[Federal Register Volume 89, Number 202 (Friday, October 18, 2024)]
[Rules and Regulations]
[Pages 84028-84063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23906]



[[Page 84027]]

Vol. 89

Friday,

No. 202

October 18, 2024

Part IV





Department of Energy





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10 CFR Part 430





Energy Conservation Program: Energy Conservation Standards for Oil, 
Electric, and Weatherized Gas Consumer Furnaces; Final Rule

Federal Register / Vol. 89 , No. 202 / Friday, October 18, 2024 / 
Rules and Regulations

[[Page 84028]]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2021-BT-STD-0031]
RIN 1904-AF19


Energy Conservation Program: Energy Conservation Standards for 
Oil, Electric, and Weatherized Gas Consumer Furnaces

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

ACTION: Final determination.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''), 
prescribes energy conservation standards for various consumer products 
and certain commercial and industrial equipment, including non-
weatherized oil-fired furnaces (``NWOFs''), mobile home oil-fired 
furnaces (``MHOFs''), weatherized gas furnaces (``WGFs''), weatherized 
oil-fired furnaces (``WOFs''), and electric furnaces (``EFs''). EPCA 
also requires the U.S. Department of Energy (``DOE'') to periodically 
review its existing standards to determine whether more-stringent, 
amended standards would be technologically feasible and economically 
justified, and would result in significant energy savings. In this 
final determination, DOE has determined that the energy conservation 
standards for EFs, NWOFs, MHOFs, WOFs, and WGFs do not need to be 
amended.

DATES: The effective date of this final determination is November 18, 
2024.

ADDRESSES: The docket for this activity, which includes Federal 
Register notices, public meeting attendee lists and transcripts, 
comments, and other supporting documents/materials, is available for 
review at www.regulations.gov. All documents in the docket are listed 
in the www.regulations.gov index. However, not all documents listed in 
the index may be publicly available, such as information that is exempt 
from public disclosure.
    The docket web page can be found at www.regulations.gov/docket/EERE-2021-BT-STD-0031. The docket web page contains instructions on how 
to access all documents, including public comments, in the docket.

FOR FURTHER INFORMATION CONTACT: 
    Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: 
(240) 597-6737. Email: <a href="/cdn-cgi/l/email-protection#f9b88989959098979a9caa8d98979d988b9d8ac598d9918b9c9fc4" mailto:Questions@ee.doe.gov"><span class="__cf_email__" data-cfemail="1342667660677a7c7d605376763d777c763d747c65">[email protected]</span></a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#3667435345425f5958457653531852595318515940"><span class="__cf_email__" data-cfemail="80d1f5e5f3f4e9efeef3c0e5e5aee4efe5aee7eff6">[email protected]</span></a></a>.
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-4798. Email: <a href="/cdn-cgi/l/email-protection#6326110a004d30170210230b124d070c064d040c15"><span class="__cf_email__" data-cfemail="b3f6c1dad09de0c7d2c0f3dbc29dd7dcd69dd4dcc5">[email protected]</span></a>.
    For further information on how to review the docket, contact the 
Appliance and Equipment Standards Program staff at (202) 287-1445 or by 
email: <a href="/cdn-cgi/l/email-protection#9fdeefeff3f6fef1fcfaccebfef1fbfeedfbeca3febff7edfaf9a2" mailto:Questions@ee.doe.gov"><span class="__cf_email__" data-cfemail="d889adbdabacb1b7b6ab98bdbdf6bcb7bdf6bfb7ae">[email protected]</span></a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#80d1f5e5f3f4e9efeef3c0e5e5aee4efe5aee7eff6"><span class="__cf_email__" data-cfemail="18496d7d6b6c7177766b587d7d367c777d367f776e">[email protected]</span></a></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Final Determination
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. Current Rulemaking History
III. General Discussion and Rationale
    A. General Comments
    1. Comments Supporting Proposed Determination
    2. Comments Opposing Proposed Determination
    3. Other Topics
    B. Scope of Coverage and Product Classes
    C. Test Procedure
    D. Standby Mode and Off Mode
    E. Technological Feasibility
    1. General Considerations
    2. Maximum Technologically Feasible Levels
    F. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    G. Cost-Effectiveness
    H. Further Considerations
    1. Economic Impact on Manufacturers and Consumers
    2. Savings in Operating Costs Compared To Increase in Price
    3. Energy Savings
    4. Lessening of Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need for National Energy Conservation
    7. Other Factors
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage
    a. Electric Furnaces
    b. Weatherized Oil-Fired Furnaces
    2. Product Classes
    3. Technology Options
    4. Screening Analysis
    a. Screened-Out Technologies
    b. Remaining Technologies
    5. Impact From Other Rulemakings
    B. Engineering and Cost Analysis
    1. Efficiency Analysis
    a. Baseline Efficiency
    b. Intermediate Efficiency Levels
    c. Maximum Technology (``Max-Tech'') Efficiency Levels
    d. Summary of Efficiency Levels Analyzed
    2. Cost Analysis
    a. Teardown Analysis
    b. Cost Estimation Method
    3. Cost-Efficiency Results
    C. Markups Analysis
    D. Energy Use Analysis
    E. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    F. Shipments Analysis
    G. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
V. Analytical Results and Conclusions
    A. Economic Impacts on Individual Consumers
    B. National Impact Analysis
    1. National Energy Savings
    2. Net Present Value of Consumer Costs and Benefits
    C. Final Determination
    1. Technological Feasibility
    2. Cost-Effectiveness
    3. Significant Conservation of Energy
    4. Further Considerations
    a. Oil Furnaces
    b. Weatherized Gas Furnaces
    5. Summary
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866, 13563, and 14094
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act of 1995
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Synopsis of the Final Determination

    The Energy Policy and Conservation Act, Public Law 94-163, as 
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency 
of a number of consumer products and certain industrial equipment. (42 
U.S.C. 6291-6317, as codified) Title III, Part B of

[[Page 84029]]

EPCA \2\ established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products 
include oil, electric, and weatherized gas consumer furnaces, the 
subject of this final determination. (42 U.S.C. 6292(a)(5))
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    \1\ All references to EPCA in this document refer to the statute 
as amended through the Energy Act of 2020, Public Law 116-260 (Dec. 
27, 2020), which reflects the last statutory amendments that impact 
Parts A and A-1 of EPCA.
    \2\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
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    Pursuant to EPCA, DOE is required to review its existing energy 
conservation standards for covered consumer products no later than six 
years after issuance of any final rule establishing or amending a 
standard. (42 U.S.C. 6295(m)(1)) Pursuant to that statutory provision, 
DOE must publish either a notification of determination that standards 
for the product do not need to be amended, or a notice of proposed 
rulemaking (``NOPR'') including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (Id.) DOE has 
conducted this review of the energy conservation standards for oil, 
electric, and weatherized gas consumer furnaces under EPCA's six-year-
lookback authority described herein.
    For this final determination, DOE analyzed oil, electric, and 
weatherized gas consumer furnaces subject to energy conservation 
standards specified in the Code of Federal Regulations (``CFR'') at 10 
CFR 430.32(e)(1). DOE first analyzed the technological feasibility of 
more energy-efficient oil, electric, and weatherized gas furnaces and 
determined that amended standards for electric furnaces are not 
technologically feasible. For those oil and weatherized gas furnaces 
for which DOE determined higher standards to be technologically 
feasible, DOE evaluated whether higher standards would be cost-
effective by conducting life-cycle cost (``LCC'') and payback period 
(``PBP'') analyses. In addition, DOE estimated energy savings that 
would result from potential energy conservation standards by conducting 
a national impacts analysis (``NIA''), in which it estimated the net 
present value (``NPV'') of the total costs and benefits experienced by 
consumers.
    Based on the results of the analyses, summarized in section V of 
this document, DOE has determined that the current standards for oil, 
electric, and weatherized gas furnaces do not need to be amended and is 
issuing this final determination accordingly.

II. Introduction

    The following sections briefly discuss the statutory authority 
underlying this final determination, as well as some of the historical 
background relevant to the establishment of energy conservation 
standards for oil, electric, and weatherized gas furnaces.

A. Authority

    Among other things, EPCA authorizes DOE to regulate the energy 
efficiency of a number of consumer products and certain industrial 
equipment. (42 U.S.C. 6291-6317, as codified) Title III, Part B of EPCA 
\3\ established the Energy Conservation Program for Consumer Products 
Other Than Automobiles. These products include consumer furnaces, the 
subject of this document. (42 U.S.C. 6292(a)(5))
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    \3\ As noted previously, for editorial reasons, upon 
codification in the U.S. Code, Part B was redesignated Part A.
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    The energy conservation program under EPCA consists essentially of 
four parts: (1) testing, (2) labeling, (3) the establishment of Federal 
energy conservation standards, and (4) certification and enforcement 
procedures. Relevant provisions of EPCA specifically include 
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), 
labeling provisions (42 U.S.C. 6294), energy conservation standards (42 
U.S.C. 6295), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6296).
    Federal energy efficiency requirements for covered products 
established under EPCA generally supersede State laws and regulations 
concerning energy conservation testing, labeling, and standards. (42 
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal 
preemption in limited circumstances for particular State laws or 
regulations, in accordance with the procedures and other provisions set 
forth under EPCA. (42 U.S.C. 6297(d))
    Subject to certain criteria and conditions, DOE is required to 
develop test procedures to measure the energy efficiency, energy use, 
or estimated annual operating cost of each covered product. (42 U.S.C. 
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products 
must use the prescribed DOE test procedure as the basis for certifying 
to DOE that their product complies with the applicable energy 
conservation standards and as the basis for any representations 
regarding the energy use or energy efficiency of the product. (42 
U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these 
test procedures to evaluate whether a basic model complies with the 
applicable energy conservation standard(s). (42 U.S.C. 6295(s)) The DOE 
test procedures for consumer furnaces appear at title 10 of the Code of 
Federal Regulations (``CFR'') part 430, subpart B, appendix N.
    EPCA prescribed energy conservation standards for consumer furnaces 
(42 U.S.C. 6295(f)(1)-(2)) and directed DOE to conduct future 
rulemakings to determine whether to amend these standards. (42 U.S.C. 
6295(f)(4) and 42 U.S.C. 6295(m)(1)) As explained in section II.B of 
this document, DOE has completed its rulemaking obligations pursuant to 
EPCA under 42 U.S.C. 6295(f)(4) for the subject consumer furnaces. 
However, DOE has ongoing rulemaking obligations under 42 U.S.C. 
6295(m)(1) (i.e., the six-year-lookback review requirement). More 
specifically, and as noted previously, not later than six years after 
the issuance of any final rule establishing or amending a standard, DOE 
must publish either a notice of proposed determination (``NOPD'') that 
standards for the product do not need to be amended, or a NOPR 
including new proposed energy conservation standards (proceeding to a 
final rule, as appropriate). (42 U.S.C. 6295(m)(1) and (3)) DOE must 
make the analysis on which a NOPD or NOPR is based publicly available 
and provide an opportunity for written comment. (42 U.S.C. 6295(m)(2))
    A determination that amended standards are not needed must be based 
on consideration of whether amended standards will result in 
significant conservation of energy, are technologically feasible, and 
are cost-effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) 
Additionally, any new or amended energy conservation standard 
prescribed by the Secretary 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)) Among the factors 
DOE considers in evaluating whether a proposed standard level is 
economically justified includes whether the proposed standard at that 
level is cost-effective, as defined under 42 U.S.C. 
6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an 
evaluation of cost-effectiveness requires DOE to consider savings in 
operating costs throughout the estimated average life of the covered 
products in the type (or class) compared to any increase in the price, 
initial charges, or maintenance expenses for the covered products that 
are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42 
U.S.C. 6295(o)(2)(B)(i)(II))

[[Page 84030]]

    Finally, pursuant to the amendments to EPCA contained in the Energy 
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into 
a single standard, or, if that is not feasible, adopt a separate 
standard for such energy use for that product. (42 U.S.C. 
6295(gg)(3)(A)-(B)) DOE's current test procedures and standards for 
oil, electric, and weatherized gas furnaces address standby mode and 
off mode energy use. DOE's energy conservation standards address 
standby mode and off mode energy use only for non-weatherized oil-fired 
furnaces (``NWOFs'') (including mobile home furnaces) and electric 
furnaces (``EFs''). 10 CFR 430.32(e)(1)(iv). In this analysis, DOE 
considers such energy use in its determination of whether energy 
conservation standards need to be amended.
    DOE is publishing this final determination pursuant to the six-
year-lookback review requirement in EPCA.

B. Background

1. Current Standards
    DOE most recently completed a review of the subject consumer 
furnace standards in a direct final rule (``DFR'') published in the 
Federal Register on June 27, 2011 (``June 2011 DFR''), through which 
DOE prescribed amended energy conservation standards for non-
weatherized gas furnaces (``NWGFs''), mobile home gas furnaces 
(``MHGFs''), weatherized gas furnaces (``WGFs''), non-weatherized oil-
fired furnaces (``NWOFs''), mobile home oil furnaces (``MHOFs''), and 
weatherized oil furnaces (``WOFs'').\4\ 76 FR 37408. The June 2011 DFR 
amended the existing energy conservation standards for NWGFs, MHGFs, 
and NWOFs (which are specified in terms of annual fuel utilization 
efficiency (``AFUE'')) and amended the compliance date (but left the 
existing standards in place) for WGFs. The June 2011 DFR also 
established electrical standby mode and off mode standards for NWGFs, 
MHGFs, NWOFs, MHOFs, and electric furnaces. As a result of a settlement 
agreement approved by the Court of Appeals for the District of Columbia 
(``D.C.'') Circuit, the standards established by the June 2011 DFR for 
NWGFs and MHGFs did not go into effect.\5\ However, the court order 
left in place the standards for WGFs, NWOFs, MHOFs, WOFs, and EFs, 
which are the subject of this final determination. These standards are 
set forth in DOE's regulations at 10 CFR 430.32(e)(1)(ii) and 
(e)(1)(iv) and are shown in Table II.1 and Table II.2.
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    \4\ This rulemaking was undertaken pursuant to the voluntary 
remand in State of New York, et al. v. Department of Energy, et al., 
08-311-ag(L); 08-312-ag(con) (2d Cir. filed Jan. 17, 2008).
    \5\ DOE confirmed the standards and compliance dates promulgated 
in the June 2011 DFR in a notice of effective date and compliance 
dates published in the Federal Register on October 31, 2011 
(``October 2011 notice''). 76 FR 67037. After publication of the 
October 2011 notice, the American Public Gas Association (``APGA'') 
sued DOE to invalidate the rule as it pertained to NWGFs and MHGFs. 
Petition for Review, American Public Gas Association, et al. v. 
Department of Energy, et al., No. 11-1485 (D.C. Cir. filed Dec. 23, 
2011). On April 24, 2014, the Court granted a motion that approved a 
settlement agreement that was reached between DOE, APGA, and the 
various intervenors in the case, in which DOE agreed to a remand of 
the NWGF and MHGF portions of the June 2011 DFR in order to conduct 
further notice-and-comment rulemaking. Accordingly, the Court's 
order vacated the June 2011 DFR in part (i.e., those portions 
relating to NWGFs and MHGFs) and remanded to the agency for further 
rulemaking. DOE addressed NWGFs and MHGFs in a separate rulemaking 
proceeding (see Docket No. EERE-2014-BT-STD-0031). DOE published a 
final rule in the Federal Register on December 18, 2023 amending the 
energy conservation standards for NWGFs and MHGFs. 88 FR 87502.

     Table II.1--Federal AFUE Energy Conservation Standards for Oil,
                 Electric, and Weatherized Gas Furnaces
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        Product class         AFUE (percent)        Compliance date
------------------------------------------------------------------------
Non-weatherized oil-fired                 83  May 1, 2013.
 furnaces (not including
 mobile home furnaces).
Mobile home oil-fired                     75  September 1, 1990.
 furnaces.
Weatherized gas furnaces....              81  January 1, 2015.
Weatherized oil-fired                     78  January 1, 1992.
 furnaces.
Electric furnaces...........              78  January 1, 1992.
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    Table II.2--Federal Standby Mode and Off Mode Energy Conservation Standards for Oil and Electric Furnaces
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                                           Maximum standby
                                           mode electrical    Maximum off mode
                                                power         electrical power
              Product class                consumption, PW,   consumption, PW,           Compliance date
                                              SB (watts)        OFF (watts)
 
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Non-weatherized oil-fired furnaces                       11                 11  May 1, 2013.
 (including mobile home furnaces).
Electric furnaces.......................                 10                 10  May 1, 2013.
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2. Current Rulemaking History
    Amendments to EPCA in the National Appliance Energy Conservation 
Act of 1987 (``NAECA''; Pub. L. 100-12) established EPCA's original 
energy conservation standards for furnaces, consisting of the minimum 
AFUE levels for mobile home furnaces and for all other furnaces except 
``small'' gas furnaces. (42 U.S.C. 6295(f)(1)-(2)) The original 
standards established a minimum AFUE of 75 percent for mobile home 
furnaces and 78 percent for all other furnaces. Pursuant to authority 
conferred under 42 U.S.C. 6295(f)(1)(B), DOE subsequently adopted a 
mandatory minimum AFUE level for ``small'' furnaces through a final 
rule published in the Federal Register on November 17, 1989 (``the

[[Page 84031]]

November 1989 Final Rule''). 54 FR 47916. The standards established by 
NAECA and the November 1989 Final Rule for ``small'' gas furnaces are 
still in effect for MHOFs, WOFs, and EFs.
    Pursuant to EPCA, DOE was required to conduct two rounds of 
rulemaking to consider amended energy conservation standards for all 
consumer furnaces, and an additional round of rulemaking for mobile 
home furnaces. (42 U.S.C. 6295(f)(4)(A), (B), and (C)) In satisfaction 
of the first round of amended standards rulemaking under 42 U.S.C. 
6295(f)(4)(B), on November 19, 2007, DOE published in the Federal 
Register a final rule (``November 2007 Final Rule'') that revised the 
standards for most furnaces but left them in place for two product 
classes (i.e., MHOFs and WOFs).\6\ The standards amended in the 
November 2007 Final Rule were to apply to furnaces manufactured or 
imported on and after November 19, 2015. 72 FR 65136 (Nov. 19, 2007). 
The energy conservation standards in the November 2007 Final Rule 
consist of a minimum AFUE level for each of the six classes of 
furnaces. Id. at 72 FR 65169. Based on the market analysis for the 
November 2007 Final Rule and the standards established under that rule, 
the November 2007 Final Rule eliminated the distinction between 
furnaces based on their certified input capacity (i.e., the standards 
applicable to ``small'' furnaces were established at the same level and 
as part of their appropriate class of furnace generally). Id.
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    \6\ The November 2007 Final Rule adopted amended standards for 
``oil-fired furnaces'' generally. However, on July 28, 2008, DOE 
published a technical amendment final rule in the Federal Register 
that clarified that the amended standards adopted in the November 
2007 Final Rule for oil-fired furnaces did not apply to MHOFs and 
WOFs; rather, they were only applicable for NWOFs. 73 FR 43611, 
43613 (July 28, 2008).
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    Following DOE's adoption of the November 2007 Final Rule, several 
parties jointly sued DOE in the United States Court of Appeals for the 
Second Circuit (``Second Circuit'') to invalidate the rule. Petition 
for Review, State of New York, et al. v. Department of Energy, et al., 
Nos. 08-0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The 
petitioners asserted that the standards for furnaces promulgated in the 
November 2007 Final Rule did not reflect the ``maximum improvement in 
energy efficiency'' that ``is technologically feasible and economically 
justified'' under 42 U.S.C. 6295(o)(2)(A). On April 16, 2009, DOE filed 
with the Court a motion for voluntary remand that the petitioners did 
not oppose. The motion did not state that the November 2007 Final Rule 
would be vacated, but it indicated that DOE would revisit its initial 
conclusions outlined in the November 2007 Final Rule in a subsequent 
rulemaking action. DOE also agreed that the final rule in that 
subsequent rulemaking action would address both regional standards for 
furnaces and the effects of alternate standards on natural gas prices. 
The Second Circuit granted DOE's motion on April 21, 2009. DOE notes 
that the Second Circuit's order did not vacate the energy conservation 
standards set forth in the November 2007 Final Rule, and during the 
remand, the standards went into effect as originally scheduled.
    On June 27, 2011, DOE published a direct final rule (``DFR'') in 
the Federal Register (``June 2011 DFR'') revising the energy 
conservation standards for residential furnaces pursuant to the 
voluntary remand in State of New York, et al. v. Department of Energy, 
et al. 76 FR 37408. In the June 2011 DFR, DOE considered the amendment 
of the same six product classes considered in the November 2007 Final 
Rule analysis plus electric furnaces. As discussed previously, the June 
2011 DFR amended the existing AFUE energy conservation standards for 
NWGFs, MHGFs, and NWOFs and amended the compliance date (but left the 
existing standards in place) for WGFs. The June 2011 DFR also 
established electrical standby mode and off mode energy conservation 
standards for NWGFs, MHGFs, NWOFs, MHOFs, and EFs. DOE confirmed the 
standards and compliance dates promulgated in the June 2011 DFR in a 
notice of effective date and compliance dates published in the Federal 
Register on October 31, 2011 (``October 2011 Notice''). 76 FR 67037. 
The November 2007 Final Rule and the June 2011 DFR represented the 
first and the second rounds, respectively, of the two rulemakings 
required under 42 U.S.C. 6295(f)(4)(B)-(C) to consider amending the 
energy conservation standards for consumer furnaces.
    The June 2011 DFR and October 2011 Notice amended, in relevant 
part, the AFUE energy conservation standards and compliance dates for 
three product classes of consumer furnaces (i.e., NWGFs, MHGFs, and 
NWOFs).\7\ The existing AFUE standards were left in place for three 
classes of consumer furnaces (i.e., WOFs, MHOFs, and EFs). For WGFs, 
the existing standard was left in place, but the compliance date was 
amended. Electrical standby mode and off mode energy consumption 
standards were established for non-weatherized gas and oil-fired 
furnaces (including mobile home furnaces) and EFs. Compliance with the 
energy conservation standards promulgated in the June 2011 DFR was to 
be required on May 1, 2013 for NWGFs, MHGFs, and NWOFs, and on January 
1, 2015, for weatherized furnaces. 76 FR 37408, 37547-37548 (June 27, 
2011); 76 FR 67037, 67051 (Oct. 31, 2011). The amended energy 
conservation standards and compliance dates in the June 2011 DFR 
superseded those standards and compliance dates promulgated by the 
November 2007 Final Rule for NWGFs, MHGFs, and NWOFs. Similarly, the 
amended compliance date for WGFs in the June 2011 DFR superseded the 
compliance date in the November 2007 Final Rule.
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    \7\ For NWGFs and MHGFs, the standards were amended to a level 
of 80-percent AFUE nationally with a more-stringent 90-percent AFUE 
requirement in the Northern Region. For NWOFs, the standard was 
amended to 83-percent AFUE nationally. 76 FR 37408, 37410 (June 27, 
2011).
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    Following DOE's adoption of the June 2011 DFR, APGA filed a 
petition for review with the United States Court of Appeals for the 
District of Columbia Circuit (``D.C. Circuit'') to invalidate the DOE 
rule as it pertained to NWGFs and MHGFs. Petition for Review, American 
Public Gas Association, et al. v. Department of Energy, et al., No. 11-
1485 (D.C. Cir. filed Dec. 23, 2011). The parties to the litigation 
engaged in settlement negotiations, which ultimately led to filing of 
an unopposed motion on March 11, 2014, seeking to vacate DOE's rule in 
part and to remand to the agency for further rulemaking.
    On April 24, 2014, the Court granted the motion and ordered that 
the standards established for NWGFs and MHGFs be vacated and remanded 
to DOE for further rulemaking. As a result, the standards established 
by the June 2011 DFR for NWGFs and MHGFs did not go into effect, and, 
thus, required compliance with the standards established in the 
November 2007 Final Rule for these products began on November 19, 2015. 
As stated previously, the AFUE standards for WOFs, MHOFs, and EFs were 
unchanged, and as such, the original standards for those product 
classes remain in effect. Further, the amended standard for NWOFs was 
not subject to the Court order and went into effect as specified in the 
June 2011 DFR. The AFUE standards currently applicable to all 
residential furnaces,\8\ including the

[[Page 84032]]

five product classes for which DOE is analyzing amended standards 
leading to this final determination, are set forth in DOE's regulations 
at 10 CFR 430.32(e)(1)(ii).
---------------------------------------------------------------------------

    \8\ DOE divides consumer furnaces into seven classes for the 
purpose of setting energy conservation standards: (1) NWGFs, (2) 
MHGFs, (3) WGFs, (4) NWOFs, (5) MHOFs, (6) WOFs, and (7) EFs. 10 CFR 
430.32(e)(1)(ii). As noted previously, DOE analyzed amended 
standards for NWGFs and MHGFs as part of a separate rulemaking (see 
Docket No. EERE-2014-BT-STD-0031). DOE published a final rule in the 
Federal Register on December 18, 2023 amending the energy 
conservation standards for NWGFs and MHGFs. 88 FR 87502.
---------------------------------------------------------------------------

    On January 28, 2022, DOE published in the Federal Register a 
request for information (``January 2022 RFI'') to initiate a review to 
determine whether any new or amended standards would satisfy the 
relevant requirements of EPCA for a new or amended energy conservation 
standard for oil, electric, and weatherized gas consumer furnaces. 87 
FR 4513. On November 29, 2022, DOE published in the Federal Register a 
notice of availability of a preliminary technical support document 
(``TSD'') (``the November 2022 Preliminary Analysis'') and the 
accompanying preliminary TSD (``the November 2022 Preliminary Analysis 
TSD'') that presented initial technical analyses in the following 
areas: (1) market and technology; (2) screening; (3) engineering; (4) 
markups to determine product price; (5) energy use; (6) LCC and PBP, 
and (7) national impacts. 87 FR 73259. DOE held a public meeting 
webinar on December 19, 2022, in order to receive public input and 
information related to the November 2022 Preliminary Analysis for the 
subject furnaces. On November 29, 2023, DOE published a NOPD (``the 
November 2023 NOPD'') in the Federal Register, which tentatively 
determined that current standards for oil, electric, and weatherized 
gas furnaces do not need to be amended.\9\ 88 FR 83426.
---------------------------------------------------------------------------

    \9\ No stakeholders requested that a public meeting webinar be 
held in response to the November 2023 NOPD, and, therefore, DOE did 
not elect to host a webinar for this NOPD.
---------------------------------------------------------------------------

    DOE received comments in response to the November 2023 NOPD from 
the interested parties listed in Table II.3.

