'--RR/STZD- / c-/r- /O 30.3 EE-RM/STD-98.440-483

EXECUTIVE ORDER 12866 SUBMISSION'

Important

Please read the instructions on the reverse side before completing this form.

For additional forms or assistance in completing this form, contact the OIRA Docket Library, (202) 395-6880,

or your OIRA Desk Officer.

Send three copies of both this form and supporting material (four copies if Economically Significant or an

Unfunded Mandate) to:

Office of Information and Regulatory Affairs

Office of Management and Budget

Attention: Docket Library, Room 10102

725 17th Street, N.W.

Washington, D. C. 20503

1. Agency/Subagency originating request 2. Regulation Identifier Number (RIN)

Department of Energy 1904-AA77

3. Title

Energy Efficiency Standards for Central Air Conditioners and

Heat Pumps

4. Stage of Development 5. Legal Deadline for this submission

Prerule a) EN Yes ' D No

Proposed Rule

Interim Final Rule b) Date ol / ol / 1994

XX Final Rule DD MM YYYY

Final Rule - No material change c) a[ Statutory E Judicial

Notice

Other 6. Designations

a) Economically Significant (E.O. 12866)

F Yes E No

Description of Other

b) Unfunded Mandate (2 U.S.C. 1532)

7. Agency Contact (person who can best answer questions RJ Yes aI No

regarding the content of this submission)

If either of the above is "Yes," submit four (4) complete

Michael Raymond packages to OIRA

Phone (202) 586-0854

Certification for Executive Order 12866 Submissions

The authorized regulatory contact and the program official certify that the agency has complied with the requirements of

E. 0. 12866 and any applicable policy directives.

Signature of Program Official Date

Signature of Authorized Regulatoy Contact Date

OMB 83-R \ .l Revision: 12197 (Previous versions obsolete)

EE-RM-STD-98-440 COMMENT 303

15 e-RA\/S7l>- '1 g-l/'/C ::If 30.3 EE-RM/STD-98 -3>83 

EXECUTIVE ORDER 12866 SUBMISSION' -440 

Important 

Please read the instructions on the reverse side before completing this form. 

For additional forms or assistance in completing this form. contact the OIRA Docket Ubrary. (202) 395-6880. 

or your OIRA Desk Officer. 

Send three copies of both this form and supporting material (four copies if Economically Significant or an 

Unfunded Mandate) to: 

Office of Information and Regulatory Affairs 

Office of Management and Budget 

Attention: Docket Ubrary. Room 10102 

72517th Street. N.W. 

Washington. D. C. 20503 

1. Agency/Subagency originating request 2. Regulation Identifier Number (RIN) 

Department of Energy 1904-AA77 

3. Title 

Energy Efficiency Standards for Central Air Conditioners and 

Heat Pumps 

4. Stage of Development 

__ Prerule 

__ Proposed Rule 

Interim Final Rule 

XX Final Rule 

__ Final Rule - No material change 

Notice 

Other 

Description of Other 

7. Agency Contact (person who can best answer questions 

regarding the content of this submission) 

Michael Raymond 

Phone <202) 586-0854 

5. Legal Deadline for this submission 

a) 1m Yes 0 No 

b) Date 01 I 01 I 1994 

DO MM yyyy 

c) [Xl Statutory o Judicial 

6. Designations 

a) Economically Significant (E.O. 12866) 

~ Yes 0 No 

b) Unfunded Mandate (2 U.S.C. 1532) 

iOiI Yes 0 No 

If either of the above is "Yes." submit four (4) complete 

packages to OIRA 

Certification for Executive Order 12866 Submissions 

The. autl:1orized regulatory contact and the program official certify that the agency has complied with the requirements of 

E. O. 12866 and any applicable policy directives. 

. ..... 
EE.RM/STD-98-440 i3 03

[6450-01-P]

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, Department of Energy.

ACTION: Final rule.

SUMMARY: The Department of Energy (DOE) today amends the existing energy conservation

standards for central air conditioners and heat pumps by raising the minimum energy efficiency

levels by 20 percent for most central air conditioners and heat pumps, with somewhat lower

levels for certain space-constrained products. DOE also today withdraws a final rule, published

on January 22, 2001, that would have established even higher standards. DOE has determined

that the standards in the January 22 final rule, which never became effective, are not

economically justified under the Energy Policy and Conservation Act (EPCA). Finally, DOE

adopts provisions that clarify the point in time at which DOE's discretion to amend standards

1

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 :iF 3 OJ 

[6450-01-P) 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and Renewable Energy 

10 CFR Part 430 

[Docket Number EE-RM-98-440] 

ruN: 1904-AA 77 

Energy Conservation Program for Consumer Products; Central Air Conditioners and Heat 

Pumps Energy Conservation Standards 

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. 

ACTION: Final rule. 

SUMMARY: The Department of Energy (DOE) today amends the existing energy conservation 

standards for central air conditioners and heat pumps by raising the minimum energy efficiency 

levels by 20 percent for most central air conditioners and heat pumps, with somewhat lower 

levels for certain space-constrained products. DOE also today withdraws a final rule, published 

on January 22, 2001, that would have established even higher standards. DOE has determined 

that the standards in the January 22 final rule, which never became effective, are not 

economically justified under the Energy Policy and Conservation Act (EPCA). Finally, DOE 

adopts provisions that clarify the point in time at which DOE's discretion to amend standards 

1 
becomes limited under EPCA. EE-RM/STD-98-440 -303

EFFECTIVE DATE: The effective date of this rule is [INSERT DATE 75 DAYS FROM

DATE OF PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES:

You may read copies of the public comments, the Technical Support Document for

Energy Efficiency Standards for Consumer Products: Central Air Conditioners and Heat Pumps

(TSD), the transcript of the public hearing, workshop transcripts in this proceeding, the petition

for reconsideration submitted by the Air-Conditioning and Refrigeration Institute, and other postpromulgation submissions at the DOE Freedom of Information (FOI) Reading Room, U.S.

Department of Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, S.W.,

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. You may obtain copies of the TSD and analysis

spreadsheets from the Office of Energy Efficiency and Renewable Energy's (EERE) web site at:

http://www.eren.doe.gov/buildings/codes_standards/applbrf/centralairconditioner.html.

FOR FURTHER INFORMATION CONTACT: Michael Raymond, U.S. Department of

Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building, EE-41, 1000

Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586- 0854, e-mail:

michael.raymond@ee.doe.gov, or Michael Bowers, Esq., U.S. Department of Energy, Office of

General Counsel, Forrestal Building, GC-72, 1000 Independence Avenue, S.W., Washington,

D.C. 20585, (202) 586-9507, e-mail: mike.bowers@hq.doe.gov.

2

EE-RM-STD-98-440 COMMENT 303

becomes limited under EPCA. EE-RM/STD-98-440 ·-303 

EFFECTIVE DATE: The effective date of this rule is [INSERT DATE 75 DAYS FROM 

DATE OF PUBLICATION IN THE FEDERAL REGISTER]. 

ADDRESSES: 

You may read copies of the public comments, the Technical Support Document for 

Energy Efficiency Standards for Consumer Products: Central Air Conditioners and Heat Pumps 

(TSD), the transcript of the public hearing, workshop transcripts in this proceeding, the petition 

for reconsideration submitted by the Air-Conditioning and Refrigeration Institute, and other postpromulgation submissions at the DOE Freedom ofInformation (FOI) Reading Room, U.S. 

Department of Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, S.W., 

Washington, DC 20585, (202-586-3142, between the hours of9:00 a.m. and 4:00 p.m., Monday 

through Friday, except Federal holidays. You may obtain copies of the TSD and analysis 

spreadsheets from the Office of Energy Efficiency and Renewable Energy's (EERE) web site at: 

http://www.eren.doe.gov/buildings/codes_standards/applbrf/central_air_conditioner.htmI. 

FOR FURTHER INFORMATION CONTACT: Michael Raymond, U.S. Department of 

Energy, Office of Energy Efficiency and Renewable Energy, Forrestal Building, EE-41 , 1000 

Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586- 0854, e-mail: 

michael.raymond@ee.doe.gov, or Michael Bowers, Esq., U.S. Department of Energy, Office of 

General Counsel, Forrestal Building, GC-72, 1000 Independence Avenue, S.W., Washington, 

D.C. 20585, (202) 586-9507, e-mail: mike.bowers@hq.doe.gov. 

2 
SUPPLEMENTARY INFORMATION:

Table of Contents EE-RM/STD-98-440 - 303 Table of Contents

I. Introduction

II. Rulemaking History

III. Authority of DOE to Reconsider and Withdraw the January 22, 2001 Final Rule and Adopt a

12 SEER Standard for Central Air Conditioners

A. DOE's Analysis of EPCA's Anti-Backsliding Provision

B. Discussion of Public Comments on the Anti-Backsliding Provision

1. Environmental Advocates' Views

2. ARI's Views

IV. Basis for DOE's Decision to Withdraw the January 22, 2001 Final Rule

A. Legal Issues

B. Policy Issues

V. Amended Energy Conservation Standards

A. Overview

1. Central Air Conditioner and Heat Pump Features

2. Consumer Benefits

3. National Benefits

B. Statutory Framework

C. Methodology Used in DOE Analyses

D. General Discussion of DOE's Consideration of Statutory Criteria

1. Technological Feasibility

2. Economic Justification Factors

a. Economic Impact on Manufacturers and Consumers

b. Life-cycle Costs and Rebuttable Presumption

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Lessening of Competition

f. Need of the Nation to Conserve Energy

g. Other Factors

VI. Discussion of Comments

A. Impact on Consumers

1. Low-Income Consumers

2. Electricity Prices

3. Installation Costs

4. Manufactured Housing Owners

B. Life-Cycle Cost and Payback Period

1. Product Lifetime

2. Warranty, Maintenance, and Service Costs

3. Markups

4. Energy Use

5. Rebuttable Payback Period

3

EE-RM-STD-98-440 COMMENT 303

SUPPLEMENTARY INFORMATION: 

Table of Contents 

l. Introduction 

II. Rulemaking History 

EE-RM/STD-98-440 - 303 

III. Authority of DOE to Reconsider and Withdraw the January 22, 2001 Final Rule and Adopt a 

12 SEER Standard for Central Air Conditioners 

A. DOE's Analysis ofEPCA's Anti-Backsliding Provision 

B. Discussion of Public Comments on the Anti-Backsliding Provision 

1. Environmental Advocates' Views 

2. ARI's Views 

IV. Basis for DOE's Decision to Withdraw the January 22,2001 Final Rule 

A. Legal Issues 

B. Policy Issues 

V. Amended Energy Conservation Standards 

A. Overview . 

1. Central Air Conditioner and Heat Pump Features 

2. Consumer Benefits 

3. National Benefits 

B. Statutory Framework 

c. Methodology Used in DOE Analyses 

D. General Discussion of DOE's Consideration of Statutory Criteria 

1. Technological Feasibility 

2. Economic Justification Factors 

a. Economic Impact on Manufacturers and Consumers 

b. Life-cycle Costs and Rebuttable Presumption 

c. Energy Savings 

d. Lessening of Utility or Performance of Products 

e. Impact of Lessening of Competition 

f. Need of the Nation to Conserve Energy 

g. Other Factors 

VI. Discussion of Comments 

A. Impact on Consumers 

1. Low-Income Consumers 

2. Electricity Prices 

3. Installation Costs 

4. Manufactured Housing Owners 

B. Life-Cycle Cost and Payback Period 

1. Product Lifetime 

2. Warranty, Maintenance, and Service Costs 

3. Markups 

4. Energy Use 

5. Rebuttable Payback Period 

3 
C. Shipments/National Energy Savings

1. Shipments Forecasts EE-RM/STD-98-440 3D

2. Heat Rates

3. Fuel Switching

D. Impact on Manufacturers

1. Cumulative Regulatory Burden

2. Financial Burdens Associated with New Standards

3. Small Manufacturers

4. Manufacturer Cost Estimates

E. Effect on Competition

F. Effect on Utility or Performance

1. Dehumidification

G. Electric System Reliability/Peak Power

1. Peak Power

2. Reliability

H. Other Issues

1. Minimum EER Requirement

2. TXV Requirement

3. State Exemption From DOE Standards

4. Effective Date

5. Environmental Impacts

6. Employment Impacts

7. Space-Constrained Products

a. Through-the-Wall Products

b. Small Duct, High Velocity Systems

8. Basis for HSPF Level

9. Non-Regulatory Approaches

10. Energy Policy

VII. Analytical Results and Conclusions

A. Overview of Analytical Results

1. General

2. Through-the-Wall Products

3. Small Duct, High Velocity Systems

B. Conclusions Regarding Conventional Products

C. Conclusions Regarding Space-Constrained Products

1. Through-the-Wall Products

2. Small Duct, High Velocity Systems

VIII. Procedural Issues and Regulatory Review

A. Review Under the National Environmental Policy Act

B. Review Under Executive Order 12866

C. Review Under the Regulatory Flexibility Act

D. Review Under the Paperwork Reduction Act

E. Review Under Executive Order 12988

4

EE-RM-STD-98-440 COMMENT 303

C. Shipments/National Energy Savings 

1. Shipments Forecasts 

2. Heat Rates 

3. Fuel Switching 

D. Impact on Manufacturers 

1. Cumulative Regulatory Burden 

2. Financial Burdens Associated with New Standards 

3. Small Manufacturers 

4. Manufacturer Cost Estimates 

E. Effect on Competition 

F. Effect on Utility or Perfonnance 

1. Dehumidification 

G. Electric System ReliabilityfPeak Power 

1. Peak Power 

2. Reliability 

H. Other Issues 

1. Minimum EER Requirement 

2. TXV Requirement 

3. State Exemption From DOE Standards 

4. Effective Date 

5. Environmental Impacts 

6. Employment Impacts 

7. Space-Constrained Products 

a. Through-the-Wall Products 

. b. Small Duct, High Velocity Systems 

8. Basis for HSPF Level 

9. Non-Regulatory Approaches 

10. Energy Policy 

VII. Analytical Results and Conclusions 

A. Overview of Analytical Results 

1. General 

2. Through-the-Wall Products 

3. Small Duct, High Velocity Systems 

B. Conclusions Regarding Conventional Products 

CConclusions Regarding Space-Constrained Products 

1. Through-the-Wall Products 

2. Small Duct, High Velocity Systems 

VIII. Procedural Issues and Regulatory Review 

A. Review Under the National Environmental Policy Act 

B. Review Under Executive Order 12866 

C. Review Under the Regulatory Flexibility Act 

D. Review Under the Paperwork Reduction Act 

E. Review Under Executive Order 12988 

4 

EE~RM/STD-98a440 .... 303 
F. Review Under Executive Order 12630 EE-RM/STD-98-440 -3 3

G. Review Under Executive Order 13132

H. Review Under the Unfunded Mandates Reform Act of 1995

I. Review Under the Treasury and General Government Appropriations Act, 1999

J. Review Under Executive Order 13211

K. Congressional Notification

I. Introduction

DOE today publishes three final rulemaking determinations with respect to amended central

air conditioner and heat pump energy conservation standards under section 325 of the Energy

Policy and Conservation Act (42 U.S.C. 6295). First, for reasons described in detail in Section

IV of this Supplementary Information, DOE hereby withdraws the January 22, 2001 final rule

that would have established 13 as the mandatory Seasonal Energy Efficiency Rating (SEER)' for

most central air conditioners and central air conditioning heat pumps (heat pumps). DOE

withdraws the final rule because it: (1) was promulgated without consulting with the Attorney

General on potential anti-competitive effects, (2) contained a material defect in the statement of

basis and purpose required by the Administrative Procedure Act (APA), (3) contained an

effective date in conflict with the Congressional Review Act's lie-before-the-Congress

requirement for major rules, and (4) was based on an assessment of benefits and burdens that

resulted in an erroneous conclusion that a 13 SEER standard for both central air conditioners and

central air conditioning heat pumps would be economically justified under title III, part B of the

Energy Policy and Conservation Act (EPCA)(42 U.S.C. 6291 et seq.). Second, DOE adopts

regulatory provisions that implement section 325(o)(1) of EPCA, including definitions of the

'The Seasonal Energy Efficiency Ratio or SEER is DOE's measure of energy efficiency for the seasonal

cooling performance of central air conditioners and central air conditioning heat pumps.

5

EE-RM-STD-98-440 COMMENT 303

F. Review Under Executive Order 12630 EE-RM/STD-98-440 - 3 D 3 

G. Review Under Executive Order 13132 

H. Review Under the Unfunded Mandates Reform Act of 1995 

I. Review Under the Treasury and General Government Appropriations Act, 1999 

1. Review Under Executive Order 13211 

K. Congressional Notification 

I. Introduction 

DOE today publishes three final rulemaking determinations with respect to amended central 

air conditioner and heat pump energy conservation standards under section 325 of the Energy 

Policy and Conservation Act (42 U .S.C. 6295). First, for reasons described in detail in Section 

IV of this Supplementary Information, DOE hereby withdraws the January 22, 2001 final rule 

that would have established 13 as the mandatory Seasonal Energy Efficiency Rating (SEER)I for 

most central air conditioners and central-air conditioning heat pumps (heat pumps). DOE 

withdraws the final rule because it: (1) was promulgated without consulting with the Attorney 

General on potential anti-competitive effects, (2) contained a material defect in the statement of 

basis and purpose requited by the Administrative Procedure Act (AP A), (3) contained an 

effective date in conflict with the Congressional Review Act's lie-before-the-Congress 

requirement for major rules, and (4) was based on an assessment of benefits and burdens that 

resulted in an erroneous conclusion that a 13 SEER standard for both central air conditioners and 

central air conditioning heat pumps would be economically justified under title III, part B of the 

Energy Policy and Conservation Act (EPCA)(42 U.S.C.6291 et seq.). Second, DOE adopts 

regulatory provisions that implement section 325(0)(1) of EPCA, including definitions of the 

IThe Seasonal Energy Efficiency Ratio or SEER is DOE's measure of energy efficiency for the seasonal 

cooling performance of central air conditioners and central air conditioning heat pumps. 

5 
EE-RM/STD-98-440 - 3 O3

statutory terms "maximum allowable energy use" and "minimum required energy efficiency,"

and thereby pinpoints the point in time at which DOE's discretion to alter an amended standard

becomes limited. The basis for this determination is discussed in Section III of this

Supplementary Information. Third, DOE finalizes 12 SEER and 7.4 Heating System

Performance Factor (HSPF)2 as the amended energy conservation standard for most central air

conditioner and central air conditioning heat pumps and adopts lower standards for certain spaceconstrained products. The basis for these determinations is discussed in Sections V through VII

of this Supplementary Information

II. Rulemaking History

The existing standards for residential central air conditioners and heat pumps were

prescribed by the National Appliance Energy Conservation Act of 1987 (NAECA) (Pub. L. 100-

12) and have been in effect since 1992. The current central air conditioner and heat pump

efficiency standards are as follows:

- Split system air conditioners and heat pumps - 10 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 DOE's intention to revise the existing central air conditioner and heat

pump efficiency standard pursuant to section 325(d) of EPCA, as amended by NAECA. 58 FR

47326. The fiscal year (FY) 1996 appropriations legislation for DOE imposed a moratorium on

proposed and final energy conservation standards. Pub. L. 104-134. During the moratorium,

2The Heating Seasonal Performance Factor is DOE's measure of energy efficiency for the seasonal heating

performance of heat pumps.

6

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ,- 303 

statutory tenns "maximum allowable energy use" and "minimum required energy efficiency," 

and thereby pinpoints the point in time at which DOE's discretion to alter an amended standard 

becomes limited. The basis for this detennination is discussed in Section III of this 

Supplementary Infonnation. Third, DOE finalizes 12 SEER and 7.4 Heating System 

Perfonnance Factor (HSPFf as the amended energy conservation standard for most central air 

conditioner and central air conditioning heat pumps and adopts lower standards for certain spaceconstrained products. The basis for these detenninations is discussed in Sections V through VII 

of this Supplementary Infonnation 

II. Rulemaking History 

The existing standards for residential central air conditioners and heat pumps were 

prescribed by the National Appliance Energy Conservation Act of 1987 (NAECA) (Pub. L. 100-

12) and have been in effect since 1992. The current central air conditioner and heat pump 

efficiency standards are as follows: 

- Split system air conditioners and heat pumps - 10 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 DOE's intention to revise the existing central air conditioner and heat 

pump efficiency standard pursuant to section 325(d) ofEPCA, as amended by NAECA. 58 FR 

47326. The fiscal year (FY) 1996 appropriations legislation for DOE imposed a moratorium on 

proposed and final energy conservation standards. Pub. L. 104-134. During the moratorium, 

2The Heating Seasonal Perfonnance Factor is DOE's measure of energy efficiency for the seasonal heating 

perfonnance of heat pumps. 

6 
EE-RM/STD-98-440- 33

DOE responded to congressional concern about how the appliance standards program was

working by consulting with a broad spectrum of interested persons on possible improvements.

As a result, on July 15, 1996, DOE published a new policy on how it would conduct appliance

standards rulemaking (61 FR 36974). The new policy, "Procedures for Consideration of New or

Revised Energy Conservation Standards for Consumer Products," is commonly referred to as the

Process Improvement Rule and is codified at 10 CFR part 430, subpart C, Appendix A. Under

this new policy, DOE presented for comment an analytical framework for the central air

conditioner and heat pump standards rulemaking during a workshop on June 30, 1998. The

analytical framework described the different analyses that DOE would conduct, the methods for

conducting them, the use of new spreadsheets, and the relationship of the various analyses. On

November 24, 1999, DOE published a Supplemental ANOPR for central air conditioners and

heat pumps and invited additional comment on issues raised following publication of the original

ANOPR. 64 FR 66306.

DOE published a notice of proposed rulemaking on October 5, 2000 (October 5, 2000

NOPR). 65 FR 59590. The energy efficiency standards that DOE proposed for residential

central air conditioners and heat pumps were as follows:

- Split-system and single-package air conditioners -12 SEER

- Split-system and single package heat pumps - 13 SEER/7.7 HSPF

- Through-the-wall air conditioners and heat pumps - 11 SEER/7.1 HSPF.

In addition to the increase proposed in SEER and HSPF, DOE requested comments on a

proposal to adopt a standard for steady-state cooling efficiency, denominated EER (or Energy

Efficiency Ratio). The proposal of an EER was designed to ensure more efficient operation at

7

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-303 

DOE responded to congressional concern about how the appliance standards program was 

working by consulting with a broad spectrum of interested persons on possible improvements. 

As a result, on July 15, 1996, DOE published a new policy on how it would conduct appliance 

standards rulemaking (61 FR 36974). The new policy, "Procedures for Consideration of New or 

Revised Energy Conservation Standards for Consumer Products," is commonly referred to as the 

Process Improvement Rule and is codified at 10 CFR part 430, subpart C, Appendix A. Under 

this new policy; DOE presented for comment an analytical framework for the central air 

conditioner and heat pump st(ll1dards rulemaking during a workshop on June 30, 1998. The 

analytical framework described the different analyses that DOE would conduct, the methods for 

conducting them, the use of new spreadsheets, and the relationship of the various analyses. On 

November 24, 1999, DOE published a Supplemental ANOPR for central air conditioners and 

heat pumps and invited additional comment on issues raised following publication of the original 

ANOPR. 64 FR 66306. 

DOE published a notice of proposed rulemaking on October 5, 2000 (October 5, 2000 

NOPR). 65 FR 59590. The energy efficiency standards that DOE proposed for residential 

central air conditioners and 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 - 11 SEERl7.I HSPF. 

In addition to the increase proposed in. SEER and HSPF, DOE requested comments on a 

proposal to adopt a standard for steady-state cooling efficiency, denominated EER (or Energy 

Efficiency Ratio). The proposal of an EER was designed to ensure more efficient operation at 

7 
EE-RM/STD-98-440 -303

high outdoor temperatures, during periods when electricity use by air conditioners is at its peak.

A public hearing was held in Washington, D.C. on November 16, 2000, to hear oral views, data

and arguments on the proposed rule.

On January 22, 2001, at the close of the Clinton Administration, DOE published a final

rule that would have required a SEER of 13 for all classes of central air conditioners, except for

"niche" products which were omitted from the rule, and a corresponding HSPF of 7.7 for central

air conditioning heat pumps (Final Rule, "Energy Conservation Program for Consumer Products;

Central Air Conditioners and Heat Pump Energy Conservation Standards," 61 FR 7170).

Pursuant to President Bush's Regulatory Review Plan,3 DOE conducted an internal

review of the final, not-yet-effective rules issued under section 325 of EPCA that DOE published

at the end of the Clinton Administration, including final rules concerning energy conservation

standards for clothes washers, water heaters, and central air conditioners and central air

conditioning heat pumps. Consistent with the EPCA criteria for determining whether a standard

level is economically justified under section 325 (42 U.S.C. 6295(o)(2)(B)), DOE examined each

of these three rules to determine, among other things, whether the rulemaking record was

complete and whether the affirmative determination of economic justification was based on

adequate findings with regard to the statutorily required considerations that make up the test of

economic justification.

While DOE examined the three appliance energy conservation standards rulemakings

under the President's Regulatory Review Plan, DOE received petitions for reconsideration for

3

This Plan was set forth in a memorandum from Assistant to the President and Chief of Staff Andrew H.

Card, dated January 20, 2001, and published in the Federal Register on January 24, 2001 (66 FR 7702).

8

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

high outdoor temperatures, during periods when electricity use by air conditioners is at its peak. 

A public hearing was held in Washington, D.C. on November 16,2000, to hear oral views, data 

and arguments on the proposed rule. 

On January 22, 2001, at the close of the Clinton Administration, DOE published a final 

rule that would have required a SEER of 13 for all classes of central air conditioners, except for 

"niche" products which were omitted from the rule, and a corresponding HSPF of 7.7 for central 

air conditioning heat pumps (Final Rule, "Energy Conservation Program for Consumer Products; 

Central Air Conditioners and Heat Pump Energy Conservation Standards," 61 FR 7170). 

Pursuant to President Bush's Regulatory Review Plan,3 DOE conducted an internal 

review of the final, not-yet-effective rules issued under section 325 ofEPCA that DOE published 

at the end of the Clinton Administration, including final rules concerning energy conservation 

standards for clothes washers, water heaters, and central air conditioners and central air 

conditioning heat pumps. Consistent with the EPCA criteria for determining whether a standard 

level is economically justified under section 325 (42 U.S.C. 6295(0)(2)(B», DOE examined each 

of these three rules to determine, among other things, whether the rulemaking record was 

complete and whether the affirmative determination of economic justification was based on 

adequate findings with regard to the statutorily required considerations that make up the test of 

economic justification. 

While DOE examined the three appliance energy conservation standards rulemakings 

under the President's Regulatory Review Plan, DOE received petitions for reconsideration for 

3Th is Plan was set forth in a memorandum from Assistant to the President and Chief of Staff Andrew H. 

Card, dated January 20, 2001, and published in the Federal Register on January 24, 2001 (66 FR 7702). 

8 
EE-RM/STD-98-440- 303

each final rule. In addition, DOE received notice that the Gas Appliance Manufacturers

Association (with regard to the water heater rule) and the Air-Conditioning and Refrigeration

Institute (ARI) and certain manufacturers (with regard to the central air conditioner rule) had

filed petitions for review in the United States Court of Appeals for the Fourth Circuit.

Ultimately, DOE decided that neither the clothes washer rule nor the water heater rule

warranted further rulemaking action and denied the related petitions for reconsideration. See 66

FR 19714 (April 17, 2001). With regard to central air conditioners and central air conditioning

heat pumps, DOE concluded that ARI had raised substantial questions as to the legal sufficiency

of and basis for the January 22, 2001 final rule and that the interests of justice therefore dictated

that DOE further postpone the rule's effective date in light of the pendency of ARI's petition for

judicial review in the Fourth Circuit and its related petition for reconsideration. 66 FR 20191

(April 20, 2001). At that time DOE indicated that it would likely resolve these issues through

supplemental rulemaking that would be forthcoming shortly.

On June 19, 2001, the State of New York, several other states, the Natural Resources

Defense Council, Consumer Federation of America, and the Public Utility Law Project sued

DOE in the Federal court challenging its actions delaying the effective date of the January 22

final rule. The cases have been consolidated, with the states of California, Connecticut,

Vermont, Maine, New Jersey and Nevada joining the lawsuit (State of New York et al. v.

Abraham, 01 Civ. 5499 (LTS) and 01 Civ. 5500(LTS)(SDNY)).

On July 25, 2001, DOE granted ARI's petition and published a three part supplemental

proposal with regard to energy conservation standards for central air conditioners and central air

conditioning heat pumps. 66 FR 38822. First, DOE proposed regulatory provisions to clarify

9

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

each final rule. In addition, DOE received notice that the Gas Appliance Manufacturers 

Association (with regard to the water heater rule) and the Air-Conditioning and Refrigeration 

Institute (ARI) and certain manufacturers (with regard to the central air conditioner rule) had 

filed petitions for review in the United States Court of Appeals for the Fourth Circuit. 

Ultimately, DOE decided that neither the clothes washer rule nor the water heater rule 

warranted further rulemaking action and denied the related petitions for reconsideration. See 66 

FR 19714 (April 17, 2001). With regard to central air conditioners and central air conditioning 

heat pumps, DOE concluded that ARI had raised substantial questions as to the legal sufficiency 

of and basis for the January 22, 2001 final rule and that the interests of justice therefore dictated 

that DOE further postpone the rule's effective date in light of the pendency of ARI's petition for 

judicial review in the Fourth Circuit and its related petition for reconsideration. 66 FR 20191 

(April 20, 2001). At that time DOE indicated that it would likely resolve these issues through 

supplemental rulemaking that would be forthcoming shortly. 

On June 19,2001, the State of New York, several other states, the Natural Resources 

Defense Council, Consumer Federation of America, and the Public Utility Law Project sued 

DOE in the Federal court challenging its actions delaying the effective date of the January 22 

final rule. The cases have been consolidated, with the states of California, Connecticut, 

Vermont, Maine, New Jersey and Nevada joining the lawsuit (State of New York et al. v. 

Abraham, 01 Civ. 5499(LTS) and 01 Civ; 5500(LTS)(SDNY». 

On July 25, 2001, DOE granted ARI's petition and published a three part supplemental 

proposal with regard to energy conservation standards for central air conditioners and central air 

conditioning heat pumps. 66 FR 38822. First, DOE proposed regulatory provisions to clarify 

9 
EE-RM/STD-98-440 - 30O

that section 325(o)(1), which qualifies DOE's rulemaking authority to prescribe amended energy

conservation standards, applies as of an effective date for modifying the Code of Federal

Regulations (CFR) set forth in the notice of final rulemaking and established consistent with the

Congressional Review Act (5 U.S.C. 801-804). Second, in order to correct arguable legal errors

and policy shortcomings, DOE proposed to withdraw the January 22 final rule. Third, based on a

re-assessment of factual information and analyses already in the record, DOE proposed to

determine that elevation of the currently enforceable central air conditioner and central air

conditioning heat pump energy conservation standards by 20 percent is the maximum increase

that is economically justified. For product classes other than through-the-wall products, DOE

proposed a SEER of 12 with a corresponding HSPF of 7.4 which would apply to products

manufactured in 2006. With respect to through-the-wall product classes, DOE proposed

somewhat lower standards. DOE conducted a public hearing in Washington, D.C. on October 2,

2001, to hear oral views, data and arguments on the proposed rule.

III. Authority of DOE to Reconsider and Withdraw the January 22, 2001 Final Rule and Adopt a

12 SEER Standard for Central Air Conditioners

The issue of DOE's authority to withdraw the January 22 final rule and propose a 12

SEER standard was first raised in ARI's March 23, 2001 petition for reconsideration (ARI, No.

138) and in a responding letter submitted to Secretary Abraham by various environmental

organizations on April 6, 2001 (Alliance to Save Energy, et al., ASE, No. 183). ARI contended

that section 325(o)(1) of EPCA, which prohibits DOE from decreasing the maximum allowable

energy use or minimum required energy efficiency of covered products, did not apply to

10

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD.98-440'" 30~ 

that section 325(0)(1), which qualifies DOE's rulemaking authority to prescribe amended energy 

conservation standards, applies as of an effective date for modifying the Code of Federal 

Regulations (CFR) set forth in the notice of final rulemaking and established consistent with the 

Congressional Review Act (5 U.S.c. 801-804). Second, in order to correct arguable legal errors 

and policy shortcomings, DOE proposed to withdraw the January 22 final rule. Third, based on a 

re-assessment of factual information and analyses already in the record, DOE proposed to 

determine that elevation of the currently enforceable central air conditioner and central air 

conditioning heat pump energy conservation standards by 20 percent is the maximum increase 

that is economically justified. For product classes other than through-the-wall products, DOE 

proposed a SEER of 12 with a corresponding HSPF of 7.4 which would apply to products 

manufactured in 2006. With respect to through-the-wall product classes, DOE proposed 

somewhat lower standards. DOE conducted a public hearing in Washington, D.C. on October 2, 

2001, to hear oral views, data and arguments on the proposed rule . 

. III. Authority of DOE to Reconsider and Withdraw the January 22, 2001 Final Rule and Adopt a 

12·SEER Standard for Central Air Conditioners 

The issue of DOE's authority to withdraw the January 22 final rule and propose a 12 

SEER standard was first raised in ARI's March 23, 2001 petition for reconsideration (ARI, No. 

138) and in a responding letter submitted to Secretary Abraham by various environmental 

organizations on April 6, 2001 (Alliance to Save Energy, et aI., ASE, No. 183). ARI contended 

that section 325(0)(1) ofEPCA, which prohibits DOE from decreasing the maximum allowable 

energy use or minimum required energy efficiency of covered products, did not apply to 

10 
EE-RM/STD-98-440- 303

reconsideration of the January 22 final rule because DOE had suspended the effective date of the

rule (ARI, No. 138 at p. 3, n. 2). This provision has been referred to in the rulemaking as

EPCA's "anti-backsliding provision." The environmental advocates took a contrary position,

arguing that the anti-backsliding provision did apply and, thus, that DOE was precluded from

reconsidering the rule and proposing a less stringent standard (ASE et al., No. 183 at p. 5). In

the April 20, 2001, notice postponing the effective date of the January 22 final rule, DOE stated

its intention to issue a further notice of proposed rulemaking that would propose a 12 SEER/7.4

HSPF standard for central air conditioners and heat pumps, and stated that it would invite public

comment on its explanation of the statutory authority to make such a proposal upon

reconsideration of the January 22 final rule (66 FR 20101). Subsequently in the notice of

supplemental proposed rule published on July 25, 2001 (July 25 SNOPR), DOE included a

detailed explanation of its interpretation of section 325(o)(1) of EPCA. We repeat much of the

July 25 SNOPR explanation here as a preface to a discussion of public comments received on

this issue. (Repeating DOE's analysis of section 325(o)(1) here also will assist readers who

otherwise would have to look back at a copy of the July 25 SNOPR.)

A. DOE's Analysis ofEPCA 's Anti-Backsliding Provision

The starting point for the analysis of DOE's authority to reconsider the January 22 final

rule and propose 12 SEER standards is the text of the statute. Section 325(o)(1) of EPCA

provides as follows:

The Secretary may not prescribe any amended standard which increases the

maximum allowable energy use, or, in the case of showerheads, faucets, water

closets, or urinals, water use, or decreases the minimum required energy

efficiency, of a covered product.

11

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- ~3 

reconsideration of the January 22 final rule because DOE had suspended the effective date of the 

rule (ARI, No. 138 at p. 3, n. 2). This provision has been referred to in the rulemaking as 

EPCA's "anti-backsliding provision." The environmental advocates took a contrary position, 

arguing that the anti-backsliding provision did apply and, thus, that DOE was precluded from 

reconsidering the rule and proposing a less stringent standard (ASE et aI., No. 183 at p. 5). In 

the April 20, 2001, notice postponing the effective date of the January 22 final rule, DOE stated 

its intention to issue a further notice of proposed rulemaking that would propose a 12 SEERJ7.4 

HSPF standard forcentraI air conditioners and heat pumps, and stated that it would invite public 

comment on its explanation of the statutory authority to make such a proposal upon 

reconsideration of the January 22 final rule (66 FR 20101). Subsequently in the notice of 

supplemental proposed rule published on July 25, 2001 (July 25 SNOPR), DOE included a 

detailed explanation of its interpretation of section 325(0)(1) of EPCA. We repeat much of the 

July 25 SNOPR explanation here as a preface to a discussion of public comments received on 

this issue. (Repeating DOE's analysis of section 325(0)(1) here also will assist readers who 

otherwise would have to look back at a copy of the July 25 SNOPR.) 

A. DOE's Analysis of EPCA 's Anti-Backsliding Provision 

The starting point for the analysis of DOE's authority to reconsider the January 22 final 

rule and propose 12 SEER standards is the text of the statute. Section 325(0)(1) of EPCA 

provides as follows: 

The Secretary may not prescribe any amended standard which increases the 

maximum allowable energy use, or, in the case of showerheads, faucets, water 

closets, o~ urinals, water use, or decreases the minimum required energy . 

efficiency, of a covered product. 

11 
42 U.S.C. 6295(o)(1). EE-RM/STD-98-440 -3

The critical term in section 325(o)(1), as it relates to the rulemaking on central air

conditioners and heat pumps, is "minimum required energy efficiency." EPCA does not define

this term. However, in context, it is clear that a SEER and an HSPF are benchmarks of

"minimum required energy efficiency" for central air conditioners and heat pumps. See 42

U.S.C. 6295(d)(1) and (d)(2). The key question, however, is which SEER and HSPF represent

the "minimum required energy efficiency" for central air conditioners and heat pumps that may

.not be decreased by an amended standard.

Had the new SEER and HSPF set out in the January 22, 2001, final rule been allowed to

take effect, but (as the rule set forth) been made applicable only to appliances manufactured on or

after January 23, 2006, we think this would be a close question. A reasonable argument could be

made that the new SEER and HSPF became "required" immediately as to such appliances

provided they were manufactured on or after January 23, 2006. A reasonable argument could

also be made that the new SEER and HSPF would not be "required" until January 23, 2006,

when appliances manufactured after that date would have had to comply with them. We address

this question, and other considerations bearing on the answer to it, at greater length below.

In fact, however, the January 22, 2001 final rule expressly stated that the amendments it

set out to existing standards in the Code of Federal Regulations would not take effect until 30

days after publication in the Federal Register. Well before that date arrived, on February 2, 2001,

DOE postponed that effective date for an additional 60 days. Before that 60-day period had

passed, on April 18, 2001, DOE further postponed the amendments' effective date pending the

outcome of petitions by ARI for reconsideration and for judicial review.

12

EE-RM-STD-98-440 COMMENT 303

42 U.S.C. 6295(0)(1). EE-RM/STD-98-440 ... .303 

The critical term in section 325(0)(1), as it relates to the rulemaking on central air 

conditioners and heat pumps, is "minimum required energy efficiency." EPCA does not define 

this term. However, in context, it is clear that a SEER and an HSPF are benchmarks of 

"minimum required energy efficiency" for central air conditioners and heat pumps. See 42 

U.S.C.6295(d)(1) and (d)(2). The key question, however, is which SEER and HSPF represent 

the "minimum required energy efficiency" for central air conditioners and heat pumps that may 

.not be decreased by an amended standard. 

Had the new SEER and HSPF set out in the January 22, 2001, final rule been allowed to 

take effect, but (as the rule set forth) been made applicable only to appliances manufactured on or 

after January 23, 2006, we think this would be a close question. A reasonable argument could be 

made that the new SEER and HSPF became "required" immediately as to such appliances 

provided they were manufactured on or after January 23, 2006. A reasonable argument could 

also be made that the new SEER and HSPF would not be "required" until January 23, 2006, 

when appliances manufactured afterthat date would have had to comply with them. We address 

this question, and other considerations bearing on the answer to it, at greater length below. 

In fact, however, the January 22,2001 final rule expressly stated that the amendments it 

set out to existing standards in the Code of Federal Regulations would not take effect until 30 

days after publication in the Federal Register. Well before that date arrived, on February 2, 2001, 

DOE postponed that effective date for an additional 60 days. Before that 60-day period had 

passed, on April 18,2001, DOE further postponed the amendments' effective date pending the 

outcome of petitions by ARI for reconsideration and for judicial review. 

12 
EE-RM/STD-98-440- 363.

As a result, the new SEER and HSPF, though set out in a final rule, never in any sense

achieved the status of being the "required" "minimum energy efficiency" benchmarks. There has

never been a single moment under any understanding of the word "required" at which any central

air conditioner or heat pump, including one manufactured after January 23, 2006, could even

arguably have been legally required to be manufactured in conformity with them. Hence,

whatever might have been the case had the January 22 final rule been allowed to take effect, we

do not see how the publication of a final rule that would have changed those standards, but was

prevented by later agency action from doing so, could possibly establish "minimum required

energy efficiency" benchmarks.

This interpretation of "minimum required energy efficiency" is reinforced by the rest of

the sentence in section 325(o)(1) of which the phrase is a part. That sentence establishes a

limitation on the "amended standards" the Secretary may prescribe. That wording strongly

suggests that the "minimum required energy efficiency" levels below which the Secretary may

not go are the ones established by the standards being amended. Because of the various actions

postponing the effective date of the amendments to the standards it proposed, the January 22,

2001 rule never actually effectuated any amendment to the prior standards. Therefore, the

standards that DOE proposed to amend are not the ones that would have been in place had the

amendments set out in the January 22 rule actually been made. Rather, they are the standards

prescribed by NAECA (SEER of 10.0 and HSPF of 6.8 for split systems manufactured after

January 1, 1992, SEER of 9.7 and HSPF of 6.6 for single package systems manufactured after

January 1, 1993), unamended until now by anything, including the never-made-effective

amendments set out in the January 22, 2001 rule.

13

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-44()" 303. 

As a result, the new SEER and HSPF, though set out in a final rule, never in any sense 

achieved the status of being the "required" "minimum energy efficiency" benchmarks. There has 

never been a single moment under any understanding of the word "required" at which any central 

air conditioner or heat pump, including one manufactured after January 23, 2006, could even 

arguably have been legally required to be manufactured in conformity with them. Hence, 

whatever might have been the case had the January 22 final rule been allowed to take effect, we 

do not see how the publication of a final rule that would have changed those standards, but was 

prevented by later agency action from doing so, could possibly establish "minimum required 

energy efficiency" benchmarks. 

This interpretation of "minimum required energy efficiency" is reinforced by the rest of 

the sentence in section 325(0)(1) of which the phrase is a part. That sentence establishes a 

limitation on the "amended standards" the Secretary may prescribe. That wording strongly 

suggests that the "minimum required energy efficiency" levels below which the Secretary may 

not go are the ones established by the standards being amended. Because of the various actions 

postponing the effective date of the amendments to the standards it proposed, the January 22, 

2001 rule never actually effectuated any amendment to the prior standards. Therefore, the 

standards that DOE proposed tq amend are not the ones that would have been in place had the 

amendments set out in the January 22 rule actually been made. Rather, they are the standards 

prescribed by NAECA (SEER of 10.0 and HSPF of 6.8 for split systems manufactured after 

January 1, 1992, SEER of9.7 and HSPF of6.6 for single package systems manufactured after 

January 1, 1993), unamended until now by anything, including the never-made-effective 

amendments set out in the January 22, 2001 rule. 

13 
EE-RM/STD-98-440- 33

Notwithstanding public comments (discussed below), DOE continues to believe the

foregoing analysis establishes that EPCA is unambiguous on the question of whether standards

that are published in the Federal Register, but not yet effective, represent the "minimum required

energy efficiency" benchmarks for central air conditioners and heat pumps for purposes of

section 325(o)(1). We think it is clear from the statutory text that such standards do not represent

the benchmarks for "minimum required energy efficiency." We also believe that even if the

statute were found to be ambiguous, for the reasons set out in the discussion that follows, that

would not be the interpretation that we should select as a matter of policy.

If published but not yet effective standards are not the benchmarks for "minimum

required energy efficiency" in section 325(o)(1), the question remains whether DOE should

construe the term "minimum required energy efficiency" to mean (A) energy efficiency standards

that are not yet enforceable against the manufacturers, but that have been prescribed in a final

rule amending prior standards, which amendments have been made to the CFR pursuant to an

effective date that has passed; or (B) energy efficiency standards that are currently enforceable

against the manufacturers if they manufacture and sell a non-compliant product.

DOE believes that alternative (A) is the preferable construction of the term, but only if

the effective date selected for the final rule is consistent with other applicable laws and

regulations and allows the Secretary an opportunity promptly to correct legal and policy errors

that may have been contained in the final rule. If that precondition is satisfied, DOE believes

alternative (A) will better advance the relevant statutory and policy considerations underlying

section 325(o)(1): to promote greater energy efficiency while providing greater certainty to

manufacturers who must plan and make the expenditures necessary to comply with an amended

14

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-363 

Notwithstanding public comments (discussed below), DOE continues to believe the 

foregoing analysis establishes that EPCA is unambiguous on the question of whether standards 

that are published in the Federal Register, but not yet effective, represent the "minimum required 

energy efficiency" benchmarks for central air conditioners and heat pumps for purposes of 

section 325(0)(1). Wethink it is clear from the statutory text that such standards do not represent 

the benchmarks for "minimum required energy efficiency." We also believe that even if the 

statute were found to be ambiguous, for the reasons set out in the discussion that follows, that 

would 110t be the interpretation that we should select as a matter of policy. 

If published but not yet effective standards are not the benchmarks for "minimum 

required energy efficiency" in section 325(0)(1), the question remains whether DOE should 

construe the term "minimum required energy efficiency" to mean (A) energy efficiency standards 

that are not yet enforceable against the manufacturers, but that have been prescribed in a final 

rule amending prior standards, which amendments have been made to the CFR pursuant to an 

effective date that has passed; or (B) energy efficiency standards that are currently enforceable 

against the manufacturers if they manufacture and sell a non-compliant product. 

DOE believes that alternative (A) is the preferable construction of the term, but only if 

the effective date selected for the final rule is consistent with other applicable laws and 

regulations and allows the Secretary an opportunity promptly to correct legal and policy errors 

that may have been contained in the final rule. If that precondition is satisfied, DOE believes 

alternative (A) will better advance the relevant statutory and policy considerations underlying 

section 325(0)(1): to promote greater energy efficiency while providing greater certainty to 

manufacturers who must plan and make the expenditures necessary to comply with an amended 

14 
EE-RM/STD-98-440- 303

energy conservation standard -- which is often a multi-year endeavor with substantial costs. We

note that the relative certainty the interpretation set out in alternative (A) produces for

manufacturers, which is a key comparative advantage of this interpretation over the competing

one, is intimately tied to a proper effective date choice that facilitates prompt error correction,

thereby potentially avoiding litigation that would seriously undermine the certainty sought to be

achieved.

DOE believes that this resolution of the ambiguities in the statute is consistent with the

statute's text, structure, legislative history, and the fundamental policy choices it makes. We

believe that on balance this approach better accomplishes the statute's objectives than either

adopting alternative (A) without the qualification set out above, thereby establishing a set of

procedures that could have the effect of preventing the Secretary, within a short period after

publication of a final rule that would modify such standards, from correcting defects in them that

subsequently come to his attention; or adopting alternative (B), thereby reading the phrase

"minimum required energy efficiency" to encompass only energy efficiency standards as of the

date upon which manufacturers have to comply with those standards. Although at least the latter

approach may well be a permissible interpretation of section 325(o)(1), DOE believes that the

view set out in our proposed rule is the better one.

The latter view - that a standard is only covered by section 325(o)(1) after

manufacturers are required to comply with it - does at first blush appear to be the most natural

reading of the phrase. This view, however, is in tension with the rest of the sentence, which, as

explained above, suggests that the relevant point of comparison is the standard being amended,

regardless of whether manufacturers actually have to comply with it. Moreover, if adopted, this

15

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 30 3 

energy conservation standard -- which is often a multi-year endeavor with substantial costs. We 

note that the relative certainty the interpretation set out in alternative (A) produces for 

manufacturers, which is a key comparative advantage of this interpretation over the competing 

one, is intimately tied to a proper .effective date choice that facilitates prompt error correction, 

thereby potentially avoiding litigation that would seriously undermine the certainty sought to be 

achieved. 

DOE believes that this resolution of the ambiguities in the statute is consistent with the 

statute's text, structure, legislative history, and the fundamental policy choices it makes. We 

believe that on balance this approach better accomplishes the statute's objectives than either 

adopting alternative (A) without the qualification set out above, thereby establishing a set of 

procedures that could have the effect of preventing the Secretary, within a short period after 

publication of a final rule that would modify such standards, from correcting defects in them that 

subsequently come to his attention; or adopting alternative (B), thereby reading the phrase 

"minimum required energy efficiency" to encompass only energy efficiency standards as of the 

date upon which manufacturers have to comply with those standards. Although at least the latter 

approach may well be a permissible interpretation of section 325(0)( 1), DOE believes that the 

view set out in our proposed rule is the better one. 

The latter view - that astandard is only covered by section 325(0)(1) after 

manufacturers are required to comply with it - does at first blush appear to be the most natural 

reading of the phrase. This view, however, is in tension with the rest of the sentence, which, as 

explained above, suggests that the relevant point of comparison is the Standard being amended, 

. regardless of whether manufacturers actually have to comply with it. Moreover, if adopted, this 

15 
EE-RM/STD-98-440- 303

view would allow the Secretary to change the energy efficiency standards right up to the minute

before the compliance date. This seems to slight important reliance interests given significant

weight in other respects by EPCA's provisions on central air conditioner standards. For

example, section 325(d) provides that with respect to central air conditioners, any amended

standard contained in a final rule published on January 1, 1994, can apply only to products

manufactured on or after January 1, 1999. It similarly provides that any amended standard

contained in a final rule published between January 1, 1994, and January 1, 2001, can apply only

to products manufactured on or after January 1, 2006. The purpose of these delays is plainly to

give manufacturers a significant amount of time to develop and manufacture new products after a

new standard is adopted but before it becomes enforceable. These delays also suggest that a

change of standard on the eve of the manufacture of a product would be quite disruptive -

which stands to reason given the lead-time necessary to be in a position to manufacture a

compliant product. Thus, to allow a standard to be blocked at the last minute before the

compliance deadline would potentially leave a rather large residual uncertainty difficult to

reconcile with the central purpose of establishing a climate of regulatory stability served by these

closely related portions of EPCA.

The legislative history of section 325(o)(1), although sparse, also suggests that this

interpretation may not be the one best suited to accomplish the statute's objectives. In discussing

this provision in the House bill, the House report states:

DOE may not prescribe an amended standard that increases the maximum

allowable energy use or decreases the minimum required energy efficiency

of a covered product. The purpose of this requirement is to prevent the

Secretary from weakening any energy conservation standard for a covered

product, whether established in this Act or subsequently adopted. This

16

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303. 

view would allow the Secretary to change the energy efficiency standards right up to the minute 

before the compliance date. This seems to slight important reliance interests given significant 

weight in other respects by EPCA's provisions on central air conditioner standards. For 

example, section 325(d) provides that with respect to central air conditioners, any amended 

standard contained in a final rule published on January 1, 1994, can apply only to products 

manufactured on or after January 1, 1999. It similarly provides that any amended standard 

contained in a final rule published between January 1, 1994, and January 1, 2001, can apply only 

to products manufactured on or after January 1, 2006. The purpose of these delays is plainly to 

give manufacturers a significant amount of time to develop and manufacture new products after a 

new standard is adopted but before it becomes enforceable. These delays also suggest that a 

change of standard on the eve of the manufacture of a product would be quite disruptive -

which stands to reason given the lead-time necessary to be in a position to manufacture a 

compliant product. Thus, to allow a standard to be blocked at the last minute before the 

compliance deadline would potentially leave a rather large residual uncertainty difficult to 

reconcile with the central purpose of establishing a climate of regulatory stability served by these 

closely related portions of EPCA. 

The legislative history of section 325(0)( 1), although sparse, also suggests that this 

interpretation may not be the one best suited to accomplish the statute's objectives. In discussing 

this provision in the House bill, the House report states: 

DOE may not prescribe an amended standard that increases the maximum 

allowable energy use or decreases the minimum required energy efficiency 

of a covered product. The purpose of this requirement is to prevent the 

Secretary from weakening any energy conservation standard for a covered 

product, whether established in this Act or subsequently adopted. This 

16 
EE.RM/STD-98-440 - 303

serves to maintain a climate of relative stability with respect to future

planning by all interested parties. ..

House Report No. 100-11 at p. 22 (emphasis added).

This language suggest that section 325(o)(1) was specifically expected, at least in the view

of the House Committee, to act harmoniously with the other provisions of EPCA discussed above

in facilitating regulatory certainty. The latter purpose is better accomplished by construing the

provision to become applicable at a point well before the compliance date.

On the other hand, the reliance interests at stake also are not best served in the long run by

taking the opposite course and adopting the view that section 325(o)(1) becomes applicable at the

earliest possible moment. Let us imagine, for example, that DOE were routinely to make final

rules containing standards potentially subject to section 325(o)(1) effective as soon as possible

under the Administrative Procedure Act (APA). This would likely result in its making such rules

effective 30 days after publication. DOE also could refuse to reconsider any aspect of such a rule

relevant to the standard (unless it could complete its consideration and correct any errors within

that 30-day time period), no matter how serious or legitimate a question might be raised, since to

do so effectively, it would have to prevent the standard from going into effect.

This approach, however, would not be the best way for DOE to promote regulatory

certainty either. It is common for agencies to entertain petitions for reconsideration at least for a

short period after issuance of a final rule as well as to correct errors on their own motion during

that time. Moreover, there is good reason why agencies follow this course, since otherwise such

errors would have to await the completion of judicial review before they could be corrected,

thereby creating substantial delay and uncertainty. Accordingly, this approach too, in addition to

17

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

serves to maintain a climate of relative stability with respect to future 

planning by all interested parties . .. 

House Report No. 100-11 at p. 22 (emphasis added). 

This language suggest that section 325(0)(1) was specifically expected, at least in the view 

of the House Committee, to act harmoniously with the other provisions of EPCA discussed above 

in facilitating regulatory certainty. The latter purpose is better accomplished by construing the 

provision to become applicable at a point well before the compliance date. . 

On the other hand, the reliance interests at stake also are not best served in the long run by 

taking the opposite course and adopting the view that section 325(0)(1) becomes applicable at the 

earliest possible moment. Let us imagine, for example, that DOE were routinely to make final 

rules containing standards potentially subject to section 325(0)(1) effective as soon as possible 

under the Administrative Procedure Act (APA). This would likely result in its making such rules 

effective 30 days after publication. DOE also could refuse to reconsider any aspect of such a rule 

relevant to the standard (unless it could complete its consideration and correct any errors within 

that 3~-day time period), no matter how serious or legitimate a question might be raised, since to 

do so effectively, it would have to prevent the standard from going into effect. 

This approach, however, would not be the best way for DOE to promote regulatory 

certainty either. It is common for agencies to entertain petitions for reconsideration at least for a 

short period after issuance of a final rule as well as to correct errors on their own motion during 

that time. Moreover, there is good reason why agencies follow this course, since otherwise such 

errors would have 10 await the completion of judicial review before they could be corrected, 

thereby creating substantial delay and uncertainty. Accordingly, this approach too, in addition to 

17 
EE-RM/STD-98- 44 0 - 33

running counter to ordinary administrative practices that there is no reason to believe section

325(o)(1) was intended to abrogate, is not the best way to advance the regulatory stability sought

by section 325(o)(1) and the other related EPCA provisions discussed above.

With respect to major rules, this approach also would create unnecessary conflict between

section 325(o)(1) and the Congressional Review Act (CRA) (5 U.S.C. 801-804) enacted in 1996.

Under the CRA, before a final rule can become "effective," DOE must send a report to Congress

(5 U.S.C. 801(a)(l)(A) and (B)). With respect to a "major rule" within the meaning of 5 U.S.C.

.804(2), the CRA provides for the passing of a 60-calendar-day-lie-before-the-Congress period,

after submission of the agency report, at the end of which a final rule could become effective in

the absence of a Congressional resolution of disapproval (5 U.S.C. 801(a)(3)). CRA allows for an

exception to the 60-day-lie-before requirement only if the President determines that a major rule

should take effect before the end of that period because of an imminent health or safety threat or

other emergency; because it is necessary to the enforcement of criminal laws or national security;

or if it is issued pursuant to a statute implementing an international trade agreement (5 U.S.C.

80 1(c)).

In DOE's view, this last set of considerations also points the way to the answer to the

question of at what time amendments to an energy-efficiency-setting-standard should best be

viewed as having set "minimum required energy efficiency" benchmarks. For the reasons

explained at the beginning of this section, that time must be after the final rule making the

amendments to the standard is in effect. But, consistent with the objective of section 325(o)(1)

and the other closely related EPCA provisions of promoting regulatory certainty, and to

harmonize section 325(o)(1) with common administrative practice and the CRA, such final rules

18

EE-RM-STD-98-440 COMMENT 303

EE-RM/STO-9S-440.- 3613 

running counter to ordinary. administrative practices that there is no reason to believe section 

325(0)(1) was intended to abrogate, is not the best way to advance the regulatory stability sought 

by section 325(0)( 1) and the other related EPCA provisions discussed above. 

With respect to major rules, this approach also would create unnecessary conflict between 

section 325(0)(1) and the Congressional Review Act (CRA) (5 U.S.c. 801-804) enacted in 1996. 

Under the CRA, before a final rule can become "effective," DOE must send a report to Congress 

(5 U.S.C. 801 (a)(l)(A) and (B)). With respect to a "major rule" within the meaning of 5 U.S.C . 

. 804(2), the CRA provides for the passing of a 60-calendar-day-lie-before-the-Congress period, 

after submission of the agency report, at the end of which a final rule could become effective in 

the absence ofa Congressional resolution of disapproval (5 U.S.c. 801(a)(3)). CRA allows for an 

exception to the 60-day-lie-before requirement only if the President determines that a major rule 

should take effect before the end of that period because of an imminent health or safety threat or 

other emergency; because it is necessary to the enforcement of criminal laws or national security; 

or if it is issued pursuant to a statute implementing an international trade agreement (5 U.S.C. 

80 1 (c)). 

In DOE's view, this last set of considerations also points the way to the answer to the 

question of at what time amendments to an energy-efficiency-setting-standard should best be 

viewed as having set "minimum required energy efficiency" benchmarks. For the reasons 

explained at the beginning of this section, that time must be after the final rule making the 

amendments to the standard is in effect. But, consistent with the objective of section 325(0)(1) 

and the other closely related EPCA provisions of promoting regulatory certainty, and to 

harmonize section 325(0)(1) with common administrative practice and the CRA, such final rules 

18 
EE-RM/STD-98-440- 3 D3

should ordinarily be made effective only after a reasonable hiatus after the date of publication has

elapsed, allowing for prompt use of ordinary administrative error correction procedures and

completion of congressional review under CRA. This is the earliest that manufacturer planning in

reliance on a final major rule to amend appliance energy conservation standards can realistically

be expected to begin. The certainty of the regulatory regime sought to be achieved therefore

cannot occur until that time.

Accordingly, DOE believes it should construe section 325(o)(1) as applying to standards

designed to set "minimum required energy efficiency" benchmarks at the point in time a final rule

containing such a standard becomes effective. It also believes, however, that it should take care to

select effective dates for final rules containing such standards that are consistent with the CRA

and any other applicable law. This approach will best promote the regulatory certainty sought by

section 325(o)(1) and its companion provisions and also comports well with the ordinary

understanding of when a rule containing such standards has established "require[ments]."

Based on this consideration of the meaning of section 325(o)(1), DOE proposed to adopt a

series of amendments to the EPCA rules intended to address these general issues. First, it

proposed definitions of the terms "maximum allowable energy use" and "minimum required

energy efficiency" as energy conservation standards established by a final rule that has become

effective in the sense that it has modified the Code of Federal Regulations. It further proposed to

include in its definition that to qualify, the final rule has to have made that modification on a date

selected consistent with the CRA and other applicable law. Finally, in order to avoid confusion, it

proposed a technical amendment adding a definition of the EPCA term "effective date," which

EPCA, inconsistently with the Office of Federal Register guidance, treats as synonymous with

19

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 3D3 

should ordinarily be made effective only after a reasonable hiatus after the date of publication has 

elapsed, allowing for prompt use of ordinary administrative error correction procedures and 

completion of congressional review under CRA. This is the earliest that manufacturer planning in 

reliance on a final major rule to amend appliance energy conservation standards can realistically 

be expected to begin. The certainty of the regulatory regime sought to be achieved therefore 

cannot occur until that time. 

Accordingly, DOE believes it should construe section 325(0)(1) as applying to standards 

designed to set "minimum required energy efficiency" benchmarks at the point in time a final rule 

containing such a standard becomes effective. It also believes, however, that it should take care to 

select effective .dates for final rules containing such standards that are consistent with theCRA 

and any other applicable law. This approach will best promote the regulatory certainty sought by 

section 325(0)(1) and its companion provisions and also comports well with the ordinary 

understanding of when a rule containing such standards has established "require[ments]." 

Based on this consideration of the meaning of section 325(0)( 1), DOE proposed to adopt a 

series of amendments to the EPCA rules intended to address these general issues. First, it 

proposed definitions of the tenns "maximum allowable energy use" and "minimum required 

energy efficiency" as energy conservation standards established by a final rule that has become 

effective in the sense that it has modified the Code of Federal Regulations. It further proposed to 

include in its definition that to qualify, the final rule has to have made that modification on a date 

selected consistent with the CRA and other applicable law. Finally, in order to avoid confusion, it 

proposed a technical amendment adding a definition of the EPCA tenn "effective date," which 

EPCA, inconsistently with the Office of Federal Register guidance, treats as synonymous with 

19 
"compliance date." EE-RM/STD-98-440 - 3 3

B. Discussion of Public Comments on the Anti-Backsliding Provision

DOE's analysis of section 325(o)(1) and related proposals were the subject of comment by

the environmental advocates and by ARI. Their comments elaborated upon the basic positions

each had taken in connection with ARI's petition for reconsideration. The environmental

advocates prefaced their comments with the observation that ultimately the question whether the

anti-backsliding provision prevents DOE from withdrawing the January 22 final rule and

proposing a 12 SEER standard would likely be resolved in the Federal litigation previously

mentioned (see "Rulemaking History.").

1. Environmental Advocates' Views

The environmental advocates, led by the Natural Resources Defense Council (NRDC, No.

250) and several states, argue that EPCA's anti-backsliding provision applies upon publication of

final standards in the Federal Register, and that DOE is powerless thereafter to entertain and grant

a petition for reconsideration that requests lower amended standards.

The NRDC commented that the APA contains no provision for "withdrawing" a final rule,

and that if DOE wishes to change the rule, it may propose to "amend, revise or revoke" the rule

consistent with the APA. NRDC also states there is no statutory or regulatory provision allowing

interested persons to "petition for reconsideration" of a final rule. DOE does not believe these

arguments have merit. DOE chose to use the word "withdraw" at the suggestion of staff in the

Office of the Federal Register. "Withdraw" is the term that Office uses to describe the action of

an agency in pulling back a rule document before it is officially filed and published in the Federal

Register. The Office of the Federal Register decided that the word "withdraw" also is apt when

20

EE-RM-STD-98-440 COMMENT 303

"compliance date." EE-RM/STD-98-440- 3D 3 

B. Discussion of Public Comments on the Anti-Backsliding Provision 

DOE's analysis of section 325(0)( 1) and related proposals were the subject of comment by 

the environmental advocates and by ARI. Their comments elaborated upon the basic positions 

each had taken in connection withARI's petition for reconsideration. The environmental 

advocates prefaced their comments with the observation that ultimately the question whether the 

anti-backsliding provision prevents DOE from withdrawing the January 22 final rule and 

proposing a 12 SEER standard would likely be resolved in the Federal litigation previously 

mentioned (see "Rulemaking History."). 

1. Environmental Advocates' Views 

The environmental advocates, led by the Natural Resources Defense Council (NRDC, No. 

250) and several states, argue that EPCA's anti-backsliding provision applies upon publication of 

final standards in the Federal Register, and that DOE is powerless thereafter to entertain and grant 

a petition for reconsideration that requests lower amended standards. 

The NRDC commented that the AP A contains no· provision for "withdrawing" a final rule, 

and that if DOE wishes to change the rule, it may propose to "amend, revise or revoke" the rule 

consistent with the AP A. NRDC also states there is no statutory or regulatory provision allowing 

interested persons to "petition for reconsideration" of a final rule. DOE does not believe these 

arguments have merit. DOE chose to use the word "withdraw" at the suggestion of staff in the 

Office of the Federal Register. "Withdraw" is the term that Office uses to describe the action of 

an agency in pulling back a rule document before it is officially filed and published in the Federal 

Register. The Office of the Federal Register decided that the word "withdraw" also is apt when 

20 
EE-RM/STD-98-440- 363

an agency proposes to rescind a published final rule before it becomes effective, thus pulling it

back before it modifies the Code of Federal Regulations. By proposing to withdraw the January

22 final rule and proposing a 12 SEER standard, DOE was proposing actions that, if adopted and

implemented in a future final rule, would rescind or repeal the January 22 final rule. This course

of action is entirely consistent with the APA. While an agency generally has inherent authority to

reconsider its decisions, as the comments of ARI state (ARI, No. 259, at p. 6), the APA

specifically gives interested persons the right to petition for rulemaking (5 U.S.C. 553(e)).

NRDC further believes DOE has misconstrued section 325(o)(1) by placing undue weight

on the word "required" in the term "minimum required energy efficiency." (Several state officials

submitted comments similar in most respects to the NRDC views summarized here and in the

discussion that follows.) NRDC faults DOE for ignoring the terms "maximum allowable energy

use" and "maximum water use" in the same provision. All of these terms, NRDC argues, are

simply measurements of energy conservation and do not refer in any way to compliance dates or

requirements for manufacturers. NRDC, therefore, concludes that the word "require" is

ambiguous and that one needs to look to the entire statutory scheme to determine when the antibacksliding provision applies.

