13120 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

DEPARTMENT OF ENERGY 

10 CFR Part 430 

[Docket Number EERE–2014–BT–STD– 

0031] 

RIN 1904–AD20 

Energy Conservation Program for 

Consumer Products: Energy 

Conservation Standards for 

Residential Furnaces 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Notice of proposed rulemaking 

and announcement of public meeting. 

SUMMARY: The Energy Policy and 

Conservation Act of 1975 (EPCA), as 

amended, prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including residential furnaces. EPCA 

also requires the U.S. Department of 

Energy (DOE) to periodically determine 

whether more-stringent, amended 

standards would be technologically 

feasible and economically justified, and 

would save a significant amount of 

energy. In this document, DOE proposes 

amended energy conservation standards 

for residential non-weatherized gas 

furnaces and mobile home furnaces, in 

partial fulfillment of a court-ordered 

remand of DOE’s 2011 rulemaking for 

these products. The proposed rule also 

announces a public meeting to receive 

comment on these proposed standards 

and associated analyses and results. 

DATES: Meeting: DOE will hold a public 

meeting on Friday, March 27, from 9:00 

a.m. to 4:00 p.m., in Washington, DC. 

The meeting will also be broadcast as a 

webinar. See section VII, ‘‘Public 

Participation,’’ for webinar registration 

information, participant instructions, 

and information about the capabilities 

available to webinar participants. 

Comments: DOE will accept 

comments, data, and information 

regarding this notice of proposed 

rulemaking (NOPR) before and after the 

public meeting, but no later than June 

10, 2015. See section VII, ‘‘Public 

Participation,’’ for details. 

ADDRESSES: The public meeting will be 

held at the U.S. Department of Energy, 

Forrestal Building, Room 8E–089, 1000 

Independence Avenue SW., 

Washington, DC 20585. To attend, 

please notify Ms. Brenda Edwards at 

(202) 586–2945. Please note that foreign 

nationals visiting DOE Headquarters are 

subject to advance security screening 

procedures. Any foreign national 

wishing to participate in the meeting 

should advise DOE as soon as possible 

by contacting Ms. Edwards at the phone 

number above to initiate the necessary 

procedures. Please also note that any 

person wishing to bring a laptop 

computer or tablet into the Forrestal 

Building will be required to obtain a 

property pass. Visitors should avoid 

bringing laptops, or allow an extra 45 

minutes. Persons may also attend the 

public meeting via webinar. For more 

information, refer to section VII, ‘‘Public 

Participation,’’ near the end of this 

NOPR. 

Instructions: Any comments 

submitted must identify the NOPR for 

Energy Conservation Standards for 

Residential Furnaces, and provide 

docket number EERE–2014–BT–STD– 

0031 and/or regulatory information 

number (RIN) number 1904–AD20. 

Comments may be submitted using any 

of the following methods: 

1. Federal eRulemaking Portal: 

www.regulations.gov. Follow the 

instructions for submitting comments. 

2. Email: ResFurnaces2014STD0031@

ee.doe.gov. Include the docket number 

and/or RIN in the subject line of the 

message. Submit electronic comments 

in Word Perfect, Microsoft Word, PDF, 

or ASCII file format, and avoid the use 

of special characters or any form on 

encryption. 

3. Postal Mail: Ms. Brenda Edwards, 

U.S. Department of Energy, Building 

Technologies Office, Mailstop EE–5B, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121. If 

possible, please submit all items on a 

compact disc (CD), in which case it is 

not necessary to include printed copies. 

4. Hand Delivery/Courier: Ms. Brenda 

Edwards, U.S. Department of Energy, 

Building Technologies Office, 950 

L’Enfant Plaza SW., Suite 600, 

Washington, DC 20024. Telephone: 

(202) 586–2945. If possible, please 

submit all items on a CD, in which case 

it is not necessary to include printed 

copies. 

Written comments regarding the 

burden-hour estimates or other aspects 

of the collection-of-information 

requirements contained in this proposed 

rule may be submitted to Office of 

Energy Efficiency and Renewable 

Energy through the methods listed 

above and by email to Chad_S_

Whiteman@omb.eop.gov. 

No telefacsimilies (faxes) will be 

accepted. For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see section VII of this document (Public 

Participation). 

Docket: The docket, 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, some documents listed in the 

index may not be publically available, 

such as those containing information 

that is exempt from public disclosure. 

A link to the docket Web page can be 

found at: http://www.regulations.gov/

#!docketDetail;D=EERE-2014-BT-STD0031. This Web page contains a link to 

the docket for this notice on the 

www.regulations.gov site. The 

www.regulations.gov Web page contains 

simple instructions on how to access all 

documents, including public comments, 

in the docket. See section VII, ‘‘Public 

Participation,’’ for further information 

on how to submit comments through 

www.regulations.gov. 

For further information on how to 

submit a comment, review other public 

comments and the docket, or participate 

in the public meeting, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT:

Mr. John Cymbalsky, 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: (202) 287–1692. Email: 

residential_furnaces_and_boilers@

ee.doe.gov. 

Mr. Eric Stas or Ms. Johanna 

Hariharan, U.S. Department of Energy, 

Office of the General Counsel, GC–33, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 586–9507 or (202) 

287–6307. Email: Eric.Stas@hq.doe.gov 

or Johanna.Hariharan@hq.doe.gov. 

For information on how to submit or 

review public comments, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Summary of the Proposed Rule 

A. Benefits and Costs to Consumers 

B. Impact on Manufacturers 

C. National Benefits 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

Residential Furnaces 

III. General Discussion 

A. Product Classes and Scope of Coverage 

B. Test Procedure 

C. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13121 

1For editorial reasons, upon codification in the 

U.S. Code, Part B was redesignated Part A. 

2All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act 

(AEMTCA), Public Law 112–210 (Dec. 18, 2012). 

D. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

E. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Savings in Operating Costs Compared to 

Increase in Price (LCC and PBP) 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Products 

e. Impact of Any Lessening of Competition 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

F. Regional Standards 

G. Compliance Date 

H. Standby Mode and Off Mode 

IV. Methodology 

A. Market and Technology Assessment 

1. Definition and Scope of Coverage 

2. Product Classes 

3. Technology Options 

B. Screening Analysis 

1. Screened-Out Technologies 

2. Remaining Technologies 

C. Engineering Analysis 

1. Efficiency Levels 

a. Baseline Efficiency Level and Product 

Characteristics 

b. Other Energy Efficiency Levels 

2. Cost-Assessment Methodology 

a. Teardown Analysis 

b. Cost Model 

c. Manufacturing Production Costs 

d. Cost-Efficiency Relationship 

e. Manufacturer Markup 

f. Manufacturer Interviews 

D. Markups Analysis 

E. Energy Use Analysis 

1. Active Mode 

2. Standby Mode and Off Mode 

F. Life-Cycle Cost and Payback Period 

Analysis 

1. Inputs to Installed Cost 

2. Installation Cost 

3. Inputs to Operating Costs 

a. Energy Consumption 

b. Energy Prices 

c. Maintenance and Repair Costs 

d. Product Lifetime 

e. Discount Rates 

f. Base-Case Efficiency 

4. Accounting for Product Switching Under 

Potential Standards 

5. Inputs to Payback Period Analysis 

G. Shipments Analysis 

1. Overview 

2. Impact of Potential Standards on 

Shipments: Accounting for Product 

Switching 

H. National Impact Analysis 

1. Efficiency in the Base Case and 

Standards Cases 

2. Product Cost Trend 

3. Product Switching 

4. National Energy Savings 

5. Net Present Value of Consumer Benefit 

I. Consumer Subgroup Analysis 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

a. Government Regulatory Impact Model 

Key Inputs 

b. Government Regulatory Impact Model 

Scenarios 

3. Manufacturer Interviews 

K. Emissions Analysis 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

2. Valuation of Other Emissions 

Reductions 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

1. TSLs for AFUE 

2. TSLs for Standby Mode and Off Mode 

Power 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback Period 

2. Economic Impacts on Manufacturers 

a. Industry Cash-Flow Analysis Results 

b. Direct Impacts on Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Subgroups of Manufacturers 

e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Consumer Costs 

and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Product Utility or 

Performance 

5. Impact of Any Lessening of Competition 

6. Need of the Nation To Conserve Energy 

7. Other Factors 

8. Summary of National Economic Impacts 

C. Proposed Standards 

1. Benefits and Burdens of TSLs 

Considered for NWGFs and MHGFs 

AFUE Standards 

2. Benefits and Burdens of TSLs 

Considered for NWGFs and MHGFs 

Standby Mode and Off Mode Standards 

3. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under the Regulatory Flexibility 

Act 

1. Description and Estimated Number of 

Small Entities Regulated 

2. Description and Estimate of Compliance 

Requirements 

3. Duplication, Overlap, and Conflict With 

Other Rules and Regulations 

4. Significant Alternatives to the Rule 

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 

VII. Public Participation 

A. Attendance at the Public Meeting 

B. Procedure for Submitting Requests To 

Speak and Prepared General Statements 

for Distribution 

C. Conduct of the Public Meeting 

D. Submission of Comments 

E. Issues on Which DOE Seeks Comment 

VIII. Approval of the Office of the Secretary 

I. Summary of the Proposed Rule 

Title III, Part B1 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6291–6309, as codified), established the 

Energy Conservation Program for 

Consumer Products Other Than 

Automobiles.2 These products include 

non-weatherized gas furnaces (NWGFs) 

and mobile home gas furnaces (MHGFs), 

the subject of this notice. 

Pursuant to EPCA, any new or 

amended energy conservation standard 

must be designed to achieve the 

maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified. (42 

U.S.C. 6295(o)(2)(A)) Furthermore, the 

new or amended standard must result in 

a significant conservation of energy. (42 

U.S.C. 6295(o)(3)(B)) EPCA specifically 

provides that DOE must conduct a 

second round of energy conservation 

standards rulemaking for NWGFs and 

MHGFs. (42 U.S.C. 6295(f)(4)(C)) The 

statute also provides that not later than 

6 years after issuance of any final rule 

establishing or amending a standard, 

DOE must publish either a notice of 

determination that standards for the 

product do not need to be amended, or 

a notice of proposed rulemaking 

including new proposed energy 

conservation standards. (42 U.S.C. 

6295(m)(1)) Once complete, this 

rulemaking will satisfy both statutory 

provisions. 

In accordance with these and other 

statutory provisions discussed in this 

document, DOE proposes amended 

energy conservation standards for 

NWGFs and MHGFs. The proposed 

standards, which are expressed as 

minimum annual fuel utilization 

efficiencies (AFUE), are shown in Table 

I.1. Table I.2 shows the proposed 

standards for standby mode and off 

mode. These proposed standards, if 

adopted, would apply to all products 

listed in Table I.1 and Table I.2 and 

manufactured in, or imported into, the 

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13122 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

3The average LCC savings are measured relative 

to the base-case efficiency distribution, which 

depicts the furnace market in the compliance year 

(see section IV.F.3.f). The simple PBP, which is 

designed to compare specific furnace AFUE and 

standby and off mode efficiency levels, is measured 

relative to the baseline furnace AFUE and standby 

and off mode (see section IV.C.1.a). The AFUE 

standard results include the projected fuel 

switching as described in chapter 8 of the NOPR 

TSD. 

4See appendix 8G of the NOPR TSD for details 

of the derivation of the average furnace lifetime. 

United States on or after the date 5 years after the publication of the final rule for 

this rulemaking. 

TABLE I.1—PROPOSED AFUE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES (TSL 3) 

Product class 

Proposed standard: 

AFUE 

(%) 

Non-Weatherized Gas-Fired Furnaces ................................................................................................................................ 92 

Mobile Home Gas-Fired Furnaces ...................................................................................................................................... 92 

TABLE I.2—PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES ELECTRICAL ENERGY CONSUMPTION (TSL 3) 

Product class 

Proposed 

standby mode 

standard: PW,SB

(watts) 

Proposed 

off mode 

standard: PW,OFF

(watts) 

Non-Weatherized Gas-Fired Furnaces ........................................................................................................ 8.5 8.5 

Mobile Home Gas-Fired Furnaces .............................................................................................................. 8.5 8.5 

A. Benefits and Costs to Consumers 

Table I.3 and Table I.4 present DOE’s 

evaluation of the economic impacts of 

the proposed AFUE and standby and off 

mode standards on consumers of 

NWGFs and MHGFs, as measured by the 

average life-cycle cost (LCC) savings and 

the simple payback period (PBP).3 In 

both cases, the average LCC savings are 

positive for all product classes. The PBP 

for each product class falls well below 

the average furnace lifetime, which is 

approximately 22 years.4

TABLE I.3—IMPACTS OF PROPOSED AFUE ENERGY CONSERVATION STANDARDS ON CONSUMERS OF RESIDENTIAL

FURNACES (TSL 3) 

Product class 

Average 

LCC savings 

(2013$) 

Simple 

payback period 

(years) 

Non-Weatherized Gas-Fired Furnaces ........................................................................................................ $305 7.2 

Mobile Home Gas-Fired Furnaces .............................................................................................................. 691 2.2 

TABLE I.4—IMPACTS OF PROPOSED STANDBY MODE AND OFF MODE ELECTRICAL ENERGY CONSUMPTION ENERGY

CONSERVATION STANDARDS ON CONSUMERS OF RESIDENTIAL FURNACES (TSL 3) 

Product class 

Average 

LCC savings 

(2013$) 

Median 

payback 

period 

(years) 

Non-Weatherized Gas Furnace ................................................................................................................... $13 6.6 

Mobile Home Gas Furnace ......................................................................................................................... 1 5.9 

B. Impact on Manufacturers 

The industry net present value (INPV) 

is the sum of the discounted cash flows 

to the industry from the base year of the 

MIA analysis through the end of the 

analysis period (2014 to 2050). Using a 

real discount rate of 6.4 percent, DOE 

estimates that the INPV for 

manufacturers of NWGF and MHGF is 

$1055.13 million in 2013$. DOE 

analyzed the impacts of AFUE energy 

conservation standards and standby/off 

mode electrical energy consumption 

energy conservation standards on 

manufacturers independently. Under 

the proposed AFUE standards, DOE 

expects the change in INPV to range 

from ¥7.93 percent to 0.62 percent. 

Under the proposed standby mode and 

off mode standards, DOE expects the 

change in INPV will range from ¥1.1 to 

0.2 percent. Industry total conversion 

costs are expected to total $55 million 

as a result of the proposed standard. 

A key consideration in DOE’s 

selection of the proposed standard was 

the cumulative regulatory burden 

associated with the residential furnace 

fan final rule, 79 FR 38130 (July 3, 

2014). Today’s proposed standard and 

the furnace fans standard impact the 

same products (i.e., residential 

furnaces), affect the same group of 

manufacturers, and go into effect in a 

similar timeframe. Based on currently 

available information, DOE assumes the 

regulatory impact of these two rules to 

be largely additive with limited 

opportunity for cost savings to be 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13123 

5Energy savings in this section refer to full-fuelcycle savings (see section IV.H for discussion). 

6A quad is equal to 1015 British thermal units 

(Btu). 

7A metric ton is equivalent to 1.1 short tons. 

Results for emissions other than CO2 are presented 

in short tons. 

8 DOE calculated emissions reductions relative to 

the Annual Energy Outlook 2014 (AEO 2014) 

Reference case, which generally represents current 

legislation and environmental regulations, 

including recent government actions for which 

implementing regulations were available as of 

October 31, 2013. 

9Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/

assets/inforeg/technical-update-social-cost-ofcarbon-for-regulator-impact-analysis.pdf.) 

10 DOE is investigating valuation of avoided Hg 

and SO2 emissions. 

achieved through coordinating the 

expenditures of the two rules. Thus, 

when considering the total conversion 

costs of the furnace fans final rule ($40.6 

million), manufacturers could incur a 

combined total of $95.6 million 

conversion costs in the years leading up 

to the 2019 furnace fans and the 

projected 2021 residential furnaces 

effective dates. 

DOE selected the proposed standard 

levels in today’s proposal in such a way 

as to reduce the cumulative burden on 

manufacturers that result from the 

additive effects of the two rules, 

although higher standard levels for 

residential furnaces may have been 

justified based solely on the analytical 

results presented in this NOPR. See 

Sections V.B.2.e and V.C.1 for a more 

detail discussion of cumulative 

regulatory burden. 

C. National Benefits 5

DOE’s analyses indicate that the 

proposed AFUE energy conservation 

standards for NWGFs and MHGFs 

would save a significant amount of 

energy. The lifetime energy savings for 

NWGFs and MHGFs purchased in the 

30-year period that begins in the first 

full year of compliance with amended 

standards (2021–2050) amount to 2.78 

quads 6 of full-fuel-cycle energy. This is 

a savings of 1.1 percent relative to the 

energy use of these products in the base 

case without amended standards. 

The cumulative net present value 

(NPV) of total consumer costs and 

savings for the proposed NWGF and 

MHGF AFUE standards ranges from 

$3.1 billion to $16.1 billion at 7-percent 

and 3-percent discount rates, 

respectively. This NPV expresses the 

estimated total value of future 

operating-cost savings minus the 

estimated increased installed product 

costs for NWGFs and MHGFs purchased 

in 2021–2050. 

In addition, the proposed NWGF and 

MHGF AFUE standards would have 

significant environmental benefits. The 

proposed standards would result in 

cumulative emission reductions of 137 

million metric tons (Mt) 7 of carbon 

dioxide (CO2), 3,424 thousand tons of 

methane (CH4), and 816 thousand tons 

of nitrogen oxides (NOX).8 Projected 

emissions show an increase of 203 

thousand tons of sulfur dioxide (SO2), 

2.61 thousand tons of nitrous oxide 

(N2O), and 0.629 tons of mercury (Hg). 

The increase is due to projected 

switching from NWGFs to electric heat 

pumps and electric furnaces under the 

proposed standards. The cumulative 

reduction in CO2 emissions through 

2030 amounts to 4.2 Mt, which is a 

savings of 0.2 percent relative to the CO2

emissions in the base case without 

amended standards. 

The value of the CO2 reductions is 

calculated using a range of values per 

metric ton of CO2 (otherwise known as 

the Social Cost of Carbon, or SCC) 

developed by a recent Federal 

interagency process.9 The derivation of 

the SCC values is discussed in section 

IV.L. Using discount rates appropriate 

for each set of SCC values, DOE 

estimates the present monetary value of 

the CO2 emissions reduction is between 

$0.7 billion and $11.7 billion. 

Additionally, DOE estimates the present 

monetary value of the NOX emissions 

reduction to be $0.32 billion to $0.88 

billion at 7-percent and 3-percent 

discount rates, respectively.10

Table I.5 summarizes the national 

economic benefits and costs expected to 

result from the proposed AFUE 

standards for NWGFs and MHGFs. 

TABLE I.5—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED AFUE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) * 

Category Present value 

(billion 2013$) 

Discount rate 

(%) 

Benefits 

Consumer Operating Cost Savings ........................................................................................................... 8.9 7 

27.7 3 

CO2 Reduction Monetized Value ($12.0/t case) ** .................................................................................... 0.7 5 

CO2 Reduction Monetized Value ($40.5/t case) ** .................................................................................... 3.8 3 

CO2 Reduction Monetized Value ($62.4/t case) ** .................................................................................... 6.1 2 .5 

CO2 Reduction Monetized Value ($119/t case) ** ..................................................................................... 11.7 3 

NOX Reduction Monetized Value (at $2,684/ton) ** .................................................................................. 0.9 3 

Total Benefits † .......................................................................................................................................... 13.0 7 

32.4 3 

Costs 

Consumer Incremental Installed Costs ..................................................................................................... 5.8 7 

11.6 3 

Total Net Benefits 

Including Emissions Reduction Monetized Value † ................................................................................... 7.2 7 

20.8 3 

* This table presents the costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. 

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13124 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of high and low values found in the literature. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with a 3-percent discount rate 

($40.5/t in 2015). 

For the proposed standby mode and 

off mode standards, the lifetime energy 

savings for NWGFs and MHGFs 

purchased in the 30-year period that 

begins in the first full year of 

compliance with amended standards 

(2021–2050) amount to 0.28 quads of 

energy. This is a savings of 15.9 percent 

relative to the standby energy use of 

these products in the base case without 

amended standards. 

The cumulative net present value 

(NPV) of total consumer costs and 

savings for the proposed NWGF and 

MHGF standby mode and off mode 

standards ranges from $1.0 billion to 

$3.3 billion at 7-percent and 3-percent 

discount rates, respectively. This NPV 

expresses the estimated total value of 

future operating-cost savings minus the 

estimated increased product costs for 

NWGFs and MHGFs purchased in 2021– 

2050. 

In addition, the proposed standby 

mode and off mode standards would 

have significant environmental benefits. 

The energy savings would result in 

cumulative emission reductions of 15.6 

Mt of CO2, 75 thousand tons of CH4, 

0.22 thousand tons of N2O, 13.0 

thousand tons of SO2, 24.3 thousand 

tons of NOX, and 0.04 tons of Hg. The 

cumulative reduction in CO2 emissions 

through 2030 amounts to 1.5 Mt. 

As noted above, the value of the CO2

reductions is calculated using a range of 

SCC values developed by a recent 

Federal interagency process. Using 

discount rates appropriate for each set 

of SCC values, DOE estimates the 

present monetary value of the CO2

emissions reduction is between $0.09 

billion and $1.37 billion. Additionally, 

DOE estimates the present monetary 

value of the NOX emissions reduction to 

be $0.01 billion to $0.03 billion at 7- 

percent and 3-percent discount rates, 

respectively. 

Table I.6 summarizes the national 

economic benefits and costs expected to 

result from the proposed standby mode 

and off mode standards for NWGFs and 

MHGFs. 

TABLE I.6—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE

ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

(TSL 3) * 

Category Present value 

(billion 2013$) 

Discount rate 

(%) 

Benefits 

Consumer Operating Cost Savings ......................................................................................................... 1 .4 7 

3 .9 3 

CO2 Reduction Monetized Value ($12.0/t case) ** .................................................................................. 0 .1 5 

CO2 Reduction Monetized Value ($40.5/t case) ** .................................................................................. 0 .4 3 

CO2 Reduction Monetized Value ($62.4/t case) ** .................................................................................. 0 .7 2 .5 

CO2 Reduction Monetized Value ($119/t case) ** ................................................................................... 1 .4 3 

NOX Reduction Monetized Value (at $2,684/ton) ** ................................................................................ 0 .01 7 

0 .03 3 

Total Benefits † ........................................................................................................................................ 1 .8 7 

4 .4 3 

Costs 

Consumer Incremental Installed Costs ................................................................................................... 0 .33 7 

0 .67 3 

Total Net Benefits 

Including Emissions Reduction Monetized Value † ................................................................................. 1 .5 7 

3 .7 3 

* This table presents the costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of high and low values found in the literature. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with a 3-percent discount rate 

($40.5/t in 2015). 

The benefits and costs of the proposed 

energy conservation standards, for 

NWGFs and MHGFs products sold in 

2021–2050, can also be expressed in 

terms of annualized values. Benefits and 

costs for the AFUE standards are 

considered separately from benefits and 

costs for the standby mode and off mode 

electrical consumption standards, 

because it was not feasible to develop a 

single, integrated standard. As 

discussed in the October 20, 2010 test 

procedure final rule, DOE concluded 

that due to the magnitude of the active 

mode energy consumption as compared 

to the standby mode and off mode 

electrical consumption, an integrated 

metric would not be feasible because the 

standby and off mode electrical 

consumption would be a de minimis 

portion of the overall energy 

consumption. 75 FR 64621, 64627. 

Thus, an integrated metric could not be 

used to effectively regulate the standby 

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11To convert the time-series of costs and benefits 

into annualized values, DOE calculated a present 

value in 2014, the year used for discounting the 

NPV of total consumer costs and savings. For the 

benefits, DOE calculated a present value associated 

with each year’s shipments in the year in which the 

shipments occur (e.g., 2020 or 2030), and then 

discounted the present value from each year to 

2014. The calculation uses discount rates of 3 and 

7 percent for all costs and benefits except for the 

value of CO2 reductions, for which DOE used casespecific discount rates, as shown in Table I.7. Using 

the present value, DOE then calculated the fixed 

annual payment over a 30-year period, starting in 

the compliance year, that yields the same present 

value. 

mode and off mode energy 

consumption. The annualized monetary 

values are the sum of: (1) The 

annualized national economic value of 

the benefits from consumer operation of 

products that meet the proposed new or 

amended standards (consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

product purchase and installation costs, 

which is another way of representing 

consumer NPV), and (2) the annualized 

monetary value of the benefits of 

emission reductions, including CO2

emission reductions.11

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 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 different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

NWGFs and MHGFs shipped in 2021– 

2050. The SCC values, on the other 

hand, reflect the present value of some 

future climate-related impacts resulting 

from the emission of one ton of carbon 

dioxide in each year. These impacts 

continue well beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed AFUE standards 

are shown in Table I.7. The results 

under the primary estimate are as 

follows. Using a 7-percent discount rate 

for benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate ($40.5/t in 2015), the cost 

of the NWGFs and MHGFs standards 

proposed in this rule is $701 million per 

year in increased equipment costs, 

while the estimated benefits are $1,074 

million per year in reduced equipment 

operating costs, $231 million per year in 

CO2 reductions, and $39 million per 

year in reduced NOX emissions. In this 

case, the net benefit would amount to 

$642 million per year. Using a 3-percent 

discount rate for all benefits and costs 

and the average SCC series that uses a 

3-percent discount rate ($40.5/t in 

2015), the estimated cost of the NWGFs 

and MHGFs standards proposed in this 

rule is $709 million per year in 

increased equipment costs, while the 

estimated benefits are $1,690 million 

per year in reduced equipment 

operating costs, $231 million per year in 

CO2 reductions, and $54 million per 

year in reduced NOX emissions. In this 

case, the net benefit would amount to 

$1,264 million per year. 

TABLE I.7—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE ENERGY CONSERVATION STANDARDS FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

Benefits 

Consumer Operating Cost Savings 7 ..................................... 1,074 .............................. 903 ................................. 1,174. 

3 ..................................... 1,690 .............................. 1,383 .............................. 1,887. 

CO2 Reduction Monetized Value 

($12.0/t case) **.

5 ..................................... 64 ................................... 59 ................................... 72. 

CO2 Reduction Monetized Value 

($40.5/t case) **.

3 ..................................... 231 ................................. 211 ................................. 260. 

CO2 Reduction Monetized Value 

($62.4/t case) **.

2.5 .................................. 340 ................................. 311 ................................. 384. 

CO2 Reduction Monetized Value 

($119/t case) **.

3 ..................................... 715 ................................. 654 ................................. 805. 

NOX Reduction Monetized Value 

(at $2,684/ton) **.

7 ..................................... 38.50 .............................. 35.68 .............................. 42.48. 

3 ..................................... 53.52 .............................. 49.26 .............................. 59.53. 

Total Benefits † ....................... 7 plus CO2 range ........... 1,177 to 1,828 ................ 998 to 1,593 ................... 1,288 to 2,022. 

7 ..................................... 1,343 .............................. 1,150 .............................. 1,476. 

3 plus CO2 range ........... 1,807 to 2,458 ................ 1,491 to 2,087 ................ 2,018 to 2,751. 

3 ..................................... 1,974 .............................. 1,643 .............................. 2,206. 

Costs 

Consumer Incremental Installed 

Costs.

7 ..................................... 701 ................................. 750 ................................. 683. 

3 ..................................... 709 ................................. 766 ................................. 689. 

Net Benefits 

Total † ..................................... 7 plus CO2 range ........... 476 to 1,127 ................... 248 to 843 ...................... 605 to 1,339. 

7 ..................................... 642 ................................. 400 ................................. 793. 

3 plus CO2 range ........... 1,098 to 1,749 ................ 725 to 1,320 ................... 1,329 to 2,062. 

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TABLE I.7—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE ENERGY CONSERVATION STANDARDS FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3)—Continued 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

3 ..................................... 1,264 .............................. 877 ................................. 1,517. 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO 2014 Reference case, Low Estimate, and High Estimate, respectively. In addition, incremental product costs reflect a modest decline rate for projected product price trends in the Primary Estimate, a constant 

rate in the Low Benefits Estimate, and a higher decline rate in the High Benefits Estimate. The methods used to derive projected price trends are 

explained in section IV.F.1. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of high and low values found in the literature. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate 

($40.5/t in 2015). In the rows labeled ‘‘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 the proposed standby mode and 

off mode standards are shown in Table 

I.8. The results under the primary 

estimate are as follows. Using a 7- 

percent discount rate for benefits and 

costs other than CO2 reduction, for 

which DOE used a 3-percent discount 

rate along with the average SCC series 

that uses a 3-percent discount rate 

($40.5/t in 2015), the estimated cost of 

the NWGFs and MHGFs standby mode 

and off mode standards proposed in this 

rule is $40.4 million per year in 

increased equipment costs, while the 

estimated benefits are $165.4 million 

per year in reduced equipment 

operating costs, $26.9 million per year 

in CO2 reductions, and $1.1 million per 

year in reduced NOX emissions. In this 

case, the net benefit would amount to 

$153.0 million per year. Using a 3- 

percent discount rate for all benefits and 

costs and the average SCC series that 

uses a 3-percent discount rate ($40.5/t 

in 2015), the estimated cost of the 

NWGFs and MHGFs standby mode and 

off mode standards proposed in this rule 

is $41.0 million per year in increased 

equipment costs, while the estimated 

benefits are $240.2 million per year in 

reduced equipment operating costs, 

$26.9 million per year in CO2

reductions, and $1.6 million per year in 

reduced NOX emissions. In this case, the 

net benefit would amount to $227.6 

million per year. 

TABLE I.8—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

Benefits 

Consumer Operating Cost Savings 7 ..................................... 165.4 .............................. 149.7 .............................. 190.8 

3 ..................................... 240.2 .............................. 214.9 .............................. 281.5 

CO2 Reduction Monetized Value 

($12.0/t case) **.

5 ..................................... 7.65 ................................ 6.94 ................................ 8.60 

CO2 Reduction Monetized Value 

($40.5/t case) **.

3 ..................................... 26.87 .............................. 24.31 .............................. 30.28 

CO2 Reduction Monetized Value 

($62.4/t case) **.

2.5 .................................. 39.46 .............................. 35.68 .............................. 44.50 

CO2 Reduction Monetized Value 

($119/t case) **.

3 ..................................... 83.18 .............................. 75.26 .............................. 93.76 

NOX Reduction Monetized Value 

(at $2,684/ton) **.

7 ..................................... 1.14 ................................ 1.04 ................................ 1.27 

3 ..................................... 1.59 ................................ 1.44 ................................ 1.78 

Total Benefits † ....................... 7 plus CO2 range ........... 174 to 250 ...................... 158 to 226 ...................... 201 to 286 

7 ..................................... 193.4 .............................. 175.0 .............................. 222.4 

3 plus CO2 range ........... 249 to 325 ...................... 223 to 292 ...................... 292 to 377 

3 ..................................... 268.6 .............................. 240.7 .............................. 313.5 

Costs 

Consumer Incremental Installed 

Costs.

7 ..................................... 40.35 .............................. 45.01 .............................. 36.86 

3 ..................................... 41.02 .............................. 46.13 .............................. 37.19 

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TABLE I.8—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3)—Continued 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

Net Benefits 

Total † ..................................... 7 plus CO2 range ........... 134 to 209 ...................... 113 to 181 ...................... 164 to 249 

7 ..................................... 153.0 .............................. 130.0 .............................. 185.5 

3 plus CO2 range ........... 208 to 284 ...................... 177 to 246 ...................... 255 to 340 

3 ..................................... 227.6 .............................. 194.6 .............................. 276.3 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO 2014 Reference case, Low Estimate, and High Estimate, respectively. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of high and low values found in the literature. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate 

($40.5/t in 2015). In the rows labeled ‘‘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 the combined annualized 

benefits and costs of the proposed AFUE 

and standby mode and off mode 

standards are shown in Table I.9. The 

results under the primary estimate are 

as follows. Using a 7-percent discount 

rate for benefits and costs other than 

CO2 reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate ($40.5/t in 2015), the 

estimated cost of the NWGFs and 

MHGFs AFUE and standby mode and 

off mode standards proposed in this rule 

is $741.2 million per year in increased 

equipment costs, while the estimated 

benefits are $1,240 million per year in 

reduced equipment operating costs, 

$257.4 million per year in CO2

reductions, and $39.6 million per year 

in reduced NOX emissions. In this case, 

the net benefit would amount to $795.5 

million per year. Using a 3-percent 

discount rate for all benefits and costs 

and the average SCC series that uses a 

3-percent discount rate ($40.5/t in 

2015), the estimated cost of the NWGFs 

and MHGFs AFUE and standby mode 

and off mode standards proposed in this 

rule is $750.5 million per year in 

increased equipment costs, while the 

estimated benefits are $1,930 million 

per year in reduced equipment 

operating costs, $257.4 million per year 

in CO2 reductions, and $55.1 million 

per year in reduced NOX emissions. In 

this case, the net benefit would amount 

to $1,492 million per year. 

TABLE I.9—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE AND STANDBY MODE AND OFF MODE ENERGY

CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

Benefits 

Consumer Operating Cost Savings 7 ..................................... 1,240 .............................. 1,053 .............................. 1,365. 

3 ..................................... 1,930 .............................. 1,598 .............................. 2,168. 

CO2 Reduction Monetized Value 

($12.0/t case) **.

5 ..................................... 71.49 .............................. 65.60 .............................. 80.15. 

CO2 Reduction Monetized Value 

($40.5/t case) **.

3 ..................................... 257.4 .............................. 235.2 .............................. 290.0. 

CO2 Reduction Monetized Value 

($62.4/t case) **.

2.5 .................................. 379.6 .............................. 346.6 .............................. 428.0. 

CO2 Reduction Monetized Value 

($119/t case) **.

3 ..................................... 798.1 .............................. 729.2 .............................. 898.9. 

NOX Reduction Monetized Value 

(at $2,684/ton) **.

7 ..................................... 39.64 .............................. 36.72 .............................. 43.75. 

3 ..................................... 55.11 .............................. 50.70 .............................. 61.31. 

Total Benefits † ....................... 7 plus CO2 range ........... 1,351 to 2,077 ................ 1,155 to 1,819 ................ 1,489 to 2,308. 

7 ..................................... 1,537 .............................. 1,325 .............................. 1,699. 

3 plus CO2 range ........... 2,057 to 2,783 ................ 1,715 to 2,378 ................ 2,310 to 3,128. 

3 ..................................... 2,243 .............................. 1,884 .............................. 2,519. 

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TABLE I.9—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE AND STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3)—Continued 

Discount rate (%) 

(Million 2013$/year) 

Primary 

estimate * 

Low net 

benefits 

estimate * 

High net 

benefits 

estimate * 

Costs 

Consumer Incremental Installed 

Costs.

7 ..................................... 741.2 .............................. 795.0 .............................. 719.9. 

3 ..................................... 750.5 .............................. 812.4 .............................. 726.3. 

Net Benefits 

Total † ..................................... 7 plus CO2 range ........... 609.6 to 1,336 ................ 360.3 to 1,024 ................ 768.9 to 1,588. 

7 ..................................... 795.5 .............................. 529.8 .............................. 978.7. 

3 plus CO2 range ........... 1,306 to 2,033 ................ 0,902 to 1,566 ................ 1,583 to 2,402. 

3 ..................................... 1,492 .............................. 1,072 .............................. 1,793. 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO 2014 Reference case, Low Estimate, and High Estimate, respectively. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of high and low values found in the literature. 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate 

($40.5/t in 2015). In the rows labeled ‘‘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. 

DOE has tentatively concluded that 

the proposed standards (for AFUE as 

well as standby mode and off mode) 

represent the maximum improvement in 

energy efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy. DOE further 

notes that products achieving these 

standard levels are already 

commercially available for all product 

classes covered by this proposal. Based 

on the analyses described above, DOE 

has tentatively concluded that the 

benefits of the proposed standards to the 

Nation (energy savings, positive NPV of 

consumer benefits, consumer LCC 

savings, and emission reductions) 

would outweigh the burdens (loss of 

INPV for manufacturers and LCC 

increases for some consumers). 

DOE also considered more-stringent 

energy efficiency levels as trial standard 

levels, and is still considering them in 

this rulemaking. However, DOE has 

tentatively concluded that the potential 

burdens of the more-stringent energy 

efficiency levels would outweigh the 

projected benefits. Based on 

consideration of the public comments 

DOE receives in response to this NOPR 

and related information collected and 

analyzed during the course of this 

rulemaking effort, DOE may adopt 

energy efficiency levels presented in 

this NOPR that are either higher or 

lower than the proposed standards, or 

some combination of level(s) that 

incorporate the proposed standards in 

part. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying today’s proposal, as well as 

some of the relevant historical 

background related to the establishment 

of amended standards for residential 

non-weatherized gas furnaces and 

mobile home gas furnaces. 

A. Authority 

Title III, Part B of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6291–6309, as codified) established the 

Energy Conservation Program for 

Consumer Products Other Than 

Automobiles, a program covering most 

major household appliances 

(collectively referred to as ‘‘covered 

products’’). These products include the 

residential furnaces that are the subject 

of this rulemaking. (42 U.S.C. 

6292(a)(5)) EPCA, as amended, 

prescribed energy conservation 

standards for these products (42 U.S.C. 

6295(f)(1) and (2)), and directed DOE to 

conduct further rulemakings to 

determine whether to amend these 

standards (42 U.S.C. 6295(f)(4)). Under 

42 U.S.C. 6295(m), the agency must 

periodically review established energy 

conservation standards for a covered 

product; under this requirement, such 

review must be conducted no later than 

6 years from the issuance of any final 

rule establishing or amending a 

standard for a covered product. 

Pursuant to EPCA, DOE’s energy 

conservation program for covered 

products consists essentially of four 

parts: (1) Testing; (2) labeling; (3) 

establishing Federal energy 

conservation standards; and (4) 

certification and enforcement 

procedures. The Federal Trade 

Commission (FTC) is primarily 

responsible for labeling, and DOE 

implements the remainder of the 

program. Subject to certain criteria and 

conditions, DOE is required to conduct 

a second round of rulemaking under 42 

U.S.C. 6295(f)(4)(C) to consider 

amended energy conservation standards 

for residential furnaces, and DOE is also 

required to consider amended standards 

under 42 U.S.C. 6295(m)(1) by June 27, 

2017 (i.e., with either: (1) A NOPR with 

proposed standards, or (2) a notice of 

determination not to amend the 

standards within six years of issuance of 

the last final rule for residential 

furnaces). DOE is further required to 

develop test procedures to measure the 

energy efficiency, energy use, or 

estimated annual operating cost of each 

covered product prior to the adoption of 

a new or amended energy conservation 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13129 

standard. (42 U.S.C. 6295(o)(3)(A) and 

(r)) Manufacturers of covered products 

must use the prescribed DOE test 

procedure as the basis for certifying to 

DOE that their products comply with 

the applicable energy conservation 

standards adopted under EPCA and 

when making representations to the 

public regarding the energy use or 

efficiency of those products. (42 U.S.C. 

6293(c) and 6295(s)) Similarly, DOE 

must use these test procedures to 

determine whether the products comply 

with standards adopted pursuant to 

EPCA. (42 U.S.C. 6295(s)) The DOE test 

procedures for residential furnaces 

appear at title 10 of the Code of Federal 

Regulations (CFR) part 430, subpart B, 

appendix N. In 2012, DOE initiated a 

rulemaking to review the residential 

furnace and boiler test procedure. 

Details on this rulemaking are discussed 

in section III.B. 

DOE must follow specific statutory 

criteria for prescribing amended 

standards for covered products, 

including residential furnaces. As 

indicated above, any amended standard 

for a covered product must be designed 

to achieve the maximum improvement 

in energy efficiency that is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A) and (3)(B)) Furthermore, 

DOE may not adopt any standard that 

would not result in the significant 

conservation of energy. (42 U.S.C. 

6295(o)(3)) Moreover, DOE may not 

prescribe a standard: (1) For certain 

products, including residential furnaces, 

if no test procedure has been established 

for the product, or (2) if DOE determines 

by rule that the proposed standard is not 

technologically feasible or economically 

justified. (42 U.S.C. 6295(o)(3)(A)–(B)) 

In deciding whether a proposed 

standard is economically justified, after 

receiving comments on the proposed 

standard, 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 by, 

to the greatest extent practicable, 

considering the following seven factors: 

(1) The economic impact of the 

standard on manufacturers and 

consumers of the products subject to the 

standard; 

(2) The 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; 

(3) The total projected amount of 

energy (or as applicable, water) savings 

likely to result directly from the 

standard; 

(4) Any lessening of the utility or the 

performance of the covered products 

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; 

(6) The need for national energy and 

water conservation; and 

(7) Other factors the Secretary of 

Energy (Secretary) considers relevant. 

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

EPCA, as codified, also contains what 

is known as an ‘‘anti-backsliding’’ 

provision, which prevents the Secretary 

from prescribing any amended standard 

that either increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of 

a covered product. (42 U.S.C. 

6295(o)(1)) Also, the Secretary may not 

prescribe an amended or new standard 

if interested persons have established by 

a preponderance of evidence that the 

standard is likely to result in the 

unavailability in the United States of 

any covered product type (or class) of 

performance characteristics (including 

reliability), features, sizes, capacities, 

and volumes that are substantially the 

same as those generally available in the 

United States. (42 U.S.C. 6295(o)(4)) 

Further, EPCA, as codified, 

establishes a rebuttable presumption 

that a standard is economically justified 

if the Secretary finds that the additional 

cost to the consumer of purchasing a 

product complying with an energy 

conservation standard level will be less 

than three times the value of the energy 

savings during the first year that the 

consumer will receive as a result of the 

standard, as calculated under the 

applicable test procedure. (42 U.S.C. 

6295(o)(2)(B)(iii)) 

Additionally, 42 U.S.C. 6295(q)(1) 

specifies requirements when 

promulgating an energy conservation 

standard for a covered product that has 

two or more subcategories. DOE must 

specify a different standard level for a 

type or class of covered product that has 

the same function or intended use, if 

DOE determines that products within 

such group: (A) Consume a different 

kind of energy from that consumed by 

other covered products within such type 

(or class); or (B) have a capacity or other 

performance-related feature that other 

products within such type (or class) do 

not have and such feature justifies a 

higher or lower standard. (42 U.S.C. 

6295(q)(1)) In determining whether a 

performance-related feature justifies a 

different standard for a group of 

products, DOE must consider such 

factors as the utility to the consumer of 

the feature and other factors DOE deems 

appropriate. Id. Any rule prescribing 

such a standard must include an 

explanation of the basis on which such 

higher or lower level was established. 

(42 U.S.C. 6295(q)(2)) 

Federal energy conservation 

requirements generally supersede State 

laws or regulations concerning energy 

conservation testing, labeling, and 

standards. (42 U.S.C. 6297(a)–(c)) DOE 

may, however, grant waivers of Federal 

preemption for particular State laws or 

regulations, in accordance with the 

procedures and other provisions set 

forth under 42 U.S.C. 6297(d). 

Pursuant to amendments contained in 

the Energy Independence and Security 

Act of 2007 (EISA 2007), Public Law 

110–140, DOE may consider the 

establishment of regional energy 

conservation standards for furnaces 

(except boilers). (42 U.S.C. 

6295(o)(6)(B)) Specifically, in addition 

to a base national standard for a 

product, DOE may establish for furnaces 

a single more-restrictive regional 

standard. (42 U.S.C. 6295(o)(6)(B)) The 

regions must include only contiguous 

States (with the exception of Alaska and 

Hawaii, which may be included in 

regions with which they are not 

contiguous), and each State may be 

placed in only one region (i.e., an entire 

State cannot simultaneously be placed 

in two regions, nor can it be divided 

between two regions). (42 U.S.C. 

6295(o)(6)(C)) Further, DOE can 

establish the additional regional 

standards only: (1) Where doing so 

would produce significant energy 

savings in comparison to a single 

national standard; (2) if the regional 

standards are economically justified; 

and (3) after considering the impact of 

these standards on consumers, 

manufacturers, and other market 

participants, including product 

distributors, dealers, contractors, and 

installers. (42 U.S.C. 6295(o)(6)(D)) 

Finally, pursuant to other 

amendments contained in EISA 2007, 

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 for residential 

furnaces address standby mode and off 

mode energy use. In this rulemaking, 

DOE intends to adopt separate energy 

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12After APGA filed its petition for review on 

December 23, 2011, various entities subsequently 

intervened. 

conservation standards to address 

standby mode and off mode energy use. 

