l

k ' EE-RMSTD-98-440 JO/

i6E- R M/57 -48-IVt/O

.^^REC^oki £Monday,

8 v January 22, 2001

I' -Part XII

Department of

{I > Energy

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

Energy Conservation Program for

Consumer Products: Central Air

Conditioners and Heat Pumps Energy

Conservation Standards; Final Rule

Finding of No Significant Impact Energy

Conservation Program for Consumer

Products; Notice

EE-RM-STD-98-440 COMMENT 204

" 

\ 

; 

EE-RM/STD-98-440 #c2..()':1--:" 

e E- RM;57i) -9S-ll'/o 

Monday, 

January 22, 2001 

Part XII 

Department of 

Energy 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 430 

Energy Conservation Program for 

Consumer Products: Central Air 

Conditioners and Heat Pumps Energy 

Conservation Standards; Final Rule 

Finding of No Significant Impact Energy 

Conservation Program for Consumer 

Products; Notice 
EE-RM/STD-98-440-Oi 9 Ut

7170 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

DEPARTMENT OF ENERGY SUPPLEMENTARY INFORMATION: 1. Economic Impact on Manufacturers and

Consumers

I. Introduction Consumers Office of Energy Efficiency and Introduction2. Life-cycle-cost (LCC) ROnfic hof Energy Efficuen A .

C onsu m er Ov ervi ew 3. Net Present Value and Net National Renewable Energy 1. Background Employment

2. Central Air Conditioner and Heat Pump 4. Impact on Utility or Performance of

10 CFR Part 430 Features Products

3. Consumer Benefits 5. Impact of Any Lessening of Competition [Docket Number EE-RM-98-40] 4. National Benefits 6. Need of the Nation to Save Energy

RIN B. Authority 1904AA7 7. Other Factors C. Background E. Conclusion

Energy Conservation Program for II. General Discussion VI. Procedural Issues and Regulatory Review Energy Conservatin Program for A. Technological Feasibility A. Review Under the National

Consumer Products: Central Air 1. General Environmental Policy Act

Conditioners and Heat Pumps Energy 2. Maximum Technologically Feasible B. Review Under Executive Order 12866,

Conservation Standards Levels "Regulatory Planning and Review'

AGENCY: ffie of Energy Efficiency and B. Energy Savings C. Review under the Regulatory Flexibility AGENCY: ffice ofEnergy Efficiency and 1. Determination of SavingsAct

Renewable Energy, Energy. 2. Significance of Savings D. Review Under the Paperwork Reduction

ACTION: Final rule. C. Rebuttable Presumption Act

-D. Economic Justification E. Review Under Executive Order 12988,

SUMMARY: The Department of Energy 1. Economic Impact on Manufacturers and "Civil Justice Reform'

(DOE or Department) has determined Consumers F. "Takings" Assessment Review

that revised energy conservation 2. Life-cycle-costs G. Review under Executive Order 13132

standards for central air conditioners 3. Energy Savings H. Review Under the Unfunded Mandates standards central or air conditioners 4. Lessening of Utility or Performance of Reform Act

and and heat heat pumps pumps will will result result in in Products Products I. Review Under the Treasury and General

significant conservation of energy, are 5. Impact of Lessening of Competition Government Appropriations Act of 1999

technologically feasible, and are 6. Need of The Nation to Conserve Energy j. Review Under the Plain Language

economically justified. On this basis, 7. Other Factors Directives

the Department is today amending the III. Methodology K. Congressional Notification

existing energy conservation standards IV. Discussion of Comments

for central air conditioners adA. Burdens and Benefits I. Introduction

1. Economic Impacts. C

pumps. a. Economic Impacts on Manufacturers A. Consumer Overview

EFFECTIVE DATE: The effective date of b. Economic Impacts on Consumers 1. Background

this rule is February 21, 2001. 2. Life-Cycle Costs 3. Energy Savings The Department of Energy (DOE or ADDRESSES: A copy of the Technical 4 Lessening of Utility or Performance of the Department) is directed by the

Support Document (TSD) may be read at Products Energy Policy and Conservation Act to

the DOE Freedom of Information 5. Impact of Lessening of Competition consider establishing minimum

Reading Room, U.S. Department of 6. Need of the Nation to Conserve Energy efficiency standards for various

Energy, Forrestal Building, Room 1E- 7. Other Factors consumer products, including central

190, 1000 Independence Avenue, SW., B. Analysis and Assumptions air conditioners and heat pumps

Washington, DC 20585, (202) 586-3142, :. Engineering Analysis between hours 0 the ) 5 42 a. Reliance on ARI and Reverse Today's final rule adopts standards that

between the hours of 9:00 a.m. and 4:00 Engineering Cost Estimates are consistent with these requirements

p.m., Monday through Friday, except b. Consideration of Emerging Technologies of the law. The Department is amending Federal holidays. Copies of the TSD 2. Life Cycle Cost (LCC) analysis the almost ten year old minimum

may be obtained from: the Codes and a. Probability-based analysis efficiency standards for new central air

Standards Internet site at: http:// b. Energy Use conditioners and heat pumps. These

www.eren.doe.gov/buildings/ c. Electricity Prices amended standards take into account a

codes standards/applbrf/ d. Product Lifedecade of technological advancements

central air conditioner.html or from the e Istllation Cost and will save consumers and the nation

f. Mark-ups and will save consumers and the nation

U.S. Department of Energy, Office of 3. Shipments/National Energy Savings money, significant amounts of energy, Energy Efficiency and Renewable a. Adjustments to NAECA Shipment and have substantial environmental and

Energy, Forrestal Building, Mail Station Scenario economic benefits.

EE-41, 1000 Independence Avenue, b. Fuel Switching When today's adopted standards go

SW., Washington, DC 20585-0121. (202) c. Drop in Shipments in New Construction into effect, they will essentially raise the

586-9127. Market energy efficiency standards to 13 SEER

FOR FURTHER INFORMATION CONTACT: Dr. 4. Manufacturer Impact Analysis for new central air conditioners and to

Michael E. McCabe, U.S. Department of 5 Utility Impacts 13 SEER/7.7 HSPF for new central air

Energy, Office of Energy Efficiency and 6. Projection of Trends conditioning heat pumps (heat pumps).

Renewable Energy, EE-41, 1000 C. Other Comments SEER, Seasonal Energy Efficiency Ratio,

Independence Avenue, SW., 1. HCFC Phaseout is the Department's measure of energy

Washington, DC 20585-0121, (202) 586- 2. Ozone Reduction Catalyst Requirement efficiency for the seasonal cooling

0854, e-mail: D. Additional Standard Requirements performance of central air conditioners

michael.e.mccabe@ee.doe.gov, or 1. EER Standard and heat pumps. HSPF, Heating

Eugene Margolis, Esq., U.S. Depart TXV Reuiment Seasonal Performance Factor, is the 3. HSPF Levels of Energy, Office of General Counsel, V. Analytical Results and Conclusions Department's measure of energy - GC-72, 1000 Independence Avenue, A. Trial Standard Levels efficiency for the seasonal heating

SW., Washington, DC 20585, (202) 586- B. Significance of Energy Savings performance of heat pumps. The

9507, e-mail: C. Payback Period standards will apply to products

eugene.margolis@hq.doe.gov. D. Economic Justification manufactured for sale in the United

EE-RM-STD-98-440 COMMENT 204

t, 

EEoRM/STOo98-440--# ~O tt 

7170 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 430 

[Docket Number EE-RM-98-440] 

RIN 1904-AA77 

Energy Conservation Program for 

Consumer Products: Central Air 

Conditioners and Heat Pumps Energy 

Conservation Standards 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Energy. 

ACTION: Final rule. 

SUMMARY: The Department of Energy 

(DOE or Department) has determined 

that revised energy conservation 

standards for central air conditioners 

and heat pumps will result in 

significant conservation of energy, are 

technologically feasible, and are 

economically justified. On this basis, 

the Department is today amending the 

existing energy conservation standards 

for central air conditioners and heat 

pumps. 

EFFECTIVE OATE: The effective date of 

this rule is February 21,2001. 

ADDRESSES: A copy of the Technical 

Support Document (TSD) may be read at 

the DOE Freedom of Information 

Reading Room, U.S. Department of 

Energy, Forrestal Building, Room lE190,1000 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: the Codes and 

Standards Internet site at: http:// 

www.eren.doe.govlbuildings! 

codes_standards!applbrf! 

central air conditioner.html or from the 

U.S. D~artment 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. 

FOR FURTHER INFORMATION CONTACT: Dr. 

Michael E. McCabe, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, EE-41, 1000 

Independence Avenue, SW., 

Washington, DC 20585-0121, (202) 586-

0854, e-mail: 

michael.e.mccabe@ee.doe.gov, or 

Eugene Margolis, Esq., U.S. Department 

of Energy, Office of General Counsel, 

GC-72, 1000 Independence Avenue, 

SW., Washington, DC 20585, (202) 586-

9507, e-mail: 

eugene.margolis@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

A. Consumer Overview 

1. Background 

2. Central Air Conditioner and Heat Pump 

Features 

3. Consumer Benefits 

4. National Benefits 

B. Authority 

C. Background 

II. General Discussion 

A. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

B. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

C. Rebuttable Presumption 

D. Economic Justification 

1. Economic Impact on Manufacturers and 

Consumers 

2. Life-cycle-costs 

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 

III. Methodology 

IV. Discussion of Comments 

A. Burdens and Benefits 

1. Economic Impacts a. Economic Impacts on Manufacturers 

b. Economic Impacts on Consumers :~. Life-Cycle Costs 

:I. Energy Savings 

<I. Lessening of Utility or Performance of 

Products 

5. Impact of Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

B. Analysis and Assumptions 

1. Engineering Analysis a. Reliance on ARI and Reverse 

Engineering Cost Estimates 

b. Consideration of Emerging Technologies 

2. Life Cycle Cost (LCC) analysis 

a. Probability-based analysis 

h. Energy Use . c. Electricity Prices 

d. Product Life 

e. Installation Cost 

f. Mark-ups 

3. ShipmentslNational Energy Savings a. Adjustments to NAECA Shipment 

Scenario 

b. Fuel Switching c. Drop in Shipments in New Construction 

Market 

4. Manufacturer Impact Analysis 

5. Utility Impacts a. Peak Demand Impacts 

6. Projection of Trends 

C. Other Comments 

1. HCFC Phaseout 

2. Ozone Reduction Catalyst Requirement 

D. Additional Standard Requirements 

1. EER Standard 

2. TXV Requirement 

3. HSPF Levels 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Significance of Energy Savings 

C. Payback Period 

D. Economic Justification 

1. Economic Impact on Manufacturers and 

Consumers 

2. Life-cycle-cost (LCC) 

3. Net Present Value and Net National 

Employment 

4. Impact on Utility or Performance of 

Products 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Save Energy 

7. Other Factors 

E. Conclusion 

VI. Procedural Issues and Regulatory Review 

A. Review Under the National 

Environmental Policy Act 

B. Review Under Executive Order 12866, 

"Regulatory Planning and Review' 

C. Review under the Regulatory Flexibility 

Act 

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 

H. Review Under the Unfun,ded Mandates 

Reform Act 

I. Review Under the Treasury and General 

Government Appropriations Act of 1999 

J. Review Under the Plain Language 

Directives 

K. Congressional Notification 

I. Introduction 

A. Consumer Overview 

1. Background 

The Department of Energy (DOE or 

the Department) is directed by the 

Energy Policy and Conservation Act to 

consider establishing minimum 

efficiency standards for various 

consumer products, including central 

air conditioners and heat pumps. 

Today's final rule adopts standards that 

are consistent with these requirements 

of the law. The Department is amending 

the almost ten year old minimum 

efficiency standards for new central air 

conditioners and heat pumps. These 

amended standards take into account a 

decade of technological advancements 

and will save consumers and the nation 

money, significant amounts of energy, 

and have substantial environmental and 

economic benefits. 

When today's adopted standards go 

into effect, they will essentially raise the 

energy efficiency standards to 13 SEER 

for new cerltral air conditioners and to 

13 SEER/7.7 HSPF for new central air 

conditioning heat pumps (heat pumps). 

SEER, Seasonal Energy Efficiency Ratio, 

is the Department's measure of energy 

efficiency for the seasonal cooling 

performance of central air conditioners 

and heat pumps. HSPF, Heating 

Seasonal Performance Factor, is the 

Department's measure of energy 

efficiency for the seasonal heating 

performance of heat pumps. The 

standards will 'apply to products 

manufactured for sale in the United 
EE-RM/STD-98-440- c2

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7171

States, as of January 23, 2006. The is not yet adopting new standards for pump designs that are already available

standard for split-system air some products to ensure that more in the market. We fully expect

conditioners, the most common type of efficient versions remain available for variations of these models to exist under

residential air conditioning equipment, niche applications. The Department has the new standards, offering all the

represents a 30 percent improvement in determined that the new standards are features and utility that are found in

energy efficiency. For split-system heat the highest efficiency levels that are currently available products.

pumps, the new standard would technically feasible and economically

represent a 30 percent improvement in justified as required by law. Therefore, 3. Consumer Benefits

cooling efficiency and a 13 percent the Department is amending the energy Table 1.1 summarizes the

improvement in heating efficiency. The conservation standards for residential "characteristics" of today's typical

standard will also increase the cooling central air conditioners and heat pumps. characteristics of today's typical

efficiency of single-package air central air conditioners and heat pumps.

conditioners and single-package heat 2. Central Air Conditioner and Heat Table 1.2 presents the implications for

pumps by 34 percent and the heating Pump Features the average consumer of the standards

efficiency of single-package heat pumps The amended efficiency levels can be becoming effective in 2006.

by 17 percent. Finally, the Department met by central air conditioner and heat

TABLE 1.1.-CHARACTERISTICS OF TODAY'S TYPICAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS1

Split system Split system Single Single air conditioner heat pump package air package heat conditioner pump

Average Installed Price ............ ................................................................. $2,236 $3,668 $2,607 $3,599

Annual Utility Bill2 ........................................................................... $189 $453 $189 $453

Life Expectancy (years) ................................................................................... 18.4 18.4 18.4 18.4

Energy Consumption per year (kWh) .............................................................. 2,305 6,549 2,305 6,549

1 "Typical" equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively.

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump.

TABLE 1.2.-IMPLICATIONS OF NEW STANDARDS FOR THE AVERAGE CONSUMER

Split system Split system Single Single air conditioner heat pump packae air package heat conditioner pump

Year Standard Comes into Effect .................................................. 2006 2006 2006 2006

New Average Installed Price ........................................ .......... $2,571 $4,000 $3,032 $4,034

Estimated Price Increase ................................................................................. $335 $332 $425 $435

Annual Utility Bill Savings ................................................. . $42 $70 $42 $70

Average Net Saving over Equipment Life ....................................................... $113 $372 $29 $353

Energy Savings per Year (kWh) ...................................................................... 532 1081 532 1081

The most typical air conditioner (i.e., consumer and operate their equipment energy over 25 years (2006 through

split system air conditioners which more or less often. Consequently, the 2030). This is equivalent to all the

comprise approximately 65 percent of Department has investigated the effects energy consumed by nearly 26 million

today's central air conditioning and heat of the different energy prices across the American households in a single year.

pump market) has an installed price of nation and different air-conditioning We also estimate this standard will have

$2,236 and an annual utility cost of usage patterns. The Department a net benefit to the nation's consumers $189. In order to meet the 2006 estimates that 61 percent of all of $1 billion over the same period. In

standard, the Department estimates that consumers purchasing a new typical air 2020, the standards will avoid the

the installed price of a typical air conditioner will either save money or construction of five 400 megawatt coalconditioner will be $2,571, an increase will be negligibly impacted as a result fired plants and thirty-four 400

of $335. This price increase will be of the 2006 standard. In the case of a megawatt gas-fired plants. These energy

offset by an annual energy savings of new typical heat pump, 94 percent of all savings will result in cumulative

about $42 on the utility bills. The most consumers either save money or will be greenhouse gas emission reductions of

typical heat pump (i.e., split system heat negligibly impacted. approximately 33 million metric tons

pump) currently has an installed price The Department also investigated how (Mt) of carbon, or an amount equal to

of $3,668 and an annual utility cost of these standards might affect low income that produced by approximately 3

$453. In order to meet the 2006 consumers. On average, the Department million cars every year. Additionally,

standard, the Department estimates that estimates that it is likely that low air pollution will be reduced by the

the installed price of a typical heat income air conditioner and heat pump elimination of approximately 94

pump will be $4,000, an increase of consumers will also save money as a thousand metric tons of nitrous oxides

$332. This price increase will be offset result of the standard. (NOx) from 2006 through 2020.

by an annual energy savings of about

$70 on the utility bills. 4. National Benefits B. Authority

The Department recognizes that most The standards will provide benefits to Part B of Title III of the Energy Policy consumers pay energy prices that are the nation. DOE estimates the standards and Conservation Act (EPCA), Pub. L.

higher or lower than the "typical" will save approximately 4.2 quads of 94-163, as amended by the National

EE-RM-STD-98-440 COMMENT 204

E~.RM/STD.~-#J{O'-fFederal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7171 

States, as of January 23, 2006. The is not yet adopting new standards for 

standard for split-system air some products to ensure that more 

conditioners, the most common type of efficient versions remain available for 

residential air conditioning equipment, niche applications. The Department has 

represents a 30 percent improvement in determined that the new standards are 

energy efficiency. For split-system heat the highest efficiency levels that are 

pumps, the new standard would technically feasible and economically 

represent a 30 percent improvement in justified as required by law. Therefore, 

cooling efficiency and a 13 percent the Department is amending the energy 

improvement in heating efficiency. The conservation standards for residential 

standard will also increase the cooling central air conditioners and heat pumps. 

efficiency of single-package air 2. Central Air Conditioner and Heat 

conditioners and single-package heat 

pumps by 34 percent and the heating Pump Features 

efficiency of single-package heat pumps The amended efficiency levels can be 

by 17 percent. Finally, the Department met by central air conditioner and heat 

pump designs that are already available 

in the market. We fully expect 

variations of these models to exist under 

the new standards, offering all the 

features and utility that are found in 

currently available products. 

3. Consumer Benefits 

Table 1.1 summarizes the 

"characteristics" of today's typical 

central air conditioners and heat pumps. 

Table 1.2 presents the implications for 

the average consumer of the standards 

becoming effective in 2006. 

TABLE 1.1.-CHARACTERISTICS OF TODAY'S TYPICAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS 1 

Split system Split system Single Single package air package heat air conditioner heat pump conditioner pump 

Average Installed Price .................................................................................. .. $2,236 $3,668 $2,607 $3,599 

Annual Utility BiII2 ........................................................................................... . $189 $453 $189 $453 

Life Expectancy (years) .................................................................................. . 18.4 18.4 18.4 18.4 

Energy Consumption per year (kWh) ............................................................. . 2,305 6,549 2,305 6,549 

1 ''Typical'' equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively. 2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump. 

TABLE 1.2.-IMPLICATIONS OF NEW STANDARDS FOR THE AVERAGE CONSUMER 

Split system air conditioner 

Year Standard Comes into Effect .................................................................. .. 2006 

New Average Installed Price ......................................................................... .. $2,571 

Estimated Price Increase ............................................................................... .. $335 

Annual Utility Bill Savings ............................................................................... . $42 

Average Net Saving over Equipment Life ...................................................... . $113 

Energy Savings per Year (kWh) .................................................................... .. 532 

The most typical air conditioner (i.e., 

split system air conditioners which 

comprise approximately 65 percent of 

today's central air conditioning and heat 

pump market) has an installed price of 

$2,236 and an annual utility cost of 

$189. In order to meet the 2006 

standard, the Department estimates that 

the installed price of a typical air 

conditioner will be $2,571, an increase 

of $335. This price increase will be 

offset by an annual energy savings of 

about $42 on the utility bills. The most 

typical heat pump (i.e., split system heat 

pump) currently has an installed price 

of $3,668 and an annual utility cost of 

$453. In order to meet the 2006 

standard, the Department estimates that 

the installed price of a typical heat 

pump will be $4,000, an increase of 

$33'2. This price increase will be offset 

by an annual energy savings of about 

$70 on the utility bills. 

The Department recognizes that most 

consumers pay energy prices that are 

higher or lower than the "typical" 

consumer and operate their equipment 

more or less often. Consequently, the 

Department has investigated the effects 

of the different energy prices across the 

nation and different air-conditioning 

usage patterns. The Department 

estimates that 61 percent of all 

consumers purchasing a new typical air 

conditioner will either save money or 

will be negligibly impacted as a result 

of the 2006 standard. In the case of a 

new typical heat pump, 94 percent of all 

consumers either save money or will be 

negligibly impacted. . 

The Department also investigated how 

these standards might affect low income 

consumers. On average, the Department 

estimates that it is likely that low 

income air conditioner and heat pump 

consumers will also save money as a 

result of the standard. 

4. National Benefits 

The standards will provide benefits to 

the nation. DOE estimates the standards 

will save approximately 4.2 quads of 

Split system Single Single 

heat pump packaQe air package heat 

conditIoner pump 

2006 2006 2006 

$4,000 $3,032 $4,034 

$332 $425 $435 

$70 $42 $70 

$372 $29 $353 

1081 532 1081 

energy over 25 years (2006 through 

2030). This is equivalent to all the 

energy consumed by nearly 26 million 

American households in a single year. 

We also estimate this standard will have 

a net benefit to the nation's consumers 

of $1 billion over the same period. In 

2020, the standards will avoid the 

construction of five 400 megawatt coalfired plants and thirty-four 400 

megawatt gas-fired plants. These energy 

savings will result in cumulative 

greenhouse gas emission reductions of 

approximately 33 million metric tons 

(Mt) of carbon. or an amount equal to 

that produced by approximately 3 

million cars every year. Additionally, 

air pollution will be reduced by the 

elimination of approximately 94 

thousand metric tons of nitrous oxides 

( NOx) from 2006 through 2020. 

B. Authority 

Part B of Title III of the Energy Policy 

and Conservation Act (EPCA), Pub. L. 

94-163, as amended by the National 
EE-RM/STD-98-440- s

7172 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

Energy Conservation Policy Act, Pub. L. (iii) The total projected amount of energy -Split system and single-package air

95-619, by the National Appliance savings likely to result directly from the conditioners-12 SEER

Energy Conservation Act, Pub. L. 100- imposition of the standard; -Split system and single package heat

12, 12, by the by the National National Appliance Appliance Energy Energy performance iv) Any lessening of the covered of the utility products or the likely to pumps-13 mps--13 SEER/7.7 SEERJ7.7 HSPF HSPF

Conservation Amendments of 1988, result from the imposition of the standard; -Through-the-Wall air conditioners

Pub. L. 100-357, and by the Energy (v) The impact of any lessening of and heat pumps- 1 SEER/7.1 HSPF.

Policy Act of 1992, Pub. L. 102-486' competition, as determined in writing by the In addition to the increase proposed created the Energy Conservation Attorney General, that is likely to result from in SEER and HSPF, the Department Program for Consumer Products other the imposition of the standard; requested comments on a proposal to

than Automobiles. The consumer (vi) The need for national energy adopt a standard for steady-state cooling

products subject to this program (oftener (vii) rs Other faco factors the the Secretary Secretary conefficiency, considers efficiency, EER. EER. 2 The The proposal proposal on on EER EER referred to hereafter as "covered relevant." was designed to ensure more efficient

products") include central air t - operation at high outdoor temperature,

conditioners and heat pumps. establishesdairebuttableopresumptionrofsduring In addition, section 325(o)(2)(B)(iii) during periods periods when when electricity electricity use use byby Under the Act, the program consists establishes a rebuttable presumption of air conditioners is at its peak.

essentially of three parts: testing, economic justification in instances The proposed rule provided labeling, and Federal energy here the Secretary determines that additional background information on conservation standards. the current standards, the history of

The National Appliance Energy purchasing a product complying withhe

Conservation Act of 1987 (NAECA) an will energy conservation standard level previolicies be less than three times the value procedures, interpretations and policies prescribed initial Federal energyheene * * * s du e which guide the Department in

conservation standards for central air of the energy * * standards, ncy first year that the consumer will receive developing new efficiency standards, conditioners and heat pumps. EPCA as a r ltofthest dard l t which are set forth as the Process

Section 325(d), 42 U.S.C. 6295(d). The under the a icablt rocedure s Improvement Rule. 61 FR 36974. A

Act specifies that the Department is to *." The rebuttable presumption test public hearing was held in Washington,

review the standards January 1, 1994. is an alternative path to establishing DC on November 16, 2000, to hear oral

EPCA Section 325(d)(3)(A), 42 U.S.C. economic justification views, data and arguments on the

6295(d)(3)(A). proposed rule.

Any new or amended standard must C. Background. General Discussion

be designed so as to achieve the The existing standards for residential

maximum improvement in energy central air conditioners and heat pumps A. Technological Feasibility

efficiency that is technologically have been in effect since 1992. As 1 General

feasible and economically justified. described above, the descriptor for air

EPCA Section 325(o)(2)(A), 42 U.S.C. conditioner and heat pump cooling There are central air conditioners and

6295(o)(2)(A). efficiency is SEER and the descriptor for heat pumps in the market at all of the

Section 325(o)(2)(B)(i) provides that heat pump heating efficiency is HSPF. efficiency levels prescribed in today's

before DOE determines whether a The current central air conditioner and final rule. The Department, therefore,

standard is economically justified, it heat pump efficiency standards are as believes all of the efficiency levels

must first solicit comments on a follows: adopted by today's final rule are

proposed standard. After reviewing -Split system air conditioners and heat technologically feasible.

comments on the proposal, and before it pumps-10 SEER/6.8 HSPF 2. Maximum Technologically Feasible

adopts a standard, DOE must then -Single package air conditioners and Levels

determine whether the benefits of the heat pumps-9.7 SEER/6.6 HSPF

standard exceed its burdens, based, to On September 8,1993, DOE Pursuant to section 325(p)(2) of the

the greatest extent practicable, on a published an Advance Notice of Act, and as discussed in the proposed weighing of the following seven factors: Proposed Rulemaking (ANOPR) ru le, the Department determined that 18

"(i) The economic impact of the standard announcing the Department's intention SEER is the maximum technologically on the manufacturers and on the consumers to revise the existing central air feasible (Max Tech) level for cooling of the products subject to such standard; conditioner and heat pump efficiency efficiency for all product classes and

(ii) The savings in operating costs standard. 58 FR 47326. During a capacities covered by this rulemaking. throughout the estimated average life of the workshop on June 30, 1998, we 65 FR 59593. The Max Tech level for

covered product in the type (or class) presented for comment an analytical heating efficiency, is 9.4 HSPF which is

compared to any increase in the price of, or framework for the central air the highest HSPF rating currently

in the initial charges for, or maintenance conditioner and heat pump standards available in residential heat pumps. expenses of, the covered products which are likely to result from the imposition of the rulemaking. The analytical framework B. Energy Savings

standard; described the different analyses to be

conducted, the method for conducting 1 Determinaton of Savings

'Part B of Title 111 of the Energy Policy and them, the use of new spreadsheets, and The Department forecasted energy

Conservation Act, as amended by the National the relationship of the various analyses. savings through the use of a national

Energy Conservation Policy Act, the National On November 24, 1999, DOE published energy savings (NES) spreadsheet as Appliance Energy Conservation Act, the National a Supplemental ANOPR. 64 FR 66306. discussed in the proposed rule. 65 FR

Appliancde Energy olcctit of 1992. is referred On October 5, 2000, DOE published a 59590, 59593 (October 5, 2000). The

to in this notice as EPCA, or the "Act." Part B of Notice of Proposed Rulemaking (NOPR Title II is codified at 42 U.S.C. 6291 et seq. Part or proposed rule). 65 FR 59590. The 2

EER, Energy Efficiency Ratio. is a steady-state B of Title Ill of the Energy Policy and Conservation energy efficiency standards proposed for measure of energy efficiency which measures Act, as amended by the National Energy rsidential central air conditioners and efficiency at a prescribed outdoor temperature (95 Conservation Policy Act only, is referred to in this rsidntial cntral air conditionrs and F), and is one of the test conditions in the notice as the National Energy Conservation Policy central air conditioning heat pumps Department's test procedure used to develop the Act. (heat pumps) were as follows: SEER

EE-RM-STD-98-440 COMMENT 204

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7172 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

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 by the Energy 

Policy Act of 1992, Pub. L. 102-486 1 

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 central air 

conditioners and heat pumps. 

Under the Act, the program consists 

essentially of three parts: testing, 

labeling, and Federal energy 

conservation standards. 

The National Appliance Energy 

Conservation Act of 1987 (NAECA) 

prescribed in~tial Federal energy 

conservation standards for central air 

conditioners and heat pumps. EPCA 

Section 325(d), 42 U.S.c. 6295(d). The 

Act specifies that the Department is to 

review the standards January 1, 1994. 

EPCA Section 325(d)(3)(A), 42 U.S.C. 

6295(d)(3)(A). 

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. 

EPCA Section 325(0)(2)(A), 42 U.S.C. 

6295(0)(2)(A). 

Section 325(0)(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, and before it 

adopts a standard, DOE must then 

determine whether the benefits of the 

standard exceed its burdens, based, to 

the greatest extent practicable, on a weighing of the following seven factors: 

"(i) The economic impact of the standard on the manufacturers and on the consumers of the products subject to such standard; 

(ii) The savings in operating costs 

throughout the estinlated average life of the 

covered product in the type (or class) 

compared to any increase in the price of, or in the initial charges for. or maintenance 

expenses of. the covered products which are likely to result from the imposition of the 

standard; 

1 Part B of Titlo III of tho 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 EPCA, or the "Act." Part B of 

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

B of Title III of tho 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. 

(iii) The total projected amount of energy 

savings likely to result directly from the 

imposition of the standard; 

(iv) Any lessening of the utility or the 

performance of the covered products likely to 

result from the imposition of the standard; 

(v) The impact of any lessening of 

competition, as determined in writing by the 

Attorney General. that is likely to result from 

the imposition of the standard; 

(vi) The need for national energy 

conservation; and 

(vii) Other factors the Secretary considers 

relevant." 

In addition, section 325(0)(2)(B)(iii) 

establishes a rebuttable presumption of 

economic justification in instances 

where the Secretary determines that 

"the additional cost to the consumer of 

purchasing a product complying with 

an energy conservation standard level 

will be less than three times the value 

of the energy" .. .. savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the applicable test procedure 

.. .. "." The rebuttable presumption test 

is an alternative path to establishing 

economic justification. 

C. Background 

The existing standards for residential 

central air conditioners and heat pumps 

have been in effect since 1992. As 

described above, the descriptor for air 

conditioner and heat pump cooling 

efficiency is SEER and the descriptor for 

heat pump heating efficiency is HSPF. 

The current central air conditioner and 

heat pump efficiency standards are as 

follows: 

-Split system air conditioners and heat 

pumps-l0 SEER/6.8 HSPF 

-Single package air conditioners and 

heat pumps-9.7 SEER/6.6 HSPF 

On September 8,1993, DOE 

published an Advance Notice of 

Proposed Rulemaking (ANOPR) 

announcing the Department's intention 

to revise the existing central air 

conditioner and heat pump efficiency 

standard. 58 FR 47326. During a 

workshop on June 30, 1998, we 

presented for comment an analytical 

framework for the central air 

conditioner and heat pump standards 

rulemaking. The analytical framework 

described the different analyses to be 

conducted, the method for conducting 

them, the use of new spreadsheets, and 

the relationship of the various analyses. 

On November 24, 1999. DOE published 

a Supplemental ANOPR. 64 FR 66306. 

On October 5.2000, DOE published a 

Notice of Proposed Rulemaking (NOPR 

or proposed rule). 65 FR 59590. The 

energy efficiency standards proposed for 

rE$idential central air conditioners and 

central air conditioning heat pumps 

(heat pumps) were as follows: 

-Split system and single-package air 

conditioners-12 SEER 

-Split system and single package heat 

pumps-13 SEERl7.7 HSPF 

-Through-the-Wall air conditioners 

and heat pumps-ll SEERl7.1 HSPF. 

In addition to the increase proposed 

in SEER and HSPF, the Department 

requested comments on a proposal to 

adopt a standard for steady-state cooling 

efficiency, EER.2 The proposal on EER 

was designed to ensure more efficient 

operation at high outdoor temperature, 

during periods when electricity use by 

air conditioners is at its peak. 

The proposed rule provided 

additional background information on 

the current standards, the history of 

previous rulemakings and the 

procedures, interpretations and policies 

which guide the Department in 

developing new efficiency standards, 

which are set forth as the Process 

Improvement Rule. 61 FR 36974. A 

public hearing was held in Washington, 

DC on November 16. 2000, to hear oral 

views, data and arguments on the 

proposed rule. 

II. General Discussion 

A. Technological Feasibility 

1. General 

There are central air conditioners and 

heat pumps in the market at all of the 

efficiency levels prescribed in today's 

final rule. The Department, therefore, 

believes all of the efficiency levels 

adopted by today's final rule are 

technologically feasible. 

2. Maximum Technologically Feasible 

Levels 

Pursuant to section 325(p)(2) of the 

Act, and as discussed in the proposed 

rule, the Department determined that 18 

SEER is the maximum technologically 

feasible (Max Tech) level for cooling 

efficiency for all product classes and 

capacities covered by this rulemaking. 

65 FR 59593. The Max Tech level for 

heating effiCiency, is 9.4 HSPF which is 

the highest HSPF rating currently 

available in residential heat pumps. 

B. Energy Savings 

1. Determination of Savings 

The Department forecasted energy 

savings through the use of a national 

energy savings (NES) spreadsheet as 

discussed in the proposed rule. 65 FR 

59590,59593 (October 5. 2000). The . 

Z EER, Energy EffiCiency Ratio. is a stendy-state 

measure of energy efficiency which measures 

efficiency at a prescribed outdoor temperature (95 

OF), and is one of the test conditions in the 

Department's tost procedure used to develop the 

SEER. 
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Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7173

spreadsheets and assumptions upon 2. Life-cycle-costs 7. Other Factors

which the results of today's final rule is We considered life-cycle-costs as This provision allows the Secretary of

based are unchanged. discussed in the proposed rule. 65 FR Energy, in determining whether a

2. Significance of Savings 59590, 59594 (October 5, 2000). The standard is economically justified, to

As discussed in the proposed rule, installed price and operation and consider any other factors that the

section 325(o)(3)(B) of the Act prohibits maintenance costs were calculated for a Secretary deems to be relevant. EPCA

the Department from adopting a range of consumers around the nation to Section 325(o)(2)(B)(i)(VI), 42 U.S.C.

standard for a product if that standard estimate the range in life cycle cost 6295(o)(2)(B)(i)(VI).

would not result in "significant" energy benefits that consumers would expect to Under this factor, we considered the

savings. The energy savings for the achieve due to new standards. potential improvement to the reliability ~~~~~~~~~savings.~~ fof ~ me energy savings the electrical system. Recent

standard levels we are adopting today 3. Energy Savings summertime electric power outages in

are non-trivial-indeed they are

substantial-and therefore we consider While significant conservation of various regions of our country resulted

them "significant" within the meaning energy is a separate statutory in disruption of many peoples' lives and

of section 325 of the Act. requirement for establishing an energy businesses. The schedule contained in

conservation standard, the Act requires the Act called for the Department to

C. Rebuttable Presumption DOE, in determining the economic revise the standards for central air

The National Appliance Energy justification of a standard, to consider conditioners and heat pumps by 1994,

Conservation Act established new the total projected energy savings that to be effective in 1999. For reasons

criteria for determining whether a are expected to result directly from explained in the proposed rule and

standard level is economically justified. revised standards. ANOPR, promulgation of many

Section 325(o)(2)(B)(iii) of the Act Lessening of Uility or Perfstandards including those for central air s t a t e s 4. Lessening of Utility or Performance of conditioners and heat pumps was : Products delayed.

"If the Secretary finds that the additional This factor cannot be quantified. In While central air conditioning cost to the consumer of purchasing a product

complying with an energy conservation establishing classes of products, the accounts for about 10 percent of

standard level will be less than three times Department has attempted to eliminate residential electricity consumption, it

the value of the energy * * * savings during any degradation of utility or can account for several times this

the first year that the consumer will receive performance in the products covered by amount during peak hours on hot

as a result of the standard, as calculated today's final rule. Attributes that affect summer days, when electricity

under the applicable test procedure, there utility include the product's ability to reliability is most strained. A 30 percent

shall be a rebuttable presumption that such cool and dehumidify. In some improvement in air conditioner

standard level is economically justified. A standard level is economically ustified A applications, noise levels may also be an efficiency would reduce the nation's determination by the Secretary that such

criterion is not met shall not be taken into aspect of utility. Product size ortotal annual electricity use by

consideration in the Secretary's configuration can also be considered approximately 2 percent after it was

determination of whether a standard is utility if a change in size would cause fully phased in. However, the same

economically justified." the consumer to install the product in efficiency improvement would provide

If, according to the test procedure, the a location or in a manner inconsistent a greater percentage reduction in peak

increase in initial price of an appliance with the consumer's preferences. loads, reducing the prospect of

due to a conservation standard would 5. Impact of Lessening of Competition brownouts and prie spikes. These peak

repay itself to the consumer in energy load reductions are critical given that

savings in less than three years, then we It is important to note that this factor the conditions leading to grid instability

presume that such standard is has two parts; on the one hand, it can occur well before peak demand

economically justified. This assumes that there could be some even equals supply.

presumption of economic justification lessening of competition as a result of The Final Report 3 by the team of

can be rebutted upon a proper showing. standards; and on the other hand, it experts convened by the Secretary to

The standard levels we are adopting directs the Attorney General to gauge investigate the electric power problem

today do not satisfy the criteria set forth the impact, if any, of that effect. included the recommendation to

above. Therefore, we cannot presume In order to assist the Attorney General increase the energy efficiency of central

them to be economically justified and in making such a determination, the air conditioners as one means for

have performed additional analysis to Department provided the Attorney enhancing reliability. This

support the Secretary's determination General with copies of the proposed recommendation led the Secretary to

that they are indeed economically rule and the Technical Support put this rulemaking on the fast track and

justified. Document for review. The Attorney to advance the publication of today's

General's response is discussed in final rule for central air conditioners

D. Economic Justification section V.D.5 below, and is reprinted at and heat pumps. Thus, the Department

As noted earlier, Section the end of the rule. has considered effects of the rule on

325(o)(2)(B)(i) of the Act provides seven electric power system reliability. 6. Need of the Nation To Conserve factors to be evaluated in determining Energy III. Methodology

whether a conservation standard is

economically justified. The Secretary recognizes that energy As discussed in the proposed rule, the

conservation benefits the Nation in Department developed new analytical 1. Economic Impact on Manufacturers several important ways. Enhanced tools for this and other recent

and Consumers energy efficiency improves the Nation's rulemakings. The first tool was a

We considered the economic impact energy security, strengthens the

on manufacturers and consumers as economy, and reduces the 3 "Rport of the U.S. Department of Energy's discussed i the proposed rule. 65 FR etn o er Power Onutage Sutudy Team: Findings and discussed in the proposed rule. 65 FR environmental impacts of energy Recommendations to Enhance Reliability from the

59590, 59593 (October 5, 2000). production. Summer of 1999". March 2000.

EE-RM-STD-98-440 COMMENT 204

Federal Register/Vol. 66, No. t4/Monday, January 22, 200t/Rules and Regulations 7173 

spreadsheets and assumptions upon 

which the results of today's final rule is 

based are unchanged. 

2. Significance of Savings 

As discussed in the proposed rule, 

section 325(0)(3)(B) of the Act prohibits 

the Department from adopting a 

standard for a product if that standard 

would not result in "significant" energy 

savings. The energy savings for the 

standard levels we are adopting today 

are non-trivial-indeed they are 

substantial-and therefore we consider 

them "significant" within the meaning 

of section 325 of the Act. 

C. Rebuttable Presumption 

The National Appliance Energy 

Conservation Act established new 

criteria for determining whether a 

standard level is economically justified. 

Section 325(0)(2)(B)(iii) of the Act 

states: 

"If the Secretary fmds 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, according to the test procedure, the 

increase in initial price of an appliance 

due to a conservation standard would 

repay itself to the consumer in energy 

savings in less than three years, then we 

presume that such standard is 

economically justified. This 

presumption of economic justification can be rebutted upon a proper showing. 

The standard levels we are adopting 

today do not satisfy the criteria set forth 

above. Therefore, we cannot presume 

them to be economically justified and 

have performed additional analysis to 

support the Secretary's determination 

that they are indeed economically 

justified. 

D. Economic Justification 

As noted earlier, Section 

325(0)(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 

We considered the economic impact 

on manufacturers and consumers as 

discussed in the proposed rule. 65 FR 

59590, 59593 (October 5, 2000). 

2. Life-cycle-costs 

We considered life-cycle-costs as 

discussed in the proposed rule. 65 FR 

59590,59594 (October 5, 2000). The 

installed price and operation and 

maintenance costs were calculated for a 

range of consumers around the nation to 

estimate the range in life cycle cost 

benefits that consumers would expect to 

achieve due to new standards. 

3. Energy Savings 

While significant conservation of 

energy is a separate statutory 

requirement for establishing 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. 

4. Lessening of Utility or Performance of 

Products 

This factor cannot be quantified. In 

establishing classes of products, the 

Dflpartment has attempted to eliminate 

any degradation of utility or 

performance in the products covered by 

today's final rule. Attributes that affect 

utility include the product's ability to 

cool and dehumidify. In some 

applications, noise levels may also be an 

aspect of utility. Product size or 

configuration can also be considered 

utility if a change in size would cause 

the consumer to install the product in 

a location or in a manner inconsistent 

with the consumer's preferences. 