          Table II.3--List of Commenters With Written Submissions in Response to the November 2023 NOPD
----------------------------------------------------------------------------------------------------------------
                                                                      Comment No. in
              Commenter(s)                       Abbreviation           the docket          Commenter type
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating, and            AHRI......................              36  Trade Association.
 Refrigeration Institute.
American Gas Association, American        Joint Commenters..........              33  Trade Association.
 Public Gas Association, National
 Propane Gas Association.
Andrew Chiafullo........................  Chiafullo.................              31  Individual.
Appliance Standards Awareness Project,    Joint Advocates...........              34  Efficiency Organization.
 American Council for an Energy-
 Efficient Economy, Natural Resources
 Defense Council, New York State Energy
 Research and Development Authority,
 Northwest Energy Efficiency Alliance.
Daikin Comfort Technologies North         Daikin....................              35  Manufacturer.
 America, Inc..
Lennox International....................  Lennox....................              32  Manufacturer.
Michael Ravnitzky.......................  Ravnitzky.................              30  Individual.
----------------------------------------------------------------------------------------------------------------

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\10\
---------------------------------------------------------------------------

    \10\ The parenthetical reference provides a reference for 
information located in the docket. (Docket No. EERE-2021-BT-STD-
0031, which is maintained at www.regulations.gov). The references 
are arranged as follows: (commenter name, comment docket ID number, 
page of that document).
---------------------------------------------------------------------------

III. General Discussion and Rationale

    DOE developed this final determination after a review of the market 
for the subject oil, electric, and weatherized gas consumer furnaces. 
DOE also considered comments, data, and information from interested 
parties that represent a variety of interests. This final determination 
addresses issues raised by these commenters.

A. General Comments

    This section summarizes general comments received from interested 
parties.
1. Comments Supporting Proposed Determination
    Daikin supported DOE's conclusion in the November 2023 NOPD that 
the current standards for oil, electric, and weatherized gas consumer 
furnaces do not need to be amended based on the results of the analyses 
that assessed impacts on manufacturers and product availability. 
(Daikin, No. 35 at p. 1) AHRI supported DOE's determination not to 
amend energy conservation standards for oil and weatherized gas 
consumer furnaces due to the small markets for these products, the 
minimal energy savings potential at the efficiency levels analyzed, and 
the problems consumers would face from lack of product availability. In 
addition, AHRI agreed with DOE's conclusion that amended energy 
standards for electric furnaces are not technologically feasible. 
(AHRI, No. 36 at p. 1) Ravnitzky supported DOE's conclusion regarding 
energy conservation standards for oil, electric, and weatherized gas 
consumer furnaces due to DOE's analysis of the technological 
feasibility, economic justification, and potential for significant 
energy savings. (Ravnitzky, No. 30 at p. 1)
    Lennox supported DOE's conclusion that no new standards are 
appropriate for oil and weatherized gas consumer furnaces. (Lennox, No. 
32 at pp. 1-2) The commenter agreed with DOE's conclusion that oil-
fired and weatherized gas furnaces are niche products with flat or 
declining sales; Lennox added that consumer cost and utility issues for 
weatherized gas products--including costs and physical challenges 
regarding condensate management that would be required if standards 
were tightened--provide additional support to DOE's conclusion that 
more-stringent standards for weatherized gas products are not 
justified. (Id. at p. 3) Lennox further agreed with DOE's conclusion 
that more-stringent energy conservation standards for electric furnaces 
are not technologically feasible for the niche electric furnace market. 
(Id. at p. 2) Lennox recommended that DOE continue to refrain from 
increasing furnace equipment costs by imposing new efficiency standards 
because they cannot be justified due to impacts resulting from the 
COVID-19 pandemic and the rise of inflation. (Id. at pp. 2, 4)
    The Joint Commenters supported DOE's proposed determination that 
amended standards for weatherized gas consumer furnaces are not 
statutorily justified at this time because they are not economically 
justified and because they have relatively small or declining

[[Page 84033]]

markets. (Joint Commenters, No. 33 at p. 2)
2. Comments Opposing Proposed Determination
    The Joint Advocates recommended that DOE reconsider its proposed 
determination that amended AFUE standards for oil and weatherized gas 
consumer furnaces are not needed despite their technological 
feasibility. The Joint Advocates commented that DOE did not complete a 
manufacturer impact analysis (``MIA'') for the November 2023 NOPD, 
despite claiming that amended standards would not be economically 
justified due to potential manufacturer challenges that may impact the 
market for those products. These commenters stated that, according to 
DOE's data, strengthening standards for these products would result in 
considerable cost savings for consumers, as outlined in the LCC and NIA 
results presented in the November 2023 NOPD. The Joint Advocates 
commented that amending the standards for NWOFs in particular could 
provide significant benefits for consumers. (Joint Advocates, No. 34 at 
pp. 1-2)
    In response, as discussed in section II.A of this document, DOE is 
directed by EPCA to conduct periodic rulemakings to determine whether 
to amend the current energy conservation standards for various 
products, including consumer furnaces. (42 U.S.C. 6295(m)(1)) In 
determining whether a potential more-stringent standard is economically 
justified, DOE must determine whether the benefits of the standard 
exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this 
determination after receiving comments on the proposed standard, and by 
considering, to the greatest extent practicable, the seven statutory 
factors, which include the economic impacts to both consumers and 
manufacturers. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) Section IV of this 
document outlines DOE's approach to analyzing various potential amended 
standard levels, including a discussion of market trends and 
qualitative market impacts in section IV.F of this document. Section V 
of this document provides a qualitative discussion of the potential 
impacts to manufacturers, as well as a detailed explanation of DOE's 
weighing of the benefits and burdens (including consumer cost savings 
as noted by the Joint Advocates) and the rationale for not amending the 
existing standards for oil, electric, and weatherized gas furnaces.
    DOE assessed in the November 2023 NOPD the market size and 
manufacturer landscape for NWOFs and MHOFs and concluded that these 
products make up less than one percent of the U.S. residential furnace 
market. With this small market size and expected diminishing sales, 
cost recovery could be challenging for manufacturers. In the case of 
WGFs, manufacturers would need to redesign 99 percent of products on 
the market today to meet a standard set at EL 1 for those products, and 
all but one OEM would need to design new condensing products. Given the 
dynamics of both the oil and weatherized gas furnace market, amending 
standards may result in shifts in market competition impacting 
availability of products that cover the full range of capacities. With 
this understanding of the manufacturer and market landscape, DOE is 
unable to conclude that any of the efficiency levels analyzed for these 
categories of furnaces would meet the statutory criteria required to 
amend energy conservation standards.
3. Other Topics
    Ravnitzky recommended that DOE consider establishing a series of 
incentives and challenges designed to encourage technological 
advancements in furnace designs that improve both the function and 
energy efficiency of consumer furnaces. (Ravnitzky, No. 30 at pp. 1-2) 
The commenter stated that incentivizing innovation offers a way to 
develop better and more affordable high-efficiency furnaces and 
suggested that prize contests have resulted in technological 
advancement while simultaneously fostering energy conservation and 
affordability. Ravnitzky commented that such a program could spur 
participants to surpass energy efficiency benchmarks (e.g., AFUE 
ratings), innovate in the area of emissions reduction, develop 
materials that enhance heat transfer efficiency and durability, and 
lead to furnace designs that are both innovative and cost-effective. 
Ravnitzky argued that an added benefit to an approach incentivizing 
advancements would be the resulting likelihood of contributing to 
national energy independence and forming new business opportunities and 
job creation in the energy sector. (Id.) Ravnitzky further commented 
that incentives and challenges could foster collaboration and 
competition among manufacturers, universities, independent investors, 
and other stakeholders. Finally, the commenter recommended that the 
program be administered by DOE offices, including the Advanced Research 
Projects Agency--Energy, and structured to reward innovations in 
design, manufacturing processes, or materials that make high-efficiency 
furnaces more cost-effective and accessible to consumers. (Id.)
    In response, DOE notes that its authority to regulate the energy 
efficiency of consumer products (including consumer furnaces) is 
outlined in EPCA, as discussed in section II.A of this document. Any 
incentive programs or prize contests are outside of the scope of that 
authority and this rulemaking. However, DOE further notes that there 
are voluntary energy efficiency appliance programs for consumer 
products, including furnaces, such as the ENERGY STAR[supreg] Program 
administered by the U.S. Environmental Protection Agency (``EPA'') or 
other DOE-funded initiatives such as the American-Made Challenges 
program.\11\
---------------------------------------------------------------------------

    \11\ For more information, see www.energy.gov/eere/funding/eere-prizes-and-competitions.
---------------------------------------------------------------------------

    The Joint Commenters encouraged DOE to implement the 
recommendations from the National Academy of Sciences' (``NAS's'') 
December 2021 report (``the NAS Report'') into its appliance 
rulemakings, including for WGFs. These commenters stated that the NAS 
Report identified several suggestions to improve DOE's rulemaking 
process, including ones related to economic modeling and providing data 
for public review to ensure transparency. (Joint Commenters, No. 33 at 
p. 2) The Joint Commenters recommended that DOE should ensure the 
public has sufficient notice and comment opportunity in the separate 
rulemaking proceeding mentioned in the November 2023 NOPD so as to 
confirm that the NAS Report's recommendations are appropriately 
implemented in all future appliance rulemakings, including this oil, 
electric, and weatherized gas furnace rulemaking. (Id. at p. 3)
    The Joint Commenters reiterated the earlier comments of the 
American Gas Association, et al. in response to DOE's request for 
information regarding energy conservation standards for consumer 
boilers in May 2021, particularly regarding concerns about the 
following: (1) DOE's reliance on flawed projections of natural gas 
price trends and marginal residential natural gas prices, and (2) 
systemic problems with the agency's economic analysis of standards. The 
Joint Commenters stated that, like the recommendations in the NAS 
Report, these earlier comments highlight flaws in DOE's process that 
must be addressed to better model consumer purchasing decisions, future 
fuel prices, and more. (Id.)

[[Page 84034]]

    In response, DOE notes that the rulemaking evaluating DOE's 
analytical methodologies and whether any modifications are warranted in 
relation to the NAS Report will be handled separately from individual 
product rulemakings, as stated in section VI.L of this document. As 
discussed in section V.C of this document, DOE is not amending the 
current energy conservation standards for the subject oil, electric, 
and weatherized gas consumer furnaces, and DOE has made this 
determination consistent with EPCA's requirements, including evaluation 
of economic justification of standards, and applicable executive 
orders.

B. Scope of Coverage and Product Classes

    This final determination covers certain product classes of consumer 
furnaces (i.e., ones for oil, electric, and weatherized gas furnaces) 
that meet the following definition of consumer ``furnace'' as codified 
at 10 CFR 430.2:

    A ``furnace'' is defined as a product which utilizes only 
single-phase electric current, or single-phase electric current or 
DC current in conjunction with natural gas, propane, or home heating 
oil, and which--
    (A) Is designed to be the principal heating source for the 
living space of a residence;
    (B) Is not contained within the same cabinet with a central air 
conditioner whose rated cooling capacity is above 65,000 Btu per 
hour;
    (C) Is an electric central furnace, electric boiler, forced-air 
central furnace, gravity central furnace, or low-pressure steam or 
hot water boiler; and
    (D) Has a heat input rate of less than 300,000 Btu per hour for 
electric boilers and low-pressure steam or hot water boilers and 
less than 225,000 Btu per hour for forced-air central furnaces, 
gravity central furnaces, and electric central furnaces.

10 CFR 430.2. As noted previously, this final determination applies 
only to oil, electric, and weatherized gas consumer furnaces. The scope 
of coverage is discussed in further detail in section IV.A.1 of this 
document.
    When evaluating and establishing/amending energy conservation 
standards, DOE divides covered products into product classes by the 
type of energy used or by capacity or other performance-related 
features that justify differing standards. In making a determination on 
whether a performance-related feature justifies a different standard, 
DOE must consider such factors as the utility of the feature to the 
consumer and other factors DOE determines are appropriate. (42 U.S.C. 
6295(q)) The product classes for this final determination are discussed 
in further detail in section IV.A.2 of this document.

C. Test Procedure

    EPCA sets forth generally applicable criteria and procedures for 
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) 
Manufacturers of covered products must use these test procedures to 
quantify the efficiency of their product and as the basis for 
certifying to DOE that their product complies with the applicable 
energy conservation standards and as the basis for any representations 
regarding the energy use or energy efficiency of the product. (42 
U.S.C. 6295(s) and 42 U.S.C. 6293(c)). Similarly, DOE must use these 
test procedures to evaluate whether a basic model complies with the 
applicable energy conservation standard(s) adopted pursuant to EPCA. 
(42 U.S.C. 6295(s); 10 CFR 429.110(e))
    The test procedure for determining AFUE, P<INF>W, SB</INF>, and 
P<INF>W, OFF</INF> is established at 10 CFR part 430, subpart B, 
appendix N. AFUE is an annualized fuel efficiency metric that accounts 
for fossil fuel consumption in active, standby, and off modes. 
P<INF>W, SB</INF> and P<INF>W, OFF</INF> are measurements of the 
standby mode and off mode electrical power consumption, respectively, 
in watts. The test procedure for consumer furnaces was last amended by 
a final rule published in the Federal Register on January 15, 2016 
(``January 2016 TP Final Rule''). 81 FR 2628.\12\
---------------------------------------------------------------------------

    \12\ On March 13, 2023, DOE published in the Federal Register a 
test procedure final rule for consumer boilers, which are a type of 
furnace under EPCA (see 42 U.S.C. 6291(23)) but are not included 
within the scope of this rulemaking (see section IV.A.1 of this 
document). 88 FR 15510. This test procedure final rule separated the 
test method for consumer boilers from the test method for other 
types of furnaces and moved the boilers test method to a new 
appendix EE to 10 CFR part 430, subpart B. Accordingly, it amended 
appendix N so as to remove provisions applicable only to boilers, 
but it did not materially change the test method for the oil, 
electric, and weatherized gas furnaces that are the subject of this 
rulemaking.
---------------------------------------------------------------------------

    The revisions to the consumer furnaces test procedure in the 
January 2016 TP Final Rule included:
    <bullet> Clarification of the electrical power term ``PE'';
    <bullet> Adoption of a smoke stick test for determining use of 
minimum default draft factors;
    <bullet> Allowance for the measurement of condensate under steady-
state conditions;
    <bullet> Reference to manufacturer's installation and operation 
manual and clarifications for when that manual does not specify test 
set-up;
    <bullet> Specification of duct-work requirements for units that are 
installed without a return duct;
    <bullet> Specification of testing requirements for units with 
multi-position configurations; and
    <bullet> Revision of the requirements regarding AFUE reporting 
precision.

81 FR 2628, 2629-2630 (Jan. 15, 2016).
    The changes in the January 2016 TP Final Rule were mandatory for 
representations of furnace efficiency made on or after July 13, 2016. 
As such, the most current version of the test procedure (published in 
January 2016) has now been in place for several years.

D. Standby Mode and Off Mode

    As discussed in section II.A of this document, EPCA requires any 
final rule for new or amended energy conservation standards promulgated 
after July 1, 2010, to address standby mode and off mode energy use. 
(42 U.S.C. 6295(gg)(3))
    ``Standby mode'' and ``off mode'' energy use are defined in the DOE 
test procedure for residential furnaces (i.e., ``Uniform Test Method 
for Measuring the Energy Consumption of Consumer Furnaces Other Than 
Boilers,'' 10 CFR part 430, subpart B, appendix N; ``appendix N''). In 
that test procedure, DOE defines ``standby mode'' as any mode in which 
the furnace is connected to a main power source and offers one or more 
of the following space heating functions that may persist: (a) to 
facilitate the activation of other modes (including activation or 
deactivation of active mode) by remote switch (including thermostat or 
remote control), internal or external sensors, and/or timer; and (b) 
continuous functions, including information or status displays or 
sensor-based functions. 10 CFR part 430, subpart B, appendix N, section 
2. ``Off mode'' for consumer furnaces is defined as a mode in which the 
furnace is connected to a main power source and is not providing any 
active mode or standby mode function, and where the mode may persist 
for an indefinite time. The existence of an off switch in off position 
(a disconnected circuit) is included within the classification of off 
mode. 10 CFR part 430, subpart B, appendix N, section 2. An ``off 
switch'' is defined as the switch on the furnace that, when activated, 
results in a measurable change in energy consumption between the 
standby and off modes. 10 CFR part 430, subpart B, appendix N, section 
2. Currently, the standby mode and off mode energy conservation 
standards for NWOFs and EFs are outlined in 10 CFR 430.32(e)(1)(iv) and 
are shown in Table II.2 of this document. Compliance with

[[Page 84035]]

the Federal standards for standby mode and off mode electricity 
consumption for NWOFs, MHOFs, and EFs, as measured by standby power 
consumption in watts (``P<INF>W, SB</INF>'') and off mode power 
consumption in watts (``P<INF>W, OFF</INF>''), was required on May 1, 
2013.
    In the November 2022 Preliminary Analysis, DOE analyzed amended 
standby/off mode standards for NWOFs, MHOFs, and EFs. DOE did not 
consider amended standby mode and off mode standards for WGFs and WOFs, 
because DOE has previously concluded in a DFR published in the Federal 
Register on June 27, 2011 that these products are packaged with either 
an air conditioner or a heat pump and that the standards for those 
products, specified in terms of power consumption in watts and seasonal 
energy efficiency ratio (``SEER''), already account for the standby 
mode and off mode energy consumption for these classes of furnaces. 76 
FR 37408, 37433. Based on market analysis conducted for the November 
2022 Preliminary Analysis and updated for this final determination, DOE 
concludes that WGFs and WOFs continue to be packaged with an air 
conditioner or heat pump.
    In the analysis for the November 2022 Preliminary Analysis, DOE 
established the baseline for NWOFs, MHOFs, and EFs as the current 
Federal standby mode and off mode standards (see Table II.2). DOE also 
defined and identified baseline components as those that consumed the 
most electricity during standby mode and off mode operation. For 
intermediate efficiency levels, DOE utilized a design-option approach 
to identify design options that could be applied to the baseline design 
to reduce standby mode and off mode energy consumption. Above the 
baseline efficiency level, DOE implemented design options in the order 
of incremental energy savings relative to baseline until all available 
design options were employed (i.e., at a max-tech level). DOE 
identified two design options between the baseline and max-tech designs 
that were used as the basis for intermediate standby mode and off mode 
design options. Specifically, DOE replaced the linear transformer found 
in models at the baseline with a low-loss transformer (``LL-LTX'') for 
the first intermediate efficiency level and replaced the linear power 
supply found in baseline models with a switching mode power supply 
(``SMPS'') for the second intermediate efficiency level.
    The max-tech standby mode and off mode efficiency level in the 
November 2022 Preliminary Analysis was based on a combination of the 
two design options that were analyzed for the intermediate efficiency 
levels. To reach max-tech, DOE analyzed using an LL-LTX in combination 
with an SMPS to reach the minimum standby mode or off mode power 
consumption (without eliminating other consumer- or performance-related 
electronic features). For this design option, a transformer is only 
needed to step down the voltage for the thermostat because the SMPS is 
able to step down the voltage for the other components of the furnace. 
As such, a smaller, lower-cost LL-LTX is used at the max-tech level, as 
compared to the LL-LTX used at EL 1 (i.e., the first intermediate 
efficiency level). Since the November 2022 Preliminary Analysis, DOE 
has not identified any additional design options that could reduce 
standby mode and off mode energy consumption.
    In the November 2023 NOPD, DOE found that there was some degree of 
uncertainty with respect to the appropriateness of the standby mode/off 
mode efficiency levels analyzed in the November 2022 Preliminary 
Analysis--particularly for products that are in development but also 
possibly in some products already on the market. There was also 
uncertainty related to the potential impacts that standby mode and off 
mode power consumption standards could have on overall system energy 
consumption, taking into account the power needs for features such as 
safety sensors or other improvements to functionality that would 
benefit the consumer. Consequently, DOE determined that it lacked the 
necessary information and requisite evidence to amend the standby mode 
and off mode standards and did not propose to amend the standby mode/
off mode power standards for NWOFs, MHOFs, and EFs. 88 FR 83426, 83433-
83434 (Nov. 29, 2023). This assessment has not materially changed since 
the time of the November 2023 NOPD.
    Lennox agreed with DOE's conclusion that no new standards for 
standby mode and off mode are appropriate. The commenter stated that 
increasing the stringency of standby power levels would inhibit 
innovations that benefit consumers, save more significant amounts of 
energy, and implement additional safety features. (Lennox, No. 32 at 
pp. 1-3) Lennox also agreed with DOE's conclusion that separate standby 
mode and off mode power standards are not appropriate for weatherized 
gas furnace products, as these products are packaged with air 
conditioners or heat pumps that account for standby mode and off mode 
energy use in the respective energy conservation standards for those 
products. (Id. at p. 3)
    In this final determination, for reasons similar to those explained 
in the November 2023 NOPD, DOE concludes that amended standby mode/off 
mode standards for NWOFs, MHOFs, and EFs are not justified at this 
time.

