# GAO

U.S. GOVERNMENTACCOUNTABILITY OFFICE 441 GSt. N.W. Washington, DC 20548

B-326096

August 4, 2014

The Honorable Mary Landrieu Chair The Honorable Lisa Murkowski Ranking Member Committee on Energy and Natural Resources United States Senate

The Honorable Fred Upton Chairman The Honorable Henry

### A. Waxman Ranking Member Committee on Energy and Commerce House of Representatives
Subject: DepartmentofEnergy: EnergyConservation Program forConsumerProducts: Energy Conservation Standards forResidentialFurnace Fans ·

Pursuant to section 801 (a)(2)(A) oftitle 5, United States Code, this is our report on a major rule promulgated by the Department of Energy (Energy) entitled "Energy Conservation Program for Consumer Products: Energy Conservation Standards forResidential Furnace Fans".(RIN: 1904, AC22). We received the rule on July 18, 2014. Itwas published in the FederalRegisteras a final rule on July 3, 2014. 79 Fed. Reg. 38,130.

Thefinal rule prescribes energy conservation standardsfor residential furnace fans. Pursuant to the Energy Policy and Conservation Act of 1975 (EPCA), as amended, Energy must prescribe energy conservation standards forvarious consumer products and certain commercial and industrial equipment, including residential furnace fans. EPCA requires Energy to determinewhether such standards would be technologically feasible and economicallyjustified and would save a significant amount of energy. Energy has determined that the prescribed energy conservation standards forthese products would result in significant conservation of energy and are technologically feasible.and economicallyjustified. The effective date forthis final rule is September 2, .2014. Compli.ance with the prescribed standards established for residential furnace fans is required on and afterJuly 3, 2019.

The Congressional ReviewAct (CRA) requires a 60-day delay in the effective date of a major rule from the date ofpublication in the FederalRegisteror receipt ofthe rule by Congress, Whichever is later. 5 U.S.C. 

### § 801 (a)(3)(A). This final rule was published in the Federal Registeron July 3, 2014, received by the Senate on July 22, 2014, and received by the House of Representatives on July 18, 2014. 79 Fed. Reg. 28,130; 160 Cong. Rec. S4702 (July 22, 2014); 160 Cong. Rec. H6812 (July 24, 2014). This final rule has astated effective date of September2, 2104. Therefore, this final rule does not have the required 60-day delay in effective date under CRA.

GA0-14-798REnclosed is our assessment of Energy's compliance with the procedural steps required by section 801 (a)(1)(B)(i) through (iv) oftitle 5with respectto the rule. Otherthan the 60-day delay, our review ofthe procedural steps taken indicates that Energy complied with the applicable requirements.

· Ifyou have any questions about this report orwish to contact GAO officials responsible forthe

evaluation work relating to the subject matter ofthe rule, please contactShirley

### A. Jones, Assistant General Counsel, at (202) 512-8156.

Robert J. Cramer Managing Associate General Counsel

Enclosure

cc: DanielCohen Assistant General Counsel for Legislation,

Regulation and Energy Efficiency Department of Energy

Page 2 GA0-14-798RREPORT UNDER 5 U.S.C. 

### § 801 (a)(2)(A) ON A MAJOR RULE ISSUED BYTHE DEPARTMENT OF ENERGY ENTITLED ENCLOSURE

"ENERGY CONSERVATION PROGRAM FOR

- CONSUMER PRODUCTS: ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACE FANS" (RIN: 1904-AC22)

(i) Cost-benefit analysis

The Department of Energy (Energy) analyzed the costs and benefits ofthis final rule. Energy presented atable ofits evaluation ofthe economic impacts ofthis final rule on consumers of residential furnace fans, as measured by the average life-cycle cost (LCC) savings and the median payback period (PBP). The average LCC savings are positive for all product classes. Energy also calculated the impact on manufacturers. The industry net presentvalue (INPV) is the sum ofthe discounted cash flows to the industry from the base yearthrough the end ofthe analysis period (2014 to 2048). Using a real discount rate of7.8 percent, Energy estimated that the INPVfor manufacturers of residential furnace fans is $349.6 million. Underthis final rule, Energy expects that manufacturers may lose upto 16.9 percent oftheir INPV, which is approximately $59:0 million. Total conversion costs incurred by industry priorto the compliance date are expected to reach $40.6 million.
Energy also estimated the benefits ofthis final rule, stating that this final rule would save a significant amount of energy. The lifetime energy savings for residential furnace fans purchased in the.30-yearperiod that beginsinthe yearof.compliance**with.thestandards.(2019~2048)** amount to 3.99 quadrillion Btu (quads). The estimated annual energy savings in 2030 (0.07 quads) are equivalent to 0.3 percent oftotal U.S. residential energy use in 2012. The cumulative net present value (NPV) oftotal consumer costs and savings ofthe standards for residential furnace fans ranges from $10,024 million (at a 7 percent discount rate) to $28,810 million (at a 3 percent discount rate). This NPV expresses the estimated total value offuture operating-cost savings minus the estimated increased product costs for residential furnace fans purchased in 2019-2048. In addition, this final rule is expected to have significant environmental benefits. The energy savings would result in cumulative emission reductions of approximately 180.6 million metrictons (Mt) ofcarbon dioxide (C02 ), 695.0 thousand tons of methane (CH4), 235.7 thousand tons ofsulfur dioxide (S02 ), 84.0 thousand tons of nitrogen oxides (NOx). 6.2thousand tons of nitrous oxide (N20), and 0.4 tons of mercury (Hg). The cumulative reduction in C02 emissions through 2030 amounts to 34 million Mt. The value ofthe C02reductions is calculated using a range ofvalues per metricton ofC02 (otherwise known as the Social Cost ofCarbon) developed by a recentfederal interagency process.

