planning Council; and Pacific

Gas and Electric (PG&E). The proposal

as submitted in the Joint Stakeholders

Comment consists of four parts as

follows:

‘‘Clothes Washer Energy Standard.

The clothes washer energy standards for

standard class clothes washers shall be

1.04 modified energy factor (MEF) in 1/

1/2004 and 1.26 MEF in 1/1/2007. The

energy test procedure will be revised to

ensure that variability between test

cloths will not significantly affect

remaining moisture content (RMC)

results. Additional clarifications will

also be made to test procedure.

Energy Star Labeling Program. Energy

Star levels shall be set as follows:

Standard Class Clothes Washers—1.26

MEF in 2001; 1.42 MEF in 2004;

Refrigerator/Freezers—10% better than

the 2001 standard in 2001; change to

15% better than the 2001 in 2004.

Tax Credit for the Production of

Energy Efficient Clothes Washers and

Refrigerator-Freezers. The credit shall

provide for two energy efficiency tiers,

each with separately designated funds.

There is $30 million in each designated

fund per company per efficiency tier.

Cap of $60 million per company for the

two funds or yearly cap with carry

forward. Annual total tax credit cannot

exceed in any taxable year 2% of

corporate gross revenues as determined

by average of 3 prior years.

Standard Class Clothes Washers: Two

tiers coterminous 2001–2006; $50 per

unit for products manufactured with a

1.26 MEF and $100 per unit for

products manufactured with a 1.42

MEF, increasing to 1.5 MEF in 2004.

Includes residential-style ‘‘coinoperated’’ washers.

Refrigerators: First tier effective in

2001. $50 per unit for products

manufactured 10% above 2001

minimum efficiency standard. Credit

runs through 2004. Second tier also

effective in 2001 and runs through 2006.

It is $100 for products manufactured

15% above the 2001 minimum

efficiency standard. Credits apply to

automatic defrost refrigerator-freezers

only, at 16.5 cubic feet internal volume

and above.

Voluntary Industry Water Program.

Water factor reporting shall be part of a

voluntary industry sponsored program.

AHAM members agree to publicly

disclose through AHAM, water factors

for each model that meets Energy Star/

Tax Credit MEF levels, starting

sometime in calendar year 2001. In

calendar year 2002 and each year

thereafter, industry-wide shipment

weighted average water factors for units

shipped in the previous year shall be

reported by AHAM. Water factor

calculations will use Appendix J water

factor through 2003 and will use

Appendix J1 thereafter. Starting in 2007,

AHAM members agree to report water

factor for all models. AHAM will

sponsor water conference.’’ (Joint

Comment, No. 204).

This rulemaking only addresses the

clothes washer energy standards of this

agreement. The above proposed

standard, based on this agreement

would go into effect in stages, with the

first level going into effect on January 1,

2004, and the second level going into

effect on January 1, 2007. The initial

standard is a 22 percent (%) reduction

in energy consumption over the current

standard or a MEF of 1.04, and can be

attained with current vertical-axis (Vaxis) clothes washer designs. The later,

more stringent standard, is a 35 percent

reduction in energy consumption over

the current standard or a MEF of 1.26.

While both vertical- and horizontal-axis

(H-axis) design clothes washers are

currently available in retail appliance

stores at these levels, they represent less

than nine percent of the washers sold

per year.

The Department’s analyses indicates

that the proposed standards, trial

standard level of a 1.04 MEF in 2004

and a 1.26 MEF in 2007 saves an

estimated 5.52 quads of energy over 27

years (2004–2030), a significant amount.

This amount is more than the primary

energy used for heating water in all U.S.

buildings (residential, commercial and

industrial) in 1997 (3.82 quads). The

economic impacts on consumers (i.e.,

the average life-cycle cost (LCC) savings)

are positive.

The national NPV of trial standard

level of a 1.04 MEF in 2004 and a 1.26

MEF in 2007 is $15.3 billion from 2004–

2030 in 1997 dollars. This is the

estimated total value of future savings

discounted to 1997 minus the estimated

increased equipment costs also

discounted to 1997. The clothes washer

industry net present value (INPV) today

is estimated to be $1,452 million. If we

adopt trial standard level proposed, we

expect manufacturers may lose between

28.6–36.0% of the INPV, which is

approximately $411.0–$518.3 million.

With the present value of future energy

savings for the U.S. of $15.3 billion, this

would exceed industry losses due to

energy efficiency standards by about 30

times. Additionally, based on our

interviews with the five major

manufacturers, we do not expect any

plant closings or loss of employment

because the manufacturers stated that

they would stay in business.

The proposed standard has significant

environmental benefits, reducing

greenhouse gas emissions and air

pollution. This proposed standard level

would result in cumulative greenhouse

gas emission reductions of 95.1 million

59552 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

1The Department recognizes that the

Environmental Protection Agency is considering

regulations which could affect the amount of sulfur

in home heating oil. 2 DOE estimates that standards will result in 5

coal-fired and 11 gas-fired power plants avoided.

3Part B of Title III of the Energy Policy and

Conservation Act, as amended by the National

Energy Conservation Policy Act, the National

Appliance Energy Conservation Act, the National

Appliance Energy Conservation Amendments of

1988, and the Energy Policy Act of 1992, is referred

to in this notice as the ‘‘Act.’’ Part B of Title III is

codified at 42 U.S.C. 6291 et seq. Part B of Title III

metric tons (Mt) of carbon dioxide (CO2

equivalent. Additionally, air pollution

would be reduced by the elimination of

253.5 thousand metric tons of nitrous

oxides (NOX) and 28.1 thousand metric

tons of sulfur dioxide (SO2) from 2004–

2030. The NOX reduction are derived

from the power sector and household

emissions, whereas the SO2 reductions

are derived only from household

emission.

The proposed standard also saves a

significant quantity of water, which

amounts to 11.59 trillion gallons

through the period 2004–2030.

Therefore, DOE has determined that

the benefits (energy and water savings,

consumer life cycle cost savings,

national net present value increase, job

creation and emission reductions) to the

nation outweigh the burdens (loss of

manufacturer net present value and

consumer life cycle cost increases for

some users of clothes washers). We

conclude that the proposed standard of

a 1.04 MEF in 2004 and a 1.26 MEF in

2007 is economically justified.

Furthermore, DOE has determined this

standard level is technologically

feasible. Clothes washers reaching this

standard level already are commercially

available in both V- and H-axis models.

II. Introduction

A. Consumer Overview

The Energy Policy and Conservation

Act, as amended, specifies that the

Department must consider, for amended

standards, those standards that ‘‘achieve

the maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified’’ and which

will ‘‘result in significant conservation

of energy.’’ Accordingly, today’s

proposed rule would be amending the

energy conservation standard for

residential clothes washers.

We are currently establishing a new

energy efficiency standard for clothes

washers that will amend the standard

set in 1994. When today’s proposed

standards go into effect, they will

essentially require more efficient

Standard class clothes washers. The

efficiency levels can be met by either

top or front loading machines. The

major stakeholders, including

manufacturers and energy efficiency

advocates, have jointly submitted a

proposed clothes washer efficiency

standard to the Department that they

both feel is technically feasible and

economically justified. The proposed

standard would go into effect in two

stages. The first stage would begin

January 1, 2004, and require that all new

residential clothes washers be 22

percent more efficient than today’s

baseline clothes washer. The second

stage would begin January 1, 2007, and

require that all new residential clothes

washers be 35 percent more efficient

than today’s baseline clothes washer.

The Department has reviewed this

proposal and its analyses, and agrees

that the standard they proposed is

technically feasible and economically

justified. The Department therefore

proposes to amend the energy

conservation standard for Standard class

clothes washers for residential

applications as recommended in the

joint stakeholders proposal and

announce a public hearing.

As a result of today’s proposed rule,

clothes water efficiency standard will

provide significant energy savings and

water savings to the nation. The

Department’s analyses indicates that the

proposed standards would save an

estimated 5.52 quads of energy over 27

years (2004 to 2030). That is equivalent

to saving enough electricity to light 16

million U.S. homes for 25 years, while

cutting greenhouse gas emissions by an

amount equal to that produced by three

million cars every year. This proposed

standard level would result in

cumulative greenhouse gas emission

reductions of 95.1 million metric tons

(Mt) of carbon dioxide (CO2) equivalent.

Additionally, air pollution would be

reduced by the elimination of 253.5

thousand metric tons of nitrous oxides

(NOX) and 28.1 thousand metric tons of

sulfur dioxide (SO2) from 2004 to 2030.

The NOX reductions are derived from

the power sector and household

emissions. The SO2 reductions are

derived only from household emissions

and is a result of less home heating oil

and LPG being used in oil-fired and

LPG-fired water heaters for water

heating.1 DOE is seeking comment on

what will be the likely impact of EPA

rules, such as its proposed rule to

reduce sulfur levels in highway diesel

fuel, on home heating oil sulfur levels

and household SO2 emissions. In 2020,

the standards will save the amount of

electricity generated by 15 large, 400

megawatt, power plants. 2 The standards

will save enough water to supply the

needs of 6.6 million households for 25

years. The water savings will reach up

to 11 trillion gallons, meaning less water

needs to be pumped from America’s

aquifers and rivers, and less strain on

many of the nation’s overtaxed water

and sewer systems. In total, we

estimated the net present value (NPV) to

the nation of this standard to be $15.3

billion from 2004 to 2030.

The proposed clothes washer energy

efficiency standard will not impact

clothes washer features valued by

consumers. For instance, consumers

will still be able to purchase either a top

loading clothes washer or a front

loading machine, whichever they prefer.

The energy and water savings will result

primarily from a variety of design

changes, such as higher spin speeds,

more efficient use of hot water, more

sensitive clothes load technologies,

more efficient motors, and the increased

use of spray rinse cycles. The

Department does not expect the

cleaning ability or reliability of washing

machines to be compromised by the

design changes anticipated under the

proposed clothes washer standard.

The Department expects the purchase

price of the high efficiency clothes

washers (i.e., 35 percent efficiency

increase) to be approximately $200

higher than the average price of clothes

washers today. Although the purchase

cost is expected to increase, the energy

and water efficiency gains will result in

lower washer-related energy costs and

water costs, saving consumers $30 a

year on their utility bills and 18 gallons

of water for every load of wash. As such,

the life cycle cost analysis estimates that

the payback period for the high

efficiency machines will be

approximately 7 years. In other words,

the energy and water cost savings will

enable the average consumer to recoup

the additional $200 he/she had to spend

on the purchase of the high efficiency

machine in 7 years through the energy

and water cost savings. When these

savings are summed over the lifetime of

the high efficiency machine, consumers

will save $260, on average, compared to

today’s baseline clothes washing

machines.

B. Authority

Part B of Title III of the Energy Policy

and Conservation Act, Pub. L. 94–163,

as amended by the National Energy

Conservation Policy Act, Pub. L. 95–

619, by the National Appliance Energy

Conservation Act, Pub. L. 100–12, by

the National Appliance Energy

Conservation Amendments of 1988,

Pub. L. 100–357, and the Energy Policy

Act of 1992, Pub. L. 102–486 3 (the Act

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59553

of the Energy Policy and Conservation Act, as

amended by the National Energy Conservation

Policy Act only, is referred to in this notice as the

National Energy Conservation Policy Act.

or EPCA) created the Energy

Conservation Program for Consumer

Products other than Automobiles. The

consumer products subject to this

program (often referred to hereafter as

‘‘covered products’’) include clothes

washers.

Under the Act, the program consists

essentially of three parts: testing,

labeling, and Federal energy

conservation standards. The

Department, in consultation with the

National Institute of Standards and

Technology, amends or establishes new

test procedures for each of the covered

products. Section 323. The test

procedures measure the energy

efficiency, energy use, or estimated

annual operating cost of a covered

product during a representative average

use cycle or period of use. They must

not be unduly burdensome to conduct.

Section 323(b)(3). A test procedure is

not required if DOE determines by rule

that one cannot be developed. Section

323(d)(1). Test procedures appear at 10

CFR Part 430, Subpart B.

A test procedure promulgated under

Section 323 of the Act must be

reasonably designed to produce test

results which measure energy

efficiency, energy use, water use (in the

case of shower heads, faucets, water

closets and urinals), or estimated annual

operating cost of a covered product

during a representative average use

cycle or period of use, and must not be

unduly burdensome to conduct. EPCA,

Section 323(b)(3). A test procedure is

not required if DOE determines by rule

that one cannot be developed. EPCA,

Section 323(d)(1). One hundred and

eighty days after a test procedure for a

product is adopted, no manufacturer

may make representations with respect

to energy use, efficiency or water use of

such product, or the cost of energy

consumed by such product, except as

reflected in tests conducted according to

the DOE procedure. EPCA, Section

323(c)(2). This 180-day period may be

extended for up to an additional 180

days if the Secretary determines that the

requirements of Section 323(c)(2) would

impose undue burden. EPCA, Section

323(c)(3).

Section 323(e) of the Act requires

DOE to determine to what extent, if any,

a proposed test procedure would alter

the measured energy efficiency,

measured energy use or measured water

use of any covered product as

determined under the existing test

procedure. If DOE determines that an

amended test procedure would alter the

measured efficiency or measured use of

a covered product, DOE is required to

amend the applicable energy

conservation standard accordingly.

EPCA, Section 323(e)(2).

The Federal Trade Commission (FTC)

prescribes rules governing the labeling

of covered products after DOE publishes

test procedures. Section 324(a). The FTC

labels indicate the annual operating cost

for the particular model and the range

of estimated annual operating costs for

other models of that product. Section

324(c)(1). Disclosure of estimated

operating cost is not required if the FTC

determines that such disclosure is not

likely to assist consumers in making

purchasing decisions, or is not

economically feasible. In such a case,

the FTC must require a different useful

measure of energy consumption. Section

324(c). At the present time, there are

Federal Trade Commission rules

requiring labels for the following

products: room air conditioners,

furnaces, clothes washers, dishwashers,

water heaters, refrigerators, refrigeratorfreezers and freezers, central air

conditioners and central air

conditioning heat pumps, and

fluorescent lamp ballasts.

The National Appliance Energy

Conservation Act of 1987 amended the

Act to impose prescriptive standards

(design feature requirements) for clothes

washers as part of the energy

conservation program for consumer

products. EPCA, § 325(g), 42 U.S.C.

6295(g). The design feature requirement

that clothes washers shall have an

unheated rinse option was effective for

appliances manufactured on or after

January 1, 1988. The Act required the

Department to conduct a rulemaking by

January 1, 1990, to determine if the

above mentioned standards should be

amended. The Act provided that any

amendment to the standards would

apply to products manufactured three

years after the rulemaking. The Final

Rule was issued on May 14, 1991, and

is effective for products manufactured

on or after May 14, 1994, (hereinafter

referred to as the May 1991 Final Rule)

which required top loading compact

clothes washers (less than 1.6 cubic feet

capacity) to have an energy factor (EF)

of 0.90 cubic feet/kilowatt-hours/cycle

(cu.ft/Kwh/cycle) and top loading

standard clothes washers (1.6 cu. ft. or

greater capacity) to have an EF of 1.18

cu. ft./Kwh/cycle). 56 FR 22279. The

Act also requires the Department to

conduct a subsequent rulemaking no

later than five years after the date of

publication of the previous final rule.

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.

Section 325(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. After reviewing

comments on the proposal, DOE must

then determine that the benefits of the

standard exceed its burdens, based, to

the greatest extent practicable, on a

weighing of the following seven factors:

(1) The economic impact of the

standard on the manufacturers and on

the consumers;

(2) 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, initial charges, or maintenance

expenses;

(3) The total projected amount of

energy, or as applicable, water, savings

likely to result directly from the

standard;

(4) Any lessening of the utility or the

performance of the covered products

likely to result from the standard;

(5) The impact of any lessening of

competition, as determined in writing

by the Attorney General, that is likely to

result from the standard;

(6) The need for national energy and

water conservation; and

(7) Other factors the Secretary

considers relevant.

In addition, Section 325(o)(2)(B)(iii),

42 U.S.C. 6295(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, and as applicable, water,

savings during the first year that the

consumer will receive as a result of the

standard, as calculated under the

applicable test procedure. * * *’’ The

rebuttable presumption test is an

alternative path to establishing

economic justification.

Section 327 of the Act addresses the

effect of Federal rules on State laws or

regulations concerning testing, labeling,

and standards. Generally, all such State

laws or regulations are superseded by

the Act unless specifically exempted in

Section 327. The Department can grant

a waiver of preemption in accordance

with the procedures and other

provisions of Section 327(d) of the Act.

42 U.S.C. 6297(d).

59554 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

C. Background

1. Current Standards

The existing clothes washer efficiency

standards have been in effect since

1994. Energy efficiency for a clothes

washer is measured in terms of an

energy factor (EF), which measures

overall clothes washer efficiency, in

terms of cubic feet per kilowatt-hour per

cycle, and is determined by the DOE test

procedure. 10 CFR Part 430, Subpart B,

Appendix J. The current clothes washer

efficiency standards are as follows:

• Top loading, compact (less than 1.6

cubic feet capacity), EF = 0.90.

• Top loading, standard (1.6 cubic

feet or greater capacity), EF = 1.18.

• Top loading, semi-automatic, must

have an unheated rinse option.

• Front loading, must have an

unheated rinse option.

• Suds saving, must have an

unheated rinse option.

2. History of Previous Rulemakings

On November 14, 1994 DOE

published an Advance Notice of

Proposed Rulemaking (ANOPR). 59 FR

56423. On November 19, 1998, DOE

published a Supplemental ANOPR.

(Hereafter referred to as the 1998

Supplemental ANOPR.) 63 FR 64344. In

the 1998 Supplemental ANOPR, we

provided interested persons an

opportunity to comment on:

(1) The product classes that we

propose to analyze;

(2) The analytical framework, models

(e.g., the Government Regulatory Impact

Model (GRIM)), and tools (e.g., a Monte

Carlo sampling methodology, and lifecycle-cost (LCC) and national energy

savings (NES) spreadsheets) that we

plan to use in performing analyses of

the impacts of standards; and

(3) The results of preliminary analyses

for LCC, payback and national energy

savings contained in the Preliminary

Technical Support Document: Energy

Efficiency Standards for Consumer

Products: Clothes Washers (TSD) dated

October 1998 and summarized in the

1998 Supplemental ANOPR.

3. Process Improvement

The fiscal year (FY) 1996

appropriations legislation imposed a

moratorium on proposed or final rules

for appliance efficiency standards for

FY 1996. Public Law 104–134. During

the moratorium, the Department

examined the appliance standards

program and how it was working.

Congress advised DOE to correct the

standards-setting process and to bring

together stakeholders (such as

manufacturers and environmentalists)

for assistance. We consulted with

energy efficiency groups, manufacturers,

trade associations, state agencies,

utilities and other interested parties to

provide input to the process used to

develop appliance efficiency standards.

As a result, on July 15, 1996, the

Department published a Final Rule:

Procedures for Consideration of New or

Revised Energy Conservation Standards

for Consumer Products (referred to as

the Process Rule) (61 FR 36974),

codified at 10 CFR Part 430, Subpart C,

Appendix A. DOE completed this

review and decided to use the Process

Rule, to the extent possible, in the

development of the revised clothes

washer standards.

We developed an analytical

framework for the clothes washer

standards rulemaking for our

stakeholders. The analytical framework

described the different analyses (e.g.,

LCC, payback and manufacturing

impact analyses (MIA)) to be conducted,

the method for conducting them, the use

of new LCC and national energy savings

(NES) spreadsheets, and the relationship

between the various analyses. We have

conducted several meetings, workshops

and discussions regarding energy

efficiency standards for clothes washers.

These workshops included discussions

on proposed design options and a

preliminary engineering analysis on

November 15, 1996; development of an

analytical framework for appliance

standards rulemaking on July 23, 1997;

and development of two new

spreadsheet tools for LCC and NES on

March 11, 1998. We conducted public

hearings on December 15, 1998, to

receive additional comments on the

1998 Supplemental ANOPR and on July

22, 1999, to discuss the process,

analytical tools and uncertainties with

the test procedures.

In this rulemaking we incorporated

the recommendations made by the

Advisory Committee on Appliance

Energy Efficiency Standards on April

21, 1998. (Advisory Committee, No. 96).

These recommendations relate to using

the full range of consumer marginal

energy prices (CMEP) in the LCC

analysis (replacing the use of national

average energy prices), defining a range

of energy price futures for each fuel

used in the economic analyses and

defining a range of primary energy

conversion factors and associated

emission reductions, based on the

generation displaced by energy

efficiency standards for each

rulemaking. We discuss how these

recommendations have been

incorporated in the discussions on

methodology (Section IV). Marginal

energy prices are used in the LCC,

payback and NES analyses. Because the

NES results are inputs to the analyses

for utility, emissions and employment;

these analyses are also impacted by

using marginal rates.

4. Test Procedures

Federal test procedures for clothes

washers were first established in 1977.

Simultaneous with the rulemaking for

clothes washer standards, the

Department was also in the process of

revising the clothes washer test

procedure. The Department needed to

address a number of innovative

technologies for which there were no

test procedures. A number of proposals

were published, one on December 22,

1993, (58 FR 67710) and another on

March 23, 1995. 60 FR 15330. In its

comments to the March, 1995 proposed

rule, AHAM requested that DOE adopt

an additional new test procedure, based

on current consumer habits, which

would be used in considering the

revision of the clothes washer energy

conservation standards, and would go

into effect upon issuance of standards.

On April 22, 1996, the Department

issued a supplemental Notice of

Proposed Rulemaking proposing such a

new test procedure, Appendix J1, as

well as certain additional revisions to

the currently applicable test procedure

in Appendix J to Subpart B of 10 CFR

Part 430. 61 FR 17589. The

supplemental notice was published to

seek comments on whether DOE should

adopt the AHAM recommended test

procedure with certain changes. The

Final Rule, published on August 27,

1997, adopted this recommendation. 62

FR 45484. Appendix J is the current

applicable test procedure. Appendix J1

is informational and will not become

mandatory until the energy conservation

standards of this rule become effective.

Appendix J1 includes a modified energy

factor (MEF) which replaces the EF.

Contrasting with the previous EF

(energy factor) descriptor, the MEF

descriptor incorporates clothes dryer

energy by consideration of the

remaining moisture content (RMC) of

clothes leaving the clothes washer.

Other substantive differences between

the test procedures include using

different water temperatures for testing

and using cloth loads in J1 and not in

J. The issuance of the Final Rule was a

major step in accelerating the

development of clothes washer

standards because it provided the basis

upon which the energy and water

consumption, as well as the

manufacturing costs would be

submitted.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59555

III. General Discussion

A. Test Procedure

As part of the July 15, 1996, Process

Rule (61 FR 36974), we stated that a

final modified test procedure would be

issued prior to the notice of proposed

rulemaking on standards. The process

described in this rule provides for

greatly enhanced opportunities for

public input, improved analytical

approaches, and encouragement of

consensus-based standards. Section 7,

Test Procedures, of the Process Rule

provides that modifications in test

procedures will be proposed before

revised standards are proposed. Today’s

proposed revisions to the clothes

washer test procedures follows the

process in the Process Rule in that the

Final Rule for test procedures was

published on August 27, 1997, with the

exception of today’s proposed revisions

to the test procedure language as

recommended by clothes washer

manufacturers and energy conservation

advocates. (Joint Comment, No. 204)

During this standards rulemaking, it

was discovered that the test cloth to be

used for determining the RMC was

giving inconsistent results. Over the

approximately 20 year period that the

original clothes washer and clothes

dryer test procedures have been used,

no variations or inconsistency of washer

or dryer test results had been attributed

to variations in the test cloths. A

significant inconsistency in RMC test

results under the new Appendix J1

procedure was noted by Alliance

Laundry Systems LLC and was brought

to the Department of Energy’s attention

in a letter dated June 7, 1999. (Alliance

Laundry Systems, No. 179). In the tests

referred to in this letter, which were run

at Intertek Testing Services (ITS), the

RMC values that were obtained in one

machine with two different lots of

energy test cloths differed by over 11

percentage points (67.9% versus

56.0%). When these two lots of energy

test cloth were run through a second

machine, a similar difference in RMC

occurred.

The effect of RMC on MEF can be

substantial, particularly for washers

which are more efficient with respect to

electrical consumption and use of hot

water. The following scenario

illustrates: For a high efficiency

horizontal axis washer, an 18% increase

in RMC (54.5%–64.5%) will result in a

13% decrease in MEF (1.52–1.33). For a

lower efficiency washer, a 17% increase

in RMC (57.7%–67.7%) will result in

only a 6% decrease in MEF (0.82–0.77).

The Department investigated possible

causes for the inconsistent test results,

and results are summarized in the DOE

report, ‘‘Development of a Standardized

Energy Test Cloth for Measuring

Remaining Moisture Content in a

Residential Clothes Washer,’’ May 2000.

(DOE, No. 200). As part of our

investigation into the cause of these

discrepancies, we found that various

lots of test cloth will yield inconsistent

RMC results. To understand the effects

of operating variables and cloth

specifications, it was necessary to

conduct laboratory tests to determine

RMC. To insure that test results would

not be influenced or biased by any

manufacturer’s product (clothes

washer), we used an extractor to remove

moisture content. An extractor is a

centrifuge—basically a rotating basket

that has a controllable speed to produce

a variety of centrifugal forces. The speed

was varied to impose different

centripetal accelerations on the test

load. These accelerations are reported in

terms of gravitational acceleration (g).

