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CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT ................................................................................. 1-1

1.2 SUMMARY OF NATIONAL BENEFITS ..................................................................... 1-1

1.3 OVERVIEW OF ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL 

FURNACES AND CENTRAL AIR CONDITIONERS AND HEAT PUMPS.............. 1-7

1.3.1 Furnaces............................................................................................................... 1-7

1.3.2 Central Air Conditioners and Heat Pumps........................................................... 1-8

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS ................. 1-10

1.5 STRUCTURE OF THE DOCUMENT.......................................................................... 1-15

LIST OF TABLES

Table 1-1 Annualized Benefits and Costs of Standards for Furnace and Central Air 

Conditioner and Heat Pump Energy Efficiency (TSL 4)*................................... 1-4

Table 1-2 Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode (TSL 2)*................ 1-6

Table 1-3 Energy Conservation Standards for Residential Furnaces Manufactured On or 

After November 19, 2015 .................................................................................... 1-7

Table 1-4 Analyses During Each Rulemaking Stage ......................................................... 1-12

 
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CHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This technical support document (TSD) is a stand-alone report that provides the technical 

analyses and results supporting the information presented in the direct final rule for residential 

furnaces and central air conditioners and heat pumps. This direct final rule TSD reports on the 

activities and analyses conducted in support of the direct final rule.

1.2 SUMMARY OF NATIONAL BENEFITS

DOE’s analyses indicate that today’s standards for energy efficiency and standby mode 

and off mode power would save a significant amount of energy–an estimated 3.36 to 4.38 quads

of cumulative energy in 2013–2045 for furnaces and in 2015-2045 for central air conditioners 

and heat pumps.a This amount is comprised of savings of 3.20 to 4.22 quads for today’s 

standards on energy efficiency and 0.16 quads for today’s standards on standby mode and off 

mode power. The total amount is approximately one-fifth of the amount of total energy used 

annually by the U.S. residential sector. In addition, DOE expects the energy savings from today’s

standards to eliminate the need for approximately 3.80 to 3.92 gigawatts (GW) of generating 

capacity by 2045.

The cumulative national net present value (NPV) of total consumer costs and savings of 

today’s standards for products shipped in 2013–2045 for furnaces and in 2015-2045 for central 

air conditioners and heat pumps, in 2009$, ranges from $4.56 billion to $4.30 billion to $4.58

billion (at a 7-percent discount rate) to $15.9 billion to $18.7 billion (at a 3-percent discount 

rate).

b This NPV is the estimated total value of future operating-cost savings during the analysis 

period, minus the estimated increased product costs (including installation), discounted to 2011. 

In addition, today’s standards would have significant environmental benefits. The energy 

savings would result in cumulative greenhouse gas emission reductions of 113 million to 

143million metric tons (Mt)c

 

a DOE has calculated the energy savings over a period that begins in the year in which compliance with the proposed 

standards would be required (as described in the text preceding Table I.1) and continues through 2045. DOE used 

the same end year (2045) for both types of products to be consistent with the end year that it used in analyzing other 

standard levels that it considered.

of carbon dioxide (CO2) in 2013–2045 for furnaces and in 2015-

b DOE uses discount rates of 7 and 3 percent based on guidance from the Office of Management and Budget (OMB 

Circular A-4, section E (Sept. 17, 2003)). See section IV.G of this notice for further information. c A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons.
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2045 for central air conditioners and heat pumps. During this period, today’s standards would 

also result in emissions reductions of 97 to 124 thousand tons of nitrogen oxides (NOX) and 

0.143 to 0.169 ton of mercury (Hg).d DOE estimates the present monetary value of the total CO2 

emissions reductions is between $0.574 billion and $11.8 billion, expressed in 2009$ and 

discounted to 2011 using a range of discount rates (see notes to Table 1-1). DOE also estimates 

the present monetary value of the NOX emissions reductions, expressed in 2009$ and discounted 

to 2011, is between $12.7 million and $169 million at a 7-percent discount rate, and between 

$30.7 million and $403 million at a 3-percent discount rate.e

The benefits and costs of today’s standards can also be expressed in terms of annualized 

values. The annualized monetary values are the sum of: (1) the annualized national economic 

value, expressed in 2009$, of the benefits from operating products that meet today’s standards 

(consisting primarily of operating cost savings from using less energy, minus increases in 

equipment purchase costs, which is another way of representing consumer NPV), and (2) the 

monetary value of the benefits of emission reductions, including CO2 emission reductions.f The 

value of the CO2 reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated 

using a range of values per metric ton of CO2 developed by a recent interagency process. The 

monetary costs and benefits of cumulative emissions reductions are reported in 2009$ to permit 

comparisons with the other costs and benefits in the same dollar units. The derivation of the SCC 

values is discussed in further detail in chapter 16 of this TSD. 