E. Technological Feasibility

1. General Considerations
    As discussed, a determination that amended energy conservation 
standards are not needed must be based on consideration of whether 
amended standards would result in significant conservation of energy, 
are technologically feasible, and are cost-effective. (42 U.S.C. 
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
    To determine whether potential amended standards would be 
technologically feasible, DOE first develops a list of all known 
technologies and design options that could improve the efficiency of 
the products that are the subject of the determination. DOE considers 
technologies incorporated in commercially-available products or in 
working prototypes to be ``technologically feasible.'' 10 CFR part 430, 
subpart C, appendix A, sections 6(b)(3)(i) and 7(b)(1). Section IV.A.3 
of this document discusses the technology options identified and 
considered by DOE for this analysis for oil, electric, and weatherized 
gas furnaces.
    After DOE has determined which, if any, technologies and design 
options are technologically feasible, it further evaluates each 
technology and design option in light of the following additional 
screening criteria: (1) practicability to manufacture, install, and 
service; (2) adverse impacts on product utility or availability; (3) 
adverse impacts on health or safety; and (4) unique-pathway proprietary 
technologies. 10 CFR part 430, subpart C, appendix A, sections 
6(b)(3)(ii)-(v) and 7(b)(2)-(5). Those technology options that are 
``screened out'' based on these criteria are not considered further. 
Those technology and design options that are not screened out are 
considered as the basis for higher efficiency levels that DOE could 
consider for potential amended standards. Section IV.A.4 of this 
document discusses the results of this screening analysis conducted for 
this final determination.

[[Page 84036]]

2. Maximum Technologically Feasible Levels
    EPCA requires that for any proposed rule that prescribes an amended 
or new energy conservation standard or prescribes no amendment or no 
new standard for a type (or class) of covered product, DOE must 
determine the maximum improvement in energy efficiency or maximum 
reduction in energy use that is technologically feasible for each type 
(or class) of covered products. (42 U.S.C. 6295(p)(1)) Accordingly, in 
the engineering analysis, DOE identifies the maximum technologically 
feasible efficiency level currently available on the market for oil, 
electric, and weatherized gas furnaces. DOE also defines such ``max-
tech'' efficiency level, representing the maximum theoretical 
efficiency that can be achieved through the application of all 
available technology options retained from the screening analysis.\13\ 
In many cases, the max-tech efficiency level is not commercially 
available because it is not currently economically feasible. The max-
tech levels that DOE determined for this analysis are described in 
section IV.B.1.c of this final determination.
---------------------------------------------------------------------------

    \13\ In applying these design options, DOE would only include 
those that are compatible with each other that when combined, would 
represent the theoretical maximum possible efficiency.
---------------------------------------------------------------------------

F. Energy Savings

1. Determination of Savings
    For each efficiency level (``EL'') evaluated, DOE projects 
anticipated energy savings from application of the EL to the oil, 
electric, and weatherized gas furnace products purchased during the 30-
year period that begins in the assumed year of compliance with 
potential amended standards (2030-2059).\14\ The savings are measured 
over the entire lifetime of products purchased during the 30-year 
analysis period. DOE quantifies the energy savings attributable to each 
EL as the difference in energy consumption between each standards case 
and the no-new-standards case. The no-new-standards case represents a 
projection of energy consumption that reflects how the market for such 
products would likely evolve in the absence of amended energy 
conservation standards.
---------------------------------------------------------------------------

    \14\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a nine-year period.
---------------------------------------------------------------------------

    DOE uses its NIA spreadsheet models to estimate national energy 
savings from potential amended standards for the products analyzed. The 
NIA spreadsheet model (described in section IV.G of this document) 
calculates energy savings in terms of site energy, which is the energy 
directly consumed by the products at the locations where they are used. 
For electricity, DOE reports national energy savings in terms of 
primary energy savings, which is the savings in the energy that is used 
to generate and transmit the site electricity. For natural gas, the 
primary energy savings are considered to be equal to the site energy 
savings. DOE also calculates national energy savings (``NES'') in terms 
of full-fuel-cycle (``FFC'') energy savings. The FFC metric includes 
the energy consumed in extracting, processing, and transporting primary 
fuels (i.e., coal, natural gas, petroleum fuels), and, thus, presents a 
more complete picture of the impacts of energy conservation 
standards.\15\ DOE's approach is based on the calculation of an FFC 
multiplier for each of the energy types used by covered products. 
Section IV.G of this document provides more information on FFC energy 
savings.
---------------------------------------------------------------------------

    \15\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51281 (August 18, 2011), as 
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
    As discussed, a determination that amended standards are not needed 
must be based on consideration of whether amended standards will result 
in significant conservation of energy, among other factors. (42 U.S.C. 
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2))
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a given rulemaking.\16\ For 
example, for some covered products, most of the energy consumption 
occurs during periods of peak energy demand. The impacts of these 
products on the energy infrastructure can be more pronounced than the 
impacts of products with relatively constant demand. Accordingly, DOE 
evaluates the significance of energy savings on a case-by-case basis. 
The significance of energy savings is further discussed in section 
V.B.1 of this final determination.
---------------------------------------------------------------------------

    \16\ The numeric threshold for determining the significance of 
energy savings established in a final rule published on February 14, 
2020 (85 FR 8626, 8670) was subsequently eliminated in a final rule 
published on December 13, 2021 (86 FR 70892).
---------------------------------------------------------------------------

G. Cost-Effectiveness

    As discussed, a determination that amended standards are not needed 
must be based on consideration of whether amended standards would be 
cost-effective, among other factors. (42 U.S.C. 6295(m)(1)(A) and 42 
U.S.C. 6295(n)(2))
    In evaluating cost-effectiveness, EPCA requires DOE to consider 
savings in operating costs throughout the estimated average life of the 
covered product in the type (or class) compared to any increase in the 
price, initial charges, or maintenance expenses for the covered product 
that are likely to result from the standard. (42 U.S.C. 6295(n)(2)(c) 
and 42 U.S.C. 6295(o)(2)(B)(i)(II)) Cost-effectiveness is also one of 
the factors that DOE considers under 42 U.S.C. 6295(o)(2)(B) in 
determining whether new or amended standards are economically 
justified. (42 U.S.C. 6295(o)(2)(B)(i)(II))
    In determining cost-effectiveness of potential amended standards 
for covered products, DOE generally conducts LCC and PBP analyses that 
estimate the costs and benefits to users from potential standards. 
Section IV.E of this document provides more information on the LCC and 
PBP analyses conducted for this final determination. To further inform 
DOE's consideration of the cost-effectiveness of potential amended 
standards, DOE considered the NPV of total costs and benefits estimated 
as part of the NIA. The inputs for determining the NPV of the total 
costs and benefits experienced by consumers are: (1) total annual 
installed cost, (2) total annual operating costs (energy costs and 
repair and maintenance costs), and (3) a discount factor to calculate 
the present value of costs and savings. The results of this analysis 
are discussed in section V.C.2 of this document.

H. Further Considerations

    In determining whether a potential, more-stringent standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)). DOE must 
make this determination after receiving comments on the proposed 
standard, and by considering, to the greatest extent practicable, the 
following seven statutory factors:

    (1) The economic impact of the standard on manufacturers and 
consumers of the product subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered product in the type (or class) compared 
to any increase in the price, initial charges for, or maintenance 
expenses of the covered product that are likely to result from the 
standard;
    (3) The total projected amount of energy (or as applicable, 
water) savings likely to result from the standard;
    (4) Any lessening of the utility or the performance of the 
covered product likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;

[[Page 84037]]

    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

    The following sections discuss how DOE has addressed each of these 
seven factors in this final determination.
1. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential new or amended standard 
on manufacturers, DOE conducts an MIA. DOE first uses an annual cash-
flow approach to determine the quantitative impacts. This step includes 
both a short-term assessment--based on the cost and capital 
requirements during the period between when a regulation is issued and 
when entities must comply with the regulation--and a long-term 
assessment over a 30-year period. The industry-wide impacts analyzed 
include: (1) industry net present value, which values the industry on 
the basis of expected future cash flows; (2) cash flows by year; (3) 
changes in revenue and income; and (4) other measures of impact, as 
appropriate. Since DOE has determined not to amend standards for oil, 
electric, and weatherized gas furnaces, this final determination will 
have no cash-flow impacts on manufacturers. Accordingly, DOE did not 
conduct an MIA for this final determination.
    For individual consumers, measures of economic impact include the 
changes in LCC and PBP associated with new or amended standards. These 
measures are discussed further in the following section. For consumers 
in the aggregate, DOE also calculates the national NPV of the consumer 
costs and benefits expected to result from particular standards. DOE 
also evaluates the impacts of potential standards on identifiable 
subgroups of consumers that may be affected disproportionately by a 
standard. Since DOE has determined not to amend standards for oil, 
electric, and weatherized gas furnaces, this final determination will 
have no disproportionate impact on identifiable subgroups of consumers. 
Accordingly, DOE did not conduct a subgroup analysis for this final 
determination.
2. Savings in Operating Costs Compared To Increase in Price
    EPCA requires DOE to consider 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 product 
that are likely to result from a standard. (42 U.S.C. 6295(m)(1); 42 
U.S.C. 6295(n)(2), and 42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts 
this comparison in its LCC and PBP analyses.
    For its LCC and PBP analyses, DOE assumes that consumers will 
purchase the covered product in the first year of compliance with new 
or amended standards. The LCC savings for the considered efficiency 
levels are calculated relative to the case that reflects projected 
market trends in the absence of new or amended standards. DOE's LCC and 
PBP analyses are discussed in further detail in section IV.E of this 
document.
3. Energy Savings
    EPCA requires DOE, in determining the economic justification of an 
amended standard, to consider the total projected energy savings that 
are expected to result directly from the standard. (42 U.S.C. 
6295(o)(2)(B)(i)(III))
    As discussed in section IV.G of this document, DOE uses the NIA 
spreadsheet models to project national energy savings that are expected 
to result directly from an amended standard.
4. Lessening of Utility or Performance of Products
    In establishing product classes and in evaluating design options 
and the impact of potential standard levels, DOE evaluates potential 
standards that would not lessen the utility or performance of the 
considered product. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Since DOE has 
determined not to amend standards for oil, electric, and weatherized 
gas furnaces, this final determination will not impact the utility of 
such products.
5. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) Since 
DOE has determined not to amend standards for oil, electric, and 
weatherized gas furnaces, DOE did not transmit a copy of its 
determination to the Attorney General for anti-competitive review.
6. Need for National Energy Conservation
    DOE also considers the need for national energy conservation in 
determining whether a new or amended standard is economically 
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the 
standards are likely to provide improvements to the security and 
reliability of the Nation's energy system. Reductions in the demand for 
electricity also may result in reduced costs for maintaining the 
reliability of the Nation's electricity system. DOE generally conducts 
a utility impact analysis to estimate how standards may affect the 
Nation's needed power generation capacity. However, since DOE has 
determined not to amend standards for oil, electric, and weatherized 
gas furnaces, DOE did not conduct this analysis.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. Amended standards are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production and use. DOE 
generally conducts an emissions analysis to estimate how amended 
standards may affect these emissions. DOE also generally estimates the 
economic value of emissions reductions resulting from an amended 
standard. However, since DOE has determined not to amend standards for 
oil, electric, and weatherized gas furnaces, DOE did not conduct this 
analysis.
7. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To 
the extent DOE identifies any relevant information regarding economic 
justification that does not fit into the other categories described 
previously, DOE could consider such information under ``other 
factors.''

IV. Methodology and Discussion of Related Comments

    The following sections of this document address each key component 
of the analyses DOE has performed for this final determination with 
respect to oil, electric, and weatherized gas furnaces. Comments 
received from interested parties are addressed in each relevant 
section.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and

[[Page 84038]]

qualitative assessments, based primarily on publicly-available 
information. The subjects addressed in the market and technology 
assessment for this final determination include: (1) a determination of 
the scope and identification of product classes, (2) manufacturers and 
industry structure, (3) existing efficiency programs, (4) shipments 
information, (5) market and industry trends, and (6) technologies or 
design options for improving efficiency. The key findings of DOE's 
market assessment are summarized in the following sections.
1. Scope of Coverage
    As mentioned in section III.B of this document, in assessing the 
scope of this rulemaking, DOE relied on the definition of ``furnace'' 
in 10 CFR 430.2. Any product meeting the definition of a ``furnace'' 
that is also an oil, electric, and weatherized gas furnace was included 
in the scope of DOE's analysis for this final determination. Non-
weatherized gas furnaces and mobile home gas furnaces were considered 
in a separate rulemaking.\17\
---------------------------------------------------------------------------

    \17\ See Docket No. EERE-2014-BT-STD-0031, which can be accessed 
at www.regulations.gov.
---------------------------------------------------------------------------

a. Electric Furnaces
    A basic EF is composed of an electric resistance heating element 
and blower assembly. (Additionally, there are products that include 
electrically powered heat pumps, but these are separately covered 
products not addressed here.) The electric resistance heating elements 
of EFs are highly efficient, and the efficiency of these units already 
approaches 100 percent. DOE is unaware of any technology options that 
can improve the efficiency of electric furnaces, so DOE has determined 
that more-stringent standards for EFs would not be technologically 
feasible. Therefore, DOE concludes that the energy savings potential 
from amended standards for EFs would be minimal. Consequently, DOE did 
not consider amended AFUE standards for EFs in this rulemaking.
b. Weatherized Oil-Fired Furnaces
    DOE is not aware of any WOFs on the market, and, therefore, DOE did 
not analyze amended standards for that product class. DOE has concluded 
that because there are no WOFs on the market, there would be no 
potential energy savings from amended standards.
2. Product Classes
    When evaluating and establishing or amending energy conservation 
standards, DOE may establish separate standards for a group of covered 
products (i.e., establish a separate product class) if DOE determines 
that separate standards are justified based on the type of energy used, 
or if DOE determines that the product's capacity or other performance-
related feature justifies a different standard. (42 U.S.C. 6295(q)) In 
making a determination whether a performance-related feature justifies 
a different standard, DOE considers such factors as the utility of the 
feature to the consumer and other factors DOE determines are 
appropriate. (Id.)
    In this case, DOE divides furnaces into seven product classes based 
on fuel type (gas, oil, or electric), whether the furnace is 
weatherized or not, and whether the furnace is designed for use only in 
mobile homes or not. The current product classes for furnaces are (1) 
NWGFs, (2) MHGFs, (3) NWOFs, (4) MHOFs, (5) WGFs, (6) WOFs, and (7) 
EFs. 10 CFR 430.32(e)(1)(ii). As noted previously, NWGFs and MHGFs are 
being addressed in a separate rulemaking process.\18\ Therefore, the 
product classes that DOE considered for this final determination are 
NWOFs, MHOFs, WGFs, WOFs, and EFs. However, for the reasons discussed 
in sections IV.A.1.a and IV.A.1.b of this document, amended energy 
conservation standards were not analyzed for EFs or WOFs.
---------------------------------------------------------------------------

    \18\ See Docket No. EERE-2014-BT-STD-0031.
---------------------------------------------------------------------------

    In summary, DOE assessed amended energy conservation standards in 
terms of AFUE for the NWOF, MHOF, and WGF product classes in this final 
determination. Again, for the reasons discussed in section III.D of 
this document, DOE did not analyze new or amended standby mode/off mode 
power standards for any product classes this time.
    This final determination maintains the product classes currently 
established for oil, electric, and weatherized gas furnaces.
3. Technology Options
    DOE develops information in the technology assessment that 
characterizes the technologies and design options that manufacturers 
may use to attain higher-efficiency performance.
    In the November 2023 NOPD, DOE identified several technology 
options that would be expected to improve the efficiency of oil and 
weatherized gas furnaces in terms of AFUE, as measured by the DOE test 
procedure. To develop a list of technology options, DOE examined the 
efficiency-improving technologies used in consumer furnaces today. 
These technology options provide insight into the technological 
improvements typically used to increase the energy efficiency of 
consumer furnaces.
    For this final determination, DOE has reviewed the consumer 
furnaces market and confirmed that the technology options identified in 
the November 2023 NOPD continue to reflect the market. The identified 
technology options are shown in Table IV.1.

[[Page 84039]]



    Table IV.1--List of Technology Options Considered for This Final
                              Determination
------------------------------------------------------------------------
      Technology option                       Description
------------------------------------------------------------------------
Condensing Secondary Heat      The secondary heat exchanger allows more
 Exchanger.                     heat to be extracted from the flue gases
                                before the products of combustion exit
                                through the flue to the vent system by
                                condensing any water vapor and releasing
                                the resulting latent heat.
Heat Exchanger Improvements..  Improvements to the heat exchanger can be
                                achieved by modifying baseline designs
                                of standard furnaces to incorporate any
                                combination of: (1) increased heat
                                exchanger surface area, (2) heat
                                exchanger surface features, and/or (3)
                                heat exchanger baffles and turbulators.
                                Improving the heat exchanger for fossil
                                fuel-fired furnaces can increase the
                                rate of heat transfer from the hot
                                combustion gases to the circulation air
                                that is distributed to the heated space.
                                This improved heat transfer increases
                                thermal efficiency and AFUE.
Two-Stage and Modulating       Two-stage and modulating combustion allow
 Combustion.                    furnaces to meet heating load
                                requirements more precisely. When low
                                heating load conditions exist, a two-
                                stage or modulating furnace can operate
                                at a reduced input rate for an extended
                                period of burner on-time to meet the
                                reduced heating load. This improves
                                comfort by reducing large fluctuations
                                in room temperature. Because burner on-
                                time increases, however, fuel use does
                                not drastically decrease, so efficiency
                                gains are typically small.
Pulse Combustion.............  Pulse combustion burners operate on self-
                                sustaining resonating pressure waves
                                that alternately rarefy the combustion
                                chamber (drawing a fresh fuel-air
                                mixture into the chamber) and pressurize
                                it (causing ignition by compression
                                heating of the mixture to its flash
                                point). Pulse combustion systems feature
                                high heat transfer rates, can self-vent,
                                and can operate as isolated combustion
                                systems. Because the pulse combustion
                                process is highly efficient, the burners
                                are generally used with condensing
                                appliances.
Premix Burners...............  Premix burners completely premix the
                                primary air and fuel prior to
                                combustion, thereby eliminating the need
                                for secondary air. These burners allow
                                for more precise control over the air-
                                fuel ratio, so that the level of excess
                                air can be set for optimal performance.
                                Premix burners are often utilized to
                                control production of emissions, in
                                particular NOX. The premix burners used
                                in consumer furnaces on the market today
                                are capable of achieving ``ultra-low
                                NOX'' levels.
Burner Derating..............  Burner derating (i.e., reducing burner
                                firing rate while keeping heat exchanger
                                geometry and surface area the same) will
                                increase the ratio of heat transfer
                                surface area to energy input, thereby
                                increasing the AFUE.
Insulation Improvements......  If the jacket loss test is performed,
                                insulation improvements would reduce
                                jacket losses and increase AFUE.
                                Insulation can be improved by modifying
                                the baseline furnace design through the
                                use of increased jacket insulation or
                                advanced forms of insulation.
Off-Cycle Dampers............  Off-cycle (which refers to the burner off-
                                cycle) dampers restrict the intake and
                                exhaust airflow through the venting
                                system during standby mode by closing
                                when the burner is not operating,
                                thereby trapping residual heat in the
                                heat exchanger. During the burner off-
                                cycle, a furnace can lose heat by
                                natural convection and conduction
                                through the combustion air inlet and
                                flue. Installing a damper at these
                                points can prevent heat from escaping
                                and minimize off-cycle heat losses.
                                Dampers have no effect on the steady-
                                state performance of the furnace;
                                however, they can reduce standby losses.
                                The AFUE metric captures both steady-
                                state and standby performance of the
                                furnace, and thus any heated air that is
                                retained in the system during the
                                standby mode improves the furnace's
                                AFUE.
                               Off-cycle dampers include: (1) electro-
                                mechanical flue dampers, which are
                                installed downstream of the heat
                                exchanger, are activated by an external
                                source of electricity, and open and
                                close immediately when combustion starts
                                and stops, (2) electro-mechanical burner
                                inlet dampers, which are installed at
                                the combustion-air inlet to the burner
                                box and are designed to automatically
                                close off the air passage and restrict
                                the airflow through the heat exchanger
                                when the burner is off.
Direct Venting...............  A direct venting system consists of a
                                pipe that provides the burner with a
                                direct connection to a combustion air
                                source on the exterior of the building.
                                This external connection allows the
                                furnace to utilize outdoor air for
                                combustion, which could result in an
                                improvement in AFUE.
Concentric Venting...........  Concentric venting is accomplished by
                                running the inlet and exhaust vents
                                concentrically. The flue gases are
                                exhausted through a central vent pipe,
                                and the intake combustion air passes
                                through a concentric duct surrounding
                                it. This arrangement creates a counter-
                                flow heat exchanger that recovers some
                                heat from the flue gases to preheat the
                                combustion air. It provides an
                                efficiency advantage compared to non-
                                concentric venting systems, as the
                                concentric vent essentially serves as a
                                shell-in-tube heat exchanger to recover
                                heat.
Low-Pressure, Air-Atomized     To overcome the low input limitations of
 Oil Burner.                    conventional oil burners, Brookhaven
                                National Laboratory developed a low-
                                pressure, air-atomized oil burner that
                                can operate at firing rates as low as
                                0.25 gallons of oil per hour (10 kW). In
                                addition, it can operate with low levels
                                of excess combustion air (less than 10
                                percent) for lean-burning, ultra-clean
                                combustion. A lower level of excess air
                                generally improves AFUE rating. This
                                single-stage burner design is also
                                capable of firing fuel at high and low
                                input rates, which are manually actuated
                                by a switch, allowing it to closely
                                match the smaller heating loads of well-
                                insulated modern homes. The ability to
                                derate the flame also greatly enhances
                                the effectiveness of the heat exchanger,
                                which improves steady-state efficiency.

[[Page 84040]]

 
High-Static Oil Burner.......  A modification of the conventional flame
                                retention head burner is the high-static
                                pressure flame retention head oil
                                burner. These burners employ an air
                                guide to direct air onto the optimal
                                point on the blower wheel and a scroll
                                insert to create high static pressure in
                                the combustion chamber while maintaining
                                consistent airflow. This higher pressure
                                enables the furnace to overcome
                                restrictive flow passages in compact,
                                more efficient heat exchangers. These
                                types of burners are also able to
                                operate at lower levels of excess air,
                                giving them a nearly five-percent AFUE
                                advantage over flame retention head
                                burners.
Delayed-Action Oil Pump        A delayed-action oil pump solenoid valve
 Solenoid Valve.                is installed between the oil pump and
                                the burner nozzle to supplement the fuel
                                pump regulator by delaying the fuel
                                release by 3 to 6 seconds after the
                                igniter and burner blower start until
                                the oil pressure reaches the level
                                required to fully discharge the oil into
                                the combustion chamber without dripping.
                                This ensures that the oil burns more
                                completely. Testing at Brookhaven
                                National Laboratory indicates that the
                                typical efficiency benefit of delayed-
                                action solenoid valves is expected to be
                                less than one-percent AFUE.
------------------------------------------------------------------------

    As detailed in section IV.A.5 of this document, for each technology 
option identified, DOE applies screening criteria before considering it 
further in the analysis.
4. Screening Analysis
    As discussed, DOE conducts a screening analysis to evaluate whether 
to further consider each identified technology and design option. DOE 
uses the following five screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:
    (1) Technological feasibility. Technologies that are not 
incorporated in commercially-available products or in commercially-
viable, existing prototypes will not be considered further.
    (2) Practicability to manufacture, install, and service. If it is 
determined that mass production of a technology in commercially-
available products and reliable installation and servicing of the 
technology could not be achieved on the scale necessary to serve the 
relevant market at the time of the projected compliance date of the 
standard, then that technology will not be considered further.
    (3) Impacts on product utility. If a technology is determined to 
have a significant adverse impact on the utility of the product to 
subgroups of consumers, or result in the unavailability of any covered 
product type with performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as products generally available in the United States at the time, 
it will not be considered further.
    (4) Safety of technologies. If it is determined that a technology 
would have significant adverse impacts on health or safety, it will not 
be considered further.
    (5) Unique-pathway proprietary technologies. If a technology has 
proprietary protection and represents a unique pathway to achieving a 
given efficiency level, it will not be considered further, due to the 
potential for monopolistic concerns.