We also soak the cloth in a tub at

controlled temperature rather than use

the agitated soak cycle provided by a

typical washer. The RMC tests closely

resembles those specified in the energy

test procedure.

An extractor based test has been

established to examine RMC values at

different gravitational forces (g-forces).

A correction factor is derived by which

the deviation between a new production

batch of test cloth and a standard

reference test cloth is measured. This

deviation is measured as the root mean

square between the set of measured

RMC values and the set of standard

RMC values. If this absolute deviation is

below 2%, then no correction factors are

needed in MEF tests using that batch of

cloth. If the absolute root-mean-square

(RMS) difference between the cloth

RMC values and standard RMC values is

above 2%, then correction factors may

be applied when using the cloth to test

the MEF of a clothes washer.

As part of this rulemaking, we have

included revisions to the test procedure

based on our proposed language

addressed in the May 2000 report

dealing with the energy test cloth, RMC,

extractor testing and the correction

factor and Joint Stakeholders Comment.

(Joint Comment No. 204). In addition,

we incorporated AHAM’s comments

and Joint Stakeholders Comment

requesting minor editorial changes to

help clarify both Appendix J and J1.

(AHAM , Nos. 197 and 199, and Joint

Comment No. 204). These changes have

been included in their entirety in this

rulemaking pertaining to the test

procedure.

B. Technological Feasibility

1. General

There are or have been clothes

washers in the market at all of the

efficiency levels analyzed in today’s

notice. Therefore, the Department

believes all of the efficiency levels

discussed in today’s notice are

technologically feasible.

2. Maximum Technologically Feasible

Levels

Under the guidelines in the Process

Rule, DOE will eliminate from

consideration, early in the process, any

design option which is not practicable

to manufacture, install, or service, will

eliminate product utility features or for

which there are safety concerns that can

not be resolved. In order to conduct the

screening analysis, the Department

gathers information regarding all current

technology options and prototype

designs. In consultation with interested

parties, the Department develops a list

of design options for consideration in

the rulemaking. All technologically

feasible design options are candidates in

this initial assessment. We did not reject

any design options from consideration

in this rulemaking.

The Department considers design

options technologically feasible if they

are already in use by the respective

industry or research has progressed to

the development of a working

prototype. The Process Rule sets forth a

definition of technological feasibility as

follows: ‘‘Technologies incorporated in

commercially available products or in

working prototypes will be considered

technologically feasible.’’ 10 CFR 430,

Subpart C, Appendix A(4)(a)(4)(I).

When we amend or consider new

standards, we must consider those that

‘‘shall be designed to achieve the

maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified.’’ (Section

325 (l)(2)(A)). For this clothes washer

rulemaking, the Department determined

that a 50% reduction in the energy use

of the baseline model (corresponding to

an MEF of 1.634) is the maximum

technologically feasible level for the

Standard class (1.6 ft.3 or greater

capacity). This determination was based

on information relative to existing

technology options and prototype

designs. In consultation with interested

parties, the Department developed a list

of design options for consideration. All

technologically feasible design options

were candidates in this initial

assessment. Furthermore, the clothes

washer rulemaking analysis was

originally performed using the design

59556 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

4For this calculation, the Department calculated

cost-of-operation based on the DOE test procedures

with assumed usage shown in Chapter 7 of the TSD.

Consumers that use the clothes washer less will

experience a longer payback while those that use

them more will have a shorter payback.

option approach. Using this approach,

information was gathered on all possible

energy saving design options. The

Department gathered design option

information from previous clothes

washer analyses, trade publications,

industry research organizations, product

brochures from domestic and foreign

manufacturers, and appliance

conferences, including the International

Appliance Technical Conference

(IATC). The ‘‘Draft Report on Design

Options for Clothes Washers’’ and

‘‘Draft Report on the Preliminary

Engineering Analysis for Clothes

Washers’’ provide details on the

potential technologies. (Clothes Washer

Public Workshop, No. 55B and 55C).

3. Product Classes

DOE divides clothes washers into

classes based on the size and features,

e.g., suds saving. For the existing

standards, DOE defines residential

clothes washers in the following classes:

• Top loading, compact (less than 1.6

cubic feet capacity);

• Top loading, standard (1.6 cubic

feet or greater capacity);

• Top loading, semi-automatic;

• Front loading; and

• Suds saving.

The Department is proposing to

maintain the current definitions for all

these product classes. For this

rulemaking, the Department is

proposing to maintain the current

requirements for the Semi-Automatic

Top-Loading and Suds Saving classes.

In the May 1991 Final Rule, these

classes were not subject to minimum

energy conservation standards because

they represented a small portion of the

market, and due to a lack of adequate

information to analyze them. The

standard for these classes will continue

to be ‘‘not applicable,’’ except for the

1988 requirement of an unheated rinse

water option.

C. Energy Savings

1. Determination of Savings

The Department forecasted energy

savings through the use of a national

energy savings (NES) spreadsheet,

which forecasted energy savings over

the period of analysis for candidate

standards relative to the base case. The

Department quantified the energy

savings that would be attributable to a

standard as the difference in energy

consumption between the candidate

standards case and the base case. The

base case represents the forecast of

energy consumption in the absence of

amended mandatory efficiency

standards.

The NES spreadsheet model is

described in Section IV.e of this notice,

infra, and in Chapters 9 and 10 of the

TSD. The NES spreadsheet model first

calculates the energy savings in site

energy. The energy savings to the nation

is expressed in quads, that is,

quadrillions of British thermal units

(Btus).

2. Significance of Savings

Under Section 325(o)(3)(B) of the Act,

the Department is prohibited from

adopting a standard for a product if that

standard would not result in

‘‘significant’’ energy savings. While the

term ‘‘significant’’ has never been

defined in the Act, the U.S. Court of

Appeals, in 768 F.2d 1355, 1373 (D.C.

Cir. 1985), concluded that Congressional

intent in using the word ‘‘significant’’

was to mean ‘‘non-trivial.’’

D. Rebuttable Presumption

The National Appliance Energy

Conservation Act established new

criteria for determining whether a

standard level is economically justified.

Section 325(o)(2)(B)(iii) states:

‘‘If the Secretary finds 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, there

shall be a rebuttable presumption that such

standard level is economically justified. A

determination by the Secretary that such

criterion is not met shall not be taken into

consideration in the Secretary’s

determination of whether a standard is

economically justified.’’

If 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 we presume that such

standard is economically justified.4 This

presumption of economic justification

can be rebutted upon a proper showing.

E. Economic Justification

As noted earlier, Section

325(o)(2)(B)(i) of the Act provides seven

factors to be evaluated in determining

whether a conservation standard is

economically justified.

1. Economic Impact on Manufacturers

and Consumers

The July 1996 Process Improvement

Rule established procedures,

interpretations and policies to guide the

Department in the consideration of new

or revised appliance efficiency

standards (Procedures for Consideration

of New or Revised Energy Conservation

Standards for Consumer products). 61

FR 36974 (July 15, 1996). Key objectives

of the rule have direct bearing on the

implementation of manufacturer impact

analyses. First, the Department will

utilize an annual cash flow approach in

determining the quantitative impacts on

manufacturers. This includes a shortterm assessment based on the cost and

capital requirements during the period

between the announcement of a

regulation and the time when the

regulation comes into effect, and a longterm assessment. Impacts analyzed

include industry net present value, cash

flows by year, changes in revenue and

income, and other measures of impact,

as appropriate. Second, the Department

will analyze and report the impacts on

different types of manufacturers, with

particular attention to impacts on small

manufacturers. Third, the Department

will consider the impact of standards on

domestic manufacturer employment,

manufacturing capacity, plant closures

and loss of capital investment. Finally,

the Department will take into account

cumulative impacts of different DOE

regulations on manufacturers.

For consumers, measures of economic

impact are the changes in purchase

price and annual energy expense. The

purchase price and annual energy

expense, i.e., life-cycle cost, of each

standard level are presented in Chapter

7 of the TSD. Under Section 325 of the

Act, the life-cycle cost analysis is a

separate factor to be considered in

determining economic justification.

2. Life-Cycle Cost (LCC)

One measure of the effect of proposed

standards on consumers is the change in

operating expense as compared to the

change in purchase price, both resulting

from standards. This is quantified by the

difference in the LCC between the

baseline and the more efficient

technologies for the clothes washers

analyzed. The LCC is the sum of the

purchase price and the operating

expense, including installation and

maintenance expenditures, discounted

over the lifetime of the appliance.

For each clothes washer, we

calculated the life-cycle costs for six

efficiency levels: 20, 25, 35, 40, and

50% reduction in the energy use of the

baseline model. In addition, a two-step

standard as proposed by the Joint

Stakeholders Comment was analyzed. A

distribution of discount rates averaging

6.1% was used in the calculations. The

consumer is assumed to purchase a

clothes washer in 2004 or 2007 (for step

2 of the Joint Stakeholders Comment).

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59557

Price forecasts are taken from the 1999

Annual Energy Outlook of the Energy

Information Administration (DOE/EIA–

0383). Chapter 7 of the TSD contains the

details of the life-cycle cost calculations

including those considered under factor

seven below, infra.

3. Energy Savings

While significant conservation of

energy is a separate statutory

requirement for imposing an energy

conservation standard, the Act 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. The Department used

the NES spreadsheet results, discussed

earlier, in its consideration of total

projected savings. The savings are

provided in Section V of today’s notice.

4. Lessening of Utility or Performance of

Products

This factor cannot be quantified. In

establishing classes of products the

Department tries to eliminate any

degradation of utility or performance in

the products under consideration in this

rulemaking.

An issue of utility that was

considered in this rule concerns the

consumer utility of V-axis and H-axis

machines. We conducted consumer

focus groups and a conjoint analysis

study to address this issue.

5. Impact of Lessening of Competition

It is important to note that this factor

has two parts; on the one hand, it

assumes that there could be some

lessening of competition as a result of

standards; and 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, the

Department will provide the Attorney

General with copies of this notice and

the Technical Support Document for

review.

6. Need of the Nation To Conserve

Energy

Most of the non-monetary benefits of

the proposed standard are likely to be

reflected in improvements to the

environment, rather than in the security

or reliability of the Nation’s energy

system. We report the environmental

effects in Section V of today’s notice.

7. Other Factors

This provision 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. Section

325(o)(2)(B)(i)(VI), 42 U.S.C.

6295(o)(2)(B)(i)(VI).

Under this factor, we considered the

water savings from each standard level.

The Department received numerous

comments asking for the inclusion of a

water factor standard in addition to the

MEF standard. (City of Austin, No. 105

at 1; City of Bellingham, Washington,

Department of Public Works, No. 106 at

1; Lower Colorado River Authority

(LRCA), No. 109 at 1; Amy Vicker and

Associates, Inc., No. 110 at 1; City of

San Diego, No. 123 at 1; City of Santa

Barbara, Public Works Department, No.

125 at 1; City of Seattle, No. 126 at 2;

Santa Clara Valley Water District, No.

127 at 1; American Water Works

Association, No. 149 at 1; City of

Redmond, Office of the Mayor, No. 153

at 1; Massachusetts Water Resources

Authority, No. 152 at 4; State of New

Mexico, Office of the State Engineer, No.

158 at 1). As stated previously, the

Department is considering water savings

as a factor in determining the economic

justification of the clothes washer

standard level. However, the

Department does not have the authority

to prescribe a minimum water factor

standard.

Another factor that the Department

considered is the life-cycle cost impacts

on those subgroups of consumers who,

if forced by standards to purchase more

efficient washers, would choose to

repair their existing machines.

IV. Methodology

The methodology to be used in this

rulemaking was described in the 1998

Supplemental ANOPR and

accompanying TSD. In this section we

will discuss comments and changes in

the methodology. These changes were

performed because new data was

obtained or in response to comments

received after publication of the 1998

Supplemental ANOPR.

In general, when information is based

on periodic forecasts and surveys such

as the Annual Energy Outlook (AEO)

forecasts of energy prices and the

Residential Energy Consumption

Survey, both from the Energy

Information Administration (EIA), we

try to use the latest available

information. The analysis in support of

this proposed rule was performed using

RECS93 and AEO 1999 data. Just prior

to publication of this proposed rule both

RECS97 and AEO2000 data became

available. Although we do not expect a

significant difference in results by

updating to RECS97 and AEO2000, we

intend to use this updated information

for the final rule. We seek comment on

the use of the most current RECS and

AEO data.

A. Product Classes

The Supplemental ANOPR contained

three proposals regarding clothes

washer product classes. The first

proposal suggested eliminating the

Semi-Automatic Top-Loading, FrontLoading and Suds Saving classes

identified in the May 1991 Final Rule.

In its second proposal, the Department

proposed to increase the compact class

to include all clothes washers with a

volume less than 2.0 cubic feet. The

third proposal was to not establish

separate classes for Horizontal and

Vertical-axis clothes washers.

The Department received no

comments on its proposal to eliminate

the Semi-Automatic Top-Loading and

Suds Saving classes. In the May 1991

Final Rule, these classes were not

subject to minimum energy

conservation standards because they

represented a small portion of the

market, and due to a lack of adequate

information to analyze them. However,

the 1988 standard requiring an unheated

rise option is still applicable to these

classes. Given the continued absence of

information available to analyze these

classes and ensure that they could meet

the proposed standard levels, the

Department is proposing to maintain

these product classes but not to subject

them to minimum energy conservation

standards. However, the unheated rise

water option is still applicable to these

classes.

DOE received several comments

regarding changing the definition of the

compact clothes washers class

maximum capacity, from 1.6 cubic feet

to 2.0 cubic feet. Whirlpool believes that

this re-definition for the compact class

would better reflect the actual product

offerings that exist in the marketplace

which range from 1.6 to 1.96 cubic feet.

(Whirlpool, No. 141 at 3). Amana

Appliances is not opposed to the

change. (Amana, No. 146 at 1). ACEEE

and American Water Works Association

(AWWA) also find this proposal

acceptable. (ACEEE, No. 150 at 4 and

AWWA, No. 149 at 4). Maytag is

concerned that a clothes washer at 2.0

cubic feet, if not subjected to the same

standard as full size washers will

become a relatively larger volume seller.

This would result in a reduction in the

potential national energy and water

savings of the standard and may place

some manufacturers that have complied

with more stringent standards at a

competitive disadvantage. Accordingly,

Maytag recommends that the

Department develops safeguards as

retail market share or product sales

volume limits which, if exceeded,

would require the product to meet the

59558 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

same energy standards as full-size

washers. (Maytag, No. 137 at 4–5). PG&E

supported changing the ‘‘compact’’ size

to 2.0 cubic feet, up from 1.6 cubic feet

under the condition that the ‘‘compact’’

washers are required to at least meet the

25 percent more efficient standard level.

(PG&E, No. 189 at 1).

We received several comments in

support of maintaining the current limit

of 1.6 cubic feet for the compact class.

(Northwest Energy Efficiency Alliance,

No. 131 at 3; the Northwest Power

Planning Council, No. 135 at 2; Bosch,

No. 142 at 1; and Miele, No. 156 at 1).

GEA opposed the change in definition

because it believed there is substantial

room for these products to increase their

efficiency. (GEA, No. 143 at 11). The

Oregon Office of Energy commented

that the new 2.0 cu. ft. definition puts

a significantly greater number of more

efficient machines in the compact class.

For this reason it will insist that the

Department conduct enough of an

analysis on this class of products to

justify raising the standard for this class.

(Oregon, No. 162 at 2).

Staber Industries proposed removing

tub size as a factor in determining both

capacity and energy efficiency and

proposed instead classifying washers by

loading capacity. (Staber, Nos. 185 and

187).

The Department agrees that the

increasing the compact class size to 2.0

cu. ft. will increase the number of

washers in this class and possibly

incorporate products currently already

more efficient than compact models of

1.6 cu. ft. The Department has not been

provided any information in order to

conduct such an analysis. For this

notice the Department is maintaining

the existing 1.6 cu. ft. definition of the

compact product class and given the

small size of this market (less than one

percent) is proposing not to change the

minimum efficiency levels. However

given the new test procedure (Appendix

J1) and the change in descriptor it is

necessary to translate the current

standard of EF of 0.9 into an MEF value.

Since no mathematical translation is

possible, we have estimated this value

using engineering calculations and

assumptions which are detailed in the

TSD. This value is estimated to be an

MEF of 0.65.

For the Final Rule, the Department

will consider changes to the definition

and efficiency standards for the top

loading compact class. A new definition

could have different capacity

requirements (such as less than 2.0 cu.

ft.) and additional requirements for the

maximum external dimensions (such as

a width not to exceed 22.5 inches). The

Department will also consider any new

information on the efficiency of current

models under Appendix J1. The

Department seeks comment on these

issues.

The Department’s ANOPR proposal to

eliminate the Front-Loading product

class also received no negative

comments. NRDC commented that the

existence of a top-loading horizontalaxis washer clearly dispels the notion

that the location of a washer’s port of

access (Top or Front) is synonymous

with axis of rotation (Vertical and

Horizontal). Amana notes that because

of technological differences it would be

more appropriate to refer to the current

‘‘Front-Loading’’ and ‘‘Top-Loading’’

product classes as Horizontal-Axis and

Vertical-Axis (Amana, No. 146 at 1).

Elimination of the Front-Loader class is

invariably linked by many comments

with the need to establish separate

classes for V- and H-axis washers.

The Department received numerous

comments on the proposal not to

establish separate classes for V- and Haxis clothes washers. Comments

supportive of the Department’s proposal

were received from Maytag, Whirlpool,

Bosch, Staber, Miele, NRDC, the

Alliance to Save Energy, ACEEE, and

approximately fifteen state or city

agencies and utilities. (Maytag, No. 137

at 2; Whirlpool, No. 141 at 7; Bosch ,

No. 142 at 1; Staber, Nos. 185 and 187;

Miele, No. 156 at 1; NRDC, No. 138 at

5; the Alliance to Save Energy, No. 148

at 2; and ACEEE, No. 150 at 5).

GEA, Alliance Laundry and Amana

opposed the Department’s proposal.

GEA commented that the unique

characteristic and energy performance

of H- and V-axis washers require twoproduct classes with separate minimum

energy efficiency standards for each. Haxis are less convenient and potentially

less reliable with different systems or

features for loading clothes and adding

clothes during the wash cycle, longer

cycle times, smaller capacities, more

expensive detergents, and availability of

deep pre-soak which are important to

consumers. (GEA, No. 143 at 2).

Alliance Laundry commented that the

V- and H-axis product classifications

would ignore relevant consumer utility

differences and would combine two

distinct products which do not compete

in the market for energy comparison

purposes. (Alliance Laundry, No. 145 at

3). Amana commented that the

machines differ in cost/price, utility,

energy efficiency, performance, and

ergonomics. The integration of these

two categories into one will increase

rather than decrease confusion in the

marketplace with consumers. (Amana,

No. 146 at 2). These concerns, DOE

believes, are superceded by the Joint

Comment in which the same standard

was agreed to for V- and H-axis

products.

The Alliance to Save Energy

commented that recent technology

development shows that various axis

types can meet relatively stringent

performance criteria. (Alliance to Save

Energy, No. 148 at 2). The Department

agrees with this view. Recent product

introductions by Whirlpool Corporation

and Fisher & Paykel of high-efficiency

V-axis washers have positively

demonstrated that V-axis designs are

available for the same range of

efficiencies as H-axis washers. Since

both H-axis and V-axis washers can

achieve the same range of efficiency,

there is no basis for separate efficiency

standards based on axis of rotation or

orientation of loading. Additionally the

existence of a Top Loading horizontalaxis washers dispels the notion that

orientation of loading is necessarily

associated with efficiency. Therefore, in

today’s proposal the Department is

maintaining the Front Loading product

class but is proposing a single efficiency

standard for both the Front Loading and

the Top Loading, Standard class

washers.

B. Engineering Analysis

The engineering analysis develops

cost-efficiency relationships to show the

manufacturer costs of achieving

increased efficiency. Three

methodologies can be used to generate

the manufacturing costs needed for the

engineering analysis. These methods

include: (1) The design-option

approach, reporting the incremental

costs of adding design options to a

baseline model; (2) the efficiency-level

approach, reporting relative costs of

achieving energy efficiency

improvements; and/or (3) the costassessment approach which requires a

‘‘bottoms-up’’ manufacturing cost

assessment based on a detailed bill of

materials.

As summarized in the Supplemental

ANOPR, the engineering analysis was

conducted using the efficiency-level

approach. The cost-assessment

approach was also used to supplement

the efficiency-level approach because of

the existence of a proprietary

technology for which no data was

available. The objective of the

manufacturing cost assessment was to

quantify the differential manufacturing

costs of producing high efficiency

clothes washers based on (1) a

Whirlpool proprietary V-axis design,

and (2) commercially available V- and

H-axis designs.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59559

C. Life-Cycle Cost (LCC) Analysis

The effect of standards on individual

consumers includes a change in

operating expense (usually decreased)

and a change in purchase price (usually

increased). The life-cycle cost (LCC)

spread sheet is used to analyze the

economic impacts of possible standards

on individual consumers. This section

describes modifications to the LCC

spreadsheet model and revisions to data

inputs as a result to new data or

recommendations from comments

received after the publication of the

1998 Supplemental ANOPR. 63 FR

64353 (November 19, 1998).

Table 1 summarizes the assumptions

used in the LCC analysis for the 1998

Supplemental ANOPR analysis and the

changes made for this proposed rule

analysis than followed by a written

discussion of these changes.

TABLE 1.—ASSUMPTIONS IN THE LCC ANALYSIS 1

Parameter Supplemental ANOPR Proposed rule

Energy Price ...................................................... average prices .................................................. marginal prices.

Variation in Household Energy Prices, Energy

Use, and Water Heater Shares.

1993 RECS data .............................................. Marginal prices derived from 1993 RECS data

and adjusted to 1997 prices.

Energy Price Projections ................................... AEO 1998 reference case to the year 2020,

with extrapolations to the year 2030.

AEO 1999 reference, high & low cases to the

year 2020, with extrapolations to the year

2030; used FEMP methodology for extrapolations.

Water and Sewer Prices .................................... Urban ($0.00 to $7.84 per 1000 gallons) ........

Ave. price = $3.18 per 1000 gals ....................

Urban 0–$7.97.

Rural 0–$7.97.

Rural (no sewer) 0–$3.53.

Individual well 2.61 kWh/1000 gals.

Ave. price = $2.48 per 1000 gals.

Annual Real Change in Water and Sewer Cost

(Water Price Projections).

0 percent .......................................................... Urban = 3.01% (high 5.41%, low 0.53%).

Rural = 3.01% (high 5.41%, low 0.53%).

Rural with septic = 0.64% (high 2.93%, low

¥2.89%).

Individual well (electricity price escalation).

Manufacturer Cost ............................................. AHAM ............................................................... No change.

Manufacturer Mark-ups ...................................... Min. 1.000 ........................................................

Mean 1.175 ......................................................

Max. 1.350

Distribution: triangular

Range: varies with standard level.

Distribution: uniform.

Retail Mark-up .................................................... 1.4 .................................................................... No change.

Detergent Savings ............................................. not an input parameter ..................................... allowed as an input (detergent savings =

zero).

Discount Rate .................................................... Distribution (0–15 percent) ............................... No change.

Lifetime ............................................................... Distribution (12–17 years) ................................ No change.

Cycles Per Year ................................................. Distribution from RECS database (207–645) .. No change.

Start Year (Effective Date of Standard) ............. 2003 ................................................................. 2004 (and 2007 if a second tier).

1All prices and costs are shown in 1997 dollars.

Energy Prices. For the Supplemental

ANOPR the LCC spreadsheet model

sampled the individual prices paid by

households in the 1993 version of the

Residential Energy Consumption Survey

(RECS). These prices were updated

(scaled up or down based on AEO 1998

national prices) and converted to 1997

dollars. The Advisory Committee

recommended DOE use the full range of

consumer marginal energy prices

instead of national average energy

prices. Marginal energy prices are those

prices consumers pay (or save) for their

last units of energy used (or saved). The

Department agreed that marginal energy

prices would improve the accuracy of

the LCC analysis and estimated

marginal rates for electricity and natural

gas from the 1993 RECS database.

In accordance with the Advisory

Committee’s recommendation, the

Department elected to substitute

marginal energy prices for average

prices for calculating LCC and NPV. EIA

gathered monthly energy bills and

energy consumption data for the RECS

public use data. It did not gather

information on rate schedules, fixed

charges, or marginal prices. DOE

estimated consumer marginal electricity

and natural gas prices directly from

household data in the 1993 RECS public

use data survey as the change in

household monthly energy bills divided

by the change in monthly energy

consumption for each fuel, referred to as

the change in monthly bill method. This

provides a precise marginal energy rate

based on actual household bills.

Households for which marginal

energy prices could not be calculated

were eliminated, resulting in a

reduction of approximately 10% of the

households used from the RECS.

Although electricity rates were

calculated separately for four summer

months (June–September) and,

separately for winter (October–May)

months, unlike other appliances, the

usage of clothes washers for summer

and winter months is on average,

approximately constant.