B. Background 

1. Current Standards 

EPCA established the energy 

conservation standards that apply to 

most residential furnaces currently 

being manufactured. The original 

standards, which are still in place for a 

number of product classes (including all 

product classes except for nonweatherized oil-fired furnaces), 

consisted of a minimum AFUE of 75 

percent for mobile home furnaces and a 

minimum AFUE of 78 percent for all 

other furnaces, except ‘‘small’’ gas 

furnaces (those having an input rate of 

less than 45,000 Btu per hour), for 

which DOE was directed to prescribe a 

separate standard. (42 U.S.C. 6295(f)(1)– 

(2); 10 CFR 430.32(e)(1)(i)) 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. Id. 

On November 17, 1989, DOE published 

a final rule in the Federal Register 

adopting the current standard for 

‘‘small’’ gas furnaces, which consists of 

a minimum AFUE of 78 percent that has 

applied to products manufactured or 

imported since January 1, 1992. 54 FR 

47916. 

EPCA also required DOE to conduct 

two rounds of rulemaking to consider 

amended standards for residential 

furnaces (42 U.S.C. 6295(f)(4)(B)–(C)), a 

requirement subsequently expanded to 

encompass a six-year look back review 

of all covered products (42 U.S.C. 

6295(m)(1)). In a final rule published on 

November 19, 2007 (November 2007 

final rule), DOE prescribed amended 

energy conservation standards for 

residential furnaces manufactured on or 

after November 19, 2015. 72 FR 65136. 

The November 2007 final rule revised 

the energy conservation standards for 

non-weatherized gas furnaces to 80 

percent AFUE, weatherized gas furnaces 

to 81 percent AFUE, mobile home gas 

furnaces to 80 percent AFUE, and nonweatherized oil-fired furnaces to 82 

percent AFUE. Id. at 65169. 

Subsequently, on October 31, 2011, DOE 

published a notice of effective date and 

compliance dates (76 FR 67037) to 

confirm amended energy conservation 

standards and compliance dates 

contained in a June 27, 2011 direct final 

rule (76 FR 37408) for residential central 

air conditioners and residential 

furnaces. These two rulemakings 

represented the first and the second, 

respectively, of the two rulemakings 

required under 42 U.S.C. 6295(f)(4)(B)– 

(C) to consider amending the standards 

for furnaces. 

The June 2011 direct final rule and 

October 2011 notice of effective date 

and compliance dates amended, in 

relevant part, the energy conservation 

standards and compliance dates for 

three product classes of residential 

furnaces (i.e., non-weatherized gas 

furnaces, mobile home gas furnaces, and 

non-weatherized oil furnaces) The 

existing standards were left in place for 

three classes of residential furnaces (i.e., 

weatherized oil-fired furnaces, mobile 

home oil-fired furnaces, and electric 

furnaces). For one class of residential 

furnaces (weatherized gas furnaces), 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 electric furnaces. 

Compliance with the energy 

conservation standards promulgated in 

the June 2011 direct final rule was to be 

required on May 1, 2013 for nonweatherized furnaces and on January 1, 

2015 for weatherized furnaces. 76 FR 

37408, 37547–48 (June 27, 2011); 76 FR 

67037, 67051 (Oct. 31, 2011). The 

amended energy conservation standards 

and compliance dates in the June 2011 

direct final rule would have superseded 

those standards and compliance dates 

promulgated by the November 2007 

final rule for non-weatherized gas 

furnaces, mobile home gas furnaces, 

non-weatherized oil furnaces. Similarly, 

the amended compliance date for 

weatherized gas furnaces in the June 

2011 direct final rule supersedes the 

compliance date in the November 2007 

final rule. 

After publication of the October 2011 

notice, the American Public Gas 

Association (APGA) sued DOE 12 in the 

United States Court of Appeals for the 

District of Columbia Circuit (D.C. 

Circuit) to invalidate the rule as it 

pertained to non-weatherized gas 

furnaces (as discussed further in section 

II.B.2). 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 non-weatherized gas 

furnaces and mobile home gas furnaces 

be vacated and remanded to DOE for 

further rulemaking. As a result, only the 

standards for non-weatherized oil-fired 

furnaces and weatherized gas furnaces 

established in the June 2011 direct final 

rule will go into effect as stated in that 

final rule. The standards established by 

the June 2011 direct final rule for the 

non-weatherized gas furnaces and 

mobile home gas furnaces will not go 

into effect, and thus, the standards 

established for these products in the 

November 2007 final rule will require 

compliance beginning on November 19, 

2015. As stated previously, the 

standards for weatherized oil-fired 

furnaces, mobile home oil-fired 

furnaces, and electric furnaces were 

unchanged, and as such, the original 

standards for those product classes will 

remain in effect. The standards for all 

residential furnaces, including the two 

product classes being analyzed in this 

NOPR, are set forth in DOE’s regulations 

at 10 CFR 430.32(e)(1)(ii). Table II.1 

below shows the upcoming standards 

for product classes that have been 

previously amended (either by the 

November 2007 final rule or June 2011 

direct final rule) and the existing 

standards for the product classes where 

there AFUE standard has not been 

amended. 

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TABLE II.1—FEDERAL ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES

Product class 

Minimum annual 

fuel utilization 

efficiency 

(%) 

Compliance date 

Non-weatherized Gas-Fired * ....................................................................................................................... 80 11/19/2015 

Mobile Home Gas-Fired * ............................................................................................................................ 80 11/19/2015 

Weatherized Gas-Fired ................................................................................................................................ 81 1/1/2015 

Non-weatherized Oil-Fired ........................................................................................................................... 83 5/1/2013 

Mobile Home Oil-Fired ................................................................................................................................. 75 9/1/1990 

Weatherized Oil-Fired .................................................................................................................................. 78 1/1/1992 

Electric ......................................................................................................................................................... 78 1/1/1992 

* Only non-weatherized gas-fired and mobile home gas-fired furnaces are being analyzed for this current rulemaking. 

2. History of Standards Rulemaking for 

Residential Furnaces 

Given the somewhat complicated 

interplay of recent DOE rulemakings 

and statutory provisions related to 

residential furnaces, DOE provides the 

following regulatory history as 

background leading to the present 

rulemaking. 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 described above for mobile 

home furnaces and for all other furnaces 

except ‘‘small’’ gas furnaces. (42 U.S.C. 

6295(f)(1)–(2)) Pursuant to 42 U.S.C. 

6295(f)(1)(B), in November 1989, DOE 

adopted a mandatory minimum AFUE 

level for ‘‘small’’ furnaces. 54 FR 47916 

(Nov. 17, 1989). The standards 

established by NAECA and the 

November 1989 final rule for ‘‘small’’ 

gas furnaces are still in effect for all 

residential product classes except for 

non-weatherized oil-fired furnaces, for 

which the standards adopted in the June 

2011 direct final rule are in effect. 

Pursuant to EPCA, DOE was required 

to conduct two rounds of rulemaking to 

consider amended energy conservation 

standards for furnaces. (42 U.S.C. 

6295(f)(4)(B) and (C)) In satisfaction of 

this first round of amended standards 

rulemaking under 42 U.S.C. 

6295(f)(4)(B), as noted above, DOE 

published a final rule in the Federal 

Register on November 19, 2007 (the 

November 2007 Rule) that revised these 

standards for most furnaces, but left 

them in place for two product classes 

(i.e., mobile home oil-fired furnaces and 

weatherized oil-fired furnaces; there 

standards were to apply to furnaces 

manufactured or imported on and after 

November 19, 2015). 72 FR 65136. 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 65169. 

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 residential furnaces 

promulgated in the November 2007 Rule 

did not reflect the ‘‘maximum 

improvement in energy efficiency’’ that 

‘‘is technologically feasible and 

economically justified,’’ as required 

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 

rule would be vacated, but indicated 

that DOE would revisit its initial 

conclusions outlined in the November 

2007 Rule in a subsequent rulemaking 

action. DOE also agreed that the final 

rule would address both regional 

standards for furnaces, as well as the 

effects of alternate standards on natural 

gas prices. The Second Circuit granted 

DOE’s motion on April 21, 2009. 

On June 27, 2011 DOE published a 

direct final rule (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 in section II.B.1, 

the June 2011 DFR amended the existing 

energy conservation standards for nonweatherized gas furnaces, mobile home 

gas furnaces, and non-weatherized oil 

furnaces, and amended the compliance 

date (but left the existing standards in 

place) for weatherized gas furnaces. The 

June 2011 DFR also established 

electrical standby mode and off mode 

standards for non-weatherized gas 

furnaces, non-weatherized oil furnaces, 

and electric furnaces. DOE confirmed 

the standards and compliance dates 

promulgated in the June 2011 final rule 

in a notice of effective date and 

compliance dates published on October 

31, 2011. 76 FR 67037. As noted earlier, 

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 to invalidate the DOE rule as it 

pertained to non-weatherized natural 

gas furnaces. 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 interveners 

in the case, in which DOE agreed to a 

remand of the non-weatherized gas 

furnace and mobile home gas furnace 

portions of the June 2011 direct final 

rule in order to conduct further noticeand-comment rulemaking. Accordingly, 

the Court’s order vacated the June 2011 

DFR in part (i.e., those portions relating 

to non-weatherized gas furnaces and 

mobile home gas furnaces) and 

remanded to the agency for further 

rulemaking. 

As part of the settlement, DOE has 

agreed to issue a notice of public 

rulemaking within one year of the 

remand, and to issue a final rule within 

the later of two years of the issuance of 

remand or one year of the issuance of 

the proposed rule, including at least a 

ninety-day public comment period. Due 

to the extensive and recent rulemaking 

history for residential furnaces, as well 

as the associated opportunities for 

notice and comment described above, 

DOE is foregoing the typical earlier 

rulemaking stages (e.g., framework 

document, preliminary analysis) and 

has instead developed this NOPR. DOE 

has tentatively concluded that there has 

been a sufficient recent exchange of 

information between interested parties 

and DOE regarding the energy 

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13132 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

conservation standards for residential 

furnaces such as to allow for this 

proceeding to move directly to the 

NOPR stage. Moreover, DOE notes that 

under 42 U.S.C. 6295(p), DOE is only 

required to publish a notice of proposed 

rule and accept public comments before 

amending energy conservation 

standards in a final rule (i.e., DOE is not 

required to conduct the earlier 

rulemaking stages). 

DOE has initiated this rulemaking in 

partial fulfillment of the remand in 

American Public Gas Association, et al. 

v. Department of Energy, et al. and 

pursuant to its authority under 42 

U.S.C. 42 U.S.C. 6295(f)(4)(C), which 

requires DOE to conduct a second round 

of amended standards rulemaking for 

residential non-weatherized gas 

furnaces and mobile home gas furnaces. 

EPCA, as amended by EISA 2007, also 

requires that not later than 6 years after 

issuance of any final rule establishing or 

amending a standard, DOE must publish 

either a notice of the determination that 

standards for the product do not need to 

be amended, or a notice of proposed 

rulemaking including proposed energy 

conservation standards. (42 U.S.C. 

6295(m)(1)) This rulemaking will satisfy 

both statutory provisions. 

Furthermore, EISA 2007 amended 

EPCA to require that any new or 

amended energy conservation standard 

adopted after July 1, 2010, shall address 

standby mode and off mode energy 

consumption pursuant to 42 U.S.C. 

6295(o). (42 U.S.C. 6295(gg)(3)) If 

feasible, the statute directs DOE to 

incorporate standby mode and off mode 

energy consumption into a single 

standard with the product’s active mode 

energy use. If a single standard is not 

feasible, DOE may consider establishing 

a separate standard to regulate standby 

mode and off mode energy 

consumption. Consequently, DOE will 

consider standby mode and off mode 

energy use as part of this rulemaking for 

residential furnaces. 

III. General Discussion 

A. Product Classes and Scope of 

Coverage 

When evaluating and establishing 

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 a different standard. 

In making a determination 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 

deems appropriate. (42 U.S.C. 6295(q)). 

As previously noted in section II.B.2, 

DOE agreed to the partial vacatur of the 

June 2011 final rule as it relates to 

energy conservation standards for nonweatherized gas-fired furnaces and 

mobile home gas-fired furnaces in the 

settlement agreement to resolve the 

litigation in American Public Gas 

Association, et al. v. Department of 

Energy, et al. Therefore, for this 

rulemaking, DOE has only considered 

amending the energy conservation 

standards for these two product classes 

of residential furnaces (i.e., nonweatherized gas-fired furnaces and 

mobile home gas-fired furnaces). This 

rulemaking considers energy 

conservation standards for electrical 

power consumption in standby mode 

and off mode, as well as the annual fuel 

utilization efficiency standards for both 

product classes. More information 

relating to the scope of coverage is 

described in section IV.A of this 

proposed rule. 

B. Test Procedure 

DOE’s current energy conservation 

standards for residential furnaces are 

expressed in terms of annual fuel 

utilization efficiency for fossil fuel 

consumption (see 10 CFR 430.32(e)(1)). 

AFUE is an annualized fuel efficiency 

metric that fully accounts for fuel 

consumption in active, standby, and off 

modes. The existing DOE test procedure 

for determining the AFUE of residential 

furnaces is located at 10 CFR part 430, 

subpart B, appendix N. The current DOE 

test procedure for residential furnaces 

was originally established by a May 12, 

1997 final rule, which incorporates by 

reference the American Society of 

Heating, Refrigerating and AirConditioning Engineers (ASHRAE)/

American National Standards Institute 

(ANSI) Standard 103–1993, Method of 

Testing for Annual Fuel Utilization 

Efficiency of Residential Central 

Furnaces and Boilers (1993). 62 FR 

26140, 26157. 

On October 20, 2010, DOE updated its 

test procedures for residential furnaces 

in a final rule published in the Federal 

Register (October 2010 test procedure 

rule). 75 FR 64621. This rule amended 

DOE’s test procedure for residential 

furnaces and boilers to establish a 

method for measuring the electrical 

energy use in standby mode and off 

mode for gas-fired, oil-fired, and electric 

furnaces pursuant to requirements 

established by EISA 2007. These test 

procedure amendments were primarily 

based on and incorporate by reference 

provisions of the International 

Electrotechnical Commission (IEC) 

Standard 62301 (First Edition), 

‘‘Household electrical appliances— 

Measurement of standby power.’’ On 

December 31, 2012, DOE published a 

final rule in the Federal Register which 

updated the incorporation by reference 

of the standby mode and off mode test 

procedure provisions to refer to the 

latest edition of IEC Standard 62301 

(Second Edition). 77 FR 76831. 

On July 10, 2013, DOE published a 

final rule in the Federal Register (July 

2013 final rule) that modified the 

existing testing procedures for 

residential furnaces and boilers. 78 FR 

41265. The modification addressed the 

omission of equations needed to 

calculate AFUE for two-stage and 

modulating condensing furnaces and 

boilers that are tested using an optional 

procedure provided by section 9.10 of 

ASHRAE 103–1993 (incorporated by 

reference into DOE’s test procedure), 

which allows the test engineer to omit 

the heat-up and cool-down tests if 

certain conditions are met. Specifically, 

the DOE test procedure allows 

condensing boilers and furnaces to omit 

the heat-up and cool-down tests 

provided that the units have no 

measurable airflow through the 

combustion chamber and heat 

exchanger during the burner off period 

and have post-purge period(s) of less 

than 5 seconds. For two-stage and 

modulating condensing furnaces and 

boilers, ASHRAE 103–1993 (and by 

extension the DOE test procedure) does 

not contain the necessary equations to 

calculate the heating seasonal efficiency 

(which contributes to the ultimate 

calculation of AFUE) when the option 

in section 9.10 is selected. The July 

2013 final rule adopted two new 

equations needed to account for the use 

of section 9.10 for two-stage and 

modulating condensing furnaces and 

boilers. Id. 

EPCA, as amended by EISA 2007, 

requires that DOE must review test 

procedures for all covered products at 

least once every 7 years. (42 U.S.C. 

6293(b)(1)(A)). Accordingly, DOE must 

complete the residential furnaces and 

boiler test procedure rulemaking no 

later than December 19, 2014 (i.e., 7 

years after the enactment of EISA 2007), 

which is before the expected completion 

of this energy conservation standards 

rulemaking. In February 2015, DOE 

issued a notice of proposed rulemaking 

for the test procedure (February 2015 

Test Procedure NOPR), a necessary step 

toward fulfillment of the requirement 

under 42 U.S.C. 6293(b)(1)(A) for 

residential furnaces and boilers. DOE 

must base the analysis of amended 

energy conservation standards on the 

most recent version of its test 

procedures, and accordingly, DOE will 

use any amended test procedure when 

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13 DOE also presents a sensitivity analysis that 

considers impacts for products shipped in a 9-year 

period. 14 In the past, DOE presented energy savings 

results for only the 30-year period that begins in the 

year of compliance. In the calculation of economic 

impacts, however, DOE considered operating cost 

savings measured over the entire lifetime of 

products purchased in the 30-year period. DOE has 

chosen to modify its presentation of national energy 

savings to be consistent with the approach used for 

its national economic analysis. 

considering product efficiencies, energy 

use, and efficiency improvements in its 

analyses. Major changes proposed in the 

February 2015 Test Procedure NOPR 

that relate to residential furnaces 

included proposals to: 

• Adopt ANSI/ASHRAE 103–2007 by 

reference in place of the existing 

reference to ANSI/ASHRAE 103–1993; 

• Modify the requirements for the 

measurement of condensate under 

steady-state conditions; 

• Update references to installation 

manuals; 

• Update the auxiliary electrical 

consumption calculation to include 

additional measurements of electrical 

consumption; 

• Adopt a method for qualifying the 

use of the minimum draft factor. 

C. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology and prototype 

designs that could improve the 

efficiency of the products or equipment 

that are the subject of the rulemaking. 

As the first step in such an analysis, 

DOE develops a list of technology 

options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially-available products or in 

working prototypes to be 

technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) Practicability to 

manufacture, install, and service; (2) 

adverse impacts on product utility or 

availability; and (3) adverse impacts on 

health or safety. 10 CFR part 430, 

subpart C, appendix A, section 

4(a)(4)(ii)–(iv). Additionally, it is DOE 

policy not to include in its analysis any 

proprietary technology that is a unique 

pathway to achieving a certain 

efficiency level. Section IV.B of this 

NOPR discusses the results of the 

screening analysis for residential 

furnaces, particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the trial 

standard levels (TSLs) in this 

rulemaking. For further details on the 

screening analysis for this rulemaking, 

see chapter 4 of the NOPR technical 

support document (TSD). 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered product, it must determine the 

maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such product. (42 U.S.C. 

6295(p)(1)). Accordingly, in the 

engineering analysis, DOE determined 

the maximum technologically feasible 

(max-tech) improvements in energy 

efficiency for NWGFs and MHGFs, 

using the design parameters for the 

most-efficient products available on the 

market or in working prototypes. The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C of this proposed rule and 

in chapter 5 of the NOPR TSD. 

D. Energy Savings 

1. Determination of Savings 

For each TSL, DOE projected energy 

savings from the products that are the 

subject of this rulemaking purchased in 

the 30-year period that begins in the 

year of compliance with amended 

standards (2021–2050).13 The savings 

are measured over the entire lifetime of 

products purchased in the 30-year 

analysis period.14 DOE quantified the 

energy savings attributable to each TSL 

as the difference in energy consumption 

between each standards case and the 

base case. The base case represents a 

projection of energy consumption in the 

absence of amended energy 

conservation standards, and it considers 

market forces and policies that affect 

demand for more-efficient products. 

DOE used its national impact analysis 

(NIA) spreadsheet model to estimate 

energy savings from potential amended 

standards for the products that are the 

subject of this rulemaking. The NIA 

spreadsheet model (described in section 

IV.H of this NOPR) calculates energy 

savings in site energy, which is the 

energy directly consumed by products 

at the locations where they are used. For 

electricity, DOE reports national energy 

savings on an annual basis in terms of 

primary (source) energy savings, which 

is the savings in the energy that is used 

to generate and transmit the site 

electricity. To calculate the primary 

energy savings, DOE derives annual 

conversion factors from the model used 

to prepare the Energy Information 

Administration’s (EIA) most recent 

Annual Energy Outlook (AEO). 

DOE has begun to also estimate fullfuel-cycle energy savings, as discussed 

in DOE’s statement of policy and notice 

of policy amendment. 76 FR 51282 

(August 18, 2011), as amended at 77 FR 

49701 (August 17, 2012). The full-fuelcycle (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 efficiency standards. 

DOE’s approach is based on the 

calculation of an FFC multiplier for 

each of the energy types used by 

covered equipment. For more 

information on FFC energy savings, see 

section IV.H.3. 

2. Significance of Savings 

To adopt more-stringent standards for 

a covered product, DOE must determine 

that such action would result in 

‘‘significant’’ energy savings. (42 U.S.C. 

6295(o)(3)(B)) Although the term 

‘‘significant’’ is not defined in the Act, 

the U.S. Court of Appeals for the District 

of Columbia Circuit, in Natural 

Resources Defense Council v. 

Herrington, 768 F.2d 1355, 1373 (D.C. 

Cir. 1985), opined that Congress 

intended ‘‘significant’’ energy savings in 

the context of EPCA to be savings that 

were not ‘‘genuinely trivial.’’ The energy 

savings for all of the trial standard levels 

considered in this rulemaking, 

including the proposed standards 

(presented in section V.B.3), are 

nontrivial, and, therefore, DOE 

considers them ‘‘significant’’ within the 

meaning of section 325 of EPCA. 

E. Economic Justification 

1. Specific Criteria 

EPCA provides seven factors to be 

evaluated in determining whether a 

potential energy conservation standard 

is economically justified. (42 U.S.C. 

6295(o)(2)(B)(i)(I)–(VII)) The following 

sections discuss how DOE has 

addressed each of those seven factors in 

this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of a 

potential amended standard on 

manufacturers, DOE conducts a 

manufacturer impact analysis (MIA), as 

discussed in section IV.J. DOE first uses 

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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 industrywide impacts analyzed include: (1) 

Industry net present value (INPV), 

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. Second, DOE 

analyzes and reports the impacts on 

different types of manufacturers, 

including impacts on small 

manufacturers. Third, DOE considers 

the impact of standards on domestic 

manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

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 net 

present value of the economic impacts 

applicable to a particular rulemaking. 

DOE also evaluates the LCC impacts of 

potential standards on identifiable 

subgroups of consumers that may be 

affected disproportionately by a national 

standard. 

b. Savings in Operating Costs Compared 

to Increase in Price (LCC and PBP) 

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(o)(2)(B)(i)(II)) DOE conducts 

this comparison in its LCC and PBP 

analyses. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating expense 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the product. The LCC 

analysis requires a variety of inputs, 

such as product prices, product energy 

consumption, energy prices, 

maintenance and repair costs, product 

lifetime, and consumer discount rates. 

To account for uncertainty and 

variability in specific inputs, such as 

product lifetime and discount rate, DOE 

uses a distribution of values, with 

probabilities attached to each value. For 

its analysis, DOE assumes that 

consumers will purchase the covered 

products in the first year of compliance 

with amended standards. 

The PBP is the estimated amount of 

time (in years) it takes consumers to 

recover the increased purchase cost 

(including installation) of a moreefficient product through lower 

operating costs. DOE calculates the PBP 

by dividing the change in purchase cost 

due to a more-stringent standard by the 

change in annual operating cost for the 

year that standards are assumed to take 

effect. 

The LCC savings for the considered 

efficiency levels are calculated relative 

to a base case that reflects projected 

market trends in the absence of 

amended standards. DOE identifies the 

percentage of consumers estimated to 

receive LCC savings or experience an 

LCC increase, in addition to the average 

LCC savings associated with a particular 

standard level. In contrast, the PBP is 

measured relative to the baseline 

product. 

DOE’s LCC and PBP analyses are 

discussed in further detail in section 

IV.F. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) 

As discussed in section IV.H, DOE uses 

the NIA spreadsheet to project national 

energy savings. 

d. 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 products. (42 U.S.C. 

6295(o)(2)(B)(i)(IV)) Based on data 

available to DOE, the standards 

proposed in this document would not 

reduce the utility or performance of the 

products under consideration in this 

rulemaking. 

e. 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 proposed standard. (42 U.S.C. 

6295(o)(2)(B)(i)(V)) It also directs the 

Attorney General to determine the 

impact, if any, of any lessening of 

competition likely to result from a 

proposed standard and to transmit such 

determination to the Secretary within 60 

days of the publication of a proposed 

rule, together with an analysis of the 

nature and extent of the impact. (42 

U.S.C. 6295(o)(2)(B)(ii)) DOE will 

transmit a copy of this proposed rule to 

the Attorney General with a request that 

the Department of Justice (DOJ) provide 

its determination on this issue. DOE 

will publish and respond to the 

Attorney General’s determination in the 

final rule. 

f. 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 new or amended 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 conducts a utility impact 

analysis to estimate how standards may 

affect the nation’s needed power 

generation capacity, as discussed in 

section IV.M. 

New or amended standards also are 

likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases associated with energy 

production. DOE conducts an emissions 

analysis to estimate how standards may 

affect these emissions, as discussed in 

section IV.K. DOE reports the emissions 

impacts from the proposed standards, 

and from each TSL it considered, in 

section V.B.6 of this NOPR. DOE also 

estimates the economic value of 

emissions reductions resulting from the 

considered TSLs, as discussed in 

section IV.L. 

g. Other Factors 

EPCA allows the Secretary of Energy, 

in determining whether a standard is 

economically justified, to consider any 

other factors that the Secretary deems to 

be relevant. (42 U.S.C. 

6295(o)(2)(B)(i)(VII)) To the extent 

interested parties submit any relevant 

information regarding economic 

justification that does not fit into the 

other categories described above, DOE 

could consider such information under 

‘‘other factors.’’ 

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15 DOE used the population weighted state HDD 

as determined by the National Oceanic and 

Atmospheric Administration (NOAA) in its 1971– 

2000 United States Climate Normals report, 

available at http://hurricane.ncdc.noaa.gov/

climatenormals/hcs/HCS_51.pdf (last accessed July 

28, 2014). 

2. Rebuttable Presumption 

As set forth in 42 U.S.C. 

6295(o)(2)(B)(iii), EPCA creates a 

rebuttable presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effects that proposed 

energy conservation standards would 

have on the payback period for 

consumers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the Nation, and the environment, as 

required under 42 U.S.C. 

6295(o)(2)(B)(i). The results of this 

analysis serve as the basis for DOE’s 

evaluation of the economic justification 

for a potential standard level (thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification). The rebuttable 

presumption payback calculation is 

discussed in section V.B.1 of this 

proposed rule. 

F. Regional Standards 

As discussed in section II.A, EISA 

2007 amended EPCA to allow 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)) The 

regions must include only contiguous 

States (with the exception of Alaska and 

Hawaii, which can be included in 

regions with which they are not 

contiguous), and each State may be 

placed in only one region (i.e., a State 

cannot be divided among or otherwise 

included in two regions). (42 U.S.C. 

6295(o)(6)(C)) 

Further, EPCA mandates that a 

regional standard must produce 

significant energy savings in 

comparison to a single national 

standard, and 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)(D)) For this rulemaking, DOE 

has considered the above-delineated 

impacts of regional standards in 

addition to national standards. 

Where appropriate, DOE has 

addressed the potential impacts from 

considered regional standards in the 

relevant analyses, including the markups to determine product price, the LCC 

and payback period analysis, the 

national impact analysis (NIA), and the 

manufacturer impact analysis (MIA). 

DOE’s approach for addressing regional 

standards is included in the 

methodology section corresponding to 

each individual analysis (see section IV 

of this notice), and in the NOPR TSD, 

specifically Chapter 8 (LCC and PBP 

Analysis) and Chapter 10 (National 

Impact Analysis). For certain phases of 

the analysis, additional regional 

analysis is not required. For example, 

technologies for improving product 

efficiency generally do not vary by 

region, and thus, DOE did not perform 

any additional regional analysis for the 

technology assessment and screening 

analysis. Similarly, DOE did not 

examine the impacts of having two 

regions in the engineering analysis, 

since the technologies and manufacturer 

processes are the same under both a 

national and regional standard. 

To evaluate regional standards for 

residential furnaces, DOE maintained 

the same regions analyzed in the June 

2011 direct final rule, which are shown 

in Table III.1 and Figure III.1. The 

allocation of individual States to the 

regions was largely based on whether a 

State’s annual heating degree day 

(HDD) 15 average is above or below 

5,000, which offers a rough threshold 

point at which space heating demands 

are significant enough to require longer 

operation of heating systems, thereby 

providing a basis for utilization of 

higher-efficiency systems. 

TABLE III.1—NATIONAL STANDARD AND

REGIONAL STANDARD (BY STATE) 

FOR ANALYSIS OF FURNACE STANDARDS

National standard * Northern region 

standard 

Alabama .................... Alaska 

Arizona ...................... Colorado 

Arkansas ................... Connecticut 

California ................... Idaho 

Delaware ................... Illinois 

District of Columbia ... Indiana 

Florida ....................... Iowa 

Georgia ..................... Kansas 

Hawaii ....................... Maine 

Kentucky ................... Massachusetts 

Louisiana ................... Michigan 

Maryland ................... Minnesota 

Mississippi ................. Missouri 

Nevada ...................... Montana 

New Mexico .............. Nebraska 

North Carolina ........... New Hampshire 

Oklahoma .................. New Jersey 

South Carolina .......... New York 

Tennessee ................ North Dakota 

Texas ........................ Ohio 

Virginia ...................... Oregon 

Pennsylvania 

Rhode Island 

South Dakota 

Utah 

Vermont 

Washington 

West Virginia 

Wisconsin 

Wyoming 

* DOE analyzes an approach whereby the 

agency would set a base National standard, 

as well as a more-stringent standard in the 

Northern region. Because compliance with the 

regional standard would also meet the National standard, Table III.1 categorizes States 

in terms of the most stringent standard applicable to that State. 

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G. Compliance Date 

EPCA establishes a lead time between 

the publication of amended energy 

conservation standards and the date by 

which manufacturers must comply with 

the amended standards for residential 

furnaces. Specifically, EPCA dictated an 

eight-year period between the 

rulemaking publication date and 

compliance date for the first round of 

amended residential furnace standards, 

and a five-year period for the second 

round of amended residential furnace 

standards. (42 U.S.C. 6295(f)(4)(B)–(C)) 

DOE notes that the first remand 

agreement for residential furnaces 

(resulting from the 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)) did not vacate the November 

2007 Rule for furnaces and boilers. 

Therefore, DOE has concluded that the 

November 2007 final rule completed the 

first round of rulemaking for amended 

energy conservation standards for 

furnaces, thereby satisfying the 

requirements of 42 U.S.C. 6295(f)(4)(B). 

The June 2011 direct final rule satisfied 

the second round of rulemaking for 

amended energy conservation standards 

for furnaces; however, the settlement 

resulting from the APGA lawsuit 

(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) vacated the 

standards for non-weatherized gas 

furnaces and mobile home gas furnaces. 

As a result, the June 2011 direct final 

rule completed the second round of 

rulemaking for the furnace product 

classes for which it was not vacated, 

and the current rulemaking constitutes 

the second round of rulemaking for 

amended energy conservation standards 

for non-weatherized gas and mobile 

home gas furnaces, as required under 42 

U.S.C. 6295(f)(4)(C). This provision 

prescribes a five-year period between 

the standard’s publication date and 

compliance date. Accordingly, in its 

analysis of amended energy 

conservation standards for NWGFs and 

MHGFs, DOE used a 5-year lead time 

between the publication of the final rule 

and the compliance date for the 

standard. 

H. Standby Mode and Off Mode 

As discussed in section II.A of this 

NOPR, any final rule for amended or 

new energy conservation standards that 

is published on or after July 1, 2010 

must address standby mode and off 

mode energy use. (42 U.S.C. 6295(gg)(3)) 

As a result, DOE has analyzed and is 

proposing new energy conservation 

standards for the standby mode and off 

mode electrical energy consumption for 

residential non-weatherized gas 

furnaces and mobile home gas furnaces. 

AFUE, the statutory metric for 

residential furnaces, does not 

incorporate standby mode or off mode 

use of electricity, although it already 

fully addresses the fossil fuel use of gasfired furnaces when operating in 

standby mode and off mode. In the 

October 2010 test procedure final rule 

for residential furnaces and boilers, DOE 

determined that incorporating standby 

mode and off mode electricity 

consumption into a single standard for 

residential furnaces and boilers is not 

technically feasible. 75 FR 64621, 

64626–64627 (Oct. 20, 2010). DOE 

concluded that a metric that integrates 

standby mode and off mode electricity 

consumption into AFUE is not 

technically feasible, because the standby 

mode and off mode energy usage, when 

measured, is essentially lost in practical 

terms due to rounding conventions for 

certifying furnace compliance with 

Federal energy conservation standards. 

Id. Therefore, in this document, DOE is 

adopting amended furnace standards 

that are AFUE levels, which exclude 

standby mode and off mode electricity 

use, and DOE is also adopting separate 

standards that are maximum wattage 

(W) levels to address the standby mode 

(PW,SB) and off mode (PW,OFF) electrical 

energy use of furnaces. DOE also 

presents corresponding trial standard 

levels (TSLs) for energy consumption in 

standby mode and off mode. DOE has 

decided to use a maximum wattage 

requirement to regulate standby mode 

and off mode for furnaces. DOE believes 

using an annualized metric could add 

unnecessary complexities, such as 

trying to estimate an assumed number of 

hours that a furnace typically spends in 

standby mode. Instead, DOE believes 

that a maximum wattage standard is the 

most straightforward metric for 

regulating standby mode and off mode 

energy consumption of furnaces and 

will result in the least amount of 

industry and consumer confusion. 

DOE is using the metrics just 

described—AFUE, PW,SB, and PW,OFF— 

in the amended energy conservation 


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16All three spreadsheet tools are available online 

at the rulemaking portion of DOE’s Web site at the 

following address: http://www1.eere.energy.gov/

buildings/appliance_standards/product.aspx/

productid/72. 

17For more information on NEMS, refer to the 

U.S. Department of Energy, Energy Information 

Administration documentation. See, e.g., Energy 

Info. Admin., The National Energy Modeling 

System: An Overview DOE/EIA–0581(2009), 

available at http://www.eia.gov/oiaf/aeo/overview/. 

18See chapter 3 of the NOPR TSD for further 

discussion of the market and technology 

assessment. 19 63 FR 48038, 48041 (Sept. 8, 1998). 

standards it is proposing in this 

rulemaking for furnaces. This approach 

satisfies the mandate of 42 U.S.C. 

6295(gg)(3) that amended standards 

address standby mode and off mode 

energy use. The various analyses 

performed by DOE to evaluate minimum 

standards for standby mode and off 

mode electrical energy consumption for 

furnaces are discussed further in section 

IV.E.2 of this NOPR. 

IV. Methodology 

This section addresses the analyses 

DOE has performed for this rulemaking 

with regard to residential furnaces. 

Separate subsections will address each 

component of DOE’s analyses. 

DOE used three spreadsheet tools to 

estimate the impact of today’s proposed 

standards. The first spreadsheet 

calculates LCCs and payback periods of 

potential standards. The second 

provides shipments forecasts, and then 

calculates national energy savings and 

net present value impacts of potential 

standards. Finally, DOE assessed 

manufacturer impacts, largely through 

use of the Government Regulatory 

Impact Model (GRIM).16

Additionally, DOE estimated the 

impacts on utilities and the 

environment that would be likely to 

result from potential standards for 

residential furnaces. DOE used 

published output from the AEO 2014 

version of Energy Information 

Administration’s (EIA) National Energy 

Modeling System (NEMS) for both the 

utility and the environmental analyses. 

NEMS projects the production, imports, 

conversion, consumption, and prices of 

energy, subject to assumptions on 

macroeconomic and financial factors, 

world energy markets, resource 

availability and costs, behavioral and 

technological choice criteria, cost and 

performance characteristics of energy 

technologies, and demographics.17 EIA 

uses NEMS to prepare its Annual 

Energy Outlook, a widely-known energy 

forecast for the United States. NEMS 

offers a sophisticated picture of the 

effect of standards because it accounts 

for the interactions between the various 

energy supply and demand sectors and 

their impact on the economy as a whole. 

A. Market and Technology Assessment 

In conducting a market and 

technology assessment, DOE develops 

information 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. 

These activities include both 

quantitative and qualitative 

assessments, based primarily on 

publicly-available information. The 

issues covered in the market and 

technology assessment for this 

residential furnaces rulemaking include: 

(1) A determination of the scope of the 

rulemaking and product classes; (2) 

manufacturers and industry structure; 

(3) quantities and types of products sold 

and offered for sale; (4) retail market 

trends; (5) regulatory and non-regulatory 

programs; and (6) technologies or design 

options that could improve the energy 

efficiency of the product(s) under 

examination. The key findings of DOE’s 

market assessment are summarized 

below.18

1. Definition and Scope of Coverage 

EPCA defines a ‘‘furnace’’ as ‘‘a 

product which utilizes only singlephase electric current, or single-phase 

electric current or DC current in 

conjunction with natural gas, propane, 

or home heating oil, and which: 

(1) Is designed to be the principal 

heating source for the living space of a 

residence; 

(2) Is not contained within the same 

cabinet with a central air conditioner 

whose rated cooling capacity is above 

65,000 Btu per hour; 

(3) Is an electric central furnace, 

electric boiler, forced-air central 

furnace, gravity central furnace, or low 

pressure steam or hot water boiler; and 

(4) 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.’’ (42 U.S.C. 6291(23)) 

DOE has incorporated this definition 

into its regulations in the Code of 

Federal Regulations (CFR) at 10 CFR 

430.2. 

EPCA’s definition of a ‘‘furnace’’ 

covers the following types of products: 

(1) Gas furnaces (non-weatherized and 

weatherized); (2) oil-fired furnaces (nonweatherized and weatherized); (3) 

mobile home furnaces (gas and oilfired); (4) electric resistance furnaces; 

(5) hot water boilers (gas and oil-fired); 

(6) steam boilers (gas and oil-fired); and 

(7) combination space/water heating 

appliances (water-heater/fancoil 

combination units and boiler/tankless 

coil combination units). In accordance 

with the April 24th, 2014 court order in 

the American Public Gas Association, et 

al. v. Department of Energy, et al., case, 

which granted the unopposed joint 

motion for a voluntary remand (see 

section II.B), DOE only analyzed 

potential amended energy conservation 

standards for non-weatherized gas-fired 

and mobile home gas-fired furnace 

product classes of furnaces in this 

rulemaking. 

2. Product Classes 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered products into product 

classes by the type of energy used, by 

capacity, or by other performancerelated features that justify a different 

standard. In making a determination 

whether a performance-related feature 

justifies a different standard, DOE must 

consider factors such as the utility to the 

consumer of the feature and other 

factors DOE determines are appropriate. 

(42 U.S.C. 6295(q)) DOE has viewed 

utility as an aspect of the product that 

is accessible to the layperson and is 

based on user operation, rather than 

performing a theoretical function. This 

interpretation has been implemented 

consistently in DOE’s previously 

determining utility through the value 

the item brings to the consumer, rather 

than through analyzing more 

complicated design features, or costs 

that anyone, including the consumer, 

manufacturer, installer, or utility 

companies may bear. This approach is 

consistent with EPCA requiring a 

separate and extensive analysis of 

economic justification for the adoption 

of any new or amended energy 

conservation standard (see 42 U.S.C. 

6295(o)(2)(A)–(B) and (3)). 

Under EPCA, DOE has typically 

addressed consumer utility by 

establishing separate product classes or 

otherwise taken action when a 

consumer may value a product feature 

based on the consumer’s everyday 

needs. For instance, DOE has 

determined that it would be 

impermissible under 42 U.S.C. 

6295(o)(4) to include elimination of 

oven door windows as a technology 

option to improve the energy efficiency 

of cooking products.19 DOE reached this 

conclusion based upon how consumers 

typically use the product: Peering 

through the oven window to judge if an 

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20 73 FR 62034, 62048 (Oct. 17, 2008) (separating 

standard ovens and self-cleaning ovens into 

different product classes). 

21 77 FR 32307, 32319 (May 31, 2012) (creating a 

separate product class for compact front-loading 

residential clothes washers). 

22 75 FR 59469, 59487 (Sept. 27, 2010) (creating 

a separate product class for refrigerators with 

bottom-mounted freezers). 

item is finished cooking, as opposed to 

checking the timer and/or indicator 

light or simply opening the oven door 

to see if the item is finished cooking. 

DOE has also determined that 

consumers may value other qualities 

such as ability to self-clean,20 size,21

and configuration.22 This 

determination, however, can change 

depending on the technology and the 

consumer, and it is conceivable that 

certain products may disappear from the 

market entirely due to shifting 

consumer demand. DOE determines 

such value on a case-by-case basis 

through its own research as well as 

public comments received, the same 

approach that DOE employs in all other 

parts of its energy conservation 

standards rulemaking. 

As a cautionary note, disparate 

products may have very different 

consumer utilities, thereby making 

direct comparisons difficult and 

potentially misleading. For instance, in 

a 2011 rulemaking, DOE created 

separate product classes for vented and 

ventless residential clothes dryers based 

on DOE’s recognition of the ‘‘unique 

utility’’ that ventless clothes dryers offer 

to consumers. 76 FR 22454, 22485 

(April 21, 2011). This utility could be 

characterized as the ability to have a 

clothes dryer in a living area where 

vents are impossible to install (i.e., an 

apartment in a high-rise building). As 

explained in that April 2011 direct final 

rule technical support document, 

ventless dryers can be installed in 

locations where venting dryers would 

be precluded due to venting restrictions. 

But in another rulemaking, DOE 

found that water heaters that utilize heat 

pump technology did not need to be put 

in a separate product class from 

conventional types of hot water heaters 

that utilize electric resistance 

technology, even though water heaters 

utilizing heat pumps require the 

additional installation of a condensate 

drain that a hot water heater utilizing 

electric resistance technology does not 

require. 74 FR 65852, 65871 (Dec. 11, 

2009). DOE found that regardless of 

these installation factors, the heat pump 

water heater and the conventional water 

heater still had the same utility to the 

consumer: Providing hot water. Id. In 

both cases, DOE made its finding based 

on consumer type and utility type, 

rather than product design criteria that 

impact product efficiency. These 

distinctions in both the consumer type 

and the utility type are important 

because, as DOE has previously pointed 

out, taken to the extreme, each design 

differential could be designated a 

different ‘‘product class’’ and, therefore, 

require different energy conservation 

standards. 

Tying the concept of ‘‘feature’’ to a 

specific technology would effectively 

lock-in the currently existing technology 

as the ceiling for product efficiency and 

eliminate DOE’s ability to address 

technological advances that could yield 

significant consumer benefits in the 

form of lower energy costs while 

providing the same functionality for the 

consumer. DOE is very concerned that 

determining features solely on product 

technology could undermine the 

Department’s Appliance Standards 

Program. If DOE is required to maintain 

separate product classes to preserve 

less-efficient technologies, future 

advancements in the energy efficiency 

of covered products would become 

largely voluntary, an outcome which 

seems inimical to Congress’s purposes 

and goals in enacting EPCA. 

Turning to the product at issue in this 

rulemaking, residential furnaces are 

currently divided into several product 

classes. For example, furnaces are 

separated into product classes based on 

their fuel source (gas, oil, or electricity), 

which is required by statute. As 

discussed in section IV.A.1, for this 

rulemaking, DOE is analyzing only two 

product classes for residential furnaces: 

(1) Non-weatherized gas-fired furnaces 

(NWGFs) and (2) mobile home gas-fired 

furnaces (MHGFs). DOE does not 

additionally separate NWGFs and 

MHGFs into condensing and noncondensing product classes because 

they provide the same utility to the 

consumer (i.e., both are vented 

appliances that provide heat to a 

consumer). 

DOE has tentatively concluded that 

the methods by which a furnace is 

vented do not provide any separate 

performance-related impacts, and, 

therefore, DOE has no statutory basis for 

defining a separate class based on 

venting and drainage characteristics. 

NWGF and MHGF venting methods do 

not provide unique utility to consumers 

beyond the basic function of providing 

heat, which all furnaces perform. The 

possibility that installing a noncondensing furnace may be less costly 

than a condensing furnace due to the 

difference in venting methods does not 

justify separating the two types of 

NWGFs into different product classes. 

Unlike the consumers of ventless dryers, 

which DOE has determined to be a 

performance-related feature based on 

the impossibility of venting in certain 

circumstances (e.g., high-rise 

apartments), consumers of condensing 

NWGFs are homeowners that may either 

use their existing venting or have a 

feasible alternative to obtain heat, which 

is the furnace’s singular utility to the 

consumer. In other words, homeowners 

will still be able to obtain heat 

regardless of the venting. In contrast, a 

resident of a high-rise apartment or 

condominium building that is not 

architecturally designed to 

accommodate vented clothes dryers 

would have no option in terms of 

installing and enjoying the utility of a 

dryer in their home unless he uses a 

ventless dryer. 