NRDC argues that the key word in section 325(o)(1) is "prescribe," which it states occurs

when a final rule is published in the Federal Register, and that it is the act of"prescribing" a final

rule that triggers application of the anti-backsliding provision. NRDC finds supports for this

interpretation of "prescribe" in section 325(p), which includes publication of a final rule as the last

step in the procedure for prescribing a new or amended standard, and in the deadlines for various

amendments of product standards that are determined by reference to the date of publication of the

21

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

an agency proposes to rescind a published final rule before it becomes effective, thus pulling it 

back before it modifies the Code of Federal Regulations. By proposing to withdraw the January 

22 final rule and proposing a 12 SEER standard, DOE was proposing actions that, if adopted and 

implemented in a future final rule, would rescind or repeal the January 22 final rule. This course 

of action is entirely consistent with the APA. While an agency generally has inherent authority to 

reconsider its decisions, as the comments of ARl state (ARl, No. 259, at p. 6), the APA 

specifically gives interested persons the right to petition for rulemaking (5 U.S.C. 553(e». 

NRDC further believes DOE has misconstrued section 32S(0)(1}by placing undue weight 

on the word "required" in the term "minimum required energy efficiency." (Several state officials 

submitted comments similar in most respects to the NRDC views summarized here and in the 

discussion that follows.) NRDC faults DOE for ignoring the terms "maximum allowable energy 

use" and "maximum water use" in the same provision. All of these terms, NRDC argues, are 

simply measurements of energy conservation and do not refer in any way to compliance dates or 

requirements for manufacturers .. NRDC, therefore, concludes that the word "require" is 

ambiguous and that one needs to look to the entire statutory scheme to determine when the antibacksliding provision applies. 

NRDC argues that the key word in section 325(0)(1) is "prescribe," which it states occurs 

when a final rule is published in the Federal Register, and that it is the act of "prescribing" a final 

rule that triggers application of the anti-backsliding provision. NRDC finds supports for this 

interpretation of "prescribe" in section 32S(p), which includes publication of a final rule as the last 

step in the procedure for prescribing a new or amended standard, and in the deadlines for various 

amendments of product standards that are determined by reference to the date of publication of the 

21 
EE-RM/STD-98-440- -303

previous standard. NRDC also points to House Report language stating that section 325(o)(1)

prevents DOE from weakening any energy conservation standard for a product "whether

established in this Act or subsequently adopted," and states that use of the word "adopted"

confirms its view that the anti-backsliding provision applies when a rule is published in the

Federal Register. Thus, under NRDC's interpretation, once DOE published the January 22 final

rule, it was powerless to reconsider it and propose a lower energy conservation standard.

DOE agrees that the term "minimum required energy efficiency" is not the only descriptor

of energy or water efficiency used in section 325(o)(1), but it is the only descriptor that applies to

standards for central air conditioners and heat pumps. That is why DOE's analysis focuses on the

word "required." For other covered products, the applicable descriptor would be "maximum

allowable energy use" or "maximum allowable water use," and today's rule contains definitions of

those terms. For those products, the key word would be "allowable." In any event, as explained in

DOE's analysis above, the SEER and HSPF levels set out in the January 22 final rule never in any

sense achieved the status of being the "required" "minimum energy efficiency" benchmarks.

DOE also thinks NRDC's view of the importance of the word "prescribe" in section

325(o)(1) is wrong. The word "prescribe" is nowhere defined in EPCA, but it does not

necessarily mean "publication." For example, section 325(p), concerning the procedure for

prescribing any new or amended standard, provides that "[a] final rule prescribing an amended or

new energy conservation standard or prescribing no amended or new standard for a type (or class)

of covered products shall be published as soon as practicable. . " 42 U.S.C. 6295(p)(4). The use

of the word "prescribe" in the same provision in which the word "publish" is used is a clear

indication that Congress considered the two words to have different meanings. It is not necessary

22

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

previous standard. NRDC also points to House Report language stating that section 325(0)(1) 

prevents DOE from weakening any energy conservation standard for a product "whether 

estabHshed in this Act or subsequently adopted," and states that use of the word "adopted" 

confinns its view that the anti-backsliding provision applies when a rule is published in the 

Federal Register. Thus, under NRDC's interpretation, once DOE published the January 22 final 

-rule, it was powerless to reconsider it and propose a lower energy conservation standard. 

DOE agrees that the tenn "minimum required energy efficiency" is not the only descriptor 

of energy or water efficiency used in section 325(0)(1), but it is the only descriptor that applies to 

standards for central air conditioners and heat pumps. That is why DOE's analysis focuses on the 

word "required." For other covered products, the applicable descriptor would be "maximum 

allowable energy use" or "maximum allowable water use," and today's rule contains definitions of 

those tenns. For those products, the key word would be "allowable." In any event, as explained in 

DOE's analysis above, the SEER and HSPF levels set out in the January 22 final rule never in any 

sense achieved the status of being the "required" "minimum energy efficiency" benchmarks. 

DOE also thinks NRDC's view of the importance of the word "prescribe" in section 

325(0)(1) is wrong. The word "prescribe" is nowhere defined in EPCA, but it does not 

necessarily mean "publication." For example, section 325(P), concerning the procedure for 

prescribing any new or amended standard, provides that "[ a] final rule prescribing an amended or 

new energy conservation standard or prescribing no amended or new standard for a type (or class) 

of covered products shall be published as soon as practicable ... "42 U.S.C. 6295(p)(4). The use 

of the word "prescribe" in the same provision in which the word "publish" is used is a clear 

indication that Congress considered the two words to have different meanings. It is not necessary 

22 
EE-RM/STD-98-440- 303

to resolve the question of the meaning to the word "prescribe" because it begs the critical question

of what DOE may not prescribe under section 325(o)(1). With respect to central air conditioners

and heat pumps, the what that DOE may not prescribe under section 325(o)(1) is any amended

standard "which increases the ... minimum required energy efficiency" of a central air

conditioner or heat pump. We continue to believe that standards in a published rule that have

never become effective are in no sense "required" energy efficiency levels, and therefore cannot

be the baseline for determining whether the amended standards increase the minimum required

energy efficiency.

Finally, DOE disagrees with NRDC's conclusion that the structure and language of EPCA

point to the date of publication of amended standards as the time at which section 325(o)(1)

applies. More specifically, DOE does not think the statutory intervals for issuance of amended

standards, which reference to the date the previous amendment is published, are relevant to the

question of when the anti-backsliding provision applies. The fact that Congress required DOE to

periodically review and publish amendments to standards does not seem to have any bearing on

the question of what point in time standards are required for purposes of section 325(o)(1).

The Attorneys General of the States of New York and Massachusetts attacked the legality

of DOE's February 2, 2001, and April 20, 2001, notices delaying the effective date of the January

22 final rule (Attorneys General, No. 277). In their view, DOE lacked good cause for not

proposing the delays for public comment. They dismiss DOE's analysis of, and provisions for,

implementing the anti-backsliding provision as a post hoc attempt to justify its illegal delays of

the January 22 final rule. Implicit in their comment is the view that the January 22 final rule

actually became effective and, thus, became the required standards for purposes of section

23

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

to resolve the question of the meaning to the word "prescribe" because it begs the critical question 

of what DOE may not prescribe under section 325(0)(1). With respect to central air conditioners 

and heat pumps, the what that DOE may not prescribe under section 325(0)(1) is any amended 

standard "which increases the ... minimum required energy efficiency" of a central air 

conditioner or heat pump. We continue to believe that standards in a published rule that have 

never become effective are in no sense "required" energy efficiency levels, and therefore cannot 

be the baseline for detennining whether the amended standards increase the minimum required 

energy efficiency. 

Finally, DOE disagrees with NRDC's conclusion that the structure and language of EPCA 

point to the date of publication of amended standards as the time at which section 325(0)( 1) 

applies. More specifically, DOE does not think the statutory intervals for issuance of amended 

standards, which reference to the date the previous amendment is published, are relevant to the 

question of when the anti-backsliding provision applies. The fact that Congress required DOE to 

- periodically review and publish amendments to standards does not seem to have any bearing on 

the question of what point in time standards are required for purposes of section 325(0)(1). 

The Attorneys General of the States of New York and Massachusetts attacked the legality 

of DOE's February 2, 2001, and April 20, 2001, notices delaying the effective date of the January 

22 final rule (Attorneys General, No. 277). In their view, DOE lacked good cause for not 

proposing the delays for public comment. They dismiss DOE's analysis of, and provisions for, 

implementing the anti-backsliding provision as a post hoc attemptto justify its illegal delays of 

the January 22 final rule. Implicit in their comment is the view that the January 22 final rule 

actually became effective and, thus, became the required standards for purposes of section 

23 
EE-RM/STD-98-440- 30 3

325(o)(1). Based on this understanding of the anti-backsliding provision, the States of New York

and Massachusetts consider DOE's action to withdraw the January 22 final rule and adopt 12

SEER standards to be a "rollback" of established standards.

As explained in the February 2, 2001, notice, DOE temporarily delayed the effective date

of the January 22 final rule pursuant to Executive branch wide direction from the Assistant to the

President and Chief of Staff. DOE explained that seeking public comment would be

impracticable and contrary to the public interest, and further that the imminence of the effective

date in the rule constituted good cause for making the temporary delay effective upon publication.

66 FR 8745-46. The further postponement of the effective date on April 20, 2001, was based in

part on several reasons why seeking public comment and delaying the effective date of the action

were impracticable, unnecessary, and contrary to the public interest. 66 FR 20191. These reasons

are not repeated in full here, but DOE explained why in light of ARI's petition for reconsideration

and its lawsuit in the Court of Appeals for the Fourth Circuit, DOE concluded there was good

cause for further delaying the January 22 final rule's effective date pending consideration of ARI's

petition and judicial review. The legality of DOE's actions to institute short-term delays of the

January 22 final rule's effective date to deal with substantial legal questions will be resolved in

the Federal litigation. DOE, however, rests on its prior decisions and rejects the characterization

of DOE's proposals as a "rollback" of the energy conservation standards.

The Attorneys General of the States of New York and Massachusetts (Attorneys General,

No. 277 at p. 9) and the American Council for an Energy-Efficient Economy (ACEEE, No. 284 at

p. 3) argued that choosing an effective date for purposes of section 325(o)(1) other than the date

of publication of amended standards would lead to delay and cause uncertainty with respect to

24

EE-RM-STD-98-440 COMMENT 303

EE-RM/STO-98-440 .. 36' 3 

325(0)(1). Based on this understanding of the anti-backsliding provision, the States of New York 

and Massachusetts consider DOE's action to withdraw the January 22 final rule and adopt 12 

SEER standards to be a "rollback" of established standards. 

As expJained in the February 2,2001, notice, DOE temporarily delayed the effective date 

of the January 22 final rule pursuant to Executive branch wide direction from the Assistant to the 

President and Chief of Staff. DOE explained that seeking public comment would be 

impracticable and contrary to the public interest, and further that the imminence of the effective 

date in the rule constituted good cause for' making the temporary delay effective upon publication. 

66 FR 8745-46. The further postponement of the effective date on April 20, 2001, was based in 

part on several reasons why seeking public comment and delaying the effective date of the action 

were impracticable, unnecessary, and contrary to the public interest. 66 FR 20191. These reasons 

are not repeated in full here, but DOE explained why in light of ARI's petition for reconsideration 

and i~s lawsuit in the Court of Appeals for the Fourth Circuit, DOE concluded there was good 

cause for further delaying the January 22 final rule's effective date pending consideration of ARI's 

petition and judicial review. The legality of DOE's actions to institute short-term delays of the 

January 22 final rule's effective date to deal with substantial legal questions will be resolved in 

the Federal litigation. DOE, however, rests on its prior decisions and rejects the characterization 

of DOE's proposals as a "rollback" of the energy conservation standards. 

The Attorneys General of the States of New York and Massachusetts (Attorneys General, 

No. 277 at p. 9) and the American Council for an Energy-Efficient Economy (ACEEE, No. 284 at 

p. 3) argued that choosing an effective date for purposes of section 325(0)( 1) other than the date 

of publication of amended standards would lead to delay and cause uncertainty with respect to 

24 
EE.RM/STD-98-440 303

when manufacturers must make investments needed to comply with amended standards. The

Northeast Energy Efficiency Partnerships, Inc., (NEEP, No. 273 at p. 3) argued DOE's proposed

approach would give stakeholders another opportunity to try to influence decision makers and

would "politicize" the standard setting process. As explained above, DOE does not believe

section 325(o)(1) can be reasonably interpreted to apply upon the publication of final standards in

the Federal Register. However, assuming DOE had the discretion to adopt such an interpretation,

DOE would not choose the date of publication as the date for purposes of section 325(o)(1). As

explained previously, a practice of routinely making published standards effective in the shortest

time after publication (normally 30 days after publication under the APA) is not likely to provide

greater certainty about the point in time when standards would take effect. If DOE were unable to

respond to legitimate requests for reconsideration and correction of errors, then the only avenue

available to aggrieved stakeholders would be lawsuits in Federal courts or efforts to obtain a

legislative reversal under the CRA. This would not lead to expeditious correction of errors or

resolution of issues and would not advance the goal of regulatory certainty. Such a practice also

would create needless conflict with the CRA's 60-day lie-before-the-Congress provision for major

rules.

2. ARI's Views

ARI agrees with DOE that the existing "minimum required energy efficiency" levels for

central air conditioners and heat pumps, which DOE may not lower, are the standards established

by NAECA, effective on January 1, 1992 (i.e., 10 SEER/6.8 HSPF for split systems and 9.7

SEER/6.6 HSPF for single package systems). However, ARI believes the term "minimum

required energy efficiency" should be understood to mean the existing efficiency standard as of

25

EE-RM-STD-98-440 COMMENT 303

EE_RM/STO-98-440 __ 3D 3 

when manufacturers must make investments needed to comply with amended standards. The 

Northeast Energy Efficiency Partnerships, Inc., (NEEP, No. 273 at p. 3) argued DOE's proposed 

approach would give stakeholders another opportunity to try to influence decision makers and 

would "politicize" the standard setting process. As explained above, DOE does not believe 

section 325(0)(1) can be reasonably interpreted to apply upon the publication of final standards in 

the Federal Register. However, assuming DOE had the discretion to adopt such an interpretation, 

DOE would not choose the date of publication as the date for purposes of section 325(0)(1). As 

explained previously, a practice of routinely making published standards effective in the shortest 

time after publication (normally 30 days after publication under the AP A) is not likely to provide 

greater certainty about the point in time when standards would take effect. If DOE were unable to 

respond to legitimate requests for reconsideration and correction of errors, then the only avenue 

available to aggrieved stakeholders would be lawsuits in Federal courts or efforts to obtain a 

legisl~tive reversal under the CRA. This would not lead to expeditious correction of errors or 

resolution of issues and would not advance the goal of regulatory certainty. Such a practice also 

would create needless conflict with the CRA's 60-day lie-before-the-Congress provision for major 

rules. 

2. ARI's Views 

ARI agrees with DOE that the existing "minimum required energy efficiency" levels for 

central air conditioners and heat pumps, which DOE may not lower, are the standards established 

by NAECA, effective on January 1, 1992 Ci.&., 10 SEER/6.8 HSPF for split systems and 9.7 

SEERl6.6 HSPF for single package systems). However, ARI believes the term "minimum 

required energy efficiency" should be understood to mean the existing efficiency standard as of 

25 
EE-RM/STD-98-440- 303

the effective date under EPCA, i.e., the date on which the standard is required to be complied with

(ARI, No. 259 at p. 19). ARI believes its interpretation would avoid the risk of having the antibacksliding provision apply unreasonably early, which could prevent DOE from taking

appropriate administrative action to correct a promulgated standard or to respond to

extraordinarily changed circumstances.

DOE acknowledged in its analysis of section 325(o)(1) that the view that a standard is only

covered by anti-backsliding provision after manufacturers are required to comply with it is an

arguable one. This view, however, is in tension with the rest of the sentence, which suggests that

the relevant point of comparison is the standard being amended, regardless of whether

manufacturers actually have to comply with it. Moreover, by allowing the Secretary to change the

energy efficiency standards at any point in time before the compliance date, this view would slight

important reliance interests that, as DOE explained in its analysis, are given significant weight by

other provisions and the legislative history of EPCA. For these reasons, DOE continues to believe

that section 325(o)(1) should be construed as applying to standards designed to set "minimum

required energy efficiency" benchmarks at the point in time a final rule containing such a standard

becomes effective for purposes of revising the Code of Federal Regulations, as long as the

effective date that is selected is consistent with the CRA and any other applicable law. In today's

rule, DOE adopts provisions that implement this approach.

ARI stated that if DOE adopted the approach it proposed in the July 25 SNOPR, then it

would like the definitions of "minimum required energy efficiency" and "maximum allowable

energy use" revised to ensure that DOE has sufficient time to complete any administrative action

it takes in response to a petition for reconsideration. ARI recommended adding to each definition

26

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440--- :,303 

the effective date under EPCA, i.e., the date on which the standard is required to be complied with 

(ARl, No. 259 at p. 19). ARl believes its interpretation would avoid the risk of having the antibacksliding provision apply unreasonably early, which could prevent DOE from taking 

appropriate administrative action to correct a promu1gated standard or to respond to 

extraordinarily changed circumstances. 

DOE acknowledged in its analysis of section 325(0)(1) that the view that'a standard is only 

covered by anti-backsliding provision after manufacturers are required to comply with it is an 

arguable one. This view, however, is in tension with the rest of the sentence, which suggests that 

the relevant point of comparison is the standard being amended, regardless of whether 

manufacturers actually have to comply with it. Moreover, by allowing the Secretary to change the 

energy efficiency standards at any point in time before the compliance date, this view would slight 

important reliance interests that, as DOE explained in its analysis, are given significant weight by 

other provisions and the 1egislative history of EPCA. For these reasons, DOE continues to believe 

that section 325(0)(1) should be construed as applying to standards designed to set "minimum 

required energy efficiency" benchmarks at the point in time a final rule containing such a standard 

becomes effective for purposes of revising the Code of Federal Regulations, as long as the 

effective date that is selected is consistent with the CRA and any other applicable law. In today's 

rule, DOE adopts provisions that implement this approach. 

ARl stated that if DOE adopted the approach it proposed in the July 25 SNOPR, then it 

would like the definitions of "minimum required energy efficiency" and "maximum allowable 

energy use" revised to ensure that DOE has sufficienttime to complete any administrative action 

it takes in response to a petition for reconsideration. ARl recommended adding to each definition 

26 
EE-RM/STD-98-440- 3D3

the words "or the date on which DOE completes action on any timely-initiated administrative

reconsideration, whichever is later." (ARI, No. 259 at pp. 20-21.) We think ARI's suggested

language is a useful addition to the definitions. Therefore, we have revised the proposed

definitions of "maximum allowable energy use" and "minimum required energy efficiency," to be

added to section 430.2, accordingly. In addition, DOE adds a similar definition of "maximum

allowable water use," which was inadvertently omitted in the July 25 SNOPR.

Under the provisions adopted in today's final rule, IOE will select a date for the

"Effective Date" line of the notice of final rulemaking that in most instances will be 60 to 80 days

after the date of publication. (DOE has chosen 75 days after the date of publication for the

effective date of today's rule.) DOE would expect that any petition for reconsideration, to be

considered timely, ordinarily would be submitted to DOE before the effective date specified in the

notice of final rulemaking.

DOE did not receive any public comments on the proposed definition of the term

"effective date" as used in EPCA and 10 CFR 430.32. This definition clarifies that for purposes

of construing the term under EPCA (but not for purposes of determining the point at which

amendments to a standard qualify for protection under section 325(o)(1)), the "effective date" is

the date on which an amended energy conservation standard becomes enforceable. DOE also did

not receive comments on proposed section 430.34, which tracks the language of section 325(o)(1).

Therefore, DOE today adopts these provisions without substantive change.

IV. Basis for DOE's Decision to Withdraw the January 22, 2001, Final Rule

In the July 25 SNOPR, DOE discussed possible legal errors in the promulgation of the

January 22 final rule and economic issues that DOE believed had not been adequately considered

27

EE-RM-STD-98-440 COMMENT 303

EE .. RM/STD-98-440- 3 03 

the words "or the date on which DOE completes action on any timely-initiated administrative 

reconsideration, whichever is later." (ARl, No. 259 at pp. 20-21.) We think ARl's suggested 

language is a useful addition to the definitions. Therefore, we have revised the proposed 

definitions of "maximum allowable energy use" and "minimum required energy efficiency," to be 

added to section 430.2, accordingly. In addition, DOE adds a similar definition of "maximum 

allowable water use," which was inadvertently omitted in the July 25 SNOPR. 

Under the provisions adopted in today's final rule, Ij>OE will select a date for the 

"Effective Date" line of the notice of final rulemaking that in most instances will be 60 to 80 days 

after the date of publication. (DOE has chosen 75 days after the date of publication for the 

effective date oftoday's rule.) DOE would expect that any petition for reconsideration, to be 

considered timely, ordinarily would be submitted to DOE before the effective date specified in the 

notice of final rulemaking. 

DOE did not receive any public comments on the proposed definition of the term 

"effective date" as used in EPCA and 10 CFR 430.32. This definition clarifies that for purposes 

of construing the term under EPCA (but not for purposes of determining the point at which 

amendments to a standard qualify for protection under section 325(0)(1», the "effective date" is 

the date on which an amended energy conservation standard becomes enforceable. DOE also did 

not receive comments on proposed section 430.34, which tracks the language of section 325(0)(1). 

Therefore, DOE today adopts these provisions without substantive change. 

IV. Basis for DOE's Decision to Withdraw the January 22, 2001, Final Rule 

In the July 25 SNOPR, DOE discussed possible legal errors in the promulgation of the 

January 22 final rule and economic issues that DOE believed had not been adequately considered 

27 
EE-RM/STD-98-440 - 303

in determining the energy efficiency levels that are the maximum technologically feasible and

economically justified (66 FR 38827-29). On the basis of these possible legal and policy errors,

DOE proposed to withdraw the January 22 final rule and proposed to adopt a 12 SEER standard

for most central air conditioners and heat pumps, rather than the 13 SEER standard in the January

22 final rule (66 FR 38842). DOE today finally withdraws the January 22 final rule and amends

the energy conservation standards for central air conditioners and heat pumps at the 12 SEER

level except for two types of space-constrained products (through-the-wall products and small

duct, high velocity systems) that are subject to lower standards. In taking this action, DOE

corrects the legal and policy errors that were the basis for DOE's decision to withdraw the January

22, final rule.

A. Legal Issues

In the July 25 SNOPR, DOE acknowledged that to comply with section 325(o)(2)(B)(i) of

EPCA, DOE arguably should have invited the Department of Justice to submit a supplemental

statement of its views on the potential anti-competitive impact of a 13 SEER standard for both

central air conditioners and heat pumps which was included in the January 22 final rule (66 FR

38827-28).

Section 325(o)(2)(B)(i) requires DOE to determine whether the benefits of a new or

amended energy conservation standard exceed its burdens by considering "to the greatest extent

practicable" seven factors, including: "(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" (42 U.S.C. 6295(o)(2)(B)(i)). Section 325(o) also provides that:

For purposes of clause (i)(V), the Attorney General shall make a determination

28

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

in determining the energy efficiency levels that are the maximum technologically feasible and 

economically justified (66 FR 38827-29). On the basis of these possible legal and policy errors, 

DOE proposed to withdraw the January 22 final rule and proposed to adopt a 12 SEER standard 

for most central air conditioners and heat pumps, rather than the 13 SEER standard in the January 

22 final rule (66 FR 38842). DOE today finally withdraws the January 22 final rule and amends 

the energy conservation standards for central air conditioners and heat pumps at the 12 SEER 

level except for two types of space-constrained products (through-the-wall products and small 

duct, high velocity systems) that are subject to lower standards. In taking this action, DOE 

corrects the legal and policy errors that were the basis for DOE's decision to withdraw the January 

22, final rule. 

A. J-egallssues 

In the July 25 SNOPR, DOE acknowledged that to comply with section 325(0)(2)(B)(i) of 

EPCA, DOE arguably should have invited the Department of Justice to submit a supplemental 

statement of its views on the potential anti-competitive impact of a 13 SEER standard for both 

central air conditioners and heat pumps which was included in the January 22 final rule (66 FR 

38827-28). 

Section 325(0)(2)(B)(i) requires DOE to determine whether the benefits of a new or 

amended energy conservation standard exceed its burdens by considering "to the greatest extent 

practicable" seven factors, including:. "(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" (42 U.S.C. 6295(0)(2)(B)(i)). Section 325(0) also provides that: 

For purposes of clause (i)(V), the Attorney General shall make a determination 

28 
EE-RM/STD-98-440- 3 0 3

of the impact, if any, of any lessening of competition likely to result from such

standard and shall transmit such determination, not later than 60 days after the

publication of a proposed rule prescribing or amending an energy conservation

standard, in writing to the Secretary, together with an analysis of the nature and

extent of such impact. Any such determination and analysis shall be published

by the Secretary in the Federal Register.

42 U.S.C. 6295(o)(2)(B)(ii).

In context, it is clear that the term "the standard" in section 325(o)(2)(B)(i) refers to any

new or amended energy conservation standard finally prescribed by DOE under section 325(o) of

EPCA. Because the Department of Justice must transmit its determination to DOE within 60 days

after the publication of a proposed rule, EPCA contemplates that the Department of Justice's

determination on the anti-competitive effects of a proposed rule usually will enable DOE to fulfill

its substantive obligation to consider the Department's expert opinion on the anti-competitive

impact of a final standard. However, as the following discussion shows, this will not always be

the case.

DOE submitted the October 5, 2000, NOPR to the Attorney General for review pursuant to

the foregoing provisions. The NOPR described the range of potential trial standards considered

by DOE, and proposed adoption of Trial Standard Level 3, i.e., a minimum SEER of 12 for

central air conditioner product classes and a SEER of 13, with a corresponding HSPF of 7.7, for

central air conditioning heat pumps. The Department of Justice, consistent with its past practice,

confined its response to the proposed standards, corresponding to Trial Standard Level 3.

The Department of Justice had several concerns about the proposed rule's potential impact

on competition (see December 4, 2000, letter in the Appendix to this notice). First, the

Department of Justice was concerned the proposed rule would have a disproportionate impact on

29

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

of the impact, if any, of any lessening of competition likely to result from such 

standard and shall transmit such determination, hot later than 60 days after the 

publication of a proposed rule prescribing or amending an energy conservation 

standard, in writing to the Secretary, together with an analysis of the nature and 

extent of such impact.. Any such determination and analysis shall be published 

by the Secretary in the Federal Register. 

42 U.S.C. 6295(0)(2)(B)(ii). 

In context, it is clear that the term ''the standard" in section 325(0)(2)(B)(i) refers to any 

new or amended energy conservation standard finally prescribed by DOE under section 325(0) of 

EPCA. Because the Department of Justice must transmit its determination to DOE within 60 days 

after the publication of a proposed rule, EPCA contemplates that the Department of Justice's 

determination on the anti-competitive effects of a proposed rule usually will enable DOE to fulfill 

its substantive obligation to consider the Department's expert opinion on the anti-competitive 

impact of a final standard. However, as the following discussion shows, this will not always be 

the case. 

DOE submitted the October 5, 2000, NOPR to the Attorney General for review pursuant to 

the foregoing provisions. The NOPR described the range of potential trial standards considered 

by DOE, and proposed adoption of Trial Standard Level 3, i.e., a minimum SEER of 12 for 

central air conditioner product classes and a SEER of 13, with a corresponding HSPF of7.7, for 

central air conditioning heat pumps. The Department of Justice, consistent with its past practice, 

confined its response·to the proposed standards, corresponding to Trial Standard Level 3. 

The Department of Justice had several concerns about the proposed rule's potential impact 

on competition (see December 4,2000, letter in the Appendix to this notice). First, the 

Department of Justice was concerned the proposed rule would have a disproportionate impact on 

29 
EE-RM/STD-98-440- 3 '

small manufacturers. Second, it was concerned that the proposed standard for heat pumps, and in

some instances the standard for air conditioners, would have an adverse impact on some

manufacturers of equipment to be used to retrofit existing housing and used in manufactured

housing. Third, it was concerned that the proposed 13 SEER for central air conditioning heat

pumps could cause consumers to shift from heat pumps to other systems that include resistance

heat systems, reducing the competition that presently exists between manufacturers of heat pumps

and manufacturers of those other heating systems. The Department of Justice urged DOE to take

these concerns into account and 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 and for manufactured housing." 66 FR

7200.

DOE published a final rule on January 22, 2001, that adopted standards that corresponded

to Trial Standard Level 4 (the next higher level) and prescribed a minimum SEER of 13 for all the

product classes, except for niche products, with a corresponding 7.7 HSPF. While the preamble

to the final rule addressed the Department of Justice's specific concerns about the proposed 12

SEER standards for central air conditioners/13 SEER/7.7 HSPF standard for central air

conditioning heat pump systems (66 FR 7192-93), DOE did not have the benefit of the

Department of Justice's views on the potential anti-competitive impact of the final 13 SEER

standards for both air conditioners and heat pumps. This is particularly of concern in light of

information in the TSD indicating that standards at Trial Standard Level 4 (uniform 13 SEER

standards) could cause several major manufacturers to consider selling their production assets

rather than make the investment required to meet the new standard or face the loss of profits

30

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-30:3 

small manufacturers. Second, it was concerned that the proposed standard for heat pumps, and in 

some instances the standard for air conditioners, would have an adverse impact on some 

manufacturers of equipment to be used to retrofit existing housing and used in manufactured 

housing. Third, it was concerned that the proposed 13 SEER for central air conditioning heat 

pumps could cause consumers to shift from heat pumps to other systems that include resistance 

heat systems, reducing the competition that presently exists between manufacturers of heat pumps 

and manufacturers of those other heating systems. The Department of Justice urged DOE to take 

these concerns into account and 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 and for manufactured housing." 66 FR 

7200. 

DOE published a final rule on January 22, 2001, that adopted standards that corresponded 

to Trial Standard Level 4 (the next higher level) and prescribed a minimum SEER of 13 for all the 

product classes, except for niche products, with a corresponding 7.7 HSPF. While the preamble 

to the final rule addressed the Department of Justice's specific concerns about the proposed 12 

SEER standards for central air conditioners/I 3 SEERl7.7 HSPF standard for central air 

conditioning heat pump systems (66 FR 7192-93), DOE did not have the benefit of the 

Department of Justice's views on the potential anti-competitive impact of the final 13 SEER 

standards for both air conditioners and heat pumps. This is particularly of concern in light of 

information in the TSD indicating that standards at Trial Standard Level 4 (uniform 13 SEER 

standards) could cause several major manufacturers to consider selling their production assets 

rather than make the investment required to meet the new standard or face the loss of profits 

30 
EE-RM/STD-98-440 -303

caused by the absence of premium products in the marketplace (see July 25 SNOPR at 38827).

Therefore, DOE believes the Department of Justice's views on the potential of the standards in the

January 22 final rule to accelerate consolidation in the industry should have been obtained.

As part of its review of the January 22 final rule pursuant to the President's Regulatory

Review Plan, DOE on March 20, 2001, requested the views of the Department of Justice on the

13 standards for central air conditioners and heat pumps. The Department of Justice's letter

responding to our request is published in the Appendix to this notice. While some commenters

were critical of the substance of the Department of Justice's determinations about the anticompetitive impact of 13 SEER standards (see Section VI below), none of the comments disputed

DOE's view that it should have obtained the Department of Justice's views on 13 SEER standards

for both central air conditioners and heat pumps.

A second legal error that DOE considered in deciding to propose withdrawal of the

January 22 final rule was the absence of any discussion of cumulative regulatory burden in the

statement of basis and purpose for the January 22 final rule. One aspect of the assessment of

manufacturer burden required by EPCA (42 U.S.C. 6295(o)(2)(B)(i)(I)) is the cumulative impact

of multiple DOE standards and the regulatory actions of other Federal agencies and States that

affect the manufacture of a covered product. The preamble to the January 22 final rule contained

an assertion that DOE considered cumulative burdens, but it did not discuss the magnitude of the

burden or how DOE took it into account in evaluating manufacturer impact (see 66 FR 7174). In

light of the evidence of cumulative regulatory burdens on manufacturers documented in the TSD,

DOE thinks the mere assertion that DOE considered the cumulative burdens on manufacturers

was not an adequate statement of basis and purpose for DOE's determination on manufacturer

31

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -3:?3 

caused by the absence of premium products in the marketplace (see July 25 SNOPR at 38827). 

Therefore, DOE believes the Department of Justice's views on the potential of the standards in the 

January 22 final rule to accelerate consolidation in the industry should have been obtained. 

As part of its review of the January 22 final rule pursuant to the President's Regulatory 

Review Plan, DOE on March 20, 2001, requested the views of the Department of Justice on the 

13 standards for central air conditioners and heat pumps. The Department of Justice's letter 

responding to our request is published in the Appendix to this notice. While some commenters 

were critical of the substance of the Department of Justice's determinations about the anticompetitive impact of 13 SEER standards (see Section VI below), none of the comments disputed 

DOE's view that it should have obtained the Department of Justice's views on 13 SEER standards 

for both central air conditioners and heat pumps. 

A second legal error that DOE considered in deciding to propose withdrawal of the 

January 22 final rule was the absence of any discussion of cumulative regulatory burden in the 

statement of basis and purpose for the January 22 final rule. One aspect of the assessment of 

manufacturer burden required by EPCA (42 U.S.C. 6295(0)(2)(B)(i)(I» is the cumulative impact 

of multiple DOE standards and the regulatory actions of other Federal agencies and States that 

affect the manufacture of a covered product. The preamble to the January 22 final rule contained 

an assertion that DOE considered cumulative burdens, but it did not discuss the magnitude of the 

burden or how DOE took it into account in evaluating manufacturer impact (see 66 FR 7174). In 

light of the evidence of cumulative regulatory burdens on manufacturers documented in the TSD, 

DOE thinks the mere assertion that DOE considered the cumulative burdens on manufacturers 

was not an adequate statement of basis and purpose for DOE's determination on manufacturer 

31 
EE-RM/STD-98-440- 323

impact resulting from a 13 SEER standard. See July 25 SNOPR at 38828.

Finally, as explained in DOE's analysis of EPCA's anti-backsliding provision, the

effective date included in the January 22 final rule (i.e, the date 30 days after the date of

publication of the notice) was in direct conflict with the CRA requirement that a major rule may

not take effect until the later of the date occurring 60 days after the date Congress receives the

agency's report under 5 U.S.C. 801 or the date the rule is published in the Federal Register. 5

U.S.C. 801(a)(3)(A)).

B. Policy Issues

DOE also based its decision to propose withdrawal of the January 22 final rule and to

propose 12 SEER standards on its review of the analysis of benefits and burdens that underpinned

the January 22 determination that 13 SEER is the maximum efficiency level that is

technologically feasible and economically justified. As a result of its review of the January 22

rule, DOE tentatively concluded that a 13 SEER standard was not economically justified, and

therefore DOE proposed to withdraw the January 22 final rule and proposed to adopt a 12 SEER

standard (66 FR 38828-29).

As explained in the July 25 SNOPR (66 FR 38828) DOE believed that in issuing the

January 22 final rule, the previous Administration had given inadequate consideration to the

fraction of consumers, and especially low income consumers, who would incur negative life-cycle

cost impacts as a result of the 13 SEER standard. DOE decided to propose a 12 SEER standard,

instead of 13 SEER, because the analysis showed it would result in a lower fraction of consumers

who would be negatively impacted (25 percent and 34 percent of average and low income

consumers, respectively, at 12 SEER versus 39 percent and 50 percent, respectively, at 13 SEER).

32

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ... 3if3 

impact resulting from a 13 SEER standard. See July 25 SNOPR at 38828. 

Finally, as explained in DOE's analysis ofEPCA's anti-backsliding provision, the 

effective date included in the January 22 final rule (i.e., the date 30 days after the date of 

publication of the notice) was in direct conflict with the CRA requirement that a major rule may 

not take effect until the later of the date occurring 60 days after the date Congress receives the 

agency's report under 5 U.S.C. 801 or the date the rule is published in the Fedenil Register. 5 

U.S.c. 80l(a)(3)(A». 

B. Policy Issues 

DOE also based its decision to propose withdrawal of the January 22 final rule and to 

propose 12 SEER standards on its review of the analysis of benefits and burdens that underpinned 

the January 22 determination that 13 SEER is the maximum efficiency level that is 

technologically feasible and economically justified. As a result of its review of the January 22 

rule, DOE tentatively concluded that a 13 SEER standard was not economically justified, and 

therefore DOE proposed to withdraw the January 22 final rule and proposed to adopt a 12 SEER 

standard (66 FR 38828-29). 

As explained in the July 25 SNOPR (66 FR 38828) DOE believed that in issuing the 

January 22 final rule, the previous Administration had given inadequate consideration to the 

fraction of consumers, and especially low income consumers, who would incur negative life-cycle 

cost impacts as a result of the 13 SEER standard. DOE decided to propose a 12 SEER standard, 

instead of 13 SEER, because the analysis showed it would result in a lower fraction of consumers 

who would be negatively impacted (25 percent and 34 percent of average and low income 

consumers, respectively, at 12 SEER versus 39 percent and 50 percent, respectively, at 13 SEER). 

32 
EE-RM/STD-98-440 -- 3D3

DOE also based its decision to propose the withdrawal of the January 22 final rule on its

conclusion that DOE, in determining whether 13 SEER was economically justified, had not

adequately assessed the potential regulatory burden and financial impacts on manufacturers of

central air conditioners and heat pumps. See July 25 SNOPR at 38828-29. First, DOE concluded

that the cumulative regulatory burden on manufacturers was not given sufficient weight in the

determination of economic justification. As discussed previously, the statement of basis and

purpose for the final rule did not explain how DOE considered the cumulative impact on

manufacturers of the costs of complying with various new regulatory actions. DOE also

concluded that inadequate consideration was given in the January 22 determination to the effect of

13 SEER standards on industry net cash flow and the maldistribution of regulatory burden on the

two major types of manufacturers (66 FR 38829).

DOE's tentative conclusions in the July 25 SNOPR about the appropriate weight to give to

the benefits and burdens of 13 SEER versus 12 SEER standards, and the resulting conclusion

about which level is economically justified, were the subject of extensive public comment. These

comments are discussed in Section VI of this Supplementary Information, and the analysis that

supports DOE's determination that 12 SEER is the maximum efficiency level that is

technologically feasible and economically justified is set forth in Section VII.

V. Amended Energy Conservation Standards

A. Overview

The amended standards in today's rule 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 they go into effect, the amended

33

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD-98-440·- 303 

DOE also based its decision to propose the withdrawal of the January 22 final rule on its 

conclusion that DOE, in determining whether 13 SEER was economically justified, had not 

adequately assessed the potential regulatory burden and financial impacts on manufacturers of 

central air conditioners and heat pumps. See July 25 SNOPR at 38828-29. First, DOE concluded 

that the cumulative regulatory burden on manufacturers was not given sufficient weight in the 

determination of economic justification. As discussed previously, the statement of basis and 

purpose for the final rule did not explain how DOE considered the cumulative impact on 

manufacturers of the costs of complying with various new regulatory actions. DOE also 

concluded that inadequate consideration was given in the January 22 determination to the effect of 

13 SEER standards on industry net cash flow and the maldistribution of regulatory burden on the 

two major types of manufacturers (66 FR 38829). 

DOE's tentative conclusions in the July 25 SNOPR about the appropriate weight to give to 

the benefits and burdens of 13 SEER versus 12 SEER standards, and the resulting conclusion 

about which level is economically justified, vyere the subject of extensive public comment. These 

comments are discussed in Section VI of this Supplementary Information, and the analysis that 

supports DOE's determination that 12 SEER is the maximum efficiency level that is 

technologically feasible and economically justified is set forth in Section VII. 

V. Amended Energy Conservation Standards 

A. Overview 

The amended standards in today's rule 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 they go into effect, the amended 

33 
EE-RM/STD-98-440-303

standards will raise the energy efficiency standards to 12 SEER for new central air conditioners

and to12 SEER/ 7.4 HSPF for new central air conditioning heat pumps. The standards will apply

to products manufactured for sale in the United States, as of January 23, 2006. The standard for

split-system air conditioners, the most common type of residential air conditioning equipment,

represents a 20 percent improvement in energy efficiency. For split-system heat pumps, the new

standard represents a 20 percent improvement in cooling efficiency and a 9 percent improvement

in heating efficiency. The standard will increase the cooling efficiency of single-package air

conditioners and single-package heat pumps by 24 percent and the heating efficiency of singlepackage heat pumps by 12 percent. DOE has determined that the new standards are the highest

efficiency levels that are technologically feasible and economically justified as required by law.

DOE adopts somewhat lower amended standards for through-the-wall central air

conditioner and heat pump products to ensure that more efficient versions remain available for

this application. DOE establishes 10.9 SEER and 7.1 HSPF as the standard for through-the-wall

split systems, and 10.6 SEER and 7.0 HSPF for through-the-wall single package systems.

Finally, DOE creates a new class for small duct, high velocity central air conditioners and

heat pumps. These products are designed for retrofit applications and have special requirements

that make it unlikely they can meet the efficiency standards that DOE today establishes for

conventional equipment. As discussed in Section VI, DOE received public comments that

supported creation of a separate class for these products. While DOE includes a definition of

"small duct, high velocity system" in the final rule and creates a separate class for them, DOE

retains the NAECA prescribed standard levels for small duct, high velocity products in today's

final rule because DOE has not yet conducted the analysis required to determine whether higher

34

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -303 

standards will raise the energy efficiency standards to 12 SEER for new central air conditioners 

and to12 SEERl7.4 HSPF for new central air conditioning heat pumps. The standards will apply 

to products manufactured for sale in the United States, as of January 23, 2006. The standard for 

split-system air conditioners, the most common type of residential air conditioning equipment, 

represents a 20 percent improvement in energy efficiency. For split-system heat pumps, the new 

standard represents a 20 percent improvement in cooling efficiency and a 9 percent improvement 

in heating efficiency. The standard will increase the cooling efficiency of single-package air 

conditioners and single-package heat pumps by 24 percent and the heating efficiency of singlepackage heat pumps by 12 percent. DOE has determined that the new standards are the highest 

efficiency levels that are technologically feasible and economically justified as required by law. 

DOE adopts somewhat lower amended standards for through-the-wall central air 

conditioner and heat pump products to ensure that more efficient versions remain available for 

this application. DOE establishes 10.9 SEER and 7.1 HSPF as the standard for through-the-wall 

split systems, and 10.6 SEER and 7.0 HSPF for through-the-wall single package systems. 

Finally, DOE creates a new class for small duct, high velocity central air conditioners and 

heat pumps. These products are designed for retrofit applications and have special requirements 

that make it unlikely they can meet the efficiency standards that DOE today establishes for 

conventional equipment. As discussed in Section VI, DOE received public comments that 

supported creation of a separate class for these products. While DOE includes a definition of 

"small duct, high velocity system" in the final rule and creates a separate class for them, DOE 

retains the NAECA prescribed standard levels for small duct, high velocity products in today's 

final rule because DOE has not yet conducted the analysis required to determine whether higher 

34 
EE-RM/STD-98-440- 303

levels are technologically feasible and economically justified. DOE in the near future intends to

begin a rulemaking to determine if a higher standard is warranted.

Several aspects of today's standards warrant highlighting, as follows.

1. Central Air Conditioner and Heat Pump Features

The efficiency levels in today's final rule can be met by central air conditioner and heat

pump designs that are already available in the market. DOE fully expects variations of these

models to exist under the new standards, offering all the features and utility that are found in

currently available products.

2. Consumer Benefits

Table 1 summarizes the "characteristics" of today's typical central air conditioners and

heat pumps. Table 2 presents the implications for the average consumer of the standards

becoming effective in 2006.

Table 1: Characteristics of Today's Typical Central Air Conditioners and Heat Pumps'

Split System Split System Single Package Single Package

Air Conditioner Heat Pump Air Conditioner Heat Pump

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

Annual Utility Bill 2 $189 $453 $189 $453

Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years

Energy Consumption per year 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh

"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.

35

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

levels are technologically feasible and economically justified. DOE in the near future intends to 

begin a rulemaking to determine if a higher standard is warranted. 

Several aspects oftoday's standards warrant highlighting, as follows. 

1. Central Air Conditioner and Heat Pump Features 

The efficiency levels in today's final rule can be met by central air conditioner and heat 

pump designs that are already available in the market. DOE fully expects variations of these 

models to exist under the new standards, offering all the features and utility that are found in 

currently available products. 

2. Consumer Benefits 

Table 1 summarizes the "characteristics" oftoday's typical central air conditioners and 

heat pumps. Table 2 presents the implications for the average consumer of the standards 

becoming effective in 2006. 

Table 1: Characteristics of Today's Typical Central Air Conditioners and Heat Pumps' 

Split System Split System Single Package Single Package 

Air Conditioner Heat Pump Air Conditioner Heat Pump 

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

Annual Utility BilF $189 $453 $189 $453 

Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years 

Energy Consumption per year 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh 

I "TYPIcal" equIpment have coohng and heatmg 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. 

35 
EE-RM/STD-98-440-30-3

Table 2: Implications of New Standards for the Average Consumer

Split System Split System Single Package Single Package

Air Conditioner Heat Pump Air Conditioner Heat Pump

Year Standard Comes into Effect 2006 2006 2006 2006

New Average Installed Price $2,449 $3,812 $2,765 $3,748

Estimated Price Increase $213 $144 $158 $149

Annual Utility Bill Savings $31 $50 $31 $50

Average Net Saving over Equipment $113 $365 $163 $421

Life

Energy Savings per Year 384 kWh 768 kWh 384 kWh 768 kWh

The most typical air conditioner (i.e., split system air conditioner which comprises

approximately 65 percent of today's central air conditioning and heat pump market) has an

installed price of $2,236 and an annual utility costs of $189. In order to meet the 2006 standard,

DOE estimates that the installed price of a typical air conditioner would be $2,449, an increase of

$213.4 This price increase would be offset by an annual energy savings of about $31 on the utility

bills. The most typical heat pump (i.e., split system heat pump) currently has an installed price of

$3,668 and annual utility costs of $453. In order to meet the 2006 standard, DOE estimates that

the installed price of a typical heat pump would be $3,812, an increase of $144. 5 This price

increase would be offset by an annual energy savings of about $50 on the utility bills.

DOE 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, DOE has

investigated the effects of the different energy prices across the nation and different air4 Based on estimates supplied by the industry trade association, the Air-Conditioning and Refrigeration

Institute (ARI), the installed price is estimated to be $2,510, an increase of $274.

5 Based on estimates supplied by ARI, the installed price is estimated to be $3,933, an increase of $265.

36

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-.303 

Table 2: Implications of New Standards for the Average Consumer 

Split System Split Syst~ni Single Package Single Package 

Air Conditioner .,eatPump Air Conditioner Heat Pump 

Year Standard Comes into Effect 2006 2006 2006 2006 

New Average Installed Price $2,449 $3,812 $2,765 $3,748 

Estimated Price Increase $213 $144 $158 $149 

Annual Utility Bill Savings $31 $50 $31 $50 

Average Net Saving over Equipment $113 $365 $163 $421 

Life 

Energy Savings per Year 384 kWh 768 kWh 384 kWh 768 kWh 

The most typical air conditioner (i.e., split system air conditioner which comprises 

approximately 65 percent oftoday's central air conditioning and heat pump market) has an 

installed price of $2,236 and an annual utility costs of $189. In order to meet the 2006 standard, 

DOE estimates that the installed price of a typical air conditioner would be $2,449, an increase of 

$213.4 This price increase would be offset by an annual energy savings of about $31 on the utility 

bills. The most typical heat pump (i.e., split system heat pump) currently has an installed price of 

$3,668 and annual utility costs of$453. In order to meet the 2006 standard, DOE estimates that 

the installed price ofa typical heat pump would be $3,812, an increase of$144.s This price 

increase would be offset by an annual energy savings of about $50 on the utility bills. 

DOE 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, DOE has 

investigated the effects of the different energy prices across the nation and different air4 Based on estimates supplied by the industry trade association, the Air-Conditioning and Refrigeration 

Institute (ARl), the installed price is estimated to· be $2,510, an increase of $274. 

S Based on estimates supplied by ARl, the installed price is estimated to be $3,933, an increase of$265. 

36 
EE RM/STD-98-440- 3 3

conditioning usage patterns. DOE estimates that 75 percent of all consumers purchasing a new

typical air conditioner would either save money or would be negligibly impacted as a result of the

2006 standard.6 In the case of a new typical heat pump, all consumers either would save money or

be negligibly impacted.7

DOE also investigated how these standards might affect low income consumers. On

average, DOE estimates that it is likely that low income air conditioner and heat pump consumers

would also save money over the life of the equipment as a result of the standard.

3. National Benefits

The standards in today's rule will provide benefits to the nation. DOE estimates the

standards will save approximately 3 quads of energy over 25 years (2006 through 2030). This is

equivalent to all the energy consumed by nearly 17 million American households in a single year.

In 2020, the standards will avoid the construction of three 400 megawatt coal-fired plants and

nineteen 400 megawatt gas-fired plants. These energy savings would result in cumulative

greenhouse gas emission reductions of approximately 24 million metric tons (Mt) of carbon, or an

amount equal to that produced by approximately 2 million cars every year. Additionally, air

pollution would be reduced by the elimination of approximately 80 metric tons of nitrous oxides

(NOx) from 2006 through 2020. In total, DOE estimates this standard will have a net benefit to

the nation's consumers of $2 billion over the period 2006 through 2030.8

6Based on estimates supplied by ARI, 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.

7 Based on estimates supplied by ARI, 97 percent of all consumers purchasing a new typical heat pump

will either save money or will be negligibly impacted as a result of the 2006 standard.

8

Net benefit assumes NAECA efficiency scenario. Net benefit would be $3 billion for Roll-up efficiency

scenario.

37

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

conditioning usage patterns. DOE estimates that 75 percent of all consumers purchasing a new 

typical air conditioner would either save money or would be negligibly impacted as a result of the 

2006 standard.6 In the case of a new typical heat pump, all consumers either would save money or 

be negligibly impacted.7 

DOE also investigated how these standards might affect low income consumers. On 

average, DOE estimates that it is likely that low income air conditioner and heat pump consumers 

would also save money over the life of the equipment as a result of the standard. 

3. National Benefits 

. The standards in today's rule will provide benefits to the nation. DOE estimates the 

standards will save approximately 3 quads of energy over 25 years (2006 through 2030). This is 

equivalent to all the energy consumed by nearly 17 million American households in a single year. 

In 2020, the standards will avoid the construction of three 400 megawatt coal-fired plants and 

nineteen 400 megawatt gas-fired plants. These energy savings would result in cumulative 

greenhouse gas emission reductions of approximately 24 million metric tons (Mt) of carbon, or an 

amount equal to that produced by approximately 2 million cars every year. Additionally, air 

pollution would be reduced by the elimination of approximately 80 metric tons of nitrous oxides 

(NOx) from 2006 through 2020. In total, DOE estimates this standard will have a net benefit to 

the nation's consumers of$2 billion over the period 2006 through 2030.8 

6Based on estimates supplied by ARl, 61 percent of all consumers purchasing a new typical air conditioner 

will either save money ot will be negligibly impacted as a result of the 2006 standard. 

7 Based on estimates supplied by ARl,. 97 percent of all consumers purchasing a new typical heat pump 

will either save money or will be negligibly impacted as a result of the 2006 standard. 

8Net benefit assumes NAECA efficiency scenario. Net benefit would be $3 billion for Roll-up efficiency 

scenario. 

37 
B. Statutory Framework EE-RM/STD-98-440 - 3 3

Part B of Title III of EPCA provides for the Energy Conservation Program for Consumer

Products other than Automobiles (42 U.S.C. 6291 et seq.). The consumer products subject to this

program include central air conditioners and heat pumps. Under the Act, the program consists

essentially of three parts: testing, labeling, and Federal energy conservation standards.

As previously stated, NAECA prescribed initial Federal energy conservation standards for

central air conditioners and heat pumps (42 U.S.C. 6295(d)). NAECA further specified that DOE

is to review and publish amended standards by January 1, 1994 (42 U.S.C. 6295(d)(3)(A)). Under

EPCA, 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 (42

U.S.C. 6295(o)(2)(A)).

Section 325(o)(2)(B)(i) provides that before DOE determines whether a standard is

economically justified, it must first solicit comments on a proposed standard (42 U.S.C.

6295(o)(2)(B)(i)). That section further provides that, after reviewing the comments, DOE must

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 estimated 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;

38

EE-RM-STD-98-440 COMMENT 303

B. Statutory Framework EE-RM/STD-98-440 - 3D 3 

Part B of Title III ofEPCA provides for the Energy Conservation Program for Consumer 

Products other than Automobiles (42 U.S.C. 6291 et seq.). The consumer products subject to this 

program include central air conditioners and heat pumps. Under the Act, the program consists 

essentially of three parts: te,sting, labeling, and Federal energy conservation standards. 

As previously stated, NAECA prescribed initial Federal energy conservation standards for 

central air conditioners and heat pumps (42 U.S.c. 6295(d)). NAECA further specified that DOE 

is to review and publish amended standards by January 1, 1994 (42 U.S;C. 6295(d)(3)(A)). Under 

EPCA, 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 (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 (42 U.S.C. 

6295(0)(2)(B)(i)). That section further provides that, after reviewing the comments, DOE must' 

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 estimated 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; 

38 
EE.RM/STD-98-440 -303

(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(o)(2)(B)(iii) establishes a rebuttable presumption of economic

justification in instances where the Secretary determines that "the additional cost to the consumer

of purchasing a product complying with an energy conservation standard level will be less than

three times the value of the energy ... savings during the first year that the consumer will receive

as a result of the standard, as calculated under the applicable test procedure .... "

(42 U.S.C. 6295(o)(2)(B)(iii)). The rebuttable presumption test is an alternative path to

establishing economic justification.

C. Methodology Used in DOE Analyses

For this final rule, the methodologies used to evaluate the seven factors described above

are unchanged from those used in the analyses that DOE relied on for the October 5 proposed rule

and the January 22 final rule. DOE's methodology is discussed in the October 5, 2000 NOPR (65

FR 59594-97) and the January 22 final rule (66 FR 7173-74). Additionally, the TSD that

accompanies this rulemaking provides a detailed description of every aspect of the various

analytical methodologies used.

39

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD-98-440 -303 

(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 .... " 

(42 U.S.C. 6295(o)(2)(B)(iii)). The rebuttable presumption test is an alternative path to 

establishing economic justification. 

C. Methodology Used in DOE Analyses 

For this final rule, the methodologies used to evaluate the seven factors described above 

are unchanged from those used in the analyses that DOE relied on for the October 5 proposed rule 

and the January 22 final rule. DOE's methodology is discussed in the October 5, 2000 NOPR (65 

FR 59594-97) and the January 22 final rule (66 FR 7173-74). Additionally, the TSD that 

accompanies this rulemaking provides a detailed description of every aspect of the various 

analytical methodologies used. 

39 
EE-RM/STD-98-440-3 0 3

D. General Discussion of DOE's Consideration of Statutory Criteria

1. Technological Feasibility

Pursuant to section 325(p)(2) of EPCA, and as discussed in the October 5, 2000 NOPR

(65 FR 59593, 59612) and January 22 final rule (66 FR 7172), DOE determined that 18 SEER is

the maximum technologically feasible level (Max Tech Level) for cooling efficiency for all

product classes and capacities covered by this rulemaking. The Max Tech Level for heating

efficiency is 9.4 HSPF, which is the highest HSPF rating currently available in residential heat

pumps. DOE's determinations of technological feasibility for central air conditioners and heat

pumps have not been disputed in the written and oral comments of interested persons in the

rulemaking.

2. Economic Justification Factors

DOE has considered the seven statutory factors for determining whether a conservation

standard is economically justified. This section briefly summarizes DOE's consideration of these

factors. More detailed consideration of these factors is provided in the discussion of comments in

Section VI and the discussion of analytical results in Section VII of this Supplementary

Information.

a. Economic Impact on Manufacturers and Consumers

The record for this rulemaking contains several discussions of the economic impact on

manufacturers and consumers See 66 FR 7174-78, 7185-7191, and 66 FR 38828-29, 38834-35. In

the July 25 SNOPR, DOE identified deficiencies in the assessment of manufacturer and consumer

impacts that were the basis for adoption of the January 22 final rule. Later sections of this

Supplementary Information address the public comments received and DOE's conclusions on

40

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-303 

D. General Discussion of DOE's Consideration o/Statutory Criteria 

1. Technological Feasibility 

Pursuant to section 325(P)(2) ofEPCA, and as discussed in the October 5, 2000 NOPR 

(65 FR 59593~ 59612) and January 22 final rule (66 FR7172), DOE determined that 18 SEER is 

the maximum technologically feasible level (Max Tech Level) for cooling efficiency for all 

product classes and capacities covered by this rulemaking. The Max Tech Level for heating 

efficiency is 9.4 HSPF,whichis the highest HSPF rating currently available in residential heat 

pumps~ DOE's determinations of technological feasibility for central air conditioners and heat 

pumps have not been disputed in the written and oral comments of interested persons in the 

rulemaking. 

2. Economic Justification Factors 

DOE has considered the seven statutory factors for determining whether a conservation 

standard is economically justified. This section briefly summarizes DOE's consideration of these 

factors. More detailed consideration of these factors is provided in the discussion of comments in 

Section VI and the discussion of analytical results in Section VII of this Supplementary 

Information. 

a. Economic Impact on Manufacturers and Consumers 

. The· record for this rulemaking contains several discussions of the economic impact on 

manufacturers and consUlliers See 66 FR 7174-78, 7185-7191, and 66 FR 38828-29,38834-35. In 

the July 25 SNOPR, DOE identified deficiencies in the assessment of manufacturer and consumer 

impacts that were the basis for adoption of the January 22 final rule. Later sections of this 

Supplementary Information address the public comments received and DOE's conclusions on 

40 
these subjects. EE-RM/STD-98-440- 3 3

b. Life-Cycle Costs and Rebuttable Presumption

DOE considered life-cycle costs, as discussed in the January 22 final rule. 66 FR 7173,

7175, 7187-90. DOE calculated the installed price and operation and maintenance costs for a

range of consumers around the nation to estimate the range in life-cycle cost benefits that

consumers would expect to receive due to new standards. DOE has made no change in its

assumptions and analysis of life-cycle costs in making the determinations in today's notice of final

rulemaking.

Section 325(o)(2)(B)(iii) of EPCA provides that if, according to the applicable 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 DOE is to presume that such

standard is economically justified. This presumption of economic justification can be rebutted

upon a proper showing.

Using the reverse engineering manufacturing costs, the standards DOE adopts today for

split heat pumps and packaged heat pumps can be shown to have satisfied the rebuttable

presumption requirements in section 325(o)(2)(B)(iii). 9 Therefore, DOE presumes that the

standards adopted for split system and single package heat pumps are economically justified. The

analysis, however, shows that split system air conditioners and single package air conditioners do

9

To avoid confusion, DOE points out that the statute requires DOE to use "the applicable test procedure" to

calculate the payback periods for purposes of the rebuttable presumption. As explained in the October 5, 2000

NOPR (65 FR 59596), the annual cooling and heating energy consumption calculations based on DOE's test

procedure are significantly greater than the weighted-average values from DOE's life-cycle cost analyses based on

the 1997 Residential Energy Consumption Survey, used in other DOE analyses. For this reason, the payback

periods presented in Section VII of this portion of the preamble, entitled "Analytical Results and Conclusions," are

significantly longer than those calculated to determine whether the rebuttable presumption applies to these products.

41

EE-RM-STD-98-440 COMMENT 303

these subjects. EE-RM/STD-98-440- 3 03 

b. Life-Cycle Costs and Rebuttable Presumption 

DOE considered life-cycle costs, as discussed in the January 22 final rule. 66 FR 7173, 

7175, 7187-90. DOE calculated the installed price and operation and maintenance costs for a 

range of consumers around the nation to estimate the range in life-cycle cost benefits that 

consumers would expect to receive due to new standards. DOE has made no change in its 

assumptions and analysis oflife-cycle costs in making the determinations in today's notice of final 

rulemaking. 

Section 325(o)(2)(B)(iii) of EPCA provides that if, according to the applicable 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 DOE is to presume that such 

standard is economically justified. This presumption of economic justification can be rebutted 

upon a proper showing. 

Using the reverse engineering manufacturing costs, the standards DOE adopts today for 

split heat pumps and packaged heat pumps can be shown to have satisfied the rebuttable 

presumption requirements in section 32S(o)(2)(B)(iii).9 Therefore, DOE presumes that the 

standards adopted for split system and single package heat pumps are economically justified. The 

analysis, however, shows that split system air conditioners and single package air conditioners do 

9To avoid confusion, DOE points out that the statute requires DOE to use "the applicable test procedure" to 

calculate the payback periods for purposes of the rebuttable presumption. As explained in the October 5, 2000 

NOPR (65 FR 59596), theannualcooling and heating energy consumption calculations based on DOE's test 

procedure are significantly greater than the weighted-average values from DOE's life-cycle cost analyses based on 

the 1997 Residential Energy Consumption Survey, used in other DOE analyses. For this reason, the payback 

periods presented in Section VII of this portion of the preamble, entitled "Analytical Results and Conclusions," are 

significantly longer than those calculated to determine whether the rebuttable presumption applies to these products. 

41 
EE-RM/STD-98-440 -3 03

not meet the standard for use of the rebuttable presumption of economic justification. Therefore,

DOE does not presume them to be economically justified. If the rebuttable presumption does not

apply, DOE must perform additional analysis to determine economic justification. As discussed

in Section VII, DOE has performed an analysis for all classes of central air conditioner and heat

pump products that shows the standards in today's rule are indeed economically justified.

c. Energy Savings

EPCA 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. DOE

forecasted energy savings through the use of a national energy savings (NES) spreadsheet, as

discussed in the October 5, 2000 NOPR (65 FR 59590, 59593). DOE relies on the same

spreadsheets and assumptions for its estimate of the NES that would result from implementation

of today's standards.

As discussed in the October 5, 2000 NOPR, section 325(o)(3)(B) of EPCA prohibits DOE

from adopting a standard for a product if that standard would not result in "significant" energy

savings. The energy savings for the standard levels DOE is adopting today are non-trivial -

indeed they are substantial - and therefore we consider them "significant" within the meaning of

section 325 of the Act as construed by the court in Natural Resources Defense Council v.

Herrington, 768 F.2d 1355 (D.C. Cir. 1985).

d. Lessening of Utility or Performance of Products

This factor cannot be quantified. In establishing classes of products, DOE has attempted

to eliminate any degradation of utility or performance in the products covered by today's rule.

42

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD·98·440 ·~3 03 

not meet the standard for use of the rebuttable presumption of economic justification. Therefore, 

DOE does not presume them to be economically justified. If the rebuttable presumption does not 

apply, DOE must perform additional analysis to determine economic justification. As discussed 

in Section VII, DOE has performed an analysis for all classes of central air conditioner and heat 

pump products that shows the standards in today's rule are indeed economically justified. 

c. Energy Savings 

EPCA requires DOE, in determining the economic justification ofastandard, to consider 

.the total projected energy savings that are expected to result directly from revised standards. DOE 

forecasted energy savings through the use of a national energy savings (NES) spreadsheet, as 

discussed in the October 5, 2000 NOPR (65 FR 59590, 59593). DOE relies on the same 

spreadsheets and assumptions for its estimate oftheNES that would result from implementation 

oftoday's standards. 

As discussed in the October 5, 2000 NOPR, section 325(0)(3)(B) ofEPCA prohibits DOE 

from adopting a standard for a product if that standard would not result in "significant" energy 

savings. The energy savings for the standard levels DOE is adopting today are non-trivialindeed they are substantial - and therefore we consider them "significant" within the meaning of 

section 325 of the Act as construed by the court in Natural Resources Defense Council v. 

Herrington, 768 F.2d 1355 (D.C. Cir. 1985). 

d. Lessening of Utility or Performance of Products 

This factor cannot be quantified. In establishing classes of products, DOE has attempted 

to eliminate any degradation of utility or performance in the products covered by today's rule. 

42 
EE-RM/STD-98-440-3 03

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. The separate treatment of

through-the-wall products and small duct, high velocity systems in today's rule is based in part on

utility and performance considerations.

e. Impact of Lessening of Competition

This economic justification factor has two aspects: on the one hand, it assumes that there

could be some lessening of competition as a result of standards; on the other hand, it directs the

Attorney General to gauge the impact, if any, of that effect and DOE must consider the Attorney

General's views in determining whether an efficiency level is economically justified..

In order to assist the Attorney General in making such a determination, DOE provided the

Attorney General with copies of the October 5, 2000, NOPR and the TSD for review. The

Attorney General's determination, in a letter dated December 4, 2000, was discussed in the

preamble to the January 22 final rule. 66 FR 7176, 7199-200. The Attorney General's December

4, 2000, determination is included in the Appendix to this notice of final rulemaking.

During the review conducted pursuant to the President's Regulatory Review Plan, DOE

invited the Attorney General to submit supplemental views on the January 22 final rule. The

Department of Justice, in a letter dated April 5, 2001, provided comments on whether the final

rule effectively removed its concerns regarding possible lessening of competition that could result

from the October 5 proposed standards. The Department of Justice's April 5, 2001, letter is also

included in the Appendix to this notice. The Department of Justice concluded that the 13 SEER

43

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-9S-44o--303 

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. The separate treatment of 

through-the-wall products and small duct, high velocity systems in today's rule is based in part on 

utility and performance considerations. 

e. Impact of Lessening of Competition 

This economic justification factor has two aspects: on the one hand, it assumes that there 

could be some lessening of competition as a result of standards; on the other hand, it directs the 

Attorney General to gauge the impact, if any, of that effect and DOE must consider the Attorney 

General's views in determining whether an efficiency level is economically justified .. 