In order to understand and

characterize regional variations in

pricing and distribution of fuel oil and

LPG, we collected information relating

to pricing and distribution of fuel oil

and LPG. We learned that bills paid by

residential consumers for both fuel oil

and LPG are essentially volume-driven,

with a single block rate. We interpreted

the average prices inherent in those

bills, as reported in the RECS public use

data, as being equivalent to marginal

prices for the purposes of the LCC price

analysis. A detailed description of the

methodology used to determine

marginal energy rates is contained in the

report entitled ‘‘Marginal Energy Prices

Final Report, July, 1999,’’ which can be

obtained at the website address: http://

www.eren.doe.gov/buildings/

codes_standards/applbrf/clwasher.html.

As an enhancement to the LCC

analysis for the proposed rule, Liquid

59560 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

Petroleum Gas (LPG or propane) was

added as a water heater fuel type.

Variation in Household Energy Prices,

Energy Use, and Water Heater Shares. In

addition to determining energy prices

RECS data is used to determine the

market share, i.e., percentage of water

heaters and dryers, that are electric, gas,

liquefied petroleum gas (LPG) or oil.

The current analysis was based on

Residential Energy Consumption Survey

1993 (RECS93) and Annual Energy

Outlook 1999 (AEO99). Although

demographic information, price and

equipment types change from survey to

survey, we do not expect that the

differences are significant enough to

change the outcome of this rulemaking.

Energy Price Projections. For the

proposed rule, the Annual Energy

Outlook 1999 (AEO99) forecasts

replaced AEO98 energy price forecasts

for electricity, gas and oil. Given the

uncertainty of projections of future

energy prices, DOE used scenario

analysis to examine the robustness of

proposed energy efficiency standards

under different energy price conditions.

The LCC calculations use these

scenarios. Each scenario provides a selfconsistent projection, integrating energy

supply and demand. The scenarios

differ from each other in the energy

prices that result. The Advisory

Committee suggested the use of three

scenarios. While many scenarios can be

envisioned, specification of three

scenarios should be sufficient to bound

the range of energy prices.

The AEO 1999 reference case

provides a well-defined middle

scenario. DOE also used AEO fuel price

forecasts under assumptions of high and

low economic growth. The future trend

in energy prices assumed in each of the

three scenarios is clearly labeled and

accessible in the LCC spreadsheet. The

Gas Research Institute (GRI) reference

case fuel price forecast is another choice

available in the LCC spreadsheet.

Stakeholders can easily substitute

alternative assumptions in the LCC

spreadsheet to examine additional

scenarios as needed.

Another modification for the

proposed rule analysis concerns the

extrapolation method used to project the

AEO energy prices from 2020 to 2030.

(The AEO contains energy prices

projections to the year 2020.) For the

ANOPR the price of electricity was

extrapolated based on the trend of the

last five years of the scenario used. For

gas and oil, prices values were kept

constant from the year at which the

extrapolation was necessary.

For the proposed rule we are now

using the approach EIA uses to forecast

fuel prices for the Federal Energy

Management Program (FEMP). This was

done to be consistent with the rest of the

energy forecasting also done by EIA.

Water and Sewer Prices. For the

Supplemental ANOPR the main source

of data on water and sewer prices was

from a 1994 survey of water prices in

major metropolitan areas by Ernst &

Young. The Ernst and Young data was

adjusted for service population, base

utility charges and average household

use by Al Dietemann of Seattle Water.

The Department received several

comments on this issue. Denver Water

suggested replacing the 1994 Rates

Study done by Ernst and Young and

using the 1998 Raftelis Study. (Denver

Water, No. 107 at 20). The American

Water Works Association (AWWA)

commented that an average water price

of $3.18 per thousand gallons as used

was too high. (AWWA, No. 108 at

64360). Energy Market and Policy

Analysis, Inc. observed that the data

was limited to certain metropolitan

areas and probably would overstate

water and sewer costs in nonmetropolitan areas. Therefore, use of the

data would probably overstate potential

water and sewer cost savings that might

be achieved by using a washer that uses

less water. (Energy Market and Policy

Analysis, Inc., No. 144 at 8).

In response to comments received and

for the proposed rule analysis, 1998

prices and projected escalation rates

were added for rural water and

wastewater to the previous estimates for

urban customers. The revised analysis,

based on the 1998 Raftelis Study,

divided water use into categories of

urban, rural with water and wastewater

utilities, rural with water utility service

and septic tank, and individual well

with septic tank. The range of prices

used for each category is: for urban areas

0–$7.97, rural areas 0–$7.97, rural areas

(no sewer) 0–$3.53, individual well 2.61

kWh/1000 gals. The resulting average

price is $2.48 per 1,000 gallons.

Water Price Projections. As of the time

of publication of the Supplemental

ANOPR, the Department had found no

national level water price forecasts and

thus the Supplemental ANOPR assumed

that future water prices would remain

constant. In the Supplemental ANOPR

the Department agreed that future water

prices should not be assumed to be

constant and described an approach to

establish marginal water prices and

escalation rates. See Chapter 7 of the

TSD for details on how these marginal

water prices and escalation rates where

determined.

At a workshop held on December 15,

1998, DOE detailed its proposal for

water prices and escalation rates.

Support for this proposal was given by

ACEEE, the Oregon Office of Energy,

NRDC, the Northwest Energy Efficiency

Alliance, PG&E, and the City of Seattle,

Seattle Public Utilities. (ACEEE, No. 150

at 1; Oregon Office of Energy, No. 162

at 7; NRDC, No. 138 at 14; Northwest

Energy Efficiency Alliance, No. 131 at 2;

PG&E, No. 130 at 2; and the City of

Seattle, Seattle Public Utilities, No. 126

at 2). In contrast, the Edison Electric

Institute (EEI) commented that the

escalation rate of 3.1% real will

probably overstate the change in water

and wastewater prices. (EEI, No. 122 at

6).

For the proposed rule, escalation rates

were specified for urban and rural water

and wastewater customers. The average

escalation rates used are: for urban

areas, 3.01% (high 5.41%, low 0.53%),

rural areas, 3.01% (high 5.41%, low

0.53%), rural areas with septic 0.64%

(high 2.93%, low ¥2.89%). Finally for

areas with individual wells, the

electricity price escalation rates were

used.

Manufacturing Cost. The cost data

used was provided by manufacturers. It

was then compiled and reported to the

Department by AHAM as a range of

costs at each efficiency level. NRDC

observed that the Department’s

engineering analysis weights

incremental costs submitted by AHAM

manufacturers by their 1997 market

shares. In its opinion the real impact on

consumers will be weighted not by 1997

market shares but by the market shares

following the introduction of the

standards. The argument is based not on

a lack of credibility of the AHAM data

but on the assumption that the market

share of the very expensive machines

will go down. As a consequence, NRDC

believes the Department should weight

the outlier points at the high cost end

of the cost distribution curve minimally,

if at all, in doing its analysis. (NRDC,

No. 138 at 6 and 14).

The Department agrees that a wide

variation in costs exists in the AHAM

data. This variation in incremental costs

are driven in part by the variability in

cost structures of the various

manufacturers (production volume,

current technology) and in part by the

variability in designs. Additionally,

given the lack of experience

manufacturing some of these

technologies, uncertainty contributes to

the range in costs. The Department

believes the mean values of the

distribution are the most appropriate for

consideration in the LCC analysis and

will weight analysis results for values

surrounding the mean more heavily.

However it will continue to incorporate

the full range of costs as it represents a

probability-weighted distribution of

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59561

costs based on the full spectrum of

possible costs.

Manufacturer Mark-ups. In the

Preliminary TSD for the ANOPR, the

Department used a manufacturer markup over the full production costs with

a maximum value of 1.35, which

maintains industry (manufacturer) cost

structure, and a minimum value of 1.00,

which represents a pass-through of full

production costs. This was modeled as

a triangular distribution with a

minimum value of 1.00, a most likely

value of 1.175, and a maximum value of

1.35. For the proposed rule, a uniform

distribution was used. The range of the

mark-up is dependent on the standard

level and obtained from the GRIM

model.

Alliance Laundry believes that the

low end of 1.00 for the manufacturing

mark-up should not be used at all. It

commented that history suggests

manufacturing mark-up is within the

1.27 to 1.35 range. (Alliance Laundry,

No. 164 at 10). The Oregon Office of

Energy commented that manufacturer

mark-ups are not static over time. Nor

are they typically the same for products

at the lower end of the product line as

they are for the upper end. It further

recommended that DOE find a way to

model a variable mark-up pattern for

each manufacturer—a pattern that is

appropriate for each and responsive to

market conditions as they evolve.

(Oregon Office of Energy, No. 162 at 8).

As suggested, the Department worked

with each manufacturer to forecast its

future mark-ups at the various standards

levels factoring anticipated market

dynamics. These market dynamics

include: the technology status of

existing product offerings as it relates to

the cost-efficiency relationship; the

status of manufacturing technology,

including an assessment of conversion

and restructuring costs; likely product

offerings at each efficiency level (e.g., Vaxis, H-axis), consumer demand for

product features and its implications for

trade-offs between manufacturing cost

and consumer utility; patent restrictions

on design options; brand equity;

availability of technical and financial

resources; manufacturing versus

sourcing strategies; and company cost

structure and ability to pass on fixed

(and sometimes even variable) costs.

Individual mark-up forecasts were

aggregated to characterize the industry

and the resulting range of mark-ups was

used in both the industry GRIM and

LCC analysis.

Retail Mark-up. In the Preliminary

TSD for the ANOPR, the Department

used a fixed retail mark-up of 1.40, and

a fixed mark-up of 1.052 to cover the

sales tax. There was no change made for

the proposed rule. ACEEE commented

that the retail mark-up of 40% is too

high. It proposed that the Department

use an average retail mark-up based on

the last five years of available data.

(ACEEE, No. 150 at 4). In response to

this comment, the Department did

examine more recent data from the same

data sources originally used

(Dealerscope Merchandising’s Annual

Statistics Surveys, Bureau of Census—

Current Industrial Report (CIR), Bureau

of Labor Statistics—Consumer

Expenditure Survey (CES), INTELECT—

Elrick & Lavidge Computerized Audit

Program (ELCAP) price database,

AHAM Fact Book) and found no

significant cause to alter its earlier

estimate.

Detergent Savings. In the

Supplemental ANOPR we did not

include any possible detergent savings

into the LCC analysis. The Northwest

Power Planning Council, Oregon Office

of Energy, ACEEE, Northwest Energy

Efficiency Alliance, and PG&E

commented that the Department should

consider detergent cost savings as a

benefit of H-axis clothes washers.

(Northwest Power Planning Council,

No. 135 at 1; Oregon Office of Energy,

No. 162 at 6; ACEEE, No. 150 at 4;

Northwest Energy Efficiency Alliance,

No. 131 at 2&3; and PG&E, No. 189 at

2). These comments did not have

specific recommendations as to

appropriate values to use for detergent

cost savings in the LCC.

Alliance Laundry System LLC

commented that detergent cost savings

associated with horizontal axis

machines are unlikely. In fact, detergent

costs may even be higher due to the fact

that higher priced specially formulated

detergent may have to be used for

optimal cleaning performance. (Alliance

Laundry, No. 145 at 11). Maytag

believes that the detergent and dosage

recommended by the detergent

manufacturer will produce the best

washing performance and that detergent

use will not be a significant factor in

consumer operating cost savings.

(Maytag, No. 137 at 7).

The Department believes there is no

conclusive evidence that detergent costs

will change due to new standards. We

believe results of the Bern Study (Bern

Clothes Washer Study Final Report;

ORNL/M–6382; prepared by Oak Ridge

National Laboratory for the U.S. DOE,

dated March 1998) do not show any

significant difference in cost savings

related to detergent use. Patterns of

detergent use will change as detergent

specially formulated for H-axis

machines become more available. In

addition, comments by major detergent

manufacturers state that savings based

on less detergent use will not occur

(Procter & Gamble, No. 9 at 1) and using

a lessor amount of detergent produced

inferior cleaning performance (Lever

Brothers, No. 51 at 2). In consideration

of the previous evidence detergent

savings were not included in the

analysis. However, the LCC spread sheet

does include the capability to input

detergent costs, at the users’ option.

Cycles per year. The EEI commented

that the number of washer cycles

appeared to be on the high side,

especially for one and two person

households. (EEI, No. 122 at 3). The

Department used the most current

information available to estimate the

cycles per year. The Department

adjusted the number of cycles per year

based on the number of occupants for

each RECS household. The cycles per

week are based on a Procter and Gamble

survey and adjusted using the RECS

data, so the overall average cycles per

year agree with the test procedure

assumption of an overall average of 392

cycles per year.

Discount Rate. The LCC spreadsheet

uses a distribution for discount rates

ranging from 0 to 15%. These represent

the variability in financing methods

consumers use in purchasing

appliances. The average discount rate

from this distribution is 6.1% real.

Four comments suggested that the

discount rate used in the consumer

analysis was likely too high. Comments

stated that DOE should take into

account such factors as: declining bank

card rates, the substantial fraction of

card users who pay off monthly credit

card balances, the substantial number of

buyers who use lower-cost credit such

as home equity credit lines, and bank

card default rates. Future interest rates

on credit cards are not expected to rise,

so future inflation will yield lower real

interest rates. (Alliance to Save Energy,

No. 148 at 3; ACEEE, No. 150 at 4;

Oregon Office of Energy, No. 162 at 7;

and NRDC, No. 138 at 6). Three

comments suggested that the discount

rate may be too low. (Energy Market and

Policy Analysis, Inc., No. 144 at 8;

Consumer Alert, No. 155 at 4; and EEI,

No. 122 at 6). Opportunity costs are

higher and EIA uses higher rates for

forecasting residential purchase

decisions. DOE policy is to base

discount rates on average financing

costs (or opportunity cost of reduced

savings).

In the Process Rule, DOE committed

to using real (adjusted for federal taxes)

discount rates for residential consumers

by considering a range of three different

real discount rates: credit card financing

rate, a rate based on consumers having

substantial savings, and a mid-range

59562 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

rate. The mid-range discount rate will

represent DOE’s approximation of the

average financing cost (or opportunity

cost of reduced savings) experienced by

typical consumers.

Based on the guidelines from the

Process Rule, we derived a distribution

of discount rates to reflect the variability

in financing methods consumers can

use in purchasing clothes washers. The

real interest rate associated with

financing an appliance purchase is a

good indicator of the additional costs

incurred by consumers who pay a

higher first cost, but enjoy future

savings, although it is not the only

indicator of such costs. While the

method used to derive this distribution

relies on a number of uncertain

assumptions regarding the financing

methods used by consumers, DOE

believes the resulting distribution of

discount rates encompasses the full

range of discount rates that are

appropriate to consider in evaluating

the impacts of standards on consumers

(i.e., values represented by the midrange financing cost, consumers with no

savings, and consumers with substantial

savings), as well as all the discount rates

that fall between the high and low

extreme values.

DOE assumes the method of purchase

used by consumers is indicative of the

source of the funds and the type of

financing used, although DOE is not

aware of detailed research into this

relationship. Whirlpool Corporation

indicated that approximately 40% of

white goods are purchased in cash, 35%

with credit cards, and 25% with retailer

loans. (1994 Eight Product Notice of

Proposed Rulemaking, 59 FR 10464,

March 4, 1994.) Whirlpool also

indicated that 25% of appliance

purchases are for new homes. However,

we know consumers purchase 20% of

clothes washers with new homes, i.e., in

mortgages, and 80% as replacements for

existing clothes washers in separate

retail purchases. Consumers pay for

retail purchases by cash, credit cards, or

loans. In order to derive a full

distribution of discount rates, DOE

estimated a range of interest rates, based

on historical data and judgments of

future trends, for different types of

consumer savings or financing.

For new housing, the estimated

nominal mortgage rate ranges from 5–

8%, the derived after-tax rate is based

on a tax of 28%, and a 2% inflation rate

is subtracted from the total. The result

is a range of real mortgage rates from

1.60%–3.76%. Example: 5%*(100%–

28%)–2%=1.6%.

For cash, the minimum interest rate is

0%. This rate applies to consumers

making cash purchases without

withdrawing from savings accounts or

interest bearing checking accounts. For

the maximum rate, the opportunity cost

is the interest that could have been

earned in a savings account or mutual

fund. Historic savings rate ranged from

4.5–5.5% from 1970–1986 (real rates of

¥8.27 to +3.58%). We believe the

current maximum is the opportunity

cost represented by the interest earned

in a typical mutual fund (assumed to be

6% real). DOE selected a real rate of 3%

as the mean.

DOE assumed the interest rates for

retail loans and credit cards have the

same range. The minimum credit card

rate is 6% real. Introductory rates on

some credit cards today are 5.9%

nominal, but after the introductory

period (often six months), the rate can

increase sharply. Maximum rates are

more than 20% nominal. However, if

the consumer pays with a credit card

and the balance is paid in less than the

life of the clothes washer, then the

effective interest rate is lower than the

nominal credit card rate. The current

assumption is a range of 6–15% real.

Combining the assumed shares of

each financing method, the above real

interest rates result in a weightedaverage (mean) value of 6% and a

distribution that varies from 0–15%.

Sensitivity studies show that while the

LCC results are sensitive to the value

chosen for the mean discount rate, the

LCC results are not sensitive to the

distribution of discount rates.

DOE believes the methods described

above are valid for establishing a

distribution of discount rates relevant to

most purchasers of the products covered

by this rulemaking. However, the

Department acknowledges that different

assumptions could be made about likely

interest, inflation and marginal tax rates,

or about consumer financing methods,

and that different approaches to

identifying consumer discount rates

might also be valid. For example, it is

possible to base consumer discount

rates on the average real rates of return

on consumer investment or other

measures of the opportunity costs

incurred by consumers who purchase

the covered products. DOE does not

believe, however, such alternative

assumptions or alternative approaches

would significantly alter the range of

discount rates used by the Department

or the conclusions drawn from the LCC

analyses conducted using these

discount rates.

The Department is seeking any

information that would support

significant alterations in the range or

distribution of the discount rates

derived from its analysis. Alternatively,

DOE is soliciting comment on the

possible use of a standardized

distribution of discount rates ranging

from approximately 4–12%, with a

mean of 6%. The use of such a

standardized distribution would

explicitly recognize the many

uncertainties associated with DOE’s

current analysis and, based on

sensitivity analyses already performed

by DOE, such a standardized

distribution would not significantly

alter the conclusions of DOE’s life cycle

cost analyses.

Lifetime. The ANOPR analysis

assumes that the period of time a

clothes washer will provide service

ranges from 12 to 16 years with an

average of 14.2 years. One comment

asked the Department to explain the

assumptions used to determine the

lifetime of a clothes washer. Since few

consumers who purchase a clothes

washer own it for the full lifetime of the

appliance, using this value in the LCC

may overstate the benefits to the original

purchaser. (Energy Market and Policy

Analysis, Inc., No. 119 at 4). For the

national energy savings, calculating the

benefits requires consideration of the

full lifetime of the product. In response,

DOE believes that the requirements of

the statute are to analyze the savings in

operating costs throughout the

estimated average life of the covered

product even if there is more than one

owner during this lifetime for the LCC

analysis.

Start Year. This is the year the new

standard is expected to become

effective. The Joint Stakeholder

Comment proposes a two-step standard

in which the first standard level is

effective in 2004 and the second high

standard level becomes effective in

2007. (Joint Comment No. 204).

Maintenance and Repair Costs. The

ANOPR analysis assumed no change in

maintenance and repair costs as a result

of new clothes washer standards. The

Department received a comment

expressing the need to account for

maintenance, repair and warranty costs

in the LCC analysis. (Energy Market and

Policy Analysis, Inc., No. 119 at 3).

Staber Industries also requested that the

Department consider maintenance in

the LCC analysis since H-axis have no

transmissions and it is more reliable

than V-axis. (Staber, Nos. 185 and 187).

In response, the Department’s analysis

does not consider changes in the

maintenance and repair cost as we do

not have any data to indicate the costs

to be different for more efficient

products for the proposed rule.

Request for Comment. DOE requests

comments on the LCC analysis,

particularly the range of values used as

input to the analysis. For example,

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59563

RECS does not measure usage so we

used the Proctor & Gamble survey data

for national average usage values and

then adjusted those values based on

RECS-reported household size. DOE

would like comment both on the Proctor

& Gamble and RECS data as well as the

method DOE used to develop the range

of usage.

D. Payback Period Analysis

The payback period measures the

amount of time needed to recover the

additional consumer investment in

increased efficiency through lower

operating costs. The payback period is

the ratio of the increase in purchase

price to the decrease in annual

operating expenditures from replacing

the baseline clothes washer with a more

efficient washer. We express payback

periods in years.

Rebuttable Payback. In accordance

with EPCA, DOE calculated payback

based on the values specified by the

DOE test procedure, Appendix J1. This

includes the Appendix J1 test procedure

assumption of an electric water heater

and an electric dryer. Today’s

amendments to Appendix J1 have no

effect on these results. This payback,

however, does take into account that a

distribution of clothes washer

efficiencies exists in the current and

future stock. This distribution is

approximated by assuming that the

efficiency of the stock of washers is a

combination of baseline and H-axis

efficiency washers. Table 2 shows the

changes in assumptions since the

ANOPR for the base case.

TABLE 2.—CHANGES IN REBUTTABLE PAYBACK ASSUMPTIONS

Parameter Supplemental ANOPR Proposed rule

H-axis sales ....................................................... 3.0% in 1998 .................................................... 6.25% in 1998.

Escalation of H-axis sales ................................. 0.5% annual (linear) ......................................... 0.5% of sales not already H-axis.

Changes in assumptions outlined in

Table 1 that also apply to rebuttable

payback include:

• Water price;

• Energy price;

• Energy and water price escalation

only to the year 2004; and

• Manufacturer mark-up (average of

range is used).

Basecase Assumptions. The

Department received comments on the

assumptions made concerning the

existing saturation of higher efficiency

washers and their expected increase in

sales over time. We received comments

stating that we had either overestimated

or underestimated the penetration of Haxis washers, and we either

overestimated or underestimated the

future escalation of H-axis sales. EEI,

Whirlpool, NRDC, City of Seattle,

Seattle Public Utilities, Alliance

Laundry System, Northwest Power

Planning Council, ACEEE, and Amana

believes that the projections for sale of

high efficiency units is too low. (EEI,

No. 122 at 3; Whirlpool, No. 141 at 12;

NRDC, No. 138 at 8; City of Seattle,

Seattle Public Utilities, No. 126 at 2;

Alliance Laundry, No. 145 at 20;

Northwest Power Planning Council, No.

135 at 1; ACEEE, No. 150 at 7; and

Amana, No. 146 at 2). Northwest Energy

Efficiency Alliance, Oregon Office of

Energy and the Alliance to Save Energy

believe DOE overestimated sales in the

absence of standards because many

incentive programs are ending.

(Northwest Energy Efficiency Alliance,

No. 131 at 4; Oregon Office of Energy,

No. 162 at 2; and Alliance to Save

Energy, No.148 at 3–4).

Based on additional updated data, we

revised the estimated H-axis sales in

1998 from 3.0% to 6.25%. Previously

the annual escalation rate of H-axis

washer sales market were assumed to

capture an additional 0.5% per year of

all clothes washer sales but now the

annual sales of H-axis clothes washers

is determined by an amount equal to

0.5% of the previous year’s V-axis sales.

Additional sensitivity analyses were

performed at escalation rates of 0.25%

and 0.75% with minimal effect on

rebuttable payback (less than half a year

payback difference from the reference

case). Base case assumptions are

addressed in greater detail in the

National Impact Analysis, infra.

E. National Impact Analyses

The national energy savings is

determined in two steps using the

integrated NES/Shipments spreadsheet

model. First the shipments are

determined before and after a new

standard; and then the shipments are

used to calculate energy savings and

national economic benefits (net present

value of the higher standards). Chapters

9 and 10 of the TSD contains a detail

explanation of the NES/Shipments

spreadsheet model.

The basic outputs from the National

Impact Analysis are shipments

forecasts, energy and water

consumption, and the Net Present Value

(NPV) for baseline and standards

scenarios. The shipments forecasts are

an input into the National Energy

Savings model as well as an input for

the Manufacturing Impact Analysis. The

cumulative savings for energy and water

are determined for the nation to the year

2030. Finally, the net present values

(NPVs) are determined for each standard

level based average data for the nation.

See results in Section V of this notice.

1. National Energy Savings (NES)

Spreadsheet Model

Historical Background. The

development of the NES and shipments

model consisted of three phases: (1)

Supplemental ANOPR and preliminary

TSD analysis, (2) analysis presented at

the July 1999 Workshop, and (3)

proposed rule and TSD analysis.

At the time of the supplemental

ANOPR the shipment model was a work

in progress. We asked for comment on

a general accounting methodology that

included price, operating cost and

income elasticities. Since the shipments

model was not fully developed at the

time of the supplemental ANOPR, a

placeholder set of shipments were used

as input to the NES spreadsheet in order

to produce a preliminary analysis on the

national impacts.

