01/16/2007 1602 FAX

DEPARTMENT OF JUSTICE

Antitrust Division

Main Justice Building

950 Pennsylvania Avenue, N.W.

Washington, D.C. 20530-0001

(202) 514-2401 I (202) 616-2645 (Fax)

e-mail: antitrustC? usdoj.gov

Web site: http:llwww. usdoj . gov/atr

January 16, 2007

FACSIMILE TRANSMITTAL AND FIRST CLASS MAIL

Warren Belmar, Esq.

Deputy General Counsel for Energy Policy

U.S. Department of Energy

Washington, D.C. 20585

Dear Deputy General Counsel Belmar:

0 002/003

144

I am responding to your November 14, 2006 letters seeking the views of the Attorney

General about the potential impact an competition of proposed energy efficiency standards

relating to (1) liquid-immersed and medium-voltage, dry-type distribution transformers

("distribution transformers"), and (2) residential furnaces and boilers ("furnaces and boilers").

The Energy Policy and Conservation Act ("SPCA'") authorizes the Department of Energy

("DOE") to establish energy conservation standards for a number of appliances where DOE

determines that those standards would be technologically feasible, economically justified, and

result in significant energy savings.

Your requests were submitted pursuant to Section 325(o)(2)(B)(I) of the Energy Policy

and Conservation Act, 42 U.S.C. §6291, 6295 ("EPCA"), which states that, before the Secretary

of Energy may prescribe a new or amended energy conservation standard, the Secretary shall ask

the Attorney General to make a determination of "the impact of any lessening of competition ...

that is likely to result from the imposition of the standard." 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). In conducting its analysis the Antitrust Division examines whether a proposed

standard may lessen competition, for example, by placing certain manufacturers of a product at

an unjustified competitive disadvantage compared to other manufacturers, or by inducing

avoidable inefficiencies in production or distribution of particular products. In addition to

harming consumers directly through higher prices, these effects could undercut the ultimate goals

of the legislation.

Your requests included the Notices of Proposed Rulemaking ("NOPR") that were

published in the Federal Register and transcripts of public hearings relating to the proposed

standards. The NOPR relating to distribution transformers proposed Trial Standard Level 2 and

explained why DOE had decided not to propose higher trial standard levels. The NOPR relating

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#144 

., 

DEPARTMENT OF JUSTICE 

Antitrust Division 

Main Justice Budding 

950 Pennsylvania Avenue, N. W. 

Washington, D.C. 20530·0001 

(202) 514·24011 (202) 616-2645 (FIIX) 

~:-mail; antirrust@usdoj.gov 

Web site: hlfp:l/www.usdoj.gov/atr 

January 16, 2007 

FACSIMILE TRANSMITTAL AND FIRST CLASS MAIL 

Warren Belmar. Esq. 

Deputy General Counsel for Energy Policy 

u.s. Department of Energy 

Washington, D.C. 20585 

Dear Deputy General Counsel Belmar: 

I am responding to your November 14,2006 letters seeking the views of the Attorney 

General about the potential impact on competition of proposed energy efficiency standards 

relating to (1) liquid-immersed and medium-voltage, dry-type distribution transfonners 

("distribution transfonners"), and (2) residential furnaces and boilers ("furnaces and boilers"). 

The Energy Policy and Conservation Act ("EPCA") authorizes the Department of Energy 

("DOE") to establish energy conservation standards for a numbttr of appliances where DOE 

detennines that those standards would be technologically feasible, economically justified, and 

result in significant energy savings. 

Your requests were submitted pursuant to Section 325(0 )(2)(B)(I) of the Energy Policy 

and Conservation Act, 42 U.S.C. §6291, 6295 ("EPCA"), which states that, before the Secretary 

of Energy may prescribe a new or amended energy conservation standard, the Secretary shall ask 

the Attorney General to make a determination of "the impact of any lessening of competition ... 

that is likely to result from the imposition ofthe standard." 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 § O.40(g). In conducting its analysis the Antitrust Division examines whether a proposed 

standard may lessen competition, for example, by placing certain manufacturers of a product at 

an unjustified competitive di:iadvantage compared to other manufacturers, or by inducing 

avoidable inefficiencies in production or distribution of particular products. In addition to 

harming consumers directly through higher prices, these effects could Wldercut the ultimate goals 

of the legislation. 

Your requests included the Notices of Proposed Rulemaking ("NOPR") that were 

published in the Federal Register and transcripts of public hearings relating to the proposed 

standards. The NOPR relating to distribution transformers proposed Trial Standard Level 2 and 

explained why DOE had decided not to propose higher trial standard levels. The NOPR relating 
01/16/2007 16:02 FAX !i 003/003

to furnaces and boilers proposed the following standards: 80% annual fuel utilization efficiency

("AFUE") for non-weatherized gas furnaces and mobile home gas furnaces ; 82% AFUE for oilfired furnaces; 83% AFUE for weatherized gas furnaces and oil-fired boilers ; and 84% AFUE for

gas boilers. Our review regarding distribution transformers and furnaces and boilers has focused

upon the standards DOE has proposed adopting; we have not determined the impact on

competition of more stringent standards than those set forth in the NOPRs.