5. Impact of Lessening of Competition 

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 provided the Attorney 

General with copies of the proposed 

rule and the Technical Support 

Document for review. The Attorney 

General's response is discussed in 

section V.D.5 below, and is reprinted at 

the end of the rule. 

6. Need of the Nation To Conserve 

Energy 

The Secretary recognizes that energy 

conservation benefits the Nation in 

several important ways. Enhanced 

energy efficiency improves the Nation's 

energy security, strengthens the 

economy, and reduces the 

environmental impacts of energy 

production. 

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. EPCA 

Section 325(0)(2)(B)(i)(VI), 42 U.S.c. 

6295(0 )(2)(B)(i)(VI). 

Under this factor, we considered the 

potential improvement to the reliability 

of the electrical system. Recent 

summertime electric power outages in 

various regions of our country resulted 

in disruption of many peoples' lives and 

businesses. The schedule contained in 

the Act called for the Department to 

revise the standards for central air 

conditioners and heat pumps by 1994, 

to be effective in 1999. For reasons 

explained in the proposed rule and 

ANOPR, promulgation of many 

standards including those for central air 

conditioners and heat pumps was 

delayed. 

While central air conditioning 

accounts for about 10 percent of 

residential electricity consumption, it 

can account for several times this 

amount during peak hours on hot 

summer days, when electricity 

reliability is most strained. A 30 percent 

improvement in air conditioner 

efficiency would reduce the nation's 

total annual electricity use by 

approximately 2 percent after it was 

fully phased in. However, the same 

efficiency improvement would provide 

a greater percentage reduction in peak 

loads, reducing the prospect of 

brownouts and price spikes. These peak 

load reductions are critical given that 

the conditions leading to grid instability 

can occur well before peak demand 

even equals supply. The Final Report 3 by the team of 

experts convened by the Secretary to 

investigate the electric power problem 

included the recommendation to 

increase the energy efficiency of central 

air conditioners as one means for 

enhancing reliability. This 

recommendation led the Secretary to 

put this rulemaking on the fast track and 

t? advance the publication of today's 

fmal rule for central air conditioners 

and heat pumps. Thus, the Department 

has considered effects of the rule on 

electric power system reliability. 

1lI. Methodology 

As discussed in the proposed rule, the 

Department developed new analytical 

tools for this and other recent 

rulemakings. The first tool was a 

3 "Report of the U.S. Department of Energy's 

Power Outage Study Team: Findings and 

Recommendations to Enhance Reliability from tho 

Summer of 1999 ", March 2000. 
EE-RM/STD-98-440-' : ( j

7174 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

spreadsheet that calculates life-cycle- its results were similar to those derived questions whether we considered that

cost (LCC) and payback period. The using our 18.4-year equipment life reverse engineering-based prices reduce

second calculates national energy assumption, we are no longer impacts through price elasticity effects,

savings and national net present value considering the 14-year equipment but noted that industry impacts did not

(NPV). The Department also completely lifetime scenarios in the economic seem to change across trial standard

revised the methodology used in analysis. Finally, the emissions levels, and the Oregon Office of Energy

assessing manufacturer impacts reductions analysis now also estimates (OOE) believes that we have overstated

including the adoption of the the discounted value of cumulative manufacturer impacts since they are

Government Regulatory Impact Model emission reductions. already making investments in new (GRIM). Additionally, DOE developed a I Discussion of Commentstechnologies to help them improve

new approach using the National Energy Cproduct efficiency. (NRDC, No. 88 at p.

Modeling System (NEMS) to estimate Since we opened the docket for this 15; and OOE, No. 84 at p.5).

impacts of air conditioner energy rulemaking, we have received over 800 The reduction in industry net present

efficiency standards on electric utilities comments from a diverse set of value does increase with increasing

and the environment. interested parties, including standard levels, particularly since we In order to estimate production costs manufacturers and their representatives, consider it more likely that the Roll-up 4

for this rulemaking, we used an states, energy conservation advocates, scenario will occur under higher

efficiency level approach, with cost data heating and air-conditioning standard levels. Individual

provided by the Air Conditioning and contractors, consumers, electric utilities manufacturers themselves discussed

Refrigeration Institute (ARI) and through and others. The comments addressed their situations with us at length, and our own reverse engineering methods. the burdens and benefits associated we have incorporated the information

The ARI cost data presented the with more stringent standards, aspects they presented to us into our minimum, mean, and maximum cost of our analysis, the merits of the manufacturer impact analysis. In

estimates for the sample of ARI different trial standard levels and adopting this rule, we have assumed

members who participated. The data standard options we considered, and the that the Roll-up scenario is the most

covered each product class at each DOE rulemaking process. Many likely outcome resulting from a new 13

efficiency level through 15 SEER, and comments raised issues that we SEER standard for all product classes. was expressed relative to the base cost substantially addressed in the proposed We did consider the change in sales

for each manufacturer. The reverse rule and Supplementary ANOPR. volumes driven by changes in the

engineering methodology, conceived as Comments received during the most underlying cost assumptions. a way to validate the ARI data, analyzed recent comment period are addressed Many comments described what they

seventy-one samples, mostly selected by below, and some previous comments are consider disproportionate impacts on manufacturers, using design data revisited. manufacturers of niche products. Those

provided by manufacturers. Wecomments are discussed in Section IV.4

physically examined three of these A. Bu r e n s a nd Benefits below

models. In refining our results, we This section discusses comments we The Department has considered the

reviewed our detailed cost estimates for received on the burdens and benefits manufacturer burdens as described in

split air conditioners with a major associated with more stringent the manufacturer impact analysis of the

manufacturer. minimum efficiency standards,TSD in adopting the new standard.

The benefits of reverse engineering organized into the seven factors that the These include cumulative burdens. It

include the transparency of the Secretary considers as a basis for also considers the extent to which the

methods, data, and assumptions used to deciding whether a standard level is differences among efficiency scenarios

produce the estimates, and the insights economically justified. change the implications of more

gained into the design options used to stringent standards.

achieve the different efficiency levels. 1. Economic Impacts

The ARI data provides none of these a. Economic Impacts on b. Economic Impacts on Consumers.

benefits, but does draw on the Manufacturers. According to our Man comments mention the economic

considerable expertise of the manufacturer impact analysis, more budens that more stringent efficiency

manufacturers involved in producing stringent efficiency standards burden standards can place on consumers who

the underlying estimates describing all most manufacturers by causing them to are sensitive to increases in first cost.

of the products on the market. One make new investments in capacity, May noted that our decision should

benefit of the reverse engineering research and development, and testing. consider burdens on consumers caused

analysis is that results are expressed in We also expect most manufacturers to by long median payback periods. Some

absolute costs instead of relative costs. experience lower profitability and sales omments emphasized that

Absolute costs are needed to represent volumes for several years after the disproportionate impacts on low income

production costs at the minimum adopted standards become effective consumers due to an expected increase

efficiency level and are helpful in Some manufacturers in our analysis n istalled price would reduce the

representing the production costs at benefit under more stringent standards. number of consumers who would be

higher efficiency levels. ARI characterizes the financialable to afford new air conditioners.

Regarding the analytical methodology, burdens on the industry overall as Some comments suggested that this

the Department continues to use the severe. They also assert that the effect could increase health problems

spreadsheets and approaches explained hydrochloroflourocarbons (HCFC) and deaths. The Mercatus Center stated

in the proposed rule. 65 FR at 59594- phaseout results in cumulative burdens. that the Department believed consumers

59597; We have applied them to (ARI, No. 100 at pp. 6 and 13). Some pass up energy efficient equipment

develop the analysis further in this final manufacturers noted that EER and because they are misinformed about

rule. We added new analysis based on thermal expansion valve (TXV)

the manufacturing cost estimates that requirements would add to the burden. Th Roll-up scenario assumes that the we had derived through reverse (York, No. 90, at pp. 4-5). The Natural proportion of equipment with efficiency ratings we had derived through reverse (York, No. 90, pp. 4-5). The at Natural bove the new standard level will not increase

engineering techniques. Also, because Resources Defense Council (NRDC) compared to their proportion today.

EE-RM-STD-98-440 COMMENT 204

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7174 Federal Register/Vol. 66, No. 14/Monday, January 22, ZOOl/Rules and Regulations 

spreadsheet that calculates life-cyclecost (LCC) and payback period. The 

second calculates national energy 

savings and national net present value 

(NPV). The Department also completely 

revised the methodology used in 

assessing manufacturer impacts 

including the adoption of the 

Government Regulatory Impact Model 

(GRIM). Additionally. DOE developed a 

new approach using the National Energy 

Modeling System (NEMS) to estimate 

impacts of air conditioner energy 

efficiency standards on electric utilities 

and the environment. 

In order to estimate production costs 

for this rule making, we used an 

efficiency level approach, with cost data 

provided by the Air Conditioning and 

Refrigeration Institute (ARl) and through 

our own reverse engineering methods. 

The ARI cost data presented the 

minimum, mean, and maximum cost 

estimates for the sample of ARI 

members who participated. The data 

covered each product class at each 

efficiency level through 15 SEER, and 

was expressed relative to the base cost 

for each manufacturer. The reverse 

engineering methodology, conceived as 

a way to validate the ARI data, analyzed 

seventy-one samples, mostly selected by 

manufacturers, using design data 

provided by manufacturers. We 

physically examined three of these. 

models. In refining our results, we 

reviewed our detailed cost estimates for 

split air conditioners with a major 

manufacturer. 

The benefits of reverse engineering 

include the transparency of the 

methods, data. and assumptions used to 

produce the estimates, and the insights 

gained into the design options used to 

achieve the different efficiency levels. 

The ARI data provides none of these 

benefits, but does draw on the 

considerable expertise of the 

manufacturers involved in producing 

the underlying estimates describing all 

of the products on the market. One 

benefit of the reverse engineering 

analysis is that results are expressed in 

absolute costs instead of relative costs. 

Absolute costs are needed to represent 

production costs at the minimum 

efficiency level and are helpful in 

representing the production costs at 

higher efficiency levels. 

Regarding the analytical methodology, 

the Department continues to use the 

spreadsheets and approaches explained 

in the proposed rule. 65 FR at 59594-

59597: We have applied them to 

develop the analysis further in this final 

rule. We added new analysis based on 

the manufacturing cost estimates that 

we had derived through reverse 

engineering techniques. Also. because 

its results were similar to those derived 

using our 18.4-year equipment life 

assumption, we are no longer 

considering the 14-year equipment 

lifetime scenarios in the economic 

analysis. Finally, the emissions 

reductions analysis now also estimates 

the discounted value of cumulative 

emission reductions. 

IV. Discussion of Comments 

Since we opened the docket for this 

rulemaking, we have received over 800 

comments from a diverse set of 

interested parties, including 

manufacturers and their representatives, 

states, energy conservation advocates, 

heating and air-conditioning 

contractors, consumers, electric utilities 

and others. The comments addressed 

the burdens and benefits associated 

with more stringent standards. aspects 

of our analysis, the merits of the 

different trial standard levels and 

standard options we considered, and the 

DOE rulemaking process. Many 

comments raised issues that we 

substantially addressed in the proposed 

rule and Supplementary ANOPR. 

Comments received during the most 

recent comment period are addressed 

below, and some previous comments are 

revisited. 

A. Burdens and Benefits 

This section discusses comments we 

received on the burdens and benefits 

associated with more stringent 

minimum efficiency standards, 

organized into the seven factors that the 

Secretary considers as a basis for 

deciding whether a standard level is 

economically justified. 

1. Economic Impacts 

a. Economic Impacts on Manufacturers. According to our 

manufacturer impact analysis, more 

stringent efficiency standards burden 

most manufacturers by causing them to 

make new investments in capacity, 

research and development, and testing. 

We also expect most manufacturers to 

experience lower profitability and sales 

volumes for several years after the 

adopted standards become effective. 

Some manufacturers in our analysis 

benefit under more stringent standards. 

ARl characterizes the financial 

burdens on the industry overall as 

severe. They also assert that the 

hydrochloroflourocarbons (HCFC) 

phaseout results in cumulative burdens. 

(ARI, No. 100 at pp. 6 and 13). Some 

manufacturers noted that EER and 

thermal expansion valve (TXV) 

requirements would add to the burden. 

(York, No. 90, at pp. 4-5). The Natural 

Resources Defense Council (NRDC) 

questions whether we considered that 

reverse engineering-based prices reduce 

impacts through price elasticity effects. 

but noted that industry impacts did not 

seem to change across trial standard 

levels, and the Oregon Office of Energy 

(ODE) believes that we have overstated 

manufacturer impacts since they are 

already making investments in new 

technologies to help them improve 

product efficiency. (NRDC, No. 88 at p. 

15; and ODE, No. 84 at p.5). 

The reduction in industry net present 

value does increase with increasing 

standard levels, particularly since we 

consider it more likely that the Roll-up 4 

scenario will occur under higher 

standard levels. Individual 

manufacturers themselves discussed 

their situations with us at length, and 

we have incorporated the information 

they presented to us into our 

manufacturer impact analysis. In 

adopting this rule, we have assumed 

that the Roll-up scenario is the most 

likely outcome resulting from a new 13 

SEER standard for all product classes. 

We did consider the change in sales 

volumes driven by changes in the 

underlying cost assumptions. 

Many comments described what they 

consider disproportionate impacts on 

manufacturers of niche products. Those 

comments are discussed in Section IVA 

below. 

The Department has considered the 

manufacturer burdens as described in 

the manufacturer impact analysis of the 

TSD in adopting the new standard. 

These include cumulative burdens. It 

also considers the extent to which the 

differences among efficiency scenarios 

change the implications of more 

stringent standards. 

b. Economic Impacts on Consumers. 

Many comments mention the economic 

burdens that more stringent efficiency 

standards can place on consumers who 

are sensitive to increases in first cost. 

Many noted that our decision should 

consider burdens on consumers caused 

by long median payback periods. Some 

comments emphasized that 

disproportionate impacts on low income 

consumers due to an expected increase 

in installed price would reduce the 

number of consumers who would be 

able to afford new air conditioners. 

Some comments suggested that this 

effect could increase health problems 

and deaths. The Mercatus Center stated 

that the Department believed consumers 

pass up energy efficient equipment 

because they are misinformed about 

4 The Roll-up scenario assumes that the 

proportion of equipment with efficiency ratings 

above the new standard level will not increase 

compared to their proportion today. 
EE-RMISTD-98-440-I ^ T

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7175

operating costs, therefore the 103 at p. 3 and Transcript No. 73 at pp. basing the savings on source energy

Department should construct a program 50-51; and EEI, Transcript No. 73 at pp. consumption at the power plant, rather

to correct this deficiency. (ARI, No. 100 176-178). Carrier Corp. asserted that than site energy consumption at the

at pp. 2 and 5; American Public Power there were too many consumers household or commercial building.

Association (APPA), No. 113 at p. 2; incurring life-cycle-cost increases at 12 (ARI, No. 100 at p. 11). While neither

Manufactured Home Institute (MHI), SEER. (Carrier, No. 92 at p. 5). In stating that the energy savings estimated

No. 99 at p. 1; Lennox, No. 91 at p. 3; contrast, the American Council for an by the Department were too great or too

Consumer Federation of America (CFA), Energy-Efficient Economy (ACEEE), the low, ASE claims that 70 billion kWh

No. 110 at p. 1; Nebraska Public Power Alliance to Save Energy (ASE), the would be saved from a 13 SEER

District (NPPD), No. 109 at p. 2; Pacific Gas and Electric Company standard coupled with a minimum EER

National Association of Home Builders (PG&E), and NRDC argued that the requirement of 11.6 and mandatory use (NAHB), No. 94 at p. 1; Nordyne, No. percent of consumers realizing life- of TXVs. (ASE, No. 81 at p. 12). ACEEE

101 at p. 2; Trane, No. 93 at p. 4; York, cycle-cost savings from a particular also claims that significant national

No. 90 at pp. 4-5; and Mercatus Center, standard level is not the appropriate energy savings will be realized from a No. 115 at pp. 18-19). measure for establishing an updated 13 SEER standard, an 11.6 minimum

CFA considers lower energy bills a efficiency standard. Because air- EER requirement, mandatory use of

benefit and would support regional conditioning use is highly dependent on TXVs, and an HSPF standard of 7.9.

standards and public assistance climatic conditions and because these NAECA prescribes that consumer programs to mitigate long payback are national standards, it is to be energy savings be evaluated based on periods and disproportionate impacts expected that some consumers in the site rather than source energy on consumers. (CFA, No. 110 at p. 2). Northern part of the U.S. will realize net consumption. However, the Department Many comments express the belief costs from an increased standard but believes national energy savings that, for various reasons, we either will be offset by consumers in the evaluated at the source reflects a more underestimated or overestimated Southern part of the U.S. who will accurate representation of the energy economic impacts on consumers. Those realize life-cycle cost savings from more consumption being avoided from a comments are addressed in Section efficient air-conditioning equipment. standard. Evaluating energy at the

IV.B. below. Due to this disparity, they argue it is source takes into account the efficiency We recognize that increases in first better to base the standard on national of the generation source as well as the

cost and long payback periods are average life-cycle-cost results. (ACEEE, transmission and distribution of the

generally considered burdens on No. 104 at p. 13; ASE, No. 81 at p.9; electricity. The Department accounts for consumers. Based on the reverse PG&E, No. 104 at p. 5; and NRDC, No. site energy consumption in its analysis engineering derived manufacturing cost 88 at pp. 19-21). of consumer life-cycle-cost impacts. estimates, however, our analysis shows EPCA requires the Department to With regard to the magnitude of the

that, at the adopted standard levels, the consider life-cycle-cost as one of the energy being saved from a standard, the

payback period is shorter than the life seven factors in determining economic Department is confident in its National

of the equipment. This means that over justification. In determining economic Energy Savings (NES) spreadsheet the life of the product, any increase in justification, the Secretary must model to forecast the source energy price will be paid back to the average determine whether the benefits of a savings realized from all standard consumer. Thus, the new efficiency standard exceed the burdens. Life-cycle- levels, including a 13 SEER standard.

standards should provide the average cost is just one of the factors to be Discussions with regard to minimum consumer with a long term economic considered and there is no mathematical EER standards and TXV requirements benefit. Also, we have examined formula for weighing the benefits and are presented later in this Chapter. impacts on low income consumers, and burdens of the various factors. There are . nn r r n found them to benefit overall, also no mathematical thresholds for life- e g of U ty or Performance of

Consumers concerned about potential cycle-cost as implied by EEI andProducts

health effects should note that ACEEE. (EEI, Transcript No. 73 at p. Comments regarding lessening of

assistance programs are already 177; and ACEEE, Transcript No. 73 at p. utility related mainly to the impacts that

available to assist them with their air 182). The Department notes that under more stringent standards may have on

conditioning purchases, and that room the standards in today's rule, consumers the availability of niche products and

air conditioners will continue to be on average will have lower life-cycle some products that are not typically

available when cooling in individual costs. Furthermore, it appears that considered "niche". Most comments rooms could mitigate their health EPCA, in requiring DOE to set national stated that those products face size concerns. standards that maximize energy savings constraints that they will find difficult,

2. Life-Cycle Costs for appliances where there will if not impossible, to conform to under

obviously be regional differences in more stringent standards. That result

ARI, The Trane Company (Trane), usage and energy costs, contemplated could lead to the removal of the

American Electric Power (AEP), that the level of life cycle cost savings products from the market, or to

Mercatus Center, Southern Company, would vary among consumers. equipment prices that are higher than

Dominion Virginia Power (Dominion), We have quantified the distribution of the market would be able to sustain.

and Edison Electric Institute (EEI) life cycle costs among consumers and (Friedrich, No. 116 at p. 1; Unico, No.

asserted that the percent of consumers have considered it, along with other 117 at pp. 1-2; Carrier, No. 92 at p. 8;

realizing life-cycle-cost savings at the information, in the weighing of the Lennox, No. 91 at p. 7; Trane, No. 93 at

standard levels issued in the proposed benefits and burdens of each standard p. 18; Mitsubishi, No. 87 at p. 1;

rule were too low and did not warrant level we assessed. Armstrong, No. 86 at pp. 1-3; and an increase in the minimum efficiency Fujitsu, No. 85 at p. 1).

standard. (ARI, No. 100 at p. 2; Trane, 3. Energy Savings We recognize that contractors and

No. 93 at p. 4; AEP, No. 83 at p. 1; ARI states that the Department consumers do take product size into

Mercatus Center, No. 115; Southern overestimated the energy savings account when making a purchase, and

Company, No. 96 at p. 2; Dominion, No. realized from efficiency standards by that size constraints can make it more

EE-RM-STD-98-440 COMMENT 204

· . EE-RM/STD~8-440-1f ~ f) tf 

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7175 

operating costs, therefore the 

Department should construct a program 

to correct this deficiency. (ARI, No. 100 

at pp. 2 and 5; American Public Power 

Association (APPA). No. 113 at p. 2; 

Manufactured Home Institute (MHI), 

No. 99 at p. 1; Lennox. No. 91 at p. 3; 

Consumer Federation of America (CF A), 

No. 110 at p. 1; Nebraska Public Power 

District (NPPD), No. 109 at p. 2; 

National Association of Home Builders 

(NAHB), No. 94 at p. 1; Nordyne, No. 

101 at p. 2; Trane, No. 93 at p. 4; York. 

No. 90 at pp. 4-5; and Mercatus Center, 

No. 115 at pp. 18-19). 

CF A considers lower energy bills a 

benefit and would support regional 

standards and public assistance 

programs to mitigate long payback 

periods and disproportionate impacts on consumers. (CFA, No. 110 at p. 2). 

Many comments express the belief 

that, for various reasons, we either 

underestimated or overestimated 

economic impacts on consumers. Those 

comments are addressed in Section 

IV.B. below. 

We recognize that increases in first 

cost and long payback periods are 

generally considered burdens on 

consumers. Based on the reverse 

engineering derived manufacturing cost 

estimates, however, our analysis shows 

that, at the adopted standard levels, the 

payback period is shorter than the life 

of the equipment. This means that over 

the life of the product, any increase in 

price will be paid back to the average 

consumer. Thus, the new efficiency 

standards should provide the average 

consumer with a long term economic 

benefit. Also, we have examined 

impacts on low income consumers, and 

found them to benefit overall. 

Consumers concerned about potential 

health effects should note that 

assistance programs are already 

available to assist them with their air 

conditioning purchases, and that room 

air conditioners will continue to be 

available when cooling in individual 

rooms could mitigate their health 

concerns. 

2. Life-Cycle Costs 

ARl, The Trane Company (Trane), 

American Electric Power (AEP), 

Mercatus Center, Southern Company, 

Dominion Virginia Power (Dominion), 

and Edison Electric Institute (EEl) 

asserted that the percent of consumers 

realizing life-cycle-cost savings at the 

standard levels issued in the proposed 

rule were too low and did not warrant 

an increase in the minimum efficiency 

standard. (ARI, No. 100 at p. 2; Trane, 

No. 93 at p. 4; AEP, No. 83 at p. 1; 

Mercatus Center, No. 115; Southern 

Company, No. 96 at p. 2; Dominion, No. 

103 at p. 3 and Transcript No. 73 at pp. 

50-51; and EEl, Transcript No. 73 at pp. 

176-178). Carrier Corp. asserted that 

there were too many consumers 

incurring life-cycle-cost increases at 12 

SEER. (Carrier, No. 92 at p. 5). In 

contrast, the American Council for an 

Energy-Efficient Economy (ACEEE), the 

Alliance to Save Energy (ASE), the 

Pacific Gas and Electric Company 

(PG&E), and NRDC argued that the 

percent of consumers realizing lifecycle-cost savings from a particular 

standard level is not the appropriate 

measure for establishing an updated 

efficiency standard. Because airconditioning use is highly dependent on 

climatic conditions and because these 

are national standards, it is to be 

expected that some consumers in the 

Northern part of the U.S. will realize net 

costs from an increased standard but 

will be offset by consumers in the 

Southern part of the U.S. who will 

realize life-cycle cost savings from more 

efficient air-conditioning equipment. 

Due to this disparity, they argue it is 

better to base the standard on national 

average life-cycle-cost results. (ACEEE, 

No. 104 at p. 13; ASE, No. 81 at p.9; 

PG&E, No. 104 at p. 5; and NRDC, No. 

88 at pp. 19-21). 

EPCA requires the Department to 

consider life-cycle-cost as one of the 

seven factors in determining economic 

justification. In determining economic 

justification, the Secretary must 

determine whether the benefits of a 

standard exceed the burdens. Life-cyclecost is just one of the factors to be 

considered and there is no mathematical 

formula for weighing the benefits and 

burdens of the various factors. There are 

also no mathematical thresholds for lifecycle-cost as implied by EEl and 

ACEEE. (EEl, Transcript No. 73 at p. 

177; and ACEEE, Transcript No. 73 at p. 

182). The Department notes that under 

the standards in today's rule, consumers 

on average will have lower life-cycle 

costs. Furthermore, it appears that 

EPCA, in requiring DOE to set national 

standards that maximize energy savings 

for appliances where there will 

obviously be regional differences in 

usage and energy costs, contemplated 

that the level of life cycle cost savings 

would vary among consumers. We have quantified the distribution of 

life cycle costs among consumers and 

have considered it, along with other 

information, in the weighing of the 

benefits and burdens of each standard 

level we assessed. 

3. Energy Savings 

ARI states that the Department 

overestimated the energy savings 

realized from efficiency standards by 

basing the savings on source energy 

consumption at the power plant, rather 

than site energy consumption at the 

household or commercial building. 

(ARl, No. 100 at p. 11). While neither 

stating that the energy savings estimated 

by the Department were too great or too 

low, ASE claims that 70 billion kWh 

would be saved from a 13 SEER 

standard coupled with a minimum EER 

requirement of 11.6 and mandatory use 

of TXVs. (ASE, No. 81 at p. 12). ACEEE 

also claims that significant national 

energy savings will be realized from a 

13 SEER standard, an 11.6 minimum 

EER requirement, mandatory use of 

TXVs, and an HSPF standard of 7.9. 

NAECA prescribes that consumer 

energy savings be evaluated based on 

site rather than source energy 

consumption. However. the Department 

believes national energy savings 

evaluated at the source reflects a more 

accurate representation of the energy 

consumption being avoided from a 

standard. Evaluating energy at the 

source takes into account the efficiency 

of the generation source as well as the 

transmission and distribution of the 

electricity. The Department accounts for 

site energy consumption in its analysis 

of consumer life-cycle-cost impacts. 

With regard to the magnitude of the 

energy being saved from a standard, the 

Department is confident in its National 

Energy Savings (NES) spreadsheet 

model to forecast the source energy 

savings realized from all standard 

levels, including a 13 SEER standard. 

Discussions with regard to minimum 

EER standards and TXV requirements 

are presented later in this Chapter. 

4. Lessening of Utility or Performance of 

Products 

Comments regarding lessening of 

utility related mainly to the impacts that more stringent standards may have on 

the availability of niche products and 

some products that are not typically 

considered "niche". Most comments 

stated that those products face size 

constraints that they will find difficult, 

if not impossible. to conform to under 

more stringent standards. That result 

could lead to the removal of the 

products from the market, or to 

equipment prices that are higher than 

the market would be able to sustain. 

(Friedrich, No. 116 at p. 1; Unico, No. 

117 at pp. 1-2; Carrier, No. 92 at p. 8; 

Lennox, No. 91 at p. 7; Trane, No. 93 at 

p. 18; Mitsubishi. No. 87 at p. 1; 

Armstrong, No. 86 at pp. 1-3; and 

Fujitsu, No. 85 at p. 1). 

We recognize that contractors and 

consumers do take product size into 

account when making a purchase, and 

that size constraints can make it more 
* '* EE-RM/STD-98-440- - 0

7176 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

difficult for manufacturers to offer we believe that competition will remain plants rather than the heat rate of

equipment meeting performance needs. vigorous under the adopted standard, operating plants displaced by the

This is true for niche products, which and any lessening of competition that efficiency standards when determining

we discuss elsewhere, as well as for does occur will not result in price emission reductions. As a result,

conventional products. The same was increases or loss of choice and utility for NWPPC claims that the emissions

the case when the 10 SEER minimum consumers. mitigated by the standards were

standards were agreed upon and Other comments note that a large underestimated (NWPPC, No. 76 at p.

established in 1987. Manufacturers can fraction of today's models would not be 6).

attempt to prevent size constraints from able to meet more stringent standards. National energy savings realized from

degrading performance or utility by (AEP, No. 83 at p. 1; Dominion, No. 68 central air conditioner and heat pump

offering smaller 13 SEER equipment at p. 2; ARI, No. 100 at p. 11; and EEI, efficiency standards are directly

than they typically offer today. The No. 80 at p. 8). In the manufacturer translated into reduced air-borne

technical options for achieving that impact analysis, we considered that emissions at electric power plants. The

objective include existing and emerging manufacturers will have to design new magnitude of the emission reductions

technologies. Therefore, we do not products to meet any increased standard are determined through the use of

consider it likely that products will be level. Furthermore, products are NEMS-BRS 5, a version of NEMS used

unavailable that meet the new 13 SEER technologically feasible through 18 for appliance standards analyses.

standard, and have substantially the SEER. So, while many of today's models NEMS-BRS is based on the AEO2000

same capacities, performance and range may not be available under more version with minor modifications.

of sizes as today's products. stringent standards, we fully expect NEMS offers a sophisticated picture of

If the size of 13 SEER equipment does variations of those models to be the effect of standards since its scope

not generally decrease under new available, offering all the features and allows it to measure the interactions

standards, some consumers may be utility of currently available products. between the various energy supply and

required to incur additional installation 6 Nd of th Nation T Conserve demand sectors and the economy as a

expense to accommodate the larger l o n whole. Thus, although the Department

equipment. We discuss this in more agrees with ASE that emissions will be

depth in Section IV.B.2.e. The Of the approximately 800 comments avoided from new air conditioner and

Department did consider that possibility we have received, the vast majority were heat pump efficiency standards, the

when adopting today's standards. from individuals and organizations who Department believes that the magnitude

Along a separate line, Southern made similar claims regarding the of those emission reductions are best

Company is concerned that higher benefits that would be associated with estimated with NEMS-BRS. In the case efficiency equipment will reduce a 13 SEER standard and an EER of SO2, the Clean Air Act Amendments

dehumidification, which is an standard for air conditioners and heat of 1990 set an emissions cap on all

important attribute in moderate, humid, pumps. These benefits included savings power generation. The attainment of

climates. (Southern Company, No. 96 at for consumers, avoided emissions and this target, however, is flexible among

pp. 4-5). The equipment's ability to electrical capacity, and the reduced generators and is enforced by applying

dehumidify is a function of its design occurrence of brownouts and blackouts. market forces, through the use of

and not necessarily its efficiency. As we Although our analysis is not able to emissions allowances and tradable

stated in the proposed rule, evidence substantiate many of these claims, all of permits. As a result, accurate simulation

indicates that sensible heat ratios in these issues relate to the need of our of SO2 trading tends to imply that

high efficiency equipment are similar to nation to conserve energy. We recognize physical emissions effects will be zero those at the baseline. We trust that that a broad cross-section of citizens and because emissions will always be at, or under a more stringent standard, organizations are concerned about these near, the ceiling. This fact has caused

manufacturers will seek to serve the issues and in the potential for more considerable confusion in the past. We

needs of the market with products that stringent standards to address them. do not believe there is a potential dehumidify properly. We discuss more specific comments benefit in reductions in SO 2 emissions

5 Lssenin Imact of f related to economic benefits and electric from electricity savings as long as 5. Impact of Lessening of Competition system capacity in other sections of this emissions of SO2 are at or near the

The Department of Justice (DOJ) and chapter. In this section, we discuss the emission ceilings. With regard to the

others commented that the more comments we received regarding issue of heat rates, contrary to NWPPC's

stringent standards contained in the environmental benefits. assertion, the Department did use the

proposed rule could lessen competition. ASE claims that a 13 SEER standard heat rates of displaced power plants in

(DOJ, No. 112; Trane, No. 93 at p. 12; coupled with an 11.6 EER minimum determining the emission reductions

and EEI, No. 80 at p. 8). Aspects of our standard and a mandatory TXV resulting from efficiency standards.

manufacturer impact analysis support requirement would yield environmental

that conclusion. We discuss the DOJ benefits in the form of the following air- 7 Other Factors

concerns in more depth in Section borne emission reductions: 15 million With regard to other factors, the issue

V.D.5. The letter from the Department of metric tons of carbon, 40,000 tons of of electric system reliability attracted

Justice is attached in the Appendix of nitrous oxides, and 200,000 tons of numerous comments. EEI, AEP, and

this rulemaking. We recognize that the sulfur dioxide in 2020. Northeast Energy

standard levels we are adopting could Efficiency Partnership (NEEP) also EIA approves use of the name NEMS to describe

accelerate the consolidation trend states that significant carbon dioxide only an AEO version of the model without any

among major manufacturers. However, emission reductions could be achieved modifiction to code or data. Because our analysis entails some minor code modifications and the as discussed in the manufacturer impact with a 13 SEER standard relative to a 12 model is run under various policy scenarios that

analysis, we do not expect that any SEER standard. (ASE, No. 81 at p. 12; deviate from AEO assumptions. the name NEMSmanufacturer or group of manufacturers and NEEP, No. 118 at p. 2). The BRS refers to the model as used here. For more

will be able to use the standards as an Northwest Power Planning Council information on NEMS. please refer to the National

Energy Modelling System: An Overview 1998. DOE/ opportunity to consolidate their market (NWPPC) states that the Department EIA-058 (98), February. 1998. BRS is DOE' s Office

power. (See TSD, Chapter 8). Therefore, used the average heat rate of avoided of Building Research and Standards.

EE-RM-STD-98-440 COMMENT 204

EE-RM/STD .. H..wo --# c5/ () f 

7176 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

difficult for manufacturers to offer 

equipment meeting performance needs. 

This is true for niche products, which 

we discuss elsewhere, as well as for 

conventional products. The same was 

the case when the 10 SEER minimum 

standards were agreed upon and 

established in 1987. Manufacturers can 

attempt to prevent size constraints from 

degrading performance or utility by 

offering smaller 13 SEER equipment 

than they typically offer today. The 

technical options for achieving that 

objective include existing and emerging 

technologies. Therefore, we do not 

consider it likely that products will be 

unavailable that meet the new 13 SEER 

standard, and have substantially the 

same capacities, performance and range 

of sizes as today's products. 

If the size of 13 SEER equipment does 

not generally decrease under new 

standards, some consumers may be 

required to incur additional installation 

expense to accommodate the larger 

equipment. We discuss this in more 

depth in Section IV.B.2.e. The 

Department did consider that possibility 

when adopting today's standards. 

Along a separate line, Southern 

Company is concerned that higher 

efficiency equipment will reduce 

dehumidification, which is an 

important attribute in moderate, humid, 

climates. (Southern Company, No. 96 at 

pp. 4-5). The equipment's ability to 

dehumidify is a function of its design 

and not necessarily its efficiency. As we 

stated in the proposed rule, evidence 

indicates that sensible heat ratios in 

high efficiency equipment are similar to 

those at the baseline. We trust that 

under a more stringent standard, 

manufacturers will seek to serve the 

needs of the market with products that 

dehumidify properly. 

5. Impact of Lessening of Competition 

The Department of Justice (DOn and 

others commented that the more 

stringent standards contained in the 

proposed rule could lessen competition. 

(DOJ, No. 112; Trane, No. 93 at p. 12; 

and EEl, No. 80 at p. 8). Aspects of our 

manufacturer impact analysis support 

that conclusion. We discuss the DO] 

concerns in more. depth in Section 

V.D.5. The letter from the Department of 

Justice is attached in the Appendix of 

this rulemaking. We recognize that the 

standard levels we are adopting could 

accelerate the consolidation trend 

among major manufacturers. However, 

as discussed in the manufacturer impact 

analysis, we do not expect that any 

manufacturer or group of manufacturers 

will be able to use the standards as an 

opportunity to consolidate their market 

power. (See TSD, Chapter 8). Therefore, 

we believe that competition will remain 

vigorous under the adopted standard, 

and any lessening of competition that 

does occur will not result in price 

increases or loss of choice and utility for 

consumers. 

Other comments note that a large 

fraction of today's models would not be 

able to meet more stringent standards. 

(AEP, No. 83 at p. 1; Dominion, No. 68 

at p. 2; ARI, No. 100 at p. 11; and EEl, 

No. 80 at p. 8). In the manufacturer 

impact analysis, we considered that 

manufacturers will have to design new 

products to meet any increased standard 

level. Furthermore, products are 

technologically feasible through 18 

SEER. So, while many of today's models 

may not be available under more 

stringent standards, we fully expect 

variations of those models to be 

available, offering all the features and 

utility of currently available products. 

6. Need of the Nation To Conserve 

Energy 

Of the approximately 800 comments 

we have received, the vast majority were 

from individuals and organizations who 

made similar claims regarding the 

benefits that would be associated with 

a 13 SEER standard and an EER 

standard for air conditioners and heat 

pumps. These benefits included savings 

for consumers, avoided emissions and 

electrical capacity, and the reduced 

occurrence of brownouts and blackouts. 

Although our analysis is not able to 

substantiate 'many of these claims, all of 

these issues relate to the need of our 

nation to conserve energy. We recognize 

that a broad cross-section of citizens and 

organizations are concerned about these 

issues and in the potential for more 

stringent standards to address them. 

We discuss more specific comments 

related to economic benefits and electric 

system capacity in other sections of this 

chapter. In this section, we discuss the 

comments we received regarding 

environmental benefits. 

ASE claims that a 13 SEER standard 

coupled with an 11.6 EER minimum 

standard and a mandatory TXV 

requirement would yield environmental 

benefits in the form of the following airborne emission reductions: 15 million 

metric tons of carbon, 40,000 tons of 

nitrous oxides, and 200,000 tons of 

sulfur dioxide in 2020. Northeast Energy 

Efficiency Partnership (NEEP) also 

states that significant carbon dioxide 

emission reductions could be achieved 

with a 13 SEER standard relative to a 12 

SEER standard. (ASE, No. 81 at p. 12; 

and NEEP, No. 118 at p. 2). The 

Northwest Power Planning Council 

(NWPPC) states that the Department 

used the average heat rate of avoided 

plants rather than the heat rate of 

operating plants displaced by the 

efficiency standards when determining 

emission reductions. As a result, 

NWPPC claims that the emissions 

mitigated by the standards were 

underestimated (NWPPC, No. 76 at p. 

6). 

National energy savings realized from 

central air conditioner and heat pump 

efficiency standards are directly 

translated into reduced air-borne 

emissions at electric power plants. The 

magnitude of the emission reductions 

are determined through the use of 

NEMS-BRS 5, a version of NEMS used 

for appliance standards analyses. 

NEMS-BRS is based on the AE02000 

version with minor modifications. 

NEMS offers a sophisticated picture of 

the effect of standards since its scope 

allows it to measure the interactions 

between the various energy supply and 

demand sectors and the economy as a 

whole. Thus, although the Department 

agrees with ASE that emissions will be 

avoided from new air conditioner and 

heat pump efficiency standards, the 

Department believes that the magnitude 

of those emission reductions are best 

estimated with NEMS-BRS. In the case 

of S02, the Clean Air Act Amendments 

of 1990 set an emissions cap on all 

power generation. The attainment of 

this target, however, is flexible among 

generators and is enforced by applying 

market forces, through the use of 

emissions allowances and tradable 

permits. As a result, accurate simulation 

of S02 trading tends to imply that 

physical emissions effects will be zero 

because emissions will always be at, or 

near, the ceiling. This fact has caused 

considerable confusion in the past. We 

do not believe there is a potential 

benefit in reductions in S02 emissions 

from electricity savings as long as emissions of S02 are at or near the 

emission ceilings. With regard to the 

issue of heat rates, contrary to NWPPC's 

assertion, the Department did use the 

heat rates of displaced power plants in 

determining the emission reductions 

resulting from efficiency standards. 

7. Other Factors 

With regard to other factors, the issue 

of electric system reliability attracted 

numerous comments. EEl, AEP, and 

5 ElA approves uso of the name NEMS to describe 

only an AEO version of the model without any 

modification to code or data. Because our analysis 

ontails some minor code modifications and the 

model is run under various policy scenarios that 

deviate from AEO assumptions. the name NEMSBRS rofers to tho model as used here. For morc 

information on NEMS. please refer to the National 

Energy Modelling System: An Overview 1998. DOEI 

ElA-QS81 (98), February. 1998. BRS is DOE' s Offico 

of Building Research and Standards. 
EE-RM/STD-98-440 --" o

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7177

Dominion Virginia Power stated many grid experienced sudden and steep standards: one source provided by the

changes are occurring in the electric voltage declines as an all-time-high peak industry through ARI and the other

utility industry at the same time electric load was recorded. The integrity of the source determined from the

load is continuing to grow. As a result, system was maintained by reducing Department's reverse engineering

the overall effect of any end-use voltage, curtailing contractually analysis. In the proposed rule, our

efficiency measure, such as an air interruptible customers and appealing analyses and conclusions relied heavily

conditioner and heat pump standard, is for voluntary load reductions. On that on the ARI manufacturing cost

likely small. (EEI, Transcript, No. 73 at same day, Delmarva Power and Light estimates, and less on the reverse

p. 224; AEP, No. 83 at p. 4; and had a capacity shortfall that resulted in engineering cost estimates.