At the July 1999 Workshop, we

presented a fully developed shipment

model that included a decision tree. The

decision tree allows the consumer to

choose between not buying a washer,

buying a new washer, repairing a

washer or buying a used washer. It also

allows consumers to decide to replace a

washer before it was necessary (see TSD

Chapter 9 for details). This model also

incorporated results from the consumer

conjoint analysis along with fitting

parameters to historical data.

After presenting this shipment model

at the July 1999 Workshop, we received

comments regarding specific parameters

of the model, sources of data used in the

model and whether or not the results

forecasted seemed reasonable. We

received comments agreeing that the

general approach of the Shipment and

NES models were appropriate, however,

comments included suggestions to

modify parts of the models. (Oregon

Office of Energy, No. 162 at 8 and

59564 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

ACEEE, No.188 at 3). Details of the

Shipment and NES models are

discussed in the sections on elasticity

below. After the Workshop we carefully

looked at the comments and began to

make improvements to the model. These

improvements included refinements

that were not necessarily suggested by

stakeholders but were based on using

more data and detail. In addition,

suggestions contributed by a renowned

economist were carefully considered.

(Assessment of DOE Shipments Model

for Forecasting the Impacts of Clothes

Washer Standards, Kenneth Train,

Comment No. 194 at 13). After all of the

revisions, the shipment model

forecasted had significantly different

results. The two changes made that had

the greatest effect on results were using

a longer historical time period to fit

forecasting equations to and accounting

for new appliance sales due to all

changes in residence, not just purchases

of new housing.

The following section describes the

modifications to the NES and Shipment

spreadsheets as recommended in

comments received after the publication

of the 1998 Supplemental ANOPR. 63

FR 64347, 64359 (November 19, 1998).

The modifications to the NES Model

follows the three phase development

from the Supplemental ANOPR analysis

to the July 1999 Workshop analysis to

the proposed rulemaking analysis. The

changes to the Shipment Model as

incorporated into the NES are

summarized in Table 3. Discussions of

these changes and of comments received

which prompted these changes are also

discussed after the table.

TABLE 3.—MODIFICATIONS TO THE NES MODEL, INCLUDING SHIPMENTS MODEL

Parameter Supplemental ANOPR July 1999 workshop Proposed rule

Shipment Model ................... accounting model recommended—

fixed shipment values were used

as a placeholder.

accounting with decision tree .......... accounting with decision tree.

Shipment Elasticities ............ price .................................................

operating cost ..................................

income .............................................

(These were used in analysis prior

to the Supplemental ANOPR.).

price .................................................

operating savings .............................

top/front access feature ...................

price.

operating savings.

top/front access feature.

price/income.

income.

interest rate elasticities.

Source of Elasticities ............ In previous analyses the three input

variables below were used.

Price Elasticity (PE)—from Oak

Ridge equation.

Operating Cost (OC) elasticity—derived from implicit discount rate.

Income Elasticity—from Oak Ridge

model.

(For the ANOPR, a shipment analysis had not been performed yet

and shipments were kept constant as a placeholder pending

future analysis.).

Operating savings—derived from

the WashWise Intercept Survey.

Features elasticity—based on conjoint analysis.

Price elasticity—with other parameters set, determined by calibrating to 1981–1996 historical

data.

Operating savings—derived from

the WashWise Intercept Survey.

Features elasticity—based on conjoint analysis.

Price elasticity—with other parameters set, determined by calibrating to 1970–1996 historical

data.

Market Segments ................. new housing starts ...........................

existing homes (replacement washers).

New housing starts ..........................

early replacement market ................

regular replacement market .............

extra repair market ..........................

homes without a clothes washer .....

New housing completions & moves.

early replacement market.

regular replacement market.

extra repair market.

homes without a clothes washer.

Houses that Drop Out of

Washer Market.

not applicable ................................... energy accounted for—assumes

laundry done at Laundromat or

elsewhere.

energy accounted for—assumes

laundry done at Laundromat or

elsewhere.

Cost of Repairs and Used

Washers.

None ................................................ The model factored in the price of a

new washer into the Replace or

buy Used versus buy new decision without subtracting the cost

of repairing or buying a used

washer.

Allows input on the cost of repairs

and used washers relative to buying a new washer. Changed the

net washer price in the Used vs.

New decision model and the Replace decision model. The net

washer price is the price of a new

washer minus the price of either

the used washer or the repair,

where the used washer and the

repair are assumed to scale with

new washer price.

Residence-Change-Induced

Purchase.

None, however in prior analysis

new housing starts were accounted for and this approach

was recommended in the Supplemental ANOPR TSD.

Assumes New Housing Market is

determined by net housing increase. Ignores AHAM data on

the number of washers purchased due to a change of residence.

A small market of purchases induced by changes of residence is

included. Assumed that new

sales from changes in residence

are correlated with new housing

completions. The volume of sales

induced by change of residence

is calibrated with AHAM NFO

data on washers purchased due

to a move.

Implied Discount Rate Used

in Historical Fit.

None—consumer discount rate had

not been established at this point.

75%—from WashWise intercept

survey.

75%—from WashWise intercept

survey.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59565

TABLE 3.—MODIFICATIONS TO THE NES MODEL, INCLUDING SHIPMENTS MODEL—Continued

Parameter Supplemental ANOPR July 1999 workshop Proposed rule

Historical Fit .......................... None ................................................ Historical fit made to 1981 to 1996

period.

Model projected back to 1951. Fit

made to 1970 to 1996 data.

Operating Cost Scaling ........ None ................................................ Assumed operating cost scaled with

electricity price changes.

Disaggregates operating cost and

estimates operating cost back to

1951 using Electricity, Gas,

Water, Oil, and LPG price indices.

Stock Accounting .................. Uses historical sales and saturation

data as input to clothes washers

household stock accounting due

to lack of model estimates prior to

1980.

Uses historical sales and saturation

data as input to clothes washers

household stock accounting due

to lack of model estimates prior to

1980.

Model is more independent of historical data inputs. It uses model

estimates of annual sales as the

input into stock accounting after

1951.

Housing Start Data ............... Recommended using AEO 1996

Housing Starts Projection.

Uses AEO 1996 Housing Starts

Projection.

Uses AEO 1999 projections adjusted to reflect housing completions.

Initial Stock Assumption ....... Pre-1957 clothes washer stock

initialized as zero.

Pre-1957 clothes washer stock

initialized as zero.

1951 automatic washer stock

initialized at 1.63 million (1950

sales) for one-year age washers

decreasing linearly to 1.03 million

at 13-year vintage and zero

thereafter.

Operation Cost Comparison None—no shipments model yet For

NES incremental cost from the

baseline washer.

Measured operating cost savings

relative to the real operating cost

in 1997 of a 1997 base case machine (MEF=0.817).

Measures savings in current year

relative to a baseline machine

(MEF=0.817) with current fuel

costs.

Fuel Site-to-Source Conversion.constant value .................................. conversion varies yearly and is generated by EIA’s NEMS–BRS1

program.

conversion varies yearly and is generated by EIA’s NEMS–BRS1

program.

Fuel Prices ........................... average from RECS 93 ................... average of marginal prices determined from RECS93.average of marginal prices determined from RECS93.

Escalation of Fuel Prices ..... AEO98 ............................................. AEO98 ............................................. AEO99.

Fuel Price Extrapolation from

2020 to 2030.

LBNL method ................................... method used by EIA, consistent

with new LCC methodology.

method used by EIA, consistent

with new LCC methodology.

Water Heater Fuels .............. electricity, gas, oil ............................ electricity, gas, oil ............................ added LPG.

Water & Wastewater Prices urban rates: $3.18 per 1000 gallons average rates: $2.66 per 1000 gallons in 1998.updated average for urban & rural:

avg.=$2.48 per 1000 gals. (1998)

(see LCC).

Water & Wastewater Price

Escalation.

0% .................................................... 2.96% an average from LCC—a

weighting of 3.01% and 0.64%

(see LCC).

2.96% an average from LCC—a

weighting of 3.01% and 0.64%

(see LCC).

Base Case: H-axis Escalation Rates.0.5% ................................................. 0.5% ................................................. 0.5%.

Base Case: H-axis Sales ..... 3% in 1998 ....................................... 6.25% in 1998 .................................. 6.25% in 1998.

Discount Rate ....................... 7% .................................................... 7% .................................................... 7%.

Manufacturer Mark-ups ........ Min. 1.000 ........................................

Mean 1.175 ......................................

Max. 1.350 .......................................

Distribution: triangular ......................

Min. 1.000 ........................................

Mean 1.175 ......................................

Max. 1.350

Distribution: triangular

Range: varies with standard level.

Distribution: uniform.

.

1EIA approves use of the names NEMS (National Energy Modeling System) only to describe an AEO version of the model with out any modification to code or data. Since, in this work, there will be some minor code modifications, DOE proposes use of the name NEMS–BRS for the

model as used here.

Shipments Model. In the

Supplemental ANOPR, we examined

several different approaches to

forecasting washer sales. The

investigated models included an AutoRegressive Moving Average Model

(ARIMA), a Multi-Variate Time Series

Fit, a Saturation/Lifetime Model, and an

Accounting Model with elasticity. Of

the different approaches, we selected

the Accounting Model because it was

the most full-featured model which

included price and operating cost

elasticities. At the July 1999 Workshop

we described the revised accounting

model for projecting annual clothes

washer shipments. After stakeholder

comment the Shipment model was

further revised and integrated into a

single spreadsheet called the NES/

Shipment spreadsheet. It includes the

following features:

• Combined effects of price, operating

cost, and features on annual U.S.

shipments

• Market segments (e.g., new housing,

replacement decisions, non-owner

adding a washer)

• Decisions to repair rather than

replace

• Purchases of used washers

• Age categories of clothes washers

The NES/Shipment spreadsheet now

incorporates information from the DOE

Consumer Analysis. Since the

Supplemental ANOPR, DOE has

gathered additional information about

features of clothes washers that

influence consumers’ purchase

decisions, and analyzed consumer’s

stated preferences. This new

information also has been calibrated

with updated information about

historical purchases. Details of the

consumer analysis and shipment

59566 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

spreadsheet are explained in Chapters 8

(Consumer Analysis) and 9 (Shipments)

of the TSD.

Shipment Elasticities. The

Department received many comments

concerning which elasticities need to be

considered in the shipments model.

Whirlpool notes that combining the

impacts of the purchase behavior of

discretionary buyers with the

postponement and repair decisions or

‘‘forced purchase’’ consumers, and

assuming energy reduction regulation of

35% (a $250 retail price increase), it is

reasonable to expect shipment decreases

in excess of 10%. (Whirlpool, No. 141

at 10). Amana states that the elasticity

of price and sales needs to be

considered. (Amana, No. 146 at 3). Both

ACEEE and the Alliance to Save Energy

stated that the only market for which

there is likely to be an elasticity of

demand is the early replacement

market, since homeowners expect to

have access to a clothes washer and will

continue to purchase them even if the

cost is higher. (ACEEE, No. 150 at 6 and

Alliance to Save Energy, No. 148 at 3).

The Oregon Office of Energy and ACEEE

recommended reconstructing the

shipments model without a price-based

elasticity variable but including

variables for disposable income, credit

availability, usable washer capacity, and

average washer cleaning ability (Oregon

Office of Energy, No. 190 at 11 and

ACEEE, No. 188 at 5).

In consideration of the comments

received, the Department elected to use

elasticity values for the following

factors: clothes washer price, operating

savings, top/front access feature, clothes

washer price/income. In addition,

income elasticities, and interest rate

elasticities were added as input options

to the spreadsheet. Details of how

elasticities were derived are explained

in Chapter 9 (Shipments) of the TSD.

Source of Elasticities. After we

presented the shipments model at the

July 1999 Workshop, we received

several comments relating to how the

value of elasticities are determined. The

Oregon Office of Energy took issue with

the methodologies used to derive price

elasticities, especially the use of the

consumer conjoint analysis. (Oregon

Office of Energy, Nos.162 at 8 and No.

190 at 4–9). Several comments also

question whether price elasticities

derived from past declining prices

would apply in a future market of

increased prices due to a standard.

(ACEEE, No.188 at 3; Oregon Office of

Energy, No.190 at 8; and PG&E, No. 189

at 2–3). PG&E also questions the use of

the consumer research survey to

calibrate elasticity variables. It states

that instead of asking questions about a

10-year-old washer, the questions

should have been posed for a series of

washer ages. It also believes that the

likely repair cost of a washer is likely to

exceed the $150 value used in the

questionnaire. (PG&E, No. 189 at 2).

Many enhancements were made to the

shipment model to address the

stakeholder comments listed above. The

purpose of these model enhancements is

to provide the best possible estimates of

the impacts of standards, consistent

with the recent history of washer

shipments, clothes washer market

structure and consumer preferences.

These enhancements are: (1) Calibration

of the model over a longer historical

period. (2) more detailed and accurate

calculation of operating costs and

savings (3) inclusion of additional user

specified explanatory macroeconomic

variables (4) inclusion of consumer

responsiveness to price and operating

costs as calibrated to historical clothes

washer shipments. (5) calibration of the

relative size of the features response,

and estimation of the rate at which

clothes washer owners might drop out

of the market using the results from the

Clothes Washer Consumer Analysis. (6)

use of NFO Research Incorporated data

from a 1996 survey (prepared for

AHAM) to estimate the proportion of

early (discretionary) replacements, and

the proportion of new versus used

purchases. (7) consideration of AHAM

historical shipments and statistics on

the recent (post 1994 standard) changes

in mean clothes washer efficiency. (8)

inclusion of Consumer Reports data on

repair rates during the first five years of

the clothes washer lifetime. These

enhancements are described in more

detail below.

Market Segments. Shipment models

used prior to the supplemental ANOPR

accounted for the new clothes washer

and the replacement markets which

assumed that a washer was replaced by

a new machine when it broke down.

The new shipment model presented at

the July 1999 Workshop provides a

more detailed accounting of different

market segments, washer ownership

categories and accounts for a variety of

other market dynamics including new

versus used shipments, changes in

repair behavior and life extension of

machines through extra repairs.

Houses That Drop Out of Washer

Market. Houses that drop out of the

washer market are where the laundry is

done at Laundromats or elsewhere and

were not accounted for in analyses

presented prior to the July 1999

Workshop. One stakeholder commented

that the analysis will be incomplete and

not useful without an assessment of the

used appliance market, and

participation in that market on the part

of low income consumers. (Oregon

Office of Energy, No. 162 at 11). Another

comment emphasized that low income

consumers will find it increasingly

difficult to purchase clothes washers at

more stringent standard levels, and may

simply not be able to buy a new

machine. Thus DOE should expect an

increase in used/repaired clothes

washer sales and a relative decrease in

shipments of new high efficiency

models. (Whirlpool, No. 141 at 15). In

response to the previous comments, the

revised shipments model takes in

account the households that drop out of

the washer market, and assumes that

they wash their clothes at a Laundromat

or elsewhere.

Cost of Repair and Used Washers. The

shipment model presented at the July

1999 Workshop incorporated changes in

the prices of new washers, but not

changes in the prices of used washers or

the price of repairing an existing

washer. The Department received a

comment which asked that the model

incorporate the higher price of used

washers and repair services resulting

from increased demand as consumers

delay the purchase of new washers in

response to higher prices. (Assessment

of DOE Shipments Model for

Forecasting the Impacts of Clothes

Washer Standards, Kenneth Train,

Comment No. 194 at 13). The proposed

rule Shipment/NES model now gives an

input option for the cost ratios of

repairing a washer and of buying a used

washer instead of buying a new washer.

This option is now an input in terms of

the ratio between these options and

buying a new washer. See TSD Chapter

9 on Shipments.

Residence-Change-Induced Purchase.

The versions of the Shipment model

presented at the July 22 Workshop only

considered residence changes for those

purchasing new housing. The model

now includes purchases of washers for

change of residences for new and

existing housing. This improvement to

the model has a significant effect on

forecasted shipments.

Implied Discount Rate Used in

Historical Fit. The implied discount rate

is a value that describes how important

energy cost savings are to consumers

relative to increases in price. This is

different from the 7% discount rate used

in the analysis that describes the time

value of money in order to convert

dollar costs and savings (first price and

operating savings) to the same year in

order to determine the LCC. Ken Train

commented that both a 20% implied

discount rate which was derived from

the conjoint analysis and a 75% implied

discount rate which was derived from

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59567

the WashWise survey are consistent

with historical shipments data. (Ken

Train, Comment No. 194 at 4 and 13).

A lower implied discount rate would

place greater value on future operating

cost savings and result in a lower drop

in shipments as compared to the higher

implied discount rate. We agree that

several values for the implied discount

rate can be used to fit a curve to

historical data. We derived an implied

discount rate by two methods: (1) The

relationship of price and efficiency for

current models (based on the

engineering analysis) is consistent with

an implied discount rate of 50–100%;

(2) while stated preference surveys are

often unreliable indicators of revealed

preferences, we analyzed. We believe

the WashWise intercept survey results

are a more accurate measurement of the

implied discount rate because its sole

intent was specific to recent washer

purchases, designed to measure price

savings and interviewed consumers at

the point of purchase. In contrast, the

conjoint analysis provided a limited set

of choices for implied discount rate and

was conducted in a setting removed

from purchase decision. See TSD

Chapter 9. Both derivations (engineering

analysis and WashWise) are consistent

with an implied discount rate of 75%.

This value is higher than found from

studies of other appliances, perhaps in

part because consumers are unaware of

how much water costs contribute to

operating expense. The Department is

interested in comments.

Historical Fit; Operating Cost Scaling;

Stock Accounting; Housing Start Data;

Initial Stock Assumption; and

Operation Cost Comparison. These

parameters were refined, after the July

1999 Workshop, to reflect updated data

or longer historical time periods. These

changes were not prompted by any

specific stakeholder comments.

Fuel Site-to-Source Conversion. The

Appliance Energy Efficiency Standards

Advisory Committee recommended

(letter dated April 21, 1998) that we

define a range of energy conversion

factors and associated emission

reductions based on generation

displaced by standards. In the

supplemental ANOPR, a constant

conversion factor was used. EEI

commented that the value shown for

electric conversion (heat rates) on the

NES spreadsheet is overstated by at least

11% because AEO 98 (authored by EIA)

assigns the same factor for fossil fuel

power plant heat rates to hydro-electric

and other renewable forms of electric

generation. This results in overstating

primary energy savings from reductions

in electricity usage. (EEI, No.122 at 7).

We have addressed this issue by using

a year-by-year conversion rate that is

calculated based on displaced

generation using NES.

Fuel Prices. As discussed in the LCC

methodology section, after the

supplemental ANOPR, marginal gas and

electric prices were used, whereas

previously average prices were used.

The marginal price is the price paid for

the last increment of fuel used. Refer to

Section C. Life-Cycle Cost (LCC)

Analysis for a description of these

changes.

Escalation of Fuel Prices. The

Alliance to Save Energy, ACEEE and the

Oregon Office of Energy believe that

assumptions of residential price

declines are overstated. (Alliance to

Save Energy, No. 148 at 1–2; ACEEE,

No. 150 at 4; and Oregon Office of

Energy, No. 162 at 6). The Alliance to

Save Energy recommends that DOE

analyze at least one case with flat

residential energy prices. (Alliance to

Save Energy, No. 148 at 1–2). ACEEE

believes EIA estimates of residential

energy price declines remain too high.

It cites its April 1998 comments in

which it referred to a survey by the

Association of Energy Service

Professionals of its members projected

on average that residential bills will

increase 4.9% with restructuring while

commercial and industrial bills will

decrease an average of 5.8 to 8.6%.

Based on this information, ACEEE

believes EIA’s projections of future

residential electricity prices are higher

in the 1999 Annual Energy Outlook than

in the 1998. ACEEE recommends that

DOE conduct a sensitivity analysis with

smaller price declines, such as the EIA

high use forecast. (ACEEE, No. 150 at 4).

Similarly, the Oregon Office of Energy

believes residential rates will remain

flat or rise somewhat. (Oregon Office of

Energy, No.162 at 6).

While we generally agree that future

energy prices are uncertain, we are

relying on the EIA and its forecasts for

the analysis. To account for the

uncertainty, we have included the high

and low fuel and electricity forecasts,

i.e., AEO low & high economic growth

scenarios in the analysis.

Fuel Price Extrapolation from 2020 to

2030. Refer to Section C. Life-Cycle Cost

(LCC) Analysisfor a description of this

change.

Water Heater Fuels. LPG was added as

a fuel type.

Water and Wastewater Prices; and

Water and Wastewater Price Escalation.

Refer to Section C. Life-Cycle Cost (LCC)

Analysis for a description of these

changes.

Base Case H-axis Escalation Rates;

and Base Case H-axis Sales. These

issues concern the estimated initial

percentage of sales that are H-axis and

the estimated escalation of H-axis sales.

EEI, Whirlpool, NRDC, City of Seattle,

Seattle Public Utilities, Alliance

Laundry System LLC, Northwest Power

Planning Council, ACEEE, and Amana

believe that the projections for sale of

high efficient units is too low. (EEI, No.

122 at 3; Whirlpool, No. 141 at 12;

NRDC, No. 138 at 8; City of Seattle,

Seattle Public Utilities, No. 126 at 2;

Alliance Laundry, No. 145 at 20;

Northwest Power Planning Council, No.

135 at 1; ACEEE, No. 150 at 7; and

Amana, No. 146 at 2). Northwest Energy

Efficiency Alliance, Oregon Office of

Energy and the Alliance to Save Energy

believe DOE overestimated sale in the

absence of standards because many

incentive programs are ending.

(Northwest Energy Efficiency Alliance,

No. 131 at 4; Oregon Office of Energy,

No. 162 at 2; and Alliance to Save

Energy, No. 148 at 3–4).

NRDC commented that the

Supplemental ANOPR proposal to use a

single basecase forecast with a known

gradually increasing penetration of high

efficiency clothes washers is incorrect.

(NRDC, No. 138 at 8). Whirlpool,

Amana, and Alliance Laundry System

LLC provide estimates of the growth of

H-axis clothes washers. Whirlpool

commented that the forecasts presented

in the TSD of 0.5% per year growth in

market penetration is significantly low

based on actual trends. (Whirlpool, No.

141 at 12). Amana commented that the

assumption of 1.5% H-axis washers in

1995 with a 0.5% yearly increase has

proved to be a conservative assumption

and that its competitive information

indicates a 6% market share of H-axis

machines is a more appropriate number

to use at this time. (Amana, No. 146 at

2). Alliance Laundry System LLC

commented that it does not believe that

front load washing penetration will

actually shrink 20% in the next 24

months, as the DOE spreadsheet

analysis presumes. (See TSD at page 8–

16, Table 8.3). It believes that a more

realistic projection would show front

load washing machines gaining in

acceptance for those consumers who

choose energy and water savings over

other features such as ergonomics or far

lower purchase price. (Alliance

Laundry, No. 145 at 20). With regard to

the assumptions concerning sales in

absence of standards, ACEEE believes

the DOE forecast seems conservative in

early years. Saturation are currently

running higher than DOE’s forecast. But,

without a standard, we’d expect a

leveling off at around 15% saturation

(based on levels achieved in the NorthVerDate 11<MAY>2000 18:50 Oct 04, 2000 Jkt 194001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 E:\FR\FM\05OCP3.SGM pfrm08 PsN: 05OCP3
59568 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

West, even with heavy promotion).

(ACEEE, No. 150 at 7).

The Northwest Energy Efficiency

Alliance believes that the baseline

forecast of resource-efficient clothes

washers (RECWs) should begin with a

current (1998) market penetration rate of

5–6%. It should then assume an annual

increase of .75% every year until 2030

(i.e., 28% market share by 2030). This

forecast would place the market share of

RECWs at approximately 10% in 2030.

This value represents the conservative

end of the range of estimates provided

by manufacturers participating in the

Northwest Energy Efficiency Alliance’s

interviews, (Market Progress Evaluation

Report: WashWise No. 2, publication

No. E98–012.). (Northwest Energy

Efficiency Alliance, No. 131 at 4.)

Oregon Office of Energy believes DOE

has potentially overestimated the base

case share of high efficiency clothes

washers defined by DOE, based on

AHAM data, to be 35% more efficient

than the minimum efficiency required

of today’s machines in future

shipments. There is not a lot of

expectation that this share will grow

significantly, now or in the near term,

as organized efficiency programs are

seriously on the wane. (Oregon Office of

Energy, No. 162, at 2).

DOE agrees the market share of the

more efficient clothes washers is greater

than estimated. Based on the comments,

DOE has updated the estimate of the Haxis sales to assume in 1998 that 6.25%

of clothes washers are H-axis, escalating

at 0.5% a year.

Discount Rate. The NES analysis

assumes a fixed discount rate of 7%.

This is used in determining the savings

and costs due to a new standard and for

calculating the NPV. This is unchanged

from the ANOPR.

Manufacturer Mark-ups. For the

Supplemental ANOPR the shipment

weighted average was used for the

manufacturing mark-up. One value was

used for all standard levels. For the

proposed rule, a range of manufacturer

mark-ups were calculated for each

standard level. The average of the range

was used.