Although combining the values of operating savings and CO2 emission reductions provides 

a useful perspective, two issues should be considered. First, the national operating savings are 

 

d DOE calculates emissions reductions relative to the most recent version of the Annual Energy Outlook (AEO) 

Reference case forecast. As noted in section 15.2.4 of TSD chapter 15, this forecast accounts for regulatory 

emissions reductions through 2008, including the Clean Air Interstate Rule (CAIR, 70 FR 25162 (May 12, 2005)), 

but not the Clean Air Mercury Rule (CAMR, 70 FR 28606 (May 18, 2005)). Subsequent regulations, including the 

currently proposed CAIR replacement rule, the Clean Air Transport Rule (75 FR 45210 (Aug. 2, 2010)), do not 

appear in the forecast. 

e DOE is aware of multiple agency efforts to determine the appropriate range of values used in evaluating the 

potential economic benefits of reduced Hg emissions. DOE has decided to await further guidance regarding 

consistent valuation and reporting of Hg emissions before it once again monetizes Hg emissions reductions in its 

rulemakings.

f DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. 

First, DOE calculated a present value in 2011, the year used for discounting the NPV of total consumer costs and 

savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates. From the present 

value, DOE then calculated the fixed annual payment over a 32-year period, starting in 2011 that yields the same 

present value. The fixed annual payment is the annualized value. Although DOE calculated annualized values, this 

does not imply that the time-series of cost and benefits from which the annualized values were determined would be

a steady stream of payments.
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domestic U.S. consumer monetary savings that occur as a result of market transactions, whereas 

the value of CO2 reductions is based on a global value. Second, the assessments of operating cost 

savings and CO2 savings are performed with different methods that use quite different time 

frames for analysis. The national operating cost savings is measured for the lifetime of products 

shipped in 2013–2045 for furnaces and 2015-2045 for central air conditioners and heat pumps. 

The SCC values, on the other hand, reflect the present value of future climate-related impacts 

resulting from the emission of one metric ton of carbon dioxide in each year. These impacts 

continue well beyond 2100.

Estimates of annualized benefits and costs of today’s standards for furnace, central air 

conditioner, and heat pump energy efficiency are shown in Table 1-1. The results under the 

primary estimate are as follows. Using a 7-percent discount rate for consumer impacts and the 

SCC series that has a value of $22.1/ton in 2010 (in 2009$), the cost of the standards in today’s 

rule is $527 million to $773 million per year in increased equipment costs, while the annualized 

benefits are $837 million to $1106 million per year in reduced equipment operating costs, $140

million to $178 million in CO2 reductions, and $5.3 million to $6.9 million in reduced NOX

emissions. In this case, the net benefit amounts to $456 million to $517 million per year. DOE 

also calculated annualized net benefits using a range of potential electricity and equipment price 

trend forecasts. Given the range of modeled price trends, the range of net benefits in this case is 

from $295 million to $623 million per year. The low estimate in Table I.3 corresponds to a 

scenario with a low electricity price trend and a constant real price trend for equipment, while the 

high estimate reflects a high electricity price trend and a strong declining real price trend for 

equipment.

Using a 3-percent discount rate for consumer impacts and the SCC series that has a value 

of $22.1/ton in 2010 (in 2009$), the cost of the standards in today’s rule is $566 million to $825

million per year in increased equipment costs, while the benefits are $1289 million to $1686

million per year in reduced operating costs, $140 million to $178 million in CO2 reductions, and 

$7.9 million to $10.2 million in reduced NOX emissions. In this case, the net benefit amounts to 

$871 million to $1049 million per year. DOE also calculated annualized net benefits using a 

range of potential electricity and equipment price trend forecasts. Given the range of modeled 

price trends, the range of net benefits in this case is from $601 million to $1,260 million per 

year. The low estimate corresponds to a scenario with a low electricity price trend and a constant 

real price trend for equipment, while the high estimate reflects a high electricity price trend and a 

strong declining real price trend for equipment.
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Table 1-1 Annualized Benefits and Costs of Standards for Furnace and Central Air 

Conditioner and Heat Pump Energy Efficiency (TSL 4)*

Discount Rate

Primary 

Estimate**

Low 

Estimate**

High 

Estimate**

Monetized (million 2009$/year)