In order to assist the Attorney General in making such a determination, DOE provided the 

Attorney General with copies of the October 5, 2000, NOPR and the TSD for review. The 

Attorney General's determination, in a letter dated December 4,2000, was discussed in the 

preamble to the January 22 final rule. 66 FR 7176, 7199-200. The Attorney General's December 

4,2000, determination is included in the Appendix to this notice of final rulemaking. 

During the review conducted pursuant to the President's Regulatory Review Plan, DOE 

invited the Attorney General to submit supplemental views on the January 22 final rule. The 

Department of Justice, in a letter dated April 5,2001, provided comments on whether the final 

rule effectively removed its concerns regarding possible lessening of competition that could result 

from the October 5 proposed standards. The Department of Justice's April 5,2001, letter is also 

included in the Appendix to this notice. The Department of Justice concluded that the 13 SEER 

43 
EE-RM/STD-98-440 -- 03

standards for heat pumps and air conditioners in the January 22 final rule still presented anticompetitive concerns. More specifically, the Department of Justice concluded that while the final

rule's exclusion of niche products might alleviate competitive problems for manufacturers of

those products, the Department of Justice remained concerned about the impact of the final rule

on manufacturers of standard equipment who could not make 13 SEER equipment that would fit

into space-constrained sites. The Department of Justice also concluded the January 22 final rule

would have a disproportionate impact on smaller manufacturers of heat pumps. Finally, the

Department of Justice was of the view that the 13 SEER standard for air conditioners presents the

same kinds of anti-competitive problems as the 13 SEER standard for heat pumps, and urged

DOE to adopt a 12 SEER standard for all products covered by the rule.

DOE submitted the July 25, 2001, supplemental proposed rule to the Department of

Justice for comment. The Assistant Attorney General, Antitrust Division, responded in a letter

dated October 19, 2001, (see Appendix to this notice) that the Department of Justice had

concluded that the proposed 12 SEER standards would not adversely affect competition. This

factor is discussed further in Section VI.E of this Supplementary Information.

f. Need of The Nation to Conserve Energy

DOE 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. As part of the analysis supporting

today's rule, DOE estimated energy savings and the national consumer benefits and estimated

reduction in emissions of pollutants and greenhouse gases resulting from those energy savings.

See the October 5, 2000 NOPR for a qualitative discussion of how these standards affect energy

44

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -303 

standards for heat pumps and air conditioners in the January 22 final rule still presented anticompetitive concerns. More specifically, the Department of Justice concluded that while the final 

rule's exclusion of niche products might alleviate competitive problems for manufacturers of 

those products, the Department of Justice remained concerned about the impact of the final rule 

on manufacturers of standard equipment who could not make 13 SEER equipment that would fit 

into space-constrained sites. The Department of Justice also concluded the January 22 final rule 

would have a disproportionate impact on smaller manufacturers of heat pumps. Finally, the 

Department of Justice was of the view that the 13 SEER standard for air conditioners presents the 

same kinds of anti-competitive problems as the 13 SEER standard for heat pumps, and urged 

DOE to adopt a 12 SEER standard for all products covered by the rule. 

DOE submitted the July 25, 2001, supplemental proposed rule to the Department of 

Justice for comment. The Assistant Attorney General, Antitrust Division, responded in a letter 

dated October 19, 2001, (see Appendix to this notice) that the Department of Justice had 

concluded that the proposed 12 SEER standards would not adversely affect competition. This 

factor is discussed further in Section VI.E of this Supplementary Information. 

f. Need of The Nation to Conserve Energy 

DOE 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. As part of the analysis supporting 

today's rule, DOE estimated energy savings and the national consumer benefits and estimated 

reduction in emissions of pollutants and greenhouse gases resulting from those energy savings. 

See the October 5, 2000 NOPR for a qualitative discussion of how these standards affect energy 

44 
EE-RM/STD-98-440- 303

savings and those benefits. 65 FR 59622-3. The amount of energy savings ultimately associated

with a particular standard level is also affected by the effect of a given standard on competition

and consumer cost. Selecting a standard level should take into account manufacturer - and

therefore inevitably consumer - costs, in order to encourage robust competition and heightened

introduction of newer, more efficient units into the inventory of units available for purchase and

use by consumers.

g. Other Factors

Section 325(o) of EPCA 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 (42 U.S.C. 6295(o)(2)(B)(i)(VI)). Under this provision, DOE considered the potential

improvement to the reliability of the electrical system and health effects caused by foregone air

conditioner purchases. These issues are discussed in the October 5, 2000 NOPR (65 FR 59605);

the January 22 final rule (66 FR 7195); and in the Discussion of Comments that follows. The

Utility Impacts Analysis in Chapter 11 of the TSD describes the technical analysis used in

estimating the effects of adopting new efficiency standards on installed generation capacity. As

will be described in the Discussion of Comments, the Utility Impacts Analysis has been revised.

Updated results are provided in Appendix M of the TSD.

VI. Discussion of Comments

A. Impact on Consumers

The record for this rulemaking includes numerous discussions of the distributions, extent,

and type of burdens on the typical consumer as well as on low-income consumers. See 65 FR

59623-59624, 66 FR 7189-7190, and 66 FR 38834. In the January 22 notice of final rulemaking,

45

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 . 

savings and those benefits. 65 FR 59622-3. The amount of energy savings ultimately associated 

with a particular standard level is also affected by the effect of a given standard on competition 

and consumer cost. . Selecting a standard level should take into account manufacturer - and 

therefore inevitably consumer - costs, in order to encourage robust competition and heightened 

introduction of newer, more efficient units into the inventory of units available for purchase and 

use by consumers. 

g. Other Factors 

Section 325(0) of EPCA 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 (42 U$.C. 6295(0)(2)(B)(i)(VI)). Under this provision, DOE considered the potential 

improvement to the reliability of the electrical system and health effects caused by foregone air 

conditioner purchases. These issues are discussed in the October 5, 2000 NOPR (65 FR 59605); 

the January 22 final rule (66 FR 7195); and in the Discussion of Comments that follows. The 

Utility Impacts Analysis in Chapter 11 of the TSD describes the technical analysis used in 

estimating the effects of adopting new efficiency standards on installed generation capacity. As 

will be described in the Discussion of Comments, the Utility Impacts Analysis has been revised. 

Updated results are provided in Appendix M of the TSD. 

VI. Discussion of Comments 

A. Impact on Consumers 

The record for this rulemaking includes numerous discussions of the distributions, extent, 

and type of burdens on the typical consumer as well as on low-income consumers. See 65 FR 

59623-59624,66 FR 7189-7190, and 66 FR 38834. In the January 22 notice of final rulemaking, 

45 
EE-RM/STD-98-440 -3a3

DOE determined that most consumers, including low-income consumers, would likely benefit

financially over the life of the equipment, but that all consumers would bear higher initial costs,

and many consumers, though not the majority, would never recover the higher first costs in the

form of savings in their utility bills. However, the previous Administration concluded that the

national energy savings and the slight financial benefit to the typical consumer overrode any

negative and maldistributed consumer impacts. Upon review pursuant to President Bush's

Regulatory Review Plan, DOE focused on analytical results showing that the benefits of the

standards adopted in the January 22 final rule would accrue to a much smaller fraction of

consumers than is the case for recent standards for other products, particularly low income

consumers. Therefore, DOE sought to mitigate those burdens by proposing on July 25 a 12 SEER

standard, which would reduce the increase in equipment cost compared to the 13 SEER

requirements issued on January 22. See July 25 SNOPR, 66 FR 38828, 38834. DOE received

extensive public comments on this subject in response to the July 25 SNOPR.

1. Low-Income Consumers

As noted in the July 25 SNOPR, DOE is particularly concerned that new standards be

designed to distribute their burdens and benefits as fairly as practical. Although some disparity is

expected in any national standard, the disparity in impacts between low-income and typical

consumers is of more concern at more stringent efficiency standards because increases in first cost

and increases in life cycle costs are felt more sharply by lower income consumers.

Many advocates of a 13 SEER standard argued that because a majority of low-income

central air conditioner and heat pump consumers are renters, most would not bear the first cost

increases associated with more efficient equipment. These comments asserted that landlords

46

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -303 

DOE determined that most consumers, including low-income consumers, would likely benefit 

financially over the life of the equipment, but that all consumers would bear higher initial costs, 

and many consumers, though not the majority, would never recover the higher first costs in the 

form of savings in their utility bills. However, the previous Administration concluded that the 

national energy savings and the slight financial benefit to the typical consumer overrode any 

negative and mal distributed consumer impacts. Upon review pursuant to President Bush's 

Regulatory Review Plan, DOE focused on analytical results showing that the benefits of the 

standards adopted in the January 22 final rule would accrue to a much smaller fraction of 

consumers than is the case for recent standards for other products, particularly low income 

• 

consumers. Therefore, DOE sought to mitigate those burdens by proposing on July 25 a 12 SEER 

standard, which would reduce the increase in equipment cost compared to the 13 SEER 

requirements issued on January 22. See July 25 SNOPR, 66 FR 38828, 38834. DOE received 

extensive public coinments on this subject in response to the July 25 SNOPR. 

1. Low-Income Consumers 

As noted in the July 25 SNOPR, DOE is particularly concerned that new standards be 

designed to distribute their burdens and benefits as fairly as practical. Although some disparity is 

expected in any national standard, the disparity in impacts between low-income and typical 

consumers is of more concern at more stringent efficiency standards because increases in first cost 

and increases in life cycle costs are felt more sharply by lower income consumers. 

Many advocates of a 13 SEER standard argued that because a majority of low-income 

central air conditioner and heat pump consumers are renters, most would not bear the first cost 

increases associated with more efficient equipment. These comments asserted that landlords 

46 
EE.RM/STD-98-440 -303

would have to absorb any first cost increase because rental prices are dictated by housing

availability, real estate prices, and a number of other market forces as opposed to first cost

increases in any single appliance. The comments also asserted that because landlords typically

purchase the least expensive, and in turn, the least efficient equipment, stringent efficiency

standards are one of the few options provided to renters to protect them from unduly high energy

bills. (American Council for an Energy-Efficiency Economy (ACEEE), No. 284 at p. 3;

Appliance Standards Awareness Project (ASAP), No. 244 at pp. 1-2; Austin Energy, No. 243 at p.

2; Consumer Federation of America (CFA), No. 246 at p. 2; Northeast Energy Efficiency

Partnerships (NEEP), No. 273 at p. 3; State of Vermont, No. 268 at p. 3; Goodman Global

Holdings (Goodman), No. 269 at p. 4; Alliance to Save Energy (ASE), No. 282 at p. 4; California

Energy Commission (CEC), No. 263 at p. 2; NRDC, No. 250 at pp. 17-18; Environmental

Ministries of Southern California, No. 263 at p. 4; Texas Ratepayers' Organization to Save

Energy (Texas ROSE), No. 241-SS at pp. 15-16; National Consumer Law Center (NCLC), No.

241-NN at p. 1; Texas Natural Resource Conservation Commission (TNRCC), No. 286 at pp. 1-2;

American Geothermal DX, No. 241-HH at p. 1; EPA, No. 276 at p. 5). Goodman, Oregon Office

of Energy (OOE), National Grid, and Texas ROSE stated that low-income consumers in general

would benefit from stringent efficiency standards. Goodman argued that any first cost increase

would be made up through lower energy bills, while Texas ROSE asserted that the stringency of

the efficiency standard is immaterial as most low-income households would find buying a new

central air conditioning unit a prohibitive expense at any efficiency level. (OOE, No. 275 at pp. 4-

5; Goodman, No. 269 at p. 4; National Grid, No. 241-00 at p. 2; Texas ROSE, No. 241-SS at pp.

12-16).

47

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -30.3 

would have to absorb any first cost increase because rental prices are dictated by housing 

availability, real estate prices, and·a number of other market forces as opposed to first cost 

increases in any single appliance. The comments also asserted that because landlords typically 

purchase the least expensive, and in turn, the least efficient equipment, stringent efficiency 

standards are one of the few options provided to renters to protect them from unduly high energy 

bills. (American Council for ali Energy-Efficiency Economy (ACEEE), No. 284 at p. 3; 

Appliance Standards Awareness Project (ASAP), No. 244 at pp. 1-2; Austin Energy, No. 243 at p. 

2; Consumer Federation of America (CF A), No. 246 at p. 2; Northeast Energy Efficiency 

Partnerships (NEEP), No. 273 at p. 3; State of Vermont, No. 268 at p.3; Goodman Global 

lipldings (Goodman), No. 269 at p. 4; Alliance to Save Energy (ASE), No. 282 at p. 4; California 

Energy Commission (CEC), No. 263 at p. 2; NRDC, No. 250 at pp. 17-18; Environmental 

Ministries of Southern California, No. 263 at p. 4; Texas Ratepayers' Organization to Save 

Energy (Texas ROSE), No. 241-SS at pp. 15-16; National Consumer Law Center (NCLC), No. 

241-NN at p. 1; Texas Natural Resource Conservation Commission (TNRCC), No. 286 at pp. 1-2; 

American Geothermal DX, No. 241-HH at p. 1; EPA, No. 276 at p. 5). Goodman, Oregon Office 

of Energy (OOE), National Grid, and Texas ROSE stated that low-income consumers in general 

would benefit from stringent efficiency standards. Goodman argued that any first cost increase 

would be made up through lower energy bills, while Texas ROSE asserted that the stringency of 

the efficiency standard is immaterial as most low-income households would find buying a new 

central air conditioning unit a prohibitive expense at any efficiency level. (OOE, No. 275 at pp. 4-

5; Goodman, No. ~69 at-po 4; National Grid, No. 241-00 at p. 2; Texas ROSE, No. 241-SS at pp. 

12-16). 

47 
EE-RM/STD-98-440 - 3 3

Countering the above comments, York International (York), Trane Company and

American Standard Heating and Air Conditioning (Trane), Southern Company, ARI, Edison

Electric Institute (EEI), Rheem Manufacturing (Rheem), Carrier Corporation (Carrier), and

George Mason University Mercatus Center (Mercatus Center) all argued that the increased cost of

more efficient air-conditioning equipment cannot be afforded by those consumers living on fixed

or low incomes. For those low-income consumers that are elderly or of ill-health, Carrier and

Mercatus Center stated that the increased first cost associated with more efficient equipment could

cause these consumers to forego the purchase of new equipment leading to potential adverse

health effects for this sub-population. With regard to low-income renters, both Trane and

Southern Company maintained that landlords will pass on the higher first costs associated with

more efficient equipment to renters. Southern Company elaborated by stating the "renters get it

free" argument only has validity in the very short-term. In the long term, higher costs experienced

by landlords will inevitably result in higher costs to their tenants. Southern Company asserts that

DOE would be better served looking at cost-effectiveness from a direct-cost, societal viewpoint,

and avoid speculating on changes in landlord profit margins decades from now. (York, No. 270 at

pp. 2-3; Trane, No. 262 at pp. 4-5; Southern Company, No. 257 at p. 2; ARI, No. 259 at p. 2; EEI,

No. 253 at p. 4; Rheem, No. 248 at p. 2; Carrier, No. 280 at p. 2; Mercatus Center, No. 242 at p.

11).

DOE believes roughly half of low income households are renters. The 1997 Residential

Energy Consumption Survey (RECS) that was used as the basis for determining the impacts of

increased efficiency standards on households estimates that 49.8 percent of low-income

households with central air-conditioners or heat pumps are renters. What is at issue is the extent

48

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 3D 3 

Countering the above comments, York International (York), Trane Company and 

American Standard Heating and Air Conditioning (Trane), Southern Company, ARI, Edison 

Electric Institute (EEl), Rheem Manufacturing (Rheem), Carrier Corporation (Carrier), and 

George Mason University Mercatus Center (Mercatus Center) all argued that the increased cost of 

more efficient air-conditioning equipment cannot be afforded by those consumers living on fixed 

or low incomes. For those low-income consumers that are elderly or of ill-health, Carrier and 

Mercatus Center stated that the increased first cost associated with more efficient equipment could 

cause these consumers to forego the purchase of new equipment leading to potential adverse 

health effects for this sub-population. With regard to low-income renters, both Trane and 

Southern Company maintained that landlords will pass on the higher first costs associated with 

more efficient equipment to renters. Southern Company elaborated by stating the "renters get it 

free" argument only has validity in the very short-term. In the long term, higher costs experienced 

by landlords will inevitably result in higher costs to their tenants. Southern Company asserts that 

DOE would be better served looking at cost-effectiveness from a direct-cost, societal viewpoint, 

and avoid speculating on changes in landlord profit margins decades from now. (York, No. 270 at 

pp. 2-3; Trane, No. 262 at pp. 4-5; Southern Company, No. 257 at p. 2; ARI, No. 259 at p. 2; EEl, 

No. 253 at p. 4; Rheem; No. 248 at p. 2; Carrier, No. 280 at p. 2; Mercatus Center, No. 242 at p. 

11). 

DOE believes roughly half of low income households are renters. The 1997 Residential 

Energy Consumption Survey (RECS) that was used as the basis for determining the impacts of 

increased efficiency standards on households estimates that 49.8 percent of low-income 

households with central air-conditioners or heat pumps are renters. What is at issue is the extent 

48 
EE-RM/STD-98-440- 303

to which increased equipment costs will be borne by occupants of these households or by the

building owners.

DOE examined existing literature on the economics of rental markets to determine

whether any previous analyses might help resolve the disagreements on this issue'0. The existing

literature appears to support a broad conclusion that most or all of the higher costs of more energy

efficient equipment will, eventually, be passed on to renters. However, this literature suggests

that it is possible that some landlords will not be able to pass on all such costs, while other

landlords may actually pass on more than 100 percent of these costs. Those landlords who are

unable to pass on all of these added costs will, of course, be adversely affected by this rulemaking

(unless they are directly responsible for the utility bills associated with air conditioning use),

although their renters are much more likely to benefit. Landlords that would be adversely affected

may be more likely to seek alternatives, such as small capacity units or even delayed replacement

of failed units. Those landlords that pass on more than 100 percent of the costs of new equipment

could benefit from efficiency standards, but their renters are much more likely to be adversely

affected. Since no study could be found that addressed the specific population of renters likely to

be affected by this rulemaking. DOE believes there is insufficient basis to change its analysis

methods or conclusions regarding the likely effects of central air conditioner and heat pump

standards on low-income renters.

'OPindykck, R. and D. Rubinfeld, Microeconomic Theory, 2001, provides equations for renter and landlord

pass-through fractions as a function of elasticities for long-run housing supply and demand. The renter passthrough fraction is that fraction of a landlord's investment cost that gets passed through to the renter. The landlord

pass-through fraction is that fraction of a renter's benefit due to a landlord's investment that gets passed back

through to the landlord. Typical supply elasticities can be found in Pindykck, R. and D. Rubinfeld,

Microeconomics, 2001, Prentice Hall (citing de Leeuw, F. and N. Ekanem, "The Supply of Rental Housing", AER,

Vol. 61, 1971, pp. 806-817). Typical demand elasticities can be found in Hanushek, E.A. and J. M. Quigley, "The

Determinants of Housing Demand", Research in Urban Economics, Vol. 2, 1982, pp. 221-242.

49

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -3CJ3 

to which increased equipment costs will be borne by occupants of these households or by the 

building owners. 

DOE examined existing literature on the economics of rental markets to determine 

whether any previous analyses might help resolve the disagreements on this issue 10• The existing 

literature appears to support a broad conclusion that most or all of the' higher costs of more energy 

efficient equipment will, eventually, be passed on to renters. However, this literature suggests 

that it is possible that some landlords will not be able to pass on all such costs, while other 

landlords may actually pass on more than 1 00 percent of these costs~ Those landlords who are 

unable to pass on all of these added costs will, of course, be adversely affected by this rulemaking 

(unless they are directly responsible for the utility bills associated with air conditioning use), 

although their renters are much more likely to benefit. Landlords that would be adversely affected 

may be more likely to seek alternatives, such as small capacity units or even delayed replacement 

of failed units. Those landlords that pass on more than 100 percent of the costs of new equipment 

could benefit from efficiency standards, but their renters are much more likely to be adversely 

affected. Since no study could be found that addressed the specific population of renters likely to 

. be affected by this rulemaking. DOE believes there is insufficient basis to change its analysis 

methods or conclusions regarding the likely effects of central air conditioner and heat pump 

standards on low-income renters. 

IOPindykck, R. and D. Rubinfeld, Microeconomic Theory, 2001, provides equations for renter and landlord 

. pass-through fractions as a function of elasticities for long-run housing supply and demand. The renter passthrough fraction is that fraction ofa hindlord's investment cost that gets passed through to the renter. The landlord 

pass-through fraction is that fraction of a renter's benefit due to a landlord's investment that gets passed back 

through to the landlord. Typical supply elasticities can be found in Pindykck, R. and D. Rubinfeld, 

Microeconomics, 2001, Prentice Hall (citing de Leeuw, F. and N. Ekanem, "The Supply of Rental Housing", AER, 

Vol. 61,1971, pp. 806-817). Typical demand elasticities can be found in Hanushek, E.A. and J. M. Quigley, "The 

Determinants of Housing Demand", Research in Urban Economics, Vol. 2, 1982, pp. 221-242. 

49 
2. Electricity Prices EE-RM/STD-98-440 -303

In proposing a 12 SEER standard in the July 25 SNOPR, DOE stated that a lower fraction

of consumers would be negatively impacted in terms of life-cycle cost than under a 13 SEER

standard. See 66 FR 28828.

Several comments disagreed with DOE's life-cycle cost conclusions, claiming that DOE's

analysis of the benefits of the 13 SEER rule are significantly underestimated due to their failure

to account for recent increases in electricity prices. The comments note that DOE based its

seasonal price forecasts on electricity price data from 1996-97 that were adjusted downward using

Energy Information Administration (EIA) projections of future annual electricity prices. Citing

recent residential rate data from areas of the country that have undergone some form of electricity

deregulation (e.g., Massachusetts, California, and the Northwest), the comments assert that DOE's

electricity cost projections fail to recognize the significant summertime consumer price increases

that are accompanying restructuring of the electric utility industry. For additional support, some

comments refer to an analysis conducted by Synapse Energy Economics that demonstrated that

summer daytime wholesale electric prices across the country averaged approximately 2/2 0/kWh

(kilowatt-hour) more than annual average wholesale prices. These comments conclude that if

DOE's analysis were revised to include more recent electricity prices, the results would indicate

that a 13 SEER standard represents a better choice for consumers and the Nation. (ACEEE, No.

284 at pp. 8-1 1;CFA, No. 246 at p. 2; Offices of the New York State and Massachusetts Attorney

Generals, No. 277 at pp. 15-16; OOE, No. 275 at p. 3; Pacific Gas & Electric Company (PG&E),

No. 274 at pp. 1-2; ASE, No. 282 at p. 4; Goodman, No. 269 at p. 2; National Rural Electric

Cooperative Association (NRECA), No. 278 at pp. 1-2; Environmental Ministries of Southern

50

EE-RM-STD-98-440 COMMENT 303

2. Electricity Prices EE-RM/STD-98-440 - '3D3 

In proposing a 12 SEER standard in the July 25 SNOPR, DOE stated that a lower fraction 

of consumers would be negatively impacted in terms of life-cycle cost than under a 13 SEER 

standard. See 66 FR 28828. 

Several comments disagreed with DOE's life-cycle cost conclusions, claiming that DOE's 

analysis of the benefits of the 13 SEER rule are significantly underestimated due to their failure 

to account for recent increases in electricity prices. The comments note that DOE based its 

seasonal price forecasts on electricity price data from 1996-97 that were adjusted downward using 

Energy Information Administration (EIA) projections of future annual electricity prices. Citing 

recent residential rate data from areas of the country that have undergone some form of electricity 

deregulation (e.g., Massachusetts, California, and the Northwest), the comments assert that DOE's 

electricity cost projections fail to recognize the significant summertime consumer price increases 

that are accompanying restructuring of the electric utility industry. For additional support, some 

comments refer to an analysis conducted by Synapse Energy Economics that demonstrated that 

summer daytime wholesale electric prices across the country averaged approximately 2Y2 ¢/kWh 

(kilowatt-hour) more than annual average wholesale prices. These comments conclude that if 

DOE's analysis were revised to include more recent electricity prices, the results would indicate 

that a 13 SEER standard represents a better choice for consumers and the Nation. (ACEEE, No. 

284 at pp. 8-11 ;CF A, No. 246 at p. 2; Offices of the New York State and Massachusetts Attorney 

Generals, No. 277 at pp. 15-16; OOE, No. 275 at p. 3; Pacific Gas & Electric Company (PG&E), 

No. 274 at pp. 1-2; ASE, No. 282 at p. 4; Goodman, No. 269 at p. 2; National Rural Electric 

Cooperative Association (NRECA), No. 278 at pp. 1-2; Environmental Ministries of Southern 

50 
EE-RM/STD-98-440-303

California, No. 236 at pp. 2-3; Texas ROSE, No. 241-SS at pp. 7-8; NCLC, No. 255 at pp. 2-4;

Northwest Power Planning Council (NWPPC), No. 287 at pp. 1-3; Environmental Protection

Agency (EPA), No. 276 at p. 4). Some comments further argue that the costs of electricity price

increases due to air-conditioning are passed, in the form of higher rates, onto all consumers for all

end uses, regardless of the importance of their role in creating the price increase. Thus, DOE's

analysis should account for how lower air-conditioning consumption lowers electricity bills for all

consumers and not only those that utilize air conditioners. (NEEP, No. 273 at pp. 2-3; NRDC,

No. 250 at pp. 14-17).

Trane, ARI, and EEI all disagree that recent price increases due to electricity deregulation

will lead to higher electricity rates in the long-term. For example, Trane asserts that competition

will cause energy prices to consumers to remain stable. EEI adds that price collapses have

recently occurred in some of the same regional markets which experienced rate increases. EEI

also states that retail price caps have been instituted in many areas of the country that have been

deregulated in order to shield residential consumers from the price fluctuations in the wholesale

market. (Trane, No. 262 at pp. 14-16; ARI, No. 259 at pp. 33-34; EEI, No. 253 at p. 3).

Rather than speculate on how current volatility in energy markets will impact future

electricity prices, DOE has consistently relied on EIA energy price forecasts and has used other

forecasts, including the various EIA scenarios, to bound the energy prices used in the standards

analysis. EIA's most recent Annual Energy Outlook (AEO) for the year 2002 recognizes that over

the past year energy markets have been extremely volatile". Recent energy market volatility as

"U.S. Department of Energy-Energy Information Administration (EIA), Early Release of the Annual

Energy Outlook 2002. EIA website: <http://www.eia.doe.gov/oiaf/aeo/>

51

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-"303 

California, No. 236 at pp. 2-3; Texas ROSE, No. 241-SS at pp. 7-8; NCLC, No. 255 at pp. 2-4; 

Northwest Power Planning Council (NWPPC), No. 287 at pp. 1-3; Environmental Protection 

Agency (EPA), No. 276 at p. 4). Some comments further argue that the costs of electricity price 

increases due to air-conditioning are passed, in the form of higher rates, onto all consumers for all 

end uses, regardless of the importance of their role in creating the price increase. Thus, DOE's 

analysis should account for how lower air-conditioning consumption lowers electricity bills for all 

consumers and not only those that utilize air conditioners. (NEEP, No. 273 at pp. 2-3; NRDC, 

No. 250 at pp. 14-17). 

Trane, ARI, and EEl all disagree that recent price increases due to electricity deregulation 

will lead to higher electricity rates in the long-term. For example, Trane asserts that competition 

will cause energy prices to consumers to remain stable. EEl adds that price collapses have 

recently occurred in some of the same regional markets which experienced rate increases. EEl 

also states that retail price caps have been instituted in many areas of the country that have been 

deregulated in order to shield residential consumers from the price fluctuations in the wholesale 

market. (Trane, No. 262 at pp. 14-16; ARI, No. 259 at pp. 33-34; EEl, No. 253 at p. 3). 

Rather than speculate on how current volatility in energy markets will impact future 

electricity prices, DOE has consistently relied on EIA energy price forecasts and has used other 

forecasts, including the various EIA scenarios, to bound the energy prices used in the standards 

analysis. EIA's most recent Annual Energy Outlook (AEO) for the year 2002 recognizes that over 

the past year energy markets have been extremely volatile)). Recent energy market volatility as 

IIU;S. Department of Energy-Energy Information Administration (EIA) , Early Release of the Annual 

Energy Outlook 2002. EIA website: <hnp:llwww.eia.doe.gov/oiaf/aeo/> 

51 
EE-RM/STD-98-440- 30-3

well as the economic slowdown and lower prices following the September terrorists' attacks in the

United States have been incorporated in the short-term projections of the AEO2002. To be more

specific regarding the AEO2002 assumptions, its projections assume a transition to full

competitive pricing of electricity in States with specific deregulation plans. Other States are

assumed to continue cost-of-service pricing. Price projections include the contracts entered into

by California to guarantee electricity supplies in the State. Increased competition in electricity

markets is also represented through changes in the financial structure of the industry and

efficiency and operating improvement. The impact of EIA's assumptions are evidenced from the

average residential electricity price estimated by AE02002 for the year 2001. The average rate

estimated by AE02002 for 2001 is 4.2 percent greater (or 0.3 ¢/kWh) than that estimated by the

AEO2000. Although the AEO2002 short-term projections have taken into account recent events,

EIA estimates that long-term volatility in energy markets will not occur from recent events or

from the impacts of such future events as supply disruptions or severe weather. Again, this is

evidenced from the average residential electricity price forecasts from the AEO2002. Starting in

the year 2003 average rates are projected to drop below those forecasted by the AEO2000 and

remain that way until 2010. After 2010 the rates forecasted by both the AEO2002 and AEO2000

are essentially the same. In terms of the consumer analysis, this means that the life-cycle results

based on the AEO2000 price projections would remain virtually unchanged if the AE02002

projections were to be substituted in their place.

With regard to Synapse Energy Economics' wholesale electricity price analysis, DOE does

recognize that wholesale summertime electricity prices are on average 21⁄2L ¢/kWh greater than

average wholesale rates. But as was stated in the January 22 final rule, DOE cannot speculate as

52

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD-98-440 - 30-3 

well as the economic slowdown and lower prices following the September terrorists' attacks in the 

United States have been incorporated in the short-term projections of the AE02002. To be more 

specific regarding the AE02002 assumptions, its projections assume a transition to full 

competitive pricing of electricity in States with specific deregulation plans. Other States are 

assumed to continue cost-of-service pricing. Price projections include the contracts entered into 

by California to guarantee electricity supplies in the State. Increased competition in electricity 

markets is also represented through changes in the financial structure of the industry and 

efficiency and operating improvement. The impact ofEIA's assumptions are evidenced from the 

average residential electricity price estimated by AE02002 for the year 2001. The average rate 

estimated by AE02002 for 2001 is 4.2 percent greater (or 0.3 ¢/kWh) than that estimated by the 

AE02000. Although the AE02002 short-term projections have taken into account recent events, 

EIA estimates that long-term volatility in energy markets will not occur from recent events or 

from the impacts of such future events as supply disruptions or severe weather. Again, this is 

evidenced from the average residential electricity price forecasts from the AE02002. Starting in 

the year 2003 average rates are projected to drop below those forecasted by the AE02000 and 

remain that way until 2010. After 2010 the rates forecasted by both the AE02002 and AE02000 

are essentially the same. In terms of the consumer analysis, this means that the life-cycle results 

based on the AE02000 price projections would remain virtually unchanged if the AE02002 

projections were to be substituted in their place. 

With regard to Synapse Energy Economics' wholesale electricity price analysis, DOE does 

recognize that wholesale summertime electricity prices are on average 2 ~ ¢/k Wh greater than 

average wholesale rates. But as was stated in the January 22 final rule, DOE cannot speculate as 

52 
EE-RM/STD-98-440- 303

to how wholesale prices will be translated into retail prices to residential consumers. It is possible

that this difference in wholesale rates will ultimately result in higher marginal energy prices for

the operation of central air conditioners. However, several other assumptions about future

electricity prices are equally reasonable. It is possible that increased competition will result in

higher fixed charges for utility service and higher fixed charges would lower marginal rates. It is

also possible that higher peak load prices for electricity would cause consumers to significantly

alter the times at which they use air conditioning, thus reducing projected electricity costs (and

cost savings). Finally, it is possible that the recent trend for increased retail level competition

will slow or even stop. Given the many possible scenarios affecting the costs of operating central

air conditioners, DOE will retain the existing method, which is based upon actual consumer bill

and EIA price forecasts, to evaluate consumer benefits and costs.

3. Installation Costs

The potential increase in installation costs associated with 13 SEER equipment was cited

by DOE as one of the reasons for not proposing a 13 SEER standard in its July 25 SNOPR. See

66 FR 38836. Several comments disagreed with DOE's conclusion that installation costs could be

significantly different between 12 and 13 SEER equipment. Goodman claims that because their

12 and 13 SEER equipment are similar in size, there is almost no difference in the installation

costs associated with their 12 and 13 SEER systems. (Goodman, No. 269 at p. 3). American

Geothermal DX, an HVAC contractor, asserts that, based on their experience, any cost difference

between installing a 13 SEER unit over a 12 SEER unit would be minimal. (American

Geothermal DX, No. 241-HH at pp. 1-2). Several other comments, in particular those from

ACEEE, assert that DOE's treatment of the "footprint" issue is speculative, i.e., DOE provides no

53

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

to how wholesale prices will be translated into retail prices to residential consumers. It is possible 

that this difference in wholesale rates will·ultimately result in higher marginal energy prices for 

the operation of central air conditioners. However, several other assumptions about future 

electricity prices are equally reasonable. It is possible that increased competition will result in 

higher fixed charges for utility service and higher fixed charges would lower marginal rates. It is 

also possible that higher peak load prices for electricity would cause consumers to significantly 

alter the times at which they use air conditioning, thus reducing projected electricity costs (and 

cost savings). Finally, it is possible that the recent trend for increased retail level competition 

will slow or even stop. Given the many possible scenarios affecting the costs of operating central 

. air conditioners, DOE will retain the existing method, which is based upon actual consumer bill 

and EIA price forecasts, to evaluate consumer benefits and costs. 

3. Installation Costs 

The potential increase in installation costs associated with 13 SEER equipment was cited 

by DOE as one of the reasons for not proposing a 13 SEER standard in its July 25 SNOPR. See 

66 FR 38836. Several comments disagreed with DOE's conclusion that installation costs could be 

significantly different between 12 and 13 SEER equipment. Goodman claims that because their 

12 and 13 SEER equipment are similar in size, there is almost no difference in the installation 

costs associated with their 12 and 13 SEER systems. (Goodman, No. 269 at p. 3). American 

Geothermal DX, an HV AC contractor, asserts that, based on their experience, any cost difference 

between installing a 13 SEER unit over a 12 SEER unit would be minimal. (American 

Geothermal DX, No. 241-HH at pp. 1-2). Several other comments, in particular those from 

ACEEE, assert that DOE's treatment of the "footprint" issue is speculative, i.e., DOE provides no 

53 
EE-RM/STD-98-440- 303

evidence that installation costs will actually increase for 13 SEER equipment. With regard to

space-constrained equipment, ACEEE adds that because DOE has already moved to isolate this

type of equipment as separate product classes, it effectively dismisses any arguments asserting

that the impact of space constraints would result in higher installation costs for "mainstream" 13

SEER equipment. (ACEEE, No. 284 at pp. 13-14; ASE, No. 282 at p. 5; NRDC, No. 250 at p.

23; National Grid, No. 241 -00 at p. 2).

Trane, ARI, and Rheem all argue that 13 SEER equipment is significantly larger than 12

SEER systems. As a result, installation costs are significantly greater for 13 SEER units than for

12 SEER units. In particular, they state there will be many instances where it will be very difficult

to physically fit larger indoor coils, needed to match outdoor 13 SEER condensing units, without

retrofitting the air handler originally designed for a smaller, lower SEER indoor coil. (ARI, No.

259 at pp. 25-26; Trane, No. 262 at pp. 5-9; Rheem, No. 248 at p. 3).

Throughout the analysis DOE has assumed that installation costs would remain constant as

efficiency increased. As stated in the January 22 final rule, DOE believes that 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, 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. See January 22 final rule, 66 FR 7180.

Although DOE still maintains that installation costs generally are unlikely to increase due to the

above reason, as stated in the July 25 SNOPR, there is the possibility that substantial increases in

installation costs due to larger and heavier 13 SEER systems may materialize for some consumers,

54

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD-98-440- 303 

evidence that installation costs will actually increase for 13 SEER equipment. With regard to 

space-constrained equipment, ACEEE adds that because DOE has already moved to isolate this 

type of equipment as separate product classes, it effectively dismisses any arguments asserting 

that the impact of space constraints would result in higher installation costs for "mainstream" 13 

SEER equipment. (ACEEE, No. 284 at pp. 13-14; ASE, No. 282 at p. 5; NRDC, No. 250 at p. 

23; National Grid, No. 241-00 at p. 2). 

Trane, ARI, and Rheem all argue that 13 SEER equipment is significantly larger than 12 

. SEER systems. As a result, installation costs are significantly greater for 13 SEER units than for 

12 SEER units. In particular, they state there will be many instances where it will be very difficult 

to physically fit larger indoor coils, needed to match outdoor 13 SEER condensing units, without 

retrofitting the air handler originally designed for a smaller, lower SEER indoor coil. (ARI, No. 

259 at pp. 25-26; Trane, No. 262 at pp. 5-9; Rheem, No. 248 at p. 3). 

Throughout the analysis DOE has assumed that installation costs would remain constant as 

efficiency increased. As stated in the January 22 final rule, DOE believes that 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, 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. See January 22 final rule, 66 FR 7180. 

Although DOE still maintains that installation costs generally are unlikely to increase due to the 

above reason, as stated in the July 25 SNOPR, there is the possibility that substantial increases in 

installation costs due to larger and heavier 13 SEER systems may materialize for some consumers, 

54 
EE-RM/STD-98-440- 303

especially for those replacing 10 SEER systems. See July 25 SNOPR, 66 FR 38836. As a result,

DOE continues to believe the possibility of increased installation costs is a factor that supports

adopting the less costly 12 SEER standard.

4. Manufactured Housing Owners

York, ARI, and Nordyne Inc. (Nordyne) stated that consumers living in manufactured

homes are especially vulnerable to the increased first costs associated with more efficient

equipment. They asserted that manufactured homes are typically "starter" homes for low-tomiddle income families where any increases in household expenses, including those associated

with more efficient space-conditioning equipment, are difficult to afford. Because the life-cycle

cost analysis made no explicit mention of this sub-population, they are concerned that DOE did

not consider manufactured-home owners in its analysis. (York, No. 270 at pp. 2-3; ARI, No. 259

at p. 9; Nordyne, No. 264 at pp. 1-2).

DOE considered all household types utilizing central air conditioners or heat pumps in its

consumer life-cycle cost analysis, including manufactured homes. Of the households with central

air conditioners analyzed in the consumer life-cycle analysis, 4.5 percent were manufactured

homes. For households with heat pumps, 6.1 percent were manufactured homes.

In its decision to propose 12 SEER standards for conventional products, DOE took into

consideration the first cost impacts of higher efficiency standards to manufactured home owners.

In particular, DOE was concerned that the 13 SEER standards issued in the January 22 final rule

could cause manufactured home consumers to shift from heat pumps to other systems that include

resistance heat systems. See July 25 SNOPR, 66 FR 38836.

B. Life-Cycle Cost and Payback Period

55

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" 303 

especially for those replacing 10 SEER systems. See July 25 SNOPR, 66 FR 38836. As a result, 

DOE continues to believe the possibility of increased installation costs is a factor that supports 

adopting the less costly 12 SEER standard. 

4. Manufactured Housing Owners 

York, ARI, and Nordyne Inc. (Nordyne) stated that consumers living in manufactured 

homes are especially vulnerable to the increased first costs associated with more efficient 

equipment. They asserted that manufactured homes are typically "starter" homes for low-tomiddle income families where any increases in household expenses, including those associated 

with more efficient space-conditioning equipment, are difficult to afford. Because the life-cycle 

cost analysis made no explicit mention of this sub-population, they are concerned that DOE did 

not consider manufactured-home owners in its analysis. (York, No. 270 at pp. 2-3; ARI, No. 259 

at p. 9; Nordyne, No. 264 at pp. 1-2). 

DOE considered all household types utilizing central air conditioners or heat pumps in its 

consumer life-cycle cost analysis, including manufactured homes. Of the households with central 

air conditioners analyzed in the consumer life-cycle analysis, 4.5 percent were manufactured 

homes. For households with heat pumps, 6.1 pe~cent were manufactured homes. 

In its decision to propose 12 SEER standards for conventional products, DOE took into 

consideration the first cost impacts of higher efficiency standards to manufactured home owners. 

In particular, DOE was concerned that the 13 SEER standards issued in the January 22 final rule 

could cause manufactured home consumers to shift from heat pumps to other systems that include 

resistance heat systems. See July 25 SNOPR, 66 FR 38836. 

B. Life-Cycle Cost and Payback Period 

55 
EE-RM/STD-98-440 303

Although a majority of the comments concerning consumer impacts addressed either lowincome impacts or the effect that electricity prices had on the number of consumers either

benefitting or being burdened by increased standards, several comments expressed concerns over

other elements of the consumer life-cycle cost analysis.

1. Product Lifetime

Energy Market & Policy Analysis, Inc. (EMPA) stated that DOE incorrectly used

estimates of the full lifetime of the equipment rather than the time that the equipment may remain

in the ownership and use of the initial owner. (EMPA, No. 241-LL at pp. 5-6).

In analyzing increases in efficiency standards, DOE is required by section 325(o)(2)(B)(i)

of EPCA to use the full lifetime of the equipment for establishing the operating cost savings

resulting from higher efficiency standards. The second factor in section 325 to be considered for

determining whether the benefits of the standard exceed its burdens is "the savings in operating

costs throughout the estimated average life of the covered product in the type (or class) compared

to any increase in the price 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." 42 U.S.C,

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

A retirement function with an average 18.4-year equipment lifetime was used in the lifecycle cost analysis for central air conditioners and heat pumps. As stated in the January 22 final

rule, 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 12. See 66 FR 7179-7180.

12 "Bucher, M.E., Grastataro, C.M., and Coleman, W.R., "Heat Pump Life and Compressor Longevity in

Diverse Climates." ASHRAE Transactions, 1990. 96(1): pp. 1567-1571.

56

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" <3?3 . 

Although a majority of the comments concerning consumer impacts addressed either lowincome impacts or the effect that electricity prices had on the number of consumers either 

benefitting or being burdened by increased standards, several comments expressed concerns over 

other elements of the consumer life-cycle cost analysis. 

1. Product Lifetime 

Energy Market & Policy Analysis, Inc. (EMPA) stated that DOE incorrectly used 

estimates of the full lifetime of the equipment rather than the time that the equipment may remain 

in the ownership and use of the initial owner. (EMP A, No. 241 .. LL at pp. 5-6). 

In analyzing increases in efficiency standards, DOE is required by section 325(0)(2)(B)(i) 

of EPCA to use the full lifetime of the equipment for establishing the operating cost savings 

resulting from higher efficiency standards. The second factor in section 325 to be considered for 

detennining whether the benefits of the standard exceed its burdens is "the savings in operating 

C?sts throughout the estimated 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." 42 U.S.C, 

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

A retirement function with an average 18.4-year equipment lifetime was used in the lifecycle cost analysis for central air conditioners and heat pumps. As stated in the January 22 final 

rule, 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 J2. See 66 FR 7179-7180. 

12 "Bucher, M.E., Grastataro, C.M., and Coleman, W.R., "Heat Pump Life and Compressor Longevity in 

Diverse Climates." ASHRAE Transactions, 1990. 96(1): pp. 1567-1571. 

56 
EE-RM/STD-98-4400 0 '

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,

DOE has not been provided with more substantive data to support discontinuing its use of the

above mentioned survey data. DOE believes that the survey data provides an accurate

representation of central air conditioner and heat pump life. Although the survey was conducted

only on heat pumps, the retirement function was also used as the basis for estimating central air

conditioner product lifetime. Because heat pumps are used during both the cooling and heating

seasons, they generally incur more operating hours and more wear during the course of a year than

air conditioners. Thus, the use of a heat pump retirement function for air conditioners likely

underestimates their lifetime. Although heat pump and air conditioner lifetimes likely differ,

DOE was unable to obtain any well substantiated data to determine whether air conditioner

lifetimes are longer than those for heat pumps. Without such data, the heat pump retirement

function was assumed valid for air conditioners.

57

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-44o- 30'~ 

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, 

DOE has not been provided with more substantive data to support discontinuing its use of the 

above mentioned survey data. DOE believes that the survey data provides an accurate 

representation of central air conditioner and heat pump life. Although the survey was conducted 

only on heat pumps, the retirement function was also used as the basis for estimating central air 

conditioner product lifetime. Because heat pumps are used during both the cooling and heating 

seasons~ they generally incur more operating hours and more wear during the course of a year than 

air conditioners. Thus, the use of a heat pump retirement function for air conditioners likely 

underestimates their lifetime. Although heat pump and air conditioner lifetimes likely differ, 

DOE was unable to obtain any well substantiated data to determine whether air conditioner 

lifetimes are longer than those for heat pumps. Without such data, the heat pump retirement 

function was assumed valid for air conditioners. 

57 
2. Warranty, Maintenance, and Service Costs EE.RM/STD-98-440-303

EMPA stated that DOE made no attempt to collect or include warranty, maintenance, and

service costs in the consumer analysis. (EMPA, No. 241-LL at pp. 5-6). On the issue of warranty

costs, Mercatus Center adds that the reliability patterns of new components that are part of high

efficiency products are less known, so warranty accruals may be significantly higher for these

products (ie., 12 to 13 SEER equipment). (Mercatus Center, No. 242 at p. 8).

With regard to maintenance and service (or repair) costs, DOE did collect data or make

reasonable assumptions to establish both types of costs.

Maintenance costs are costs to the consumer of maintaining equipment operation such as

checking and maintaining refrigerant charge levels and cleaning heat exchanger coils. For the

life-cycle cost analysis, maintenance costs were based on data from Service Experts, an HVAC

service company. See TSD, Chapter 5. Maintenance costs were assumed not to change with

increased efficiency, the rationale being that the general maintenance of more efficient products

would not be impacted by the more sophisticated components that they contain.

Service or repair costs are costs to the consumer for replacing or repairing components

which have failed. For baseline equipment (ie., 10 SEER) and equipment with efficiencies

greater than 13 SEER, annualized repair costs were assumed to equal one-half the equipment

price divided by the average lifetime (18.4 years). Equipment with efficiencies of 11 through 13

SEER were assumed to incur a one percent increase in repair cost over the baseline level.

Because systems with efficiencies up to and including 13 SEER generally do not include

sophisticated electronic components, repair costs were assumed to remain essentially flat from 10

to 13 SEER. As noted above in the discussion of equipment lifetime, compressor replacement

58

EE-RM-STD-98-440 COMMENT 303

2~ Warranty, Maintenance, and Service Costs EE-RM/STD-98-440 - 003 

EMPA stated that DOE made no attempt to collect or include warranty, maintenance, and 

service costs in the consumer analysis. (EMPA, No. 241-LL at pp. 5-6). On the issue of warranty 

costs, Mercatus Center adds that the reliability patterns of new components that are part of high 

efficiency products are less known, so warranty accruals may be significantly higher for these 

products (i.e., 12 to 13 SEERequipment)~ (Mercatus Center, No. 242 at p. 8) .. 

With regard to maintenance and service (or repair) costs, DOE did collect data or make 

reasonable assumptions to establish both types of costs. 

Maintenance costs are costs to the consumer of maintaining equipment operation such as 

checking and maintaining refrigerant charge levels and cleaning heat exchanger coils. For the 

life-cycle cost analysis, maintenance costs were based on data from Service Experts, an HV AC 

service company. See TSD, Chapter 5. Maintenance costs were assumed not to change with 

increased efficiency, the rationale being that the general maintenance of more efficient products 

would not be impacted by the more sophisticated components that they contain. 

Service or repair costs are costs to the consumer for replacing or repairing components . 

which have failed. For baseline equipment (i.e., 10 SEER) and equipment with efficiencies 

greater than 13 SEER, annualized repair costs were assumed to equal one-half the equipment 

price divided by the average lifetime (18.4 years). Equipment with efficiencies of 11 through 13 

SEER were assumed to incur a one percent increase in repair cost over the baseline level. 

Because systems with efficiencies up to and including 13 SEER generally do not include 

sophisticated electronic components, repair costs were assumed to remain essentially flat from 10 

to 13 SEER. As noted above in the discussion of equipment lifetime, compressor replacement 

58 
costs were also included in the analysis. EE-RM/STD-98-440 - 3°3

With regard to warranty costs, these costs were essentially considered by incorporating

repair costs into the analysis. As noted above, a product that is less reliable or contains more

expensive components was assumed to have a higher cost of repair over its lifetime. As stated in

the October 5, 2000 NOPR, either the consumer or the warranty provider will bear that added cost

directly through more frequent service calls or higher repair costs. See 65 FR 59599-59600. If

the cost is covered by warranty, however, the warranty provider passes it back to future warranty

holders in the form of slightly higher warranty prices. DOE believes the incremental increase in

the price of the warranty is equal to, or just slightly higher, than the discounted present value of

the incremental repair costs over the life of the warranty. Over the long term then, the average

consumer always incurs higher repair costs, either directly or through higher warranty prices.

Since the life-cycle cost analysis considers the present value of consumer life cycle costs on the

average consumer, incremental repair costs and incremental warranty costs are the same, and

interchangeable.

3. Markups

ARI, Trane, and York all believe that DOE greatly underestimated the manufacturer,

distributor, and contractor markups used to derive consumer purchase prices. ARI maintains that

the manufacturer markup should be approximately 1.35, as verified by a survey ARI conducted in

the fall of 2000. Furthermore, ARI continues to believe that the distributor and contractor

markups should be approximately 1.37, as determined by DOE in the 1999 Supplemental

Advance Notice of Proposed Rulemaking (SANOPR). (ARI, No. 259 at pp. 23-25; Trane, No.

262 at pp. 10-11; York, No. 270 at p. 3).

59

EE-RM-STD-98-440 COMMENT 303

costs were also included in the analysis. EE-RM/STD-98-440 - 303 

With regard to warranty costs, these costs were essentially considered by incorporating 

repair costs into the analysis. As noted above, a product that is less reliable or contains more 

expensive components was assumed to have a higher cost of repair over its lifetime. As stated in 

the October 5, 2000 NOPR, either the consumer or the warranty provider will bear that added cost 

directly through more frequent service calls or higher repair costs. See 65 FR 59599-59600. If 

the cost is covered by warranty, however, the warranty provider passes it back to future warranty 

holders in the form of slightly higher warranty prices. DOE believes the incremental increase in 

the price of the warranty is equal to, or just slightly higher, than the discounted present value of 

the incremental repair costs over the life of the warranty. Over the long term then, the average 

consumer always incurs higher repair costs, either directly or through higher warranty prices. 

Since the life-cycle cost analysis considers the present value of consumer life cycle costs on the 

average consumer, incremental repair costs and incremental warranty costs are the same, and 

interchangeable. 

3. Markups 

ARI, Trane, and York all believe that DOE greatly underestimated the manufacturer, 

distributor, and contractor markups used to derive consumer purchase prices. ARI maintains that 

the manufacturer markup should be approximately 1.35, as verified by a survey ARI conducted in 

the fall of2000. Furthermore, ARI continues to believe that the distributor and contractor 

markups should be approximately 1.37, as determined by DOE in the 1999 Supplemental 

Advance Notice of Proposed Rulemaking (SANOPR). (ARI, No. 259 at pp. 23-25; Trane, No. 

262 at pp. 10-11; York, No. 270 at p. 3). 

59 
EE-RM/STD-98-440- 503

As stated in the January 22 final rule, DOE did assume for the Manufacturer Impact

Analysis that markups increase with increasing efficiency under a given standard level. However,

for the consumer economic analyses, as the minimum standard level increases, DOE determined

that the distributor and contractor markups on more efficient products do decrease. See January

22 final rule, 66 FR 7180.

DOE's analysis of distributor cost data revealed a measurable difference between the

average aggregate markup on the entire set of direct business costs and the incremental markup

on only direct equipment costs. In other words, for an incremental increase in the cost of the

equipment, the markup required to cover the incremental cost increase is distinctly different than

the average markup required to cover all business costs. The average aggregate distributor

markup was determined to be 1.36 and is assumed to cover the direct business costs that are

present at the current baseline (i.e., 10 SEER) level. Note that the average aggregate distributor

markup of 1.36 is approximately equal to the value used in DOE's analysis for the SANOPR. The

incremental distributor markup was determined to be 1.11 and is assumed to cover incremental

equipment cost increases, such as those associated with increases in equipment efficiency.

DOE's analysis of contractor cost data revealed a significant difference between the

markup required for covering labor and equipment expenses and the markup required for covering

only equipment expenses. The markup covering all business expenses was determined to be 1.53

while the markup for only equipment expenses was determined to have a mean value of 1.27.

The 1.53 markup value covering all business expenses is approximately equal to the value used in

DOE's analysis for the SANOPR. Because the life-cycle cost analysis breaks out the contractor's

installation cost (i.e., the cost to install the equipment) from the cost which is charged for the

60

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 .., '303 

As stated in the January 22 final rule, DOE did assume for the Manufacturer Impact 

Analysis that markups increase with increasing efficiency under a given standard level. However, 

for the consumer economic analyses, as the minimum standard level increases, DOE determined 

that the distributor and contractor markups on more efficient products do decrease. See January 

22 final rule, 66 FR 7180. 

DOE's analysis of distributor cost data revealed a measurable difference between the 

average aggregate markup on the entire set of direct business costs and the incremental markUp 

. on only direct equipment costs. In other words, for an incremental increase in the cost of the 

equipment, the markup required to cover the incremental cost increase is distinctly different than 

the average markup required to cover all business costs. The average aggregate distributor 

markup was determined to be 1.36 and is assumed to cover the direct business costs that are 

present at the current baseline (i.e., 10 SEER) level. Note that the average aggregate distributor 

. markup of 1.36 is approximately equal to the value used in DOE's analysis for the SANOPR. The 

incremental distributor markup was determined to be 1.11 and is assumed to cover incremental 

equipment cost increases, such as those associated with increases in equipment efficiency. 

DOE's analysis of contractor cost data revealed a significant difference between the 

markup required for covering labor and equipment expenses and the markup required for covering 

only equipment expenses. The markup covering all business expenses was determined to be 1.53 

while the markup for only equipment expenses was determined to have a mean value of 1.27. 

The 1.53 markup value covering all business expenses is approximately equal to the value used in 

DOE's analysis for the SANOPR. Because the life-cycle cost analysis breaks out the contractor's 

installation cost (i.e., the cost to install the equipment) from the cost which is charged for the 

60 
EE-RM/STD-98-440- 303

equipment, only the markup value of 1.27 is applicable for marking up the equipment. As with

the distributor markup, a contractor markup associated only with an incremental increase in

equipment cost was also determined. Since the incremental markup was shown to be close to the

average value of 1.27, only the average markup value was used in the analysis.

As a result of determining lower distributor and contractor markups on incremental

equipment cost increases, such as those associated with more efficient equipment, the overall

markups decrease as efficiency increases. Although comments argued that overall distributor and

contractor markups should not decrease, no data was offered to counter DOE's approach. Thus,

DOE has retained its methodology for estimating both distributor and contractor markups.

Appendix D of the TSD provides more detailed information on this issue.

4. Energy Use

EMPA asserted that DOE violated well-established statistical principles by basing the

proposed standards on small subsets of data from EIA's Residential Energy Consumption Survey

(RECS). As a result, EMPA concludes that DOE simply has no reasonable claim of validity for

either the calculations or its analytical conclusions. (EMPA, No. 241-LL at pp. 2-4).

As stated in the January 22 final rule, as part of the process to improve the energy

efficiency standards analysis, DOE is committed to use of sensitivity analysis tools to evaluate the

potential distribution of impacts among different subgroups of consumers. DOE believes that

RECS provides a nationally representative household data set which is suited for conducting the

type of sensitivity analyses suggested by the Process Improvement Rule. Limiting the RECS

households to those equipped with either central air conditioners or heat pumps, the life-cycle cost

analysis performs a household-by-household analysis that predicts the percentage of households

61

EE-RM-STD-98-440 COMMENT 303

EE .. RM/STD-98-440 ... 30.3 

equipment, only the markup value of 1.27 is applicable for marking up the equipment. As with 

the distributor markup, a contractor markup associated only with an incremental increase in 

equipment cost was also determined. Since the incremental markup was shown to be close to the 

average value of 1.27, only the average markup value was used in the analysis. 

As aresult of determining lower distributor and contractor markups on incremental 

equipment cost increases, such as those associated with more efficient equipment, the overall 

markUps decrease as efficiency increases. Although comments argued that overall distributor and 

contractor markups should not decrease, no data was offered to counter DOE's approach. Thus, 

DOE has retained its methodology for estimating both distributor and contractor markups. 

Appendix D of the TSD provides more detailed information on this issue. 

4. Energy Use 

EMPA asserted that DOE violated well-established statistical principles by basing the 

proposed standards on small subsets of data from EIA's Residential Energy Consumption Survey 

(RECS). As a result, EMPA concludes that DOE simply has no reasonable claim of validity for 

either the calculations or its analytical conclusions. (EMPA, No. 241-LL at pp. 2-4). 

As stated in the January 22 final rule, as part of the process to improve the energy 

efficiency standards analysis, DOE is committed to use of sensitivity analysis tools to evaluate the 

potential distribution of impacts among different subgroups of consumers. DOE believes that 

RECSprovides a nationally representative household data set which is suited for conducting the 

type of sensitivity analyses suggested by the Process Improvement Rule. Limiting the RECS 

households to those equipped with either central air conditioners or heat pumps, the life-cycle cost 

analysis performs a household-by-household analysis that predicts the percentage of households 

61 
EE-RM/STD-98-440 - 30'3

that will incur net life-cycle cost savings or costs from an increased efficiency standard. See

January 22 final rule, 66 FR 7178-7179.

5. Rebuttable Payback Period

NWPPC asserts that 13 SEER, at least for split system heat pumps, is economically

justified. NWPPC states the DOE has not justified why it should not adopt the HSPF 7.7 and

SEER 13 standards for split system heat pumps since this level of efficiency satisfies the

"rebuttable presumption" requirements of the law. (NWPPC, No. 287 at p. 3).

As noted in the July 25 SNOPR, DOE recognizes some standard levels for some product

classes satisfy the rebuttable presumption requirements in section 325(o)(2)(B)(iii). But DOE

points out that the statute requires DOE to use "the applicable test procedure" to calculate the

payback periods for purposes of the rebuttable presumption. As explained in the October 5, 2000

NOPR, the annual cooling and heating energy consumption calculations based on DOE's test

procedure are significantly greater than the weighted-average values from DOE's life-cycle cost

analyses based on the 1997 Residential Energy Consumption Survey, used in other DOE analyses,

including evaluation of consumer impacts. 65 FR 59596. For this reason, the payback periods

presented in Section VII of this portion of the preamble, entitled "Analytical Results and

Conclusions," are significantly longer than those calculated to determine whether the rebuttable

presumption applies to these products. More importantly, DOE's economic justification analysis

for a particular class of covered product involves consideration of factors other than the payback

period. For example, as discussed in the July 25 SNOPR (66 FR 38837), one reason DOE did not

propose Trial Standard Level 3 (12 SEER for air conditioners and 13 SEER for heat pumps) was

the potential of those standards to cause heat pump owners to switch to resistance heating, and

62

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD-98-440 - 30;:; 

that will incur net life-cycle cost savings or costs from an increased efficiency standard. See 

January 22 final rule, 66 FR 7178-7179. 

5. Rebuttable Payback Period 

NWPPC asserts that 13 SEER, at least for split system heat pumps, is economically 

justified. NWPPC states the DOE has not justified why it should not adopt the HSPF 7.7 and 

SEER 13 standards for split system heat pumps since this level of efficiency satisfies the 

"rebuttable presumption" requirements of the law. (NWPPC, No. 287 at p.3). 

As noted in the July 25 SNOPR, DOE recognizes some standard levels for some product 

classes satisfY the rebuttable presumption requirements in section 325(0 )(2)(8)(iii). But DOE 

points out that the statute requires DOE to use "the applicable test procedure" to calculate the 

payback periods for purposes of the rebuttable presumption. As explained in the October 5,2000 

NOPR, the annual cooling and heating energy consumption calculations based on DOE's test 

procedure are significantly greater than the weighted-average values from DOE's life-cycle cost 

analyses based on the 1997 Residential Energy Consumption Survey, used in other DOE analyses, 

including evaluation of consumer impacts. 65 FR 59596. For this reason, the payback periods 

presented in Section VII of this portion of the preamble, entitled "Analytical Results and 

Conclusions," are significantly longer than those calculated to determine whether the rebuttable 

presumption applies to these products. More importantly, DOE's economic justification analysis 

for a particular class of covered product involves consideration of factors other than the payback 

period. For example, as discussed in the July 25 SNOPR (66 FR 38837); one reason DOE did not 

propose Trial Standard Level 3 (12 SEER for air conditioners and 13 SEER for heat pumps) was 

the potential of those standards to cause heat pump owners to switch to resistance heating, and 

62 
possibly adversely affect competition.

C. Shipments/National Energy SavingsM/STD 440

1. Shipments Forecasts

Mercatus Center asserts that DOE's shipment model does not account for the reduced

equipment sales that occur when consumers forego purchases due to the increased equipment

prices resulting from higher efficiency standards. As a result of delayed consumer purchases, the

energy savings to the nation would build up more slowly than forecasted by DOE. (Mercatus

Center, No. 245 at p. 5). This is effectively an argument that the price elasticity for the air

conditioner and heat pump market should be higher than what was assumed.

DOE has used historical saturation trends to establish price elasticities for the overall air

conditioner and heat pump market. Higher saturation levels are assumed to decrease price

elasticity, which makes sales volume less sensitive to price increases. Over the past twenty years

household saturation levels of central air-conditioning have increased, primarily due to the steady

increase in real household incomes. In order to capture the effect that increased equipment price

and household income have on equipment sales, the shipments model breaks the air conditioner

market into the following segments: new construction, early (discretionary) replacements, regular

replacements, extra repairs, and remodels. In the new construction market, the price of air

conditioning has dropped over time relative to household income resulting in a corresponding

increase in saturation to its current value of approximately 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 early 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

63

EE-RM-STD-98-440 COMMENT 303

possibly adversely affect competition. 

C. Shipments/Nationai Energy Savings 

1. Shipments Forecasts 

EE-RM/STD-98-440 oJ' 30-3 

Mercatus Center asserts that DOE's shipment model does not account for the reduced 

equipment sales that occur when consumers forego purchases due to the increased equipment 

prices resulting from higher efficiency standards. As a result of delayed consumer purchases, the 

energy savings to the nation would build up more slowly than forecasted by DOE. (Mercatus 

Center, No. 245 at p. 5). This is effectively an argument that the price elasticity for the air 

conditioner and heat pump market should be higher than what was assumed. 

DOE has used historical saturation trends to establish price elasticities for the overall air 

conditioner and heat pump market. Higher saturation levels are assumed to decrease price 

elasticity, which makes sales volume less sensitive to price increases. Over the past twenty years 

household saturation levels of central air-conditioning have increased, primarily due to the steady 

increase in real household incomes. In order to capture the effect that increased equipment price 

and household income have on equipment sales, the shipments model breaks the air conditioner 

market into the following segments: new construction, early (discretionary) replacements, regular 

replacements, extra repairs, and remodels. In the new construction market, the price of air 

conditioning has dropped over time relative to household income resulting in a corresponding 

increase in saturation to its current value of approximately 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 early 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 

63 
EE-RM/STD-98-440- 303

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. 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 is much more elastic. With regard to the other

market segments, the regular replacement and extra repair market price elasticities are dependent

on the age of the equipment in addition to price. Thus, the price elasticity for a relatively new air

conditioner is much more elastic than that for a relatively old air conditioner. With regard to the

remodel market (otherwise known as the market of stock homes without air-conditioning),

historical data reveals that a relatively low number of non-air conditioned households purchase

new air-conditioning equipment. Thus, like the early replacement market, the remodel market's

price elasticity is relatively sensitive to first cost increases.

Because the price elasticities in the shipments model are based on actual historical data,

DOE has retained the price elasticities developed for the central air conditioner and heat pump

standards analysis.

2. Heat Rates

ACEEE asserts that DOE has severely underestimated the national energy savings

resulting from more efficient standards due to the marginal heat rates which were used to convert

electrical energy savings at the site (i.e., at the household or commercial building) into fuel

savings at the source (ie., at the power plant). ACEEE contends that the value assumed by DOE

in 2018 and beyond (5519 Btu/kWh) is well below the heat rate estimates provided by EIA (e.g.,

9617 Btu/kWh in 2020). Using the EIA heat rate estimate would lead to about a 2-fold increase in

64

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD.98-440- .3D3 

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. 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 is much more elastic. With regard to the other 

market segments, the regular replacement and extra repair market price elasticities are dependent 

on the age of the equipment in addition to price. Thus, the price elasticity for a relatively new air 

conditioner is much more elastic than that for a relatively old air conditioner. With regard to the 

remodel market (otherwise known as the market of stock homes without air-conditioning), 

historical data reveals that a relatively low number of non-air conditioned households purchase 

new air-conditioning equipment. Thus, like the early replacement market, the remodel market's 

price elasticity is relatively sensitive to first cost increases. 

Because the price elasticities in the shipments model are based on actual historical data, 

DOE has retained the price elasticities developed for the central air conditioner and heat pump 

standards analysis. 