    See 10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 
7(b).
    If DOE determines that a technology fails to meet one or more of 
these listed criteria, it is excluded from further consideration in the 
engineering analysis. The following sections include DOE's evaluation 
of each technology option against the screening analysis criteria.
a. Screened-Out Technologies
    Based on DOE's research, DOE screened out the technology options on 
the basis of each screening criteria shown in Table IV.2 from further 
consideration as options to improve the AFUE (as measured by the DOE 
test procedure) of NWOFs, MHOFs, and WGFs. The reasons for exclusion 
associated with each technology are marked in the table with an X. 
Additional details about the reasons for exclusion are discussed in 
this section.

                                                       Table IV.2--Technology Options Screened Out
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Screening criteria (X = basis for screening out)
                                                                    ------------------------------------------------------------------------------------
                                             Applicable product                        Practicability     Impacts on        Adverse
       Excluded technology option                 class(es)           Technological     to install,    product utility     impacts on    Unique- pathway
                                                                       feasibility      manufacture,      or product       health or        proprietary
                                                                                        and service      availability        safety        technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pulse combustion.......................  WGF.......................  ...............  ...............  ...............               X   ...............
Burner derating........................  WGF, NWOF, MHOF...........  ...............  ...............               X   ...............  ...............
Low-pressure, air-atomized oil burner..  NWOF, MHOF................               X   ...............  ...............  ...............  ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------

Pulse Combustion
    In contrast to natural draft and induced draft furnaces, pulse 
combustion furnaces generate positive pressure in the heat exchanger. 
Although these products are generally safe, this could create a 
potential safety problem if the heat exchanger breaches, because 
combustion products can contaminate the circulation airstream.
    Pulse combustion gas furnaces were available in the United States 
for more than two decades. However, they were withdrawn from the market 
within the past 20 years because manufacturers found that competing 
technologies, such as condensing secondary heat exchangers, cost 
significantly less to manufacture and operate. In light of the ability 
of furnace manufacturers to cost-effectively achieve high efficiencies 
without the use of pulse combustion, the technology's risks do not 
outweigh its benefits for consumer furnace applications. Accordingly, 
DOE did not

[[Page 84041]]

further analyze this technology option as part of this final 
determination.
Burner Derating
    Because heat output rate is directly related to burner size, burner 
derating reduces the amount of heated air available to the consumer. 
This reduction in heat output rate adversely affects the utility to 
consumers. Therefore, DOE did not consider this technology option.
Low-Pressure, Air-Atomized Oil Burner
    While tests performed at the Brookhaven National Laboratory seem to 
have successfully demonstrated enhanced AFUE performance under the DOE 
test procedure in oil boilers that employed prototype low-pressure air-
atomized burners, the prototype burner was never tested on a furnace. 
Therefore, the technological feasibility of the burner prototype for 
incorporation into a residential oil-fired furnace remains unknown, so 
DOE did not consider low-pressure, air-atomized oil burners to be a 
viable technology for efficiency improvement for this final 
determination.
b. Remaining Technologies
    After a thorough review of each technology, DOE concludes that all 
of the remaining identified technologies not ``screened out'' meet all 
of the screening criteria. In summary, DOE retained (i.e., did not 
screen out) the technology options listed below:

<bullet> Condensing secondary heat exchanger
<bullet> Heat exchanger improvements
<bullet> Two-stage and modulating combustion
<bullet> Premix burners
<bullet> Insulation improvements
<bullet> Off-cycle dampers
<bullet> Direct venting
<bullet> Concentric venting
<bullet> High-static oil burner
<bullet> Delayed-action oil pump solenoid valve

    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been used in 
commercially-available products or working prototypes. DOE also finds 
that all of the remaining technology options meet the other screening 
criteria (i.e., practicable to manufacture/install/service; do not 
result in adverse impacts on product utility, product availability, 
health, or safety; and do not utilize unique-pathway proprietary 
technologies). DOE considers these remaining technology options as the 
basis for higher efficiency levels that DOE could consider for 
potential amended standards.
5. Impact From Other Rulemakings
    Lennox commented that manufacturers are facing unprecedented 
regulatory change elsewhere and significant cumulative regulatory 
burdens, which further supports DOE's determination not to increase the 
AFUE efficiency standards and not to increase standby and off mode 
standards for oil, electric, and weatherized gas consumer furnaces. 
(Lennox, No. 32 at pp. 3-4) Lennox stated that the related rulemakings 
include the EPA phasedown to lower-global warming potential (``GWP'') 
refrigerants, the energy conservation standards final rule for NWGFs/
MHGFs, the National and Regional Cold Climate Heat Pump Specifications, 
the DOE energy conservation standards for air-cooled, three-phase air 
conditioners and heat pumps below 65,000 Btu/h and air-cooled, three-
phase, variable refrigerant flow (``VRF'') air conditioners and heat 
pumps below 65,000 Btu/h, the DOE test procedure for VRF systems, and 
the EPA ENERGY STAR 4.0 for Light Commercial Heating, Ventilation, and 
Air Conditioning (``HVAC''). (Id. at p. 4) AHRI commented that most of 
the consumer furnace market (i.e., NWGFs) is obligated to increase 
efficiency to 95-percent AFUE by December 2028, which is one step below 
max-tech and which is expected to place a significant economic burden 
on the industry. (AHRI, No. 36 at p. 2)
    In response, DOE notes that the Department is not amending the 
energy conservation standards for oil, electric, and weatherized gas 
consumer furnaces, and, therefore, it does not expect this rulemaking 
to contribute to the cumulative regulatory burden on manufacturers.

B. Engineering and Cost Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the efficiency and manufacturer production cost 
(``MPC'') of the subject products (i.e., NWOFs, MHOFs, and WGFs). There 
are two elements to consider in the engineering analysis: (1) the 
selection of efficiency levels to analyze (i.e., the ``efficiency 
analysis''), and (2) the determination of product cost at each 
efficiency level (i.e., the ``cost analysis''). In determining the 
performance of higher-efficiency products, DOE considers those 
technologies and design option combinations not eliminated by the 
screening analysis. For each product class, DOE estimates the baseline 
cost, as well as the incremental cost for the product at efficiency 
levels above the baseline. The output of the engineering analysis is a 
set of cost-efficiency ``curves'' that are used in downstream analyses 
(i.e., the LCC and PBP analyses and the NIA).
    DOE recently conducted an engineering analysis to determine the 
cost-efficiency relationship for oil and weatherized gas consumer 
furnaced for the November 2023 NOPD. 88 FR 83426, 83439-83446 (Nov. 29, 
2023). For this final determination, DOE analyzed cost trends across 
the consumer oil and weatherized gas furnace market as part of the 
market and technology assessment (see section IV.A of this document) 
and found that oil and weatherized gas consumer furnace efficiencies 
have not changed substantially since the NOPD analysis. Thus, as 
discussed in section IV.B.1 of this document, DOE maintained the 
efficiency levels from the November 2023 NOPD in the final 
determination analysis. Additionally, DOE examined its most recent 
inputs to its manufacturing cost analysis (e.g., raw material prices, 
component prices, labor rates) and found that, although MPC values for 
each efficiency level may have increased, the incremental MPCs would 
not significantly change from those in the November 2023 NOPD. 
Therefore, DOE concludes that an updated cost analysis would not impact 
the results of this final determination, so the Department is using the 
same methodology and analytical results as those described in the 
November 2023 NOPD engineering and cost analysis. Further information 
on this analytical methodology used in the November 2023 NOPD is 
presented in the following subsections.
1. Efficiency Analysis
    DOE typically uses one of two approaches to develop energy 
efficiency levels for the engineering analysis: (1) relying on observed 
efficiency levels in the market (i.e., the efficiency-level approach), 
or (2) determining the incremental efficiency improvements associated 
with incorporating specific design options to a baseline model (i.e., 
the design-option approach). Using the efficiency-level approach, the 
efficiency levels established for the analysis are determined based on 
the market distribution of existing products (in other words, based on 
the range of efficiencies and efficiency level ``clusters'' that 
already exist on the market). Using the design-option approach, the 
efficiency levels established for the analysis are determined through 
detailed engineering calculations and/or computer simulations of the 
efficiency improvements from implementing

[[Page 84042]]

specific design options that have been identified in the technology 
assessment. DOE may also rely on a combination of these two approaches. 
For example, the efficiency-level approach (based on actual products on 
the market) may be extended using the design-option approach to 
interpolate to define ``gap fill'' levels (to bridge large gaps between 
other identified efficiency levels) and/or to extrapolate to the ``max-
tech'' level (particularly in cases where the ``max-tech'' level 
exceeds the maximum efficiency level currently available on the 
market). For this final determination analysis, DOE used the 
efficiency-level approach.
a. Baseline Efficiency
    For each product class, DOE generally selects a baseline model as a 
reference point for each class, and measures anticipated changes to the 
product resulting from potential energy conservation standards against 
the baseline model. The baseline model in each product class represents 
the characteristics of products typical of that class (e.g., capacity, 
physical size). Generally, a baseline model is one that just meets 
current energy conservation standards, or, if no standards are in 
place, the baseline is typically the most common or least-efficient 
unit on the market.
    A basic consumer gas furnace comprises a hot surface or direct 
spark ignition system, tubular in-shot burners, a noncondensing heat 
exchanger, a blower assembly (including motor and forward-swept fan 
blade), a mechanical draft combustion fan assembly, and automatic 
controls. A basic consumer oil-fired furnace comprises an interrupted 
spark ignition system, power burner, noncondensing heat exchanger, and 
blower assembly. Details and descriptions of each of these components 
can be found in chapter 3 of the November 2022 Preliminary Analysis 
TSD.
    The identification of baseline units requires establishing the 
baseline efficiency level. In cases where there is an existing 
standard, DOE typically defines ``baseline units'' as units with 
efficiencies equal to the current Federal energy conservation 
standards. However, for the MHOF product class, DOE did not identify 
any currently available units at the minimum standard level (75-percent 
AFUE), and, therefore, DOE analyzed 80-percent AFUE as the baseline 
level for MHOFs, as it was the lowest efficiency available on the 
market.
    In the November 2023 NOPD, DOE used the baseline levels presented 
in Table IV.3 as the baseline efficiency AFUE levels for oil, electric, 
and weatherized gas furnaces, along with the typical characteristics of 
a baseline unit.

                 Table IV.3--Baseline Efficiency Levels
------------------------------------------------------------------------
                                  Baseline AFUE
         Product class              level (%)    Typical characteristics
------------------------------------------------------------------------
NWOF...........................              83  --Single-stage burner.
                                                 --Electronic ignition.
                                                 --Aluminized-steel heat
                                                  exchanger.
                                                 --Indoor blower fan
                                                  including PSC motor *
                                                  and forward-curved
                                                  blower impeller blade.
MHOF...........................              80  --Single-stage burner.
                                                 --Electronic ignition.
                                                 --Aluminized-steel heat
                                                  exchanger.
                                                 --Indoor blower fan
                                                  including PSC motor *
                                                  and forward-curved
                                                  blower impeller blade.
                                                 --Direct venting
                                                  system.
                                                 --Built-in evaporator
                                                  coil cabinet.
WGF............................              81  --Draft inducer.
                                                 --Single-stage burner.
                                                 --Electronic ignition.
                                                 --Aluminized-steel
                                                  tubular heat
                                                  exchanger.
                                                 --Indoor blower fan
                                                  including BPM * motor
                                                  and forward-curved
                                                  blower impeller blade.
------------------------------------------------------------------------
* Consumer furnace fans incorporated into NWOFs, MHOFs, and WGFs
  manufactured on and after July 3, 2019 must meet fan energy rating
  (``FER'') standards specified in 10 CFR 430.32(y). The blower fan
  motor (among other factors) can affect FER. Brushless permanent magnet
  (``BPM'') motors have become the predominant motor type at the
  baseline AFUE levels for WGFs, and permanent split capacitor (``PSC'')
  motors, which are less efficient than BPM motors, are common for NWOFs
  and MHOFs.

    Typically, baseline units are representative of the minimum 
technology and lowest-cost product that manufacturers can produce. 
Accordingly, in the teardown analysis, DOE examined a variety of 
baseline units that incorporate the various baseline design options for 
furnace components.
    As stated previously, for this final determination, DOE used the 
baseline efficiency levels as presented in the November 2023 NOPD.
b. Intermediate Efficiency Levels
    In the November 2023 NOPD, DOE also analyzed intermediate 
efficiency levels for NWOFs and MHOFs. 88 FR 83426, 83440-83441 (Nov. 
29, 2023). However, for WGFs, DOE did not find any models on the market 
between the baseline (81-percent AFUE) and max-tech level (95-percent 
AFUE) and, therefore, did not analyze any intermediate efficiency 
levels for this product class. The intermediate efficiency levels 
analyzed for NWOFs were 85-percent and 87-percent AFUE, and the 
intermediate efficiency levels analyzed for MHOFs were 83-percent and 
85-percent AFUE. To improve efficiency from the baseline to these 
intermediate efficiency levels, manufacturers generally increase the 
surface area of the heat exchanger, which increases the heat transfer 
area and, thus, allows manufacturers to achieve higher efficiencies. 
The intermediate efficiency levels analyzed were representative of 
common efficiency levels available on the market. DOE reviewed its own 
Compliance Certification Database (``CCD''), as well as AHRI's product

[[Page 84043]]

certification directories,\19\ California Energy Commission's 
database,\20\ manufacturer catalogs, and other publicly-available 
literature to inform its selection of intermediate efficiency levels.
---------------------------------------------------------------------------

    \19\ AHRI's Directory of Certified Product Performance 
(Available at: www.ahridirectory.org/Search/SearchHome) (last 
accessed May 6, 2024).
    \20\ California Energy Commission's MAEDbs (Available at: 
cacertappliances.energy.ca.gov/Pages/Search/AdvancedSearch.aspx) 
(last accessed May 6, 2024).
---------------------------------------------------------------------------

    As stated previously, for this final determination, DOE used the 
intermediate efficiency levels as presented in the November 2023 NOPD.
c. Maximum Technology (``Max-Tech'') Efficiency Levels
    As noted, EPCA requires that any new or amended energy conservation 
standard be designed to achieve the maximum improvement in energy 
efficiency that is technologically feasible. (42 U.S.C. 6295(o)(2)(A)) 
As part of its analysis, DOE identifies the ``maximum available'' 
efficiency level, representing the highest efficiency unit currently 
available on the market. DOE also defines a ``max-tech'' efficiency 
level, representing the maximum theoretical efficiency that can be 
achieved through the application of all available technology options 
retained from the screening analysis. In many cases, the max-tech 
efficiency level is not commercially available because it is not 
currently economically feasible.
    In the November 2023 NOPD, DOE conducted an analysis of the market 
and a technology assessment and researched current product offerings to 
determine the max-tech efficiency levels. 88 FR 83426, 83441 (Nov. 29, 
2023). The max-tech level identified in each product class corresponded 
to the highest-AFUE furnace available on the market, which DOE found to 
correspond to the maximum technologically feasible levels at this time. 
For NWOFs, DOE identified a design that achieves a max-tech efficiency 
level of 96-percent AFUE. For MHOFs, the maximum efficiency level that 
DOE identified was 87-percent AFUE. For WGFs, DOE identified a max-tech 
efficiency level design that achieves 95-percent AFUE. For WGFs and 
NWOFs, the max-tech efficiency level is currently achieved by use of a 
condensing secondary heat exchanger. A constant-airflow BPM (``CA-
BPM'') indoor blower motor was also implemented as the motor design 
option for the max-tech efficiency level for NWOFs, because the only 
NWOF model on the market available at this level includes a CA-BPM 
motor, and it was unclear if this level is achievable without using a 
CA-BPM fan motor. For MHOFs, the max-tech efficiency level is currently 
achieved by use of a heat exchanger with increased surface area.
    As stated previously, for this final determination, DOE used the 
max-tech efficiency levels as presented in the November 2023 NOPD.
d. Summary of Efficiency Levels Analyzed
    The AFUE efficiency levels analyzed along with the technologies 
that are expected to be used to increase energy efficiency above the 
baseline efficiency level for NWOFs, MHOFs, and WGFs are presented in 
Table IV.4, Table IV.5, and Table IV.6, respectively.

    Table IV.4--AFUE Efficiency Levels and Technologies Used at Each
                Efficiency Level Above Baseline for NWOFs
------------------------------------------------------------------------
                                                      Description of
        Efficiency level            AFUE (%)      technologies typically
                                                       incorporated
------------------------------------------------------------------------
0--Baseline....................              83  See Table IV.3 for
                                                  baseline features.
1..............................              85  Baseline EL + Increased
                                                  heat exchanger area.
2..............................              87  EL 1 + Increased heat
                                                  exchanger area.
3--Max-tech....................              96  EL 2 + Addition of
                                                  condensing secondary
                                                  heat exchanger (and
                                                  associated components,
                                                  sensors, etc.) + CA-
                                                  BPM motor.
------------------------------------------------------------------------


    Table IV.5--AFUE Efficiency Levels and Technologies Used at Each
                Efficiency Level Above Baseline for MHOFs
------------------------------------------------------------------------
                                                      Description of
        Efficiency level            AFUE (%)      technologies typically
                                                       incorporated
------------------------------------------------------------------------
0--Baseline....................              80  See Table IV.3 for
                                                  baseline features.
1..............................              83  Baseline EL + Increased
                                                  heat exchanger area.
2..............................              85  EL 1 + Increased heat
                                                  exchanger area.
3--Max-tech....................              87  EL 2 + Increased heat
                                                  exchanger area.
------------------------------------------------------------------------


    Table IV.6--AFUE Efficiency Levels and Technologies Used at Each
                Efficiency Level Above Baseline for WGFs
------------------------------------------------------------------------
                                                      Description of
        Efficiency level            AFUE (%)      technologies typically
                                                       incorporated
------------------------------------------------------------------------
0--Baseline....................              81  See Table IV.3 for
                                                  baseline features.
1--Max-tech....................              95  Baseline EL + Addition
                                                  of condensing
                                                  secondary heat
                                                  exchanger (and
                                                  associated components,
                                                  sensors, etc.).
------------------------------------------------------------------------

2. Cost Analysis
    The cost analysis portion of the engineering analysis is conducted 
using one or a combination of cost approaches. The selection of cost 
approach depends on a suite of factors, including the availability and 
reliability of public information, characteristics of the regulated 
product, and the availability and timeliness of purchasing the product 
on the market.

[[Page 84044]]

The cost approaches generally used by DOE are summarized as follows:
    [ballot] Physical teardowns: Under this approach, DOE physically 
dismantles commercially-available products, component-by-component, to 
develop a detailed bill of materials for the products.
    [ballot] Catalog teardowns: In lieu of physically deconstructing 
products, DOE identifies each component using parts diagrams (available 
from manufacturer websites or appliance repair websites, for example) 
to develop the bill of materials for the product.
    [ballot] Price surveys: If neither a physical nor a catalog 
teardown is feasible (e.g., for tightly integrated products such as 
fluorescent lamps, which are infeasible to disassemble and for which 
parts diagrams are unavailable), cost-prohibitive, or otherwise 
impractical (e.g., large commercial boilers), DOE conducts price 
surveys using publicly-available pricing data published on major online 
retailer websites and/or by soliciting prices from distributors and 
other commercial channels.
    In the November 2023 NOPD, DOE conducted the cost analysis using a 
combination of physical and catalog teardowns. 88 FR 83426, 83443 (Nov. 
29, 2023). DOE estimated the MPC associated with each efficiency level 
to characterize the cost-efficiency relationship of improving consumer 
furnace performance, in terms of AFUE.
    The units selected for the teardown analysis for the November 2023 
NOPD and used in this final determination spanned a range of 
manufacturers and efficiencies for commercially-available products that 
are the subject of this rulemaking. Products were selected that have 
characteristics of typical products on the market at a representative 
input capacity. Based on information gathered as part of the market and 
technology assessment (see section IV.A of this document), as well as 
discussions with manufacturers, DOE determined that 80 kBtu/h and 105 
kBtu/h were representative input capacities for WGFs and oil furnaces, 
respectively. Where possible, DOE selected teardowns at those 
representative capacities. Where needed, catalog teardowns were also 
conducted to supplement the physical teardowns. DOE estimated the 
manufacturing cost for each furnace selected for teardown by 
disassembling the furnace and developing a bill of materials (``BOM''). 
The resulting BOM provides the basis for the MPC estimates for products 
at various efficiency levels spanning the full range of efficiencies 
from the baseline to max-tech.
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a non-production cost multiplier (the manufacturer 
markup) to the MPC. The resulting manufacturer selling price (``MSP'') 
is the price at which the manufacturer distributes a unit into 
commerce. DOE developed an average manufacturer markup by examining the 
annual Securities and Exchange Commission (``SEC'') 10-K reports filed 
by publicly-traded manufacturers primarily engaged in HVAC 
manufacturing whose combined product range includes oil and weatherized 
gas furnaces. The manufacturer markup estimates are consistent with the 
manufacturer markups developed for a final rule for furnace fan energy 
conservation standards published in the Federal Register on July 3, 
2014. 79 FR 38130. Specifically, DOE estimates the industry average 
manufacturer markup to be 1.35 for NWOFs, 1.29 for MHOFs, and 1.27 for 
WGFs.
    In this final determination, DOE used the same cost analysis as in 
the November 2023 NOPD.
a. Teardown Analysis
    For the November 2023 NOPD teardown analysis, DOE used a total of 
31 teardowns of consumer furnaces as the basis for calculating industry 
MPCs. The units DOE selected for teardown are manufactured in 
considerable volume, are commonly available, and have features that DOE 
believes are representative of the most common characteristics (i.e., 
input capacity, configuration, and heat exchanger type) of each product 
class. As discussed previously, most physical teardown units had input 
capacities of approximately 80 kBtu/h for WGFs or 105 kBtu/h for NWOFs 
and MHOFs, which DOE considers to be representative of those furnace 
product classes. For units that were not at the representative 
capacity, an adjustment was developed to normalize all units to the 
representative capacity. To the extent possible, all major efficiency 
levels and technologies were captured in the selection of models for 
the teardown analysis. WGF and oil furnace teardowns were considered 
separately.
    Whenever possible, DOE examined multiple models from a given 
manufacturer that capture different design options and used them as 
direct points of comparison. The teardown selections also minimized the 
incorporation of non-efficiency-related premium features, which 
otherwise could inflate the incremental manufacturing cost of achieving 
higher efficiency levels.
    For the November 2023 NOPD, DOE examined products with a variety of 
indoor blower motor technologies and combustion systems (i.e., single-
stage, two-stage, or modulating). DOE also examined products with PSC, 
constant-torque BPM (``CT-BPM''), and CA-BPM indoor blower motors. As 
further discussed in section IV.B.2.b of this document, DOE determined 
the cost of including these technologies and applied the costs in the 
downstream analyses to estimate the manufacturing cost of going from 
one technology to another with higher efficiency (e.g., using a CA-BPM 
instead of a CT-BPM, or two-stage combustion instead of single-stage 
combustion). Although such changes are not necessarily required due to 
changes in the AFUE level, DOE included these costs to better reflect 
the products available on the market such that it represents the 
products expected to be available in a scenario where the standard were 
set at that level.
    Due to the similarity observed in NWOF and MHOF designs available 
in the market, DOE has found that the costs associated with increasing 
the energy efficiency of MHOFs are equivalent to the costs for NWOFs. A 
MHOF teardown was used to examine key differences between NWOFs and 
MHOFs and confirmed that the MPCs of MHOFs could be estimated based on 
the NWOF teardowns. Therefore, in the November 2023 NOPD, DOE based MPC 
estimates for MHOFs at each efficiency level analyzed largely on 
teardowns of NWOFs at that efficiency level by determining the 
differences between the NWOF and MHOF product classes and estimating 
the costs associated with those differences.
b. Cost Estimation Method
    In the November 2023 NOPD, DOE assigned costs of labor, materials, 
and overhead to each part, whether purchased or produced in-house. DOE 
then aggregated single-part costs into major assemblies (e.g., 
packaging, cabinet assembly, heat exchanger, burner system/gas train, 
exhaust subassembly, fan system, controls) and summarized these costs 
in a spreadsheet BOM. DOE repeated this same process for every physical 
and catalog teardown in the engineering analysis.
    Analytical inputs related to manufacturer practices and cost 
structure play an important role in estimating the final cost of a 
product. DOE used inputs regarding the manufacturing process parameters 
(e.g., equipment use, labor rates, tooling depreciation, and cost of 
purchased raw materials) to determine the value for each furnace 
component. DOE collected

[[Page 84045]]

information on labor rates, tooling costs, raw material prices, and 
other factors to use as inputs into the cost estimates. DOE determined 
values for these parameters using internal expertise and confidential 
information available to its contractors, some of which was obtained 
via confidential interviews with manufacturers. For purchased parts, 
DOE estimated the purchase price based on volume-variable price 
quotations and detailed discussions with manufacturers and component 
suppliers. DOE then summed the values of the furnace components into 
assembly costs and, finally, the total MPC for the entire furnace.
    The MPC includes material, labor, and depreciation costs, as well 
as the overhead costs associated with the manufacturing facility. 
Material costs include both raw materials and purchased-part costs. 
Labor costs include fabrication, assembly, and indirect and overhead 
(burdened) labor rates. Depreciation costs include production equipment 
depreciation, tooling depreciation, and building depreciation. The 
overhead costs associated with the manufacturing facility include 
indirect process costs, utilities, equipment and building maintenance, 
and reworking of defective parts/units.
    DOE determined the costs of raw materials based on manufacturer 
interviews, quotes from suppliers, and secondary research. Past results 
are updated periodically and/or inflated to present-day prices using 
indices from resources such as MEPS International,\21\ 
PolymerUpdate,\22\ the U.S. Geologic Survey (``USGS''),\23\ and the 
U.S. Bureau of Labor Statistics (``BLS'').\24\ Raw material prices for 
metals, such as those of stainless steel and other sheet metals, are 
estimated on the basis of five-year averages to smooth out spikes in 
demand. For other ``raw'' materials such as plastic resins, insulation 
materials, etc., DOE used prices based on current market data (as of 
December 2022) rather than a five-year average, because non-metal raw 
materials have not experienced the same level of price volatility in 
recent years as metal raw materials.
---------------------------------------------------------------------------

    \21\ For more information on MEPS International, please visit 
www.meps.co.uk/ (last accessed April 15, 2024).
    \22\ For more information on PolymerUpdate, please visit 
www.polymerupdate.com (last accessed May 9, 2024).
    \23\ For more information on the USGS metal price statistics, 
please visit www.usgs.gov/centers/nmic/commodity-statistics-and-information (last accessed May 9, 2024).
    \24\ For more information on the BLS producer price indices, 
please visit www.bls.gov/ppi/ (last accessed May 9, 2024).
---------------------------------------------------------------------------

    DOE characterized parts based on whether manufacturers fabricated 
them in-house or purchased them from outside suppliers. For fabricated 
parts, DOE estimated the price of intermediate materials (e.g., tube, 
sheet metal) and the cost of forming them into finished parts. For 
purchased parts, DOE estimated the purchase prices paid to the original 
equipment manufacturers (``OEMs'') of these parts, based on discussions 
with manufacturers during confidential interviews. Whenever possible, 
DOE obtained price quotes directly from the component suppliers used by 
furnace manufacturers whose products were examined in the engineering 
analysis. DOE determined that the components in Table IV.7 are 
generally purchased from outside suppliers.

