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441 G St. N.W. Washington, DC 20548
8-325919
June 13, 2014 

### U.S. GOVERNMENTACCOUNTABILITY OFFICE

The Honorable Mary L. Landrieu Chair The Honorable Lisa Murkowski Ranking Member Committee on Energy and Natural Resources United States Senate
The Honorable Fred Upton Chairman The Honorable HenryA Waxman Ranking Member Committee on Energy and Commerce House of Representatives Subject: DepartmentofEnergy: Energy Conservation Program: Energy Conservation Standards for CommercialandIndustrial Electric Motors
Pursuantto section 801 (a)(2)(A) oftitle 5, United States Code, this is our report on a major rule promulgated by the Departmentof Energy (Energy) entitled "Energy Conservation Program: Energy Conservation Standards for Commercial and Industrial Electric Motors" (RIN: 1904-AC28). We received the rule on May 29, 2014. Itwas published in the FederalRegisteras a final rule on May29, 2014, with a stated effective date ofJuly 28, 2014. 79 Fed. Reg. 30,934.
The final rule establishes energy conservation standards for a numberofdifferentgroups ofelectric motors that Energy has not previously regulated. Forthose groups ofelectric motors currently regulated, this rulemaking would maintain the current energy conservation standardsfor some electric motortypes and amend the energy conservation standards for otherelectric motortypes. Energy determined that the newand amended energy conservation standards forthis equipmentwould result in significant conservation ofenergy and are technologically feasible and economicallyjustified.
Enclosed is our assessmentof Energy's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) oftitle 5 with respectto the rule. Our review ofthe procedural steps taken indicates that Energy complied with the applicable requirements.
Ifyou have any questions about this report orwish to contact GAO officials responsible forthe evaluation work relating to the subject matterofthe rule, please contact ShirleyA Jones, Assistant General Counsel, at (202) 512-8156.

# £~o~~ RobertJ. Cramer Managing Associate General Counsel
Enclosure

cc: Daniel Cohen Assistant General Counsel for Legislation,

Regulation and Energy Efficiency Department of Energy
GA0-14-669R

### REPORT UNDER 5 U.S.C. 

### § 801(a)(2)(A) ON A MAJOR RULE ISSUED BY THE DEPARTMENT OF ENERGY ENTITLED "ENERGY CONSERVATION PROGRAM: ENERGY CONSERVATION STANDARDS FOR COMMERCIALAND INDUSTRIAL ELECTRIC MOTORS" (RIN: 1904-AC28) (i) Cost-benefit analysis ENCLOSURE

The Department of Energy (Energy) discussed the costs and benefits ofthis final rule. Energy calculated that the weighted average life cycle cost savings for consumers ofthe three equipment class groups covered by this rule are $160, $53, and none (because the standard level is the same as the baseline and, thus, no customers are affected), respectively. The weighted median payback periods forthe three groups are 2.9 years, 4.5 years, and none. Energy also calculated the impact on manufacturers. Using a real discount rate of9.1 percent, Energy estimated thatthe industry net present value (INPV) for manufacturers of electric motors is $3,478 million. Underthe standards in this rule, Energy expects that manufacturers may lose up to 10.0 percent oftheir INPV, approximately $348 million. Additionally, Energy does not expect any plant closings or significant loss ofemployment based on the energy conservation standards in this rule. Energy also estimated the national benefits and costs ofthis final rule. Forelectric motors shipped in 2016to 2045, Energy estimates that the present value 

## ofthe total national economic benefits is $30.9 billion using a7 percent discount rate and $54.4 billion using a 3 percent discount rate. Energy further estimates thatthe present value ofthe total national costs is $6.9 billion using a 7 percent discount rate and $12.5 billion using a 3 percent discount rate. In addition to its present value estimates, Energy also calculated annualized benefits and costs of this rule. Using a7 percent discount rate for benefits and costs otherthan C02 