As explained above, the utility of a 

furnace involves providing heat to a 

consumer. Such utility is provided by 

any type of furnace, but to the extent 

that a consumer has a preference for a 

particular fuel type (e.g., gas), 

improvements in venting technology 

may soon allow a consumer to obtain 

the efficiency of a condensing furnace 

using the existing venting in a residence 

by sharing venting space with water 

heaters. This update in technology 

significantly reduces the cost burden 

associated with installing condensing 

furnaces and reduces potential instances 

of ‘‘orphaned’’ water heaters, where the 

furnace and water heater can no longer 

share the same venting (due to one unit 

being condensing and the other 

noncondensing). In other words, this 

technology allows consumers to switch 

from a non-condensing furnace to a 

condensing furnace in a greater variety 

of applications, such as urban row 

houses. For more information, see 

appendix 8L of the NOPR TSD. 

3. Technology Options 

DOE identified 12 technology options 

that would be expected to improve the 

AFUE of residential furnaces, as 

measured by the DOE test procedure: 

(1) Using a condensing secondary heat 

exchanger; (2) increasing the heat 

exchanger area; (3) heat exchanger 

baffles; (4) heat exchanger surface 

feature improvements; (5) two-stage 

modulating combustion; (6) stepmodulating combustion; (7) pulse 

combustion; (8) low NOX premix 

burners; (9) burner de-rating; (10) 

insulation improvements; (11) off-cycle 

dampers; and (12) direct venting. In 

addition, DOE identified three 

technologies that would reduce the 

standby mode and off mode energy 

consumption of residential furnaces: 

(1) Low-loss transformer (LLTX); (2) 

switching mode power supply; and (3) 

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control relay for models with brushless 

permanent magnet (BPM) motors. 

After identifying potential technology 

options for improving the efficiency of 

residential furnaces, DOE performed the 

screening analysis (see section IV.B of 

this NOPR or chapter 4 of the TSD) on 

these technologies to determine which 

could be considered further in the 

analysis and which should be 

eliminated. 

B. Screening Analysis 

DOE uses the following four 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 commercial products or in working 

prototypes will not be considered 

further. 

2. Practicability to manufacture, 

install, and service. If DOE determines 

that mass production, reliable 

installation, and servicing of a 

technology in commercial products 

could not be achieved on the scale 

necessary to serve the relevant market at 

the time of the compliance date of the 

standard, then that technology will not 

be considered further. 

3. Impacts on product utility or 

product availability. If it is determined 

that a technology would have significant 

adverse impact on the utility of the 

product to significant subgroups of 

consumers or would 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. Adverse impacts on health or 

safety. If it is determined that a 

technology would have significant 

adverse impacts on health or safety, it 

will not be considered further. (10 CFR 

part 430, subpart C, appendix A, 4(a)(4) 

and 5(b)) 

In sum, if DOE determines that a 

technology, or a combination of 

technologies, fails to meet one or more 

of the above four criteria, it will be 

excluded from further consideration in 

the engineering analysis. The reasons 

for eliminating certain technologies are 

discussed below. 

1. Screened-Out Technologies 

DOE decided to screen the use of 

pulse combustion from further analysis. 

Based on manufacturer feedback 

received during the analysis for the June 

2011 direct final rulemaking, pulse 

combustion furnaces have had 

reliability and safety issues in the past, 

and therefore, manufacturers do not 

consider their use a viable option to 

improve efficiency. In addition, 

manufacturers can attain similar or 

greater efficiencies through the use of 

other technologies. For these reasons, 

DOE is not including pulse combustion 

as a technology option, as its reliability 

and safety issues could reduce 

consumer utility. 

DOE also decided to screen out burner 

de-rating. Burner de-rating reduces the 

burner firing rate while maintaining the 

same heat exchanger geometry/surface 

area and fuel-air ratio, which increases 

the ratio of heat transfer surface area to 

the energy input, which increases 

efficiency. However, the lower energy 

input means that less heat is provided 

to the user than is provided using 

conventional burner firing rates. As a 

result of the decreased heat output of 

furnaces with de-rated burners, DOE has 

screened out burner de-rating as a 

technology option, as it could reduce 

consumer utility. 

In addition, DOE is screening lowNOX premix burners from further 

analysis. Premix burners eliminate the 

need for secondary air in the 

combustion process by completely 

mixing heating fuel with primary air 

prior to ignition. This raises the overall 

flame temperature, which improves heat 

transfer and AFUE. In-shot burners that 

are commonly used in residential 

furnaces, on the other hand, cannot 

entrain sufficient primary air to 

completely premix the air and gas. As 

a result, premix burner design 

incorporates a fan to ensure sufficient 

and complete mixing of the air and fuel 

prior to combustion and does so by 

delivering the air to the fuel at positive 

pressure. To the extent of DOE’s 

knowledge, and based on manufacturer 

feedback during the manufacturer 

interviews, low-NOX premix burners 

have not yet been successfully 

incorporated into a residential furnace 

design that is widely available on the 

market. DOE is aware that low-NOX

premix burners have been incorporated 

into boilers, but boilers have 

significantly different heat exchangers 

and burners, allowing for the integration 

of premix burner technology in those 

products. Incorporating this technology 

into furnaces on a large scale will 

require further research and 

development due to the technical 

constraints imposed by current furnace 

burner and heat exchanger design. 

Among the standby and off mode 

technologies, DOE decided to screen out 

using a control relay to depower BPM 

motors due to feedback received during 

the manufacturer interviews conducted 

for both this NOPR and the residential 

furnace June 2011 direct final rule, 

which indicated that using a control 

relay to depower brushless permanent 

magnet motors could reduce the lifetime 

of the motors (the reason for this 

reduction in product lifetime is further 

explained in Chapter 4 of the TSD). DOE 

believes that this reduction in lifetime 

would lead to a reduction in utility of 

the product. For this reason, DOE is not 

including control relays for models with 

brushless permanent magnet motors as 

a technology option, as it could reduce 

consumer utility. 

2. Remaining Technologies 

Through a review of each technology, 

DOE found that all of the other 

identified technologies met all four 

screening criteria and consequently, are 

suitable for further examination in 

DOE’s analysis. In summary, DOE did 

not screen out the following technology 

options to improve AFUE: (1) 

Condensing secondary heat exchanger; 

(2) increased heat exchanger face area; 

(3) heat exchanger baffles; (4) heat 

exchanger surface feature 

improvements; (5) two-stage modulating 

combustion; (6) step-modulating 

combustion; (7) insulation 

improvements; (8) off-cycle dampers; 

and (9) direct venting. DOE also 

maintained the following technology 

options to improve standby mode and 

off mode energy consumption: (1) Lowloss transformer; and (2) switching 

mode power supply. All of these 

technology options are technologically 

feasible, given that the evaluated 

technologies are being used (or have 

been used) in commercially-available 

products or working prototypes. 

Therefore, all of the trial standard levels 

evaluated in this notice are 

technologically feasible. DOE also found 

that all of the remaining technology 

options also meet the other screening 

criteria (i.e., practicable to manufacture, 

install, and service, and do not result in 

adverse impacts on consumer utility, 

product availability, health, or safety). 

For additional details, please see 

chapter 4 of the NOPR TSD. 

C. Engineering Analysis 

In the engineering analysis 

(corresponding to chapter 5 of the NOPR 

TSD), DOE establishes the relationship 

between the manufacturer selling price 

(MSP) and improved residential furnace 

efficiency. This relationship serves as 

the basis for cost-benefit calculations for 

individual consumers, manufacturers, 

and the Nation. DOE typically structures 

the engineering analysis using one of 

three approaches: (1) Design-option; (2) 

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23For more information on the Furnace Fans 

Rulemaking, see the DOE Furnace Fans Rulemaking 

Web page at: http://www1.eere.energy.gov/

buildings/appliance_standards/rulemaking.aspx/

ruleid/41. 

efficiency-level; or (3) reverseengineering (or cost-assessment). The 

design-option approach involves adding 

the estimated cost and efficiency of 

various efficiency-improving design 

changes to the baseline to model 

different levels of efficiency. The 

efficiency-level approach uses estimates 

of cost and efficiency at distinct levels 

of efficiency from publicly-available 

information, as well as information 

gathered in manufacturer interviews 

that is supplemented and verified 

through technology reviews. The 

reverse-engineering approach involves 

testing products for efficiency and 

determining cost from a detailed bill of 

materials (BOM) derived from reverse 

engineering representative products. 

The efficiency values range from that of 

a least-efficient furnace sold today (i.e., 

the baseline) to the maximum 

technologically feasible efficiency level. 

At each efficiency level examined, DOE 

determines the manufacture production 

cost (MPC) and MSP; the relationship 

between efficiency levels and MPC is 

referred to as a cost-efficiency curve. 

DOE conducted the engineering 

analysis for residential furnaces using a 

combination of the efficiency-level and 

the reverse-engineering approach. More 

specifically, DOE identified the 

efficiency levels for analysis and then 

used the reverse-engineering approach 

to determine the technologies used and 

the associated manufacturing costs at 

those levels. In the residential furnace 

market, manufacturers may use slight 

variations on designs to achieve a given 

efficiency level. The benefit of using the 

efficiency level approach is that it 

allows DOE to examine products at each 

efficiency level regardless of the specific 

design options that manufacturers use to 

achieve that level, so the analysis can 

account for variations in design. Using 

the reverse-engineering approach to 

estimate a product cost at each 

efficiency level allows DOE to analyze 

actual models as the basis for 

developing the MPCs. 

For the standby mode and off mode 

analyses, DOE adopted a design option 

approach, which allowed for the 

calculation of incremental costs through 

the addition of specific design options 

to a baseline model. DOE decided on 

this approach because it did not have 

sufficient data to execute an efficiencylevel analysis, as manufacturers 

typically do not rate or publish data on 

the standby mode and/or off mode 

energy consumption of their products. 

As such, DOE was not able to conduct 

a reverse-engineering approach due to a 

lack of definitive knowledge of the 

electrical energy consumption of 

products on the market. Also, the design 

options used to obtain higher 

efficiencies were composed of 

purchased parts, so obtaining price 

quotes on these electrical components 

was more accurate than attempting to 

determine their manufacturing costs via 

a reverse-engineering analysis. 

See chapter 5 of the NOPR TSD for 

additional details about the engineering 

analysis. 

1. Efficiency Levels 

As noted above, for analysis of 

amended AFUE standards, DOE used an 

efficiency-level approach in 

combination with a reverse-engineering 

approach to identify the technology 

options needed to reach incrementally 

higher efficiency levels. DOE physically 

tore down newly manufactured furnaces 

for its analysis. Prior to teardown, all of 

the furnaces were tested to verify their 

AFUE ratings and determine their 

standby mode and off mode power 

consumption (in watts). From the 

market analysis, DOE was able to 

identify the most common AFUE ratings 

of NWGF and MHGF on the market and 

used this information to select AFUE 

efficiency levels for analysis. After 

identifying AFUE efficiency levels for 

analysis, DOE used the reverseengineering approach (section IV.A.2) to 

determine the MPC at each AFUE 

efficiency level identified for analysis. 

For the analysis of amended standby 

mode and off-mode energy conservation 

standards, DOE used a design-option 

approach to identify the efficiency 

levels that would result from 

implementing certain design options for 

reducing power consumption in standby 

mode and off mode. 

a. Baseline Efficiency Level and Product 

Characteristics 

DOE selected baseline units typical of 

the least-efficient commerciallyavailable residential furnaces. DOE 

selected baseline units as reference 

points for both NWGF and MHGF, 

against which it measured changes 

resulting from potential amended 

energy conservation standards. The 

baseline unit in each product class 

represents the basic characteristics of 

products in that class. Additional 

details on the selection of baseline units 

may be found in chapter 5 of the NOPR 

TSD. 

DOE uses the baseline unit for 

comparison in several phases of the 

analyses, including the engineering 

analysis, LCC analysis, PBP analysis, 

and the NIA. To determine energy 

savings that will result from an 

amended energy conservation standard, 

DOE compares energy use at each of the 

higher energy efficiency levels to the 

energy consumption of the baseline 

unit. Similarly, to determine the 

changes in price to the consumer that 

will result from an amended energy 

conservation standard, DOE compares 

the price of a baseline unit to the price 

of a unit at each higher efficiency level. 

When calculating the price of a 

baseline furnace and comparing it to the 

price of units at each higher efficiency 

level, DOE factored in future changes to 

the indoor blower motor baseline design 

option resulting from the 2014 furnace 

fans rulemaking,23 which sets new 

baseline efficiency levels for furnace 

fans requiring compliance in the year 

2019. Specifically, a level effectively 

requiring constant torque brushless 

permanent magnet (BPM) motors as the 

minimum standard indoor blower motor 

technology option for NWGF units, and 

improved primary split capacitor (PSC) 

motors as the minimum standard 

technology option for MHGF units, will 

be enforced beginning in 2019. As such, 

when compliance is required for this 

rulemaking, constant torque BPM 

motors will be the baseline design 

feature for NWGF units, and improved 

PSC motors will be the baseline design 

feature for MHGF units. DOE has 

included constant torque BPM motors 

and improved PSC motors in the MPCs 

for NWGF and MHGF units, 

respectively. The current and expected 

baseline motor types are listed in Table 

IV.1. 

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TABLE IV.1—BASELINE BLOWER MOTOR TYPES

[Current and expected in 2019] 

Product class Current typical baseline blower motor type Expected typical baseline blower motor type 

starting in 2019 

NWGF ................................................................ PSC .................................................................. Constant-Torque BPM. 

MHGF ................................................................. PSC .................................................................. Improved PSC. 

Currently, the baseline indoor blower 

motor design option for all residential 

furnace types is a PSC motor. From 

here, the next step up is an improved 

PSC motor, which consumes less energy 

during fan operation than a standard 

PSC motor. As compared to PSC motors, 

BPM motors offer further efficiency 

improvements. BPM motors feature a 

completely redesigned inner drive 

mechanism, as compared to PSC motors, 

which significantly reduces electricity 

wasted as heat during fan operation. 

The basic type of BPM motor is a 

constant torque BPM motor, which 

accepts a specified number of torque 

commands from an outside control 

source. A second type of BPM motor is 

a constant airflow BPM motor, which is 

similar to a constant torque BPM motor, 

but allows for more precise operational 

commands. Constant airflow BPM 

motors accept precise airflow 

commands from an outside control 

source, which allow it to adjust the 

building airflow to a wide range of 

operational demands. 

Table IV.2 presents the baseline AFUE 

levels identified for each product class 

of furnaces. The baseline AFUE levels 

analyzed represent the minimum AFUE 

standards that will be required starting 

on November 19, 2015, as a result of the 

November 2007 final rule. 

TABLE IV.2—BASELINE RESIDENTIAL

FURNACE AFUE EFFICIENCY LEVELS

Product class AFUE 

(%) 

Non-Weatherized Gas-Fired. ........ 80 

Mobile Home Gas-Fired ............... 80 

For the standby mode and off-mode 

analysis, DOE identified baseline 

components as those that consume the 

most electricity during the operation of 

those modes. Since it would not be 

practical for DOE to test every furnace 

on the market to determine the baseline 

efficiency, and since manufacturers do 

not currently report standby mode and 

off mode energy consumption, DOE 

‘‘assembled’’ the most consumptive 

baseline components from the models 

tested to model the electrical system of 

a furnace with the expected maximum 

system standby mode and off mode 

power consumption observed during 

testing of furnaces. The baseline standby 

mode and off-mode consumption levels 

used in the NOPR analysis are presented 

in Table IV.3. 

TABLE IV.3—BASELINE STANDBY

MODE AND OFF MODE POWER CONSUMPTION FOR NWGF AND MHGF 

Component 

Standby mode 

and off-mode 

power 

consumption 

(watts) 

Transformer .......................... 4 

ECM Blower Motor (includes 

controls) ............................ 3 

Controls/Other ...................... 4 

Total (watts) ................... 11 

b. Other Energy Efficiency Levels 

Table IV.4 through Table IV.5 show 

the efficiency levels DOE selected for 

analysis of amended AFUE standards, 

along with a description of the typical 

technological change at each level. 

TABLE IV.4—AFUE EFFICIENCY LEVELS FOR NON-WEATHERIZED GAS-FIRED FURNACES

Efficiency level EL AFUE 

(%) Technology options 

0—Baseline ............................................... 80 Baseline. 

1 ................................................................ 90 EL0 + Secondary condensing heat exchanger. 

2 ................................................................ 92 EL1 + Increased heat exchanger area. 

3 ................................................................ 95 EL2 + Increased heat exchanger area. 

4—Max-Tech ............................................ 98 EL3 + Step-modulating combustion + Increased heat exchanger area. 

TABLE IV.5—AFUE EFFICIENCY LEVELS FOR MOBILE HOME FURNACES

Efficiency level AFUE 

(%) Technology options 

0—Baseline ............................................... 80 Baseline. 

1 ................................................................ 92 EL0 + Secondary condensing heat exchanger +. 

2 ................................................................ 95 EL1 + Increased heat exchanger area. 

3—Max-Tech ............................................ 97 EL2 + Step-modulating combustion + Increased heat exchanger area. 

In addition to the technology options 

listed in Table IV.4 and Table IV.5, DOE 

considered certain enhanced design 

features that may be chosen for 

consumer comfort or to reduce electrical 

energy consumption during furnace 

operating periods. These enhancements 

are listed in Table IV.6. 

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TABLE IV.6—DESIGN FEATURES NOT DIRECTLY INCLUDED IN ANALYSIS OF AFUE EFFICIENCY LEVELS

Design feature Baseline option * Enhanced option 

NWGF Indoor Blower Motor ............ Constant Torque brushless permanent 

magnet (BPM) motor.

Constant Speed motor. 

MHGF Indoor Blower Motor ............ Improved PSC Motor ............................. Constant Torque BPM motor. 

Constant Airflow BPM motor. 

Combustion system ......................... Single stage combustion ....................... Two-stage modulating combustion (includes two-stage gas 

valve, 2-speed inducer assembly, upgraded pressure switch, 

and additional controls and wiring). 

* The baseline design options listed for NWGF and MHGF indoor blower motors will not become effective until 2019 when the 2014 furnace 

fan rulemaking mandates new efficiency standards for furnace fans. 

Indoor blower motors can be either 

improved PSC motors, constant torque 

BPM motors, or constant airflow BPM 

motors. As compared to constant torque 

BPM and improved PSC motors, which 

operate at design-specific torque 

settings, constant airflow BPM motors 

can operate at a wide range of specific 

speed commands. As a result, constant 

airflow BPM motors can adjust airflow 

to different building conditions better 

than constant torque BPM and improved 

PSC motors, and may be chosen for 

enhanced consumer comfort. Constant 

airflow BPM motors are also the current 

standard motor type at the max-tech 

AFUE level for both NWGF and MHGF 

units. This is because precise airflow 

adjustments are needed in order to 

match the wide range of heating rates 

offered by modulating combustion 

systems, which are used to reach the 

max-tech AFUE levels in both NWGF 

and MHGF units. 

The combustion system baseline 

design feature for mobile home gas 

furnaces is a single-stage combustion 

system, which includes a single-stage 

gas valve and a 1-speed inducer fan 

assembly. During building warm-up 

periods, there may be a delay between 

when the target building temperature is 

reached, and when the thermostat 

detects this condition and sends a signal 

to the furnace to switch off. As a result, 

the furnace operates for a longer amount 

of time than needed and warms the 

building beyond the target temperature, 

which is uncomfortable for the building 

occupants and consumes more energy 

than is necessary. To improve comfort 

and save energy, a two-stage modulating 

combustion system can be used in place 

of a 1-stage combustion system. A twostage combustion system includes a 

two-stage gas valve paired with a 

2-speed combustion inducer fan, both of 

which serve to decrease the heating rate 

as the target temperature is approached. 

This decrease in heating rate can 

diminish any overshoot of the target 

building temperature, should the 

thermostat delay signaling the furnace 

to switch off once the proper 

temperature has been reached. By 

stabilizing the heating rate during 

warm-up, the furnace is able to achieve 

the target temperature more precisely, 

which improves comfort and reduces 

extraneous energy consumption. 

Because the furnace fans energy 

conservation standards will likely 

require that NWGF incorporate twostage performance, DOE has included 

two-stage as the design for NWGF in 

this analysis. 

Two-stage modulating combustion 

system design was one of the technology 

options DOE considered in the 

engineering analysis for improving 

AFUE, although this has been shown in 

some products to have a minor to 

negligible effect. In addition to 

improving AFUE, two-stage combustion 

allows the furnace to reduce its heating 

load when approaching the target 

indoor air temperature, which helps to 

prevent the conditioned space from 

becoming too hot, thus improving the 

comfort of building occupants. Based on 

market analysis, DOE determined that 

two-stage combustion is a common 

design feature in residential furnaces. 

However, due to its high cost relative to 

other technologies that can improve 

AFUE, DOE determined it is primarily 

offered to consumers as a comfort 

feature rather than for its efficiency 

benefits. 

In addition to analyzing efficiency 

levels based on design options, DOE 

considered whether changes to the 

residential furnaces and boilers test 

procedure, as proposed by the February 

2015 test procedure NOPR would 

necessitate changes to the AFUE levels 

being analyzed. The primary change 

proposed in the test procedure included 

updating the incorporation by reference 

to ASHRAE 103–2007. As discussed in 

the February 2015 test procedure NOPR, 

adopting ASHRAE 103–2007 would not 

be expected to change the AFUE rating 

for single-stage products and would 

result in a de minimis increase in the 

AFUE ratings for two-stage and 

modulating non-condensing products. 

Adopting ASHRAE 103–2007 provisions 

was assessed to have no statistically 

significant impact on the AFUE for 

condensing products. DOE has 

tentatively determined that this 

amendment to the test procedure would 

not be substantial enough to merit a 

revision of the proposed AFUE 

efficiency levels for residential furnaces. 

Table IV.7 shows the efficiency levels 

DOE selected for the analysis of standby 

mode and off mode standards, along 

with a description of the typical 

technological change at each level. 

‘‘Standby mode’’ and ‘‘off mode’’ 

power consumption are defined in the 

DOE test procedure for residential 

furnaces and boilers. DOE defines 

‘‘standby mode’’ as ‘‘the condition 

during the heating season in which the 

furnace or boiler is connected to the 

power source, and neither the burner, 

electric resistance elements, nor any 

electrical auxiliaries such as blowers or 

pumps, are activated.’’ (10 CFR part 430, 

subpart B, appendix N, section 2.8) ‘‘Off 

mode’’ is defined as ‘‘the condition 

during the non-heating season in which 

the furnace or boiler is connected to the 

power source, and neither the burner, 

electric resistance elements, nor any 

electrical auxiliaries such as the blowers 

or pumps, are activated.’’ (10 CFR part 

430, subpart B, appendix N, section 2.6) 

A ‘‘seasonal off switch’’ is defined as 

‘‘the switch on the furnace or boiler 

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 2.7.) 

Through reviewing product literature 

and discussing with manufacturers, 

DOE has found that furnaces generally 

do not have a seasonal off switch that 

would be used to turn the product off 

during the off season. Manufacturer 

stated that if a switch is included with 

a product, it is left in the on position 

during the non-heating season because 

the indoor blower motor in the furnace 

is needed to move air for the AC side 

of the home’s HVAC system and that the 

switch is typically used only as a 

service or repair switch. Therefore, DOE 

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assumed that the standby mode and the 

off mode power consumption for 

residential furnaces are equal. DOE 

requests comment on the efficiency 

levels analyzed for standby mode and 

off mode, and on the assumption that 

standby mode and off mode energy 

consumption (as defined by DOE) 

would be equal. This is identified as 

issue 1 in section VII.E, ‘‘Issues on 

Which DOE Seeks Comment.’’ 

TABLE IV.7—STANDBY MODE AND OFF MODE EFFICIENCY LEVELS FOR NON-WEATHERIZED AND MOBILE HOME GASFIRED FURNACES

Efficiency level EL 

Standby mode and 

off mode power 

consumption 

(W) 

Technology options 

0—Baseline ............................................ 11 Linear Power Supply. 

1 ............................................................. 9 .5 Linear Power Supply with Low-Loss Transformer (LLTX). 

2 ............................................................. 9 .2 Switching Mode Power Supply. 

3—Max-Tech .......................................... 8 .5 Switching Mode Power Supply with LLTX. 

2. Cost-Assessment Methodology 

At the start of the engineering 

analysis, DOE identified the energy 

efficiency levels associated with 

residential furnaces on the market using 

data gathered in the market assessment. 

DOE also identified the technologies 

and features that are typically 

incorporated into products at the 

baseline level and at the various energy 

efficiency levels analyzed above the 

baseline. Next, DOE selected products 

for physical teardown analysis having 

characteristics of typical products on 

the market at the representative input 

capacity. DOE gathered information by 

performing a physical teardown analysis 

(see section IV.C.2.a) to create detailed 

BOMs, which included all components 

and processes used to manufacture the 

products. DOE used the BOMs from the 

teardowns as an input to a cost model, 

which was then used to calculate the 

MPC for products at various efficiency 

levels spanning the full range of 

efficiencies from the baseline to the 

maximum technology achievable (‘‘maxtech’’) level. 

During the development of the 

engineering analysis, DOE held 

interviews with manufacturers to gain 

insight into the residential furnace 

industry, and to request feedback on the 

engineering analysis and assumptions 

that DOE used. DOE used the 

information gathered from these 

interviews, along with the information 

obtained through the teardown analysis, 

to refine the assumptions and data used 

in the cost model for this rulemaking. 

Next, DOE derived manufacturer 

markups using publicly-available 

residential furnace industry financial 

data in conjunction with manufacturers’ 

feedback. The markups were used to 

convert the MPCs into MSPs. Further 

information on the analytical 

methodology is presented in the 

subsections below. For additional detail, 

see chapter 5 of the NOPR TSD. 

a. Teardown Analysis 

To assemble BOMs and to calculate 

the manufacturing costs for the different 

components in residential furnaces, 

DOE disassembled multiple units into 

their base components and estimated 

the materials, processes, and labor 

required for the manufacture of each 

individual component, a process 

referred to as a ‘‘physical teardown.’’ 

Using the data gathered from the 

physical teardowns, DOE characterized 

each component according to its weight, 

dimensions, material, quantity, and the 

manufacturing processes used to 

fabricate and assemble it. 

DOE also used a supplementary 

method, called a ‘‘virtual teardown,’’ 

which examines published 

manufacturer catalogs and 

supplementary component data to 

estimate the major physical differences 

between a product that was physically 

disassembled and a similar product that 

was not. For supplementary virtual 

teardowns, DOE gathered product data 

such as dimensions, weight, and design 

features from publicly-available 

information, such as manufacturer 

catalogs. The NOPR teardown analysis 

included a total of 62 physical and 

virtual teardowns of residential 

furnaces. These teardowns are broken 

down among equipment classes in Table 

IV.8. 

TABLE IV.8—RESIDENTIAL FURNACE TEARDOWNS BY EQUIPMENT CLASS

Equipment class Physical Virtual 

Non-weatherized Gas-Fired ..................................................................................................................................... 26 32 

Mobile Home Gas-Fired .......................................................................................................................................... 6 0 

The teardown analysis allowed DOE 

to identify the technologies that 

manufacturers typically incorporate into 

their products, along with the efficiency 

levels associated with each technology 

or combination of technologies. The end 

result of each teardown is a structured 

BOM, which DOE developed for each of 

the physical and virtual teardowns. The 

BOMs incorporate all materials, 

components, and fasteners (classified as 

either raw materials or purchased parts 

and assemblies), and characterize the 

materials and components by weight, 

manufacturing processes used, 

dimensions, material, and quantity. The 

BOMs from the teardown analysis were 

then used as inputs to the cost model to 

calculate the MPC for each product that 

was torn down. The MPCs resulting 

from the teardowns were then used to 

develop an industry average MPC for 

each efficiency level of each product 

class analyzed. 

More information regarding details on 

the teardown analysis can be found in 

chapter 5 of the NOPR TSD. 

b. Cost Model 

The cost model is a spreadsheet that 

converts the materials and components 

in the BOMs into dollar values based on 

the price of materials, average labor 

rates associated with manufacturing and 

assembling, and the cost of overhead 

and depreciation, as determined based 

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24American Metals Market, available at http://

www.amm.com/ (last accessed August 19, 2014). 25U.S. Department of Labor, Bureau of Labor 

Statistics, Produce Price Indices, available at 

http://www.bls.gov/ppi/ (last accessed July 28, 

2014). 

26The Furnace Fans rule set a mandatory fan 

energy rating (FER) of .044*Qmax + 182 for NWGF 

units, .071*Qmax + 222 for non-condensing MHGF 

units, and .071*Qmax + 240 for condensing MHGF 

units, where Qmax equals the airflow through the 

furnace at the maximum airflow-control setting 

operating point. For more information, see the 

furnace fans rulemaking Web page at: http://

www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx/ruleid/41. 

on manufacturer interviews and DOE 

expertise. To convert the information in 

the BOMs to dollar values, DOE 

collected information on labor rates, 

tooling costs, raw material prices, and 

other factors. For purchased parts, the 

cost model estimates the purchase price 

based on volume-variable price 

quotations and detailed discussions 

with manufacturers and component 

suppliers. For fabricated parts, the 

prices of raw metal materials 24 (e.g., 

tube, sheet metal) are estimated on the 

basis of 5-year averages (from 2009 to 

2014). The cost of transforming the 

intermediate materials into finished 

parts is estimated based on current 

industry pricing.25

c. Manufacturing Production Costs 

Once the cost estimates for all the 

components in each teardown unit were 

finalized, DOE totaled the cost of 

materials, labor, and direct overhead 

used to manufacture a product in order 

to calculate the MPC. The total cost of 

the product was broken down into two 

main costs: (1) The full MPC; and (2) the 

non-production cost, which includes 

selling, general, and administration 

(SG&A) expenses, the cost of research 

and development, and interest from 

borrowing for operations or capital 

expenditures. DOE estimated the MPC 

at each efficiency level considered for 

each product class, from the baseline 

through the max-tech. After 

incorporating all calculations and 

determinations into the cost model, 

DOE calculated the percentages 

attributable to each element of total 

production cost (i.e., materials, labor, 

depreciation, and overhead). These 

percentages are used to validate the 

assumptions by comparing them to 

manufacturers’ actual financial data 

published in annual reports, along with 

feedback obtained from manufacturers 

during interviews. DOE uses these 

production cost percentages in the 

manufacturer impact analysis (MIA) (see 

section IV.J). 

In estimating the MPC, DOE took into 

account the various furnace design 

enhancements offered for consumer 

comfort or to reduce electrical energy 

consumption during furnace operating 

periods (see Table IV.6 in section 

IV.C.1.b of this NOPR). In order to 

accommodate these additional design 

features into the MPC estimates, DOE 

calculated MPC estimates both with and 

without these added design features. 

All of the furnaces torn down during 

the teardown analysis used PSC indoor 

blower motors, except for at the maxtech efficiency level, where constant 

airflow BPM motors were used. As 

discussed previously, constant torque 

BPM indoor blower motors were 

considered the baseline design for 

NWGF units since the 2014 furnace fans 

rule will set a level 26 that effectively 

requires the use of this technology 

before the compliance date of this 

residential furnaces rulemaking. 

Similarly, improved PSC indoor blower 

motors were considered as the baseline 

design feature for MHGF units as a 

result of the requirements set in the 

2014 furnace fans rulemaking.26 DOE 

used the results of the furnace fans 

rulemaking to calculate the increase in 

furnace MPC needed to accommodate 

constant torque BPM and improved PSC 

indoor blower motors into NWGF and 

MHGF units, respectively, in place of 

the PSC motors present in the tear down 

units. In addition, DOE considered the 

increases in MPC needed to 

accommodate constant airflow BPM 

indoor blower motors. Motor type was 

assigned in the LCC analysis based on 

the market penetration of each type of 

motor at different efficiency levels. At 

the max-tech efficiency levels for both 

NWGF and MHGF units, DOE 

determined that constant airflow BPM 

motors are a required technology option. 

As such, the incremental MPC changes 

of using a constant airflow BPM indoor 

blower motor in place of a PSC motor 

were included in the MPCs for NWGF 

and MHGF units at their respective 

max-tech AFUE levels. 

In addition to estimating the impacts 

on MPC of different blower motor 

design features, DOE also estimated the 

impact on MPC of switching from a 

single-stage to a two-stage combustion 

system. The cost to change from a 

single-stage to a two-stage combustion 

system includes the cost of a two-stage 

gas valve, a two-speed inducer 

assembly, upgraded pressure switch, 

and additional controls and wiring. 

Generally, these costs are completely 

independent of input capacity and 

AFUE. As such, for two-stage 

combustion, DOE developed a single 

cost adder to apply to the MPCs for all 

furnace input capacities and efficiency 

levels. 

Table IV.9 and Table IV.10 present 

DOE’s estimates of the MPCs by AFUE 

efficiency level at the representative 

input capacity (80,000 Btu/hr) for both 

the NWGF and MHGF furnaces in this 

rulemaking. The MPCs presented 

incorporate the appropriate design 

characteristics of NWGF and MHGF 

furnaces at each efficiency level. These 

design characteristics include a singlestage gas valve (and corresponding 

single-stage components) for all MHGF 

efficiency levels, a two-stage gas valve 

(and corresponding components) for all 

NWGF levels (except for the max-tech 

level, which incorporates a fully 

modulating (or ‘‘step modulating’’) 

design), a constant-torque BPM blower 

motor for NWGF (except for the maxtech level, where the blower motor is a 

constant-airflow BPM motor), and an 

improved permanent split capacitor 

(PSC) blower motor for all MHGF 

efficiency levels. Further discussion of 

the MPCs that incorporate other design 

options (e.g., two-stage modulating 

combustion and constant airflow BPM 

motors) is included in chapter 5 of the 

TSD. 

TABLE IV.9—MANUFACTURER PRODUCTION COST FOR NON-WEATHERIZED GAS-FIRED FURNACES

Efficiency level 

Efficiency level 

(AFUE) 

(%) 

MPC * 

($) 

Incremental 

cost above 

baseline 

($) 

Baseline ....................................................................................................................................... 80 360 ........................

EL1 ............................................................................................................................................... 90 443 83 

EL2 ............................................................................................................................................... 92 451 91 

EL3 ............................................................................................................................................... 95 505 145 

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TABLE IV.9—MANUFACTURER PRODUCTION COST FOR NON-WEATHERIZED GAS-FIRED FURNACES—Continued 

Efficiency level 

Efficiency level 

(AFUE) 

(%) 

MPC * 

($) 

Incremental 

cost above 

baseline 

($) 

EL4 ............................................................................................................................................... 98 616 256 

* The MPC for efficiency levels from Baseline through EL3 are for two-stage operation and incorporate a constant-torque BPM indoor blower 

motor. At EL4 DOE has determined that modulating operation and a constant-airflow BPM blower motor are present for NWGF furnaces. 

TABLE IV.10—MANUFACTURER PRODUCTION COST FOR MOBILE HOME GAS-FIRED FURNACES

Efficiency level 

Efficiency level 

(AFUE) 

(%) 

MPC 

($) 

Incremental 

cost above 

baseline 

($) 

Baseline ....................................................................................................................................... 80 323 ........................

EL1 ............................................................................................................................................... 92 420 97 

EL2 ............................................................................................................................................... 95 476 153 

EL3 ............................................................................................................................................... 97 542 219 

* The MPC for efficiency levels from Baseline through EL2 are for single-stage operation and incorporate an improved PSC indoor blower 

motor. At EL 3 DOE has determined that single stage operation and an improved PSC blower motor are present for MHGF furnaces. 

Table IV.11 presents DOE’s estimates 

of the incremental MPCs of each 

standby mode and off mode efficiency 

level for this rulemaking. 

TABLE IV.11—INCREMENTAL MANUFACTURER PRODUCTION COST FOR NON-WEATHERIZED GAS-FIRED AND MOBILE HOME

GAS-FIRED FURNACES STANDBY MODE AND OFF MODE

Efficiency level 

Standby mode 

and off mode 

power 

consumption 

(W) 

Incremental 

MPC 

($) 

Baseline ............................................................................................................................................................... 11 0 

EL1 ....................................................................................................................................................................... 9 .5 1 .00 

EL2 ....................................................................................................................................................................... 9 .2 10 .47 

EL3 ....................................................................................................................................................................... 8 .5 11 .12 

Chapter 5 of the NOPR TSD presents 

more information regarding the 

development of DOE’s estimates of the 

MPCs for this rulemaking. 

d. Cost-Efficiency Relationship 

DOE’s engineering analysis results 

may be portrayed as a cost-efficiency 

relationship. DOE created costefficiency curves representing the costefficiency relationships for both product 

classes that it examined (i.e., NWGF and 

MHGF). To develop the cost-efficiency 

relationships for residential furnaces, 

DOE first calculated a market-shareweighted baseline MPC representative 

of all baseline residential furnaces torn 

down in the teardown analysis. DOE 

then took the calculated MPCs of all of 

the furnaces at efficiency levels above 

the baseline that were torn down, and 

subtracted the cost of the manufacturerspecific baseline counterpart that was 

torn down in order to develop a data set 

of the incremental costs for each 

manufacturer to get from the baseline 

efficiency level to each higher efficiency 

level for which one of their furnaces 

was torn down. DOE developed an 

average incremental cost for each 

efficiency level analyzed from the 

incremental data, and then added the 

average incremental costs to the marketshare-weighted baseline MPC to 

calculate the market-share-weightedaverage MPCs for the higher efficiency 

levels. Additional details on how DOE 

developed the cost-efficiency 

relationships and related results are 

available in chapter 5 of the NOPR TSD, 

which also presents these costefficiency curves in the form of energy 

efficiency versus MPC. 

The results indicate that costefficiency relationships are nonlinear. In 

other words, as efficiency increases, 

manufacturing becomes more difficult 

and more costly. A large cost increase is 

evident between the non-condensing 

(80% AFUE) and condensing (90% 

AFUE) efficiency levels due to the 

requirement for a heat exchanger that 

can withstand corrosive condensate, 

which is typically achieved through the 

addition of a secondary heat exchanger 

in condensing furnaces. A significant 

cost increase also occurs between the 

95% and 98% AFUE levels due to the 

need for modulating combustion 

components paired with a constant 

airflow BPM motor at 98% AFUE. 

e. Manufacturer Markup 

To account for manufacturers’ nonproduction costs and profit margin, DOE 

applies a non-production cost multiplier 

(the manufacturer markup) to the full 

MPC. The resulting MSP is the price at 

which the manufacturer can recover all 

production and non-production costs 

and earn a profit. To meet new or 

amended energy conservation 

standards, manufacturers typically 

introduce design changes to their 

product lines that increase manufacturer 

production costs. Depending on the 

competitive environment for these 

particular products, some or all of the 

increased production costs may be 

passed from manufacturers to retailers 

and eventually to consumers in the form 

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27U.S. Securities and Exchange Commission, 

Annual 10–K Reports (various years between 2009 

and 2013), available at http://sec.gov. 

28 DOE estimates that three percent of NWGFs are 

installed in commercial buildings. See section IV.E 

for further discussion. 

29Heating, Air Conditioning & Refrigeration 

Distributors International 2013 Profit Report, 

available at http://www.hardinet.org/Profit-Report 

(last accessed Aug. 19, 2014). 

30Air Conditioning Contractors of America 

(ACCA), Financial Analysis for the HVACR 

Contracting Industry (2005), available at http://

www.acca.org/store/ (last accessed Aug. 19, 2014). 

31U.S. Census Bureau, 2007 Economic Census 

Data, available at: http://www.census.gov/econ/ (last 

accessed April 10, 2014). 

32Sales Tax Clearinghouse Inc., State Sales Tax 

Rates Along with Combined Average City and 

County Rates (2014) available at http://thestc.com/ 

STrates.stm (last accessed May 27, 2014). 

of higher purchase prices. As 

production costs increase, 

manufacturers typically incur additional 

overhead. The MSP should be high 

enough to recover the full cost of the 

product (i.e., full production and nonproduction costs) and yield a profit. 

The manufacturer markup has an 

important bearing on profitability. A 

high markup under a standards scenario 

suggests manufacturers can readily pass 

along the increased variable costs and 

some of the capital and product 

conversion costs (the one-time 

expenditures) to consumers. A low 

markup suggests that manufacturers will 

not be able to recover as much of the 

necessary manufacturing investments. 

To calculate the manufacturer 

markups, DOE used 10–K reports 27

submitted to the U.S. Securities and 

Exchange Commission (SEC) by six 

publicly-owned residential furnace 

companies. The financial figures 

necessary for calculating the 

manufacturer markup are net sales, 

costs of sales, and gross profit. For 

furnaces, DOE averaged the financial 

figures spanning the years 2009 to 2013 

in order to calculate the markups. DOE 

used this approach because amended 

standards may transform high-efficiency 

products (which currently are 

considered premium products) into 

typical products. DOE acknowledges 

that numerous residential furnace 

manufacturers are privately-held 

companies and do not file SEC 10–K 

reports. In addition, while the publiclyowned companies file SEC 10–K 

reports, the financial information 

summarized may not be exclusively for 

the residential furnace portion of their 

business and can also include financial 

information from other product sectors, 

whose margins could be quite different 

from the residential furnace industries. 

DOE discussed the manufacturer 

markup with manufacturers during 

interviews, and used product specific 

feedback on market share, markups and 

cost structure from manufacturers to 

adjust the markup calculated through 

review of SEC 10–K reports. See chapter 

12 of the NOPR TSD for more details 

about the manufacturer markup 

calculation. 

f. Manufacturer Interviews 

Throughout the rulemaking process, 

DOE has sought and continues to seek 

feedback and insight from interested 

parties that would improve the 

information used in its analyses. DOE 

interviewed manufacturers representing 

35% of the product listings on the 

NWGF market and 50% of the product 

listings on the MHGF market as a part 

of the NOPR manufacturer impact 

analysis (see section IV.J.3). During the 

interviews, DOE sought feedback on all 

aspects of its analyses for residential 

furnaces. DOE discussed the analytical 

assumptions and estimates, cost model, 

and cost-efficiency curves with 

residential furnace manufacturers. DOE 

considered all the information 

manufacturers provided when refining 

the cost model and assumptions. 

However, DOE incorporated equipment 

and manufacturing process figures into 

the analysis as averages in order to 

avoid disclosing sensitive information 

about individual manufacturers’ 

products or manufacturing processes. 

More details about the manufacturer 

interviews are contained in chapter 12 

of the NOPR TSD. 

D. Markups Analysis 

DOE uses distribution channel 

markups and sales taxes (where 

appropriate) to convert the 

manufacturer production cost estimates 

from the engineering analysis to 

consumer prices, which are then used in 

the LCC, PBP, and the manufacturer 

impact analyses. The markups are 

multipliers that are applied to the 

purchase cost at each stage in the 

distribution channel. 

DOE characterized two distribution 

channels to describe how NWGFs and 

MHGFs pass from manufacturers to 

residential consumers: Replacement 

market and new construction. The 

replacement market channel is 

characterized as follows: 

Manufacturer → Wholesaler → 

Mechanical contractor → Consumer 

The new construction distribution 

channel is characterized as follows: 

Manufacturer → Wholesaler → 

Mechanical contractor → General 

contractor → Consumer 

For NWGFs and MHGFs installed in 

commercial buildings,28 DOE 

understands that, in general, the on-site 

contractor staff purchases equipment 

directly from the wholesaler and 

performs the installation. Therefore, 

DOE used a distribution channel in 

which the product goes from the 

manufacturer to a wholesaler and then 

to the commercial consumer through a 

national account: 

Manufacturer → Wholesaler → 

Consumer 

The derivation of the manufacturer 

markup is discussed in section IV.C. To 

develop markups for the parties 

involved in the distribution of the 

product, DOE utilized several sources, 

including: (1) The Heating, AirConditioning & Refrigeration 

Distributors International (HARDI) 2013 

Profit Report 29 (to develop wholesaler 

markups); (2) the Air Conditioning 

Contractors of America’s (ACCA) 2005 

financial analysis on the heating, 

ventilation, air-conditioning, and 

refrigeration (HVACR) contracting 

industry 30 (to develop mechanical 

contractor markups); and (3) U.S. 

Census Bureau 2007 Economic Census 

data 31 on the residential and 

commercial building construction 

industry (to develop general contractor 

markups). 

For wholesalers and contractors, DOE 

developed baseline and incremental 

markups based on the product markups 

at each step in the distribution chain. 

The baseline markup relates the change 

in the manufacturer selling price of 

baseline models to the change in the 

consumer purchase price. The 

incremental markup relates the change 

in the manufacturer selling price of 

higher-efficiency models (the 

incremental cost increase) to the change 

in the consumer purchase price. 