Dominion, No. 103 at p. 4). Southern rotating outages from 10:30 a.m. until However, several comments

Company argued that once a standard is 7:30 p.m. affecting 138,000 customers. questioned the validity of the ARI

established, new load growth forecasts In the Chicago area on July 30, results and recommended we rely more

incorporating its effects will likely be Commonwealth Edison set all-time-peak heavily, if not exclusively, on the

made and investment decisions will be demand during a period of intense heat reverse engineering estimates. They

accordingly adjusted. In other words, and humidity. Resulting system failures cited various reasons, including retail

since the effects of this rule do not caused more than 100,000 customers price information that matched the ARI

become noticeable until five or more temporary losses of power for up to Mean, the greater transparency of the

years after its 2006 effective date, several hours. The summer of 2000 has reverse engineering process and results,

utilities will have ample time to plan seen similar types of problems in the - and the natural tendencies of

and construct capacity in response to state of California. manufacturers to overestimate the costs

expectations of load growth, reserve Outages such as these can cost of complying with more stringent

margin, and, where competition has millions of dollars per hour depending standards. The same comments even

become normal practice, to prices. on which and how many customers are suggest that the reverse engineering cost

(Southern Company, Transcript No. 73 affected. Although we recognize that estimates may themselves be

at p. 241). Synapse Energy Economics system adequacy may only play a small overestimates. (OOE, No. 84 at p. 3;

(Synapse), along with ACEEE, NWPPC, part in ensuring system reliability, the NRDC, No. 88 at pp. 3-15; ASE, No. 81

NRDC, ASE, and PG&E noted that there Department is convinced, especially due at p. 11; and NEEP, No. 188 at p. 3).

is a real issue in meeting increased to recent expansion shortfalls in the Other comments supported the use of

demand, due in large part to increased Western part of the U.S., that system the ARI data, citing the experience of

air conditioner usage. Synapse also reliability is an important issue which the manufacturers and apparent flaws in

notes that conventional assumptions can be addressed, to some degree, by the assumptions and methodology used

about the ability of the power system to increased air conditioner and heat in the reverse engineering analysis,

meet growing load are increasingly pump standards. The impacts of which was designed as a validation tool.

coming into question as the barriers to standards could be potentially These perceived flaws included the

system expansion are not inadequate beneficial in lowering overall system small number of tear-downs performed.

price incentives or unwillingness to stress and postponing necessary However, ARI and some of its members

invest, but rather siting (of generation, investment. This is especially important recognize that the reverse engineering

transmission, and distribution since annual investment in transmission results fall within their range and seem

capability), environmental, and other has roughly halved since the levels of to validate their data to some extent.

constraints. (Synapse, Transcript No. 73 the 1970's 6. The potential benefit of air (ARI, Transcript No. 14 at p. 42, No. 48

at p. 243; ACEEE, No. 104 at pp. 13-15; conditioner and heat pump efficiency at p. 2 and No. 100 at p. 9; Carrier, No.

NWPPC, Transcript No. 73 at p. 253; improvements is a factor in establishing 92; Trane, No. 93; and Lennox, No. 91

NRDC, No. 88 at pp. 4 and 6; ASE, . the standards being issued today. In at p. 4).

81 at pp. 7 and, 10; and PG&E, addition, the Department is continuing While we recognize the expertise of

Transcript No. 73 at 251). ^. to establish national equipment ARI's members related to projecting the

ranscrpt o. 7 at p. 21J.standards in the form of the current cost of producing central air

In a March 2000 final report, the DOE efficiency descriptors (i.e., SEER and conditioning equipment, we have

Power Outage Study Team described HSPF), as discussed below, it will several concerns with the ARI data.

several power outages that occurred in examine ways to provide additional First, ARI has not satisfactorily the summer of 1999. During early July, credit in the test procedure for EER explained why their cost data at 12 a heat storm affected much of the East rather than using such additional SEER and higher levels display such a from New England down past the Mid- measures as minimum EER standards large range between the minimum and

Atlantic causing many problems. From and mandatory TXV requirements. maximum values. We are convinced

July 3 through 8, service was that, in order to remain competitive,

interrupted to a total of 110,000 Long B. Analysis and Assumptions manufacturers will have to adopt

Island Power Authority (LIPA) 1. Engineering Analysis relatively similar paths to increase the

customers for varying periods. During a. Reliance on ARI and Reverse efficiency of their baseline products to

that period, two new system peak loads Engineering Cost Estimates. The meet the new minimum standards. This were set and LIPA activated its Department considered primarily two will tend to result in actual costs that

Commercial Peak Reduction Program, sets of data for relating the are closer to the ARI Minimum values

appealed to its other large customers to manufacturing costs of current baseline than to the ARI Mean values.

voluntarily curtail their use of We are also concerned with how

electricity and reduced system-wide manufacturing costs of higher efficiencyWisconsin voltage by five percent. Many equipment which would become retail prices, submitted by ACEEE,

organizations and government offices baseline equipment under ne agrees with the ARI Mean cost

responded by closing early or cutting q estimates. Once we adopt a higher

back on their electricity use. On July 6, 6

"Hirst, E., "Expanding U.S. Transmission minimum efficiency level, we believe

the eastern half of the Pennsylvania, Capacity." Paper prepared for Edison Electric that the retail prices of baseline

New Jersey, Maryland Interconnection Institute, Washington D.C. July 2000: p. 8-9. equipment that must meet that level

EE-RM-STD-98-440 COMMENT 204

EE.RM/STD~~8-440 -:tt:- A () tf 

Federal Register / Vol. 66. No. 14/ Monday, January 22, 2001/ Rules and Regulations 7177 

Dominion Virginia Power stated many 

changes are occurring in the electric 

utility industry at the same time electric 

load is continuing to grow. As a result, 

the overall effect of any end-use 

efficiency measure. such as an air 

conditioner and heat pump standard, is 

likely small. (EEl, Transcript, No. 73 at 

p. 224; AEP, No. 83 at p. 4; and 

Dominion, No. 103 at p. 4). Southern 

Company argued that once a standard is 

established, new load growth forecasts 

incorporating its effects will likely be 

made and investment decisions will be 

accordingly adjusted. In other words, 

since the effects of this rule do not 

become noticeable until five or more 

years after its 2006 effective date, 

utilities will have ample time to plan 

and construct capacity in response to 

expectations of load growth, reserve 

margin, and, where competition has 

become normal practice, to prices. 

(Southern Company, Transcript No. 73 

at p. 241). Synapse Energy Economics 

(Synapse), along with ACEEE, NWPPC, 

NRDC, ASE, and PG&E noted that there 

is a real issue in meeting increased 

demand, due in large part to increased 

air conditioner usage. Synapse also 

notes that conventional assumptions 

about the ability of the power system to 

meet growing load are increasingly 

coming into question as the barriers to 

system expansion are not inadequate 

price incentives or unwillingness to 

. invest, but rather siting (of generation, 

transmission, and distribution 

capability), environmental, and other 

constraints. (Synapse, Transcript No. 73 

at p. 243; ACEEE, No. 104 at pp. 13-15; 

NWPPC, Transcript No. 73 at p. 253; 

NRDC, No. 88 at pp. 4 and 6; ASE, No. 

81 at pp. 7 and, 10; and PG&E, 

Transcript No. 73 at p. 251). 

In a March 2000 final report, the DOE 

Power Outage Study Team described 

several power outages that occurred in 

the summer of 1999. During early July, 

a heat storm affected much of the East 

from New England down past the MidAtlantic causing many problems. From 

July 3 through 8, service was 

interrupted to a total of 110,000 Long 

Island Power Authority (LIPA) 

customers for varying periods. During 

that period, two new system peak loads 

were set and LIP A activated its 

Commercial Peak Reduction Program, 

appealed to its other large customers to 

voluntarily curtail their use of 

electricity and reduced system-wide 

voltage by five percent. Many 

organizations and government offices 

responded by closing early or cutting 

back on their electricity use. On July 6, 

the eastern half of the Pennsylvania, 

New Jersey, Maryland Interconnection 

grid experienced sudden and steep 

voltage declines as an all-time-high peak 

load was recorded. The integrity of the 

system was maintained by reducing 

voltage, curtailing contractually 

interruptible customers and appealing 

for voluntary load reductions. On that 

same day, Delmarva Power and Light 

had a capacity shortfall that resulted in 

rotating outages from 10:30 a.m. until 

7:30 p.m. affecting 138,000 customers. 

In the Chicago area on July 3D, 

Commonwealth Edison set all-time-peak 

demand during a period of intense heat 

and humidity. Resulting system failures 

caused more than 100,000 customers 

temporary losses of power for up to 

several hours. The summer of 2000 has 

seen similar types of problems in the -

state of California. 

Outages such as these can cost 

millions of dollars per hour depending 

on which and how many customers are 

affected. Although we recognize that 

system adequacy may only playa small 

part in ensuring system reliability, the 

Department is convinced, especially due 

to recent expansion shortfalls in the 

Western part of the U.S., that system 

reliability is an important issue which 

can be addressed. to some degree, by 

increased air conditioner and heat 

pump standards. The impacts of 

standards could be potentially 

beneficial in lowering overall system 

stress and postponing necessary 

investment. This is especially important 

since annual investment in transmission 

has roughly halved since the levels of 

the 1970's 6. The potential benefit of air 

conditioner and heat pump efficiency 

improvements is a factor in establishing 

the standards being issued today. In 

addition, the Department is continuing 

to establish national equipment 

standards in the form of the current 

efficiency descriptors (i.e., SEER and 

HSPF), as discussed below, it will 

examine ways to provide additional 

credit in the test procedure for EER 

rather than using such additional 

measures as minimum EER standards 

and mandatory TXV requirements. 

B. Analysis and Assumptions 

1. Engineering Analysis 

a. Reliance on ARI and Reverse 

Engineering Cost Estimates. The 

Department considered primarily two 

sets of data for relating the 

manufacturing costs of current baseline 

(minimum SEER) equipment to the 

manufacturing costs of higher efficiency 

equipment which would become 

baseline equipment under new 

• "Hirst. E .. "Expanding U.S. Transmission 

Capacity:' Paper propared for Edison Electric 

Institute. Washington D.C.. July 2000: p. 6-9. 

standards: one source provided by the 

industry through ARI and the other 

source determined from the 

Department's reverse engineering 

analysis. In the proposed rule, our 

analyses and conclusions relied heavily 

on the ARl manufacturing cost 

estimates, and less on the reverse 

engineering cost estimates. 

However, several comments 

questioned the validity of the ARI 

results and recommended we rely more 

heavily, if not exclusively, on the 

reverse engineering estimates. They 

cited various reasons, including retail 

price information that matched the ARI 

Mean, the greater transparency of the 

reverse engineering process and results, 

and the natural tendencies of 

manufacturers to overestimate the costs 

of complying with more stringent 

standards. The same comments even 

suggest that the reverse engineering cost 

estimates may themsel ves be 

overestimates. (OOE. No. 84 at p. 3; 

NRDC, No. 88 at pp. 3-15; ASE. No. 81 

at p. 11; and NEEP. No. 188 at p. 3). 

Other comments supported the use of 

the ARl data. citing the experience of 

the manufacturers and apparent flaws in 

the assumptions and methodology used 

in the reverse engineering analysis, 

which was designed as a validation tool. 

These perceived flaws included the 

small number of tear-downs performed. 

However. ARI and some of its members 

recognize that the reverse engineering 

results fall within their range and seem 

to validate their data to some extent. 

(ARl. Transcript No. 14 at p. 42. No. 48 

at p. 2 and No. 100 at p. 9; Carrier. No. 

92; Trane, No. 93; and Lennox, No. 91 

at p. 4). 

While we recognize the expertise of 

ARI's members related to projecting the 

cost of producing central air 

conditioning equipment. we have 

several concerns with the ARI data. 

First, ARI has not satisfactorily 

explained why their cost data at 12 

SEER and higher levels display such a 

large range between the minimum and 

maximum values. We are convinced 

that, in order to remain competitive. 

manufacturers will have to adopt 

relatively similar paths to increase the 

efficiency of their baseline products to 

meet the new minimum standards. This 

will tend to result in actual costs that 

are closer to the ARI Minimum values 

than to the ARI Mean values. 

We are also concerned with how 

closely the data on recent Wisconsin 

retail prices, submitted by ACEEE. 

agrees with the ARI Mean cost 

estimates. Once we adopt a higher 

minimum efficiency level, we believe 

that the retail prices of baseline 

equipment that must meet that level 
EE-RM/STD-98-440 -1' G D

7178 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

will decline below the price of bound, which we believe will be quite the market in 13 SEER products under

equipment currently at that level. York an unlikely outcome. a 13 SEER standard to be higher than

International Corporation (York) and b. Consideration of Emerging under lower standard levels. Partially

ARI confirmed, for example, that their Technologies. ACEEE and others for that reason, we believe that the

markups generally increase on higher commented we should have included burdens that could accrue from

efficiency equipment, and Star Supply the savings that could result from the increases in the size of baseline

Company seemed to imply that use of emerging technologies rather than equipment under a 13 SEER standard

distributor markups increase with presenting them separately. The Oregon can be somewhat mitigated by the use

increasing efficiency. (Star Supply Co., Energy Office and Thermalex, Inc. also of emerging technologies.

No. 95 at p. 2; York, Transcript No. 73 expressed more optimism regarding the Life Cycle Cost (LCC) Analysis

at p. 117; and ARI, No. 100 at p. 3). applicability and probability of

Those markups are reflected in the adoption for microchannel heat a. Probability-based analysis. Trane

current retail prices of those products. exchangers than we had expressed in questioned the use of a Monte Carlo

Due to competitive pressures at the the TSD. (ACEEE, Transcript No. 73 at probability-based analysis because they

baseline level, today's markups would p. 88; ASE, No. 81 at pp. 8, 9 and 12; claim that several of the distributions

not be sustainable for baseline OOE, No. 84 at p. 5; and Thermalex, No. used to characterize the inputs to the

equipment that meets, but does not 89 at pp. 1-2). analysis are erroneous. (Trane, No. 93 at

exceed, a new standard. In addition, as Trane and York dispute some of the pp. 4-5).

noted by John Compton of Home claims regarding the potential of As part of the process to improve the

Excellence, Inc. (HEI), a heating and air- emerging technologies. (Trane, No. 93 at energy efficiency standards analysis, the

conditioning contractor, the new, more p. 7; and York, No. 90 at p.4). Department uses a probability-based

efficient, baseline equipment would According to our engineering analysis analysis to determine a distribution of

likely possess fewer of the premium described in Section 4.5 of the TSD, on life-cycle cost impacts for consumers

features found in today's high efficiency a system basis, emerging technologies utilizing central air conditioners and

equipment. (HE Transcript No. 73 at cannot make a significant cost impact heat pumps. Most of the inputs to the

123). For those reasons, current retail below 14 SEER. That explains why they analysis are characterized with

price data would overestimate the are not in widespread use today. At 14 distributions. While some of the input

relative cost ofhigh efficiency products SEER and above, some emerging distributions are based on limited data,

under under new new standards. standards. The agreement The agreement technologies I could compete quite no other data have been offered to

between ARI's mean cost data and the favorably with the technologies that recharacterize the distributions.

consinetaircdata suests tatcurrently dominate in some Therefore, the Department sees no Wisconsin retail price data suggests thatapplications. We did not analyze compelling reason to alter its

cthe A cost data correspond to today standard levels at 14 SEER, instead we assumptions regarding the input

costs of producing high efficiency examined 13 SEER and 18 SEER, the distributions.

equipment rather than to the lower Max Tech level. ACEEE contends that, b. Energy Use. Trane claimed that the

production costs we would expect had we evaluated life-cycle-costs using 1997 Residential Energy Consumption under standards.reverse new engineering analysis combined Survey (RECS) sample is too small and

The reverse engineering analysis, on with emerging technology impacts, a may not accurately represent the

the other hand, is transparent and the standard level as high as 14 SEER may population of central air conditioner

results fall within the ARI range and have been justified after all, and should and heat pump consumers. In addition, nearer to the ARI Minimum where we have been considered. (ACEEE, they claimed that the Department is not

expect competitive pressure to drive Transcript No. 73 at p. 171, and No. 101 accurately representing the saturation of

manufacturing costs. Seventy-one at . 7). air-conditioned households. Trane

samples were analyzed using bills-of- From our ANOPR analysis based on stated that the saturation reported by the

materials provided manufacturers, ARI mean costs, we concluded that Department (37.6 percent) is

supplemented with three physical standard levels between 13 SEER and 18 inconsistent with the saturation

teardowns, and detailed estimates for SEER did not warrant further reported by RECS (47 percent). (Trane, split air conditioners were reviewed consideration. York had stated that No. 93 at pp. 4-5).

with a major manufacturer. Our reverse ARI's cost data already included the As part of the process to improve the

engineering methodology, though benefits of emerging technologies energy efficiency standards analysis, the

originally conceived as a validation although we could not verify the Department is committed to use exercise, is itself a valid method of methods they used to incorporate them. sensitivity analysis tools to evaluate the

estimating equipment production costs, (York, Transcript No. 14 at p. 116; and potential distribution of impacts among and is well suited for use in this ARI, Transcript No. 14 at p. 115). different subgroups of consumers. The

rulemaking as an indicator of the most Economic impact results based on Department believes that RECS provides

likely production costs under new reverse engineering were more a nationally representative household

standards. favorable, but still were far from data set which is suited for conducting

Based on a consideration of the above, compelling. For example, the impact on the type of sensitivity analyses we conclude that the reverse national net present value was negative suggested by the Process Rule. Limiting

engineering cost estimates are more $8.4 billion for 14 SEER split air the RECS households to those equipped

representative of what actual production conditioners. We believe that with either central air conditioners or costs will be under new standards and incorporating the modest reduction in heat pumps, the LCC analysis performs

that the ARI Mean cost data very likely cost due to the most likely impact of a household-by-household analysis that

overestimate those costs. For that emerging technologies (about 10 percent predicts the percentage of households

reason, we are weighing the reverse for split air conditioners) would not that will incur net life-cycle cost savings

engineering cost estimates heavily in have resulted in a 14 SEER level being or costs from an increased efficiency our decision-making. We continue to economically justified. standard. With regard to apparent

provide the results based on the ARI Overall, we considered the potential discrepancies between air-conditioned

Mean data cost to illustrate an upper of emerging technologies to penetrate household saturations, the 37.6 percent

EE-RM-STD-98-440 COMMENT 204

,'. EE.RM/STD~98-440 -1f' c;q 2> f 

7178 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

will decline below the price of 

equipment currently at that level. York 

International Corporation (York) and 

ARI confirmed, for example, that their 

markups generally increase on higher 

efficiency equipment, and Star Supply 

Company seemed to imply that 

distributor markups increase with 

increasing efficiency. (Star Supply Co., 

No. 95 at p. 2; York, Transcript No. 73 

at p. 117; and ARI, No. 100 at p. 3). 

Those markups are reflected in the 

current retail prices of those products. 

Due to competitive pressures at the 

baseline level, today's markups would 

not be sustainable for baseline 

equipment that meets, but does not 

exceed, a new standard. In addition, as 

noted by John Compton of Home 

Excellence, Inc. (HE!), a heating and airconditioning contractor, the new, more 

efficient, baseline equipment would 

likely possess fewer of the premium 

features found in today's high efficiency 

equipment. (HEI, Transcript No. 73 at p. 

123). For those reasons, current retail 

price data would overestimate the 

relative cost of high efficiency products 

under new standards. The agreement 

between ARI's mean cost data and the 

Wisconsin retail price data suggests that 

the ARI cost data correspond to today's 

costs of producing high efficiency 

equipment rather than to the lower 

production costs we would expect 

under new standards. 

The reverse engineering analysis, on 

the other hand, is transparent and the 

results fall within the ARI range and 

nearer to the ARI Minimum where we 

expect competitive pressure to drive 

manufacturing costs. Seventy-one 

samples were analyzed using bills-ofmaterials provided manufacturers, 

supplemented with three physical 

teardowns, and detailed estimates for 

split air conditioners were reviewed" 

with a major manufacturer. Our reverse 

engineering methodology, though 

originally conceived as a validation 

exercise, is itself a valid method of 

estimating equipment production costs, 

and is well suited for use in this 

rulemaking as an indicator of the most 

likely production costs under new 

standards. 

Based on a consideration of the above, 

we conclude that the reverse 

engineering cost estimates are more 

representative of what actual production 

costs will be under new standards and 

that the ARI Mean cost data very likely 

overestimate those costs. For that 

reason, we are weighing the reverse 

engineering cost estimates heavily in 

our decision-making. We continue to 

provide the results based on the ARI 

Mean data cost to illustrate an upper 

bound, which we believe will be quite 

an unlikely outcome. 

b. Consideration of Emerging 

Technologies. ACEEE and others 

commented we should have included 

the savings that could result from the 

use of emerging technologies rather than 

presenting them separately. The Oregon 

Energy Office and Thermalex, Inc. also 

expressed more optimism regarding the 

applicability and probability of 

adoption for microchannel heat 

exchangers than we had expressed in 

the TSD. (ACEEE, Transcript No. 73 at 

p. 88; ASE, No. 81 at pp. 8, 9 and 12; 

OOE, No. 84 at p. 5; and Thermalex, No. 

89 at pp. 1-2). 

Trane and York dispute some of the 

claims regarding the potential of 

emerging technologies. (Trane, No. 93 at 

p. 7; and York, No. 90 at p.4). 

According to our engineering analysis 

described in Section 4.5 of the TSD, on 

a system basis, emerging technologies 

cannot make a significant cost impact 

below 14 SEER. That explains why they 

are not in widespread use today. At 14 

SEER and above, some emerging 

technologies could compete quite 

favorably with the technologies that 

currently dominate in some 

applications. We did not analyze 

standard levels at 14 SEER, instead we 

examined 13 SEER and 18 SEER, the 

Max Tech level. ACEEE contends that, 

had we evaluated life-cycle-costs using 

reverse engineering analysis combined 

with emerging technology impacts. a 

standard level as high as 14 SEER may 

have been justified after all. and should 

have been considered. (ACEEE, 

Transcript No. 73 at p. 171. and No. 101 

at p. 7). 

From our ANOPR analysis based on 

ARI mean costs, we concluded that 

standard levels between 13 SEER and 18 

SEER did not warrant further 

consideration. York had stated that 

ARI's cost data already included the 

benefits of emerging technologies 

although we could not verify the 

methods they used to incorporate them. 

(York, Transcript No. 14 at p. 116; and 

ARI, Transcript No. 14 at p. 115). 

Economic impact results based on 

reverse engineering were more 

favorable, but still were far from 

compelling. For example, the impact on 

national net present value was negative 

$8.4 billion for 14 SEER split air 

conditioners. We believe that 

incorporating the modest reduction in 

cost due to the most likely impact of 

emerging technologies (about 10 percent 

for split air conditioners) would not 

have resulted in a 14 SEER level being 

economically justified. 

Overall, we considered the potential 

of emerging technologies to penetrate 

the market in 13 SEER products under 

a 13 SEER standard to be higher than 

under lower standard levels. Partially 

for that reason, we believe that the 

burdens that could accrue from 

increases in the size of baseline 

equipment under a 13 SEER standard 

can be somewhat mitigated by the use 

of emerging technologies. 

2. Life Cycle Cost (LCC) Analysis 

a. Probability-based analysis. Trane 

questioned the use of a Monte Carlo 

probability-based analysis because they 

claim that several of the distributions 

used to characterize the inputs to the 

analysis are erroneous. (Trane, No. 93 at 

pp.4-5). 

As part ofthe process to improve the 

energy efficiency standards analysis, the 

Department uses a probability-based 

analysis to determine a distribution of 

life-cycle cost .impacts for consumers 

utilizing central air conditioners and 

heat pumps. Most of the inputs to the 

analysis are characterized with 

distributions. While some of the input 

distributions are based on limited data, 

no other data have been offered to 

recharacterize the distributions. 

Therefore, the Department sees no 

compelling reason to alter its 

assumptions regarding the input 

distributions. 

b. Energy Use. Trane claimed that the 

1997 Residential Energy Consumption 

Survey (RECS) sample is too small and 

may not accurately represent the 

population of central air conditioner 

and heat pump consumers. In addition, 

they claimed that the Department is not 

accurately representing the saturation of 

air-conditioned households. Trane 

stated that the saturation reported by the 

Department (37.6 percent) is 

inconsistent with the saturation 

reported by RECS (47 percent). (Trane, 

No. 93 at pp. 4-5). 

As part of the process to improve the 

energy efficiency standards analysis, the 

Department is committed to use 

sensitivity analysis tools to evaluate the 

potential distribution of impacts among 

different subgroups of consumers. The 

Department believes that RECS provides 

a nationally representative household 

data set which is suited for conducting 

the type of sensitivity analyses 

suggested by the Process Rule. Limiting 

the RECS households to those equipped 

with either central air conditioners or 

heat pumps, the LCC analysis performs 

a household-by-household analysis that 

predicts the percentage of households 

that will incur net life-cycle cost savings 

or costs from an increased efficiency 

standard. With regard to apparent 

discrepancies between air-conditioned 

household saturations, the 37.6 percent 
EE-RM/STD-98-440 -· <

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7179

represents 

saturation value 

only those 

cited 

households 

by Trane 

with an indicator as what will happen to (NPV)) to increases in the marginal

central air conditioners. When 

retail 

warned 

prices in the future. Southern also electricity price. As will be reported in

including homes with central airthat the specific problems facing Chapter V, Analytical Results, the NPV

conditioning heat 

California with regard to wholesale of a 13 SEER standard based on Reverse

saturation used by 

pumps, 

the Department 

the household 

in its 

electricity costs are not representative of Engineering manufacturing costs is a

LCC analysis matches 

the current situation in the Southeast savings to the nation of $1 billion. An the 47 percent where peak prices were considerably saturation level reported by RECS. increase in the marginal electricity price c. Electricity Prices. Wholesale 

lower in the summer of 2000 on pooled of 3 cents/kWh yields a further increase prices than they were the previous electricity cost data for the period in the operating cost savings so that the

1998 through October, 2000, presented 

of summer because of greater supply NPV equals $5 billion. Although the

by experts on behalf of the Appliance 

availability. EEI argued that flat rate Department will continue to rely on its

Standards Awareness Project 

retail pricing will likely continue into existing method for establishing

demonstrated dramatic variations 

(ASAP), the future even under a deregulated marginal electricity prices, we recognize

seasonal wholesale electricity 

in market. Electricity suppliers will hedge that future changes in the electric utility

regions of the country (i.e., California, 

costs for against any probable summer price industry due to deregulation could

New England, New York, and 

spikes by offering high enough flat rates significantly change future electricity

Pennsylvania-New Jersey-Maryland 

the so that financial losses incurred during prices and, as a result, improve the

region) that have 

times of high summer wholesale costs economic benefits of the standards recently deregulated will be more than offset by the profits being issued today. their 

particular, 

electric 

wholesale 

utility industry. 

costs during 

In earned during times when wholesale d. Product Life. ARI, Carrier Corp.,

summer months and especially 

costs are low (e.g., off peak summer and The Trane Company all asserted

summer day hours were certain hours or the winter season). (EEI, that the 18.4-year average equipment significantly Transcript No. 73 at pp. 148-150; greater than annual average wholesale Dominion, lifetime assumed by the Department is

costs. Wholesale electricity cost 

Transcript No. 73 at pp. 158- not representative of actual central air

the period 

data for 160; and Southern Company, No. 96 at conditioner and heat pump life. Both

for six regulated spanning North 

1998 

American through 1999 pp. 

As 

6-7). 

was Carrier and Trane believed the lifetime

Electric Reliability Council 

stated in the proposed rule, is 15 years while ARI stated that the

regions were also presented 

(NERC) the method for establishing marginal lifetime is even lower at 13 years. (ARI,

that summer costs were also 

showing electricity prices only allows for No. 100 at p. 4; Carrier, No.92 at p. 5;

significantly greater defining marginal prices for those years and Trane No. 93 at p 8).

costs. (Synapse, Transcript, 

than average 

No. 

annual in which data are available. In the case The basis of the 18.4-year equipment

pp.127-137 and No. 108 

73 at of residential pricing, the data for lifetime was a survey conducted on

Asserting that DOE's marginal 

at p. 5). 

prices 

establishing 

RECS marginal prices (the 1997 more than 2,100 heat pumps in a seven based on 1996 and 1997 data are ) was taken from the years 1996 state region of the U.S. The survey

regulated 

and 1997. For commercial buildings, determined not only the lifetime of a

marginal cost 

and 

of 

do 

electricity 

not reflect 

under 

the 

a utility tariffs used to establish marginal complete heat pump system, but the life

deregulated market, ASAP, ACEEE, prices were collected in the year 1997. of the original compressor as well

NWPPC, and Synapse argued that based 

On 

for households 

average, residential 

with marginal prices Although the system lifetime is on central air Although th on recent wholesale electricity cost data, conditioners are 3 percent lower than s ag oe r 1 year the i c al resoy 

average costs during periods when air heat pumps marginal prices are 7 the survey indicated that essentially all

to 

marginal 

increase electricity 

as electricity prices 

markets 

are also likely prices in commercial buildings are on original compressor once in the lifetime

through out the U.S. are deregulated. average 2 percent greater than average of system. Since the heat pump survey commercial rates. Our method for o

(ASAP, No. S inc c e eat pump survey

Transcript No. 

108 at p. 1; ACEEE, determining marginal prices provides a clearly indicates that the original 73 at pp. 154-158; snapshot of recent retail rates and may compressor is replaced once in a

Synapse, 

NWPPC, No. 

Transcript 

76 at pp. 

No. 

3-4; and or may not accurately reflect what system's life, DOE' analysis was based 73 at pp. 152- marginal prices will be like in the on the inclusion of a repair cost for the 153). Dominion Virginia Dominion 

future. Although wholesale electricity compressor. Conducting the analysis in ), costs for four deregulated electricity this manner retains the average system

Dominion Virginia Power 

The Southern Company (Southern), lifetime of 18.4 years but explicitly and markets demonstrate higher wholesale lfeme of 18.4 years but explicitly

higher 

EEI all 

marginal 

disagree with the assertion that electricity costs during times when air addresses the replacement cost of the costs will result from conditioners are likely to be used, we compressor, which is the most higher 

Dominion 

wholesale electricity costs. cannot speculate as to how wholesale expensive component of a system. As stated that recent electricity prices will be translated into indicated by the survey data, the deregulation pilot programs in Virginia retail prices to residential consumers. compressor was assumed to be replaced revealed 

not being 

that residential consumers are Thus, rather than speculating as to how n the 14th year of the system's life. offered rates that reflect the electricity deregulation may impact Although a shorter equipment lifetime costs of generation (e.g., time of use marginal electricity prices, we are is possible, the Department has not been rates). 

premature 

Southern warned that it is retaining our existing method for provided with more substantive data to

wholesale 

to draw conclusions from establishing marginal prices. support discontinuing its use of the electricity costs this early With the above said, the Department above mentioned survey data. The into the deregulation process. Extremely investigated the sensitivity of consumer Department believes that the survey high wholesale prices now may not be life-cycle costs (aggregated to a national

level 

~ in the form of a net present value "Bucher. M.E.. Grastataro. C.M.. and Coleman. _ 7 Margi exclude fixed charges, average_ Marginal prices _WR.._ "Heat Pump Life and Compressor Longevity in prices exclude fixed charges , average prices in 'Diverse Climates." ASHRAE Transacitons. 1990, include fixed charges. a Residential Energy Consumption Survey. 96(1): p. 1567-1571.

EE-RM-STD-98-440 COMMENT 204

EE.RM/STD.~8-440 -tf 01) f 

Federal Register/Vol. 66, No. 14/Monday, January 22, 200l/Rules and Regulations 7179 

saturation value cited by Trane 

represents only those households with 

central air conditioners. When 

including homes with central airconditioning heat pumps, the household 

saturation used by the Department in its 

LCC analysis matches the 47 percent 

saturation level reported by RECS. c. Electricity Prices. Wholesale 

electricity cost data for the period of 

1998 through October, 2000, presented 

by experts on behalf of the Appliance 

Standards Awareness Project (ASAP), 

demonstrated dramatic variations in 

seasonal wholesale electricity costs for 

regions of the country (i.e., California, 

New England, New York, and the 

Pennsylvania-New Jersey-Maryland 

region) that have recently deregulated 

their electric utility industry. In 

particular, wholesale costs during 

summer months and especially certain 

summer day hours were significantly 

greater than annual average wholesale 

costs. Wholesale electricity cost data for 

the period spanning 1998 through 1999 

for six regulated North American 

Electric Reliability Council (NERC) 

regions were also presented showing 

that summer costs were also 

significantly greater than average annual 

costs. (Synapse, Transcript, No. 73 at 

pp.127-137 and No. 108 at p. 5). 

Asserting that DOE's marginal prices 

based on 1996 and 1997 data are 

regulated and do not reflect the 

marginal cost of electricity under a deregulated market, ASAP, ACEEE, 

NWPPC, and Synapse argued that based 

on recent wholesale electricity cost data, 

marginal costs will significantly exceed 

average costs during periods when air 

conditioners are operating.7 Future 

marginal electricity prices are also likely 

to increase as electricity markets 

through out the U.S. are deregulated. 

(ASAP, No. 108 at p. 1; ACEEE, 

Transcript No. 73 at pp. 154-158; 

NWPPC, No. 76 at pp. 3-4; and 

Synapse, Transcript No. 73 at pp. 152-

153). 

Dominion Virginia Power (Dominion), 

The Southern Company (Southern), and 

EEl all disagree with the assertion that 

higher marginal costs will result from 

higher wholesale electricity costs. 

Dominion stated that recent 

deregulation pilot programs in Virginia 

revealed that residential consumers are 

not being offered rates that reflect the 

costs of generation (e.g., time of use 

rates). Southern warned that it is 

premature to draw conclusions from 

wholesale electricity costs this early 

into the deregulation process. Extremely 

high wholesale prices now may not be 

, Marginal prices exclude fixed charges. average 

prices include fixed charges. 

an indicator as what wiII happen to 

retail prices in the future. Southern also 

warned that the specific problems facing 

California with regard to wholesale 

electricity costs are not representative of 

the current situation in the Southeast 

where peak prices were considerably 

lower in the summer of 2000 on pooled 

prices than they were the previous 

summer because of greater supply 

availability. EEl argued that flat rate 

retail pricing will likely continue into 

the future even under a deregulated 

market. Electricity suppliers will hedge 

against any probable summer price 

spikes by offering high enough flat rates so that financial losses incurred during 

times of high summer wholesale costs 

will be more than offset by the profits 

earned during times when wholesale 

costs are low (e.g., off peak summer 

hours or the winter season). (EEL 

Transcript No. 73 at pp. 148-150; 

Dominion, Transcript No. 73 at pp. 158-

160; and Southern Company, No. 96 at 

pp.6-7). 

As was stated in the proposed rule, 

the method for establishing marginal 

electricity prices only allows for 

defining marginal prices for those years 

in which data are available. In the case 

of residential pricing, the data for 

establishing marginal prices (the 1997 

RECS 8) was taken from the years 1996 

and 1997. For commercial buildings, 

utility tariffs used to establish marginal 

prices were collected in the year 1997. 

On average, residential marginal prices 

for households with central air 

conditioners are 3 percent lower than 

average rates while for households with 

heat pumps marginal prices are 7 

percent lower. Space-cooling marginal 

prices in commercial buildings are on 

average 2 percent greater than average 

commercial rates. Our method for 

determining marginal prices provides a snapshot of recent retail rates and may 

or may not accurately reflect what 

marginal prices will be like in the 

future. Although wholesale electricity 

costs for four deregulated electricity 

markets demonstr~te higher wholesale 

electricity costs during times when air 

conditioners are likely to be used, we 

cannot speculate as to how wholesale 

electricity prices will be translated into 

retail prices to residential consumers. 

Thus, rather than speculating as to how 

electricity deregulation may impact 

marginal electricity prices, we are 

retaining our existing method for 

establishing marginal prices. 

With the above said, the Department 

investigated the sensitivity of consumer 

life-cycle costs (aggregated to a national 

level in the form of a net present value 

8 Residential Energy Consumption Survey. 

(NPV)) to increases in the marginal 

electricity price. As will be reported in 

Chapter V, Analytical Results, the NPV 

of a 13 SEER standard based on Reverse 

Engineering manufacturing costs is a 

savings to the nation of $1 billion. An 

increase in the marginal electricity price 

of 3 cents/kWh yields a further increase 

in the operating cost savings so that the 

NPV equals $5 billion. Although the 

Department will continue to rely on its 

existing method for establishing 

marginal electricity prices, we recognize 

that future changes in the electric utility 

industry due to deregulation could 

significantly change future electricity 

prices and, as a result, improve the 

economic benefits of the standards 

being issued today. 

d. Product Life. ARl, Carrier Corp., 

and The Trane Company all asserted 

that the 18.4-year average equipment 

lifetime assumed by the Department is 

not representative of actual central air 

conditioner and heat pump life. Both 

Carrier and Trane believed the lifetime 

is 15 years while ARl stated that the 

lifetime is.even lower at 13 years. (ARI. 

No. 100 at p. 4; Carrier, No. 92 at p. 5; 

and Trane, No. 93 at p. 8). . The basis of the 18.4-year equipment 

lifetime was a survey conducted on 

more than 2,100 heat pumps in a seven state region of the U.S. 9. The survey 

determined not only the lifetime of a 

complete heat pump system, but the life 

of the original compressor as well. 

Although the system lifetime is on 

average over 18 years, the survey also 

showed that the original compressor 

lifetime was, on average, 14 years. Thus, 

the survey indicated that essentially all 

heat pump owners replaced their 

original compressor once in the lifetime 

of system. Since the heat pump survey 

clearly indicates that the original 

compressor is replaced once in a 

system's life, DOE's analYSis was based 

on the inclusion of a repair cost for the 

compressor. Conducting the analysis in 

this manner retains the average system 

lifetime of 18.4 years but explicitly 

addresses the replacement cost of the 

compressor, which is the most 

expensive component of a system. As 

indicated by the survey data, the 

compressor was assumed to be replaced 

in the 14th year of the system's life. 

Although a shorter equipment lifetime 

is possible, the Department has not been 

provided with more substantive data to 

support discontinuing its use of the 

above mentioned survey data. The 

Department believes that the survey 

9" Bucher. M.E .• Grastataro. G.M .. and Coleman. 

W.R.. "Heat Pump Life and Compressor Longevity 

in 'Diverse Climates." ASHRAE Transacitens. 1990. 

96(1): p. 1567-1571. 
EE-RM/STD-98-440-4 t J 7

7180 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

data provides an accurate representation p. 4; Carrier, No. 92 at p. 5; and Trane, incremental purchase price of a 13 SEER

of central air conditioner and heat pump No. 93 at p. 12). heat pump relative to a 12 SEER air

life. In addition, an average lifetime of In fact, we did assume for the conditioner with either a gas-fired or

14 years was run as a scenario for the Manufacturer Impact Analysis that electric resistance heating system is

analyses conducted for the proposed markups increase with increasing great enough to drive heat pump

rulemaking showing that the resulting. efficiency under a given standard level. consumers to an alternative spaceconsumer economics were very close to This agrees with the comments. conditioning system. (ARI, No. 100 at p.

the results generated with the 18.4-year However, for the consumer economic. 10; Southern Company, No. 96 at p. 3;

average life coupled with compressor analyses, as the minimum standard AEP, No. 83 at p. 2; Carrier, No. 92 at

replacement costs. level increases, we assumed that some p. 4; EEI, No. 80 at p. 8; York, No. 90 e. Installation Cost. International of the markups on the baseline product at p. 7; and Lennox, No. 91 at pp. 4-6).