Benefits

Operating Cost Savings

7% 837 to 1,106 723 to 959 955 to 1,258

3% 1,289 to 1,686 1,083 to 1,422 1,493 to 1,948

CO2 Reduction at $4.9/t† 5% 34 to 43 34 to 43 34 to 43

CO2 Reduction at $22.1/t† 3% 140 to 178 141 to 178 140 to 178

CO2 Reduction at $36.3/t† 2.5% 224 to 284 225 to 285 224 to 284

CO2 Reduction at $67.1/t† 3% 427 to 541 428 to 543 427 to 541

NOX Reduction at 

$2,519/ton†

7% 5.3 to 6.9 5.3 to 7.0 5.3 to 6.9

3% 7.9 to 10.2 7.9 to 10.3 7.9 to 10.2

Total††

7% plus CO2

range

876 to 1,653 762 to 1,509 994 to 1,805

7% 983 to 1,290 869 to 1,144 1,100 to 1,442

3% 1,437 to 1,874 1,232 to 1,611 1,641 to 2,136

3% plus CO2

range

1,330 to 2,237 1,125 to 1,975 1,535 to 2,499

Costs

Incremental Product Costs

7% 527 to 773 574 to 840 555 to 819

3% 566 to 825 630 to 916 599 to 876

Net Benefits/Costs

Total††

7% plus CO2

range

349 to 880 188 to 669 438 to 986

7% 456 to 517 295 to 305 545 to 623

3% 871 to 1,049 601 to 695 1,042 to 1,260

3% plus CO2

range

764 to 1,412 494 to 1,059 935 to 1,623

* The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 2015-

2045 for the central air conditioner and heat pump standards.

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the AEO2010

Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, the low 

estimate uses incremental product costs that reflects constant prices (no learning rate) for product prices, and the 

high estimate uses incremental product costs that reflects a declining trend (high learning rate) for product prices. 

The derivation and application of learning rates for product prices is explained in section IV.F.1.
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† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 under 

several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC distributions 

calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value of $67.1 per ton 

represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The value for NOX

(in 2009$) is the average of the low and high values used in DOE’s analysis.

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 3-

percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” and “3% 

plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount rate, and those values 

are added to the full range of CO2 values.

Estimates of annualized benefits and costs of today’s standards for furnace, central air 

conditioner, and heat pump standby mode and off mode power are shown in Table 1-2. The 

results under the primary estimate are as follows. Using a 7-percent discount rate and the SCC 

value of $22.1/ton in 2010 (in 2009$), the cost of the standards in today’s rule is $16.4 million 

per year in increased equipment costs, while the annualized benefits are $46.5 million per year in 

reduced equipment operating costs, $12.4 million in CO2 reductions, and $0.4 million in reduced 

NOX emissions. In this case, the net benefit amounts to $42.8 million per year. Using a 3-percent 

discount rate and the SCC value of $22.10/ton in 2010 (in 2009$), the cost of the standards in 

today’s rule is $19.1 million per year in increased equipment costs, while the benefits are $79.3

million per year in reduced operating costs, $12.4 million in CO2 reductions, and $0.6 million in 

reduced NOX emissions. In this case, the net benefit amounts to $73.2 million per year.
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Table 1-2 Annualized Benefits and Costs of Standards for Furnace, Central Air 

Conditioner, and Heat Pump Standby Mode and Off Mode (TSL 2)*

Discount Rate

Primary 

Estimate**

Low 

Estimate**

High 

Estimate**

Monetized (million 2009$/year)

Benefits

Operating Cost Savings

7% 46.5 40.4 52.8

3% 79.3 67.9 90.8

CO2 Reduction at $4.9/t† 5% 2.9 2.9 2.9

CO2 Reduction at $22.1/t† 3% 12.4 12.4 12.4

CO2 Reduction at $36.3/t† 2.5% 19.9 19.9 19.9

CO2 Reduction at $67.1/t† 3% 37.6 37.6 37.6

NOX Reduction at 

$2,519/ton†

7% 0.4 0.4 0.4

3% 0.6 0.6 0.6

Total††

7% plus CO2

range

49.7 to 84.5 43.6 to 78.4 56.1 to 90.8

7% 59.2 53.1 65.5

3% 92.3 80.9 103.8

3% plus CO2

range

82.8 to 117.5 71.4 to 106.2 94.3 to 129.1

Costs

Incremental Product Costs

7% 16.4 15.2 17.7

3% 19.1 17.6 20.6

Net Benefits/Costs

Total††

7% plus CO2

range

33.3 to 68.1 28.5 to 63.2 38.4 to 73.1

7% 42.8 38.0 47.9

3% 73.2 63.3 83.2

3% plus CO2

range

63.7 to 98.4 53.8 to 88.5 73.7 to 108.5

* The benefits and costs are calculated for products shipped in 2013-2045 for the furnace standards and in 2015-

2045 for the central air conditioner and heat pump standards.

**The Primary, Low, and High Estimates utilize forecasts of energy prices and housing starts from the AEO2010

Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, the low 

estimate uses incremental product costs that reflects constant prices (no learning rate) for product prices, and the 

high estimate uses incremental product costs that reflects a declining trend (high learning rate) for product prices. 

The derivation and application of learning rates for product prices is explained in section IV.F.1.
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† The CO2 values represent global monetized values (in 2009$) of the social cost of CO2 emissions in 2010 under 

several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC distributions 

calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The value of $67.1 per ton 

represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The value for NOX

(in 2009$) is the average of the low and high values used in DOE’s analysis.