In addition to the markups, DOE 

derived state and local taxes from data 

provided by the Sales Tax 

Clearinghouse.32 These data represent 

weighted average taxes that include 

county and city rates. DOE derived 

shipment-weighted average tax values 

for each region considered in the 

analysis. 

Chapter 6 of the NOPR TSD provides 

further detail on the estimation of 

markups. 

E. Energy Use Analysis 

The purpose of the energy use 

analysis is to assess the energy 

requirements of residential furnaces at 

different efficiencies in representative 

U.S. single-family homes, multi-family 

residences, and commercial buildings, 

and to assess the energy savings 

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33U.S. Department of Energy: Energy Information 

Administration, Residential Energy Consumption 

Survey: 2009 RECS Survey Data (2013), available at: 

http://www.eia.gov/consumption/residential/data/

2009/ (last accessed July 29, 2014). 

34U.S. Department of Energy: Energy Information 

Administration, Commercial Buildings Energy 

Consumption Survey (2003), available at http://

www.eia.gov/consumption/commercial/data/2003/

index.cfm?view=microdata) (last accessed July 29, 

2014). 

35EIA estimated the equipment’s annual energy 

consumption from the household’s utility bills 

using conditional demand analysis. 

36 DOE’s analysis accounts for the over-sizing of 

furnace capacity because the furnace capacity 

assignment is a function of historical shipments by 

furnace capacity, which reflects actual practice, as 

well as heating square footage and the outdoor 

design temperature for heating (i.e., the temperature 

that is exceeded by the 30-year minimum average 

temperature 1 percent of the time). 

37National Oceanic and Atmospheric 

Administration (NOAA), NNDC Climate Data 

Online (2009), available at http://www7.ncdc.noaa.

gov/CDO/CDODivisionalSelect.jsp (last accessed 

July 29, 2014). 

38The LCC and PBP analysis uses the climate 

projected for 2021, the first full year of compliance 

with potential amended furnace standards. 

39U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2014, 

available at http://www.eia.gov/forecasts/aeo/pdf/

0383(2014).pdf (last accessed July 29, 2014). 

40See Table 1 at: http://www1.eere.energy.gov/

buildings/appliance_standards/product.aspx/

productid/42. 

41Found in 10 CFR Pt. 430, subpart B, appendix 

N. 

42AHRI Directory of Certified Furnace 

Equipment, February 2013 (Available at: http://

www.ahridirectory.org/ahridirectory/pages/

home.aspx). 

43Steven Sorrell, et. al, Empirical Estimates of the 

Direct Rebound Effect: A Review, 37 Energy Pol’y 

1356–71 (2009). 

potential of increased furnace 

efficiency. DOE estimated the annual 

energy consumption of NWGFs and 

MHGFs at specified energy efficiency 

levels across a range of climate zones, 

building characteristics, and heating 

applications. The annual energy 

consumption includes the natural gas, 

liquid petroleum gas (LPG), and 

electricity used by the furnace. 

DOE’s analysis estimated the energy 

use of NWGFs and MHGFs in the field 

(i.e., as they are actually used by 

consumers). In contrast to the DOE test 

procedure, which provides standardized 

results that can serve as the basis for 

comparing the performance of different 

appliances used under the same 

conditions, the energy use analysis 

seeks to capture the range of operating 

conditions for NWGFs and MHGFs. 

To determine the field energy use of 

residential furnaces used in homes, DOE 

established a sample of households 

using NWGFs and MHGFs from the 

Energy Information Administration’s 

(EIA) 2009 Residential Energy 

Consumption Survey (RECS 2009).33

DOE assumed that furnaces in 

residential buildings smaller than 

11,250 sq. ft. are residential furnaces 

and that each building has one furnace. 

The RECS data provide information on 

the vintage of the home, as well as 

heating energy use in each household. 

DOE used the household samples not 

only to determine furnace annual energy 

consumption, but also as the basis for 

conducting the LCC and PBP analysis. 

DOE projected household weights and 

household characteristics in 2021, the 

first full year of compliance with any 

amended energy conservation standards 

for NWGFs and MHGFs. To characterize 

future new homes, DOE used a subset of 

homes that were built after 1990. 

To determine the field energy use of 

NWGFs used in commercial buildings, 

DOE established a sample of buildings 

using NWGFs from EIA’s 2003 

Commercial Building Energy 

Consumption Survey (CBECS 2003),34

which is the most recent such survey 

that is currently available. DOE assumed 

that 80 percent of furnaces in 

commercial buildings smaller than 

10,000 sq. ft are residential nonweatherized gas furnaces and each 

building has one or more furnaces. 

1. Active Mode 

To estimate the annual energy 

consumption in active mode of furnaces 

meeting the considered efficiency 

levels, DOE first calculated the house 

heating load based on the RECS 

estimates of household furnace annual 

energy consumption.35 DOE estimated 

the house heating load by reference to 

the existing furnace’s characteristics, 

specifically its capacity 36 and efficiency 

(AFUE), as well as by the heat generated 

from the electrical components. The 

analysis assumes that homes with more 

than 5,000 square feet (about 10 percent 

of the sample) have two furnaces, with 

the heating load split evenly between 

them. This assumption decreases the 

energy use per furnace. The AFUE of the 

existing furnaces was determined using 

the furnace vintage (the year of 

installation of the product) from RECS 

and historical data on the market share 

of furnaces by AFUE (see section IV.E). 

DOE then used the house heating load 

to calculate the burner operating hours 

at each considered efficiency level, 

which are needed to calculate the fuel 

consumption and electricity 

consumption based on the DOE 

residential furnace test procedure. 

DOE adjusted the energy use 

estimated for 2009 to ‘‘normal’’ weather 

by using long-term heating degree-day 

(HDD) data for each geographical 

region.37 DOE also accounted for future 

climate trends based on Annual Energy 

Outlook 2014 (AEO 2014) projections of 

HDD.38 This adjustment results in 

approximately three percent lower 

building heating load from 2014 to 

2021. 

DOE accounted for change in building 

shell characteristics and building size 

(square footage) between 2009 and 2021 

by applying the building shell indexes 

in the National Energy Modeling System 

(NEMS) associated with Annual Energy 

Outlook 2014.39 The indexes consider 

projected improvements in building 

thermal efficiency due to improvement 

in home insulation and other thermal 

efficiency practices, as well as projected 

increases in square footage. Application 

of the index results in nine percent 

lower building heating load from 2009 

to 2021. EIA provides separate indexes 

for new buildings and existing 

buildings. 

To calculate furnace fan electricity 

consumption, DOE accounted for field 

data from several sources (as described 

in chapter 8 of the NOPR TSD) on static 

pressures of duct systems, as well as 

airflow curves for furnace blowers from 

manufacturer literature. As noted in 

section IV.C, the furnace designs 

incorporate furnace fans that meet the 

standard that will take effect in 2019.40

To calculate electricity consumption 

for the inducer fan, ignition device, gas 

valve and controls, DOE used the 

calculation approach described in 

DOE’s test procedure 41 as well as 2013 

AHRI Directory of Certified Furnace 

Equipment and manufacturer product 

literature.42

Once annual energy use had been 

calculated, DOE disaggregated the total 

into monthly amounts, as described in 

chapter 8 of the NOPR TSD. This allows 

DOE to apply monthly energy prices in 

the LCC and PBP analysis. 

Higher-efficiency furnaces reduce the 

operating costs for a consumer, which 

can lead to greater use of the furnace. A 

direct rebound effect occurs when a 

piece of equipment that is made more 

efficient is used more intensively, such 

that the expected energy savings from 

the efficiency improvement may not 

fully materialize. For the NOPR 

analysis, DOE examined a 2009 review 

of empirical estimates of the rebound 

effect for various energy-using 

products.43 This review concluded that 

the econometric and quasi-experimental 

studies suggest a mean value for the 

direct rebound effect for household 

heating of around 20 percent. DOE also 

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44Steven Nadel, ‘‘The Rebound Effect: Large or 

Small?’’ ACEEE White Paper (August 2012) 

(Available at: http://www.aceee.org/white-paper/

rebound-effect-large-or-small). 

45Brinda Thomas & Ines Azevedo, Estimating 

Direct and Indirect Rebound Effects for U.S. 

Households with Input–Output Analysis, Part 1: 

Theoretical Framework, 86 Ecological Econ. 199– 

201 (2013), available at http://www.sciencedirect.

com/science/article/pii/S0921800912004764. 

46Lorna A. Greening, et. al., Energy Efficiency 

and Consumption—The Rebound Effect—A Survey, 

28 Energy Pol’y 389–401 (2002). 

47Crystal Ball is a commercial software program 

developed by Oracle and used to conduct stochastic 

analysis using Monte Carlo simulation. A Monte 

Carlo simulation uses random sampling over many 

iterations of the simulation to obtain a probability 

distribution of results. Certain key inputs to the 

analysis are defined as probability distributions 

rather than single-point values. 

examined a 2012 ACEEE paper 44 and a 

2013 paper by Thomas and Azevedo.45

Both of these publications examined the 

same studies that were reviewed by 

Sorrell, as well as Greening et al,46 and 

identified methodological problems 

with some of the studies. The studies, 

believed to be most reliable by Thomas 

and Azevedo, show a direct rebound 

effect for heating products in the 1- 

percent to 15-percent range, while 

Nadel concludes that a more likely 

range is 1 to 12 percent, with rebound 

effects sometimes higher than this range 

for low-income households who could 

not afford to adequately heat their 

homes prior to weatherization. Based on 

DOE’s review of these recent 

assessments (see chapter 10 of the 

NOPR TSD), DOE used a 15 percent 

rebound effect for NWGFs and MHGFs 

in this NOPR. Although a lower value 

might be warranted, DOE prefers to be 

conservative and not risk understating 

the rebound effect. DOE welcomes 

comment on its assessment of this effect 

on today’s rulemaking. 

2. Standby Mode and Off Mode 

DOE calculated furnace standby mode 

and off mode electricity consumption 

for each technology option identified in 

the engineering analysis by multiplying 

the power consumption at each 

efficiency level by the number of 

standby mode and off mode hours. To 

calculate the annual number of standby 

mode and off mode hours for each 

sample household, DOE subtracted the 

estimated total furnace fan operating 

hours from the total hours in a year 

(8,760). The total furnace fan operating 

hours includes the furnace fan operating 

hours during heating, cooling and 

continuous fan modes. 

See chapter 7 in the NOPR TSD for 

additional detail on the energy analysis 

for furnace standby mode and off mode 

operation. 

F. Life-Cycle Cost and Payback Period 

Analysis 

In determining whether an energy 

efficiency standard is economically 

justified, DOE considers the economic 

impact of potential standards on 

consumers. The effect of new or 

amended standards on individual 

consumers usually includes a reduction 

in operating cost and an increase in 

purchase cost. DOE used the following 

two metrics to measure consumer 

impacts: 

• LCC (life-cycle cost) is the total 

consumer cost of an appliance or 

product, generally over the life of the 

appliance or product, including 

purchase and operating costs. The latter 

costs consist of maintenance, repair, and 

energy costs. Future operating costs are 

discounted to the time of purchase and 

summed over the lifetime of the 

appliance or product. 

• PBP (payback period) measures the 

amount of time it takes consumers to 

recover the assumed higher purchase 

price of a more energy-efficient product 

through reduced operating costs. 

For any given efficiency level, DOE 

measures the change in LCC relative to 

an estimate of the base-case efficiency 

level. The base-case estimate reflects the 

market in the absence of amended 

energy conservation standards, 

including market trends for equipment 

that exceeds the current energy 

conservation standards. 

DOE analyzed the net effect of 

potential amended furnace standards on 

consumers by calculating the LCC and 

PBP for each household by efficiency 

level. Inputs to the LCC calculation 

include the installed cost to the 

consumer (purchase price, including 

sales tax where appropriate, plus 

installation cost), operating costs 

(energy expenses, repair costs, and 

maintenance costs), the lifetime of the 

product, and a discount rate. Inputs to 

the payback period calculation include 

the installed cost to the consumer and 

first-year operating costs. 

DOE performed the LCC and PBP 

analyses using a spreadsheet model 

combined with Crystal Ball 47 to account 

for uncertainty and variability among 

the input variables. Each Monte Carlo 

simulation consists of 10,000 LCC and 

PBP calculations using input values that 

are either sampled from probability 

distributions and household samples or 

characterized with single point values. 

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 base 

case efficiency forecast. 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 and PBP 

calculation reveals that a consumer is 

not impacted by the standard level. By 

accounting for consumers who already 

purchase more-efficient products, DOE 

avoids overstating the potential benefits 

from increasing product efficiency. 

EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the test procedure in place for 

that standard. (42 U.S.C. 6295(o)(B)(ii)) 

For each considered efficiency level, 

DOE determines the value of the first 

year’s energy savings by calculating the 

quantity of those savings in accordance 

with the applicable DOE test procedure, 

and multiplying that amount by the 

average energy price forecast for the 

year in which compliance with the 

amended standards would be required. 

As discussed in section IV.E, DOE 

developed nationally-representative 

household samples from 2009 RECS, 

and a sample of commercial buildings 

using CBECS 2003. For each sampled 

building, DOE determined the energy 

consumption of the furnace and the 

appropriate energy prices in the area 

where the building is located. 

DOE calculated the LCC and PBP for 

all furnace consumers as if the 

consumers were to purchase the product 

in the year that compliance with 

amended standards is required. At the 

time of preparation of the NOPR 

analysis, the expected issuance date for 

the final rule was in January 2016. 

EPCA also prescribes a five-year period 

between the standard’s publication date 

and the compliance date, which leads to 

a compliance date of January 2021. (42 

U.S.C. 6295(f)(4)(C)) For purposes of its 

analysis, DOE modelled furnaces 

purchased on or after this date as if they 

operated for a full year, beginning on 

January 1, 2021, and continuing 

thereafter. 

1. Inputs to Installed Cost 

The primary inputs for establishing 

the total installed cost are the baseline 

consumer product price, standard-level 

consumer price increases, and 

installation costs (labor and material 

cost). Baseline consumer prices and 

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48Margaret Taylor & Sydny K. Fujita, Accounting 

for Technological Change in Regulatory Impact 

Analyses: The Learning Curve Technique. 

(Lawrence Berkeley Nat’l Lab., 2013) available at: 

http://eetd.lbl.gov/publications/accounting-fortechnological-change-0. 

49U.S. Department of Labor, Bureau of Labor 

Statistics, Produce Price Indices Series ID 

PCU333415333415C, available at http://

www.bls.gov/ppi/ (last accessed July 28, 2014). 

50RS Means Company Inc., RS Means Residential 

Cost Data. Kingston, MA (2013). 

standard-level consumer price increases 

were determined by applying markups 

to manufacturer selling price estimates, 

including sales tax where appropriate. 

The installation cost is added to the 

consumer price to produce a total 

installed cost. 

The manufacturer selling price 

estimated in the engineering analysis 

refers to the current price. Economic 

literature and historical data suggest 

that the real prices of many products 

may trend downward over time 

according to ‘‘learning’’ or ‘‘experience’’ 

curves. Experience curve analysis 

focuses on entire industries and 

aggregates over many causal factors that 

may not be well characterized.48 For 

example, experience curve analysis 

implicitly includes factors such as 

efficiencies in labor, capital investment, 

automation, materials prices, 

distribution, and economies of scale at 

an industry-wide level. An experience 

curve relates the product price to the 

cumulative production of the product. 

Using a given set of historical data, DOE 

derived an experience rate that 

expresses the percentage reduction in 

price for each doubling of cumulative 

production. 

For the default price trend for 

residential furnaces, DOE derived an 

experience rate based on an analysis of 

long-term historical data. As a proxy for 

manufacturer price, DOE used Producer 

Price Index (PPI) data for warm-air 

furnace equipment from the Bureau of 

Labor Statistics for 1990 through 2013.49

An inflation-adjusted PPI was 

calculated using the implicit price 

deflators for GDP for the same years. To 

calculate an experience rate, DOE 

performed a least-squares power-law fit 

on the inflation-adjusted PPI versus 

cumulative shipments of residential 

furnaces, based on a corresponding 

series for total shipments of residential 

furnaces (see section IV.G of this NOPR 

for discussion of shipments data). A 

detailed discussion of DOE’s derivation 

of the experience rate is provided in 

appendix 8C of the NOPR TSD. 

DOE then derived a price factor index, 

with the price in 2013 equal to 1, to 

forecast prices in 2021 for the LCC and 

PBP analysis, and, for the NIA, for each 

subsequent year through 2050. The 

index value in each year is a function 

of the experience rate and the 

cumulative production through that 

year. To derive the latter, DOE 

combined the historical shipments data 

with projected shipments from the basecase projection made for the NIA (see 

section IV.H of this NOPR). Application 

of the index results in prices that 

decline 6 percent from 2013 to 2021. 

2. Installation Cost 

Installation cost includes labor, 

overhead, and any miscellaneous 

materials and parts needed to install the 

equipment. 

DOE conducted a detailed analysis of 

installation costs when a noncondensing gas furnace is replaced with 

a condensing gas furnace, with 

particular attention to venting issues in 

replacement applications. DOE gave 

separate consideration to the cost of 

installing a condensing gas furnace in 

new homes. As part of its analysis, DOE 

used information in the 2009 RECS to 

estimate the location of the furnace in 

each of the sample homes. 

First, DOE estimated basic installation 

costs that are applicable to both 

replacement and new home 

applications. These costs, which apply 

to both condensing and non-condensing 

gas furnaces, include putting in place 

and setting up the furnace, gas piping, 

ductwork, electrical hookup, permit and 

removal/disposal fees, and where 

applicable, additional labor hours for an 

attic installation. 

For replacement applications, DOE 

then included a number of additional 

costs (‘‘adders’’) for a fraction of the 

sample households. For non-condensing 

gas furnaces, these additional costs 

included updating flue vent connectors, 

vent resizing, and chimney relining. For 

condensing gas furnaces, DOE included 

new adders for flue venting (PVC), 

combustion air venting (PVC), 

concealing vent pipes, addressing an 

orphaned water heater (by updating flue 

vent connectors, vent resizing, or 

chimney relining), and condensate 

removal. Freeze protection is accounted 

for in the cost of condensate removal. 

Table IV.12 shows the fraction of 

installations impacted and the average 

cost for each of the adders. The estimate 

of the fraction of installations impacted 

was based on the furnace location 

(primarily derived from information in 

the 2009 RECS) and a number of other 

sources that are described in chapter 8 

of the NOPR TSD. The costs were based 

on 2013 RS Means data.50 Chapter 8 of 

the NOPR TSD describes in detail how 

DOE estimated the cost for each 

installation item. 

TABLE IV.12—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES IN REPLACEMENT APPLICATIONS

Installation cost adder 

Replacement 

installations 

impacted 

Average cost 

(2013$) 

Non-Condensing Furnaces 

Updating Flue Vent * ........................................................................................................................................ 2% $555.95 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................................................................. 100% $296.12 

Combustion Air Venting (PVC) ........................................................................................................................ 59 295.36 

Concealing Vent Pipes .................................................................................................................................... 9 360.25 

Orphaned Water Heater .................................................................................................................................. 19 672.09 

Condensate Removal ...................................................................................................................................... 100 70.06 

* For a fraction of installation, this cost includes the commonly vented water heater vent connector, relining chimney, and vent resizing. 

DOE also included installation adders 

for new construction installations. For 

non-condensing furnaces, the only 

adder is a new flue vent (metal, 

including a fraction with stainless steel 

venting). For condensing gas furnaces, 

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51U.S. Department of Energy-Energy Information 

Administration, Form EIA–826 Database Monthly 

Electric Utility Sales and Revenue Data (2013) 

available at: http://www.eia.doe.gov/cneaf/

electricity/page/eia826.html. 

52U.S. Department of Energy-Energy Information 

Administration, Natural Gas Navigator (2013), 

available at: http://tonto.eia.doe.gov/dnav/ng/ng_

pri_sum_dcu_nus_m.htm. 

53U.S. Department of Energy-Energy Information 

Administration, 2012 State Energy Consumption, 

Price, and Expenditure Estimates (SEDS) (2013), 

available at: http://www.eia.doe.gov/emeu/states/_

seds.html. 

54U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2014, 

Table 3, available at http://www.eia.gov/forecasts/

aeo/data.cfm#enprisec (last accessed July 29, 2014). 

55RS Means Company Inc., RS Means Facilities 

Maintenance & Repair Cost Data. Kingston, MA 

(2013). 

56See appendix 8–F of the NOPR TSD for a listing 

of the sources. 

the adders include a new flue vent, 

combustion air venting for direct vent 

installations, accounting for a 

commonly vented water heater, and 

condensate removal. Table IV.13 shows 

the estimated fraction of new home 

installations impacted and the average 

cost for each of the adders. For details, 

see chapter 8 of the NOPR TSD. 

TABLE IV.13—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES IN NEW HOME APPLICATIONS

Installation cost adder 

New construction 

installations 

impacted 

Average cost 

(2013$) 

Non-Condensing Furnaces 

New Flue Vent (Metal) * ................................................................................................................................... 100% $1,273.78 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................................................................. 100% $207.83 

Combustion Air Venting (PVC) ........................................................................................................................ 60 205.77 

Concealing Vent Pipes .................................................................................................................................... 6 125.28 

Orphaned Water Heater .................................................................................................................................. 45 987.60 

Condensate Removal ...................................................................................................................................... 100 47.46 

* For a fraction of installation, this cost includes the commonly vented water heater vent connector. 

DOE included basic installation costs 

for mobile home gas furnaces similar to 

those described above for nonweatherized gas furnaces. DOE also 

included costs for venting and 

condensate removal. Freeze protection 

is accounted for in the cost of 

condensate removal. In addition, DOE 

considered the cost of dealing with 

space constraints that could be 

encountered when a condensing furnace 

is installed. 

3. Inputs to Operating Costs 

a. Energy Consumption 

For each sample household, DOE 

determined the energy consumption for 

a furnace at different efficiency levels 

using the approach described above in 

section IV.E. 

As discussed in section IV.E, DOE is 

taking into account the rebound effect 

associated with more-efficient 

residential furnaces. The take-back in 

energy consumption associated with the 

rebound effect provides consumers with 

increased value (e.g., enhanced comfort 

associated with a cooler or warmer 

indoor environment). The increased 

comfort has a cost that is equal to the 

monetary value of the higher energy use. 

DOE could reduce the energy cost 

savings to account for the rebound 

effect, but then it would have to add the 

value of increased comfort in order to 

conduct a proper economic analysis. 

The approach that DOE uses—not 

reducing the energy cost savings to 

account for the rebound effect and not 

adding the value of increased comfort— 

assumes that the value of increased 

comfort is equal to the monetary value 

of the higher energy use. Although DOE 

cannot measure the actual value of 

increased comfort to the consumers, the 

monetary value of the higher energy use 

represents a lower bound for this 

quantity. 

b. Energy Prices 

Using the most current data from EIA 

on average energy prices in various 

States and regions,51 52 53 DOE assigned 

an appropriate energy price to each 

household or commercial building in 

the sample, depending on its location 

(see chapter 8 of the NOPR TSD for 

details). Average electricity and natural 

gas prices from the EIA data were 

adjusted using seasonal marginal price 

factors to derive monthly marginal 

electricity and natural gas prices. For a 

detailed discussion of the development 

of marginal energy price factors, see 

appendix 8F of the NOPR TSD. 

To estimate future prices, DOE used 

the projected annual changes in average 

residential and commercial natural gas, 

LPG, and electricity prices in the 

Reference case projection in AEO 

2014.54

c. Maintenance and Repair Costs 

Repair costs are associated with 

repairing or replacing components that 

have failed, whereas maintenance costs 

are associated with maintaining the 

proper operation of the equipment. DOE 

estimated the frequency of annual 

maintenance using data from RECS 2009 

survey on the frequency with which 

owners of different types of furnaces 

perform maintenance. 

DOE estimated maintenance and 

repair costs for residential furnaces at 

each considered efficiency level using a 

variety of sources, including 2013 RS 

Means,55 manufacturer literature, and 

information from expert consultants. 

d. Product Lifetime 

Product lifetime is the age at which an 

appliance is retired from service. DOE 

conducted an analysis of furnace 

lifetimes using a combination of data on 

shipments and the furnace stock (see 

section IV.G) and RECS data on the age 

of the furnaces in the homes. The data 

allowed DOE to develop a survival 

function, which provides a range from 

minimum to maximum lifetime as well 

as an average lifetime. The average 

lifetimes estimated for the NOPR are 

21.5 years for NWGFs and MHGFs. In 

addition, DOE reviewed a number of 

sources to validate the derived furnace 

lifetimes, including American and 

European research studies and field data 

reports.56 Chapter 8 of the NOPR TSD 

provides further details on the 

methodology and sources DOE used to 

develop furnace lifetimes. 

e. Discount Rates 

In the calculation of LCC, DOE 

applies discount rates to estimate the 

present value of future operating costs. 

The discount rate used in the LCC 

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57 Damodaran Online, Data Page: Costs of Capital 

by Industry Sector (2012), http://pages.stern.nyu.

edu/∼adamodar/ (last accessed July 29, 2014). 

58The market share of furnaces with AFUE 

between 80 and 90 percent is well below 1 percent 

due to the very high installed cost of 81-percent 

AFUE furnaces, compared with condensing designs, 

and concerns about safety of operation. 

59ENERGY STAR Unit Shipment Data (2012), 

https://www.energystar.gov/index.cfm?c=partners.

unit_shipment_data. 

60Air Conditioning, Heating, and Refrigeration 

Institute, Directory of Certified Performance: 

Furnaces (2013), http://www.ahridirectory.org/. 

analysis represents the rate from an 

individual consumer’s perspective. 

To establish discount rates for 

residential consumers, 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 

and maintenance costs. DOE 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 Survey 

of Consumer Finances (SCF) for 1995, 

1998, 2001, 2004, 2007, and 2010. DOE 

then developed a distribution of rates 

for each type of debt and asset by 

income group to represent the discount 

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. 

The average residential discount rate 

across all types of household debt and 

equity and income groups, weighted by 

the shares of each class, is 4.5 percent. 

To establish discount rates for 

commercial consumers, DOE estimated 

the cost of capital for the types of 

companies that purchase NWGFs and 

MHGFs. The weighted average cost of 

capital is commonly used to estimate 

the present value of cash flows 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 estimated the 

weighted average cost of capital using 

financial data for publicly traded firms 

in the sectors that purchase residential 

furnaces.57

See chapter 8 in the NOPR TSD for 

further details on the development of 

discount rates for the LCC analysis. 

f. Base-Case Efficiency 

To estimate the share of consumers 

affected by a potential standard at a 

particular efficiency level, DOE’s LCC 

and PBP analysis considers the 

projected distribution (i.e., market 

shares) of product efficiencies that 

consumers will purchase in the first 

compliance year, without amended 

energy conservation standards (base 

case). 

DOE considered incentives and other 

market forces that have increased the 

sales of high-efficiency furnaces to 

estimate base-case efficiency 

distributions for the considered 

products. DOE started with data 

provided by AHRI on historical 

shipments for each product class. For 

non-weatherized gas furnaces, DOE 

reviewed AHRI data from 1992 to 2009, 

detailing the market shares of noncondensing (80 percent AFUE) and 

condensing (90 percent AFUE and 

greater) furnaces by region.58 DOE also 

compiled data on the national market 

shares of non-condensing and 

condensing gas furnaces from 2010 to 

2012 from the ENERGY STAR 

program.59 With these data, DOE 

derived historic trends for the North and 

South regions. 

To project trends from 2011 to 2021, 

DOE only used the trends from 1993 to 

2004 because from 2005 to 2011, there 

was a sharp increase in the share of 

condensing furnaces primarily due to 

Federal tax credits, which was followed 

by a sharp decrease in 2012. DOE 

determined that excluding these years 

provides a more reasonable projection. 

The maximum share of condensing 

shipments for each region is assumed to 

be 95 percent. In other words, at least 

five percent of NWGF and MHGF 

furnace shipments will be noncondensing. 

DOE used data on the distribution of 

models in AHRI’s Directory of Certified 

Product Performance 60 to disaggregate 

the condensing-level shipments among 

condensing efficiency levels. Based on 

stakeholder input, DOE assumed that for 

furnace replacements, the fraction of 95 

percent AFUE and above shipments in 

the replacement market would be 

double the fraction in the new 

construction market. DOE also assumed 

that the fraction of 95 percent AFUE and 

above shipments would be higher in the 

North compared to the South, because 

the ENERGY STAR level in the North is 

95 percent AFUE compared to 90 

percent in the South. 

Table IV.14 and Table IV.15 show the 

estimated AFUE base-case efficiency 

distributions in 2021 for NWGFs and 

MHGFs. For further information on 

DOE’s estimation of the base-case 

efficiency distributions for nonweatherized gas furnaces, see chapter 8 

of the NOPR TSD. 

TABLE IV.14—CURRENT AND BASE-CASE AFUE DISTRIBUTION FOR NON-WEATHERIZED GAS FURNACES

Efficiency, AFUE 

(%) 

2021 Market share in percent 

National 

(%) 

North, Repl 

(%) 

North, New 

(%) 

South, Repl 

(%) 

South, New 

(%) 

80 ......................................................................................... 53.4 33.0 34.7 77.6 70.4 

90 ......................................................................................... 5.2 5.5 8.8 3.4 5.5 

92 ......................................................................................... 17.9 15.8 32.4 13.9 20.2 

95 ......................................................................................... 23.0 44.9 23.6 4.9 3.8 

98 ......................................................................................... 0.5 0.8 0.6 0.1 0.2 

TABLE IV.15—CURRENT AND BASE-CASE AFUE DISTRIBUTION FOR MOBILE HOME GAS FURNACES

Efficiency, AFUE 

(%) 

2021 Market share in percent 

National 

(%) 

North, Repl 

(%) 

North, New 

(%) 

South, Repl 

(%) 

South, New 

(%) 

80 ......................................................................................... 73.9 65.8 64.3 87.2 89.2 

92 ......................................................................................... 12.1 6.1 21.2 9.6 9.6 

95 ......................................................................................... 13.8 27.7 14.3 3.2 1.2 

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61Scott Pigg, Electricity Use by New Furnaces: A 

Wisconsin Field Study (Energy Center of Wis. 

2003), available at http://www.ecw.org/publications

/electricity-use-new-furnaces-wisconsin-field-study. 

62RS Means Company Inc., RS Means Facilities 

Maintenance & Repair Cost Data (2013). 

63RS Means Company Inc., RS Means Residential 

Cost Data. Kingston, MA (2013). 

64 Decision Analysts, 2006, 2008, 2010, and 2013 

American Home Comfort Studies. Available at 

http://www.decisionanalyst.com/Syndicated/

HomeComfort.dai 

TABLE IV.15—CURRENT AND BASE-CASE AFUE DISTRIBUTION FOR MOBILE HOME GAS FURNACES—Continued 

Efficiency, AFUE 

(%) 

2021 Market share in percent 

National 

(%) 

North, Repl 

(%) 

North, New 

(%) 

South, Repl 

(%) 

South, New 

(%) 

97 ......................................................................................... 0.2 0.4 0.2 0.0 0.0 

DOE also estimated base-case 

efficiency distributions for furnace 

standby mode and off mode power. As 

shown in Table IV.16, DOE estimated 

that 61 percent of the affected market 

would be at the baseline level in 2021 

based on data from 18 furnace models 

from field study conducted in 

Wisconsin 61 and data from DOE 

laboratory tests (see appendix 8I). In 

addition, for MHGFs, DOE assumed that 

all PSC furnace fan motor models would 

have lower standby power than the max 

tech efficiency level. 

TABLE IV.16—STANDBY MODE AND OFF MODE BASE-CASE EFFICIENCY DISTRIBUTION IN 2021 FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES

Efficiency level Standby/off 

mode (watts) 

NWGF market 

share in 

percent 

MHGF market 

share in 

percent 

Baseline ....................................................................................................................................... 11.0 61 5 

1 ................................................................................................................................................... 9.5 0 0 

2 ................................................................................................................................................... 9.2 17 1 

3 ................................................................................................................................................... 8.5 22 94 

4. Accounting for Product Switching 

Under Potential Standards 

Because home builders are sensitive 

to the cost of heating equipment, a 

standard level that significantly 

increases purchase price may induce 

some builders to switch to a different 

heating system than they would have 

otherwise installed (i.e., in the base 

case). Such an amended standard level 

may also induce some home owners to 

replace their existing furnace at the end 

of its useful life with a different type of 

heating product, although in this case, 

switching may incur additional costs to 

accommodate the different product. The 

decision to switch is also affected by the 

prices of the energy sources for 

competing equipment. 

For this NOPR, DOE developed a 

consumer choice model to estimate the 

response of builders and home owners 

to potential amended furnace standards. 

The model considers the options 

available to each sample household, 

which are to purchase and install: (1) 

The furnace that meets a particular 

standard level, (2) a heat pump, or (3) 

an electric furnace. In addition, DOE 

allowed for the possibility that 

households for which installation of a 

condensing furnace would leave an 

‘‘orphaned’’ gas water heater that would 

require expensive re-sizing of the vent 

system might choose instead to 

purchase an electric water heater when 

they choose any of the above three 

options. DOE did not include a repair 

option in the consumer choice model 

and associated analysis. Current data 

collected by DOE suggests that repair in 

the case of major equipment failure, 

such as a furnace, would be minimal, 

unless the furnace is relatively new. For 

option 2, purchase a heat pump, DOE 

takes into consideration the age of the 

existing central air conditioner, if one 

exists, because if the air conditioner is 

not very old, it is unlikely that the 

consumer would opt to install a heat 

pump to provide both heating and 

cooling. 

The consumer choice model uses the 

installed cost of each option, as would 

be likely for each sample household, 

and the operating costs, taking into 

account the space heating load and the 

water heating load for each household 

and the energy prices it will pay over 

the equipment lifetime of the available 

product options. DOE also accounted for 

the cooling load of each relevant 

household that might switch from gas 

furnace and CAC to a heat pump. 

For heat pumps, DOE used efficiency 

and consumer prices for models that 

meet the energy conservation standards 

due to take effect on January 1, 2015 (10 

CFR 430.32(c)(3)),and for water heaters, 

it used efficiency and consumer prices 

for models that meet the standards due 

to take effect on April 16, 2015. (10 CFR 

430.32(d)) For electric furnaces, DOE 

used an efficiency of 98 percent and a 

consumer price based on RS Means.62

For situations where a household with 

a gas furnace might switch to electric 

space heating, DOE used the installed 

cost of the electric heating options, 

including a separate circuit up to 100 

amps that would need to be installed to 

power the electric resistance heater 

within an electric furnace or heat pump, 

as well as a cost for upgrading the 

electrical service panel for a fraction of 

households. For all installations, DOE 

used regional labor rates from RS 

Means.63

Electric furnaces are estimated to have 

the same lifetime as NWGFs, but heat 

pumps have an estimated average 

lifetime of 19 years, which is 2.5 years 

less than the estimated average lifetime 

of NWGFs (21.5 years). To ensure 

comparable accounting, DOE 

annualized the installed cost of a second 

heat pump and multiplied the 

annualized cost by the difference in 

years between the heat pump and a gas 

furnace in a particular switching 

situation. 

The decision criteria in the model are 

based on proprietary data from Decision 

Analysts,64 which identified for a 

representative sample of consumers 

their willingness to purchase moreefficient space-conditioning systems. 

Each of the four surveys that DOE used, 

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65Appliance Historical Statistical Review: 1954– 

2012, Appliance Mag. (2014), available at http://

www.appliancemagazine.com/marketresearch/

editorial.php?article=2476. 

66Air-Conditioning, Heating, & Refrigeration 

Institute. Monthly Shipments (2010–2013), 

available at http://www.ahrinet.org/site/498/

Resources/Statistics/Monthly-Shipments). 

67U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2014, 

Table 20, available at http://www.eia.gov/forecasts/ 

aeo/data.cfm?filter=macroeconomic#

macroeconomic (last accessed July 29, 2014). 

68U.S. Census Bureau, Characteristics of New 

Housing, http://www.census.gov/const/www/

charindex.html (last accessed Aug. 19, 2014). 

69 Decision Analysts, 2008 American Home 

Comfort Study: Online Database Tool, available at 

http://www.decisionanalyst.com/Syndicated/

HomeComfort.dai. 

70The results derived from RECS 2009 and 

CBECS 2003 show there are 45.6 and 1.2 million 

residential furnaces in residential and commercial 

buildings, respectively. DOE assumed that the share 

of shipments is similar to the share in the stock. 

71 DOE also accounted for situations when 

installing a condensing furnace could leave an 

‘‘orphaned’’ gas water heater that would require 

expensive re-sizing of the vent system. Rather than 

incurring this cost, the consumer could choose to 

purchase an electric water heater along with a new 

furnace. 

which span the period 2006 to 2013, 

involved approximately 30,000 

homeowners. The surveys asked 

respondents the maximum price they 

would be willing to pay for a product 

that was 25 percent more efficient than 

their existing product, which DOE 

assumed is equivalent to a 25-percent 

decrease in annual energy costs. DOE 

also used Decision Analyst data for 

consumer choice model in the June 27, 

2011 direct final rule for residential 

central air conditioners and residential 

furnaces. 76 FR 37408. From these data, 

DOE deduced that consumers would 

expect a payback period of 3.5 years or 

less for a more-expensive but moreefficient product (see appendix 8J of the 

NOPR TSD for further discussion). This 

reflects that, in general, consumers 

place a relatively high importance on 

the first cost differences. 

The consumer choice model estimates 

the PBP between the higher efficiency 

NWGF in each standards case compared 

to the electric heating options using the 

total installed cost and first year 

operating cost as estimated for each 

sample household or building. For 

switching to occur, the total installed 

cost of the electric option has to be less 

than the NWGF standards case option. 

The model assumes that there will be 

switching to an electric heating option 

if the PBP of the NWGF relative to the 

electric heating option is greater than 

3.5 years or the PBP is negative. In the 

case of switching to an electric heating 

option, the model selects the most 

economically beneficial case. 

In addition to the default estimate, 

DOE conducted sensitivity analyses 

assuming higher and lower amounts of 

switching. Whereas the default estimate 

uses a consumer decision metric 

involving expectation of a payback 

period of 3.5 years or less for a moreexpensive but more-efficient product, 

the sensitivity analyses use payback 

periods that are one year higher or lower 

than 3.5 years (i.e., 2.5 years and 4.5 

years). 

Key results of the consumer choice 

model are presented in section V.B.1 of 

this NOPR. 

5. Inputs to Payback Period Analysis 

The payback period is the amount of 

time it takes the consumer to recover the 

additional installed cost of more 

efficient products, compared to baseline 

products, through energy cost savings. 

The simple payback period does not 

account for changes in operating 

expense over time or the time value of 

money. Payback periods that exceed the 

life of the product mean that the 

increase in total installed cost is not 

recovered in reduced operating 

expenses. 

The inputs to the PBP calculation are 

the total installed cost of the equipment 

to the customer for each efficiency level 

and the average annual operating 

expenditures for each efficiency level. 

The PBP calculation uses the same 

inputs as the LCC analysis, except that 

discount rates are not needed. The 

results of DOE’s PBP analysis are 

presented in section V.B.1. 

For the rebuttable presumption PBP, 

for each considered efficiency level, 

DOE determined the value of the first 

year’s energy savings by calculating the 

quantity of those savings in accordance 

with the applicable DOE test procedure, 

and multiplying that amount by the 

average energy price forecast for the 

year in which compliance with the 

amended standard would be required. 

G. Shipments Analysis 

1. Overview 

DOE uses forecasts of product 

shipments to calculate the national 

impacts of potential amended energy 

conservation standards on energy use, 

NPV, and future manufacturer cash 

flows. DOE develops shipment 

projections based on historical data and 

an analysis of key market drivers for 

each product. DOE estimated furnace 

shipments by projecting shipments in 

three market segments: (1) 

Replacements; (2) new housing; and (3) 

new owners in buildings that did not 

previously have a NWGF. DOE also 

considered whether standards that 

require more-efficient furnaces would 

have an impact on furnace shipments. 

First, DOE assembled historic 

shipments data for NWGFs and MHGFs 

from Appliance 65 and AHRI.66 To 

project furnace replacement shipments, 

DOE developed retirement functions 

from the furnace lifetime estimates and 

applied them to the existing products in 

the housing stock, which are tracked by 

vintage. 

To project shipments to the new 

housing market, DOE utilized a forecast 

of new housing construction and 

historic saturation rates of furnace 

product types in new housing. DOE 

used AEO 2014 for forecasts of new 

housing.67 DOE estimated future 

furnace saturation rates in new housing 

based on a weighted-average of U.S. 

Census Bureau’s Characteristics of New 

Housing 68 values from1990 through 

2013. 

To project shipments to new owners 

of NWGF, DOE used data in the 

American Home Comfort Survey 69 to 

estimate that the annual total amounts 

to five percent of replacement 

shipments. 

DOE developed base-case shipments 

forecasts for each of the four Census 

regions that, in turn, were aggregated to 

produce regional and national forecasts. 

DOE estimated that the fraction of 

residential NWGFs shipped to the 

commercial sector is approximately 

three percent.70

For details on the shipments analysis, 

see chapter 9 of the NOPR TSD. 

2. Impact of Potential Standards on 

Shipments: Accounting for Product 

Switching 

To estimate the impacts of potential 

standards on furnace shipments, DOE 

applied the consumer choice model 

described in section IV.F.4. The options 

available to each sample household are 

to purchase and install: (1) The furnace 

that meets a particular standard level, 

(2) a heat pump, or (3) an electric 

furnace.71

As applied in the LCC and PBP 

analysis, the model considers 

equipment prices in the compliance 

year and energy prices over the lifetime 

of equipment installed in that year. The 

shipments model considers the 

switching that might occur in each year 

of the considered 2021–2050 forecast 

period. To do so, DOE estimated the 

switching in the final year of the 

shipments period (2050), and derived 

trends from 2021 to 2050. First, DOE 

applied the furnace product price trend 

described above to project prices in 

2050. DOE used the appropriate energy 

prices over the lifetime of equipment 

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72 DOE’s use of spreadsheet models provides 

interested parties with access to the models within 

a familiar context. In addition, the TSD and other 

documentation that DOE provides during the 

rulemaking help explain the models and how to use 

them, and interested parties can review DOE’s 

analyses by changing various input quantities 

within the spreadsheet. 

installed in that year. Although the 

inputs vary, the decision criteria, as 

described in section IV.F.4, are the same 

in each year. 

For each considered standard level, 

the number of gas furnaces shipped in 

each year is equal to the base shipments 

minus the number of gas furnace buyers 

who switched to either a heat pump or 

an electric furnace. The shipments 

model also tracks the number of 

additional heat pumps and electric 

furnaces shipped in each year. 

Because measures to limit standby 

mode and off mode power consumption 

have a very small impact on the total 

installed cost and do not impact 

consumer utility, and thus have a 

minimal effect on consumer purchase 

decisions, DOE assumed that base-case 

product shipments would be unaffected 

by standards to limit standby mode and 

off mode power consumption. 

For details on DOE’s shipments 

analysis of product and fuel switching, 

see chapter 9 of the NOPR TSD. 

H. National Impact Analysis 

The NIA assesses the national energy 

savings (NES) and the net present value 

(NPV) from a national perspective of 

total consumer costs and savings 

expected to result from new or amended 

energy conservation standards at 

specific efficiency levels. DOE 

determined the NPV and NES for the 

efficiency levels considered for the 

furnace product classes analyzed. 

To make the analysis more accessible 

and transparent to all interested parties, 

DOE used a spreadsheet model to 

calculate the energy savings and the 

national consumer costs and savings 

from each TSL.72 The NIA calculations 

are based on the annual energy 

consumption and total installed cost 

data from the energy use analysis and 

the LCC analysis. In the NIA, DOE 

forecasted the energy savings, energy 

cost savings and installed product costs 

for each product class over the lifetime 

of products sold from 2021 through 

2050. 

1. Efficiency in the Base Case and 

Standards Cases 

A key component of the NIA is the 

trend in energy efficiency forecasted for 

the base case (without amended 

standards) and each of the standards 

cases. Section IV.F.3.f describes how 

DOE developed a base-case energy 

efficiency distribution for each of the 

considered product classes for the first 

full year of compliance (2021). To 

project base-case efficiency over the 30- 

year shipments period, DOE 

extrapolated the historical trends in 

efficiency that were described in section 

IV.F.3.f. DOE estimated that the national 

market share of condensing products 

would grow from 45 percent in 2021 to 

61 percent by 2050 for NWGFs, and 

from 23 percent to 29 percent for 

MHGFs. The market shares of the 

different condensing efficiency levels 

(i.e., 90-, 92-, 95-, and 98-percent AFUE 

for NWGF and 92-, 95-, and 97-percent 

AFUE for MHGF) are maintained in the 

same proportional relationship as in 

2021. 