Comfort Products (ICP) and HEI stated do decrease. Comments did not address Acknowledging the potential for fuelthat the consumer's installation costs, that issue, and we believe our or equipment-switching, both ASE and

e.g, labor and materials costs, exclusive assumption is correct. Appendix D of ACEEE recommended setting both air

of equipment cost, for installing a the TSD provides more information on conditioner and heat pump standards to

central air conditioner or heat pump this issue. 13 SEER. (ASE, Transcript No. 73 at p.

will increase with product efficiency. 3 Shipments/National Energy Savings 197; and ACEEE, Transcript No. 73 at

(ICP, Transcript No. 73 at pp. 126-127; pp. 202-203).

and HEI, Transcript No. 73 at pp. 92- a. Adjustments to NAECA Shipment From the perspective of saving the

93). ICP specifically voiced concerns Scenario. ACEEE and the NEEP assert maximum amount of energy that is

over the installation cost differences that the NAECA efficiency scenario we economically justifiable, the biggest

between baseline (10 SEER) and 14 developed is not at all representative of "fuel" switching concern is from heat

SEER equipment stating that the more the effect of the NAECA standard as we pumps to a combination of central air

efficient equipment, due its increased claim. (ACEEE; Transcript No. 73 at p. conditioners and electric resistance

physical size, would incur higher labor 213 and No. 118 at p. 4). They point out heating. This may occur in households

expenses as a result of needing extra that the distribution of equipment that have only electric service and

personnel to install the equipment. higher than 10 SEER in 1993 was 18 where the incremental purchase price of

Other comments claimed that percent, and that our NAECA scenarios heat pumps is too great. Such a price

installation costs would be impacted by apply much smaller fractions of increase might occur if the standard on

larger and more efficient units for those shipments than 18 percent. heat pumps is significantly higher than

installations with size constraints such As we mentioned in the TSD for the the standard for central air conditioners.

as equipment closets in manufactured proposed rule (section 8.3.5), the Based on data from the 1997 RECS, a

homes and certain replacement NAECA scenario represents the effect little over 14 percent of households

installations in single-family homes. that NAECA had on equipment have either baseboard or forced air

(MHI, No. 99 at p. 4; York, No. 90 at p. efficiency in the market. A further electric resistance heating with room or

5; and Lennox, No. 91 at p. 7). explanation is warranted. While sales of central air conditioning compared to

Throughout the analysis we have equipment rated higher than 10 SEER almost 10 percent of households which

assumed that installation costs would was indeed 18 percent in 1993, it was have heat pumps. Because there are

remain constant as efficiency increased. 10 percent in 1992, 7 percent in 1991, already such a large percentage of

We remain unconvinced based on the 5 percent in 1990 and 3 percent in 1989. households that utilize a combination of

comments we have received that our A trend of improving efficiency had central or room air-conditioning with

assumption is necessarily incorrect. already been in place since the late resistance heat to meet their spaceEven if installation costs do generally 1970's. NAECA, which became effective conditioning needs, this supports the

rise as the size and weight of equipment in 1992, clearly did not cause all the possibility that some purchasers would

increases, manufacturers will have the high efficiency shipments that existed choose to switch to resistance heat from

incentive under new standards to in 1993. However, NAECA did seem to heat pumps.

reduce the size of 13 SEER equipment stimulate more high efficiency Compared to heat pumps meeting the

using various approaches at their shipments than could have been standards issued in the proposed rule

disposal. These include existing design explained by the ongoing trend. It is that (i.e., 13 SEER and 7.7 HSPF), electric

options that we have mentioned, such enhancement to the status quo that our resistance heating uses over 225 percent as adopting variable speed and NAECA scenario attempts to reproduce. of the energy for the same amount of

modulating capacity technologies, Thus, under our NAECA scenario, heating. Therefore, if a standard of 13

converting to microchannel heat shipments above the 13 SEER level SEER and 7.7 HSPF is issued for heat

exchangers, increasing the size of the increase from 1 percent under the base pumps while a 12 SEER standard is set

unconstrained outdoor unit or indoor case to 7 percent with a 13 SEER for central air conditioners, a mere 4

unit only, or changing the footprint or standard. Expecting them to increase percent of heat pump households would

elevation of the unit. These possible from 1 percent to 18 percent as ACEEE need to switch to central air

solutions are applicable to and NEEP seem to assert is not at all conditioners and electric resistance

manufactured homes as well as site- representative of the NAECA experience heating to negate the energy savings

built homes. and is more in line with the Shift achieved from increasing the heat pump

For those reasons, we are retaining scenario that we developed. standard from 12 SEER/7.4 HSPF to 13

our assumption that installation costs b. Fuel Switching. Several comments SEER/7.7 HSPF.

remain constant as efficiency levels rise. noted the potential for fuel- or If heat pump and air conditioner

f. Markups. ARI, York, Carrier and equipment-switching from heat pumps standards were set at different levels,

Trane commented that we had to either gas-fired or electric resistance the price differential between the two

apparently assumed that markups heating equipment due to the disparity would increase on the order of $200.

decreased as efficiency levels increased, in the standards proposed for central air Under those conditions, we consider it

and provided evidence to the contrary. conditioners (12 SEER) and heat pumps likely that at least 4 percent of

(ARI, No. 100 at p. 3; York, No. 90 at (13 SEER). The comments stated that the prospective heat pump owners would

EE-RM-STD-98-440 COMMENT 204

EE.RM/STD~~8.440-#=A () ~ 

7180 Federal Register / Vol. 66. No. 14/ Monday. January 22. 2001/ Rules and Regulations 

data provides an accurate representation 

of central air conditioner and heat pump 

life. In addition. an average lifetime of 

14 years was run as a scenario for the 

analyses conducted for the proposed 

rulemaking showing that the resulting. 

consumer economics were very close to 

the results generated with the 18.4-year 

average life coupled with compressor 

replacement costs. e. Installation Cost. International 

Comfort Products (ICP) and HEI stated 

that the consumer's installation costs. 

e.g, labor and materials costs. exclusive 

of equipment cost. for installing a 

central air conditioner or heat pump 

will increase with product efficiency. 

(ICP. Transcript No. 73 at pp. 126-127; 

and HEI. Transcript No. 73 at pp. 92-

93). ICP specifically voiced concerns 

over the installation cost differences 

between baseline (10 SEER) and 14 

SEER equipment stating that the more 

efficient equipment. due its increased 

physical size, would incur higher labor 

expenses as a result of needing extra 

personnel to install the equipment. 

Other comments claimed that 

installation costs would be impacted by 

larger and more efficient units for those 

installations with size constraints such 

as equipment closets in manufactured 

homes and certain replacement 

installations in single-family homes. 

(MH!. No. 99 at p. 4; York. No. 90 at p. 

5; and Lennox. No. 91 at p. 7). 

Throughout the analysIs we have 

assumed that installation costs would 

remain constant as efficiency increased. 

We remain unconvinced based on the 

comments we have received that our 

assumption is necessarily incorrect. 

Even if installation costs do generally 

rise as the size and weight of equipment 

increases. manufacturers will have the 

incentive under new standards to 

reduce the size of 13 SEER equipment 

using various approaches at their 

disposal. These include existing design 

options that we have mentioned. such 

as adopting variable speed and 

modulating capacity technologies. 

converting to microchannel heat 

exchangers. increasing the size of the 

unconstrained outdoor unit or indoor 

unit only. or changing the footprint or 

elevation of the unit. These possible 

solutions are applicable to 

manufactured homes as well as sitebuilt homes. 

For those reasons. we are retaining 

our assumption that installation costs 

remain constant as efficiency levels rise. 

f. Markups. ARl. York. Carrier and 

Trane commented that we had 

apparently assumed that markups 

decreased as efficiency levels increased. 

and provided evidence to the contrary. 

(ARI. No. 100 at p. 3; York, No. 90 at 

p. 4; Carrier. No. 92 at p. 5; and Trane. 

No. 93 at p. 12). 

In fact. we did assume for the 

Manufacturer Impact Analysis that 

markups increase with increasing 

efficiency under a given standard level. 

This agrees with the comments. 

However. for the consumer economic. 

analyses. as the minimum standard 

level increases. we assumed that some 

of the markUps on the baseline product 

do decrease. Comments did not address 

that issue. and we believe our 

assumption is correct. Appendix D of 

the TSD provides more information on 

this issue. 

3. Shipments/National Energy Savings 

II. Adjustments to NAECA Shipment 

Scenario. ACEEE and the NEEP assert 

that the NAECA efficiency scenario we 

developed is not at all representative of 

the effect of the NAECA standard as we 

claim. (ACEEE; Transcript No. 73 at p. 

213 and No. 118 at p. 4). They point out 

that the distribution of equipment 

higher than 10 SEER in 1993 was 18 

percent. and that our NAECA scenarios 

apply much smaller fractions of 

shipments than 18 percent. 

As we mentioned in the TSD for the 

proposed rule (section 8.3.5). the 

NAECA scenario represents the effect 

that NAECA had on equipment 

efficiency in the market. A further 

explanation is warranted. While sales of 

equipment rated higher than 10 SEER 

was indeed 18 percent in 1993. it was 

10 percent in 1992, 7 percent in 1991, 

5 percent in 1990 and 3 percent in 1989. 

A trend of improving efficiency had 

already been in place since the late 

1970·s. NAECA. which became effective 

in 1992. clearly did not cause all the 

high efficiency shipments that existed 

in 1993. However. NAECA did seem to 

stimulate more high efficiency 

shipments than could have been 

explained by the ongoing trend. It is that 

enhancement to the status quo that our 

NAECA scenario attempts to reproduce. 

Thus. under our NAECA scenario. 

shipments above the 13 SEER level 

increase from 1 percent under the base 

case to 7 percent with a 13 SEER 

standard. Expecting them to increase 

from 1 percent to 18 percent as ACEEE 

and NEEP seem to assert is not at all 

representative of the NAECA experience 

and is more in line with the Shift 

scenario that we developed. 

b. Fuel Switching. Several comments 

noted the potential for fuel- or 

equipment-switching from heat pumps 

to either gas-fired or electric resistance 

heating equipment due to the disparity 

in the standards proposed for central air 

conditioners (12 SEER) and heat pumps 

(13 SEER). The comments stated that the 

incremental purchase price of a 13 SEER 

heat pump relative to a 12 SEER air 

conditioner with either a gas-fired or 

electric resistance heating system is 

great enough to drive heat pump 

consumers to an alternative spaceconditioning system. (ARI, No. 100 at p. 

10; Southern Company, No. 96 at p. 3; 

AEP. No. 83 at p. 2; Carrier. No. 92 at 

p. 4; EEl, No. 80 at p. 8; York. No. 90 

at p. 7; and Lennox, No. 91 at pp. 4-6). 

Acknowledging the potential for fuelor equipment-switching. both ASE and 

ACEEE recommended setting both air 

conditioner and heat pump standards to 

13 SEER. (ASE. Transcript No. 73 at p. 

197; and ACEEE. Transcript No. 73 at 

pp. 202-203). 

From the perspective of saving the 

maximum amount of energy that is 

economically justifiable. the biggest 

"fuel" switching concern is from heat 

pumps to a combination of central air 

conditioners and electric resistance 

heating. This may occur in households 

that have only electric service and 

where the incremental purchase price of 

heat pumps is too great. Such a price 

increase might occur if the standard on 

heat pumps is significantly higher than 

the standard for central air conditioners. 

Based on data from the 1997 RECS. a 

little over 14 percent of households 

have either baseboard or forced air 

electric resistance heating with room or 

central air conditioning compared to 

almost 10 percent of households which 

have heat pumps. Because there are 

already such a large percentage of 

households that utilize a combination of 

central or room air-conditioning with 

resistance heat to meet their spaceconditioning needs. this supports the 

possibility that some purchasers would 

choose to switch to resistance heat from 

heat pumps. 

Compared to heat pumps meeting the 

standards issued in the proposed rule 

(j.e .• 13 SEER and 7.7 HSPF). electric 

resistance heating uses over 225 percent 

of the energy for the same amount of 

heating. Therefore, if a standard of 13 

SEER and 7.7 HSPF is issued for heat 

pumps while a 12 SEER standard is set 

for central air conditioners. a mere 4 

percent of heat pump households would 

need to switch to central air 

conditioners and electric resistance 

heating to negate the energy savings 

achieved from increasing ~he heat pump 

standard from 12 SEERl7.4 HSPF to 13 

SEERi7.7 HSPF. 

If heat pump and air conditioner 

standards were set at different levels. 

the price differential between the two 

would increase on the order of $200. 

Under those conditions. we consider it 

likely that at least 4 percent of 

prospective heat pump owners would 
EE-RM/STD-98-44G-f"-", 0t

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7181

switch to lower-priced resistance heat. price of air conditioners and heat impacts. (Trane, No. 93 at pp. 12 and 22;

Therefore, we have weighed this pumps has dropped over time relative to and ARI, No. 100 at p. 3).

concern in adopting today's standard household income, the saturation of air- Trane also pointed out several

levels, which require air conditioners conditioning and heat pump equipment oversights and simplifications relating

and heat pumps to meet the same has increased in the new housing to our characterization of manufacturers

minimum efficiency standard so as to market to its current value of 80 percent. and our apparent failure to present cash

reduce the likelihood of switching to Because of the high saturation in the flow results and other important

resistance heating. new construction market, the purchase indicators of financial strength. (Trane,

A larger price differential between price elasticity for the new housing No. 93 at pp. 6, 11-13 and 23). We

heat pumps and air conditioners will market is small relative to the believe that Chapter 8 of the TSD

also tend to encourage switching to gas replacement market. But although the addresses most of Trane's concerns. No or oil fired furnaces. It is not our price elasticity is small, a decrease in evidence cited in the comments suggest

objective to encourage or discourage shipments to the new construction that our assumptions contain errors that

that type of fuel switching. Therefore, market will still be likely when would warrant significant change in our we also considered this potential effect equipment prices increase (as we expect conclusions regarding manufacturing

in our decision to establish air to occur under a new efficiency impacts.

conditioner and heat pump efficiency standard). As a result, for the case of a 5. Utility Impacts standards at the same SEER level. 13 SEER standard for split system air

c. Drop in Shipments in New conditioners for example, shipments to a. Peak Demand Impacts. ACEEE

Construction Market. ACEEE argued th new construction market drop by asserts that the peak power impacts

that DOE's forecasts for more efficient approximately 3 percent based onpresented in the proposed rule

air-conditioning equipment estimated rev e engineering manufacturing cost underestimate the true peak generation

too large of a drop in shipments to the data. For comparison purposes, impacts due to central air conditioner

new construction market. They state shipments to the early replacement and heat pump standards. ACEEE's

that because the new construction market drop much more significantly assertion is based on what they consider

market already has an 80 percent arcent nt as more accurate and significantly

saturation rate it is unlikely that this (approximately 15 percent) as this greater peak impacts as estimated by the

market will forego the installation of market is ar ess saturate an the Appliance Standards Awareness Project more efficient air-conditioning resulting purchase price elasticity is (ASAP).1' (ACEEE, No. 104 at pp. 5-6).

equipment due to its associated much more elastic. For those reasons, APPA warned that excessively high

increased purchase price. (ACEEE, we retained our assumed price elasticity SEER standards could increase peak

Transcript No. 73 at pp. 219-221). This in the analysis. demand. (APPA, No. 113 at p. 1).

is effectively an argument that the price 4. Manufacturer Impact Analysis For purposes of comparing the

elasticity of air conditioners and heat estimated peak impacts from the

pumps in the new construction market A few comments addressed the Department's analysis based on the use

should be much lower than we have manufacturer impact analysis. Trane of NEMS-BRS and those from ASAP, it

assumed. disputes our assumed manufacturer is helpful to consider the concept of a Historical saturation data, however, markups. ARI commented that a survey conservation load factor (CLF). The CLF seems to confirm that the price elasticity of their members revealed that our was first introduced by researchers at

in the new construction market is closer markup assumptions are grossly Lawrence Berkeley National Laboratory

to what was derived for the Shipments underestimated, but the TSD (Table 8.7) to allow for the straightforward

Analysis, which is already much lower reveals that, in fact, their survey data calculation of the peak demand avoided

than the elasticity we assumed in the agrees with the markups we used in the from a given amount of energy

replacement market, for example. As the GRIM analysis to estimate manufacturer savings.1 The CLF is defined as:

F Annual Site Energy Savings (kWh) CLF = Peak Load Savings (kW) * 8760 hours

Thus, a conservation technology that forecasts peak demand savings which suspect air conditioner demand data,

saves a constant amount of power on a result in a nationally representative CLF and (2) metered end-use data from aircontinuous basis has a CLF of 1.0. of 0.22. In contrast, for the same 13 conditioned households in California

Because air conditioning use occurs SEER standard, ASAP forecasts energy and Florida indicate that the NEMSmost often during times of peak and peak demand savings which result BRS-based CLF value of 0.22 is

demand, the CLF is significantly lower. in CLFs ranging from 0.08 to 0.14. Based reasonable.

The lower the CLF, the greater the on the above discrepancy in the CLF, With regard to ASAP's peak demand

amount of peak load savings achieved ACEEE asserts that the peak demand estimates, regional calculations are

for a given amount of annual energy savings forecasted by NEMS-BRS are based on peak demand data from a savings. too low. The Department disagrees with single 1988 study by the Narragansett

For a 13 SEER central air conditioner ACEEE's position for two reasons: (1) Electric Co. (an electric utility in the

and heat pump standard, NEMS-BRS ASAP's peak savings estimates rely on Northeast).12 Although ASAP increased

' oStaying cool: How Energy-Efficient Air " Conservation Screening Curves to Compare Proceedings of the 1990 ACEEE Summer Study on

Conditioners Can Prevent Blackouts. Cut Pollution Efficiency Investments to Power Plants: Energy Efficiency in Buildings, Authors: J. Koomey.

and Save Money, Appliance Standards Awareness Applications to Commercial Sector Conservation A. Rosenfold, and A. Gadgil.

Project, July 2000, Authors: J. Thone, T. Kubo. and Programs. Lawrence Berkeley National Laboratory. 12 Personal communication with Steve Nadel,

S. Nadel. Berkeley, CA. August 1990, published in the ACEEE, October, 2000.

EE-RM-STD-98-440 COMMENT 204

'. 

EE.RM/STD~~8-44o-.# c?, () 'f 

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7181 

switch to lower-priced resistance heat. 

Therefore, we have weighed this 

concern in adopting today's standard 

levels, which require air conditioners 

and heat pumps to meet the same 

minimum efficiency standard so as to 

reduce the likelihood of switching to 

resistance heating. 

A larger price differential between 

heat pumps and air conditioners will 

also tend to encourage switching to gas 

or oil fired furnaces. It is not our 

objective to encourage or discourage 

that type of fuel switching. Therefore, 

we also considered this potential effect 

in our decision to establish air 

conditioner and heat pump efficiency 

standards at the same SEER level. 

c. Drop in Shipments in New 

Construction Market. ACEEE argued 

that DOE's forecasts for more efficient 

air-conditioning equipment estimated 

too large of a drop in shipments to the 

new construction market. They state 

that because the new construction 

market already has an 80 percent 

saturation rate it is unlikely that this 

market will forego the installation of 

more efficient air-conditioning 

equipment due to its associated 

increased purchase price. (ACEEE, 

Transcript No. 73 at pp. 219-221). This 

is effectively an argument that the price 

elasticity of air conditioners and heat 

pumps in the new construction market 

should be much lower than we have 

assumed. 

Historical saturation data, however, 

seems to confirm that the price elasticity 

in the new construction market is closer 

to what was derived for the Shipments 

Analysis, which is already much lower 

than the elasticity we assumed in the 

replacement market, for example. As the 

price of air conditioners and heat 

pumps has dropped over time relative to 

household income, the saturation of airconditioning and heat pump equipment 

has increased in the new housing 

market to its current value of 80 percent. 

Because of the high saturation in the 

new construction market, the purchase 

price elasticity for the new housing 

market is small relative to the 

replacement market. But although the 

price elasticity is small, a decrease in 

shipments to the new construction 

market will still be likely when 

equipment prices increase (as we expect 

to occur under a new efficiency 

standard). As a result, for the case of a 

13 SEER standard for split system air 

conditioners for example, shipments to 

the new construction market drop by 

approximately 3 percent based on 

reverse engineering manufacturing cost 

data. For comparison purposes, 

shipments to the early replacement 

market drop much more significantly 

(approximately 15 percent) as this 

market is far less saturated and the 

resulting purchase price elasticity is 

much more elastic. For those reasons, 

we retained our assumed price elasticity 

in the analysis. 

4. Manufacturer Impact Analysis 

A few comments addressed the 

manufacturer impact analysis. Trane 

disputes our assumed manufacturer 

markups. ARI commented that a survey 

of their members revealed that our 

markup assumptions are grossly 

underestimated, but the TSD (Table 8.7) 

reveals that, in fact, their survey data 

agrees with the markups we used in the 

GRIM analysis to estimate manufacturer 

eLF = Annual Site Energy Savings (kWh) 

Peak Load Savings (kW) . 8760 hours 

Thus, a conservation technology that 

saves a constant amount of power on a 

continuous basis has a CLF of 1.0. 

Because air conditioning use occurs 

most often during times of peak 

demand, the CLF is significantly lower. 

The lower the CLF, the greater the 

amount of peak load savings achieved 

for a given amount of annual energy 

savings. . 

For a 13 SEER central air conditioner 

and heat pump standard, NEMS-BRS 

10 Staying cool: How Energy-Efficient Air 

Conditioners Can Prevent Blackouts. Cut Pollution 

and Save Money. Appliance Standards Awareness 

Project, July 2000, Authors: J. Thone. T. Kubo. and 

S. Nadel. 

forecasts peak demand savings which 

result in a nationally representative CLF 

of 0.22. In contrast, for the same 13 

SEER standard, ASAP forecasts energy 

and peak demand savings which result 

in CLFs ranging from 0.08 to 0.14. Based 

on the above discrepancy in the CLF, 

ACEEE asserts that the peak demand 

savings forecasted by NEMS-BRS are 

too low. The Department disagrees with 

ACEEE's position for two reasons: (I) 

ASAP's peak savings estimates rely on 

II Conservation Scrooning Curves to Compare 

Efficiency Investments to Power Plants: 

Applications to Commercial Sector Conservation 

Programs. Lawrence Berkeley National Laboratory. 

Berkeley, CA. August 1990, published in the 

impacts. (Trane, No. 93 at pp. 12 and 22; 

and ARI, No. 100 at p. 3). 

Trane also pointed out several 

oversights and sjmplifications relating 

to our characterization of manufacturers 

and our apparent failure to present cash 

flow results and other important 

indicators of financial strength. (Trane, 

No. 93 at pp. 6, 11-13 and 23). We 

believe that Chapter 8 of the TSD 

addresses most of Trane's concerns. No 

evidence cited in the comments suggest 

that our assumptions contain errors that 

would warrant significant change in our 

conclusions regarding manufacturing 

impacts. 

5. Utility Impacts 

a. Peak Demand Impacts. ACEEE 

asserts that the peak power impacts 

presented in the proposed rule 

underestimate the true peak generation 

impacts due to central air conditioner 

and heat pump standards. ACEEE's 

assertion is based on what they consider 

as more accurate and significantly 

greater peak impacts as estimated by the 

Appliance Standards Awareness Project 

(ASAP).lO (ACEEE, No. 104 at pp. 5-6). 

APPA warned that excessively high 

SEER standards could increase peak 

demand. (APPA, No. 113 at p. 1). 

For purposes of comparing the 

estimated peak impacts from the 

Department's analysis based on the use 

of NEMS-BRS and those from ASAP, it 

is helpful to consider the concept of a 

conservation load factor (CLF). The CLF 

was first introduced by researchers at 

Lawrence Berkeley National Laboratory 

to allow for the straightforward 

calculation of the peak demand avoided 

from a given amount of energy 

savings.11 The CLF is defined as: 

suspect air conditioner demand data, 

and (2) metered end-use data from airconditioned households in California 

and Florida indicate that the NEMSBRS-based CLF value of 0.22 is 

reasonable. 

With regard to ASAP's peak demand 

estimates, regional calculations are 

based on peak demand data from a 

single 1988 study by the Narragansett 

Electric Co. (an electric utility in the 

Northeast}.12 Although ASAP increased 

Procoodings of the 1990 ACEEE Summer Study on 

Energy Efficiency in Buildings, Authors: J. Koomey. 

A. Rosenfeld, and A. Gadgil. 

12 Personal communication with Steve Nadel. 

ACEEE. October. 2000. 
EE-RM/STD-98-440 -

7182 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

the Northeast peak demand data by 25 issue of price reductions or productivity requirement to mandate the application

percent for the two Southern divisions improvements, some contend that of ozone reduction technology in its

and decreased it by 25 percent for the reductions are due to declining most severe non-attainment areas. (ARI,

Pacific division, no basis for these commodity metals prices rather than No. 100 at p. 13; and Carrier, No. 92 at

adjustments are provided. Because of any increases in production efficiency. p. 4).

ASAP's reliance on peak demand data (Lennox, No. 91 at pp. 4-5). On the We understand that Texas has since

from only one region of the country, we issue of efficiency trends, EEI claims withdrawn its proposal. However, the

do not place much confidence in the that rather than post-standard efficiency TSD does include a preliminary

peak generation savings provided by increases, the Department neglected to estimate of the burden of this

ASAP. account for pre-standard efficiency requirement on the industry and, to the

As opposed to the ASAP results, increases. (EEI, Transcript No. 73 at pp. extent that other states may pursue the

metered end-use data from Southern 206-208). Counter to claims that same course of action, included that in

California and Florida indicate that electricity prices will increase in the our consideration of cumulative burden.

climate has a much larger affect on the future due to the deregulation of the We consider that widespread

CLF than reported by ASAP. In electric utility industry, others state that requirements for this technology will

Southern California, a metered end-use the future path of deregulation is so not be likely, due to its apparently high study conducted on 132 air-conditioned uncertain that it is unknown as to cost, questionable efficacy, and possible households in Southern California whether prices will decline or increase. reduction in energy efficiency. Edison's service area revealed that the (EEI, Transcript No. 73 at pp. 148-150; D Additional Standard Requirements

CLF for this region is likely 0.08.'3 In Dominion, Transcript No. 73 at pp. 158-

Homestead, Florida, a metered end-use 160; and Southern Company, No. 96 at 1. EER Standard

study conducted on ten air-conditioned pp 6-7) In the proposed rule, we discussed

homes indicated that the CLF is likely In these instances where we have including a requirement for a new 0.42.'4 Although strong conclusions conflicting opinions about what is standard based on a system's energy

cannot be drawn from only two studies, responsible for creating a trend, we have efficiency ratio (EER) in addition to its

the metered end-use results do provide no basis for changing our initial seasonal energy efficiency ratio (SEER). the Department with some confidence assumption. Usually, we rely on the That new standard was to be established

that the NEMS-BRS CLF estimate of most recent set of data we have at the median of available EER ratings 0.22 is reasonable since it falls between available to us to make projections into at a particular SEER level. Our objective

the CLF range provided by the two the future. In the case of efficiency was to ensure that any increase in the

metered end-use studies. Therefore, we trends, we rely on existing trends that SEER standard also resulted in an have reason to believe that our seem to indicate that efficiency will increase in equipment efficiency under

assumption is more valid than ASAP's. remain static after a new standard the warmer conditions best measured by Obviously more research needs to be becomes effective. In the case of EER. That resulting drop in peak power conducted in the area of peak demandmn electricity prices, we rely on the 

impacts due to increased air conditioner lectrc ltny pride we reln thedemand would then help avoid the need

efficiency. But until such extensive projections provided in the Annual for new power plants and, in the view

research is conducted, the Department Energy Outlook, which is publicly and of many stakeholders, improve power

sees no reason to discontinue its use of readl

ly available, and which we assume system reliability. We asked whether an

NEMS-BRS to estimate peak demand is unbiased with respect to parties EER standard would impose a savi s ings. terested in the outcome of this significant burden on manufacturers, rulemaking. Since this is the case for all would significantly affect the cost of

6. Projection of Trends the supposed trends listed above, we equipment considered in our analysis,

Several comments suggested or have not changed any of our projections. would negatively impact the sale of

asserted that we should project C. Other Comments modulating equipment, or would

historical trends that they believe exist. significantly improve power system These include price reductions or 1. HCFC Phaseout reliability.

productivity improvements in Comments noted that as efficiency Several comments, including those of

manufacturing. (ACEEE, Transcript No. increases, refrigerant charge may environmental advocacy groups and

73 at pp. 64 and 88-90; and NRDC, increase also. This could cause the some utilities, supported adding an EER

Transcript No. 73 at pp. 105 and 115), United States to reach its cap on HCFC- standard and urged us to adopt the

post-standard product efficiencies 22 use earlier, resulting in higher prices median EER standards we proposed.

(ACEEE, Transcript No. 73 at p. 210), for HCFC-22 than we have considered. They cited potential benefits that would

and electricity prices. (ASAP, No. 108 at (Carrier, No. 92 at p. 4). We would point accrue from avoidance of new power

p. 1; ACEEE, Transcript No. 73 at pp. out that occurrence would likely plant capacity and a reduction in the

154-158; NWPPC, No. 76 at pp. 3-4; accelerate the transition to HCFC-free occurrence of blackouts. NRDC believes

and Synapse, Transcript No. 73 at pp. refrigerants. There are also other options that the Act requires us to adopt an EER152-153). available for manufacturers to improve based standard. Underlying these

Other comments responded to some equipment efficiency without increasing comments is a belief that SEER

of these suggestions. With regard to the equipment size or charge. Both of these standards alone cannot guarantee those

factors will have the effect of benefits. Carrier supports an EER-based '3 Residential Appliance End-Use Survey; Col3lect Residential Applianc E e Sursuppressing i-Use increases in refrigerant standard only in lieu of a SEER-based

Energy Load Profiles; 1991 Results, prepared by prices over the long term. standard because it would harmonize

Quantum Consulting Inc., Berkeley, CA for with International Standards

Southern California Edison Co.. San Dimas. CA, 2. Ozone Reduction Catalyst Organization testing requirements.

November. 1992. Requirement (ACEEE, Transcript No. 73 at p. 62;

Monitord Energy Use Patterns in Low-Income ARI and its members remind us to NWPPC, Transcript No. 73 at p. 161; Housing (FSEC-PF-300). Florida Solar Energy Center. Cocoa, FL, 1996, Authors: D. S. Parker. M. consider the potential impact on the ASE, No. 81 at p. 1; NPPD, No. 109 at

D. Mazzara, and .R. Sherwin. industry of Texas' proposed p. 1; OOE, No. 84 at p. 2; NRDC, No. 88

EE-RM-STD-98-440 COMMENT 204

" EE-RM/STD-98-440 ~~{)L( 

7182 Federal Register! Vol. 66, No. 141 Monday, January 22, 20011 Rules and Regulations 

the Northeast peak demand data by 25 

percent for the two Southern divisions 

and decreased it by 25 percent for the 

Pacific division, no basis for these 

adjustments are provided. Because of 

ASAP's reliance on peak demand data 

from only one region of the country, we 

do not place much confidence in the 

peak generation savings provided by 

ASAP. 

As opposed to the ASAP results, 

metered end-use data from Southern 

California and Florida indicate that 

climate has a much larger affect on the 

CLF than reported by ASAP. In 

Southern California, a metered end-use 

study conducted on 132 air-conditioned 

households in Southern California 

Edison's service area revealed that the 

CLF for this region is likely 0.08.13 In 

Homestead, Florida, a metered end-use 

study conducted on ten air-conditioned 

homes indicated that the CLF is likely 

0.42.14 Although strong conclusions 

cannot be drawn from only two studies, 

the metered end-use results do provide 

the Department with some confidence 

that the NEMS-BRS CLF estimate of 

0.22 is reasonable since it falls between 

the CLF range provided by the two 

metered end-use studies. Therefore, we 

have reason to believe that our 

assumption is more valid than ASAP's. 

Obviously more research needs to be 

conducted in the area of peak demand 

impacts due to increased air conditioner 

efficiency. But until such extensive 

research is conducted, the Department 

sees no reason to discontinue its use of 

NEMS-BRS to estimate peak demand 

savings. 

6. Projection of Trends 

Several comments suggested or 

asserted that we should project 

historical trends that they believe exist. 

These include price reductions or 

productivity improvements in 

manufacturing. (ACEEE, Transcript No. 

73 at pp. 64 and 88-90; and NRDC, 

Transcript No. 73 at pp. 105 and 115), 

post-standard product efficiencies 

(ACEEE, Transcript No. 73 at p. 210), 

and electricity prices. (ASAP, No. 108 at 

p. 1; ACEEE, Transcript No. 73 at pp. 

154-158; NWPPC, No. 76 at pp. 3-4; 

and Synapse, Transcript No. 73 at pp. 

152-153). 

Other comments responded to some 

of these suggestions. With regard to the 

13 Residential Appliance End-Use Survey; 

Collection of Residential Appliance Tim(}-of-Use 

Energy Load Profiles; 1991 Results. prepared by 

Quantum Consulting Inc .. Berkeley. CA for 

Southern California Edison Co .. San Dimas. CA. 

November. 1992. 

14 Monitored Energy Use Patterns in Low-Income 

Housing (FSEC-PF -300). Florida Solar Energy 

Center. Cocoa. FL. 1996. Authors: D. S. Parker. M. 

D. Mazzara. and J. R. Sherwin. 

issue of price reductions or productivity 

improvements, some contend that 

reductions are due to declining 

commodity metals prices rather than 

any increases in production efficiency. 

(Lennox, No. 91 at pp. 4-5). On the 

issue of efficiency trends, EEl claims 

that rather than post-standard efficiency 

increases, the Department neglected to 

account for pre-standard efficiency 

increases. (EEl, Transcript No. 73 at pp. 

206-208). Counter to claims that 

electricity prices will increase in the 

future due to the deregulation of the 

electric utility industry, others state that 

the future path of deregulation is so 

uncertain that it is unknown as to 

whether prices will decline or increase. 

(EEl, Transcript No. 73 at pp. 148-150; 

Dominion, Transcript No. 73 at pp. 158-

160; and Southern Company, No. 96 at 

pp.6-7). 

In these instances where we have 

conflicting opinions about what is 

responsible for creating a trend, we have 

no basis for changing our initial 

assumption. Usually, we rely on the 

most recent set of data we have 

available to us to make projections into 

the future. In the case of efficiency 

trends, we rely on existing trends that 

seem to indicate that efficiency will 

remain static after a new standard 

becomes effective. In the case of 

electricity prices, we rely on the 

projections provided in the Annual 

Energy Outlook, which is publicly and 

readily available. and which we assume 

is unbiased with respect to parties 

interested in the outcome of this 

rulemaking. Since this is the case for all 

the supposed trends listed above, we 

have not changed any of our projections. 

C. Other Comments 

1. HCFC Phaseout 

Comments noted that as efficiency 

increases, refrigerant charge may 

increase also. This could cause the 

United States to reach its cap on HCFC22 use earlier, resulting in higher prices 

for HCFC-22 than we have considered. 

(Carrier, No. 92 at p. 4). We would point 

out that occurrence would likely 

accelerate the transition to HCFC-free 

refrigerants. There are also other options 

available for manufacturers to improve 

equipment efficiency without increasing 

equipment size or charge. Both of these 

factors will have the effect of 

suppressing increases in refrigerant 

prices over the long term. 

2. Ozone Reduction Catalyst 

Requirement 

ARI and its members remind us to 

consider the potential impact on the 

industry of Texas' proposed 

requirement to mandate the application 

of ozone reduction technology in its 

most severe non-attainment areas. (ARI, 

No. 100 at p. 13; and Carrier, No. 92 at 

p.4). 

We understand that Texas has since 

withdrawn its proposal. However, the 

TSD does include a preliminary 

estimate of the burden of this 

requirement on the industry and, to the 

extent that other states may pursue the 

same course of action, included that in 

our consideration of cumulative burden. 

We consider that widespread 

requirements for this technology will 

not be likely, due to its apparently high 

cost, questionable efficacy, and possible 

reduction in energy efficiency. 

D. Additional Standard Requirements 

1. EER Standard 

In the proposed rule, we discussed 

including a requirement for a new 

standard based on a system's energy 

efficiency ratio (EER) in addition to its 

seasonal energy efficiency ratio (SEER). 

That new standard was to be established 

at the median of available EER ratings 

at a particular SEER level. Our objective 

was to ensure that any increase in the 

SEER standard also resulted in an 

increase in equipment efficiency under 

the warmer conditions best measured by 

EER. That resulting drop in peak power 

demand would then help avoid the need 

for new power plants and, in the view 

of many stakeholders, improve power 

system reliability. We asked whether an 

EER standard would impose a 

significant burden on manufacturers, 

would significantly affect the cost of 

equipment considered in our analysis, 

would negatively impact the sale of 

modulating equipment, or would 

significantly improve power system 

reliability. 

Several comments, including those of 

environmental advocacy groups and 

some utilities, supported adding an EER 

standard and urged us to adopt the 

median EER standards we proposed. 

They cited potential benefits that would 

accrue from avoidance of new power 

plant capacity and a reduction in the 

occurrence of blackouts. NRDC believes 

that the Act requires us to adopt an EERbased standard. Underlying these 

comments is a belief that SEER 

standards alone cannot guarantee those 

benefits. Carrier supports an EER-based 

standard only in lieu of a SEER-based 

standard because it would harmonize 

with International Standards 

Organization testing requirements. 

(ACEEE, Transcript No. 73 at p. 62; 

NWPPC, Transcript No. 73 at p. 161; 

ASE, No. 81 at p. 1; NPPD, No. 109 at 

p. 1; OOE, No. 84 at p. 2; NRDC, No. 88 
EE-RM/STD-98-440- - -T+

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7183

at p. 3; Omaha Public Power District incentive to simplify the design of 2. TXV Requirement

(OPPD), No. 111 at p. 2; and Carrier, No. baseline equipment. This suggests they In the proposed rule, we discussed

92 at p. 8). will favor heat exchanger or compressor the issues associated with mandating

Other comments took an opposing improvements that improve EER. thermostatic expansion valves, or TXVs.

position on the grounds that including On the other hand, manufacturers will We did not propose such a requirement, an EER standard would impede the have a strong incentive to reduce the but we recognized that such a application of modulating components; ave a strong mcentive to reduce the

thaati w are ot pemitted to adopt a size of 13 SEER baseline equipment. requirement may be capable of saving a

standtard other than SEER and haveot Although microchannel heat exchangers great deal of energy. We discussed our standard other than SEER and have not

sufficiently analyzed the validity of an could reduce size and improve EER, options for encouraging their use.

EER-based standard; that an EER manufacturers could also choose to Many comments continue to express

standard would eliminate products from introduce variable speed or capacity strong support for a TXV requirement.

the market; that an EER standard will modulation technologies that can Many cite a report submitted by Proctor

not improve electric system reliability, induce them to lower EER at a given Engineering (Proctor) that describes the

particularly nationwide; and that there SEER level. As the cost of power results of a field study covering 4,000

are burdens associated with testing and electronics and control technologies units in California. The study concluded

certifying EER. (National Comfort come down, this possibility becomes that 62 percent of equipment is

Products (NCP), No. 77 at p. 3; EEI, more likely. mischarged by more than percent, and

Transcript No. 73 at p. 327 and No. 80 However, even if variable speed or tht TorXsce, whiunerrbetter

at pp. 3 and 9; Dominion, Transcript No. modulating technologfixed orifices in undercharged at pp. 3 and 9; Dominion, Transcript No. modulating technologies eventually conditions, could save 11 percent of the

73 at p. 264 and No. 68 at p. 2; Trane, predominate, and thereby reduce EERs en sed by that equipment. (Proctor

No. 93 at p. 14; York, No. 90 at pp. 1 in typical equipment, they would still No. 105; OOE, No. 84 at p. 2; NRDC, No.

4; ARI, Transcript No. 73 at p. 320 and reduce peak demand compared to 88; Califoria Eergy Commissio

No. 100 at p. 16; Goodman, Transcript today's 10 SEER baseline equipment. (CEC), No. 98 at p. 1; ACEEE, No. 101

No. 73 at p. 302; and Southern, Furthermore, because variable speed at p. 8; PG&E No. 104 at p. 1; and ASAP,

Transcript No. 73 at p. 243). efficienand modulating equipment mitigate the Transcript No. 73 at p. 4).

level approach, we assume efficienthat ally cyclic losses that are due to widespread Other comments expressed some

equipment at the se e SEER level costs over sizing, the aggregated peak demand resistance to a TXV requirement,

the same to produce regardless of the of a group of modulating air particularly regarding our authority to

combination of design options chosen to conditioners with lower EERs will likely establish one. Some also express

achieve that SEER level. These options be lower than that of a similar group of concerns about problems associated

include those that raise EER, including non-modulating air conditioners with with TXVs. (NCP, No. 77 at p. 4; Trane,

compressor and heat exchanger higher EERs at the same SEER level. No. 93 at p. 19; York, No. 90 at pp. 4-

upgrades, as well as those that do not Also, utilities have the opportunity with 5; Lennox, No. 91 at p. 3; EEI No. 80 at

raise EER, such as thermostatic modulating equipment to offer p. 3; and Carrier, No. 92 at p. 10).

expansion valves. For any given SEER customers the option to allow the utility In response to our concern that

and HSPF levels, the efficiency level to "lock" the equipment into low- mandating TXVs would stifle the

approach cannot differentiate capacity operation in return for a lower development of other, perhaps

equipment cost based on different EER electricity price. preferable, technologies, Proctor and

choices. Finally, although the Department is ACEEE suggested performance tests that

Underlying the efficiency level interested in reducing peak demand, the could be applied in lieu of a TXV

approach, however, is the assumption primary purpose of appliance efficiency requirement. They would reward

that manufacturers make cost-optimal standards is to save energy. An EER equipment that possessed a TXV or

choices based on their own unique standard could be counterproductive by performed as well while undercharged

situations. Therefore, a manufacturer discouraging variable speed and or when airflow is restricted. This

who was required to raise the EER of its modulation, which can save substantial approach is at least partially endorsed

equipment from the 10th percentile to amounts of energy over the cooling by others. (NRDC No. 88 at p. 17; CEC

the 50th percentile (median) would season while providing consumers with N. 199 at p. 1; and OOE, No. 84 at p.

indeed incur added costs since its additional benefits not found in single 8). Some of the commenters preferred

design choices would no longer be cost- speed and non-modulating equipment. that we initially specify TXVs but then

optimal for its own circumstances. phase out that requirement in favor of

Since efficiency levels are expressed in Although the Department believes a performance-based approach.

terms of SEER and HSPF only, we that EPCA permits adoption of an EER As we alluded to in the proposed rule,

would have to depart from the standard, for the foregoing reasons, we a performance-based approach is also

efficiency level approach in order to do not believe that the Act requires or our preference and is certainly in the

quantify those costs. suggests that we establish such a spirit of EPCA. As such, the SEER test

We are still convinced that the standard under the circumstances here. procedure, not a TXV requirement,

stringent physical relationship between Given the adopted standard levels, a appears to be the most appropriate

EER and SEER in equipment rated national EER standard is both vehicle for assuring that an equipment's

through 12 SEER, which is comprised unnecessary and undesirable. Most efficiency rating is based on its

exclusively of non-modulating benefits accruing from an EER standard performance characteristics. In fact,

equipment, would remain intact under will likely accrue from the SEER TXVs already receive credit in the test

new standards and for the foreseeable standards alone, without the associated procedure because of their superior

future. Under the adopted 13 SEER burdens on manufacturers and the cyclic performance. We are not eager to

standard, we have less certainty since disincentives to apply energy-saving circumvent the test procedure,

there are counteracting incentives. On modulating technologies. Therefore, we particularly when the key data either are the one hand, to reduce warranty have not adopted an EER standard in not available or have not been

claims, manufacturers have a strong this rule. thoroughly reviewed by all interested

EE-RM-STD-98-440 COMMENT 204

Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 7183 

at p. 3; Omaha Public Power District 

(OPPD), No. 111 at p. 2; and Carrier, No. 