†† Total Benefits for both the 3-percent and 7-percent cases are derived using the SCC value calculated at a 3-

percent discount rate, which is $22.1/ton in 2010 (in 2009$). In the rows labeled as “7% plus CO2 range” and “3% 

plus CO2 range,” the operating cost and NOX benefits are calculated using the labeled discount rate, and those values 

are added to the full range of CO2 values.

1.3 OVERVIEW OF ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL 

FURNACES AND CENTRAL AIR CONDITIONERS AND HEAT PUMPS

1.3.1 Furnaces

The National Appliance Energy Conservation Act of 1987 (NAECA) amended the 

Energy Policy and Conservation Act (EPCA) to establish EPCA’s original energy conservation 

standards for furnaces, which are still in force, consisting of minimum AFUE levels at 75-

percent AFUE for mobile home furnaces and 78-percent AFUE for all other furnaces except 

“small” gas furnaces. The standard for mobile home furnaces has applied to products 

manufactured for sale in the United States or imported into the United States, since September 1, 

1990; and the standard for most other furnaces has applied to products manufactured or imported 

since January 1, 1992. (42 U.S.C. 6295(f)(1)–(2)) Pursuant to EPCA, (42 U.S.C. 6295(f)(1)(B)) 

in November 1989 DOE adopted a mandatory minimum AFUE level for “small” furnaces at 78-

percent AFUE, applicable for products manufactured on or after January 1, 1992 54 FR 7916. 

The NAECA amendments to EPCA also required DOE to conduct an initial rulemaking to 

determine whether to amend the standards for mobile home furnaces, and then to conduct two 

more cycles of rulemakings to determine whether to amend all of the standards for furnaces. (42 

U.S.C. 6295(f)(4)(A)-(C))

Pursuant to 42 U.S.C. 6295(f)(4)(B), DOE published a final rule on November 19, 2007 

(the November 2007 Rule) that revised the minimum energy conservation standards for all but 

two product classes of furnaces. 72 FR 65136. This rule completed the first of the two 

rulemakings required under 42 U.S.C. 6295(f)(4)(B)-(C) to consider amending the standards for 

furnaces. The minimum AFUE standards set in the November 2007 Rule for each of the six 

classes of furnaces (10 CFR 430.32(e)(ii)) and are listed in Table 1-3 below.

Table 1-3 Energy Conservation Standards for Residential Furnaces Manufactured On or 

After November 19, 2015

Product Class AFUE (percent)

Non-weatherized Gas Furnaces 80

Weatherized Gas Furnaces 81

Mobile Home Oil-Fired Furnaces 75

Non-weatherized Oil-Fired Furnaces 82

Weatherized Oil-Fired Furnaces 78
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In response to the November 2007 final rule, the state of New York, city of New York, 

state of Connecticut, commonwealth of Massachusetts, and Natural Resources Defense Council 

filed a joint lawsuit against DOE in the United States Court of Appeals for the Second Circuit. 

The petitioners asserted that the standards for residential furnaces promulgated by the November 

2007 final rule did not reflect the “maximum improvement in energy efficiency” that “is 

technologically feasible and economically justified,” as required by section 325(o)(2)(A) of 

EPCA. On April 16, 2009, DOE filed a motion for voluntary remand that the petitioners did not 

oppose. The motion requires DOE to revisit its initial conclusions outlined in the November 

2007 final rule. As part of the remand, DOE originally agreed to issue a final rule amending the 

energy conservation standards for residential furnaces by May 1, 2011. Subsequently, because 

the furnaces rulemaking was combined with the central air conditioners and heat pumps 

rulemaking, the petitioners and DOE agreed that the final rule for furnaces should be issued on 

June 30, 2011, to coincide with the date by which the central air conditioner and heat pump 

rulemaking is required to be issued.

As with central air conditioners and heat pumps, section 306(a) of EISA 2007 amended 

EPCA to allow DOE to consider the establishment of separate regional standards for furnaces. 

(42 U.S.C. 6295(o)(6)(A)) Specifically, EPCA allows for the establishment of a single morerestrictive regional standard in addition to the base national standard for furnaces. (42 U.S.C. 

6295(o)(6)(B)) EPCA stipulates that the regions must include only contiguous states (with the 

exception of Alaska and Hawaii, which can be included in regions that they are not contiguous 

with) and that each state may be placed in only one region (i.e., a state cannot be divided among 

two regions). (42 U.S.C. 6295(o)(6)(C)) EPCA mandates that a regional standard must produce 

significant energy savings in comparison to a single national standard. Further, EPCA provides 

that DOE must determine that the additional standards are economically justified and consider 

the impact of the additional regional standards on consumers, manufacturers, and other market 

participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 

6295(o)(6)(C)-(D)). For single-package air conditioners and single-package heat pumps, DOE 

has analyzed the regional standards on a national basis because the standards considered would 

be identical in each region. Additionally, given the low level of shipments of these products, 

DOE determined that an analysis of regional standards would not produce significant differences

in comparison to a single national standard. DOE made a similar determination for oil-fired 

furnaces.