2. Heat Rates 

ACEEE asserts that DOE has severely underestimated the national energy savings 

resulting from more efficient standards due to the marginal heat rates which were used to convert 

electrical energy savings at the site (i.e., at the household or commercial building) into fuel 

savings at the source (i.e., at the power plant). ACEEE contends that the value assumed by DOE 

in 2018 and beyond (5519 BtulkWh) is well below the heat rate estimates provided by EIA (e.g., 

9617 BtulkWh in 2020). Using the EIA heat rate estimate would lead to about a 2-fold increase in 

64 
EE-RM/STD-98-440 - 30

energy savings and reduction in pollution for 2020, with progressively smaller differences earlier.

(ACEEE, No. 284 at pp. 9-10).

The standards analysis has used marginal heat rates calculated by using a version of EIA's

National Energy Modeling System (NEMS-BRS"3) to translate end use electricity savings to

primary energy savings. The marginal heat rate is calculated by imposing a load reduction to the

appliance end-use being analyzed in NEMS-BRS and observing the change in primary energy use.

As noted by ACEEE, the marginal heat rates used in the central air-conditioning analysis are

lower than expected. One would expect the central air-conditioning marginal heat rate to be

higher than those of more baseload appliances (like clothes washers or electric water heaters)

because this peak-use appliance displaces more expensive, less efficient generation. Further, this

marginal displaced plant should be not unlike the inefficient plant in place today because most

rapid technological change occurs in the base load. The key to understanding this apparent

paradox is that this conversion rate does not represent a specific marginal generator or

combination of generators, but is actually a conversion factor that incorporates several simulated

effects resulting from the standard.

The primary reason as to why the marginal heat rate is lower than expected is that the

overall rate of efficiency improvement of the power system with the standard in place is slower

than estimated by EIA in the AEO Reference Case. While there are many effects of the standard,

DOE's analysis shows the two major components of the standard's impact on the power sector

3 EIA approves use of the name NEMS to describe only an AEO version of the model without any modification to

code or data. Because our analysis entails some minor code modifications and the model is run under various policy scenarios

that deviate from AEO assumptions, the name NEMS-BRS refers to the model as used here. For more information on NEMS,

please refer to the National Energy Modelling System: An Overview 1998. DOE/EIA-0581 (98), February, 1998. BRS is

DOE's Office of Building Research and Standards.

65

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - :;, D 3> 

energy savings and reduction in pollution for 2020, with progressively smaller differences earlier. 

(ACEEE, No. 284 at pp. 9-10). 

The standards analysis has used marginal heat rates calculated by using a version ofEIA's 

National Energy Modeling System (NEMS-BRS13) to translate end use electricity savings to 

primary energy savings. The marginal heat rate is calculated by imposing a load reduction to the 

appliance end-use being analyzed in NEMS-BRS and observing the change in primary energy use. 

As noted by ACEEE, the marginal heat rates used in the central air-conditioning analysis are 

lower than expected. One would expect the central air-conditioning marginal heat rate to be 

higher than those of more baseload appliances (like clothes washers or electric water heaters) 

because this peak-use appliance displaces more expensive, less efficient generation. Further, this 

margirial displaced plant should be not unlike the inefficient plant in place today because most 

rapid technological change occurs in the base load. The key to understanding this apparent 

paradox is that this conversion rate does not represent a specific marginal generator or 

combination of generators, but is actually a conversion factor that incorporates several simulated 

effects resulting from the standard. 

The primary reason as to why the marginal heat rate is lower than expected is that the 

overall rate of efficiency improvement of the power system with the standard in place is slower 

than estimated by EIA in the AEO Reference Case. While there are many effects of the standard, 

DOE's analysis shows the two major components of the standard's impact on the power sector 

l3 EIA approves use of the name NEMS to describe only an AEO version of the model without any modification to 

code or data. Because our analysis entails some minor code modifications and the model is run under various po/.icy scenarios 

that deviate from AEO assumptions, the name NEMS-BRS refers to the model as used here. For more information on NEMS, 

please refer to the National Energy Modelling System: An Overview 1998. DOEIEIA-0581 (98), February, 1998. BRS is 

DOE's Office of Building Research and Standards. 

65 
EE-RM/STD-98-440- 3- 3

are: (1) the direct reduction in fuel burned in power plants and (2) the indirect effect whereby the

slowing of electricity demand growth slows new investment, thereby impeding the rate of overall

improvement in power sector efficiency. While this latter effect would seem to be trivial relative

to the first, it grows significantly over time because fewer and fewer of more efficient generating

plants are added to the power system. By the end of the forecast period, this effect becomes a

significant drag on the primary energy savings of the standard, which explains why the marginal

heat rate is less than that attributed to new technology. Further, it is a bigger drag on the benefits

of I eaking end-use efficiency improvements. These reduce peak demand more and slow

investment more because the rate of new construction is heavily dependent on growth in peak

demand. A more detailed discussion of this effect can be found in Appendix M of the TSD.

3. Fuel Switching

As discussed in the July 25 SNOPR, potential equipment switching from heat pumps to

electric resistance heating due to high heat pump prices was cited as one the reasons for not

proposing a 13 SEER standard. The energy savings resulting from 13 SEER heat pumps would be

eliminated if only a small fraction of heat pump owners (4 percent) switched to electric resistance

heating. See July 25 SNOPR, 66 FR 38836.

ACEEE, NRDC, and NWPPC all disagreed that more efficient heat pump standards would

cause consumers to switch to electric resistance heating. Both ACEEE and NRDC stated that if

equipment switching was truly a concern, DOE should prevent such action not by lowering heat

pump efficiency standards, but by promoting revisions to building energy codes to minimize the

use of resistive heat. (ACEEE, No. 284 at p. 14; NRDC, No. 250 at pp. 18-20). ACEEE adds that

DOE failed to account for the impact that electric resistance heating has on consumer energy bills

66

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ~ 3 b .3 

. are: (1) the direct reduction in fuel burned in power plants and (2) the indirect effect whereby the 

slowing of electricity demand growth slows new investment, thereby impeding the rate of overall 

improvement in power sector efficiency. While this latter effect would seem to be trivial relative 

to the first, it grows significantly over time because fewer and fewer of more efficient generating 

plants are added to the power system. By the end of the forecast period, this effect becomes a 

:,ignificant drag on the primary energy savings of the standard, which explains why the marginal 

hlat rate is less than that attributed to new technology. Further, it is a bigger drag on the benefits 

. of I eaking end-use efficiency improvements. These reduce peak demand more and slow 

investment more because the rate of new construction is heavily dependent on growth in peak 

demand. A more detailed discussion of this effect can be found in Appendix M of the TSD. 

3. Fuel Switching 

As discussed in the July 25 SNOPR, potential equipment switching from heat pumps to 

electric resistance heating due to high heat pump prices was cited as one the reasons for not 

proposing a 13 SEER standard. The energy savings resulting from 13 SEER heat pumps would be 

eliminated if only a small fraction of heat pump owners (4 percent) switched to electric resistance 

heating. See July 25 SNOPR, 66 FR 38836. 

ACEEE, NRDC, and NWPPC all disagreed that more efficient heat pump standards would 

cause consumers to switch to electric resistance heating. Both ACEEE and NRDC stated that if 

equipment switching was truly a concern, DOE should prevent such action not by lowering heat 

pump efficiency standards, but by promoting revisions to building energy codes to minimize the 

use of resistive heat. (ACEEE, No. 284 at p. 14; NRDC, No. 250 at pp. 18·20). ACEEE adds that 

DOE failed to account for the impact that electric-resistance heating has on consumer energy bills 

66 
EE-RM/STD-98-440 -" .

(nearly doubling average annual heating bills) in their assessment of the potential of equipment

switching. NWPPC claims that DOE overstated the potential of equipment switching if split

system heat pump SEER standards were set higher than those for split system air conditioners.

NWPPC states that the price difference between a heat pump and an air conditioner at the same

SEER level is already very high (approximately $1400). The extra price associated with a more

efficient heat pump (approximately $150 between 13 and 12 SEER) is not enough to alter

consun er purchase decisions. (NWPPC, No. 287 at p. 3).

York agrees with DOE that there is potential for equipment switching if the standards for

heat punmps are set too high. York states that the higher price associated with more efficient heat

pumps would force consumers to choose either resistance heat and the resulting higher utility

bills, or fossil fuel furnaces that may have to operate on higher cost fuels with more volatile prices

such as oil or propane. (York, No. 270 at pp. 3-4).

As stated in the January 22 final rule, a significant number of households use electric

resistance heat, indicating the potential for equipment switching from heat pumps to resistance

heat. See 66 FR 7180. Based on data from the 1997 RECS, a little over 14 percent of households

with room or central air conditioning have either baseboard or forced air electric resistance

heating 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 airconditioning with resistance heat to meet their space-conditioning needs, this supports the

possibility that some purchasers would choose to switch to resistance heat from heat pumps.

DOE believes that consumer prices associated with 13 SEER heat pumps are great enough

to cause some consumers to make such a switch. DOE has not attempted to estimate the number

67

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" 303 

(nearly doubling average annual heating bills) in their assessment of the potential of equipment 

switching. NWPPC claims that DOE overstated the potential of equipment switching if split 

system heat pump SEER standards were set higher than those for split system air conditioners. 

NWPPC states that the price difference between a heat pump and an air conditioner at the same 

SEER level is already very high (approximately $1400). The extra price associated with a more 

efficient heat pump (approximately $150 between 13 and 12 SEER) is not enough to alter 

consun er pu~chase decisions. (NWPPC, No. 287 at p. 3). 

York agrees with DOE that there is potential for equipment switching if the standards for 

heat pumps ar,~ set too high. York states that the higher price associated with more efficient heat 

pumps wouM force consumers to choose either resistance heat and the resulting higher utility 

bills, or fossH fuel furnaces that may have to operate on higher cost fuels with more volatile prices 

such as oil or propane. (York, No. 270 at pp. 3-4). 

As stated in the January 22 final rule, a significant number of households use electric 

resistance heat, indicating the potential for equipment switching from heat pumps to resistance 

heat. See 66 FR 7180. Based on data from the 1997 RECS, a little over 14 percent of households 

with room or central air conditioning have either baseboard or forced air electric resistance 

heating 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 airconditioning with resistance heat to meet their space-conditioning needs, this supports the 

possibility that some purchasers would choose to switch to resistance heat from heat pumps. 

DOE believes that consumer prices associated with 13 SEER heat pumps are great enough 

to cause some consumers to make such a switch. DOE has not attempted to estimate the number 

67 
EE-RM/STD-98-440- 303

of consumers that might actually switch from heat pumps to resistance heating. Rather, DOE has

determined that 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

the heat pump standard from 12 SEER/7.4 HSPF to 13 SEER/7.7 HSPF. Because such a small

fraction of heat pump owners would need to switch to electric resistance heating to negate the

energy savings realized from 13 SEER heat pumps, DOE believes the possibility of equipment

switching is serious ,nough to warrant its inclusion as a factor supporting a 12 SEER/7.4 HSPF

standard.

D. Impact on ManufatIurers

1. Cumulative Regulatory Burden

DOE considers that a standard level is not economically justified if it contributes to an

unacceptable cumulative regulatory burden. The TSD contains information on cumulative

regulatory burden (section 8.6 of the TSD), although as previously discussed, DOE did not

explain how it considered this information in promulgating the 13 SEER standard on January 22,

2001. The TSD shows that the burden on manufacturers due to all other recent or imminent

Federal regulations exceeds $479 million. DOE estimates the 13 SEER amendments to the

standards for central air conditioners and heat pumps would contribute up to an additional $303

million in manufacturer costs, bringing the total cumulative regulatory burden to as high as $782

million. In light of that heavy burden, the July 25 SNOPR proposed 12 SEER standards that DOE

estimates will reduce the expected financial burden on manufacturers from all new Federal and

State regulations by $144 million compared to the 13 SEER final rule of January 22.

ACEEE, NRDC, and EPA all argued that DOE overestimated the impacts to the industry

68

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440" 3D3 

of consumers that might actually switch from heat pumps to resistance heating. Rather, DOE has 

determined that a mere 4 percent of heat pump households would need to switch to central air 

conclitioners and electric resistance heating to negate the energy savings achieved from increasing 

the heat pump standard from 12 SEERl7.4 HSPF to 13 SEERf7. 7 HSPF. Because such a small 

fraction of heat pump owners would need to switch to electric resistance heating to negate the 

energy savings realized from 13 SEER heat pumps, DOE believes the possibility of equipment 

switching is serious '!nough to warrant its inclusion as a factor supporting a 12 SEERf7.4 HSPF 

standard. 

D. Impact on Manu!a,-::t,Urers 

1. Cumulative Regulatory Burden 

DOE considers that a standard level is not economically justified if it contributes to an 

unacceptable cumulative regulatory burden. The TSD contains information on cumulative 

regulatory burden (section 8.6 of the TSD), although as previously discussed, DOE did not 

explain how it considered this information in promulgating the 13 SEER standard on January 22, 

2001. The TSD shows that the burden on manufacturers due to all other recent or imminent 

Federal regulations exceeds $479 million. DOE estimates the 13 SEER amendments to the 

standards for central air conditioners and heat pumps would contribute up to an additional $303 

million in manufacturer costs, bringing the total cumulative regulatory burden to as high as $782 

million. In light of that heavy burden, the July 25 SNOPR proposed 12 SEER standards that DOE 

estimates will reduce the expected financial burden on manufacturers from all new Federal and 

State regulations by $144 million compared to the 13 SEER final rule of January 22. 

ACEEE, NRDC, and EPA all argued that DOE overestimated the impacts to the industry 

68 
EE-RM/STD-98-440- 303

due to cumulative regulatory burden. EPA focused on the impacts due to the phase out of HCFC22 (the hydrochlorofluorocarbon used as a refrigerant) and cited its own analysis as well as an

estimate from Goodman Manufacturing to claim that DOE's estimate of $50 million per company

is at least twice as high as warranted based on prior industry transitions and more recent trends.

Referring to the costs incurred by the refrigerator industry in the mid-1980's to convert from CFCs

to HCFCs, EPA suggests that a more reasonable estimate to phase out HCFC-22 is $20 to $30

million per company. EPA also cites Goodman's estimate that the combined cost of meeting a 13

SEER standard and transitioning from HmCFC-22 is approximately $25 million per company, half

of DOE's $50 million estimate for just converting to a new refrigerant. (EPA, No. 276 at pp. 2-4).

Because the industry has known foi well over a decade of the impending phase out of

HCFC-22, both ACEEE and NRDC claim that the costs for converting to a new refrigerant should

be lower than DOE's estimate. ACEEE states that DOE seems to treat the costs of redesign for

efficiency and redesign for refrigerants as additive, as though manufacturers would first redesign

for efficiency (2006) and then for replacement refrigerants (2010). ACEEE believes this

assumption would be demonstrably false as there is every reason to accomplish the two goals with

a single re-engineering effort, both saving capital and improving time-to-market. ACEEE adds

that since there is already fairly widespread use of an alternative refrigerant, R-410A, this strongly

suggests that component manufacturers of compressors, coils, valves, lubricants, and all other

critical components are already geared up and supplying the manufacturers with the necessary

pieces to assemble non-HCFC-based heat pumps and air conditioners. With regard to the costs to

be incurred by the industry to comply with Clean Air Act amendments for coating large

appliances, ACEEE asserts that much more data are needed before any definitive estimates can be

69

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

due to cumulative regulatory burden. EPA focused on the impacts due to the phase out of HCFC22 (the hydrochlorofluorocarbon used as a refrigerant) and cited its own analysis as well as an 

estimate from Goodman Manufacturing to claim that DOE's estimate of$50 million per company 

is at least twice as high as warranted based on prior industry transitions and more recent trends. 

Referring to the costs incurred by the refrigerator industry in the mid-1980's to convert from CFCs 

to HCFCs, EPA suggests that a more rea~,mable estimate to phase out HCFC-22 is $20 to $30 

million per company. EPA also cites C'roodman's estimate that the combined cost of meeting a 13 

SEER standard and transitioning f~om BCFC-22 is approximately $25 million per company, half 

of DOE's $50 million estimate for just cO.1Verting to a new refrigerant. (EPA, No. 276 at pp. 2-4). 

Because the industry has known fOl well over a decade of the impending phase out of 

HCFC-22, both ACEEE and NRDC claim that the costs for converting to a new refrigerant should 

be lower than DOE's estimate. ACEEE states that DOE seems to treat the costs of redesign for 

efficiency and redesign for refrigerants as additive, as though manufacturers would first redesign 

for efficiency (2006) and then for replacement refrigerants (2010). ACEEE believes this 

assumption would be demonstrably false as there is every reason to accomplish the two goals with 

a single re-engineering effort, both saving capital and improving time-to-market. ACEEE adds 

that since there is already fairly widespread use of an alternative refrigerant, R-41 OA, this strongly 

suggests that component manufacturers of compressors, coils, valves, lubricants, and all other 

critical components are already geared up and supplying the manufacturers with the necessary 

pieces to assemble non-HCFC-based heat pumps and air conditioners. With regard to the costs to 

be incurred by the industry to comply with Clean Air Act amendments for coating large 

appliances, ACEEE asserts that much more data are needed before any definitive estimates can be 

69 
EE-RM/STD-98-440- 5 03

made. (ACEEE, No. 284 at pp. 11-13; NRDC, No. 250 at pp. 13-14).

Counter to the above arguments, ARI states that DOE is correct to provide greater weight

to cumulative burden. ARI asserts that the cost impacts due to cumulative regulatory burdens will

exceed DOE's estimate of $479 million. ARI notes that various additional burdens to the industry

were not quantified by DOE including: (1) recently revised DOE efficiency standards for room air

conditioners; (2) on-going DOE review of possible new minimum efficiency standards for

residential furnaces; (3) DOE's adoption of standard levels related to ASHRAE 90.1-1999

(American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. Standard 90.1

as revised in October 1999); (4) EPA's Metal Products and Machinery (MP&M) effluent

guidelines and standards; and (5) EPA's allowance system for controlling production, import, and

export ofHCFCs. ARI states that DOE's own estimate that a 12 SEER standard would have $144

million less cumulative burden than a 13 SEER standard warrants adoption of a 12 SEER

standard. (ARI, No. 259 at pp. 10-13).

In reaching its conclusion on manufacturer impacts, DOE considered the cumulative

regulatory cost imposed on air conditioner manufacturers under the various standards scenarios,

including manufacturers' investment to meet the new standard. As noted above, DOE estimated

the cumulative regulatory impacts on manufacturers to likely exceed $782 million if a 13 SEER

standard were adopted. This includes the $303 million reduction in industry value due to a 13

SEER standard and $479 million in other regulatory burdens, including costs associated with the

HCFC phase out. It does not include other major Federal and State regulations that we listed but

did not quantify.

The comments submitted by ACEEE, NRDC, and, in particular, EPA do not address the

70

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD-98-440'" .:3 ()..3 . 

made. (ACEEE, No. 284 at pp. 11-13; NRDC, No. 250 at pp. 13-14). 

Counter to the above arguments, ARI states that DOE is correct to provide greater weight 

to cumulative burden. ARI asserts that the cost impacts due to cumulative regulatory burdens will 

exceed DOE's estimate of $479 million. ARI notes that various additional burdens to the industry 

were ·not quantified by DOE including: (1) recently revised DOE efficiency standards for room air. 

conditioners; (2) on-going DOE review of possible ne':1 minimum efficiency standards for 

residential furnaces; (3) DOE's adoption ofst31darri levels related to ASHRAE 90.1-1999 

(American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. Standard 90.1 

as revised in October 1999); (4) EPA's Metal Products and Machinery (MP&M) effluent 

guidelines and standards; and (5) EPA's allowance systtm for controlling production, import, and 

export ofHCFCs. ARI states that DOE's own estimate filat a 12 SEER standard would have $144 

million less cumulative burden than a 13 SEER standard warrants adoption of a 12 SEER 

standard. (ARI, No. 259 at pp. 10-13). 

In reaching its conclusion on manufacturer impacts, DOE considered the cumulative 

regulatory cost imposed on air conditioner manufacturers under the various standards scenarios, 

including manufacturers' investment to meet the new standard. As noted above, DOE estimated 

the cumulative regulatory impacts on manufacturers to likely exceed $782 million if a 13 SEER 

standard were adopted. This includes the $303 million reduction in industry value due to a 13 

SEER standard and $479 million in other regulatory burdens, including costs associated with the 

HCFC phase out. It does not include other major Federal and State regulations that we listed but 

did not quantify. 

The comments submitted by ACEEE, NRDC, and, in particular, EPA do not address the 

70 
EE-RM/STD-98-440- 3

cumulative manufacturer impacts. Rather, the comments were limited to manufacturer's

investment required to transition away from HCFC refrigerant. DOE's estimated $50 million per

company investment to comply with the HCFC phaseout was based on interviews with all seven

major air conditioner manufacturers during 1998 and 1999 when the firms were asked specific

questions regarding the costs of replacing HCFCs in their equipment. In contrast, ICF Consulting,

in its analysis for the EPA, refers to mid-1980's estimated costs associated with phasing CFCs out

of the refrigerator industry, without explaining the link bet' veen .hose costs estimates and ICF's

estimated $20 to $30 million per company to phase HCFCs )ut of the air conditioner industry.

DOE believes that the cost to convert from CFC refrigerants used in residential

refrigerators is substantially less than the cost to convert from HCFC. 22 refrigerant used in central

air conditioners and heat pumps. For example, compressor capacity and power input for central

air conditioners and heat pumps is an order of magnitude larger than compressor capacity and

power input needed for home refrigerators (2 to 5 horsepower for central air conditioners versus

one-quarter horsepower for home refrigerators). For this reason alone, significantly higher

conversion costs would be expected. Further, central air conditioner or heat pump components

(compressors, coils and air handlers) comprise almost the entire product cost. In contrast, over 50

percent of the cost of a home refrigerator is embodied in such non-refrigerant components as the

insulated cabinet, shelves and other storage components, and other accessories such as icemakers

and through the door ice and drink dispensers.

Refrigerant related design changes are also believed to result in greater impact on the

overall product cost and competitive position for air conditioner manufacturers than will be the

case for refrigerator manufacturers. Since HFC-410A refrigerant operates at substantially higher

71

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- "308 

cumulative manufacturer impacts. Rather, the comments were limited to manufacturer's 

investment requiTed to transition away from HCFC refrigerant. DOE's estimated $50 million per 

company investment to comply with the HCFC phaseout was based on interviews with all seven 

major air conditioner manufacturers during 1998 and 1999 when the firms were asked specific 

questions regarding the costs of replacing HCFCs in their equipment. In contrast, ICF Consulting, 

in its analysis for the EPA, refers to mid-1980's estimated costs associated with phasing CFCs out 

of the refrigerator industry, without explaining the link bet'veen : hose costs estimates and ICF's 

estimated $20 to $30 million per company to phase HCFCs mt of the air conditioner industry. 

DOE believes that the cost to convert from CFC refrigfTants used in residential 

refrigerators is substantially less than the cost to convert from HCFC22 refrigerant used in central 

air conditioners and heat pumps. For example, compressor capacity :md power input for central 

air conditioners and heat pumps is an order of magnitude larger than compressor capacity and 

power input needed for home refrigerators (2 to 5 horsepower for central air conditioners versus 

one-quarter horsepower for home refrigerators). For this reason alone, significantly higher 

conversion costs would be expected. Further, central air conditioner or heat pump components 

(compressors, coils and air handlers) comprise almost the entire product cost. In contrast, over 50 

percent of the cost of a home refrigerator is embodied in such non-refrigerant components as the 

insulated cabinet, shelves and other storage components, and other accessories such as icemakers 

and through the door ice and drink dispensers. 

Refrigerant related design changes are also believed to result in greater impact on the 

overall product cost and competitive position for air conditioner manufacturers than will be the 

case for refrigerator manufacturers. Since HFC-41 OA refrigerant operates at substantially higher 

71 
EE-RM/STD-98-440-- 3 35

operating pressures than HCFC-22 refrigerant, a major system redesign is necessary with HFC410A refrigerant to take advantage of the beneficial aspects of the 40 to 50 percent higher pressure

and to minimize any deleterious effects. With the alternative replacement refrigerant HFC-407C,

system efficiency is reduced by 5 to 10 percent compared to use of HCFC-22 refrigerant in the

same system. Significant resizing and reconfiguring of components is required to restore

efficiency levels.

Replacing CFC-12 refrigerant in refrigerators with HFC-134a ref igerart reduced system

efficiency by only 1 to 2 percent, which was easily offset by higher the higher efficiency

compressors available at the time of CFC to HFC conversion. In contrast, replacing air

conditioner compressors, whose efficiencies are already close to thermodynamic limits, with

higher efficiency units to offset the impact of refrigerant related efficiency loss is not a viable

option. Finally, there are fewer models of refrigeration systems in a typical appliance

manufacturer's refrigerator product line than the number of residential central air conditioner and

heat pump models (multiple efficiency level products) produced by a typical unitary air

conditioner manufacturer. As a result, significantly more redesign and product validation is

necessary for the unitary air conditioner manufacturers to convert their product lines and

production from R-22 to either of the HFC blends.

ACEEE states that the rational approach to meeting the two regulatory requirements - new

efficiency levels in 2006 and the phase out of HCFCs in 2010 - is to do so simultaneously, rather

than sequentially, 3 to 4 years apart. If both changes could be accomplished simultaneously, the

investment would indeed be less than the cost of making the two changes separately. Adjusting to

the characteristics of the new refrigerant, with significantly higher operating pressures, will add to

72

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440-. ~ O,,?; 

operating pressures than HCFC-22 refrigerant, a major system redesign is necessary with HFC410A refrigerant to take advantage of the beneficial aspects of the 40 to 50 percent higher pressure 

and to minimize any deleterious effects. With the alternative replacement refrigerant HFC-407C, 

system efficiency is reduced by 5 to 10 percent compared to use of HCFC-22 refrigerant in the 

same system. Significant resizing and reconfiguring of components is required to restore 

efficiency levels. 

, Replacing CFC-12 refrigerant in refrigerators with HFC-134a ref igerartt reduced system 

efficiency by only 1 to 2 percent, which was easily offset by higher the hi\~her efficiency 

compressors available at the time of CFC to HFC conversion. In contrast, replacing air 

conditioner compressors, whose efficiencies are already close to thermodynamic limits, with 

higher efficiency units to offset the impact of refrigerant related efficiency loss is n'.)t a viable 

option. Finally, there are fewer models of refrigeration systems in a typical appliance 

manufacturer's refrigerator product line than the number of residential central air conditioner and 

heat pump models (multiple efficiency level products) produced by a typical unitary air 

conditioner manufacturer. As a result, significantly more redesign and product validation is 

necessary for the unitary air conditioner manufacturers to convert their product lines and 

production from R-22 to either of the HFC blends. 

ACEEE states that the rational approach to meeting the two regulatory requirements - new 

efficiency levels in 2006 and the phase out of HCFCs in 2010 - is to do so simultaneously, rather 

than sequentially, 3 to 4 years apart. Jfboth changes could be accomplished simultaneously, the 

investment would indeed be less than the cost of making the two changes separately. Adjusting to 

the characteristics of the new refrigerant, with significantly higher operating pressures, will add to 

72 
EE-RM/STD-98-440- 303,

the scope and cost of the development effort for the increased efficiency product families, but in

principle product validation testing and retooling would occur only once, saving substantial

resources.

The difficulty with this scenario is the competitive reality of the industry. Competition in

the US air conditioning industry is especially vigorous, with 7 major manufacturers competing for

business. Consumers have benefited significantly from this, with real (inflation adjusted) prices

having fallen steadily over the past 20 years, even during periods of rapid market gro rth. In

addition, this level of competition in the domestic industry has provided no opportunity for

foreign competition to displace main line HVAC products, preserving traditional manufacturirig

jobs in the US.

In 2006, in this environment of vigorous competition, each manufacturer will be faced

with the choice of producing a cost optimized product line using HCFC-22 refrigerant or of also

making the additional investment to convert to an HFC refrigerant, combined with meeting the

increased efficiency standard level. It is clear that either HFC blend (R-407C or R-410A) will

result in increased product cost (at comparable efficiency and performance level). If it would

result in lower cost compared to R-22, manufacturers would already have voluntarily converted.

In fact, hardware cost increases are readily identifiable and the higher cost HFC refrigerant alone

will add $20 to $30 to the direct manufacturing cost of each unit. Therefore, it is highly likely that

one or more manufacturers will opt to use HCFC-22 in the majority of their product line between

2006 and 2009. The resulting cost advantage will force the other manufacturers to follow suit to

remain competitive and avoid market share loss. While most manufacturers produce 12 and 13

SEER HFC air conditioners, they are low volume products and the tooling for full scale mass

73

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 309, 

the scope and cost of the development effort for the increased efficiency product families, but in 

principle product validation testing and retooling would occur only once, saving substantial 

resources. 

The difficulty withthis scenario is the competitive reality of the industry. Competition in 

the US air conditioning industry is especially vigorous, with 7 major manufacturers competing for 

business. Consumers have benefited significantly from this, with real (inflation adjusted) prices 

having fallen steadily over the past 20 years, even during periods of rapid market grovrth. b 

addition, this level of competition in the domestic industry has provided no opportunity for 

foreign competition to displace main line HV AC products, preserving traditional manufacturirig 

jobs in the US. 

In 2006, in this environment of vigorous competition, each manufacturer will be faced 

with the choice of producing a cost optimized product line using HCFC-22 refrigerant or of also 

making the additional investment to convert to an HFC refrigerant, combined with meeting the 

increased efficiency standard level. It is clear that either HFC blend (R-407C or R-41 OA) will 

result in increased product cost (at comparable efficiency and performance level). If it would 

result in lower cost compared to R-22, manufacturers would already have voluntarily converted. 

In fact, hardware cost increases are readily identifiable and the higher cost HFC refrigerant alone 

will add $20 to $30 to the direct manufacturing cost of each unit. Therefore, it is highly likely that 

one or more manufacturers will opt to use HCFC-22 in the majority of their product line between 

2006 and 2009. The resulting cost advantage will force the other manufacturers to follow suit to 

remain competitive and avoid market share loss. While most manufacturers produce 12 and 13 

SEER HFC air conditioners, they are low volume products and the tooling for full scale mass 

73 
EE-RM/STD-98-440 -303

production does not exist. Moreover, manufacturers have cost optimized product platforms for

mass production around the 10 SEER models that currently satisfy 80 percent of market demand.

Higher efficiency models are produced in lower volumes and generally are not cost effective

platforms for mass production. To increase production of 12 SEER or 13 SEER units,

manufacturers will need expanded tooling to produce those models. To obtain the least cost,

manufacturers will need to use designs that are better optimized for mass production.

Consequently, much of the redesign, validation, and retooling effort faced by the industry is likely

to happen once for efficiency standards in 2006 and a second time for the HCFC phaseout in

2010.

2. Financial Burdens Associated with New Efficiency Standards.

As explained in the July 25 SNOPR (66 FR 38829), the 13 SEER standards in the January

22 final rule were projected by the TSD to result in a negative cash flow for the industry in the

year preceding the new standards' enforcement. Moreover, DOE's analysis shows that 13 SEER

standards would impose far greater financial burdens on manufacturers whose operating costs

exceed the industry average. Those manufacturers typically engage in more research and

development or provide additional sales or service support than do their lower operating cost

competitors. Consequently, DOE proposed the 12 SEER standard to reduce the maldistribution of

financial impacts on manufacturers and would allow manufacturers to maintain a positive cash

flow.

Trane concurred with DOE's action to reduce the maldistribution of financial impacts on

manufacturers. Trane asserted that as efficiency is increased, a larger commodity market is

created. This in turn reduces the market opportunities for companies that focus on value-added

74

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

production does not exist. Moreover, manufacturers have cost optimized product platforms for 

mass production around the 10 SEER models that currently satisfy 80 percent of market demand. 

Higher efficiency models are produced in lower volumes and generally are not cost effective 

platforms for mass production. To increase production of 12 SEER or 13 SEER units, 

manufacturers will need expanded tooling to produce those models. To obtain the least cost, 

manufacturers will need to use designs that are better optimized for mass production. 

Consequently, much of the redesign, validation, and retooling effort faced by the industry is likely 

to harpen once for efficiency standards in 2006 and a second time for the HCFC phaseout in 

2010. 

2. Financial Burdens Associated with New Efficiency Standards. 

As explained in the July 25 SNOPR (66 FR 38829), the 13 SEER standards in the January 

22 final rule were projected by the TSD to result in a negative cash flow for the industry in the 

year preceding the new standards' enforcement. Moreover, DOE's analysis shows that 13 SEER 

standards would impose far greater financial burdens on manufacturers whose operating costs 

exceed the industry average. Those manufacturers typically engage in more research and 

development or provide additional sales or service support than do their lower operating cost 

competitors. Consequently, DOE proposed the 12 SEER standard to reduce the maldistribution of 

financial impacts on manufacturers and would allow manufacturers to maintain a positive cash 

flow. 

Trane concurred with DOE's action to reduce the maldistribution of financial impacts on 

manufacturers. Trane asserted that as efficiency is increased, a larger commodity market is 

created. This in tum reduces the market opportunities for companies that focus on value-added 

74 
EE-RM/STD-98-440- 03

systems and services. Thus, the "volume" manufacturers (i.e., lower operating cost

manufacturers) benefit disproportionately. Trane also noted that under a 13 SEER standard,

manufacturers who invest heavily in research and development (R&D) would dedicate less

funding to innovative programs resulting in the entire industry focusing on the development of

designs that address the absolute lowest commodity product. Trane's opinion was shared by

Equipment Distributors. (Trane, No. 262 at pp. 2-4, 13-14: Equipment Distributors, Inc., No. 266

atp. 1).

NRDC disputed DOE's interpretation of the financial impacts to manufacturers by

pointing out that DOE's own analysis undercuts the contention that the industry is impacted more

severely under a 13 SEER standard. Referring to the TSD, NRDC notes that under two different

scenarios (NAECA and Roll-up) lowering the standard from 13 to 12 SEER actually increases the

burden to the industry (as measured by the industry net present value). (NRDC, No. 250 at pp.

20-22).

DOE notes that in its interpretation of manufacturer impacts, NRDC overlooks the

important role that the efficiency mix assumptions play in the financial projections. In Section

8.4.8 of the TSD we described the dynamics by which the profits of manufacturers with higher

operating costs depend on the sale of premium products, and how those products are differentiable

only at efficiency levels higher than the baseline. The closer the baseline unit is to the

technological limit, the fewer consumers will "buy up" to a higher efficiency. For more and more

consumers, the baseline will be the cost-effective option, and those consumers who wish to "buy

up" will have fewer options and less financial incentive to do so. For these reasons, DOE

assumed the Roll-up efficiency scenario to be the most probable for 13 SEER standard levels and

75

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" B 0 :3 

systems and services. Thus, the "volume" manufacturers (Le., lower operating cost 

manufacturers} benefit disproportionately. Trane also noted that under a 13 SEER standard, 

manufacturers who invest heavily in research and development (R&D) would dedicate less 

funding to innovative programs resulting in the entire industry focusing on the development of 

designs that address the absolute lowest commodity product. Trane's opinion was shared by 

Equipment Distributors. (Trane, No. 262 at pp. 2-4, 13-14: Equipment Distributors, Inc., No. 266 

at p. 1). 

NRDC disputed DOE's interpretation of the financial impacts to manufacturers by 

pointing out that DOE's own analysis undercuts the contention that the industry is impacted more 

severely under a 13 SEER standard. Referring to the TSD, NRDC notes that under two different 

scenarios (NAECA and Roll-up) lowering the standard from 13 to 12 SEER actually increases the 

burden to the industry (as measured by the industry net present value). (NRDC, No. 250 at pp. 

20-22). 

DOE notes that in its interpretation of manufacturer impacts, NRDC overlooks the 

important role that the efficiency mix assumptions play in the financial projections. In Section 

8.4.8 of the TSD we described the dynamics by which the profits of manufacturers with higher 

operating costs depend on the sale of premium products, and how those products are differentiable 

only at efficiency levels higher than the baseline. The closer the baseline unit is to the 

technological limit, the fewer consumers will "buy up" to a higher efficiency. For more and more 

. consumers, the baseline will be the cost-effective option, and those consumers who wish to "buy 

up" will have fewer options and less financial incentive to do so. For these reasons, DOE 

assumed the Roll-up efficiency' scenario to be the most probable for 13 SEER standard levels and 

75 
EE-RM/STD-98-440- 0 3

the NAECA efficiency scenario most probable at 12 SEER standard levels. The resulting

cumulative change in industry net present value (NPV) is negative $300 million at 13 SEER

levels compared to negative $199 million at 12 SEER levels.

NRDC's interpretation of manufacturer impacts also overlooks short-run cash flow

impacts of the standards. While NPV is useful for evaluating the long-term effects'of new

standards, short-term changes in cash flow are also important indicators of the industry's financial

situation. The annual cash flow impacts at 13 SEER are $31 million more than at 12 SEER and

turn the absolute cash flow negative. Depressed cash flow can strain the industry's access to

capital or cause investors to flee.

OOE, Goodman, and ACEEE all claim that the industry impacts due to 13 SEER

standards cannot be too severe as the technologies required to comply with the standard are

conventional and well known. (OOE, No. 275 at p. 3; Goodman, No. 269 at p. 3; ACEEE, No.

284 at p. 7). Goodman specifically states that the only difference between a 10 SEER, 12 SEER,

and 13 SEER units is a little more copper and aluminum used in manufacturing different sized

coils.

DOE believes it is erroneous to conclude from the fact that technologies required to

comply with standards are conventional and well known that it is a trivial exercise to increase

production volumes to a level capable of satisfying the entire U.S. demand for air conditioners.

Sales of 13 SEER equipment and higher are only 3 percent of all equipment sold and large

investments would be required to convert all production to these levels. Furthermore, as

previously described, much of the industry's financial health today depends on sales of 12 SEER

equipment.

76

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - .8 D .3 

the NAECA efficiency scenario most probable at 12 SEER standard levels. The resulting 

cumulative change in industry net present value (NPV) is negative $300 million at 13 SEER 

levels compared to negative $199 million at 12 SEER levels. 

NRDC's interpretation of manufacturer impacts also overlooks short-run cash flow 

impacts of the standards. While NPV is useful for evaluating the long-term'effects'ofnew 

standards, short-term changes in cash flow are also important indicators of the industry's financial 

situation. The annual cash flow impacts at 13 SEER are $31 million more than at 12 SEER and 

tum the absolute cash flow negative. Depressed cash flow can strain the industry'S access to 

capital or cause investors to flee. 

OOE, Goodman, and ACEEE all claim that the industry impacts due to 13 SEER 

standards cannot be too severe as the technologies required to comply with the standard are 

conventional and well known. (OOE, No. 275 at p. 3; Goodman, No. 269 at p. 3; ACEEE, No. 

284 at p. 7). Goodman specifically states that the only difference between a 10 SEER, 12 SEER, 

and 13 SEER units is a little more copper and aluminum used in manufacturing different sized 

coils. 

DOE believes it is erroneous to conclude from the fact that technologies required to 

comply with standards are conventional and well known that it is a trivial exercise to increase 

production volumes to a level capable of satisfying the entire U.S. demand for air conditioners. 

Sales of 13 SEER equipment and higher are only 3 percent of all equipment sold and large 

. investments would be required to convert all production to these levels. Furthermore, as 

previously described, much of the industry's financial health today depends on sales of 12 SEER 

equipment. 

76 
3. Small Manufacturers EE-RM/STD-98-440- 3 3

The issue of how higher efficiency standards impact small manufacturers also drew several

comments. The Department of Justice's April 5, 2001, letter to DOE regarding the potential

effect on competition of new central air conditioner and heat pump efficiency standards stated that

some small manufacturers would be disproportionately impacted under a 13 SEER standard, and

noted that 1 00 percent of their current product line would fail to comply with the new efficiency

requirement. The Department of Justice also stated that manufacturers of equipn ent for spaceconstrained installation sites (such as manufactured housing) would also be dispr(portionately

impacted by a 13 SEER standard (DOJ No. 285 printed in Appendix of this notice).

Goodman asserted that moving to a 13 SEER would not be a hardship to small

manufacturers. Goodman claims that 13 SEER technology has been available to both large and

small manufacturers for approximately 15 years. Goodman also points to the fact that Goettl Air

Conditioning, a small manufacturer based in Arizona, supports the 13 SEER standard.

(Goodman, No. 269 at p. 3). PG&E concurs with Goodman's statements. (PG&E, No. 274 at p.

4). NRDC asserts that higher efficiency standards encourage competition by shaking up the cozy

arrangements that the bigger companies have drifted into, requiring manufacturers either to invest

in building new components or to purchase new components from other suppliers. They claim

that this provides smaller, nimble manufacturers an opportunity to unseat large but slow-adapting

competitors. (NRDC, No. 250 at p. 31).

Both ARI and Rheem agree with the Department of Justice's statements regarding small

manufacturers. Rheem states that small manufacturers will most likely not be able to afford the

redesign and retooling of their equipment and manufacturing facilities to meet the 13 SEER

77

EE-RM-STD-98-440 COMMENT 303

3. Small Manufacturers EE-RM/STD-98-440.., 302 

The issue of how higher efficiency standards impact small manufacturers also drew several 

comments. The Department of Justice's April 5,2001, letter to DOE regarding the potential 

effect on competition of new central air conditioner and heat pump efficiency standards stated that 

some small manufacturers would be disproportionately impacted under a 13 SEER standard, and 

noted that] 00 percent of their current product line would fail to comply with the new efficiency 

requirement. The Department of Justice also stated that manufacturers of equipn ent fl'r spaceconstrained installation sites (such as manufactured housing) would also be dispn'portlOnately 

impacted by a 13 SEER standard (DO] No. 285 printed in Appendix of this nofict). 

Goodman asserted that moving to a 13 SEER would not be a hardship to small 

manufacturers. Goodman claims that 13 SEER technology has been available to both 1c!T'e~ and 

small manufacturers for approximately 15 years. Goodman also points to the fact that Goettl Air 

Conditioning, a small manufacturer based in Arizona, supports the 13 SEER standard. 

(Goodman, No. 269 at p. 3). PG&E concurs with Goodman's statements. (PG&E, No. 274 at p. 

4). NRDC asserts that higher efficiency standards encourage competition by shaking up the cozy 

arrangements that the bigger companies have drifted into, requiring manufacturers either to invest 

in building new components or to purchase new components from other suppliers. They claim 

that this provides smaller, nimble manufacturers an opportunity to unseat large but slow-adapting 

competitors. (NRDC, No. 250 at p. 31). 

Both ARl and Rheem agree with the Department of Justice's statements regarding small 

manufacturers. Rheem states that small manufacturers will most likely not be able to afford the 

redesign and retooling of their equipment and manufacturing facilities to meet the 13 SEER 

77 
EE-RM/STD-98-440- 3 3

standard. ARI quotes DOE's TSD in stating that "small manufacturers engaged in the production

of conventional equipment would find it difficult to overcome the financial and technical burdens

associated with the transition, and could decide to exit the market." (ARI, No. 259 at pp. 10-11;

Rheem, No. 248 at p. 3).

With regard to the manufacturers of equipment for the manufactured housing industry,

both ARI and Goodman agree that products for markets like manufactured housing, where space

constraints limit efficiency gains achieved with conventional technology, should be granted an

exemption from higher efficiency standards. (ARI, No. 259 at p. 8; Goodman, No. 269 at p. 3)

The Department of Justice's concerns relate to disproportionate impacts on small

manufacturers. Most small manufacturers produce only indoor coils or niche product lines. For

small manufacturers who produce coils only, there are no intensive incremental technological or

capital requirements for them to increase the efficiency of their products and DOE does not expect

them to face any incremental burden as a result of the new standards. However, DOE has

documented that manufacturers of niche air conditioning products, such as through-the-wall

equipment and small duct, high velocity systems, face special technological and financial

considerations compared to those faced by the major air conditioner producers. Consequently,

new efficiency standards could be more detrimental to the financial situation of niche product

manufacturers than of major manufacturers. Technical considerations are typically more

important for certain niche manufacturers than for major manufacturers and have more severe

consequences related to increased production costs or loss of sales volume due to increased price.

Overall, if provisions were not made in the standard for niche products that face severe

technological constraints, we would expect their impacts to be disproportionate to those on the

78

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - .3 0:3 

standard. ARl quotes DOE's TSD in stating that "small manufacturers engaged in the production 

of conventional equipment would find it difficult to overcome the financial and technical burdens 

associated with the transition, and could decide to exit the market." (ARl, No. 259 at pp. 10-11; 

Rheem, No. 248 at p. 3). 

With regard to the manufacturers of equipment for the manufactured housing industry, 

both ARl and Goodman agree that products for markets like manufactured housing, where space 

constraints limit efficiency gains achieved with conventional technology, should be granted an 

exemrtion from higher efficiency standards. (ARl, No. 259 at p. 8; Goodman, No. 269 at p. 3). 

The Department of Justice's concerns relate to disproportionate impacts on small 

manufacturers. Most small manufacturers produce only indoor coils or niche product lines. For ., 

small manufacturers who produce coils only, there are no intensive incremental technological or 

capital requirements for them to increase the efficiency of their products and DOE does not expect 

them to face any incremental burden as a result of the new standards. However, DOE has 

documented that manufacturers of niche air conditioning products, such as through-the-wall 

equipment and small duct, high velocity systems, face special technological and financial 

considerations compared to those faced by the major air conditioner producers. Consequently, 

new efficiency standards could be more detrimental to the financial situation of niche product 

manufacturers than of major manufacturers. Technical considerations are typically more 

important for certain niche manufacturers than for major manufacturers and have more severe 

consequences related to increased production costs or loss of sales volume due to increased price. 

Overall, if provisions were not made in the standard for niche products that face severe 

technological constraints, we would expect their impacts to be disproportionate to those on the 

78 
EE-RM/STD-98-440 -- 3 3

industry as a whole. In today's rule, DOE is establishing separate product classes for throughthe-wall equipment and small duct, high velocity systems, which will be required to meet a lower

SEER. DOE believes this meets the Department of Justice's concern regarding the impact of

more stringent standards on small manufacturers.

DOE recognizes that products used for manufactured housing and modular housing also

face space constraints. In its decision to propose 12 SEER standards for conventional products,

DOE took into consideration the impacts of higher efficiency standards on the manufacturers of

manufactured housing and modular housing products. For these applications, products at the 12

SEER level are currently on the market. DOE has concluded that, at the 12 SEER level, there is

no need for a separate product class.

4. Manufacturer Cost Estimates

Several comments asserted that DOE's manufacturing cost estimates derived from the

reverse engineering analysis were too high. The comments stated that economies of scale in

production and competitive forces will result in lower costs for the more efficient equipment as

compared to pre-implementation estimates. (ACEEE, No. 284 at p. 2; CFA, No. 246 at p. 1;

NCLC, No. 241-NN at p. 1). OOE specifically states that the cost of the commodity product at a

minimum standard level cannot be appropriately characterized by looking at the mean or median

manufacturer cost estimates from the reverse engineering analysis. (OOE, No. 275 at p. 3),

Goodman states that their incremental cost for producing a 13 SEER unit is $100 and is

comparable to DOE's estimate. (Goodman, No. 269 at pp. 3-4).

The reverse engineering analysis does in fact take into account economies of scale by

79

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - :::>03 

industry as a whole. In today's rule, DOE is establishing separate product classes for throughthe-wall equipment and small duct, high velocity systems, which will be required to meet a lower 

SEER. DOE believes this meets the Department of Justice's concern regarding the impact of 

more stringent standards on small manufacturers. 

DOE recognizes that products used for manufactured housing and modular housing also 

face space constraints. In its decision to propose 12 SEER standards for conventional products, 

DOE took into consideration the impacts of higher efficiency standards on the manufacturers of 

manufactured housing and modular housing products. For these applications, products at the 12 

SEER level are currently on the market. DOE has concluded that, at the 12 SEER level, there is 

no need for a separate product class. 

4. Manufacturer Cost Estimates 

Several comments asserted that DOE's manufacturing cost estimates derived from the 

reverse engineering analysis were too high. The comments stated that economies of scale in 

production and competitive forces will result in lower costs for the more efficient equipment as 

compared to pre-implementation estimates. (ACEEE, No. 284 at p. 2; CF A, No. 246 at p. 1; 

NCLC, No. 241-NN at p. 1). OOE specifically states that the cost of the commodity product at a 

minimum standard level cannot be appropriately characterized by looking at the mean or median 

manufacturer cost estimates from the reverse engineering analysis. (ODE, No. 275 at p. 3), 

Goodman states that their incremental cost for producing a 13 SEER unit is $100 and is 

comparable to DOE's estimate. (Goodman, No. 269 at pp. 3-4). 

The reverse engineering analysis does in fact take into account economies of scale by 

79 
EE-RM/STD-98-440 - 03

considering larger production volumes for more efficient products after implementation of the

new standards. In its production modeling, DOE also considered that manufacturers would costoptimize their production at the new level because of more intense competition at that level. We

expect this competitive pressure to drive manufacturing costs and this is illustrated by the results

of the reverse engineering analysis which fall within the ARI range and nearer to the ARI

minimum.

ARI, Trane, York, and EEI disagree with the above comments and assert that DOE's

manufacturing cost estimates are too low. Trane states that the reverse engineering analysis was

based on too small of a sample of units and eliminated units which fell out of the range of costs

bounded by the manufacturers submission. Trane nevertheless thinks that, despite its

shortcomings, the reverse engineering analysis essentially confirmed cost levels submitted by

ARI. However, Trane recommends that DOE utilize the cost data submitted by ARI. EEI concurs

with this conclusion. (Trane, No. 262 at 9-10; EEI, No. 253 at p. 2). ARI states that it surveyed

its manufacturer members after DOE issued its January 22 final rule. The results of the survey

indicate that: (1) DOE has underestimated the baseline manufacturer costs by approximately 30

percent and (2) the additional cost of a 13 SEER split air conditioner over a 12 SEER is not $122

as estimated by DOE, but is at least approximately $305. ARI also refutes Goodman's claim that

the amount of copper and aluminum needed for a 13 SEER unit is insignificant. In reviewing

Goodman's current technical literature, ARI states that on average a Goodman 13 SEER split air

conditioner weighs 44 pounds (18 percent) more than a 12 SEER system. More specifically,

Goodman's 13 SEER condenser and evaporator coils are on average 20.2 percent and 11.5 percent

heavier than the condenser and evaporator coils from their 12 SEER unit, respectively. (ARI, No.

80

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" 30-3 

considering larger production volumes for more efficient products after implementation of the 

new standards. In its production modeling, DOE also considered that manufacturers would costoptimize their production at the new level because of more intense competition at that level. We 

expect this competitive pressure to drive manufacturing costs and this is illustrated by the results 

of the reverse engineering analysis which fall within the ARI range and nearer to the ARI 

mInImum. 

ARI, Trane, York, and EEl disagree with the above comments and assert that DOE's 

manufacturing cost estimates are too low. Trane states that the reverse engineering analysis was 

based on too small of a sample of units and eliminated units which fell out of the range of costs 

bounded by the manufacturers submission. Trane nevertheless thinks that, despite its 

shortcomings, the reverse engineering analysis essentially confirmed cost levels submitted by 

ARI. However, Trane recommends that DOE utilize the cost data submitted by ARI. EEl concurs 

with this conclusion. (Trane, No. 262 at 9-10; EEl, No. 253 at p. 2). ARI states that it surveyed 

its manufacturer members after DOE issued its January 22 final rule. The results of the survey 

indicate that: (1) DOE has underestimated the baseline manufacturer costs by approximately 30 

percent and (2) the additional cost of a 13 SEER split air conditioner over a 12 SEER is not $122 

as estimated by DOE, but is at least approximately $305. ARI also refutes Goodman's claim that 

the amount of copper and aluminum needed for a 13 SEER unit is insignificant. In reviewing 

Goodman's current technical literature, ARI states that on average a Goodman 13 SEER split air 

conditioner weighs 44 pounds (18 percent) more than a 12 SEER system. More specifically, 

Goodman's 13 SEER condenser and evaporator coils are on average 20.2 percent and 11.5 percent 

heavier than the condenser and evaporator coils from their 12 SEER unit, respectively. (ARI, No. 

80 
EE-RM/STD-98-440 -"303

259 at pp. 23-25). York states that the reverse engineering analysis is flawed because it focused

on one size of equipment, a 3-ton unit. They feel the whole range of equipment should have been

analyzed, as size becomes much more problematic and costly at higher capacities. (York, No. 270

at p. 3).

DOE believes that the reverse engineering analysis is based on a sufficient equipment

sample size to capture variability in design, manufacturing practices and costs across the range

products subject to new standards. The equipment models were selected to be representative of

the costs to manufacture existing baseline models and to capture the costs to manufacture

products at potential new standards levels. To select representative equipment samples for the

reverse engineering analysis, DOE requested that manufacturers identify equipment in their

product lines most appropriate for this purpose. Four major manufacturers submitted design data

for split cooling-only equipment, and three of those submitted design data for the other classes as

well. This submission process yielded information on 62 models. DOE selected an additional

nine models from catalogs of those and other manufacturers and also used the ARI Product

Attribute Database and technical literature to describe the efficiency-related attributes in those

products. Additionally, from the group of manufacturer submittals, three units were purchased for

extensive disassembly and inspection. In their comment ARI does not explain how they derived

their baseline costs (estimation method, models included, product features, etc.), making an

assessment or comparison to DOE's costs impossible. In contrast, the reverse engineering

derivation method and resulting dis-aggregated baseline data are transparent and have been

reviewed extensively by stakeholders.

Several comments also focused on the issue of productivity gains and asserted that these

81

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 3D'3 

259 at pp. 23-25). York states that the reverse engineering analysis is flawed because it focused 

on one size of equipment, a 3-ton unit. They feel the whole range of equipment should have been 

analyzed, as size becomes much more problematic and costly at higher capacities. (York, No. 270 

at p. 3). 

DOE believes that the reverse engineering analysis is based on a sufficient equipment 

sample size to capture variability in design, manufacturing practices and costs across the range 

products subject to new standards. The equipment models were selected to be representative of 

. the costs to manufacture existing baseline models and to capture the costs to manufacture 

products at potential new standards levels. To select representative equipment samples for the 

reverse engineering analysis, DOE requested that manufacturers identify equipment in their 

product lines most appropriate for this purpose. Four major manufac~urers submitted design data 

for split cooling-only equipment, and three of those submitted design data for the other classes as 

well. This submission process yielded infonnation on 62 models. DOE selected an additional 

nine models from catalogs of those and other manufacturers and also used the ARI Product 

Attribute Database and technical literature to describe the efficiency-related attributes in those 

products. Additionally, from the group of manufacturer submittals, three units were purchased for 

extensive disassembly and inspection. In their comment ARI does not explain how they derived 

their baseline costs (estimation method, models included, product features, etc.), making an 

assessment or comparison to DOE's costs impossible. In contrast, the reverse engineering 

derivation method and resulting dis-aggregated baseline data are transparent and have been 

reviewed extensively by stakeholders. 

Several comments also focused on the issue of productivity gains and asserted that these 

81 
EE-RM/STD-98-440 - 3b3

gains would lower manufacturing costs below the levels estimated by DOE. ACEEE, ASE, and

OOE all refer to historic changes as shown by the U.S. Census Bureau's Current Industrial

Reports series in stating that these trends demonstrate that air conditioner costs to the

manufacturer have declined at a rate of 1.7 percent annually over the 1994-1998 period. They

assert that DOE should include this rate of cost reductions in its analysis. They add that the

Census figures are probably conservative as they ignore the fact that manufacturers tend to find

ways to substantially increase productivity when standards take effect in order to reduce the

impact of standards-induced cost increases. In making this claim, the comments cite DOE's cost

estimates from the 1980's for meeting the 10 SEER standards that took effect in 1992. Rather

than having any cost impacts, they assert that the 1992 standards resulted in essentially no change

in product costs. (ACEEE, No. 284 at pp. 4-8; OOE, No. 275 at p. 3; ASE, No. 282 at 3-4).

Although NRDC recognizes that the reverse engineering model accounts for economies of

scale, it states that it does not account for any "learing-curve" effect. Thus, as cumulative

production of high efficiency units increase, the reverse engineering model merely scales up the

costs rather than factoring the downward effect that "learning" has on production costs. (NRDC,

No. 250 at pp. 31-32). Goodman also alludes to the "learning-curve" when it states that when a

unit meeting a new standard is produced in volume, it allows the manufacturer to run its plant

more efficiently and pass the resulting cost savings on to the consumer. (Goodman, No. 269 at

pp. 4-5). Trane, Rheem, and Lennox International, Inc. (Lennox)) all refute the contention that

productivity gains will materialize. Trane asserts that earlier hard won productivity gains were

produced by the industry through untold millions spent on R&D. These expenditures reduced the

cost to produce the entire product line, but did little to reduce the material-driven incremental

82

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440'" 3D 3 

gains would lower manufacturing costs below the levels estimated by DOE. ACEEE, ASE, and 

OOE all refer to historic changes as shown by the U.S. Census Bureau's Current Industrial 

Reports series in stating that these trends demonstrate that air conditioner costs to the 

manufacturer have declined at a rate of 1.7 percent annually over the 1994-1998 period. They 

assert that DOE should include this rate of cost reductions in its analysis. They add that the 

Census figures are probably conservative as they ignore the fact that manufacturers tend to find 

ways to substantially increase productivity when standards take effect in order to reduce the 

impact of standards-induced cost increases. In making this claim, the comments cite DOE's cost 

estimates from the 1980's for meeting the 10 SEER standards that took effect in 1992. Rather 

than having any cost impacts, they assert that the 1992 standards resulted in essentially no change 

in product costs. (ACEEE, No. 284 at pp. 4-8; OOE, No. 275 at p. 3; ASE, No. 282 at 3-4). 

Although NRDC recognizes that the reverse engineering model accounts for economies of 

scale, it states that it does not account for any "learning-curve" effect. Thus, as cumulative 

production of high efficiency units increase, the reverse engineering model merely scales up the 

costs rather than factoring the downward effect that "learning" has on production costs. (NRDC, 

No. 250 at pp. 31-32). Goodman also alludes to the "learning-curve" when it states that when a 

unit meeting a new standard is produced in volume, it allows the manufacturer to run its plant 

more efficiently and pass the resulting cost savings on to the consumer. (Goodman, No. 269 at 

pp.4-5). Trane, Rheem, and Lennox International, Inc. (Lennox» all refute the contention that 

productivity gains will materialize. Trane asserts that earlier hard won productivity gains were 

produced by the industry through untold millions spent on R&D. These expenditures reduced the 

cost to produce the entire product line, but did little to reduce the material-driven incremental 

82 
EE-RM/STD-98-440- 503

costs of efficiency upgrades. Likewise, any cost reductions likely to occur in the next decade will

have significantly greater impact on the overall consumer cost structure than on the cost and price

increment between successively higher efficiency levels. Rheem states that under a 13 SEER

standard only industry profits will be reduced, lessening the money available for research and

design of new products to meet other upcoming standards, i.e., HCFC phase-out, new commercial

standards, new gas and oil furnace standards. (Trane, No. 262 at pp. 10-11; Rheem, No. 248 at p.

.; Lennox, No. 272 at p. 2).

DOE has not included unspecified productivity improvements or "learning-curve" cost

re luctior.s in its analysis. DOE does not believe historical price trends for unitary air

conditioners, or other products, can be applied to forecast equipment costs where there are no data

to indicate what factors resulted in the observed trends or that the trends will continue.

Furthermore, without specific cost information, it is impossible to tell if productivity

improvements would apply equally to baseline costs and standards induced incremental costs.

Therefore, without specific data on the nature and magnitude of cost impacts, DOE will not apply

a productivity improvement factor in this rulemaking or other rulemakings.

E. Effect on Competition

Several comments argued that DOE was unduly concerned that 13 SEER standards would

lead to industry consolidation. NRDC claimed that the 13 SEER standards would actually

enhance competition relative to the existing 10 SEER standards because economic losses imposed

on higher-cost producers would force them to be more competitive. (NRDC, No. 250 at pp. 20-

22). OOE adds that industry consolidation occurs regularly in all sectors of the economy. In the

context of the various factors that influence industry consolidation, OOE asserts that it is

83

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 .... ~O,3 

costs of efficiency upgrades. Likewise, any cost reductions likely to occur in the next decade will 

have significantly greater impact on the overall consumer cost structure than on the cost and price 

increment between successively higher efficiency levels. Rheem states that under a 13 SEER 

standard only industry profits will be reduced, lessening the money available for research and 

design of new products to meet other upcoming standards, i.e., HCFC phase-out, new commercial 

standards, new gas and oil furnace standards. (Trane, No. 262 at pp. 10-11; Rheem, No. 248 at p. 

: ; Lennox, No. 272 at p. 2). 

DOE has not included unspecified productivity improvements or "learning-curve" cost 

re iuctior..s in its analysis. DOE does not believe historical price trends for unitary air 

conditionus, or other products, can be applied to forecast equipment costs where there are no data 

to indicate what factors resulted in the observed trends or that the trends will continue. 

Furthermore, without specific cost information, it is impossible to tell if productivity 

improvements would apply equally to baseline costs and standards induced incremental costs. 

Therefore, without specific data on the nature and magnitude of cost impacts, DOE will not apply 

a productivity improvement factor in this rulemaking or other rulemakings. 

E. Effect on Competition 

Several comments argued that DOE was unduly concerned that 13 SEER standards would 

lead to industry consolidation. NRDC claimed that the 13 SEER standards would actually 

enhance competition relative to the existing 10 SEER standards because economic losses imposed 

on higher-cost producers would force them to be more competitive. (NRDC, No. 250 at pp. 20-

22). OOE adds that industry consolidation occurs regularly in all sectors of the economy. In the 

context of the various factors that influence industry consolidation, OOE asserts that it is 

83 
EE-RM/STD-98-440- -,

unreasonable for DOE to claim that the incremental effects of efficiency standards can have any

measurable effect on the industry. (OOE, No. 275 at pp. 3-4). PG&E cites third party coil

manufacturers' response to PG&E's high efficiency rebate programs as support for the view that

these small coil manufacturers can supply the efficiency combinations needed to meet new

standards. By extension, PG&E asserts that 13 SEER standards would foster manufacturing

diversity by providing the coil manufacturers more business. (PG&E, No. 274 at p. 3).

Counte ring the above claims, ARI, Trane, and the U.S. Small Business Administration

asserted that a i 2 SEER standard would have less of an anti-competitive impact than the 13 SEER

standard. (ARI, No. 259 at pp. 3-4, 25; Trane, No. 262 at pp. 2-4, 13-14; U.S. SBA, No. 234 at p.

1.) Both ARI and Trane cited the Department of Justice's April 5, 2001 letter to DOE regarding

the anti-competitive impacts of 13 SEER standards in claiming that the industry impacts due to 13

SEER standards are too severe. ARI additionally stated that DOE's failure to obtain a

determination by the Attorney General of the anti-competitive impact of the 13 SEER standard

prior to issuing the January 22 final rule is an appropriate basis to withdraw the 13 SEER

decision. The Department of Justice submitted comments on DOE's July 25, 2001 SNOPR which

concluded that the 12 SEER proposal would not adversely affect competition; DOJ, No. 285

printed in the Appendix to this notice.

In establishing the new standards, DOE considered several factors which have a potential

bearing on industry competition and consolidation. For each trial standard level DOE considered:

changes in manufacturer net present value; cumulative regulatory burden; and changes in annual

cash flow. To further capture competitive effects, DOE considered differential impacts on three

sub-groups of manufacturers, since higher efficiency standards will affect each group of

84

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -803 

unreasonable for DOE to claim that the incremental effects of efficiency standards can have any 

measurable effect on the industry. (OOE, No. 275 at pp. 3-4). PG&E cites third party coil 

manufacturers' response to PG&E's high efficiency rebate programs as support for the view that 

these small coil manufacturers can supply the efficiency combinations needed to meet new 

standards. By extension, PG&E asserts that 13 SEER standards would foster manufacturing 

diversity by providing the coil manufacturers more business. (PG&E, No. 274 at p. 3). 

Countt: ring the above claims, ARI, Trane, and the U.S. Small Business Administration 

asserted that a 12 SEER standard would have less of an anti·competitive impact than the 13 SEER 

standard. (ARl, ~o. 2S9 at pp. 3-4,25; Trane, No. 262 at pp. 2-4, 13-14; U.S. SBA, No. 234 at p. 

1.) Both ARI and Tral1(~ cited the Department of Justice's April 5,2001 letter to DOE regarding 

the anti-competitive imp;icts of 13 SEER standards in claiming that the industry impacts due to 13 

SEER standards are too severe. ARI additionally stated that DOE's failure to obtain a 

determination by the Attorney General of the anti-competitive impact of the 13 SEER standard 

prior to issuing the January 22 final rule is an appropriate basis to withdraw the 13 SEER 

decision. The Department of Justice submitted comments on DOE's July 25, 2001 SNOPR which 

concluded that the 12 SEER proposal would not adversely affect competition; DOJ, No. 285 

printed in the Appendix to this notice. 

In establishing the new standards, DOE considered several factors which have a potential 

bearing on industry competition and consolidation. For each trial standard level DOE considered: 

changes in manufacturer net present value; cumulative regulatory burden; and changes in annual 

cash flow. To further capture competitive effects, DOE considered differential impacts on three 

sub-groups of manufacturers, since higher efficiency standards will affect each group of 

84 
EE-RM/STD-98-440- 303

manufacturers differently. "Low Operating Cost Manufacturers" observe a low cost, commodityproduct strategy and achieve a higher operating profit margin on their baseline equipment. DOE's

analysis indicates that this group of manufacturers will likely benefit from higher standards.

"High Operating Cost" manufacturers typically place more of an emphasis on product

differentiation than cost leadership. For this group of manufacturers, higher standards reduce

opportunities for product differentiation and lower profitability. Finally "Small Manufacturers"

fall into two groups; manul acturcrs of equipment for niche markets and manufactures of indoor

coils and fancoil units. As previously stated in Section VI (D) (3), we do not expect coil

manufacturers to face any in remental burden as a result of new standards. Also we stated that

impacts on niche manufacturers have been largely addressed through the creation of separate

product classes for products used in space contained applications.