In addition to the NOPRs and transcripts, your staff provided us comments that had been

submitted to DOE regarding the proposed standards. (We understand that the docket has not

closed with respect to furnaces and that more comments may be forthcoming.) We have

reviewed these materials and additionally conducted interviews with members of the industries.

Based on this inquiry, the Division is concerned that the distribution transformer Trial

Standard Level 2 may adversely affect competition with respect to distribution transformers used

in industries, such as underground coal mining, where physical conditions limit the size of

equipment that can be effectively utilized . We understand manufacturers would not be able to

satisfy the proposed standard without increasing the size (or decreasing the power) of each class

of distribution transformer. Firms facing space constraints would incur significantly increased

costs due to enlarging the required installation space (which, for example, could involve removal

of solid rock around coal seams in underground mines ) or reconfiguring the size and number of

each class of distribution transformers at each site. The resulting cost increases could constitute

production inefficiencies that could make certain products less competitive . For example, the

rule could, by raising the costs of certain coal mines , adversely affect production decisions at

those mines and potentially result in increased use of less efficient energy alternatives . We urge

the DOE to consider these concerns carefully in its analysis, and to consider creating an

exception for distribution transformers used in industries with space constraints.

The Division is also concerned that the standards for weatherized gas furnaces and gas

boilers could adversely affect competition . We understand that manufacturers would have

difficulty designing products that safely meet the proposed standards . For weatherized gas

furnaces, meeting the standard would likely result in increased condensation, potentially resulting

in significant deterioration that would jeopardize the safety of the product, and, for weatherized

gas-fired water boilers, meeting the standard would make effective carbon dioxide venting more

difficult. Any resulting costs incurred to solve these issues could adversely affect the

competitiveness of these products in relation to electric heat pumps and water heaters . We urge

the DOE to carefully consider its proposed standards in light of these concerns.

Aside from the discussion above , the Division does not otherwise believe the proposed

standards would adversely impact competition.

Bruce McDonald

cling Assistant Attorney General

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#144 

to furnaces and boilers proposed the following standards: 80% annual fuel utilization efficiency 

(UAFUE") for non-weatherized gas furnaces and mobile home gas furnaces; 82% AFUE for oilfired furnaces; 83% AFUE for weatherized gas furnaces and oil-tired boilers; and 84% AFUE for 

gas boilers. Our review regarding distribution transfonners and furnaces and boilers has focused 

upon the standards DOE has proposed adopting; we bave not detennined the impact on 

competition of more stringent standards than those set forth in the NOPRs. 

In addition to the NOPRs and transcripts, your staff provided us comments that had been 

submitted to DOE regarding the proposed standards. (We understand that the docket has not 

closed with respect to furnaces and that more comments may be forthcoming.) We have 

reviewed these materials and additionally conducted interviews with members of the industries. 

Based on this inquiry, the Division is concerned that the distribution transformer Trial 

Standard Level 2 may adversely affect competition with respect to distribution transfonners used 

in industries, such as underground coal mining, where physical conditions limit the size of 

equipment that can be effectively utilized. We understand manufacturers would not be able to 

satisfy the proposed standard without increasing the size (or decreasing the power) of each class 

of distribution transfonner. Firms facing space constraints would incur significantly increased 

costs due to enlarging the required installation space (which, for example, could involve removal 

of solid rock around coal seams in underground mines) or reconfiguring the size and number of 

each class of distribution transfonners at each site. The resulting cost increases could constitute 

production inefficiencies that could make certain products less competitive. For example, the 

mle could, by raising the costs of certain coal mines, adversely affect production decisions at 

those mines and potentially result in increased use ofless efficient energy alternatives. We urge 

the DOE to consider these concerns carefully in its analysis, and to consider creating an 

exception for distribution transfonners used in industries with space constraints. 

The Division \5 also concerned that the standards for weatherized gas furnaces and gas 

boilers could adversely affect competition. We understand that manufacturers would have 

difficulty designing products that safely meet the proposed standards. For weatherized gas 

furnaces, meeting the standard would likely result in increased condensation, potentially resulting 

in significant deterioration that would jeopardize the safety of the product, and, for weatherized 

gas-fired water boilers, meeting the standard would make effective carbon dioxide venting more 

difficult. Any resulting costs incurred to solve these issues could adversely affect the 

competitiveness of these products in relation to electric heat pumps and water heaters. We urge 

the DOE to carefully consider its proposed standards in light of these concerns. 

Aside from the discussion above, the Division does not otherwise believe the proposed 

standards would adversely impact competition. 

Yo= SID;~tljA 

.Bruce~~ cting Assistan[ Attorney General