1.3.2 Central Air Conditioners and Heat Pumps

NAECA also amended EPCA to establish energy conservation standards for central air 

conditioners and heat pumps as well as requirements for determining whether these standards 

should be amended. Specifically, NAECA established energy conservation standards for central 

air conditioners and heat pumps in the form of minimum limits on the seasonal energy efficiency 

ratio (SEER) for air conditioners and for heat pumps operating in the cooling mode, and on the 

heating seasonal performance factor (HSPF) for heat pumps operating in the heating mode. 

NAECA established the following standards for central air conditioners and heat pumps: 10.0 
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SEER/6.8 HSPF for split systems,g 9.7 SEER/6.6 HSPF for single-package systems.h

Pursuant to 42 U.S.C. 6295(d)(3)(A), DOE published a final rule in the Federal Register

on January 22, 2001 (2001 final rule), amending the energy conservation standards for central air 

conditioners and heat pumps. 66 FR 7170. The amended standards would have increased the 

minimum SEER to 13 and the minimum HSPF to 7.7. 

 These 

standards became effective January 1, 1992 for split systems; standards for single-package 

systems came into effect one year later. See 42 U.S.C. 6295(d)(1)(A)-(B) and (2)(A)-(B). 

NAECA also required that DOE conduct two cycles of rulemakings to determine if more 

stringent standards are economically justified and technologically feasible. (42 U.S.C. 

6295(d)(3)(A)-(B)) 

Id.

EPCA was further amended by the Energy Policy Act of 2005 (EPACT), Pub. L. 109-58. 

In Section 141 of EPACT, Congress directed DOE to submit an initial report regarding a plan for 

expeditiously prescribing new or revised standards. Pursuant to Section 141 of EPACT, DOE 

submitted an implementation report

 This final rule constituted the first 

cycle of revised standards for central air conditioners and heat pumps. Shortly after the 

publication of the 2001 final rule, DOE postponed the effective date of the rule to take time to 

reconsider the amended standards for central air conditioners and heat pumps. DOE eventually 

promulgated a 12 SEER standard in a final rule published May 23, 2002 (2002 final rule), 67 FR 

36368; but the U.S. Court of Appeals for the Second Circuit ruled that DOE had done so 

improperly. Natural Resources Defense Council v. Abraham, 355 F.3d 179 (2d Cir. 2004). As a 

result, DOE published a technical amendment on August 17, 2004, which established a 13 SEER 

standard for all central air conditioners and heat pumps, excluding through-the-wall and spaceconstrained systems. 69 FR 50997.

i

 

g

 “Split systems” consist of outdoor and indoor units which are “split” from each other and connected via refrigerant 

tubing. The outdoor unit resides outdoors and consists of a compressor, heat exchanger coil, fan, and fan motor. 

The indoor unit, consisting of a heat exchanger coil, resides either within a furnace or blower-coil unit, and 

conditioned air is conveyed to the home via ducts

to Congress in January 2006. This report specified a 

schedule for the completion of the second rulemaking cycle of revised standards for central air 

conditioners and heat pumps, requiring DOE to publish a final rule by June 2011, with a 

standards compliance effective date of June 2016. In separate court proceedings (New York v. 

Bodman, No. 05 Civ. 7807 (S.D.N.Y. filed Sept. 7, 2005) and Natural Resources Defense 

Council v. Bodman, No. 05 Civ. 7808 (S.D.N.Y. filed Sept. 7, 2005) the resulting consent decree 

h

 In “single-package systems,” all the components that comprise a split system, including the air circulation 

equipment, are placed in a single cabinet. The single-package system resides outdoors, and conditioned air is 

conveyed to the home via ducts.

3

 Energy Conservation Standards Activities, January 2006. This document can be downloaded from the DOE 

website at: http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html.
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(filed November 6, 2006) adopted the schedule for central air conditioners and heat pumps that 

DOE published in the January 2006 report to Congress (i.e., June 30, 2011). 

More recently, EPCA was amended by the Energy Independence and Security Act of 2007 

(EISA 2007), Pub. L. 110-140. In Section 306 of EISA 2007, Congress directed DOE to 

consider regional standards for central air conditioners and heat pumps for one or two regions in 

addition to a base national standard. (42 U.S.C. 6295(o)(6)) EISA 2007 states that in 

considering regional standards, DOE may consider regions made up of contiguous States only. 

Further, in Section 310 of EISA 2007, Congress directed DOE to consider amended test 

procedures and standards for standby-mode and off-mode energy consumption by covered 

equipment for any amended standard published after July 1, 2010. (42 U.S.C. 6295(gg)(3)) 

Because this energy conservation standards rulemaking for central air conditioners and heat 

pumps and furnaces will be completed in 2011, the requirement to incorporate standby-mode and 

off-mode energy use into the energy conservation standards analysis is applicable.