In arriving at today's decision to adopt a 12 SEER standard DOE factored into

consideration its serious concerns regarding potential anti-competitive effects at higher trial

standard levels. DOE's analysis demonstrates that both High and Low Operating Cost

Manufacturer groups would experience negative cash flows in the years leading up to the new

standard under TSL3 and TSL4, but only the higher operating cost group is expected to suffer a

long term decline in value, cash flow, and return on invested capital. Since Low Operating Cost

Manufacturers would likely benefit from 13 SEER standards, most of the total financial burden

due to the standards would need to be borne by High Operating Cost Manufacturers. The

differential impact between the subgroups is $238 million at 12 SEER and rises to $429 million at

13 SEER. Due to this probable maldistribution of industry impacts at 13 SEER, DOE was

particularly concerned that either accelerated industry consolidation (i.e., less competitive market)

85

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- '2P8 

manufacturers differently. "Low Operating Cost Manufacturers" observe a low cost, commodityproduct strategy and achieve a higher operating profit margin on their baseline equipment. DOE's 

analysis indicates that this group of manufacturers will likely benefit from higher standards. 

"High Operating Cost" manufacturers typically place more of an emphasis on product 

differentiation than cost leadership. For this group of manufacturers, higher standards reduce 

opportunities for product differentbtion and lower profitability. Finally "Small Manufacturers" 

fall into two groups; manul actun~rs of equipment for niche markets and manufactures of indoor 

coils and fancoil units. As previol\sly stated in Section VI (D) (3), we do not expect coil 

manufacturers to face any in~Iemf'fltal burden as a result of new standards. Also we stated that 

impacts on niche manufacturers have been largely addressed through the creation of separate 

product classes for products used in ~pace contained applications. 

In arriving at today's decision to adopt a 12 SEER standard DOE factored into 

consideration its serious concerns regarding potential anti-competitive effects at higher trial 

standard levels. DOE's analysis demonstrates that both High and Low Operating Cost 

Manufacturer groups would experience negative cash flows in the years leading up to the new 

standard under TSL3 and TSL4, but only the higher operating cost group is expected to suffer a 

long term decline in value, cash flow, and return on invested capital. Since Low Operating Cost 

Manufacturers would likely benefit from 13 SEER standards, most of the total financial burden 

due to the standards would need to be borne by High Operating Cost Manufacturers. The 

differential impact between the subgroups is $238 million at 12 SEER and rises to $429 million at 

13 SEER. Due to this probable mal distribution of industry impacts at 13 SEER, DOE was 

particularly concerned that either accelerated industry consolidation (i.e., less competitive market) 

85 
or the stifling of innovation could occur.

F. Effect on Utility or Performance

EE-RM/STD-98-440- 303

1. Dehumidification

The only comments regarding product utility pertained to the impacts that more stringent

standards may have on the ability of air-conditioning equipment to properly dehumidify. Both

Southern Company and Mercatus Center claim that the lower latent cooling capacity inherent in

larger, more efficient single speed equip nent would result in dehumidification problems in humid

climates. (Southern Company, No. 257 I.t pp. 3-4; Mercatus Center, No. 242 at p. 8).

As stated in the October 5, 2000 Y'OPR, ARI research has demonstrated for hundreds of

systems that latent heat removal is not obvioujsly impacted by increases in equipment efficiency at

rated conditions (i.e., 95°F outdoor temperature) 4. See 65 FR 59611-59612. Nonetheless, DOE

recognizes the humidity control problems that exist in the southern region of the U.S. For the

excessive humidity conditions commonly experienced in the South, the equipment may very likely

not provide adequate dehumidification. Equipment efficiency should not be viewed as the sole

source of the problem, however. Proper installation and maintenance practices also likely play a

large role in the equipment's performance, as well as other factors, such as the duct system and

the building shell characteristics. All these factors play a role in how a system dehumidifies. For

these reasons, DOE does not believe the 12 SEER standard adopted today will have an

appreciable effect on the performance of central air conditioners, and any problem with

dehumidification can be dealt with in a variety of ways other than lowering the energy efficiency

standard.

4 D. Godwin. 1998. "Latent Capacity of Unitary Equipment." ASHRAE Transactions 98(2).

86

EE-RM-STD-98-440 COMMENT 303

or the stifling of innovation could occur. 

F. Effect on Utility or Performance 

1. Dehumidification EE-RM/STD-9S-440- 303 

The only comments regarding product utility pertained to the impacts that more stringent 

standards may have on the ability of air-conditioning equipment to properly dehumidify. Both 

Southern Company and Mercatus Center claim tnat the lower latent cooling capacity inherent in 

larger, more efficient single speed equip nent would result in dehumidification problems in humid 

climates. (Southern Company, No. 257 <.'t pp. :-4; Mercatus Center, No. 242 at p. 8). 

As stated in the October 5, 2000 l':OPR, ARI research has demonstrated for hundreds of 

systems that latent heat removal is not obvio'Jsly impacted by increases in equipment efficiency at 

rated conditions (i.e., 95 OF outdoor temperature)14. See 65 FR 59611-59612. Nonetheless, DOE 

recognizes the humidity control problems that exist in the southern region of the U.S. For the 

excessive humidity conditions commonly experienced in the South, the equipment may very likely 

not provide adequate dehumidification. Equipment efficiency should not be viewed as the sole 

source of the problem, however. Proper installation and maintenance practices also likely playa 

large role in the equipment's performance, as well as other factors, such as the duct system and 

the building shell characteristics. All these factors playa role in how a system dehumidifies. For 

these reasons, DOE does not believe the 12 SEER standard adopted today will have an 

appreciable effect on the performance of central air conditioners, and any problem with 

dehumidification can be dealt with in a variety of ways other than lowering the energy efficiency 

standard. 

14 D. Godwin. 1998. "Latent Capacity of Unitary Equipment." ASHRAE Transactions 98(2). 

86 
G. Electric System Reliability/Peak Power

1. Peak Power EE-RM/STD-98-440- 3p3

As part of its analysis to determine the impacts of amended efficiency standards, DOE

quantified how increased standards affected installed generation capacity, i.e., reduction in

electrical power demand. Due to DOE's decision to withdraw the January 22 final rule, several

comments expressed concern that the 12 SEER standard would have less of an impact on peak

power demand than the 13 SEER standard. (Austin Lnergy, No. 243 at p. 1; State of Connecticut,

No. 279 at p. 1; Offices of the New York and Massachusetts Attorney Generals, No. 277 at pp.

15-16; New York State Energy Research and Development Authority (NYSERDA), No. 252 at p.

1; State of Vermont, No. 268 at p. 3; PG&E, No. 274 at p. 3; State of Nevada, No. 271 at p. 2;

National Grid, No. 241-00 p. at 3).

Regardless of SEER level, ACEEE asserted that DOE significantly underestimated the

peak demand impacts of more efficient air conditioners. Specifically, ACEEE states that DOE's

model to estimate peak power impacts, NEMS-BRS, uses load shapes that underestimate the

effect that residential central air conditioners have on peak power by a factor of more than two.

To correct this problem, ACEEE recommends correcting NEMS-BRS with load shape data that is

more nationally representative of central air conditioner power consumption. ACEEE specifically

recommends load shape data that has a Conservation Load Factor (CLF) of 0.104. (ACEEE, No.

284 at pp. 8-11).

Both EEI and Southern Company assert that a 13 SEER standard could actually increase

peak power demand. EEI states that for units rated at 13 SEER and higher, there is no correlation

87

EE-RM-STD-98-440 COMMENT 303

G. Electric System Reliability/Peak Power 

1. Peak Power EE-RM/STD-98-440- 303 

As part of its analysis to detennine the impacts of amended efficiency standards, DOE 

quantified how increased standards affected installed generation capacity, i.e., reduction in 

electrical power demand. Due to DOE's decision to withdraw the January 22 final rule, several 

comments expressed concern that the 12 SEER standard wOll!d have less of an impact on peak 

power demand than the 13 SEER standard. (Austin l~nerg:" No. 243 at p. 1; State of Connecticut, 

No. 279 at p. 1; Offices of the New York and MassaC;lUsett~ Attorney Generals, No. 277 at pp. 

15-16; New York State Energy Research and Develop.'11ent .A uthority (NYSERDA), No. 252 at p. 

1; State ofVennont, No. 268 at p. 3; PG&E, No. 274 at p. 3; State of Nevada, No. 271 at p. 2; 

National Grid, No. 241-00 p. at 3). 

Regardless of SEER level, ACEEE asserted that DOE significantly underestimated the 

peak demand impacts of more efficient air conditioners. Specifically, ACEEE states that DOE's 

model to estimate peak power impacts, NEMS-BRS, uses load shapes that underestimate the 

effect that residential central air conditioners have on peak power by a factor of more than two. 

To correct this problem, ACEEE recommends correcting NEMS-BRS with load shape data that is 

more nationally representative of central air conditioner power consumption. ACEEE specifically 

recommends load shape data that has a Conservation Load Factor (CLF) of 0.104. (ACEEE, No. 

284 at pp. 8-11). 

Both EEl and Southern Company assert that a 13 SEER standard could actually increase 

peak power demand. EEl states that for units rated at 13 SEER and higher, there is no correlation 

87 
EE-RM/STD-98-440, 35

between SEER and EER' 5. So if the standard was raised to 13 SEER, EEI believes it is likely that

the manufacturers would use technologies to raise SEER values and lower EER values, assuming

it would lower their production costs. Thus, the higher SEER values could very easily lead to

lower EER values, resulting in reduced energy savings in warmer climates, increased peak

demands associated with residential systems in all climates, and increased need for peaking power

plants. (EEI, No. 253 at pp. 2-3). Southern Company adds that the reduction in peak demand

from higher efficiency standards is so long-term as to have no bear ng or; current problems. Thus,

it is entirely possible that the higher efficiency levels could exacerbate a supply glut in the regions

now experiencing shortages ten to fifteen years from now. (Southern Company, No. 257 at p. 3).

Mercatus Center believes that higher SEER standards would cause mor., people to purchase air

conditioners due to their lower operating costs. The result during a heat wave could increase

overall air conditioning usage, increasing peak demand and the risk of a blackout, and leaving

everyone without air conditioning. (Mercatus Center, No. 242 at pp. 9-10).

First, in response to the comments submitted by EEI and Southern Company, DOE has

demonstrated in its technical analysis (See TSD, Chapter 4) that in the efficiency range of 10 to 13

SEER, the EER, on average, increases proportionally to the SEER. Thus, DOE maintains that

higher standards of up through 13 SEER will yield progressively greater peak demand reductions.

Mercatus Center's claims regarding increased equipment sales leading to higher overall air

conditioner use are not substantiated. As presented earlier in the shipments forecasts discussion,

15 EER, Energy Efficiency Ratio, is a steady-state measure of energy efficiency which determines

efficiency at a prescribed outdoor temperature (95°F), and is one of the test conditions in the DOE test procedure

used to develop the SEER. EER is generally thought of as an efficiency descriptor that indicates the level of

performance during periods when electricity use by air conditioners is at its peak.

88

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -' 3J 43 

between SEER and EER IS. SO if the standard was raised to 13 SEER, EEl believes it is likely that 

the manufacturers would use technologies to raise SEER values and lower EER values, assuming 

it would lower their production costs. Thus, the higher SEER values could very easily lead to 

lower EER values, resulting in reduced energy savings in warmer climates, increased peak 

demands associated with residential systems in all climates, and increased need for peaking power 

plants. (EEl, No. 253 at pp. 2-3). Southern Company adds that the reduction in peak demand 

from higher efficiency standards is so long-term as to have no bearng Of; current problems. Thus, 

it is entirely possible that the higher efficiency levels could exacerbil~e a supply glut in the regions 

now experiencing shortages ten to fifteen years from now. (Southern Company, No. 257 at p. 3). 

Mercatus Center believes that higher SEER standards would cause mor.! peoole to purchase air 

conditioners due to their lower operating costs. The result during a heat \\-Cive could increase 

overall air conditioning usage, increasing peak demand and the risk of a blackout, and leaving 

everyone without air conditioning. (Mercatus Center, No. 242 at pp. 9-10). 

First, in response to the comments submitted by EEl and Southern Company, DOE has 

demonstrated in its technical analysis (See TSD, Chapter 4) that in the efficiency range of 10 to 13 

SEER, the EER, on average, increases proportionally to the SEER. Thus, DOE maintains that 

higher standards of up through 13 SEER will yield progressively greater peak demand reductions. 

Mercatus Center's claims regarding increased equipment sales leading to higher overall air 

conditioner use are not substantiated. As presented earlier in the shipment!> forecasts discussion, 

IS EER, Energy Efficiency Ratio, is a steady-state measure of energy efficiency which detennines 

efficiency at a prescribed outdoor temperature (95°F), and is one of the test conditions in the DOE test procedure 

used to develop the SEER. EER is generally thought of as an efficiency descriptor that indicates the level of 

perfonnance during periods when electricity use by air conditioners is at its peak. 

88 
EE-RM/STD-98-440 - 3. 3

due to higher consumer purchase prices, DOE's shipments model forecasts declining rather than

increasing sales due to more efficient standards. Thus, DOE concludes that there is a very low

probability that increased standards could actually lead to an increase in peak demand.

As stated in the January 22 final rule regarding peak demand impacts, DOE recognized

that more research was needed to resolve the issue of whether NEMS-BRS accurately estimates

the peak demand reductions resulting from air conditioner efficiency standards. See 65 FR 7182.

To resolve this outstanding issue as well as address those comments submitted )y ACEEE in

response to the July 25 SNOPR, DOE conducted a comprehensive review of the end-use load

shapes used by NEMS-BRS, not only for the residential sector, but for the comrrercial, industrial,

and transportation sectors as well.'6 DOE discovered a number of problems associated with the

specific load shapes. In the case of the residential air-conditioning end-use, DOE determined that

a non-representative load shape was assigned to it. This non-representative load shape peaks in

October and has a correspondingly high CLF. As discussed in the January 22 final rule, 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.'7

The CLF is defined as:

Annual Site Energy Savings (kWh)

CLF ==Peak Load Savings (kW) . 8760 hours

1

6 Alternative Sectoral LoadShapes for NEMS, Department of Energy-Energy Information Administration,

Washington, D.C., August 2001.

17 Conservation Screening 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 Proceedings of the 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J.

Koomey, A. Rosenfeld, and A. Gadgil.

89

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 .... 3IJ3 

due to higher consumer purchase prices, DOE's shipments model forecasts declining rather than 

increasing sales due to more efficient standards. Thus, DOE concludes that there is a very low 

probability that increased standards could actually lead to an increase in peak demand. 

As stated in the January 22 final rule regarding peak demand impacts, DOE recognized 

that more research was needed to resolve the issue of whether NEMS-BRS accurately estimates 

the peak demand reductions resulting from air conditioner efficiency standards. See 66 FR 7182. 

To resolve this outstanding issue as well as address those comments submitted )y ACEEE in 

response to the July 25 SNOPR, DOE conducted a comprehensive review of the end··use load 

shapes used by NEMS-BRS, not only for the residential sector, but for the comrr.ercial, industrial, 

and transportation sectors as well. 16 DOE discovered a number of problems associated with the ... 

specific load shapes. In the case of the residential air-conditioning end-use, DOE determined that 

a non-representative load shape was assigned to it. This non-representative load shape peaks in 

October and has a correspondingly high eLF. As discussed in the January 22 final rule, the eLF 

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.17 

The eLF is defined as: 

Annual Site Energy Savings (kWh) eLF = ------~----­

Peak Load Savings(kW)· 8760 hours 

16 Alternative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information Administration, 

Washington, D.C., August 2001. 

17 Conservation Screening Curves to Compare Efficiency Investments to Power Plants: Applications to 

Commercial Sector Consef1lation Programs, Lawrence Berkeley National Laboratory, Berkeley, CA, August 1990, 

published in the Proceedings of the 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J. 

Koomey, A. Rosenfeld, and A. Gadgil. 

89 
EE-RM/STD-98-440 - 3.'3

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. See 66 FR 7181.

As a result of discovering several problems with the load shapes within NEMS-BRS, an

alternative set of sectoral end-use load shapes were assigned to the 2002 version of NEMS-BRS

that were distinctly different than the load shapes used in prior versions of the model (includ ng

the 2000 and 2001 versions). For example, in the case of the residential air-conditioning end-use,

the alternative version consists of thirteen regional load shapes based on regions defined by the

North American Electric Reliability Council (NERC) as compared to the single national load

shape used in prior versions. Depending on the region of the country, the thirteen air-conditioning

load shapes have CLFs ranging from 0.063 to 0.183 and generally peak in either July or August.

Although the alternative load shapes specific to the residential air-conditioning end-use are more

representative (e.g., the loads peak during the summer months), switching to the entire set of

alternative sectoral end-use load shapes results in smaller peak-to-average system loads. As a

consequence, the overall built-up system load shapes using the alternative sectoral end-use load

shapes have less pronounced peaks than those that are used in prior versions of NEMS-BRS.

Because the built-up system loads within the 2002 version of NEMS-BRS have less pronounced

peaks, the impact of reducing the energy use on a relatively peaky end-use like residential airconditioning (such as through increased efficiency standards) will have less of an affect on overall

system capacity.

New NEMS-BRS standard case runs were conducted with the entire set of alternative

90

EE-RM-STD-98-440 COMMENT 303

EE-RMjSTD-98-440.".30.3 

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. See 66 FR 7181. 

As a result of discovering several problems with the load shapes within NEMS-BRS, an 

alternative set of sectoral end-use load shapes were assigned to the 2002 version ofNEMS-BRS 

that were distinctly different than the load shapes used in prior versions of the model (includ.ng 

the 2000 and 2001 versions). For example, in the case of the residential air-conditioning end-lise, 

the alternative version consists of thirteen regional load shapes based on regions defined by th~ 

North American Electric Reliability Council (NERC) as compared to the single national load 

shape used in prior versions. Depending on the region of the country, the thirteen air-conditioning 

load shapes have CLFs ranging from 0.063 to 0.183 and generally peak in either July or August. 

Although the alternative load shapes specific to the residential air-conditioning end-use are more 

representative (e.g., the loads peak during the summer months), switching to the entire set of 

alternative sectoral end-use load shapes results in smaller peak-to-average system loads. As a 

consequence, the overall built-up system load shapes using the alternative sectoral end-use load 

shapes have less pronounced peaks than those that are used in prior versions ofNEMS-BRS. 

Because the built-up system loads within the 2002 version ofNEMS-BRS have less pronounced 

peaks, the impact of reducing the energy use on a relatively peaky end-use like residential airconditioning (such as through increased efficiency standards) will have less of an affect on overall 

system capacity. 

New NEMS-BRS standard case runs were conducted with the entire set of alternative 

90 
EE-RM/STD-9440- 30 3

sectoral end-use load shapes, including the updated residential air-conditioning load shapes, to

determine their impact on system capacity. These new runs were conducted with the 2000 version

of NEMS-BRS by replacing the existing set of sectoral load shapes with the alternative versions.

As expected, the installed generation capacity reductions based on the new NEMS-BRS runs are

lower than those produced for the January 22 final rule. In the case of today's final rule, the

installed generation capacity reduction is now estimated to be 8.7 GW as opposed to the 10.6 GW

provided in the January 22 final rule. A complete set of updated installed generation capacity

reduction impacts can be found in Appendix M of the TSD.

2. Reliability

As stated in the July 25 SNOPR, DOE has considered as a benefit the potential of the

proposed standards to improve the reliability of the electric generation and distribution system by

reducing the need for installed generation capacity. See July 25 SNOPR, 66 FR 38841.

Several comments, while not disputing DOE's conclusion that air conditioner standards

would improve electric system reliability, argued that the potential for improving reliability would

be reduced by going forward with the proposed standards (12 SEER) instead of those standards

issued in the January 22 final rule (13 SEER). (ACEEE, No. 284 at p. 2; NRDC, No. 250 at p. 23;

NEEP, No. 273 at p. 1; ASE, No. 282 at p. 2; CEC, No. 263 at p. 1; National Association of

Regulatory Utility Commissioners (NARUC), No. 260 at p. 2).

Southern Company, which states that raising the standard from 12 to 13 SEER will have

minimal effect on peak demand growth, believes this efficiency increase will have even less effect

on reliability, because there is not a direct relationship between peak demand growth and reduced

electric system reliability. The Southern Company claims that the reduction in peak demand from

91

EE-RM-STD-98-440 COMMENT 303

\. ~ 

EE.R~-3D3 

sectoral end-use load shapes, including the updated residentral air-'Conditioning load shapts, to 

determine their impact on system capacity. These new runs were conducted with the 2000 version 

ofNEMS-BRS by replacing the existing set of sectoral load shapes with the alternative versions. 

As expected, the installed generation capacity reductions based on the new NEMS-BRS runs are 

lower than those produced for the January 22 final rule. In the case oftoday's final rule, the 

installed generation capacity reduction is now estimated to be 8.7 GW as opposed to the 10.6 GW 

provided in the January 22 final rule. A complete set of updated installed generation capacity 

reduction impacts can be found in Appendix M of the TSD. 

2. Reliability 

As stated in the July 25 SNOPR, DOE has considered as a benefit the potential of the 

proposed standards to improve the reliability of the electric generation and distribution system by 

reducing the need for installed generation capacity. See July 25 SNOPR, 66 FR 38841. 

Several comments, while not disputing DOE's conclusion that air conditioner standards 

would improve electric system reliability, argued that the potential for improving reliability would 

be reduced by going forward with the proposed standards (12 SEER) instead of those standards 

issued in the January 22 final rule (13 SEER). (ACEEE, No. 284 at p. 2; NRDC, No. 250 at p. 23; 

NEEP, No. 273 at p. 1; ASE, No. 282 at p. 2; CEC, No. 263 at p. 1; National Association of 

Regulatory Utility Commissioners (NARUC), No. 260 at p. 2). 

Southern Company, which states that raising the standard from 12 to 13 SEER will have 

minimal effect on peak demand growth, believes this efficiency increase will have even less effect 

on reliability, because there is not a direct relationship between peak demand growth and reduced 

electric system reliability. The Southern Company claims that the reduction in peak demand from 

91 
EE-RM/STD-98-440- 3 63

higher efficiency standards is so long-term as to have no bearing on 'currenlt problems. It is

entirely possible that the higher efficiency levels could exacerbate a supply glut in the regions now

experiencing shortages ten to fifteen years from now. (Southern Company, No. 257 at p. 3). For

different reasons, Mercatus Center also argues that higher efficiency standards would not improve

and could possibly reduce electric system reliability. As stated in their arguments pertaining to

peak demand impacts, they believe higher standards could lead to increased purchases of airconditioning products due their lower operating costs. During periods of peak demand this could

lead to an overall increase in air-conditioning. The resulting increase in peak demand heightens

the risk of blackouts. (Mercatus Center, No. 242 at pp. 9-10).

DOE agrees with the assertion of the Southern Company that the primary effects of the

proposed efficiency standards are so long term (more than 10 years in the future) that they are very

unlikely to have any significant effect on electric system reliability. While DOE still believes that

near term improvements in energy efficiency can help improve the reliability of systems that now

have inadequate generating or transmission capacity (e.g., California), the primary effect of energy

efficiency standards is well beyond the 3-10 year planning horizon of most electric systems. This

means that long term electric system reliability is determined primarily by how well system

planners (generators, utilities, regulators) anticipate future loads, not by how large those loads will

be. DOE knows of no analysis which has found a correlation between system load factor and

system reliability over the long term. Nor is DOE aware of any analysis that found a correlation

between the long term rate of growth of electricity demand and system reliability.

Higher efficiency standards for central air conditioners and heat pumps are expected to

reduce significantly the peak loads of electric systems in the future, thus enabling a reduction in

92

EE-RM-STD-98-440 COMMENT 303

"1 

EE-RM/STD-98-440- 36'3 

If 

higher efficiency standards is so long-tenn as to have no 'bearing on'currertt problems. It is 

entirely possible that the higher efficiency levels could exacerbate a supply glut in the regions now 

experiencing shortages ten to fifteen years from now. (Southern Company, No. 257 at p. 3). For 

different reasons, Mercatus Center also argues that higher efficiency standards would not improve 

and could possibly reduce electric system reliability. As stated in their arguments pertaining to 

peak demand impacts, they believe higher standards could lead to increased purchases of airconditioning products due their lower operating costs. During periods of peak demand this could 

lead to an overall increase in air-conditioning. The resulting increase in peak demand heightens 

the risk of blackouts. (Mercatus Center, No. 242 at pp. 9-10). 

DOE agrees with the assertion of the Southern Company that the primary effects of the 

proposed efficiency standards are so long tenn (more than 10 years in the future) that they are very 

unlikely to have any significant effect on electric system reliability. While DOE still believes that 

near tenn improvements in energy efficiency can help improve the reliability of systems that now 

have inadequate generating or transmission capacity (e.g., California), the primary effect of energy 

efficiency standards is well beyond the 3-10 year planning horizon of most electric systems. This 

means that long tenn electric system reliability is detennined primarily by how well system 

planners (generators, utilities, regulators) anticipate future loads, not by how large those loads will 

be. DOE knows of no analysis which has found a correlation between system load factor and 

system reliability over the long tenn. Nor is DOE aware of any analysis that found a correlation 

between the long tenn rate of growth of electricity demand and system reliability. 

Higher efficiency standards for central air conditioners and heat pumps are expected to 

reduce significantly the peak loads of electric systems in the future, thus enabling a reduction in 

92 
EE-RM/STD-98-440- 3-3

the number of new power plants and transmission lines required to meet future demand. Electric

system planners will take these efficiency improvements and other factors affecting future

electricity demand into account when estimating how many new plants and transmission lines will

be required to meet future demand, while maintaining or improving system reliability. Long term

system reliability will be determined by how accurately system planners anticipate electricity

demand and whether they take steps to ensure the addition of sufficient electricity generating,

transmission and distribution capacity to meet this expected demand, while maintaining adequate

reserve margins. For example, EIA's Annual Energy Outlook 2001 forecast that the cumulative

requirements for additional electricity generating capacity by 2020 might range from roughly 350

gigawatts, assuming a low rate of economic growth, to nearly 500 gigawatts, assuming a

comparatively high rate of economic growth. This compares to a difference of approximately 4

gigawatts between the estimated effects on capacity requirements of a SEER 12 standard and

those of a SEER 13 standard. The range of estimated requirements for additional electricity

generating capacity that result from varying assumptions about the rate of change in end-use

technology (in all sectors) and the rate of economic growth is even greater. While these

differences in future capacity requirements will have cost and environmental implications, there is

no indication that higher rates of growth in electricity demand would cause a deterioration in

system reliability, nor is there any indication that lower rates of growth would somehow ensure

better planning by electric system generators, utilities and regulators.

H. Other Issues

1. Minimum EER Requirement

Several comments were in support of a minimum EER requirement to ensure more

93

EE-RM-STD-98-440 COMMENT 303

.; 

." 

EE-RM/STD-98-440 - 303 

• the number of new power plants and transmission 'lines required to meet future demand. Electric 

system planners will take these efficiency improvements and other factors affecting future 

electricity demand into account when estimating how many new plants and transmission lines will 

be required to meet future demand, while maintaining or improving system reliability. Long term 

system reliability will be determined by how accurately system planners anticipate electricity 

demand and whether they take steps to ensure the addition of sufficient electricity generating, 

transmission and distribution capacity to meet this expected demand, while maintaining adequate 

. reserve margins. For example, EIA's Annual Energy Outlook 2001 forecast that the cumulative 

requirements for additional electricity generating capacity by 2020 might range from roughly 350 

gigawatts, assuming a low rate of economic growth, to nearly 500 gigawatts, assuming a 

comparatively high rate of economic growth. This compares to a difference of approximately 4 

gigawatts between the estimated effects on capacity requirements of a SEER 12 standard and 

those of a SEER 13 standard. The range of estimated requirements for additional electricity 

generating capacity that result from varying assumptions about the rate of change in end-use 

technology (in all sectors) and the rate of economic growth is even greater. 'While these 

differences in future capacity requirements will have cost and environmental implications, there is 

no indication that higher rates of growth in electricity demand would cause a deterioration in 

system reliability, nor is there any indication that lower rates of growth would somehow ensure 

better planning by electric system generators, utilities and regulators. 

H. Other Issues 

1. Minimum EER Requirement 

Several comments were in support of a minimum EER requirement to ensure more 

93 
EE-RM/STD-98-440- 03

efficient operation at high outdoor temperatures during periods when electricity use by air

conditioners is at its peak. (ACEEE, No. 284 at p.3; Austin Energy, No. 243 at p. 1; PG&E, No..

274 at p. 1). NARUC passed a resolution in July, 2000, urging DOE to'raise the standard by 30

percent (i.e., to 13 SEER) with a minimum peak efficiency performance requirement. (NARUC,

No. 260 at p. 2). NEEP also supports a standard of at least 13 SEER with a corresponding

minimum EER of 11.6. (NEEP, No. 273 at p. 2). NRDC believes that DOE cannot set a standard

at the highest level that is technologically feasible and economically justified if it does not include

in that standard a minimum EER requirement. NRDC adds that this recommendation does not

mean that EER would drop as SEER increases; it simply reflects NRDC's concern that EER

might not rise as quickly without a separate regulation than it would with one. (NRDC, No. 250

at p.32).

York and Southern Company are both opposed to a minimum EER requirement. York

asserts that an EER standard could be counter-productive by discouraging variable speed and

modulating equipment, which could save consumers substantial amounts of money over the

cooling season. (York, No. 270 at p. 4). Southern Company believes that, regardless of costeffectiveness, DOE does not possess regulatory authority to specify performance measures

necessary to insure cost savings to consumers (SEER) and peak demand benefits to electricity

suppliers (EER). (Southern Company, No. 257 at p. 4).

As stated in the January 22 final rule, DOE is still convinced that the stringent physical

relationship between EER and SEER in equipment rated through the adopted standard of 12

SEER, which is comprised exclusively of non-modulating equipment, will remain intact for the

foreseeable future. Thus, there is no strong need for a minimum EER requirement in addition to a

94

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-9S-440" 3 0.3 

efficient operation at high outdoor temperatures during periods when·electricity use by air 

conditioners is at its peak. (ACEEE, No. 284 at p.3; Austin Energy, No. 243 at p. 1; PG&E, No .. 

274 at p. 1). NARUC passed a resolution in July, 2000, urging DOE to·raise the standard by 30 

percent (i.e., to 13 SEER) with a minimum peak efficiency performance requirement. (NARUC, 

No. 260 at p. 2). NEEP also supports a standard of at least 13 SEER with a corresponding 

minimum EER of 11.6. (NEEP, No. 273 at p. 2). NRDC believes that DOE cannot set a standard 

at the highest level that is technologically feasible and economically justified if it does not include 

in that standard a minimum EER requirement. NRDC adds that this recommendation does not 

mean that EER would drop as SEER increases; it simply reflects NRDC's concern that EER 

might not rise as quickly without a separate regulation than it would with one. (NRDC, No. 250 

at p.32). 

York and Southern Company are both opposed to a minimum EER requirement. York 

asserts that an EER standard could be counter-productive by discouraging variable speed and 

modulating equipment, which could save consumers substantial amounts of money over the 

cooling season. (York, No. 270 at p. 4). Southern Company believes that, regardless of costeffectiveness, DOE does not possess regulatory authority to specify performance measures 

necessary to insure cost savings to consumers (SEER) and peak demand benefits to electricity 

suppliers (EER). (Southern Company, No. 257 at p. 4). 

As stated in the January 22 final rule, DOE is still convinced that the stringent physical 

relationship between EER and SEER in equipment rated through the adopted standard of 12 

SEER, which is comprised exclusively of non-modulating equipment, will remain intact for the 

foreseeable future. Thus, there is no strong need for a minimum EER requirement in addition to a 

94 
EE-RM/STD-9-440- 303

minimum SEER standard. See January 22 final rule, 66 FR 7183.

With regard to the use of variable speed or modulating technologies, even if these

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 'ower EERs will likely be lower than that of a similar group of non-modulating air

:onditioners 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 low-:apacity operation in return for a lower electricity price.

Although DOE 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.

Finally, although DOE 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.

95

EE-RM-STD-98-440 COMMENT 303

EE.RM/STD.98-4~O_ j 03 

minimum SEER standard. See January 22 final rule, 66 FR 7183. 

With regard to the use of variable speed or modulating technologies, even if these 

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 'ower EERs will likely be lower than that of a similar group of non-modulating air 

,~onditioners with higher EERs at the same SEER level. Also, utilities have the opportunity with 

modula1ing equipment to offer customers the option to allow the utility to "lock" the equipment 

into low--:apacity operation in return for a lower electricity price. 

Although DOE 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. 

Finally, although DOE 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. 

95 
2. TXV Requirement

EE"RM/STD-98-440-30 3

ACEEE and PG&E were both in support of a prescriptive requirement for adaptive

expansion devices such as thermostatic expansion valves (TXV). (ACEEE, No. 284 at p. 3;

PG&E, No. 274 at p. 1). NEEP was more expansive on the topic by stating that the evidence in

the record supports a TXV requirement. NEEP claims that TXVs provide additional efficiency

benefits, over and above the benefits captured in the SEER rating procedure. They assert that

central air conditioners with TXVs suffer lower efficiency degradation when a unit is improperly

installed. The result is that TXVs can provide 12 percent energy savings over and above the

energy savings associated with increasing SEERs. (NEEP, No. 273 at pp. 2,4).

York agrees w ith DOE's decision in the both the January 22 final rule and the July 25

SNOPR not to impose a TXV requirement. York claims that imposing a TXV requirement in this

rule would circumvent the test procedure. Also, it asserts that key data for evaluating the impacts

of TXVs on system performance have not been thoroughly reviewed by all interested parties.

(York, No. 270 at p. 4).

As stated in the January 22 final rule, a performance-based approach is also our preference

and is certainly in the spirit of EPCA. See 66 FR 7183-7184. 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. DOE is 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 parties. That said, DOE favors a SEER test

procedure that fairly evaluates equipment performance under conditions that represent those

96

EE-RM-STD-98-440 COMMENT 303

2. TXV Requirement 

EE-RM/STD-98-440-3D 3 

ACEEE and PG&E were both in support -of a prescriptive requirement for adaptive 

expansion devices such as thermostatic expansion valves (TXV). (ACEEE, No. 284 at p. 3; 

PG&E, No. 274 at p. 1). NEEP was more expansive on the topic by stating that the evidence in 

the record supports a TXV requirement. NEEP claims that TXV s provide additional efficiency 

benefits, over and above the benefits captured in the SEER rating procedure. They assert that 

central air c(Jnditioners with TXVs suffer lower efficiency degradation when a unit is improperly 

installed. TI,e result is that TXV s can provide 12 percent energy savings over and above the 

energy savinf"s associated with increasing SEERs. (NEEP, No. 273 at pp. 2,4). 

York agrees with DOE's decision in the both the January 22 final rule and the July 25 

SNOPR not to im .. 10se a TXV requirement. York claims that imposing a TXV requirement in this 

rule would circumvent the test procedure. Also, it asserts that key data for evaluating the impacts 

. of TXV s on system performance have not been thoroughly reviewed by all interested parties. 

(York, No. 270 at p. 4). 

As stated in the January 22 final rule, a performance-based approach is also our preference 

and is certainly in the spirit ofEPCA. See 66 FR 7183-7184. 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. DOE is 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 parties. That said, DOE favors a SEER test 

procedure that fairly evaluates equipment performance under conditions that represent those 

96 
EE-RM/STD-98-440-3 03

encountered in the field. DOE prefers to encourage correct charging or proper airflow but

recognizes that practical barriers exist. Although no immediate action will be taken to address

field equipment performance in the test procedure currently under revision, attempts may be made

in future test procedure revisions to evaluate whether the SEER test procedure can and should be

amended to better reflect equipment performance under improper charge or airflow.

In sum, this rulemaking does not adopt a TXV requirement. Any alterations in the SEER

test procedure further to encoulage the use of TXVs may be undertaken in a separate rulemaking

process after proposed revisions to the test procedure have been finalized. We also encourage

parties interested in encouraging the broader application of TXVs to pursue other avenues. These

include voluntary programs like Erergy 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. State Exemption from Final Rule

The Council of State Governments, Eastern Regional Conference (ERC) states that if DOE

fails to implement a 13 SEER standard, then ERC member States will seek a waiver from the

federal standard and implement the higher standard at the state level, as the States of California

and Oregon are currently doing. ERC goes on to quote 42 U.S. Code Section 6297(d) "Waiver of

Federal Preemption" where it states that "Any state...which provides for any energy conservation

standard for any type of covered product for which there is a Federal energy conservation

standard...may file a petition with the Secretary (of Energy) requesting that such State regulation

become effective with respect to such covered product." (ERC, No. 241-JJ at p. 1).

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EE-RM/STD-98-440-3 03 

encountered in the field. DOE prefers to encourage correct charging or proper airflow but 

recognizes that practical barriers exist. Although no immediate action will be taken to address 

field equipment performance in the test procedure currently under revision, attempts may be made 

in future test procedure revisions to evaluate whether the SEER test procedure can and should be 

amended to better reflect equipment performance under improper charge or airflow. 

In sum, this rulemaking dves not adopt a TXV requirement. Any alterations in the SEER 

test procedure further to e ncoulage the use of TXV s may be undertaken in a separate rulemaking 

process after proposed rev.isions to the test procedure have been finalized. We also encourage 

parties interested in encour.aging the broader application of TXVs to pursue other avenues .. These 

include voluntary programs like Er;ergy Star, tax incentives, and other state and local initiatives, 

which can all be tied to the presenc(! 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. State Exemption from Final Rule 

The Council of State Governments, Eastern Regional Conference (ERC) states that if DOE 

fails to implement a 13 SEER standard, then ERC member States will seek a waiver from the 

federal standard and implement the higher standard at the state level, as the States of California 

and Oregon are currently doing. ERC goes on to quote 42 U.S. Code Section 6297(d) "Waiver of 

Federal Preemption" where it states that "Any state ... which provides for any energy conservation 

standard for any type of covered product for which there is a Federal energy conservation 

standard ... may file a petition with the Secretary (of Energy) requesting that such State regulation 

become effective with respect to such covered product." (ERC, No. 241-JJ at p. 1). 

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DOE will promptly act upon any petition for waiver that may be submitted by a State

pursuant to section 327(d) of EPCA (42 U.S.C. 6297(d)). Section 327(d) provides that DOE must

prescribe a rule granting a waiver from Federal preemption if the State establishes by a

preponderance of the evidence that a State regulation is needed to meet "unusual and compelling

State or local energy or water interests," as that phrase is defined by the statute (42 U.S.C.

6297(d)(1)(B)). Section 327(d) further provides that DOE may not grant a waiver if interested

persons establish by a preponderance (f the evidence that the State regulation would significantly

burden manufacturing, marketing, distlibuti on, sale, or servicing of the covered product on a

national basis (42 U.S.C. 6297(d)(3)). Finally. section 327(d) establishes the timetable and

procedure that must be followed for acting upo: petitions for waiver from Federal preemption.

4. Effective Date

DOE received written and oral comments with regard to DOE's proposed effective date

(i.e., the date when the covered products must comply with the new standards for the proposed

amended standards contained in the July 25 SNOPR). In written comments, NRDC notes that the

proposed effective date in the July 25 SNOPR is approximately six months later than that in the

January 22 final rule, and claims that any delay in the effective date of new standards would

reduce their benefits. NRDC adds that section 325(d) of EPCA (42 U.S.C. 6295(d)) does not

require DOE to provide a five-year lead time for compliance by manufacturers after publication of

a final rule. (NRDC, No. 250 at p. 34). TNRCC recommends that rather than making the

proposed standards effective in 2006, DOE should accelerate the effective date of the standards

from the year 2006 to 2004, thereby providing improved energy efficiency and resultant air quality

benefits as soon as reasonably practicable. (TNRCC, No. 286 at p. 2). At the public hearing on

98

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EE-RM/STD-98-440 - -303 

DOE will promptly act upon any petition for waiver that may be submitted by a State 

pursuant to section 327(d) of EPCA (42 U.S.c. 6297(d». Section 327(d) provides that DOE must 

prescribe a rule granting a waiver from Federal preemption if the State establishes by a 

preponderance of the evidence that a State regulation is needed to meet "unusual and compelling 

State or local energy or water interests," as that phrase is defined by the statute (42 U.S.C. 

6297(d)(l )(B». Section 327(d) further provides that DOE may not grant a waiver if interested 

persons establish by a preponderance (f the evidence that the State regulation would significantly 

. burden manufacturing, marketing, dish ibuti ').1, sale, or servicing of the covered product on a 

national basis (42 U.S.C. 6297(d)(3». finally, section 327(d) establishes the timetable and 

procedure that must be followed for acting UpOl petitions for waiver from Federal preemption. 

4. Effective Date 

DOE received written and oral comments with regard to DOE's proposed effective date 

(i.e., the date when the covered products must comply with the new standards for the proposed 

amended standards contained in the July 25 SNOPR). In written comments, NRDC notes that the 

proposed effective date in the July 25 SNOPR is approximately six months later than that in the 

January 22 final rule, and claims that any delay in the effective date of new standards would 

reduce their benefits. NRDC adds that section 325(d) ofEPCA (42 U.S.C. 6295(d» does not 

require DOE to provide a five-year lead time for compliance by manufacturers after publication of 

a final rule. (NRDC, No. 250 at p. 34). TNRCC recommends that rather than making the 

proposed standards effective in 2006, DOE should accelerate the effective date of the standards 

from the year 200~ to 2004, thereby providing improved energy efficiency and resultant air quality 

benefits as soon as reasonably practicable. (TNRCC, No. 286 at p. 2). At the public hearing on 

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the July 25 SNOPR, representatives of the California Energy Commission, PG&E, and Goodman

also urged DOE to establish an earlier effective date if a 12 SEER standard was adopted. (Hearing

Transcript, at pp. 142-144 and 164-165). In initial written comments, ARI stated a willingness to

consent to the proposed 5-years-from-date-of-publication effective date for the proposed 12 SEER

standard. (ARI, No. 259 at p. 36). In supplemental comments submitted after the close of the

comment period, ARI responded to the comments that requested an earlier effective date by

stating that ARI would accept a compliance date of January 23, 2006, the same effective date as

provided in the January 22 final rule (ARI, No. 289). ARI stated that any agreement on its part to

an earlier effective date should not be deemed as a precedent by DOE or concession by ARI with

respect to future rulemaking proceedings.

Although section 325(d) of EPCA does not specitically state that initial amended standards

become applicable to the manufacture of covered products after a certain number of years elapse

following publication of a notice of final rulemaking, it provides a schedule of specific dates for

the promulgation of a final rule and of specific dates on which an initial amended SEER and an

initial HSPF established by a final rule would apply to the manufacture of new central air

conditioners and new central air conditioning heat pumps. In the past, in circumstances where

DOE was unable to publish a final rule by a deadline date established by a statute with scheduled

compliance dates, DOE has had a practice of adjusting the statutorily scheduled date such a rule

becomes enforceable to allow for the same amount of lead time as provided in the original

statutory schedule. However, the application of this practice in any particular rulemaking is

subject to public comment and to exceptions in special circumstances. See, e.g., 61 FR 10622,

10625 (March 14, 1996) (final rule establishing the Alternative Fuel Vehicle Acquisition Program

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EE-RM/STD-98-440- -303 

the July 25 SNOPR, representatives of the California Energy Commission, PG&E, and Goodman 

also urged DOE to establish an earlier effective date if a 12 SEER standard was adopted. (Hearing 

Transcript, at pp. 142-144 and 164-165). In initial written comments, ARI stated a willingness to 

consent to the proposed 5-years-from-date-of-publication effective date for the proposed 12 SEER 

standard. (ARl, No. 259 at p. 36). In supplemental comments submitted after the close of the 

comment period, ARI responded to the comments that requ-;sted an earlier effective date by 

stating that ARl would accept a compliance date of Januc.TY 23, 2006, the same effective date as 

. provided in the January 22 final rule (ARl, No. 289). ARl stated that any agreement on its part to 

an earlier effective date should not be deemed as a pre,~edfr:t by DOE or concession by ARl with 

respect to future rulemaking proceedings. 

Although section 325(d) ofEPCA does not specitkalJy state that initial amended standards 

become applicable to the manufacture of covered products after a certain number of years elapse 

following publication of a notice of final rulemaking, it provides a schedule of specific dates for 

the promulgation of a final rule and of specific dates on which an initial amended SEER and an 

initial HSPF established by a final rule would apply to the manufacture of new central air 

conditioners and new central air conditioning heat pumps. In the past, in circumstances where 

DOE was unable to publish a final rule by a deadline date established by a statute with scheduled 

compliance dates, DOE has had a practice of adjusting the statutorily scheduled date such a rule 

becomes enforceable to allow for the same amount of lead time as provided in the original 

statutory schedule. However, the application of this practice in any particular rulemaking is 

subject to public comment and to exceptions in special circumstances. See, e.g., 61 FR 10622, 

10625 (March 14, 1996) (final rule establishing the Alternative Fuel Vehicle Acquisition Program 

99 
EE-RM/STD-98-440 -303

with a compliance schedule that varied from the statutory schedule established by the Energy

Policy Act of 1992 and that was subject to case-by-case exceptions). In this rulemaking, all

interested persons who have an interest in the date that the final rule becomes enforceable -

including representatives of all of the manufacturers who would have to comply with that rule -

agree that the full amount of time between date of publication and the dates on which the rule

applies in the statutory schedule is not needed for central air conditioner and central air

conditioning heat pump manufacturers to come into compliance vith a. 12 SEER standard and that

four years would suffice. Moreover, if, as a result of unforeseen circumstances, a particular

manufacturer can show hardship, inequity, or unfair distributions of burdens, the standard would

be subject to case-by-case exception pursuant to the authority of the DOE Office of Hearing and

Appeals under section 504 of the DOE Organization Act (42 U.S.C. 7194), as implemented at

subpart B of 10 CFR part 1003. Finally, as other commenters have pointed out in arguments

supporting retention of January 23, 2006, as the compliance date, the shortened lead time will

provide approximately one year of additional energy and energy cost savings. On the basis of the

foregoing, DOE has decided to fix January 23, 2006, as the date on which the amended standards

set forth in today's final rule apply to the manufacture of central air conditioners and central air

conditioning heat pumps.

5. Environmental Impacts

Several comments stated that there would be greater environmental benefits under a 13

SEER standard. (Goodman, No. 269 at p. 2; Austin Energy, No. 243 at p. 1; State of Connecticut,

No. 279 at p. 2; State of Maine, 254 at pp.l-2). The Attorneys General from the States of New

York and Massachusetts asserted that DOE's assessment of environmental impact used the wrong100

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 .-J D 3 

with a compliance schedule that varied from the statutory schedule established by the Energy 

Policy Act of 1992 and that was subject to case-by-case exceptions). In this rulemaking, all 

interested persons who have an interest in the date that the final rule becomes enforceable -

including representatives of all of the manufacturers who would have to comply with that rule -

agree that the full amount of time between date of publication and the dates on which the rule 

applies in the statutory schedule is not needed for central air conditioner and central air 

conditioning heat pump manufacturers to come into compliance Nith t. 12 SEER standard and that 

four years would suffice. Moreover, if, as a result of unforeseen circumstances, a particular 

manufacturer can show hardship, inequity, or unfair distributions of burdens, the standard would 

be subject to case-by-case exception pursuant to the authority ofthe DOE Office of Hearing and 

Appeals under section 504 of the DOE Organization Act (42 U.S.C. 7194), as implemented at 

subpart B of 10 CFR part 1003. Finally, as other commenters have pointed out in arguments 

supporting retention of January 23, 2006, as the compliance date, the shortened lead time will 

provide approximately one year of additional energy and energy cost savings. On the basis of the 

foregoing, DOE has decided to fix January 23, 2006, as the date on which the amended standards 

set forth in today's final rule apply to the manufacture of central air conditioners and central air 

conditioning heat pumps. 

5. Environmental Impacts 

Several comments stated that there would be greater environmental benefits under a 13 

SEER standard. (Goodman, No. 269 at p. 2; Austin Energy, No. 243 at p. 1; State of Connecticut, 

No. 279 at p. 2; State of Maine, 254 at pp.1-2). The Attorneys General from the States of New 

York and Massachusetts asserted that DOE's assessment of environmental impact used the wrong' 

100 
EE-RM/STD-98-440 - 303

"no action" scenario; in their view, the correct "no action" scenario or baseline for measuring

impacts is the SEER 13 standard in the January 22 rule (Attorneys General, No. 277 at p. 11). In

addition to the carbon and NOx emissions, the Attorneys General state that power plants,

particularly coal-fired power plants, are also dominant sources of mercury and particulate

pollution nationwide. By ignoring these impacts of its SNOPR, DOE, in their view, violated the

National Environmental Policy Act (NEPA). (Attorneys General, No. 277 at pp. 14-15).

DOE disagrees with the comment that DOE failed to comply with NEI'A in proposing 12

SEER standards in the July 25 SNOPR. As previously discussed, DOE does not believe the

standards in the January 22 final rule constitute the baseline for assessing the impact of today's

final rule because those standards never became effective. The correct baseline, and the one used

for the "no action" alternative in the EA, are the currently effective NAECA standards.

DOE's environmental assessment (EA) examined the environmental impacts of all trial

standard levels being considered. See Section VIII.A. of this Supplementary Information. All of

the alternatives considered in DOE's analysis were found to have beneficial environmental

impacts compared to the "no action" alternative. Under the "no-action" or base case alternative,

the minimum efficiency requirements would remain at their current levels: a cooling efficiency of

10 SEER for split system air conditioners and heat pumps, a cooling efficiency of 9.7 SEER for

single package system air conditioners and heat pumps, a heating efficiency of 6.8 HSPF for split

system heat pumps, and a heating efficiency of 6.6 HSPF for single package system heat pumps.

The primary focus of the EA is the effect of alternative efficiency standards on air resources

resulting from decreased emissions from fossil-fueled electricity generation. For each of the trial

standard levels, DOE used the NEMS-BRS model to calculate total power sector emissions of

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EE-RM/STD-98-440 - 303 

"no action" scenario; in their view, the correct "no action" scenario or baseline for measuring 

impacts is the SEER 13 standard in the January 22 rule (Attorneys General, No. 277 at p. 11). In 

addition to the carbon and NOx emissions, the Attorneys General state that power plants, 

particularly coal-fired power plants, are also dominant sources of mercury and particulate 

pollution nationwide. By ignoring these impacts of its SNOPR, DOE, in their view, violated the 

National Environmental Policy Act (NEP A). (Attorneys General, No. 277 at pp. 14-15). 

DOE disagrees with the comment that DOE failed to comply with NEl' A in proposing 12 

SEER standards in the July 25 SNOPR. As previously discussed, DOE does not beli~ve the 

standards in the January 22 final rule constitute the baseline for assessing the impact oftoday's 

final rule because those standards never became effective. The correct baseline, and tht, one used 

for the "no action" alternative in the EA, are the currently effective NAECA standards. 

DOE's environmental assessment (EA) examined the environmental impacts of all trial 

standard levels being considered. See Section VIlLA. of this Supplementary Information. All of 

the alternatives considered in DOE's analysis were found to have beneficial environmental 

impacts compared to the "no action" alternative. Under the "no-action" or base case alternative, 

the minimum efficiency requirements would remain at their current levels: a cooling efficiency of 

10 SEER for split system air conditioners and heat pumps, a cooling efficiency of9.7 SEER for 

single package system air conditioners and heat pumps, a heating efficiency of 6.8 HSPF for split 

system heat pumps, and a heating efficiency of 6.6 HSPF for single package system heat pumps. 

The primary focus of the EA is the effect of alternative efficiency st~dards on air resources 

resulting from decreased emissions from fossil-fueled electricity generation. For each of the trial 

standard levels, DOE used the NEMS-BRS model to calculate total power sector emissions of 

101 
EE-RM/STD-98-440 - 3J3

nitrogen oxide, sulfur dioxide, and carbon. As explained in Section VIII of this Supplementary

Information, on the basis of the EA, DOE determined that the environmental effects associated

with the standard levels in today's final rule are not significant.

DOE has corrected an error that DOE discovered in the NEMS-BRS, the model used by

DOE to estimate both peak power and power plant emission impacts due to appliance standards.

As discussed earlier (see Peak Power), DOE conducted a comprehensive review of the end-use

load shapes used by NEMS-BRS, not only for the residential sector and, specifically, the airconditioning end-use, but for the commercial, industrial, and transportation sectors as well.

Several problems were discovered with the load shapes and, as a result, an alternative set of

sectoral end-use load shapes were assigned to NEMS-BRS. By implementing a new set of

sectoral load shapes, NEMS-BRS estimates greater power plant emission impacts (in the form of

reduced CO2 and NO, emissions) from increased central air conditioner and heat pump standards.

Appendix M of the TSD includes an updated set of power plant emission impacts. The changes

resulting from this NEMS-BRS error correction do not affect DOE's finding of no significant

impact.

6. Employment Impacts

With regard to the impact that amended central air conditioner and heat pump standards

have on national employment, both ARI and Rheem are concerned that high efficiency standards

can lead to job losses in the air-conditioning industry's manufacturing sector. Rheem states that

fewer units will be sold due to the higher purchase prices associated with more efficient

equipment. Fewer equipment sales will in turn reduce the need for personnel in manufacturing

facilities and design groups. (Rheem, No. 248 at p. 3). ARI states that DOE's decision to issue

102

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EE-RM/STD-98-440 - J 03 

nitrogen oxide, sulfur dioxide, and carbon. As explained in Section VIII of this Supplementary 

Information, on the basis of the EA, DOE determined that the environmental effects associated 

with the standard levels in today's final rule are not significant. 

DOE has corrected an error that DOE discovered in the NEMS-BRS, the model used by 

DOE to estimate both peak power and power plant emission impacts due to appliance standards. 

As discussed earlier (see Peak Power), DOE conducted a comprehensive review of the end-use 

load shapes used by NEMS-BRS, not only for the residential sector and, specifically, the aitconditioning end-use, but for the commercial, industrial, and tgmsportation sectors as well. 

Several problems were discovered with the load shapes and, as a result, an alternative set of 

sectoral end-use load shapes were assigned to NEMS-BRS. By implementing a new set of 

sectoral load shapes, NEMS-BRS estimates greater power plant emission impacts (in the form of 

reduced CO2 and NOx emissions) from increased central air conditioner and heat pump standards. 

Appendix M of the TSD includes an updated set of power plant emission impacts. The changes 

resulting from this NEMS-BRS error correction do not affect DOE's finding of no significant 

impact. 

6. Employment Impacts 

With regard to the impact that amended central air conditioner and heat pump standards 

have on national employment, both ARI and Rheem are concerned that high efficiency standards 

can lead to job losses in the air-conditioning industry's manufacturing sector. Rheem states that 

fewer units will be sold due to the higher purchase prices associated with more efficient 

equipment. Fewer equipment sales will in tum reduce the need for personnel in manufacturing 

facilities and design groups. (Rheem, No. 248 at p. 3). ARI states that DOE's decision to issue 

102 
EE-RM/STD-98-440 - 3 5

13 SEER standards in its January 22 final rule was in part based on the fact that unemployment

was then at the lowest rate in 30 years. Because the current state of the national economy is

certainly worse than when DOE issued its January 22 final rule, ARI claims that 13 SEER

standards would have a much worse impact on the air-conditioning industry than initially

forecasted by DOE. In any case, ARI points out that DOE's analysis demonstrates that 12 SEER

standards would have approximately 50 percent fewer job losses compared to 13 SEER standards.

ARI asserts that this difference in job losses is significant and demonstrates that the proposed 12

SEER standards are a much better choice. (ARI, No. 259 at pp. 11-12, 31-32).

OOE has a much different perspective on DOE's employment impact analysis. OOE

states that it is purely speculative to claim that there is a distinguishable difference between the

impacts that 12 SEER and 13 SEER standards have on the national economy. The accuracy of the

macroeconomic model used by DOE to estimate employment impacts does not allow for such a

distinction. (OOE, No. 275 at pp. 3-4).

As stated in the January 22 final rule, DOE estimated the impacts of the new standards on

national labor demand using an input/output model of the U.S. economy. See 66 FR 7192. The

model characterizes the interconnections between 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,'8 producing a gain of jobs in the manufacturing sector that is

'8 Bureau of Economic Analysis, Regional Multipliers: A User Handbookfor the Regional Input-Output

Modeling System (RIMS II)

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EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

13 SEER standards in its January 22 final rule was in part based on the fact that unemployment 

was then at the lowest rate in 30 years. Because the current state of the national economy is 

certainly worse than when DOE issued its January 22 final rule, ARI claims that 13 SEER 

standards would have a much worse impact on the air-conditioning industry than initially 

forecasted by DOE. In any case, ARI points out that DOE's analysis demonstrates that 12 SEER 

standards would have approximately 50 percent fewer job losses compared to 13 SEER standards. 

ARI asserts that this difference injob losses is significant and demonstrates that the proposed 12 

SEER standards are a much better choice. (ARI, No. 259 at pp. 11-12,31-32). 

ODE has a much different perspective on DOE's employment impact analysis. ODE 

states that it is purely speculative to claim that there is a distinguishable difference between the 

impacts that 12 SEER and 13 SEER standards have on the national economy. The accuracy of the 

macroeconomic model used by DOE to estimate employment impacts does not allow for such a 

distinction. (ODE, No. 275 at pp. 3-4). 

As stated in the January 22 final rule, DOE estimated the impacts of the new standards on 

national labor demand using an input/output model of the U.S. economy. See 66 FR 7192. The 

model characterizes the interconnections between 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, J8 producing a gain of jobs in the manufacturing sector that is 

18 Bureau of Economic Analysis, Regional Multipliers: A User Handbookfor the Regional Input-Output 

Modeling System (RIMS 1/) 

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less than the loss of jobs in other sectors of the economy. 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. The following reasons were given in the January 22 final

rule for the conclusion that any modest changes in employment were in doubt (66 FR 7192):

* 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 input-output 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 identify and consider separately any employment

impacts beyond the calculation of net present value.

Although, as noted by ARI, unemployment is no longer as low as it was at the time the

January 22 final rule was issued, the average unemployment rate through October, 2001, (4.6

percent) is only slightly higher than the annual rates for 1998, 1999, and 2000 and still less than

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EE-RM/STD-98-440 - 3 () 3 

less than the loss of jobs in other sectors of the economy. 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. The following reasons were given in the January 22 final 

rule for the conclusion that any modest changes in employment were in doubt (66 FR 7192): 

• 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 input-output 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 identify and consider separately any emp'Ioyment 

impacts beyond the calculation of net present value. 

Although, as noted by ARI, unemployment is no longer as low as it was at the time the 

January 22 final rule was issued, the average unemployment rate through October, 2001, (4.6 

percent) is only slightly higher than the annual rates for 1998, 1999, and 2000 and still less than 

104 
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the annual rates for all other years in the 1990's'9. Thus, after discounting the first concern cited

above, and considering the other two legitimate concerns regarding the interpretation and use of

the employment impacts analysis, DOE cannot conclude that the central air conditioner and heat

pump standards issued in today's final rule are likely to result in appreciable job losses to the

nation.

7. Space-Constrained Products

a. Through-the-Wall Products

All parties commenting on DOE's proposed standards for through-the-wall products

supported the proposed standards - 10.9 SEER and 7.1 HSPF for split system air conditioners and

heat pumps and 10.6 SEER and 7.0 HSPF for single package air conditioners and heat pumps.

(Austin Energy, No. 243 at p. 3; OOE, No. 275 at p. 4; Lennox, No. 272 at p. 3; ASE, No. 282 at

p. 4; ACEEE, No. 284 at pp. 13-14).

Thus, DOE is adopting as minimum efficiency standards for the through-the-wall

products the standards proposed in the July 25 SNOPR.

b. Small Duct, High Velocity Systems

DOE received information in the rulemaking that indicated that the special

characteristics of small duct, high velocity (SDHV) air conditioner and heat pump systems make it

unlikely such systems could meet the 12 SEER/7.4 HSPF standard established for conventional

products. Spacepak, Unico, and ARI all support the creation of a separate product class for

SDHV systems and the development of technologically feasible and economically justified

19 U.S. Department of Labor-Bureau of Labor Statistics (BLS), Labor Force Statistics from the Current

Population Survey. BLS website <http://stats.bls.gov:80/cps/home.htm>

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EE-RM/STD-98-440 - j 03 

the annual rates for all other years in the 1990'SI9. Thus, after discounting the first concern cited 

above, and considering the other two legitimate concerns regarding the interpretation and use of 

the employment impacts analysis, DOE cannot conclude that the central air conditioner and heat 

pump standards issued in today's final rule are likely to result in appreciable job losses to the 

nation. 

7. Space-Constrained Products 

a. Through-the-Wall Products 

AU parties commenting on DOE's proposed standards for through-the-wal1 products 

supported the proposed standards -10.9 SEER and 7.1 HSPF for split system air conditioners and 

heat pumps and 10.6 SEER and 7.0 HSPF for single package air conditioners and heat pumps. 

(Austin Energy, No. 243 at p. 3; OOE, No. 275 at p. 4; Lennox, N~. 272 at p. 3; ASE, No. 282 at 

p. 4; ACEEE, No. 284 at pp. 13-14). 

Thus, DOE is adopting as minimum efficiency standards for the through-the-wall 

products the standards proposed in the July 25 SNOPR. 

b. Small Duct, High Velocity Systems 

DOE received information in the rulemaking that indicated that the special 

characteristics of small duct, high velocity (SDHV) air conditioner and heat pump systems make it 

unlikely such systems could meet the 12 SEERJ7.4 HSPF standard established for conventional 

products. Spacepak, Unico, and ARI all support the creation of a separate product class for 

SDHV systems and the development of technologically feasible and economically justified 

19 U.S. Department of Labor-Bureau of Labor Statistics (BLS), Labor Force Statistics/rom the Current 

Population Survey. BLS website <http://stats.bls.gov:80/cps/home.htm> 

105 
EE-RM/STD-98-440 - 3 5

standards for this product. Although all three comments are in agreement with regard to the

establishment of a new product class for SDHV systems, Unico and ARI are in disagreement over

how these systems should be tested. While ARI recommends that no special consideration be

given for SDHV systems and, therefore, no changes be made to the test procedures for central air

conditioners and heat pumps, Unico proposes three options for amending the test procedure to rate

SDHV systems. The three options include: (1) a coil-only test with a higher allowable coil

pressure drop and use of a default fan power; (2) coil and blower tested with a 1.2 inch minimum

external static pressure; and (3) coil-only testing with existing coil pressure drop allowance and

default fan power without mention of the blower. (Spacepak, No. 267 at p. 1; Unico, No. 251 at

pp. 3-4; ARI, No. 259 at p. 35).

While DOE agrees with public comments stating that these systems should not be subject

to the standards set for conventional products, DOE does not currently have an analytical basis for

setting a new standard for SDHV systems. DOE is currently in the process of amending the test

procedure for rating the performance of central air conditioners and heat pumps and will take the

above comments into consideration when determining the appropriate testing requirements for

SDHV systems. DOE has started the research needed to propose amended standards for SDHV

systems and it intends to initiate a rulemaking shortly for this product class.

8. Basis for HSPF Level

ARI stated in its comments that if a 12 SEER standard is adopted for central air

conditioning heat pumps, the HSPF should be no higher than 7.3. ARI believes the HSPF should

be based on an analysis of the SEER-HSPF relationships across equipment of varying capacity

ratings. It faults DOE's analysis for relying on an analysis of only 3-ton equipment to determine

106

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

standards for this product. Although all three comments are in agreement with regard to the 

establishment of a new product class for SDHV systems, Unico and ARI are in disagreement over 

how these systems should be tested. While ARI recommends that no special consideration be 

given for SDHV systems and, therefore, no changes be made to the test procedures for central air 

conditioners and heat pumps, Unico proposes three options for amending the test procedure to rate 

SDHV systems. The three options include: (1) a coil-only test with a higher allowable coil 

pressure drop and use of a default fan power; (2) coil and blower tested with a 1.2 inch minimum 

external static pressure; and (3) coil-only testing with existing coil pressure drop allowance and 

default fan power without mention of the blower. (Spacepak, No. 267 at p. 1; Unico, No. 251 at 

pp. 3-4; ARI, No. 259 at p. 35). 

While DOE agrees with public comments stating that these systems should not be subject 

to the standards set for conventional products, DOE does not currently have an analytical basis for 

setting a new standard for SDHV systems. DOE is currently in the process of amending the test 

procedure for rating the performance of central air conditioners and heat pumps and will take the 

above comments into consideration when determining the appropriate testing requirements for 

SDHV systems. DOE has started the research needed to propose amended standards for SDHV 

systems and it intends to initiate a rulemaking shortly for this product class. 

8. Basis for HSPF Level 

ARI stated in its comments that if a 12 SEER standard is adopted for central air 

conditioning heat pumps, the HSPF should be no higher than 7.3. ARI believes the HSPF should 

be based on an analysis of the SEER-HSPF relationships across equipment of varying capacity 

ratings. It faults DOE's analysis for relying on an analysis of only 3-ton equipment to determine 

106 
the HSPF. (ARI, No. 259 at p. 4).

EE-RM/STD-98-440- 3-3

As DOE explained in the preamble to the January 22 final rule, DOE established the

SEER-HSPF pairings in order to maintain the offset between the minimum SEER and the

minimum HSPF in the current standards. Because heating energy is a large fraction of total heat

pump energy consumption, DOE stated it would not relax the HSPF level in the absence of sound

evidence regarding the burdens that would be mitigated (66 FR 7184). DOE continues to think an

HSPF of 7.4 is the appropriate level for 12 SEER, and today adopts that level. DOE's decision is

supported by data discussed in the TSD (Section 4.6.2.1) which shows that most models of

equipment below 3-tons meet or exceed an HSPF of 7.4, and almost a third of models available

below 20,000 BTU/hr meet or exceed an HSPF of 7.4.