Due to the lack of historical efficiency 

data for standby mode and off mode 

power consumption, DOE estimated that 

the efficiency distribution would remain 

the same throughout the forecast period. 

To estimate the impact that amended 

energy conservation standards may have 

in the year compliance becomes 

required, DOE used a ‘‘roll-up’’ 

scenario: products with efficiencies in 

the base case that do not meet a 

potential amended standard level ‘‘roll 

up’’ to meet that standard level, and 

products at efficiencies above the 

standard level under consideration 

would not be affected. DOE believes that 

the roll-up approach provides a 

conservative estimate of the potential 

energy savings in the standards cases. 

For the standards case with a 90-percent 

AFUE national standard, DOE estimated 

that many consumers will purchase a 

92-percent AFUE furnace rather than a 

90-percent AFUE furnace because the 

extra installed cost is minimal. 

After the year of compliance, DOE 

estimated growth in efficiency in the 

standards cases, except in the max-tech 

standards case. The estimated growth 

accounts for potential changes in 

ENERGY STAR criteria and the 

response of manufacturers to minimum 

standards in the condensing range. For 

the TSLs requiring 90-, 92-, and 95- 

percent AFUE, DOE projected growth in 

the market shares of 95-percent AFUE 

and 98-percent AFUE furnaces. For the 

proposed NWGF AFUE standards (TSL 

3, requiring 92-percent AFUE), the share 

of 95-percent AFUE furnaces increases 

from 24 to 56 percent from 2021 to 

2050, and the share of 98-percent AFUE 

furnaces increases from 0.5 to 8.4 

percent. For the proposed MHGF AFUE 

standards (TSL 3, requiring 92-percent 

AFUE), the share of 95-percent furnaces 

increases from 11 percent to 34 percent, 

and the share of 97-percent AFUE 

furnaces increases from 0.1 percent to 

2.6 percent. 

DOE did not have a basis on which to 

predict a change in efficiency trend for 

standby mode and off mode power 

consumption, so DOE assumed that the 

efficiency distribution would not 

change after the first full year of 

compliance. 

Details on how the efficiency trends 

were developed are in chapter 10 of the 

NOPR TSD. 

2. Product Cost Trend 

As discussed in section IV.F.1, DOE 

used an experience curve method to 

project future product price trends. 

Application of the price index results in 

a decline of 22 percent in furnace prices 

from 2021 to 2050. In addition to the 

default trend described in section 

IV.F.1, which shows a modest rate of 

decline, DOE performed price trend 

sensitivity calculations in the NIA to 

examine the dependence of the analysis 

results on different analytical 

assumptions. The price trend sensitivity 

analysis considered a trend with a 

greater rate of decline than the default 

trend and a trend with constant prices. 

The derivation of these trends is 

described in appendix 10C of the NOPR 

TSD. 

3. Product Switching 

As discussed in section IV.F.4, DOE 

estimated the extent of switching from 

NWGFs to electric heating equipment 

that might occur in each year of the 

considered 2021–2050 forecast period in 

response to potential amended 

standards. In addition to the default 

estimate, DOE conducted sensitivity 

analyses assuming higher and lower 

amounts of switching. 

4. National Energy Savings 

To develop the NES, DOE calculated 

annual energy consumption for the base 

case and the standards cases. DOE 

calculated the annual energy 

consumption for each case using the 

appropriate per-unit annual energy use 

data multiplied by the projected NWGF 

or MHGF shipments for each year. The 

per-unit annual energy use is adjusted 

with the building shell improvement 

index, which results in a decline of 12 

percent in the heating load from 2021 to 

2050, and the climate index, which 

results in a decline of 6.5 percent in the 

heating load. 

In the standards cases, there are fewer 

shipments of NWGFs or MHGFs 

compared to the base case because of 

product switching, but there are 

additional shipments of heat pumps, 

electric furnaces and electric water 

heaters. DOE incorporated the per-unit 

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73U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2014, 

available at http://www.eia.gov/forecasts/aeo/

data.cfm (last accessed July 29, 2014). 

74Office of Management and Budget, OMB 

Circular A–4, section E, Identifying and Measuring 

Benefits and Costs (2003), available at http://

www.whitehouse.gov/omb/memoranda/m03- 

21.html. 

75As previously discussed in section IV.F, the 

rebound effect provides consumers with increased 

utility (e.g., a more comfortable indoor 

environment). 

annual energy use of the heat pumps 

and electric furnaces that was calculated 

in the LCC and PBP analysis (based on 

the specific sample households that 

switch to these products) into the NIA 

model. 

As explained in section IV.E.1, DOE 

incorporated a rebound effect for 

NWGFs and MHGFs by reducing the site 

energy savings in each year by 15 

percent. 

To estimate the national energy 

savings expected from amended 

appliance standards, DOE used a 

multiplicative factor to convert site 

electricity consumption (at the home or 

commercial building) into primary 

energy consumption (the energy 

required to convert and deliver the site 

electricity). These conversion factors 

account for the energy used at power 

plants to generate electricity and energy 

losses during transmission and 

distribution. The factors vary over time 

due to changes in generation sources 

(i.e., the power plant types projected to 

provide electricity to the country) 

projected in AEO 2014.73 The factors 

that DOE developed are marginal 

values, which represent the response of 

the electricity sector to an incremental 

decrease in consumption associated 

with potential appliance standards. 

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 Science, in 2011 DOE 

announced its intention to use full-fuelcycle (FFC) measures of energy use and 

greenhouse gas and other emissions in 

the national impact analyses 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 the Federal Register in which 

DOE explained that NEMS is the most 

appropriate tool for its FFC analysis and 

DOE intended to use NEMS for that 

purpose. 77 FR 49701 (August 17, 2012). 

The FFC factors incorporates 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 this NOPR is described in more 

detail in appendix 10B of the NOPR 

TSD. 

5. Net Present Value of Consumer 

Benefit 

To develop the national NPV of 

consumer benefits from potential energy 

conservation standards, DOE calculated 

projected annual operating costs (energy 

costs and repair and maintenance costs) 

and annual installation costs for the 

base case and the standards cases. DOE 

calculated annual energy expenditures 

from annual energy consumption using 

forecasted energy prices in each year. 

DOE calculated annual product 

expenditures by multiplying the price 

per unit times the projected shipments 

in each year. 

As mentioned above, in the standards 

cases there are fewer shipments of 

NWGFs or MHGFs than in the base case 

because of product switching, but there 

are additional shipments of heat pumps 

and electric furnaces. For these 

products, the appropriate annual 

operating costs and installed costs that 

were calculated in the LCC and PBP 

analysis were incorporated into the NIA 

model. 

The aggregate difference each year 

between operating cost savings and 

increased installation costs is the net 

savings or net costs. DOE multiplies the 

net savings in future years by a discount 

factor to determine their present value. 

DOE estimates the NPV of consumer 

benefits using both a 3-percent and a 7- 

percent real discount rate, in accordance 

with guidance provided by the Office of 

Management and Budget (OMB) to 

Federal agencies on the development of 

regulatory analysis.74 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 

‘‘societal rate of time preference,’’ which 

is the rate at which society discounts 

future consumption flows to their 

present value. The discount rates for the 

determination of NPV differ from the 

discount rates used in the LCC analysis, 

which are designed to reflect a 

consumer’s perspective. 

As noted above, in determining 

national energy savings, DOE is 

accounting for the rebound effect 

associated with more-efficient 

furnaces.75 Because consumers have 

foregone a monetary savings in energy 

expenses, it is reasonable to conclude 

that the value of the increased utility is 

equivalent to the monetary value of the 

energy savings that would have 

occurred without the rebound effect. 

Therefore, the economic impacts on 

consumers with or without the rebound 

effect, as measured in the NPV, are the 

same. 

I. Consumer Subgroup Analysis 

In analyzing the potential impacts of 

new or amended standards on 

consumers, DOE evaluated the impacts 

on two identifiable subgroups of 

consumers, low-income consumers and 

senior citizens, that may be 

disproportionately affected by a national 

standard. DOE analyzed the LCC 

impacts and PBP for those particular 

consumers from alternative standard 

levels. The analysis used subsets of the 

RECS 2009 sample comprised of 

households that meet the criteria for the 

two subgroups for both non-weatherized 

gas furnaces and mobile home gas 

furnaces. 

Chapter 11 of the NOPR TSD 

describes the consumer subgroup 

analysis and its results. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed a manufacturer 

impact analysis (MIA) to determine the 

financial impact of amended energy 

conservation standards on residential 

furnace manufacturers and to estimate 

the potential impact of such standards 

on employment and manufacturing 

capacity. 

The MIA has both quantitative and 

qualitative aspects. The quantitative 

part of the MIA primarily relies on the 

Government Regulatory Impact Model 

(GRIM), an industry cash-flow model 

with inputs specific to this rulemaking. 

The key GRIM inputs are industry cost 

structure data, shipment data, product 

costs, markups, and conversion costs. 

The key output is the industry net 

present value (INPV). The INPV is the 

sum of the discounted cash flows for the 

industry over the MIA analysis period 

and provides a valuation of the 

industry. The GRIM applies standard 

accounting principles to calculate 

industry cash flows and to estimate 

changes in INPV between a base case 

and various TSLs (the standards case). 

The difference in INPV between the 

base case and standards cases represents 

the financial impact of amended energy 

conservation standards on residential 

furnace manufacturers. DOE used 

different sets of assumptions (markup 

scenarios) to represent the uncertainty 

surrounding potential impacts on prices 

and manufacturer profitability as a 

result of amended standards. These 

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76U.S. Securities and Exchange Commission, 

Annual 10–K Reports (Various Years), available at: 

http://www.sec.gov/edgar/searchedgar/

companysearch.html (last accessed August 1, 2014). 77U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries (2011), available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?refresh=t. 

78Hoovers Inc. Company Profiles, Various 

Companies, available at: http://www.hoovers.com. 

different assumptions produce a range 

of INPV results. 

The qualitative part of the MIA 

addresses the proposed standard’s 

potential impacts on manufacturing 

capacity and industry competition, as 

well as differential impacts the 

proposed standard may have on any 

particular sub-group of manufacturers. 

DOE also assesses the cumulative 

regulatory burden stemming from the 

combined effects of several recent or 

impending regulations, and considers 

opportunities to align future 

rulemakings to reduce burden to 

industry (see section V.B.2.e). The 

complete MIA is outlined in chapter 12 

of the NOPR TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In the first 

phase of the MIA, DOE prepared an 

industry characterization based on the 

market and technology assessment and 

publicly available information. As part 

of its profile of the residential furnace 

industry, DOE also conducted a topdown cost analysis of manufacturers in 

order to derive preliminary financial 

inputs for the GRIM (e.g., sales, general, 

and administration (SG&A) expenses; 

research and development (R&D) 

expenses; and tax rates). DOE used 

public sources of information, including 

company SEC 10–K filings,76 corporate 

annual reports, the U.S. Census 

Bureau’s Economic Census,77 and 

Hoover’s reports 78 to conduct this 

analysis. 

In the second phase of the MIA, DOE 

prepared an industry cash-flow analysis 

to quantify the potential impacts of 

amended energy conservation 

standards. In general, energy 

conservation standards can affect 

manufacturer cash flow in three distinct 

ways. These include: (1) Creating a need 

for increased investment; (2) raising 

production costs per unit; and (3) 

altering revenue due to higher per-unit 

prices and possible changes in sales 

volumes. DOE estimated industry cash 

flows in the GRIM at various potential 

standard levels using industry financial 

parameters derived in the first phase 

and the shipment scenario used in the 

NIA. The GRIM modeled both impacts 

from the AFUE energy conservation 

standards and impacts from standby 

mode and off mode energy conservation 

standards (i.e., standards based on 

standby mode and off mode wattage). 

The GRIM results from the two 

standards were evaluated independent 

of one another. 

In the third phase of the MIA, DOE 

conducted structured, detailed 

interviews with manufacturers that 

account for approximately 35% of 

NWGF product listings and 50% of 

MHGF product listings. During these 

interviews, DOE discussed engineering, 

manufacturing, procurement, and 

financial topics to validate assumptions 

used in the GRIM. DOE also solicited 

information about manufacturers’ views 

of the industry as a whole and their key 

concerns regarding this rulemaking. See 

section IV.J.3 for a description of the key 

issues manufacturers raised during the 

interviews. 

Additionally, in the third phase, DOE 

also evaluated subgroups of 

manufacturers that may be 

disproportionately impacted by 

amended standards or that may not be 

accurately represented by the average 

cost assumptions used to develop the 

industry cash-flow analysis. For 

example, small manufacturers, niche 

players, or manufacturers exhibiting a 

cost structure that largely differs from 

the industry average could be more 

negatively affected by amended energy 

conservation standards. DOE identified 

one subgroup (small manufacturers) for 

a separate impact analysis. 

To identify small businesses for this 

analysis, DOE applied the small 

business size standards published by 

the Small Business Administration 

(SBA) to determine whether a company 

is considered a small business. 65 FR 

30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. To be categorized as a small 

business under North American 

Industry Classification System (NAICS) 

code 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing,’’ a 

residential furnace manufacturer and its 

affiliates may employ a maximum of 

750 employees. The 750-employee 

threshold includes all employees in a 

business’ parent company and any other 

subsidiaries. Based on this 

classification, DOE identified three 

residential furnace companies that 

qualify as small businesses. The 

residential furnace small manufacturer 

subgroup is discussed in section VI.B of 

this NOPR and in chapter 12 of the 

NOPR TSD. 

2. Government Regulatory Impact Model 

DOE used the GRIM to quantify the 

potential changes in cash flow due to 

amended standards that result in a 

higher or lower industry value. The 

GRIM was designed to conduct an 

annual cash-flow analysis using 

standard accounting principles that 

incorporates manufacturer costs, 

markups, shipments, and industry 

financial information as inputs. DOE 

calculated a series of annual cash flows, 

beginning in 2014 (the base year of the 

analysis) and continuing to 2050 (the 

end of the analysis period). DOE 

calculated INPVs by summing the 

stream of annual discounted cash flows 

during this period. DOE applied a 

discount rate of 6.4 percent, which was 

derived from industry financials and 

feedback received during manufacturer 

interviews. More information about the 

derivation of the manufacturers’ 

discount rate can be found in chapter 12 

of the TSD. 

After calculating industry cash flows 

and INPV, DOE compared changes in 

INPV between the base case and each 

standards case. The difference in INPV 

between the base case and a standards 

case represents the financial impact of 

the amended energy conservation 

standard on the industry at a particular 

TSL. As discussed previously, DOE 

collected this information on GRIM 

inputs from a number of sources, 

including publicly-available data and 

confidential interviews with a number 

of manufacturers. 

For consideration of standby mode 

and off mode regulations, DOE modeled 

the impacts of the technology options 

for reducing electricity usage discussed 

in the engineering analysis (chapter 5 of 

the TSD). The GRIM analysis 

incorporates the increases in MPC and 

changes in markups the results from the 

standby mode and off mode 

requirements. Due to the small cost of 

standby mode and off mode components 

relative to the overall cost of a 

residential furnace, DOE assumed that 

standby mode and off mode standards 

alone would not impact product 

shipment numbers. In general, the 

impacts of the standby and off mode 

standard are significantly smaller than 

the impacts of the AFUE standard. For 

this reason, the analysis of employment, 

capacity constraints, and sub-group 

impacts focus on the AFUE standard. 

The GRIM results for both the AFUE 

standard and the standby mode and off 

mode standard are discussed in section 

V.B.2. Additional details about the 

GRIM, the discount rate, and other 

financial parameters can be found in 

chapter 12 of the NOPR TSD. 

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a. Government Regulatory Impact Model 

Key Inputs 

Manufacturer Production Costs 

Manufacturing a higher-efficiency 

product is typically more expensive 

than manufacturing a baseline product 

due to the use of more complex 

components, which are typically more 

costly than baseline components. The 

changes in the MPCs of the analyzed 

products can affect the revenues, gross 

margins, and cash flow of the industry, 

making these product cost data key 

GRIM inputs for DOE’s analysis. 

In the MIA, DOE used the MPCs 

calculated in the engineering analysis, 

as described in section IV.C and further 

detailed in chapter 5 of the NOPR TSD. 

In addition, DOE used information from 

its teardown analysis (described in 

chapter 5 of the TSD) to disaggregate the 

MPCs into material, labor, and overhead 

costs. To calculate the MPCs for 

products at and above the baseline, DOE 

performed teardowns and cost modeling 

that allowed DOE to estimate the 

incremental material, labor, and 

overhead costs for products above the 

baseline. These cost breakdowns and 

product markups were validated and 

revised with input from manufacturers 

during manufacturer interviews. 

Shipments Forecast 

DOE used the GRIM to estimate 

manufacturer revenues based on total 

unit shipment forecasts and the 

distribution of these values by efficiency 

level. Changes in sales volumes and 

efficiency mix over time can 

significantly affect manufacturer 

finances. For this analysis, DOE used 

the NIA’s annual shipment forecasts 

derived from the shipments analysis 

from 2014 (the base year) to 2050 (the 

end year of the analysis period). In the 

shipments analysis, DOE estimates the 

distribution of efficiencies in the base 

case for all equipment classes. See 

section IV.G for additional details. 

For the standards-case shipment 

forecast, the GRIM uses the shipments 

analysis standards case forecasts. To 

account for regional standards, 

shipments values inputted to the GRIM 

are break out the north and the ‘‘rest of 

country’’ for TSL 1 and TSL 2. The NIA 

assumes that product efficiencies in the 

base case that do not meet the energy 

conservation standard in the standards 

case either ‘‘roll up’’ to meet the 

amended standard or switch to another 

product such as a heat pump or electric 

furnace. In other words, the market 

share of products that are below the 

energy conservation standard is added 

to the market share of products at the 

minimum energy efficiency level 

allowed under each standard case. The 

market share of products above the 

energy conservation standard is 

assumed to be unaffected by the 

standard in the compliance year. (See 

section IV.H.1 for further details on the 

roll-up and product switching 

methodology). 

Product and Capital Conversion Costs 

Amended energy conservation 

standards would cause manufacturers to 

incur one-time conversion costs to bring 

their production facilities and product 

designs into compliance. DOE evaluated 

the level of conversion-related 

expenditures that would be needed to 

comply with each considered efficiency 

level in each product class. For the MIA, 

DOE classified these conversion costs 

into two major groups: (1) Capital 

conversion costs; and (2) product 

conversion costs. Capital conversion 

costs are one-time investments in 

property, plant, and equipment 

necessary to adapt or change existing 

production facilities such that new 

compliant product designs can be 

fabricated and assembled. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with amended 

energy conservation standards. 

To evaluate the level of capital 

conversion expenditures manufacturers 

would likely incur to comply with 

amended AFUE energy conservation 

standards, DOE used manufacturer 

interviews to gather data on the 

anticipated level of capital investment 

that would be required at each 

efficiency level. Based on the 

manufacturer feedback, DOE developed 

a market-share weighted average capital 

expenditure per manufacturer. DOE 

then scaled up this number to estimate 

the industry capital conversion cost. 

DOE validated manufacturer comments 

with estimates of capital expenditure 

requirements derived from the product 

teardown analysis and engineering 

analysis described in chapter 5 of the 

NOPR TSD. 

DOE assessed the product conversion 

costs at each considered AFUE 

efficiency level by integrating data from 

quantitative and qualitative sources. 

DOE considered market-share weighted 

feedback regarding the potential costs at 

each efficiency level from multiple 

manufacturers to estimate product 

conversion costs (e.g., R&D 

expenditures, certification costs. 

Manufacturer data was aggregated to 

better reflect the industry as a whole 

and to protect confidential information. 

DOE separately calculated the 

conversion costs for the standby mode 

and off mode standard. DOE anticipated 

that manufacturers would incur 

minimal capital conversion costs, as the 

engineering analysis indicates that all 

the design options to improve standby 

and off mode performance are 

component swaps which would not 

require new investments along 

production lines. However, the standby 

and off mode standard may require 

product conversion costs related to the 

specification and testing of a new 

components, as well as one-time 

updates to marketing literature for 

standby mode and off mode. DOE 

estimated these product conversion 

costs based on the engineering analysis 

and feedback collected in manufacturer 

interviews. 

In general, DOE assumed that all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

amended standards. The conversion 

cost figures used in the GRIM can be 

found in section V.B.2 of this notice. For 

additional information on the 

estimation of product and capital 

conversion costs, see chapter 12 of the 

NOPR TSD. 

b. Government Regulatory Impact Model 

Scenarios 

Manufacturer Markup Scenarios 

As discussed in the previous section, 

MSPs include direct manufacturing 

production costs (i.e., labor, materials, 

and overhead estimated in DOE’s MPCs) 

and all non-production costs (i.e., 

SG&A, R&D, and interest), along with 

profit. To calculate the MSPs in the 

GRIM, DOE applied non-production 

cost markups to the MPCs estimated in 

the engineering analysis for each 

product class and efficiency level. 

Modifying these markups in the 

standards case yielded different sets of 

impacts on manufacturers. For the MIA, 

DOE modeled two standards-case 

markup scenarios to represent the 

uncertainty regarding the potential 

impacts on prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) A 

preservation of gross margin percentage 

markup scenario; (2) a preservation of 

per-unit operating profit markup 

scenario; and (3) a three-tier markup. 

These scenarios lead to different 

markup values that, when applied to the 

inputted MPCs, resulted in varying 

revenue and cash-flow impacts. The 

analytic results in section V.B.2 presents 

the upper and lower bound markup 

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scenarios, which are the preservation of 

gross margin percentage and three-tier 

markup scenarios for AFUE standard 

and the preservation of gross margin 

percentage and per-unit preservation of 

operating profit markup scenarios for 

standby and off mode standard. 

Under the preservation of gross 

margin percentage markup scenario, 

DOE applied a single uniform ‘‘gross 

margin percentage’’ markup across all 

efficiency levels, which assumes that 

following amended standards, 

manufacturers would be able to 

maintain the same amount of profit as 

a percentage of revenue at all efficiency 

levels within a product class. As 

production costs increase with 

efficiency, this scenario implies that the 

absolute dollar markup will increase as 

well. Based on publicly-available 

financial information for residential 

furnace manufacturers, as well as 

comments from manufacturer 

interviews, DOE assumed the average 

non-production cost markup—which 

includes SG&A expenses, R&D 

expenses, interest, and profit—to be 

1.34 for non-weatherized gas furnaces 

and 1.27 for mobile home gas furnaces. 

Manufacturers do not believe they could 

maintain the same gross margin 

percentage markup as their production 

costs increase. Therefore, DOE assumes 

that this markup scenario represents the 

upper bound of the residential furnace 

industry’s profitability in the standards 

case because manufacturers are able to 

fully pass through additional costs due 

to standards to consumers. 

In the per-unit preservation-ofoperating-profit scenario, as the cost of 

production goes up under a standards 

case, manufacturers are generally 

required to reduce their markups to a 

level that maintains base-case operating 

profit. In this scenario, the industry can 

only maintain its operating profit in 

absolute dollars after the standard (but 

not on a percentage basis, as seen in the 

preservation of gross margin markup 

scenario). Manufacturer markups are set 

so that operating profit one year after 

the compliance date of amended energy 

conservation standards is the same as in 

the base case on a per-unit basis. In 

other words, manufacturers are not able 

to garner additional operating profit 

from the higher production costs and 

the investments that are required to 

comply with the amended standards, 

but, they are able to maintain the same 

operating profit in the standards case 

that was earned in the base case. 

Therefore, in percentage terms, the 

operating margin is reduced between 

the base case and standards case. 

DOE also modeled a three-tiered 

markup scenario, which reflects the 

industry’s ‘‘good, better, best’’ pricing 

structure. DOE implemented the threetiered markup scenario because 

multiple manufacturers stated in 

interviews that they offer multiple tiers 

of equipment lines that are 

differentiated, in part, by efficiency 

level. The higher efficiency tiers 

typically earn premiums (for the 

manufacturer) over the baseline 

efficiency tier. Several manufacturers 

suggested that amended standards 

would lead to a reduction in premium 

markups and reduce the profitability of 

higher efficiency products. During the 

MIA interviews, manufacturers 

provided information on the range of 

typical efficiency levels in those tiers 

and the change in profitability at each 

level. DOE used this information to 

estimate markups for residential gasfired furnaces under a three-tier pricing 

strategy in the base case. In the 

standards case, DOE modeled the 

situation in which standards result in 

less product differentiation, 

compression of the markup tiers, and an 

overall reduction in profitability. 

3. Manufacturer Interviews 

DOE interviewed manufacturers 

representing 35 percent of the product 

listings in the NWGF market and 50 

percent of the product listings in the 

MHGF market for this analysis. DOE 

contractors endeavored to conduct 

interviews with a representative cross 

section of manufacturers (including 

large and small manufacturers, covering 

all equipment classes and product 

offerings). DOE contractors reached out 

to all the small business manufacturers 

that were identified as part of the 

analysis, as well as larger manufacturers 

that have significant market share in the 

residential furnace market. The 

information gathered during these 

interviews enabled DOE to tailor the 

GRIM to reflect the unique financial 

characteristics of the residential furnace 

industry. All interviews provided 

information that DOE used to evaluate 

the impacts of potential amended 

energy conservation standards on 

manufacturer cash flows, manufacturing 

capacities, and employment levels. 

In interviews, DOE asked 

manufacturers to describe their 

concerns with the rulemaking regarding 

residential gas-fired furnace products. 

The following section highlights 

manufacturer responses that helped 

shape DOE’s understanding of potential 

impacts of an amended standard on the 

industry. Manufacturer interviews are 

conducted under non-disclosure 

agreements (NDAs), so DOE does not 

document these discussions in the same 

way that it does public comments in the 

comment summaries and DOE’s 

responses throughout the rest of this 

NOPR. 

Replacement Market 

Multiple manufacturers noted that an 

energy conservation standard set at 90% 

AFUE or above would make it difficult 

for substantial portions of the install 

base to replace their existing residential 

furnaces. They noted that some 

consumers may be faced with 

significant installation or home 

renovation costs when for replacing 

non-condensing furnaces with new 

condensing units due to the challenges 

of disposing of condensate from 

furnaces with efficiencies above 80% 

AFUE. 

Product Switching 

Several manufacturers stated that gasfired furnaces may not be economically 

justified for certain customers, 

depending on the level of the amended 

energy conservation standard for 

residential furnaces. These customers 

may be forced to seek more alternatives 

with lower upfront costs. Manufacturers 

expressed concern that customers may 

opt to buy alternative products, such as 

heat pumps, water heater systems, or 

electric furnaces. Such substitutions 

could decrease shipments of gas-fired 

furnaces, which in turn would reduce 

industry revenue. 

Regional Enforcement 

Several manufacturers expressed 

concern about the potential 

complications of implementing and 

enforcing regional standards. Without a 

clear enforcement plan for regional 

standards, manufacturers were 

concerned about the potential burdens 

and impacts on their residential furnace 

product lines. The manufacturers noted 

that any amended standard should 

provide enough lead-in time between 

the announcement date and effective 

date to comply with the increased 

burden of regional standard. 

Negative Impacts on Industry 

Profitability 

During interviews, all manufacturers 

agreed that if DOE set amended energy 

conservation standards too high, 

increased standards could limit their 

ability to differentiate residential 

furnace products based on efficiency. As 

the standard approaches max tech, 

manufacturers stated that there would 

be fewer performance differences and 

operating cost savings between baseline 

and premium products. They were 

concerned the drop in differentiation 

would lead to an erosion of markups for 

top efficiency products. Thus, the 

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79See http://www.epa.gov/climateleadership/

inventory/ghg-emissions.html. 

80U.S. Environmental Protection Agency, 

Compilation of Air Pollutant Emission Factors, AP– 

42, Fifth Edition, Volume I: Stationary Point and 

Area Sources (1998), available at http://

www.epa.gov/ttn/chief/ap42/index.html). 

81 IPCC, Climate Change 2013: The Physical 

Science Basis. Contribution of Working Group I to 

the Fifth Assessment Report of the 

Intergovernmental Panel on Climate Change 

(Cambridge University Press, 2013). 

82See North Carolina v. EPA, 550 F.3d 1176 (D.C. 

Cir. 2008); North Carolina v. EPA, 531 F.3d 896 

(D.C. Cir. 2008). 

83See EME Homer City Generation, LP v. EPA, 

696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 

U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 

(2013) (No. 12–1182). 

84On April 29, 2014, the U.S. Supreme Court 

reversed the judgment of the DC Circuit and 

remanded the case for further proceedings 

consistent with the Supreme Court’s opinion. The 

Supreme Court held in part that EPA’s methodology 

for quantifying emissions that must be eliminated 

in certain States due to their impacts in other 

downwind States was based on a permissible, 

workable, and equitable interpretation of the Clean 

Air Act provision that provides statutory authority 

for CSAPR. See EPA v. EME Homer City Generation, 

No 12–1182, slip op. at 32 (April 29, 2014). On 

October 23, 2014, the D.C. Circuit lifted the stay of 

CSAPR and CSAPR went into effect (and the CAIR 

sunset) in January 1, 2015. Because DOE is using 

emissions factors based on AEO 2013 for today’s 

NOPR, the NOPR assumes that CAIR, not CSAPR, 

is the regulation in force. The difference between 

CAIR and CSAPR is not relevant for the purpose of 

DOE’s analysis of SO2 emissions. 

85CSAPR also applies to NOX, and it would 

supersede the regulation of NOX under CAIR. As 

stated previously, the current analysis assumes that 

CAIR, not CSAPR, is the regulation in force. The 

difference between CAIR and CSAPR with regard to 

DOE’s analysis of NOX is slight. 

manufacturers’ profitability would 

decrease with compressed product 

offerings and markups. 

K. Emissions Analysis 

In the emissions analysis, DOE 

estimated the impacts on site and power 

sector emissions of carbon dioxide 

(CO2), nitrogen oxides (NOX), sulfur 

dioxide (SO2), and mercury (Hg) from 

potential amended energy conservation 

standards for residential furnaces. In 

addition, DOE estimated emissions 

impacts in production activities 

(extracting, processing, and transporting 

fuels) that provide energy to power 

plants or building sites. These are 

referred to as ‘‘upstream’’ emissions. 

Together, these emissions account for 

the full-fuel-cycle (FFC). In accordance 

with DOE’s FFC Statement of Policy (76 

FR 51281 (Aug. 18, 2011) as amended at 

77 FR 49701 (August 17, 2012)), the FFC 

analysis also includes impacts on 

emissions of methane (CH4) and nitrous 

oxide (N2O), both of which are 

recognized as greenhouse gases. 

DOE primarily conducted the 

emissions analysis using emissions 

factors for CO2 and most of the other 

gases derived from data in AEO 2014. 

Combustion emissions of CH4 and N2O 

were estimated using emissions 

intensity factors published by the 

Environmental Protection Agency (EPA) 

in its GHG Emissions Factors Hub.79

Site emissions of CO2 and NOX were 

estimated using emissions intensity 

factors from a separate EPA 

publication.80 DOE developed separate 

emissions factors for power sector 

emissions and upstream emissions. The 

method that DOE used to derive 

emissions factors is described in chapter 

13 of the NOPR TSD. 

For CH4 and N2O, DOE calculated 

emissions reduction in tons and also in 

terms of units of carbon dioxide 

equivalent (CO2eq). Gases are converted 

to CO2eq by multiplying each ton of the 

greenhouse gas by the gas’s global 

warming potential (GWP) over a 100- 

year time horizon. Based on the Fifth 

Assessment Report of the 

Intergovernmental Panel on Climate 

Change,81 DOE used GWP values of 28 

for CH4 and 265 for N2O. 

SO2 emissions from affected electric 

generating units (EGUs) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (DC). (42 U.S.C. 7651 et seq.) 

SO2 emissions from 28 eastern States 

and DC were also limited under the 

Clean Air Interstate Rule (CAIR; 70 FR 

25162 (May 12, 2005)), which created an 

allowance-based trading program that 

operates along with the Title IV 

program. CAIR was remanded to the 

U.S. Environmental Protection Agency 

(EPA) by the U.S. Court of Appeals for 

the District of Columbia Circuit, but it 

remained in effect.82 In 2011, EPA 

issued a replacement for CAIR, the 

Cross-State Air Pollution Rule (CSAPR). 

76 FR 48208 (August 8, 2011). On 

August 21, 2012, the D.C. Circuit issued 

a decision to vacate CSAPR.83 The court 

ordered EPA to continue administering 

CAIR. The emissions factors used for 

today’s NOPR, which are based on AEO 

2014, assume that CAIR remains a 

binding regulation through 2040.84

The attainment of emissions caps is 

typically flexible among EGUs and is 

enforced through the use of emissions 

allowances and tradable permits. 

Beginning in 2016, however, SO2

emissions will decline significantly as a 

result of the Mercury and Air Toxics 

Standards (MATS) for power plants. 77 

FR 9304 (Feb. 16, 2012). In the final 

MATS rule, EPA established a standard 

for hydrogen chloride as a surrogate for 

acid gas hazardous air pollutants (HAP), 

and also established a standard for SO2

(a non-HAP acid gas) as an alternative 

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions will be reduced as 

a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. AEO 2014 assumes that, in 

order to continue operating, coal plants 

must have either flue gas 

desulfurization or dry sorbent injection 

systems installed by 2016. Both 

technologies, which are used to reduce 

acid gas emissions, also reduce SO2

emissions. Under the MATS, emissions 

will be far below the cap established by 

CAIR, so it is likely that the increase in 

electricity demand associated with the 

highest residential furnace efficiency 

levels would increase SO2 emissions. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia.85 Thus, it is 

unlikely that the increase in electricity 

demand associated with the considered 

residential furnace efficiency levels 

would increase NOX emissions in those 

States covered by CAIR. However, these 

efficiency levels would be expected to 

increase NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions increases for 

these States. 

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps and, as such, the 

increase in electricity demand 

associated with the residential furnace 

efficiency levels would be expected to 

increase mercury emissions. DOE 

estimated mercury emissions using 

emissions factors based on AEO 2014, 

which incorporates the MATS. 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

As part of the development of this 

proposed rule, DOE considered the 

estimated monetary benefits from the 

reduced emissions of CO2 and NOX that 

are expected to result from each of the 

TSLs considered. In order to make this 

calculation similar to the calculation of 

the NPV of consumer benefit, DOE 

considered the reduced emissions 

expected to result over the lifetime of 

equipment shipped in the forecast 

period for each TSL. This section 

summarizes the basis for the monetary 

values used for each of these emissions 

and presents the values considered in 

this rulemaking. 

To make these calculations, DOE is 

relying on a set of values for the social 

cost of carbon (SCC) that was developed 

by a Federal interagency process. A 

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86National Research Council. Hidden Costs of 

Energy: Unpriced Consequences of Energy 

Production and Use (2009). 

summary of the basis for these values is 

provided below, and a more detailed 

description of the methodologies used is 

provided as an appendix to chapter 14 

of the NOPR TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of carbon dioxide. A domestic SCC 

value is meant to reflect the value of 

damages in the United States resulting 

from a unit change in carbon dioxide 

emissions, while a global SCC value is 

meant to reflect the value of damages 

worldwide. 

Under section 1(b)(6) of Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, ‘‘assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs.’’ 

The purpose of the SCC estimates 

presented here is to allow agencies to 

incorporate the monetized social 

benefits of reducing CO2 emissions into 

cost-benefit analyses of regulatory 

actions. The estimates are presented 

with an acknowledgement of DOE 

acknowledges that there are many 

uncertainties involved in the estimates 

and with a clear understanding that they 

should be updated over time to reflect 

increasing knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed the SCC estimates, technical 

experts from numerous agencies met on 

a regular basis to consider public 

comments, explore the technical 

literature in relevant fields, and discuss 

key model inputs and assumptions. The 

main objective of this process was to 

develop a range of SCC values using a 

defensible set of input assumptions 

grounded in the existing scientific and 

economic literatures. In this way, key 

uncertainties and model differences 

transparently and consistently inform 

the range of SCC estimates used in the 

rulemaking process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of carbon 

dioxide emissions, the analyst faces a 

number of challenges. A recent report 

from the National Research Council 86

points out that any assessment will 

suffer from uncertainty, speculation, 

and lack of information about: (1) 

Future emissions of greenhouse gases; 

(2) the effects of past and future 

emissions on the climate system; (3) the 

impact of changes in climate on the 

physical and biological environment; 

and (4) the translation of these 

environmental impacts into economic 

damages. As a result, any effort to 

quantify and monetize the harms 

associated with climate change will 

raise questions of science, economics, 

and ethics, and should be viewed as 

provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing carbon 

dioxide emissions. The agency can 

estimate the benefits from reduced (or 

costs from increased) emissions in any 

future year by multiplying the change in 

emissions in that year by the SCC value 

appropriate for that year. The net 

present value of the benefits can then be 

calculated by multiplying each of these 

future benefits by an appropriate 

discount factor and summing across all 

affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits of reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits were evaluated across 

agencies, the Administration sought to 

develop a transparent and defensible 

method, specifically designed for the 

rulemaking process, to quantify avoided 

climate change damages from reduced 

CO2 emissions. The interagency group 

did not undertake any original analysis. 

Instead, it combined SCC estimates from 

the existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim global SCC estimates for 

2007 (in 2006 dollars) of $55, $33, $19, 

$10, and $5 per metric ton of CO2. These 

interim values represented the first 

sustained interagency effort within the 

U.S. government to develop an SCC for 

use in regulatory analysis. The results of 

this preliminary effort were presented in 

several proposed and final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specifically, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: the FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change (IPCC). Each model was given 

equal weight in the SCC values that 

were developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models, while respecting the different 

approaches to quantifying damages 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

In 2010, the interagency group 

selected four sets of SCC values for use 

in regulatory analyses. Three sets of 

values are based on the average SCC 

from three integrated assessment 

models, at discount rates of 2.5 percent, 

3 percent, and 5 percent. The fourth set, 

which represents the 95th-percentile 

SCC estimate across all three models at 

a 3-percent discount rate, is included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The values 

grow in real terms over time. 

Additionally, the interagency group 

determined that a range of values from 

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87 It is recognized that this calculation for 

domestic values is approximate, provisional, and 

highly speculative. There is no a priori reason why 

domestic benefits should be a constant fraction of 

net global damages over time. 88 Interagency Working Group on Social Cost of 

Carbon, Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866 (2010), 

available at http://www.whitehouse.gov/sites/

default/files/omb/inforeg/for-agencies/Social-Costof-Carbon-for-RIA.pdf. 89Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866. Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

7 percent to 23 percent should be used 

to adjust the global SCC to calculate 

domestic effects, although preference is 

given to consideration of the global 

benefits of reducing CO2 emissions.87

Table IV.17 presents the values in the 

2010 interagency group report,88 hich is 

reproduced in appendix 14A of the 

NOPR TSD. 

TABLE IV.17—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th Percentile 

2010 ................................................................................................................. 4.7 21.4 35.1 64.9 

2015 ................................................................................................................. 5.7 23.8 38.4 72.8 

2020 ................................................................................................................. 6.8 26.3 41.7 80.7 

2025 ................................................................................................................. 8.2 29.6 45.9 90.4 

2030 ................................................................................................................. 9.7 32.8 50.0 100.0 

2035 ................................................................................................................. 11.2 36.0 54.2 109.7 

2040 ................................................................................................................. 12.7 39.2 58.4 119.3 

2045 ................................................................................................................. 14.2 42.1 61.7 127.8 

2050 ................................................................................................................. 15.7 44.9 65.0 136.2 

The SCC values used for today’s 

notice were generated using the most 

recent versions of the three integrated 

assessment models that have been 

published in the peer-reviewed 

literature. Table IV.18 shows the 

updated sets of SCC estimates from the 

2013 interagency update 89 in five-year 

increments from 2010 to 2050. 

Appendix 14B of the NOPR TSD 

provides the full set of values. The 

central value that emerges is the average 

SCC across models at a 3-percent 

discount rate. However, for purposes of 

capturing the uncertainties involved in 

regulatory impact analysis, the 

interagency group emphasizes the 

importance of including all four sets of 

SCC values. 

TABLE IV.18—ANNUAL SCC VALUES FROM 2013 INTERAGENCY UPDATE, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th Percentile 

2010 ................................................................................................................. 11 32 51 89 

2015 ................................................................................................................. 11 37 57 109 

2020 ................................................................................................................. 12 43 64 128 

2025 ................................................................................................................. 14 47 69 143 

2030 ................................................................................................................. 16 52 75 159 

2035 ................................................................................................................. 19 56 80 175 

2040 ................................................................................................................. 21 61 86 191 

2045 ................................................................................................................. 24 66 92 206 

2050 ................................................................................................................. 26 71 97 220 

The interagency group recognizes that 

a number of key uncertainties remain, 

and that current SCC estimates should 

be treated as provisional and revisable 

since they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The National Research 

Council report describes tension 

between the goal of producing 

quantified estimates of the economic 

damages from an incremental ton of 

carbon and the limits of existing efforts 

to model these effects. There are a 

number of analytical challenges that are 

being addressed by the research 

community, including research 

programs housed in many of the Federal 

agencies participating in the interagency 

process to estimate the SCC. The 

interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions, DOE used the 

values from the 2013 interagency report, 

adjusted to 2013$ using the Gross 

Domestic Product price deflator. For 

each of the four SCC cases specified, the 

values used for emissions in 2015 were 

$12.0, $40.5, $62.4, and $119 per metric 

ton avoided (values expressed in 

2013$). DOE derived values after 2050 

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90U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities (2006), available at http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

omb/inforeg/2006_cb/2006_cb_final_report.pdf. 

91See Bureau of Economic Analysis, ‘‘Regional 

Multipliers: A Handbook for the Regional InputOutput Modeling System (RIMS II),’’ U.S. 

Department of Commerce (1992). 

92M.J. Scott, et. al., ImSET 3.1: Impact of Sector 

Energy Technologies, PNNL–18412, (2009), 

available at www.pnl.gov/main/publications/

external/technical_reports/PNNL-18412.pdf. 

using the relevant growth rates for the 

2040–2050 period in the interagency 

update. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SCC values in each case. 

2. Valuation of Other Emissions 

Reductions 

As noted above, DOE has taken into 

account how amended energy 

conservation standards would reduce 

site NOX emissions nationwide and 

increase power sector NOX emissions in 

those 22 States not affected by the CAIR. 

DOE estimated the monetized value of 

net NOX emissions reductions resulting 

from each of the TSLs considered for 

today’s NOPR based on estimates found 

in the relevant scientific literature. 

Estimates of monetary value for 

reducing NOX from stationary sources 

range from $476 to $4,893 per ton in 

2013$.90 DOE calculated monetary 

benefits using a medium value for NOX

emissions of $2,684 per short ton (in 

2013$), and real discount rates of 3 

percent and 7 percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. DOE has not 

included monetization of those 

emissions in the current analysis. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

several effects on the power generation 

industry that would result from the 

adoption of new or amended energy 

conservation standards. In the utility 

impact analysis, DOE analyzes the 

changes in installed electrical capacity 

and generation that would result for 

each trial standard level. The analysis is 

based on published output from NEMS, 

which is a public domain, multisectored, partial equilibrium model of 

the U.S. energy sector. Each year, NEMS 

is updated to produce the AEO 

reference case as well as a number of 

side cases that estimate the economywide impacts of changes to energy 

supply and demand. DOE uses those 

published side cases that incorporate 

efficiency-related policies to estimate 

the marginal impacts of reduced energy 

demand on the utility sector. The output 

of this analysis is a set of timedependent coefficients that capture the 

change in electricity generation, primary 

fuel consumption, installed capacity 

and power sector emissions due to a 

unit reduction in demand for a given 

end use. These coefficients are 

multiplied by the stream of electricity 

savings calculated in the NIA to provide 

estimates of selected utility impacts of 

new or amended energy conservation 

standards. Chapter 15 of the NOPR TSD 

describes the utility impact analysis in 

further detail. 

N. Employment Impact Analysis 

Employment impacts from new or 

amended energy conservation standards 

include direct and indirect impacts. 

Direct employment impacts are any 

changes in the number of employees of 

manufacturers of the products subject to 

standards; the MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient appliances. Indirect 

employment impacts from standards 

consist of the jobs created or eliminated 

in the national economy, other than in 

the manufacturing sector being 

regulated, due to: (1) Reduced spending 

by end users on energy; (2) reduced 

spending on new energy supply by the 

utility industry; (3) increased consumer 

spending on the purchase of new 

products; and (4) the effects of those 

three factors throughout the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.91 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

sector (i.e., the utility sector) to more 

labor-intensive sectors (e.g., the retail 

and service sectors). Thus, based on the 

BLS data alone, DOE believes net 

national employment may increase 

because of shifts in economic activity 

resulting from amended standards for 

NWGFs and MHGFs. 