                Table IV.7--Purchased Furnace Components
------------------------------------------------------------------------
                 Assembly                      Purchased subassemblies
------------------------------------------------------------------------
Burner/Exhaust............................  Gas valve.
                                            Spark igniter.
                                            Draft inducer assembly.
Blower....................................  Indoor blower fan blade.
                                            Indoor blower fan motor.
Controls..................................  Control boards.
                                            Capacitors, transformers,
                                             contactors, switches, etc.
------------------------------------------------------------------------

    Certain factory parameters, such as fabrication rates, labor rates, 
and wages, also affect the cost of each unit produced. DOE factory 
parameter assumptions were based on internal expertise and manufacturer 
feedback. Table IV.8 lists the factory parameter assumptions used in 
the analysis. For the engineering analysis, these factory parameters, 
including production volume, are the same at every efficiency level. 
The production volume used at each efficiency level corresponds with 
the average production volume, per manufacturer, if 100 percent of all 
units manufactured were at that efficiency level. This production 
volume was estimated based on historical shipments. These assumptions 
are generalized to represent typical production and are not intended to 
model a specific factory.

                Table IV.8--Factory Parameter Assumptions
------------------------------------------------------------------------
                                      Oil furnace
            Parameter                  estimate          WGF estimate
------------------------------------------------------------------------
Actual Annual Production Volume   5,000 units/year..  500,000 units/
 (units/year).                                         year.
Purchased Parts Volume..........  5,000 units/year..  100,000 units/
                                                       year.
Workdays Per Year (days)........  250...............  250.
Assembly Shifts Per Day (shifts)  1.................  2.
Fabrication Shifts Per Day        2.................  2.
 (shifts).
Fabrication Labor Wages ($/h)...  16................  16.
Assembly Labor Wages ($/h)......  16................  16.
Length of Shift (h).............  8.................  8.
Average Equipment Installation    10%...............  10%.
 Cost (% of purchase price).
Fringe Benefits Ratio...........  50%...............  50%.
Indirect to Direct Labor Ratio..  33%...............  33%.
Average Scrap Recovery Value....  30%...............  30%.
Worker Downtime.................  10%...............  10%.
Burdened Assembly Labor Wage ($/  24................  24.
 h).
Burdened Fabrication Labor Wage   24................  24.
 ($/h).
Supervisor Span (workers/         25/1..............  25/1.
 supervisor).
Supervisor Wage Premium (over     30%...............  30%.
 fabrication and assembly wage).
------------------------------------------------------------------------


[[Page 84046]]

Indoor Blower Motor Costs
    As discussed in section IV.B.1.a of this document, the baseline 
design for WGFs includes a BPM motor. DOE research suggests that the 
predominant BPM indoor blower motors sold on the market today are 
either a CT-BPM or a CA-BPM design. Both types of motors rely on 
electronic variable-speed motor systems that are typically mounted in 
an external chassis to the back of the motor. CA-BPM motors utilize 
feedback control to adjust torque based on external static pressure 
(``ESP'') in order to maintain a desired airflow. This differentiates 
them from CT-BPM motors, which will maintain torque and likely decrease 
airflow output in environments with high ESPs. CT-BPMs are capable of 
achieving airflows similar to CA-BPMs but are generally less expensive. 
Therefore, for the November 2023 NOPD, DOE considered the baseline 
design to include a CT-BPM motor for the WGF product class and 
determined the incremental cost of a CA-BPM motor.
    DOE's review of the market for the November 2023 NOPD showed that 
PSC motors are still being used in some NWOFs and MHOFs, so the final 
MPC results are presented based on a PSC motor at the baseline through 
87-percent AFUE. To account for the variety of motor technologies 
available on the market, DOE determined the incremental cost associated 
with use of various types of more-efficient BPM fan motors as compared 
to baseline PSC motors for NWOFs and MHOFs. Additionally, for NWOFs, a 
CA-BPM indoor blower motor was implemented as the motor design option 
for the max-tech efficiency level because the only NWOF model on the 
market available at this level includes a CA-BPM motor, and it is 
unclear if this level is achievable without a constant-airflow fan. For 
the NWOF efficiency levels below max-tech and for all MHOF efficiency 
levels, DOE calculated the additional cost to switch from a PSC blower 
motor to either a CT-BPM motor or a CA-BPM motor. As discussed in 
Chapter 8 of the November 2022 Preliminary Analysis TSD, these costs 
are applied in the LCC and PBP analyses to determine the MPC of a 
furnace with each motor technology in order to better represent typical 
costs to consumers for NWOFs and MHOFs. CA-BPM blower motors are 
sometimes used as a utility-enhancing feature on units below the max-
tech efficiency level. The incremental cost increases for using CT-BPM 
or CA-BPM motors, as compared to PSC motors, are outlined in Table 
IV.9.

                   Table IV.9--Cost Increases for BPM Blower Motors as Compared to PSC Motors
----------------------------------------------------------------------------------------------------------------
                                                                           Incremental cost    Incremental cost
                      Product class                       Input capacity   increase for CT-    increase for CA-
                                                             (kBtu/h)         BPM (2022$)         BPM (2022$)
----------------------------------------------------------------------------------------------------------------
NWOF, MHOF..............................................             105              $30.65              $80.48
WGF.....................................................              80               37.94               59.92
----------------------------------------------------------------------------------------------------------------

Multi-Stage Furnaces
    As explained in the November 2023 NOPD (see 88 FR 83426, 83445 
(Nov. 29, 2023)), the market for WGFs contains a significant number of 
two-stage furnaces that are rated at the same efficiency as single-
stage furnaces. DOE believes consumers sometimes choose to purchase 
two-stage products for the additional thermal comfort offered by 
furnaces with multiple stages of heating output. As such, in order to 
better represent typical costs to consumers, DOE analyzed the cost of 
multiple burner stages for WGFs. DOE determined that oil units with 
multi-staging were rare and, thus, not representative of the market, so 
DOE did not analyze the cost of multiple stages for the NWOF and MHOF 
product classes. Where applicable, the additional cost to change to a 
two-stage furnace includes the added cost of a two-stage gas valve, a 
two-speed inducer assembly, an additional pressure switch, and 
additional controls and wiring. The additional cost to change to a 
modulating furnace includes the added cost of a modulating gas valve, 
an inducer assembly, an upgraded pressure switch, and additional 
controls and wiring. The incremental costs to implement multi-staging 
in WGFs are outlined in Table IV.10

Table IV.10--Multi-Stage Burner Incremental Cost Increase as Compared to
                           Single-Stage Burner
------------------------------------------------------------------------
                                                       Incremental cost
                                                      increase for multi-
                        Adder                            stage burners
                                                            (2022$)
------------------------------------------------------------------------
Two-Stage...........................................              $21.07
Modulating..........................................               75.36
------------------------------------------------------------------------

Low-NO<INF>X</INF> and Ultralow-NO<INF>X</INF> Furnaces
    Some furnaces are marketed as ``low-NO<INF>X</INF>,'' which 
indicates that their NO<INF>X</INF> emissions are less than 40 
nanograms of NO<INF>X</INF> per joule of useful heat energy (``ng/J''). 
Certain local jurisdictions require natural gas furnaces to comply with 
NO<INF>X</INF> emissions restrictions as low as 14 ng/J,\25\ which is 
referred to as ``ultralow-NO<INF>X</INF>.'' A common method of reducing 
furnace NO<INF>X</INF> emissions is to slightly delay the natural gas 
combustion process, which in turn produces a cooler flame and results 
in suppressed formation of NO<INF>X</INF>.\26\ DOE has observed during 
its teardown analysis that to achieve low-NO<INF>X</INF> operation, 
manufacturers implement low-NO<INF>X</INF> baffles. For ultralow-
NO<INF>X</INF> operation, DOE used NWGF teardowns to approximate the 
cost to implement this technology option in WGFs, as DOE understands 
that the methodology would be the same for both product classes. 
Through these teardowns of NWGFs, DOE has observed that in order to 
achieve ultralow-NO<INF>X</INF> operation, the in-shot burners 
typically used in residential furnaces were replaced with a mesh premix 
burner. In addition, the model used a variable-speed BPM inducer fan 
motor. DOE identified an ultralow-NO<INF>X</INF> WGF on the market and 
compared the burner construction for the torn-down NWGF and the 
ultralow-NO<INF>X</INF> WGF. DOE found that the approach used for 
achieving ultralow-NO<INF>X</INF> in WGFs is similar to that used in 
NWGFs. DOE also determined that oil units with ultralow-NO<INF>X</INF> 
operation were rare and, thus, not representative of the market, so the 
Department did not

[[Page 84047]]

analyze the cost of ultralow-NO<INF>X</INF> for the NWOF and MHOF 
product classes.
---------------------------------------------------------------------------

    \25\ Rule 1111 of the South Coast Air Quality Management 
District of Southern California currently requires that all NWGFs 
and MHGFs not exceed a 14 ng/J restriction on NO<INF>X</INF> 
emissions. For more information on Rule 1111, see www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4 (last 
accessed June 28, 2024).
    \26\ U.S. Environmental Protection Agency, Natural Gas 
Combustion (available at www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf) (last accessed June 28, 2024).
---------------------------------------------------------------------------

    Using raw material price data, teardown data from NWGFs, and 
manufacturing expertise, DOE estimated the manufacturing cost 
difference between standard NO<INF>X</INF> burners and low-
NO<INF>X</INF> and ultralow-NO<INF>X</INF> burners. For low-
NO<INF>X</INF>, MPC cost values were developed for the implementation 
of low-NO<INF>X</INF> baffles in WGFs at the representative input 
capacity of 80 kBtu/h. For ultralow-NO<INF>X</INF>, MPC values were 
developed for the implementation of a mesh premix burner and variable-
speed BPM inducer fan (along with other related components necessary). 
The resulting MPC estimates to achieve low-NO<INF>X</INF> and ultralow-
NO<INF>X</INF> operation are shown in Table IV.11.
    In the LCC and PBP analyses (see section IV.E of this document), 
DOE estimated the fractions of furnaces that are installed in 
jurisdictions that require low-NO<INF>X</INF> or ultralow-
NO<INF>X</INF> compliance and applied these cost adders to those 
fractions of furnace installations accordingly. The application of 
these adders is discussed in more detail in Chapter 8 of the November 
2022 Preliminary Analysis TSD.

     Table IV.11--Increase in MPCs for Low-NOX and Ultralow-NOX WGFs
------------------------------------------------------------------------
                          Adder                            Value (2022$)
------------------------------------------------------------------------
Low-NOX.................................................           $3.10
Ultralow-NOX............................................          113.68
------------------------------------------------------------------------

Shipping Cost
    Freight is not a manufacturing cost, but because it is a 
substantial cost incurred by the manufacturer, DOE accounts for 
shipping costs separately from other costs. For the November 2023 NOPD, 
DOE calculated shipping costs based on a typical 53-foot straight-frame 
trailer with a storage volume of 4,240 cubic feet.
    DOE first calculated the cost per cubic foot of space on a trailer 
based on a cost of $3,643 per shipping load and the standard dimensions 
of a 53-foot trailer. This cost was determined based on a combination 
of full truck load freight quotations, manufacturer feedback, and BLS 
producer price indices for the ``fuels and related products and power'' 
grouping.\27\ Then, DOE examined the average sizes of products in each 
product class at each efficiency and capacity combination analyzed. DOE 
estimated the shipping costs by multiplying the product volume by the 
cost per cubic foot of space on the trailer. Furnace dimensions 
typically do not change as a result of increases in efficiency, and 
accordingly, DOE's shipping costs show no change across efficiency 
levels. In determining volumetric shipping costs, DOE also used 
manufacturer feedback regarding product mix on each trailer, packing 
efficiency, and methods and equipment used to load the trailers to 
revise the shipping costs. Table IV.12 shows the shipping costs for the 
products analyzed in this rulemaking.
---------------------------------------------------------------------------

    \27\ U.S. Department of Labor, Bureau of Labor Statistics, 
Producer Price Indices (available at: data.bls.gov/timeseries/WPU057303?data_tool=XGtable) (last accessed June 28, 2024).

                  Table IV.12--Shipping Costs Per Unit
------------------------------------------------------------------------
                                       Representative       Per-unit
            Product class              capacity (kBtu/    shipping cost
                                             h)              (2022$)
------------------------------------------------------------------------
WGF.................................                80            $55.69
NWOF................................               105             19.92
MHOF................................               105             19.92
------------------------------------------------------------------------

3. Cost-Efficiency Results
    The results of the engineering analysis are reported as cost-
efficiency relationships (or ``curves'') in the form of aggregated MPCs 
for each product class. The final results of the AFUE engineering 
analysis are the MPCs for WGFs, NWOFs, and MHOFs at each efficiency 
level. The cost-efficiency results are shown in tabular form in Table 
IV.13 through Table IV.15 as efficiency versus MPC and MSP. These 
results include the furnace fan and combustion system staging 
incorporated into most furnace designs.

  Table IV.13--Cost-Efficiency Data for WGFs With a Constant-Torque BPM
              Indoor Blower Motor and a Single-Stage Burner
------------------------------------------------------------------------
                  AFUE                      MPC (2022$)     MSP (2022$)
------------------------------------------------------------------------
81......................................       $1,412.32       $1,793.65
95......................................        1,505.40        1,911.85
------------------------------------------------------------------------


  Table IV.14--Cost-Efficiency Data for NWOFs With a PSC Indoor Blower
                     Motor and a Single-Stage Burner
------------------------------------------------------------------------
                  AFUE                      MPC (2022$)     MSP (2022$)
------------------------------------------------------------------------
83......................................         $700.73         $945.98
85......................................          730.94          986.77
87......................................          761.16        1,027.57
96......................................        1,334.85        1,802.05
------------------------------------------------------------------------


  Table IV.15--Cost-Efficiency Data for MHOFs With a PSC Indoor Blower
                     Motor and a Single-Stage Burner
------------------------------------------------------------------------
                  AFUE                      MPC (2022$)     MSP (2022$)
------------------------------------------------------------------------
80......................................         $664.47         $857.16
83......................................          709.79          915.63
85......................................          740.01          954.61
87......................................          770.23          993.59
------------------------------------------------------------------------

    DOE did not receive comments in response to the engineering and 
cost analysis methodology in the November 2023 NOPD and maintains the 
same methodology for the final determination.

C. Markups Analysis

    The markups analysis develops appropriate markups (e.g., 
distributor markups, retailer markups, contractor markups) in the 
distribution chain and sales taxes to convert the MSP estimates derived 
in the engineering analysis to consumer prices, which are then used in 
the LCC and PBP analyses. At each step in the distribution channel, 
companies mark up the price of the product to cover business costs and 
profit margin.
    As part of the analysis, DOE identifies key market participants and 
distribution channels. For the subject consumer furnaces, the main 
parties in the distribution chains are: (1) manufacturers; (2) 
wholesalers or distributors; (3) retailers; (4) mechanical contractors; 
(5) builders; (6) manufactured home manufacturers, and (7) manufactured 
home dealers/retailers. For this final determination, DOE

[[Page 84048]]

maintained the same approach as in the NOPD. DOE characterized two 
distribution channel market segments to describe how NWOFs, MHOFs, and 
WGFs pass from the manufacturer to residential and commercial 
consumers: \28\ (1) replacements and new owners \29\ and (2) new 
construction.
---------------------------------------------------------------------------

    \28\ DOE estimates that five percent of WGFs and three percent 
of NWOFs are installed in commercial buildings.
    \29\ New owners are new furnace installations in buildings that 
did not previously have a NWOF, MHOF, or WGF, or existing owners 
that are adding an additional consumer furnace. They primarily 
consist of households that add or switch to these furnaces during a 
major remodel.
---------------------------------------------------------------------------

    In the replacement and new owner market, the primary distribution 
channel for NWOFs, MHOFs, and WGFs is characterized as follow:

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

    DOE estimates that the above distribution channel applies to the 
majority of the shipments of the subject consumer furnaces.\30\ As 
retail, including internet sales, grew significantly in the last five 
years (previously it was negligible) and some consumers purchase the 
appliance directly and then have contractors install it, DOE considered 
additional distribution channels as follows: \31\
---------------------------------------------------------------------------

    \30\ In the residential sector, DOE estimates that this 
distribution channel is applicable to 90 percent of the shipments 
for NWOFs and MHOFs and 80 percent for WGFs; in the commercial 
sector, it is applied to 75 percent of NWOF and 70 percent of WGF 
distributions.
    \31\ In the residential sector, DOE estimates that these two 
distribution channels combined are applicable to five percent of the 
shipments for NWOFs and MHOFs, and 15 percent for WGFs (in mobile 
home applications, 10 percent of WGFs distributed to mobile homes is 
assumed to go through these channels); in the commercial sector, 
they are applied to 10 percent of NWOF and 15 percent of WGF 
distributions.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Retailer 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Retailer 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

    For mobile home applications, there is another distribution channel 
considered on top of the aforementioned channels, where the MHOF or WGF 
is purchased via a mobile home specialty retailer or dealer: \32\
---------------------------------------------------------------------------

    \32\ DOE estimates that five percent of MHOFs and 10 percent of 
WGFs that go to mobile homes are distributed through this channel.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home 
Specialty Retailer/Dealer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< 
---------------------------------------------------------------------------
Consumer

    In the new construction market, DOE identified three primary 
distribution channels that involve builders, or manufactured home 
builders when considering mobile home applications:

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mechanical Contractor 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Builder [rarr] Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Builder 
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home 
Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Mobile Home 
Dealer [rarr] Consumer

    For both the replacements and new owners/new construction markets, 
DOE additionally considered the national accounts or direct-from-
manufacturer distribution channel, where the manufacturer through a 
wholesaler sells directly consumers.\33\
---------------------------------------------------------------------------

    \33\ The national accounts channel where the buyer is the same 
as the consumer is mostly applicable to NWOFs and WGFs installed in 
small to mid-size commercial buildings, where on-site contractors 
purchase equipment directly from wholesalers at lower prices due to 
the large volume of equipment purchased and perform the installation 
themselves. DOE's analysis assumes that approximately 5 and 15 
percent of NWOFs and WGFs installed in the residential and 
commercial sector, respectively, use the national accounts 
distribution channel for replacements. For new construction, DOE 
assumes 10 percent of the subject furnaces installed in the 
residential sector and 20 percent installed in the commercial sector 
are distributed through national accounts.

Manufacturer ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Wholesaler 
(National Account) ><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Buyer 
---------------------------------------------------------------------------
><h-dar/uar><u-arrow><h-dar/uar><h-dar/uar>< Consumer

    DOE developed baseline and incremental markups for each actor in 
the distribution chain to ultimately determine the consumer purchase 
cost. Baseline markups are applied to the price of products with 
baseline efficiency, while incremental markups are applied to the 
difference in price between baseline and higher-efficiency models 
(i.e., the incremental cost increase). The incremental markup is 
typically less than the baseline markup and is designed to maintain 
similar per-unit operating profit before and after new or amended 
standards.\34\
---------------------------------------------------------------------------

    \34\ Because the projected price of standards-compliant products 
is typically higher than the price of baseline products, using the 
same markup for the incremental cost and the baseline cost would 
result in higher per-unit operating profit. While such an outcome is 
possible, DOE maintains that in markets that are reasonably 
competitive, it is unlikely that standards would lead to a 
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

    DOE did not receive comments in response to the markups methodology 
in the November 2023 NOPD and maintains the same methodology for this 
final determination.

D. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of oil and weatherized gas consumer furnaces at 
different efficiencies in representative U.S. homes and commercial 
buildings, and to assess the energy savings potential of increased oil 
and weatherized gas consumer furnace efficiency. The energy use 
analysis estimates the range of energy use of the subject products in 
the field (i.e., as the products are actually used by consumers). The 
energy use analysis provides the basis for other analyses DOE 
performed, particularly assessments of the potential energy savings and 
the savings in consumer operating costs that could result from adoption 
of amended or new standards.
    DOE estimated the annual energy consumption of oil and weatherized 
gas consumer furnaces at specific energy efficiency levels across a 
range of climate zones, building characteristics, and space heating 
needs. The annual energy consumption includes the natural gas, liquid 
petroleum gas (``LPG''), oil, and electricity, as applicable, used by 
the furnace.
    For the November 2023 NOPD, DOE developed a building sample based 
on the Energy Information Administration's (``EIA's'') 2015 Residential 
Energy Consumption Survey (``RECS 2015'') \35\ and 2012 Commercial 
Building Energy Consumption Survey (``CBECS 2012'').\36\ DOE used RECS 
2015-reported or CBECS 2012-reported heating energy consumption (based 
on the existing heating system) to calculate the heating load of each 
household or building. The heating load represents the amount of 
heating required to keep a housing unit or building comfortable 
throughout an average year. DOE assigned the energy efficiency of 
existing systems based on the design of the distribution systems, a 
historical distribution of energy efficiencies for NWOFs, MHOFs, and 
WGFs, and data about the age of the existing furnace. The estimation of 
heating loads also required calculating the electricity consumption of 
the blower, because heat from the operation of the blower contributes 
to space heating. In addition, DOE made adjustments based on historical 
weather data, projections of building shell efficiency, and building 
square footage, as well as for homes that had secondary heating 
equipment that used the same fuel as the furnace. To complete the 
analysis, DOE calculated the anticipated energy consumption of 
alternative (more energy-efficient) products if they were to replace 
existing systems in each housing unit or commercial building.
---------------------------------------------------------------------------

    \35\ Energy Information Administration (``EIA''), 2015 
Residential Energy Consumption Survey (RECS) (available at: 
www.eia.gov/consumption/residential/data/2015) (last accessed June 
28, 2024).
    \36\ EIA, 2012 Commercial Buildings Energy Consumption Survey 
(CBECS) (available at: www.eia.gov/consumption/commercial/) (last 
accessed June 28, 2024).
---------------------------------------------------------------------------

    In the November 2023 NOPD, DOE also included the electricity use of 
auxiliary equipment, such as condensate pumps and heat tape, which

[[Page 84049]]

are sometimes installed with higher-efficiency products. The 
electricity consumption of the auxiliary equipment is added to the 
total electricity consumption.
    EIA recently published the microdata for the 2020 edition of 
RECS.\37\ To assess the impact of using RECS 2020, DOE compared the LCC 
consumer sample in the July 2022 Consumer Furnace NOPR, which used RECS 
2015, (see 87 FR 40590, 40624 (July 7, 2022)) to the consumer sample 
used in the December 2023 Consumer Furnace final rule consumer sample, 
which used RECS 2020 (see 88 FR 87502, 87547 (Dec. 18, 2023)). DOE 
assumed that changes in annual energy heating use between the two RECS 
editions for those consumer furnaces (i.e., NWGFs and MHGFs) serve as a 
reasonable proxy for the relative change in oil and weatherized gas 
furnace energy use. As can be seen by comparing Table 7.4.1 of the TSDs 
for that NOPR and final rule, the reported estimated annual heating 
energy consumption by region and efficiency level is similar between 
the two versions of RECS for households with furnaces, with RECS 2020 
showing a slightly lower energy consumption. Given in the space-heating 
end use for NWGFs compared with NWOFs, MHOFs, WOFs, WGFs, and EFs, and 
given that the estimated furnace energy use declines when updating to 
RECS 2020 for consumer furnaces, DOE has concluded that updating the 
consumer sample to RECS 2020 would not alter but only strengthen the 
conclusions of this final determination. Therefore, DOE continued to 
use RECS 2015 as the basis for its consumer sample, as was done in the 
November 2023 NOPD.
---------------------------------------------------------------------------

    \37\ EIA, 2020 Residential Energy Consumption Survey (RECS) 
(available at: www.eia.gov/consumption/residential/data/2020/index.php/) (last accessed June 11, 2024).
---------------------------------------------------------------------------

    A similar comparison of commercial installations of oil and weather 
gas furnaces found similar energy use between CBECS 2012 used in the 
July 2022 Consumer Furnace NOPR (see 87 FR 40590, 40624 (July 7, 2022)) 
and CBECS 2018 used in the December 2023 Consumer Furnace final rule 
(see 88 FR 87502, 87547 (Dec. 18, 2023)). DOE also notes that 
commercial installations of oil and weatherized gas furnaces account 
for approximately five percent or less of total installations, as show 
in Table 6.2.1 of the Preliminary Analysis TSD. Given the relatively 
small number of installations in the commercial sector relative to the 
residential sector, DOE has concluded that changes between CBECS 2012 
and 2018 would not significantly impact overall analytical conclusions. 
Therefore, for this final determination, DOE continued to use CBECS 
2012 as the basis of its commercial consumer sample, as was done in the 
November 2023 NOPD.
    Chapter 7 of the November 2022 Preliminary Analysis TSD provides 
details on DOE's energy use analysis for oil and weatherized gas 
furnaces. DOE did not receive comments on its energy use analysis 
methodology in response to the November 2023 NOPD.

E. Life-Cycle Cost and Payback Period Analysis

    DOE conducts LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential amended energy conservation 
standards for oil and weatherized gas furnaces. The effect of new or 
amended energy conservation standards on individual consumers usually 
involves a reduction in operating cost and an increase in purchase 
cost. DOE typically uses the following two metrics to measure consumer 
impacts:
    [ballot] Life-Cycle Cost (LCC) is the total consumer expense of 
operating the product over the lifetime of that product, consisting of 
total installed cost (which includes manufacturer selling price, 
distribution chain markups, sales tax, and installation costs) plus 
operating costs (e.g., expenses for energy use, maintenance, and 
repair). To compute the operating costs, DOE discounts future operating 
costs to the time of purchase and sums them over the lifetime of the 
product.
    [ballot] Payback Period (PBP) is the estimated amount of time (in 
years) it takes consumers to recover the increased purchase cost 
(including installation) of a more-efficient product through lower 
operating costs. DOE calculates the PBP by dividing the change in 
purchase cost at higher efficiency levels by the change in annual 
operating cost for the year that amended or new standards are assumed 
to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of the product in the absence of new 
or amended energy conservation standards. In contrast, the PBP for a 
given efficiency level is measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and, where appropriate, commercial buildings. As stated 
previously, DOE developed household and commercial building samples 
from the from RECS 2015 and CBECS 2012. For each sample household or 
commercial building, DOE determined the energy consumption for the oil 
and weatherized gas furnaces and the appropriate energy price. By 
developing a representative sample of households and commercial 
buildings, the analysis captured the variability in energy consumption 
and energy prices associated with the use of oil and weatherized gas 
furnaces.
    Inputs to the LCC calculation include the installed cost to the 
consumer, operating expenses, the lifetime of the product, and a 
discount rate. Inputs to the calculation of total installed cost 
include the cost of the product--which includes MPCs, manufacturer 
markups, retailer and distributor markups, and sales taxes (where 
applicable)--and installation costs. Inputs to the calculation of 
operating expenses include annual energy consumption, energy prices and 
price projections, repair and maintenance costs, product lifetimes, and 
discount rates. Inputs to the PBP calculation include the installed 
cost to the consumer and first-year operating expenses. DOE created 
distributions of values for installation cost, repair and maintenance, 
product lifetime, discount rates, and sales taxes, with probabilities 
attached to each value, to account for their uncertainty and 
variability.
    The computer model DOE uses to calculate the LCC relies on a Monte 
Carlo simulation to incorporate uncertainty and variability into the 
analysis. The Monte Carlo simulations randomly sample input values from 
the probability distributions and product user samples. For this 
proceeding, the Monte Carlo approach is implemented in MS Excel 
together with the Crystal Ball<SUP>TM</SUP> add-on.\38\ The model 
calculated the LCC for products at each efficiency level for 10,000 
housing units or commercial buildings per simulation run. The 
analytical results include a distribution of 10,000 data points showing 
the range of LCC savings for a given efficiency level relative to the 
no-new-standards case efficiency distribution. In performing an 
iteration of the Monte Carlo simulation for a given consumer, product 
efficiency is chosen based on its probability. If the chosen product 
efficiency is greater than or equal to the efficiency of the standard 
level under consideration, the LCC calculation reveals that a consumer 
is

[[Page 84050]]

not impacted by the standard level. By accounting for consumers who are 
already projected to purchase more-efficient products than the baseline 
product in a given case, DOE avoids overstating the potential benefits 
from increasing product efficiency.
---------------------------------------------------------------------------

    \38\ Crystal Ball<SUP>TM</SUP> is a commercially-available 
software tool to facilitate the creation of these types of models by 
generating probability distributions and summarizing results within 
Excel (available at: www.oracle.com/middleware/technologies/crystalball.html) (last accessed June 11, 2024).
---------------------------------------------------------------------------

    DOE calculated the LCC and PBP for consumers of oil and weatherized 
gas furnaces as if each were to purchase a new product in the expected 
first year of required compliance with new or amended standards. Any 
amended standards would apply to oil and weatherized gas furnaces 
manufactured five years after the date on which any new or amended 
standard is published in the Federal Register. (42 U.S.C. 
6295(m)(4)(A)(ii)) Therefore, DOE used 2030 as the first year of 
compliance with any amended standards.
    Table IV.16 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP analyses. The subsections that follow provide 
further discussion. Details of the spreadsheet model, and how all 
inputs to the LCC and PBP analyses are applied, are contained in 
chapter 8 of the November 2022 Preliminary Analysis TSD and its 
appendices.

 Table IV.16--Summary of Inputs and Methods for the LCC and PBP Analyses
                                    *
------------------------------------------------------------------------
              Inputs                            Source/method
------------------------------------------------------------------------
Product Cost......................  Derived by multiplying MPCs by
                                     manufacturer and distribution chain
                                     markups and sales tax, as
                                     appropriate. Used historical data
                                     to derive a price-scaling index to
                                     project product costs.
Installation Costs................  Baseline installation cost
                                     determined with data from RS Means
                                     2023, manufacturer literature, and
                                     expert consultant. DOE assumed
                                     increased installation costs for
                                     condensing furnaces.
Annual Energy Use.................  The annual energy consumption per
                                     unit at each efficiency level (see
                                     section IV.D of this document).
                                    Variability: Based on RECS 2015 and
                                     CBECS 2012.
Energy Prices.....................  Natural Gas: Based on EIA's Natural
                                     Gas Navigator data for 2022 and
                                     RECS 2015 and CBECS 2012 billing
                                     data.
                                    Propane and Fuel Oil: Based on EIA's
                                     State Energy Data System (``SEDS'')
                                     for 2021.
                                    Electricity: Based on EIA's Form 861
                                     data for 2022 and RECS 2015 and
                                     CBECS 2012 billing data.
                                    Variability: State energy prices
                                     determined for residential and
                                     commercial applications.
                                    Marginal prices used for natural
                                     gas, propane, and electricity
                                     prices.
Energy Price Trends...............  Residential and commercial prices
                                     were escalated by using EIA's 2023
                                     Annual Energy Outlook (AEO 2023)
                                     forecasts to estimate future energy
                                     prices. Escalation was performed at
                                     the Census Division level.
Repair and Maintenance Costs......  Baseline installation cost
                                     determined with data from RSMeans
                                     2023, manufacturer literature, and
                                     expert consultant. DOE assumed
                                     increased repair and maintenance
                                     costs for condensing furnaces.
Product Lifetime..................  Based on shipments data, multi-year
                                     RECS, American Housing Survey,
                                     American Home Comfort Survey data.
                                     Average: 20.2-22.5 years.
Discount Rates....................  For residential end users, approach
                                     involves identifying all possible
                                     debt or asset classes that might be
                                     used to purchase the considered
                                     appliances or might be affected
                                     indirectly. Primary data source was
                                     the Federal Reserve Board's Survey
                                     of Consumer Finances. For
                                     commercial end users, DOE
                                     calculates commercial discount
                                     rates as the weighted-average cost
                                     of capital using various financial
                                     data.
Compliance Date...................  2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the November
  2022 Preliminary Analysis TSD. Energy price trends, product lifetimes,
  and discount rates are not used for the PBP calculation.

1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described 
previously (along with sales taxes). DOE used different markups for 
baseline products and higher-efficiency products, because DOE applies 
an incremental markup to the increase in MSP associated with higher-
efficiency products.
    For the November 2023 NOPD, DOE estimated product prices in the 
year of compliance by using a least-squares power-law fit on the 
inflation-adjusted, unified price index (historical Producer Price 
Index (``PPI'') data) for warm-air furnaces from BLS spanning the time 
period 1990-2018 versus cumulative shipments.\39\ DOE did not receive 
comments on its price learning methodology in response to the November 
2023 NOPD and maintains this methodology for this final determination.
---------------------------------------------------------------------------

    \39\ U.S. Department of Labor, Bureau of Labor Statistics, 
Produce Price Indices Series ID PCU333415333415C (available at: 
www.bls.gov/ppi/) (last accessed June 28, 2024).
---------------------------------------------------------------------------

2. Installation Cost
    The installation cost is the expense to the consumer of installing 
the furnace, in addition to the cost of the furnace itself. 
Installation cost includes all labor, overhead, and any miscellaneous 
materials and parts needed that are associated with the replacement of 
an existing furnace or the installation of a furnace in a new home, as 
well as delivery of the new furnace, removal of the existing furnace, 
and any applicable permit fees. Higher-efficiency furnaces may require 
a consumer to incur additional installation costs.
    For the November 2023 NOPD, DOE used data from RSMeans,\40\ 
manufacturer literature, and expert consultants to estimate the 
installation cost, including labor costs, for oil and weatherized gas 
furnaces. DOE's analysis of installation costs accounted for regional 
differences in labor costs by aggregating city-level labor rates from 
RSMeans into the 50 distinct States plus Washington, DC to match RECS 
2015 and CBECS 2012 data. The installation cost methodology accounts 
for all potential installation cases, including when a noncondensing 
furnace is replaced with a condensing furnace, with particular 
attention to venting issues in replacement applications (see 
descriptions that follow). The installation cost also depends on the 
furnace installation location, which DOE determined using information 
from RECS 2015 and CBECS 2012.
---------------------------------------------------------------------------

    \40\ RSMeans Company Inc., RSMeans Cost Data, Kingston, MA 
(2023) (available at: www.rsmeans.com/products/online/) (last 
accessed June 11, 2024).
---------------------------------------------------------------------------

    For NWOF replacement installations, DOE included a number of 
additional costs (``adders'') for a fraction of the sample households 
that have particular features. For noncondensing furnaces, these 
additional costs included updating flue vent connectors, vent resizing, 
and chimney relining. For condensing furnaces, these additional costs 
included adding a new flue vent (polyvinyl chloride (``PVC'')), adding

[[Page 84051]]

combustion air vents for direct vent installations (PVC), adding 
concealing vent pipes for indoor installations, addressing an orphaned 
water heater (by updating flue vent connectors, vent resizing, or 
chimney relining), and removing condensate, all based on manufacturer 
installation manuals and expert consultant input. Freeze protection 
(heat tape) is accounted for in the cost of condensate removal for a 
fraction of NWOFs installed in unconditioned attics.
    For WGF installations, DOE included additional cost adders for 
condensing WGFs to dispose of the condensate created and to prevent 
freezing of the condensate, as the entire product is outdoors based on 
manufacturer installation manuals, field study reports, and expert 
consultant input. DOE also accounted for a fraction of installations in 
colder climates that could require freeze protection (heat tape), a 
condensate line being buried below the frost line, or a condensate 
pump.
    DOE did not receive comments regarding its installation cost 
analysis in response to the November 2023 NOPD. Accordingly, DOE has 
maintained the same approach for this final determination.
    For further information on the derivation of installation costs, 
see chapter 7 of the November 2022 Preliminary Analysis TSD.
3. Annual Energy Consumption
    For each sampled household or commercial building, DOE determined 
the energy consumption for oil and weatherized gas furnaces at 
different efficiency levels using the approach described previously in 
section IV.D of this document.
4. Energy Prices
    Energy bills to consumers typically include fixed costs (i.e., 
costs that do not depend on consumption) and costs that depend on the 
level of consumption. To estimate the impact of standards on consumer 
operating costs, DOE calculated average energy prices, which represent 
the typical cost for a consumer to use energy, including fixed costs, 
and marginal energy prices, which represent the energy price consumers 
would pay for reduced consumption. Because marginal energy price more 
accurately captures the incremental savings associated with a change in 
energy use from higher efficiency, it provides a better representation 
of incremental change in consumer costs than average electricity 
prices. DOE applied average energy prices for the energy use of the 
product purchased in the no-new-standards case, and marginal 
electricity prices for the incremental change in energy use associated 
with the other efficiency levels considered.
    For the November 2023 NOPD, DOE derived 2022 annual residential and 
commercial electricity prices by State from EIA Form 861M data.\41\ DOE 
obtained 2022 annual residential and commercial natural gas prices by 
State from EIA's Natural Gas Navigator.\42\ DOE collected 2021 average 
LPG and fuel oil prices by State from EIA's 2021 State Energy 
Consumption, Price, and Expenditures Estimates and scaled to 2022 
prices using AEO 2023 data.\43\ To determine monthly prices for use in 
the analysis, DOE developed monthly energy price factors for each fuel 
based on long-term monthly price data. Monthly electricity and natural 
gas prices were adjusted using seasonal marginal price factors to 
determine monthly marginal electricity and natural gas prices. These 
marginal energy prices were used to determine the cost to the consumer 
of the change in energy consumed. Because marginal price data is only 
available for residential electricity and natural gas, DOE only 
developed marginal monthly prices for these fuels. For LPG and fuel 
oil, DOE used average monthly prices.
---------------------------------------------------------------------------

    \41\ EIA, Form EIA-861M (formerly EIA-826) detailed data (2022) 
(available at: www.eia.gov/electricity/data/eia861m/) (last accessed 
June 1, 2024).
    \42\ EIA, Natural Gas Navigator (2022) (available at: 
www.eia.gov/naturalgas/data.php) (last accessed June 1, 2024).
    \43\ EIA, 2021 State Energy Data System (2021) (available at: 
www.eia.gov/state/seds/) (last accessed June 1, 2024).
---------------------------------------------------------------------------

    To estimate energy prices in future years, DOE multiplied the 2022 
energy prices by the projection of annual average price changes for 
each State from the Reference case in AEO 2023, which has an end year 
of 2050.\44\ To estimate price trends after 2050, DOE used the average 
annual rate of change in prices from 2046 through 2050. See chapter 8 
of the November 2022 Preliminary Analysis TSD for details.
---------------------------------------------------------------------------

    \44\ EIA, Annual Energy Outlook 2023 with Projections to 2050 
(available at: www.eia.gov/forecasts/aeo/) (last accessed June 1, 
2024).
---------------------------------------------------------------------------

    To assess the impact of updated energy price estimates, DOE 
compared the energy price estimates in 2030 from the November 2023 NOPD 
to the projected estimates using updated EIA energy price data from 
2023. The results of this comparison are presented in Table IV.17.

    Table IV.17--Summary of Energy Price Comparison of 2023 EIA Data
                     Relative to November 2023 NOPD
------------------------------------------------------------------------
                                                          Percent change
                       Energy type                        in 2030 energy
                                                               price
------------------------------------------------------------------------
Electricity.............................................             -20
Natural Gas.............................................              +1
LPG.....................................................              +1
Fuel Oil................................................             -16
------------------------------------------------------------------------

    Based upon this review, DOE has determined that energy prices have 
either not changed significantly, as in the case of natural gas and 
LPG, or have decreased, as in the case of electricity and fuel oil, 
relative to the energy prices used in the November 2023 NOPD. 
Consequently, updating energy prices would either have no impact on 
analytical results or decrease operating cost savings, thereby further 
justifying DOE's decision to not amend the existing energy conservation 
standards for oil and weatherized gas furnaces. DOE did not receive 
comments regarding energy prices in response to the November 2023 NOPD. 
As a result, DOE has continued to use the energy prices from the 
November 2023 NOPD in this determination.
5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance, whereas maintenance costs 
are associated with maintaining the operation of the product. The 
maintenance and repair costs (including labor hours, component costs, 
and frequency) at each considered efficiency level are derived based on 
2023 RSMeans Facilities Maintenance and Repair Data,\45\ manufacturer 
literature, consultant input, and industry reports. DOE also accounted 
for regional differences in labor costs based on these 2023 RSMeans 
data.
---------------------------------------------------------------------------

    \45\ RSMeans Company Inc., RSMeans Facilities Maintenance & 
Repair Cost Data (2023) (available at: www.rsmeans.com/) (last 
accessed June 11, 2024).
---------------------------------------------------------------------------

    DOE assumes that condensing furnaces have a higher maintenance cost 
than noncondensing furnaces, but that this maintenance cost is the same 
at all noncondensing or condensing efficiency levels within each 
product class. The additional maintenance cost for condensing furnaces 
includes maintenance tasks related to the condensate withdrawal system 
(such as condensate pump or condensate neutralizer filter) and 
additional

[[Page 84052]]

maintenance related to the cleaning or checking of the heat exchanger 
(in particular, for condensing oil-fired furnaces using high-sulfur 
fuel oil).
    DOE also assumes that condensing furnaces have a higher repair cost 
than noncondensing furnaces, but the repair cost is the same at all 
noncondensing or condensing efficiency levels within each product 
class.
    DOE did not receive comments on its maintenance and repair cost 
methodology in response to the November 2023 NOPD, and accordingly, the 
Department has maintained the same methodology for this final 
determination.
    For more details on DOE's methodology for calculating maintenance 
and repair costs, including all online resources reviewed, see appendix 
8E of the November 2022 Preliminary Analysis TSD.
6. Product Lifetime
    Product lifetime is the age at which an appliance is retired from 
service. DOE conducted an analysis of furnace lifetimes based on the 
methodology described in a journal paper.\46\ For the November 2023 
NOPD, DOE relied on RECS 1990, 1993, 2001, 2005, 2009, and 2015.\47\ 
DOE also used the U.S. Census's biennial American Housing Survey 
(``AHS'') from 1974 to 2021, which surveys all housing, noting the 
presence of a range of appliances.\48\ DOE used the appliance age data 
from these surveys, as well as the historical furnace shipments, to 
generate an estimate of the survival function. The survival function 
provides a lifetime range from minimum to maximum, as well as an 
average lifetime. For oil and weatherized gas furnaces, DOE developed 
Weibull distributions resulting in an average lifetime of 20.2 to 22.5 
years (based on region).
---------------------------------------------------------------------------

    \46\ Lutz, J., et al., ``Using National Survey Data to Estimate 
Lifetimes of Residential Appliances,'' HVAC&R Research (2011) 17(5): 
p. 28 (available at: www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166) (last accessed June 1, 2024).
    \47\ EIA, Residential Energy Consumption Survey (``RECS''), 
Multiple Years (1990, 1993, 1997, 2001, 2005, 2009, and 2015) 
(available at: www.eia.gov/consumption/residential/) (last accessed 
June 1, 2024).
    \48\ U.S. Census Bureau: Housing and Household Economic 
Statistics Division, American Housing Survey, Multiple Years (1974, 
1975, 1976, 1977, 1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989, 
1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 2007, 2009, 2011, 
2013, 2015, 2017, 2019, and 2021) (available at: www.census.gov/programs-surveys/ahs/) (last accessed June 1, 2024).
---------------------------------------------------------------------------

    DOE did not receive any comments on the lifetime distributions used 
in the November 2023 NOPD. As oil and weatherized gas furnaces have not 
changed significantly since the November 2023 NOPD, DOE maintains the 
same lifetime distribution in this final determination.
    Appendix 8F of the November 2022 Preliminary Analysis TSD provides 
further details on the methodology and sources DOE used to develop the 
subject furnace lifetimes.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to estimate the present value of future expenditures and savings. DOE 
estimated a distribution of discount rates for oil and weatherized gas 
furnaces based on the opportunity cost of funds. DOE estimates discount 
rates separately for residential and commercial end users.
    For residential end users, DOE applies weighted-average discount 
rates calculated from consumer debt and asset data, rather than 
marginal or implicit discount rates.\49\ The LCC analysis estimates net 
present value over the lifetime of the product, so the appropriate 
discount rate will reflect the general opportunity cost of household 
funds, taking this timescale into account. Given the long time horizon 
modeled in the LCC analysis, the application of a marginal interest 
rate associated with an initial source of funds is inaccurate. 
Regardless of the method of purchase, consumers are expected to 
continue to rebalance their debt and asset holdings over the LCC 
analysis period, based on the restrictions consumers face in their debt 
payment requirements and the relative size of the interest rates 
available on debts and assets.
---------------------------------------------------------------------------

    \49\ The implicit discount rate is inferred from a consumer 
purchase decision between two otherwise identical goods with 
different first cost and operating cost. It is the interest rate 
that equates the increment of first cost to the difference in net 
present value of lifetime operating cost, incorporating the 
influence of several factors: transaction costs, risk premiums and 
response to uncertainty, time preferences, and interest rates at 
which a consumer is able to borrow or lend. The implicit discount 
rate is not appropriate for the LCC analysis because it reflects a 
range of factors that influence consumer purchase decisions, rather 
than the opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------

    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes in order to 
approximate a consumer's opportunity cost of funds related to appliance 
energy cost savings. It estimated the average percentage shares of the 
various types of debt and equity by household income group using data 
from the Federal Reserve Board's triennial Survey of Consumer Finances 
\50\ (``SCF''). Using the SCF and other sources, DOE developed a 
distribution of rates for each type of debt and asset by income group 
to represent the rates that may apply in the year in which amended 
standards would take effect. DOE assigned each sample household a 
specific discount rate drawn from one of the distributions.
---------------------------------------------------------------------------

    \50\ The Federal Reserve Board, Survey of Consumer Finances 
(1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019) 
(available at: www.federalreserve.gov/econres/scfindex.htm) (last 
accessed June 11, 2024).
---------------------------------------------------------------------------

    For commercial end users, DOE estimated the weighted-average cost 
of capital using data from various financial sources. The weighted-
average cost of capital is commonly used to estimate the present value 
of cash flows to be derived from a typical company project or 
investment. Most companies use both debt and equity capital to fund 
investments, so their cost of capital is the weighted average of the 
cost to the firm of equity and debt financing.
    DOE did not receive comments on its discount rate distribution 
methodology in response to the November 2023 NOPD, and accordingly, the 
Department has maintained the same methodology for this final 
determination.
    See appendix 8G of the November 2022 Preliminary Analysis TSD for 
further details on the development of discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (i.e., market shares) of product efficiencies under the 
no-new-standards case (i.e., the case without amended or new energy 
conservation standards) in the compliance year (2030). This approach 
reflects the fact that some consumers may purchase products with 
efficiencies greater than the baseline levels, even in the absence of 
new or amended standards.
    For consumer furnaces, DOE had limited historical-shipments data by 
efficiency level. For NWOFs/MHOFs, DOE reviewed market shares from 
HARDI 2013-2022 data and BRG 2007-2022 data.<SUP>51 52</SUP> The 
shipments data are not disaggregated between NWOFs and

[[Page 84053]]

MHOFs, but DOE assigned all shipments data below 83-percent AFUE to 
MHOFs. For WGFs, DOE had insufficient historical shipments data by 
efficiency level to develop a reliable efficiency distribution. To 
cover the lack of available shipments data, DOE referred to CCD \53\ 
for furnaces to develop efficiency distributions based on available 
models for WGFs.
---------------------------------------------------------------------------

    \51\ Heating, Air-conditioning and Refrigeration Distributors 
International (HARDI), DRIVE portal (HARDI Visualization Tool 
managed by D+R International until 2022), proprietary Gas Furnace 
Shipments Data from 2013-2022 provided to Lawrence Berkeley National 
Laboratory (LBNL).
    \52\ BRG Building Solutions. The North American Heating & 
Cooling Product Markets (2022 Edition) (Available at: 
www.brgbuildingsolutions.com/reports-insights) (last accessed June 
28, 2024).
    \53\ U.S. Department of Energy Compliance Certification Database 
(``CCD'') (Available at: www.regulations.doe.gov/certification-data/
) (last accessed June 28, 2024).
---------------------------------------------------------------------------

    DOE did not receive additional data or comments on estimated market 
shares in the no-new-standard case in response to the November 2023 
NOPD. Accordingly, DOE used estimates from the November 2023 NOPD for 
this final determination.
    The estimated market shares for the no-new-standards case for oil 
and weatherized gas furnaces are shown in Table IV.18 of this document. 
See chapter 8 of the November 2022 Preliminary Analysis TSD for further 
information on the derivation of the efficiency distributions.