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS

Under EPCA, when DOE studies new or amended standards, it must consider to the 

greatest extent practicable the following seven factors:

• the economic impact of the standard on the manufacturers and consumers of the 

products subject to the standard;

• the savings in operating costs throughout the estimated average life of the products 

in the type (or class) compared to any increases in the price, initial charges, or 

maintenance expense for the products that are likely to result from the imposition 

of the standard;

• the total projected amount of energy savings likely to result directly from the 

imposition of the standard;

• any lessening of the utility or the performance of the products likely to result from 

the imposition of the standard;

• the impact of any lessening of competition, as determined in writing by the 

Attorney General, that is likely to result from the imposition of the standard;

• the need for national energy conservation; and

• other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i))

Other statutory requirements are set forth in 42 U.S.C. 6295(o)(1)-(2)(A), (2)(B)(ii)-(iii), 

and (3)-(4).
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DOE considers the participation of interested parties a very important part of the process 

for setting energy conservation standards. Through formal public notifications (i.e., Federal

Register notices), DOE encourages the participation of all interested parties during the comment 

period in each stage of the rulemaking. Throughout the entire duration of the rulemaking process, 

interactions among interested parties provide a balanced discussion of the information that is 

required for the standards rulemaking.

Before DOE determines whether to adopt a proposed energy conservation standard, it must 

first solicit comments on the proposed standard. (42 U.S.C 6313(a)(6)(B)(i)) Any new or 

amended standard must be designed to achieve significant additional conservation of energy and 

be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)) To determine 

whether economic justification exists, DOE must review comments on the proposal and 

determine that the benefits of the proposed standard exceed its burdens to the greatest extent 

practicable, weighing the seven factors listed above. (42 U.S.C. 6295(o)(2)(B)(i))

EPCA also authorizes DOE to issue a direct final rule establishing an energy conservation 

standard for a covered product on receipt of a statement submitted jointly by interested persons 

that are fairly representative of relevant points of view (including representatives of 

manufacturers of covered products, States, and efficiency advocates) that contains 

recommendations with respect to an energy conservation standard that are in accordance with the 

provisions of 42 U.S.C. 6295(o). EPCA requires that a notice of proposed rulemaking that 

proposes an identical energy efficiency standard be published simultaneously with the direct 

final rule. (42 U.S.C. 6295(p)(4)) If one or more adverse comments or an alternative joint 

recommendation are received relating to the direct final rule, DOE must determine whether the 

comments or alternative recommendation may provide a reasonable basis for withdrawal under 

42 U.S.C. 6295(o) or other applicable law. If DOE makes such a determination, DOE must 

withdraw the direct final rule and proceed with the simultaneously published notice of proposed 

rulemaking. DOE must also publish in the Federal Register the reason why the direct final rule 

was withdrawn. Id

The energy conservation standards rulemaking process usually involves three formal 

public notices (which are published in the Federal Register) after the framework document.

.

j

 

j

Due to the abbreviated rulemaking schedule, the framework document and preliminary analysis for furnaces was 

replaced by the rulemaking analysis plan (RAP).

The 

first of the rulemaking notices is typically a notice of public meeting (NOPM) and availability of 

a preliminary TSD, which is designed to publicly vet the models and tools used in the 

preliminary analysis and to facilitate public participation before the notice of proposed 

rulemaking (NOPR) stage. The second notice is usually the NOPR, which typically presents a 

discussion of comments received in response to the NOPM and the preliminary analyses and 
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analytical tools; analyses of the impacts of potential amended energy conservation standards on 

consumers, manufacturers, and the Nation; DOE’s weighting of these impacts of amended 

energy conservation standards; and the proposed energy conservation standards for each product. 

The third notice is usually the final rule, which presents a discussion of the comments received in 

response to the NOPR; the revised analyses; DOE’s weighting of these impacts; the amended 

energy conservation standards DOE is adopting for each product; and the compliance dates of 

the amended energy conservation standards. Table 1-4 shows the analyses that occur during each 

phase of the typical rulemaking process.

In situations where DOE receives a consensus agreement and exercises its authority to 

issue a direct final rule, the NOPR and direct final rule are published in the Federal Register 

simultaneously. The NOPR proposes the exact same standards as the direct final rule and briefly 

discusses the weighting of the benefits and burdens of the proposed standards being adopted in 

the direct final rule. The direct final rule notice presents a discussion of comments received in 

response to prior phases of the analyses; DOE’s analyses of the impacts of potential amended 

energy conservation standards on consumers, manufacturers, and the Nation; DOE’s weighting 

of these impacts of amended energy conservation standards; and the adopted energy conservation 

standards for each product.