9. Non-Regulatory Approaches

ARI, Carrier, and Mercatus Center contended that DOE did not adequately evaluate the

national impacts of non-regulatory programs for improving the efficiency of central air

conditioners and heat pumps. ARI claimed that by combining several non-regulatory alternatives,

such as consumer tax credits, consumer rebates and low-income subsidies, the amount of energy

saved could increase to 3.5 quads while the net present value would remain relatively unchanged.

(ARI, No. 259 at pp. 15-16). Carrier points out that DOE overlooked the energy saving benefits

due to the proper installation and maintenance of air-conditioning equipment. Carrier claims that

the total energy savings from these actions far exceed those limited to increasing the SEER of the

equipment. In stating the proposed 12 SEER standards represent an appropriate level for the

entire nation, Carrier recognizes that there are some regions of the country that could benefit from

higher efficiency for unique climate or electrical supply reasons. In these instances, government

107

EE-RM-STD-98-440 COMMENT 303

the HSPF. (ARl, No. 259 at p. 4). 

EE-RM/STD-98-440 - .303 

As DOE explained in the preamble to the January 22 final rule, DOE established the 

SEER-HSPF pairings in order to maintain the offset between the minimum SEER and the 

minimum HSPF in the current standards. Because heating energy is a large fraction of total heat 

pump energy consumption, DOE stated it would not relax the HSPF level in the absence of sound 

evidence regarding the burdens that would be mitigated (66 FR 7184). DOE continues to think an 

HSPF of7.4 is the appropriate level for 12 SEER, and today adopts that level. DOE's decision is 

supported by data discussed in the TSD (Section 4.6.2.1) which shows that most models of 

equipnent below 3-tons meet or exceed an HSPF of 7.4, and almost a third of models available 

below ::'0,000 BTU/hr meet or exceed an HSPF of 7.4. 

9. Non-Regulatory Approaches 

ARl, Carrier, and Mercatus Center contended that DOE did not adequately evaluate the 

national impacts of non-regulatory programs for improving the efficiency of central air 

conditioners and heat pumps. ARl claimed thatby combining several non-regulatory alternatives, 

such as consumer tax credits, consumer rebates and low-income subsidies, the amount of energy 

saved could increase to 3.5 quads while the net present value would remain relatively unchanged. 

(ARl, No. 259 at pp. 15-16). Carrier points out that DOE overlooked the energy saving benefits 

due to the proper installation and maintenance of air-conditioning equipment. Carrier claims that 

the total energy savings from these actions far exceed those limited to increasing the SEER of the 

equipment. In stating the proposed 12 SEER standards represent an appropriate level for the 

entire nation, Carrier recognizes that there are some regions of the country that could benefit from 

higher efficiency for unique climate or electrical supply reasons. In these instances, government 

107 
EE-RM/STD-98-440 - 3 ·

agencies and utilities should provide incentives to encourage the use of higher efficiency

equipment. (Carrier, No. 280 at p. 3). Mercatus Center states that DOE does not evaluate nonregulatory programs adequately because it assumes their effects rather than estimating them based

on any credible data or evidence. (Mercatus Center, No. 242 at p. 13).

DOE disagrees with this comment. In determining the base case for the analysis of the

highest efficiency standards that are technologically feasible and economically justified (i.e., the

energy cor sump'ion likely to occur in the absence of standards), DOE gave adequate

consideration to all non-regulatory market forces likely to occur in the absence of standards.

Additionally, the Regulatory Impact Analysis estimated the national energy savings and net

present value that w,)uld result from non-regulatory approaches including: (1) consumer product

labeling, (2) public education, (3) prescriptive standards, (4) consumer tax credits, (5)

manufacturer tax credits, (6) consumer rebates, (7) low income subsidies, (8) voluntary efficiency

targets, and (9) mass government purchases. The analysis found that none of them would save an

equivalent amount of energy as energy conservation standards.

10. Energy Policy

On the issue of energy policy, several comments claimed that DOE's action of

withdrawing the 13 SEER standards issued in the January 22 final rule is not consistent with the

current Administration's own National Energy Policy. ASAP, ASE, CEC, and NRDC all note

that the Administration calls for appliance standards as way to moderate growth in electricity

demand and limit consumer energy bills. (ASAP, No. 244 at p. 1; ASE, No. 282 at p. 2; CEC,

No. 263 at p. 2; NRDC, No. 250 at p. 28). NRDC also states that the relaxation of the 13 SEER

standard is inconsistent with the obligations of the United States under the United Nations

108

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD-98-440 - 3 (J 3 . 

agencies and utilities should provide incentives to encourage the use of higher efficiency 

equipment. (Carrier, No. 280 at p. 3). Mercatus Center states that DOE does not evaluate nonregulatory programs adequately because it assumes their effects rather than estimating them based 

on any credible data or evidence. (Mercatus Center, No. 242 at p. 13). 

DOE disagrees with this comment. In detennining the base case for the analysis of the 

highest efficiency standards that are technologically feasible and economically justified (i.e., the 

energy cor sump.'ion likely to occur in the absence of standards), DOE gave adequate 

consiaeration to a.'1 non-regulatory market forces likely to occur in the absence of standards. 

Additionally, the Regulatory Impact Analysis estimated the national energy savings and net 

present value that w,mld result from non-regulatory approaches including: (1) consumer product 

labeling, (2) public education, (3) prescriptive standards, (4) consumer tax credits, (5) 

manufacturer tax credits, (6) consumer rebates, (7) low income subsidies, (8) voluntary efficiency 

targets, and (9) mass government purchases. The analysis found that none of them would save an 

equivalent amount of energy as energy conservation standards. 

10. Energy Policy 

On the issue of energy policy, several comments claimed that DOE's action of 

withdrawing the 1 J SEER standards issued in the January 22 final rule is not consistent with the 

current Administration's own National Energy Policy. ASAP, ASE, CEC, and NRDC all note 

that the Administration calls for appliance standards as way to moderate growth in electricity 

demand and limit consumer energy bills. (ASAP, No. 244 at p. 1; ASE, No. 282 at p. 2; CEC, 

No. 263 at p. 2; NRDC, No. 250 at p. 28). NRDC also states that the relaxation ofthe 13 SEER 

standard is inconsistent with the obligations of the United States under the United Nations 

108 
EE-RM/STD-98-440- 33.

Framework Convention on Climate Change (UNFCCC), to which our country became a Party

with the advice and consent of the Senate in 1992. (NRDC, No. 250 at pp. 29-30).

DOE disagrees that its action to finalize 12 SEER standards for central air conditioners

and heat pumps is inconsistent with either the Administration's National Energy Policy or with

the United States' obligations under the UNFCCC. The 12 SEER standards being finalized today

significantly increase the minimum efficiency requirements for central air conditioners and heat

pumps. Thus, the policy to amend the standards is consistent with the Administration's call to use

appliance standards as a methcd to moderate growth in electricity demand and limit consumer

energy bills.

VII. Analytical Results and Conclusions

A. Overview ofAnalytical Results

1. General

Although DOE reassessed the benefits and burdens of the trial standard levels in arriving

at the determinations in today's rule, the underlying analyses are unchanged from those presented

in the January 22 final rule except for additional analysis of through-the-wall product classes

included as Appendix L to the TSD. Briefly, DOE examined five standard levels. Table 3

presents the trial standards levels analyzed and the corresponding efficiency level for each class of

product. Trial Standard Level 5 is the Max Tech Level for each class of product. Trial Standard

Level 4 was the one DOE adopted for the standards set forth in the January 22 final rule. Trial

Standard Level 2 is the one DOE today determines to be the maximum efficiency that is

technologically feasible and economically justified.

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EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440_ oD3 

Framework Convention on Climate Change (UNFCCC), to which our country became a Party 

with the advice and consent of the Senate in 1992. (NRDC, No. 250 at pp. 29-30). 

DOE disagrees that its action to fmalize 12 SEER standards for central air conditioners 

and heat pumps is inconsistent with either the Administration's National Energy Policy or with 

the United States' obligations under the UNFCCC. The 12 SEER standards being finalized today 

significantly increase the minimum efficiency requirements for central air conditioners and heat 

pumps. Thus, the polic:.r to amend the standards is consistent with the Administration's call to use 

appliance standards as a methcd to moderate growth in electricity demand and limit consumer 

energy bills. 

VII. Analytical Results ami: Conclusions 

A. Overview of Analytical Results 

1. General 

Although DOE reassessed the benefits and burdens of the trial standard levels in arriving 

at the detenninations in today's rule, the underlying analyses are unchanged from those presented 

in the January 22 final rule except for additional analysis of through-the-wall product classes 

included as Appendix L to the TSD. Briefly, DOE examined five standard levels. Table 3 

presents the trial standards levels analyzed and the corresponding efficiency level for each class of 

product. Trial Standard Level 5 is the Max Tech Level for each class of product. Trial Standard 

Level 4 was the one DOE adopted for the standards set forth in the January 22 final rule. Trial 

Standard Level 2 is the one DOE today detennines to be the maximum efficiency that is 

technologically feasible and economically justified. 

109 
EE-RM/STD-98-440 - 3J3

Table 3: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER)

Trial Standard Split Air Packaged Air Split Heat Packaged

Level Conditioners Conditioners Pumps Heat 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 examined, several different scenarios were analyzed consisting of

variations on: (1) electricity price and housing projections; (2) equipment efficiency distributions;

(3) marmlfacturer cost estimates; and (4) socieial discount rate. Electricity price and housing

projections were based on three different fcrecasts from the Energy Information Agency's 2000

Annual Energy Outlook (AEO): (1) Reference Case, (2) High Growth Case, and (3) Low Growth

Case. DOE 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. See October 5, 2000 NOPR for an explanation of the three scenarios (65

FR 59596, notes 10 through 12 and accompanying text). Under the standard levels in today's

rule, DOE believes that the NAECA scenario most closely represents the likeliest impact of the

new standards, as explained in Chapter 8 of the TSD. DOE analyzed two manufacturer cost

scenarios: (1) based on reverse engineering estimates, and (2) based on ARI-provided mean cost

estimates. For the reasons given in the preamble to the January 22 final rule (66 FR 7177-78),

DOE expects manufacturer costs under the amended standards will lie closer to the estimates

produced through DOE's reverse engineering analysis, which lie between ARI's minimum and

110

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - J 03 

Table 3: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER) 

Trial Standard Split Air Packaged Air Split Heat Packaged 

Level Conditioners Conditioners Pumps . Heat 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 examined, several different scenarios were analyzed consisting of 

variations on: (1) electricity price an6 housiug projections; (2) equipment efficiency distributions; 

(3) mar'ufacturer cost estimates; and (4) £Ocielal discount rate. Electricity price a..'1d housing 

projections were based on three different forpcasts from the Energy Information Agency's 2000 

Annual Energy Outlook (AEO): (1) Reference Case, (2) High Growth Case, and (3) Low Growth 

Case. DOE 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. See October 5, 2000 NOPR for an explanation of the three scenari<;ls (65 

FR 59596, notes 10 through 12 and accompanying text). Under the standard levels in today's 

rule, DOE believes that the NAECA scenario most closely represents the likeliest impact of the 

new standards, as explained in Chapter 8 of the TSD. DOE analyzed two manufacturer cost 

scenanos: (1) based on reverse engineering estimates, and (2) based on ARl-provided mean cost 

estimates. For the reasons given in the preamble to the January 22 final rule (66 FR 7177-78), 

DOE expects manufacturer costs under the amended standards will lie closer to the estimates 

produced through DOE's reverse engineering analysis, which lie between ARl's minimum and 

110 
EE-RM/STD-98-440 -

ARI's mean cost values. DOE 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.

2. Through-the-Wall Products

In response to comments on the October 5, 2000 NOPR, DOE conducted additional

analysis on the cost and technical issues related to through-the-wall air conditioner and heat pump

products. The analysis is described in detail in Appendix L of the TSD and is summarized here.

DOE performed a design assessment on two split tirough-the-wall systems and one

packaged through-the-wall system. All systems are designed primarily for the replacement market

and fit the physical definition of through-the-wall equipment proposed in the October 5, 2000

NOPR and July 25 SNOPR. The design assessment sought to identify the cost and efficiency

impacts of employing commonly applied techniques to improve efficiency including reduction of

air leakage and improvement in airflow, utilizing more efficient compression and fan motors, and

increasing heat exchanger surface area. Emerging technologies and modulating technologies were

not considered since they are not likely to be applied in conventional baseline equipment.

The cost estimation for the analysis was based on a modified version of the reverse

engineering cost models developed as part of this rulemaking for conventional products. The

perfonnance impacts of employing various design options were estimated utilizing a spreadsheet

model populated with actual performance data and engineering guidelines.

The analysis concluded that utilizing commonly applied technologies and designs, the

most constrained through-the-wall split-system analysis could increase its SEER rating from 10.0

111

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

ARI's mean cost values. DOE assumed a societal discount rate of7 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. 

2. Through-the-Wall Products 

In response to comments on the October 5,2000 l'!OPR, DOE conducted additional 

analysis on the cost and technical issues related to throu~h-the-wall air conditioner and heat pump 

products. The analysis is described in detail in Appendix L of the TSD and is summarized here. 

DOE performed a design assessment on two split tirrough-the-wall systems and one 

packaged through-the-wall system. All systems are designe.d primarily for the replacement market 

and fit the physical definition of through-the-wall equipmem proposed in the October 5, 2000 

NOPR and July 25 SNOPR. The design assessment sought to identify the cost and efficiency 

impacts of employing commonly applied techniques to improve efficiency including reduction of 

air leakage and improvement in airflow, utilizing more efficient compression and fan motors, and 

increasing heat exchanger surface area. Emerging technologies and modulating technologies were 

not considered since they are not likely to be applied in conventional baseline equipment. 

The cost estimation for the analysis was based on a modified version of the reverse 

engineering cost models developed as part of this rulemaking for conventional products. The 

perfonnance impacts of employing various design options were estimated utilizing a spreadsheet 

model populated with actual performance data and engineering guidelines. 

The analysis concluded that utilizing commonly applied technologies and designs, the 

most constrained through-the-wall split-system analysis could increase its SEER rating from 10.0 

111 
EE-RM/STD-98-440 - 303

SEER to as high as 11.4 SEER, and the packaged system analysis could increase its SEER rating

from 9.7 SEER to 10.6 SEER. Employing all improvements would add $106 and $129 to the

retail price of the equipment, respectively, comparable to the increases expected in conventional

equipment moving to a 12 SEER standard.

To explore the effects that more stringent standards for through-the-wall products would

have on consumers, DOE performed a life-cycle cost analysis. The life-cycle cost analysis for

through-the-wall consumers used a subset of consumers identified as living in multi-family

dwellings, which are the predominate application for through-the.-wall products.

In the July 25 SNOPR, DOE proposed, based on its analysis, a 10.9 SEER/7.1 HSPF

standard for through-the-wall split systems and a 10.6 SEER/7.0 HSPF standard for through-thewall single package system products. After considering public comments, DOE today adopts

those levels as final standards for through-the-wall products.

3. Small Duct, High Velocity Systems

In response to comments on the July 25, 2001 SNOPR, DOE has determined that

additional analysis on the cost and technical issues related to small duct, high velocity (SDHV) air

conditioner and heat pump products are needed to determine appropriate minimum efficiency

standards for this class of product. The analysis plan for establishing the manufacturing cost and

efficiency relationship for SDHV systems has yet to be developed. But the intention is to involve

those manufacturers that produce these products (Spacepak and Unico) in the process to develop

the cost and efficiency relationship.

To explore the effects that more stringent standards for SDHV systems have on

consumers, DOE intends to perform a life-cycle cost analysis. The life-cycle cost analysis for

112

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ... 303. 

SEER to as high as 11.4 SEER, and the packaged system analysis could increase its SEER rating 

from 9.7 SEER to 10.6 SEER. Employing all improvements would add $106 and $129 to the 

retail price of the equipment, respectively, comparable to the increases expected in conventional 

equipment moving to a 12 SEER standard. 

To explore the effects that more stringent standards for through-the-wall products would 

have on consumers, DOE performed a life-cycle cost analysis. The life-cycle cost analysis for 

through-the-wall consumers used a subset of consumers identifled as ;iving in multi-family 

dwellings, which are the predominate application for through-th\.~· wall products. 

In the July 25 SNOPR, DOE proposed, based on its analy.5L~, a 1'1.9 SEERl7.l HSPF 

standard for through-the-wall split systems and a 10.6 SEERl7.0 HSPF standard for through-thewall single package system products. After considering public comments, DOE today adopts 

those levels as final standards for through-the-wall products. 

3. Small Duct, High Velocity Systems 

In response to comments on the July 25, 2001 SNOPR, DOE has determined that 

additional analysis on the cost and technical issues related to small duct, high velocity (SDHV) air 

conditioner and heat pump products are needed to determine appropriate minimum efficiency 

standards for this class of product. The analysis plan for establishing the manufacturing cost and 

efficiency relationship for SDHV systems has yet to be developed. But the intention is to involve 

those manufacturers that produce these products (Spacepak and Unico) in the process to develop 

the cost and efficiency relationship. 

To explore the effects that more stringent standards for SDHV systems have on 

consumers, DOE intends to perform a life-cycle cost analysis. The life-cycle cost analysis for 

112 
EE-RM/STD-98-440 - J03

SDHV consumers will use a subset of consumers identified as probable candidates for the

application of SDHV products.

Although DOE has concluded that SDHV systems warrant their own product class, it has

yet to determine an appropriate minimum efficiency standard for them. Therefore, this final rule

provides that the NAECA-prescribed minimum efficiency standards covering all product types

(e.g., 10 SEER for split system air conditioners) will remain applicable to SDHV systems. A

separate rulemaking process will be conducted for SDHV systems in the ne.r futule to establish

appropriate minimum efficiency standards for this class of product.

B. Conclusions Regarding Conventional Products

EPCA specifies that any new or amended energy conservation standard for any type (or

class) of covered product shall be designed to achieve the maximum improvement in energy

efficiency which the Secretary determines is technologically feasible and economically justified

(42 U.S.C. 6295(o)(2)(A)). In determining whether a standard is economically justified, the

Secretary must determine whether the benefits of the standard exceed its burdens (42 U.S.C.

6295(o)(2)(B)(i)). The amended standard must "result in significant conservation of energy"

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

In conducting its analysis, DOE considers the impacts of standards beginning with the

Max Tech Level, i.e., Trial Standard Level 5 in this rulemaking. DOE then considers less

efficient levels until it reaches the level which is both technologically feasible and economically

justified.

To aid the reader in the discussion of the benefits and burdens of the trial standard levels,

113

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - j 03 

SDHV consumers will use a subset of consumers identified as probable candidates for the 

application of SDHV products. 

Although DOE has concluded that SDHV systems warrant their own product class, it has 

yet to determine an appropriate minimum efficiency standard for them. Therefore, this final rule 

provides that the NAECA-prescribed minimum efficiency standards covering all product types 

(e.g., 10 SEER for split system air conditioners) will remain applicable to SDHV systems. A 

separate rulemaking process will be conducted for SDHV systems in the netr future to establish 

appropriate minimum efficiency standards for this class of product. 

B. Conclusions Regarding Conventional Products 

EPCA specifies that any new or amended energy conservation standard for any type (or 

class) of covered product shall be designed to achieve the maximum improvement in energy 

efficiency which the Secretary determines is technologically feasible and economically justified 

(42 U.S.C. 6295(0)(2)(A)). In determining whether a standard is economically justified, the 

Secretary must determine whether the benefits of the standard exceed its burdens (42 U.S.C. 

6295(0)(2)(B)(i)). The amended standard must "result in significant conservation of energy" 

(42 U.S.C. 6295(0)(3)(B)). 

In conducting its analysis, DOE considers the impacts of standards beginning with the 

Max Tech Level, i.e., Trial Standard Level 5 in this rulemaking. DOE then considers less 

efficient levels until it reaches the level which is both technologically feasible and economically 

justified. 

To aid the reader in the discussion of the benefits and burdens of the trial standard levels, 

113 
EE-RM/STD-98-440 - -03

DOE includes a summary of the analysis results for all of the levels in Table 4.20 Table 4 presents

a summary of quantitative analysis results for each trial standard level based on the assumptions

DOE considers 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 AEO2000 Reference Case.

2All cumulative effects that are not monetary are not discounted. Monetary effects are discounted to 1998 dollars.

114

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

DOE includes a summary of the analysis results for all of the levels in Table 4.20 Table 4 presents 

a summary of quantitative analysis results for each trial standard level based on the assumptions 

DOE considers 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. 

20 All cumulative effects that are not monetary are not discounted. Monetary effects are discounted to 1998 dollars. 

114 
EE-RM/STD-98-440- 303

Table 4: Summary of Quantitative Results'

_ Trial Std I Trial Std 2 Trial Std 3 Trial Std 4 Trial Std 5

SEER levels for most products 11 12 1for CAC/ 3

13 for HP

Primary Energy Saved (quads) 1.7 3.0 3.5 4.2 8.8

Generation Capacity Offset (GW) 4.4 8.7 10.1 12.6 21.9

NPV ($billion) 2

7% Discount Rate 2 | 21 (10)

Industry Impacts (million $)2

Cumulative Change in Industry

NPV (30) (159) (171) (303)

Differential impact between

Industry Sub-groups 3 75 75 238 2 38 261 1 429 429

Cumulative Regulatory Burden on IndCumulative Relry n (>509) (>638) (>650) (>782)

Minimum net cash flow 62 31 18 (3)

Life-Cycle Cost Savings ()4

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

Equipment Price Increase ($)

Split AC 91 213 213 335 754

Packaged AC 89 158 158 425 859

Split HP 55 144 332 332 1039

Packaged Heat Pump 92 149 435 435 985

Fraction of all Consumers with Net LCC Losses >2% (%)

Split AC 2 25 25 39 68

Packaged AC 1 99 52 73

Split HP 0 0 6 6 57

Packaged Heat Pump 0 0 12 12 48

Fraction of Low Income Consumers with Net LCC Losses >2% (%)

Split AC 5 34 34 50 77

Packaged AC 2 14 14 61 80

Split HP 0 0 12 12 75

Packaged Heat Pump 0 0 20 20 66

'Parentheses indicate negative (-) values. Unless otherwise noted, Trial Standard Levels 1 - 3 refer to the NAECA efficiency scenario, and Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario.

2 Not calculated at Trial Standard Level 5.

3 The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup 4 Negative values indicate LCC increases.

In addition to the quantitative results, DOE also considers other burdens and benefits that

115

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Table 4: Summary of Quantitative Results I 

Trial Std 1 Trial Std 2 Trial Std 3 Trial Std 4 Trial Std 5 

SEER levels for most products 11 12 12 forCACI 13 18 13 forHP 

Primary Energy Saved (quads) 1.7 3.0 3.5 4.2 S.8 

Generation Capacity Offset (GW) 4.4 8.7 10.1 12.6 21.9 

NPV ($billion) 

7% Discount Rate 2 2 1 1 (10) 

Industry Impacts (million $)2 

Cumulative Change in Industry (30) (159) (171) (303) - NPV 

Differential impact between 75 238 261 429 - Industry Sub-groups] 

Cumulative Regulatory Burden on (>509) (>638) (>650) ·(>782) - Industry 

Minimum net cash flow 62 31 18 (3) - Life-Cycle Cost Savings ($t 

Split AC 75 II3 113 113 (137) 

Packaged AC 78 163 163 29 (276) 

Split HP 209 365 372 372 (41) 

Packaged HP 207 421 353 353 166 

Equipment Price Increase ($) 

Split AC 91 213 213 335 754 

Packaged AC 89 158 ISS 425 859 

SpJit HP 55 144 332 332 1039 

Packaged Heat Pump 92 149 435 435 985 

fraction of all Consumers with Net LCC Losses >2% (%) 

Split AC 2 25 25 39 68 

Packaged AC I 9 9 52 73 

Split HP 0 0 6 6 57 

Packaged Heat Pump 0 0 12 12 48 

Fraction of Low Income Consumers with Net LCC Losses >2% (%) 

Split AC 5 34 34 50 77 

Packaged AC 2 14 14 61 80 

Split HP 0 0 12 12 75 

Packaged Heat Pump 0 0 20 20 66 

I Parentheses mdlcate negative (-) values. Unless otherwise noted, Trial Standard Levels 1 - 3 refer to the NAECA effiCiency 

scenario, and Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario. 

2 Not calculated at Trial Standard Level 5. 

3 The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup 

• Negative values indicate LeC increases. 

In addition to the quantitative results, DOE also considers other burdens and benefits that 

115 
EE-RM/STD-98-440- 3 )3

might affect the economic justification.

The potential to improve the reliability of the electricity system is considered by some to

be the major benefit that DOE had 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 DOE's analysis as savings in

consumer utility bills. However, in areas that are unable to maintain adequate capacity reserves,

the value of avoided blackouts associated with reductions in peak demand often far exceed the

normal costs of capacity expansion.2 DOE has reexamined claims that the energy efficiency

standards under consideration could improve significantly electric system reliability over the long

term.

DOE also recognizes that the adopted standards could result in additional unquantifiable

benefits and burdens. These include the avoidance of environmental impacts associated with the

siting of some powerplants, a possible increase in health problems caused by consumers foregoing

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.

First DOE considered Trial Standard Level 5, the Max Tech Level for each of four classes

of products, representing uniform 18 SEER requirements. The manufacturing cost DOE assumes

21 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 those blackouts 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 same

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible

alternative.

116

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ~ 3D3 

might affect the economic justification. 

The potential to improve the reliability of the electricity system is considered by some to 

'be the major benefit that DOE had 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 DOE's analysis as savings in 

consumer utility bills. However, in areas that are unable to maintain adequate capacity reserves, 

the value of avoided blackouts associated with reductions in peak demand often far exceed the 

normal costs of capacity expansion.21 DOE has reexamined claims that the energy efficiency 

standards under consideration could improve significantly electric system reliability over the long 

term. 

DOE also recognizes that the adopted standards could result in additional unquantifiable 

benefits and burdens. These include the avoidance of envirorunental impacts associated with the 

siting of some powerplants, a possible increase in health problems caused by consumers foregoing 

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. 

First DOE considered Trial Standard Level 5, the Max Tech Level for each of four classes 

of products, representing uniform 18 SEER requirements. The manufacturing cost DOE assumes 

21 For instance, if capacity-related blackouts cost a region $ I billion, society would be wiIIing to pay up to 

$1 billion to prevent them. If those blackouts can be prevented through either a capacity expansion or a reduction in 

peak demand, and the 'new capacity would cost $JOOmillion, 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 same 

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible 

alternative. 

116 
EE-RM/STD-98-440 - 30)

for Trial Standard Level 5 is equal to the cost of 15 SEER equipment, rather than the cost of 18

SEER equipment, since manufacturer cost data were not available for the 18 SEER efficiency

levels. Because of that assumption, DOE expects that its estimate of the cost and price of the

product at Trial Standard Level 5 are understated. Trial Standard Level 5 would likely save 8.8

quads of energy between 2006 and 2030 which DOE considers significant. The energy savings

through 2020 would result in the avoidance of approximately 22 gigawatts (GW) of installed

generation capacity in 2020. For comparison, the generating capacity is equivalent to roughly 55

large, 400 megawatt, power plants, and reduced emissions would range up to 73 Mt of carbon

equivalent and up to 279 thousand metric tons (kt) of NO,. 22 Furthermore, for the nation as a

whole, Trial Standard Level 5 is estimated to result in a net cost in excess of $10 billion. DOE

did not calculate manufacturer impacts at this trial standard level, determining based on

preliminary evaluation that they would be severe and unacceptable.

At Trial Standard Level 5, the average consumer would experience an increase in lifecycle cost. Compared to today's standards, purchasers of split central air-conditioners, the

predominate class of central air conditioner with 65 percent of the sales of central air conditioners

and heat pumps, would most likely lose in excess of $137 over the life of the appliance.

Purchasers of split heat pumps, the predominant class of heat pump, would most likely lose in

excess of $41. These life-cycle cost estimates represent lower bounds to the actual costs because

they 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.

DOE concludes that at Trial Standard Level 5, the benefits of energy and energy cost

2 Generating capacity, carbon, and NOx reductions are based on Roll-up efficiency scenario.

117

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

for Trial Standard Level 5 is equal to the cost of 15 SEER equipment, rather than the cost of 18 

SEER equipment, since manufacturer cost data were not available for the 18 SEER efficiency 

levels. Because of that assumption, DOE expects that its estimate of the cost and price of the 

product at Trial Standard LevelS are understated. Trial Standard LevelS would likely save 8.8 

quads of energy between 2006 and 2030 which DOE considers significant. The energy savings 

through 2020 would result in the avoidance of approximately 22 gigawatts (GW) of installed 

generation capacity in 2020. For comparison, the generating capacity is equivalent to roughly 55 

large, 400 megawatt, power plants, and reduced emissions would range up to 73 Mt of carbon 

equivalent and up to 279 thousand metric tons (kt) ofNO/2 Furthermore, for the nation as a 

whole, Trial Standard LevelS is estimated to result in a net cost in excess of $10 billion. DOE 

did not calculate manufacturer impacts at this trial standard level, determining based on 

preliminary evaluation that they would be severe and unacceptable. 

At Trial Standard LevelS, the average consumer would experience an increase in lifecycle cost. Compared to today's standards, purchasers of split central air-conditioners, the 

predominate class of central air conditioner with 65 percent of the sales of central air conditioners 

and heat pumps, would most likely lose in excess of $137 over the life of the appliance. 

Purchasers of split heat pumps, the predominant class of heat pump, would most likely lose in 

excess of $41. These life-cycle cost estimates represent lower bounds to the actual costs because 

they 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. 

DOE concludes that at Trial Standard Level 5, the benefits of energy and energy cost 

22 Generating capacity, carbon, and NOx reductions are based on Roll-up efficiency scenario. 

117 
EE-RM/STD-98-440- 303

savings, and emission reductions would be outweighed by the negative economic impacts to the

nation, to the vast majority of consumers and to the manufacturers. Consequently, DOE has

determined that Trial Standard Level 5, the Max Tech Level, is not economically justified.

Next, DOE considered Trial Standard Level 4, the level that the previous Administration

determined to be economically justified in the January 22 final rule. This level specifies 13 SEER

equipment for all product classes. In considering Trial Standard Level 4, DOE assumed the Rollup efficiency scenario and reverse engineering cost estimates to be the most probable. Under the

Roll-up scenario, equipment that in the base case was forecast to be less efficient than the trial

standard level is assumed to move up to the standard level, and equipment forecasted to be at or

above the trial standard level is assumed not to increase in efficiency. (See Section 8.4.8 of the

TSD for the reasons DOE considers the Roll-up efficiency scenario most probable above Trial

Standard Level 3 and the NAECA efficiency scenario most probable at Trial Standard Levels 1, 2,

and 3; see Section 7.2.2.5 of the TSD for the current efficiency distribution for each product class

and for the assumed efficiency distributions after new standards.)

Primary energy savings between 2006 and 2030 is estimated to be 4.2 quads, which DOE

considers significant. The estimated energy savings through 2020 would result in avoidance of

approximately 12.6 GW in installed generating capacity in 2020. For comparison, the generating

capacity is equivalent to avoiding the need for 32 large 400 megawatt power plants, and reduced

emissions would range up to 33 Mt of carbon equivalent and up to I 1 1 kt of N0,. 23 Trial

Standard Level 4 would lower peak electricity demand compared to the base case. That would

allow utility service areas to build less new capacity, with attendant environmental benefits.

23 Generating capacity, carbon, and NO, reductions are based on Roll-up efficiency scenario.

118

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

savings, and emission reductions would be outweighed by the negative economic impacts to the 

nation, to the vast majority of consumers and to the manufacturers. Consequently, DOE has 

determined that Trial Standard Level 5, the Max Tech Level, is not economically justified. 

Next, DOE considered Trial Standard Level 4, the level that the previous Administration 

determined to be economically justified in the January 22 final rule. This level specifies 13 SEER 

equipment for all product classes. In considering Trial Standard Level 4, DOE assumed the Rollup efficiency scenario and reverse engineering cost estimates to be the most probable. Under the 

Roll-up scenario, equipment that in the base case was forecast to be less efficient than the trial 

standard level is assumed to move up to the standard level, and equipment forecasted to be at or 

above the trial standard level is assumed not to increase in efficiency. (See Section 8.4.8 of the 

TSD for the reasons DOE considers the Roll-up efficiency scenario most probable above Trial 

Standard Level 3 and the NAECA efficiency scenario most probable at Trial Standard Levels 1, 2, 

an~ 3; see Section 7.2.2.5 of the TSD for the current efficiency distribution for each product class 

and for the assumed efficiency distributions after new standards.) 

Primary energy savings between 2006 and 2030 is estimated to be 4.2 quads, which DOE 

considers significant. The estimated energy savings through 2020 would result in avoidance of 

approximately 12.6 GW in installed generating capacity in 2020. For comparison, the generating 

capacity is equivalent to avoiding the need for 32 large 400 megawatt power plants, and reduced 

emissions would range up to 33 Mt of carbon equivalent and up to 111 kt ofNOx•

23 Triiil 

Standard Level 4 would lower peak electricity demand compared to the base case. That would 

allow utility service areas to build less new capacity, with attendant environmental benefits. 

23 Generating capacity, carbon, and NO. reductions are based on Roll-up efficiency scenario. 

118 
EE-RM/STD-98-440 - 03

A measure of an efficiency standard's economic benefit to the nation is the increase in

net present value, which is the difference in total cost, both initial cost and discounted operating

cost, between the base case (without a new standard ) and the case with a new standard. For Trial

Standard Level 4, the increase in national net present value is estimated to be $1 billion.24

Since DOE expects ihe Roll-up efficiency scenario to result from standards adopted at

Trial Standard Level 4, the burdens of Trial Standard Level 4 on manufacturers are likely to be

severe. Not only does DOE expect the average loss in industry NPV to be around 20 percent, but

'.7

impacts on most manufacturers would reach almost 30 percent. Their long term drop in return on

investment and short term drop in cash flow suggest that standards adopted at Trial Standard

Level K could accelerate the consolidation trend, possibly resulting in fewer choices for consumers

and in a slowing of the pace of innovation well into the future. Furthermore, the cumulative

impact on the industry of all new Federal and State regulations is estimated to exceed $782

million.

For Trial Standard level 4, the average purchaser of a split system air conditioner, the

predominant class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2571, an increase of $335. Lower utility bills from the energy savings would repay this increase

in 11.3 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

percent of all shipments, would see the average installed price of $2607 rise to $3032, an increase

of $425. Lower utility bills from the energy savings would repay this increase in 14.5 years and

produce a total saving with a net present value of $29 over the 18.4 year life of the product.

24 Under the NAECA efficiency scenario, the increase in national net present value would be zero.

119

EE-RM-STD-98-440 COMMENT 303

EE .. RM/STD-98-440 - SO 3 

A measure of an efficiency standard's economic benefit to the nation is the increase in 

net present value, which is the difference in total cost, both initial cost and discounted operating 

cost, between the base case (without a new standard) and the case with a new standard. For Trial 

Standard Level4, the increase in national net present value is estimated to be $1 billion.24 

Since DOE expects the Roll-up efficiency scenario to result from standards adopted at 

Trial Standard Level 4, the burdens of Trial Standard Level 4 on manufacturers are likely to be 

severe. Not only does DOE expect the average loss in industry NPV to be around 20 percent, but 

'r 

impacts on most manufacturers would reach almost 30 percent. Their long term drop in return on 

;nvestment and short term drop in cash flow suggest that standards adopted at Trial Standard .. 1 

Level ~ could accelerate the consolidation trend, possibly resulting in fewer choices for consumers 

and in a slowing of the pace of innovation well into the future. Furthermore, the cumulative 

impact on the industry of all new Federal and State regulations is estimated to exceed $782 

million. 

For Trial Standard level 4, the average purchaser of a split system air conditioner, the 

predominant class with 65 percent of all shipments, would see the installed price of $2236 rise to 

$2571, an increase of$335. Lower utility bills from the energy savings would repay this increase 

in 11.3 years and produce a total saving with a net present value of $113 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

percent of all shipments, would see the average installed price of $2607 rise to $3032, an increase 

of $425. Lower utility bills from the energy savings would repay this increase in 14.5 years and 

produce a total saving with a net present value of $29 over the 18.4 year life of the product. 

24 Under the NAECA efficiency scenario, the increase in national net present value would be zero. 

119 
EE-RM/STD-98-440- 3 3

The average purchaser of a split system heat pump, which represents 22 percent of all

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332.

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a

total saving with a net present value of $372 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from

the energy savings would repay this increase in 8.4 years and produce a total saving with a net

present value of $353 over the 18.4 year life of the product. While the average consumer

purchasing a i3 SEER air conditioner or heat pump would experience a net saving over the

lifetime of the product, a substantial fraction of all households would experience net costs

exceeding 2 percent of the total life-cycle cost of today's baseline units. Thirty-nine percent of the

households with split system air conditioners, 52 percent with single package air conditioners, 6

percent with split system heat pumps and 12 percent with single package heat pumps would

experience a net cost. The percentage of low-income consumers who would experience net costs

exceeding 2 percent of the total life-cycle cost of today's baseline units is greater than that of the

average household; 50 percent of low-income households with split system air conditioners, 61

percent with single package air conditioners, 12 percent with split system heat pumps and 20

percent with single package heat pumps. Also, the possibility that many consumers would incur

substantial installation costs is great because 13 SEER equipment often will not fit in the same

space as current 10 SEER equipment. In light of the higher purchase cost increase experienced by

all consumers and the percentage of households that experience life-cycle cost increases, in

particular low-income households, which experience life-cycle cost increases, consumer burdens

120

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 3 0.3 

The average purchaser of a split system heat pump, which represents 22 percent of all 

shipments, would see the average installed price of $3668 rise to $4000, an increase of $332. 

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a 

total saving with a net present value of $372 over the 18.4 year life of the product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of $3599 rise to $4034, an increase of$435. Lower utility bills from 

the energy savings would repay this increase in 8.4 years and produce a total saving with a net 

present valut~ of $353 over the 18.4 year life of the product. While the average consumer 

purchasing a 13 SEBR air conditioner or heat pump would experience a net saving over the 

lifetime of the produl-;t, a substantial fraction of all households would experience net costs 

exceeding 2 percent of the total life-cycle cost oftoday's baseline units. Thirty-nine percent of the 

households with split system air conditioners, 52 percent with single package air conditioners, 6 

percent with split system heat pumps and 12 percent with single package heat pumps would 

experience a net cost. The percentage of low-income consumers who would experience net costs 

exceeding 2 percent of the total life-cycle cost oftoday's baseline units is greater than that of the 

average household; 50 percent oflow-income households with split system air conditioners, 61 

percent with single package air conditioners, 12 percent with split system heat pumps and 20 

percent with single package heat pumps. Also, the possibility that many consumers would incur 

substantial installation costs is great because 13 SEER equipment often will not fit in the same 

space as current 10 SEER equipment. In light of the higher purchase cost increase experienced by 

all consumers and the percentage of households that experience life-cycle cost increases, in 

particular low-income households, which experience life-cycle cost increases, consumer burdens 

120 
EE-RM/STD-98-440 - .0 3

are particularly acute under Trial Standard Level 4.

DOE concludes that at Trial Standard Level 4, the benefits of energy savings, generating

capacity and emission avoidance, and net benefit to the nation's consumers would be outweighed

by the maldistribution of consumer benefits, the potential increase in installation costs for some

consumers related to installing potentially larger equipment, and the cost to manufacturers taking

into account the cumulative regulatory burden. Trial Standard Level 4 introduces the serious

concern that prospective owners of air conditioning heat pump systems would instead purchase

less costly air conditioner resistance heater combinations because of the substantial purchase price

differential between heat pump n md air conditioners. As discussed in the January 22 notice of

final rulemaking (66 FR 7196), 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.

Those households residing in manufactured housing, which is often shipped from the factory

without an air conditioning system but with a resistance furnace, might be inclined to simply add a

lower cost air conditioner and retain the resistance furnace instead of replacing the resistance

furnace with a heat pump. In short, the large financial burdens of Trial Standard Level 4 are not

outweighed by the expected financial benefits. Other potential burdens include possible health

effects caused indirectly by foregone air conditioning purchases and possible lessening of

competition. Consequently, DOE determines that Trial Standard Level 4 is not economically

justified.

Next, DOE considered Trial Standard Level 3. This level specifies 12 SEER equipment

for air conditioners and 13 SEER equipment for heat pumps. In considering Trial Standard Level

3, DOE assumed the NAECA efficiency scenario and reverse engineering cost estimates to be the

121

EE-RM/STD-98-440 - jo 3 

are particularly acute under Trial Standard Level 4. 

DOE concludes that at Trial Standard Level 4, the benefits of energy savings, generating 

capacity and emission avoidance, and net benefit to the nation's consumers would be outweighed 

by the mal distribution of consumer benefits, the potential increase in installation costs for some 

consumers related to installing potentially larger equipment, and the cost to manufacturers taking 

into account the cumulative regulatory burden. Trial Standard Level 4 introduces the serious 

concern that prospectiv( own~'rs of air conditioning heat pump systems would instead purchase 

less costly air conditionc.~r resi!,1ilnce heater combinations because of the substantial purchase price 

differential between heat pump\! 'md air conditioners. As discussed in the January 22 notice of 

;. 

final rulemaking (66 FR 7196), 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. 

Those households residing in manufactured housing, which is often shipped from the factory 

without an air conditioning system but with a resistance furnace, might be inclined to simply add a 

lower cost air conditioner and retain the resistance furnace instead of replacing the resistance 

furnace with a heat pump. In short, the large financial burdens of Trial Standard Level 4 are not 

outweighed by the expected financial benefits. Other potential burdens include possible health 

effects caused indirectly by foregone air conditioning purchases and possible lessening of 

competition. Consequently, DOE determines that Trial Standard Level 4 is not economically 

justified. 

Next, DOE considered Trial Standard Level 3. This level specifies 12 SEER equipment 

for air conditioners and 13 SEER equipment for heat pumps. In considering Trial Standard Level 

3, DOE assumed the NAECA efficiency scenario and reverse engineering cost estimates to be the 

121 
EE-RM/STD-98-440 -303

most probable. (See Section 8.4.8 of the TSD for the reasons DOE considers the Roll-up

efficiency scenario most probable at Trial Standard Levels 4 and 5 and the NAECA efficiency

scenario most probable at Trial Standard Levels 1, 2, and 3.)

For Trial Standard Level 3, primary energy savings between 2006 and 2030 are estimated

to be 3.5 quads, which DOE considers significant. The energy savings through 2020 would result

in avoidance of approximately 10.1 GW in installed generating capacity in 2020. For comparison,

the generating capacity is equivalent .o avoiding the need for 25 large 400 megawatt power plants,

and reduced emissions would range u1, to 28 Mt of carbon equivalent and up to 97 kt of NOx. 2

Trial Standard Level 3 would lower peak ele:tricity demand compared to the base case. That

would allow utility service areas to buildless new capacity, with attendant environmental benefits.

For Trial Standard Level 3, the increase in national net present value is estimated to be $1

billion 26. Since DOE expects the NAECA efficiency scenario to result from standards adopted at

Trial Standard Level 3, the burdens of Trial Standard Level 3 on manufacturers are likely to be

less severe than at Trial Standard Level 4. DOE expects the average loss in industry NPV to be

around 11 percent, but impacts on most manufacturers would be around 17 percent. Their long

term drop in return on investment and short term drop in cash flow suggest that standards adopted

at Trial Standard Level 3 could accelerate the consolidation trend, possibly resulting in fewer

choices for consumers and in a slowing of the pace of innovation well into the future.

Furthermore, the cumulative impact of all new Federal and State regulations would exceed $650

million.

25 Generating capacity, carbon, and NO, reductions are based on NAECA efficiency scenario.

26 Under the Roll-up efficiency scenario, the increase in national net present value would be $2 billion.

122

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 30.3 

most probable. (See Section 8.4.8 of the TSD for the reasons DOE considers the Roll-up 

efficiency scenario most probable at Trial Standard Levels 4 and 5 and the NAECA efficiency 

scenario most probable at Trial Standard Levels 1, 2, and 3.) 

For Trial Standard Level 3, primary energy savings between 2006 and 2030 are estimated 

to be 3.5 quads, which DOE considers significant. The energy savings through 2020 would result 

in avoidance of approximately 10.1 GW in installed generating capacity in 2020. For comparison, 

the generating capacity is equivalent '.0 qvo\ding the need for 25 large 400 megawatt power plants, 

and reduced emissions would range Ui) to 28 Mt of carbon equivalent and up to 97 kt ofNO/5 

Trial Standard Level 3 would lower peak ele-:i1icity demand compared to the base case. That 

would allow utility service areas to build1ess new capacity, with attendant environmental benefits. 

For Trial Standard Level 3, the increase in national net present value is estimated to be $1 

billion26• Since DOE expects the NAECA efficiency scenario to result from standards adopted at 

Trial Standard Level 3, the burdens of Trial Standard Level 3 on manufacturers are likely to be 

less severe than at Trial Standard Level 4. DOE expects the average loss in industry NPV to be 

around 11 percent, but impacts on most manufacturers would be around 17 percent. Their long 

term drop in return on investment and short term drop in cash flow suggest that standards adopted 

at Trial Standard Level 3 could accelerate the consolidation trend, possibly resulting in fewer 

choices for consumers and in a slowing of the pace of innovation well into the future. 

Furthermore, the cumulative impact of all new Federal and State regulations would exceed $650 

million. 

2~ Generating capacity, carbon, and NO" reductions are based on NAECA efficiency scenario: 

26 Under the Roll-up efficiency scenario, the increase in national net present value would be $2 billion. 

122 
EE-RM/STD-98-440 - 303

At Trial Standard Level 3, the average purchaser of a split system air conditioner, the

predominant class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2449, an increase of $213. Lower utility bills from the energy savings would repay this increase

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and

produce a total saving with a net present value of $163 over the 18.4 year life of the product.

The average purchaser of a split system heat pump, which represents 22 percent of all

shipments. would see the average installed price of $3668 rise to $4000, an increase of $332.

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a

total saving with a net present value of $372 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $4034, an increase of $435. Lower utility bills from

the energy savings would repay this increase in 8.4 years and produce a total saving with a net

present value of $353 over the 18.4 year life of the product.

Like Trial Standard Level 4, Trial Standard Level 3 raises the serious concern that

prospective owners of air conditioning heat pump systems would purchase less costly air

conditioner resistance heater combinations. In this case there is a potential loss of energy savings

because of the lower standards for air conditioners compared to heat pumps. which could

eliminate all energy savings from the more efficient heat pumps if only a small fraction of heat

pump owners (4 percent) switched to resistance heating. Trial Standard Level 3 poses a serious

123

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 30,3. 

At Trial Standard Level 3, the average purchaser of a split system air conditioner, the 

predominant class with 65 percent of all shipments, would see the installed price 0[$2236 rise to 

$2449, an increase of$213. Lower utility bills from the energy savings would repay this increase 

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase 

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and 

. produce a total saving with a net present value of $163 over the 18.4 year life of the product. 

The average purchaser of a split system heat pump, which represents 22 percent of all 

shipments. would see the average installed price of $3668 rise to $4000, an increase: of $332. 

Lower utility bills from the energy savings would repay this increase in 6.4 years and produce a 

total saving with a net present value of $372 over the 18.4 year life of the product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of$3599 rise to $4034, an increase of$435. Lower utility bills from 

the energy savings would repay this increase in 8.4 years and produce a total saving with a net 

present value of$353 over the 18.4 year life of the product. 

Like Trial Standard Level 4, Trial Standard Level 3 raises the serious concern that 

prospective owners of air conditioning heat pump systems would purchase less costly air 

conditioner resistance heater combinations. In this case there is a potential loss of energy savings 

because of the lower standards for air conditioners compared to heat pumps. which could 

eliminate all energy savings from the more efficient heat pumps if only a small fraction of heat 

pump owners (4 percent) switched to resistance heating. Trial Standard Level 3 poses a serious 

123 
EE-RM/STD-98-440 3- 3

concern regarding potential anti-competitive effects because the size and cost of the higher

efficiency heat pumps could reduce competition between manufacturers of heat pumps and

manufacturers of resistance heating and other lower cost heating systems.

DOE concludes that, at Trial Standard Level 3, the benefits of energy savings, generating

capacity and emission avoidance, and net benefit to the nation's consumers would be outweighed

by the maldistribution of consumer benefits and manufacturer costs, the likelihood of higher

installation costs resulting from potentially larger equipment, and the net impact on the industry in

light of the cumulative regulatory burden. The most serious concern is the possibility of

equipment switching that would likely substantially reduce the calculated energy savings,

drastically reducing the potential benefits. Other possible burdens include lessening of

competition and health effects caused by forgone air conditioner purchases. Consequently, DOE

determines that Trial Standard Level 3 is not economically justified.

Next, DOE considered Trial Standard Level 2. This level specifies 12 SEER equipment

for all product classes, and this is the level that DOE has determined is the maximum efficiency

level that is economically justified. In considering Trial Standard Level 2, DOE assumed the

NAECA efficiency scenario and reverse engineering cost estimates to be the most probable.

Primary energy savings between 2006 and 2030 is estimated to be 3 quads, which DOE considers

significant. The energy savings through 2020 would result in avoidance of approximately 8.7 GW

in installed generating capacity in 2020. For comparison, the generating capacity is equivalent to

avoiding the need for 22 large 400 megawatt power plants, and reduced emissions would range up

to 24 Mt of carbon equivalent and up to 83 kt of NO. 27 Trial Standard Level 2 would lower peak

27 Generating capacity, carbon, and NOx reductions are based on NAECA efficiency scenario.

124

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 _ 3 D 3 

concern regarding potential anti-competitive effects because the size and cost of the higher 

efficiency heat pumps could reduce competition between manufacturers of heat pumps and 

manufacturers of resistance heating and other lower cost heating systems. 

DOE concludes that, at Trial Standard Level 3, the benefits of energy savings, generating 

capacity and emission avoidance, and net benefit to the nation's consumers would be outweighed 

by the mal distribution of consumer ·benefits and manufacturer costs, the likelihood of higher 

inst.,llation costs resulting from potentially larger equipment, and the net impact on the industry in 

light l)fthe cumulative regulatory burden. The most serious concern is the possibility of 

equipment switching that would likely substantially reduce the calculated energy savings, 

drastically reducing the potential benefits. Other possible burdens include lessening of 

competition and health effects caused by forgone air conditioner purchases. Consequently, DOE 

determines that Trial Standard Level 3 is not economically justified. 

Next, DOE considered Trial Standard Level 2. This level specifies 12 SEER equipment 

for all product classes, and this is the level that DOE has determined is the maximum efficiency 

level that is economically justified. In considering Trial Standard Level 2, DOE assumed the 

NAECA efficiency scenario and reverse engineering cost estimates to be the most probable. 

Primary energy savings between 2006 and 2030 is estimated to be 3 quads, which DOE considers 

significant. The energy savings through 2020 would result in avoidance of approximately 8.7 GW 

in installed generating capacity in 2020. For comparison, the generating capacity is equivalent to 

avoiding the need for 22 large 400 megawatt power plants, and reduced emissions would range up 

to 24 Mt of carbon equivalent and up to 83 kt ofNO/' Trial Standard Level 2 would lower peak 

27 Generating capacity. carbon; and NO" reductions are based on NAECA efficiency scenario. 

124 
EE-RM/STD-98-440 - 303

electricity demand compared to the base case. That would allow utility service areas to either

avoid build less new capacity, with attendant environmental benefits. For Trial Standard level 2,

the increase in national net present value is estimated to be $2 billion, which represents the

highest level for all the standard levels considered 2s.

Since DOE expects the NAECA efficiency scenario to result from standards adopted at

Trial Standard Level 2, the burdens of Trial Standard Level 2 on manufacturers are likely to be

moderate. I )OE expects the average loss in industry NPV to be around 10 percent, with impacts

on most marnufaciurers around 16 percent. Their long term drop in return on investment and short

term drop in cash fluw are moderate; suggesting that standards adopted at Trial Standard Level 2

would not accelerate the consolidation trend, and could result in more choices for consumers and

raise the pace of innovation. Furthermore, the cumulative impact of all new Federal and State

regulations is estimated to exceed $638 million.

For Trial Standard Level 2, the average purchaser of a split system air conditioner, the

piedominant class with 65 percent of all shipments, would see the installed price of $2236 rise to

$2449, an increase of $213. Lower utility bills from the energy savings would repay this increase

in 9.8 years and produce a total saving with a net present value of $113 over the 18.4 year life of

the product. The average purchaser of a single package air conditioner, which represents 10

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase

of $158. Lower utility bills from the energy savings would repay this increase in 7.5 years and

produce a total saving with a net present value of $163 over the 18.4 year life of the product.

The average purchaser of a split system heat pump, which represents 22 percent of all

28 Under the Roll-up efficiency scenario, the increase in national net present value would be $3 billion.

125

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - ~03 

electricity demand compared to the base case. That would allow utility service areas to either 

avoid build less new capacity, with attendant environmental benefits. For Trial Standard level 2, 

the increase in national net present value is estimated to be $2 billion, which represents the 

highest level for all the standard levels considered28 • 

. Since DOE expects the NAECA efficiency scenario to result from standards adopted at 

Trial Standard Levc12, the burdens' of Trial Standard Level 2 on manufacturers are likely to be 

moderate. I )OE t:xpects the average loss in industry NPV to be around 10 percent, with impacts 

on most mar,ufacrurers around 16 percent. Their long term drop in return on investment and short 

term drop in cash Huw are moderate; suggesting that standards adopted at Trial Standard Level 2 

would not accelt~rate the consolidation trend, and could result in more choices for consumers and 

raise the pace of il1n(lvation. Furthermore, the cumulative impact of all new Federal and State 

regulations is estimated to exceed $638 million. 

For Trial Standard Level 2, the average purchaser of a split system air conditioner, the 

predominant class with 65 percent of all shipments, would see the installed price of $2236 rise to 

$2449, an increase of$213. Lower utility bills from the energy savings would repay this increase 

in 9.8 years and produce a total saving with a net present value of$l13 over the 18.4 year life of 

the product. The average purchaser of a single package air conditioner, which represents 10 

percent of all shipments, would see the average installed price of $2607 rise to $2765, an increase 

of$158. Lower utility bills from the energy savings would repay this increase in 7.5 years and 

produce a total saving with a net present value of $163 over the 18.4 year life of the product. 

The average purchaser of a split system heat pump, which represents 22 percent of all 

28 Under the Roll-up efficiency scenario, the increase in national net present value would be $3 billion. 

125 
EE-RM/STD-98-440. 303

shipments, would see the average installed price of $3668 rise to $3812, an increase of $144.

Lower utility bills from the energy savings would repay this increase in 3.9 years and produce a

total saving with a net present value of $365 over the 18.4 year life of the product. The average

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see

the average installed price of $3599 rise to $3748, an increase of $149. Lower utility bills from

the energy savings would repay this increase in 4 years and produce a total saving with a net

present value of $421 ov :r the 18.4 year life of the product.

While the average consumer purchasing a 12 SEER air conditioner or heat pump would

experience a net saving over the lifetime of the product, some households would experience net

costs exceeding 2 percent of the tctal life-cycle cost of today's baseline units. Thus, 25 percent of

the households with split system air conditioners and 9 percent with single package air

conditioners would experience a net cost. No households with heat pumps would experience a net

cost. The percentage of low-income consumers who would experience net costs exceeding 2

percent of the total life-cycle cost of today's baseline units is greater than that for an average

household. Thus, 34 percent of low-income households with split system air conditioners and 14

percent with single package air conditioners would experience a net cost. No low-income

households with heat pumps would experience a net cost. Also, the possibility that consumers

would incur substantial installation costs is less than that with a 13 SEER standard because 12

SEER equipment is more likely to fit in the same space as current 10 SEER equipment. In light

of the moderate purchase cost increase experienced by all consumers, the percentage of

households, in particular low-income households, which experience life-cycle cost increases,

consumer burdens are less severe under Trial Standard Level 2.

126

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 .. 303 

shipments, would see the average installed price of$3668 rise to $3812, an increase of$144. 

Lower utility bills from the energy savings would repay this increase in 3.9 years and produce a 

total saving with a net present value of $365 over the 18.4 year life of the product. The average 

purchaser of a single package heat pump, which represents 4 percent of all shipments, would see 

the average installed price of$3599 rise to $3748, an increase of$149. Lower utility bills from 

the energy savings would repay this increase in 4 years and produce a total saving with a net 

present value of$421 ov:r the 18.4 year life of the product. 

While the average con~umer purchasing a 12 SEER air conditioner or heat pump would 

experience a net saving ove.':' thf~ 1 ifetime of the product, some households would experience net 

costs exceeding 2 percent of the tctallife-cycle cost oftoday's baseline units. Thus, 25 percent of 

the households with split system ajr conditioners and 9 percent with single package air 

conditioners would experience a net cost. No households with heat pumps would experience a net 

cost. The percentage of low-income consumers who would experience net costs exceeding 2 

percent of the total life-cycle cost oftoday's baseline units is greater than that for an average 

household. Thus, 34 percent of low-income households with split system air conditioners and 14 

percent with single package air conditioners would experience a net cost. No low-income 

households with heat pumps would experience a net cost. Also, the possibility that consumers 

would incur substantial installation costs is less than that with a 13 SEER standard because 12 

SEER equipment is more likely to fit in the same space as current 10 SEER equipment. In light 

of the moderate purchase cost increase experienced by all consumers, the percentage of 

households, in particular low-income households, which experience life-cycle cost increases, 

consumer burdens are less severe under Trial Standard Level 2. 

126 
EE-RM/STD-98-440 - 303

After carefully reconsidering the analyses and comments, and giving appropriate weight

given to consumer impacts and cumulative regulatory burden in the assessment of the benefits and

burdens, DOE today amends the energy conservation standards for central air conditioners and

central air conditioning heat pumps at Trial Standard Level 2. DOE concludes this standard saves

a significant amount of energy and is technologically feasible and economically justified. In

determining economic justification, DOE concludes that the benefits of energy savings, the

projected amount of avoided power pl nt capacity, 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, taking into account the

cumulative regulatory burden and annual cash f'ow, increases in life-cycle cost for some users of

products covered by today's rule, any possible increase in health problems caused by consumers

foregoing 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.

C. Conclusions Regarding Space-Constrained Products

If a 12 SEER minimum requirement for air conditioners and heat pumps is implemented,

DOE's analysis suggests that of all potential space-constrained products, only those with throughthe-wall condensers and small duct, high velocity systems need special consideration.

1. Through-the-Wall Products

The TSD contains a new appendix Appendix L describing the results of our recent reevaluation of those products. They demonstrate that split through-the-wall equipment can attain

10.9 SEER using designs and technologies that are commonly applied or available, with price

127

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD-98-440 ... 303 

After carefully reconsidering the analyses and comments, and giving appropriate weight 

given to consumer impacts and cumulative regulatory burden in the assessment of the benefits and 

burdens, DOE today amends the energy conservation standards for central air conditioners and 

central air conditioning heat pumps at Trial Standard Level 2. DOE concludes this standard saves 

a significant amount of energy and is technologically feasible and economically justified. In 

determining economic justification, DOE concludes that the benefits of energy savings, the 

projected amount of avoided power pI mt capacity, consumer life-cycle cost savings, national net 

present value increase, and emission rfductlOns resulting from the standards outweigh the 

burdens. The burdens include the loss of manufacturer net present value, taking into account the 

cumulative regulatory burden and annual c ash flow, increases in life-cycle cost for some users of 

products covered by today's rule, any possib!~ increase in health problems caused by consumers 

foregoing 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 

n"ew baseline products into replacement applications. 

c. Conclusions Regarding Space-Constrained Products 

If a 12 SEER minimum requirement for air conditioners and heat pumps is implemented, 

DOE's analysis suggests that of all potential space-constrained products, only those with throughthe-wall condensers and small duct, high velocity systems need special consideration. 

1. Through-the-Wall Products 

The TSD contains a new appendix Appendix L describing the results of our recent reevaluation of those products. They demonstrate that split through-the-wall equipment can attain 

10.9 SEER using designs and technologies that are commonly applied or available, with price 

127 
EE-RM/STD-98-440 - 3 03

impacts similar to those that conventional equipment would experience in meeting the proposed

12 SEER standard. The packaged equipment analyzed was demonstrated to be capable of

attaining only a 10.6 SEER rating, although comments received indicate that one manufacturer of

packaged through-the-wall equipment, Armstrong, expects their equipment to be capable of

attaining 11 SEER.

Based on this evaluation, DOE adopts new product classes for products that have throughthe-wall condensers and are intended for replacemt nt applications. The new classes are required

to meet minimum efficiencies lower than those of tl ie other classes: 10.9 SEER and 7.1 HSPF for

through-the-wall air conditioner and heat pump split-systems, and 10.6 SEER and 7.0 HSPF for

through-the-wall air conditioner single-package systems. DOE's analysis suggests those products

can attain these levels without substantial redesign or price increases that would result in a loss of

market share to conventional products. Also, the life-cycle cost analysis confirms that, on

average, consumers of split through-the-wall equipment would not incur an increase in life-cycle

cost, and that consumers of packaged through-the-wall equipment would incur an increase of $52

over the life of the equipment. In no case would any consumer of split through-the-wall products

be expected to incur life-cycle costs greater than 2 percent of the total life-cycle cost, and only 17

percent of consumers of packaged through-the-wall equipment would be expected to incur cost

increases greater than 2 percent of the total life-cycle cost.

DOE concludes that standard levels higher than 10.9 SEER (split through-the-wall) and

10.6 SEER (packaged through-the-wall) are technologically feasible. DOE's analysis on three

through-the-wall models suggests that those products could attain efficiencies as high as 11.4

SEER using design options that would likely be economically justified. However, the results are

128

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

impacts similar to those that conventional equipment would experience in meeting the proposed 

12 SEER standard. The packaged equipment analyzed was demonstrated to be capable of 

attaining only a 10.6 SEER rating, although comments received indicate that one manufacturer of 

packaged through-the-wall equipment, Armstrong, expects their equipment to be capable of 

attaining 11 SEER. 

Based on this evaluation, DOE adopts new product classes for products that have throughthe-wall condensers and are intended for replacemt nt applications. The new classes are required 

to meet minimum efficiencies lower than those of tlle oth(;r classes: 10.9 SEER and 7.1 HSPF for 

through-the-wall air conditioner and heat pump split-systems, and 10.6 SEER and 7.0 HSPF for 

through-the-wall air conditioner single-package system.~. DOE's analysis suggests those products 

can attain these levels without substantial redesign or prke increases that would result in a loss of 

market share to conventional products. Also, the life-cycle cost analysis confirms that, on 

average, consumers of split through-the-wall equipment would not incur an increase in life-cycle 

cost, and that consumers of packaged through-the-wall equipment would incur an increase of$52 

over the life of the equipment. In no case would any consumer of split through-the-wall products 

be expected to incur life-cycle costs greater than 2 percent of the total life-cycle cost, and only 17 

percent of consumers of packaged through-the-wall equipment would be expected to incur cost 

increases greater than 2 percent of the total life-cycle cost. 

DOE concludes that standard levels higher than 10.9 SEER (split through-the-wall) and 

10.6 SEER (packaged through-the-wall) are technologically feasible. DOE's analysis on three 

through-the-wall ~odels suggests that those products could attain efficiencies as high as 11.4 

SEER using design options that would likely be economically justified. However, the results are 

128 
EE-RM/STD-98-440 - 30 -.

not conclusive and cannot be confidently applied to all through-the-wall products. DOE's

analysis does not provide enough evidence to convince us that levels higher than 10.9 SEER (10.6

SEER for packaged through-the-wall) will be technologically feasible during the five year period

during which manufacturers would prepare to meet the new requirements. DOE's analysis does

indicate that opportunities for efficiency improvement do exist, and that manufacturers of those

products should continue to investigate those opportunities.

A serious concern that DOE has considered is that the lo ver through-the-wall standards

could encourage purchasers of conventional equipment to shift to through-the-wall products,

undermining the benefits of the 12 SEER standard for conventional products. DOE is therefore

limiting the new through-the-wall classes to products manufactured before January 23, 2010. See

definition of "through-the-wall air conditioner and heat pump." Thus, these classes will exist only

for a period of four years following the compliance date established for the new standards for

conventional products. During that time, the availability of suitable high-efficiency components

will likely increase and the manufacturers of through-the-wall products will be able to investigate

options for meeting the more stringent 12 SEER level. Both will make it easier for through-thewall products to attain the 12 SEER minimum efficiency required of other products, thereby

making 12 SEER a technologically feasible and economically justified level. The sunset

provision will help to ensure that other manufacturers will not make the investment required to

market through-the-wall products heavily for conventional applications during the four year

period. It will also limit the time during which lower efficiency through-the-wall equipment is

installed, ensuring that additional energy savings associated with the 12 SEER level are realized in

a certain time period.

129

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ... 3 D3 . 

not conclusive and cannot be confidently applied to all through-the-wall products. DOE's 

analysis does not provide enough evidence to convince us that levels higher than 10.9 SEER (10.6 

SEER for packaged through-the-wall) will be technologically feasible during the five year period 

. during which manufacturers would prepare to meet the new requirements. DOE's analysis does 

indicate that opportunities for efficiency improvement do exist, and that manufacturers of those 

products should continue to investigate those opportunities. 

A serious concern that DOE has considered is that the 10 oVer through-the-wall standards 

. could encourage purchasers of conventional equipment to shift to throu~h-the-wall products, 

undermining the benefits of the 12 SEER standard for conventional products. DOE is therefore 

limiting the new through-the-wall classes to products manufactured before January 23, 2010. See 

definition of "through-the-wall air conditioner and heat pump." Thus, these classes will exist only 

for a period of four years following the compliance date established for the new standards for 

~onventional products. During that time, the availability of suitable high-efficiency components 

will likely increase and the manufacturers of through-the-wall products will be able to investigate 

options for meeting the more stringent 12 SEER level. Both will make it easier for through-thewall products to attain the 12 SEER minimum efficiency required of other products, thereby 

making 12 SEER a technologically feasible and economically justified level. The sunset 

provision will help to ensure that other manufacturers will not make the investment required to 

market through-the-wall products heavily for conventional applications during the four year 

period. It will also limit the time during which lower efficiency through-the-wall equipment is 

installed, ensuring that additional energy savings associated with the 12 SEER level are realized in 

a certain time period. 