 Table IV.18--No-New-Standards Case Efficiency Distributions in 2030 for
                    Oil and Weatherized Gas Furnaces
------------------------------------------------------------------------
                                                           Distribution
           Product class              Efficiency level          (%)
------------------------------------------------------------------------
NWOF..............................  Baseline............            37.2
                                    1...................            60.0
                                    2...................             1.5
                                    3...................             1.3
MHOF..............................  Baseline............              95
                                    1...................               2
                                    2...................               3
                                    3...................               0
WGF...............................  Baseline............              96
                                    1...................               4
------------------------------------------------------------------------

    The LCC Monte Carlo simulations draw from the efficiency 
distributions and randomly assign an efficiency to the oil and 
weatherized gas furnaces purchased by each sample household and 
commercial business in the no-new-standards case. The resulting percent 
shares within the sample match the market shares in the efficiency 
distributions.
9. Payback Period Analysis
    The payback period is the amount of time (expressed in years) it 
takes the consumer to recover the additional installed cost of more-
efficient products, compared to baseline products, through energy cost 
savings. Payback periods that exceed the life of the product mean that 
the increased total installed cost is not recovered in reduced 
operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. DOE 
refers to this as a ``simple PBP'' because it does not consider changes 
over time in operating cost savings. The PBP calculation uses the same 
inputs as the LCC analysis when deriving first-year operating costs, 
except that discount rates are not needed.
    DOE did not receive comments on its PBP calculation in response to 
the November 2023 NOPD, and accordingly, the Department has maintained 
the same methodology for this final determination.

F. Shipments Analysis

    DOE uses projections of annual product shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, NPV, and future manufacturer cash flows.\54\ 
The shipments model takes an accounting approach, tracking market 
shares of each product class and the vintage of units in the stock. 
Stock accounting uses product shipments as inputs to estimate the age 
distribution of in-service product stocks for all years. The age 
distribution of in-service product stocks is a key input to 
calculations of both the NES and NPV, because operating costs for any 
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

    \54\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

    In response to the November 2023 NOPD, Chiafullo suggested that DOE 
should avoid any regulation that would essentially require people who 
currently use natural gas in their homes to switch to electric energy. 
The commenter stated that, in the event of changes to the energy 
efficiency standards for consumer furnaces, consumers would be faced 
with the prohibitive cost of switching from gas-powered to electric 
appliances, coupled with the fact that owners of electric appliances 
would need generators when the electricity is out. (Chiafullo, No. 31 
at p. 1)
    In response, DOE has determined that energy conservation standards 
for standards for oil, electric, and weatherized gas furnaces do not 
need to be amended and, hence, there will be no market impact 
associated with this final determination.
    DOE did not receive additional historical shipments data to update 
shipments projections in response to the November 2023 NOPD. DOE notes 
that although there may be additional historical data available for 
2023, including an additional year of historical data would be expected 
to have a minimal impact on projected shipments over the shipments 
analysis period (2030-2059). Additionally, the November 2023 NOPD 
relied on AEO 2023, which remains the most recent available edition for 
AEO for many key inputs related to future product demand. For these 
reasons, DOE continues to use shipments from the November 2023 NOPD for 
this final determination.
    As discussed in the November 2023 NOPD, DOE estimates that the 
shipments of NWOFs and MHOFs have declined by more than 70 percent over 
the past 20 years. 88 FR 83426, 83459 (Nov. 29, 2023). Shipments for 
oil furnaces have accounted for less than 1 percent of the consumer 
furnaces market over the past 10 years, and

[[Page 84054]]

shipments for weatherized gas have accounted for seven percent of the 
consumer furnace market over the past 20 years. Id. Additionally, DOE 
estimates shipments of both oil and weatherized gas consumer furnaces 
have been flat or declining over time. Id. These trends have been 
considered as a part of this final determination in section V.C.4 of 
this document.

G. National Impact Analysis

    The NIA assesses the NES and the NPV from a national perspective of 
total consumer costs and savings that would be expected to result from 
new or amended energy conservation standards at specific efficiency 
levels.\55\ (``Consumer'' in this context refers to consumers of the 
product being regulated.) DOE calculates the NES and NPV for the 
potential standard levels considered based on projections of annual 
product shipments, along with the annual energy consumption and total 
installed cost data from the energy use and LCC analyses.\56\ For the 
present analysis, DOE projected the energy savings, operating cost 
savings, product costs, and NPV of consumer benefits over the lifetime 
of oil and weatherized gas furnaces sold from 2030 through 2059.
---------------------------------------------------------------------------

    \55\ The NIA accounts for impacts in the United States and U.S. 
territories.
    \56\ For the NIA, DOE adjusts the installed cost data from the 
LCC analysis to exclude sales tax, which is a transfer.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each product class if DOE 
adopted new or amended standards at specific energy efficiency levels 
for that class. For the standards cases, DOE considers how a given 
standard would likely affect the market shares of products with 
efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each EL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    Table IV.19 summarizes the inputs and methods DOE used for the NIA 
for the final determination. Discussion of these inputs and methods 
follows the table. See chapter 10 of the November 2022 Preliminary 
Analysis TSD for details.

   Table IV.19--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
Compliance Date of Standard.......  2030.
Efficiency Trends.................  No-new-standards case: Based on
                                     historical data.
                                    Standards cases: Roll-up in the
                                     compliance year and then DOE-
                                     estimated growth in shipment-
                                     weighted efficiency in all the
                                     standards cases, except max-tech.
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each EL.
                                     Incorporates projection of future
                                     energy use based on AEO 2023
                                     projections for heating degree days
                                     (``HDD''), cooling degree days
                                     (``CDD''), and building shell
                                     efficiency index.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each EL.
                                    Incorporates projection of future
                                     product prices based on historical
                                     data.
Annual Energy Cost per Unit.......  Annual weighted-average values as a
                                     function of the annual energy
                                     consumption per unit and energy
                                     prices.
Repair and Maintenance Cost per     Annual weighted-average values
 Unit.                               increase for condensing levels.
Energy Price Trends...............  AEO 2023 projections (to 2050) and
                                     extrapolation after 2050.
Energy Site-to-Primary and FFC      A time-series conversion factor
 Conversion.                         based on AEO 2023.
Discount Rate.....................  3% and 7%.
Present Year......................  2023.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case and each of the standards 
cases. Section IV.E.8 of this document describes how DOE developed an 
energy efficiency distribution for the no-new-standards case (which 
yields a shipment-weighted average efficiency) for each of the 
considered product classes for the year of anticipated compliance with 
an amended or new standard (2030).
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective (2030). In this scenario, the market 
shares of products in the no-new-standards case that do not meet the 
standard under consideration would ``roll up'' to meet the new standard 
level, and the market share of products above the standard would remain 
unchanged.
    To develop standards case efficiency trends after 2030, DOE 
estimated growth in shipment-weighted efficiency in the standards 
cases, except in the max-tech standards case.
2. National Energy Savings
    The NES analysis involves a comparison of national energy 
consumption of the considered products between each potential standards 
case and the case with no new or amended energy conservation standards. 
DOE calculated the national energy consumption by multiplying the 
number of units (i.e., stock) of each product (by vintage or age) by 
the unit energy consumption (also by vintage). DOE calculated annual 
NES based on the difference in national energy consumption for the no-
new-standards case and for each higher-efficiency standards case. DOE 
estimated energy consumption and savings based on site energy and 
converted the electricity consumption and savings to primary

[[Page 84055]]

energy (i.e., the energy consumed by power plants to generate site 
electricity) using annual conversion factors derived from AEO 2023. For 
natural gas and LPG, primary energy consumption is the same as site 
energy consumption. Cumulative energy savings are the sum of the NES 
for each year over the timeframe of the analysis.
    Use of higher-efficiency products is sometimes associated with a 
direct rebound effect, which refers to an increase in utilization of 
the product due to the increase in efficiency. In the November 2023 
NOPD, DOE applied a rebound effect of 15 percent for residential 
applications by reducing the site energy savings (and the associated 
primary and FFC energy savings) for oil and weatherized gas furnaces. 
However, for commercial applications, DOE applied no rebound effect in 
order to be consistent with other recent standards rulemakings.
    DOE did not receive comments on rebound in response to the November 
2023 NOPD. Accordingly, DOE has maintained the same approach for this 
final determination.
    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the NIAs and emissions analyses 
included in future energy conservation standards rulemakings. 76 FR 
51281 (August 18, 2011). After evaluating the approaches discussed in 
the August 18, 2011 notice, DOE published a statement of amended policy 
in which DOE explained its determination that EIA's National Energy 
Modeling System (``NEMS'') is the most appropriate tool for its FFC 
analysis and its intention to use NEMS for that purpose. 77 FR 49701 
(August 17, 2012). NEMS is a public domain, multi-sector, partial 
equilibrium model of the U.S. energy sector \57\ that EIA uses to 
prepare its Annual Energy Outlook. The FFC factors incorporate losses 
in production and delivery in the case of natural gas (including 
fugitive emissions) and additional energy used to produce and deliver 
the various fuels used by power plants. The approach used for deriving 
FFC measures of energy use and emissions is described in appendix 10B 
of the November 2022 Preliminary Analysis TSD.
---------------------------------------------------------------------------

    \57\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview May 2023, DOE/EIA (May 2023) (Available 
at: www.eia.gov/outlooks/archive/0581(2023).pdf (last accessed July 
22, 2024).
---------------------------------------------------------------------------

    The Joint Advocates commented that because the annual operating 
costs for baseline NWOFs exceed $2,000 and NWOFs have an outsized 
impact on greenhouse gas emissions, improved standards for NWOFs are 
particularly important for improving energy affordability and 
contributing to decarbonization goals. (Joint Advocates, No. 34 at p. 
2)
    In response, DOE notes that NWOF shipments have declined by more 
than 70 percent over the past 20 years and are likely to continue to 
decrease over the analysis period. Given the projected declining market 
for NWOFs, their contribution to greenhouse gas emissions is likewise 
projected to decrease over the analysis period in the absence of 
standards. Furthermore, DOE notes that, given the small role of oil 
furnaces in the overall furnace market and their low sales volume 
relative to the consumer boiler and consumer water heater markets, 
manufacturers faced with amended standards may deprioritize updates for 
these product classes and instead choose to exit the market. Although 
the existing oil-fired furnace market currently has a diversity of 
competitors, the loss of a few manufacturers could lead to shifts in 
market competition and availability of products that cover the full 
range of capacities. Such scenario may impact consumer's ability to 
obtain a suitable replacement for a failed NWOF.
3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are: (1) total annual installed cost; (2) 
total annual operating costs (which include energy costs and repair and 
maintenance costs), and (3) a discount factor to calculate the present 
value of costs and savings. DOE calculates net savings each year as the 
difference between the no-new-standards case and each standards case in 
terms of total savings in operating costs versus total increases in 
installed costs. DOE calculates operating cost savings over the 
lifetime of each product shipped during the projection period.
    As discussed in section IV.E.1 of this document, DOE developed oil 
and weatherized gas furnaces price trends based on historical PPI data 
and cumulative shipments. DOE applied the same trends to project prices 
for each product class at each considered efficiency level. By 2059, 
which is the end date of the projection period, the average oil and 
weatherized gas furnace price is projected to drop 17 percent relative 
to 2022. DOE's projection of product prices is described further in 
chapter 10 of the November 2022 Preliminary Analysis TSD.
    The operating cost savings are energy cost savings minus any repair 
and maintenance cost increases. Energy cost savings are calculated 
using the estimated energy savings in each year and the projected price 
of the appropriate form of energy. To estimate energy prices in future 
years, DOE multiplied the national-average energy prices by the 
projection of annual national-average residential (or commercial, as 
appropriate) energy price changes in the AEO 2023 Reference case, which 
has an end year of 2050. To estimate price trends after 2050, DOE used 
the average annual rate of change in prices from 2046 through 2050. 
Repair and maintenance cost for each of the efficiency levels is 
calculated in the LCC, and repair and maintenance cost increases are 
calculated as the repair and maintenance cost differential between 
efficiency levels.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
final determination, DOE estimated the NPV of consumer benefits using 
both a 3-percent and a 7-percent real discount rate. DOE uses these 
discount rates in accordance with guidance provided by the Office of 
Management and Budget (``OMB'') to Federal agencies on the development 
of regulatory analysis.\58\ The discount rates for the determination of 
NPV are in contrast to the discount rates used in the LCC analysis, 
which are designed to reflect a consumer's perspective. The 7-percent 
real value is an estimate of the average before-tax rate of return to 
private capital in the U.S. economy. The 3-percent real value 
represents the ``social rate of time preference,'' which is the rate at 
which society discounts future consumption flows to their present 
value.
---------------------------------------------------------------------------

    \58\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Available at: www.whitehouse.gov/omb/information-for-agencies/circulars) (last accessed June 11, 2024). 
DOE used the prior version of Circular A-4 (September 17, 2003) in 
accordance with the effective date of the November 9, 2023 version 
(Available at: www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (last accessed June 
11, 2024).
---------------------------------------------------------------------------

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for oil 
and weatherized gas furnaces. It addresses the efficiency levels 
(``ELs'') examined by DOE (see section IV.B.1 of this

[[Page 84056]]

document) and the projected impacts of each of these levels if adopted 
as energy conservation standards for the subject oil and weatherized 
gas furnaces. Additional details regarding DOE's analyses are contained 
in the November 2022 Preliminary Analysis TSD supporting this document.

A. Economic Impacts on Individual Consumers

    DOE analyzed the economic impacts on oil and weatherized gas 
furnace consumers by looking at the effects that potential amended 
energy conservation standards at each EL would have on the LCC and PBP. 
This approach allowed DOE to assess the potential standards' cost-
effectiveness (i.e., the savings in operating costs throughout the 
estimated average life of oil and weatherized gas furnaces compared to 
any increase in the price of, or in the initial charges for, or 
maintenance expenses of, oil and weatherized gas furnaces which are 
likely to result from the imposition of a standard). These analyses are 
discussed in the following sections.
    In general, higher-efficiency products can affect consumers in two 
ways: (1) purchase price increases, and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses product lifetime and a discount rate. Chapter 8 of the November 
2022 Preliminary Analysis TSD provides detailed information on the LCC 
and PBP analyses.
    Table V.1 through Table V.6 show the average LCC and PBP results 
for the ELs considered for each product class of oil and weatherized 
gas furnaces. In the first of each pair of tables, the simple payback 
is measured relative to the baseline level. In the second table, the 
impacts are measured relative to the efficiency distribution in the no-
new-standards case in the compliance year. The LCC and PBP results for 
oil and weatherized gas furnaces include both residential and 
commercial users. Because some consumers purchase products with higher 
efficiency in the no-new-standards case, the average savings are less 
than the difference between the average LCC of the baseline product and 
the average LCC at each EL. The savings refer only to consumers who are 
affected by a standard at a given EL. Those who already purchase a 
product with efficiency at or above a given EL are not affected. 
Consumers for whom the LCC increases at a given EL experience a net 
cost.

                                                    Table V.1--Average LCC and PBP Results for NWOFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Average costs  (2022$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................           4,333           2,132          32,211          36,544  ..............            22.2
1.......................................................           4,392           2,086          31,528          35,920             1.3            22.2
2.......................................................           4,451           2,043          30,876          35,327             1.3            22.2
3.......................................................           5,898           1,920          29,212          35,110             7.4            22.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each EL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


                 Table V.2--Average LCC Savings Relative to the No-New-Standards Case for NWOFs
----------------------------------------------------------------------------------------------------------------
                                                                             Life-cycle cost savings
                                                               -------------------------------------------------
                       Efficiency level                                                  Percentage of consumers
                                                                 Average LCC savings *     that experience net
                                                                        (2022$)                 cost  (%)
----------------------------------------------------------------------------------------------------------------
1.............................................................                      608                      0.5
2.............................................................                      820                      1.4
3.............................................................                     1015                     37.0
----------------------------------------------------------------------------------------------------------------
Note: The savings represent the average LCC for affected consumers.


                                                    Table V.3--Average LCC and PBP Results for MHOFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Average costs  (2022$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................           3,377           1,142          17,913          21,290  ..............            22.6
1.......................................................           3,465           1,107          17,371          20,836             2.5            22.6
2.......................................................           3,523           1,085          17,030          20,553             2.5            22.6
3.......................................................           3,581           1,063          16,705          20,286             2.6            22.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each EL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


[[Page 84057]]


                 Table V.4--Average LCC Savings Relative to the No-New-Standards Case for MHOFs
----------------------------------------------------------------------------------------------------------------
                                                                             Life-cycle cost savings
                                                               -------------------------------------------------
                       Efficiency level                                                  Percentage of consumers
                                                                 Average LCC savings *     that experience net
                                                                        (2022$)                 cost  (%)
----------------------------------------------------------------------------------------------------------------
1.............................................................                      452                      0.8
2.............................................................                      724                      0.9
3.............................................................                      971                      1.0
----------------------------------------------------------------------------------------------------------------
Note: The savings represent the average LCC for affected consumers.


                                                     Table V.5--Average LCC and PBP Results for WGFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Average costs  (2022$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................           5,533             471           7,215          12,748  ..............            20.6
1.......................................................           5,822             433           6,698          12,519             7.5            20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each EL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


                  Table V.6--Average LCC Savings Relative to the No-New-Standards Case for WGFs
----------------------------------------------------------------------------------------------------------------
                                                                             Life-cycle cost savings
                                                               -------------------------------------------------
                       Efficiency level                                                  Percentage of consumers
                                                                 Average LCC Savings *     that experience net
                                                                        (2022$)                 cost  (%)
----------------------------------------------------------------------------------------------------------------
                                                                .......................
1.............................................................                      223                     40.4
----------------------------------------------------------------------------------------------------------------
Note: The savings represent the average LCC for affected consumers.

    In response to the November 2023 NOPD, Lennox agreed with DOE's 
conclusion that more-stringent efficiency levels would cause many 
consumers to have net costs. (Lennox, No. 32 at p. 3) Lennox stated 
that the long payback period and high percentage of consumers with net 
costs support the idea that amended standards are not justified for 
weatherized gas furnaces. (Id.) In contrast, the Joint Advocates 
commented that the potential utility bill savings resulting from 
updated standards would particularly benefit low-income households and 
that DOE's proposed determination to refrain from updating the 
standards is potentially sacrificing millions of dollars in consumer 
savings. (Joint Advocates, No. 34 at p. 2)
    As required by EPCA, DOE's determination considers whether amended 
standards would result in significant conservation of energy, be 
technologically feasible, and be cost-effective. (42 U.S.C. 
6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) Additionally, DOE can only 
propose an amended standard if it is, among other things, economically 
justified. (42 U.S.C. 6295(m)(1)(B); 42 U.S.C. 6295(o)(2)(A)) For these 
product classes, DOE expects that manufacturers would need to make 
significant investments in developing new model lines for the subject 
furnaces in order to meet more-stringent, amended standards. Although 
this analysis finds positive LCC savings at the considered ELs, given 
the relatively small market for oil and weatherized gas furnaces and 
declining shipments, DOE expects that such savings are unlikely to be 
realized because manufacturers may exit the market in response to 
amended standards, thereby resulting in certain products or capacities 
becoming unavailable to consumers. Consequently, DOE has determined 
that it is unable to conclude that amended energy conservation 
standards for oil-fired furnaces and weatherized gas furnaces would be 
economically justified.

B. National Impact Analysis

    This section presents DOE's estimates of the NES and the NPV of 
consumer benefits that would result from each of the ELs considered as 
potential amended standards.
1. National Energy Savings
    To estimate the energy savings attributable to potential amended 
energy conservation standards for oil and weatherized gas furnaces, DOE 
compared their energy consumption under the no-new-standards case to 
their anticipated energy consumption under each EL. The savings are 
measured over the entire lifetime of products purchased during the 30-
year period that begins in the year of anticipated compliance with 
amended standards (2030-2059).
    Table V.8 presents DOE's projections of the national energy savings 
for each EL considered for the analysis. The savings were calculated 
using the approach described in section IV.G.2 of this document.