92 at p. 8). 

Other comments took an opposing 

position on the grounds that including 

an EER standard would impede the 

application of modulating components; 

that we are not permitted to adopt a 

standard other than SEER and have not 

sufficiently analyzed the validity of an 

EER-based standard; that an EER 

standard would eliminate products from 

the market; that an EER standard will 

not improve electric system reliability, 

particularly nationwide; and that there 

are burdens associated with testing and 

certifying EER. (National Comfort 

Products (NCP), No. 77 at p. 3; EEl, 

Transcript No. 73 at p. 327 and No. 80 

at pp. 3 and 9; Dominion, Transcript No. 

73 at p. 264 and No. 68 at p. 2; Trane, 

No. 93 at p. 14; York, No. 90 at pp. 1-

4; ARt Transcript No. 73 at p. 320 and 

No. 100 at p. 16; Goodman, Transcript 

No. 73 at p. 302; and Southern, 

Transcript No. 73 at p. 243). 

It is true that under the efficiency 

level approach, we assume that all 

equipment at the same SEER level costs 

the same to produce regardless of the 

combination of design options chosen to 

achieve that SEER level. These options 

include those that raise EER, including 

compressor and heat exchanger 

upgrades. as well as those that do not 

raise EER, such as thermostatic 

expansion valves. For any given SEER 

and HSPF levels, the efficiency level 

approach cannot differentiate 

equipment cost based on different EER 

choices. 

Underlying the efficiency level 

approach. however, is the assumption 

that manufacturers make cost-optimal 

choices based on their own unique 

situations. Therefore, a manufacturer 

who was required to raise the EER of its 

equipment from the 10th percentile to 

the 50th percentile (median) would 

indeed incur added costs since its 

design choices would no longer be costoptimal for its own circumstances. 

Since efficiency levels are expressed in 

terms of SEER and HSPF only, we 

would have to depart from the 

efficiency level approach in order to 

quantify those costs. 

We are still convinced that the 

stringent physical relationship between 

EER and SEER in equipment rated 

through 12 SEER, which is comprised 

exclusively of non-modulating 

equipment. would remain intact under 

new standards and for the foreseeable 

future. Under the adopted 13 SEER 

standard, we have less certainty since 

there are counteracting incentives. On 

the one hand, to reduce warranty 

claims. manufacturers have a strong 

incentive to simplify the design of 

baseline equipment. This suggests they 

will favor heat exchanger or compressor 

improvements that improve EER. 

On the other hand, manufacturers will 

have a strong incentive to reduce the 

size of 13 SEER baseline equipment. 

Although microchannel heat exchangers 

could reduce size and improve EER. 

manufacturers could also choose to 

introduce variable speed or capacity 

modulation technologies that can 

induce them to lower EER at a given 

SEER level. As the cost of power 

electronics and control technologies 

come down. this possibility becomes 

more likely. 

However, even if variable speed or 

modulating technologies eventually 

predominate. and thereby reduce EERs 

in typical equipment, they would still 

reduce peak demand compared to 

today's 10 SEER baseline equipment. 

Furthermore, because variable speed 

and modulating equipment mitigate the 

cyclic losses that are due to widespread 

over sizing. the aggregated peak demand 

of a group of modulating air 

conditioners with lower EERs wIll likely 

be lower than that of a similar group of 

non-modulating air conditioners with 

higher EERs at the same SEER level. 

Also, utilities have the opportunity with 

modulating equipment to offer 

customers the option to allow the utility 

to "lock" the equipment into lowcapacity operation in return for a lower 

eloctricity price. 

Finally, although the Department is 

interested in reducing peak demand, the 

primary purpose of appliance efficiency 

standards is to save energy. An EER 

standard could be counterproductive by 

discouraging variable speed and 

modulation. which can save substantial 

amounts of energy over the cooling 

season while providing consumers with 

additional benefits not found in single 

speed and non-modulating equipment. 

Although the Department believes 

that EPCA permits adoption of an EER 

standard, for the foregoing reasons. we 

do not believe that the Act requires or 

suggests that we establish such a 

standard under the circumstances here. 

Given the adopted standard levels. a 

national EER standard is both 

unnecessary and undesirable. Most 

benefits accruing from an EER standard 

will likely accrue from the SEER 

standards alone, without the associated 

burdens on manufacturers and the 

disincentives to apply energy-saving 

modulating technologies. Therefore. we 

have not adopted an EER standard in 

this rule. 

2. TXV Requirement 

In the proposed rule, we discussed 

the issues associated with mandating 

thermostatic expansion valves, or TXVs. 

We did not propose such a requirement, 

but we recognized that such a 

requirement may be capable of saving a 

great deal of energy. We discussed our 

options for encouraging their use. Many comments continue to express 

strong support for a TXV requirement. 

Many cite a report submitted by Proctor 

Engineering (Proctor) that describes the 

results of a field study covering 4,000 

units in California. The study concluded 

that 62 percent of equipment is 

mischarged by more than 5 percent, and 

that TXVs, which perform better than 

fixed orifices in undercharged 

conditions, could save 11 percent of the 

energy used by that equipment. (proctor 

No. 105; OOE, No. 84 at p. 2; NRDC, No. 

88; California Energy Commission 

(CEC), No. 98 at p. 1; ACEEE, No. 101 

at p. 8; PG&E No. 104 at p. 1; and ASAP. 

Transcript No. 73 at p. 4). 

Other comments expressed some resistance to a TXV requirement, 

particularly regarding our authority to 

establish one. Some also express 

concerns about problems associated 

with TXVs. (NCP, No. 77 at p. 4; Trane, 

No. 93 at p. 19; York. No. 90 at pp. 4-

5; Lennox, No. 91 at p. 3; EEl No. 80 at 

p. 3; and Carrier, No. 92 at p. 10). 

In response to our concern that 

mandating TXVs would stifle the 

development of other, perhaps 

preferable, technologies, Proctor and 

ACEEE suggested performance tests that 

could be applied in lieu of a TXV 

requirement. They would reward 

equipment that possessed a TXV or 

performed as well while undercharged 

or when airflow is restricted. This 

approach is at least partially endorsed 

by others. (NRDC No. 88 at p. 17; CEC 

No. 199 at p. 1; and OOE, No. 84 at p. 

8). Some of the commenters preferred 

that we initially specify TXVs but then 

phase out that requirement in favor of 

a performance-based approach. 

As we alluded to in the proposed rule, 

a performance-based approach is also 

our preference and is certainly in the 

spirit of EPCA. As such, the SEER test 

procedure, not a TXV requirement. 

appears to be the most appropriate 

vehicle for assuring that an equipment's 

efficiency rating is based on its 

performance characteristics. In fact, 

TXVs already receive credit in the test 

procedure because of their superior 

cyclic performance. We are not eager to 

circumvent the test procedure, 

particularly when the key data either are 

not available or have not been 

thoroughly reviewed by all interested 
EE-RM/STD-98-440 -t ('

7184 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

parties. That said, we favor a SEER test would allow them to implement their consumption, so we prefer not to relax

procedure that fairly evaluates own requirements based on their own that relationship without sound

equipment performance under unique circumstances. evidence regarding the burdens that

conditions that represent those 3. HSPF Levels would be mitigated. We are reluctant to

encountered in the field. We would adopt a more stringent level since we

prefer to encourage correct charging or Some comments urged us to are aware that heat pump design is

proper airflow, but we recognize that reconsider our proposed HSPF levels, difficult and costly, and that

practical barriers exist, and we will take particularly to reflect differences among improvements in HSPF typically are

steps to evaluate whether the SEER test the HSPF-SEER relationships across associated with a reduction in SEER.

procedure can and should be amended capacity ratings. Trane commented that Too stringent a standard would impose

to better reflect equipment performance HSPF-SEER factors for heat pumps are considerable design and testing burdens

under improper charge or airflow. lower with 410A refrigerant than with on manufacturers, could result in the

In sum, we are not adopting a TXV HCFC-22, and that the current proposal permanent loss of heat pump market

requirement in this rulemaking. Any for HSPF is too high for 410A by as share to electric resistance heat, and

alterations in the SEER test procedure to much as 3 to 5 percent. (ARI, No. 100 could encourage fuel switching.

further encourage the use of TXVs will at p. 11; Carrier, No. 92 at p. 7; and For those reasons, we are retaining

be undertaken in a separate process. In Trane, No. 93 at p. 8). Others urged us our proposed minimum HSPF levels in

addition to pursuing modifications to to adopt HSPF levels at the median for the standards adopted today.

the test procedure, we encourage parties each SEER level we considered. (OOE, V. Analytical Results and Conclusions

interested in encouraging the broader No. 84 at p. 11; and ACEEE, No. 104 at

application of TXVs to pursue other p. 12). A. Trial Standard Levels

avenues. These include voluntary As we explained in the proposed rule, We examined five standard levels.

programs like Energy Star, tax we established the HSPF levels Table V.1 presents the trial standards

incentives, and other state and local corresponding to SEER levels in an levels analyzed for today's final rule and

initiatives, which can all be tied to the attempt to maintain the existing offset the corresponding efficiency level for

presence of a device like a TXV. States between the minimum HSPF and the each class of product. Trial standard

also have the opportunity to apply to us minimum SEER. Heating energy is a level 5 is the max tech level for each

for an exemption from preemption that large fraction of total heat pump energy class of product.

TABLE V.1.-TRIAL STANDARDS LEVELS FOR CENTRAL AIR CONDITIONERS AND HEAT PUMPS (SEER)

Trial standard level Split air condi- Packaged air Split heat Packaged heat tioners conditioners pumps pumps

1 ....................................................................................................................... 11 11 11 11

2 ....................................................................................................................... 12 12 12 12

3 ....................................................................................................................... 12 12 13 13

4 ....................................................................................................................... 13 13 13 13

5 ....................................................................................................................... 18 18 18 18

For each trial standard level the reverse engineering data most The results presented in this chapter

examined, several different scenarios closely represents the costs as they will include only those that are needed to

were analyzed consisting of variations actually be under the new standards. supplement or replace the results we on: (1) Electricity price and housing We assumed a societal discount rate of presented in the proposed rule, which

projections; (2) equipment efficiency 7 percent for calculating net present still form a basis for our decision with

distributions; (3) manufacturer cost value (NPV). However, a 3 percent value the exception that we are no longer

estimates; and (4) societal discount rate. was investigated as an alternative considering the 14-year life scenarios.

Electricity price and housing projections scenario in accordance with the Office We believe that the 18.4-year life with

were based on three different AEO 2000 of Management and Budget's (OMB) a compressor replacement in the 14th

forecasts: (1) Reference Case, (2) High Guidelines to Standardize Measures of year addresses the concerns of those

Growth Case, and (3) Low Growth Case. Costs and Benefits and the Format of who believe that actual equipment life

We analyzed three efficiency scenarios, Accounting Statements. is closer to 14 years and achieves

each of which assumed a different Our decision on today's final rule was substantially the same analytical results.

efficiency distribution after new arrived at by placing more emphasis on Therefore, all analyses below assume an

standards would take effect: (1) NAECA some scenarios rather than others. Our 18.4-year average equipment lifetime

scenario, (2) Roll-up scenario, and (3) estimates of electricity price and with a compressor replacement in the

Shift scenario. Under the standard housing projections relied primarily on 14th year.

levels we are adopting, we believe that the AEO2000 reference case. We B. Significance of Energy Savings

the Roll-up scenario most closely considered primarily the NAECA and

represents the most likely impact of the Roll-up efficiency scenarios with an To estimate the energy savings

new standards, as explained in Chapter increasing expectation of the Roll-up through 2030 due to revised standards,

8 of the TSD. We analyzed two scenario occurring for more stringent we compared the energy consumption

manufacturer cost scenarios: (1) Based trial standard levels. Finally, we expect of central air conditioners and heat

on reverse engineering data, and (2) manufacturer costs to lie closer to the pumps under the base case to energy

based on ARI-provided mean cost data. reverse engineering estimates (which lie consumption of central air conditioners

For the reasons expressed in Parts III between the ARI minimum and ARI and heat pumps under the revised

and IV of this document, we believe that mean values). standard.

EE-RM-STD-98-440 COMMENT 204

7184 Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 

parties. That said, we favor a SEER test 

procedure that fairly evaluates 

equipment performance under 

conditions that represent those 

encountered in the field. We would 

prefer to encourage correct charging or 

proper airflow, but we recognize that 

practical barriers exist, and we will take 

steps to evaluate whether the SEER test 

procedure can and should be amended 

to better reflect equipment performance 

under improper charge or airflow. 

In sum, we are not adopting a TXV 

requirement in this rulemaking. Any 

alterations in the SEER test procedure to 

further encourage the use of TXVs will 

be undertaken in a separate process. In 

addition to pursuing modifications to 

the test procedure, we encourage parties 

interested in encouraging the broader 

application of TXVs to pursue other 

avenues. These include voluntary 

programs like Energy Star, tax 

incentives, and other state and local 

initiatives, which can all be tied to the 

presence of a device like a TXV. States 

also have the opportunity to apply to us 

for an exemption from preemption that 

would allow them to implement their 

own requirements based on their own 

unique circumstances. 

3. HSPF Levels 

Some comments urged us to 

reconsider our proposed HSPF levels, 

particularly to reflect differences among 

the HSPF-SEER relationships across 

capacity ratings. Trane commented that 

HSPF-SEER factors for heat pumps are 

lower with 410A refrigerant than with 

HCFC-22, and that the current proposal 

for HSPF is too high for 410A by as 

much as 3 to 5 percent. (ARl, No. 100 

at p. 11; Carrier, No. 92 at p. 7; and 

Trane, No. 93 at p. 8). Others urged us 

to adopt HSPF levels at the median for 

each SEER level we considered. (DOE, 

No. 84 at p. 11; and ACEEE, No. 104 at 

p.12). 

As we explained in the proposed rule, 

we established the HSPF levels 

corresponding to SEER levels in an 

attempt to maintain the existing offset 

between the minimum HSPF and the 

minimum SEER. Heating energy is a 

large fraction of total heat pump energy 

consumption, so we prefer not to relax 

that relationship without sound 

evidence regarding the burdens that 

would be mitigated. We are reluctant to 

adopt a more stringent level since we 

are aware that heat pump design is 

difficult and costly, and that 

improvements in HSPF typically are 

associated with a reduction in SEER. 

Too stringent a standard would impose 

considerable design and testing burdens 

on manufacturers, could result in the 

permanent loss of heat pump market 

share to electric resistance heat, and 

could encourage fuel switching. 

For those reasons, we are retaining 

our proposed minimum HSPF levels in 

the standards adopted today. 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

We examined five standard levels. 

Table V.l presents the trial standards 

levels analyzed for today's final rule and 

the corresponding efficiency level for 

each class of product. Trial standard 

level 5 is the max tech level for each 

class of product. 

TABLE V.1.-TRIAL STANDARDS LEVELS FOR CENTRAL AIR CONDITIONERS AND HEAT PUMPS (SEER) 

Trial standard level Split air conditioners 

1 ...................................................................................................................... . 11 

2 ...................................................................................................................... . 12 

3 ...................................................................................................................... . 12 

4 ..................................................................................................................... .. 13 

5 ..................................................................................................................... .. 18 

For each trial standard level 

examined, several different scenarios 

were analyzed consisting of variations 

on: (1) Electricity price and housing 

projections; (2) equipment efficiency 

distributions; (3) manufacturer cost 

estimates; and (4) societal discount rate. 

Electricity price and housing projections 

were based on three different AEO 2000 

forecasts: (1) Reference Case, (2) High 

Growth Case, and (3) Low Growth Case. 

We analyzed three efficiency scenarios, 

each of which assumed a different 

efficiency distribution after new 

standards would take effect: (1) NAECA 

scenario, (2) Roll-up scenario, and (3) 

Shift scenario. Under the standard 

levels we are adopting, we believe that 

the Roll-up scenario most closely 

represents the most likely impact of the 

new standards, as explained in Chapter 

8 oJ the TSD. We analyzed two 

manufacturer cost scenarios: (1) Based 

on reverse engineering data, and (2) 

based on ARI-provided mean cost data. 

For the reasons expressed in Parts III 

and IV of this document, we believe that 

the reverse engineering data most 

closely represents the costs as they will 

actually be under the new standards. 

We assumed a societal discount rate of 

7 percent for calculating net present 

value (NPV). However, a 3 percent value 

was investigated as an alternative 

scenario in accordance with the Office 

of Management and Budget's (OMB) 

Guidelines to Standardize Measures of 

Costs and Benefits and the Format of 

Accounting Statements. 

Our decision on today's final rule was 

arrived at by placing more emphasis on 

some scenarios rather than others. Our 

estimates of electricity price and 

housing projections relied primarily on 

the AE02000 reference case. We 

considered primarily the NAECA and 

Roll-up efficiency scenarios with an 

increasing expectation of the Roll-up 

scenario occurring for more stringent 

trial standard levels. Finally, we expect 

manufacturer costs to lie closer to the 

reverse engineering estimates (which lie 

between the ARI minimum and ARl 

mean values). 

Packaged air 

conditIoners Split heat Packaged heat 

pumps pumps 

11 11 11 

12 12 12 

12 13 13 

13 13 13 

18 18 18 

The results presented in this chapter 

include only those that are needed to 

supplement or replace the results we 

presented in the proposed rule, which 

still form a basis for our decision with 

the exception that we are no longer 

considering the 14-year life scenarios. 

We believe that the 18.4-year life with 

a compressor replacement in the 14th 

year addresses the concerns of those 

who believe that actual equipment life 

is closer to 14 years and achieves 

substantially the same analytical results. 

Therefore, all analyses below assume an 

18.4-year average equipment lifetime 

with a compressor replacement in the 

14th year. 

B. Significance of Energy Savings 

To estimate the energy savings 

through 2030 due to revised standards, ' 

we compared the energy consumption 

of central air conditioners and heat 

pumps under the base case to energy 

consumption of central air conditioners 

and heat pumps under the revised 

standard. 
EE-RM/STD-98-440-'-4 t9

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7185

Table V.2 shows the range of Low Growth cases for each trial three equipment shipment efficiency

cumulative energy savings based on the standard level. The parameters shown scenarios.

AEO 2000 Reference, High Growth, and are the two manufacturing costs and the

TABLE V.2.-RANGE OF NATIONAL ENERGY SAVINGS WITH AEO PRICE FORECAST

Range of national energy savings for units sold from 2006 to 2030 (quads)

Reverse engineering costs ARI mean costs

Trial standard level

NAECA Roll-up Shift NAECA Roll-up Shift

1 ............................................. 1.7 to 1.8 .......... 1.5 to 1.6 .......... 1.9 to 2.0 .......... 1.7 to 1.8 .......... 1.5 to 1.6 .......... 1.9to20

2 ............................................. 2.9 to 3.2 .......... 2.8 to 3.0 .......... 3.4 to 3.6 .......... 2.9 to 3.2 .......... 2.8 to 3.0 .......... 3.4 to 3.6

3 ............................................. 3.4 to 3.7 .......... 3.3 to 3.5 .......... 3.8 to 4.1 .......... 3.4 to 3.6 .......... 3.3 to 3.5 .......... 3.8 to 4.1

4 ............................................. 4.3to4.6 .......... 4.1to4.4 .......... 4.7 to 5.0 .......... 4.2 to 4.5 .......... 4.1 to 4.4 .......... 4.6 to 4.9

5 ............................................. 8.4 to 9.0 .......... 8.4 to 9.0 .......... 8.4 to 9.0 .......... 8.1 to 8.7 .......... 8.1 to 8.7 .......... 8.1 to 8.7

C. Payback Period based on the hours of use in the test rebuttable payback periods which are

procedure are on the order of 50 percent shorter than median payback periods As discussed above, the Act requires greater than the weighted-average calculated from the LCC analysis.

the Department to examine payback energy consumption data used in the In Table V.3, we list the rebuttable

periods to determine if the three-year life-cycle-cost (LCC) analysis. The LCC payback periods versus SEER efficiency

rebuttable presumption of economic data are based on the 1997 RECS for level for the four product classes, using

justification applies. As prescribed by residential buildings and hourly the 1997 RECS energy consumption

the Act, the rebuttable payback period is simulations for commercial buildings. data. This information shows that both

"calculated under the applicable test Since the test procedure assumes higher classes of heat pumps are presumed to

procedure * * *". annual operating hours than the RECS be economically justified up to a 12

The annual space-cooling and space- data implied, the use of test procedure SEER efficiency level, using the reverse

heating energy consumption calculated energy consumption results in engineering cost estimates.

TABLE V.3.-SUMMARY OF REBUTTABLE PAYBACK PERIOD (YEARS)

Reverse engi- ARI mean Product class/efficiency level neering costs costs

Split System Central Air Conditioner.

11 ...................................................................................................................................................................... 3.5 4 .7

12 ..................................................................................................................................................................... 4 5 5.8

13 ...................................................................................................................................................................... 5.2 7 .6

18 ...................................................................................................................................................................... 7 .3 11.3

Split System Heat Pump:

11.3 1 ...................................................................................................................................................................... 1.3 2 .5

12 ...................................................................................................................................................................... 1.8 3.3

13 ...................................................................................................................................................................... 3.2 4 .5

18 ....................... ............................................................................................................................................... 5.8 6.85.8

Single Package Air Conditioner:

1 1 ...................................................................................................................................................................... 3 .5 7 .3

12 .................. 3.3 6.2.........................

6.2

13 ...................................................................................................................................................................... 6 .8 9 .8

18 ...................................................................................................................................................................... 8 .6 13 .3

Single Package Heat Pump:

1 1 ...................................................................................................................................................................... 2 .1 3 .7

12 ...................................................................................................................................................................... 1.8 4 .0

...................................................................................................................................................................... 4.3 6.513 6.5

18 .................................................................................................................................................................... 5.4 7.2

D. Economic Justification manufacturers are presented in terms of of capital. This method of calculating

1. Economic Impact on Manufacturers industry net present value (INPV) as INPV provides one measure of the fair

and Consumers well as change in INPV. INPV is value of the industry in today's dollars.

calculated by summing the stream of The impact of new standards on INPV

Estimated economic impacts of annual discounted cash flows beginning is then the difference between the INPV

standards on manufacturers are based from the base year of the analysis (2000) in the base case (no new standards) and

on the methodology described in the and continuing explicitly for ten years the INPV is the standards case (with

proposed rule; however, in today's final after the implementation of the standard new standards).

rule the manufacturer impact analysis and adding the discounted value of the Data are presented for the base case

has been expanded to include impacts industry at the end of the ten-year and for trial standard levels 1 through

based on reverse engineering cost period (see TSD Section 8.4.4 and 4, in Tables V.4 through V.9. As can be

estimates as well as ARI manufacturing Appendix G). The discount rate is based observed, manufacturer impacts are

cost data. The economic impacts on on the industry's weighted average cost relatively insensitive between the

EE-RM-STD-98-440 COMMENT 204

EE.RM/STD~98.44~~ {) Cf 

Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 7185 

Table V.2 shows the range of 

cumulative energy savings based on the 

AEO 2000 Reference, High Growth, and 

Low Growth cases for each trial three equipment shipment efficiency 

standard level. The parameters shown scenarios. 

are the two manufacturing costs and the 

TABLE V.2.-RANGE OF NATIONAL ENERGY SAVINGS WITH AEO PRICE FORECAST 

Range of national energy savings for units sold from 2006 to 2030 (quads) 

Reverse engineering costs ARI mean costs 

Trial standard level 

NAECA Roll-up Shift NAECA Roll-up Shift 

1 ............................................. 1.7 to 1.8 .......... 1.5 to 1.6 .......... 1.9 to 2.0 .......... 1.7 to 1.8 .......... 1.5 to 1.6 .......... 1.9 to 20 

2 ............................................. 2.9 to 3.2 .......... 2.8 to 3.0 .......... 3.4 to 3.6 .......... 2.9 to 3.2 .......... 2.8 to 3.0 .......... 3.4 to 3.6 

3 ............................................. 3.4 to 3.7 .......... 3.3 to 3.5 .......... 3.8 to 4.1 .......... 3.4 to 3.6 .......... 3.3 to 3.5 .......... 3.8 to 4.1 

4 ............................................. 4.3 to 4.6 .......... 4.1 to 4.4 .......... 4.7 to 5.0 .......... 4.2 to 4.5 .......... 4.1 to 4.4 .......... 4.6 to 4.9 

5 ............................................. 8.4 to 9.0 .......... 8.4 to 9.0 .......... 8.4 to 9.0 .......... 8.1 to 8.7 .......... 8.1 to 8.7 .......... 8.1 to 8.7 

C. Payback Period 

As discussed above, the Act requires 

the Department to examine payback 

periods to determine if the three-year 

rebuttable presumption of economic 

justification applies. As prescribed by 

the Act, the rebuttable payback period is 

"calculated under the applicable test 

procedure * * *". 

The annual space-cooling and spaceheating energy consumption calculated 

based on the hours of use in the test 

procedure are on the order of 50 percent 

greater than the weighted-average 

energy consumption data used in the 

life-cycle-cost (LCC) analysis. The LCC 

data are based on the 1997 RECS for 

residential buildings and hourly 

simulations for commercial buildings. 

Since the test procedure assumes higher 

annual operating hours than the RECS 

data implied, the use of test procedure 

energy consumption results in 

rebuttable payback periods which are 

shorter than median payback periods 

calculated from the LCC analysis. 

In Table V.3, we list the rebuttable 

payback periods versus SEER efficiency 

level for the four product classes, using 

the 1997 RECS energy consumption 

data. This information shows that both 

classes of heat pumps are presumed to 

be economically justified up to a 12 

SEER efficiency level, using the reverse 

engineering cost estimates. 

TABLE V.3.-SUMMARY OF REBUTTABLE PAYBACK PERIOD (YEARS) 

Product class/efficiency level Reverse engi- ARI mean nee ring costs costs 

Split System Central Air Conditioner. 

11 ..................................................................................................................................................................... . 3.5 4.7 

12 ................................................................................................. : ................................................................... . 4.5 5.8 

13 ..................................................................................................................................................................... . 5.2 7.6 

18 ..................................................................................................................................................................... . 7.3 11.3 

Split System Heat Pump: 

11 ..................................................................................................................................................................... . 1.3 2.5 

12 ..................................................................................................................................................................... . 1.8 3.3 

13 ..................................................................................................................................................................... . 3.2 4.5 

18 ..................................................................................................................................................................... . 5.8 6.8 

Single Package Air Conditioner: 

11 ..................................................................................................................................................................... . 3.5 7.3 

12 ..................................................................................................................................................................... . 3.3 6.2 

13 ..................................................................................................................................................................... . 6.8 9.8 

18 ..................................................................................................................................................................... . 8.6 13.3 

Single Package Heat Pump: 

11 ..................................................................................................................................................................... . 2.1 3.7 

12 ..................................................................................................................................................................... . 1.8 4.0 

13 ..................................................................................................................................................................... . 4.3 6.5 

18 ..................................................................................................................................................................... . 5.4 7.2 

D. Economic Justification 

1. Economic Impact on Manufacturers 

and Consumers 

Estimated economic impacts of 

standards on manufacturers are based 

on the methodology described in the 

proposed rule; however, in today's final 

rule the manufacturer impact analysis 

has been expanded to include impacts 

based on reverse engineering cost 

estimates as well as ARI manufacturing 

cost data. The economic impacts on 

manufacturers are presented in terms of 

industry net present value (INPV) as 

well as change in INPV. INPV is 

calculated by summing the stream of 

aIlnual discounted cash flows beginning 

from the base year of the analysis (2000) 

and continuing explicitly for ten years 

after the implementation of the standard 

and adding the discounted value of the 

industry at the end of the ten-year 

period (see TSD Section 8.4.4 and 

Appendix G). The discount rate is based 

on the industry's weighted average cost 

of capital. This method of calculating 

INPV provides one measure of the fair 

value of the industry in today's dollars. 

The impact of new standards on INPV 

is then the difference between the INPV 

in the base case (no new standards) and 

the INPV is the standards case (with 

new standards). 

Data are presented for the base case 

and for trial standard levels 1 through 

4, in Tables V.4 through V.g. As can be 

observed, manufacturer impacts are 

relatively insensitive between the 
* ? EE-RM/STD-98-440-"-_ 9-

7186 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

manufacturing cost estimates, but information on the methodology,

sensitive to the shipment scenarios. The assumptions and results.

proposed rule provides additional

TABLE V.4.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, NAECA

EFFICIENCY MIX

Industry net Change in INPV from base

Standard level present value case

($$ million) $million Percent

B ase ............................................................................................................................................. 1,539

1 .................................................................................................................................................. 1,509 (30) -

2 1,380 ,38059) (159) -................................

-,38059) -10

1,368 ,368 (..............................................................

(171) - 11

4,370 1,370 (69).....................................................

(169) (69)11 -,370 

TABLE V.5.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, ROLL-UP

EFFICIENCY MIX

Industry net Change in INPV from base

Standard level present value case

($$ million) $million Percent

B ase ............................................................................................................................................. 1,539 ........................ .......................

1 ................................................................................................................................................... 1,379 (160) - 1 0

2 .......................................................................................................................................... 1,226 (313) -20

3 .................................................................................................................................................. 1,220 (319) - 2 1

4 .......................................................................................................................................... 1,236 (303) - 20

TABLE V.6.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, SHIFT EFFICIENCY

MIX

Industry net Change in INPV from base

Standard level present value case

($ million) $million Percent

B ase ............................................................................................................................................. 1,539 ........................ .......................

1 ................................................................................................................................................... 1,658 119 8

2 ........................................................................................ ,772 233 15

3 .......................................................................................................................................... 1,776 237 15

4 .......................................................................................................................................... 1,824 285 19

TABLE V.7.-CHANGES IN INDUSTRY NET FRESENT VALUE-ARI MEAN MANUFACTURING COST, NAECA EFFICIENCY MIX

Industry net Change in INPV from base

Standard level present value case

($ million) $million . Percent

B ase ............................................................................................................................................. 1,603 .. ........................

.......................................................................................................................................... 1,566 (37) -2

2 ................................................................................................................................................... 1,417 (186) - 12

3 .......................................................................................................................................... 1,406 (197) -12

4 .......................................................................................................................................... 1,420 (183) -11

TABLE V.8.-CHANGES IN INDUSTRY NET PRESENT VALUE-ARI MEAN MANUFACTURING COST, ROLL-UP EFFICIENCY MIX

Industry net Change in INPV from base

Standard level present value c a se

($ million) $ million Percent

Base ....................................................................................................................................... ...... 1,603 ........................ ........................

1 .......................................................................................................................................... 1,422 (181) -11

2 ................................................................................................................................................... 1,241 (362) - 2 3

3 .......................................................................................................................................... 1,236 (367) -23

4 ................................................................................................................................................... 1,268 (335) - 2 1

EE-RM-STD-98-440 COMMENT 204

EE-RM/STO-9S-44o--tf=" ~ O<f 

7186 Federal Register/Vol. 66, No. l4/Monday, January 22, 200l/Rules and Regulations 

manufacturing cost estimates, but 

sensitive to the shipment scenarios. The 

proposed rule provides additional 

information on the methodology, 

assumptions and results. 

TABLE V.4.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, NAECA 

EFFICIENCY MIX 

Standard level 

Base ............................................................................................................................................ . 

1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .................................................................................................................................................. . 

4 .................................................................................................................................................. . 

Industry net 

present value 

($ million) 

1,539 

1,509 

1,380 

1,368 

1,370 

Change in INPV from base case 

$ million 

(30) 

(159) 

(171) 

(169) 

Percent 

-2 

-10 

-11 

-11 

TABLE V.S.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, ROLL-UP 

EFFICIENCY MIX 

Standard level 

Base ............................................................................................................................................ . 

1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .............................................................................................................. , ................................... . 

4 .................................................................................................................................................. . 

Industry net 

present value 

($ million) 

1,539 

1,379 

1,226 

1,220 

1,236 

Change in INPV from base case 

$ million 

(160) 

(313) 

(319) 

(303) 

Percent 

-10 

-20 

-21 

-20 

TABLE V.6.-CHANGES IN INDUSTRY NET PRESENT VALUE-REVERSE ENGINEERING RELATIVE COST, SHIFT EFFICIENCY . MIX . 

Standard level 

Base ............................................................................................................................................ . 

1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .................................................................................................................................................. . 

4 .................................................................................................................................................. . 

Industry net 

present value 

($ million) 

1,539 

1,658 

1,n2 

1,n6 

1,824 

Change in INPV from base case 

$ million 

119 

233 

237 

285 

Percent 

8 

15 

15 

19 

TABLE V.7.-CHANGES IN INDUSTRY NET PRESENT VALUE-ARI MEAN MANUFACTURING COST, NAECA EFFICIENCY MIX 

Standard level 

Base ............................................................................................................................................ . 

1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .................................................................................................................................................. . 

4 .................................................................................................................................................. . 

Industry net 

present value 

($ million) 

1,603 

1,566 

1,417 

1,406 

1,420 

Change in INPV from base 

case 

$ million . 

(37) 

(186) 

(197) 

(183) 

Percent 

-2 

-12 

-12 

-11 

TABLE V.B.-CHANGES IN INDUSTRY NET PRESENT VALUE-ARI MEAN MANUFACTURING COST, ROLL-UP EFFICIENCY MIX 

Standard level 

Base ............................................................................................................................................ . 

1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .................................................................................................................................................. . 

4 .................................................................................................................................................. . 

Industry net Change in INPV from base 

present value t-____ c_a,se ____ _ 

($ million) 

1,603 

1,422 

1,241 

1,236 

1,268 

$ million 

(181) 

(362) 

(367) 

(335) 

Percent 

-11 

-23 

-23 

-21 
* .** ' EE-RM/STD-98-440-o a^ 5

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7187

TABLE V.9.-CHANGES IN INDUSTRY NET PRESENT VALUE-ARI MEAN MANUFACTURING COST, SHIFT EFFICIENCY MIX

ndustry net hange in INPV from base

Standard level present value c ($ million) $ million Percent

B ase ............................................................................................................................................. 1,603 ........................ ........................ Base ............................................................. ...................................................................................... 1,740 137 1 .................................. 1,740 137 9

2 ................................................................................................................................................... 1,825 222 14

3 ................................................................................................................................................... 1,854 251 16

......................................................................... 4 ................................................ 1,9 4 311 19

Table V.10 provides the change in INPV relative to the base case (with no change in standards) for trial standard

levels 1 through 4. Data are presented for two industry segments (lower cost manufacturers and higher cost manufacturers),

and for the three shipment efficiency scenarios.

TABLE V.10.-CHANGE IN INDUSTRY NET PRESENT VALUE (PERCENT) RELATIVE TO BASE-COMPARISON BETWEEN

LOWER (L) AND HIGHER (H) COST MANUFACTURERS

Reverse engineering relative cost (in percent) ARI mean manufacturing cost (in percent)

etandard NAECA Roll-up Shift NAECA Roll-up Shift level

L H L H L H L H L H L H

1............... 5 -4 3 -15 6 8 5 -5 3 -16 7 9

2 ............... 7 -16 5 -28 13 16 7 -17 5 -31 12 14

3 ............... 8 -17 6 -29 14 16 9 -19 6 -32 14 16

4 ............... 12 -18 10 -29 19 18 15 -19 13 -31 21 19

For the group most negatively impacted, i.e., the higher cost group, Table V.11 presents the Return on Invested

Capital (ROIC) in year 2011 associated with the base case, and with each new standard level for the NAECA and

Roll-up shipment efficiency scenarios.

TABLE V.11.-RETURN ON INVESTED CAPITAL (ROIC) IN 2011 FOR HIGHER COST MANUFACTURERS

Reverse engineering ARI manufacturing costs

Standard level (in percent) (in percent)

NAECA Roll-up NAECA Roll-up

Base ................................................................................................................. 13.0 13.0 13.3 13.3

1 ....................................................................................................................... 12.2 10.7 12.3 10.7

2 ........................................ 1...........................2 8.5 0.2 8.4

3 ....................................................................................................................... 10.0 8.4 10.0 8.3

4 ....................................................................................................................... 9.7 8.4 9.6 8.3

Consumers will also be affected by installation costs), annual energy regard to the percentage of consumers increased efficiency standards in that savings, average and marginal electricity (both residential and commercial) that

they will experience higher purchase prices, electricity price trends, repair are impacted to a substantial degree by

prices and lower operating costs. These costs, maintenance costs, equipment an increase in the minimum efficiency

impacts are best captured by changes in lifetime, and discount rates. standard.

life cycle costs which are discussed life cycle costs which are discussed The output of the LCC model is the Table V.12 summarizes the'LCCs for

mean LCC savings for each product baseline split systems and single

2. Life-Cycle-Cost (LCC) class as well as a probability package central air conditioners and

We analyzed the net effect by distribution or likelihood of LCC heat pumps and also shows a 2 percent

calculating the LCC. Inputs required for reduction or increase. The LCC analysis threshold which helped us identify

calculating LCC include total installed for today's final rule employs a concept those consumers who are impacted to a

costs (i.e., equipment price plus described in the proposed rule with more substantial degree.

TABLE V.12.-BASELINE LIFE-CYCLE-COSTS

Product Class Baseline LCC 2% of Baseline LCC

Split Air C onditioners ................................................................................................................................... $5,170 $103

Split H eat Pum ps ......................................................................................................................................... 9,679 194

Single Package Air Conditioners ................................................................................................................. 5,629 113

Single Package H eat Pum ps ....................................................................................................................... 9,626 193

EE-RM-STD-98-440 COMMENT 204

'. EE.RM/STD.~8-440 -It 6lo Cf 

Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 7187 

TABLE V.g.-CHANGES IN INDUSTRY NET PRESENT VALUE-ARI MEAN MANUFACTURING COST, SHIFT EFFICIENCY MIX 

Standard level 

Ba'se ............................................................................................................................................ . 1 .................................................................................................................................................. . 

2 .................................................................................................................................................. . 

3 .................................................................................................................................................. . 

4 .................................................................................................................................................. . 

Industry net 

present value 

($ million) 

1,603 

1,740 

1,825 

1,854 

1,914 

Change in INPV from base case 

$ million Percent 

137 9 

222 14 

251 16 

311 19 

Table V.10 provides the change in INPV relative to the base case (with no change in standards) for trial standard 

levels 1 through 4. Data are presented for two industry segments (lower cost manufacturers and higher cost manufacturers), 

and for the three shipment efficiency scenarios. 

TABLE V.10.-CHANGE IN INDUSTRY NET PRESENT VALUE (PERCENT) RELATIVE TO BASE-COMPARISON BETWEEN 

LOWER (L) AND HIGHER (H) COST MANUFACTURERS 

Reverse engineering relative cost (in percent) ARI mean manufacturing cost (in percent) 

Standard NAECA Roll-up Shift NAECA Roll-up Shift level 

L H L H L H L H L H L H 

1 ............... 5 -4 3 -15 6 8 5 -5 3 -16 7 9 

2 ............... 7 -16 5 -28 13 16 7 -17 5 -31 12 14 

3 ............... 8 -17 6 -29 14 16 9 -19 6 -32 14 16 

4 ............... 12 -18 10 -29 19 18 15 -19 13 -31 21 19 

For the group most negatively impacted, i.e., the higher cost group, Table V.ll presents the Return on Invested 

Capital (ROIC) in year 2011 associated with the base case, and with each new standard level for the NAECA and 

Roll-up shipment efficiency scenarios. 

TABLE V.11.-RETURN ON INVESTED CAPITAL (ROIC) IN 2011 FOR HIGHER COST MANUFACTURERS 

Standard level 

Reverse engineering (in percent) 

ARI manufacturing costs 

(in percent) 

NAECA 

Base ................................................................................................................ . 13.0 

12.2 

10.2 

10.0 

1 ...................................................................................................................... . 

2 ...................................................................................................................... . 

3 ..................................................................................................................... .. 

4 ...................................................................................................................... . 9.7 

Consumers will also be affected by 

increased efficiency standards in that 

they will experience higher purchase 

prices and lower operating costs. These 

impacts are best captured by changes in 

life cycle costs which are discussed 

below. 

2. Life-Cycle-Cost (LCC) 

We analyzed the net effect by 

calculating the LCC. Inputs required for 

calculating LCC include total installed 

costs (j.e., equipment price plus 

installation costs), annual energy 

savings, average and marginal electricity 

prices, electricity price trends, repair 

costs, maintenance costs, equipment 

lifetime, and discount rates. 

The output of the LCC model is the 

mean LCC savings for each product 

class as well as a probability 

distribution or likelihood of LCC 

reduction or increase. The LCC analysis 

for today's final rule employs a concept 

described in the proposed rule with 

Roll-up 

13.0 

10.7 

8.5 

8.4 

8.4 

NAECA 

13.3 

12.3 

0.2 

10.0 

9.6 

Roll-up 

13.3 

10.7 

8.4 

8.3 

8.3 

regard to the percentage of consumers 

(both residential and commercial) that 

are impacted to a substantial degree by 

an increase in the minimum efficiency 

standard. 