129 
EE-RM/STD-98-440 - .03

To further limit the application of the through-the-wall class, products in these classes may

not exceed 30,000 BTU/hr in cooling capacity, may not contain special weatherization features

that would allow them to be installed totally outdoors, and must be marked for installation only

through an exterior wall. DOE also limits the size of the area used for condenser air exchange in

order to limit these classes to those products intended primarily for replacement applications.

2. Small Duct, High Velocity Systems

In today's final rule, DOE establishes a separate product class for sma 1 duct, high velocity

(SDHV) systems and retains the NAECA standards for these products pending .further study to

establish appropriate higher standard levels. DOE intends to publish a final rule for the test

procedure in the near future. Any future work to establish appropriate minimum efficiency

standards for SDHV systems will be based on the testing requirements developed for SDHV

systems in the test procedure revision currently being finalized, or in a future revision specifically

aimed at SDHV products.

VIII. Procedural Issues and Regulatory Review

A. Review Under the National Environmental Policy Act

DOE 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. DOE found the environmental effects associated with various standard efficiency levels for

central air conditioners and heat pumps to be not significant. Therefore DOE is publishing,

elsewhere in this issue of the Federal Register a Finding of No Significant Impact (FONSI)

130

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - .30-' 

To further limit the application of the through-the-wall class. products in these classes may 

not exceed 30,000 BTUIhr in cooling capacity. may not contain special weatherization features 

that would allow them to be installed totally outdoors. and must be marked for installation only 

through an exterior wall. DOE also limits the size of the area used for condenser air exchange in 

order to limit these classes to those products intended primarily for replacement applications. 

2. Small Duct, High Velocity Systems 

In today's final rule. DOE establishes a separate product class for sma I ducL, high velocity 

(SDHV) syStems and retains the NAECA standards for these products pendinE .~rther study to 

establish appropriate higher standard levels. DOE intends to publish a final rul.! for th~ test 

procedure in the near future. Any future work to establish appropriate minimum efficiency 

standards for SDHV systems will be based on the testing requirements developed for SDHV 

systems in the test procedure revision currently being finalized. or in a future revision specifically 

aimed at SDHV products. 

VIII. Procedural Issues and Regulatory Review 

A. Review Under the National Environmental Policy Act 

DOE prepared an Environmental Assessment (EA) (DOEIEA-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. DOE found the environmental effects associated with various standard efficiency levels for 

central air conditioners and heat pumps to be not significant. Therefore DOE is publishing. 

elsewhere in this issue of the Federal Register a Finding of No Significant Impact (FONSI) 

130 
EE-RM/STD-98-440 - 303

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 DOE's

regulations for compliance with NEPA (10 CFR Part 1021).

As previously discussed (Section VI.G. 1, "Peak Power"), the model used by DOE to

estimate both peak power and power plant emission impacts due to appliance standards was

updated to include a more representative set of end-use load shapes for the residential,

commercial, industrial, and transportation sectors. As a result of this update, NEMS-BRS

estimates somewhat greater power plant emission impacts (in the form of reduced CO2 and NO,

emissions) from increased central air conditioner and heat pump standards. Appendix M of t.e

TSD includes an updated set of power plant emission impacts. These changes, which are

discussed in the FONSI, do not affect DOE's finding of no significant impact.

The comments of some environmental advocates argue that DOE is required to prepare an

environmental impact statement for today's final rule because, in their view, DOE is "rolling

back" 13 SEER standards, and that constitutes a major agency action significantly affecting the

quality of the environment. As explained in Section III of this Supplementary Information, DOE

believes these comments are based on an erroneous premise, namely, that the January 22 final rule

attained permanent status even though the rule never became effective. The correct baseline for

assessing the impacts of today's rule, in DOE's view, are the existing energy conservation

standards established by NAECA (i.e, SEER of 10.0 and HSPF of 6.8 for split systems

manufactured after January 1, 1992, SEER of 9.7 and HSPF of 6.6 for single package systems

manufactured after January 1, 1993). The 12 SEER standard in today's rule will increase the

energy efficiency of the most common type of central air conditioners by approximately 20

131

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

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 (40CFRParts 1500-1508), and DOE's 

regulations for compliance with NEP A (10 CFR Part 1021). 

As previously discussed (Section VI.G.l, "Peak Power"), the model used by DOE to 

estimate both peak power and power plant emission impacts due to appliance standards was 

updated to include a more representative set of end-use load shapes for the residential, 

commercial, industrial, and transportation sectors. As a result of this update, NEMS-BRS 

. estimates somewhat greater power plant emission impacts (in the form of reduced CO2 and NO" 

emissions) from increased central air conditioner and heat pump standards. Appendix M of d.e 

TSD includes an updated set of power plant emission impacts. These changes, which are 

discussed in the FONSI, do not affect DOE's finding of no significant impact. 

The comments of some environmental advocates argue that DOE is required to prepare an 

environmental impact statement for today's final rule because, in their view, DOE is "rolling 

back" 13 SEER standards, and that constitutes a major agency action significantly affecting the 

quality of the environment. As explained in Section III of this Supplementary Information, DOE 

believes these comments are based on an erroneous premise, namely, that the January 22 final rule 

attained permanent status even though the rule never became effective. The correct baseline for 

assessing the impacts oftoday's rule, in DOE's view, are the existing energy conservation 

standards established by NAECA eg, SEER of 10.0 and HSPF of 6.8 for split systems 

manufactured after January 1, 1992, SEER of9.7 and HSPF of6.6 for single package systems 

manufactured after January 1, 1993). The 12 SEER standard in today' s rule will increase the 

energy efficiency of the most common type of central air conditioners by approximately 20 

131 
EE-RM/STD-98-440 - 03

percent.

B. Review Under Executive Order 12866

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 DOE'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 October 5, 2000 NOPR 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. 65 FR 59627-29. The alternatives considered in DOE's analysis

are consumer product labeling, consumer education, prescriptive standards, consumer tax credits,

consumer rebates, manufacturer tax credits, voluntary efficiency targets, low income subsidy,

mass government purchases, and performance standards. 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 or from the contact person named at the beginning of this notice. The

TSD provides: (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

132

EE-RM-STD-98-440 COMMENT 303

percent. 

EE-RM/STD-98-440 ... 303 

B. Review Under Executive Order 12866 

Today's regulatory action has been detennined 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 ofInfonnation 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 DOE's Freedom 

ofInfonnation Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585, 

between the hours of9:00 a.m. and 4:00 p.m., Monday through Friday, telephone (202) 586-3142. 

The October 5, 2000 NOPR 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. 65 FR 59627-29. The alternatives considered in DOE's analysis 

are consumer product labeling, consumer education, prescriptive standards, consumer tax credits, 

consumer rebates, manufacturer tax credits, voluntary efficiency targets, low income subsidy, 

mass government purchases, and perfonnance standards. 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 or from the contact person named at the beginning of this notice. The 

TSD provides: (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 

132 
EE-RM/STD-98-440- 30 3

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 se., requires that a Federal agency

prepare a regulatory flexibility analysis for any rule for which the agency is required to publish a

general notice of proposed rulemaking. Such an assessment of the impact of regulations on small

businesses is not required if the agency certifies that the rule would not, if promulgated, have a

significant economic impact on a substantial number of small entities (5 U.S.C. 605(b)). To be

categorized as a "small" air conditioning and warm air heating equipment manufacturer, a firm

must employ no more than 750 employees.

In the October 5, 2000 NOPR, DOE discussed the potential impacts on small businesses of

the October 5 proposed rule (corresponding to Trial Standard Level 3), and certified that the

proposed standard levels would not have a significant economic impact on a substantial number

of small entities. 65 FR 59629-30. DOE reported that nearly all small businesses engaged in the

manufacture of central air conditioners and heat pumps produce products that DOE has called

"niche" products. To avoid adversely impacting manufacturers of niche products, DOE proposed

a separate product class for through-the-wall equipment, much of which is manufactured by small

manufacturers. See 65 FR 59609-11. In the preamble to the January 22 final rule, DOE addressed

comments regarding the impacts more stringent standards might have on the availability of niche

products, and although the final rule adopted the higher Trial Standard Level 4 standards, DOE

deferred setting an amended standard for niche products. 66 FR 7175, 7196-97. The omission of

niche products from the January 22 final rule also addressed the concern expressed by the

133

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EE-RM/STD-98-440- 30.3 

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 etgg., requires that a Federal agency 

prepare a regulatory flexibility analysis for any rule for which the agency is required to publish a 

general notice of proposed rulemaking. Such an assessment of the impact of regulations on small 

businesses is not required if the agency certifies that the rule would not, if promulgated, have a 

significant economic impact on a substantial number of small entities (5 U.S.C. 605(b)). To be 

categorized as a "small" air conditioning and warm air heating equipment manufacturer, a firm 

must employ no more than 750 employees. 

In the October 5,2000 NOPR, DOE discussed the potential impacts on small businesses of 

the October 5 proposed rule (corresponding to Trial Standard Level 3), and certified that the 

proposed standard levels would not have a significant economic impact on a substantial number 

of small entities. 65 FR 59629-30. DOE reported that nearly all small businesses engaged in the 

manufacture of central air conditioners and heat pumps produce products that DOE has called 

"niche" products. To avoid adversely impacting manufacturers of niche products, DOE proposed 

a separate product class for through-the-wall equipment, much of which is manufactured by small 

manufacturers. See 65 FR 59609-11. In the preamble to the January 22 final rule, DOE addressed 

comments regarding the impacts more stringent standards might have on the availability of niche 

products, and although the final rule adopted the higher Trial Standard Level 4 standards, DOE 

deferred setting an amended standard for niche products. 66 FR 7175, 7196-97. The omission of 

niche products from the January 22 final rule also addressed the concern expressed by the 

133 
EE-RM/STD-98-440 - 303

Department of Justice about the impact of the October 5, 2000, proposed rule on small

manufacturers (see preamble to January 22 final rule at 66 FR 7192). Because the final rule

excluded most products made by small manufacturers, DOE affirmed its certification.

Today DOE publishes energy conservation standards for central air conditioners and heat

pumps that correspond to Trial Standard Level 2. Because of severe size constraints, DOE is

establishing separate product classes for through-the-wall equipment and small duct, high velocity

systems, which will be required to meet a lower SEER. In light of these product class exceptions

and after considering the information in the TSD and public comments, including the views of the

Department of Justice (see October 19, 2001, letter in the Appendix to this notice), DOE has

concluded that the 12 SEER standards in today's final rule will not have a disproportionate

adverse impact on a substantial number of small entities. In its comments, the Office of

Advocacy of the U.S. Small Business Administration stated that the proposed 12 SEER standard

would substantially improve energy efficiency while preserving competition, innovation and jobs,

and, therefore, it strongly supports the 12 SEER standard. On this basis, DOE certifies that

today's rule will not have a significant impact on a substantial number of small entities.

Accordingly, DOE has not prepared a regulatory flexibility analysis.

DOE's certification is based on an assessment of the impact the standards will have on

small entities that would be directly affected by their implementation, which is all the Regulatory

Flexibility Act requires. The assertion by ARI, in its petition for consideration, that DOE is

required to assess the indirect effects of proposed standards is contrary to established case law

interpreting the Act.

D. Review Under the Paperwork Reduction Act

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EE-RM/STD-98-440 - 303 

Department of Justice about the impact of the October 5, 2000, proposed rule on small 

manufacturers (see preamble to January 22 final.rule at 66 FR 7192). Because the final rule 

excluded most products made. by small manufacturers, DOE affirmed its certification. 

Today DOE publishes energy conservation standards for central air conditioners and heat 

pumps that correspond to Trial Standard Level 2. Because of severe size constraints, DOE is 

establishing separate product classes for through-the-wall equipment and small duct, high velocity 

systems, which will be required to meet a lower SEER. In light of these product class exceptions 

and after considering the information in the TSD and public comments, including the views of the 

Department of Justice (see October 19,2001, letter in the Appendix to this notice), DOE has 

concluded that the 12 SEER standards intoday's final rule will not have a disproportionate 

adverse impact on a substantial number of small entities. In its comments, the Office of 

Advocacy of the U.S. Small Business Administration stated that the proposed 12 SEER standard 

would substantially improve energy efficiency while preserving competition, innovation and jobs, 

and, therefore, it strongly supports the 12 SEER standard. On this basis, DOE certifies that 

today's rule will not have a significant impact on a substantial number of small entities. 

Accordingly, DOE has not prepared a regulatory flexibility analysis. 

DOE's certification is based on an assessment of the impact the standards will have on 

small entities that would be directly affected by their implementation, which is all the Regulatory 

Flexibility Act requires. The assertion by ARl, in its petition for consideration, that DOE is 

required to assess the indirect effects of proposed standards is contrary to established case law 

interpreting the A<;t. 

D. Review Under the Paperwork Reduction Act 

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EE-RM/STD-98-440 - 303

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

With respect to the review of existing regulations and the promulgation of new

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Reform," 61 FR 4729

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following

requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize

litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard

and promote simplification and burden reduction. With regard to the review required by section

3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make

every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive effect, if

any; (2) clearly specifies any effecton existing Federal law or regulation; (3) provides a clear legal

standard for affected conduct while promoting simplification and burden reduction; (4) specifies

the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important

issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney

General. Section 3(c) of Executive Order 12988 requires Executive agencies to review

regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether

they are met or it is unreasonable to meet one or more of them. DOE reviewed today's rule under

the standards of section 3 of the Executive Order and determined that, to the extent permitted by

law, this proposed rule meets the relevant standards.

F. Review Under Executive Order 12630

135

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EE-RM/STD-98-440 - .3 03 

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 

With respect to the review of existing regulations and the promulgation of new 

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Reform," 61 FR 4729 

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following 

requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize 

litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard 

and promote simplification and burden reduction. With regard to the review required by section 

3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make 

every reasonable effort to ensure that the regulation: (l) clearly specifies the preemptive effect, if 

any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal 

standard for affected conduct while promoting simplification and burden reduction; (4) specifies 

the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important 

issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 12988 requires Executive agencies to review 

regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether 

they are met or it is unreasonable to meet one or more of them. DOE reviewed today's rule under 

the standards of section 3 of the Executive Order and determined that, to the extent permitted by 

law, this proposed rule meets the relevant standards. 

F. Review Under Executive Order 12630 

135 
EE-RM/STD-98-440 - 3 3

DOE has determined pursuant to Executive Order 12630, "Governmental Actions and

Interference with Constitutionally Protected Property Rights," 52 FR 8859 (March 18, 1988), that

this rule will 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, "Federalism," 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 ind 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 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 rule were preempted by the Federal standards

established in NAECA. As discussed in Section VI ("Discussion of Public Comments"), States

can petition DOE for exemption from such preemption to the extent, and based on criteria, set

forth in section 327 of EPCA (42 U.S.C. 6297).

H. Review Under the Unfunded Mandates Reform Act of 1995

With respect to a proposed regulatory action that may result in the expenditure by State,

136

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD·98-440 - 3/) 3 

DOE has detennined pursuant to Executive Order 12630, "Governmental Actions and 

Interference with Constitutionally Protected Property Rights," 52 FR 8859 (March 18, 1988), that 

this rule will not result in any takings that might require compensation under the Fifth 

Amendmentto the United States Constitution. 

G. Review under Executive Order 13132 

Executive Order 13132, "Federalism," 64 FR 43255 (August 4, 1999) imposes certain 

re'tuirements on agencies fonnulating and implementing policies or regulations that preempt State 

law I)r 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 

S,~ates,md 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 rule and has 

detennined 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' srule were preempted by the Federal standards 

established in NAECA. As discussed in Section VI ("Discussion of Public Comments"), States 

can petition DOE for exemption from such preemption to the extent, and based on criteria, set 

forth in section 327 ofEPCA (42 U.S.C. 6297). 

H. Review Under the Unfunded Mandates Reform Act of 1995 

With respect to a proposeq regulatory action that may result in the expenditure by State, 

136 
EE-RM/STD-98-440- 303

local and tribal governments, in the aggregate, or by the private sector of $100 million or more,

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. DOE's consultation process is described in a notice published in the

Federal Rcgistei on March 18, 1997. 62 FR 12820. Today's 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(o) of EPCA

and Executive Order 12866. The "Regulatory Impact Analysis" section of the TSD for this rule

responds to those requirements.

Under section 205 of UMRA, DOE 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(o) of the Energy Policy and Conservation Act (42 U.S.C. 6295(o)),

today's rule would establish energy conservation standards for central air conditioners and heat

137

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

local and tribal governments, in the aggregate, or by the private sector of $1 00 million or more, 

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. DOE's consultation process is described in a notice published in the 

Federal R,:.gistg on March 18, 1997. 62 FR 12820. Today's 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 

~ubstantially overlap the economic analysis requirements that apply under section 325(0) ofEPCA 

and Executive Order 12866. The "Regulatory Impact Analysis" section of the TSD for this rule 

responds to those requirements. 

Under section 205 ofUMRA, DOE 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 rule would establish energy conservation standards for central air conditioners and heat 

137 
EE-RM/STD-98-440 - 3 3.

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 rule.

I. Review Under the Treasury and General Government Appropriations Act, 1999

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L.

No. 105-277) requires iederdz agencies to issue a Family Policymaking Assessment for any

proposed rule or policy hat may affect family well-being. Today's rule would not have any

impact on the autonomy or integrity of the family as an institution. Accordingly, DOE did not

prepare a Family Policymaking Assessment.

J. Revfe Under Executive Order 13211

Executive Order 13211, "Actions Concerning Regulations That Significantly Affect Energy

Supply, Distribution, or Use," (66 FR 28355, May 22, 2001) requires Federal agencies to prepare

and submit to the Office of Information and Regulatory Affairs (OIRA), Office of Management

and Budget, a Statement of Energy Effects for any significant energy action. A "significant

energy action" is defined as any action by an agency that promulgates or is expected to lead to the

promulgation of a final rule, and that: (1) is a significant regulatory action under Executive Order

12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply,

distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant

energy action. For any proposed significant energy action, the agency must give a detailed

statement of any adverse effects on energy supply, distribution, or use should the proposed action

be implemented, and of reasonable alternatives to the action and their expected benefits on energy

138

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 0C)3. 

pumps that are designed to achieve the maximum improvement in energy efficiency that DOE has 

detennined 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 rule. 

1. Review Under the Treasury and General Government Appropriations Act, 1999 

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 

No ... 105-277) requires r'ederc.l agencies to issue a Family Policymaking Assessment for any 

proposed rule or policy ,hat may affect family well-being. Today's rule would not have any 

impact onthe autonomy or integrity of the family as an institution. Accordingly, DOE did not 

prepare a Family Policymaking Assessment. 

J. R~ Under Executive Order 13211 

Executive Order 13211, "Actions Concerning Regulations That Significantly Affect Energy 

Supply, Distribution, or Use," (66 FR 28355, May 22, 2001) requires Federal agencies to prepare 

and submit to the Office of Infonnation and Regulatory Affairs (OIRA), Office of Management 

and Budget, a Statement of Energy Effects for any significant energy action. A "significant 

energy action" is defined as any action by an agency that promulgates or is expected to lead to the 

promulgation of a final rule, and that: (1) is a significant regulatory action under Executive Order 

12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, 

distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant 

energy action. For any proposed significant energy action, the agency must give a detailed 

statement of any adverse effects on ~nergy supply, distribution, or use should the proposed action 

be implemented, and of reasonable alternatives to the action and their expected benefits on energy 

138 
EE-RM/STD-98-440- 0o3

supply, distribution, and use.

Today's rule would not have any adverse effects on the supply, distribution, or use of

energy in the near term because it would not have any effect on the manufacture of central air

conditioners and heat pumps until 2006. In the longer term, beginning in 2006, the standards in

this rule would have a positive impact on the reliability of electricity supply in the United States.

The standards that DOE is adopting would represent a 20 percent improvement in the energy

efficiency of split-t ysten, central air conditioners, and a 9 percent improvement in heating

efficiency for heat I umps. The standards would improve the cooling efficiency of single-package

heat pumps by 24 percent and the heating efficiency of single-package heat pumps by 12 percent.

As explained in Sect on VII of this Supplementary Information, DOE estimates the

standards would save approximately 3 quads of energy over 25 years (2006 through 2030). Also,

in determining whether these standards are economically justified, DOE considered as a benefit

the potential of the standards to improve the reliability of the electric generation and distribution

system or to reduce the environmental impacts associated with new power plants and transmission

lines. See Section V.D.g. ("Other Factors"). DOE's analysis shows today's standards would

result in an estimated reduction in installed generation capacity in the year 2020 of approximately

8.7 gigawatts. This would be the equivalent of three 400 megawatt coal-fired plants and nineteen

400 megawatt gas-fired plants. While these reduced capacity requirements will have

environmental (and cost) benefits, they are not expected to result in improved electric system

reliability.

DOE disagrees with the NRDC's view that the levels in the January 22 final rule are the

appropriate baseline for determining whether today's rule is likely to have a significant adverse

139

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - ~o3 

supply, distribution, and use. 

Today's rule would not have any adverse effects on the supply, distribution, or use of 

energy in the near term because it would not have any effect on the manufacture of central air 

conditioners and heat pumps until 2006. In the longer term, beginning in 2006, the standards in 

this rule would have a positive impact on the reliability of electricity supply in the United States. 

The standards that DOE is adopting would represent a 20 percent improvement in the energy 

efficiency of split-~ ysten' central air conditioners, and a 9 percent improvement in heating 

efficiency for heat lumps. The standards would improve the cooling efficiency of single-package 

heat pumps by 24 pen~ent and the heating efficiency of single-package heat pumps by 12 percent. 

As explained in Sect on VII of this Supplementary Information, DOE estimates the 

standards would save approximately 3 quads of energy over 25 years (2006 through 2030). Also, 

in determining whether these standards are economically justified, DOE considered as a benefit 

the potential of the standards to improve the reliability of the electric generation and distribution 

system or to reduce the environmental impacts associated with new power plants and transmission 

lines. See Section V.D.g. ("Other Factors"). DOE's analysis shows today's standards would 

res:ult in an estimated reduction in installed generation capacity in the year 2020 of approximately 

8.7 gigawatts. This would be the equivalent of three 400 megawatt coal-fired plants and nineteen 

400 megawatt gas-fired plants. While these reduced capacity requirements will have 

environmental (and cost) benefits, they are not expected to result in improved electric system 

reliability . 

DOE disagrees with the NRDC's view that the levels in the January 22 final rule are the 

appropriate baseline for determining whether today's rule is likely to have a significant adverse 

139 
EE-RM/STD-98-440 - 303

effect on the supply, distribution, or use of energy and, thus, subject to the Executive Order's

analysis requirement. For reasons stated in Section III, we think the proper baseline is the

currently effective standards (ie., the standards prescribed by NAECA). In any case, section 325

of EPCA requires DOE to weigh all of the significant costs and benefits associated with standard

levels that are being considered and not just avoided electricity costs. DOE has set forth its

evaluation of costs and benefits elsewhere in this notice (see Section VII). DOE has also

considered various regulatory aid non-regulatory alternatives to today's proposed standard (see

Section VIII.B., "Review Under Executive Order 12866," and the Regulatory Impact Analysis

portion of the TSD). DOE has corncluded that the costs associated with elevating the current

standard to the standard level set forth in the January 22, 2001, final rule exceed the associated

benefits, including the benefit of avoided electricity consumption.

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).

140

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 003 

effect on the supply, distribution, or use of energy and, thus, subject to the Executive Order's 

analysis requirement. For reasons stated in Section III, we think the proper baseline is the 

currently effective standards (i.e., the standards prescribed by NAECA); In any case, section 325 

ofEPCA requires DOE to weigh all of the significant costs and benefits associated with standard 

levels that are being considered and not just avoided electricity costs. DOE has set forth its 

evaluation of costs and benefits elsewhere in this notice (see Section VII). DOE has also 

considered various regulatory and nOll-regulatory alternatives to today's proposed standard (see 

Section VIII.B., "Review UnderExe(~Ltive Order 12866," and the Regulatory Impact Analysis 

portion of the TSD). DOE has cor;cludf'd that the costs associated with elevating the current 

standard to the standard level set fOIth in the January 22, 2001, final rule exceed the associated 

benefits, including the benefit of avoided electricity consumption. 

K. Congressional Notification 

As required by5 U.S.C. § 801, DOE will submit to Congress a report regarding the 

issuance oftoday'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). 

140 
EE-RM/STD-98-440 - 0 6)3

List of Subjects in 10 CFR Part 430

Administrative practice and procedure, Energy conservation, Household appliances.

Issued in Washington, D.C., on

D.avid K. Garman

Assistaat Secretary

Energy Efficiency and Renewable Energy

141

EE-RM-STD-98-440 COMMENT 303

- EE-RM/STD-98-440 - \3 03 

List of Subjects in 10 CFR Part 430 

Administrative practice and procedure, Energy conservation, Household appliances. 

Issued in Washington, D.C., on 

;::;'avid K. Gannan 

A~lsista.1t Secretary 

Energy :Sfficiency and Renewable Energy 

141 
EE-RM/STD-98-440 - -3 03

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 430 - ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

1. The authority citation for Part 430 continues to read as follows:

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

2. Section 430.2 is amended by adding definitions for "elfective date," "maximum allowable

energy use," "minimum required energy efficiency," "small duct, hiigh velocity system," and

"through-the-wall air conditioner and heat pump" in alphabetical older to read as follows:

§ 430.2 Definitions.

Effective date means the date on and after which a manufacturer must comply with an energy

conservation standard in the manufacture of a covered product.

Maximum allowable energy use means an energy conservation standard for a covered product,

expressed in terms of a maximum amount of energy that may be consumed, which is established

by statute or by a final rule that has modified this part pursuant to a date DOE has selected

consistent with the Congressional Review Act (5 U.S.C. 801-804) and any other applicable law,

or the date on which DOE completes action on any timely-initiated administrative reconsideration,

whichever is later.

142

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

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 430 - ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS 

1. The authority citation for Part 430 continues to read as follows: 

Authority: 42 U.S.c. 6291-6309; 28 U.S.C. 2461 note. 

2. Section 430.2 is amended by adding definitions for "eH,~ctive date," "maximum allowable 

energy use," "minimum required energy efficiency," "small duct,,:ligh velocity system," and 

"through-the-wall air conditioner and heat pump" in alphabetkal Older to read as follows: 

§ 430.2 Definitions. 

* * * * * 

Effective date means the date on and after which a manufacturer must comply with an energy 

conservation standard in the manufacture of a covered product. 

* * * * * 

Maximum allowable energy use means an energy conservation standard for a covered product, 

expressed in terms of a maximum amount of energy that may be consumed, which is established 

by statute or by a final rule that has modified this part pursuant to a date DOE has selected 

consistent with the Congressional Review Act (5 U.S.C. 801-804) and any other applicable law, 

or the date on which DOE completes action on any timely-initiated administrative reconsideration, 

whichever is later. 

142 
EE-RM/STD-98-440 - 3,3

* * * * *

Maximum allowable water use means an energy conservation standard for a covered product,

expressed in terms of a maximum amount of water that may be consumed, which is established by

statute or by a final rule that has modified this part pursuant to a date DOE has selected consistent

with the Congressional Review Act (5 U.S.C. 801-804) and any other applicable law, or the date

on which DOE completes action on any timely-initiated administrative reconsideration, whichever

is later.

* * * * *

Minimum required energy efficiency means an energy conservation standard for a covered

product, expressed in terms of a minimum efficiency quotient, which is established by statute or

by a final rule that has modified this part pursuant to a date DOE has selected consistent with the

Congressional Review Act (5 U.S.C. 801-804) and any other applicable law, or the date on which

DOE completes action on any timely-initiated administrative reconsideration, whichever is later.

Small duct, high velocity system means a heating and cooling product that contains a blower and

indoor coil combination that:

(1) Is designed for, and produces, at least 1.2 inches of external static pressure when

operated at the certified air volume rate of 220-350 CFM per rated ton of cooling; and

(2) When applied in the field, uses high velocity room outlets generally greater than 1000

fpm which have less than 6.0 square inches of free area.

Through-the-wall air conditioner and heat pump means a central air conditioner or heat pump that

143

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

'" '" '" '" '" 

Maximum allowable water use means an energy conservation standard for a covered product, 

expressed in terms ofa maximum amount of water that may be consumed, which is established by 

statute or by a final rule that has modified this part pursuant to a date DOE has selected consistent 

with the Congressional Review Act (5 U.S.C. 801-804) and any other applicable law, or the date 

on which DOE completes action on any timely-initiated administrative reconsideration, whichever 

is later. 

'" '" '" * '" 

Minimum required energy efficiency means an energy conservation standard f('lr a covered 

product, expressed in terms of a minimum efficiency quotient, which is est.lblisiled by statute or 

by a final rule that has modified this part pursuant to a date DOE has selected consistent with the 

Congressional Review Act (5 U.S.c. 801-804) and any other applicable law, or the date on which 

DOE completes action on any timely-initiated administrative reconsideration, whichever is later. 

* '" '" * '" 

Small duct. high velocity system means a heating and cooling product that contains a blower and 

indoor coil combination that: 

(1) Is designed for, and produces, at least 1.2 inches of external static pressure when 

operated at the certified air volume rate of 220-350 CFM per rated ton of cooling; and 

(2) When applied in the field, uses high velocity room outlets generally greater than 1000 

fpm which have less than 6.0 square inches of free area. 

'" '" '" '" '" 

Through-the-wall air conditioner and heat pump means a central air conditioner or heat pump that 

143 
EE-RM/STD-98-440 - 303

is designed to be installed totally or partially within a fixed-size opening in an exterior wall, and:

(1) Is manufactured prior to January 23, 2010;

(2) Is not weatherized;

(3) Is clearly and permanently marked for installation only through an exterior wall;

(4) Has a rated cooling capacity no greater than 30,000 Btu/hr;

(5) Exchanges all of its outdoor air across a single surface of the equipment cabinet;

and

(6) Has a combined outdoor air exchange area of less than 800 square int .les (split

systems) or less than 1,210 square inches (single packaged systems) as measured

on the surface described in (5).

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.

(c) 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:

144

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

is designed to be installed totally or partially within a fixed-size opening in an exterior wall, and: 

(1) Is manufactured prior to January 23, 2010; 

(2) Is not weatherized; 

(3) Is clearly and permanently marked for installation only through an exterior wall; 

(4) Has a rated cooling capacity no greater than 30,000 Btulhr; 

(5) Exchanges aU of its outdoor air across a single surface of the equipment cabinet; 

and 

(6) Has a combined outdoor air exchange area ofless than 800 square ind.les (split 

systems) or less than 1,210 square inches (single packaged systems) as measlTed 

on the surface described in (5). 

* * * * * 

3. Section 430.32 ofSubpartC is amended by revising paragraph (c) to read as follows: 

§ 430.32 Energy and water conservation standards and effective dates. 

* * * * * 

(c) 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: 

144 
EE-RM/STD-98-440 - 303

Product class Seasonal Energy Heating Seasonal

Efficiency Ratio Performance Factor

1. Split systems ................................. 10.0 6.8

2. Single package systems ...................... 9.7 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:

Seasonal Energy Heating Seasonal

Product class Efficiency Ratio Performance Factor

(SEER) (HSPF)

1. Split system air conditioners............................. 12

2. Split system heat pum ps........................................................ 12 7.4

3. Single package air conditioners............................. 12

4. Single package heat pumps................................... 12 7.4

5.A. Through-the-wall air conditioners and heat pumps - split

system .................................. ........ .............................. 10.9 7.1

5.B. Through-the-wall air conditioners and heat pumps - single

package..................................................................................... 10.6 7.0

6. Small duct, high velocity systems ....................................... 10.0 6.8

4. Section 430.34 is added to Subpart C to read as follows:

145

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Product class Seasonal Energy Heating Seasonal 

Efficiency Ratio Perfonnance Factor 

1. Split systems ....................................... 10.0 6.8 

2. Single package systems ...................... 9.7 6.6 

(2) Centra] air conditioners and central air conditioning heat pumps manufactured on or 

after January 23, 2006, shall have Seasonal Energy Efficiency Ratio and Heating Seasonal 

Perfonnance Factor no less than: 

Seasonal Energy Heating Seasonal 

1 Product class Efficiency Ratio Perfonnance Factor 

(SEER) (HSPF) 

1. Split system air conditioners ................................................. 12 -

2. Split system heat pumps ........................................................ 12 7.4 

3. Single package air conditioners ............................................. 12 -

4. Single package heat pumps ................................................... 12 7.4 

5.A. Through-the-wall air conditioners and heat pumps - split 

system ....................................................................................... 10.9 7.1 

S.B. Through-the-wall air conditioners and heat pumps - single 

package ..................................................................................... 10.6 7.0 

6. Small duct, high velocity systems ....................................... 10.0 6.8 

*. * * * * 

4. Section 430.34 is added to Subpart C to read as follows: 

145 
EE-RM/STD-98-440- ,3 3

§ 430.34 Energy and water conservation standards amendments

The Department of Energy may not prescribe any amended standard which increases the

maximum allowable energy use or, in the case of showerheads, faucets, water closets or urinals,

the maximum allowable water use, or which decreases the minimum required energy efficiency of

a covered product.

146

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

§ 430.34 Energy and water conservation standards amendments 

The Department of Energy may not prescribe any amended standard which increases the 

maximum allowable energy use or, in the case of showerheads, faucets,. water closets or urinals, 

the maximum allowable water use, or which decreases the minimum required energy efficiency of 

a covered product. 

146 
EE-RM/STD-98-440 - 3C)3

Appendix

[The following letters from Department of Justice will not appear in the Code of Federal

Regulations.]

DEPARTMENT OF JUSTICE

Antitrust Division

A. DOUGLAS MELAMED

Acting Assistant Attorney General

Main Justice Building

950 Pennsylvania Avenue. N. W.

Washington, D.C. 20530-0001

(202) 514-2401/ (202) 616-2645 (f)

antitrust@justice.usdoj.gov (internet)

http://www.usdoj.gov (World Wide

Web)

December 4, 2000

Mary Anne Sullivan, General Counsel

Department of Energy

Washington, D.C. 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(o)(2)(B)(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).

147

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Appendix 

[The following letters from Department of Justice will not appear in the Code of Federal 

Regulations. ] 

Mary Anne Sullivan, General Counsel 

Department of Energy 

Washington, D.C. 20585 

Dear General Counsel Sullivan: 

DEPARTMENT OF JUSTICE 

Antitrust Division 

A. DOUGLAS MELAMED 

Acting Assistant Attorney General 

Main Justice Building 

950 Pennsylvania Avenue. N. W. 

Washington, D.C. 20530-0001 

(202) 514-24011 (202) 616-2645 (f) 

antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide 

Web) 

December 4, 2000 

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(0 )(2)(B)(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 § OAO(g). 

147 
EE-RM/STD-98-440 - 303

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 DOE 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 DOE 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 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 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 air 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 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, 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

'The Federal Register notice also requested comments on a proposal to adopt a standard

for steady-state cooling efficiency (EER) and discussed several options DOE of Energy is

considering. The proposed rule set forth in the notice does not, however, include a provision

regarding an EER standard, and the views of 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. If DOE of Energy proposes a rule

in the future incorporating an EER standard, DOE will then evaluate that proposed rule and

express its views about the competitive impact of that standard.

148

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

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 DOE 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 

recommendatipn submitted to DOE of Energy by m~ufacturers 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 was developed in consultation with small manufacturers, 

and that the manufacturers beUeve 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 all()w 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 cOrripetition. 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).1 These standards 

would change from the current.central air conditioner and heat pump efficiency standards of 10 

SEERl6.S HSPF for split system air conditioners and heat pumps and 9.7 SEERl6.6 HPSF for 

single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEERl7. 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 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, 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 

(The Federal Register notice also requested comments on a proposal to adopt a standard 

for steady-state cooling efficiency (EER) and discussed several options DOE of Energy is 

considering. The proposed rule set forth in the· notice does not, however, include a provision 

regarding an EER standard, and the views of 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. If DOE of Energy proposes a rule 

in the future incorporating an EER standard, DOE will then evaluate that proposed rule and 

express its views about the competitive impact of that standard. 

148 
EE-RM/STD-98-440 - 3, 3

used in manufactured housing. These manufacturers could not make units that comply with the

rule and fit into the available space.

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.

Department of Justice urges DOE of Energy to take into account these possible impacts on

competition in determining its final energy efficiency standard for air conditioners and heat

pumps. DOE 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. Doug as Melamed

149

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 3D3 

used in manufactured housing. These manufacturers could not make units that comply with the 

nile and fit into the available space. 

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 inc 1 ude electric resistance heat, reducing the competition that 

presently exists between heat pumps and those other systems . 

. Department of lusth;:e urges DOE of Energy to take into account these possible impacts on 

competition in determining its final energy efficiency standard for air conditioners and heat 

pumps. DOE ofEilergy 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. Doug 1 as Melamed 

149 
EE-RM/STD-98-440 - 303

DEPARTMENT OF JUSTICE

Antitrust Division

JOHN M. NANNES

Acting Assistant Attorney General

Main Justice Building

950 Pennsylvania Avenue. N.W.

Washington, D.C. 20530-0001

(202) 514-2401/ (202) 616-2645 (f) .

antitrust@justice.usdoj.gov (internet)

http://www.usdoj.gov (World Wide

Web)

April 5, 2001

Eric J. Fygi, Acting General Counsel

Department of Energy

Washington, D.C. 20585

Dear Acting General Counsel Fygi:

I am responding to your letter dated March 20, 2001, seeking the views of the Attorney

General about the potential effect on competition of the final rule published on January 22, 2001,

setting forth new energy efficiency standards for central air conditioners and heat pumps. You

specifically asked for our views about the impact on competition of the rule's prescription of a 13

SEER (Seasonal Energy Efficiency Rating) standard for all product classes, except for niche

products, and the desirability of reducing the standard to a 12 SEER level for all subcategories.

Your letter requested our views by March 30, but your staff agreed to extend the response date to

April 6.

As you noted in your letter to the Attorney General, the Antitrust Division had earlier expressed

its views on the proposed rule, which provided for a 12 SEER standard for air conditioners and a

13 SEER standard for heat pumps. The Division had concluded that the 13 SEER standard for

heat pumps could have an adverse effect on competition and urged the Department of Energy to

adopt a 12 SEER standard for heat pumps. We noted only minor concerns about the proposed 12

SEER standard for air conditioners.

We have reviewed the final rule and determined that the 13 SEER heat pump standard still raises

competitive problems. We have further determined that the 13 SEER standard for air conditioners

also raises competitive concerns.

150

EE-RM-STD-98-440 COMMENT 303

Eric 1. Fygi, Acting General Counsel 

DepartmeDt of Energy 

Washington, D.C. 20585 

Dear Acting General Counsel Fygi: 

EE-RM/STD-98-440 - 303 

DEPARTMENT OF JUSTICE 

Antitrust Division 

JOHN M. NANNES 

Acting Assistant Attorney General 

Main Justice Building 

950 Pennsylvania Avenue. N.W. 

Washington, D.C. 20530-0001 

(202) 514-24011 (202) 616-2645 (f) . 

antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide 

Web) 

April 5, 2001 

. I am responding to your letter dated March 20, 2001, seeking the views of the Attorney 

General about the potential effect on competition of the final rule published on January 22, 2001, 

setting forth new energy efficiency standards for central air conditioners and heat pumps. You 

specifically asked. for our views about the impact on competition of the rule's prescription of a 13 

SEER (Seasonal Energy Efficiency Rating) standard for all product classes, except for niche 

products, and the desirability of reducing the standard to a 12 SEER level for all subcategories. 

Your letter requested our views by March 30, but your staff agreed to extend the response date to 

April 6. 

As you noted in your letter to the Attorney General, the Antitrust Division had earlier expressed 

its views on the proposed rule, which provided for a 12 SEER standard for air conditioners and a 

13 SEER standard for_heatpumps. The Division had concluded that the 13 SEER standard for 

heat pumps could have an adverse effect on competition and urged the Department of Energy to 

adopt a 12 SEER standardfotheat pUinpS. We noted only minor concerns about the proposed 12 

SEER standard for air conditioners. 

We have reviewed the final·rule and determined that the 13 SEER heat pump standard still raises 

competitive problems. We have further determined that the 13 SEER standard for air conditioners 

also raises competitive concerns. 

150 
EE-RM/STD-98-440 -3 03

In our earlier letter, we identified and described three competitive problems

resulting from the proposed 13 SEER standard for heat pumps, including a disproportionate

impact on smaller manufacturers2 and an adverse effect on manufacturers of specialized

equipment (the niche product manufacturers) and manufacturers of equipment for

space-constrained installation sites (such as manufactured housing, which accounts for a

significant percentage of the country's housing starts). The exception made in the final rule for

niche product manufacturers may alleviate competitive problems for their products, but the

exception does not eliminate the difficulties for manufacturers of standard equipment who could

not make equipment that complied with the 13 SEER standard and still fit into space-constrained

sites. The final rule also continues to have a disproportionate impact on smaller manufacturers of

heat pumps. The 13 SEER standard for air conditioners raises the same kinds of competitive

problems as the 13 SEER standard does for heat pumps.

We urge the Depariiment of Energy to consider the impact on competition and to adopt a 12

SEER standard for all products covered by the rule.

Sincerely,

John M. Nannes

2

We noted in our previous letter that less than 20 percent of the total current heat pump product lines meet

the new standard, but for some small manufacturers, 100 percent of their product lines failed to satisfy the standard.

The same is true for air conditioner manufacturers when the standard is 13 SEER.

151

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

In our earlier letter, we identified and described three competitive problems 

resulting from the proposed 13 SEER standard for heat pumps, including a disproportionate 

impact on smaller manufacturers2 and an adverse effect on manufacturers of specialized 

equipment (the niche product manufacturers) and manufacturers of equipment for 

space-constrained installation sites (such as manufactured housing, which accounts for a 

significant percentage of the ,country's housing starts). The exception made in the final rule for 

niche product manufacturers may alleviate competitive problems for their products, but the 

exception does not eliminate the difficulties for manufacturers of standard equipment who could 

not make equipment that complied with the 13 SEER standard and still fit into space-constrained 

sites. The final rule also continues to have a disproportionate impact on smaller manufacturers of 

heat pumps. The 13 SEER standard for air conditioners raises the same kinds of competitive 

problems as the 13 SEER standard does for heat pumps. 

We urge the Depelimentof Energy to consider the impact on competition and to adopt a 12 

SEER standard for all p.roducts covered by the rule. 

Sincerely, 

John M. Nannes 

2We noted in our previous letter that less than 20 percent of the total current heat pump product lines meet 

the new standard, but for some small manufacturers, 100 percent of their product lines failed to satisfy the standard. 

, The same is true for air conditioner manufacturers when the standard is 13 SEER. 

151 
EE-RM/STD-98-440- 3- 3

DEPARTMENT OF JUSTICE

Antitrust Division

CHARTIES A JAMES

Assistant Attorney General

Main Justice Building

950 Pennsylvania Avenue, N.W.

Washington, D.C. 20530-0001

(202) 514-2401 / (202) 616-2645 (f)

antitrust@justice.usdoj.gov (interet)

http://www.usdoj.gov (World Wide Web)

October 19, 2001

Lee Liberman Otis, General Counsel

Department of Energy

Washington, D.C. 20585

Dear General Counsel Otis:

I am responding to your August 15, 2001 letter seeking the views of the Attorney General

about the potential impact on competition of proposed energy efficiency standards for residential

central air conditioners and central air conditioning heat pumps. Your request was submitted

pursuant to Section 325(o)(2)(B)(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).

The proposal provides for 12 SEER standards for all types of residential central air

conditioners and central air conditioning heat pumps, except those that are installed through an

exterior wall. We have reviewed the materials that accompanied your August 15 letter, the

materials that you previously provided, and the comments submitted to DOE, as well as the

results of our industry interviews. Based on that review, we have concluded that the proposal

would not adversely affect competition.

Sincerely,

152

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- .303 

DEPARTMENT OF JUSTICE 

Antitrust Division 

CHARI,ES A JAMES, 

Assistant Attorney General 

Main Justice Building 

950 Pennsylvania Avenue, N.W. 

Washington, D.C. 20530-0001 

(202)·514-2401/ (202) 616-2645 (f) 

antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide Web) 

October 19,2001 

Lee Libennan Otis, General Coun5el 

Department of Energy 

Washington, D.C. 20585 

Dear General Counsel Otis: 

I am responding to your August 15,2001 letter seeking the views of the Attorney General 

about the potential impact on competition of proposed energy efficiency standards for residential 

central air conditioners and central air conditioning heat pumps. Your request was submitted 

pursuant to Section 325(o)(2)(B)(i) of the Energy Policy and Conservation Act, 42 U.S.C. §6291, 

6295 ("EPCA"), which requires the Attorney General to make a detennination 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). 

The proposal provides for 12 SEER standards for all types of residential central air 

conditioners and central air conditioning heat pumps, except those that are installed through an 

exterior wall. We have reviewed the materials that accompanied your August 15 letter, the 

materials that you previously provided, and the comments submitted to DOE, as well as the 

results of our industry interviews. Based on that review, we have concluded that the proposal 

would not adversely affect competition. 

Sincerely, 

152 
EE-RM/STD-98-440 -,33

Charles A. James

153

EE-RM-STD-98-440 COMMENT 303

153 

EE.RM/STD·98·440 -3a.3 

Charles A. James 
EE-RM/STD-98-440 - 3 03

APPENDIX M: REVISED UTILITY IMPACTS ANALYSIS AND

ENVIRONMENTAL ASSESSMENT

M.1 INTRODUCTION

As described in the Utility Impacts Analysis chapter (Chapter 11) of the Technical Support

Document (TSD) and the Environmental Assessment (EA), a variant of the Department of Energy,

Energy Information Administration's (DOE/EIA) National EnergyModeling System (NEMS), called

NEMS-BRSa (BRS is DOE's Building Research and Standards office) is used to conduct both the

utility impacts analysis and environmental assessment. NEMS was used by DOE/EIA to produce

the 2000 Annual Energy Outlook (AEO200)',and NEMS-BPS is used to provide some key

equivalent inputs to the standards analysis.

The purpose of the utility impacts analysis is to assess the impact of each central air

conditioner and heat pump trial standard level on electric utilities. The impact of efficiency standards

on utilities isassessed by reporting several key industry parameters, notably energy sales, generation,

and capacity.

The primary focus of the EA is the effect of efficiency standaids on air resources. For each

of the trial standard levels, total power sector emissions are calculated based on output from NEMSBRS. The EA considers only two pollutants, nitrogen oxides (NO,) and sulfur dioxide (SO2 ), and

one emission, carbon (C). Because emissions of SO2 from power plants are capped by clean air

legislation, physical emissions of this pollutant from electricity generation will be only minimally

affected by possible air conditioner and heat pump standards. The maximum SO2 allowed by law

will most likely still be produced, but because SO2 emissions are traded, and if SO2 emissions are

lowered due to less power generation, then the cost of SO2 emission credits may decrease slightly.

Therefore, the EA does not consider changes in power sector SO2 emissions, although it does report

household-emissions savings. The only form of carbon tracked by NEMS-BRS is carbon dioxide

(CO2), so the carbon discussed in this analysis is only in the form of CO2, but is reported as mass of

elemental carbon, in keeping with standard practice.

For details on how the Utility Impacts Analysis was conducted refer to Chapter 11 and

Appendix H of the TSD. Details on how the Environmental Assessment was conducted can be

found in a separate document. 2

' For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information Administration

documentation. A useful summary is National Energy Modeling System: An Overview 2000, DOE/EIA-0581 (2000), March 2000.

DOE/EIA approves use of the name NEMS to describe only an official version ofthe model without any modification to code or data.

Because our analysis entails some minor code modifications and the model is run under policy scenarios that are variations on

DOE/EIA assumptions, the name NEMS-BRS refers to the model as used here (BRS is DOE's Building Research and Standards

office, under whose aegis this work has been performed).

M-l

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 3 03 

APPENDIX 1\1: REVISED UTILITY IMPACTS ANALYSIS AND 

ENVIRONMENTAL ASSESSMENT 

M.l INTRODUCTION 

As described in the Utility Impacts Analysis c~apter (Chapter II) of the Technical Support 

Document (TSD) and the Environmental Assessment (EA), a variant ofthe Department of Energy, 

Energy Infonnation Administration's (DOEIEIA) National Energy Modeling System (NEMS), called 

- NEMS-BRsa (BRS is DOE's Building Research andStandards offi~e) is used to conduct both the 

utility impacts analysis and environmental assessment. NEMS was used by DOEIEIA to produce 

the 2000 Annual Energy Outlook (A E02 00) I ,and NErv' 3-BR S is used to provide some key 

equivalent inputs to the standards analysis. 

The purpose of the utility impacts analysis is to asses:, the impact of each central air 

conditioner and heat pump trial standard level on electric utili ti es. Th e impact of efficiency standards 

on utilities is assessed by reporting several key industry parameters, notably energy sales, generation, 

and capacity. 

The primary focus of the EA is the effect of efficiency stmdards on air resources. For each 

of the trial standard levels, total power sector emissions are calculated. 'oased on output from NEMSBRS. The EA considers only two pollutants, nitrogen oxides (NOx) and sulfur dioxide (S02)' and 

one emission, carbon (C). Because emissions of S02 from power plants are capped by clean air 

legislation, physical emissions of this pollutant from electricity generation will be only minimally 

affected by possible air conditioner and heat pump standards. The maximum S02 allowed by law 

. will most likely still be produced, but because S02 emissions are traded, and if S02 emissions are 

lowered due to less power generation, then the cost of S02 emission credits may decrease slightly. 

Therefore, the EA does not consider changes in power sector S02 emissions, although it does report 

household-emissions savings. The only fonn of carbon tracked by NEMS-BRS is carbon dioxide 

(C02), so the carbon discussed in this analysis is only in the fonn of CO2, but is reported as mass of 

elemental carbon, in keeping with standard practice. 

For details on how the Utility Impacts Analysis was conducted refer to Chapter 11 and 

Appendix H of the TSD. Details on how the Environmental Assessment was conducted can be 

found in a separate document.2 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information Administration 

documentation. A useful summary is National Energy Modeling System: An Overview 2000, DOEIEIA-058I (2000), March 2000. 

DOE/EIA approves use of the name NEMS to describe only an official version of the model without any modification to code or data. 

Because our analysis entails some minor code modifications and the model is run under-policy scenarios that are variations on 

DOE/EIA assumptions, the name NEMS-BRS refers to the model as used here (BRS is DOE's Building Research and Standards 

office, under whose aegis this work has been performed). 

M-I 
EE-RM/STD-98-440 - 303

M.2 REASON FOR REVISING ANALYSES

After the completion of the prior utility impacts analysis and environmental assessment for

central air conditioner and heat pump standards, DOE determined that there were a number of

apparent problems associated with the specific load shapes used in NEMSb. As a result, DOE

conducted a comprehensive review of the end-use load shapes used by NEMS for all sectors,

including the residential, commercial, industrial, and transportation sectors. The apparent problems

associated with the load shapes were confirmed by the review and an alternative set of end-use load

shapes were constructed for all of the sectors.3

In the case of the residential air-conditioning (i.e. space-cooling) end-use, the alternative load

shapes are distinctly different than the load shapes used in the 2000 versi m of NEMS. Figure M.l

shows the monthly load shapes used in the 2000 version ofNEMS.4 Note tle non-representativeness

of the load shapes as the peakday occurs in October and the loads in typical wirter months (such as

January and February) are greater than those in typical summer months (such as June and July). In

addition, there is no attempt to capture the impact of regional variations. The alternative load shapes

for residential air-conditioning depicted in Figures M.2a and M.2b are much more representative

than those used in the 2000 version of NEMS.5 Regional variations are explicitly addressed as a

different set of load shapes are provided for each of the thirteen regions represented ii i NEMS. (Only

two of the thirteen load shapes, one for a northern region (Figure M.2a) and one for a southern region

(Figure M.2b) are shown.) Note that the peakdays now occur in what are typically ilie hottest months

of the year (July and August) with very little load allocated to the winter months. Also note that

although the alternative load shapes shift the load to a more appropriate time of the year (i.e., the

summer months), the overall magnitude of the alternative loads is less than that of the loads used in

the 2000 version of NEMS.

The use of the alternative residential air-conditioning load shape along with the entire set of

new alternative load shapes for all the other sectoral end-uses results in smaller peak-to-average

system loads. Table M. I shows the peak-to-average load ratios for the new alternative sectoral load

shapes versus the sectoral load shapes that are used in the 2000 version of NEMS.6 Note that for all

sectors and for all regions (as defined by the North American Electric Reliability Council (NERC))

the peak-to-average loads are less than those from the 2000 version ofNEMS. This results in overall

built-up system load shapes that are less peaky. By incorporating the new alternative load shapes

in NEMS, less peaking capacity and less total capacity are projected. This in turn implies that

reducing the energy use on a relatively peaky end-use like residential air-conditioning will have less

of an impact on overall system capacity.

b End-uses in NEMS are characterized with 24-hour weekday, weekend, and peakday load shapes per month. In other

words, each end-use is characterized by a minimum ofthirty-six 24-hour load shapes (three day types per month for twelve months).

Those end-uses that are impacted by regional variations and building application, such as space-conditioning appliances, are

characterized with additional load shapes. Regional load shapes in NEMS are based on the thirteen regions defined by the North

American Electric Reliability Council (NERC).

M-2

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

M.2 REASON FOR REVISING ANALYSES 

After the completion of the prior utility impacts analysis and environmental assessment for 

central air conditioner and heat pump standards, DOE determined that there were a number of 

apparent problems associated with the specific load shapes used in NEMSb

• As a result, DOE 

conducted a comprehensive review of the end-use load shapes used by NEMS for all sectors, 

including the residential, commercial, industrial, and transportation sectors. The apparent problems 

associated with the load shapes were confirmed by the review and an alternative set of end-use load 

shapes were constructed for all of the sectors. 3 

In the case of the residential air-conditioning (Le. space-cooling) end-use, the alternative load 

shapes are distinctly different than the load shapes used in the 2000 versi m of NEMS. Figure M.I 

shows the monthly load shapes used in the 2000 version ofNEMS.4 Note tbe non-representativeness 

of the load shapes as the peakday occurs in October and the loads in typic"l wirott:'r months (such as 

January and February) are greater than those in typical summer months (sll,~h as June and July). In 

addition, there is no attempt to capture the impact of regional variations. The altemative load shapes 

for residential air-conditioning depicted in Figures M.2a and M.2b are much more representative 

than those used in the 2000 version ofNEMS.s Regional variations are explicitly addressed as a 

different set ofload shapes are provided for each ofthe thirteen regions represented iJ I NEMS. (Only 

two of the thirteen load shapes, one for a northern region (Figure M.2a) and one f'Jr a southern region 

(Figure M.2b) are shown.} Note that the peakdays now occur in what are typically iile hottest months 

of the year (July and August) with very little load allocated to the winter months. Also note that 

although the alternative load shapes shift the load to a more appropriate time of the year (i.e., the 

summer months), the overall magnitude of the alternative loads is less than that ofthe loads used in 

the 2000 version ofNEMS. 

The useofthe alternative residential air-conditioning load shape along with the entire set of 

new alternative load shapes for aU the other sectoral end-uses results in smaller peak-to-average 

system loads. Table M.l shows the peak-to-average load ratios for the new alternative sectoral load 

shapes versus the sectora-lload shapes that are used in the 2000 version ofNEMS. 6 Note that for all 

sectors and for all regions (as defined by the North American Electric Reliability Council (NERC)) 

the peak-to-average loads are less than those from the 2000 version ofNEMS. This results in overall 

built-up system load shapes that are less peaky. By incorporating the new alternative load shapes 

.. in NEMS, less peaking capacity and less total capacity are projected. This in turn implies that 

reducing the energy use on a relatively peaky end-use like residential air-conditioning will have less 

of an impact on overall system capacity. 

b End-uses in NEMS are characterized with 24-hour weekday, weekend, and peakday load shapes per month. In other 

words, each end-use is characterized by a minimum of thirty-six 24-hour load shapes (three day types per month for twelve months). 

Those end-uses that are impacted by regional variations and building application, such as space-conditioning appliances, are 

characterized with additional load shapes. Regional load shapes in NEMS are based on the thirteen regions defined by the North 

American Electric Reliability Council (NERC). 

M-2 
EE-RM/STD-98-440 - 303

Resitdntial Space Cooling (all regions) (RSFSCE67)

(I1oudr Ico,:ls byi mcnlh a l dnay ti-e ;

I C S.:1 ..'.l c J ,s lli''r - INI.-d . Sl i. I tblil, L :l Sali I-- :1 UmJcI

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........ r ~...*~..". ^

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1

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1 1: ) 1 Cr r * " - *' ' * I

uI

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5 

J

Figure M.1 Residential Space-Cooling Load Shapes used in 2000 version of NEMS

M-3

' ' .·1 - r ' *,1.i l -J: ll

tI .l 1 '.I».*I ' I o.I. -l . . . . 1 . . I . ........ ** -:l .| l -1.-. 1.· l-l l 'l. l :l 

..... .1.;: r. C. *. ' .

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Resid&nrial Space Cooling (all regions) (RSFSCE67) 

(Hourly-Iwd:; 1.J"y" monll and ,I;rl tiro? i 

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Figure M.l Residential Space-Cooling Load Shapes used in 2000 version of NEMS 

M-3 
EE-RM/STD-98-440- 303

Residential Space Cooling, Region N01 (RESSCN01)

HcLifurl lcIads t n v:rlh and day ty.4'i

Load $Slrths for January Load Sh;tup for Fbiuary Load Sh3apc fto Maich

HI tlhX. Ir el dJnnu3llla ds. .Hout loh s s d annuSdl dsco: H ulks spwren s d rwa kods.

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CtrMh.:un D3*ah' lls DirlHas

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Figure M.2a Alternative Residential Space-Cooling Load Shapes for the North Region

M-4

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Residential Space Cooling. Region N01 (RESSCN01) 

; H.:·url, 1':'':ld!> t,y Ir.:.nth illld ct,)y ~,·r..;' 

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M-4 
EE-RM/STD-98-440 - 303

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M-5

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 ~ 303 

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M-5 
EE-RM/STD-98-440- 303

Table M.1 Peak-to-Average Load Ratios by Sector and Region:

Current (NEMS 2000) Load Shapes versus New (Alternative) Load Shapes

NERC Residential Commercial Industrial Transportation All Sectors Actual

Region Current New Current New Current New Current New Current New System

ECAR 3.96 2.37 2.29 2.66 1.50 1.36 4.44 2.24 2.11 1.86 1.49

ERCOT 4.67 2.97 2.23 2.71 1.52 1.36 4.44 2.25 2.49 2.20 1.71

MAAC 4.08 2.27 3.21 2.68 1.52 1.37 4.44 2.24 2.21 2.04 1.62

MAIN 3.67 2.32 2.25 2.62 1.49 1.36 4.44 2.25 2.02 1.90 1.66

MAPP 3.89 2.49 2.12 2.58 1.49 1.36 4.44 2.25 2.20 1.89 1.62

NY 3.80 2.07 2.85 2.63 1.53 1.38 4.44 2.25 2.14 2.00 1.56

NE 3.74 2.13 2.55 2.55 1.53 1.38 4.44 2.24 2.15 1.79 1.51

FL 5.00 2.39 3.75 2.57 1.49 1.36 4.44 2.24 3.09 2.21 1.63

STV 5.06 2.52 2.44 2.64 1.51 1.36 4.44 2.24 2.66 1.99 1.59

SPP 4.31 2.90 2.31 2.73 1.51 1.36 4.44 2.25 2.29 2.20 1.78

NWP 4.75 2.03 2.16 2.56 1.54 1.38 4.44 2.25 2.44 1.67 1.44

RA 3.96 2.25 2.27 2.71 1.54 1.38 4.44 2.25 2.25 2.03 1.61

CNV 5.16 2.07 2.16 2.48 1.54 1.38 4.44 2.25 2.47 1.72 1.59

M.3 REVISED RESULTS

New NEMS-BRS standards case runs were conducted with the entire set of alternative

sectoral end-use load shapes (which included the alternative residential air-conditioning load shapes)

to demonstrate their impact on system capacity. These new runs were conducted with the 2000

version of NEMS-BRS but with its existing set of sectoral load shapes replaced with the alternative

versions.

For reasons stated in Chapter 8 of the TSD (See Section 8.4.8), it is assumed that the NAECA

efficiency scenario is the most probable for Trial Standard Levels 1, 2, and 3 while the Roll-up

efficiency scenario is the most probable for Trial Standards Levels 4 and 5. (Refer to Chapter 7,

Section 7.2.2.5 of the TSD for the current efficiency distribution for each product class and for the

assumed efficiency distributions after new standards under the NAECA and Roll-up efficiency

scenarios.) As a result, revised utility and environmental impacts were generated only for the above

most probable Trial Standard Level and efficiency scenario combinations. Also, all results were

generated compared to the published AE02000 Reference Case.

M.3.1 Revised Utility Impact Results

Table M.2 shows the results from the NEMS-BRS Reference Case run with the alternative

M-6

EE-RM-STD-98-440 COMMENT 303

NERC 

Region 

ECAR 

ERCOT 

MAAC 

MAIN 

MAPP 

NY 

NE 

FL 

STY 

SPP 

NWP 

RA 

CNY 

EE-RM/STD-98-440- .3 03 

Table M.I Peak-to-Average Load Ratios by Sector and Region: 

Current (NEMS 2000)Load Shapes versus New (Alternative) Load Shapes 

Residential Commercial Industrial Transportation All Sectors Actual 

Current New Current New Current New Current New Current New System 

3.96 2.37 2.29 2.66 1.50 1.36 4.44 2.24 2.11 1.86 1.49 

4.67 2.97 2.23 2.71 1.52 1.36 4.44 2.25 2.49 2.20 1.71 

4.08 2.27 3.21 2.68 1.52 1.37 4.44 2.24 2.21 2.04 1.62 

3.67 2.32 2.25 2.62 1.49 1.36 4.44 2.25 2.02 1.90 1.66 

3.89 2.49 2.12 2.58 1.49 1.36 4.44 2.25 2.20 1.89 1.62 

3.80 2.07 2.85 2.63 1.53 1.38 4.44 2.25 2.14 2.00 1.56 

3.74 2.13 2.55 2.55 1.53 1.38 4.44 2.24 2.15 1.79 1.51 

5.00 2.39 3.75 2.57 1.49 1.36 4.44 2.24 3.09 2.21 1.63 

5.06 2.52 2.44 2.64 1.51 1.36 4.44 2.24 2.66 1.99 1.59 

4.31 2.90 2.31 2.73 1.51 1.36 4.44 2.25 2.29 2.20 1.78 

4.75 2.03 2.16 2.56 1.54 1.38 4.44 2.25 2.44 1.67 1.44 

3.96 2.25 2.27 2.71 1.54 1.38 4.44 2.25 2.25 2.03 1.61 

5.16 2.07 2.16 2.48 1.54 1.38 4.44 2.25 2.47 1.72 1.59 

M.3 REVISED RESULTS 

New NEMS-BRS standards case runs were conducted with the entire set of alternative 

. sectoral end-use load shapes (which included the alternative residential air-conditioning load shapes) 

. to demonstrate their impact on system capacity. These new runs were conducted with the 2000 

. version ofNEMS-BRS but with its existing set of sectoral load shapes replaced with the alternative 

versions. 

For reasons stated in Chapter 8 of the TSD (See Section 8.4.8), it is assumed that the NAECA 

efficiency scenario is the most probable for Trial Standard Levels 1, 2, and 3 while the Roll-up 

efficiency scenario is the most probable for Trial Standards Levels 4 and 5. (Refer to Chapter 7, 

Section 7.2.2.5 of the TSD for the current efficiency distribution for each product class and for the 

assumed efficiency distributions after new standards under the NAECA and Roll-up efficiency 

scenarios.) As a result, revised utility and environmental impacts were generated only for the above 

most probable Trial Standard Level and efficiency scenario combinations. Also, all results were 

generated compared to the published AE02000 Reference Case. 

M.3.1 Revised Utility Impact Results 

Table M.2 shows the results from the NEMS-BRS Reference Case run with the alternative 

M-6 
EE-RM/STD-98-440 - J30

sectoral load shapes. Table M.2 also provides the differences between the new run and the existing

NEMS-BRS Reference Case run (i.e., without the alternative load shapes). (Refer to Chapter 11,

Table 11.1 for the NEMS-BRS results that are comparable to the published AE02000 Reference

Case.) The effect of changing to the new alternative sectoral load shapes leads to lower overall

projected peak demands in years after 2010. By the year 2020, a total of 15 GW less installed

capacity is required. Also of note is the effect of the new alternative load shapes on the mix of

generating capacity. Although nine additional GW of coal capacity are required, 24 GW less of

fossil-fuel capacity are needed. This change in the mix of generation is intuitively consistent with

the effect that the new alternative load shapes should have on the overall system load. Since the new

alternative load shapes reduce the peak-to-average load ratios (i.e., flatten out the system load), more

base load capacity should be needed (as confirmed by the increase in coal capacity o f 9 GW) and

less peak load capacity should be required (as confirmed by the decrease in fossil-fuel capacity of

24 GW).

M.3.1.1 Central Air Conditioner and Heat Pump Standard Level Results

Trial standard level results are presented in Tables M.3 through M.7. Each table shows

forecasts using interpolated results as described in Chapter 11, Section 11.4 of the TSD for

residential energy sales and total U.S. electric generation and installed capacity. Most standards

result in similar effects on electric and gas utilities, although the magnitude of the effects varies

according to the level of forecast energy savings. When electricity savings dominate, gas-fired

generation is somewhat more affected than coal-fired generation, especially early in the forecast.