For the amended standard levels 

considered in this NOPR, DOE 

estimated indirect national employment 

impacts using an input/output model of 

the U.S. economy called Impact of 

Sector Energy Technologies, Version 

3.1.1 (ImSET).92 ImSET is a specialpurpose version of the ‘‘U.S. Benchmark 

National Input-Output’’ (I–O) model, 

which was designed to estimate the 

national employment and income 

effects of energy-saving technologies. 

The ImSET software includes a 

computer-based I–O model having 

structural coefficients that characterize 

economic flows among the 187 sectors. 

ImSET’s national economic I–O 

structure is based on a 2002 U.S. 

benchmark table, specially aggregated to 

the 187 sectors most relevant to 

industrial, commercial, and residential 

building energy use. DOE notes that 

ImSET is not a general equilibrium 

forecasting model, and understands the 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run. For the NOPR, DOE 

used ImSET only to estimate short-term 

(through 2023) employment impacts. 

For more details on the employment 

impact analysis, see chapter 16 of the 

NOPR TSD. 

V. Analytical Results and Conclusions 

The following section addresses the 

results from DOE’s analyses with 

respect to potential energy conservation 

standards for the products examined as 

part of this rulemaking. It addresses the 

trial standard levels examined by DOE, 

the projected impacts of each of these 

levels if adopted as energy conservation 

standards for furnaces, and the 

standards levels that DOE is proposing 

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93 In the context of presenting TSLs and results 

for each of them, DOE uses the term ‘‘AFUE standard’’ to refer to potential standards on AFUE 

throughout section V of this notice. TSLs for 

standby mode and off mode are addressed 

separately. 

to adopt in this NOPR. Additional 

details regarding the analyses conducted 

by DOE are contained in the publiclyavailable NOPR TSD supporting this 

document. 

A. Trial Standard Levels 

DOE developed two sets of trial 

standard levels (TSLs) that combine 

efficiency levels for NWGFs and 

MHGFs, one for AFUE and one for 

standby mode and off mode power. 

1. TSLs for AFUE 93

Table V.1 presents the AFUE levels in 

each TSL that DOE has identified for 

potential NWGF and MHGF standards. 

TSL 5 consists of the max-tech 

efficiency levels. TSL 4 consists of the 

efficiency levels that provide the 

maximum NES with an NPV greater 

than zero using a 7-percent discount 

rate. TSL 3 consists of the efficiency 

levels that provide the highest NPV 

using a 7-percent discount rate, and that 

also result in a higher percentage of 

consumers that receive an LCC benefit 

than experience an LCC loss (see section 

V.B.1 for LCC results). TSL 2 consists of 

the efficiency levels that represent 95- 

percent AFUE for the Northern region 

for each product class, and the baseline 

non-condensing efficiency level for the 

rest of the country. TSL 1 consists of the 

baseline condensing efficiency level for 

the North and the baseline noncondensing efficiency level for the rest 

of the country for each product class. 

TABLE V.1—AFUE TRIAL STANDARD LEVELS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES

Product class 

Trial standard level 

(AFUE) 

1 2 3 4 5 

Non-Weatherized Gas Furnaces .................. North: 90% ................

Rest: 80% .................

North: 95% ................

Rest: 80% .................

92% 95% 98% 

Mobile Home Gas Furnaces ......................... North: 92% ................

Rest: 80% .................

North: 95% ................

Rest: 80% .................

92% 

........................

95% 

........................

97% 

........................

2. TSLs for Standby Mode and Off Mode 

Power 

Table V.2 presents the TSLs and the 

corresponding product class efficiency 

levels (expressed in watts) that DOE 

considered for NWGF and MHGF 

standby mode and off mode power 

consumption. For each product class, 

DOE considered three efficiency levels. 

TABLE V.2—STANDBY MODE AND OFF MODE TRIAL STANDARD LEVELS FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES

Product class 

Trial standard level 

(watts) 

1 2 3 

Non-Weatherized Gas Furnaces ................................................................................................. 9.5 9.2 8.5 

Mobile Home Gas Furnaces ........................................................................................................ 9.5 9.2 8.5 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

DOE analyzed the economic impacts 

on NWGF and MHGF consumers by 

looking at the effects standards would 

have on the LCC and PBP. DOE also 

examined the impacts of potential 

standards on selected consumer 

subgroups. These analyses are discussed 

below. 

a. Life-Cycle Cost and Payback Period 

To evaluate the net economic impact 

of potential amended energy 

conservation standards on consumers of 

NWGFs and MHGFs, DOE conducted 

LCC and PBP analyses for each TSL. In 

general, higher-efficiency products 

would affect consumers in two ways: (1) 

Purchase price would increase, and (2) 

annual operating expense would 

decrease. In addition, some consumers 

may choose to switch to an alternative 

heating system rather than purchase and 

install a NWGF if they judge the 

economics to be favorable. DOE 

estimated the extent of switching at 

each TSL using the consumer choice 

model discussed in section IV.F.4. 

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 savings, energy prices, energy 

price trends, repair costs, and 

maintenance costs). The LCC 

calculation also uses product lifetime 

and discount rates. In cases where 

consumers are predicted to switch, the 

inputs include the total installed costs, 

operating costs, and product lifetime for 

the chosen heating system. 

The key outputs of the LCC analysis 

are a mean LCC savings (or cost) and a 

median PBP relative to the base-case 

efficiency distribution for each product 

class of residential NWGFs and MHGFs, 

as well as the percentage of consumers 

for whom the LCC under an amended 

standard would decrease (net benefit), 

increase (net cost), or exhibit no change 

(no impact). 

DOE also performed a PBP analysis as 

part of the consumer impact analysis. 

The PBP is the number of years it would 

take for the consumer to recover the 

increased costs of higher-efficiency 

product as a result of energy savings 

based on the operating cost savings. The 

PBP is an economic benefit-cost 

measure that uses benefits and costs 

without discounting. Chapter 8 of the 

NOPR TSD provides detailed 

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94 DOE did not analyze switching for MHGFs 

because the installation cost differential is small 

between condensing and non-condensing equipment, so the incentive for switching is fairly 

small. 

information on the LCC and PBP 

analyses. 

The simple payback is measured 

relative to the baseline product. In 

contrast, the LCC savings are measured 

relative to the base-case efficiency 

distribution in the compliance year. No 

impacts occur when the base-case 

efficiency for a specific consumer equals 

or exceeds the efficiency at a given TSL; 

a standard would have no effect because 

the product installed would be at or 

above that standard level without 

amended standards. 

For NWGFs, the LCC and PBP results 

at each efficiency level include 

consumers that would purchase and 

install a NWGF at that level, and also 

consumers that would choose to switch 

to alternative heating equipment rather 

than pay the cost of installing a furnace 

at that level.94 The impacts for 

consumers that switch depend on the 

product that they choose (heat pump or 

electric furnace) and the NWGF that 

they would purchase in the base case. 

The extent of projected product 

switching (in 2021) is shown in Table 

V.3 for each TSL for NWGFs. As 

expected, the degree of switching 

increases at higher-efficiency TSLs 

where the installed cost of a NWGF is 

very high for some consumers. As 

discussed in section IV.F.4, DOE also 

conducted sensitivity analysis using 

high and low switching estimates (based 

on paybacks of 2.5 and 4.5 years, 

respectively around the reference value 

of 3.5 years). Tables similar to Table V.3 

for the high and low switching estimates 

are shown in appendix 8J of the NOPR 

TSD. 

TABLE V.3—RESULTS OF CONSUMER CHOICE MODEL FOR NON-WEATHERIZED GAS FURNACES

Consumer Option TSL 1 ** 

(%) 

TSL 2 ** 

(%) TSL 3 TSL 4 TSL 5 

Purchase NWGF at Standard Level .................................................................. 97 .8 97 .4 90 .6 88 .6 84 .7 

Switch to Heat Pump* ........................................................................................ 1 .6 1 .9 6 .8 8 .6 12 .0 

Switch to Electric Furnace* ................................................................................ 0 .6 0 .6 2 .5 2 .8 3 .3 

Total ................................................................................................................... 100 100 100 100 100 

* Includes switching from a gas water heater to an electric water heater. 

** Results at TSLs 1 and 2 refer to the Northern region. For the Rest of Country, the proposed standard levels at TSLs 1 and 2 are at the 

baseline, so no consumers are affected. 

Table V.4 through Table V.7 provide 

key results for the AFUE TSLs. Results 

for all efficiency levels are reported in 

chapter 8 of the NOPR TSD. The LCC 

and PBP results for NWGF include both 

residential and commercial users. For 

NWGFs, similar results for the high and 

low switching estimates are shown in 

appendix 8J of the NOPR TSD. For the 

proposed standards for AFUE (TSL 3), 

the average LCC savings are $253 using 

high switching estimates, and $329 

using low switching estimates. These 

values compare to the default LCC 

savings of $305 (see Table V.5). 

TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACE AFUE STANDARDS

TSL Region AFUE 

(%) 

Average costs 

(2013$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ................. North ............................... 90 $2,985 $737 $11,761 $14,746 8.3 21.5 

Rest of Country ............... 80 2,003 456 7,374 9,376 .................... 21.5 

2 ................. North ............................... 95 3,133 706 11,251 14,385 7.2 21.5 

Rest of Country ............... 80 2,003 456 7,374 9,376 .................... 21.5 

3 ................. National ........................... 92 2,669 579 9,228 11,897 7.2 21.5 

4 ................. National ........................... 95 2,788 565 8,985 11,773 7.4 21.5 

5 ................. National ........................... 98 2,948 554 8,771 11,718 8.3 21.5 

Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the baseline product. 

TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE BASE CASE EFFICIENCY DISTRIBUTION FOR NON-WEATHERIZED

GAS FURNACE AFUE STANDARDS

TSL Region AFUE 

(%) 

Life-Cycle cost savings 

% of Consumers that 

Experience 

Net Cost 

Average 

savings* 

(2013$) 

1 .............................................. North ....................................................................................... 90 11 $208 

Rest of Country ....................................................................... 80 0 ........................

2 .............................................. North ....................................................................................... 95 14 374 

Rest of Country ....................................................................... 80 0 ........................

3 .............................................. National ................................................................................... 92 20 305 

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TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE BASE CASE EFFICIENCY DISTRIBUTION FOR NON-WEATHERIZED

GAS FURNACE AFUE STANDARDS—Continued 

TSL Region AFUE 

(%) 

Life-Cycle cost savings 

% of Consumers that 

Experience 

Net Cost 

Average 

savings* 

(2013$) 

4 .............................................. National ................................................................................... 95 24 $388 

5 .............................................. National ................................................................................... 98 40 441 

* The calculation includes households with zero LCC savings (no impact). 

TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR MOBILE HOME GAS FURNACE AFUE STANDARDS

TSL Region AFUE 

(%) 

Average costs 

(2013$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ................. North ............................... 92 $1,760 $740 $11,415 $13,175 1.8 21.5 

Rest of Country ............... 80 1,489 489 7,762 9,251 .................... 21.5 

2 ................. North ............................... 95 1,902 719 11,103 13,005 2.8 21.5 

Rest of Country ............... 80 1,489 489 7,762 9,251 .................... 21.5 

3 ................. National ........................... 92 1,721 623 9,694 11,415 2.2 21.5 

4 ................. National ........................... 95 1,864 607 9,440 11,304 3.3 21.5 

5 ................. National ........................... 97 1,979 599 9,319 11,298 4.2 21.5 

Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the baseline product. 

TABLE V.7—AVERAGE LCC SAVINGS RELATIVE TO THE BASE CASE EFFICIENCY DISTRIBUTION FOR MOBILE HOME GAS

FURNACE AFUE STANDARDS

TSL Region AFUE 

(%) 

Life-Cycle cost savings 

% of 

Consumers 

that 

experience 

net cost 

(%) 

Average 

savings * 

(2013$) 

1 .............................................. North ....................................................................................... 92 4 $770 

Rest of Country ....................................................................... 80 0 ........................

2 .............................................. North ....................................................................................... 95 8 902 

Rest of Country ....................................................................... 80 0 ........................

3 .............................................. National ................................................................................... 92 7 691 

4 .............................................. National ................................................................................... 95 13 778 

5 .............................................. National ................................................................................... 97 25 784 

* The calculation includes households with zero LCC savings (no impact). 

Table V.8 through Table V.11 show 

the national LCC and PBP results for 

standby mode and off mode TSLs. DOE 

did not consider regional standards for 

standby mode and off mode. The LCC 

and PBP results for NWGFs include 

both residential and commercial users. 

TABLE V.8—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACE STANDBY MODE AND OFF MODE

STANDARDS

TSL Efficiency level 

Average costs 

(2013$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

Baseline .............................................. $0 $11 $159 $159 .................... 21.5 

1 ...................... 1 .......................................................... 2 9 137 139 1.3 21.5 

2 ...................... 2 .......................................................... 17 9 133 150 9.7 21.5 

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13166 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

95As discussed in section IV.I, DOE did not 

perform a subgroup analysis for the residential 

furnace standby mode and off mode efficiency 

levels. The standby mode and off mode analysis 

relied on the test procedure to assess energy savings 

for the considered standby mode and off mode 

efficiency levels. Because the analysis used the 

same test procedure parameters for all sample 

households, there is no difference in energy savings 

between the consumer subgroups and the full 

sample. 

TABLE V.8—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACE STANDBY MODE AND OFF MODE

STANDARDS—Continued 

TSL Efficiency level 

Average costs 

(2013$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

3 ...................... 3 .......................................................... 18 8 123 141 7.5 21.5 

Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the baseline product. 

TABLE V.9—AVERAGE LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR NON-WEATHERIZED

GAS FURNACE STANDBY MODE AND OFF MODE STANDARDS

TSL Efficiency level 

Life-Cycle cost savings 

% of 

Consumers 

that 

experience 

net cost 

Average 

savings * 

(2013$) 

1 ................................................................................................................................................... 1 2 $12 

2 ................................................................................................................................................... 2 15 6 

3 ................................................................................................................................................... 3 9 13 

* The calculation includes households with zero LCC savings (no impact). 

TABLE V.10—AVERAGE LCC AND PBP RESULTS FOR MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE

STANDARDS

TSL 

Efficiency level 

Average 

costs 

(2013$) 

Simple 

payback 

(years) 

Average 

lifetime 

Installed cost (years) 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

Baseline .............................................. $0 $10 $155 $155 .................... 21.5 

1 ...................... 1 .......................................................... 2 9 134 136 1.2 21.5 

2 ...................... 2 .......................................................... 16 9 130 145 9.2 21.5 

3 ...................... 3 .......................................................... 17 8 120 137 7.1 21.5 

Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the baseline product. 

TABLE V.11—AVERAGE LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE STANDARDS

TSL Efficiency level 

Life-Cycle cost savings 

% of Consumers that 

experience net 

cost 

Average 

savings * 

(2013$) 

1 ................................................................................................................................................... 1 0 $1 

2 ................................................................................................................................................... 2 1 0 

3 ................................................................................................................................................... 3 1 1 

* The calculation includes households with zero LCC savings (no impact). 

b. Consumer Subgroup Analysis 95

In the consumer subgroup analysis, 

DOE estimated the impacts of the 

considered AFUE TSLs on low-income 

and senior-only households. The 

average LCC savings and simple 

payback periods for low-income and 

senior-only households are compared to 

the results for all consumers for the 

AFUE standards in Table V.12 and 

Table V.13. Because the Rest of Country 

efficiency levels at TSLs 1 and 2 are at 

the baseline, these tables only include 

results for the Northern region for these 

TSLs. Chapter 11 of the NOPR TSD 

presents detailed results of the 

consumer subgroup analysis, including 

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results for standby mode and off mode 

standards. 

TABLE V.12—NON-WEATHERIZED GAS FURNACE AFUE STANDARDS: IMPACTS FOR SENIOR-ONLY AND LOW-INCOME

CONSUMER SUBGROUPS COMPARED TO ALL HOUSEHOLDS

TSL AFUE 

(%) 

Average life-cycle cost savings 

(2013$) 

Simple payback period 

(years) 

Senior-only Low-income All consumers Senior-only Low-income All consumers 

1 * ................................. 90 $223 $148 $208 7.9 9.1 8.3 

2 * ................................. 95 405 346 374 6.7 7.6 7.2 

3 ................................... 92 326 247 305 6.8 8.3 7.2 

4 ................................... 95 427 330 388 6.9 8.3 7.4 

5 ................................... 98 542 485 441 7.5 8.5 8.3 

* Only includes results for the North region. 

TABLE V.13—MOBILE HOME GAS FURNACE AFUE STANDARDS: IMPACTS FOR SENIOR-ONLY AND LOW-INCOME

CONSUMER SUBGROUPS COMPARED TO ALL HOUSEHOLDS

TSL AFUE 

(%) 

Average life-cycle cost savings 

(2013$) 

Simple payback period 

(years) 

Senior-only Low-income All consumers Senior-only Low-income All consumers 

1 * ................................. 92 $586 $746 $770 4.1 2.2 1.8 

2 * ................................. 95 670 882 902 5.5 3.4 2.8 

3 ................................... 92 429 677 691 4.1 2.2 2.2 

4 ................................... 95 455 763 778 5.5 3.4 3.3 

5 ................................... 97 415 768 784 6.8 4.3 4.2 

* Only includes results for the North region. 

c. Rebuttable Presumption Payback 

Period 

As discussed in section III.E.2, EPCA 

establishes a rebuttable presumption 

that an energy conservation standard is 

economically justified if the increased 

purchase cost for a product that meets 

the standard is less than three times the 

value of the first-year energy savings 

resulting from the standard. 

Accordingly, DOE calculated a 

rebuttable-presumption PBP for each 

TSL for NWGFs and MHGFs based on 

average usage profiles. As a result, DOE 

calculated a single rebuttablepresumption payback value, and not a 

distribution of PBPs, for each TSL. 

However, DOE routinely conducts an 

economic analysis that considers the 

full range of impacts to the consumer, 

manufacturer, Nation, and environment, 

as required by EPCA under 42 U.S.C. 

6295(o)(2)(B)(i). The results of that 

analysis serve as the basis for DOE to 

definitively evaluate the economic 

justification for a potential standard 

level, thereby supporting or rebutting 

the results of any preliminary 

determination of economic justification. 

Table V.14 shows the rebuttablepresumption PBPs for the considered 

AFUE TSLs for NWGFs and MHGFs. 

Table V.15 shows the rebuttablepresumption PBPs for the considered 

TSLs for standby mode and off mode for 

NWGFs and MHGFs. 

TABLE V.14—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR NWGFS AND MHGFS FOR ANALYSIS OF

AFUE STANDARDS

Product class 

Trial standard level 

1 * 2 * 3 4 5 

Non-Weatherized Gas Furnaces ............................................................. 4.2 3.5 3.9 3.9 4.8 

Mobile Home Gas Furnaces .................................................................... 0.9 1.1 1.1 1.4 1.8 

* Results at TSLs 1 and 2 are for the North region. For the Rest of Country, the proposed standard levels at TSLs 1 and 2 are at the baseline, 

so no consumers are affected. 

TABLE V.15—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR NWGFS AND MHGFS FOR ANALYSIS OF

STANDBY MODE AND OFF MODE STANDARDS

Product class 

Trial standard level 

1 2 3 

Non-Weatherized Gas Furnaces ............................................................................................................. 1.5 11.1 8.6 

Mobile Home Gas Furnaces .................................................................................................................... 1.3 9.8 7.5 

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2. Economic Impacts on Manufacturers 

DOE performed a manufacturer 

impact analysis (MIA) to estimate the 

impact of an amended energy 

conservation standard on manufacturers 

of residential gas-fired furnace products. 

The following section describes the 

expected impacts on manufacturers at 

each considered TSL. DOE first 

discusses the impacts of potential AFUE 

standards and then turns to the impacts 

of potential standby mode and off mode 

standards. Chapter 12 of the NOPR TSD 

explains the analysis in further detail. 

a. Industry Cash-Flow Analysis Results 

Cash-Flow Analysis Results for 

Residential Furnaces AFUE Standards 

In this section, DOE provides GRIM 

results from the AFUE analysis, which 

examines changes in the industry that 

would result from a potential increase 

in the AFUE standard. DOE applied 

preservation of gross margin markup 

scenario as an upper bound to GRIM 

results (less severe) and the three-tiered 

markup scenario as the lower bound to 

GRIM results (more severe). 

As discussed in section IV.J.2.b, DOE 

considered the preservation of gross 

margin percentage scenario by applying 

a uniform ‘‘gross margin percentage’’ 

markup across all efficiency levels. As 

production cost increases with 

efficiency, this scenario implies that the 

absolute dollar markup will increase. 

DOE assumed the nonproduction cost 

markup—which includes SG&A 

expenses, research and development 

expenses, interest, and profit to be a 

factor of 1.34 for non-weatherized gas 

furnaces and 1.27 for mobile home gas 

furnaces. These markups are consistent 

with the ones DOE assumed in the 

engineering analysis and in the base 

case of the GRIM. Manufacturers have 

indicated that it is optimistic to assume 

that as their production costs increase in 

response to an amended energy 

conservation standard, they would be 

able to maintain the same gross margin 

percentage markup. Therefore, DOE 

assumes that this scenario represents a 

high bound to industry profitability 

under an amended energy conservation 

standard. 

To assess the more severe end of the 

range of potential impacts, DOE 

modeled the three-tier markup scenario, 

which reflects manufacturer concerns 

surrounding their inability to higher 

margins on premium efficiency 

products as the energy conservation 

standard increases. High-efficiency 

products that enjoy a premium markup 

in the base case see that premium erode 

in the standards case. Additional 

information can be found in section 

IV.J.2.b of this document and chapter 12 

of the TSD. 

As noted in the MIA methodology 

section (see IV.J.2), in addition to 

markup scenarios, the MPC, shipments, 

and conversion cost assumptions also 

affect GRIM results. The GRIM shows a 

change in industry value net present 

value that results from amended 

standards. 

Each of the modeled scenarios in the 

AFUE standards analysis results in a 

unique set of annual free cash flows at 

each TSL. The INPV is the sum of the 

annual free cash flows from the 2014 to 

2050, taking into account the time value 

of money. In the following discussion, 

the ‘‘change in INPV’’ refers to the 

difference in industry value between the 

base case and each standards case that 

results from the sum of the discounted 

cash flows from the base year 2014 

through 2050. The change in INPV 

reflects the potential changes in 

industry valuation due to amended 

standards. 

To provide perspective on the shortterm impacts, DOE discusses the change 

in free cash flow between the base case 

and the standards case in the year before 

new standards would take effect. These 

figures provide an understanding of the 

magnitude of the required conversion 

costs at each TSL relative to the cash 

flow generated by the industry in the 

base case. 

Table V.16 and Table V.17 depict the 

estimated financial impacts for 

residential furnace manufacturers 

(represented by changes in INPV, the 

short-term cash flow impacts, and the 

industry conversion costs that DOE 

expects at each TSL under each of the 

two markup scenarios discussed above. 

TABLE V.16—MANUFACTURER IMPACT ANALYSIS: AFUE STANDARDS RESULTS FOR RESIDENTIAL GAS-FIRED FURNACES— 

PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ..................................... $M 1,055 .13 1,048 .71 1,063 .45 1,061 .65 1,099 .24 1,080 .94 

Change in INPV ................... $M (6 .42) 8 .32 6 .52 44 .10 25 .80 

% (0 .61) 0 .79 0 .62 4 .18 2 .45 

2020 Free Cash Flow (FCF) $M 22 .55 10 .32 0 .88 0 .41 (13 .78) (86 .21) 

Change in 2020 FCF ........... $M (12 .23) (21 .67) (22 .15) (36 .33) (108 .76) 

% (54 .22) (96 .09) (98 .19) (161 .08) (482 .22) 

Product Conversion Costs ... $M 15 .77 23 .00 16 .47 23 .00 64 .36 

Capital Conversion Costs .... $M 16 .95 33 .24 38 .53 65 .81 199 .94 

* Parentheses indicate negative values 

TABLE V.17—MANUFACTURER IMPACT ANALYSIS: AFUE STANDARDS RESULTS FOR RESIDENTIAL GAS-FIRED FURNACES— 

THREE-TIER MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ..................................... $M 1,055 .13 990 .43 825 .26 971 .41 740 .79 548 .20 

Change in INPV ................... $M (64 .71) (229 .87) (83 .72) (314 .34) (506 .94) 

% (6 .13) (21 .79) (7 .93) (29 .79) (48 .04) 

2020 Free Cash Flow (FCF) $M 22 .55 10 .32 0 .88 0 .41 (13 .78) (86 .21) 

Change in 2020 FCF ........... $M (12 .23) (21 .67) (22 .15) (36 .33) (108 .76) 

% (54 .22) (96 .09) (98 .19) (161 .08) (482 .22) 

Product Conversion Costs ... $M 15 .77 23 .00 16 .47 23 .00 64 .36 

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TABLE V.17—MANUFACTURER IMPACT ANALYSIS: AFUE STANDARDS RESULTS FOR RESIDENTIAL GAS-FIRED FURNACES— 

THREE-TIER MARKUP SCENARIO—Continued 

Units Base case 

Trial standard level * 

1 2 3 4 5 

Capital Conversion Costs .... $M 16 .95 33 .24 38 .53 65 .81 199 .94 

* Parentheses indicate negative values 

At TSL 1, DOE estimates the change 

in INPV to range from ¥$64.71 million 

to ¥6.42 million, or a change of ¥6.13 

percent to ¥0.61 percent. At this level, 

industry free cash flow in 2020 (the year 

before the compliance date) is estimated 

to decrease to $10.32 million, or a 

change of ¥54.22 percent compared to 

the base-case value of $22.55 million. 

TSL 1 proposes regional standards, 

requiring products the North to meet an 

efficiency level above the baseline while 

the Rest of Country remains at the 

current Federal minimum of 80% 

AFUE. NWGF products in the North 

would be required to meet a minimum 

efficiency of 90% AFUE while MHGF 

products in the North would be required 

to meet a minimum efficiency of 92% 

AFUE. Conversion costs are driven by 

the need for manufacturers to add a 

secondary condensing heat exchanger 

production capacity. Today, 

approximately 39% of NWGF shipments 

and 19 percent of MHGF shipments are 

sold at condensing levels. When the 

standard goes into effect, an additional 

21 percent of NWGF shipments and 29 

percent of MHGF will require secondary 

heat exchanges, requiring manufacturers 

to add capacity to their secondary heat 

exchanger production lines. 

Manufacturers will also incur product 

conversion costs driven by the 

development necessary to create 

compliant, cost competitive products. 

DOE estimates total conversion costs to 

be $32.72 million for the industry. 

At TSL 2, DOE estimates the change 

in INPV to range from ¥$229.87 million 

to $8.32 million, or a change in INPV of 

¥21.79 percent to 0.79 percent. At this 

level, free cash flow in 2020 is estimated 

to decrease to $0.88 million, or a 

decrease of 96.09 percent compared to 

the base-case value of $22.55 million in 

the year 2020. 

TSL 2 is a regional standard requiring 

the North to meet efficiency levels 

above the baseline while the Rest of 

Country remains at baseline. NWGFs 

and MHGFs in the North would be 

required to meet a minimum efficiency 

of 95% AFUE. Manufacturer feedback in 

interviews indicated that capital 

conversion costs ramp up significantly 

at 95% AFUE. DOE estimates total 

conversion costs to be $56.24 million for 

the industry. 

Furthermore, most 95% AFUE 

products today are premium offerings 

that are sold at a higher markup than 

baseline products. Once 95% AFUE 

becomes the amended baseline standard 

in the North, manufacturers would need 

to investment engineering resources to 

create baseline, cost-optimized 95% 

AFUE models that are competitive at 

reduced markups. Additionally, 

manufacturers may find markups for 

products above 95% AFUE in the North 

are reduced, as there is less opportunity 

for differentiation based on efficiency 

between baseline products and 

premium products. This general 

reduction in markups in the North leads 

to reduced profitability for 

manufacturers and a potential drop in 

INPV. 

At TSL 3, DOE estimates the change 

in INPV to range from ¥$83.72 million 

to $6.52 million, or a change in INPV of 

¥7.93 percent to 0.62 percent. At this 

level, free cash flow is estimated to 

decrease to $0.41 million, or a change of 

¥98.19 percent compared to the basecase value of $22.55 million in the year 

2020. 

TSL 3 represents a national standard 

at 92% AFUE for both NWGF and 

MHGF products. With a national 

condensing standard, an additional 5 

percent of NWGF and an additional 81 

percent of MHGF industry shipments 

would need condensing heat 

exchangers. That increase would require 

manufacturers to add significant 

secondary heat exchanger capacity to 

their operations. Models accounting for 

65 percent of NWGF shipments and 81 

percent of MHGF shipments would 

need to be redesigned. Industry 

conversion costs reach $55 million. 

At 92% AFUE, the industry faces 

some compression of markups. 

However, on the whole, manufacturers 

are still able to maintain three tiers of 

markups with efficiency as a 

differentiator. As a result, even though 

TSL 3 conversion costs as similar to 

those at TSL 2, the INPV impacts are not 

as severe. 

At TSL 4, DOE estimates the change 

in INPV to range from ¥$314.34 million 

to $44.1 million, or a change in INPV of 

¥29.79 percent to 4.18 percent. At this 

level, free cash flow is estimated to 

decrease to ¥$13.78 million, or a 

change of ¥161.08 percent compared to 

the base-case value of $22.55 million in 

the year 2020. 

TSL 4 represents a national standard 

at 95% AFUE for both NWGF and 

MHGF products. Manufacturers would 

need to add significant secondary heat 

exchanger capacity. Additionally, 

manufacturers would need to redesign a 

models accounting for 99 percent of 

NWGF shipments and 99 percent of 

MHGF shipments. Industry conversion 

costs reach $88.81 million. These 

conversion costs are a significant drain 

on industry cash flow and could results 

in manufacturers seeking outside capital 

to finance the conversion expenses. 

At 95% AFUE, the industry faces 

significant compression of markups. As 

noted at TSL 2, most 95% AFUE 

products today are premium offerings 

that are sold at a higher markup than 

baseline products. Once 95% AFUE 

becomes the amended baseline 

standard, manufacturers would need to 

investment engineering resources to 

create baseline, cost-optimized 95% 

AFUE models that are competitive at 

reduced markups. Additionally, there is 

less opportunity for differentiation 

between baseline products and 

premium products, resulting in reduced 

markups for products that have 

premium efficiencies. This reduction in 

markups leads to reduced profitability 

for manufacturers and a potential drop 

in INPV. 

At TSL 5, DOE estimates the change 

in INPV to range from ¥$506.94 million 

to $25.80 million, or a change in INPV 

of ¥48.04 percent to 2.45 percent. At 

this level, free cash flow is estimated to 

decrease to ¥$86.21 million, or a 

decrease of 482.22 percent compared to 

the base-case value of $22.55 million in 

the year 2020. TSL 5 represents the 

max-tech standard level. 

Some manufacturers expressed great 

concern about the state of technology at 

max tech. They had concerns about the 

ability to deliver cost effectiveness of 

these products for their customers at 

such a high efficiency level. They also 

cited high conversion costs and large 

investment in R&D to produce all 

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13170 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

products at this level. Total conversion 

costs are expected to reach $264.30 

million for the industry. Additionally at 

max-tech, there is no opportunity for 

product differentiation based on 

efficiency. DOE models all shipments as 

having a baseline product markup. This 

results in a large drop in profitability for 

manufacturers in the tiered markup 

scenario. 

DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each AFUE standard TSL. 

Cash-Flow Analysis Results for 

Residential Furnaces Standby Mode and 

Off Mode Standards 

Standby mode and off mode standards 

results are presented in Table V.18 and 

Table V.19. The impacts of standby 

mode and off mode features were 

analyzed for the same product classes as 

the amended AFUE standards, but at 

different efficiency levels, which 

correspond to a different set of 

technology options for reducing standby 

mode and off mode energy 

consumption. Therefore, the TSLs in the 

standby mode and off mode analysis do 

not correspond to the TSLs in the AFUE 

analysis. 

DOE considered the impacts of 

standby mode and off mode features 

under two markup scenarios to 

represent the upper and lower bounds 

of industry impacts: (1) A preservation 

of gross margin percentage scenario; and 

(2) per-unit preservation of operating 

profit. As with the AFUE analysis, the 

preservation of gross margin percentage 

represents the upper bound of impacts 

(less severe), while the preservation of 

per-unit operating profit scenario 

represents the lower bound of impacts 

(more severe). 

TABLE V.18—MANUFACTURER IMPACT ANALYSIS: STANDBY MODE AND OFF MODE STANDARDS RESULTS FOR

RESIDENTIAL GAS-FIRED FURNACE STANDARDS—PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 

INPV ..................................................................................... $M 1055 .13 1054 .61 1055 .58 1055 .99 

Change in INPV ................................................................... $M .......................... (0 .52) (0 .45) (0 .85) 

% .......................... (0 .05) 0 .04 0 .08 

2020 Free Cash Flow (FCF) ............................................... $M 22 .55 22 .16 22 .16 22 .16 

Change in 2020 FCF ........................................................... $M .......................... (0 .39) (0 .39) (0 .39) 

% .......................... (1 .75) (1 .75) (1 .75) 

Product Conversion Costs ................................................... $M .......................... 1 .35 1 .35 1 .35 

Capital Conversion Costs .................................................... $M 

* Parentheses indicate negative values. 

TABLE V.19—MANUFACTURER IMPACT ANALYSIS: STANDBY MODE AND OFF MODE STANDARDS RESULTS FOR

RESIDENTIAL GAS-FIRED FURNACE STANDARDS—PER-UNIT PRESERVATION OF OPERATING PROFIT SCENARIO

Units Base case 

Trial standard level * 

1 2 3 

INPV ....................................................................................... $M 1,055 .13 1,053 .41 1,046 .10 1,042 .97 

Change in INPV ..................................................................... $M .......................... (1 .72) (9 .03) (12 .16) 

% .......................... (0 .16) (0 .86) (1 .15) 

2020 Free Cash Flow (FCF) ................................................. $M 22 .55 22 .16 22 .16 22 .16 

Change in 2020 FCF ............................................................. $M .......................... (0 .39) (0 .39) (0 .39) 

% .......................... (1 .75) (1 .75) (1 .75) 

Product Conversion Costs ..................................................... $M .......................... 1 .35 1 .35 1 .35 

Capital Conversion Costs ...................................................... $M 

* Parentheses indicate negative values. 

At TSL 1, DOE estimates impacts on 

INPV for residential gas-fired furnace 

manufacturers to decrease by less than 

one percent in both markup scenarios 

(preservation of gross margin and perunit preservation of operating profit). At 

this potential standard level, industry 

free cash flow is estimated to decrease 

by less than two percent, compared to 

the base-case value of $22.55 million in 

2020. DOE expects conversion costs for 

standby and off mode to be $1.35 

million. 

At TSL 2, DOE estimates impacts on 

INPV for residential gas-fired furnace 

manufacturers to decrease by less than 

one percent in both markup scenarios. 

At this potential standard level, 

industry free cash flow is estimated to 

decrease by less than two percent, 

compared to the base-case value of 

$22.55 million in 2020. DOE expects 

conversion costs for standby and off 

mode to be $1.35 million. 

At TSL 3, DOE estimates impacts on 

INPV for residential gas-fired furnace 

manufacturers to range from a decrease 

of 1.15 percent to an increase of 0.08 

percent, or a change in INPV of ¥$12.16 

million to $0.85 million. At this 

potential standard level, industry free 

cash flow is estimated to decrease by 

less than two percent compared to the 

base-case value of $22.55 million in 

2020. DOE expects conversion costs for 

standby mode and off mode to be $1.35 

million. 

DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each standby mode and off mode 

TSL. 

b. Direct Impacts on Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment in the residential furnaces 

industry, DOE used the GRIM to 

estimate the domestic labor 

expenditures and number of direct 

employees in the base case and at each 

standards case (TSL) from 2014 through 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13171 

96U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries (2011) (Available at http://www.census.gov/manufacturing/asm/

index.html). 

2050. DOE used statistical data from the 

U.S. Census Bureau’s 2011 Annual 

Survey of Manufacturers,96 the results 

of the engineering analysis, and 

interviews with manufacturers to 

determine the inputs necessary to 

calculate industry-wide labor 

expenditures and domestic direct 

employment levels. Labor expenditures 

related to manufacturing of the product 

are a function of the labor intensity of 

the product, the sales volume, and an 

assumption that wages remain fixed in 

real terms over time. The total labor 

expenditures in each year are calculated 

by multiplying the MPCs by the labor 

percentage of MPCs. 

The total labor expenditures in the 

GRIM were then converted to domestic 

production employment levels by 

dividing production labor expenditures 

by the annual payment per production 

worker (production worker hours times 

the labor rate found in the U.S. Census 

Bureau’s 2011 Annual Survey of 

Manufacturers). The production worker 

estimates in this section only cover 

workers up to the line-supervisor level 

who are directly involved in fabricating 

and assembling a product within an 

original equipment manufacturer (OEM) 

facility. Workers performing services 

that are closely associated with 

production operations, such as materials 

handling tasks using forklifts, are also 

included as production labor. DOE’s 

estimates only account for production 

workers who manufacture the specific 

products covered by this rulemaking. 

The total direct employment impacts 

calculated in the GRIM are the sum of 

the changes in the number of 

production workers resulting from the 

amended energy conservation standards 

for NWGFs and MHGFs, as compared to 

the base case. Table V.20 shows the 

range of impacts of a potential amended 

energy conservation standard on U.S. 

production workers of residential gasfired furnace products. 

TABLE V.20—POTENTIAL CHANGES IN THE TOTAL NUMBER OF PRODUCTION WORKERS IN THE RESIDENTIAL GAS-FIRED

FURNACE INDUSTRY IN 2020 

Trial standard level 

Base case 1 2 3 4 5 

Total Number of Domestic Production Workers in 2020 

(without changes in production locations).

2,692 3,037 ................. 3,200 ................. 3,172 ................. 3,474 ................. 3,804. 

Potential Changes in Domestic 

Production Workers in 2020 *.

.................... (2,692) to 75 ..... (2,692) to 238 ... (2,692) to 210 ... (2,692) to 512 ... (2,692) to 842. 

* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative values. 

In the absence of amended energy 

conservation standards, DOE estimates 

that the residential gas-fired furnace 

industry would employ 2,692 domestic 

production workers in 2020. The upper 

end of the range estimates the maximum 

increase in the number of production 

workers in the residential gas-fired 

furnace industry after implementation 

of an energy conservation standard at 

each TSL. It assumes manufacturers 

would continue to produce the same 

scope of covered products within the 

United States and would require some 

additional labor to produce moreefficient products. To establish a 

conservative lower bound, DOE assumes 

the entire industry shifts production to 

foreign countries. Some large 

manufacturers have already begun 

moving production to lower-cost 

countries, and an amended standard 

that necessitates large increases in labor 

content or that requires large 

expenditures to re-tool facilities could 

cause other manufacturers to re-evaluate 

production siting options. 

DOE notes that its estimates of the 

impacts on direct employment are based 

on the analysis of amended AFUE 

energy efficiency standards only. 

Standby mode and off mode technology 

options considered in the engineering 

analysis would result in component 

swaps, which would not make the 

product significantly more complex and 

would not be difficult to implement. 

While some product development effort 

would be required, DOE does not expect 

the standby mode and off mode 

standard to meaningfully affect the 

amount of labor required in production. 

Consequently, DOE does not anticipate 

that the proposed standby mode and off 

mode standards will have a significant 

impact on direct employment. 

These employment impact 

conclusions are independent of 

conclusions regarding indirect 

employment impacts in the broader 

United States economy, which are 

discussed in chapter 15 of the NOPR 

TSD. 

c. Impacts on Manufacturing Capacity 

According to residential gas-fired 

furnace manufacturers interviewed, 

production facilities as they are today 

may not be able to accommodate a large 

shift to condensing furnaces, if such 

shift were mandated by an energy 

conservation standard. However, 

manufacturers would be able to add 

capacity and adjust product designs 

between the announcement year of the 

standard and the compliance year of the 

standard. DOE interviewed 

manufacturers representing over 50 

percent of industry sales. None of the 

interviewed manufacturers expressed 

concern over the industry’s ability to 

ramp up production lines at TSL 1 to 

TSL 4 to meet consumer demand. At 

TSL 5, technical uncertainty was 

expressed by manufacturers that do not 

offer 98-percent AFUE products today, 

as they were unsure what production 

lines changes would be needed to meet 

a standard set at max-tech. 

d. Impacts on Subgroups of 

Manufacturers 

As discussed above, using average 

cost assumptions to develop an industry 

cash flow estimate is not adequate for 

assessing differential impacts among 

subgroups of manufacturers. Small 

manufacturers, niche players, or 

manufacturers exhibiting a cost 

structure that differs substantially from 

the industry average could be affected 

disproportionately. DOE used the 

results of the industry characterization 

to group manufacturers exhibiting 

similar characteristics. Specifically, 

DOE identified small business 

manufacturers as a subgroup for 

separate impact analyses. 

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For residential gas-fired furnace 

equipment, DOE identified and 

evaluated the impact of amended energy 

conservation standards on one 

subgroup, specifically small 

manufacturers. The SBA defines a 

‘‘small business’’ as having 750 

employees or less for NAICS 333415, 

‘‘Air-Conditioning and Warm Air 

Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

identification, DOE identified five 

domestic manufacturers in the industry 

that qualify as a small business. For a 

discussion of the impacts on the small 

manufacturer subgroup, see the 

regulatory flexibility analysis in section 

VI.B of this NOPR and chapter 12 of the 

NOPR TSD. 

e. Cumulative Regulatory Burden 

While any one regulation may not 

impose a significant burden on 

manufacturers, the combined effects of 

several recent or impending regulations 

may have serious consequences for 

some manufacturers, groups of 

manufacturers, or an entire industry. 

Assessing the impact of a single 

regulation may overlook this cumulative 

regulatory burden. Multiple regulations 

affecting the same manufacturer can 

strain profits and can lead companies to 

abandon product lines or markets with 

lower expected future returns than 

competing products. For these reasons, 

DOE conducts an analysis of cumulative 

regulatory burden as part of its 

rulemakings pertaining to appliance 

efficiency. 

For the cumulative regulatory burden 

analysis, DOE looks at other regulations 

that could affect NWGF and MHGF 

manufacturers that will take effect 

approximately three years before or after 

the 2021 compliance date of amended 

energy conservation standards for 

NWGF and MHGF. In interviews, 

manufacturers cited Federal regulations 

on equipment other than NWGF and 

MHGF that contribute to their 

cumulative regulatory burden. The 

compliance years and expected industry 

conversion costs of relevant amended 

energy conservation standards are 

indicated in Table V.21. 

TABLE V.21—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING NWGF AND MHGF MANUFACTURERS

Federal energy conservation standards Approximate 

compliance date 

Estimated total industry 

conversion expense 

Commercial Packaged Air Conditioners and Heat Pumps * 79 FR 58948 (September, 30, 2014) ... 2018 $226.4M (2013$) 

Commercial Warm-Air Furnaces * 80 FR 6182 (February 4, 2015). .................................................. 2018 $19.9M (2013$) 

2014 Furnace Fans 79 FR 38130 (July 3, 2014) ................................................................................ 2019 $40.6M (2013$) 

Miscellaneous Residential Refrigeration * ........................................................................................... 2019 TBD 

Single Packaged Vertical Units * 79 FR 78614 (December 30, 2014) ............................................... 2019 $7.2M (2013$) 

Commercial Water Heaters * ............................................................................................................... 2019 TBD 

Commercial Packaged Boilers * .......................................................................................................... 2020 TBD 

Residential Water Heaters * ................................................................................................................. 2021 TBD 

Clothes Dryers * ................................................................................................................................... 2022 TBD 

Central Air Conditioners * .................................................................................................................... 2022 TBD 

Room Air Conditioners * ...................................................................................................................... 2022 TBD 

Commercial Packaged Air Conditioning and Heating Equipment (Evaporatively and Water 

Cooled) * ........................................................................................................................................... 2023 TBD 

* The final rule for these energy conservation standards has not been published. The compliance date and analysis of conversion costs have 

not been finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the NOPR.) 

DOE notes that furnace fans standard 

creates a unique cumulative burden 

because today’s proposed residential 

furnace standard and the furnace fans 

standard impact the same products (i.e., 

residential furnaces), affect the same 

group of manufacturers, and go into 

effect in a similar timeframe. A detailed 

summary of manufacturer impacts from 

the furnace fans final rule can be found 

in Table V.22. DOE explicitly notes the 

additional burdens of the furnace fan 

rule when weighing the benefits and 

costs of the trial standard levels in 

Section V.C.1 of this NOPR. 