Table V.12 summarizes the' LCCs for 

baseline split systems and single 

package central air conditioners and 

heat pumps and also shows a 2 percent 

threshold which helped us identify 

those consumers who are impacted to a 

more substantial degree. 

TABLE V.12.-BASELINE LiFE-CYCLE-COSTS 

Product Class 

Split Air Conditioners .................................................................................................................................. . 

Split Heat Pumps ........................................................................................................................................ . 

Single Package Air Conditioners ............................................................................................................... .. 

Single Package Heat Pumps ..................................................................................................................... .. 

Baseline LCC 

$5,170 

9,679 

5,629 

9,626 

2% of Baseline 

LCC 

$103 

194 

113 

193 
EE-RM/STD-98-440 - 0O

7188 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

Tables V.13 and V.14 depict the LCC SEER LCC results which underestimate who are impacted in one of three ways:

results for split system and single their true cost level. The data in Tables consumers who achieve net LCC savings

package central air conditioners and V.13 and V.14 also present the in excess of 2 percent of the baseline

heat pumps. The tables show the difference in LCC at each efficiency LCC, consumers whose change in LCC

average LCC values for the baseline and level relative to the baseline. The is within ±2 percent of the baseline LCC,

each trial standard level. Since differences represent either an LCC and consumers who achieve a net LCC

manufacturer cost data were not savings or an LCC cost increase. In increase exceeding 2 percent of the

available for the 18 SEER efficiency addition, the tables show the subset of baseline LCC.

levels, 15 SEER cost data were used for consumers (both residential and

all 18 SEER calculations resulting in 18 commercial) at each efficiency level

TABLE V.13.-SUMMARY OF LCC RESULTS BASED ON REVERSE ENGINEERING MANUFACTURING COSTS

Percent of consumers with

Average LCC

Product Class/Efficiency Level Average LCC Savings Net Savings or Net Costs (P-<-csts *

l

Net Savings Costs N C ost s (Costs) Costs > (>2 %) (>2 %) (> 2 %)

Split System Central Air Conditioner

10 ................................................................................. $5 ,170 ........................ ........................ ........................ ........................ 11 .................................................................................. 5,095 $75 28 70 2%

12 .................................................................................. 5,057 113 35 40 25%

13 .................................................................................. 5,057 113 34 27 39%

18 .................................................................................. 5,307 (137) 25 7 68%

Split System Heat Pump:

10 .................................................................................. 9,679 ........................ ........................ ........................ ......................

11 .................................................................................. 9,470 209 40 60 0%

12 .................................................................................. 9,314 365 58 42 0%

13 .................................................................................. 9,307 372 52 42 6%

18 .................................................................................. 9,720 (41) 28 15 57%

Single Package Air Conditioner:

10 .................................................................................. 5 ,629 ........................ ........................ ........................ ........................ 11 .................................................................................. 5,551 78 27 72 1%

12 .................................................................................. 5,466 163 40 51 9%

13 .................................................................................. 5,600 29 28 20 52%

18 .................................................................................. 5,905 (276) 21 6 73%

Single Package Heat Pump:

10 .................................................................................. 9,626 ........................ ............ . ........................

11 .................................................................................. 9,419 207 39 61 0

12 .................................................................................. 9,205 421 66 34 0

13 .................................................................................. 9,273 353 50 38 12

18 .................................................................................. 9,460 166 37 15 48

TABLE V.14.-SUMMARY OF LCC RESULTS BASED ON ARI MEAN MANUFACTURING COSTS

Percent of consumers with

Average LCC

Product class/efficiency level Average LCC savings Net savings or Net costs (costs) Net savings Net costs (> 2%) costs (>2%)

Split System Central Air Conditioner

10 .................................................................................. $5,170 ........................ ........................ ........................ ....................... 11 .............................................. ..................... 5,126 $44 23 68 9

12 .................................................................................. 5,125 45 27 34 39

13 .................................................................................. 5,199 (29) 25 17 58

18 .................................................................................. 5,725 (555) 15 4 81

Split System Heat Pump:

10 .................................................................................. 9 ,67 9 ........................ ........................ ........................ .......................

11 .................................................... ..... 9,529 150 30 70 0

12 .................................................................................. 9,437 242 42 55 3

13 .................................................................................. 9,464 215 39 39 22

18 .................................................................................. 9,955 (276) 23 11 66

Single Package Air Conditioner:

10 .................................................................................. 5 ,6 2 9 ........................ ........................ ........................ .......................

11 .................................................... ..... 5,649 (20) 16 47 37

12 .................................................... ..... 5,600 29 26 30 44

13 .................................................................................. 5,804 (175) 18 11 71

18 .................................................... ..... 6,370 (741) 12 4 84

Single Package Heat Pump:

10 .................................................................................. 9 ,6 2 6 ........................ ........................ ........................ .......................

11 .................................................... ..... 9,492 134 28 72 0

12 .................................................... ..... 9,372 254 44 49 7

13 ................................................................................. 9,514 112 33 31 36

EE-RM-STD-98-440 COMMENT 204

' . 

. ' 

EE-RM/STD-98-440 --'It ~ O'f 

7188 Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 

Tables V.13 and V.14 depict the Lee 

results for split system and single 

package central air conditioners and 

heat pumps. The tables show the 

average Lee values for the baseline and 

each trial standard level. Since 

manufacturer cost data were not 

available for the 18 SEER efficiency 

levels, 15 SEER cost data were used for 

all 18 SEER calculations resulting in 18 

SEER Lee results which underestimate 

their true cost level. The data in Tables 

V.13 and V.14 also present the 

difference in Lee at each efficiency 

level relative to the baseline. The 

differences represent either an Lee 

savings or an Lee cost increase. In 

addition, the tables show the subset of 

consumers (both residential and 

commercial) at each efficiency level 

who are impacted in one of three ways: 

consumers who achieve net Lee savings 

in excess of 2 percent of the baseline 

Lee, consumers whose change in Lee 

is within ±2 percent of the baseline Lee, 

and consumers who achieve a net Lee 

increase exceeding 2 percent of the 

baseline Lee. 

TABLE V.13.-SUMMARY OF LCC RESULTS BASED ON REVERSE ENGINEERING MANUFACTURING COSTS 

Percent of consumers with 

Average LCC 

Product Class/Efficiency Level Average LCC Savings Net Savings Net Savings or Net Costs (Costs) (>2%) Costs (>2%) (±2%) 

Split System Central Air Conditioner. 

10 ................................................................................ .. $5,170 ........................ ........................ ........................ . ....................... 11 ................................................................................ .. 5,095 $75 28 70 2% 

12 ................................................................................ .. 5,057 113 35 40 25% 

13 ................................................................................ .. 5,057 113 34 27 39% 

18 ................................................................................ .. 5,307 (137) 25 7 68% 

Split System Heat Pump: 

10 ................................................................................ .. 9,679 ........................ ........................ . ....................... . ....................... 11 ................................................................................ .. 9,470 209 40 60 0% 

12 ................................................................................ .. 9,314 365 58 42 0% 

13 ................................................................................ .. 9,307 372 52 42 6% 

18 ................................................................................. . 9,720 (41) 28 15 57% 

Single Package Air Conditioner: 

10 ................................................................................. . 5,629 ........................ ........................ . ....................... ........................ 11 ................................................................................ .. 5,551 78 27 72 1% 

12 ................................................................................ .. 5,466 163 40 51 9% 

13 ................................................................................ .. 5,600 29 28 20 52% 

18 ................................................................................ .. 5,905 (276) 21 6 73% 

Single Package Heat Pump: 

10 ................................................................................. . 9,626 ........................ . ....................... . ....................... ........................ 11 ................................................................................ .. 9,419 207 39 61 0 

12 ................................................................................ .. 9,205 421 66 34 0 

13 ................................................................................ .. 9,273 353 50 38 12 

18 ................................................................................. . 9,460 166 37 15 48 

TABLE V.14.-SUMMARY OF LCC RESULTS BASED ON ARI MEAN MANUFACTURING COSTS 

Percent of consumers with 

Product class/efficiency level Average LCC 

Average LCC savings Net savings Net savin~s or Net costs (costs) (>2%) !costs (> 2%) ±2% 

Split System Central Air Conditioner. 

10 ................................................................................. . $5,170 . ....................... ........................ ........................ ........................ 11 ................................................................................. . 5,126 $44 23 68 9 

5,125 45 27 34 39 

5,199 (29) 25 17 58 

12 ................................................................................ .. 

13 ....................................................... : ........................ .. 

18 ................................................................................ .. 5,725 (555) 15 4 81 

Split System Heat Pump: 

10 ................................................................................ .. 9,679 . ....................... ........................ ........................ ........................ 11 ................................................................................ .. 9,529 150 30 70 0 

12 ................................................................................ .. 9,437 242 42 55 3 

13 ................................................................................ .. 9,464 215 39 39 22 

18 ................................................................................ .. 9,955 (276) 23 11 66 

Single Package Air Conditioner: 

10 ................................................................................ .. 5,629 ........................ ........................ . ....................... ........................ 11 ................................................................................ .. 5,649 (20) 16 47 37 

12 ................................................................................. . 5,600 29 26 30 44 

13 ................................................................................ .. 5,804 (175) 18 11 71 

1B ................................................................................ .. 6,370 (741) 12 4 84 

Single Package Heat Pump: 

10 ................................................................................ .. 9,626 .. ...................... ........................ ........................ ........................ 11 ................................................................................ .. 9,492 134 28 72 0 

12 ................................................................................ .. 9,372 254 44 49 7 

13 ................................................................................. . 9,514 112 33 31 36 
EE.RM/STD-98-440 ° G z

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7189

TABLE V.14.--SUMMARY OF LCC RESULTS BASED ON ARI MEAN MANUFACTURING COSTS-Continued

Percent of consumers with

Average LCC

Product class/efficiency level Average LCC savings Net savings Net sa or N) (> 2st

(costs) (>2%) (costs)

(± 2%)

18 .................................................................................. 9,922 (296) 24 10 66

Consumer subgroup impacts have been estimated by determining the LCC impacts of the trial standard levels on

those consumers who are below the poverty line (e.g., for a family of four, this constitutes a household income of

less than $16,036). To perform this calculation, we used the subset of RECS 97 data for households that are considered

low-income.1s Table V.15 and V.16 summarize the impacts on low-income consumers who utilize central air conditioners

and heat pumps.

TABLE V.15.-SUMMARY OF LCC RESULTS ON LOW-INCOME CONSUMERS BASED ON REVERSE ENGINEERING

MANUFACTURING COSTS

Percent of consumers with

Average LCC

Product class/efficiency level Average LCC savings Net savings Net Savins or Net costs

(costs) (>2%) ( costs>2%)

(C~'S( 2% (> 2%)

Split System Central Air Conditioner.

10 .................................................................................. $4 ,906 ........................ ........................ ....................... ........................

11 .................................................................................. 4,855 $51 21 74 5

12 .................................................................................. 4,841 65 28 38 34

13 .................................................................................. 4,863 43 26 24 50

18 .................................................................................. 5,176 (270) 17 6 77

Split System Heat Pump:

10 ............... ................................................................... 8,965 ........................ ........................ ........................ ...................... 11 .................................................................................. 8,836 129 26 74 0

12 .................................................................................. 8,742 223 44 56 0

13 .................................................................................. 8,780 185 39 49 12

18 .................................................................................. 9,389 (424) 15 10 75

Single Package Air Conditioner:

10 .................................................................................. 5 ,3 27 ........................ ........................ ........................ ...................... 11 .................................................................................. 5,272 55 21 77 2

12 .................................................................................. 5,202 125 34 52 14

13 .................................................................................. 5,364 (37) 21 18 61

18 .................................................................................. 5,704 (377) 15 5 80

Single Package Heat Pump: 10 .................................................................................. 9 ,14 9 ........................ ........................ ........................ ...................... 11 .................................................................................. 9,057 118 24 76 0

12 .................................................................................. 8,973 265 53 47 0

13 ........................................ ........... 9,145 148 36 44 20

18 .................................................................................. 9,619 (284) 20 14 66

TABLE V.16.-SUMMARY OF LCC RESULTS ON LOW-INCOME CONSUMERS BASED ON ARI MEAN MANUFACTURING COSTS

Average LCC __ Percent of consumers with

Product class/efficiency level Average LCC savings N ngs Savings/costs Net costs

(COStS) (>2%) (± 2%) (> 2%)

Split System Central Air Conditioner

10 ............................................ $4,906 ........................ ................... ..... ........................

11 .................................................................................. 4,887 $19 17 66 17

12 .................................................................................. 4,903 3 20 29 51

13 .................................................................................. 5,007 (101) 17 14 69

18 ........................................ 5,598 (692) 10 2 88

Split System Heat Pump:

10 .................................................................................. 8,965 ........................ ........................ ........................ ........................

11 .................................................................................. 8,890 75 16 84 0

12 .................................................................................. 8,862 103 27 64 9

13 .................................................................................. 8,948 17 25 40 35

18 .................................................................................. 9,610 (645) 11 8 81

Single Package Air Conditioner:

10 ............................................ 5,327 ........................ ........................ ........................

1 5 Approximately 7 percent of the RECS 97

households with central air conditioners and 9

percent of the households with heat pumps met this

criteria.

EE-RM-STD-98-440 COMMENT 204

.- EE-RM/STD-98-440 -:fI::AtYf 

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7189 

TABLE V.14.-SUMMARY OF LCC RESULTS BASED ON ARI MEAN MANUFACTURING COsTS-Continued 

Percent of consumers with 

Product class/efficiency level Average LCC Avera\le LCC 

savings Net Net savinss or savings Net costs (costs) (>2%) (costs (>2%) (±2%) 

18 .................................................................................. 9,922 (296) 24 10 66 

Consumer subgroup impacts have been estimated by determining the LCC impacts of the trial standard levels on 

those consumers who are below the poverty line (e.g., for a family of four, this constitutes a household income of 

less than $16,036). To perform this cafculation, we used the subset of RECS 97 data for households that are considered 

low-income. 15 Table V.15 and V.16 summarize the impacts on low-income consumers who utilize central air conditioners 

and heat pumps. 

TABLE V.1S.-SUMMARY OF LCC RESULTS ON LOW-INCOME CONSUMERS BASED ON REVERSE ENGINEERING 

MANUFACTURING COSTS 

Percent of consumers with 

Product class/efficiency level Average LCC 

Average LCC savings Net savings Net savin~s or Net costs (costs) (>2%) (costs (> 2%) (±2%) 

Split System Central Air Conditioner. 

10 ................................................................................. . $4,906 . ....................... ........................ ........................ . ....................... 11 ................................................................................ .. 4,855 $51 21 74 5 

12 ................................................................................ .. 4,841 65 28 38 34 

13 ................................................................................ .. 4,863 43 26 24 50 

18 ................................................................................. . 5,176 (270) 17 6 n 

Split System Heat Pump: 

10 ................................................................................ .. 8,965 . ....................... ........................ ........................ ........................ 11 ................................................................................ .. B,836 129 26 74 0 

12 ................................................................................. . 8.742 223 44 56 0 

13 ................................................................................. . 8,780 185 39 49 12 

18 ................................................................................ .. 9,389 (424) 15 10 75 

Single Package Air Conditioner: 

10 ................................................................................ .. 5,327 . ....................... ........................ ........................ ........................ 11 ................................................................................. . 5,272 55 21 77 2 

12 ................................................................................ .. 5.202 125 34 52 14 

13 ................................................................................ .. 5,364 (37) 21 18 61 

18 ................................................................................ .. 5.704 (377) 15 5 80 

Single Package Heat Pump: 

10 ................................................................................. . 9,149 ........................ ........................ ........................ ........................ 11 ................................................................................. . 9,057 118 24 76 0 

12 ................................................................................ .. 8.973 265 53 47 0 

13 ................................................................................ .. 9,145 148 36 44 20 

18 ................................................................................ .. 9,619 (284) 20 14 66 

TABLE V.16.-SUMMARY OF LCC RESULTS ON LOW-INCOME CONSUMERS BASED ON ARI MEAN MANUFACTURING COSTS 

Product class/efficiency level 

Split System Central Air Conditioner. 

10 ................................................................................ .. 

11 ................................................................................. . 12 ................................................................................ .. 

13 ................................................................................ .. 18 ................................................. : .............................. .. 

Split System Heat Pump: 

10 ................................................................................ .. 

11 ................................................................................ .. 

12 ................................................................................ .. 

13 ................................................................................. . 

18 ................................................................................ .. 

Single Package Air Conditioner: 

10 ................................................................................. . 

IS Approximately 7 percent of the REGS 97 

households with central air conditioners and 9 

percent of the households with heat pumps mot this 

critoria. 

Average LCC 

$4,906 

4,887 

4,903 

5,007 

5,598 

8,965 

8,890 

8,862 

8,948 

9,610 

5,327 

Averal:/e LCC 

savings 

(costs) 

. ....................... $19 

3 

(101) 

(692) 

........................ 75 

103 

17 

(645) 

........................ 

Percent of consumers with 

Net savings Savings/costs Net costs 

(>2%) (±2%) (> 2%) 

........................ ........................ ........................ 17 66 17 

20 29 51 

17 14 69 

10 2 88 

........................ ........................ . ....................... 16 84 0 

27 64 9 

25 40 35 

11 8 81 

........................ ........................ .. ...................... 
EE-RM/STD-98-440--7 0^' 

7190 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

TABLE V.16.-SUMMARY OF LCC RESULTS ON LOW-INCOME CONSUMERS BASED ON ARI MEAN MANUFACTURING

COSTS-Continued

Percent of consumers with Average LCC Product class/efficiency level Average LCC savings Net savings Savings/costs Net costs

(costs) (> 2%) (± 2%) (> 2%)

11 .................................................................................. 5,283 44 11 42 47

12 .................................................................................. 5,313 14 20 27 53

13 .................................................................................. 5,568 (241) 12 9 79

18 ................................................................................. 6,158 (831) 10 2 88

Single Package Heat Pump:

10 .................................................................................. 9,149 ........................ ........................ ........................ ........................ 11 ........................................ 9,057 92 21 78 1

12 .................................................................................. 8,973 176 35 53 12

13 .................................................................................. 9,145 4 25 27 48

18 .................................................................................. 9,619 (470) 18 8 74

In comparing the LCC results on the subgroup of consumers who are low-income (Tables V.15 and V.16) versus

all central air conditioner and heat pump consumers (Tables V.13 and V.14), it appears that low-income consumers

have lower savings at the different trial standard levels than the general population of central air conditioner and

heat pump consumers. Table V.17 directly compares the LCC impacts of the final rule on both the low-income subgroup

and all consumers.

TABLE V.17.-COMPARISON OF LCC IMPACTS OF THE FINAL RULE ON ALL CONSUMERS VS. LOW-INCOME CONSUMERS

Reverse engineering costs ARI mean costs

Percent of consumers Percent of conAverage LO savings with net costs (>2% of Average LCC savings sumers with net

Product class SEER (costs) baseline LCC) (costs) costs (>2% of baseline LCC)

All con- Low-in- All con- Low-in- All con- Low-in- All con- Low-insumers come sumers come sumers come sumers come

Split System A/C ................................ 13 $113 $43 39 50 ($29) ($101) 58 69

Split System HP ................................. 13 372 185 6 12 215 17 22 35

Single Package A/C ........................... 13 29 (37) 52 61 (175) (241) 71 79

Single Package HP ............................ 13 353 148 12 20 112 4 36 48

3. Net Present Value and Net National Electricity price and housing efficiency distribution after new

Employment projections; (2) shipment efficiency standards: (1) NAECA scenario, (2) RollThe net present value analysis is a distributions; (3) manufacturer cost up scenario, and (3) Shift scenario. For

measure of the cumulative benefit or estimates; and (4) societal discount rate. these results the equipment lifetime was

cost to the Nation that would result Electricity price and housing projections assumed to be 18.4 years, coupled with

from more stringent standards. As with were based on three different AEO 2000 the inclusion of compressor

the determination of national energy forecasts: (1) Reference Case, (2) High replacement costs and an assumed

savings, four different scenarios were Growth Case, and (3) Low Growth Case. societal discount rate of 7 percent. The

analyzed for each trial standard level Three efficiency scenarios were range of NPVs are reported in Table

consisting of variations on: (1) analyzed which forecast the shipment V.18.

TABLE V.18: RANGE OF NET PRESENT VALUE WITH ELECTRICITY PRICE AND HOUSING PROJECTIONS

Net present value for unites sold from 2006 to 2030 (billion 98$)

Trial standard level Reverse engineering costs ARI mean costs

NAECA Rool-up Shift NAECA Roll-up Shift

1 ........................................................................ 1to2 ............ 2 ................... 1 to 2 ............ 0 ................... 1 ................... O to - 1

2 ....................................................................... 2 ................... 2 to 3 ............ O to -1 ........ - 1 ............... to ............ -3 to -4

3 ........................................................................ 1 to 2 ............ 2 to 3 ............ - 1to - 2 .... - 1 to - 2 .... O to -1 ........ -5

4 ........................................................................ to 1 ............ 1 to 2 ............ -3 to -4 .... -5 to -6 .... -4 ............... - 10

5 ........................................................................ -10 to -11 - 10 to - 11 -10 to - 11 -22 ............. -22 ............. -22

In order to show the sensitivity of the range of assumptions and scenarios equipment. By the "base case" we mean

NPVs in Table V.18 to the various input relative to the base case national the case of no new efficiency standards.

assumptions, Tables V.19 through V.22 equipment and operating costs for all The results in Table V.19 and V.20 are report the range of NPV results for a central air-conditioning and heat pump the AEO 2000 Reference Case forecast of

EE-RM-STD-98-440 COMMENT 204

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7190 Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 

TABLE V.16.-SUMMARY OF LCC RESULTS ON LOw-INCOME CONSUMERS BASED ON ARI MEAN MANUFACTURING 

COsTs-Continued 

Product class/efficiency level 

Avera!;!e Lee Percent of consumers with 

Average Lee savings Net savings Savings/costs Net costs (costs) (>2%) (i 2%) (>2%) 

11 ................................................................................. . 5,283 44 11 42 47 

12 ................................................................................. . 5,313 14 20 27 53 

13 ................................................................................. . 5,568 (241) 12 9 79 

18 ................................................................................. . 6,158 (831) 10 2 88 

Single Package Heat Pump: 

10 ................................................................................. . 9,149 ........................ ........................ . ....................... ........................ 11 ................... : ............................................................. . 9,057 92 21 78 1 

12 ................................................................................. . 8,973 176 35 53 12 

13 ................................................................................. . 9,145 4 25 27 48 

18 ................................................................................ .. 9,61~ (470) 18 8 74 

In comparing the LCC results on the subgroup of consumers who are low-income (Tables V.15 and V.16) versus 

all central air conditioner and heat pump consumers (Tables V.13 and V.14), it appears that low-income consumers 

have lower savings at the different trial standard levels than the general population of central air conditioner and 

heat pump consumers. Table V.17 directly compares the LCC impacts of the final rule on both the low-income subgroup 

and all consumers. 

TABLE V.17.-COMPARISo.N OF LCC IMPACTS OF THE FINAL RULE ON ALL CONSUMERS VS. LOW-INCOME CONSUMERS 

Product class SEER 

Split System Ale ................................ 

Split System HP ................................. Single Package AlC ........................... 

Single Package HP ............................ 

3. Net Present Value and Net National 

Employment 

13 

13 

13 

13 

The net present value analysiS is a 

measure of the cumulative benefit or 

cost to the Nation that would result 

from more stringent standards. As with 

the determination of national energy 

savings, four different scenarios were 

analyzed for each trial standard level 

consisting of variations on: (1) 

Reverse engineering costs 

Average Lee savings Percent of consumers with net costs ~2% of (costs) baseline L C) 

All con- Low-in- All con- Low-in- sumers come sumers come 

$113 $43 39 50 

372 185 6 12 

29 (37) 52 61 

353 148 12 20 

Electricity price and housing 

projections; (2) shipment efficiency 

distributions; (3) manufacturer cost 

estimates; and (4) societal discount rate. 

Electricity price and housing projections 

were based on three different AEO 2000 

forecasts: (1) Reference Case, (2) High 

Growth Case, and (3) Low Growth Case. 

Three efficiency scenarios were 

analyzed which forecast the shipment 

ARI mean costs 

Percent of con- Average LeC savings sumers with net 

(costs) costs (>2% of baseline Lee) 

All con- Low-in- All con- Low-in- sumers come sumers come 

($29) ($101) 58 69 

215 17 22 35 

(175) (241) 71 79 

112 4 36 48 

efficiency distribution after new 

standards: (1) NAECA scenario, (2) Rollup scenario, and (3) Shift scenario. For 

these results the equipment lifetime was 

assumed to be 18.4 years, coupled with 

the inclusion of compressor 

replacement costs and an assumed 

societal discount rate of 7 percent. The 

range of NPVs are reported in Table 

V.18. 

TABLE V.18: RANGE OF NET PRESENT VALUE WITH ELECTRICITY PRICE AND HOUSING PROJECTIONS 

Trial standard level 

1 ....................................................................... . 

2 ....................................................................... . 

3 ....................................................................... . 

4 ....................................................................... . 

5 ....................................................................... . 

In order to show the sensitivity of the 

NPVs in Table V.18 to the various input 

assumptions, Tables V.19 through V.22 

report the range of NPV results for a 

Net present value for unites sold from 2006 to 2030 (billion 98$) 

Reverse engineering costs 

NAECA Rool-up ShiH 

1 to 2 ........... . 2 .................. . 1 to 2 .......... .. 2 ................. .. 2 to 3 .......... .. o to -1 ...... .. 

1 to 2 .......... .. 2 to 3 ........... . -1 to -2 .. .. 

(I to 1 ........... . 1 to 2 ........... . -3 to -4 .. .. 

-10 to -11 -10 to -11 -10to -11 

range of assumptions and scenarios 

relative to the base case national 

equipment and operating costs for all 

central air-conditioning and heat pump 

ARI mean costs 

NAECA Roll-up 

0 ................. .. 1 .................. . 

-1 ............. .. o to 1 .......... .. 

-1to-2 .. .. o to -1 ...... .. 

-5 to -6 .. .. -4 .............. . 

-22 ........... .. -22 ............ . 

ShiH 

o to -1 

-3 to -4 

-5 

-10 

-22 

equipment. By the "base case" we mean 

the case of no new efficiency standards. 

The results in Table V.19 and V.20 are 

the AEO 2000 Reference Case forecast of 
* EE-RM/STD-98-440 - O

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7191

electricity prices and housing. The total rate is 7 percent. In addition, the NPV well as the NPV as a percentage of the

costs are presented for the base case and (the difference in total costs between the "Base Case Total Costs," are calculated

each trial standard level. The discount base case and trial standard level), as for each trial standard level.

TABLE V.19.-NET PRESENT VALUES RESULTS RELATIVE TO BASE CASE TOTAL EQUIPMENT AND OPERATING COSTS

BASED ON REVERSE ENGINEERING MANUFACTURING COSTS

Efficiency scenario

Base NAECA Roll-up Shift

case total case total NPV NPV NPV TSL costs biL coss Total Total Total

biion costs As per- costs As per- costs As perbillion Billion cent of billion Billion cent of billion Billion cent of

98$ 98$ base 98$ 98$ base 98$ 98$ base case total case total case total

1 .............................. 379 378 2 0.4 377 2. 0.5 378 1 0.4

2 ............................... 379 377 2 0.5 377 3 0.7 380 (1) 0.2

3 ............................... 379 378 1 0.4 377 2 0.6 381 (2) 0.5

4 ............................... 379 379 0 0.0 378 1 0.3 383 (4) 0.9

5 ............................... 379 390 (10) -2.7 390 (10) -2.7 390 (10) -2.7

TABLE V.20.-NET PRESENT VALUES RELATIVE TO BASE CASE TOTAL EQUIPMENT AND OPERATING COSTS BASED ON

ARI MEAN MANUFACTURING COSTS

Efficiency scenario

Base NAECA Roll-up Shift Base case totalcasetotal ~ NPV NPV NPV TSL costs bTL coss Total V Total NVTotal N

on$ costs As per- costs As per- costs as per- billion Billion cent of billion Billion cent of billion billion cent of

98$ 98$ base 98$ 98$ base 98$ 98$ base case total case total case total

1 ............................... 381 381 0 0.0 381 1 0.2 385 0 -0.1

2 ............................... 381 382 (1) -0.3 381 0 0.0 388 (3) -0.9

3 ............................... 381 383 (2) -0.5 382 (1) -0.2 390 (5) -1.4

4 ............................... 381 387 (5) -1.4 386 (4) -1.1 395 (10) -2.5

5 ............................... 381 403 (22) -5.8 403 (22) -5.8 407 (22) -5.8

Table V.21 shows how a 3 percent scenario and the AEO Reference Case were considered in analyzing the

discount rate 16 impacts the net present electricity price and housing projection impacts from a 3 percent discount rate.

value. Only the Roll-up efficiency

TABLE V.21: NET PRESENT VALUES RESULTS BASED ON 3-PERCENT DISCOUNT RATE

Reverse engineering costs ARI mean costs

Trial standard level Trial standard level

TSL Base case Base case total costs Total cost Net p e Net As percent JATotal cost of base present billion 98$ billion 98$ present case total billion 98$ billion 98$ value bil- cast total value 98b value 98$ costs lion 98$ costs

1 ....................................................... 708 701 7 0.9 712 707 4 0.6

2 ....................................................... 708 697 11 1.6 712 705 6 0.9

3 ....................................................... 708 697 11 1.6 712 706 6 0.8

4 ....................................................... 708 697 11 1.5 712 711 0 0.0

5 ....................................................... 708 716 (8) -1.2 712 746 (35) -4.9

The proposed rule also estimated the energy efficiency standards for central and the resulting net savings are

national employment impacts due to air conditioners and heat pumps are expected to be redirected to other forms

each of the five trial standard levels. As expected to reduce electricity bills for of economic activity. These shifts in

discussed in the proposed rule, the residential and commercial consumers

'6 A societal discount rate of 3 percent value was Office of Management and Budget's (OMB) Guidelines to Standardize Measures of Costs and

investigated as a scenario in accordance with the Benefits and the Format of Accounting Statements.

EE-RM-STD-98-440 COMMENT 204

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EE-RM/STD-98-440 -::/Ft?,O ct 

Federal Register/Vol. 66, No. l4/Monday, January 22, ZOOl/Rules and Regulations 7191 

electricity prices and housing. The total 

costs are presented for the base case and 

each trial standard level. The discount 

rate is 7 percent. In addition, the NPV 

(the difference in total costs between the 

base case and trial standard level), as 

well as the NPV as a percentage of the 

"Base Case Total Costs," are calculated 

for each trial standard level. 

TABLE V.19.-NET PRESENT VALUES RESULTS RELATIVE TO BASE CASE TOTAL EQUIPMENT AND OPERATING COSTS 

BASED ON REVERSE ENGINEERING MANUFACTURING COSTS 

Efficiency scenario 

Base NAECA Roll-up ShiH 

case total NPV NPV NPV TSL costs Total Total Total billion costs As per- costs As per- costs As per- 98$ billion Billion cent of billion Billion cent of billion Billion cent of 

98$ 98$ base 98$ 98$ base 98$ 98$ base case total case total case total 

1 ............................... 379 378 2 0.4 3n 2. 0.5 378 1 0.4 

2 ............................... 379 377 2 0.5 3n 3 0.7 380 (1) 0.2 

3 ............................... 379 378 1 0.4 3n 2 0.6 381 (2) 0.5 

4 ............................... 379 379 0 0.0 378 1 0.3 383 (4) 0.9 

5 ............................... 379 390 (10) -2.7 390 (10) -2.7 390 (10) -2.7 

TABLE V.20.-NET PRESENT VALUES RELATIVE TO BASE CASE TOTAL EQUIPMENT AND OPERATING COSTS BASED ON 

ARI MEAN MANUFACTURING COSTS 

Efficiency scenario 

Base NAECA Roll-up ShiH .,. case total 

TSL costs NPV NPV NPV 

billion Total 

98$ costs 

billion 

98$ 

1 ............................... 381 381 

2 ............................... 381 382 

3 ............................... 381 383 

4 ............................... 381 387 

5 ............................... 381 403 

Table V.2l shows how a 3 percent 

discount rate16 impacts the net present 

value. Only the RoB-up efficiency 

Total 

As per- costs 

Billion cent of billion Billion 

98$ base 98$ 98$ case total 

0 0.0 381 1 

(1 ) -0.3 381 0 

(2) -0.5 382 (1 ) 

(5) -1.4 386 (4) 

(22) -5.8 403 (22) 

scenario and the AEO Reference Case 

electricity price and housing projection 

Total 

As per- costs as percent of billion billion cent of 

base 98$ 98$ base case total case total 

0.2 385 0 -0.1 

0.0 388 (3) -0.9 

-0.2 390 (5) -1.4 

-1.1 395 (10) -2.5 

-5.8 407 (22) -5.8 

were considered in analyzing the 

impacts from a 3 percent discount rate. 

TABLE V.21: NET PRESENT VALUES RESULTS BASED ON 3-PERCENT DISCOUNT RATE 

Reverse engineering costs 

Trial standard level 

TSL Base case As percent total costs Total cost Net of base billion 98$ billion 98$ present case total 

1 ....................................................... 2 ....................................................... 3 ....................................................... 4 ....................................................... 5 ....................................................... 

The proposed rule also estimated the 

national employment impacts due to 

each of the five trial standard levels. As 

discussed in the proposed rule, the 

,. A societal discount rate of 3 percent value was 

investigated as a scenario in accordance with the 

value 98$ costs 

708 701 7 0.9 

708 697 11 1.6 

708 697 11 1.6 

708 697 11 1.5 

708 716 (8) -1.2 

energy efficiency standards for central 

air conditioners and heat pumps are 

expected to reduce electricity bills for 

residential and commercial consumers 

Office of Management and Budget's (OMB) 

ARI mean costs 

Trial standard level 

Base case Net As percent total costs 

billion 98$ Total cost present of base 

billion 98$ value bil- cast total 

lion 98$ costs 

712 707 4 0.6 

712 705 6 0.9 

712 706 6 0.8 

712 711 0 0.0 

712 746 (35) -4.9 

and the resulting net savings are 

expected to be redirected to other forms 

of economic activity. These shifts in 

Guidelines to Standardize Measures of Costs and 

Benefits and the Format of Accounting Statements. 
EE-RM/STD-98-440 - 0-T

7192 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

spending and economic activity are in no appreciable job losses to the of their product lines fail to satisfy the

expected to affect the demand for labor. nation. proposed standard.

As we did for the proposed rule, the Second, DOJ stated that the proposed

Department estimated the impacts of the4- im ct on Utility or Performance of standard for heat pumps, and in some new standards on national labor roducts instances for air conditioners, would

demand using an input/output model of As detailed in Section V of the have an adverse impact on some ·the U.S. economy. The model proposed rule, in establishing classes of manufacturers of products (including

characterizes the interconnections products we believe the adopted those products referred to in the

among 35 economic sectors using data standards will not result in any proposed rule as "niche products") used

from the Bureau of Labor Statistics. For degradation of utility or performance in to retrofit existing housing and used in some years after the new standards go the covered products. manufactured housing. These

into effect, new consumer expenditure A manufacturers could not, according to on air conditioners and heat pumps 5 Lessenng o DOJ, make units that comply with the

each year outpaces their annual energy ompeon rule and fit into the available space.

savings. This activity redirects The Act directs the Department to Third, DOJ expressed concern that the

expenditures into the manufacturing consider any lessening of competition proposed heat pump standard of 13

sector, which is less labor intensive than that is likely to result from standards. It SEER could make heat pumps less

other sectors of the economy, 7 further directs the Attorney General to competitive with alternative heating and

producing a loss of jobs in those sectors determine the impact, if any, of any cooling systems. Because the standard

that is larger than the gain of jobs in lessening of competition likely to result would result in increases in the size and

manufacturing. Also, a loss of jobs from a proposed standard and transmit cost of heat pumps, it is possible that

results in the utility sector due to its such determination to the Secretary, not purchasers would shift away from heat

loss of revenues. As annual consumer later than 60 days after the publication pumps to other systems that include

energy savings begin to exceed annual of a proposed rule, together with an electric resistance heat, reducing the new expenditures on air conditioners, analysis of the nature and extent of such competition that presently exists

eventually the new standards will impact. EPCA Section 325(o)(2)(B)(i)(V) between heat pumps and those other

produce a net gain in national and (B)(ii), 42 U.S.C. 6295(o)(2)(B)(i)(V) systems.' 8

employment. and (B)(ii). The Department of Justice urged the

The increases or decreases in the net In order to assist the Attorney General Department of Energy to take into

demand for labor in the economy in making such a determination, the account these possible impacts on estimated by the input/output model Department provided the Department of competition in determining its final

due to air conditioner and heat pumps Justice (DOJ) with copies of the energy efficiency standard for air

standards are likely to be very small proposed rule and the TSD for review. conditioners and heat pumps. DOJ

relative to total national employment. At DOE's request, the DOJ reviewed the wrote that the Department of Energy

For the following reasons any modest manufacturer impact analysis interview should consider setting a lower SEER

changes in employment are in doubt: questionnaire to ensure that it would standard for heat pumps, such as the

*Unemployment is now at the lowest provide insight concerning any standard included in Trial Standard

rate in 30 years. If unemployment lessening of competition due to any Level 2, and a lower SEER standard for

remains very low during the period proposed trial standard levels. air conditioners for retrofit markets

when the standards are put into effect, As previously discussed in section where there are space constraints (such

it is unlikely that the standards alone II.D.4 above, the Department of Justice as markets served by niche products) could result in any change in national concluded that the residential central and for manufactured housing. employment levels; air conditioner and heat pump As we noted in the Supplementary

* Neither the BLS data nor the input- standards contained in the proposed ANOPR and proposed rule, nearly all

output model used by DOE include the rule could have an adverse impact on small manufacturers produce only niche

quality or wage level of the jobs. The competition. The proposed standards products. DOJ's first concern relates to

losses or gains from any potential would have changed the current central disproportionate impacts on small

employment change may be offset if job air conditioner and heat pump manufacturers, which are substantially quality and pay also change; and efficiency standards of 10 SEER/6.8 the same group as the niche product The net benefits or losses from HSPF for split system air conditioners manufacturers. Furthermore, niche

potential employment changes are a and heat pumps and 9.7 SEER/6.6 HSPF products almost exclusively serve

result of the estimated net present value for single package air conditioners and applications with severe space of benefits or losses likely to result from heat pumps to 12 SEER for air constraints. Today's final rule prescribes

air conditioner and heat pump conditioners and 13 SEER/7.7 HSPF for standards only for those products that

standards. It may not be appropriate to heat pumps. Through-the-wall are not severely space-constrained, and

separately identify and consider any equipment was the only exception. We therefore substantially eliminates their

employment impacts beyond the proposed an 11 SEER standard for that first concern regarding the impact of

calculation of net present value. class more stringent standards on small Taking into consideration these class, on small more stringent standards 

le gitimate con iderns rgardting these DOJ identified three possible manufacturers.

interetatie onc and use of the competitive problems presented by the

interpretation i an use of the proposed standards. First, DOJ stated '

BDO also wrote about our request for comments

Departloyment impacncludes onlysis, the that the proposed 13 SEER heat pump on a proposal to adopt a standard for steady-state

Department only that concludes the tat the 13SEERcooling sproposed efficiency (EER). The regulation language in

proposed central air conditioner and standard would have a disproportionate the proposed rule did not include a provision

heat pump standards are likely to result impact on smaller manufacturers. They regarding an EER standard, and DO) limited its

stated that currently less than 20 views to the standards set forth in the proposed

7 Bureau of Economic Analysis, Regional percent of the total current product lines regulation Department language, proposes indicating rule language that if in the the future

Multipliers: A User Handbook for the Regional meet the proposed standards, but for incorporating an EER standard, DO) would address

Input-Output Modeling System (RIMS II) some small manufacturers, 100 percent the competitive impact of that standard.

EE-RM-STD-98-440 COMMENT 204

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EE-RM/STD-~8-440 -1t~ oc.; 

7192 Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 

spending and economic activity are 

expected to affect the demand for labor. 

As we did for the proposed rule, the 

Department estimated the impacts of the 

new standards on national labor 

demand using an input/output model of 

. the U.S. economy. The model 

characterizes the interconnections 

among 35 economic sectors using data 

from the Bureau of Labor Statistics. For 

some years after the new standards go 

into effect, new consumer expenditure 

on air conditioners and heat pumps 

each year outpaces their annual energy 

savings. This activity redirects 

expenditures into the manufacturing 

sector, which is less labor intensive than 

other sectors of the economy,11 

producing a loss of jobs in those sectors 

that is larger than the gain of jobs in 

manufacturing. Also, a loss of jobs 

results in the utility sector due to its 

loss of revenues. As annual consumer 

energy savings begin to exceed annual 

new expenditures on air conditioners, 

eventually the new standards will 

produce a net gain in national 

employment. 

The increases or decreases in the net 

demand for labor in the economy 

estimated by the input/output model 

due to air conditioner and heat pumps 

standards are likely to be very small 

relative to total national employment. 