2. Net National Employment

The Process Rule includes national

employment impacts among the factors

DOE considers in selecting a proposed

standard. The Department estimates the

impacts of standards on employment for

appliance manufacturers, relevant

service industries, energy suppliers, and

the economy in general. We estimate

two employment impacts: total and

direct impacts. Total impacts—or net

national employment impacts—are

impacts on the national economy,

including the manufacturing sector

being regulated. Direct employment

impacts would result if standards led to

a change in the number of employees at

manufacturing plants and related

supply and service firms. The MIA only

discusses the direct employment

impacts.

Net national employment impacts

from clothes washer standards are

defined as net jobs created or eliminated

in the general economy as a

consequence of: (1) reduced spending

by end users on energy (electricity, gas

including LPG, and oil) and water; (2)

reduced spending on new energy supply

by the utility industry; (3) increased

spending on the purchase price of new

clothes washers; and (4) the associated

indirect effects of those three factors

throughout the national economy. The

resulting net savings are expected to be

redirected to other forms of economic

activity. We expect these shifts in

spending and economic activity to affect

the demand for labor, but there is no

generally accepted method for

estimating these effects.

One method to assess the possible

effects on the demand for labor of such

shifts in economic activity is to compare

sectoral employment statistics

developed by the Labor Department’s

Bureau of Labor Statistics (BLS). The

BLS regularly publishes its estimates of

the number of jobs per million dollars

of economic activity in different sectors

of the economy, as well as the jobs

created elsewhere in the economy by

this same economic activity. BLS data

indicates that expenditures in the

electric sector generally create fewer

jobs (both directly and indirectly) than

expenditures in other sectors of the

economy. There are many reasons for

these differences, including the capitalintensity of the utility sector and wage

differences. Based on the BLS data

alone, we believe net national

employment will increase due to shifts

in economic activity resulting from the

clothes washer standards.

In developing this proposed rule, the

Department attempted a more precise

analysis of national employment

impacts using an input/output model of

the U.S. economy. The model, ImBuild,

was developed by the Office of Building

Technology, State and Community

Programs, DOE. ImBuild is a PC-based

economic analysis model that

characterizes the interconnections

among 35 sectors as national input/

output structural matrices. It can be

applied to future time periods. ImBuild

calculates the total effect on

employment, including job creation or

deletion in the manufacturing sector.

Inputs to the ImBuild model are outputs

of the NES/Shipment spreadsheet. Since

the electric utility sector is more capitalintensive and less labor-intensive than

other sectors (see Bureau of Economic

Analysis, Regional Multipliers: A User

Handbook for the Regional InputOutput Modeling System (RIMS II),

Washington, DC., U.S. Department of

Commerce, 1992), a shift in spending

away from energy bills into other sectors

would be expected to increase overall

employment. For more details on the

net national employment analysis,

please see Chapter 13 in the TSD.

Because this is a new analysis for an

energy conservation standard

rulemaking, we are requesting public

comments on the validity of the

analytical methods used and the

appropriate interpretation and use of the

results of this analysis.

F. Consumer Analysis

In determining whether a standard is

economically justified, we consider any

other factors that the Secretary deems to

be relevant. Under this factor, the

Department is considering the life-cycle

cost impacts on those subgroups of

consumers who, if forced by standards

to purchase H-axis machines, would

choose to repair their existing machines.

Consumer Sub-Groups

The consumer analysis evaluates

impacts to any identifiable groups, such

as consumers of different income levels,

who may be disproportionately affected

by any national energy efficiency

standard level. The impact on consumer

sub-groups is determined using the LCC

spreadsheet model for low income

households and for household where

the head of the household was a senior.

G. Manufacturer Impact Analysis

The manufacturer analysis estimates

the financial impact of standards on

manufacturers and calculates impacts

on employment and manufacturing

capacity.

Prior to initiating the detailed MIA for

the clothes washer rulemaking, the

Department prepared a document titled

‘‘Clothes Washer Manufacturer Impact

Analysis’’ which outlines procedural

steps and identifies issues for

consideration in the MIA. This

document was presented at a public

workshop held on December 14–15,

1998. It was based on the general

framework for the MIA presented by the

Department at a workshop in March

1997 and was modified for its

application to the clothes washer rule.

As proposed in the approach

document, the MIA was conducted in

three phases. Phase 1, ‘‘Industry

Profile,’’ consisted of the preparation of

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59569

an industry characterization. Phase 2,

‘‘Preliminary Industry Cash Flow,’’ had

as its focus the larger industry. In this

phase, the Government Regulatory

Impact Model (GRIM) was used to

prepare a preliminary industry cash

flow analysis. Here, the Department

used publicly available information

developed in Phase 1 to adapt the GRIM

structure to facilitate the analysis of new

clothes washer standards. In Phase 3,

‘‘Sub-Group Impact Analysis,’’ the

Department discussed fully the results

of the Preliminary Industry Cash Flow

analysis with each manufacturer and

identified manufacturer-specific

variances.

Phase 3 also entailed documenting

additional impacts on employment and

manufacturing capacity through a

structured interview process.

Phase 1, Industry Profile. Phase 1 of

the MIA consisted of preparing an

Industry Profile. Prior to initiating the

detailed impact studies, DOE received

input on the present and past structure

and market characteristics of the clothes

washer industry. This activity involved

both quantitative and qualitative efforts

to assess the industry and products to be

analyzed. Issues addressed included

manufacturer market shares and

characteristics, trends in the number of

firms, the financial situation of

manufacturers, and trends in clothes

washer characteristics and markets.

The industry profile included a topdown cost analysis of the appliance

industry that was used to estimate the

disaggregated costs of a baseline clothes

washer. The cost structure was used to

derive cost and financial inputs for the

GRIM—e.g., material, labor, overhead,

depreciation, Sales General &

Administration (SG&A), and Research &

Development (R&D). The profile was

also instrumental in estimating the

manufacturer and retail mark-ups that

were used in the Life-Cycle Cost

Analysis.

Publicly-available quantitative data

published by the U.S. Bureau of Census

with regards to the clothes washer

industry was included in Chapter 3 of

the preliminary Technical Support

Document (TSD) dated October 1998

accompanying the clothes washer

Supplemental ANOPR dated November

19, 1998. These reports include such

statistics as the number of companies,

manufacturing establishments,

employment, payroll, value added, cost

of materials consumed, capital

expenditures, product shipments, and

concentration ratios.

The Department also utilized

additional sources of information to

further characterize the clothes washer

industry. These included company

Securities and Exchange Commission

(SEC) 10K and annual reports, Moody’s

company data reports, Standard &

Poor’s (S&P) stock reports, value line

industry composites, and Dow Jones

Financial Services.

Phase 2, Preliminary Industry Cash

Flow. Phase 2 of the MIA had as its

focus the ‘‘larger’’ industry. The

analytical tool used for calculating the

financial impacts of standards on

manufacturers is the GRIM. In Phase 2,

the GRIM was used to perform a

preliminary industry cash flow analysis.

For the Preliminary Industry Cash

Flow Analysis, DOE prepared a list of

financial values to be used in the GRIM

industry analysis. These were calculated

by studying publicly-available financial

statements of clothes washer

manufacturers. A detailed definition of

financial inputs and their values for a

‘‘prototypical’’ clothes washer

manufacturer was presented in Chapter

9 of the preliminary TSD. Values for

currently sold ‘‘Base Case’’ prices were

derived from the Bureau of Census’s

Current Industrial Reports (CIRs). The

dollar value of clothes washer

shipments from factories is divided by

the quantity of clothes washers shipped

to arrive at the per-unit manufacturer

price. In order to estimate

manufacturing costs—labor, materials,

depreciation/tooling, etc.—from the

average manufacturer prices obtained

from the CIRs, a typical clothes washer

industry cost structure was developed

using publicly-available information

from the Census of Manufacturers (CMs)

and from industry statistics obtained

from the SEC–10K reports. Finally, in

preparing the Preliminary Industry Cash

Flow Analysis, DOE used the same

clothes washer shipment scenarios

developed for the National Energy

Savings (NES) spreadsheet.

The Department received a comment

accurately signaling an error in the

Preliminary Industry Cash Flow

Analysis calculation of the cost of

capital. (NRDC, No. 138, at 12–13). The

suggested change was made and its

impact is the reduction of the discount

factor from 7.25% to 6.65%. Another

comment received concerned DOE’s

assumption of a 10.5% working capital

requirement. Given ValueLine’s

estimate of just under 7%, a more

detailed explanation for the

Department’s assumption was

requested. (Oregon Office of Energy, No.

162 at 8). The Department recognizes

that there exists considerable variability

in the working capital requirements of

various firms based on information

obtained from SEC 10–K reports.

Discussions with appliance industry

analysts indicated that working capital

requirements are in the 7–14%, thus the

ANOPR input assumption. This

assumption was subsequently verified

through interviews with six clothes

washer manufacturers and found to be

accurate.

Phase 3, Sub-Group Impact Analysis.

DOE conducted detailed interviews

with clothes washer manufacturers

representing over 99% of domestic

clothes washer sales to gain insight into

the potential impacts of standards.

During these interviews, the Department

solicited the information necessary to

validate industry cash flows and to

assess employment and capacity

impacts.

The interview process played a key

role in the MIA, since it allowed

manufacturers to privately express their

views on important issues and provide

confidential information needed to

assess financial, employment, and other

business impacts. To verify the

assumptions used to derive the

Preliminary Industry Cash Flow, an

interview guide solicited information on

the possible impacts of new standards

on manufacturing costs, product prices,

and sales.

Each manufacturer was provided a

version of the GRIM that included

discrete manufacturer costs for all

percentiles reported by the AHAM. In

preparation for the interview, each

manufacturer could, if desired, input its

own data and assumptions to develop

its own expected cash flow.

Alternatively, manufacturers could

select the percentile values that best

represented their costs at different

efficiency levels.

The evaluation of the possible

impacts on direct employment and

manufacturing assets also drew heavily

on the information gathered during the

interviews. The interview guide

solicited both qualitative and

quantitative information. Supporting

documentation was requested whenever

applicable. Interview participants were

asked to identify all confidential

information provided in writing or

orally as such. Approximately two

weeks following the interview, an

interview summary was provided to

give manufacturers the opportunity to

confirm the accuracy and protect the

confidentiality of all collected

information.

Small Manufacturer Sub-Group. We

received a comment following the

publication of the preliminary TSD

indicating that smaller manufacturers of

clothes washers could be negatively

affected more than other manufacturers

by any proposed standard. (Amana, No.

146 at 3). To assess the potential

impacts of possible washer standards on

59570 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

5For more information on NEMS, please refer to

the National Energy Modeling System: An

Overview 1998. DOE/EIA–0581 (98), February,

1998. DOE/EIA approves use of the name NEMS to

describe only an official version of the model

without any modification to code or data. Because

our analysis entails some minor code modifications

and the model is run under various policy scenarios

that are variations on DOE/EIA assumptions, the

name NEMS–BRS refers to the model as used here.

BRS is DOE’s Building Research and Standards

office.

smaller manufacturers, Arthur D. Little

(ADL) conducted preliminary

interviews with the three smallest

clothes washer manufacturers (by

market share) and held discussions on

possible approaches to performing the

MIA for smaller manufacturers. ADL

and the manufacturers discussed how a

small-manufacturer GRIM could be

constructed and contrasted with the

industry cash flow analysis. Foremost in

the discussions were issues surrounding

data collection and aggregation and the

ensuing confidentiality concerns given

the small group of manufacturers and

their unbalanced size.

All of the smaller manufacturers

worked with ADL to develop a

company-specific GRIM analysis for

their firms. Even within the small

manufacturer sub-group, ADL found

significant differences in financial

structure for the firms depending on

their business models (e.g., original

equipment manufacturer (OEM) vs.

retail emphasis, product market niche).

ADL found that from a financial

standpoint the common characteristic of

this group, in contrast with the overall

industry, was its need to spread fixed

costs over smaller production volumes.

During the interviews, small

manufacturers demonstrated that

several of the key costs necessary to

meet any new regulation are largely

independent of the product volume

produced. The most apparent are the

costs necessary to design a new product

meeting the proposed energy standards.

Other costs, such as plant engineering,

some tooling, and other capital costs,

have significant portions that are

independent of final production

volumes.

To assess the ‘‘differential’’ potential

impacts of possible washer standards on

smaller manufacturers without revealing

individual manufacturers’ proprietary

information, ADL prepared a cash flow

analysis of the potential effects on a

‘‘prototypical’’ smaller manufacturer.

The basic approach to analyzing the

economic effects on a smaller

manufacturer involved determining the

smaller company’s fixed cost structure

relative to the industry average and the

likely ability of the smaller company to

recover its full costs and investments

after implementation of a new standard.

Dryer Analysis: An important

consideration regarding new efficiency

standards that came to light during the

course of the manufacturer interviews,

was the pull-through effect of clothes

washers on the clothes dryer market.

The majority of manufacturers indicated

that stringent standards on clothes

washers would have an effect on dryers

since dryer sales are highly correlated to

washer sales as people frequently buy

these appliances as a set. A separate

GRIM (referred to as the Dryer GRIM)

was prepared in an effort to model the

financial impact of these considerations

on the dryer business.

Impact on Clothes Washer Repair

Industry: Should an increase in energy

efficiency standards result in higher

prices for new clothes washers,

consumers may be influenced to repair

old units rather than purchase new ones

at the higher price. The Oregon Office

of Energy strongly believes the parts

side of the manufacturers’ businesses

should be included in the manufacturer

impact analysis and urges the

Department to gather the data necessary.

(Oregon Office of Energy, No. 190, at

10). The Department agrees that the

repair business should be considered.

Based on the forecast of clothes washer

repairs in the LBNL shipments model,

the Department estimated the impact of

a change in clothes washer repair

revenues on the NPV of the clothes

washer manufacturers’ repair parts

business.

H. Utility Analysis

The utility analysis estimates the

effects of the reduced energy

consumption due to improved

appliance efficiency on the utility

industry. Because electric utility

restructuring is well underway, it is no

longer valid to assume a cost recovery

mechanism under public utility

regulation, which was the basis of

previous utility impact analyses.

Therefore, this utility analysis consists

of a comparison between forecast results

for a case comparable to the AEO99

Reference Case and forecasts for policy

cases incorporating each of the clothes

washer trial standard levels.

Table 4 lists the major assumptions

DOE used in the clothes washer utility

analysis. We discuss each of these

assumptions briefly in this section. For

more details on the utility analysis, see

Chapter 12 in the TSD.

TABLE 4.—ASSUMPTIONS USED IN THE

UTILITY IMPACT ANALYSIS

Description Assumption

Energy Prices ............ AEO99.

Energy Savings ......... From the NES

spreadsheet as site

energy savings.

Interpolation of Scaling Factors.Linear.

The Department uses a variant of

EIA’s widely recognized National

Energy Modeling System (NEMS) called

the National Energy Modeling SystemBuilding Research and Standards

(NEMS–BRS) for the utility analysis,

together with some scaling and

interpolation calculations.5 EIA uses

NEMS primarily for the purpose of

preparing the Annual Energy Outlook.

Using NEMS, EIA produces a baseline

forecast for the U.S. energy economy

through 2020. The NEMS–BRS model

used for this analysis is based on the

AEO99 version of NEMS with minor

modifications.

NEMS–BRS has several advantages

that have led to its adoption as the

source for basic forecasting in the

appliance energy efficiency analyses.

NEMS–BRS relies on the AEO99

assumptions, which are well-known and

accepted due to the exposure and

scrutiny each AEO receives. In addition,

the comprehensiveness of NEMS–BRS

permits the modeling of interactions

among the various energy supply and

demand sectors and the economy as a

whole, so it produces a sophisticated

picture of the effects of appliance

standards. Perhaps most importantly,

because it explicitly simulates the

impact on the industry, NEMS–BRS

provides an accurate estimate of

marginal effects, which yield better

indicators of actual effects than

estimates based on industry-wide

average values. Marginal rates show

only the effects of standards. Average

rates show the effects of standards as

well as what is happening in the market.

To analyze the effects of standards,

we evaluate the trial standard levels by

entering the changes in electricity, gas,

LPG, and oil consumption values into

the NEMS–BRS Residential Demand

Module. We took the energy savings

input from the NES spreadsheet,

applied it to the clothes washer, water

heater, and clothes dryer end uses, and

allocated it appropriately among census

divisions. In the TSD, we report results

for several key industry parameters,

notably residential energy sales,

generation, and installed capacity,

including the fuel mix that is used for

generation. See Chapter 12 of the TSD

for more details.

I. Environmental Analysis

The Department determines the

environmental impacts of each standard

level as required in Section

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59571

325(o)(2)(B)(i)(VI), 42 U.S.C.

6295(o)(2)(B)(i)(VI). Specifically, DOE

calculates the reduction in carbon from

carbon dioxide (CO2) and nitrogen

oxides (NOX) emissions with the

NEMS–BRS computer model, together

with external calculations. DOE also

calculated the reduction in sulfur

dioxide (SO2) household emissions

which are not covered by NEMS–BRS.

Table 5 lists the major assumptions

DOE used in the clothes washer

environmental analysis. We discuss

each of these assumptions briefly in this

section. For more details on the

environmental analysis, please see the

Environmental Assessment which is

published with the TSD.

TABLE 5.—ASSUMPTIONS USED IN

THE ENVIRONMENTAL ANALYSIS

Description Assumption

Energy Prices ............ AEO99.

Energy Savings ......... From the NES

spreadsheet as site

energy savings.

Interpolation of Scaling Factors.Linear.

Household Emissions C, NOX & SO2 estimated from general

factors.

We analyze the environmental effects

of proposed clothes washer energyefficiency standards using NEMS–BRS

plus some scaling and interpolation

calculations. Inputs to NEMS–BRS are

similar to those used for the AEO99

reference case, except residential energy

usage for clothes washer, water heaters,

and clothes dryers is reduced by the

amount of energy (gas, oil, LPG, and

electricity) saved due to the clothes

washer trial standard levels.

The environmental analysis considers

two pollutants, SO2 and NOX, and one

emission, carbon. NEMS–BRS has an

algorithm for estimating NOX emissions

from power generation. Since we use

the AEO99 version of NES, the May 25,

1999, EPA rule (64 FR 28249) on trading

of NOX is fully incorporated in our

analysis. However, NEMS–BRS

estimates of NOX emissions are

incomplete because NEMS–BRS does

not estimate household emissions.

Household emissions result from the

combustion of fossil fuels, primarily

natural gas, within individual homes.

Because households that use natural

gas, fuel oil, or LPG contribute to NOX

emissions, DOE’s analysis includes a

separate household NOX emissions

estimation, based on simple emissions

factors derived from the general

literature. NEMS–BRS tracks carbon

emissions based on the total of fuels

consumed. NEMS–BRS also produces

comprehensive estimates of the benefits

of the trial standard levels, so no

additional analysis is necessary.

Because SO2 emissions from power

plants are capped by clean air

legislation, physical emissions of this

pollutant from electricity generation

will be only minimally affected by

possible clothes washer standards.

Therefore, we do not consider power

plant SO2 emissions here, although we

report household emissions savings

using a method similar to that described

for NOX. See Appendix EA–1 in the

TSD for a description of the

methodology used to derive emission

factors for residential combustion.

The NES spreadsheet provides the

input of energy savings for NEMS–BRS,

which then produces the emissions

forecast. We calculate the net benefits of

the standard as the difference between

emissions estimated by the reference

case version of NEMS–BRS and the

emissions estimated with the trial

clothes washer standard in place. See

the Environmental Assessment (EA)

which is published with the TSD for

details.

V. Analytical Results

A. Trial Standard Levels

In selecting trial standard levels, we

followed the guidance set forth in the

Process Rule. We identified and selected

candidate standard levels at the lowest

LCC (Trial Standard Levels 4 and 5), a

three year or less payback period (Trial

Standard Levels 1 and 2), and the most

energy efficient achievable design (Trial

Standard Level 6). Additionally, we

selected as a trial standard level the

efficiency levels proposed in the joint

recommendation submitted to the

Department by clothes washer

manufacturers and energy conservation

advocates (Trial Standard Level 3). The

Joint Stakeholders Comment levels

would go into effect in stages, with the

first level going into effect on January 1,

2004, and the second level going into

effect on January 1, 2007. The initial

standard will achieve a modified energy

factor (MEF) of 1.04 (approximately a 22

percent reduction in energy

consumption over the current standard).

The later standard will achieve a MEF

of 1.26 (approximately 35 percent

reduction in energy consumption over

the current standard).

We have examined six trial standard

levels. Table 6 presents the baseline and

trial standard levels, the associated MEF

values and the percentage reduction in

energy use, from the baseline, achieved

at the trial standard level. Trial

Standard Level 3 is the combination of

standards proposed in the Joint

Stakeholders Comment. (Joint Comment

No. 204). In addition, Table 6 presents

the retail price and incremental price

from the baseline. For the clothes

washer rulemaking the method we used

to generate the manufacturing costs

needed for the engineering analysis was

the efficiency level approach, reporting

relative costs of achieving energy

efficiency improvements (represented

here as the percentage reduction in

energy use).

TABLE 6.— TRIAL STANDARD LEVELS FOR CLOTHES WASHERS

Trial standard level MEF Percent reduction in energy use Retail

price

Incremental

price from

baseline

Baseline .............................................. 0.817 .................................................. 0 ......................................................... $421

1 .......................................................... 1.021 .................................................. 20 ....................................................... 450 $29

2 .......................................................... 1.089 .................................................. 25 ....................................................... 534 113

3 .......................................................... 1.04 in 2004 ....................................... 22 in 2004 .......................................... 474 53

1.26 in 2007 ....................................... 35 in 2007 .......................................... 661 240

4 .......................................................... 1.257 .................................................. 35% .................................................... 661 240

5 .......................................................... 1.362 .................................................. 40% .................................................... 664 243

6 .......................................................... 1.634 .................................................. 50% .................................................... 775 354

59572 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

1. Economic Impact on Consumers

a. Life-Cycle-Cost. To evaluate the

economic impact on consumers, we

conducted a LCC analysis for each of the

trial standard levels as well as the

proposed standards. LCC results are

presented as differences in the LCC

relative to the baseline clothes washer

design. Life-cycle cost was determined

for three scenarios: low, reference and

high growth. The reference growth

scenario assumes the average fuel price

forecast found in the Energy Information

Administration’s (EIA) Annual Energy

Outlook 1999 (AEO99) and expected

water price escalations based on earlier

DOE analysis, which can be found in

Section 7.2 of the TSD. The high growth

scenario assumes high economic growth

will increase the demand for fuel, and

therefore increase the price of fuel. The

high growth scenario also assumes a

high water price and wastewater

escalation rate. The reference case is

assumed by AEO the most likely case

and is bounded by the high and low

growth scenarios. In Table 7 we present

results for the reference case. Results for

the high and low growth scenarios can

be found in Section 7.2.3 of the TSD.

Table 7 shows the average LCC

savings and the percentage of

households benefitting for each of the

trial standard levels. The average LCC

savings for each of the trial standards

and the joint comment proposed

standards are positive. The convention

is used whereby all values in

parentheses are negative. A negative

change in LCC means that the LCC after

standards is lower than without

standards, and implies positive LCC

savings. Note that washers purchased

under stage 1 and stage 2 of joint

comment proposal have different LCC

savings. The LCC analysis indicates that

89% of households purchasing a clothes

washer at the 1.04 MEF level would

benefit, in comparison to the LCC of a

baseline clothes washer. Starting in

2007, the LCC analysis indicates that

80% of households will benefit from the

joint comments standard level, in

comparison to the LCC of a baseline

clothes washer.

TABLE 7.—SUMMARY OF LCC RESULTS FOR THE REFERENCE CASE

Trial standard level MEF

Mean change

in LCC from

baseline 1

Percent with

LCC less than

baseline 2

1 .................................................................................... 1.021 ............................................................................. (61) 84

2 .................................................................................... 1.089 ............................................................................. (211) 87

3 .................................................................................... 1.04 in 2004 .................................................................. (103) 89

1.26 in 2007 .................................................................. (260) 80

4 .................................................................................... 1.257 ............................................................................. (242) 79

5 .................................................................................... 1.362 ............................................................................. (243) 80

6 .................................................................................... 1.634 ............................................................................. (176) 69

1The baseline LCC, based on the shipment weighted average of the most likely costs, is $1633.

2For a sample of 10,000 households.

b. Payback Period. As part of the LCC

analysis is the payback analysis. We

report the median payback for the

reference case from the distribution of

paybacks for each trial standard level in

Table 8. The median payback is the

median number of years required to

recover, in energy savings, the increased

costs of the efficiency improvements.

The mean or average payback period is

also reported. Results for the high and

low growth scenarios can be found in

Section 7.2.3 of the TSD.

TABLE 8.—SUMMARY OF PAYBACK PERIOD RESULTS—AEO REFERENCE

Trial standard level MEF Median 1 payback

Mean 1 payback

1 .................................................................................... 1.021 ............................................................................. 0.6 4.4

2 .................................................................................... 1.089 ............................................................................. 4.0 5.0

3 .................................................................................... 1.04 in 2004 ..................................................................

1.26 in 2007 ..................................................................

3.5

5.0

4.6

6.8

4 .................................................................................... 1.257 ............................................................................. 5.1 7.0

5 .................................................................................... 1.362 ............................................................................. 5.1 7.0

6 .................................................................................... 1.634 ............................................................................. 7.0 8.7

1For a sample of 10,000 households.

c. Rebuttable Presumption Payback.