Table 1-4 Analyses During Each Rulemaking Stage

Preliminary Analyses* NOPR** Final Rule†

Market and Technology Assessment Revised Preliminary 

Analyses

Revised NOPR 

Analyses

Screening Analysis Life-Cycle Cost Sub-Group 

Analysis

Engineering Analysis Manufacturer Impact 

Analysis

Energy Use Characterization Utility Impact Analysis

Markups to Determine Equipment 

Price

Employment Impact 

Analysis 

Life-Cycle Cost and Payback Period 

Analyses

Environmental Assessment 

Shipments Analysis Regulatory Impact Analysis

National Impact Analysis

Preliminary Manufacturer Impact 

Analysis

* For furnaces, DOE did not conduct a preliminary analysis due to the shortened rulemaking schedule agreed. DOE 

instead published the RAP for residential furnaces detailing its proposed approach and assumptions.

** For a direct final rule, the NOPR analyses are performed for the direct final rule.

† During the final rule phase, DOE considers the comments submitted by the U.S. Department of Justice in the 

NOPR phase concerning the impact of any lessening of competition that is likely to result from the imposition of the 

standard. (42 U.S.C. 6295(o)(2)(B)(v))
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For furnaces, DOE agreed to complete the rulemaking on an accelerated schedule as a 

part of the remand agreement. Section 307 of EISA 2007 amended EPCA by removing the 

requirement for DOE to publish an advanced notice of proposed rulemaking (ANOPR) when 

amending standards for consumer products. Because DOE had recently completed a rulemaking 

analysis for amended energy conservation standards for furnaces (the November 2007 final rule), 

and given the shortened timeline of the rulemaking and lack of an ANOPR requirement in 

EPCA, DOE developed an alternative rulemaking pathway, which consisted of a notice of public 

meeting (NOPM) and a rulemaking analysis plan (RAP) in place of a framework document and 

preliminary analysis. After the RAP, DOE planned to pursue a typical rulemaking path that 

includes a NOPR followed by a final rule.

On March 15, 2010, DOE published the NOPM and the availability of a RAP. 75 FR 

12144. The RAP contained information on the methodologies, data, and key assumptions that 

DOE planned to use for the NOPR analyses. In the RAP, DOE announced that it was 

considering combining the furnace rulemaking process with the central air conditioner and heat 

pump rulemaking process. The public meeting was held on March 31, 2010 and a comment 

period was extended to April 27, 2010, to allow interested parties to comment on the details of 

the RAP and elaborate on any comments made at the public meeting. 75 FR 19296. 

For central air conditioners and heat pumps, DOE published a notice of public meeting 

and availability of the framework document in June 2008. 73 FR 32243 (June 6, 2008). This

framework document, Rulemaking Framework for Residential Central Air Conditioners and 

Heat Pumps, describes the procedural and analytical approaches DOE anticipated using to 

evaluate the establishment of energy conservation standards for CAC. This document is 

available at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp_standards.

html.

Subsequently, DOE held a public meeting on June 12, 2008, to discuss procedural and 

analytical approaches to the rulemaking and to inform and facilitate stakeholders’ involvement in 

the rulemaking process. The analytical framework presented at the public meeting described 

different analyses, such as the engineering analysis and the life-cycle cost (LCC) and payback 

period (PBP) analyses, the methods proposed for conducting them, and the relationships among 

the various analyses. 

After receiving feedback on the planned approaches in the framework and conducting 

preliminary interviews with manufacturers (described in chapter 12 of the preliminary analysis 

TSD for central air conditioners and heat pumps), DOE developed its preliminary analysis for 

central air conditioners and heat pumps. On March 15, 2010, DOE published the NOPM and 

availability of the preliminary TSD. 75 FR 14368. The preliminary TSD provides technical 

analyses and results that support the information presented in the preliminary NOPM for 

residential central air conditioners and heat pumps. The preliminary TSD is available on DOE’s 

website at 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/cac_tsd_031010.html. 
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DOE held a public meeting on May 5, 2010, to facilitate discussion about the preliminary

analyses that were performed for the NOPM. In addition to the public meeting, a written 

comment period was open until May 17, 2010, to allow interested parties to provide new 

comments or elaborate on any comments made at the public meeting. 75 FR 27227. 