TABLE V.22—SUMMARY OF MANUFACTURER FINANCIAL IMPACTS FROM THE FURNACE FANS FINAL RULE

Units Furnace fans final rule 

INPV ............................................................................................................................................................ $M 290.6 to 397.8 

Change in INPV .......................................................................................................................................... $M (59.0) to 48.2 

(%) (16.9) to (13.8) 

Product Conversion Costs .......................................................................................................................... $M 25.5 

Capital Conversion Costs ............................................................................................................................ $M 15.1 

Total Conversion Costs ............................................................................................................................... $M 40.6 

* Values in parentheses are negative values. 

DOE requests comments on the 

identified regulations and their 

contribution to cumulative regulatory 

burden. Additionally, DOE requests 

feedback on product-specific regulations 

that take effect between 2018 and 2024 

that were not listed, including 

identification of the specific regulations 

and data quantifying the associated 

burdens. 

3. National Impact Analysis 

This section presents DOE’s estimates 

of the national energy savings and the 

NPV of consumer benefits that would 

result from each of the TSLs considered 

as potential amended furnace AFUE 

standards, as well as from each of the 

TSLs considered as potential standards 

for standby mode and off mode. 

a. Significance of Energy Savings 

For each TSL, DOE projected energy 

savings for NWGFs and MHGFs 

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purchased in the 30-year period that 

begins in the year of anticipated 

compliance with amended standards 

(2021–2050). The savings are measured 

over the entire lifetime of product 

purchased in the 30-year period. DOE 

quantified the energy savings 

attributable to each TSL as the 

difference in energy consumption 

between each standards case and the 

base case. Table V.23 presents the 

estimated primary energy savings for 

each considered TSL for AFUE 

standards, and Table V.24 presents the 

estimated FFC energy savings for each 

TSL for AFUE standards. The approach 

for estimating national energy savings is 

further described in section IV.H. 

TABLE V.23—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE PRIMARY NATIONAL

ENERGY SAVINGS FOR POTENTIAL AFUE STANDARDS

[Units Sold in 2021–2050] 

Product class 

Trial standard levels 

1 2 3 4 5 

(quads) 

Non-Weatherized Gas Furnaces ..................... 1 .004 1 .756 2 .124 3 .263 4 .364 

Mobile Home Gas Furnaces ............................ 0 .062 0 .066 0 .127 0 .131 0 .142 

Total .......................................................... 1 .066 1 .821 2 .251 3 .394 4 .507 

* Components may not sum due to rounding. 

TABLE V.24—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE FULL-FUEL-CYCLE

NATIONAL ENERGY SAVINGS FOR POTENTIAL AFUE STANDARDS

[Units Sold in 2021–2050] 

Product class 

Trial standard levels 

1 2 3 4 5 

(quads) 

Non-Weatherized Gas Furnaces ..................... 1 .222 2 .054 2 .638 3 .963 5 .322 

Mobile Home Gas Furnaces ............................ 0 .069 0 .073 0 .141 0 .146 0 .159 

Total .......................................................... 1 .291 2 .126 2 .780 4 .110 5 .481 

* Components may not sum due to rounding. 

For the proposed standards (TSL 3), 

the FFC savings of 2.780 quads is the 

net sum of the FFC natural gas savings 

(7.061 quads) and the increase in FFC 

energy use associated with higher 

electricity use due to switching to 

electric heating (4.281 quads). 

As discussed in section IV.F.4, DOE 

conducted sensitivity analyses assuming 

higher and lower levels of product 

switching for NWGFs. Table V.25 

compares the NES FFC results for 

potential AFUE standards under the 

default switching assumptions with the 

results in the sensitivity cases. 

TABLE V.25—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE FULL-FUEL-CYCLE

NATIONAL ENERGY SAVINGS FOR POTENTIAL AFUE STANDARDS (UNITS SOLD IN 2021–2050); PRODUCT SWITCHING

SENSITIVITY ANALYSIS

Switching case 

Trial standard levels 

1 2 3 4 5 

(quads) 

Default .............................................................. 1 .291 2 .126 2 .780 4 .110 5 .481 

High .................................................................. 1 .147 1 .914 2 .129 3 .272 4 .541 

Low ................................................................... 1 .484 2 .319 3 .433 4 .904 6 .424 

* Components may not sum due to rounding. 

Table V.26 presents the estimated 

primary energy savings for each 

considered TSL for standby mode and 

off mode standards, and Table V.27 

presents the estimated FFC energy 

savings for each TSL for standby mode 

and off mode standards. 

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97U.S. Office of Management and Budget, 

‘‘Circular A–4: Regulatory Analysis’’ (Sept. 17, 

2003) (Available at: http://www.whitehouse.gov/

omb/circulars_a004_a-4/). 

98Section 325(m) of EPCA requires DOE to review 

its standards at least once every 6 years, and 

requires, for certain products, a 3-year period after 

any new standard is promulgated before 

compliance is required, except that in no case may 

any new standards be required within 6 years of the 

compliance date of the previous standards. While 

adding a 6-year review to the 3-year compliance 

period adds up to 9 years, DOE notes that it may 

undertake reviews at any time within the 6 year 

period and that the 3-year compliance date may 

yield to the 6-year backstop. A 9-year analysis 

period may not be appropriate given the variability 

that occurs in the timing of standards reviews and 

the fact that for some consumer products, the 

compliance period is 5 years rather than 3 years. 

99 DOE presents results based on a nine-year 

analytical period only for the AFUE TSLs; the 

percentage difference between nine-year and 30- 

year results for the standby mode and off mode 

TSLs is the same as for the AFUE TSLs. 

TABLE V.26—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE PRIMARY NATIONAL

ENERGY SAVINGS FOR POTENTIAL STANDBY MODE AND OFF MODE POWER STANDARDS

[Units Sold in 2021–2050] 

Product class 

Trial standard levels 

1 2 3 

(quads) 

Non-Weatherized Gas Furnaces ............................................................................... 0 .147 0 .176 0 .264 

Mobile Home Gas Furnaces ...................................................................................... 0 .0002 0 .0002 0 .0003 

Total * .................................................................................................................. 0 .147 0 .176 0 .264 

* Components may not sum due to rounding. 

TABLE V.27—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE FULL-FUEL-CYCLE

NATIONAL ENERGY SAVINGS FOR POTENTIAL STANDBY MODE AND OFF MODE POWER STANDARDS

[Units Sold in 2021–2050] 

Product class 

Trial standard levels 

1 2 3 

(quads) 

Non-Weatherized Gas Furnaces ............................................................................... 0 .154 0 .184 0 .276 

Mobile Home Gas Furnaces ...................................................................................... 0 .0002 0 .0002 0 .0003 

Total * .................................................................................................................. 0 .154 0 .185 0 .277 

* Components may not sum due to rounding. 

OMB Circular A–4 97 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 rulemaking, 

DOE undertook a sensitivity analysis 

using nine, 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.98 The review timeframe 

established in EPCA is generally not 

synchronized with the product lifetime, 

product manufacturing cycles, or other 

factors specific to NWGFs and MHGFs. 

Thus, such results are presented for 

informational purposes only and are not 

indicative of any change in DOE’s 

analytical methodology. The primary 

NES based on a nine-year analytical 

period are presented for the AFUE TSLs 

in Table V.28.99 The impacts are 

counted over the lifetime of NWGFs and 

MHGFs purchased in 2021–2029. The 

percentage difference between the NES 

for 30 years of shipments and the NES 

for nine years of shipments is the same 

for FFC savings as for the primary NES. 

TABLE V.28—CUMULATIVE PRIMARY NATIONAL ENERGY SAVINGS FOR POTENTIAL AFUE STANDARDS FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES; NINE YEARS OF SHIPMENTS

[Units sold in 2021–2029] 

Product class 

Trial standard level 

1 2 3 4 5 

(quads) 

Non-Weatherized Gas Furnaces ..................... 0 .330 0 .570 0 .601 0 .950 1 .307 

Mobile Home Gas Furnaces ............................ 0 .022 0 .024 0 .042 0 .044 0 .048 

Total * ........................................................ 0 .352 0 .594 0 .643 0 .994 1 .355 

* Note: Components may not sum due to rounding. 

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100OMB Circular A–4, section E (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4). 

b. Net Present Value of Consumer Costs 

and Benefits 

Table V.29 shows the consumer NPV 

of the total costs and savings for 

consumers that would result from each 

AFUE TSL considered for NWGFs and 

MHGFs. In each case, the impacts cover 

the lifetime of products purchased in 

2021–2050. In accordance with OMB’s 

guidelines on regulatory analysis,100

DOE calculated NPV using both a 7- 

percent and a 3-percent real discount 

rate. 

TABLE V.29—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE NET PRESENT VALUE

OF CONSUMER BENEFITS FOR POTENTIAL AFUE STANDARDS

[Units sold in 2021–2050] 

Product class Discount 

rate 

Trial standard level 

1 2 3 4 5 

(billion 2013$) 

Non-Weatherized Gas Furnaces ................. 3% 8 .1 13 .5 15 .1 20 .4 24 .1 

Mobile Home Gas Furnaces ........................ .................... 0 .6 0 .7 1 .0 1 .1 1 .2 

Total * .................................................... .................... 8 .6 14 .1 16 .1 21 .5 25 .3 

Non-Weatherized Gas Furnaces ................. 7% 1 .9 3 .3 2 .8 3 .7 3 .3 

Mobile Home Gas Furnaces ........................ .................... 0 .2 0 .2 0 .3 0 .3 0 .3 

Total * .................................................... .................... 2 .1 3 .6 3 .1 4 .0 3 .7 

* Note: Components may not sum due to rounding. 

The NPV results based on the 

aforementioned nine-year analytical 

period are presented in Table V.30 for 

AFUE standards. The impacts are 

counted over the lifetime of products 

purchased in 2021–2029. As mentioned 

previously, such results are presented 

for informational purposes only and is 

not indicative of any change in DOE’s 

analytical methodology or decision 

criteria. 

TABLE V.30—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR POTENTIAL AFUE STANDARDS FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES; NINE YEARS OF SHIPMENTS

[Units sold in 2021–2029] 

Product class Discount 

rate 

Trial standard level 

1 2 3 4 5 

(billion 2013$) 

Non-Weatherized Gas Furnaces ................. 3% 2 .7 4 .6 4 .3 5 .8 6 .5 

Mobile Home Gas Furnaces ........................ .................... 0 .2 0 .3 0 .4 0 .4 0 .4 

Total * .................................................... .................... 3 .0 4 .9 4 .7 6 .2 6 .9 

Non-Weatherized Gas Furnaces ................. 7% 0 .8 1 .5 0 .9 1 .2 0 .7 

Mobile Home Gas Furnaces ........................ .................... 0 .1 0 .1 0 .2 0 .2 0 .2 

Total * .................................................... .................... 0 .9 1 .6 1 .1 1 .4 0 .9 

* Note: Components may not sum due to rounding. 

The above results reflect the use of the 

default decreasing price trend (see 

section IV.F.1) to estimate the change in 

price for NWGFs and MHGFs over the 

analysis period. DOE also conducted a 

sensitivity analysis that considered one 

scenario with a constant price trend and 

one scenario with a slightly higher rate 

of price decline than the reference case. 

The results of these alternative cases are 

presented in appendix 10C of the NOPR 

TSD. 

As discussed in section IV.F.4, DOE 

conducted sensitivity analyses assuming 

higher and lower levels of product 

switching for NWGFs. Table V.31 

compares the NPV results (using 3 and 

7-percent discount rate) for potential 

AFUE standards under the default 

switching assumptions with the results 

in the sensitivity cases. 

TABLE V.31—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE NET PRESENT VALUE

OF CONSUMER BENEFITS FOR POTENTIAL AFUE STANDARDS (UNITS SOLD IN 2021–2050); PRODUCT SWITCHING

SENSITIVITY ANALYSIS

Product class Discount 

rate 

Trial standard level 

1 2 3 4 5 

(billion 2013$) 

Default .......................................................... 3% 8 .6 14 .1 16 .1 21 .5 25 .3 

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TABLE V.31—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE NET PRESENT VALUE

OF CONSUMER BENEFITS FOR POTENTIAL AFUE STANDARDS (UNITS SOLD IN 2021–2050); PRODUCT SWITCHING

SENSITIVITY ANALYSIS—Continued 

Product class Discount 

rate 

Trial standard level 

1 2 3 4 5 

(billion 2013$) 

High .............................................................. .................... 8 .1 13 .6 11 .9 16 .7 19 .9 

Low ............................................................... .................... 9 .2 14 .8 19 .9 25 .8 30 .4 

Default .......................................................... 7% 2 .1 3 .6 3 .1 4 .0 3 .7 

High .............................................................. .................... 1 .9 3 .4 1 .6 2 .3 1 .8 

Low ............................................................... .................... 2 .3 3 .8 4 .4 5 .5 5 .4 

Table V.32 shows the consumer NPV 

results for each standby mode and off 

mode TSL considered for NWGFs and 

MHGFs. In each case, the impacts cover 

the lifetime of products purchased in 

2021–2050. The NPV results based on 

the aforementioned nine-year analytical 

period are presented in Table V.33 

TABLE V.32—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE NET PRESENT VALUE

OF CONSUMER BENEFITS FOR POTENTIAL STANDBY MODE AND OFF MODE POWER STANDARDS

[Units sold in 2021–2050] 

Product class Discount 

rate 

Trial standard levels 

1 2 3 

(billion 2013$) 

Non-Weatherized Gas Furnaces ............................................................. 3% 2 .1 2 .0 3 .3 

Mobile Home Gas Furnaces .................................................................... .................... 0 .002 0 .002 0 .003 

Total * ................................................................................................ .................... 2 .1 2 .0 3 .3 

Non-Weatherized Gas Furnaces ............................................................. 7% 0 .7 0 .6 1 .0 

Mobile Home Gas Furnaces .................................................................... .................... 0 .001 0 .001 0 .001 

Total * ................................................................................................ .................... 0 .7 0 .6 1 .0 

* Note: Components may not sum due to rounding. 

Note: Parentheses indicate negative values. 

TABLE V.33—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: CUMULATIVE NET PRESENT VALUE

OF CONSUMER BENEFITS FOR POTENTIAL STANDBY MODE AND OFF MODE POWER STANDARDS; NINE YEARS OF

SHIPMENTS

[Units Sold in 2021–2029] 

Product class Discount 

rate 

Trial standard levels 

1 2 3 

(billion 2013$) 

Non-Weatherized Gas Furnaces ............................................................. 3% 0 .8 0 .7 1 .2 

Mobile Home Gas Furnaces .................................................................... .................... 0 .001 0 .001 0 .001 

Total * ................................................................................................ .................... 0 .8 0 .7 1 .2 

Non-Weatherized Gas Furnaces ............................................................. 7% 0 .4 0 .3 0 .5 

Mobile Home Gas Furnaces .................................................................... .................... 0 .000 0 .000 0 .001 

Total * ................................................................................................ .................... 0 .4 0 .3 0 .5 

* Note: Components may not sum due to rounding. 

c. Indirect Impacts on Employment 

DOE expects that amended energy 

conservation standards for NWGFs and 

MHGFs would reduce energy costs for 

consumers, with the resulting net 

savings being redirected to other forms 

of economic activity. Those shifts in 

spending and economic activity could 

affect the demand for labor. As 

described in section IV.N, DOE used an 

input/output model of the U.S. economy 

to estimate indirect employment 

impacts of the TSLs that DOE 

considered in this rulemaking. DOE 

understands that there are uncertainties 

involved in projecting employment 

impacts, especially changes in the later 

years of the analysis. Therefore, DOE 

generated results for near-term time 

frames (2021 to 2026), where these 

uncertainties are reduced. 

The results suggest that the proposed 

standards would be likely to have a 

negligible impact on the net demand for 

labor in the economy. The net change in 

jobs is so small that it would be 

imperceptible in national labor statistics 

and might be offset by other, 

unanticipated effects on employment. 

Chapter 16 of the NOPR TSD presents 

results regarding anticipated indirect 

employment impacts. 

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4. Impact on Product Utility or 

Performance 

DOE has tentatively concluded that 

the amended standards it is proposing 

in this NOPR would not lessen the 

utility or performance of NWGFs and 

MHGFs. DOE surveyed the market and 

found that high efficiency furnaces and 

baseline products serve the same 

function and, therefore, there is no 

resulting loss in product utility by using 

higher efficiency furnaces. Furthermore, 

manufacturers of these products 

currently offer furnaces that meet or 

exceed today’s proposed standards. 

While higher efficiency standards may 

require different venting techniques and 

other installation considerations, these 

requirements do not affect the 

consumer’s utility with respect to the 

quality of the heat provided by the 

furnace. While not a utility issue, DOE 

notes that certain considerations 

associated with higher efficiency 

furnaces, such as increased installation 

costs or product size were examined, as 

appropriate, in its analyses. (See, for 

example, section IV.F.2 for discussion of 

installation cost for high efficiency 

condensing furnaces.) 

5. Impact of Any Lessening of 

Competition 

DOE considered any lessening of 

competition that is likely to result from 

new or amended standards. The 

Attorney General determines the 

impact, if any, of any lessening of 

competition likely to result from a 

proposed standard, and transmits such 

determination in writing to the 

Secretary, together with an analysis of 

the nature and extent of such impact. To 

assist the Attorney General in making 

such determination, DOE has provided 

DOJ with copies of this NOPR and the 

TSD for review. DOE will consider 

DOJ’s comments on the proposed rule in 

preparing the final rule, and DOE will 

publish and respond to DOJ’s comments 

in that document. 

6. Need of the Nation to Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

Nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts of energy 

production. Table V.34 provides DOE’s 

estimate of cumulative reductions in air 

pollutant emissions resulting from the 

AFUE TSLs, and Table V.35 provides 

estimated cumulative emissions 

reductions for the TSLs considered for 

standby mode and off mode furnace 

efficiency. The tables include both 

power sector emissions and upstream 

emissions. The emissions were 

calculated using the multipliers 

discussed in section IV.K. The increase 

in emissions of SO2, Hg, and N2O is due 

to a fraction of NWGF consumers that 

are projected to switch from gas 

furnaces to electric heat pumps and 

electric furnaces under the potential 

standards. DOE reports annual 

emissions impacts for each TSL in 

chapter 13 of the NOPR TSD. 

TABLE V.34—CUMULATIVE EMISSIONS REDUCTION ESTIMATED FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES POTENTIAL AFUE STANDARDS

Trial standard level 

1 2 3 4 5 

Site and Power Sector Emissions 

CO2 (million metric tons) .................................................................................... 51.0 91.3 105.5 163.2 215.5 

SO2 (thousand tons) .......................................................................................... (76.3 ) (72.3 ) (200.5 ) (242.0 ) (339.0 ) 

NOX (thousand tons) ......................................................................................... 126.7 181.3 292.5 404.2 547.7 

Hg (tons) ............................................................................................................ (0.238 ) (0.226 ) (0.624 ) (0.754 ) (1.056 ) 

CH4 (thousand tons) .......................................................................................... (5.79 ) (4.63 ) (15.89 ) (18.46 ) (26.14 ) 

N2O (thousand tons) .......................................................................................... (0.95 ) (0.82 ) (2.57 ) (3.04 ) (4.28 ) 

Upstream Emissions 

CO2 (million metric tons) .................................................................................... 13.6 18.7 31.9 43.4 59.0 

SO2 (thousand tons) .......................................................................................... (0.81 ) (0.74 ) (2.14 ) (2.57 ) (3.61 ) 

NOX (thousand tons) ......................................................................................... 222.6 303.0 523.4 708.7 965 

Hg (tons) ............................................................................................................ (0.002 ) (0.002 ) (0.005 ) (0.006 ) (0.009 ) 

CH4 (thousand tons) .......................................................................................... 1,458 1,969 3,440 4,643 6,326 

N2O (thousand tons) .......................................................................................... (0.011 ) (0.001 ) (0.037 ) (0.036 ) (0.054 ) 

Total FFC Emissions 

CO2 (million metric tons) .................................................................................... 64.6 110.0 137.3 206.5 274.5 

SO2 (thousand tons) .......................................................................................... (77.1 ) (73.0 ) (202.6 ) (244.6 ) (342.6 ) 

NOX (thousand tons) ......................................................................................... 349.3 484.3 815.9 1,113 1,513 

Hg (tons) ............................................................................................................ (0.240 ) (0.228 ) (0.629 ) (0.760 ) (1.065 ) 

CH4 (thousand tons) .......................................................................................... 1,452 1,964 3,424 4,624 6,300 

CH4 (thousand tons CO2eq) * ............................................................................ 40,663 54,995 95,882 129,480 176,393 

N2O (thousand tons) .......................................................................................... (0.96 ) (0.82 ) (2.61 ) (3.07 ) (4.34 ) 

N2O (thousand tons CO2eq) * ............................................................................ (256 ) (217 ) (692 ) (814 ) (1,149 ) 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

Note: Parentheses indicate negative values. 

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TABLE V.35—CUMULATIVE EMISSIONS REDUCTION ESTIMATED FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES POTENTIAL STANDBY MODE AND OFF MODE STANDARDS

Trial standard level 

1 2 3 

Site and Power Sector Emissions 

CO2 (million metric tons) ............................................................................................................. 8.2 9.8 14.7 

SO2 (thousand tons) .................................................................................................................... 7.1 8.6 12.9 

NOX (thousand tons) ................................................................................................................... 6.5 7.8 11.8 

Hg (tons) ...................................................................................................................................... 0.022 0.026 0.040 

CH4 (thousand tons) .................................................................................................................... 0.82 0.98 1.48 

N2O (thousand tons) .................................................................................................................... 0.12 0.14 0.21 

Upstream Emissions 

CO2 (million metric tons) ............................................................................................................. 0.5 0.6 0.9 

SO2 (thousand tons) .................................................................................................................... 0.08 0.10 0.15 

NOX (thousand tons) ................................................................................................................... 7.0 8.4 12.5 

Hg (tons) ...................................................................................................................................... 0.0002 0.0002 0.0003 

CH4 (thousand tons) .................................................................................................................... 40.6 48.8 73.1 

N2O (thousand tons) .................................................................................................................... 0.004 0.005 0.007 

Total FFC Emissions 

CO2 (million metric tons) ............................................................................................................. 8.6 10.4 15.6 

SO2 (thousand tons) .................................................................................................................... 7.2 8.7 13.0 

NOX (thousand tons) ................................................................................................................... 13.5 16.2 24.3 

Hg (tons) ...................................................................................................................................... 0.022 0.027 0.040 

CH4 (thousand tons) .................................................................................................................... 41.4 49.7 74.6 

CH4 (thousand tons CO2eq) * ...................................................................................................... 1,161 1,393 2,088 

N2O (thousand tons) .................................................................................................................... 0.121 0.146 0.219 

N2O (thousand tons CO2eq) * ...................................................................................................... 32 39 58 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

As part of the analysis for this 

proposed rule, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of CO2 and NOX that 

DOE estimated for each of the TSLs 

considered for NWGFs and MHGFs. As 

discussed in section IV.L, for CO2, DOE 

used the most recent values for the SCC 

developed by an interagency process. 

The four sets of SCC values for CO2

emissions reductions in 2015 resulting 

from that process (expressed in 2013$) 

are represented by $12.0/metric ton (the 

average value from a distribution that 

uses a 5-percent discount rate), $40.5/

metric ton (the average value from a 

distribution that uses a 3-percent 

discount rate), $62.4/metric ton (the 

average value from a distribution that 

uses a 2.5-percent discount rate), and 

$119/metric ton (the 95th-percentile 

value from a distribution that uses a 3- 

percent discount rate). The values for 

later years are higher due to increasing 

damages (emissions-related costs) as the 

projected magnitude of climate change 

increases. 

Table V.36 presents the global value 

of CO2 emissions reductions at each TSL 

for AFUE standards. Table V.37 presents 

the global value of CO2 emissions 

reductions at each TSL for standby 

mode and off mode standards. For each 

of the four cases, DOE calculated a 

present value of the stream of annual 

values using the same discount rate as 

was used in the studies upon which the 

dollar-per-ton values are based. DOE 

calculated domestic values as a range 

from 7 percent to 23 percent of the 

global values, and these results are 

presented in chapter 14 of the NOPR 

TSD. 

TABLE V.36—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES POTENTIAL AFUE STANDARDS

TSL 

SCC case * 

5% Discount rate, 

average 

3% Discount rate, 

average 

2.5% Discount rate, 

average 

3% Discount rate, 

95th percentile 

(million 2013$) 

Site and Power Sector Emissions 

1 ............................................................... 279.9 1,428 2,312 4,432 

2 ............................................................... 508.4 2,574 4,162 7,981 

3 ............................................................... 552.3 2,880 4,680 8,935 

4 ............................................................... 870.0 4,496 7,295 13,945 

5 ............................................................... 1,151 5,944 9,643 18,436 

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TABLE V.36—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES POTENTIAL AFUE STANDARDS—Continued 

TSL 

SCC case * 

5% Discount rate, 

average 

3% Discount rate, 

average 

2.5% Discount rate, 

average 

3% Discount rate, 

95th percentile 

(million 2013$) 

Upstream Emissions 

1 ............................................................... 78.2 389.9 628.7 1,207.6 

2 ............................................................... 106.9 534.7 862.7 1,656 

3 ............................................................... 180.0 904.2 1,460 2,800 

4 ............................................................... 244.7 1,229 1,985 3,808 

5 ............................................................... 333.6 1,674 2,703 5,185 

Total FFC Emissions 

1 ............................................................... 358.1 1,818 2,941 5,640 

2 ............................................................... 615.4 3,109 5,024 9,637 

3 ............................................................... 732.3 3,784 6,140 11,735 

4 ............................................................... 1,115 5,726 9,280 17,752 

5 ............................................................... 1,484 7,618 12,346 23,621 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$). The 

values are for CO2 only (i.e., not CO2eq of other greenhouse gases). 

TABLE V.37—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES POTENTIAL STANDBY MODE AND OFF MODE STANDARDS

TSL 

SCC case * 

5% Discount rate, 

average 

3% Discount rate, 

average 

2.5% Discount rate, 

average 

3% Discount rate, 

95th percentile 

(million 2013$) 

Site and Power Sector Emissions 

1 ............................................................... 46.1 231.4 373. 6 716.5 

2 ............................................................... 55.3 277.7 448.4 859.8 

3 ............................................................... 82.9 416.4 672.3 1,289 

Upstream Emissions 

1 ............................................................... 2.7 13.7 22.1 42.4 

2 ............................................................... 3.2 16.4 26.6 50.9 

3 ............................................................... 4.8 24.6 39.8 76.2 

Total FFC Emissions 

1 ............................................................... 48.8 245.1 395.8 758.9 

2 ............................................................... 58.5 294.1 474.9 910.6 

3 ............................................................... 87.8 441.0 712.1 1,365 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$). The 

values are for CO2 only (i.e., not CO2eq of other greenhouse gases). 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other 

greenhouse gas (GHG) emissions to 

changes in the future global climate and 

the potential resulting damages to the 

world economy continues to evolve 

rapidly. Thus, any value placed on 

reducing CO2 emissions in this 

rulemaking is subject to change. DOE, 

together with other Federal agencies, 

will continue to review various 

methodologies for estimating the 

monetary value of reductions in CO2

and other GHG emissions. This ongoing 

review will consider the comments on 

this subject that are part of the public 

record for this and other rulemakings, as 

well as other methodological 

assumptions and issues. However, 

consistent with DOE’s legal obligations, 

and taking into account the uncertainty 

involved with this particular issue, DOE 

has included in this proposed rule the 

most recent values and analyses 

resulting from the interagency review 

process. 

DOE also estimated a range for the 

cumulative monetary value of the 

economic benefits associated with NOX

emissions reductions anticipated to 

result from amended standards for the 

NWGFs and MHGFs that are the subject 

of this NOPR. The dollar-per-ton values 

that DOE used are discussed in section 

IV.L. Table V.38 presents the 

cumulative present values for NOX

emissions reductions for each AFUE 

TSL calculated using the average dollarper-ton value and seven-percent and 

three-percent discount rates. Similarly, 

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13180 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

Table V.39 presents the cumulative 

present values for NOX emissions 

reductions for each standby mode and 

off mode TSL. 

TABLE V.38—ESTIMATES OF PRESENT

VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS

FURNACES POTENTIAL AFUE 

STANDARDS

TSL 3% Discount 

rate 

7% Discount 

rate 

(million 2013$) 

Site and Power Sector Emissions 

1 .................... 137.6 49.9 

2 .................... 196.6 71.4 

3 .................... 310.0 109.4 

4 .................... 429.6 152.1 

5 .................... 583.6 207.3 

Upstream Emissions 

1 .................... 246.4 92.6 

2 .................... 332.8 123.6 

3 .................... 568.5 209.0 

4 .................... 769.2 282.2 

5 .................... 1050 386.4 

Total FFC Emissions * 

1 .................... 384.0 142.5 

2 .................... 529.5 195.0 

3 .................... 878.6 318.4 

4 .................... 1,199 434.4 

5 .................... 1,634 593.7 

* Components may not sum to total due to 

rounding. 

TABLE V.39—ESTIMATES OF PRESENT

VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS

FURNACES POTENTIAL STANDBY

MODE AND OFF MODE STANDARDS

TSL 3% Discount 

rate 

7% Discount 

rate 

million 2013$ 

Site and Power Sector Emissions 

1 .................... 7.1 2.6 

2 .................... 8.5 3.2 

3 .................... 12.8 4.7 

Upstream Emissions 

1 .................... 7.4 2.6 

2 .................... 8.8 3.1 

3 .................... 13.2 4.7 

Total FFC Emissions * 

1 .................... 14.5 5.2 

2 .................... 17.4 6.3 

3 .................... 26.0 9.4 

* Components may not sum to total due to 

rounding. 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6295(o)(2)(B)(i)(VI)) No other factors 

were considered in this analysis. 

8. Summary of National Economic 

Impacts 

The NPV of the monetized benefits 

associated with emissions reductions 

can be viewed as a complement to the 

NPV of the consumer savings calculated 

for each TSL considered in this 

rulemaking. Table V.40 presents the 

NPV values that result from adding the 

estimates of the potential economic 

benefits resulting from reduced CO2 and 

NOX emissions in each of four valuation 

scenarios to the NPV of consumer 

savings calculated for each AFUE TSL 

for NWGFs and MHGFs considered in 

this rulemaking, at both a seven-percent 

and three-percent discount rate. Table 

V.41 presents the NPV values that result 

from adding the estimates of the 

potential economic benefits resulting 

from reduced CO2 and NOX emissions 

in each of four valuation scenarios to 

the NPV of consumer savings calculated 

for each standby mode and off mode 

TSL for NWGFs and MHGFs considered 

in this rulemaking, at both a sevenpercent and three-percent discount rate. 

The CO2 values used in the columns of 

each table correspond to the four sets of 

SCC values discussed above. 

TABLE V.40—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH PRESENT VALUE OF MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS FOR POTENTIAL AFUE STANDARDS

TSL 

Consumer NPV at 3% Discount rate added with: 

SCC Case $12.0/

metric ton CO2* 

and medium value 

for NOX

SCC Case $40.5/

metric ton CO2* 

and medium value 

for NOX

SCC Case $62.4/

metric ton CO2* 

and medium value 

for NOX

SCC Case $119/

metric ton CO2* 

and Medium value 

for NOX

(Billion 2013$) 

1 ....................................................................................... 9.4 10.8 12.0 14.7 

2 ....................................................................................... 15.3 17.8 19.7 24.3 

3 ....................................................................................... 17.7 20.8 23.1 28.7 

4 ....................................................................................... 23.8 28.4 32.0 40.4 

5 ....................................................................................... 28.4 34.5 39.2 50.5 

Consumer NPV at 7% Discount Rate added with: 

TSL SCC Case $12.0/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $40.5/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $62.4/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $119/

metric ton CO2

*

and Medium Value 

for NOX

(Billion 2013$) 

1 ....................................................................................... 2.6 4.0 5.2 7.9 

2 ....................................................................................... 4.4 6.9 8.8 13.4 

3 ....................................................................................... 4.1 7.2 9.5 15.1 

4 ....................................................................................... 5.6 10.2 13.7 22.2 

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TABLE V.40—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH PRESENT VALUE OF MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS FOR POTENTIAL AFUE STANDARDS—Continued 

TSL 

Consumer NPV at 3% Discount rate added with: 

SCC Case $12.0/

metric ton CO2* 

and medium value 

for NOX

SCC Case $40.5/

metric ton CO2* 

and medium value 

for NOX

SCC Case $62.4/

metric ton CO2* 

and medium value 

for NOX

SCC Case $119/

metric ton CO2* 

and Medium value 

for NOX

(Billion 2013$) 

5 ....................................................................................... 5.7 11.9 16.6 27.9 

* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium value, which corresponds 

to $2,684 per ton. 

TABLE 41—NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES: NET PRESENT VALUE OF CONSUMER

SAVINGS COMBINED WITH PRESENT VALUE OF MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS

FOR POTENTIAL STANDBY MODE AND OFF MODE STANDARDS

TSL 

Consumer NPV at 3% discount rate added with: 

SCC Case $12.0/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $40.5/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $62.4/

metric ton CO2

*

and Medium Value 

for NOX

SCC Case $119/

metric ton CO2

*

and Medium Value 

for NOX

(Billion 2013$) 

1 ....................................................................................... 2.19 2.38 2.53 2.90 

2 ....................................................................................... 2.09 2.32 2.51 2.94 

3 ....................................................................................... 3.38 3.74 4.01 4.66 

Consumer NPV at 7% Discount Rate added with: 

TSL SCC Case $12.0/

metric ton CO2* 

and Medium Value 

for NOX

SCC Case $40.5/

metric ton CO2* 

and Medium Value 

for NOX

SCC Case $62.4/

metric ton CO2* 

and Medium Value 

for NOX

SCC Case $119/

metric ton CO2* 

and Medium Value 

for NOX

(Billion 2013$) 

1 ....................................................................................... 0.78 0.98 1.13 1.49 

2 ....................................................................................... 0.67 0.91 1.09 1.52 

3 ....................................................................................... 1.13 1.48 1.76 2.41 

* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium value, which corresponds 

to $2,684 per ton. 

Although adding the value of 

consumer savings to the values of 

emission reductions provides a valuable 

perspective, two issues should be 

considered. First, the national operating 

cost savings are domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions, while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and the SCC are 

performed with different methods that 

use different time frames for analysis. 

The national operating cost savings is 

measured for the lifetime of products 

shipped in 2021–2050. 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 CO2 in each year; these 

impacts continue well beyond 2100. 

C. Proposed Standards 

When considering standards, the new 

or amended energy conservation 

standard that DOE adopts for any type 

(or class) of covered product shall be 

designed to achieve the maximum 

improvement in energy efficiency that 

the Secretary determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) As discussed previously, 

in determining whether a standard is 

economically justified, the Secretary 

must determine whether the benefits of 

the standard exceed its burdens by, to 

the greatest extent practicable, 

considering the seven statutory factors 

discussed previously. (42 U.S.C. 

6295(o)(2)(B)(i)) The new or amended 

standard must also ‘‘result in significant 

conservation of energy.’’ (42 U.S.C. 

6295(o)(3)(B)) 

For this NOPR, DOE considered the 

impacts of amended standards for 

NWGFs and MHGFs at each TSL, 

beginning with the maximum 

technologically feasible level, to 

determine whether that level was 

economically justified. Where the maxtech level was not justified, DOE then 

considered the next-most-efficient level 

and undertook the same evaluation until 

it reached the highest efficiency level 

that is both technologically feasible and 

economically justified and saves a 

significant amount of energy. 

To aid the reader in understanding 

the benefits and/or burdens of each TSL, 

tables in this section summarize the 

quantitative analytical results for each 

TSL, based on the assumptions and 

methodology discussed herein. In 

addition to the quantitative results 

presented in the tables, DOE also 

considers other burdens and benefits 

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13182 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

101P.C. Reiss and M.W. White, Household 

Electricity Demand, Revisited, Review of Economic 

Studies (2005) 72, 853–883. 

102Alan Sanstad, Notes on the Economics of 

Household Energy Consumption and Technology 

Choice. Lawrence Berkeley National Laboratory 

(2010) (Available at: http://www1.eere.energy.gov/

buildings/appliance_standards/pdfs/consumer_ee_

theory.pdf (Last accessed May 3, 2013). 

that affect economic justification. These 

include the impacts on identifiable 

subgroups of consumers who may be 

disproportionately affected by a national 

standard (see section IV.I), and impacts 

on employment. DOE discusses the 

impacts on direct employment in NWGF 

and MHGF manufacturing in section 

IV.J, and discusses the indirect 

employment impacts in section IV.N. 

DOE also notes that the economics 

literature provides a wide-ranging 

discussion of how consumers trade off 

upfront costs and energy savings in the 

absence of government intervention. 

Much of this literature attempts to 

explain why consumers appear to 

undervalue energy efficiency 

improvements. There is evidence that 

consumers undervalue future energy 

savings as a result of: (1) A lack of 

information; (2) a lack of sufficient 

salience of the long-term or aggregate 

benefits; (3) a lack of sufficient savings 

to warrant delaying or altering 

purchases; (4) excessive focus on the 

short term, in the form of inconsistent 

weighting of future energy cost savings 

relative to available returns on other 

investments; (5) computational or other 

difficulties associated with the 

evaluation of relevant tradeoffs; and (6) 

a divergence in incentives (for example, 

renter versus owner or builder versus 

purchaser). Other literature indicates 

that with less than perfect foresight and 

a high degree of uncertainty about the 

future, consumers may trade off at a 

higher than expected rate between 

current consumption and uncertain 

future energy cost savings. This 

undervaluation suggests that regulation 

that promotes energy efficiency can 

produce significant net private gains (as 

well as producing social gains by, for 

example, reducing pollution). 

In DOE’s current regulatory analysis, 

potential changes in the benefits and 

costs of a regulation due to changes in 

consumer purchase decisions are 

included in two ways. First, if 

consumers forego a purchase of a 

product in the standards case, this 

decreases sales for product 

manufacturers, and the cost to 

manufacturers is included in the MIA. 

Second, DOE accounts for energy 

savings attributable only to products 

actually used by consumers in the 

standards case; if a standard decreases 

the number of products purchased by 

consumers, this decreases the potential 

energy savings from an energy 

conservation standard. DOE provides 

estimates of changes in the volume of 

product purchases in chapter 9 of the 

NOPR TSD. DOE’s current analysis does 

not explicitly control for heterogeneity 

in consumer preferences, preferences 

across subcategories of products or 

specific features, or consumer price 

sensitivity variation according to 

household income.101

While DOE is not prepared at present 

to provide a fuller quantifiable 

framework for estimating the benefits 

and costs of changes in consumer 

purchase decisions due to an energy 

conservation standard, DOE is 

committed to developing a framework 

that can support empirical quantitative 

tools for improved assessment of the 

consumer welfare impacts of appliance 

standards. DOE has posted a paper that 

discusses the issue of consumer welfare 

impacts of appliance standards, and 

potential enhancements to the 

methodology by which these impacts 

are defined and estimated in the 

regulatory process.102 DOE welcomes 

comments on how to more fully assess 

the potential impact of energy 

conservation standards on consumer 

choice and how to quantify this impact 

in its regulatory analysis. 

1. Benefits and Burdens of TSLs 

Considered for NWGFs and MHGFs 

AFUE Standards 

Table V.42 and Table V.43 summarize 

the quantitative impacts estimated for 

each TSL for the NWGF and MHGF 

AFUE standards. The national impacts 

are measured over the lifetime of 

NWGFs and MHGFs purchased in the 

30-year period that begins in the year of 

compliance with amended standards 

(2021–2050). The energy savings, 

emissions reductions, and value of 

emissions reductions refer to full-fuelcycle results and include the impacts of 

projected fuel switching discussed in 

sections IV.F.4 and IV.H.3 and chapter 

8 of the Technical Support Document. 

The efficiency levels contained in each 

TSL are described in section V.A. 

TABLE V.42—SUMMARY OF RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES AFUE 

TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

FFC National Energy Savings 

quads ................................................. 1.291 .................... 2.126 .................... 2.780 .................... 4.110 .................... 5.481 

NPV of Consumer Benefits (2013$ billion) 

3% discount rate ............................... 8.6 ........................ 14.1 ...................... 16.1 ...................... 21.5 ...................... 25.3 

7% discount rate ............................... 2.1 ........................ 3.6 ........................ 3.1 ........................ 4.0 ........................ 3.7 

Cumulative Emissions Reduction (Total FFC Emissions) 

CO2 (million metric tons) ................... 64.6 ...................... 110.0 .................... 137.3 .................... 206.5 .................... 274.5 

SO2 (thousand tons) ......................... (77.1) .................... (73.0) .................... (202.6) .................. (244.6) .................. (342.6) 

NOX (thousand tons) ......................... 349.3 .................... 484.3 .................... 815.9 .................... 1,113 .................... 1,513 

Hg (tons) ........................................... (0.240) .................. (0.228) .................. (0.629) .................. (0.760) .................. (1.065) 

CH4 (thousand tons) ......................... 1,452 .................... 1,964 .................... 3,424 .................... 4,624 .................... 6,300 

CH4 (thousand tons CO2eq) * ........... 40,663 .................. 54,995 .................. 95,882 .................. 129,480 ................ 176,393 

N2O (thousand tons) ......................... (1.0) ...................... (0.8) ...................... (2.6) ...................... (3.1) ...................... (4.3) 

N2O (thousand tons CO2eq) * ........... (256) ..................... (217) ..................... (692) ..................... (814) ..................... (1,149) 

Value of Emissions Reduction (Total FFC Emissions) 

CO2 (2013$ billion) ** ........................ 0.358 to 5.640 ...... 0.615 to 9.637 ...... 0.732 to 11.75 ...... 1.115 to 17.75 ...... 1.484 to 23.62 

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TABLE V.42—SUMMARY OF RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES AFUE 

TSLS: NATIONAL IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

NOX—3% discount rate (2013$ million).384.0 .................... 529.5 .................... 878.6 .................... 1,199 .................... 1,634 

NOX—7% discount rate (2013$ million).142.5 .................... 195.0 .................... 318.4 .................... 434.4 .................... 593.7 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

Note: Parentheses indicate negative values. 

TABLE V.43—SUMMARY OF RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES AFUE 

TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 ** TSL 2 ** TSL 3 TSL 4 TSL 5 

Manufacturer Impacts 

Industry NPV ($M) Base Case = 

1055.13.

990.43 to 1048.71 825.26 to 1063.45 971.41 to 1061.65 740.79 to 1099.24 548.20 to 1080.94 

Change in Industry NPV (%) ............ (6.13) to (0.61) ..... (21.79) to 0.79 ...... (7.93) to 0.62 ........ (29.79) to 4.18 ...... (48.04) to 2.45 

Consumer Mean LCC Savings (2013$) 

Non-Weatherized Gas Furnaces ...... $208 ..................... $374 ..................... $305 ..................... $388 ..................... $441 

Mobile Home Gas Furnaces ............. $770 ..................... $902 ..................... $691 ..................... $778 ..................... $784 

Shipment-Weighted Average * .......... $220 ..................... $385 ..................... $313 ..................... $396 ..................... $449 

Consumer Simple PBP (years) 

Non-Weatherized Gas Furnaces ...... 8.3 ........................ 7.2 ........................ 7.2 ........................ 7.4 ........................ 8.3 

Mobile Home Gas Furnaces ............. 1.8 ........................ 2.8 ........................ 2.2 ........................ 3.3 ........................ 4.2 

Shipment-Weighted Average * .......... 8.1 ........................ 7.1 ........................ 7.0 ........................ 7.3 ........................ 8.2 

Consumer LCC Impacts 

Non-Weatherized Gas Furnaces 

Consumers with Net Cost (%) .......... 11% ...................... 14% ...................... 20% ...................... 24% ...................... 40% 

Mobile Home Gas Furnaces 

Consumers with Net Cost (%) .......... 4% ........................ 8% ........................ 7% ........................ 13% ...................... 25% 

* Weighted by shares of each product class in total projected shipments in 2021. The results for TSLs 1 and 2 are weighted by shares of each 

product class in projected shipments to the North in 2021. 

** Results at TSLs 1 and 2 refer to the Northern region. For the Rest of Country, the proposed standard levels at TSLs 1 and 2 are at the 

baseline, so no consumers are affected. 

Note: Parentheses indicate negative values. 