The Act states that if the Department

determines that the payback period of a

standard is less than three years as

calculated under the test procedure,

there shall be a rebuttable presumption

that such trial standard level is

economically justified. The Act further

states that if this three year payback is

not met, this determination shall not be

taken into consideration in deciding

whether a standard is economically

justified. Section 325(o)(2)(B)(iii), 42

U.S.C. 6295(o)(2)(B)(iii). Rebuttable

Presumption Paybacks (PBPs) are

presented in order to provide the

established rebuttable presumption that

a energy efficiency standard is

economically justified if the additional

product costs attributed to the standard

are less than three times the value of the

first year energy cost savings. Rather

than using distributions for input

values, the Rebuttable PBP is based on

discrete values and is based on the DOE

clothes washer test procedure

assumptions. These values (including

cycles per year, electric fuel source, etc.)

correspond to those outlined in the DOE

test procedure, found in 10 CFR 10,

Volume 3, Part 430, Subpart B,

Appendix J1. The result is a single

payback value and not a distribution of

PBPs.

Payback periods are calculated at the

new standard level for all efficiency

levels of product sold in the basecase.

For this analysis the Department has

assumed two efficiency levels in the

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59573

basecase: baseline units (MEF=.817) and

units at a 35% reduction in the energy

use of the baseline model (MEF=1.26) to

represent the H-axis market segment.

With the presently available data, the

baseline efficiency level is weighted

with a market share of 91% and the

horizontal axis market share is weighted

at 9%.

The payback periods are calculated

for the expected effective year of the

standard ( 2004 or 2007) and are

presented in Table 9.

TABLE 9.—REBUTTABLE PRESUMPTION PAYBACK IN YEARS

Trial standard level MEF

Payback for

baseline to

standard level

Payback for

35% efficiency

level to standard levelMarket share

weighted payback period Market share

= 91% Market share

= 9%

1 ...................................................................... 1.021 .............................................................. 2.1 NA 2.1

2 ...................................................................... 1.089 .............................................................. 2.9 NA 2.9

3 ...................................................................... 1.04 in 2004 ...................................................

1.26 in 2007 ...................................................

2.5

4.1

NA

19.8

2.5.

5.5

4 ...................................................................... 1.257 .............................................................. 4.2 NA 4.2

5 ...................................................................... 1.362 .............................................................. 4.3 19.6 5.7

6 ...................................................................... 1.634 .............................................................. 5.7 23.2 7.3

Note: NA = not applicable.

The results in Table 9 are based on an

increase of H-axis sales per year of

0.5%. Previously the annual escalation

rate of H-axis washer sales market were

assumed to capture an additional 0.5%

per year of all clothes washer sales but

now the annual sales of H-axis clothes

washers is determined by an amount

equal to 0.5% of the previous year’s Vaxis sales. The negotiated scenario of a

two-tier standard with MEF levels of

1.04 becoming effective in the year 2004

and a MEF level of 1.26 becoming

effective in the year 2007 is also

represented. The values shown for the

second tier were calculated for the year

2007. All other calculations are based

on the year 2004. The effective year

does not have a great impact on the

payback period because only the fuel

and water price are different for

different years.

As can be seen from Table 9, Trial

Standard Levels 1, 2 and the first level

of 3 satisfy the rebuttable presumption

test.

d. Consumer Sub-Group Analysis. As

part of the consumer analysis we

evaluated the impact to any identifiable

groups or consumers, such as

households of different income levels,

who may be disproportionately affected

by any national energy efficiency

standard level. This analysis examines

the economic impacts on different

groups of consumers by estimating the

average change in LCC and by

calculating the fraction of households

that would benefit. We analyzed the

potential effect of standards for

households with low income levels and

senior households, two consumer

subgroups of interest identified by DOE

and supported by stakeholders. Seniors

is defined as having a head of

household over 65. Low income is

defined as at 100% of poverty level.

(Inputs to the spreadsheet used in

determining life-cycle-cost and payback

periods are explained in detail in

Chapter 7 of the TSD). We present the

results of the analysis in Table 10.

TABLE 10.—CONSUMER SUBGROUP LCC SAVINGS AND PERCENT OF HOUSEHOLDS BENEFITTING

Trial std levels MEF

Sample households benefitting (%) Average LCC savings ($)

Total Senior Low income Total Senior Low income

1 ........................................ 1.021 ................................. 84 79 85 61 41 69

2 ........................................ 1.089 ................................. 87 80 88 211 137 243

3 ........................................ 1.04 in 2004 ..................... 90 84 90 103 68 118

1.26 in 2007 ..................... 81 72 81 260 147 310

4 ........................................ 1.257 ................................. 79 71 81 242 132 289

5 ........................................ 1.362 ................................. 80 70 80 243 130 287

6 ........................................ 1.634 ................................. 69 55 71 176 61 227

The two consumer subgroups show

the same trend in average LCC savings

and percent of sample households

benefitting as the total sample of

households.

For the low-income subgroup the

percentage of households benefitting

from standards is either the same or

greater than for the general population.

This can be explained by looking at the

cycles per year (i.e., washer loads) used

in determining the LCC. This number is

estimated from the number of occupants

in a household. Our RECS sample of

low income households showed a

greater number of people per household

and we calculated 410 cycles per year,

greater than the 392 used for the general

population.

The senior household subgroup had

less people per household, and therefore

had less wash loads per year (on average

299 wash loads per year or 24% less

wash loads). Therefore, seniors

benefitted from standards somewhat

less.

Other differences that could explain

changes in LCC and the percentage in a

subgroup benefitting from standards are

other factors that determine the amount

spent on fuel. Fuel costs are higher if

electric water heaters and dryers are

used instead of gas. The geographic

location of these populations and the

price they pay for fuel also affect the

number of households in a subgroup

59574 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

benefitting. These differences were

small when compared to the differences

in LCC due to the cycles per year

between the subgroups and the total

sample population.

An analysis on the effects on payback

period by subgroup are shown in Table

11. In agreement with the LCC results,

the payback periods for the low income

subgroup were somewhat shorter than

that for the overall population, while

the payback periods were somewhat

longer for the senior subgroup. The

primary reason for the differences in

payback period is the same as for the

LCC analysis; the differences in wash

loads per year.

TABLE 11.—CONSUMER SUBGROUP PAYBACK PERIOD COMPARISONS

Trial Std levels MEF

Average payback period in years

Total RECS

sample Senior Low income

1 ...................................................................... 1.021 .............................................................. 4.4 5.4 4.4

2 ...................................................................... 1.089 .............................................................. 5.0 6.4 4.9

3 ...................................................................... 1.04 in 2004 ...................................................

1.26 in 2007 ...................................................

4.6

6.8

5.7

8.4

4.5.

6.5

4 ...................................................................... 1.257 .............................................................. 7.0 8.7 6.8

5 ...................................................................... 1.362 .............................................................. 7.0 8.8 6.9

6 ...................................................................... 1.634 .............................................................. 8.7 10.9 8.4

2. Economic Impact on Manufacturers

We performed a Manufacturer Impact

Analysis (MIA) to determine the impact

of standards on manufacturers. The

complete analysis is Chapter 11 of the

TSD. In conducting the analysis, we

conducted detailed interviews with six

clothes washer manufacturers that

together supply more than 99% of the

domestic clothes washer market. The

interviews provided valuable

information used to evaluate the

impacts of a new standard on

manufacturers’ cash flows,

manufacturing capacities and

employment levels.

Definition of Shipments Scenarios.

The Manufacturer Impact Analysis was

conducted using three shipment

scenarios: High Price Elasticity

Scenario, Medium Price Elasticity

Scenario, and Medium Price/Income

Elasticity Scenario. The High Price

Elasticity scenario most closely

resembles the original shipments

forecast which was presented at the July

1999 workshop and used during the

interviews. The results presented in this

notice are for the Medium Price

Elasticity Scenario—the reference

case—which forecasts a reduction in

clothes washer shipments

approximately half way between the

other two scenarios. Additional

parameters used in forecasting

shipments are summarized in Table 17.

Results for the High Price Elasticity and

Medium Price/Income Elasticity

Scenarios are shown in Chapter 11 of

the TSD.

Definition of Business Scenarios.

During the interviews, several

manufacturers stated that they would

possibly exit the clothes washer

manufacturing business if the standard

exceeded certain improvement levels.

To capture this uncertainty in future

industry dynamics, ADL evaluated the

industry financial impacts using two

different business scenarios. In the first

scenario, the ‘‘no consolidation

scenario,’’ it is assumed that all current

manufacturers continue to manufacture

clothes washers and maintain their

market share, even if they believe they

will be unable to recuperate their

incremental costs. This could result in

a negative Standard Case industry net

present value (INPV) for some

manufacturers. In the second scenario,

the ‘‘industry consolidation scenario,’’ it

is assumed that some manufacturers

would exit the industry or lose

significant market share. In this

scenario, their volumes are redistributed

among the remaining and more

profitable players in the industry.

Industry Cash Flow Results. The

Department used the interviews to

understand each manufacturer’s

incremental costs and its ability to pass

through these costs at the various

standard levels. Some manufacturers

provided their cash flow analysis using

the GRIM spreadsheet while others

provided information on mark-ups, cost

pass-through assumptions, prices, and

expected shipments which were used by

DOE to develop individual company

cashflows. Individual company

cashflow results were aggregated to

calculate standard induced changes in

Industry NPV (INPV) at each of the

potential standard levels.

The aggregated industry Standard

Case INPV for the ‘‘No Consolidation’’

scenario and the Medium Price

Elasticity Shipment Scenario is

presented in Table 12. Results for both

business scenarios and the three

shipment scenarios are presented in

Chapter 11 of the TSD. Not all

manufacturers provided information at

the 50% level (MEF=1.634) and hence

the cash flows at this level were

extrapolated from the available

information. Similarly, the Department

extrapolated data submitted at the 20%

and 25% efficiency levels to estimate

the impacts of a two step standard with

a reduction in the energy use of the

baseline model of approximately 22%

(MEF=1.04) in 2004 followed by a

second step at 35% in 2007.

TABLE 12.—INDUSTRY CASH FLOW RESULTS FOR THE ‘‘NO CONSOLIDATION’’ SCENARIO—MEDIUM PRICE ELASTICITY

Trial standard level MEF

Base

case

INPV

(million)

Standard case

INPV

($million)

Change in INPV

($million)

% Change in

INPV

Standard

deviation

% NPV

1 ......................................... 1.021 .................................. 1,439.1 1,420.4–1,349.5 (18.7)–(89.6) (1.3)–(6.2) 11.5

2 ......................................... 1.089 .................................. 1,439.1 1,033.8–877.2 (405.2)–(561.9) (28.2)–(39.0) 11.4

3 ......................................... 1.04 in 2004, 1.26 in 2007 1,439.1 1,028.0–920.8 (411.0)–(518.3) (28.6)–(36.0) 15.8

4 ......................................... 1.257 .................................. 1,439.1 944.7–842.3 (494.4)–(596.8) (34.4)–(41.5) 17.7

5 ......................................... 1.362 .................................. 1,439.1 1,002.1–929.9 (437.0)–(509.2) (30.4)–(35.4) 27.7

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59575

6Refer to Chapter 11 of the TSD for details of how

the standard deviation was calculated.

TABLE 12.—INDUSTRY CASH FLOW RESULTS FOR THE ‘‘NO CONSOLIDATION’’ SCENARIO—MEDIUM PRICE ELASTICITY—

Continued

Trial standard level MEF

Base

case

INPV

(million)

Standard case

INPV

($million)

Change in INPV

($million)

% Change in

INPV

Standard

deviation

% NPV

6 ......................................... 1.634 .................................. 1,439.1 989.7–815.2 (449.4)–(623.8) (31.2)–(43.3) 27.7

From Table 12, we note that energy

efficiency standards could result in

losses of INPV between $411.0 and

$518.3 million (28.6–36%) for the

consensus proposal (Trial Standard

Level 3). Although the impacts of the

consensus proposal approach those of

Trial Standard Levels 5 and 6, the

Department found the impacts of Trial

Standard Levels 5 and 6 to be much

more unevenly distributed between

firms. This large variability of impacts is

attributed to the presence of existing

product at these levels (H-axis designs)

for some firms which may gain a

competitive advantage over firms that

do not have product.

The standard deviation (SD) 6 values

reported in Table 12 provide a measure

of how widely individual companies’

percentage NPV changes are dispersed

from the industry percentage change in

value (% change in INPV). Calculating

the SD of individual company % value

change at each efficiency level from the

industry INPV % change yields the

following results: at Trial Standard

Level 1 the SD is 11.5%; at Trial

Standard Level 2 the SD is 11.4%; at

Trial Standard Level 3 the SD is 15.8%,

at Trial Standard Level 4 the SD is

17.7%; and at Trial Standard Levels 5

and 6 the SD leaps to 27.7%. This is

significant because the greater the

difference in impacts between

manufactures, the greater the risk of

industry consolidation. Several

manufacturers believe that setting the

standard at Trial Standard Level 5 or

more would result in industry

consolidation and the exit of two or

three firms.

Compared with Trial Standard Level

4 (MEF=1.26 in 2004), the industry

impacts of the consensus proposal (Trial

Standard Level 3) are lower and more

evenly distributed among the

manufacturers. A potential factor

lessening the impact of the consensus

proposal from the impacts shown is the

possible effect of technological

innovation. Delaying the standard

implementation date to 2007 for the

more stringent level (MEF=1.26) gives

manufacturers more time to research

and develop lower-cost solutions to

achieving higher standards.

Impact on Clothes Dryer Business.

The majority of manufacturers indicated

that stringent standards on clothes

washers would have a corresponding

effect on clothes dryers. Dryer sales are

highly correlated to washer sales as

people frequently buy these appliances

as a set. From the manufacturers’ data,

it is estimated that approximately 45%

to 55% of washers are sold in pairs with

dryers. Therefore, any change in washer

volumes will impact a significant

portion of the dryer business. A separate

GRIM was run in an effort to model the

financial impact of these considerations

on the dryer business. Table 13 presents

the Base and Standard Case INPV for the

Medium Price Elasticity Shipment

Scenario. The loss of value is significant

for standard levels 2 and greater.

TABLE 13.—STANDARD CASE NPV FOR DRYER BUSINESS—MEDIUM PRICE ELASTICITY SCENARIO

Trial standard level MEF

Base case

INPV

($million)

Standard

case INPV

($million)

Change

in INPV

($million)

%

Change

in INPV

1 .................................................................... 1.021 ............................................................. 665.1 664.5 (0.6) (0.1)

2 .................................................................... 1.089 ............................................................. 665.1 660.6 (4.48) (0.7)

3 .................................................................... 1.04 in 2004, 1.26 in 2007 ........................... 665.1 654.1 (11.0) (1.7)

4 .................................................................... 1.257 ............................................................. 665.1 648.3 (16.84) (2.5)

5 .................................................................... 1.362 ............................................................. 665.1 647.9 (17.2) (3.9)

6 .................................................................... 1.634 ............................................................. 665.1 638.3 (26.8) (4.0)

At the more stringent standard levels,

manufacturers expect that they will

redesign and retool their clothes washer

platforms and these changes will dictate

a change to the dryer platform as well.

Manufacturers estimate that, at the more

stringent standard levels of 25% and

above, total industry conversion costs

for dryers could be in the range of $25

million to $75 million. The Dryer GRIM

does not consider any conversion costs

(capital and design) that might be

required to upgrade the dryer platforms

at the more stringent standard levels.

Any such investments will increase the

negative impact on the INPV of the

dryer industry over and above those

presented in Table 13.

In addition, based on data gained

from manufacturers, a decline in

washer-related dryer sales will result in

a decline in employment related to

dryer production. The greatest impact is

at and above a 35 percent reduction in

the energy use of the baseline model,

when shipments are expected to decline

substantially, resulting in a similar

impact on related employment levels.

Table 14 summarizes the potential

impact of new clothes washer standards

on dryer industry employment. As

shown Trial Standard Level 3 and above

will result in a loss of more than 200

jobs in the dryer industry.

59576 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

TABLE 14.—IMPACT OF STANDARDS ON DRYER SHIPMENTS ON DRYER INDUSTRY EMPLOYMENT—MEDIUM PRICE

ELASTICITY SCENARIO

Trial standard level MEF 1999 dryer

employment

Forecast 2004

dryer employment

Impact relative

to 2004 base

case

Basecase ........................................................ Base Case ...................................................... 2,544 2,594 ........................

1 ...................................................................... 1.021 .............................................................. 2,544 2,578 (16)

2 ...................................................................... 1.089 .............................................................. 2,544 2,520 (74)

3 ...................................................................... 1.04 in 2004 ...................................................

1.26 in 2007 ...................................................

2,544 2,506/2,488 1(88)/(147)

4 ...................................................................... 1.257 .............................................................. 2,544 2,352 (241)

5 ...................................................................... 1.362 .............................................................. 2,544 2,348 (245)

6 ...................................................................... 1.634 .............................................................. 2,544 2,226 (368)

1 Reduction on top of first standard reduction, not cumulative.

Impact on Clothes Washer Repair

Industry. Should an increase in energy

efficiency standards result in higher

prices for new clothes washers,

consumers may be influenced to repair

old units rather than purchase new ones

at the higher price. Based on the forecast

of clothes washer repairs in the

shipments model, we estimated the

impact of a change in clothes washer

repair revenues on the INPV of the

clothes washer manufacturers’ repair

parts business. The INPV of the

estimated additional profit stream is

presented in Table 15. As may be

observed the increase in NPV for the

repair industry is one order of

magnitude lower than the loss of value

of the dryer industry. For instance for

Trial Standard Level 3 the net present

value of increases in OEM revenue is .9

million compared to a loss of 11 million

for the dryer business.

TABLE 15.—NET PRESENT VALUE OF

OEM REPAIR REVENUES

[$ millions]

Trial standard level MEF Medium price

elasticity

1 .................. 1.021 ........... 0.1

2 .................. 1.089 ........... 0.2

3 .................. 1.04 in 2004

1.26 in 2007

0.9

4 .................. 1.257 ........... 1.1

5 .................. 1.362 ........... 1.1

6 .................. 1.634 ........... 1.7

Impacts on Small Manufacturers.

Converting from a company’s current

basic product line involves creating a

new design, testing it and moving it into

production with associated capital

investments. Small manufacturers of

clothes washers, because of their need

to spread fixed costs over smaller

production volumes, could be affected

more negatively than large

manufacturers by a proposed standard.

The Department conducted a separate

GRIM analysis for small manufacturers

which are presented in Table 16. The

changes in value due to a standard for

a small company compared to a large

company illustrates the effects of capital

and engineering costs that are fixed with

respect to production volume.

As shown in Table 16, a small

manufacturer (4.2% market share)

producing 331,000 clothes washers

absent standards in 2004 sees its value

reduced by 78.9–89.9% for Trial

Standard Level 2. A small manufacturer

(2.1% market share) producing 165,000

clothes washers in 2004 will lose all of

its value (143.1–153.9%) since it is

above 100% for Trial Standard Level 2.

This compares to the loss of 28.2–39.0%

for a large manufacturer (20% market

share) producing 1,578,000 clothes

washers in 2004 for Trial Standard

Level 2.

At the time of the manufacturer

interviews, the U.S. washer industry

had one manufacturer of washers with

a production volume of approximately

300,000 units (Alliance Laundry

Systems, LLC), most of whose

production was supplied to another

relatively small appliance company

(Amana Appliances) under the terms of

a private label supply agreement entered

into when the two companies were sold

by Raytheon. This agreement ended in

September 1999, and Amana announced

that it would produce its own verticalaxis washers instead of sourcing them

from Alliance. Amana and Alliance both

report that any standard that requires a

25 percent or higher improvement (for

Trial Standard Level 2 and above) in

energy efficiency would certainly

require major investments and the

development of a horizontal-axis

machine. At this time, neither Amana

nor Alliance believes they have a

functioning horizontal-axis washer

capable of cost-competitively

participating in the mass consumer

marketplace.

The decision by either of the smaller

producers, or any other washer

manufacturer, to exit washer production

would require an assessment of the

linkages with their dryer business and

with other appliances. Manufacturers

and their retail partners generally

perceive some value in being a full-line

producer and greater value in producing

both washers and dryers. If a

manufacturer perceived significant

value in its dryer businesses and if the

total product line generated acceptable

rates of return, it might continue to

produce washers, even in the face of

declining company values due to

investment in new washer technology.

Based on the major loss in company

value associated with meeting a more

stringent standard above Trial Standard

Level 2 as seen in Table 16, it is likely

that one or both of the two smaller

companies would cease to produce

washers covered by the standard and

might also cease to market them.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59577

TABLE 16.—CHANGE IN VALUE OF SMALL MANUFACTURERS, RESULTS FOR THE ‘‘NO CONSOLIDATION’’ SCENARIO—

MEDIUM PRICE ELASTICITY SCENARIO (%)

Trial standard level MEF

Large

manufacturer

(20% market

share)

Small

manufacturer

(4.2% market

share)

Small

manufacturer

(2.1% market

share)

1 ............................................................. 1.021 ..................................................... (1.3)–(6.2) (17.4)–(22.4) (37.9)–(42.8).

2 ............................................................. 1.089 ..................................................... (28.2)–(39.0) (78.9)–(89.8) (143.1)–(153.9).

3 ............................................................. 1.04 in 2004 ..........................................

1.26 in 2007

(28.6)–(36.0) (83.1)–(90.6) (152.2)–(159.6).

4 ............................................................. 1.257 ..................................................... (34.4)–(41.5) (91.8)–(98.9) (164.4)–(171.6).

5 ............................................................. 1.362 ..................................................... (30.4)–(35.4) (87.7)–(92.7) (160.3)–(165.3).

6 ............................................................. 1.634 ..................................................... (31.2)–(43.3) (90.7)–(102.8) (166.0)–(178.1).

Impacts on Employment. The weight

of available evidence does not support

a conclusive assessment of the impact

that new energy efficiency standards

would have on employment levels in

the clothes washer industry. The data

that is available is extremely variable

and the true extent of the impact will be

largely dependent on whether

manufacturers choose to exit the

industry or move to non-domestic

production facilities.

Manufacturers stated that any

decrease in shipments will have a

similar effect on employment, as

employment levels tend to track

production levels. However, while

reductions in shipments may lead to

reductions in employment at various

manufacturers due to plant closures,

this could be matched by increased

employment in United States plants at

those firms picking up the additional

market share and corresponding

volumes. In addition, the

manufacturers’ data supplied to the

AHAM indicates that incremental laborrelated costs are expected to increase at

the higher efficiency levels (by up to 50

percent at the 40 percent reduction in

the energy use of the baseline model

level), due to the increased complexity

of production and assembly of more

efficient machines. Tracking

employment levels by shipments using

this data actually indicates total

industry employment could increase as

the change in labor expense for higher

efficiency machines is greater than the

change in labor resulting from the

decline in shipments.

B. Significance of Energy Savings

The Act requires a standard to result

in ‘‘significant’’ energy savings. Section

325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B).

While the term ‘‘significant’’ is not

defined in the Act, the U.S. Court of

Appeals, in Natural Resources Defense

Council v. Herrington, 768 F.2d 1355,

1373 (D.C. Cir. 1985), stated that

Congress intended ‘‘significant’’ energy

savings to be savings that were not

‘‘genuinely trivial.’’ The energy savings

for all of the trial standard levels

considered in this rulemaking are nontrivial and therefore we consider them

‘‘significant’’ within the meaning of

Section 325 of the Act.

All efficiency levels for which we

have engineering data were analyzed.

Each efficiency level was analyzed for

three scenarios. Some of the parameters

that were varied are inputs to the

shipment-model and some are inputs to

the NES spreadsheet model. Since

shipments have an effect on the national

energy savings, changes to the shipment

inputs have a direct effect on the

national energy savings. Changes in the

input parameter affect the base case

results as well as the standards case

results. Table 17 outlines the input

parameters used to generate the high

and low bound sensitivities. Three

scenarios are run: (1) reference case, (2)

lower bound and (3) upper bound. The

lower bound is defined as having

medium price/income elasticity. The

upper bound is defined as the price

elasticity being high. All other

parameters are unchanged from the

reference case.

TABLE 17.—NES SPREADSHEET MODEL SHIPMENTS SENSITIVITIES

Parameter Reference case Lower bound (least drop in

shipments after standard)

Upper bound (greatest

drop in shipments after

standards)

AEO growth ..................................................................... AEO99 reference ............... AEO99 reference ............... AEO99 reference.

Water Escalation Rate ..................................................... medium .............................. medium .............................. medium.

H-axis base case escalation ........................................... 0.5% .................................. 0.5% .................................. 0.5%.

Price Elasticity ................................................................. medium .............................. none ................................... high.

Price/Income Elasticity .................................................... none ................................... medium .............................. none.

Top-loading Elasticity ...................................................... medium .............................. medium .............................. medium.

Manufacturer incremental price mark-up ........................ medium .............................. medium .............................. medium.

Year of standard .............................................................. 2004 ................................... 2004 ................................... 2004.