For the following reasons any modest 

changes in employment are in doubt: • Unemployment is now at the lowest 

rate in 30 years. If unemployment 

remains very low during the period 

when the standards are put into effect, 

it is unlikely that the standards alone 

could result in any change in national 

employment levels; 

• Neither the BLS data nor the inputoutput model used by DOE include the 

quality or wage level of the jobs. The 

losses or gains from any potential 

employment change may be offset if job 

quality and pay also change; and • The net benefits or losses from 

potential employment changes are a 

result of the estimated net present value 

of benefits or losses likely to result from 

air conditioner and heat pump 

standards. It may not be appropriate to 

separately identify and consider any 

employment impacts beyond the 

calculation of net present value. 

Taking into consideration these 

legitimate concerns regarding the 

interpretation and use of the 

employment impacts analysis, the 

Department concludes only that the 

proposed central air conditioner and 

heat pump standards are likely to result 

17 Bureau of Economic Analysis. Regional 

Multipliers: A User Handbook for tho Rogional 

Input-Output Modeling Systom (RIMS II) 

in no appreciable job losses to the 

nation. 

4. Impact on Utility or Performance of 

Products 

As detailed in Section V of the 

proposed rule, in establishing classes of 

products we believe the adopted 

standards will not result in any 

degradation of utility or performance in 

the covered products. 

5. Impact of Any 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 any 

lessening of competition likely to result 

from a proposed standard and transmit 

such determination to the Secretary, not 

later than 60 days after the publication 

of a proposed rule, together with an 

analysis of the nature and extent of such 

impact. EPCA Section 325(0)(2HB)(i)(V) 

and (B)(ii). 42 U.S.C. 6295(0)(2)(B)(i)(V) 

and (BHii). 

In order to assist the Attorney General 

in making such a determination, the 

Department provided the Department of 

Justice (DOn with copies of the 

proposed rule and the TSD for review. 

At DOE's request, the DO] 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. 

As previously discussed in section 

II.D.4 above, the Department of Justice 

concluded that the residential central 

air conditioner and heat pump 

standards contained in the proposed 

rule could have an adverse impact on competition. The proposed standards 

would have changed the current central 

air conditioner and heat pump 

efficiency standards of 10 SEER/6.B 

HSPF for split system air conditioners 

and heat pumps and 9.7 SEER/6.6 HSPF 

for single package air conditioners and 

heat pumps to 12 SEER for air 

conditioners and 13 SEERl7.7 HSPF for 

heat pumps. Through-the-wall 

equipment was the only exception. We 

proposed an 11 SEER standard for that 

class. 

DO] identified three possible 

competitive problems presented by the 

proposed standards. First, DO] stated 

that the proposed 13 SEER heat pump 

standard would have a disproportionate 

impact on smaller manufacturers. They 

stated that currently less than 20 

percent of the total current product lines 

meet the proposed standards, but for 

some small manufacturers, 100 percent 

of their product lines fail to satisfy the 

proposed standard. 

Second, DO] stated that the proposed 

standard for heat pumps, and in some 

instances for air conditioners, would 

have an adverse impact on some 

manufacturers of products (including 

those products referred to in the 

proposed rule as "niche products") used 

to retrofit existing housing and used in 

manufactured housing. These 

manufacturers could not, according to 

DO], make units that comply with the 

rule and fit into the available space. 

Third, DO] expressed concern that the 

proposed heat pump standard of 13 

SEER could make heat pumps less 

competitive with alternative heating and 

cooling systems. Because the standard 

would result in increases in the size and 

cost of heat pumps, it is possible that 

purchasers would shift away from heat 

pumps to other systems that include 

electric resistance heat, reducing the 

competition that presently exists 

between heat pumps and those other 

systems.I8 

The Department of Justice urged the 

Department of Energy to take into 

account these possible impacts on 

competition in determining its final 

energy efficiency standard for air 

conditioners and heat pumps. DOJ 

wrote that the Department of Energy 

should consider setting a lower SEER 

standard for heat pumps, such as the 

standard included in Trial Standard 

Level 2, and a lower SEER standard for 

air conditioners for retrofit markets 

where there are space constraints (such 

as markets served by niche products) 

and for manufactured housing. 

As we noted in the Supplementary 

ANOPR and proposed rule, nearly all 

small manufacturers produce only niche 

products. DOl's first concern relates to 

disproportionate impacts on small 

manufacturers, which are substantially 

the same group as the niche product 

manufacturers. Furthermore, niche 

products almost exclusively serve 

applications with severe space 

constraints. Today's final rule prescribes 

standards only for those products that 

are not severely space-constrained, and 

therefore substantially eliminates their 

first concern regarding the impact of 

more stringent standards on small 

manufacturers. 

,. DO) also wrote about our request for co=ents 

on a proposal to adopt a standard for steady-state 

cooling efficioncy (EER). The regulation language in 

the proposed rule did not include a provision 

regarding an EER standard. and DO) limited its 

views to tho standards set forth in the proposed 

regulation language. indicating that if tho 

Department proposes rulo languago in the future 

incorporating an EER standard. DO) would address 

tho competitive impact of that standard. 
EE-RM/STD-98-440 -OE6 &T

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7193

DOJ's second concern about products to be available to consumers during the 6. Need of the Nation To Save Energy

intended for space constrained markets time when the standards we are

are more difficult to address since the adopting today are in effect. The Secretary recognizes the need of

standards apply to products at the point As to DOJ's third concern regarding the Nation to save energy. Enhanced

of manufacture and not the point of possible shifting in the market from heat energy efficiency improves the nation's

installation. We have removed one pumps to resistance heaters, we have energy security, and reduces the

element of this concern by not adopted the same minimum SEER environmental impacts of energy

specifying new standards for niche requirement for heat pumps as we have production. Improved efficiency of

products, primarily due to our concern for air conditioners. That action central air conditioners and heat pumps over their continued viability in substantially reduces the incentive for is also likely to improve the reliability

replacement applications. However, we consumers to switch, thereby addressing of the nation's electric system. The

recognize that larger conventional that concern, energy savings from central air

equipment also poses problems in In summary, the standards we are conditioner and heat pump standards

replacement applications and that these adopting should effectively eliminate result in reduced emissions of carbon

problems may be more complex in most of DOJ's concerns regarding the and NOx. Cumulative emissions savings

manufactured homes. Nevertheless, air lessening of competition, even under over the 15-year period modeled are conditioner and heat pump TSL 4. To the extent that we have not shown in Table V.22. The results

manufacturers do have options for fully eliminated all their concerns,

increasing the efficiency of equipment however, we have considered the presented in Table V.22 are based only

without increasing the size of both the remaining possibility for lessening of on te AEO 2000 Reference Case for

indoor and outdoor units, and we competition as we weighed the burdens electricity price and housing projections

expect products utilizing those options of today's adopted standards. and the NAECA efficiency scenario.

TABLE V.22.-CUMULATIVE EMISSIONS REDUCTIONS BASED ON AEO 2000 REFERENCE CASE AND NAECA EFFICIENCY

SCENARIO (2006-2020)

Reverse engineering costs ARI mean costs

Trial standard level

Carbon (Mt) NOx (kt) Carbon (Mt) NOx (kt)

1 ....................................................................................................................... 13.2 36.7 13.4 37.2

2 ................................................................................................................ ....... 23.8 72.7 23.7 67.9

3 ................................................................................................................ ....... 27.7 84.4 27.4 78.8

4 ................................................................................................................ ....... 32.6 85.8 33.6 102.5

5 ................................................................................................................ ....... 63.0 184.2 63.7 193.7

The impact of varying electricity price and housing projections (i.e., different AEO cases) as well as different efficiency

scenarios were considered for the Trial Standard Level 4. Table V.23 shows how carbon and NOx emissions are impacted

by the different projections and scenarios.

TABLE V.23.--CUMULATIVE EMISSIONS REDUCTIONS FOR FINAL STANDARD (2006-2020) AND THE IMPACT OF DIFFERENT

ELECTRICITY PRICE/HOUSING PROJECTIONS AND EFFICIENCY SCENARIOS

Reverse engineering costs ARI mean costs Electricity price and housing projection Efficiency scenario

Carbon (Mt) NOx (kt) Carbon (Mt) NOx (kt)

AEO reference case ............................................. NAECA ......................... 32.6 85.8 33.6 102.5

AEO reference case ............................................. Roll-up .......................... 32.7 93.8 31.3 87.5

AEO reference case ............................................. Shift .............................. 36.0 107.1 34.9 97.9

AEO low growth case ......................................... NAECA ......................... 28.5 97.2 27.5 95.8

AEO high growth case ......................................... NAECA ......................... 42.2 92.4 42.8 103.1

The annual carbon emission benefits that accumulate over time. slightly higher proportion of earlier

reductions range up to 6.8 Mt in 2020 Emission reductions that occur sooner emission reductions than another trial

and the NOx emissions reductions up to are often more desirable than equivalent standard level. To show the possible

27.0 kt in 2015.19 20 Total carbon and reductions that occur later. Like effect of the different timing patterns of

NOx emissions for each trial standard monetary benefits, the health, the emissions, the Department is also

level are reported in the Environmental recreational and ecosystem benefits that presenting discounted emissions. These

Assessment, in the TSD. result from emission reductions are calculations were done using the same The Department makes no effort to often perceived to have a greater value seven percent discount rate as was used

monetize the benefits of the actual if they occur sooner, rather than later. for discounting monetized benefits. We

emission reductions, but there may be To the extent that the different trial show discounted cumulative emission

time related differences in the perceived standard levels have slightly different savings from 2006 through 2030 in

value of the emissions depending on shipment distributions over time, some Tabl 2 2

when they occur, as with monetized trial standard levels might have a

19 Million metric tons (MtJ. 20 Thousand metric tons (kt).

EE-RM-STD-98-440 COMMENT 204

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Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 7193 

OO]'s second concern about products 

intended for space constrained markets 

are more difficult to address since the 

standards apply to products at the point 

of manufacture and not the point of 

installation. We have removed one 

element of this concern by not 

specifying new standards for niche 

products, primarily due to our concern 

over their continued viability in 

replacement applications. However, we 

recognize that larger conventional 

equipment also poses problems in 

replacement applications and that these 

problems may be more complex in 

manufactured homes. Nevertheless, air 

conditioner and heat pump 

manufacturers do have options for 

increasing the efficiency of equipment 

without increasing the size of both the 

indoor and outdoor units, and we 

expect products utilizing those options 

to be available to consumers during the 

time when the standards we are 

adopting today are in effect. 

As to OO]'s third concern regarding 

possible shifting in the market from heat 

pumps to resistance heaters, we have 

adopted the same minimum SEER 

requirement for heat pumps as we have 

for air conditioners. That action 

substantially reduces the incentive for 

consumers to switch, thereby addressing 

that concern. In summary, the standards we are 

adopting should effectively eliminate 

most of OO]'s concerns regarding the 

lessening of competition, even under 

TSL 4. To the extent that we have not 

fully eliminated all their concerns, 

however, we have considered the 

remaining possibility for lessening of 

competition as we weighed the burdens 

of today's adopted standards. 

6. Need rif the Nation To Save Energy 

The Secretary recognizes the need of 

the Nation to save energy. Enhanced 

energy efficiency improves the nation's 

energy security, and reduces the 

environmental impacts of energy 

production. Improved efficiency of 

central air conditioners and heat pumps 

is also likely to improve the reliability 

of the nation's electric system. The 

energy savings from central air 

conditioner and heat pump standards 

result in reduced emissions of carbon 

and NOx . Cumulative emissions savings 

over the 15-year period modeled are 

shown in Table V.22. The results 

presented in Table V.22 are based only 

on the AEO 2000 Reference Case for 

electricity price and housing projections 

and the NAECA efficiency scenario. 

TABLE V.22.-CUMULATIVE EMISSIONS REDUCTIONS BASED ON AEO 2000 REFERENCE CASE AND NAECA EFFICIENCY 

SCENARIO (2006-2020) 

Reverse engineering costs ARI mean costs 

Trial standard level 

Carbon (Mt) NOx (kt) Carbon (Mt) NOx (kt) 

1 ...................................................................................................................... . 13.2 36.7 13.4 37.2 

2 ..................................................................................................................... .. 23.8 72.7 23.7 67.9 

3 ...................................................................................................................... . 27.7 84.4 27.4 78.8 

4 ...................................................................................................................... . 32.6 85.8 33.6 102.5 

5 ...................................................................................................................... . 63.0 184.2 63.7 193.7 

The impact of varying electricity price and housing projections (i.e., different AEO cases) as well as different efficiency 

scenarios were considered for the Trial Standard Level 4. Table V.23 shows how carbon and NOx emissions are impacted 

by the different projections and scenarios. 

TABLE V.23.-CUMULATIVE EMISSIONS REDUCTIONS FOR FINAL STANDARD (2006-2020) AND THE IMPACT OF DIFFERENT 

ELECTRICITY PRICE/HOUSING PROJECTIONS AND EFFICIENCY SCENARIOS 

Electricity price and housing projection 

Reverse engineering costs 

EHiciency scenario 

ARI mean costs 

Carbon (Mt) 

AEO reference case ....................................... ...... NAECA ........................ . 32.6 

32.7 

36.0 

28.5 

42.2 

AEO reference case ... .............. ......... ......... .......... Roll-up ........................ .. AEO reference case ............................................. Shift ............................ .. 

AEO low growth case ........ ........... .................. ...... NAECA ........................ . AEO high growth case ..... ................ ..................... NAECA ........................ . 

The annual carbon emission 

reductions range up to 6.8 Mt in 2020 

and the NOx emissions reductions up to 

27.0 kt in 2015. 1920 Total carbon and 

NOx emissions for each trial standard 

level are reported in the Environmental 

Assessment, in the TSO. 

The Oepartment makes no effort to 

monetize the benefits of the actual 

emission reductions, but there may be 

time related differences in the perceived 

value of the emissions depending on 

when they occur, as with monetized 

,. Million melric Ions (Mil. 

benefits that accumulate over time. 

Emission reductions that occur sooner 

are often more desirable than equivalent 

reductions that occur later. Like 

monetary benefits, the health, 

recreational and ecosystem benefits that 

result from emission reductions are 

often perceived to have a greater value 

if they occur sooner, rather than later. 

To the extent that the different trial 

standard levels have slightly different 

shipment distributions over time, some 

trial standard levels might have a 

20 Thousand melric Ions (kll. 

NOx (kt) 

85.8 

93.8 

107.1 

97.2 

92.4 

Carbon (Mt) 

33.6 

31.3 

34.9 

27.5 

42.8 

NOx (kt) 

102.5 

87.5 

97.9 

95.8 

103.1 

slightly higher proportion of earlier 

emission reductions than another trial 

standard level. To show the possible 

effect of the different timing patterns of 

the emissions, the Department is also 

presenting discounted emissions. These 

calculations were done using the same 

seven percent discount rate as was used 

for discounting monetized benefits. We 

show discounted cumulative emission 

savings from 2006 through 2030 in 

Table V.24. 
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7194 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

TABLE V.24.-CUMULATIVE DISCOUNTED EMISSIONS REDUCTIONS BASED ON AEO 2000 REFERENCE CASE AND NAECA

EFFICIENCY SCENARIO (2006-2020)

Reverse engineering costs ARI mean costs

Trial standard level

Carbon (Mt) NOx (kt) Carbon (Mt) NOx (kt)

1 ..................................................................................................................... 4.7 15.7 4.8 15.7

2 ....................................................................................................................... 8.5 30.3 8.5 29.2

3 ....................................................................................................................... 9.8 35.2 9.8 33.8

4 ....................................................................................................................... 11.6 36.7 12.0 43.3

5 ....................................................................................................................... 22.3 77.1 22.7 81.1

7. Other Factors Peak power impacts on electric each of the trial standard levels. Ofthe

utilities from increases in the central air installed generating capacity avoided, This provision allows the Secretary of conditioner and heat pump standard are 13 percent would have been provided

Energy, in determining whether a calculated using the NEMS-BRS model. by coal power plants. The remaining

standard is economically justified, to NEMS-BRS is used to estimate peak percentage (87 percent) would have

consider any other factors that the power impacts by calculating the been supplied by either gas-fired, oilSecretary deems to be relevant. EPCA reduction in planned generation fired, or dual-fired power plants. The

Section 325(o)(2)(B)(i)(VI), 42 U.S.C. capacity due to an increase in the results presented in Table V.25 are

6295(o)(2)(B)(i)(VI). The Secretary has minimum efficiency standard. Table based only on the AEO 2000 Reference

decided to consider the impact on peak V.25 shows the estimated reductions in Case for electricity price and housing

power requirements and electric utility installed generation capacity, in giga- projections and the NAECA efficiency

system reliability. watts (GW), in the year 2020, due to scenario.

TABLE V.25.-INSTALLED GENERATION CAPACITY REDUCTIONS IN THE YEAR 2020 BASED ON AEO 2000 REFERENCE

CASE AND NAECA EFFICIENCY SCENARIO

Reverse engi- ARI mean neering costs costs

Trial standard level Installed Installed generating generating capacity capacity reduction reduction

(GW) (GW)

1 ............................................................................................................................................................................... 6 .5 6 .4

2 ..................................................................... ............... 10.6 10.6

3 ............................................................................................................................................................................... 12 .4 12.3

4 ............................................................................................................................................................................... 15 .5 15 .4

5 ............................................................................................................................................................................... 28 .8 28.6

The impact of varying electricity price efficiency scenarios were considered installed generation capacity is

and housing projections (i.e., different only for the final standard (trial impacted by the different projections

AEO cases) as well as different standard level 4). Table V.26 shows how and scenarios.

TABLE V.26.-INSTALLED GENERATION CAPACITY REDUCTIONS IN THE YEAR 2020 FOR FINAL STANDARD AND THE IMPACT

OF DIFFERENT ELECTRICITY PRICE/HOUSING PROJECTIONS AND EFFICIENCY SCENARIOS

Reverse engi- ARI mean neering costs costs

Electricity price and housing projection Efficiency scenario Instaled Installed generating generating capacity capacity reduction reduction

(GW) (GW)

AEO reference case ............................................................................................... NA ECA ............................... 15.5 15.4

AEO reference case ............................................................................................... Roll-up ................................ 15.5 15.0

AEO reference case ............................................................................................... Shift .................................... 16.6 16.4

AEO low growth case ............................................................................................. NAECA ............................... 14.5 13.9

AEO high growth case ............................................................................................ NAECA ............................... 16.0 15.6

E. Conclusion new or amended energy conservation achieve the maximum improvement in

standard for any type (or class) of energy efficiency which the Secretary Section 325(o)(2)(A) of the Act, 42 covered product shall be designed to determines is technologically feasible

U.S.C. 6295(o)(2)(A), specifies that any

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7194 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

TABLE V.24.-CUMULATIVE DISCOUNTED EMISSIONS REDUCTIONS BASED ON AEO 2000 REFERENCE CASE AND NAECA 

EFFICIENCY SCENARIO (2006-2020) 

Reverse engineering costs ARI mean costs 

Trial standard level 

Carbon (Mt) 

1 ........................... ~ .......................................................................................... . 4.7 

2 ...................................................................................................................... . 8.5 

3 ...................................................................................................................... . 9.8 

4 ...................................................................................................................... . 11.6 

5 ...................................................................................................................... . 22.3 

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. EPCA 

Section 325(0)(2)(B)(i)(VI), 42 U.S.c. 

6295(0)(2)(B)(i)(VI). The Secretary has 

decided to consider the impact on peak 

power requirements and electric utility 

system reliability. 

Peak power impacts on electric 

utilities from increases in the central air 

conditioner and heat pump standard are 

calculated using the NEMS-BRS model. 

NEMS-BRS is used to estimate peak 

power impacts by calculating the 

reduction in planned generation 

capacity due to an increase in the 

minimum efficiency standard. Table 

V.25 shows the estimated reductions in 

installed generation capacity, in gigawatts (GW). in the year 2020, due to 

NOx (Id) Carbon (Mt) NOx (Id) 

15.7 4.8 15.7 

30.3 8.5 29.2 

35.2 9.8 33.8 

36.7 12.0 43.3 

77.1 22.7 81.1 

each of the trial standard levels. Of the 

installed generating capacity avoided, 

13 percent would have been provided 

by coal power plants. The remaining 

percentage (87 percent) would have 

been supplied by either gas-fired, oilfired, or dual-fired power plants. The 

results presented in Table V.25 are 

based only on the AEO 2000 Reference 

Case for electricity price and housing 

projections and the NAECA efficiency 

scenario. 

TABLE V.25.-INSTALLED GENERATION CAPACITY REDUCTIONS IN THE YEAR 2020 BASED ON AEO 2000 REFERENCE 

CASE AND NAECA EFFICIENCY SCENARIO 

Trial standard level 

1 .............................................................................................................................................................................. . 

2 .............................................................................................................................................................................. . 

3 .............................................................................................................................................................................. . 

4 .............................................................................................................................................................................. . 

5 .............................................................................................................................................................................. . 

Reverse engi- neering costs 

Installed 

generating 

capacity 

reduction 

(GW) 

6.5 

10.6 

12.4 

15.5 

28.8 

ARI mean 

costs 

Installed 

generating 

capacity 

reduction 

(GW) 

6.4 

10.6 

12.3 

15.4 

28.6 

The impact of varying electricity price 

and housing projections (i.e., different 

AEO cases) as well as different 

efficiency scenarios were considered 

only for the final standard (trial 

standard level 4). Table V.26 shows how 

installed generation capacity is 

impacted by the different projections 

and scenarios. 

TABLE V.26.-INSTALLED GENERATION CAPACITY REDUCTIONS IN THE YEAR 2020 FOR FINAL STANDARD AND THE IMPACT 

OF DIFFERENT ELECTRICITY PRICE/HoUSING PROJECTIONS AND EFFICIENCY SCENARIOS 

Electricity price and housing projection Efficiency scenario 

AEO reference case ..... ..................... ...... .................................. ... ...... ... ........... ...... NAECA .............................. . AEO reference case ..................................................... .......................................... Roll-up ............................... . AEO reference case ... ........................... .... ............ ..... .... ......... ....... ......... .... ........... Shift ................................... . AEO low growth case ... ..... ....................... ....... ...... ..... ......... ........... ... ..... ................ NAECA .............................. . AEO high growth case . ......... .... ................ ............. ..................... .... ....... ....... .... ...... NAECA .............................. . 

Reverse engi- neering costs 

Installed 

generating 

capacity 

reduction 

(GW) 

15.5 

15.5 

16.6 

14.5 

16.0 

ARI mean 

costs 

Installed 

generating 

capacity 

reduction 

(GW) 

15.4 

15.0 

16.4 

13.9 

15.6 

E. Conclusion 

Section 325(0)(2)(A) of the Act, 42 

U.S.C. 6295(0)(2)(A), 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 
· * '.~ *EE-RM/STD-98440-:f/)-'

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7195

and economically justified. In We consider the impacts of standards V.27 presents a summary of quantitative

determining whether a standard is beginning with the max tech level, i.e., analysis results for each Trial Standard

economically justified, the Secretary Trial Standard Level 5. We then Level based on the assumptions we must determine whether the benefits of consider less efficient levels until we consider most plausible. These include

the standard exceed its burdens. EPCA reach the level which is technologically manufacturing cost estimates from the

Section 325(o)(2)(B)(i), 42 U.S.C. feasible and economically justified. reverse engineering, an 18.4-year

6295(o)(2)(B)(i). The amended standard To aid the reader as we discuss the equipment lifetime with one compressor

must "result in significant conservation benefits or burdens of the trial levels, replacement at 14 years, and electricity

of energy." EPCA Section 325(o)(3)(B), we have included a summary of the prices based on the AEO2000 Reference

42 U.S.C. 6295(o)(3)(B). analysis results in Table V.27.21 Table Case.

TABLE V.27.-SUMMARY OF QUANTITATIVE RESULTS 1

Trial std 1 Trial std 2 Trial std 3 Trial std 4 Trial std 5

Primary energy saved (quads)2 ......................................... 1.5 2.9 3.4 4.2 8.6

Generation capacity offset (GW) 3 ........................................ 6.5 10.6 12.4 15.5 28.8

NPV ($billion):.

7% Discount rate, roll-up .............................................. 2 3 2 1 (10)

7% Discount rate, NAECA ............................................ 2 2 1 0 (10)

3% Discount rate, roll-up .............................................. 7 11 11 11 (8)

Cumulative emissions reductions through 2020:

Carbon equivalent (Mt) 3 ............................................... 13.2 23.8 27.7 32.7 63.0

NOx (kt)3 ........................................ 36.7 72.7 84.4 93.8 184.2

Cumulative change in INPV ($ million) 4 :

Roll-up ........................................ (160) (313) (319) (303) ........................ NAECA ........................................ (30) (159) (171) (169) ........................ Life cycle cost savings ($)5:

Split AC ......................................................................... 75 113 113 113 (137)

Packaged AC ...................................... . 78 163 163 29 (276)

Split HP ............................................ .. 209 365 372 372 (41)

Packaged HP ................................................................ 207 421 353 353 166

Payback (years)6 :

Split AC ........................................ 7.8 9.8 9.8 11.3 19.6

Packaged AC ............................................ .. 7.7 7.5 7.5 14.5 25.1

Split HP ............................................ .. 2.7 3.9 6.4 6.4 14.0

Packaged heat pump ........................................ 4.6 4.0 8.4 8.4 12.8

1 Parentheses indicate negative (-) values. 2 Energy savings based on Roll-up efficiency scenario.

3 Values based on NAECA efficiency scenario with the exception of TSL 4 which is based on the Roll-up scenario. 4 Not calculated at Trial Standard Level 5.

5 Negative values indicate LCC increases.

6 Payback periods are median values.

In addition to the quantitative results, demand can far exceed the normal costs First we considered Trial Standard

we also consider other burdens and of capacity expansion. 22 Level 5, the maximum technologically

benefits that affect economic We also recognize that the adopted achievable efficiency level for each of

justification. The potential to improve standards could result in additional four classes, representing uniform 18

the reliability of the electricity system is burdens. These include a possible SEER requirements. The manufacturing

the major benefit we have not quantified increase in health problems caused by cost we assume for Trial Standard Level

explicitly. In areas where the occurrence consumers forgoing air conditioner 5 is equal to 15 SEER equipment,

of blackouts (and brownouts) can be purchases, a possible reduction in the although we would expect that

reduced through expansion of system ability of the product to dehumidify, a assumption to understate the cost and

capacity, the economic value of avoided possible lessening of competition, and price of the product. Trial Standard

blackouts associated with reductions in possible difficulty in installing the new Level 5 will likely save 8.6 quads of

peak load cannot exceed the value of the baseline products into replacement energy which the Department considers

avoided capacity expansion. That value applications. However, we generally significant. These savings will result in

is already captured in our analysis as believe that these burdens are capable of the avoidance of approximately 29 GW

savings in consumer utility bills. being mitigated at any standard level, of installed generation capacity. For

However, in areas that do not expect to except possibly Trial Standard Level 5. comparison, the generating capacity is

be able to maintain adequate capacity Section IV discusses our response to equivalent to roughly 75 large, 400

reserves, the value of avoided blackouts comments regarding benefits and megawatt, power plants,23

associated with reductions in peak burdens and explains our viewpoints on approximately 3.7 percent of current

those issues. installed generating capacity nationwide

21 All cumulative effects that are not monetary are can be prevented through either a capacity same reduction in peak demand then can equal the

not discounted. Monetary effects are discounted to expansion or a reduction in peak demand, and the value of the avoided blackout ($1 billion) since

1998 dollars. new capacity would cost $100 million, the value of there is no feasible alternative.

22 For instance, if capacity-related blackouts cost the reduction in peak demand can be no more than 23 DOE estimates 9 coal-fired power plants and 66 a region $1 billion, society would be willing to pay $100 million. If the region is short on capacity and gas-fired power plants can be avoided. See TSD,

up to $1 billion to prevent them. If those blackouts cannot add new capacity quickly, however, the Chapter 11 and Appendix H.

EE-RM-STD-98-440 COMMENT 204

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Federal Register / Vol. 66, No. 14/ Monday, January 22, 2001/ Rules and Regulations 7195 

and economically justified. In 

determining whether a standard is 

economically justified, the Secretary 

must determine whether the benefits of 

the standard exceed its burdens. EPCA 

Section 325(0)(2)(B)(i), 42 U.S.C. 

6295(0)(2)(B)(i). The amended standard 

must "result in significant conservation 

of energy." EPCA Section 325(0)(3)(B), 

42 U.S.C. 6295(0)(3)(B). 

We consider the impacts of standards 

beginning with the max tech level, i.e., 

Trial Standard Level 5. We then 

consider less efficient levels until we 

reach the level which is technologically 

feasible and economically justified. 

To aid the reader as we discuss the 

benefits or burdens of the trial levels, 

we have included a summary of the 

analysis results in Table V.27.21 Table 

V.27 presents a summary of quantitative 

analysis results for each Trial Standard 

Level based on the assumptions we 

consider most plausible. These include 

manufacturing cost estimates from the 

reverse engineering, an 18.4-year 

equipment lifetime with one compressor 

replacement at 14 years, and electricity 

prices based on the AE02000 Reference 

Case. 

TABLE V.27.-SUMMARY OF QUANTITATIVE RESULTS 1 

Trial std 1 Trial std 2 Trial std 3 Trial std 4 Trial std 5 

Primary energy saved (quads)2 .......................................... . 1.5 2.9 3.4 4.2 8.6 

Generation capacity offset (GW)3 ............................ ., ......... . 6.5 10.6 12.4 15.5 28.8 

NPV ($billion):. 

7% Discount rate, roll-up ............................................. . 2 3 2 1 (10) 

7% Discount rate, NAECA ........................................... . 2 2 1 0 (10) 

3% Discount rate, roll-up ............................................ .. 7 11 11 11 (8) 

Cumulative emissions reductions through 2020: 

Carbon equivalent (Mt)3 .............................................. . 13.2 23.8 27.7 32.7 63.0 

NOx (kt)3 ...................................................................... . 36.7 72.7 84.4 93.8 184.2 

Cumulative change in INPV ($ million)4: 

Roll-up .......................................................................... . (160) (313) (319) (303) ........................ NAECA ......................................................................... . (30) (159) (171) (169) ........................ Life cycle cost savings ($)5: 

SplitAC ........................................................................ . Packaged AC ..................................................... ,.., ...... . 75 113 113 

78 163 163 

113 (137) 

29 (276) Split HP ........................................................................ . Packaged HP ............................................................... . 209 365 372 

207 421 353 

372 (41) 

353 166 

Payback (years)8: 

SplitAC ............................................................. , .......... . 7.8 9.8 9.8 11.3 19.6 

Packaged AC ............................................................... . 7.7 7.5 7.5 14.5 25.1 

Split HP ........................................................................ . 2.7 3.9 6.4 6.4 14.0 

Packaged heat pump ................................................... . 4.6 4.0 8.4 8.4 12.8 

1 Parentheses indicate negative ( - ) values. 2 Energy savings based on Roll-up efficiency scenario. 3 Values based on NAECA efficiency scenario with the exception of TSL 4 which is based on the Roll-up scenario. 

4 Not calculated at Trial Standard Level 5. 5 Negative values indicate LCC increases. 

8 Payback periods are median values. 

In addition to the quantitative results, 

we also consider other burdens and 

benefits that affect economic 

justification. The potential to improve 

the reliability of the electricity system is 

the major benefit we have not quantified 

explicitly. In areas where the occurrence 

of blackouts (and brownouts) can be 

reduced through expansion of system 

capacity, the economic value of avoided 

blackouts associated with reductions in 

peak load cannot exceed the value of the 

avoided capacity expansion. That value 

is already captured in our analysis as 

savings in consumer utility bills. 

However, in areas that do not expect to 

be able to maintain adequate capacity 

reserves, the value of avoided blackouts 

associated with reductions in peak 

21 All cumulative effects that are not monetary are 

not discounted. Monetary cffccts are discounted to 

1998 dollars. 

22 For instance. if capaCity-related blackouts cost 

a region $1 billion. society would be willing to pay 

up to $1 billion to prevent them. If thoso blackouts 

demand can far exceed the normal costs 

of capacity expansion. 22 

We also recognize that the adopted 

standards could result in additional 

burdens. These include a possible 

increase in health problems caused by 

consumers forgoing air conditioner 

purchases, a possible reduction in the 

ability of the product to dehumidify, a 

possible lessening of competition, and 

possible difficulty in installing the new 

baseline products into replacement 

applications. However, we generally 

believe that these burdens are capable of 

being mitigated at any standard level, 

except possibly Trial Standard Level 5. 

Section IV discusses our response to 

comments regarding benefits and 

burdens and explains our viewpoints on 

those issues. 

can be prevented through either a capacity 

expansion or a reduction in peak demand. and the 

new capacity would cost $100 million. the value of 

the reduction in peak demand can be no more than 

$100 million. If the region is short on capacity and 

cannot add new capacity quickly. however. the 

First we considered Trial Standard 

Level 5, the maximum technologically 

achievable efficiency level for each of 

four classes, representing uniform 18 

SEER requirements. The manufacturing 

cost we assume for Trial Standard Level 

5 is equal to 15 SEER equipment, 

although we would expect that 

assumption to understate the cost and 

price of the product. Trial Standard 

Level 5 will likely save 8.6 quads of 

energy which the Department considers 

significant. These savings will result in 

the avoidance of approximately 29 GW 

of installed generation capacity. For 

comparison, the generating capacity is 

equivalent to roughly 75 large, 400 

megawatt, power plants,23 

approximately 3.7 percent of current 

installed generating capacity nationwide 

s8fl1e reduction in peak demand then can equal the 

value of the avoided blackout ($1 billion) since 

there is no feasible alternati vo. 

2J DOE estimates 9 coal-fired power plants and 66 

gas-fired power plants can be avoided. See TSD. 

Chapter 11 and Appendix H. 
* - * 'EE-RMISTD-98-440 -'oT t7196 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

and more than 13 percent of the to median payback periods between 6.4 burdens. Second, many comments

anticipated growth in capacity needed and 8.4 years, respectively. Trial expressed concern that adopting heat

by 2020. The emissions reductions are Standard Level 4 will lower peak pump standards that were more

63.0 Mt of carbon equivalent and 184.2 electricity demand compared to the base stringent than air conditioner standards

kt of NOx. case. That will allow utility service would encourage more consumers to

At Trial Standard Level 5, the average areas to either avoid new capacity or, to purchase electric resistance furnaces consumer would experience an increase the extent that peak loads contribute to and air conditioners instead of heat

in LCC. Purchasers of split central air- reliability problems, improve system pumps. In response to those comments,

conditioners, the predominant class of reliability. The increase in national net we verified that the energy savings from

central air conditioner with 65 percent present value is expected to be $1 the more efficient heat pumps would be

of the sales of central air conditioners billion. The decrease in the net present eliminated if only a small fraction of

and heat pumps, would lose on average value of the air conditioning and heat heat pump owners (4 percent) switched

$137 over the life of the appliance. pump manufacturing industry is to resistance heating. That possibility

Purchasers of split heat pumps, the expected to be $300 million. provided added justification for

predominant class of heat pump, would After carefully considering the adopting the same minimum standards

lose on average $41. Again, these results analysis, comments, and benefits versus for heat pumps as for air conditioners.

do not include the additional price the burdens, the Department is amending Given our decision to adopt a 13 consumer would pay over the price of the energy conservation standards for SEER standard for both central air a 15 SEER product, which would central air conditioners and central air conditioners and central air

increase the life cycle cost considerably. conditioning heat pumps at Trial conditioning heat pumps, we believe

Furthermore, for the nation as a whole, Standard Level 4. The Department further evaluation is needed before we Trial Standard Level 5 would result in concludes this standard saves a can issue final standards for air

a net cost of $10 billion in NPV. We did significant amount of energy and is conditioners or heat pumps that

not calculate manufacturer impacts at technologically feasible and currently are intended to serve this trial standard level, determining economically justified. In determining applications with severe space

based on preliminary evaluation that economic justification, the Department constraints, exemplified by what we they would be severe and unacceptable. finds that the benefits of energy savings, have referred to as "niche" products.

The Secretary concludes that at Trial the projected amount of avoided power Based on our preliminary assessment of

Standard Level 5, the benefits of energy plant capacity or improvement in "highest viable efficiency levels" we savings, generating capacity reductions system reliability that accompanies identified for these products in the TSD

and emission reductions would be expected reduction in peak demand, (Table 4.23), the comments stating that

outweighed by the burdens of negative consumer life cycle cost savings, these products would have difficulty in

economic impacts to the nation, to the national net present value increase and meeting the standards proposed in the

vast majority of consumers and to the emission reductions resulting from the proposed rule, and the concerns manufacturers. Consequently, the standards outweigh the burdens. The expressed by the Department of Justice,

Secretary has concluded that Trial burdens include the loss of we have serious concerns about whether

Standard Level 5, the Max Tech Level, manufacturer net present value, 13 SEER is an appropriate standard for

is not economically justified. increases in consumer life cycle cost for most such products. On the other hand,

Next, we considered Trial Standard some users of products covered by we are uncertain whether it would be

Level 4. This level specifies 13 SEER today's final rule, any possible increase prudent for us to apply the standards

equipment for all product classes. In in health problems caused by contained in the proposed rule to niche

considering Trial Standard Level 4 the consumers forgoing air conditioner products in light of the 13 SEER

Roll-up efficiency scenario and reverse purchases, any possible reduction in the standard we are adopting today for other

engineering cost data are the ability of the product to dehumidify, products. Doing so may create a strong assumptions we consider to be the most any possible lessening of competition, tendency for niche products, with lower

probable as discussed in Part V.A, Trial and any possible difficulty in installing minimum efficiency standards than

Standard Levels. Primary energy savings the new baseline products into conventional products, to be applied in

would likely be 4.2 quads which the replacement applications. conventional applications.

Department considers significant. The In the proposed rule, we proposed to Therefore, today's final rule provides

estimated reduction in installed adopt Trial Standard Level 3. The efficiency standards for all residential

generating capacity is approximately 15 Department's decision to instead adopt central air conditioners and heat pumps, GW, and reduced emissions would the more stringent standards except the niche products. We are range up to 32.7 Mt of carbon equivalent represented by Trial Standard Level 4 referring to these products more and up to 93.8 kt of NOx. was influenced by comments we generally as "space-constrained The average air conditioner owner received during the intervening products", since they are specifically would save $113 over the life of a split comment period. First, comments we intended for severely space-constrained

air conditioner and $29 over the life of received regarding the prices and applications. We define them as having a packaged air conditioner. These markups applied to today's equipment the following characteristics:

equate to median payback periods of persuaded us that the reverse (1) Rated cooling capacities no greater 11.3 years and 14.5 years, respectively. engineering cost data are much more than 30,000 BTU/hr

Low income consumers of split air likely than the ARI Mean cost data to (2) An outdoor or indoor unit having

conditioners and split heat pumps also represent the actual costs of producing at least two overall exterior dimensions

incur LCC savings ($43 for split air equipment under more stringent or an overall displacement that:

conditioner owners and $185 savings for standards. Placing more weight on the (a) are (is) substantially smaller than

split heat pump owners). In addition, costs represented by the reverse those of other units that are (i) currently

the average heat pump owner would engineering data substantially improved usually installed in site-built single

benefit, saving $372 over the life of a the economic benefits to air conditioner family homes, and (ii) of a similar

split heat pump and $353 over the life owners, demonstrating that the benefits cooling, and, if a heat pump, heating,

of a packaged heat pump. These equate of Trial Standard Level 4 outweigh the capacity, and

EE-RM-STD-98-440 COMMENT 204

'. EE-RM/STD-98-440 -=IF t< 0 l{-

7196 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

and more than 13 percent of the 

anticipated growth in capacity needed 

by 2020. The emissions reductions are 

63.0 Mt of carbon equivalent and 184.2 

kt ofNOx. At Trial Standard Level 5, the average 

consumer would experience an increase 

in LCC. Purchasers of split central airconditioners, the predominant class of 

central air conditioner with 65 percent 

of the sales of central air conditioners 

and heat pumps, would lose on average 

$137 over the life of the appliance. 

Purchasers of split heat pumps, the 

predominant class of heat pump, would 

lose on average $41. Again, these results 

do not include the additional price the 

consumer would pay over the price of 

a 15 SEER product, which would 

increase the life cycle cost considerably. 

Furthermore, for the nation as a whole, 

Trial Standard Level 5 would result in 

a net cost of $10 billion in NPV. We did 

not calculate manufacturer impacts at 

this trial standard level, determining 

based on preliminary evaluation that 

they would be severe and unacceptable. 

The Secretary concludes that at Trial 

Standard Level 5, the benefits of energy 

savings, generating capacity reductions 

and emission reductions would be 

outweighed by the burdens of negative 

economic impacts to the nation, to the 

vast majority of consumers and to the 

manufacturers. Consequently, the 

Secretary has concluded that Trial 

Standard Level 5, the Max Tech Level, 

is not economically justified. 

Next, we considered Trial Standard 

Level 4. This level specifies 13 SEER 

equipment for all product classes. In 

considering Trial Standard Level 4 the 

Roll-up efficiency scenario and reverse 

engineering cost data are the 

assumptions we consider to be the most 

probable as discussed in Part V.A, Trial 

Standard Levels. Primary energy savings 

would likely be 4.2 quads which the 

Department considers significant. The 

estimated reduction in installed 

generating capacity is approximately 15 

GW, and reduced emissions would 

range up to 32.7 Mt of carbon equivalent 

and up to 93.8 kt of NOx. The average air conditioner owner 

would save $113 over the life of a split 

air conditioner and $29 over the life of 

a packaged air conditioner. These 

equate to median payback periods of 

11.3 years and 14.5 years, respectively. 