### reduction (for which Energy used a 3 percent discount rate along with the average social cost ofcarbon series (SCC) that uses a 3 percent discount rate) the cost ofthe standards in this rule is $517 million per year in increased equipment costs (incremental installed costs), while the estimated benefits are $1,367 million peryear in reduced equipment operating costs, $614 million in C02 

### emission reductions, and $23.3 million in reduced NOx emissions. In this case, the net benefits would amount to $1,488 million peryear. Using a 3 percent discount rate for all benefits and costs and the average SCC series, the estimated cost ofthe standards in this rule is $621 million per year in increased equipment costs, while the estimated benefits are $2,048 million peryear in reduced operating costs, $614 million in C02 

### emission reductions, and $32.9 million in reduced NOx emissions. In this case, the net benefit would amount to approximately $2,074 million per year. (ii) Agency actions relevant to the Regulatory Flexibility Act (RFA). 5 U.S.C. §§ 

### 603-605, 607, and 609 Energy prepared afinal regulatory flexibility analysis forthis final rule. The analysis included (1) a description and estimated number ofsmall entities regulated; (2) adescription and estimate ofcompliance requirements; (3) any duplication, overlap, or conflict with other rules and regulations; and (4) significant alternatives to the rule.

GA0-14-669R(iii) Agency actions relevant to sections 202-205 ofthe Unfunded Mandates Reform Act of 1995. 2 U.S.C. 

### §§ 1532-1535 Energy has concluded thatthis final rule would likely require expenditures of $100 million or more. Such expenditures may include investment in research and development and in capital expenditures by electric motor manufacturers in the years between thefinal rule and the compliance dateforthe newstandards, and incremental additional expenditures by consumers to purchase higher-efficiency electric motors, starting at the compliance date forthe applicable standard. Energy stated that this final rule establishes energy conservation standards for electric motors that are designed to achievethe maximum improvement in energy efficiency that Energy has determined to be both technologically feasible and economicallyjustified. (iv) Other relevant information or requirements underacts and executive orders
Administrative ProcedureAct, 5 U.S.C. §§ 551 et seq.
On September28, 2010, Energy published aframework documentforthis rulemaking. 75 Fed. Reg. 59,657. In response to public comments, on March 30, 2011, Energy published a Request for Information (RFI) seeking public comments from interested parties regarding establishment ofenergy conservation standardsfor several types ofdefinite and special purpose motors. 76 Fed. Reg. 17,577. On July 23, 2012, Energy published a preliminary analysis notice of availability. 77 Fed. Reg. 43,015. Comments on these itemswere addressed in the notice of proposed rulemaking Energy published on December6, 2013. 78 Fed. Reg. 73,589. Energy received comments on the proposed rule, towhich they responded in this final rule. Paperwork Reduction Act (PRA}, 44 U.S.C. §§ 3501-3520 Energy determined thatthis final rule contains an information collection requirement underthe Act. This requirement has been approved bythe Office of Management and Budget (OMB) under OMB control number 1910-1400. Energy estimates thatthe public reporting burden for the certification will average 20 hours per response, including thetime for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Statutory authorization forthe rule Energy promulgated this final rule underthe authority ofsections 6291 to 6317 oftitle 42, United States Code.
Executive Order Nos. 12,866 and 13,563 (Regulatory Planning and Review) Energy determined thatthis final rule is significant underthe Order, and it has been reviewed by OMB.
Executive Order No. 13,132 (Federalism)
On March 14, 2000, Energy published a statement ofpolicy describing the intergovernmental consultation process it would follow in the development ofthese regulations. 65 Fed. Reg. 13,735. The Energy and Conservation Actof 1975 (EPCA) governs and prescribesfederal preemption ofstate regulations asto energy conservation forthe equipmentthat is the subject thisfinal rule. States can petition Energyfor exemption from such preemption to the extent, and based on criteria, setforth in EPCA. 42 U.S.C. 

### § 6297. Energy determined that no further action is required bythe Order. Page 2 GA0-14-669R