In atable in the final rule, Energy summarized the national economic costs and benefits expected to result from the standardsfor residential furnace fans. Based on the analyses culminating in this final rule, Energyfound the benefits to the nation ofthe standards (energy savings, consumer LCC savings, positive NPV ofconsumer benefit, and emission reductions) outweigh the burdens (loss of INPVand LCC increasesfor some users ofthese products). Energy has concluded that the standards in this final rule represent the maximum improvement

GA0-14-798Rin energy efficiencythat is technologically feasible and economicallyjustified and would result in significant conservation of energy.
(ii) Agency actions relevant to the Regulatorv FlexibilityAct (RFAl. 5 U.S.C. 

### §§ 603-605. 607, and 609
Energy prepared a final regulatory analysis forthis final rule. The analysis included (1) a description and estimated numberofsmall entities regulated; (2) a description and estimate of compliance requirements; (3) any duplication, overlap, or conflict with other rules and regulations; and (4) significant alternatives to the rule.
(iii) Agency actions relevantto sections 202-205 ofthe Unfunded Mandates Reform Act of 1995, 2 U.S.C. 

### §§ 1532-1535
Energy has concluded that this final rule would likely require annual expenditures of$100 million
ormore by the private sector. Such expenditures may include investment in research and development and in capital expenditures by residential furnace fans manufacturers in the years between the final rule and the compliance date forthe new standards, and incremental additional expenditures by consumers to purchase higher-efficiency residential furnace fans, starting atthe compliance date for the applicable standard. Energy stated·that its Regulatory ImpactAnalysis constitutes its actions taken to complywith the Act. In addition, Energy states thatthis final rule adoptsthe .most cost-effective and least burdensome alternative that achieves the objectives ofthe rule.
(iv) Other relevant information or requirements underacts and executive orders

Administrative Procedure Act, 5 U.S.C. 

### §§ 551 et seq.

OnJune 1,-2010, Energy published a.framework-documentforthis rulemaking and then published the Notice of Public Meeting and Availability ofthe Framework Documentfor furnace fans in the FederalRegisteron June 3, 2010. 75 Fed. Reg. 31,323. Energy originally scheduled the comment period on the Framework Documentto close on July 6, 2010, but due to the large numberand broad scope ofquestions and issues raised, Energy subsequently published a notice in the FederalRegisterreopening the comment period from July 15, 2010, until July 27, 2010, to allow additional time for interested parties to submit comments. 75 Fed. Reg. 41, 102 (July 15, 2010). Energy also published in the FederalRegistera Notice of Public Meeting and the Availability ofthe PreliminaryTechnical Support Document (TSO) on July 10, 2012. 77 Fed. Reg. 40,530. Energy published a Notice of Proposed Rulemaking (NOPR) in the Federal Registerand made available an accompanying NOPR TSO on October25, 2013. 78 Fed. Reg. 64,068. Energy invited and received comments on the NOPR, to which it responded in this final rule.
Paperwork Reduction Act (PRA), 44 U.S.C. 

### §§ 3501-3520
Energy determined that this final rule contains an information collection requirement underthe Act. This information collection requirement forfurnace fan certification has been submitted to the Office ofManagement and Budget (OMB)forapproval. Energy estimates tratthe public · reporting burden forthe information collection will average 30 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Energy notes that the



### Page 2 GA0-14-798Rcertification and recordkeeping requirements for certain consumer products in 1

### OC.F.R. part 430 have previously been approved by OMB and assigned OMB control number 1910-1400; the certification requirement forfurnace fans will be included in this collection once approved by OMB. Energy states that itwill notifythe public of OMB approval through a FederalRegister notice.
Statutory authorization forthe rule
Energy states that it promulgated this final rule underthe authority of sections 6291 to 6309 of title 42, United States Code.

Executive Order No. 12,866 (Regulatory Planning and Review)

·· Energy determined thatthis final rule is economically significant underthe Order, and it has

been reviewed by OMB.

Executive Order No. 13,132 (Federalism)

On March 14, 2000, Energy published a statement of policy describing the intergovernmental consultation process it would follow in the development ofthese regulations. 65 Fed. Reg. 13,735. The Energy and Conservation Act of 1975 (EPCA) governs and prescribesfederal preemption of state regulations as to energy conservation forthe equipmentthat is the subject this final rule. States can petition Energyfor exemption from such preemption to the extent, and based on criteria, setforth in EPCA. 42 U.S.C. 

### § 6297. Energy determined that no further action is required by the Order.

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