This effect reflects the more load-following role of gas generation overall.

For each of the five standard levels, residential energy sales fall compared to the AE02000

Reference Case with the alternative load shapes. The decrease in sales is proportional to the amount

of energy that the NES model predicts will be saved by each standard level, ranging from just over

0.9% (Standard Level 1) to 4.9% (Standard Level 5) of total residential electricity sales in the peak

savings year reported. For each standard level, total U.S. electric generation decreases relative to the

AE02000 baseline, by just under 1.6% in the peak year of the maximum savings case (Standard

Level 5) to 0.3% in Standard Level 1. Total installed capacity is also reduced in each standard level

scenario, by a maximum of just under 2.3% (Standard Level 5) in 2020. About 84% of the capacity

reduction is in natural gas fired capacity, in this case, reflecting the peaking nature of air conditioning

use.

M-7

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

sectoral load shapes. Table M.2 also provides the differences between the new run and the existing 

, NEMS-BRS Reference Case run (i.e., without the alternative load shapes). (Refer to Chapter II, 

Table 11.1 for the NEMS-BRS results that are comparable to the published AE02000 Reference 

Case.) The effect of changing to the new alternative sectoral load shapes leads to lower overall 

projected peak demands in years after 20 10. By the year 2020, a total of 15 GW less installed 

capacity is required. Also of note is the effect of the new alternative load shapes on the mix of 

generating capacity. Although nine additional GW of coal capacity are required, 24 GW less of 

fossil-fuel capacity are needed. This change in the mix of generation is intuitively consistent with 

the effect that the new alternative load shapes should have on the overall system load. Since the new 

alternative load shapesreduce the peak-lo-average load ratios (i.e., flatten out the system load), more 

baseload capacity should be needed (as confirmed by the increase in coal capacity 0 f9 GW) and 

less peak load capacity should be required (as confirmed by the decrease in fossil-fuel capacity of 

24 GW). 

M.3.1.l Central Air Conditioner and Heat Pump Standard Level Results 

Trial standard level results are presented in Tables M.3 through M.7. Each table shows 

forecasts using interpolated results as described in Chapter II, Section 11.4 of the TSD for 

residential energy sales and total U.S. electric generation and installed capacity. Most standards 

result in similar effects on electric and gas utilities,although the magnitude of the effects varies 

according to the level of forecast energy savings. When electricity savings dominate, gas-fired 

generation is somewhat more affected than coal-fired generation, especially early in the forecast. 

This effect reflects the more load-following role of gas generation overall. 

For each of the five standard levels, residential energy sales fall compared to the AE02000 

Reference Case with the alternative load shapes. The decrease in sales is proportional to the amount 

of energy that the NES model predicts will be saved by each standard level, ranging from just over 

0.9% (Standard Level 1) to 4.9% (Standard Level 5) of total residential electricity sales in the peak 

savings year reported. For each standard level, total U.S. electric generation decreases relative to the 

AE02000 baseline, by just under 1.6% in the peak year of the maximum savings case (Standard 

Level 5) to 0.3% in Standard Levell. Total installed capacity is also reduced in each standard level 

scenario, by a maximum of just under 2.3% (Standard Level 5) in 2020. About 84% of the capacity 

reduction is in natural gas fired capacity, in this case, reflecting the peaking nature of air conditioning 

use. 

M-7 
Table M.2 NEMS-BRS Results with Alternative Load Shapes

INEMS-BRS Results with Alternative Load Shapes: AEO 2000 Difference from AEO2000 Reference Case vithout

Reference Case Alternative Load Shapes

2000 2005 2010 2015 2020 2000 2005 2010 2015 2020

Residential Sector Energy Consumption Residential Sector Energy Consumption

Electricity Sales (TWh) 1,186 1,284 1,384 1,472 1,562 Electricity Sales (TWh) 1 3 5 8

Natural Gas (El) 5.32 5.50 5.75 5.96 6.19 Natural Gas (EJ) 0 0 0 0 -

Other(EJ) 1.96 1.91 1.84 1.78 1.74 Other(EJ) 0 0 0 0

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0 0 0 0

Other (Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0 0 0 0 0

Total US. Electric Generation Total US. Electric Generation

Coal(TWh) 1,912 2,120 2,173 2,280 2,405 Coal (TWh) -18 -7 1 29 58

Gas (TWh) 616 726 999 1,264 1,419 Gas (TWh) 15 9 -2 -33 -57

Petroleum (TWh) 86 58 51 49 45 Petroleum (TWh) -4 -10 -3 2 1

Nuclear (TWh) 688 674 627 511 427 Nuclear (TWh) 0 0 0 0

Renewables (TWh) 389 410 427 438 448 Renewables (TWh) 0 -1 -2 1 1

Total (TWh) 3,691 3,988 4,277 4,542 4,744 Total (TWh) -7 -9 -6 -1 3 r

Installed Generating Capacity Installed Generating Capacity

Coal(GW) 315.3 311.2 310.8 320.5 335.1 Coal(GW) 0 1 0 5 9

Other Fossil (GW) 292.4 346.4 403.1 444.6 483.4 OtherFossil (GW) 18 12 -2 -17 -24 rn

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0 0 0 0 0 D

Renewables (GW) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0 0 0 0 0

Total (GW) 799.9 849.5 899.7 936.3 981.2 Total (GW) | 18 13 -2 -13 -15 .

o0

M-8

, t- ,

EE-RM-STD-98-440 COMMENT 303

Table M.2 NEMS-BRS Results with Alternative Load Shapes 

rNEMS=-SRSRestdtS ~th Alternativ~Load Shapes: AEO 2000 - -- . .. --_ ..... _.- -

Difference from AE02000 Reference Case ~thout 

iReference Case Alternative ~.~_~~_pes 

I" I 2000 2005 2010 2015 2020 I 2000 2005 2010 2015 2020 

Residential Sector Energy Consumption Residential Sector Energy Consumption 

Electricity Sales (IWh) 1,186 1,284 1,384 1,472 1,562 Electricity Sales (IWh) 1 3 5 8 9 

,Natural Gis (FJ) 5.32 5.50 5.75 5.96 6.19 Natural Gis (EJ) 0 0 0 0 0 

Other(FJ) 1.96 1.9i 1.84 1.78 1.74 Other(FJ) 0 0 0 0 0 

Natural Gis (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gis (Quads) 0 0 0 0 0 

Other (Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0 0 0 0 0 

Total US. Electric Generation Total Us. Electric Generation 

Coal(IWh) 1,912 2,120 2,173 2,280 2,405 Coal(IWh) -18 -7 29 58 

Gis (IWh) 616 726 999 1,264 1,419 Gis (IWh) 15 9 -2 -33 -57 

Petroleum (IWh) 86 58 51 49 45 Petro leu m (IWh) -4 -10 -3 2 

Nuclear (IWh) 688 674 627 511 427 Nuclear (IWh) 0 0 0 0 0 

Renewables (IWh) 389 410 427 438 448 Renewables (1Wh) 0 -1 -2 

Total(TWh) 3,691 3,988 4;177 4,542 ·4,744 Total(IWh) -7 -9 -6 -1 3 ~ 'i\ 

Installed Generating Capacity Installed Generating Capacity 

Coal(GW) 315.3 311.2 310.8 320.5 335.1 Coal(GW) 0 0 5 9 

,Other Fossil (ON) 292.4 346.4 403.1 444.6 483.4 Other Fossil (GW) 18 12 -2 -17 -24 rn 

'11 

Nuclear(GW) en.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0 0 0 0 0 :II 

Renewables (ON) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0 0 0 '0 0 ~ Total (ON) 799.9 849.5 899.7 936.3 981.2 Total(GW) 18 13 -2 -13 -15 til 

-t 

t:J 

• CD 

00 

J. 

"" 0 

I 

M-8 W 

0 ~u.> ~ 
Table M.3 Standard Level 1 Forecast, NAECA Efficiency Scenario

INEMS-BRS Results: __ _Difference fromAEO2k Ref lusing AE02002 Loads

I . Extrapolation

2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 2025 2030

Residentia Residential Sector Energy Energy Cnonsumption Residential Sector Energy Consu ion

Electricity Sales (TWh) 1,186 1,284 1,380 1,462 1,548 Electricity Sales (TWh) 0.0 0.0 -4.3 -9.8 -14.4 -17.5 -19.5

Natural Gas (El) 5.32 5.50 5.75 5.96 6.19 Natural Gas (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.0

!Other(EI) 1.96 1.91 1.84 1.78 1.74 Other(EI) 0.00 0.00 0.00 0.00 0.00 0.00 00

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Other(Quads) 1.86 1.81 1.74 1.69 1.65 Other(Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Total US. Electric Generation Total US. Electric Generation

Coal (TWh) 1,912 2,120 2,172 2,277 2,399 Coal (Wh) 0.1 0.0 -0.8 -2.5 -5.8 -5.8 -5.

Gas (TWh) 616 726 996 1,257 1,410 Gas (TWh) -0.1 0.0 -2.9 -6.9 -9.5 -9.5 -9.

Petroleum(TWh) 86 58 50 48 45 Petroleum(TWh) 0.0 0.0 -0.5 -0.5 -0.3 -03 -0.

Nuclear(TWh) 688 674 627 511 427 Nuclear (TWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Renewables (TWh) 389 410 427 438 448 Renewables (TWh) 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1

Total (TWh) 3,691 3,988 4,273 4,532 4,728 Total(TWh) 0.0 0.0 -4.1 -9.9 -15.6 -15.6 -15.6

Installed Generating Capacity Installed Generating Capacity

Coal(GW) 315.3 311.2 310.8 320.3 334.4 Coal(GW) 0.0 0.0 0.0 -0.2 -0.7 -0.7 -0.7

Other Fossil (GW) 292.3 346.4 403.0 442.5 479.7 Other Fossil (GW) -0.1 0.0 -0.1 -2.1 -3.7 -3.7 -3.

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0 m

Renewables (GW) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0. m

Total (GW) 799.8 849.4 899.6 933.9 976.8 Total (GW) -0. I .1 -0.1 -2.4 -4.4 -4.4 -4.4

CO

0

M-9 q

)

EE-RM-STD-98-440 COMMENT 303

Table M.3 Standard Levell Forecast, NAECA Effirie:1c:i 3cenario 

i"NEMS-BRS R~s~I~: 

I --~1~2-0-0-0-2-0-0-5-2-0-10------

I Residential Sector Energy Consumption 

I Electricity Sales (IWh) 1,186 1,284 1,380 

-"'--.--' -- .... __ .. _---

DifTereocc fromAE02k Re~]Tsi~ AEO~002 Loa~ T--- Extrapolation 

2015 2020 \2000 2005 2010 2015 2020 2025 2030 

Residential Sector Energy Consumption 

1,462 1,548 Electricity Sales (fWh) 0.0 0.0 4.3 -9.8 -14.4 -17.5 -19.5 

I Natural cas (FJ) 5.32 5.50 5.75 

1\ Other (FJ) 1.96 1.91 1.84 

Natural Gis (Quads) 5.04 5.21 5.45 

Other (Quads) 1.86 1.81 1.74 

5.96 6.19 Natural Gis (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00, 

1.78 1.74 Other(FJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 5.65 5.87 Natural cas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00, 

1.69 1.65 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Total US. Electric Generation Total US. Electric Generation 

Coal(fWh) 1,912 2,120 2,172 2,277 2,399 Coal(fWh) 0.1 0.0 -0.8 -2.5 -5.8 -5.8 -5.8 

:Gis(IWh) 616 726 996 1,257 1,410 Gas (fWh) -0.1 0.0 -2.9 -6.9 -9.5 -9.5 -9.5 

Petroleum(fWh) 86 58 50 48 45 Petroleum (fWh) 0.0 0.0 -0.5 -0.5 -0.3 -03 -03 

Nuclear (fWh) 688 674 627 511 427 Nuclear (fWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

Renewables (lWh) 389 410 427 438 448 Renewables (IWh) 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1 

Total(IWh) 3,691 3,988 4,273 4,532 4,728 Total(IWh) 0.0 0.0 4.1 -9.9 -15.6 -15.6 -15.6 

Installed Generating Capacity Installed Generating Capacity 

Coal (ON) 315.3 311.2 310.8 320.3 334.4 Coal (ON) 0.0 0.0 0.0 -0.2 -0.7 -0.7 -0.7 

Other Fossil (ON) 292.3 346.4 403.0 442.5 479.7 Other Fossil (ON) -0.1 0.0 -0.1 -2.1 -3.7 -3.7 -3.71 

Nuclear (ON) 97.5 93.4 84.1 67.4 57.0 Nuclcar(ON) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 m 

Renewables (ON) 94.7 98.5 1Ol.7 103.8 105.7 Renewables (ON) 0.0 0.0 0.0 0.0 0.0 '0.0 0.0 m • 

Total (ON) 799.8 849.4 899.6 933.9 976.8 Total (ON) -0.1 -0.1 -0.1 -2.4 4.4 4.4 4.4 :u 

s: 

-til 

-I 

t:J 

U) • 

CD 

~ 

• 

~ 

0 

M-9 GJ 

~ 
Table M.4 Standard Level 2 Forecast, NAECA Efficiency Scenario

NEMS-BRS Results: _____ Difference from AE02k Ref Using AE02002 Loads

Extrapolation

2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 2025 2030

Residential Sector Energy Consumption Residential Sector Fncrsy Consumption

Electricity Sales (TWh) 1,186 1,284 1,376 1,455 1,536 Electricity Sales (TWh) 0.C 0.0 -7.6 -17.3 -25.6 -31.0 -34.6

Natural Cas (E) 5.32 5.50 5.75 5.96 6.19 Natural ias (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other (EJ) 1.96 1.91 1.84 1.78 1.74 Other (E 0.00 0.00 000 0.00 0.00 0.00 0.0

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other (Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Total US. Electric Generation Total US. Electric Generation

Coal(TWh) 1,912 2,120 2,172 2,277 2,396 Coal(TWh) 0.0 0.0 -1.0 -3.3 -8.6 -8.6 -8.6

Gas (TWh) 616 726 994 1,252 1,402 Gas (TWh) 0.0 0.0 -5.0 -124 -17.4 -17.4 -17.

Petroleum(TWh) 86 58 50 48 45 Petroleum(TWh) 0.0 0.0 -0.8 -0.6 0.1 0.1 0.1

Nuclear(TWh) 688 674 627 511 427 Nuclear (TWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.

Renewables (TWh) 389 410 427 438 448 Renewables (TWh) 0.0 0.0 0.1 -0.1 -0.2 -02 -0.2

Total(TWh) 3,691 3,988 4,270 4,526 4,718 Total(TWh) 0.0 0.0 -6.7 -16.4 -26.1 -26.1 -26.1

Installed Generating Capacity Installed Generating Capacity

Coal(GW) 315.3 311.2 310.8 320.1 333.9 Coal(GW) 0.0 0.0 0.0 -0.4 -1.2 -12 -1.

Other Fossil (GW) 292.4 346.4 402.9 440.3 476.0 Other Fossil (GW) 0.0 0.0 -0.2 -4.3 -7.4 -7.4 -7.

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Renewables (GW) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 m

Total(GW) 799.9 849.5 899.5 931.6 972.5 Total(GW) 0.0 0.0 -0.2 -4.7 -8.7 -8.7 -8.7 j

M-10

M-10

EE-RM-STD-98-440 COMMENT 303

~ 

Table M.4 Standard Level 2 Forecast, NAECA Efficiency Scenario 

.... -- . _. --- ..... -- _. - .. ------. -

NEMS-BRS Results: Difference from AE02k Ref Using AE02002 Loads 

· 12000 12:0: 20"5 2010 2015 

Extrapolation 

2005 2010 2015 2020 2020 2025 2030 

iResidentiaJ Sector Energy Consumption Residential Sector Fn::ri,Y Consumption 

iElectricity Sales (TWh) 1,186 1,284 1,376 1,455 1,536 Electricity Salc~ {Twh) I 0.0 0.0 -7.6 -17.3 -25.6 -31.0 -34.61 I 

Natural Gas (EJ) 5.32 5.50 5.75 5.96 6.19 Natural Uts (EJ) I).CO 0.00 0.00 0.00 0.00 0.00 O.OOj 

Other(EJ) 1.96 1.91 1.84 1.78 1.74 Other{E.T) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00, 

Other (Quads) 1.86 l.81 l.74 1.69 1.65 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Total US. Electric Generation Total US. Electric Generation 

Coal(TWh) 1,912 2, 120 2, 172 2,277 2,396 Coal(TWh) 0.0 0.0 -1.0 -3.3 -8.6 -8.6 -8.6

1 Gas (TWh) 616 726 994 1,252 1,402 Gas (TWh) 0.0 0.0 -5.0 -124 -17.4 -17.4 -17.4

1 Petroleum(TWh) 86 58 50 48 45 Petroleum(TWh) 0.0 0.0 -0.8 -0.6 0.1 0.1 0.1 

Nuclear (TWh) 688 674 627 511 427 Nuclear(TWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

Renewables (IWh) 389 410 427 438 448 Renewables (TWh) 0.0 0.0 0.1 -0.1 -0.2 -02 -0.2 

Total(TWh) 3,691 3,988 4,270 4,526 4,718 Total(TWh) 0.0 0.0 -6.7 -16.4 -26.1 -26.1 -26.1 

Installed Generating Capacity Installed Generating Capacity 

!Coal(GN) 315.3 311.2 310.8 320.1 333.9 Coal(GN) 0.0 0.0 0.0 -0.4 -1.2 -12 -1.2 

Other Fossil (GN) 292.4 346.4 402.9 440.3 476.0 Other Fossil (GN) 0.0 0.0 -0.2 -4.3 -7.4 -7.4 -7.4

1 Nuclear (GN) 97.5 93.4 84.1 67.4 57.0 Nuclear (GN) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

Renewables (GN) 94.7 98.5 1Ol.7 103.8 105.7 Renewables (GN) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 m 

m 

Total(GN) 799.9 849.5 899.5 931.6 972.5 Total(GN) 0.0 0.0 -0.2 -4.7 -8.7 -8.7 -8.7 • :0 

s: 

-rn 

-f 

C 

• CD 

CO 

~ ~ 

0 

I 

M-1O lv 

~ 
Table M.5 Standard Level 3 Forecast, NAECA Efficiency Scenario

NEMS-BRS Results: ___ _Difference from AE02k RefUsing AE02002 Loads

)i|- f Extrapolation

2000 2005 2010 2015 2020 12000 2005 2010 2015 2020 2025 2030

' Residential Sector Energy Consumption Residential Sector Energy Consumption

Electricity Sales (TWh) 1,186 1,284 1,375 1,452 1,532 Electricity Sales (TWh) 0.0 0.0 -8.8 -20.1 -29.7 -36.1 40.3

Natural Gas (EJ) 5.32 5.50 5.75 5.96 6.19 Natural Gas (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Other (EI) 1.96 1.91 1.84 1.78 1.74 Other (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 000

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 '00 0.00 0.00 0.00 0.00 0.

Other(Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0 0C 0.00 0.00 0.00 0.00 0.00

Total US. Electric Generation Total U.S. Electric Gr,'ation

Coal(TWh) 1,912 2,120 2,172 2,276 2,395 Coal (TWh) 0.0 0.0 -1.2 -3.9 -10.0 -10.0 -10.

CGs (TWh) 616 726 993 1,250 1,399 Gas (TWh) 0.0 0.0 -5.8 -14.4 -20.2 -20.2 -20.2

Petroleum(TWh) 86 58 50 48 45 Petroleum (TWh) 0.0 0.0 -0.9 -0.7 0.1 0.1 0.1

Nuclear (TWh) 688 674 627 511 427 Nuclear (TWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Renewables (TWh) 389 410 427 438 448 Renewables (TWh) 0.0 0.0 0.1 -0.1 -0.2 -0.2 -0.2

Total (TWh) 3,691 3,988 4,269 4,523 4,714 Total (TWh) 0.0 0.0 -7.8 -19.1 -30.4 -30.4 -30.4

Installed Generating Capacity Installed Generating Capacity

Coal(GW) 315.3 311.2 310.8 320.0 333.7 Coal(GW) 0.0 0.0 0.0 -0.5 -1.4 -1.4 -1.4

Other Fossil (GW) 292.4 346.4 402.9 439.6 474.8 Other Fossil(GW) 0.0 0.0 -0.2 -5.0 -8.6 -8.6 -8. m

INuclear(GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0. 0

Renewables (GW) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0. 3

Total(GW) 799.9 849.5 899.5 930.8 971.1 Total(GW) 0.0 0.0 -0.2 -5.5 -10.1 -10.1 -10.1

<b

C)

0

M-ll

EE-RM-STD-98-440 COMMENT 303

Table M.S Standard Level 3 Forecast, NAECA Efficiency Scenario 

iNEMS-BRS Resul~:oo-_-_o -0_00 0_00 _0 --J 

i r-- I 

i I 2000 2005 2010 2015 2020 

!Residential Sector Energy Consumption 

'Electricity Sales (fWh) 1,186 1,284 1,375 1,452 1,532 

Natural Gis (EJ) 5.32 5.50 5.75 5.% 6.19 

Other(EJ) 1.% 1.91 1.84 1.78 1.74 

Natural Gis (QIads) 5.04 5.21 5.45 5.65 5.87 

Other (QIads) 1.86 1.81 1.74 1.69 1.65 

I Total US. Electric Generaiion 

iCoal(IWh) 1,912 2,120 2,172 2,276 2,395 

Gis (IWh) 616 726 993 1,250 1,399 

Petroleum(IWh) 86 58 50 48 45 

Nuc\ear(IWh) 688 674 627 511 427 

Renewables (lWh) 389 410 427 438 448 

Total (IWh) 3,691 3,988 4,269 4,523 4,714 

Installed Generating Capacity 

Coal(GW) 315.3 311.2 310.8 320.0 333.7 

Other Foss il (GW) 292.4 346.4 402.9 439.6 474.8 

INuciear(GW) 97.5 93.4 84.1 67.4 57.0 

I 

Renewables (GW) 94.7 98.5 101.7 103.8 \05.7 

Total (GW) 799.9 849.5 899.5 930.8 971.1 

-

Difference fromAE02k RefUsing AE02002 Loads ! - . __ 0 _____ -&traPolation 

\2000 2005 2010 2015 2020 2025 2030 

Residential Sector Energy Consumption 

Electricity Sales (IWh) 0.0 0.0 -8.8 -20.1 -29.7 -36.1 -40.3 

Natural Gis (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 Other (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 Natural Gis (Quads) 0.00 r 00 0.00 0.00 0.00 0.00 0.00

1 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Total '.Js. Electric (k-:,,-,'ation 

Coal (TW-h) 

Gis (TWh) 

Petroleum (lWh) 

Nuclear (IWh) 

Renewables (fWh) 

Total(fWh) 

0.0 

0.0 

0.0 

0.0 

0.0 

0.0 

Installed Generating Capacity 

Coal (GW) 0.0 

Other Fossil (GW) 0.0 

Nuclear(GW) 0.0 

Renewables (GW) 0.0 

Total (GW) 0.0 

0.0 -1.2 -3.9 -10.0 -10.0 -10.0 

0.0 -5.8 -14.4 -20.2 -20.2 -20.2 

0.0 -0.9 -0.7 0.1 0.1 0.1 

0.0 0.0 0.0 0.0 0.0 0.0

1 0.0 0.1 -0.1 '{).2 '{).2 -0.21 

0.0 -7.8 -19.1 -30.4 -30.4 -30.4 

0.0 0.0 -0.5 -1.4 

0.0 -0.2 -5.0 -8.6 

0.0 0.0 0.0 0.0 

0.0 0.0 0.0 0.0 

-1.4 

-8.6 

-1.4, 

.-8.6

1 0.0 0.01 

0.0 0.0 

0.0 -0.2 -5.5 -10.1 -10.\ -10.1 

M-ll 

m 

1]'1 

:II 

s: 

-

en 

-t 

C 

cD 

CD 

~ 
Table M.6 Standard Level 4 Forecast, Roll-up Efficiency Scenario

NEMS-BRS Results: ___ _ Difference from AEO2k Ref Using AE02002 oads

I _ Extrapolation

2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 2025 2030

Residential Sector Energy Consumption Residential Sector Energy Consumption

Electricity Sales (TWh) 1,186 1,284 1,373 1,448 1,526 Electricity Sales (TWh) 0.0 0.0 -10.6 -24.2 -35.8 -43.6 -48.7

Natural Gas (El) 5.32 5.50 5.75 5.96 6.19 Natural Gas (El) 0.00 0.00 0.00 0.00 0.00 0.00 0.0

Other(EJ) 1.96 1.91 1.84 1.78 1.74 Other (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Other(Quads) 1.86 1.81 1.74 1.69 1.65 Other(Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.

Total US. Electric Generation Total US. Electric Generation

Coal(TWh) 1,912 2,120 2,171 2,275 2,394 Coal(TWh) 0.0 0.0 -2.0 -4.6 -11.3 -11.3 -11.

Gas (TWh) 616 726 993 1,247 1,394 Gas (TWh) h.C 0.0 -6.4 -17.3 -25.1 -25.1 -25.1

Petroleum(TWh) 86 58 50 48 45 Petroleum(TWh) 0.0 0.0 -1.2 -0.7 0.4 0.4 0.

Nuclear (TWh) 688 674 627 511 427 Nuclear (TWh) 0.0 0.0 0.0 0.0 0.0 0.0 0

Renewables (TWh) 389 410 427 438 448 Renevables )0.0 0.0 0.2 -0.3 -0.3 -03 -0.3

Total (TWh) 3,691 3,988 4,268 4,519 4,708 Total (TWh) 0.0 0.0 -9.4 -22.8 -36.4 -36.4 -36.4

Installed Generating Capacity Installed Generating Capacity

Coal(GW) 315.3 311.2 310.8 319.9 333.4 Coal(GW) 0.0 0.0 0.0 -0.6 -1.7 -1.7 -1.7

Other Fossil (GW) 292.4 346.4 402.8 438.2 472.5 Other Fossil (GW) 0.0 0.0 -0.3 -6.4 -10.9 -10.9 109

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0.0 0.0 00 0.0 0.0 0.0 0.0

Renewables (GW) 94.7 98.5 101.7 103.8 105.7 Renewables (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0 0

Total (GW) 799.9 849.5 899.4 929.4 968.6 Total (GW) 0.0 0.0 -0.3 -6.9 -12.6 -12.6 -126|

M-12 . C,

EE-RM-STD-98-440 COMMENT 303

Table M.6 Standard Level 4 Forecast, Roll-up Efficiency Scenario -- - - -------

NEMS-BRS Results: Difference from AE02k Ref Using AE02002 Loam 

----,----- 0l:: 2005 2010 2015 

Extrapolation 

I 2000 2005 2010 2015 2020 2020 2025 2030 

ResidentialSector Energy Consumption Residential Sector Energy Consumption 

8ectricity Sales (IWh) 1,186 1,284 1,373 1,448 1,526 8ectricity Sales (TWh) 0.0 0.0 -10.6 -24.2 -35.8 -43.6 -48.7 

Natural Gis (EJ) 5.32 5.50 5.75 5.96 6.19 Natural Gis (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 Other(EJ) 1.96 1.91 1.84 1.78 1.74 Other(EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.001 

Natural Gis (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gis (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1 Other (Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Total Us. Electric Generation Total US. Electric Generation 

Coal(TWh) 1,912 2,120 2,171 2,275 2,394 Coal(TWh) I 0.0 0.0 -2.0 -4.6 -11.3 -11.3 -11.3

1 ; Gis (TWh) 616 726 993 1,247 1,394 Gis (TWh) I).~ J.O ~.4 -17.3 -25.1 -25.1 -25.1 I 

IPetroleum(fWh) 86 58 50 48 45 Pctrolcum(TWh) I 0.0 0.0 -1.2 ..().7 0.4 0.4 0.41 

Nuclear (TWh) 688 674 627 511 427 Nuclear 0Wh) I (J.O v.O 0.0 0.0 0.0 0.0 0001 

Renewables (TWh) 389 410 427 438 448 Renev.'llbles ([WI-:) 0.0 0.0 0.2 ..().3 "().3 -03 -03 

Total(TWh) 3,691 3,988 4,268 4,519 4,708 Total(TWh) 0.0 0.0 -9.4 -22.8 -36.4 -36.4 -36.4 

Installed Generating Capacity Installed Generating Capacity 

Coal (GIN) 315.3 311.2 310.8 319.9 333.4 Coal (GIN) 0.0 0.0 0.0 -0.6 -1.7 -1.7 -1.7 

Other Fossil (GN) 292.4 346.4 402.8 438.2 472.5 Other Fossil (GIN) 0.0 0.0 -0.3 -6.4 -10.9 -10.9 -10.9

1 Nuclear (GN) 97.5 93.4 84.1 67.4 57.0 Nuclear (GN) 0.0 0.0 0.0 0.0 0.0 0.0 0.01 m 

m 

Renewables (GN) 94.7 98.5 101.7 103.8 105.7 Renewables (GIN) 0.0 0.0 0.0 0.0 0.0 . 0.0 • O'~I ::u 

Total (GIN) 799.9 849.5 899.4 929.4 968.6 Total (GIN) 0.0 0.0 "().3 -6.9 -12.6 ~12.6 -126 s: 

-

en 

-t 

C 

• CD 

Q) 

I 

~ 

~ 

0 

\ 

M-12 0J 

C) 

0J 
Table M.7 Standard Level 5 Forecast, Roll-up Efficiency Scenario

iNEMS-BRS Results: ___Difference from AE2k Ref Using AE02002 Loads

i ------ ~ ------- ~~ ~j - Extrapolation

2000 2005 2010 2015 2020 12000 2005 2010 2015 2020 2025 2030

i Residential Sector Energy Consumption Residential Sector Energy Consumption

Electricity Sales (TWh) 1,186 1,284 1,363 1,424 1,489 Electricity Sales (TWh) 0.0 0.0 -20.6 -48.0 -72.7 -89.7 -100.8

Natural Gas (EJ) 5.32 5.50 5.75 5.96 6.19 Natural Gas (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other (EJ) 1.96 1.91 1.84 1.78 1.74 Other (EJ) 0.00 0.00 0.00 0.00 0.0 0 0.00w

Natural Gas (Quads) 5.04 5.21 5.45 5.65 5.87 Natural Gas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other (Quads) 1.86 1.81 1.74 1.69 1.65 Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total US. Electric Generation Total US. Electric Generation

Coal (TWh) 1,912 2,120 2,170 2,270 2,379 Coal (TWh) 0.0 0.0 -2.7 -10.4 -25.7 -25.7 -25.7

as (TWh) 616 726 985 1,230 1,370 Gas (TWh) 0.0 0.0 -14.2 -34.1 -49.3 -49.3 -49.3

Petroleum(TWh) 86 58 49 46 44 Petroleum(TWh) 0.0 0.0 -2.3 -2.8 -1.1 -1.1 1.1

Nuclear (TWh) 688 674 627 511 427 Nuclear (TWh) 0.0 0.0 0.0 0.0 0.0 00 0.0

Renewables (TWh) 389 410 427 438 448 Renewables (TWh) 0.0 0.0 0.3 -0.4 -0.4 -0.4 -0.

Total(TWh) 3,691 3,988 4,258 4,494 4,668 Total (TWh) 0.0 0.0 -18.9 -47.7 -76.5 -76.5 -76.5

Installed Generating Capacity Installed Genern!tiig Capacity

Coal(GW) 315.3 311.2 310.8 319.5 331.7 Coal(GW) no 0.0 0.0 1.0 -3.4 -3.4 -3.4

OtherFossil(GW) 292.4 346.4 402.5 434.1 464.9 Other Fossil (T7 .' 0.0 0.0 -0.6 -10.5 -18.5 -18.5 -18.5

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 Nuclear (GW) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Renewables (GW) 94.7 98.5 101.7 103.8 105.6 Renewables (GW) 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1 m

Total(GW) 799.9 849.5 899.1 924.8 959.3 Total (GW) 0.0 0.0 -0.6 -11.5 -21.9 -21.9 -21.9

co

-I

oC

M-13

00)

(J>

EE-RM-STD-98-440 COMMENT 303

Table M.7 Standard LevelS Forecast, Roll-up Efficiency Scenario 

iNEMS-BRS Results: 

I " 12000 2005 201~ 20:" ~020 iResidential Sector Energy Consumption 

!Sectricity Sales (fWh) 1,186 1,284 

'Natural Gis (EJ) 5.32 5.50 

Other (EJ) 1.96 1.91 

Natural Gis (Quads) 5.04 5.21 

1,363 1,424 1,489 

5.75 5.96 6.19 

1.84 1.78 1.74 

5.45 5.65 5.87 

Other (Quads) 1.86 1.81 1.74 1.69 1.65 

Total US. Electric Generation 

Coal(TWh) 1,912 2,120 2,170 2,270 2,379 

cas (IWh) 616 726 985 1,230 1.370 

Petroleum(fWh) 86 58 49 46 44 

Nuclear(TWh) 688 674 627 511 427 

Renewables (1Wh) 389 410 427 438 448 

Total (IWh) 3,691 3,988 4,258 4,494 4,668 

Installed Generating Capacity 

Coal(GW) 315.3 311.2 310.8 319.5 331.7 

Other Fossil (GVV) 292.4 346.4 402.5 434.1 464.9 

Nuclear (GW) 97.5 93.4 84.1 67.4 57.0 

Renewables (GW) 94.7 98.5 101.7 103.8 105.6 

Total(GW) m.9 849.5 899.1 924.8 959.3 

I DitTe~nce f~m-AE02k Ref Using AEo2002 Loads -I ,--- .---[ -----.---- ----- '-EJdrapolation I 

12000 2005 2010 2015 2020 2025 2030'1 

Residential Sector Energy Consumption 

Scctricity Sales (TWh) 0.0 0,0 -20.6 -48.0 -727 -89,7 -100.81 

Natural Gis (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 O.OOj 

Other (EJ) 0.00 0.00 0.00 0.00 0.00 0.00 0.00\ 

Natural cas (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 O.OOj 

Other (Quads) 0.00 0.00 0.00 0.00 0.00 0.00 0.00' 

Total Us. Electric Generation 

Coal (fWh) 0.0 

cas (TWh) 0.0 

Petroleum(TWh) 0.0 

Nuclear(TWh) 0.0 

Renewables (fWh) 0.0 

Total(fWh) 0.0 

I 

Installed Genem!f;;g Capacity 

Coal (Gw) I no I 

Other Fossil ((?J.'j 0.0 

Nuclear (GW) 0.0 

Rcnewables (GW) 0.0 

Total(GW) 0.0 

M-13 

0.0 -27 -10.4 -25.7 -25.7 -25.7 

0.0 -14.2 -34.1 -49.3 -49.3 -49.3 

0.0 -2.3 -28 -1.1 -1.1 -1.1 

0.0 0.0 0.0 0.0 0.0 O.Oj 

0.0 0.3 -0.4 -0.4 -0.4 -0.41 

0.0 -18.9 -47.7 -76.5 -76.5 -76.5 

0.0 0.0 -1.0 -3.4 -3.4 -3.4j 

0.0 -0.6 -10.5 -18.5 -18.5 -18.5! 

0.0 0.0 0.0 0.0 0.0 0.01 

0.0 0.0 0.0 -0.1 -0.1 -0.1 

0.0 -0.6 -11.5 -21.9 -21.9 -21.9 

rn 

rn 

I 

:u 

3: 

-

en 

-i 

C 

I 

CO 

0) 

I 

~ 

~ 

c 

GJ 

& 
EE-RM/STD-98-440- 303

M.3.2 Revised Environmental Impact Results

Table M.8 shows total power sector carbon and NO, emissions for each of the five central

air conditioner and heat pump standard trial standard levels.

The annual carbon emissions reductions range up to 9.1 Mt/a in 2020. NO, emissions

reductions reach up to 24.7 kt/a by 2015. Table M.9 lists the cumulative emissions savings for the

power sector over the 15-year period modeled for the central air conditioner and heat pump analyses.

Table M. 10 shows the results for the cumulative emissions reductions through 2030 for carbon and

NO,.

All of the trial standard levels (TSL) considered by DOE are si, wn i.l Tables M.8 through

M.10. In this analysis, the reference case refers to cases with respect o the .4E02000 Reference

Case with the alternative load shapes. All TSLs are compared to the reference case which represents

the no action alternative. This is also referred to as the baseline case, a cooling efficiency of 10

SEER for split system air conditioners and heat pumps, a cooling efficiency of'9 7 SEER for single

package system air conditioners and heat pumps, a heating efficiency of 6.8 HSPF for split system

heat pumps, and a heating efficiency of 6.6 HSPF for single package systein heat pumps.

M-14

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440- 303 

M.3.2 Revised Environmental Impact Results 

Table M.8 shows total power sector carbon and NOx emissions for each of the five central 

air conditioner and heat pump standard trial standard levels. 

The annual carbon emissions reductions range up to 9.1 MtJa in 2020. NOx emissions 

reductions reach up to 24.7 ktJa by 2015._ Table M.9lists the cumulative emissions savings for the 

power sector over the 15-year period modeled for the central air conditioner and heat pump analyses. 

Table M.I 0 shows the results for the cumulative emissions reductions through 2030 for carbon and 

NOx• 

All of the trial standard levels (TSL) considered by DOE are st.)wn i:l Tables M.8 through 

M.IO. In this analysis, the reference case refers to cases with respect 0 the A£02000 Reference 

Case with the alternative load shapes. All TSLs are compared to the refer ence case which represents 

the no action alternative. This is also referred to as the baseline case, a cooling efficiency of 10 

SEER for split system air conditioners and heat pumps, a cooling efficiellc.y 0±,9 7 SEER for single 

package system air conditioners and heat pumps, a heating efficiency of '5. ~ HSPF for split system 

heat pumps, and a heating efficiency of 6.6 HSPF for single package system hea;; pumps. 

M-14 
EE-RM/STD-98-440 _303

Table M.8 Power Sector Emissions for all Standard Levels

NENS-BRS Results Difference from AE02000 Ref Case with 2002 Loads

2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 2025 2030

AEO2000 Reference Case Using 2002 Loadshapes Extrapolation

Carbon(M&l/a)- 3

j 584.7 638.9 676.6 724.8 760.2

NOx(kt/a)3 4,454.3 4,907.9 5,062.1 5,243.5 5,307.0

Standard Lewl I NAECA

Carbon (Mt/a) 584.7 638.9 676.0 723.7 758.3 Carbon (Mt/a) 0.0 0.0 -0.6 -1.1 -1.9 -1.9 -1.9

NOx(kt/a) 14,454.3 4,907.9 5,060.2 5,241.9 5,306.0 NOx(kt/a) 0.0 0.0 -1.9 -1.6 -1.0 -1.0 -1.0

Standard Leel 2 NAECA

Carbon (Mt/a) i 584.7 638.9 675.4 722.8 757.2 Carbon (Mt/a) 0.0 0.0 -1.2 -2.0 -33 -3.,) -3.0

NOx (kt/a) [4,454.3 4,907.9 5,054.9 5,236.5 5,303.4 NOx(kt/a) 0.0 0.0 -7.2 -7.0 -3. i -3.6 -3.6

Standard Level 3 NAECA

Carbon(Mt/a) 584.7 638.9 675.2 722.5 756.8 Carbon(Mt/a) 0.0 0.0 -1.4 -2.3 -3.4 -3.4 -3.4

NOx(kt/a) 14,454.3 4,907.9 5,053.7 5,235.4 5,302.8 NOx(kt/a) 0.0 0.0 -8.3 -8.1 -4.2 -4.2 -4.2

Standard Lerel 4 RolI-Up

Carbon (Mt/a) i 584.7 638.9 674.8 722.0 756.2 Carbon (Mt/a) 0.0 0.0 -1.8 -2.8 -4.0 -k.0 -'.

NOx(kt/a) i4,454.3 4,907.9 5,051.0 5,233.5 5,303.0 NOx(kt/a) 0.0 0.0 -11.1 -10.0 -4.0 -4.0 4.0

Standard LeIel 5 Roll-Up

Carbon(Mt/a) i 584.7 638.9 673.2 718.6 751.1 Carbon(Mt/a) 0.0 0.0 -3.4 -6.2 -9.1 -9.1 -9.1

NOx(kt/a) ,4,454.3 4,907.9 5,042.3 5,218.8 5,291.4 NOx(kt/a) 0.0 0.0 -19.8 -24.7 -15.7 -15.7 -15.7

'Crnparable to Table A 17 of AE02000: Eectric Generators

2Corparable to Table A8 of AE2000: Enissions

All results in netric tons (t), equivalent to 1.I short tons

Table M.9 Cumulative Emission Reductions through 2020: Power Sector

Standard Leel_

Enisson I (NABCA) 2 (NAECA) 3 (NACA) 4 (Roll-I) 5(Roll-4)

CQrbon (Mt) -129 -242 -28.1 -328 -726

NOx(k0) -15.5 -832 -967 -111.4 -2789

Figure M.10 Cumulative Emission Reductions through 2030: Power Sector

StandardLevel

Enisson 1 (NAE Z) 2 (NACA) 3 (NACA) 4 (Rll-4p) 5 (Roll-4)

Carbon (Mt) -31.6 -53.8 -625 -728 -163.2

NOxd ) -25.4 -119.3 -138.6 -151.9 -435.6

M-15

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 -003 

Table M.8 Power Sector Emissions for all Standard Levels --- --- ----.. --.. ---. - -- ----_. - - - -- _.- -.---.-.-.---------~---

. NEMS-BRS Results Difference from AE02000 Ref Case "ith 2002 Loads 

Table M.9 Cumulative Emission Reductions through 2020: Power Sector 

Standlrd l..e'\el 

Enisson . 1 (NAED\). i (NAEt:A) 3(NAErA) 4 (RolI-!p) 5 (RolI-Q» 

Oubon(Mt) -129 -242 -28.1 -328 -726 

IDx(kt) -15.5 -832 -96.7 -111.4 -278.9 

Figure M.10 Cumulative Emission Reductions through 2030: Power Sector -

Standlrd l..e'\el 

[rrisson 1 (NAELA) 2(NAECA) 3(NAED\) 4 (Rlil-tp) 5 (Rlil-tp) 

Oubon(Mt) -31.6 -53.8 -62.5 -728 -163.2 

l'Ox(kt) -25.4 -119.3 -138.6 -151.9 -435.6 

M-15 
EE-RM/STD-98-440 - 303

M.4 MARGINAL HEAT RATES

Marginal heat rates (MHR) are calculated by NEMS-BRS to translate end-use electricity

savings to primary energy savings. The MHR is calculated by imposing a load reduction to the enduse slot of the appliance being analyzed in NEMS-BRS and observing the change in primary energy

use. For central air conditioners and heat pumps (CAC-HP), the MHR ends up being relatively

small. For example, the CAC-HP MHR was calculated to be only 5519 Btu/kWh in 2020, low

compared to other appliance end-uses analyzed for other rulemakings (e.g., the value for clothes

washers was 7225 Btu/kWh). Such a low CAC-HP MHR seems counter intuitive to the idea that

improvements in end-use efficiency typically displace a marginal, and therefore inefficient,

generator. One would expect the CAC-HP MHR to be higher than those of more baseload

appliances (like clothes washers or electric water heaters) because this peakier appliance displaces

more expensive, less efficient generation. Further, this marginal displaced plant should be not unlike

the inefficient plant in place today because most rapid technological change occurs in the base load.

M.4.1 Higher Order Effects

On first inspection, the CAC-HP MHR seems suspicious because the conversion efficiency

(5519 Btu/kWh in 2020) seems better than any power plant likely to be in existence by 2020 and

nothing like the expected plant similar to today's least efficient. In other words, even if a CAC-HP

standard were displacing the very best plant in existence in 2020, the heat rate should not be this low.

The key to understanding this apparent paradox is that this conversion rate does not represent a

specific marginal generator or combination of generators, but is actually a conversion factor that

incorporates several simulated effects resulting from the standard.

A key reason why the CAC-HP MHR is lower than expected is because the overall efficiency

improvement of the power system with the standard in place is slower than in the AEO Reference

Case. All the NEMS-BRS runs are routinely done with multiples of actual expected proposed

standard energy savings to ensure stable results (refer to Appendix H of the TSD for more details).

In a higher decrement SEER12 standard run (4xSEER12), the conversion efficiency improvement

lags the AE02000 improvement. While there are many effects of the standard, the following

equation summarizes the two major components of the standard's impact on the power sector:

APE = AF + AS+ A T+... (M.1)

Where,

APE= the overall change in primary energy due to the CAC-HP standard,

AF= first-order effect from displace generation,

AS= second-order effect from slowed investment in power system, and its

consequent reduced rate of efficiency improvement, and

AT = third-order effects.

M-16

EE-RM-STD-98-440 COMMENT 303

EE-RMiSTD-98-440 - -303 

MA MARGINAL HEAT RATES 

Marginal heat rates (MHR) are calculated by NEMS-BRS to translate end-use electricity 

savings to primary energy savings. The MHR is calculated by imposing a load reduction to the enduse slot of the appliance being analyzed in NEMS-BRS and observing the change in primary energy 

use. For central air conditioners and heat pumps (CAC-HP), the MHR ends up being relatively 

small. For example, the CAC-HP MHR Was calculated to be only 5519 BtulkWh in 2020, low 

compared to other appliance end-uses analyzed for other rulemakings (e.g., the value for clothes 

washers was 7225 BtulkWh). Such a low CAC-HP MHR seems counter intuitive to the idea that 

. improvements in end-use. efficiency typically displace a marginal, and therefore inefficient, 

generator. One would expect the CAC-HP MHR to be higher than those of more baseload 

appliances (like clothes washers or electric water heaters) because this peakier appliance displaces 

more expensive, less efficient generation. Further, this marginal displaced plant should be not unlike 

the inefficient plant in place today because most rapid technological change occurs in the base load. 

MA.I Higher Order Effects 

On first inspection, the CAC-HP MHR seems suspicious because the conversion efficiency 

(5519 BtulkWh in 2020) seems better than any power plant likely to be in existence by 2020 and 

nothing like the expected plant similar to today's least efficient. In other words, even if a CAC-HP 

standard were displacing the very best plant in existence in 2020, the heat rate should not be this low. 

The key to understanding this apparent paradox is that this conversion rate does not represent a 

specific marginal generator or combination of generators, but is actually a conversion factor that 

incorporates several simulated effects resulting from the standard. 

A key reason why the CAG· HP MHR is lower than expected is because the overall efficiency 

improvement of the power system with the standard in place is slower than in the AEO Reference 

Case. All the NEMS-BRS runs are routinely done with mUltiples of actual expected proposed 

standard energy savings to ensure stable results (refer to Appendix H of the TSD for more details). 

In a higher decrement SEER12 standard run (4xSEER12), the conversion efficiency improvement 

lags the AE02000 improvement. While there are many effects of the standard, the following 

equation summarizes the two major components of the standard's impact on the power sector: 

Where, 

llPE= 

llF= 

IlS= 

llT= 

tlPE = tlF + tlS + tl T+ ... 

the overall change in primary energy due to the CAC-HP standard, 

first-order effect from displace generation, 

(M.I) 

second-order effect from slowed investment in power system, and its 

consequent reduced rate of efficiency improvement, and 

third-order effects. 

M-16 
EE-RM/STD-98-440 - 303

The first term, AF, represents the direct reduction in fuel burned in power plants and is the

direct result of the imposed standard (i.e., what one would expect to see as reductions in generation

with CAC-HP site energy savings imposed). The second term, AS, denotes the indirect effect

whereby the slowing of electricity demand growth slows new investment thereby impeding the rate

of overall improvement in power sector efficiency. While this later effect would seem to be trivial

relative to the first, it grows significantly over time because less and less of better and better

generating plants are added. By the end of the forecast period, this effect becomes a significant drag

on the primary energy savings of the standard, and why the MHR conversions appear to fall more

than could reasonably be explained by improving technology. Further, it's a bigger drag on the

benefits of peaking end-use efficiency improvements. These reduce peak demand more and slow

investment more because the rate of new construction is heavily dependent on growth in peak

demand. ATrepresents other third order effects, such as the effect on regional distribution of power

generation there. AT is ignored and all effects are assumed to be AS.

M.4.2 CAC-HP Example

Consider an example that shows the importance of this second order effect, AS, and that the

MHR for CAC-HP would be higher than two other appliance MHR's (clothes washers and water

heaters) in agreement with intuition. In NEMS-BRS output, APE and AS can be observed, and,

therefore, AF can be calculated. The 4xSEER12 standard run results in an average U.S. heat rate

(AHR) 46.6 Btu/kWh lower in 2020 than the AE02000 reference case. This means that the overall

efficiency of the thermal power system is significantly impeded with the 4xSEER12 standard in

place. The equivalent forgone primary energy savings resulting from this difference can be

calculated as:

(46.6 Btu/kWh)*(3785 TWh)*(109 kWh/TWh)*(Quad/10`5 Btu) = 0.18 Quads

Where 3785 TWh is the net end-use savings of the standard. Changing the sign, -0.18 Quads

represents how much more 2020 primary energy would have been estimated as saved without

considering the second-order effects.

Now, consider that the 4xSEER 12 run saves a total of 0.47 Quads in 2020. This is equivalent

to 0.12 Quads for the actual SEER12 standard (i.e. 0.47 Quads divided by 4 which is approximately

0.12 Quads). This value is the total effect from displaced generation, or APE.

So without the presence of the secondary effect, the total primary energy saved is:

APE- A5 = AF

0.12 Quads + 0.18 Quads = 0.30 Quads

An MHR in 2020 that reflects the first order effect only can now be estimated as follows:

M-17

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

The first tenn, M, represents the direct reduction in fuel burned in power plants and is the 

direct result of the imposed standard (i.e., what one would expect to see as reductions in generation 

with CAC-HP site energy savings imposed). The second tenn, M, denotes the indirect effect 

whereby the slowing of electricity demand growth slows new investment thereby impeding the rate 

of overall improvement in power sector efficiency. While this later effect would seem to be trivial 

relative to the first, it grows significantly over time because less and less of better and better 

generating plants are added. By the end ofthe forecast period, this effect becomes a significant drag 

on the primary energy savings of the standard, and why the MHR conversions appear to fall more 

than could reasonably be explained by improving technology. Further, it's a bigger drag on the 

benefits of peaking end-use efficiency improvements. These reduce peak demand more and slow 

investment more because the rate of new construction is heavily dependent on growth in peak 

demand . .1Trepresents other third order effects, such as the effect on regional distribution of power 

generation there . .1T is ignored and all effects are assumed to be M. 

M.4.2 CAC-HP Example 

Consider an example that shows the importance of this second order effect, M, and that the 

MHR for CAC-HP would be higher than two other appliance MHR's (clothes washers and water 

heaters) in agreement with intuition. In NEMS-BRS output, ME and !lS can be observed, and, 

therefore, M can be calculated. The 4xSEERI2 standard run results in an average U.S. heat rate 

(AHR) 46.6 BtulkWh lower in 2020 than the AE02000 reference case. This means that the overall 

efficiency of the thennal power system is significantly impeded with the 4xSEERI2 standard in 

place. The equivalent forgone primary energy savings resulting from this difference can be 

calculated as: 

(46.6 BtulkWh)*(3785 TWh)*(109 kWhfTWh)*(QuadiIOls Btu) = 0.18 Quads 

Where 3785 TWh is the net end-use savings of the standard. Changing the sign, -0.18 Quads 

represents how much more 2020 primary energy would have been estimated as saved without 

considering the second-order effects. 

Now, consider that the 4xSEERI2 run saves a total of 0.47 Quads in 2020. This is equivalent 

to 0.12 Quads for the actual SEERI2 standard (i.e. 0.47 Quads divided by 4 which is approximately 

.0.12 Quads). This value is the total effect from displaced generation, or ME. 

So without the presence of the secondary effect, the total primary energy saved is: 

0.12 Quads + 0.18 Qua<;ls = 0.30 Quads 

An MHR in 2020 that reflects the first order effect only can now be estimated as follows: 

M-17 
EE-RM/STD-98-440- -,03

(0.30 Quads/(86 TWh/4))*(10l5 Btu/Quad)*(TWh/10 kWh) = 13,950 Btu/kWh

Note that AF is high, almost 14,000 Btu/kWh and probably higher than most guesstimates

with the overall effect APE much lower than typical guesstimates. In other words, the effect of AS

is powerful.

Similar calculations for clothes washers result in a heat rate of 7185 Btu/kWh. So as

expected, the MHR, when ignoring the secondary effect of slowed investment in the power system,

is higher for CAC-HP than other appliances.

To summarize, with the secondary effects considered, the MHR for CAC-HP is only 5519

Btu/kWh in 2020 because the power system has an overall efficiency in the 4xSEER12 run (7824

Btu/kWh) compared to AE02000 (7777 Btu/kWh) by 46.6 Btu/kWh. A slowing trend in investment

makes the power sector less efficient and dirtier, and because this broad effect applies to all thermal

generation, the net effect on standards benefits is significant, cutting them by over 60%.

M.4.3 Interpolation

M.4.3.1 AHR and AS

The astute observer may have noticed an added potential complication to the above; namely

the assumed linearity of the second-order effects. Most results reported in the TSD from NEMSBRS are estimated using multiples of trial standard levels, such as the 4x case reported above. The

multiple results are then interpolated back to the level of the actual standard. This adjustment has

never been made to AS so we test its effect here. Figure M.3 illustrates an annual comparison of the

AHR for various higher decrement runs of a SEER13 case. The values on the x-axis are the

multipliers of actual standard decrements. Plotted as the difference from the AE02000 reference

case, this graph shows the high level of variability in the AHR. Prior to 2010, the AHR is generally

lower than the AE02000 reference case, and vice-versa for years later than 2010. In other words,

until 2010, the benefit on overall efficiency of removing marginal generation exceeds the AS effect,

but not afterwards. Also, after 2015 the AS effect is clearly increasing over time. Looking from left

to right, increasing decrements to the standard generally result in greater positive and negative

differences in the AHR. Again, earlier-in the forecast period, the AHR is more efficient (lower) than

the reference case, and beyond 2015 the AHR is worse than the AE02000 reference case. In 2020,

the AHR differences range from 56-89 Btu/kWh for the various decrement cases. Thus, the further

the CAC-HP end-use is reduced and the later in the forecast it is, the greater the impact on the overall

efficiency of the power system, or AS becomes absolutely larger.

M-18

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

(0.30 Quads/(86 TWhl4»*(10 1s Btu/Quad)*(TWhil 09 kWh) = 13,950 BtulkWh 

Note that t:J' is high, almost 14,000 BtulkWh and probably higher than most guesstimates 

with the overall effect l1PE much lower than typical guesstimates .. In other' words, the effect of !!.S 

is powerful. 

Similar calculations for clothes washers result in a heat rate of 7185 BtulkWh. So as 

expected, the MHR, when ignoring the secondary effect of slowed investment in the power system, 

is higher for CAC-HP than other appliances. 

To summarize, with the secondary effects considered, the MHR for CAC-HP is only 5519 

BtU/kWh in 2020 because the power system has an overall efficiency in the 4xSEER12 run (7824 

BtulkWh) compared toAE02000 (7777 BtU/kWh) by46.6BtulkWh. A slowing trend in investment 

makes the power sector less efficient and dirtier, and because this broad effect applies to all thennal 

generation, the net effect on standards benefits is significant, cutting them by over 60%. 

M.4.3 Interpolation 

M.4.3.t AHR and AS 

The astute observer may have noticed an added potential complication to the above; namely 

the assumed linearity of the second-order effects. Most results reported in the TSD from NEMSBRS are estimated using multiples of trial standard levels, such as the 4x case reported above. The 

multiple results are then interpolated back to the level of the actual standard. This adjustment has 

. never been made to !!.S so we test its effect here. Figure M.3 illustrates an annual comparison of the 

AHR for various higher decrement runs of a SEERl3 case. The values on the x-axis are the 

multipliers of actual standard decrements. Plotted as the difference from the AE02000 reference 

case, this graph shows the high level of variability in the AHR. Prior to 2010, the AHR is generally 

lower than the AE02000 reference case, and vice-versa for years later than 2010. In other words, 

until 2010, the benefit on overall efficiency of removing marginal generation exceeds the !!.S effect, 

but not afterwards. Also, after 2015 the t:.S effect is clearly increasing over time. Looking from left 

to right, increasing decrements to the standard generally result in greater positive and negative 

differences in the AHR Again, earlierin the forecast period, the AHR is more efficient (lower) than 

the reference case, and beyond 2015 the AHR is worse than the AE02000 reference case. In 2020, 

the AHR differences range from 56-89 BtulkWh for the various decrement cases. Thus, the further 

the CAC-HP end..:use is reduced and the later in the forecast it is, the greater the impact on the overall 

efficiency of the power system, or !!.S becomes absolutely larger. 

M-18 
ftiM/jSTD-98-440 303

Comparison of Change in AHR for Different Cases of SEER13 Only

100.0

-- 2006 o

80.0 -- 2007

-- 2008

60.0 - - 2009 o

x2010

40.0 - 2011

-20.0 2012 _

| -- 2013 _

2014 r 0.0

CO 2015 2.0 8.0 9 

-20.0 2016

2017 --- >e.a----- __e>Em

2019 -40.0 2018

-60.0 - o 2020

-80.0

nultplier

Figure M.3 Comparison of SEER 13 Average Heat Rate as Difference from AE02000

M.4.3.2 MHR Linearity

Additionally, some further investigation was done to determine the linearity of the MHR

under varying higher decrement runs. It was uncertain whether the marginal plant would exhibit a

linear trend depending on the degree of savings from each proposed appliance standard, but as it

turns out, it is quite linear, as illustrated by Figure M.4. In this figure, the 6x, 8x, and 10x the Trial

Standard Level 3 MHR are plotted for selected years to see how the MHR varies from different

decrement cases within each year. The x= I value denotes the regressed MHR based on the estimates

from the higher decrements runs. From this plot, the variation in MHR within years is seen to be

fairly flat.

M-19

EE-RM-STD-98-440 COMMENT 303

EB4tM/STD-98-440 - .303 

Comparison of Cbange in AHR for DiiTerent Cases of SEER13 Only 

100.0 

-+-2006 0 0 

ro.O -. - 'lfXJ7 __ 2008 0 

0 0 

(i).0 --'00- 2009 -- 0 

~201O -

40.0 -2011 

-2012 

~ 20.0 -- -

..:.: -2013 

:; 

iii 0.0 2014 .~ ( 0 2015 -=:-- 2.0~ ==-4.0 SO -~ 8.0 9 

2016 .I --....... -20.0 

2017 ",~ "",(", --)i-________ ~ ~~ ~ _ 

-40.0 

-60.0 

-80.0 

0 2020 

2018 

2019 ~ 

JTllltiplier 

Figure M.3 Comparison of SEER 13 Average Heat Rate as Difference from AE02000 

M.4.3.2 MHR Linearity 

Additionally, some further investigation was done to detennine the linearity of the MHR 

under varying higher decrement ~ns. It was uncertain whether the marginal plant would exhibit a 

linear trend depending on the degree of savings from each proposed appliance standard, but as it 

turns out, it is quite linear, as illustrated by Figure M.4. In this figure, the 6x, 8x, and lOx the Trial 

Standard Level 3 MHR are plotted for selected years to see how the MHR varies from different 

decrement cases within each year. The x= 1 value denotes the regressed MHR based on the estimates 

from the higher decrements runs. From this plot, the variation in MHR within years is seen to be 

fairly flat. 

M-19 
EE-RM/STD-98-440 - 303

Marginal Heat Rate for CAC Standard 3

11000

10000-____________________ _ -4-- ---- 2010 2012

90000

At- - 2012

- - Linear(2015

9000

)l- 2017

Bs8000t 2020

. I I I--Linear (20 10)

Linear (2012)

7000 -~ f ~ linear (2015)

- --- Linear(2017)

- - Linear (2020)

5000 -

0 1 2 3 4 5 6 7 8 9 10 11

mult

Figure M.4 Comparison of Higher Decrement Marginal Heat Rates for CAC-HP Trial

Standard Level 3 for Selected Years

All years were regressed in the above fashion and the newly derived MHR was compared to

the original calculation to see how different they were. Figure M.5 below plots the MHR time series, comparing the reference case MHR that was used for the CAC-HP analysis, the various higher decrement MHR estimates and the regressed MHR. This regressed time series in essence better

represents the marginal behavior of an appliance standard by not over- or under-estimating the

forecasted marginal powerplant. Comparing what was used in the analysis (dashed line with square symbols) with the regressed MHR based on various higher decrements of the proposed standard

(dashed line with triangle symbols), they track each other pretty well. Especially in the last 5-7 years of the forecast horizon, the two MHR calculations exhibit comparable MHR's. This means that the

estimate derived for the analysis based on one higher decrement run doesn't vary too much from the

regressed MHR that is based on the estimated MHR for the actual proposed standard.

M-20

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

Marginal Heat Rate for CAC Standanl3 

11000 

...-----. • 2010 

10000 • ..------- * 2012 

• 2015 

9000 

~ )K 2017 

~8000 * 2020 

:s 

---------------~ 

- .. - . Linear (2010) 

as Linear (2012) 

7000 .==-

.=I~ Linear (2015) 

- . - . Linear (2017) 

f---~ &"- • 

6000 - . - Linear (2020) 

5000 

l 0 1 2 3 4 5 6 7 8 9 10 1 1 

mult 

Hgure M.4 Comparison of Higher Decrement Marginal Heat Rates for CAC-HP Trial 

Standard Level 3 for Selected Years 

All years were regressed in the above fashion and the newly derived MHR was compared to 

the original calculation to see how different they were. Figure M.5 below plots the MHR time series, 

comparing the reference case MHR that was used for the CAC-HP analysis, the various higher 

decrement MHR estimates and the regressed MHR. This regressed time series in essence better 

represents the marginal behavior of an appliance standard by not over- or under-estimating the 

forecasted marginal power plant. Comparing what was used in the analysis (dashed line with square 

symbols) with the regressed MHR based on various higher decrements of the proposed standard 

(dashed line with triangle symbols), they track each other pretty well. Especially in the last 5-7 years 

of the forecast horizon, the two MHR calculations exhibit comparable MHR's. This means that the 

estimate derived for the analysis based on one higher decrement run doesn't vary too much from the 

regressed MHR that is based on the estimated MHR for the actual proposed standard. 

M-20 
EE-RM/STD-98-440- 303

Marginal Heat Rates for CAC SEER Levels

14000

13000-

A

12000 -- . -__ ,

1 1000 -A.., .

10000 -

9000 A

- U- 4xSEER12 ·

8000 - 0 8x SEER 12

7000 6x Std3 -

6000 ~~~~~~M ' - '-"-

60 0 -Sx Std3 - 10St

5000 - ,- ' Regressed Std3 ____,_

4000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

year

Figure M.5 Comparison of Higher Decrement Marginal Heat Rates for CAC-HP Trial

Standard Level 3 over Time

M-21

EE-RM-STD-98-440 COMMENT 303

EE·RM/STD~98-440- 503 

Marginal Heat Rates for CAC SEER Levels 

14oo0.---------------------------------------------------------~ 

13000 --.---------.--------------------------------------------4 

A 

12000 +------------. -~---.. '.-----------------------------1 

. ' • - • -. ": I \ 

11000 ------,.'7". - ,-:-~'~-.-'-'-------------------------l 

','U'·~··'1\' , , -.,' , , , .... 

10000 +--------------.', ~.~ .. ----------------------------1 ..c " , ,~ ", 

::: .. ,A ... '3 9000 +-____ , _________________ ..1... •...c',-' --------------------1 

as 

8000 

7000 

6000 

5000 

4000 

I------------~' .', -'>,-~ ' . -'-' - , -------------------1 .. 

.' .- 4xSEER12 

- 8x SEER 12 

>-- 6x Std3 

8x Std3 r-- lOx SId3 

r-- • ,.. . Regressed Std3 

2000 2001 200220032004 2005 2006 2007 2008 2009 2010 201 I 2012201320142015 20162017201820192020 

year 

figure M.S Comparison of Higher Decrement Marginal Heat Rates for CAC-HP Trial 

Standard Level 3 over Time 

M-21 
EE-RM/STD-98-440 - 303

REFERENCES

1. U.S. Department of Energy-Energy Information Administration, Annual Energy Outlook

2000, December, 1999. Washington, DC. Report No. DOE/EIA-0383(2000).

2. U.S. Department of Energy, Environmental Assessmentfor Proposed Energy Conservation

Standards for Residential Central Air Conditioners and Heat Pumps, January, 2001.

Washington, DC. Report No. DOE/EIA-1352.

3. Alternative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information

Administration, Washington, D.C., August 2001.

4. Alterrative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information

Administration, Washington, D.C., August 2001.

5. Alternative 3ectoral Load Shapes for NEMS, Department of Energy-Energy Information

Administration, Washington, D.C., August 2001.

6. Alternative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information

Administration, Washington, D.C., August 2001.

M-22

EE-RM-STD-98-440 COMMENT 303

EE-RM/STD-98-440 - 303 

REFERENCES 

1. U.S. Department of Energy-Energy Information Administration, Annual Energy Outlook 

2000, December, 1999. Washington, DC. Report No. DOE/EIA-0383(2000). 

2. U.S. Department of Energy, Environmental Assessment for Proposed Energy Conservation 

Standards for Residential Central Air Conditioners and Heat Pumps, January, 2001. 

Washington, DC. Report No. DOE/EIA-1352. 

3. Alternative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information 

Administration, Washington, D.C., August 2001. 

4. Alterr.ative Sectoral Load Shapes for NEMS, Department of Energy-Energy Information. 

Administration, Washington, D.C., August 2001. 

5. Alternative Se--:toral Load Shapes for NEMS, Department of Energy-Energy Information 

Administration, Washington, D.C., August 2001. 

6. Alternative Sec/oral Load Shapes for NEMS, Department of Energy-Energy Information 

Administration, Washington, D.C., August 2001 . 

• 

M-22