The Lower Bound Scenario results in

the greatest energy savings. This

scenario used price/income data to fit

an equation to historical data. This

resulted in a greater number of

shipments and greater savings in energy

than the reference case forecasted. The

Upper Bound Scenario resulted in the

least energy savings. This scenario

assumed a high price elasticity. This

resulted in lower shipments and energy

savings. The Reference Case Scenario

used medium or average values as

parameter inputs and is bounded on

both sides by the other scenarios

described above. This is considered the

most likely scenario.

The national energy savings and net

present value results from the NES

spreadsheet for the reference case are

shown in Tables 18 and 19,

respectively. More detailed results are

also available in Appendix N of the

TSD. Results are cumulative to 2030 and

are shown as absolute energy and water

savings and as the discounted value of

59578 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

7Purchase probabilities indicate the likelihood a

consumer will purchase a particular clothes washer,

assuming (s)he has made the decision to buy a new

clothes washer.

these savings in dollar terms. Table 20

shows the water savings for different

standard levels. It can be seen that while

the two-tier standard is a combination

or hybrid of Trial Standard Levels 1 and

4, it is estimated to attain nearly the

same energy, water, and national cost

savings as a pure Trial Standard Level

4.

All of the trial standard levels

considered in this rulemaking have

significant energy savings, ranging from

2.12 quads to 7.53 quads, depending on

the trial standard level.

TABLE 18.—REFERENCE CASE—ALL

PARAMETERS SET TO MEDIUM OR

AVERAGE

Trial standard

level MEF Energy savings quads

1 .................... 1.021 ............. 2.12

2 .................... 1.089 ............. 4.04

3 .................... 1.04 in 2004 ..

1.26 in 2007 ..

5.52

4 .................... 1.257 ............. 5.99

5 .................... 1.362 ............. 6.03

6 .................... 1.634 ............. 7.53

C. Lessening of Utility or Performance of

Products

This section summarizes the results of

the department’s consumer utility

analysis. Preferences of low-income and

elder populations are also addressed.

The focus group and conjoint results

indicate that price is the most important

attribute when consumers are

purchasing a new clothes washer,

although in each case another attribute

is virtually tied with price in terms of

importance. In the focus groups, 83% of

the respondents included price in their

top ten list of important clothes washer

attributes, while 81% included wash

tub capacity in that same list. In the

conjoint analysis, price had the highest

relative importance score (26%),

followed closely by the availability of a

wash load size option on the control

panel (25%). Of the six attributes

included in the conjoint analysis

survey, door placement was the fifth

most important attribute with a relative

importance score of 11% (for further

information, see Chapter 8 and

Appendix J of the TSD).

In the likelihood of purchase

scenarios, the purchase probabilities

were more sensitive to price than any of

the other washer attributes.7 While the

shift from a standard to a high efficiency

machine resulted in a drop in the

estimated purchase probability, this was

due to the change in price rather than

to changes in the other attributes. When

price was held constant at the standard

efficiency level and the other attributes

were allowed to change to reflect a high

efficiency machine, the likelihood of

purchase increased. This is due to the

fact that consumers value energy

savings more than top load door

placement.

The purchase probability findings

indicate that low-income consumers

and elderly consumers were slightly

more likely to purchase a high

efficiency, front-load washing machine

than the total group of consumers.

When the analysis focused exclusively

on the impacts of clothes washer prices

increasing, the data indicated that a

smaller percentage of low-income

consumers would be willing or able to

purchase machines in the $650 price

level, when compared to the total group

of consumers. There was no statistical

difference between elderly consumers

and the full sample at the $650 level.

While the data from the price impact

questions indicate that low-income

consumers are more adversely affected

by higher clothes washer prices than the

sample as a whole, the Department is

unable to determine the magnitude of

the impact on future clothes washer

purchases using the survey data. For

instance, the consumer analysis survey

found that approximately half of the

low-income respondents currently do

not own a clothes washer, while more

than three-quarters of the respondents

making more than $25,000 annually

own a washing machine. The

Department is unable to determine if

this ratio would change with a price

increase due to the proposed standards.

The fact that the survey found lowincome consumers are more likely to

use store financing plans, such as no

interest for one year, to purchase a

clothes washing machine than the

sample as a whole further clouds the

magnitude of the new standards’ impact

on low-income consumers because store

financing encourages consumers to

purchase high price products by

allowing payments to be paid over a

number of months.

The Department concludes that none

of the trial standard levels reduces the

performance of clothes washers. The

Department conducted extensive

consumer research to understand the

product features that consumers value

in clothes washers. Generally the trial

standard levels increase clothes washer

price and reduce operating cost but do

not affect other product offerings. A

significant issue raised during the

rulemaking concerns the relative

consumer utility of V-axis and H-axis

washers. Some stakeholders believed

that higher standard levels would

require H-axis designs and this would

result in eliminating the top loading Vaxis machines thereby reducing utility

for some consumers who prefer that

option. Recent product offerings of high

efficiency V-axis washers show that the

axis-efficiency relationship is untenable.

D. Impact of Lessening of Competition

The Act directs the Department to

consider any lessening of competition

that is likely to result from standards. It

further directs the Attorney General to

determine the impact, if any, of

competition likely to result from such

standard and transmit such

determination, not later than 60 days

after the publication of a proposed rule

to the Secretary, together with an

analysis of the nature and extent of such

impact. Section 325(o)(2)(B)(i)(V), 42

U.S.C. 6295(o)(2)(B)(i)(V).

In order to assist the Attorney General

in making such a determination, the

Department has provided the

Department of Justice (DOJ) with copies

of this notice and the TSD for review.

At DOE’s request, the DOJ reviewed the

manufacturer impact analysis interview

questionnaire to ensure that it would

provide insight concerning any

lessening of competition due to any

proposed trial standard levels.

E. Need of the Nation To Save Energy

and Net National Employment

1. National Net Present Value

Table 19 lists the National NPV for

the trial standard levels. The NPV

considers the combined discounted

energy savings less the increased

consumer costs of a particular trial

standard level. We base this calculation

on all expenses and savings occurring

between 2004 and 2030.

The national NPV is positive for all

the trial standard levels. In this analysis,

a positive NPV means that the estimated

energy savings are greater than the

increased costs due to standards. It can

be observed that the National NPV of

Trial Standard Levels 2 through 5 are in

the range of 14 to 17 billion dollars.

Trial Standard Level 6 however has a

lower NPV of 10 Billion due to the

higher first cost of a clothes washer at

this efficiency level.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59579

TABLE 19.—REFERENCE CASE—ALL PARAMETERS SET TO MEDIUM OR AVERAGE

Trial standard level MEF

Net present

value (NPV)

(billion 1997$)

(discounted to

1999)

1 .................................................................................................. 1.021 ........................................................................................... 3.66

2 .................................................................................................. 1.089 ........................................................................................... 14.29

3 .................................................................................................. 1.04 in 2004 ...............................................................................

1.26 in 2007 ...............................................................................

15.30

4 .................................................................................................. 1.257 ........................................................................................... 16.88

5 .................................................................................................. 1.362 ........................................................................................... 16.73

6 .................................................................................................. 1.634 ........................................................................................... 10.79

2. National Water Savings

Table 20 presents the estimated energy water savings. The savings is positive for all of the trial standard levels.

TABLE 20.—REFERENCE CASE—ALL PARAMETERS SET TO MEDIUM OR AVERAGE

Trial standard level MEF Water savings

trillion gallons

1 .................................................................................................. 1.021 ........................................................................................... 0.53

2 .................................................................................................. 1.089 ........................................................................................... 9.09

3 .................................................................................................. 1.04 in 2004 ...............................................................................

1.26 in 2007 ...............................................................................

11.59

4 .................................................................................................. 1.257 ........................................................................................... 12.94

5 .................................................................................................. 1.362 ........................................................................................... 12.94

6 .................................................................................................. 1.634 ........................................................................................... 10.85

3. Environmental Impacts

Enhanced energy efficiency improves

the Nation’s energy security, strengthens

the economy and reduces the

environmental impacts of energy

production. The energy savings from

clothes washer standards result in

reduced emissions of CO2, SO2 and NOX

and aid in addressing global climate

change and reducing air pollution.

Depending on the standard level

chosen, the cumulative emission

reductions to 2030 range from 38–135

Mt for carbon equivalent, 115–364

thousand metric tons (kt) for NOX, and

28–31 kt for SO2. Cumulative emissions

savings for the power and households

sectors through the year 2030 are

presented in Table 21.

TABLE 21.—CUMULATIVE EMISSIONS REDUCTIONS THROUGH 2030: HOUSEHOLD AND POWER SECTORS

Emission

Trial standard level emission reductions and MEF

1

0.817

2

1.089

3

1.04 in 2004,

1.26 in 2007

4

1.257

5

1.362

6

1.634

Carbon(Mt) ........... 38.1 70.9 95.1 106.2 107.3 135

NOX (kt) ............... 115.6 193.6 253.5 280.6 283.1 364

SO2 (kt) ................ 1 31.4 1 30.3 1 28.1 1 30.3 1 30.3 1 31.4

1 Results include only household emissions reductions because the power sector emissions cap implies that savings from electricity generation

will be negligible.

4. Net National Employment

Net national employment impacts

from clothes washer standards are

defined as net jobs created or eliminated

in the general economy as a

consequence of: (1) Reduced spending

by end users on energy (electricity, gas

including LPG, and oil) and water; (2)

reduced spending on new energy supply

by the utility industry; (3) increased

spending on the purchase price of new

clothes washers; and (4) the associated

indirect effects of those three factors

throughout the national economy. Jobs

are created when a clothes washer

standard results in operating cost

savings that more than offset the greater

capital required to buy a more efficient

clothes washer. More information on

how these impacts are estimated is

presented in the Net National

Employment in Chapter 13 of the TSD.

The model used to estimate net

national employment impacts suggests

that the greatest number of jobs would

be created by the standard level calling

for a 35% reduction in clothes washer

energy use. For this standard level, the

model estimates that there would be

142,800 more jobs in 2030 than if there

were no new efficiency standard

implemented. However, it is unlikely

that net employment would increase to

this extent if the economy was

continuing to perform at levels

comparable those experienced during

2000. Taking into consideration these

legitimate concerns regarding the

interpretation and use of the

employment impacts analysis, the

Department concludes only that the

proposed clothes washer standards are

likely to produce employment benefits

that are sufficient to offset fully any

59580 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

8Alliance Laundry Systems LLC, Amana

Appliances, Frigidaire Home Products, General

Electric Appliances (GEA), Maytag Corporation, and

Whirlpool Corporation.

9The standard deviation is a measure of how

widely individual companies’ percentage NPV

changes are dispersed from the industry percentage

change in value. Refer to Chapter 11 of the TSD for

a description of the calculation method.

10Alliance Laundry Systems LLC and Amana

Appliances.

adverse impacts on employment in the

clothes washer or energy industries.

F. Conclusion

The Act 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. Section

325(o)(2)(A), 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. Section

325(o)(2)(B)(i), 42 U.S.C.

6295(o)(2)(B)(i). The amended standard

must ‘‘result in significant conservation

of energy.’’ Section 325(o)(2)(B)(3)(B),

42 U.S.C. 6295(o)(B)(3)(B).

We consider the impacts of standards

at each of six trial standard levels,

beginning with the most efficient level.

We have included a summary of the

analysis results in Table 22 to aid the

reader in the discussion of the benefits

and burdens for the different trial

standard levels.

TABLE 22.—SUMMARY ANALYSIS RESULTS

Trial standard level 123456

MEF .......................................................... 1.02 1.09 1.04 in 2004,

1.26 in 2007

1.26 1.36 1.63

Total Energy Saved (Quads) ................... 2.12 4.04 5.52 5.99 6.03 7.53

Water Savings (trillion gallons) ................ 0.53 9.09 11.59 12.94 12.94 10.85

NPV (Billion $) ......................................... 3.66 14.29 15.3 16.88 16.73 10.79

Emissions

Carbon Equivalent (Mt) ............................ 38.1 70.9 95.1 106.2 107.3 134.6

NOX (kt) ................................................... 115.6 193.6 253.5 280.6 283.1 364

SO2 (kt) 1 .................................................. 131.41 30.31 28.11 30.31 30.31 31.41

Manufacturer Impacts

Cumulative Loss in Industry NPV ($ Million) 2 ..................................................... 19.2–90.1 409.9–566.2 421.1–528.4 510.1–612.5 453.1–524.9 474.5–648.9

% Change in INPV ................................... (1.3)–(6.3) (28.5)–(39.3) (29.2)–(36.7) (35.4)–(42.5) (31.7–36.5) (33.0)–(45.2)

Standard Deviation % NPV ..................... 11.5 11.4 15.8 17.7 27.7 27.7

Life Cycle Cost ($)

Mean Savings ($) ..................................... 61 211 103/260 242 243 176

Percent Households LCC Less than

Baseline ................................................ 84 87 89/80 79 80 69.

Payback (years) ....................................... 4.4 5 4.6/6.8 7 7 8.7

1 Results only include household SO2 emissions reductions because SO2 emissions from power plants are capped by clean air legislation.

Thus, SO2 emissions will only be negligibly affected by possible water heater standards. 2 Includes impacts on dryer and repair business.

Trial Standard Level 6—MEF 1.63

First, we considered the most efficient

level (max tech), MEF 1.63, which saves

a total of 7.53 quads of energy through

2030. This is a significant amount of

energy. The cumulative water savings

through 2030 would be 10.85 trillion

gallons. The emissions reductions

through 2030 would total 134.6 Mt of

carbon equivalent, 364 kt of NOX, and

31.41 kt of SO2, which are significant.

At this level, consumers experience a

considerable savings in life cycle cost of

$176, with a payback of 8.7 years.

At Trial Standard Level 6, the clothes

washer industry would experience a

cumulative INPV loss of between

$474.5–648.9 million which represents

between 33.0 and 45.2% of the clothes

washer industry value absent standards

($1,439.1 million—basecase). This

impact is not evenly distributed among

the six major manufactures.8 This large

variability of impacts is attributed to the

presence of existing product for some

manufacturers at this efficiency level

which means that some firms may gain

a competitive advantage. This

variability is measured by the standard

deviation of individual companies’

changes in NPV.9 At this level the

standard deviation in individual

companies’ percentage change in NPV is

27.7%. Given the high industry impacts

and the uneven burden on individual

firms, there exists a significant risk of

industry consolidation.

Based on the major loss in company

value associated with meeting this trial

standard level (90.7 to 102.8% assuming

a 2.1% market share and 166 to 178.1%

assuming a 4.2% market share) as

shown in Table 16, it is likely that one

or both of the two smaller

manufacturers 10 would cease to

produce clothes washers covered by the

standard and might also cease to market

commercial clothes washers.

The Department concludes that the

burdens of Trial Standard Level 6

outweigh the benefits. Consequently,

the Department concludes Trial

Standard Level 6 is not economically

justified.

Trial Standard Level 5—MEF 1.36

Next, we considered a 1.36 MEF,

which saves a total of 6.03 quads of

energy through 2030, also a significant

amount. The cumulative water savings

through 2030 for this trial standard level

would be 12.94 trillion gallons. The

emissions reductions through 2030

would total 107.3 Mt of carbon

equivalent, 283.1 kt of NOX, and 30.31

kt of SO2, which are significant. At this

level, consumer experience a

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59581

considerable savings in life cycle cost of

$243, with a 7 year payback.

The clothes washer industry would

experience a cumulative INPV loss of

between $453.1–524.9 million. This

represents between 31.7 and 36.5% of

industry value absent standards

($1,439.1 million—basecase). For the

same reason in Trial Standard Level 6,

this impact is not evenly distributed

among the six major manufactures. At

this level the standard deviation in

individual companies’ percentage

change in NPV is 27.7%. Refer to

Chapter 11 of the TSD for a description

of the calculation method for standard

deviation. Given the high industry

impacts and the uneven burden on

individual firms, there exists a

significant risk of industry

consolidation.

Once again based on the major loss in

company value associated with meeting

this standard level (87.7 to 92.7%

assuming a 2.1% market share and

160.3 to 165.3% assuming a 4.2%

market share), as shown in Table 16, it

is likely that one or both of the two

smaller manufacturers would cease to

produce washers covered by the

standard and might also cease to market

commercial clothes washers.

The Department concludes that the

burdens of Trial Standard Level 5

outweigh the benefits. Consequently,

the Department concludes Trial

Standard Level 5 is not economically

justified.

Trial Standard Level 4—MEF 1.26

Next, we considered a 1.26 MEF,

which saves a total of 5.99 quads of

energy through 2030, a significant

amount. Just as in the case of the 1.36

MEF, the cumulative water savings

through 2030 would equal 12.94 trillion

gallons. The cumulative emissions

reductions through 2030, however, are

slightly lower for the 1.26 MEF because

the cumulative energy savings is lower

for this standard level than the 1.36

MEF. The 1.26 MEF level would save

106.2 Mt of carbon equivalent, 280.6 kt

of NOX, and 30.31 kt of SO2, which are

significant. At this level, consumers

experience a considerable savings in life

cycle cost of $242 with a payback of 7

years.

Under a 1.26 MEF standard, the

clothes washer industry would

experience a cumulative INPV loss of

between $510.1–612.5 million. This

represents between 35.4 and 42.5% of

industry value absent standards

($1,439.1 million—basecase). Compared

to Trial Standard Levels 5 and 6, this

impact is more evenly distributed

amongst the six major manufactures as

represented by a standard deviation in

individual companies’ NPV of 17.7%,

and thus there exists less risk of

industry consolidation. Refer to Chapter

11 of the TSD for a description of the

calculation method for standard

deviation. This lower standard

deviation reflects the greater diversity of

designs, approaches and engineering

flexibility to meet this efficiency level

compared to Trial Standard Levels 5

and 6. However, given the high level of

investment required to meet this

efficiency level and an inability to

spread fixed costs over large volumes,

small manufacturers are particularly

vulnerable. Based on the major loss in

company value associated with meeting

this standard level (91.8 to 98.9%

assuming a 2.1% market share and

164.4 to 171.6% assuming a 4.2%

market share), as shown in Table 16, it

is likely that one or both of the two

smaller manufacturers would cease to

produce washers covered by the

standard and might also cease to market

commercial clothes washers.

The Department concludes that the

burdens of Trial Standard Level 4

outweigh the benefits. Consequently,

the Department concludes Trial

Standard Level 4 is not economically

justified.

Trial Standard Level 3—MEF 1.04/1.26

Next, we considered the two step

1.04/1.26 MEF efficiency level, which

had been proposed in the Joint

Stakeholders Comment. (Joint

Comment, No. 204). This trial standard

level, Trial Standard Level 3, had energy

savings of 5.52 quads through 2030, a

significant amount. The cumulative

water savings through 2030 would equal

11.59 trillion gallons. The emissions

reductions through 2030 would total

95.1 Mt of carbon equivalent, 253.5 kt

of NOX, and 28.11 kt of SO2, which are

significant. At the 1.04 MEF level,

consumers would experience a savings

in life cycle cost of $103, while they

would experience a LCC savings of $260

at the 1.26 MEF level that would go into

effect in 2007. The payback for the 1.04

MEF level is 4.6 years, and 6.8 years for

the 1.26 MEF. The clothes washer

industry would experience a cumulative

NPV loss of between $421.1–528.4

million representing between 29.2 and

36.7% of basecase industry value.

Compared to a single step standard

level of a 1.26 MEF implemented in

2004, the Joint Stakeholders Comment

proposal reduces the impacts of the

standards on manufacturers by delaying

the effective date three years for the 1.26

MEF level. This allows clothes washer

manufacturers more time to depreciate

their current assets and plan a more

orderly transition of their production

facilities. Delaying the standard

implementation date for the higher

efficiency level gives manufacturers

more time to research and develop

lower-cost solutions to achieve higher

standards.

Since the MIA shows that small

manufacturers suffer the greatest

impact, the Department takes into

consideration that the consensus

proposal was developed in consultation

with, and supported by small

manufacturers.

Furthermore, we consider that the

Joint Stakeholders Comment specifically

states that the proposal is not expected

to eliminate any competitors. (Joint

Comment No. 204).

Based on the manufacturers’

statement in the Joint Stakeholders

Comment, we believe that these impacts

from the proposal are mitigated and is

sufficient to conclude that, given the

benefits, the standards submitted in the

Joint Stakeholders Comment are

economically justified. (Joint Comment

No. 204).

After carefully considering the

analysis and comments, the Department

proposes to amend the energy

conservation standards for clothes

washers as proposed by the Joint

Stakeholders Comment. (Joint Comment

No. 204). The Department concludes

this standard saves a significant amount

of energy and is technologically feasible

and economically justified. In

determining economic justification, the

Department finds that the benefits of

energy and water savings, consumer life

cycle cost savings, national net present

value increase, job creation and

emission reductions resulting from the

standard outweigh the burdens of the

loss of manufacturer net present value,

and consumer life cycle cost increases

for some users of clothes washers

covered by today’s notice. Therefore, the

Department today proposes to adopt the

energy conservation standards for

clothes washers at Trial Standard Level

3.

VI. Procedural Issues and Regulatory

Review

A. Review Under the National

Environmental Policy Act of 1969

The Department is preparing an

Environmental Assessment of the

impacts of the proposed rule and DOE

anticipates completing a Finding of No

Significant Impact (FONSI) before

publishing the final rule on Energy

Conservation Standards for Clothes

Washers, pursuant to the National

Environmental Policy Act of 1969

(NEPA) (42 U.S.C. 4321 et seq.), the

regulations of the Council on

59582 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

Environmental Quality (40 CFR parts

1500–1508), and the Department’s

regulations for compliance with NEPA

(10 CFR part 1021).

B. Review Under Executive Order 12866,

‘‘Regulatory Planning and Review’’

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) in the Office of Management and

Budget (OMB).

The draft rule submitted to OIRA and

other documents submitted to OIRA for

review have been made a part of the

rulemaking record and are available for

public review in the Department’s

Freedom of Information Reading Room

(1E–190), 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 following summary of the

Regulatory Impact Analysis (RIA)

focuses on the major alternatives

considered in arriving at the proposed

approach to improving the energy

efficiency of consumer products. 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

proposed rule. It consists of: (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.

Each alternative has been evaluated in

terms of its ability to achieve significant

energy savings at reasonable costs, and

has been compared to the effectiveness

of the proposed rule. These alternatives

were analyzed with the NES/Shipments

model modified to allow inputs for

voluntary measures, as explained in the

RIA attached to the TSD.

The RIA calculates the effects of

feasible policy alternatives to clothes

washer energy efficiency standards, and

provides a quantitative comparison of

the impacts of the alternatives. We

evaluate each alternative in terms of its

ability to achieve significant energy

savings at reasonable costs, and we

compare it to the effectiveness of the

proposed rule.

We created the RIA using a series of

alternative scenarios (with various

assumptions), which we used as input

to the NES/Shipments model for clothes

washers.

We identified the following seven

major policy alternatives for achieving

consumer product energy efficiency.

These alternatives include:

• No New Regulatory Action

• Enhanced Public Education &

Information

• Financial Incentives

—Tax credits

—Rebates

—Low income and seniors subsidy

• Voluntary Energy Efficiency Targets

(5 Years, 10 Years)

• Mass Government Purchases

• Early Replacement Program to

existing standard levels

• Early Replacement Program to highefficiency clothes washers (defined as

having an MEF of 1.257, a 35% energy

reduction level)

• The Proposed Approach

(Performance Standards)

We have evaluated each alternative in

terms of its ability to achieve significant

energy savings at reasonable costs (See

Table 23), and have compared it to the

effectiveness of the proposed rule.

TABLE 23.—ALTERNATIVES CONSIDERED

Policy alternatives Energy savings

quads

Water savings trillion gallons NPV $ in billions

Enhanced Public Education & Information ................................................................ 0.026 0.054 0.074

Consumer Tax Credits ............................................................................................... 0.410 0.085 0.117

Consumer Rebates High Efficiency ........................................................................... 0.072 0.150 0.205

Low Income and Seniors Subsidy ............................................................................. 0.031 0.065 0.089

Manufacturer Tax Credits .......................................................................................... 0.153–0.330 0.299–0.666 0.203–0.707

Voluntary Efficiency Target (5 year delay) ................................................................ 4.550 9.970 11.570

Voluntary Efficiency Target (10 year delay) .............................................................. 3.090 6.810 7.980

Mass Government Purchases ................................................................................... .............................. 0.013 ..............................

Early Replacement Program (w/Current Eff.) ............................................................ 0.004 0.006 0.024

Early Replacement Program (w/H-axis) .................................................................... 0.078 0.161 0.223

Proposed Negotiated Performance Standard ........................................................... 5.520 11.590 14.330

NPV=Net Present Value (2004–2030, in billion 1997 $).

Savings=Energy Savings (Source Quads).

The Net Present Value amounts

shown in Table 23 refer to the NPV for

consumers. Rebates or tax credits are

not included as an expense since on

average consumers are both paying for

and receiving benefits of the payments.

The case in which no regulatory

action is taken with regard to clothes

washer efficiency constitutes the ‘‘base

case’’ (or ‘‘No Action’’) scenario. In this

case, between the years 2004 and 2030,

clothes washers are expected to use

21.76 Quads (22.94 Exajoules (EJ)) of

primary energy. Since this is the base

case, energy savings and NPV are zero

by definition.