Low income consumers of split air 

conditioners and split heat pumps also 

incur LCC savings ($43 for split air 

conditioner owners and $185 savings for 

split heat pump owners). In addition, 

the average heat pump owner would 

benefit, saving $372 over the life of a 

split heat pump and $353 over the life 

of a packaged heat pump. These equate 

to median payback periods between 6.4 

and 8.4 years, respectively. Trial 

Standard Level 4 will lower peak 

electricity demand compared to the base 

case. That will allow utility service 

areas to either avoid new capacity or, to 

the extent that peak loads contribute to 

reliability problems, improve system 

reliability. The increase in national net 

present value is expected to be $1 

billion. The decrease in the net present 

value of the air conditioning and heat 

pump manufacturing industry is 

expected to be $300 million. 

After carefully considering the 

analysis, comments, and benefits versus 

burdens, the Department is amending 

the energy conservation standards for 

central air conditioners and central air 

conditioning heat pumps at Trial 

Standard Level 4. 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 savings. 

the projected amount of avoided power 

plant capacity or improvement in 

system reliability that accompanies 

expected reduction in peak demand, 

consumer life cycle cost savings, 

national net present value increase and 

emission reductions resulting from the 

standards outweigh the burdens. The 

burdens include the loss of 

manufacturer net present value, 

increases in consumer life cycle cost for 

some users of products covered by 

today's final rule, any possible increase 

in health problems caused by 

consumers forgoing air conditioner 

purchases, any possible reduction in the 

ability of the product to dehumidify, 

any possible lessening of competition. 

and any possible difficulty in installing 

the new baseline products into 

replacement applications. 

In the proposed rule, we proposed to 

adopt Trial Standard Level 3. The 

Department's decision to instead adopt 

the more stringent standards 

represented by Trial Standard Level 4 

was influenced by comments we 

received during the intervening 

comment period. First. comments we 

received regarding the prices and 

markups applied to today's equipment 

persuaded us that the reverse 

engineering cost data are much more 

likely than the ARI Mean cost data to 

represent the actual costs of producing 

equipment under more stringent 

standards. Placing more weight on the 

costs represented by the reverse 

engineering data substantially improved 

the economic benefits to air conditioner 

owners, demonstrating that the benefits 

of Trial Standard Level 4 outweigh the 

burdens. Second, many comments 

expressed concern that adopting heat 

pump standards that were more 

stringent than air conditioner standards 

would encourage more consumers to 

purchase electric resistance furnaces 

and air conditioners instead of heat 

pumps. In response to those comments, 

we verified that the energy savings from 

the more efficient heat pumps would be 

eliminated if only a small fraction of 

heat pump owners (4 percent) switched 

to resistance heating. That possibility 

provided added justification for 

adopting the same minimum standards 

for heat pumps as for air conditioners. 

Given our decision to adopt a 13 

SEER standard for both central air 

conditioners and central air 

conditioning heat pumps, we believe 

further evaluation is needed before we 

can issue final standards for air 

conditioners or heat pumps that 

currently are intended to serve 

applications with severe space 

constraints, exemplified by what we 

have referred to as "niche" products. 

Based on our preliminary assessment of. 

"highest viable efficiency levels" we 

identified for these products in the TSD 

(Table 4.23). the comments stating that 

these products would have difficulty in 

meeting the standards proposed in the 

proposed rule, and the concerns 

expressed by the Department of Justice, 

we have serious concerns about whether 

13 SEER is an appropriate standard for 

most such products. On the other hand, 

we are uncertain whether it would be 

prudent for us to apply the standards 

contained in the proposed rule to niche 

products in light of the 13 SEER 

standard we are adopting today for other 

products. Doing so may create a strong 

tendency for niche products, with lower 

minimum efficiency standards than 

conventional products. to be applied in 

conventional aRplications. 

Therefore, today's final rule provides 

efficiency standards for all residential 

central air conditioners and heat pumps, 

except the niche products. We are 

referring to these products more 

generally as "space-constrained 

products", since they are specifically 

intended for severely space-constrained 

applications. We define them as having 

the following characteristics: 

(1) Rated cooling capacities no greater 

than 30,000 BTUIhr 

(2) An outdoor or indoor unit having 

at least two overall exterior dimensions 

or an overall displacement that: 

(a) are (is) substantially smaller than 

those of other units that are (i) currently 

usually installed in site-built single 

family homes, and (ii) of a similar 

cooling, and, if a heat pump, heating, 

capacity, and 
'1'' EE.RM/8TD-98-44 0 -4f 0

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001 Rules and Regulations 7197

(b) if increased, would certainly result (b) a description based on physical Environmental Quality (40 CFR Parts

in a considerable increase in the cost of characteristics, manufacturing 1500-1508), and the Department's

installation or would certainly result in characteristics, capacity, and regulations for compliance with NEPA

a significant loss in the utility of the performance attributes that would (10 CFR Part 1021).

product to the consumer. distinguish it from other types of B. Review der Executive Order 12866

(3) Of a product type that was products, and which would beRegulatoy Planning and Review"

available for purchase in the United enforceable at the point of manufacture

States as of December 1, 2000. (c) a list of models produced of that Today's regulatory action has been

Based on the information we have product type by the manufacturer, determined to be an "economically

gathered thus far in this rulemaking, we containing for each model: Physical significant regulatory action" under

believe space-constrained products dimensions, rated capacities, and range Executive Order 12866, "Regulatory

would include equipment described as: of efficiency ratings available; Planning and Review." 58 FR 51735

* through-the-wall packaged and split (3) a statement of whether the number (October 4, 1993). Accordingly, today's

* ductless split of units produced by the manufacturer action was subject to review under the

* single package and non-weatherized was less than or greater than 100,000 Executive Order by the Office of

Small duct, high velocity equipment units in the year 2000; and Information and Regulatory Affairs

is covered by today's standards. As (4) an estimate of the percentage of (OIRA) of the Office of Management and

discussed in the proposed rule (65 FR units produced by the manufacturer that Budget.

at 59609-10), DOE addressed the the manufacturer estimates are installed The draft submitted to OIRA and

concerns for that equipment by as replacements for similar units. other documents submitted to OIRA for

modifying the test procedure to allow The Department encourages review have been made a part of the

those products to be tested as coil-only companies that believe they rulemaking record and are available for

equipment. Also, the standards in manufacture space-constrained products public review in the Department's

today's rule will clearly apply to the to immediately submit this information, Freedom of Information Reading Room,

types of central air conditioners and without awaiting a request from DOE, to 1000 Independence Avenue, SW,

heat pumps normally installed in site- Ms. Geraldine Paige at the address Washington, DC 20585, between the

built single family homes. indicated at the beginning of this notice. hours of 9:00 a.m. and 4:00 p.m.,

The Department will re-open the We will make the information we Monday through Friday, telephone (202)

comment period in this rulemaking to obtain publicly available (excluding 586-3142.

address standards for space-constrained confidential information) through a The proposed rule contained a

products, and plans to publish a final Federal Register notice. A comment summary of the Regulatory Analysis

rule in the Federal Register no later period will follow during which time which focused on the major alternatives

than eighteen (18) months from the date the public will have an opportunity to considered in arriving at the approach

of publication of today's rule. The rule review the published information and to improving the energy efficiency of

covering space-constrained products respond to the Department. Following consumer products. The reader is

will establish new product classes, to the close of the comment period, we referred to the complete draft

the extent necessary, and minimum will issue in the Federal Register our "Regulatory Impact Analysis," which is

efficiency standards for these products. determination of which of the published contained in the TSD, available as

It will also contain an assessment of products we believe are space- indicated at the beginning of this notice.

technical feasibility and economic constrained products and which we It consists of: (1) A statement of the

justification in accordance with the believe are not. We expect these steps to problem addressed by this regulation,

requirements of the Act. The proceed simultaneously with the other and the mandate for government action;

Department intends to make the rule for activities to set standards for such (2) a description and analysis of the

space-constrained products effective on products. feasible policy alternatives to this

Department intends to make the rule for feasible policy alternatives to this

regulation; (3) a quantitative comparison January 23, 2006. VI. Procedural Issues and Regulatory of the impacts of the alternatives; and

Before reopening the comment period, Review(4) the national economic impacts of the we will initially identify those product proposed standard.

types we believe should be treated as A. Review Under the National

space-constrained products, and will Environmental Policy Act C. Review Under the Regulatory

begin to assess the impact of a The Department prepared an Flexibility Act

rulemaking for these products on small Environmental Assessment (EA) (DOE/ The Regulatory Flexibility Act, 5

businesses. To aid in this process, we EA-1352) available from: U.S. U.S.C. 601 et seq., requires an will seek shortly the following Department of Energy, Office of Energy assessment of the impact of regulations information from each manufacturer of Efficiency and Renewable Energy, on small businesses. To be categorized

those products that we believe may Forrestal Building, Mail Station EE-41, as a "small" air conditioning and warm meet the definition of space-constrained 1000 Independence Avenue, SW, air heating equipment manufacturer, a products: Washington, DC 20585-0121, (202) 586- firm must employ no more than 750

(1) the number of employees 0854. We found the environmental employees.

employed by the company as of effects associated with various standard The Department prepared a December 31, 2000 (to assist us in efficiency levels for central air manufacturing impact analysis which

determining whether we should conditioners and heat pumps to be not was made public and available to all

consider the company to be a small significant, and therefore we are residential central air conditioner and

business entity); publishing, elsewhere in this issue of heat pump manufacturers. Other

(2) a list of proposed space- the Federal Register, a Finding of No impacts on small businesses were constrained products, providing for Significant Impact (FONSI) pursuant to previously discussed in the proposed

each type of product: the National Environmental Policy Act rule. 65 FR 59590, 59629-30 (October 5,

(a) a description of its intended of 1969 (NEPA), 42 U.S.C. 4321 et seq., 2000). The Department reaffirms its

applications the regulations of the Council of certification in the proposed rule.

EE-RM-STD-98-440 COMMENT 204

.. ~ .' .J' 

. -~ 

EE-RM/STD.~~ - =#= ~ 0 + 

Federal Register/Vol. 66, No. l4/Monday, January 22, 200l/Rules and Regulations 7197 

(b) if increased, would certainly result 

in a considerable increase in the cost of 

installation or would certainly result in 

a significant loss in the utility of the 

product to the consumer. 

(3) Of a product type that was 

available for purchase in the United 

States as of December 1, 2000. 

Based on the information we have 

gathered thus far in this rulemaking, we 

believe space-constrained products 

would include equipment described as: 

• through-the-wall packaged and split 

• ductless split 

• single package and non-weatherized 

Small duct, high velocity equipment 

is covered by today's standards. As 

discussed in the proposed rule (65 FR 

at 59609-10). DOE addressed the 

concerns for that equipment by 

modifying the test procedure to allow 

those products to be tested as coil-only 

equipment. Also, the standards in 

today's rule will clearly apply to the 

types of central air conditioners and 

heat pumps normally installed in sitebuilt single family homes. 

The Department will re-open the 

comment period in this rulemaking to 

address standards for space-constrained 

products, and plans to publish a final 

rule in the Federal Register no later 

than eighteen (18) months from the date 

of publication of today's rule. The rule 

covering space-constrained products 

will establish new product classes, to 

the extent necessary. and minimum 

efficiency standards for these products. 

It will also contain an assessment of 

technical feasibility and economic 

justification in accordance with the 

requirements of the Act. The 

Department intends to make the rule for 

space-constrained products effective on January 23. 2006. 

Before reopening the comment period, 

we will initially identify those product 

types we believe should be treated as 

space-constrained products, and will 

begin to assess the impact of a 

rulemaking for these products on small 

businesses. To aid in this process, we 

will seek shortly the following 

information from each manufacturer of 

those products that we believe may 

meet the definition of space-constrained 

products: 

(1) the number of employees 

employed by the company as of 

December 31, 2000 (to assist us in 

determining whether we should 

consider the company to be a small 

business entity); 

(2) a list of proposed spaceconstrained products. providing for 

each type of product: 

(a) a description of its intended 

applications 

(b) a description based on physical 

characteristics, manufacturing 

characteristics, capacity, and 

performance attributes that would 

distinguish it from other types of 

products, and which would be 

enforceable at the point of manufacture 

(c) a list of models produced of that 

product type by the manufacturer, 

containing for each model: Physical 

dimensions, rated capacities, and range 

of efficiency ratings available; 

(3) a statement of whether the number 

of units produced by the manufacturer 

was less than or greater than 100,000 

units in the year 2000; and 

(4) an estimate of the percentage of 

units produced by the manufacturer that 

the manufacturer estimates are installed 

as replacements for similar units. 

The Department encourages 

companies that believe they 

manufacture space-constrained products 

to immediately submit this information, 

without awaiting a request from DOE, to 

Ms. Geraldine Paige at the address 

indicated at the beginning of this notice. 

We will make the information we 

obtain publicly available (excluding 

confidential information) through a 

Federal Register notice. A comment 

period will follow during which time 

the public will have an opportunity to 

review the published information and 

respond to the Department. Following 

the close of the comment period, we 

will issue in the Federal Register our 

determination of which of the published 

products we believe are spaceconstrained products and which we 

believe are not. We expect these steps to 

proceed simultaneously with the other 

activities to set standards for such 

products. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under the National 

Environmental Policy Act 

The Department prepared an 

Environmental Assessment (EA) (DOE/ 

EA-1352) available from: U.S. 

Department of Energy, Office of Energy 

Efficiency and Renewable Energy, 

Forrestal Building, Mail Station EE-41, 

1000 Independence Avenue, SW, 

Washington, DC 20585-0121, (202) 586-

0854. We found the environmental 

effects associated with various standard 

eftlciency levels for central air 

conditioners and heat pumps to be not 

significant, and therefore we are 

publishing, elsewhere in this issue of 

the Federal Register, a Finding of No 

Significant Impact (FONSI) pursuant to 

the National Environmental Policy Act 

of 1969 (NEPA), 42 U.S.C. 4321 et seq., 

the regulations of the Council of 

Environmental Quality (40 CFR Parts 

1500--1508). and 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) of the Office of Management and 

Budget. 

The draft 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, 

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 proposed rule contained a 

summary of the Regulatory Analysis 

which focused on the major alternatives 

considered in arriving at the approach 

to improving the energy efficiency of 

consumer products. The reader is 

referred to the complete draft 

"Regulatory Impact Analysis," which is 

contained in the TSD, available as 

indicated at the beginning of this notice. 

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. 

C. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq., requires an 

assessment of the impact of regulations 

on small businesses. To be categorized 

as a "small" air conditioning and warm 

air heating equipment manufacturer, a 

firm must employ no more than 750 

employees. 

The Department prepared a 

manufacturing impact analysis which 

was made public and available to all 

residential central air conditioner and 

heat pump manufacturers. Other 

impacts on small businesses were 

previously discussed in the proposed 

rule. 65 FR 59590, 59629-30 (October 5, 

2000). The Department reaffirms its 

certification in the proposed rule. 
EE-RM/STD-98-440- 4> O

7198 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

Today's rule will not have a significant the extent permitted by law, the final proposed significant intergovernmental

impact on a substantial number of small regulations meet the relevant standards. mandate. The Department's consultation

entities, and preparation of a regulatory . Takings" Assessment Review process is described in a notice

flexibility analysis is unnecessary. published in the Federal Register on

Most small businesses engaged in the DOE has determined pursuant to March 18, 1997 (62 FR 12820). Today's

manufacture of central air conditioners Executive Order 12630, "Governmental final rule may impose expenditures of

and heat pumps produce products that Actions and Interference with $100 million or more on the private

we have called "niche" products. To Constitutionally Protected Property sector. It does not contain a Federal

address the concerns of the Department Rights," 52 FR 8859 (March 18, 1988), intergovernmental mandate.

of Justice and many commenters that this regulation would not result in Section 202 of UMRA authorizes an regarding impacts the of more stringent any takings that might require agency to respond to the content

standards on small manufacturers, we compensation under the Fifth requirements of UMRA in any other

are continuing our evaluation ofw Amendment to the United States statement or analysis that accompanies are continuing our evaluation of Constitution. thate proposed rule. 2 U.S.C. 1532(c). The

standards for those products and have Consttutonthe proposed rule. 2 U.S.C. 1532(c). The

not issued new standards for them as G. Review Under Executive Order 13132 content requirements of section 202(b)

part of this rule. E t O 13132 (6of UMRA relevant to a private sector Executive Order 13132 (64 FR 43255, mandate substantially overlap the

D. Review Under the Paperwork August 4, 1999) imposes certain economic analysis requirements that

Reduction Act requirements on agencies formulating apply under section 325(o) of EPCA and

and implementing policies or Executive Order 12866. The No new information or record keeping regulations that preempt State law or Supplementary Information section of

requirements are imposed by this that have federalism implications. the Notice of Final Rulemaking and

rulemaking. Accordingly, no Office of Agencies are required to examine the "Regulatory Impact Analysis" section of

Management and Budget clearance is constitutional and statutory authority the TSD for this Final Rule responds to

required under the Paperwork supporting any action that would limit those requirements.

Reduction Act. 44 U.S.C. 3501 et seq. the policymaking discretion of the Under section 205 of UMRA, the

E. Review Under Executive Order 12988, States and carefully assess the necessity Department is obligated to identify and

"Civil Justice Reform" for such actions. Agencies also must consider a reasonable number of

have an accountable process to ensure regulatory alternatives before

With respect to the review of existing meaningful and timely input by State promulgating a rule for which a written

regulations and the promulgation of and local officials in the development of statement under section 202 is required. new regulations, Section 3(a) of regulatory policies that have federalism DOE is required to select from those

Executive Order 12988, "Civil Justice implications. DOE published its alternatives the most cost-effective and

Reform," 61 FR 4729 (February 7, 1996), intergovernmental consultation policy least burdensome alternative that

imposes on Executive agencies the on March 14, 2000. 65 FR 13735. DOE achieves the objectives of the rule

general duty to adhere to the following has examined today's final rule and has unless DOE publishes an explanation

requirements: (1) Eliminate drafting determined that it would not have a for doing otherwise or the selection of errors and ambiguity; (2) write substantial direct effect on the States, on such an alternative is inconsistent with

regulations to minimize litigation; and the relationship between the national law. As required by section 325(o) of the

(3) provide a clear legal standard for government and the States, or on the Energy Policy and Conservation Act (42 affected conduct rather than a general distribution of power and U.S.C. 6295(o)), today's final rule

standard and promote simplification responsibilities among the various establishes energy conservation

and burden reduction. With regard to levels of government. State regulations standards for central air conditioners

the review required by section 3(a), that may have existed on the products and heat pumps that are designed to

section 3(b) of Executive Order 12988 that are the subject of today's final rule achieve the maximum improvement in

specifically requires that Executive were preempted by the Federal energy efficiency that DOE has

agencies make every reasonable effort to standards established in NAECA. States determined to be both technologically ensure that the regulation: (1) clearly can petition the Department for feasible and economically justified. A

specifies the preemptive effect, if any; exemption from such preemption to the full discussion of the alternatives

(2) clearly specifies any effect on extent, and based on criteria, set forth in considered by DOE is presented in the

existing Federal law or regulation; (3) EPCA. "Regulatory Impact Analysis" section of

provides a clear legal standard for the TSD for today's final rule.

affected conduct while promoting H. Review Under the Unfunded

simplification and burden reduction; (4) Mandates Reform Act I. Review Under the Treasury and

specifies the retroactive effect, if any; (5) With respect to a proposed regulatory General Government Appropriations

adequately defines key terms; and (6) action that may result in the Act of 1999

addresses other important issues expenditure by State, local and tribal Section 654 of the Treasury and

affecting clarity and general governments, in the aggregate, or by the General Government Appropriations

draftsmanship under any guidelines private sector of $100 million or more Act, 1999 (Pub. L. No. 105-277) requires

issued by the Attorney General. Section (adjusted annually for inflation), section Federal agencies to issue a Family

3(c) of Executive Order 12988 requires 202 of the Unfunded Mandates Reform Policymaking Assessment for any

Executive agencies to review regulations Act of 1995 (UMRA) requires a Federal proposed rule or policy that may affect

in light of applicable standards in agency to publish estimates of the family well-being. Today's final rule

section 3(a) and section 3(b) to resulting costs, benefits and other effects would not have any impact on the

determine whether they are met or it is on the national economy. 2 U.S.C. autonomy or integrity of the family as unreasonable to meet one or more of 1532(a), (b). UMRA also requires each an institution. Accordingly, DOE has

them. DOE reviewed today's final rule Federal agency to develop an effective concluded that it is not necessary to

under the standards of section 3 of the process to permit timely input by state, prepare a Family Policymaking

Executive Order and determined that, to local, and tribal governments on a Assessment.

EE-RM-STD-98-440 COMMENT 204

". EE-RM/STO-98-440"'#= ~ 0 l{ 

7198 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

Today's rule will not have a significant 

impact on a substantial number of small 

entities, and preparation of a regulatory 

flexibility analysis is unnecessary. 

Most small businesses engaged in the 

manufacture of central air conditioners 

and heat pumps produce products that 

we have called "niche" products. To 

address the concerns of the Department 

of Justice and many commenters 

regarding the impacts of more stringent 

standards on small manufacturers, we 

are continuing our evaluation of 

standards for those products and have 

not issued new standards for them as 

part of this rule. 

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 12966, "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 Execu ti ve Order 12966 

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 12966 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 final rule 

under the standards of section 3 of the 

Executive Order and determined that, to 

the extent permitted by law, the fimd 

regulations meet the relevant standards. 

F. "Takings" Assessment Review 

DOE has determined pursuant to 

Executive Order 12630, "Governmental 

Actions and Interference with 

Constitutionally Protected Property 

Rights," 52 FR 6659 (March 16, 1966), 

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 

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 

have an accountable process to ensure 

meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have federalism 

implications. DOE published its 

intergovernmental consultation policy 

on March 14, 2000. 65 FR 13735. DOE 

has examined today's final 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 final rule were preempted by the Federal 

standards established in NAECA. States can petition the Department for 

exemption from such preemption to the 

extent, and based on criteria, set forth in 

EPCA. 

H. Review Under the Unfunded 

Mandates Reform Act 

With respect to a proposed regulatory 

action that may result in the 

expenditure by State, local and tribal 

governments, in the aggregate, or by the 

private sector of $100 million or more 

(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). UMRA also requires each 

Federal agency to develop an effective 

process to permit timely input by state, 

local, and tribal governments on a 

proposed significant intergovernmental 

mandate. The Department's consultation 

process is described in a notice 

published in the Federal Register on 

March 16, 1997 (62 FR 12620). Today's 

final rule may impose expenditures of 

$100 million or more on the private 

sector. It does not contain a Federal 

intergovernmental mandate. 

Section 202 of UMRA authorizes an 

agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. 2 U.S.C. 1532(c). The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(0) of EPCA and 

Executive Order 12666. The 

Supplementary Information section of 

the Notice of Final Rulemaking and 

"Regulatory Impact Analysis" section of 

the TSD for this Final Rule responds to 

those requirements. 

Under section 205 of UMRA, the 

Department is obligated to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating a rule for which a written 

statement under section 202 is required. 

DOE is required to select from those 

alternatives the most cost-effective and 

least burdensome alternative that 

achieves the objectives of the rule 

unless DOE publishes an explanation 

for doing otherwise or the selection of 

such an alternative is inconsistent with 

law. As required by section 325(0) of the 

Energy Policy and Conservation Act (42 

U.S.C. 6295(0)), today's final rule 

establishes energy conservation 

standards for central air conditioners 

and heat pumps that are designed to 

achieve the maximum improvement in 

energy efficiency that DOE has 

determined to be both technologically 

feasible and economically justified. A 

full discussion of the alternatives 

considered by DOE is presented in the 

"Regulatory Impact Analysis" section of 

the TSD for today's final rule. 

l. 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 final rule 

would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 
EE-RM/STD-98-440-" 0' 0/,-

Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 7199

I. Review Under the Plain Language §430.2 Definitions. Heating Seasonal seasona Directives * * * *seasonal

Section 1(b)(12) of Executive Order Space constrained product means a Product class effcency perform12866 requires that each agency draft its central air conditioner or heat pump: ratio tor

regulations to be simple and easy to () That has rated cooling capacities (SEER) (HSPF) no greater than 30,000 BTU/hr; understand, with the goal of minimizing (2) That has an outdoor or indoor unit (ii) Split system heat the potential for uncertainty and having at least two overall exterior pumps ................... 13 7.7

litigation arising from such uncertainty, dimensions or an overall displacement (iii) Single package Similarly, the Presidential that: air conditioners ...... 13 ................ memorandum of June 1, 1998 (63 FR (i) Are (is) substantially smaller than (iv) Single package

31883) directs the heads of executive those of other units that are (i) currently heat pumps ........... 13 7.7

departments and agencies to use plain usually installed in site-built single (v) Space constrained

language in all proposed and final family homes, and (ii) of a similar products ................ (reserved] [reserved]

rulemaking documents published in the cooling, and, if a heat pump, heating, * * * * *

Federal Register. capacity, and

Today's rule uses the following (ii) If increased, would certainly result Appendix

general techniques to abide by Section in a considerable increase in the usual [The following letter from the Department

1(b)(12) of Executive Order 12866 and cost of installation or would certainly of ustice will not appear in the Code of

the Presidential memorandum of June 1, result in a significant loss in the utility Federal Regulations.] 1998: of the product to the consumer; and

* Organization of the material to (3) Of a product type that wasDEPARTMENT OF JUSTICE,

serve the needs of the readers available for purchase in the United Antitrust Division, Main Justice Building,

(stakeholders); States as of December 1, 2000. 950 Pennsylvania Avenue NW.,

*Use of common, everyday words in * * * * *Washington, DC 20530-0001, (202) 514- 2401/(202) 616-2645 (f), short sentences; and 3. Section 430.32 of Subpart C is antitrust@justice.usdoj.gov (internet), * Shorter sentences and sections. amended by revising paragraph (c) to http://www.usdoj.gov (World Wide Web).

read as follows: December 4, 2000.

K. Congressional Notification Mary Anne Sullivan, General Counsel,

As required by 5 U.S.C. 801, DOE will §430.32 Energy and water conservation Department of Energy, Washington, DC

submit to Congress a report regarding standards and effective dates. 20585.

the issuance of today's final rule prior Dear General Counsel Sullivan:

to the effective date set forth at the (c) Central air conditioners and I am responding to your October 16, 2000

outset of this notice. DOE also will central air conditioning heat pumps. (1) letter seeking the views of the Attorney

submit the supporting analyses to the Split system central air conditioners and General about the potential impact on

Comptroller General (GAO) and make central air conditioning heat pumps competition of two proposed energy efficiency standards: one for clothes washers

them available to each House of manufactured after January 1, 1992, and efficiecy standards: one for clothes washers and the other for residential central air

Congress. The report will state that it before January 23, 2006, and single conditioners and heat pumps. Your request

has been determined that the rule is a package central air conditioners and was submitted pursuant to Section

"major rule" as defined by 5 U.S.C. central air conditioning heat pumps 325(o)(2)(B)(i) of the Energy Policy and

804(2). manufactured after January 1, 1993, and Conservation Act, 42 U.S.C. § 6291, 6295

before January 23, 2006, shall have ("EPCA"), which requires the Attorney

List of Subjects in 10 CFR Part 430 Seasonal Energy Efficiency Ratio and General to make a determination of the

Adrmini strative practice and Heating Seasonal Performance Factor no impact of any lessening of competition that

eAdministrativenergacn ation less than: is likely to result from the imposition of procedure, Energy conservation,le uidn^_________________ _ _proposed energy efficiency standards. The

Household appliances. Attorney General's responsibility for

Issued in Washington, DC, on January 16, Seasonal Heatisonal spoding to requests om other 2001. Product class energy seasonal responding to requests from other 2001. Product class r"e'9f perform- departments about the effect of a program on

Dan W. Reicher ratficiency ance fac- competition has been delegated to the

tor Assistant Attorney General for the Antitrust

Assistant Secretary, Energy Efficiency and Division in 28 CFR § 0.40(g). Renewable Energy. (i) Split systems ........ 10.0 6.8 We have reviewed the proposed standards

For the reasons set forth in the (ii) Single package and the supplementary information

preamble, Part 430 of Chapter II of Title systems ................. 9.7 6.6 published in the Federal Register notices and

pre amble, Pat 430dofl Chalpt;eroofs i tlsubmitted to the Attorney General, which 10, Code of Federal Regulations is (2) Central air conditioners and include information provided to the amended, as set forth below. central air conditioning heat pumps Department of Energy by manufacturers. We

PART 430-ENERGY CONSERVATION manufactured on or after January 23, have additionally conducted interviews with

PROGRAM FOR CONSUMER 2006, shall have Seasonal Energy members of the industries.

P Efficiency UCTS Ratio and Heating Seasonal We have concluded that the proposed PRODUCTSPerformance Factor no less than:clothes washer standard would not adversely

affect competition. In reaching this 1. The authority citation for Part 430 conclusion, we note that the proposed

continues to read as follows: Seasonal Heating standard is based on a joint recommendation

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. energy perform- submitted to the Department of Energy by

2461 note. Product class efficiency per fac- manufacturers and energy conservation

ratio a tor advocates. That recommendation states that 2. Section 430.2 is amended by (SEER) (HSPF) virtually all manufacturers of clothes washers adding a definition for "space- who sell in the United States participated in

constrained products" in alphabetical (i) Split system air arriving at the recommendation through their

order to read as follows: conditioners ........... 13 ................ trade association, that the recommendation

EE-RM-STD-98-440 COMMENT 204

'. 

~ 

Federal Register/Vol. 66, No. l4/Monday, January 22, 200l/Rules and Regulations 7199 

,. 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 ofJune I, 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 rule uses the following 

general techniques to abide by Section 

1(b)(12) of Executive Order 12866 and 

the Presidential memorandum of June I, 

1998: 

• Organization of the material to 

serve the needs of the readers 

(stakeholders); 

• Use of common, everyday words in 

short sentences; and 

• Shorter sentences and sections. 

K. Congressional Notification 

As required by 5 U.S.C. 801, DOE will 

submit to Congress a report regarding 

the issuance of today's final rule prior 

to the effective date set forth at the 

outset of this notice. DOE also will 

submit the supporting analyses to the 

Comptroller General (GAO) and make 

them available to each House of 

Congress. The report will state that it 

has been determined that the rule is a 

"major rule" as defined by 5 U.S.C. 

804(2). 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Energy conservation, 

Household appliances. 

Issued in Washington, DC, on January 16, 

2001. 

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 

amended, as set forth below. 

PART 43O-ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

1. The authority citation for Part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 

2461 note. 

2. Section 430.2 is amended by 

adding a definition for "spaceconstrained products" in alphabetical 

order to read as follows: 

§430.2 Definitions. 

* * * 

Space constrained product means a 

central air conditioner or heat pump: 

(1) That has rated cooling capacities 

no greater than 30,000 BTU/hr; 

(2) That has an outdoor or indoor unit 

having at least two overall exterior 

dimensions or an overall displacement 

that: 

(i) Are (is) substantially smaller than 

those of other units that are (i) currently 

usually installed in site-built single 

family homes, and (ii) of a similar 

cooling, and, if a heat pump. heating. 

capacity. and 

(ii) lfincreased. would certainly result 

in n considerable increase in the usual 

cost of installation or would certainly 

result in a significant loss in the utility 

of the product to the consumer; and 

(3) Of a product type that was 

available for purchase in the United 

States as of December 1. 2000. 

* * * * * 

3. Section 430.32 of Subpart C is 

amended by revising paragraph (c) to 

read as follows: 

§ 430.32 Energy and water conservation 

standards and effective dates. 

* * * * 

(e) Central air conditioners and 

central air conditioning heat pumps. (1) 

Split system central air conditioners and 

central air conditioning heat pumps 

manufactured after January 1. 1992. and 

before January 23, 2006. and single 

package central air conditioners and 

central air conditioning heat pumps 

manufactured after January 1. 1993. and 

before January 23. 2006, shall have 

Seasonal Energy Efficiency Ratio and 

Heating Seasonal Performance Factor no 

less than: 

Product class 

(i) Split systems ........ (ii) Single package 

systems ................ . 

Seasonal 

energy 

effiCiency ratio 

10.0 

9.7 

Heating 

seasonal 

performance factor 

6.8 

6.6 

(2) Central air conditioners and 

central air conditioning heat pumps 

manufactured on or after January 23. 

2006. shall have Seasonal Energy 

Efficiency Ratio and Heating Seasonal 

Performance Factor no less than: 

Product class 

(i) Split system air 

conditioners .......... . 

Seasonal 

energy 

efficiency 

ratio 

(SEER) 

Heating 

seasonal 

performance fac- . tor 

(HSPF) 

13 .............. .. 

Seasonal Heating 

seasonal energy perform- Product class efficiency ance lac- ratio tor (SEER) (HSPF) 

(ii) Split system heat 

pumps ................... 13 7.7 

(iii) Single package 

air conditioners ...... 13 ................ (iv) Single package 

heat pumps ........... 13 7.7 

(v) Space constrained 

products ................ [reserved) [reserved) 

* * * * * 

Appendix 

[The following letter from the Department 

of Justice will not appear in the Code of 

Federal Regulations.) . 

DEPARTMENT OF JUSTICE. 

Antitrust Division. Main Justice Building. 

950 Pennsylvania Avenue NW .. Washington. DC 20530-0001. (202) 514-

2401/(202) 616-2645 (0. 

antitrust@justice.usdoj.gov (internet). 

http;llwww.usdoj.gov (World Wide Web). 

December 4. 2000. 

Mary Anne Sullivan. General Counsel. 

Department of Energy. Washington. DC 

20585. 

Dear General Counsel Sullivan: 

I am responding to your October 16, 2000 

letter seeking the views of the Attorney 

General about the potential impact on competition of two proposed energy 

efficiency standards; one for clothes washers 

and the other for residential central air 

conditioners and heat pumps. Your request was submitted pursuant to Section 

325(0j(2j(Bj(i) of the Energy Policy and 

Conservation Act. 42 U.S.C. § 6291.6295 

("EPCA"), which requires the Attorney 

General to make a determination of the 

impact of any lessening of competition that 

is likely to result from the imposition of 

proposed energy efficiency standards. The 

Attorney General's responsibility for 

responding to requests from other 

departments about the effect of a program on 

competition has been delegated to the 

Assistant Attorney General for the Antitrust 

Division in 28 CFR § 0.40(g). 

We have reviewed the proposed standards 

and the supplementary information 

published in the Federal Register notices and 

submitted to the Attorney General. which 

include information provided to the 

Department of Energy by manufacturers. We 

have additionally conducted interviews with 

members of the industries. 

We have concluded that the proposed 

clothes washer standard would not adversely 

affect competition. In reaching this 

conclusion, we note that the proposed 

standard is based on a joint recommendation 

submitted to the Department of Energy by 

manufacturers and energy conservation 

advocates. That recommendation states that 

virtually all manufacturers of clothes washers 

who sell in the United States partiCipated in 

arriving at the recommendation through their 

trade association, that the recommendation 
, by;·~~ i/' - 'EE-RM/STD-98-440 - " '

7200 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations

was developed in consultation with small change from the current central air Third, the proposed heat pump standard of

manufacturers, and that the manufacturers conditioner and heat pump efficiency 13 SEER could make heat pumps less

believe the new standard would not likely standards of 10 SEER/6.8 HSPF for split competitive with alternative heating and

reduce competition. We note further that, as system air conditioners and heat pumps and cooling systems. Because the standard will

the industry recommended, the proposed 9.7 SEER/6.6 HPSF for single package air result in increases in the size and cost of heat

standard will be phased in over six years, conditioners and heat pumps to 12 SEER for

which will allow companies that do not air conditioners and 13 SEER/7.7 HPSF for pumps, it is possible that purchasers will

already have products that meet the proposed heatpumps. shift away from heat pumps to other systems

standard sufficient time to redesign their We have identified three possible that include electric resistance heat, reducing

product lines. competitive problems presented by the the competition that presently exists between

With respect to the proposed residential proposed standards. First, the proposed 13 heat pumps and those other systems.

central air conditioner and heat pump SEER heat pump standard would have a The Department of Justice urges the

standard, we have concluded that there could disproportionate impact on smaller Department of Energy to take into account

be an adverse impact on competition. The manufacturers. Currently less than 20% of these possible impacts on competition in

proposed standard, Trial Standard Level 3, is the total current product lines meet the determining its final energy efficiency

expressed in terms of two industry proposed standards, but for some small standard for air conditioners and heat

measurements: SEER (Seasonal Energy manufacturers, 100% of their product lines

Efficiency Ratio) and HSPF (Heating Seasonal fail to satisfy the proposed standard. pumps. The Department of Energy should

Performance Factor).' These standards would Second, the proposed standard for heat consider setting a lower SEER standard for

pumps, and in some instances for air heat pumps, such as the standard included

' The Federal Register notice also requested conditioners, would have an adverse impact in Trial Standard Level 2, and a lower SEER

comments on a proposal to adopt a standard for on some manufacturers of these products standard for air conditioners for retrofit

steady-state cooling efficiency (EER) and discussed (including those products referred to in the markets where there are space constraints

several options the Department of Energy is Federal Register notice as "niche products") (such as markets served by niche products) considering. The proposed rule set forth in the used to retrofit existing housing and used in and for manufactured housing. notice does not, however, include a provision manufactured housing. These manufacturers

regarding an EER standard, and the views of the could not make units that comply with the Sincerely, Department of Justice expressed in this letter are uld l A n l ela

limited to the impact of any lessening of rule and fit into the available space. A. Douglas Melamed,

-competition * * * that is likely to result from the Acting Assistant Attorney General.

imposition of the Iproposed] standard, " as required the Department will then evaluate that proposed F c 0-1 il -- by EPCA. If the Department of Energy proposes a rule and express its views about the competitive . - le 1-1-1 11: am rule in the future incorporating an EER standard, impact of that standard. ILLUNG CODE 6450-01-P

EE-RM-STD-98-440 COMMENT 204

,; .• .. . I .. ,'" >;: 

.. EE.RM/STD .. ~~O -::If:::::-~ 0,+ 

7200 Federal Register/Vol. 66, No. 14/Monday, January 22, 2001/Rules and Regulations 

was developed in consultation with small 

manufacturers, and that the manufacturers 

believe the new standard would not likely 

reduce competition. We note further that, as 

the industry recommended, the proposed 

standard will be phased in over six years, 

which will allow companies that do not 

already have products that meet the proposed 

standard sufficient time to redesign their 

product lines. 

With respect to the proposed residential 

central air conditioner and heat pump 

standard, we have concluded that there could 

be an adverse impact on competition. The 

proposed standard, Trial Standard Level 3, is 

expressed in terms of two industry 

measurements: SEER (Seasonal Energy 

Efficiency Ratio) and HSPF (Heating Seasonal 

Performance Factor).' These standards would 

1 The Federal Register notice also requested 

comments on a proposal to adopt a standard for 

steady-state cooling efficiency (EER) and discussod 

soveral options tho Department of Energy is 

considering. Tho proposed rule set forth in the 

notice does not. however. includo a provision 

rogarding an EER standard, and the views of the 

Department of Justice expressed in this letter are 

limited to the impact of any lessening of - competition' • • that is likely to result from the 

imposition of the [proposed) standard, .. as required 

by EPCA. U the Department of Energy proposes a 

rule in the future incorporating an EER standard, 

change from the current central air 

conditioner and heat pump efficiency 

standards of 10 SEER/6.8 HSPF for split 

system air conditioners and heat pumps and 

9.7 SEER/6.6 HPSF for single package a!r 

conditioners and heat pumps to 12 SEER for 

air conditioners and 13 SEER/7.7 HPSF for 

heat pumps. 

We have identified three possible 

competitive problems presented by the 

proposed standards. First, the proposed 13 

SEER heat pump standard would have a 

disproportionate impact on smaller 

manufacturers. Currently less than 20% of 

the total current product lines meet the 

proposed standards, but for some small 

manufacturers, 100% of their product lines 

fail to satisfy the proposed standard. 

Second, the proposed standard for heat 

pumps, and in some instances for air 

conditioners, would have an adverse impact 

on some manufacturers of these products 

(including those products referred to in the 

Federal Register notice as "niche products") 

used to retrofit existing housing and used in 

manufactured housing. These manufacturers 

could not make units that comply with the 

rule and fit into the available space. 

the Department will then evaluate that proposed 

rule and express its views about tho competitive 

impact of that standard. 

Third, the proposed heat pump standard of 

13 SEER could make heat pumps less 

competitive with alternative heating and 

cooling systems. Because the standard will 

result in increases in the size and cost of heat 

pumps, it is possible that purchasers will 

shift away from heat pumps to other systems 

that include electric resistance heat, reducing 

the competition that presently exists between 

heat pumps and those other systems. 

The Department of Justice urges the 

Department of Energy to take into account 

these possible impacts on competition in 

determining its final energy efficiency 

standard for air conditioners and heat 

pumps. The Department of Energy should 

consider setting a lower SEER standard for 

heat pumps, such as the standard included 

in Trial Standard Level 2, and a lower SEER 

standard for air conditioners for retrofit 

markets where there are space constraints 

(such as markets served by niche products) 

and for manufactured housing. 

Sincerely, 

A. Douglas Melamed, 

Acting Assistant Attorney General. 

[FR Doc. 01-1790 Filed 1-18-01; 11:30 am) 

P.ILUNG CODE 645CHlH'