During the rulemaking process for furnaces and central air conditioners and heat pumps, 

on January 15, 2010, a number of interested partiesk

After receiving comments from interested parties at both the furnace and the central air 

conditioner and heat pump public meetings and during the written comment periods (including 

the consensus agreement recommendations), DOE revised the central air conditioner and heat 

pump preliminary analysis and developed a furnaces analysis, based on the feedback from 

interested parties. Additionally, because of the significant interaction between these two products 

as part of the residential heating, ventilation, and air conditioning (HVAC) system, the fact that 

the rulemakings were on similar schedules, and the potential for product switching, DOE 

combined the two rulemakings to allow DOE to analyze the impacts of various standard levels 

and consider the product switching that may occur at various standard levels. DOE organized a 

second round of interviews with manufacturers to gather additional feedback on the analyses as 

part of the manufacturer impact analysis that was conducted for the direct final rule.

submitted a joint comment to DOE’s 

residential furnaces and central air conditioners/ heat pumps rulemakings recommending 

adoption of a package of minimum energy conservation standards for residential central air 

conditioners, heat pumps, and furnaces, as well as associated compliance dates for such 

standards. The original agreement was completed on October 13, 2009, and had 15 signatories, 

including Air-Conditioning, Heating, and Refrigeration Institute (AHRI), American Council for 

an Energy-Efficient Economy (ACEEE), Alliance to Save Energy (ASE), Appliance Standards 

Awareness Project (ASAP), National Resources Defense Council (NRDC), and Northeast 

Energy Efficiency Partnership (NEEP), Northwest Power and Conservation Council (NPCC), 

California Energy Commission (CEC), Bard Manufacturing Company Inc., Carrier Residential 

and Light Commercial Systems, Goodman Global Inc., Lennox Residential, Mitsubishi Electric 

& Electronics USA, National Comfort Products, and Trane Residential. The consensus 

agreement signatories recommended specific energy conservation standards for residential 

furnaces and central air conditioners and heat pumps that they believed would satisfy the EPCA 

requirements in 42 U.S.C. 6295(o).

In addition to the developing new analyses for furnaces and revising the various 

preliminary analyses for central air conditioners, DOE also performed an LCC sub-group 

 

k The consensus agreement was submitted to DOE for consideration as a joint comment made by the following 

organizations: AHRI, ACEEE, ASE, ASAP, NNRDC, and NEEP. (DOE Docket No. EERE–2009–BT–STD–0022, 

Comment 1.3.001; DOE Docket No. EERE–2008–BT–STD–0006, Comment 47.)
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analysis, manufacturer impact analysis, utility impact analysis, employment impact analysis, and 

regulatory impact analysis for the direct final rule stage of this rulemaking.

1.5 STRUCTURE OF THE DOCUMENT

This TSD describes the analytical approaches and data sources used in this rulemaking. 

The TSD consists of the following chapters, and a number of appendices.

Chapter 1 Introduction: provides an overview of the appliance and equipment standards 

program and how it applies to the residential furnaces and central air conditioners 

and heat pumps rulemaking, and outlines the structure of the document.

Chapter 2 Analytical Framework: describes the rulemaking process step by step and 

summarizes the major components of DOE’s analysis.

Chapter 3 Market and Technology Assessment: characterizes the residential furnaces and 

central air conditioners and heat pumps equipment market and the technologies 

available for increasing equipment efficiency.

Chapter 4 Screening Analysis: determines which technology options are viable for 

consideration in the engineering analysis.

Chapter 5 Engineering Analysis: discusses the methods used for developing the relationship 

between increased manufacturer price and increased efficiency.

Chapter 6 Markups Analysis: discusses the methods used for establishing markups for 

converting manufacturer prices to customer product prices.

Chapter 7 Energy Use Analysis: discusses the process used for generating energy-use 

estimates of residential furnaces and central air conditioners and heat pumps for a 

variety of product classes, climate locations, and standard levels.

Chapter 8 Life-Cycle Cost and Payback Period Analyses: discusses the economic effects of 

standards on individual consumers of the products and compares the LCC and 

PBP of products with and without higher efficiency standards.

Chapter 9 Shipments Analysis: discusses the methods used for forecasting shipments with 

and without higher efficiency standards.

Chapter 10 National Impact Analysis: discusses the methods used for forecasting national 

energy consumption and national economic impacts based on annual product

shipments and estimates of future product efficiency distributions in the absence 

and presence of higher efficiency standards.
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Chapter 11 Consumer Sub-Group Analysis: discusses the effects of standards on subgroups

of residential furnaces and central air conditioners and heat pumps customers and 

compares the LCC and PBP of products with and without higher efficiency 

standards for these customers.

Chapter 12 Manufacturer Impact Analysis: discusses the effects of standards on the finances 

and profitability of product manufacturers.

Chapter 13 Utility Impact Analysis: discusses the effects of standards on the installed 

generation capacity of electric utilities.

Chapter 14 Employment Impact Analysis: discusses the effects of standards on National 

employment. 

Chapter 15 Environmental Assessment: discusses the effects of standards on air-borne 

emissions of electric utilities and site emissions.

Chapter 16 Emissions Monetization: discusses the monetization of reductions in CO2 and 

NOX emissions.

Chapter 17 Regulatory Impact Analysis: discusses the present regulatory actions as well as 

the impact of non-regulatory alternatives to setting energy efficiency standards. 

Chapter 18 Regional Standards Impacts on Market Participants: discusses the effects of 

regional standards on distributors, dealers, contractors, and installers.