A short description of each alternative

is provided below:

Enhanced Public Education and

Information. This would make the

public more aware of energy savings

available for more efficient clothes

washers (examples would be Energy

Star labeling, web sites with efficiency

information and advertising). To model

this possibility, we assumed that the

effective market discount rates change

from 75% to 47% for purchasers of

clothes washers. This would have the

same effect as a $39 discount on high

efficiency washer prices. This program

is assumed to continue through 2030.

Consumer Tax Credits. We assume tax

credits equal to 15% of the cost of highefficiency models (MEF of 1.257) and

that 60% of consumers buying a clothes

washer would take advantage of the tax

credit. We assume this program is in

place for six years.

Manufacturer Tax Credits. We assume

that a manufacturer tax credit of $50 or

$100 per machine with a cap on the

number of washers per manufacturer

(based on the proposed tax credit). The

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59583

tax credits are capped at $30 million per

manufacturer per Tier, or $60 million

per manufacturer. This program is

assumed to be in place in six years

between 2004 to 2010.

Consumer Rebates. We assume a

rebate of 15% of the retail price of highefficiency models for a period of 6 years.

This is modeled by reducing the price

of a washer with a MEF of 1.257 (a 35%

reduction in energy use from the

baseline model) by 15%.

Low Income and Seniors Subsidy.

Based on the RECS survey for

households owning a clothes washer

and dryer, 28% of households qualify as

low-income or senior households. We

assumed a subsidy program would

provide an amount equivalent to 25% of

the price of a high efficiency clothes

washer. This program was assumed to

be in effect for 6 years.

Voluntary efficiency target (5 & 10

year delays). Assume a 1.26 MEF

washer efficiency level but taking place

5 and 10 years after 2007.

Mass Government Purchases. This

alternative assumes a Government

agency such as the U.S. Department of

Housing and Urban Development (HUD)

purchases high efficiency washers for

low income housing. We assume a

program in which 25% of the 1.3

million households in public housing

would participate in the program. We

also assume that only washers reaching

the end of their lifetime of 14 years

would be replaced. Over a 6 year

program period, this would result in a

replacement of 138,000 clothes washers.

Early Replacement Programs. The

purpose of this program would be to

remove older, presumably less efficient

models from the clothes washer stock

with either existing base case efficiency

washers or with high efficiency (MEF of

1.257, 35% energy reduction) washers.

We model this by assuming a 15%

increase in the size of the early

replacement market segment. This

program like the others is assumed to

have a duration of 6 years.

Performance Standards. The

proposed standard (proposed standard

level 3).

Lastly, all of these alternatives must

be gauged against the performance

standards we are proposing in this

proposed rule. Such performance

standards would result in energy

savings of 5.52 Quads (5.82 EJ), and the

NPV would be an expected $14.33

billion.

As indicated in the paragraphs above,

none of the alternatives we examined

would save as much energy as the

proposed rule. Also, several of the

alternative would require new enabling

legislation, since authority to carry out

those alternatives does not presently

exist.

C. Review Under the Regulatory

Flexibility Act of 1980

The Regulatory Flexibility Act of

1980, 5 U.S.C. 601–612, requires an

assessment of the impact of regulations

on small businesses. Small businesses

are defined as those firms within an

industry that are privately owned and

less dominant in the market.

To be categorized as a ‘‘small’’ clothes

washer manufacturer, a firm must

employ no more than 1,000 employees.

The clothes washer industry is

characterized by six firms accounting

for nearly 99% of sales. By this

definition none of the six major U.S.

manufacturers of clothes washers are

considered ‘‘small.’’ The Department is

aware of one small domestic

manufacturer of clothes washer, Staber

Industries, that produces a top loading

horizontal-axis clothes washer. The

energy efficiency of this product already

exceeds the proposed standard level.

The Department prepared a

manufacturing impact analysis which

was made public and available to all the

clothes washer manufacturers. This

analysis considered the effects on small

manufacturers with a minimum annual

production of 165,000 units

(representing a 2.1% market share). The

Department did not receive any

information or comments indicating that

even smaller manufacturers of clothes

washers would be impacted

differentially from those included in the

small manufacturer analysis performed.

In view of the foregoing, the

Department has determined and hereby

certifies pursuant to Section 605(b) of

the Regulatory Flexibility Act that, for

this particular industry, the proposed

standard levels in today’s proposed rule

will not ‘‘have a significant economic

impact on a substantial number of small

entities,’’ and it is not necessary to

prepare a regulatory flexibility analysis.

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,

‘‘Civil Justice Reform’’

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 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, the proposed regulations meet

the relevant standards.

F. ‘‘Takings’’ Assessment Review

It has been determined pursuant to

Executive Order 12630, ‘‘Governmental

Actions and Interference with

Constitutionally Protected Property

Rights,’’ 52 FR 8859 (March 18, 1988),

that this 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, ‘‘Federalism’’

Executive Order 13132 (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

provide State and local officials an

opportunity for meaningful and timely

input in the development of regulatory

proposals that have federalism

implications. DOE published a notice of

59584 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

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 the National

Appliance Energy Conservation

Amendments of 1988. States can

petition the Department for exemption

from such preemption 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 the private sector of

$100 million or more (adjusted annually

for inflation), 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).

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 Notice of Proposed Rulemaking and

‘‘Regulatory Impact Analysis’’ section of

the TSD for this proposed rule responds

to those requirements.

Under Section 205 of UMRA, we are

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. We are 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)), this proposed rule would

establish energy conservation standards

for clothes washers that are designed to

achieve the maximum improvement in

energy efficiency that DOE has

determined to be both technologically

feasible and economically justified. DOE

may not adopt an alternative that does

not meet EPCA’s substantive standard.

A full discussion of the alternatives

considered by DOE is presented in the

‘‘Regulatory Impact Analysis’’ section of

the TSD for this proposed rule.

I. Review Under the Treasury and

General Government Appropriations

Act of 1999

Section 654 of the Treasury and

General Government Appropriations

Act, 1999 (Pub. L. 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 proposal

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 the Plain Language

Directives

Section 1(b)(12) of Executive Order

12866 requires that each agency draft its

regulations to be simple and easy to

understand, with the goal of minimizing

the potential for uncertainty and

litigation arising from such uncertainty.

Similarly, the Presidential

memorandum of June 1, 1998 (63 FR

31883) directs the heads of executive

departments and agencies to use plain

language in all proposed and final

rulemaking documents published in the

Federal Register.

Today’s proposed rule uses the

following general techniques to abide by

Section 1(b)(12) of Executive Order

12866 and the Presidential

memorandum of June 1, 1998 (63 FR

31883):

• Organization of the material to

serve the needs of the readers

(stakeholders).

• Use of common, everyday words in

short sentences.

• Shorter sentences and sections.

We invite your comments on how to

make this proposed rule easier to

understand.

VII. Public Comment Procedures

A. Written Comment Procedures

The Department invites interested

persons to participate in the rulemaking

by submitting data, comments, or

information with respect to the

proposed issues set forth in today’s

proposed rule to Ms. Brenda EdwardsJones, 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. The Department of Energy 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 the Department

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

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) why disclosure

of the information would be contrary to

the public interest.

B. Public Workshop (Hearing)

1. Procedures for Submitting Requests

To Speak

You will find the time and place of

the public workshop (hearing) listed at

the beginning of this notice of proposed

rulemaking. The Department invites any

person who has an interest in today’s

notice of proposed rulemaking, or who

is a representative of a group or class of

persons that has an interest in these

proposed issues, to make a request for

an opportunity to make an oral

presentation. If you would like to attend

the public workshop, please notify Ms.

Brenda Edwards-Jones 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, or send them by mail.

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.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59585

The Department requests each person

wishing to speak to submit an advance

copy of his or her statement at least ten

days prior to the date of this workshop

as indicated at the beginning of this

notice. The Department, at its

discretion, may permit any person

wishing to speak who cannot meet this

requirement to participate if that person

has made alternative arrangements with

the Office of Building Research and

Standards in advance. The letter making

a request to give an oral presentation

must ask for such alternative

arrangements.

2. Conduct of Workshop (Hearing)

The workshop (hearing) will be

conducted in an informal, conference

style. The Department may use a

professional facilitator to facilitate

discussion, and a court reporter will be

present to record the transcript of the

meeting. We will present summaries of

major topics contained in the comments

received before the workshop, allow

time for presentations by workshop

participants, and encourage all

interested parties to share their views on

issues affecting this rulemaking.

Following the workshop, there is

provided an additional comment period,

during which time interested parties

will have an opportunity to comment on

the proceedings at the workshop, as

well as on any aspect of the rulemaking

proceeding.

The Department reserves the right to

select the persons to be heard at the

hearing, to schedule the respective

presentations, and to establish the

procedures governing the conduct of the

hearing. The length of each presentation

is limited to 5 minutes.

A DOE official will be designated to

preside at the hearing. The hearing will

not be a judicial or an evidentiary-type

hearing, but will be conducted in

accordance with 5 U.S.C. 533 and

Section 336 of the Act. At the

conclusion of all initial oral statements

at each day of the hearing, each person

who has made an oral statement will be

given the opportunity to make a rebuttal

statement, subject to time limitations.

The rebuttal statement will be given in

the order in which the initial statements

were made. The official conducting the

hearing will accept additional

comments or questions from those

attending, as time permits. Any

interested person may submit, to the

presiding official, written questions to

be asked of any person making a

statement at the hearing. The presiding

official will determine whether the

question is relevant, and whether time

limitations permit it to be presented for

answer.

Further questioning of speakers will

be permitted by DOE. The presiding

official will afford any interested person

an opportunity to question other

interested persons who made oral

presentations, and employees of the

United States who have made written or

oral presentations with respect to

disputed issues of material fact relating

to the proposed rule. This opportunity

will be afforded after any rebuttal

statements, to the extent that the

presiding official determines that such

questioning is likely to result in a more

timely and effective resolution of such

issues. If the time provided is

insufficient, DOE will consider

affording an additional opportunity for

questioning at a mutually convenient

time. Persons interested in making use

of this opportunity must submit their

request to the presiding official no later

than shortly after the completion of any

rebuttal statements and be prepared to

state specific justification, including

why the issue is one of disputed fact

and how the proposed questions would

expedite their resolution.

Any further procedural rules

regarding proper conduct of the hearing

will be announced by the presiding

official.

The Department will arrange for a

transcript of the workshop and will

make the entire record of this

rulemaking, including the transcript,

available for inspection in the

Department’s Freedom of Information

Reading Room as provided at the

beginning of this notice. Any person

may purchase a copy of the transcript

from the transcribing reporter. You can

also download the TSD and other

analyses from the Internet at: http://

www.eren.doe.gov/buildings/

codes_standards/applbrf/clwasher.html

List of Subjects in 10 CFR Part 430

Administrative practice and

procedure, Energy conservation,

Household appliances.

Issued in Washington, DC., September 26,

2000.

Dan W. Reicher,

Assistant Secretary, Energy Efficiency and

Renewable Energy.

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. Appendix J to subpart B of part 430

is amended by adding, in section 2,

paragraphs 2.3.1, 2.3.2, and by revising

paragraphs 2.10, 2.11 and 2.11.1 to read

as follows:

Appendix J to Subpart B of Part 430—

Uniform Test Method for Measuring the

Energy Consumption of Automatic and

Semi-Automatic Clothes Washers

* * * * *

2. TESTING CONDITIONS

* * * * *

2.3 Supply water. * * *

2.3.1 Supply water requirements for water

and energy consumption testing. For

nonwater-heating clothes washers not

equipped with thermostatically controlled

water valves, the temperature of the hot and

cold water supply shall be maintained at

100° ±10°F (37.8°C ±5.5°C). For nonwaterheating clothes washers equipped with

thermostatically controlled water valves, the

temperature of the hot water supply shall be

maintained at 140°F ±5°F (60.0°C ±2.8°C) and

the cold water supply shall be maintained at

60°F ±5F° (15.6°C ±2.8°C). For water-heating

clothes washers, the temperature of the hot

water supply shall be maintained at 140°F

±5°F (60.0°C ±2.8°C) and the cold water

supply shall not exceed 60°F (15.6°C). Water

meters shall be installed in both the hot and

cold water lines to measure water

consumption.

2.3.2 Supply water requirements for

remaining moisture content testing. For

nonwater-heating clothes washers not

equipped with thermostatically controlled

water valves, the temperature of the hot

water supply shall be maintained at 140°F

±5°F and the cold water supply shall be

maintained at 60°F ±5°F. All other clothes

washers shall be connected to water supply

temperatures as stated in section 2.3.1.

* * * * *

2.10 Wash time (period of agitation or

tumble) setting. If the maximum available

wash time in the normal cycle is greater than

9.75 minutes, the wash time shall be not less

than 9.75 minutes. If the maximum available

wash time in the normal cycle is less than

9.75 minutes, the wash time shall be the

maximum available wash time.

* * * * *

2.11 Agitation speed and spin speed

settings. Where controls are provided for

agitation speed and spin speed selections, set

them as follows:

2.11.1 For energy and water consumption

tests, set at the normal cycle settings. If

settings at the normal cycle are not offered,

set the control settings to the maximum

speed permitted on the clothes washer.

3. Appendix J to subpart B of part 430

is amended, in section 3, by revising

paragraph 3.3.1 to read as follows:

3. TEST MEASUREMENTS

* * * * *

3.3.1 The wash temperature shall be the

same as the rinse temperature for all testing.

Cold rinse is the coldest rinse temperature

59586 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

available on the machine. Warm rinse is the

hottest rinse temperature available on the

machine.

* * * * *

4. Appendix J1 to Subpart B of part

430 is amended, in section 1, by adding

paragraphs 1.22 and 1.23 to read as

follows:

Appendix J1 to Subpart B of Part 430—

Uniform Test Method for Measuring the

Energy Consumption of Automatic and

Semi-Automatic Clothes Washers

* * * * *

1. DEFINITIONS AND SYMBOLS

1.22 Cold rinse means the coldest rinse

temperature available on the machine (and

should be the same rinse temperature

selection tested in section 3.7).

1.23 Warm rinse means the hottest rinse

temperature available on the machine (and

should be the same rinse temperature

selection

5. Appendix J1 to subpart B of part

430 is amended in section 2 by revising

paragraphs 2.6.1, 2.6.2, and adding

paragraphs 2.6.3 through 2.6.7.2, to read

as follows:

2. TESTING CONDITIONS

* * * * *

2.6.1 Energy Test Cloth. The energy test

cloth shall be made from energy test cloth

material, as specified in 2.6.4, that is 24

inches by 36 inches (61.0 cm by 91.4 cm) and

has been hemmed to 22 inches by 34 inches

(55.9 cm by 86.4 cm) before washing. The

energy test cloth shall be clean and shall not

be used for more than 60 test runs (after

preconditioning as specified in section 2.6.3).

Mixed lots of material shall not be used for

testing the clothes washers.

* * * * *

2.6.2 Energy Stuffer Cloth. The energy

stuffer cloth shall be made from energy test

cloth material, as specified in 2.6.4, and shall

consist of pieces of material that are 12

inches by 12 inches (30.5 cm by 30.5 cm) and

have been hemmed to 10 inches by 10 inches

(25.4 cm by 25.4 cm) before washing. The

energy stuffer cloth shall be clean and shall

not be used for more than 60 test runs (after

preconditioning as specified in section 2.6.3).

Mixed lots of material shall not be used for

testing the clothes washers.

2.6.3 Preconditioning of Test Cloths. The

new test cloths, including energy test cloths

and energy stuffer cloths, shall be preconditioned in a clothes washer in the

following manner:

2.6.3.1 Perform 5 complete normal washrinse-spin cycles, the first two with AHAM

Standard detergent 2A and the last three

without detergent. Place the test cloth in a

clothes washer set at the maximum water

level. Wash the load for ten minutes in soft

water (17 ppm hardness or less) using 6.0

grams per gallon of water of AHAM Standard

detergent 2A. The wash temperature is to be

controlled to 135°F ±5°F (57.2°C ±2.8C) and

the rinse temperature is to be controlled to

60°F ±5°F (15.6°C ±2.8°C). Repeat the cycle

with detergent and then repeat the cycle

three additional times without detergent,

bone drying the load between cycles (total of

five wash and rinse cycles).

2.6.4 Energy test cloth material. The

energy test cloths and energy stuffer cloths

shall be made from fabric meeting the

following specifications. The material should

come from a roll of material with a width of

approximately 63 inches and approximately

500 yards per roll, however, other sizes

maybe used if they fall within the

specifications.

2.6.4.1 Nominal fabric type. Pure finished

bleached cloth, made with a momie or

granite weave, which is nominally 50 percent

cotton and 50 percent polyester.

2.6.4.2 The fabric weight shall be 5.60

ounces per square yard (190.0 g/m 2), ±5

percent.

2.6.4.3 The thread count shall be 61 x 54

per inch (warp x fill), ±2 percent.

2.6.4.4 The warp yarn and filling yarn

shall each have fiber content of 50 percent ±4

percent cotton, with the balance being

polyester, and be open end spun, 15/1 ±5

percent cotton count blended yarn.

2.6.4.5 Water repellent finishes, such as

fluoropolymer stain resistant finishes shall

not be applied to the test cloth. The absence

of such finishes shall be verified by:

2.6.4.5.1 AATCC–118 Oil Repellency Test

(DuPont or 3M version) of each new lot of

test cloth (when purchased from the mill) to

confirm the absence of Scotchguard or other

water repellent finish (required scores of ‘‘D’’

across the board).

2.6.4.5.2 AATCC–79 Drop Absorbency

Test of each new lot of test cloth (when

purchased from the mill) to confirm the

absence of Scotchguard  or other water

repellent finish (time to absorb one drop

should be on the order of 1 second).

2.6.4.6 The moisture absorption and

retention shall be evaluated for each new lot

of test cloth by the Standard Extractor

Remaining Moisture Content (RMC) Test

specified in section 2.6.5.

2.6.4.6.1 Repeat the Standard Extractor

RMC Test in section 2.6.5 three times.

2.6.4.6.2 An RMC correction curve shall be

calculated as specified in section 2.6.6.

2.6.5 Standard Extractor RMC Test

Procedure. The following procedure is used

to evaluate the moisture absorption and

retention characteristics of a lot of test cloth

by measuring the RMC in a standard

extractor at a specified set of conditions.

Table 2.6.5 is the matrix of test conditions.

The 500g requirement will only be used if a

clothes washer design can achieve spin

speeds in the 500g range. When this matrix

is repeated 3 times, a total of 48 extractor

RMC test runs are required. For the purpose

of the extractor RMC test, the test cloths may

be used for up to 60 test runs (after

preconditioning as specified in section 2.6.3).

TABLE 2.6.5.—MATRIX OF EXTRACTOR RMC TEST CONDITIONS

‘‘g’’ Force

Warm soak Cold soak

15 min. spin 4 min. spin 15 min. spin 4 min. spin

50 ..................................................................................................................... ........................ ........................ ........................ ........................

200 ................................................................................................................... ........................ ........................ ........................ ........................

350 ................................................................................................................... ........................ ........................ ........................ ........................

500 ................................................................................................................... ........................ ........................ ........................ ........................

2.6.5.1 The standard extractor RMC tests

shall be run in a Bock Model 215 extractor

(having a basket diameter of 19.5 inches,

length of 12 inches, and volume of 2.1 ft 3),

with a variable speed drive [Bock Engineered

Products, P.O. Box 5127, Toledo, OH 43611]

or an equivalent extractor with same basket

design (i.e. diameter, length, volume, and

hole configuration) and variable speed drive.

2.6.5.2 Test Load. Test cloths shall be

preconditioned in accordance with 2.6.3. The

load size shall be 8.4 lbs., consistent with

section 3.8.1.

2.6.5.3 Procedure.

2.6.5.3.1 Record the ‘‘bone-dry’’ weight of

the test load (WI).

2.6.5.3.2 Soak the test load for 20 minutes

in 10 gallons of soft (< 17 ppm) water. The

entire test load shall be submerged. The

water temperature shall be 100°F ±5°F.

2.6.5.3.3 Remove the test load and allow

water to gravity drain off of the test cloths.

Then manually place the test cloths in the

basket of the extractor, distributing them

evenly by eye. Spin the load at a fixed speed

corresponding to the intended centripetal

acceleration level (measured in units of the

acceleration of gravity, g) ±1 g for the

intended time period ±5 seconds.

2.6.5.3.4 Record the weight of the test load

immediately after the completion of the

extractor spin cycle (WC).

2.6.5.3.5 Calculate the RMC as (WC–WI)/

WI.

2.6.5.3.6 The RMC of the test load shall be

measured at three (3) g levels: 50g; 200g; and

350g, using two different spin times at each

g level: 4 minutes; and 15 minutes. If a

clothes washer design can achieve spin

speeds in the 500g range than the RMC of the

test load shall be measured at four (4) g

levels: 50g; 200g; 350g; and 500g, using two

different spin times at each g level: 4

minutes; and 15 minutes.

Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules 59587

2.6.5.4 Repeat 2.6.5.3 using soft (<17 ppm)

water at 60°F ±5°F.

2.6.6 Calculation of RMC correction curve.

2.6.6.1 Average the values of 3 test runs

and fill in Table 2.6.5. Perform a linear leastsquares fit to relate the standard RMC

(RMCstandard) values (shown in Table 2.6.6.1)

to the values measured in 2.6.5 (RMCcloth):

RMCstandard ∼ A * RMCcloth + B

Where A and B are coefficients of the

linear least squares fit.

TABLE 2.6.6.1.—STANDARD RMC VALUES (RMCstandard)

G

RMC percent

Warm soak Cold soak

15 min. spin 4 min. spin 15 min. spin 4 min. spin

50 ..................................................................................................................... 50.4 55.7 52.8 59.0

200 ................................................................................................................... 35.6 40.4 37.9 43.1

350 ................................................................................................................... 29.6 33.1 30.6 35.8

500 ................................................................................................................... 24.2 28.7 25.5 30.0

2.6.6.2 Check accuracy of linear least

squares fit using the following method:

The root mean square value of

RMC RMC i corr i

i

standard_ _

/

( ) − 













 =

∑ 10 1

12 2 1 2

shall be less than 2 percent, where a sum is

taken over all of the different tests, where

RMCstandard_i is the RMC standard value

measured for the I-th test, and RMCcorr3_i is

the corrected RMC value for the I-th cloth

test. This equation is valid only for the use

with three (3) g force values therefore when

using the 500g requirement; replace the 500g

value instead of the 350g value.

2.6.7 Application of RMC correction curve.

2.6.7.1 Using the coefficients, A and B

calculated in section 2.6.6.1:

RMCcorr = A * RMC + B

2.6.7.2 Substitute RMCcorr values in

calculations in section 3.8.

* * * * *

6. Appendix J1 to subpart B of part

430 is amended, in section 4.1.5, by

revising the definition of ‘‘ERx, ERa,

ERn’’ to read as follows:

4. CALCULATION OF DERIVED RESULTS

FROM TEST MEASUREMENTS

* * * * *

4.1.5 * * * ERx, ERa, ERn, are reported

electrical energy consumption values, in

kilowatt-hours per cycle, at maximum,

average, and minimum test loads,

respectively, for the warm rinse cycle per

definitions in section 3.7.2.

* * * * *

7. Section 430.32 of subpart C, 10 CFR

part 430 is amended by revising

paragraph (g) to read as follows:

§ 430.32 Energy and water conservation

standards and effective dates.

* * * * *

(g) Clothes washers.

(1) Clothes washers manufactured before

January 1, 2004, shall have an energy factor

no less than:

Product class Energy factor

(cu.ft./Kwh/cycle) as of January 1, 1988

Energy factor

(cu.ft./Kwh/cycle) as of May 14, 1988

i. Top Loading, Compact (less than 1.6 ft.3 capacity).Not Applicable.1 ............................................... 0.9.

ii. Top Loading, Standard (1.6 ft.3 or greater

capacity).

Not Applicable.1 ............................................... 1.18.

iii. Top Loading, Semi-Automatic ....................... Not Applicable.1 ............................................... Not Applicable.1

iv. Front Loading ................................................ Not Applicable.1 ............................................... Not Applicable.1

v. Suds saving ................................................... Not Applicable.1 ............................................... Not Applicable.1

1 Must have an unheated rinse water option.

59588 Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Proposed Rules

(2) Clothes washers manufactured after January 1, 2004, shall have amodified energy factor no less than:

Product Class Modified Energy factor

(cu.ft./Kwh/cycle) as of January 1, 2004

Modified Energy factor

(cu.ft./Kwh/cycle) as of January 1, 2007

i. Top Loading, Compact (less than 1.6 ft.3 capacity)..0.65 .................................................................. 0.65.

ii. Standard (1.6 ft.3 or greater capacity. ........... 1.04 .................................................................. 1.26.

iii. Top Loading, Semi-Automatic ....................... Not Applicable.1 ............................................... Not Applicable.1

iv. Front Loading ................................................ 1.04 .................................................................. 1.26.

v. Suds saving ................................................... Not Applicable.1 ............................................... Not Applicable.1

1 Must have an unheated rinse water option.

* * * * *

[FR Doc. 00–25335 Filed 9–29–00; 9:42 am]

BILLING CODE 6450–01–P