[[Page 84058]]



Table V.7--Cumulative National Energy Savings for Oil and Weatherized Gas Furnaces; 30 Years of Shipments (2030-
                                                      2059)
----------------------------------------------------------------------------------------------------------------
                                                                                 Efficiency level
                          Product class                          -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
                                                                            FFC Energy Savings (quads)
                                                                 -----------------------------------------------
Non-Weatherized Oil Furnace.....................................           0.004            0.01            0.05
Mobile Home Non-Weatherized Oil Furnace.........................          0.0004           0.001           0.001
Weatherized Gas Furnace.........................................            0.66  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    OMB Circular A-4 \59\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this final 
determination, DOE undertook a sensitivity analysis using nine years, 
rather than 30 years, of product shipments. The choice of a nine-year 
period is a proxy for the timeline in EPCA for the review of certain 
energy conservation standards and potential revision of and compliance 
with such revised standards.\60\ The review timeframe established in 
EPCA is generally not synchronized with the product lifetime, product 
manufacturing cycles, or other factors specific to oil and weatherized 
gas furnaces. Thus, such results are presented for informational 
purposes only and are not indicative of any change in DOE's analytical 
methodology. The NES sensitivity analysis results based on a nine-year 
analytical period are presented in Table V.9. The impacts are counted 
over the lifetime of oil and weatherized gas furnace products purchased 
during the period of 2030-2038.
---------------------------------------------------------------------------

    \59\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Available at: www.whitehouse.gov/omb/information-for-agencies/circulars) (last accessed June 11, 2024). 
DOE used the prior version of Circular A-4 (Sept. 17, 2003) in 
accordance with the effective date of the November 9, 2023 version 
(Available at: www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (last accessed June 
11, 2024).
    \60\ EPCA requires DOE to review its standards at least once 
every six years, and requires, for certain products, a three-year 
period after any new standard is promulgated before compliance is 
required, except that in no case may any new standards be required 
within six years of the compliance date of the previous standards. 
(42 U.S.C. 6295(m)) If DOE makes a determination that amended 
standards are not needed, it must conduct a subsequent review within 
three years following such a determination. As DOE is evaluating the 
need to amend the standards, the sensitivity analysis is based on 
the review timeframe associated with amended standards. While adding 
a six-year review to the three-year compliance period adds up to 
nine years, DOE notes that it may undertake reviews at any time 
within the six-year period and that the three-year compliance date 
may yield to the six-year backstop. A nine-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some products, the 
compliance period is five years rather than three years.

 Table V.8--Cumulative National Energy Savings for Oil and Weatherized Gas Furnaces; 9 Years of Shipments (2030-
                                                      2038)
----------------------------------------------------------------------------------------------------------------
                                                                                 Efficiency level
                          Product class                          -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
                                                                            FFC Energy Savings (quads)
                                                                 -----------------------------------------------
Non-Weatherized Oil Furnace.....................................           0.002            0.01            0.02
Mobile Home Non-Weatherized Oil Furnace.........................          0.0002          0.0004           0.001
Weatherized Gas Furnace.........................................            0.20  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    In response to the November 2023 NOPD, Lennox commented that the 
energy savings for the furnace categories addressed by the NOPD would 
not be significant. (Lennox, No. 32 at p. 3)
2. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the ELs considered for oil and 
weatherized gas furnaces. In accordance with OMB Circular A-4, DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V.10 shows the consumer NPV results with impacts counted 
over the lifetime of products purchased during the period of 2030-2059.

 Table V.9--Cumulative Net Present Value of Consumer Benefits for Oil and Weatherized Gas Furnaces; 30 Years of
                                              Shipments (2030-2059)
----------------------------------------------------------------------------------------------------------------
                                                                               Efficiency level (EL)
             Discount rate                    Product class      -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
                                                                                   billion 2022$
                                                                 -----------------------------------------------
3%....................................  Non-Weatherized Oil                 0.06            0.20            0.20
                                         Furnace.

[[Page 84059]]

 
                                        Mobile Home Non-                    0.01            0.01            0.01
                                         Weatherized Oil Furnace.
                                        Weatherized Gas Furnace.            1.88  ..............  ..............
7%....................................  Non-Weatherized Oil                 0.02            0.08            0.03
                                         Furnace.
                                        Mobile Home Non-                   0.002           0.003           0.005
                                         Weatherized Oil Furnace.
                                        Weatherized Gas Furnace.            0.45  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned nine-year analytical 
period are presented in Table V.11 of this document. The impacts are 
counted over the lifetime of oil and weatherized gas furnace products 
purchased during the period of 2030-2038. As mentioned previously, such 
results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology or decision 
criteria.

 Table V.10--Cumulative Net Present Value of Consumer Benefits for Oil and Weatherized Gas Furnaces; 9 Years of
                                              Shipments (2030-2038)
----------------------------------------------------------------------------------------------------------------
                                                                               Efficiency level (EL)
             Discount rate                    Product class      -----------------------------------------------
                                                                         1               2               3
----------------------------------------------------------------------------------------------------------------
                                                                                   billion 2022$
                                                                 -----------------------------------------------
3%....................................  Non-Weatherized Oil                 0.03            0.11            0.12
                                         Furnace.
                                        Mobile Home Non-                   0.003            0.01            0.01
                                         Weatherized Oil Furnace.
                                        Weatherized Gas Furnace.            0.67  ..............  ..............
7%....................................  Non-Weatherized Oil                 0.02            0.05            0.02
                                         Furnace.
                                        Mobile Home Non-                   0.002           0.003           0.004
                                         Weatherized Oil Furnace.
                                        Weatherized Gas Furnace.            0.22  ..............  ..............
----------------------------------------------------------------------------------------------------------------

C. Final Determination

    As discussed previously, in order to make a final determination 
that the energy conservation standards for oil, electric, and 
weatherized gas furnaces do not need to be amended, EPCA requires that 
DOE analyze whether amended standards would result in significant 
conservation of energy, be technologically feasible, and be cost-
effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) An 
evaluation of cost-effectiveness requires DOE to consider savings in 
operating costs throughout the estimated average life of the covered 
product in the type (or class) compared to any increase in the price, 
initial charges, or maintenance expenses for the covered product that 
are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42 
U.S.C. 6295(o)(2)(B)(i)(II)) The criteria considered under 42 U.S.C. 
6295(m)(1)(A) and the additional analysis relating to economic 
justification are discussed in the paragraphs that follow.
1. Technological Feasibility
    EPCA requires that DOE consider whether amended energy conservation 
standards for oil, electric, and weatherized gas furnaces would be 
technologically feasible. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 
6295(n)(2)(B)) DOE has determined that technology options are available 
that can improve the efficiency of oil and weatherized gas furnaces. 
These technology options are being used in commercially-available oil 
and weatherized gas furnaces and, therefore, are technologically 
feasible. (See section IV.A.4 of this document for further 
information.) Hence, DOE has determined that amended energy 
conservation standards for oil and weatherized gas furnaces would be 
technologically feasible. However, as discussed in section IV.A.3 of 
this document, DOE is not aware of any technology options that would 
improve the efficiency of electric furnaces. Therefore, DOE has 
determined that amended energy conservation standards for electric 
furnaces are not technologically feasible.
2. Cost-Effectiveness
    EPCA requires DOE to consider whether amended energy conservation 
standards for the subject furnaces would be cost-effective through an 
evaluation of the savings in operating costs throughout the estimated 
average life of the covered product compared to any increase in the 
price of, or in the initial charges for, or maintenance expenses of, 
the covered product that are likely to result from an amended standard. 
(42 U.S.C. 6295(m)(1)(A); 42 U.S.C. 6295(n)(2)(C); and 42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducted an LCC analysis to estimate the net 
costs/benefits to users from increased efficiency in the considered oil 
and weatherized gas furnace product classes. As shown in Table V.1 
through Table V.6, for all product classes, all the considered 
efficiency levels result in positive LCC savings, with the percentage 
of consumers experiencing net cost ranging from 0.5 percent at EL 1 to 
37 percent at max-tech for NWOFs, approximately 1 percent at all ELs 
for MHOFs, and 40 percent at the only considered efficiency level for 
WGFs.

[[Page 84060]]

    DOE then aggregated the results from the LCC analysis to estimate 
the NPV of the total costs and benefits experienced by the Nation. (See 
results in Table V.10 and Table V.11 of this document) As noted, the 
inputs for determining the NPV are: (1) total annual installed cost; 
(2) total annual operating costs (energy costs and repair and 
maintenance costs), and (3) a discount factor to calculate the present 
value of costs and savings.
3. Significant Conservation of Energy
    EPCA also requires that DOE consider whether amended energy 
conservation standards for the subject furnaces would result in 
significant conservation of energy. (42 U.S.C. 6295(m)(1)(A) and 42 
U.S.C. 6295(n)(2)(A))
    To estimate the energy savings attributable to potential amended 
standards for oil and weatherized gas furnaces, DOE compared their 
energy consumption under the no-new-standards case to their anticipated 
energy consumption under each potential standard level. The savings are 
measured over the entire lifetime of products purchased in the 30-year 
period that begins in the year of anticipated compliance with amended 
standards (2030-2059).
    As shown in Table V.8, DOE estimates that amended standards would 
results in FFC energy savings of 0.004 quads at EL 1 to 0.05 quads at 
max-tech level for NWOFs, 0.0004 quads at EL 1 to 0.001 quads at max-
tech level for MHOFs, and 0.66 quads at EL 1 (max-tech level) for WGFs, 
over a 30-year analysis period (2030-2059).
4. Further Considerations
a. Oil Furnaces
    As discussed in section IV.F of this document, DOE estimates that 
the shipments of NWOFs and MHOFs have declined by more than 70 percent 
over the past 20 years and only accounted for less than 1 percent of 
the overall consumer furnace market in the past 10 years. DOE 
considered this declining trend and the small market share for oil 
furnaces in the furnace shipments model and projected that the 
shipments of NWOFs and MHOFs will continue to decline over the analysis 
period (i.e., 2030-2059). DOE also considered that the shipments of 
NWOFs and MHOFs could decline faster than current projections, which 
may lead to further reductions in energy savings from potential amended 
standards.
    As the oil furnace market has contracted, the industry has seen 
consolidation. DOE estimates there were 11 OEMs of NWOFs selling into 
the U.S. market at the time of the June 2011 DFR that set current 
standard levels for oil furnaces. Since then, manufacturers have 
merged, been acquired, and left the market. Currently there are seven 
OEMs of NWOFs selling into the U.S. market. DOE estimated the NWOF 
market to be approximately 36,000 units per year and the MHOF market to 
be approximately 2,000 units per year in 2023. These products together 
are less than 1 percent of the overall U.S. residential furnace market, 
which is approximately 4.2 million shipments per year in 2023. The size 
of the market could make cost recovery challenging for manufacturers. 
With the small market size and continued trend of diminishing sales, 
the timeframe for recouping investments may be longer than acceptable 
for manufacturers. Given the small role of oil furnaces in the overall 
furnace market and the low sales relative to the consumer boiler and 
consumer water heater markets, manufacturers may deprioritize updates 
for these product classes. The existing oil-fired furnace market 
currently has a diversity of competitors; however, the loss of a few 
manufacturers could lead to shifts in market competition.
b. Weatherized Gas Furnaces
    DOE estimates that the shipments of WGFs have been approximately 
0.35 million per year for the past 10 years and accounted for 
approximately 7 percent of the overall consumer furnace market over the 
past 20 years, as stated in section IV.F of this document. DOE 
considered the small market share for WGFs in the furnace shipments 
model and projected that the shipments of WGFs will be approximately 
flat and account for less than 8 percent of the overall consumer 
furnace market over the analysis period (i.e., 2030-2059). DOE also 
considered that the shipments of WGFs could be less than current 
projections, which may lead to reductions in energy savings from 
potential amended standards.
    WGFs have the largest potential energy savings of the product 
classes in this rulemaking. However, DOE recognizes challenges for the 
industry at the max-tech level, which requires condensing furnace 
designs. DOE identified eight OEMs of WGFs. Only one OEM offers models 
that can meet the max-tech level. Models that meet the max-tech level 
account for 1 percent of all WGF listings.
    All other OEMs would need to invest in new WGF designs to meet a 
condensing efficiency level. DOE expects that developing new condensing 
model lines would require significant investment. If manufacturers plan 
to continue offering the same diversity of models, they would need to 
redesign nearly 1,500 basic models, or 99 percent of what is available 
on the market today. Designing condensing models would require the 
incorporation of a secondary heat exchanger and condensate management 
system. Manufacturers would likely need to reconfigure their existing 
heat exchanger to optimize airflow over the secondary heat exchanger, 
which could require investments in product redesign and retooling for 
hard-tooled portions of the heat exchanger. Manufacturers may also have 
to choose between adding the secondary heat exchanger within the 
physical limitations of the existing chassis dimension or adopting a 
new chassis size, which has the potential to be capital-intensive. The 
added production of the secondary heat exchanger could necessitate 
additional floor space and increased assembly and fabrication times.
    DOE observed that the range of heating capacities offered at EL 1 
do not cover the same range of capacities as noncondensing models. 
Condensing WGF models range from 60 to 96 kBtu/h, whereas noncondensing 
WGF models span capacities from 40 to 150 kBtu/h. DOE is concerned that 
amended standards for WGFs may limit capacity availability for 
consumers.
5. Summary
    Based on the reasons stated in the foregoing discussion, DOE has 
determined that the energy conservation standards for oil, electric, 
and weatherized gas furnaces do not need to be amended.
    As discussed previously, a determination that amended standards are 
not needed must be based on consideration of whether amended standards 
will result in significant conservation of energy, are technologically 
feasible, and are cost-effective. (42 U.S.C. 6295(m)(1)(A) and 42 
U.S.C. 6295(n)(2)) Additionally, DOE can only propose an amended 
standard if it is, among other things, economically justified. (42 
U.S.C. 6295(m)(1)(B); 42 U.S.C. 6295(o)(2)(A))
    As explained elsewhere in this document, DOE has determined that 
amended energy conservation standards for electric furnaces are not 
technologically feasible. Oil-fired furnaces and WGFs have relatively 
small markets, and shipments of these products are expected to flatten 
or decline; manufacturers facing increased standards for these product 
categories may opt to focus on products with larger market shares, 
resulting in certain products or capacities becoming unavailable for 
consumers, as well as

[[Page 84061]]

further consolidation of the market. Consequently, DOE has determined 
that it is unable to conclude that amended standards for oil-fired 
furnaces and WGFs would be economically justified. Therefore, for these 
reasons as well as those discussed throughout this document, DOE is 
unable to conclude that amended standards for furnaces at any of the 
efficiency levels analyzed would meet the applicable statutory 
criteria.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866, 13563, and 14094

    Executive Order (``E.O.'') 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by 
E.O. 13563, ``Improving Regulation and Regulatory Review,'' 76 FR 3821 
(Jan. 21, 2011) and amended by E.O. 14094, ``Modernizing Regulatory 
Review,'' 88 FR 21879 (April 11, 2023), requires agencies, to the 
extent permitted by law, to: (1) propose or adopt a regulation only 
upon a reasoned determination that its benefits justify its costs 
(recognizing that some benefits and costs are difficult to quantify); 
(2) tailor regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives, taking into account, 
among other things, and to the extent practicable, the costs of 
cumulative regulations; (3) select, in choosing among alternative 
regulatory approaches, those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity); (4) to the 
extent feasible, specify performance objectives, rather than specifying 
the behavior or manner of compliance that regulated entities must 
adopt; and (5) identify and assess available alternatives to direct 
regulation, including providing economic incentives to encourage the 
desired behavior, such as user fees or marketable permits, or providing 
information upon which choices can be made by the public. DOE 
emphasizes as well that E.O. 13563 requires agencies to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible. In its guidance, the 
Office of Information and Regulatory Affairs (``OIRA'') in OMB has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. For the reasons stated in this 
preamble, this final regulatory action is consistent with these 
principles.
    Section 6(a) of E.O. 12866 also requires agencies to submit 
``significant regulatory actions'' to OIRA for review. OIRA has 
determined that this final regulatory action does not constitute a 
``significant regulatory action'' under section 3(f) of E.O. 12866, as 
amended by E.O. 14094. Accordingly, this action was not submitted to 
OIRA for review under E.O. 12866.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (``IRFA'') 
and a final regulatory flexibility analysis (``FRFA'') for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by E.O. 13272, ``Proper Consideration of Small Entities in Agency 
Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published procedures 
and policies in the Federal Register on February 19, 2003, to ensure 
that the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's website (www.energy.gov/gc/office-general-counsel).
    DOE reviewed this final determination under the provisions of the 
Regulatory Flexibility Act and the policies and procedures published on 
February 19, 2003. Because DOE is not amending standards for oil, 
electric, and weatherized gas furnaces, the determination will not 
amend any energy conservation standards. On the basis of the foregoing, 
DOE certifies that the final determination will have no significant 
economic impact on a substantial number of small entities. Accordingly, 
DOE has not prepared an FRFA for this final determination. DOE has 
transmitted this certification and supporting statement of factual 
basis to the Chief Counsel for Advocacy of the Small Business 
Administration for review under 5 U.S.C. 605(b).

C. Review Under the Paperwork Reduction Act of 1995

    This final determination, which concludes that no amended energy 
conservation standards for oil, electric, and weatherized gas furnaces 
are needed, imposes no new informational or recordkeeping requirements. 
Accordingly, OMB clearance is not required under the Paperwork 
Reduction Act. (44 U.S.C. 3501 et seq.)

D. Review Under the National Environmental Policy Act of 1969

    DOE has analyzed this final action in accordance with the National 
Environmental Policy Act of 1969 (``NEPA'') and DOE's NEPA implementing 
regulations (10 CFR part 1021). DOE's regulations include a categorical 
exclusion for actions which are interpretations or rulings with respect 
to existing regulations. 10 CFR part 1021, subpart D, appendix A4. DOE 
has determined that this rule qualifies for categorical exclusion A4 
because it is an interpretation or ruling in regard to an existing 
regulation and otherwise meets the requirements for application of a 
categorical exclusion. See 10 CFR 1021.410. Accordingly, neither an 
environmental assessment nor an environmental impact statement is 
required.

E. Review Under Executive Order 13132

    E.O. 13132, ``Federalism,'' 64 FR 43255 (August 10, 1999), imposes 
certain requirements on Federal agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and to carefully assess 
the necessity for such actions. The Executive order also requires 
agencies to 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. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined this final determination 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. EPCA governs and prescribes Federal 
preemption of State regulations as to energy conservation for the 
products that are the subject of this final determination. States can 
petition DOE for exemption from such preemption to the extent, and 
based on criteria, set forth in EPCA. (42 U.S.C. 6297) Therefore, no 
further action is required by E.O. 13132.

[[Page 84062]]

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil 
Justice Reform,'' 61 FR 4729 (Feb. 7, 1996), imposes on Federal 
agencies the general duty to adhere to the following requirements: (1) 
eliminate drafting errors and ambiguity; (2) write regulations to 
minimize litigation; (3) provide a clear legal standard for affected 
conduct rather than a general standard, and (4) promote simplification 
and burden reduction. Regarding the review required by section 3(a), 
section 3(b) of E.O. 12988 specifically requires that Executive 
agencies make every reasonable effort to ensure that the regulation: 
(1) clearly specifies the preemptive effect, if any; (2) clearly 
specifies any effect on existing Federal law or regulation; (3) 
provides a clear legal standard for affected conduct while promoting 
simplification and burden reduction; (4) specifies the retroactive 
effect, if any; (5) adequately defines key terms, and (6) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. Section 3(c) of 
E.O. 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 has completed the required review and determined that, to the 
extent permitted by law, this final determination meets the relevant 
standards of E.O. 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'') 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a regulatory action likely to result in a rule that may cause the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector of $100 million or more in any one year 
(adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) UMRA also requires a Federal agency to develop 
an effective process to permit timely input by elected officers of 
State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at: 
www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    DOE examined this final determination according to UMRA and its 
statement of policy and determined that the final determination does 
not contain a Federal intergovernmental mandate, nor is it expected to 
require expenditures of $100 million or more in any one year by State, 
local, and Tribal governments, in the aggregate, or by the private 
sector. As a result, the analytical requirements of UMRA do not apply.

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

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any proposed rule or policy that may affect 
family well-being. When developing a Family Policymaking Assessment, 
agencies must assess whether: (1) the action strengthens or erodes the 
stability or safety of the family and, particularly, the marital 
commitment; (2) the action strengthens or erodes the authority and 
rights of parents in the education, nurture, and supervision of their 
children; (3) the action helps the family perform its functions, or 
substitutes governmental activity for the function; (4) the action 
increases or decreases disposable income or poverty of families and 
children; (5) the proposed benefits of the action justify the financial 
impact on the family; (6) the action may be carried out by State or 
local government or by the family, and whether (7) the action 
establishes an implicit or explicit policy concerning the relationship 
between the behavior and personal responsibility of youth, and the 
norms of society. In evaluating the above factors, DOE has concluded 
that it is not necessary to prepare a Family Policymaking Assessment as 
none of the above factors are implicated. Further, this final 
determination would not have any financial impact on families nor any 
impact on the autonomy or integrity of the family as an institution.

I. Review Under Executive Order 12630

    Pursuant to E.O. 12630, ``Governmental Actions and Interference 
with Constitutionally Protected Property Rights,'' 53 FR 8859 (March 
18, 1988), DOE has determined that this final determination would not 
result in any takings that might require compensation under the Fifth 
Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review 
most disseminations of information to the public under information 
quality guidelines established by each agency pursuant to general 
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 
(Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, ``Improving 
Implementation of the Information Quality Act'' (April 24, 2019), DOE 
published updated guidelines, which are available at: www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has 
reviewed this final determination under the OMB and DOE guidelines and 
has concluded that it is consistent with applicable policies in those 
guidelines.

K. Review Under Executive Order 13211

    E.O. 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 OIRA at OMB a 
Statement of Energy Effects for any proposed significant energy action. 
A ``significant energy action'' is defined as any action by an agency 
that promulgates or is expected to lead to promulgation of a final 
rule, and that: (1) is a significant regulatory action under Executive 
Order 12866, or any successor order, and is likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy; or (2) is designated by the Administrator of OIRA as a 
significant energy action. For any significant energy action, the 
agency must give a detailed statement of any adverse effects on energy 
supply, distribution, or use should the proposal be implemented, and of 
reasonable alternatives to the action and their expected benefits on 
energy supply, distribution, and use.
    This final determination, which does not amend energy conservation 
standards for oil, electric, and weatherized gas furnaces, is not a 
significant regulatory action under E.O.

[[Page 84063]]

12866. Moreover, it would not have a significant adverse effect on the 
supply, distribution, or use of energy, nor has it been designated as 
such by the Administrator at OIRA. Therefore, it is not a significant 
energy action, and accordingly, DOE has not prepared a Statement of 
Energy Effects.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (``OSTP''), issued its Final Information 
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan. 
14, 2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the Bulletin is to enhance the quality and credibility of 
the government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' Id. at 70 FR 2667.
    In response to OMB's Bulletin, DOE conducted formal peer reviews of 
the energy conservation standards development process and the analyses 
that are typically used and has prepared a peer review report 
pertaining to the energy conservation standards rulemaking 
analyses.\61\ Generation of this report involved a rigorous, formal, 
and documented evaluation using objective criteria and qualified and 
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the 
productivity and management effectiveness of programs and/or projects. 
Because available data, models, and technological understanding have 
changed since 2007, DOE has engaged with the National Academy of 
Sciences (``NAS'') to review DOE's analytical methodologies to 
ascertain whether modifications are needed to improve DOE's analyses. 
DOE is in the process of evaluating the resulting December 2021 
report.\62\
---------------------------------------------------------------------------

    \61\ ``Energy Conservation Standards Rulemaking Peer Review 
Report'' (2007) (Available at: www.energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0) (last accessed June 28, 2024).
    \62\ The December 2021 NAS report is available at 
www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards (Last accessed July 24, 
2024).
---------------------------------------------------------------------------

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of this final determination prior to its effective date. 
The report will state that it has been determined that the final 
determination does not fall within the scope of 5 U.S.C. 804(2).

VII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this final 
determination.

Signing Authority

    This document of the Department of Energy was signed on October 10, 
2024, by Jeffrey Marootian, Principal Deputy Assistant Secretary for 
Energy Efficiency and Renewable Energy, pursuant to delegated authority 
from the Secretary of Energy. That document with the original signature 
and date is maintained by DOE. For administrative purposes only, and in 
compliance with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register Liaison Officer has been authorized to 
sign and submit the document in electronic format for publication, as 
an official document of the Department of Energy. This administrative 
process in no way alters the legal effect of this document upon 
publication in the Federal Register.

    Signed in Washington, DC, on October 10, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2024-23906 Filed 10-17-24; 8:45 am]
BILLING CODE 6450-01-P


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