First, DOE considered TSL 5, which 

would save an estimated total of 5.48 

quads of energy, an amount DOE 

considers significant. TSL 5 has an 

estimated NPV of consumer benefit of 

$3.7 billion using a 7-percent discount 

rate, and $25.3 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 5 are 274 million metric tons of 

CO2, 1,513 thousand tons of NOX, and 

6,300 thousand tons of CH4. Projected 

emissions show an increase of 343 

thousand tons of SO2, 4.3 thousand tons 

of N2O, and 1.065 tons of Hg. The 

increase is due to projected switching 

from gas furnaces to electric heat pumps 

and electric furnaces under the 

proposed standards. The estimated 

monetary value of the CO2 emissions 

reductions at TSL 5 ranges from $1.48 

billion to $23.62 billion. 

At TSL 5, the average LCC savings are 

$441 for non-weatherized gas furnaces 

and $784 for mobile home gas furnaces. 

The simple PBP is 8.3 years for nonweatherized gas furnaces and 4.2 years 

for mobile home gas furnaces. The share 

of consumers experiencing a net LCC 

cost is 40 percent for non-weatherized 

gas furnaces and 25 percent for mobile 

home gas furnaces. 

At TSL 5, the projected change in 

INPV ranges from a decrease of 506.94 

million to an increase of $25.80 million. 

The upper bound is considered 

optimistic by industry because it 

assumes manufacturers could pass on 

all compliance costs as price increases 

to their customers. DOE recognizes the 

risk of negative impacts if 

manufacturers’ expectations concerning 

reduced profit margins are realized. If 

the larger decrease is reached, as DOE 

expects, TSL 5 could result in a net loss 

of up to 48.04 percent in INPV for 

manufacturers. 

The Secretary tentatively concludes 

that, at TSL 5 for NWGFs and MHGFs 

AFUE standards, the benefits of energy 

savings, positive NPV of total consumer 

benefits at a 3-percent and 7-percent 

discount rates, average consumer LCC 

savings, emission reductions, and the 

estimated monetary value of the 

emissions reductions would be 

outweighed by the very large reduction 

in industry value at TSL 5 and the high 

number of consumers experiencing a net 

LCC cost for NWGFs. Consequently, 

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DOE has concluded that TSL 5 is not 

economically justified. 

Next, DOE considered TSL 4, which 

would save an estimated total of 4.11 

quads of energy, an amount DOE 

considers significant. TSL 4 has an 

estimated NPV of consumer benefit of 

$4.0 billion using a 7-percent discount 

rate, and $21.5 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 4 are 207 million metric tons of 

CO2, 1,113 thousand tons of NOX, and 

4,624 thousand tons of CH4. Projected 

emissions show an increase of 245 

thousand tons of SO2, 3.1 thousand tons 

of N2O, and 0.760 tons of Hg. The 

increase is due to projected switching 

from gas furnaces to electric heat pumps 

and electric furnaces under the 

proposed standards. The estimated 

monetary value of the CO2 emissions 

reductions at TSL 4 ranges from $1.11 

billion to $17.75 billion 

At TSL 4, the average LCC savings are 

$388 for non-weatherized gas furnaces 

and $778 for mobile home gas furnaces. 

The simple PBP is 7.4 years for nonweatherized gas furnaces and 3.3 years 

for mobile home gas furnaces. The share 

of consumers experiencing a net LCC 

cost is 24 percent for non-weatherized 

gas furnaces and 13 percent for mobile 

home gas furnaces. 

At TSL 4, the projected change in 

INPV ranges from a decrease of $314.34 

million to an increase of $44.10 million. 

If the larger decrease is reached, TSL 4 

could result in a net loss of 29.79 

percent in INPV. 

In considering this level, DOE notes 

that the agency recently published a 

final rule for energy conservation 

standards for furnace fans. 79 FR 38130 

(July 3, 2014). Figure V.1 illustrates the 

compliance intervals of both the furnace 

fans final rule and the proposed rule for 

residential furnaces. 

Furnace fans are a major component 

of residential furnaces. The final rule for 

furnace fans has a compliance date in 

2019. This is relevant because 

manufacturers of furnaces also typically 

manufacture the furnace fans housed in 

those systems. Today’s most common 

furnace blower motor technology is PSC 

motors. However, DOE believes that the 

furnace fan standard will likely require 

manufacturers to redesign residential 

furnaces to incorporate BPM motors and 

multi-staging for NWGF, and improved 

PSC motors for MHGF. Since these 

changes would also directly affect the 

furnace manufacturing industry, in 

addition to the new standards in this 

NOPR, DOE is aware that both 

rulemakings could present a cumulative 

burden impacting both product costs 

and upfront conversion costs. While 

cumulative burden issues are common 

in rulemakings (as manufacturers often 

produce more than one type of covered 

product), this situation is unique. First, 

both this energy conservation standard 

NOPR and the energy conservation 

standards furnace fan final rule will 

directly impact the design and 

manufacturing of the same product (i.e., 

residential furnaces). Second, the two 

rules impact an identical group of 

manufacturers. Third, these 

requirements are impacting the same 

product in a very short period of time. 

And finally the design changes resulting 

from this NOPR are additive to the 

design changes needed to meet the 

furnace fan standard. The combined 

requirements from this NOPR and from 

the furnace fans final rule will result in 

a larger burden in terms of both product 

cost and product conversion cost than 

would occur as a result of either of the 

individual rulemakings alone. 

Typically, manufacturers will attempt to 

recover these additional costs by 

passing them on to consumers. If these 

rules applied to different products the 

impact on consumer prices would be 

less and the impact on manufacturers 

could be spread across a larger revenue 

base. However, because these costs 

apply to the same product (i.e., 

furnaces), it may be more difficult for 

manufacturers to pass through all of the 

costs that they normally would to the 

consumer and the percentage reduction 

in industry value would be larger. Thus, 

manufacturers may feel this form of 

cumulative regulatory burden more 

acutely than that imposed on separate 

products in their manufacturing 

portfolio. 

To reach TSL 4, DOE has tentatively 

concluded that manufacturers would 

need to increase the heat exchanger 

surface area (see section IV.C.1.b). In 

order to meet the adopted furnace fan 

standard, as discussed above, 

manufacturers would likely need to 

implement an improved blower motor 

and, for NWGF, add multi-staging. 

Although the furnace heat exchanger, 

blower components, and combustion 

system are all integrated in the 

residential furnace design, the changes 

expected from the two rules are largely 

additive, with little overlap. Thus, when 

analyzing the combined impact of the 

two rules, DOE expects that the full 

costs of each rule will be incurred, with 

limited opportunity for cost savings to 

be achieved through coordinating the 

expenditures of the two rules. DOE 

estimates that, on average, the MPC at 

TSL 4 would be $145 greater than the 

current baseline cost for NWGF. When 

added to the MPC increase projected 

from the furnace fan final rule of $68, 

the total resulting manufacturing cost 

increase would be $213 for NWGF. 

Likewise, when the estimated $154 MPC 

increase from this NOPR is combined 

with the $6 increase resulting from the 

furnace fans rulemaking, the total 

impact on the manufacturing cost of 

MHGF would be an increase of $160. In 

addition to the manufacturing costs 

being additive, the capital and product 

conversion costs are also largely 

additive, resulting in a greater impact on 

manufacturers than would be projected 

in the MIA results for either individual 

rulemaking. DOE projects that if TSL 4 

was adopted as a result of this 

rulemaking, it would result in $65.8 

million in capital conversion costs and 

$23.0 million in product conversion 

costs. These changes are in addition to 

a projected $15.1 million in capital 


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expenditures and $25.5 million in 

product conversion costs from the 

furnace fan standard, for which 

compliance will be required in 2019. 79 

FR 38130, 38188 (July 3, 2014). In sum, 

manufacturers would be expected to 

incur $80.9 million and $48.5 million in 

capital and product conversion costs, 

respectively, leading up to the 2019 

furnace fans and the projected 2021 

residential furnaces compliance dates. 

DOE strongly considered TSL 4, and 

in a typical case, DOE’s quantitative 

analysis would have likely led to 

proposed standards at those levels, 

given the potential for significant 

additional energy and carbon savings. 

However, as discussed above, the 

unique cumulative burden on 

manufacturers from this rule and the 

furnace fans rule is an important 

concern for DOE. In light of this 

situation, DOE seeks further information 

in order to balance the benefits and 

burdens of adopting TSL 4 in the final 

rule. For example, DOE seeks validation 

of its estimated capital conversion costs 

and product conversion costs. 

Conversely, DOE seeks information 

concerning whether its assumptions 

about cumulative regulatory burden are 

mistaken. That is, DOE solicits 

information regarding the potential for 

cost-reducing synergies in terms of 

improving the energy efficiency of 

furnaces and furnace fans at the same 

time. Based upon the information 

available at this time with respect to 

manufacturer impacts, including the 

cumulative effects of the furnace fan 

rulemaking, the Secretary tentatively 

concludes that, at TSL 4 for NWGF and 

MHGF AFUE standards, the benefits of 

energy savings, positive NPV of total 

consumer benefits at a 3-percent and 7- 

percent discount rates, positive average 

consumer LCC savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

be outweighed by the potential negative 

impacts on manufacturers. 

Next, DOE considered TSL 3, which 

would save an estimated total of 2.78 

quads of energy, an amount DOE 

considers significant. TSL 3 has an 

estimated NPV of consumer benefit of 

$3.1 billion using a 7-percent discount 

rate, and $16.1 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 3 are 137 million metric tons of 

CO2, 816 thousand tons of NOX, and 

3,424 thousand tons of CH4. Projected 

emissions show an increase of 203 

thousand tons of SO2, 2.6 thousand tons 

of N2O, and 0.629 tons of Hg. The 

increase is due to projected switching 

from gas furnaces to electric heat pumps 

and electric furnaces under the 

proposed standards. The estimated 

monetary value of the CO2 emissions 

reductions at TSL 3 ranges from $0.73 

billion to $11.75 billion. 

At TSL 3, the average LCC savings are 

$305 for non-weatherized gas furnaces 

and $691 for mobile home gas furnaces. 

The simple PBP is 7.2 years for nonweatherized gas furnaces and 2.2 years 

for mobile home gas furnaces. The share 

of consumers experiencing a net LCC 

cost is 20 percent for non-weatherized 

gas furnaces and 7 percent for mobile 

home gas furnaces. 

At TSL 3, the projected change in 

INPV ranges from a decrease of $83.72 

million to an increase of $6.52 million. 

If the larger decrease is reached, TSL 3 

could result in a net loss of 7.93 percent 

in INPV. DOE notes that, as explained 

with TSL 4, cumulative burden from the 

furnaces and furnace fans rules is a 

significant concern. However, at TSL 3, 

the projected manufacturer impacts are 

significantly less than at TSL 4, thereby 

mitigating some of these concerns. 

DOE estimates that the MPC at TSL 3 

would be, on average, $91 greater than 

the current baseline cost for NWGF. 

When added to the MPC increase 

projected from the furnace fans final 

rule of $68, the total resulting 

manufacturing cost increase would be 

$159 for NWGF. Likewise, for MGHF, 

when the estimated $98 MPC increase 

from this NOPR is combined with the $6 

increase resulting from the furnace fans 

rulemaking, the total impact on the 

MGHF manufacturing cost would be an 

increase of $104. DOE projects that at 

TSL 3 manufacturers will incur $38.5 

million in capital conversion costs and 

$16.5 million in product conversion 

costs. When considering the conversion 

costs of the furnace fans final rule ($15.1 

million in capital expenditures and 

$25.5 million in product conversion 

costs from the furnace fan standard) and 

residential furnaces rule as additive, 

manufacturers would be expected to 

incur $53.6 million in capital 

conversion costs and $42 million 

product conversion costs in the years 

leading up to the 2019 furnace fans and 

the projected 2021 residential furnaces 

effective dates. 

DOE notes that the extent of switching 

that would result from amended 

standards for NWGF AFUE (as 

represented in the range of estimates 

that DOE analyzed) would affect the 

benefits and costs of TSLs 3, 4, and 5. 

Thus, DOE requests comments on DOE’s 

analysis of product switching. 

After considering the analysis and 

weighing the benefits and the burdens, 

the Secretary has tentatively concluded 

that at TSL 3 for NWGF and MHGF 

AFUE standards and based upon DOE’s 

understanding of currently available 

information, the benefits of energy 

savings, positive NPV of consumer 

benefit, positive impacts on consumers 

(as indicated by positive average LCC 

savings and favorable PBPs), emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

outweigh negative impacts on some 

consumers and the potential reductions 

in INPV for manufacturers. 

Consequently, DOE is proposing energy 

conservation standards for NWGFs and 

MHGFs at TSL 3. 

In today’s proposed rule, DOE 

requests comments and data from 

interested parties that would assist DOE 

in determining whether TSL 4 for 

NWGF and MHGF AFUE standards 

would also lead to the benefits of energy 

savings, positive NPV of total consumer 

benefits at a 3-percent and 7-percent 

discount rates, positive average 

consumer LCC savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions 

outweighing the reduction in industry 

value at TSL 4. If additional information 

points to such a conclusion, DOE will 

strongly consider adoption of TSL 4 in 

the final rule. Because DOE has not yet 

reached a final decision to set standards 

at TSL 3 or TSL 4, it seeks a more 

complete understanding of the benefits 

and burdens of moving forward at each 

of these levels, as well as any 

implementation problems that might be 

reasonably foreseen. 

Based on the above considerations, 

DOE today proposes to adopt AFUE 

energy conservation standards for 

NWGFs and MHGFs at TSL 3, as 

presented in Table V.44. 

TABLE V.44—PROPOSED AMENDED

AFUE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME

GAS FURNACES

Product class AFUE 

(%) 

Non-Weatherized Gas-Fired Furnaces ......................................... 92 

Mobile Home Gas-Fired Furnaces 92 

2. Benefits and Burdens of TSLs 

Considered for NWGFs and MHGFs 

Standby Mode and Off Mode Standards 

Table V.45 and Table V.46 present a 

summary of the quantitative impacts 

estimated for each TSL considered for 

NWGFs and MHGFs standby mode and 

off mode standards. The national 

impacts are measured over the lifetime 

of NWGFs and MHGFs purchased in the 

30-year period that begins in the year of 

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13186 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

compliance with amended standards 

(2021–2050). The energy savings, 

emissions reductions, and value of 

emissions reductions refer to the fullfuel-cycle results. The efficiency levels contained in each TSL are described in 

section V.A. 

TABLE V.45—SUMMARY OF RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

STANDBY MODE AND OFF MODE TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 

FFC National Energy Savings 

quads ..................................................................... 0.154 ..................................... 0.185 ..................................... 0.277 

NPV of Consumer Benefits (2013$ billion) 

3% discount rate .................................................... 2.1 ......................................... 2.0 ......................................... 3.3 

7% discount rate .................................................... 0.7 ......................................... 0.6 ......................................... 1.0 

Cumulative Emissions Reduction (Total FFC Emissions) 

CO2 (million metric tons) ....................................... 8.6 ......................................... 10.4 ....................................... 15.6 

SO2 (thousand tons) .............................................. 7.2 ......................................... 8.7 ......................................... 13.0 

NOX (thousand tons) ............................................. 13.5 ....................................... 16.2 ....................................... 24.3 

Hg (tons) ................................................................ 0.022 ..................................... 0.027 ..................................... 0.040 

CH4 (thousand tons) .............................................. 41.45 ..................................... 49.74 ..................................... 74.58 

CH4 (thousand tons CO2eq)* ................................. 1,161 ..................................... 1,393 ..................................... 2,088. 

N2O (thousand tons) .............................................. 0.12 ....................................... 0.15 ....................................... 0.22 

N2O (thousand tons CO2eq)* ................................ 32.2 ....................................... 38.6 ....................................... 57.9 

Value of Emissions Reduction (Total FFC Emissions) 

CO2 (2013$ billion)** ............................................. 0.05 to 0.76 .......................... 0.06 to 0.91 .......................... 0.09 to 1.37 

NOX—3% discount rate (2013$ million) ................ 14.5 ....................................... 17.4 ....................................... 26.0 

NOX—7% discount rate (2013$ million) ................ 5.2 ......................................... 6.3 ......................................... 9.4 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

** Range of the value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

TABLE V.46—SUMMARY OF RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

STANDBY MODE AND OFF MODE TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 TSL 2 TSL 3 

Manufacturer Impacts 

Industry NPV ($M) Base case = 1055.13 ............. 1053.41 to 1054.61 .............. 1046.10 to 1055.58 .............. 1042.97 to 1055.99 

Change in Industry NPV (%) ................................. (0.16) to (0.05) ...................... (0.86) to 0.04 ........................ (1.15) to 0.08 

Consumer Mean LCC Savings (2013$) 

Non-Weatherized Gas Furnaces ........................... $12 ........................................ $6 .......................................... $13 

Mobile Home Gas Furnaces .................................. $1 .......................................... $0 .......................................... $1 

Shipment-Weighted Average* ............................... $12 ........................................ $6 .......................................... $13 

Consumer Simple PBP (years) 

Non-Weatherized Gas Furnaces ........................... 1.3 ......................................... 9.7 ......................................... 7.5 

Mobile Home Gas Furnaces .................................. 1.2 ......................................... 9.2 ......................................... 7.1 

Shipment-Weighted Average* ............................... 1.3 ......................................... 9.6 ......................................... 7.4 

Consumer LCC Impacts 

Non-Weatherized Gas Furnaces 

Consumers with Net Cost (%) ............................... 2% ......................................... 15% ....................................... 9% 

Mobile Home Gas Furnaces 

Consumers with Net Cost (%) ............................... 0% ......................................... 1% ......................................... 1% 

* Weighted by shares of each product class in total projected shipments in 2021. 

Note: Parentheses indicate negative values. 

First, DOE considered TSL 3, which 

would save an estimated total of 0.28 

quads of energy, an amount DOE 

considers significant. TSL 3 has an 

estimated NPV of consumer benefit of 

$1.0 billion using a 7-percent discount 

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103To convert the time-series of costs and benefits 

into annualized values, DOE calculated a present 

value in 2014, the year used for discounting the 

NPV of total consumer costs and savings. For the 

benefits, DOE calculated a present value associated 

with each year’s shipments in the year in which the 

shipments occur (e.g., 2020 or 2030), and then 

discounted the present value from each year to 

2014. The calculation uses discount rates of 3 and 

7 percent for all costs and benefits except for the 

value of CO2 reductions, for which DOE used casespecific discount rates, as shown in Table V.48. 

Using the present value, DOE then calculated the 

fixed annual payment over a 30-year period, 

starting in the compliance year, that yields the same 

present value. 

rate, and $3.3 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 3 are 15.6 million metric tons of 

CO2, 24.3 thousand tons of NOX, 13.0 

thousand tons of SO2, 0.040 tons of Hg, 

0.22 thousand tons of N2O, and 74.6 

thousand tons of CH4. The estimated 

monetary value of the CO2 emissions 

reductions at TSL 3 ranges from $0.09 

billion to $1.37 billion. 

At TSL 3, the average LCC savings are 

$13 for non-weatherized gas furnaces 

and $1 for mobile home gas furnaces. 

The simple PBP is 7.5 years for nonweatherized gas furnaces and 7.1 years 

for mobile home gas furnaces. The share 

of consumers experiencing a net LCC 

cost is 9 percent for non-weatherized 

gas furnaces and 1 percent for mobile 

home gas furnaces. 

At TSL 3, the projected change in 

INPV ranges from a decrease of $12.16 

million to an increase of $0.08 million. 

If the larger decrease is reached, TSL 3 

could result in a net loss of 1.15 percent 

in INPV. 

The Secretary concludes that at TSL 

3 for NWGF and MHGF standby mode 

and off mode standards, the benefits of 

energy savings, positive NPV of 

consumer benefits at both 7-percent and 

3-percent discount rates, positive 

impacts on consumers (as indicated by 

positive average LCC savings, favorable 

PBPs, and a higher percentage of 

consumers who would experience LCC 

benefits as opposed to costs), emission 

reductions, and the estimated monetary 

value of the CO2 emissions reductions 

would outweigh the economic burden 

on a small fraction of consumers and the 

small potential loss in manufacturer 

INPV. After considering the analysis 

and the benefits and burdens of TSL 3, 

the Secretary has concluded that this 

TSL offers the maximum improvement 

in energy efficiency that is 

technologically feasible and 

economically justified, and will result 

in the significant conservation of 

energy. Therefore, DOE proposes to 

adopt TSL 3 for NWGF and MHGF 

standby mode and off mode standards. 

The proposed energy conservation 

standards for standby mode and off 

mode, expressed as maximum power in 

watts, are shown in Table V.47. 

TABLE V.47—PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED

GAS FURNACE AND MOBILE HOME GAS FURNACE

Product class PWW,SB

(watts) 

PW,OFF

(watts) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 8 .5 8 .5 

Mobile Home Gas Furnaces .................................................................................................................................... 8 .5 8 .5 

3. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

The benefits and costs of today’s 

proposed 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 2013$) of 

the benefits from operation of products 

that meet the proposed standards 

(consisting primarily of operating cost 

savings from using less energy, minus 

increases in product purchase costs, 

which is another way of representing 

consumer NPV), and (2) the annualized 

monetary value of the benefits of 

emission reductions, including CO2

emission reductions.103 The value of 

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. 

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 domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions, while 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 different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

NWGFs and MHGFs shipped in 2021– 

2050. The SCC values, on the other 

hand, reflect the present value of some 

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 the proposed AFUE standards 

for NWGFs and MHGFs are shown in 

Table V.48. The results under the 

primary estimate are as follows. 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, (for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate ($40.5/t in 2015)), the 

estimated cost of the NWGFs and 

MHGFs AFUE standards proposed in 

this rule is $701 million per year in 

increased equipment costs, while the 

estimated benefits are $1,074 million 

per year in reduced equipment 

operating costs, $231 million per year in 

CO2 reductions, and $39 million per 

year in reduced NOX emissions. In this 

case, the net benefit would amount to 

$642 million per year. 

Using a 3-percent discount rate for all 

benefits and costs and the average SCC 

series that uses a 3-percent discount rate 

($40.5/t in 2015), the estimated cost of 

the NWGFs and MHGFs AFUE 

standards proposed in this rule is $709 

million per year in increased equipment 

costs, while the estimated benefits are 

$1,690 million per year in reduced 

equipment operating costs, $231 million 

per year in CO2 reductions, and $54 

million per year in reduced NOX

emissions. In this case, the net benefit 

would amount to $1,264 million per 

year. 

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TABLE V.48—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE STANDARDS (TSL 3) FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES * 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low net benefits 

estimate 

High net benefits 

estimate 

Benefits 

Consumer Operating Cost Savings ............................... 7% 1,074 903 1,174 

3% 1,690 1,383 1,887 

CO2 Reduction Monetized Value ($12.0/t case) ** ........ 5% 64 59 72 

CO2 Reduction Monetized Value ($40.5/t case) ** ........ 3% 231 211 260 

CO2 Reduction Monetized Value ($62.4/t case) ** ........ 2.5% 340 311 384 

CO2 Reduction Monetized Value ($119/t case) ** ......... 3% 715 654 805 

NOX Reduction Monetized Value (at $2,684/ton) ** ...... 7% 38.50 35.68 42.48 

3% 53.52 49.26 59.53 

Total Benefits † ....................................................... 7% plus CO2 range 1,177 to 1,828 998 to 1,593 1,288 to 2,022 

7% 1,343 1,150 1,476 

3% plus CO2 range 1,807 to 2,458 1,491 to 2,087 2,018 to 2,751 

3% 1,974 1,643 2,206 

Costs 

Consumer Incremental Equipment Costs ...................... 7% 701 750 683 

3% 709 766 689 

Net Benefits/Costs 

Total † ..................................................................... 7% plus CO2 range 476 to 1,127 248 to 843 605 to 1,339 

7% 642 400 793 

3% plus CO2 range 1,098 to 1,749 725 to 1,320 1,329 to 2,062 

3% 1,264 877 1,517 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the products purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO2014 Reference case, Low Economic Growth case and High Economic Growth case, respectively. In addition, incremental product costs reflect a modest decline rate for projected product price trends in the Primary Estimate, a constant rate in the Low Benefits Estimate, and a higher decline rate for projected price trends in the High Benefits Estimate. 

The methods used to derive projected price trends are explained in section IV.F.1. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC 

from the three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th percentile 

SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature 

change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate 

an escalation factor. The value for NOX 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 series corresponding to average SCC with 3-percent discount 

rate ($40.5/t in 2015). In the rows labeled ‘‘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 proposed standards for 

NWGFs and MHGFs standby mode and 

off mode power are shown in Table 

V.49. The results under the primary 

estimate are as follows. 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, (for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate ($40.5/t in 2015)), the 

estimated cost of the NWGFs and 

MHGFs standby mode and off mode 

standards proposed in this rule is $40.4 

million per year in increased equipment 

costs, while the estimated benefits are 

$165.4 million per year in reduced 

equipment operating costs, $26.9 

million per year in CO2 reductions, and 

$1.1 million per year in reduced NOX

emissions. In this case, the net benefit 

would amount to $153.0 million per 

year. 

Using a 3-percent discount rate for all 

benefits and costs and the average SCC 

series that uses a 3-percent discount rate 

($40.5/t in 2015), the estimated cost of 

the NWGFs and MHGFs standby mode 

and off mode standards proposed in this 

rule is $41.0 million per year in 

increased equipment costs, while the 

estimated benefits are $240.2 million 

per year in reduced equipment 

operating costs, $26.9 million per year 

in CO2 reductions, and $1.6 million per 

year in reduced NOX emissions. In this 

case, the net benefit would amount to 

$227.6 million per year. 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13189 

TABLE V.49—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE STANDARDS (TSL 3) 

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES * 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low net benefits 

estimate 

High net benefits 

estimate 

Benefits 

Consumer Operating Cost Savings ............................... 7% 165.4 149.7 190.8 

3% 240.2 214.9 281.5 

CO2 Reduction Monetized Value ($12.0/t case) ** ........ 5% 7.65 6.94 8.60 

CO2 Reduction Monetized Value ($40.5/t case) ** ........ 3% 26.87 24.31 30.28 

CO2 Reduction Monetized Value ($62.4/t case) ** ........ 2.5% 39.46 35.68 44.50 

CO2 Reduction Monetized Value ($119/t case) ** ......... 3% 83.18 75.26 93.76 

NOX Reduction Monetized Value (at $2,684/ton) ** ...... 7% 1.14 1.04 1.27 

3% 1.59 1.44 1.78 

Total Benefits † ....................................................... 7% plus CO2 range 174 to 250 158 to 226 201 to 286 

7% 193.4 175.0 222.4 

3% plus CO2 range 249 to 325 223 to 292 292 to 377 

3% 268.6 240.7 313.5 

Costs 

Consumer Incremental Equipment Costs ...................... 7% 40.35 45.01 36.86 

3% 41.02 46.13 37.19 

Net Benefits/Costs 

Total † ..................................................................... 7% plus CO2 range 134 to 209 113 to 181 164 to 249 

7% 153.0 130.0 185.5 

3% plus CO2 range 208 to 284 177 to 246 255 to 340 

3% 227.6 194.6 276.3 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the equipment purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO2014 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC 

from the three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th-percentile 

SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature 

change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate 

an escalation factor. The value for NOX is the average of the low and high values in DOE’s analysis. 

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate ($40.5/t in 2015). In the rows labeled ‘‘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 the combined annualized 

benefits and costs of today’s proposed 

standards for NWGFs and MHGFs AFUE 

and standby mode and off mode power 

are shown in Table V.50. The results 

under the primary estimate are as 

follows. 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate ($40.5/t in 2015), the 

estimated cost of the NWGFs and 

MHGFs AFUE and standby mode and 

off mode standards proposed in this rule 

is $741.2 million per year in increased 

equipment costs, while the estimated 

benefits are $1,240 million per year in 

reduced equipment operating costs, 

$257.4 million per year in CO2

reductions, and $39.6 million per year 

in reduced NOX emissions. In this case, 

the net benefit would amount to $795.5 

million per year. 

Using a 3-percent discount rate for all 

benefits and costs and the average SCC 

series that uses a 3-percent discount rate 

($40.5/t in 2015), the estimated cost of 

the NWGFs and MHGFs AFUE and 

standby mode and off mode standards 

proposed in this rule is $750.5 million 

per year in increased equipment costs, 

while the estimated benefits are $1,930 

million per year in reduced equipment 

operating costs, $257.4 million per year 

in CO2 reductions, and $55.1 million 

per year in reduced NOX emissions. In 

this case, the net benefit would amount 

to $1,492 million per year. 

TABLE V.50—COMBINED ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE AND STANDBY MODE AND OFF MODE

STANDARDS (TSL 3) FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES * 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low net benefits 

estimate 

High net benefits 

estimate 

Benefits 

Consumer Operating Cost Savings ............................... 7% 1,240 1,053 1,365 

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13190 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

TABLE V.50—COMBINED ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE AND STANDBY MODE AND OFF MODE

STANDARDS (TSL 3) FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES *—Continued 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low net benefits 

estimate 

High net benefits 

estimate 

3% 1,930 1,598 2,168 

CO2 Reduction Monetized Value ($12.0/t case) ** ........ 5% 71.49 65.60 80.15 

CO2 Reduction Monetized Value ($40.5/t case) ** ........ 3% 257.4 235.2 290.0 

CO2 Reduction Monetized Value ($62.4/t case) ** ........ 2.5% 379.6 346.6 428.0 

CO2 Reduction Monetized Value ($119/t case) ** ......... 3% 798.1 729.2 898.9 

NOX Reduction Monetized Value (at $2,684/ton) ** ...... 7% 39.64 36.72 43.75 

3% 55.11 50.70 61.31 

Total Benefits † .............................................................. 7% plus CO2 range 1,351 to 2,077 1,155 to 1,819 1,489 to 2,308 

7% 1,537 1,325 1,699 

3% plus CO2 range 2,057 to 2,783 1,715 to 2,378 2,310 to 3,128 

3% 2,243 1,884 2,519 

Costs 

Consumer Incremental Equipment Costs ...................... 7% 741.2 795.0 719.9 

3% 750.5 812.4 726.3 

Net Benefits/Costs 

Total † ..................................................................... 7% plus CO2 range 609.6 to 1,336 360.3 to 1,024 768.9 to 1,588 

7% 795.5 529.8 978.7 

3% plus CO2 range 1,306 to 2,033 0,902 to 1,566 1,583 to 2,402 

3% 1,492 1,072 1,793 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the equipment purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices from the AEO 2014 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect a modest decline rate for projected product price trends in the Primary Estimate, a constant rate in the Low Benefits Estimate, and a higher decline rate in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.1. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC 

from the three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th-percentile 

SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature 

change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate 

an escalation factor. The value for NOX is the average of the low and high values in DOE’s analysis. 

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate ($40.5/t in 2015). In the rows labeled ‘‘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. 

Table V.51 compares the annualized 

benefits and costs of today’s proposed 

standards for NWGF and MHGF AFUE 

under the default product switching 

estimate and under high and low 

switching estimates. The results under 

the primary, high, and low switching 

estimates are as follows. For the 

proposed standards for AFUE (TSL 3), 

the net benefits using a 7-percent 

discount rate amount to $396 million 

per year using high switching estimates, 

and $866 million per year using low 

switching estimates. These values 

compare to the primary net benefits of 

$642 million per year. The net benefits 

using a 3-percent discount rate amount 

to $942 million per year using high 

switching estimates, and $1,563 million 

per year using low switching estimates. 

These values compare to the primary 

net benefits of $1,264 million per year. 

TABLE V.51—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE STANDARDS (TSL 3) FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES UNDER ALTERNATIVE PRODUCT SWITCHING ESTIMATES * 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low switching 

estimate 

High switching 

estimate 

Benefits 

Consumer Operating Cost Savings ............................... 7% 1,074 1,271 868 

3% 1,690 1,958 1,411 

CO2 Reduction Monetized Value ($12.0/t case) ** ........ 5% 64 83 44 

CO2 Reduction Monetized Value ($40.5/t case) ** ........ 3% 231 298 163 

CO2 Reduction Monetized Value ($62.4/t case) ** ........ 2.5% 340 439 241 

CO2 Reduction Monetized Value ($119/t case) ** ......... 3% 715 923 505 

NOX Reduction Monetized Value (at $2,684/ton) ** ...... 7% 39 40 37 

3% 54 55 52 

Total Benefits † ....................................................... 7% plus CO2 range 1,177 to 1,828 1,395 to 2,235 950 to 1,411 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13191 

TABLE V.51—ANNUALIZED BENEFITS AND COSTS OF PROPOSED AFUE STANDARDS (TSL 3) FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES UNDER ALTERNATIVE PRODUCT SWITCHING ESTIMATES *—Continued 

Discount rate 

(million 2013$/year) 

Primary 

estimate 

Low switching 

estimate 

High switching 

estimate 

7% 1,343 1,609 1,069 

3% plus CO2 range 1,807 to 2,458 2,097 to 2,937 1,507 to 1,968 

3% 1,974 2,312 1,626 

Costs 

Consumer Incremental Equipment Costs ...................... 7% 701 743 673 

3% 709 748 684 

Net Benefits/Costs 

Total † ..................................................................... 7% plus CO2 range 476 to 1,127 651 to 1,491 277 to 738 

7% 642 866 396 

3% plus CO2 range 1,098 to 1,749 1,349 to 2,189 823 to 1,284 

3% 1,264 1,563 942 

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2021–2050. These results include benefits to consumers which accrue after 2050 from the equipment purchased in 2021–2050. The results account for the incremental variable and 

fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Switching Estimate, and High Switching Estimates are explained in section IV.F.4. 

** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC 

from the three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th-percentile 

SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature 

change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate 

an escalation factor. The value for NOX is the average of the low and high values in DOE’s analysis. 

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate ($40.5/t in 2015). In the rows labeled ‘‘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. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866 and 13563 

Section 1(b)(1) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

requires each agency to identify the 

problem that it intends to address, 

including, where applicable, the failures 

of private markets or public institutions 

that warrant new agency action, as well 

as to assess the significance of that 

problem. The problems these proposed 

standards address are as follows: 

(1) Insufficient information and 

difficulty in analyzing relevant 

information leads some customers to 

miss opportunities to make costeffective investments in energy 

efficiency. 

(2) In some cases the benefits of more 

efficient equipment are not realized due 

to misaligned incentives between 

purchasers and users. An example of 

such a case is when the equipment 

purchase decision is made by a building 

contractor or building owner who does 

not pay the energy costs. 

(3) There are external benefits 

resulting from improved energy 

efficiency of residential furnaces that 

are not captured by the users of such 

equipment. These benefits include 

externalities related to public health, 

environmental protection and national 

security that are not reflected in energy 

prices, such as reduced emissions of air 

pollutants and greenhouse gases that 

impact human health and global 

warming. 

In addition, DOE has determined that 

this regulatory action is a ‘‘significant 

regulatory action’’ under section 3(f)(1) 

of Executive Order 12866. Accordingly, 

section 6(a)(3) of the Executive Order 

requires that DOE prepare a regulatory 

impact analysis (RIA) on this rule and 

that the Office of Information and 

Regulatory Affairs (OIRA) in the Office 

of Management and Budget (OMB) 

review this rule. DOE presented to OIRA 

for review the draft rule and other 

documents prepared for this 

rulemaking, including the RIA, and has 

included these documents in the 

rulemaking record. The assessments 

prepared pursuant to Executive Order 

12866 can be found in the technical 

support document for this rulemaking. 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011 (76 FR 3281 

(Jan. 21, 2011)). Executive Order 13563 

is supplemental to and explicitly 

reaffirms the principles, structures, and 

definitions governing regulatory review 

established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

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 

Executive Order 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 has 

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104The size standards are listed by North 

American Industry Classification System (NAICS) 

code and industry description and are available at 

http://www.sba.gov/category/navigation-structure/

contracting/contracting-officials/small-businesssize-standards. 

105 DOE’s Compliance Certification Management 

System, http://www.regulations.doe.gov/ 

certification-data/(last accessed Aug. 19, 2014). 106AHRI Directory, https:// 

www.ahridirectory.org/ahridirectory/pages/ 

home.aspx (last accessed Aug. 19, 2014). 

107Hoovers|Company Information|Industry 

Information|Lists, http://www.hoovers.com/) (last 

accessed August 26, 2014). 

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 the preamble, DOE believes 

that this NOPR is consistent with these 

principles, including the requirement 

that, to the extent permitted by law, 

benefits justify costs and that net 

benefits are maximized. 

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) 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 Executive Order 13272, 

‘‘Proper Consideration of Small Entities 

in Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies 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 Web site (http://energy.gov/ 

gc/office-general-counsel). DOE has 

prepared the following IRFA for the 

products that are the subject of this 

rulemaking. 

For manufacturers of NWGFs and 

MHGFs, the Small Business 

Administration (SBA) has set a size 

threshold, which defines those entities 

classified as ‘‘small businesses’’ for the 

purposes of the statute. DOE used the 

SBA’s small business size standards to 

determine whether any small entities 

would be subject to the requirements of 

the rule. 65 FR 30836, 30848 (May 15, 

2000), as amended at 65 FR 53533, 

53544 (Sept. 5, 2000) and codified at 13 

CFR part 121.104 Manufacturing of 

NWGFs and MHGFs is classified under 

NAICS 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing.’’ The SBA 

sets a threshold of 750 employees or less 

for an entity to be considered as a small 

business for this category. 

1. Description and Estimated Number of 

Small Entities Regulated 

DOE reviewed the proposed energy 

conservation standards for NWGFs and 

MHGFs considered in this notice of 

proposed rulemaking under the 

provisions of the Regulatory Flexibility 

Act and the procedures and policies 

published on February 19, 2003. 68 FR 

7990. To better assess the potential 

impacts of this rulemaking on small 

entities, DOE conducted a more focused 

inquiry of the companies that could be 

small business manufacturers of 

products covered by this rulemaking. 

DOE conducted a market survey using 

available public information to identify 

potential small manufacturers. DOE’s 

research involved DOE’s Compliance 

Certification Management System 

(CCMS 105), industry trade association 

membership directories (including 

AHRI 106), individual company Web 

sites, and market research tools (e.g., 

Hoovers reports 107) to create a list of 

companies that manufacture or sell the 

NWGF and MHGF products covered by 

this rulemaking. DOE also asked 

industry representatives if they were 

aware of any other small manufacturers 

during manufacturer interviews. DOE 

reviewed publicly available data and 

contacted companies on its list, as 

necessary, to determine whether they 

met the SBA’s definition of a small 

business manufacturer of covered 

NWGF and MHGF products. DOE 

screened out companies that do not 

offer products covered by this 

rulemaking, do not meet the definition 

of a ‘‘small business,’’ or are foreignowned and operated. Out of 12 

manufacturers DOE was able to identify, 

four manufacturers were classified as 

meeting the SBA’s definition of a ‘‘small 

business’’ that manufactures products 

covered by this rulemaking. Three of 

those small manufacturers were 

domestic companies. 

Before issuing this NOPR, DOE 

attempted to contact all the small 

domestic business manufacturers of 

NWGFs and MHGFs it had identified. 

None of the small businesses consented 

to formal MIA interviews. DOE also 

attempted to obtain information about 

small business impacts while 

interviewing large manufacturers. 

2. Description and Estimate of 

Compliance Requirements 

Of the three small domestic 

manufacturers identified, one 

manufacturer was a NWGF 

manufacturer and two manufacturers 

were MHGF manufacturers. The small 

domestic NWGF manufacturer focuses 

on the residential furnace market and 

accounts for approximately 7 percent of 

the listings in the DOE Certification 

Compliance Database. This small 

manufacturer has condensing furnace 

product offerings, with 9 percent of its 

models meeting the proposed national 

standard level of 92% AFUE. In 

comparison, the NWGF industry as a 

whole has 46 percent of listings at or 

above 92% AFUE. 

DOE made several key assumptions to 

estimate the conversion costs for small 

NWGF manufacturers. First, DOE 

assumed that conversion costs scaled 

with the number of model listings. 

Second, DOE assumed that small 

manufacturers accounted for 2 percent 

of NWGF industry revenues. Using 

these assumptions, DOE estimates the 

impacts on small manufacturer relative 

to large manufacturers: 

Total conversion cost as a 

percentage of 

revenue 

Total conversion cost as a 

percentage of 

EBIT 

Capital conversion cost 

as a percentage of annual 

capex 

Product conversion cost 

as a percentage of annual 

R&D 

Average Small Manufacturer ........................................................................... 18 304 605 148 

Average Large Manufacturer ........................................................................... 3 60 99 50 

These results suggest that small 

NWGF manufacturers could be at a 

disadvantage relative to the large NWGF 

manufacturers. In general, small 

manufacturers must make many of the 

same product redesign and cost 

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Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 13193 

optimization investments as their larger 

competitors. However, for the small 

manufacturer these upfront investments 

are spread over a smaller volume of 

shipments and smaller revenue base, 

making cost recovery more difficult. 

The two small manufacturers 

producing MHGFs together account for 

approximately 32 percent of MHGF 

listings in the DOE Certification 

Compliance Database. These two 

manufacturers have zero listings at or 

above 92 percent AFUE, the proposed 

national standard level. In comparison, 

the MHGF industry as a whole has 58 

percent of listings at or above 92 percent 

AFUE. These two small MHGF 

manufacturers would thus need to 

upgrade all product lines to remain in 

the industry. DOE estimates industry 

average conversion costs of 

approximately $0.9 million per 

company at this the proposed standard 

level. However, these estimates are 

driven by feedback from manufacturers 

who have condensing products today. 

Given that the two small manufacturers 

will need to develop a condensing 

product line from scratch, they may face 

substantially higher conversion costs for 

R&D and, perhaps, for tooling-up 

production of secondary heat 

exchangers. At the proposed AFUE 

standard level, the two small 

manufacturers may re-evaluate the costbenefit of staying in the MHGF market. 

DOE has tentatively concluded that 

the impacts of the standby mode and off 

mode requirements on small business 

are small relative to the AFUE standard 

impacts. Based on the engineering 

analysis, the cost of standby mode and 

off mode components are small to the 

overall cost of a residential furnace. 

DOE estimates that the standby mode 

and off mode requirements would add 

between $1 to $10 to the MPC of NWGF 

products (which ranges from $380 to 

$650) and to the MPC of MHGF 

products (which range from $323 to 

$568). The engineering analysis suggests 

that the design paths required to meet 

the standby mode and off mode 

requirements consist of relatively 

straight-forward component swaps. 

Additionally, the INPV and short-term 

cash flow impacts of the standby mode 

and off mode requirements are dwarfed 

by the impacts of the AFUE standard. In 

general, the impacts of the standby and 

off mode standard are significantly 

smaller than the impacts of the AFUE 

standard. For this reason, the IRFA 

focuses on the impacts of the AFUE 

standard. 

DOE seeks comments, information, 

and data on the number of small 

businesses in the industry, the names of 

those small businesses, and their role in 

the market. Second, DOE requests data 

on the market share of small 

manufacturers in the NWGF and MHGF 

markets. Third, DOE request data on the 

estimate conversion costs for small 

manufacturers at all TSLs. Last, DOE 

requests comment on the potential 

impacts of the proposed AFUE standard 

and standby mode and off mode 

requirement on small manufacturers. 

3. Duplication, Overlap, and Conflict 

With Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with the rule being proposed 

today. 

4. Significant Alternatives to the Rule 

The discussion in section V.B.2 

analyzes impacts on small businesses 

that would result from DOE’s proposed 

rule. In addition to the other TSLs being 

considered, the proposed rulemaking 

TSD includes a regulatory impact 

analysis (RIA) in chapter 17. For 

NWGFs and MHGFs, the RIA discusses 

the following policy alternatives: (1) No 

change in standard; (2) consumer 

rebates; (3) consumer tax credits; (4) 

manufacturer tax credits; (5) voluntary 

energy efficiency targets; and (6) bulk 

government purchases. While these 

alternatives may mitigate the economic 

impacts on small entities compared to 

the proposed standards, DOE has 

determined that the energy savings of 

these regulatory alternatives amount to 

0.7 percent to 43.7 percent of the 

savings that would be expected to result 

from adoption of the proposed standard 

levels. Thus, DOE rejected these 

alternatives and is proposing the 

standards set forth in this rulemaking. 

See chapter 17 of the NOPR TSD for 

further detail on the policy alternatives 

DOE considered. 

C. Review Under the Paperwork 

Reduction Act of 1995 

Manufacturers of residential furnaces 

must certify to DOE that their products 

comply with any applicable energy 

conservation standards. In certifying 

compliance, manufacturers must test 

their products according to the DOE test 

procedures for residential furnaces, 

including any amendments adopted for 

those test procedures. DOE has 

established regulations for the 

certification and recordkeeping 

requirements for all covered consumer 

products and commercial equipment, 

including residential furnaces. 76 FR 

12422 (March 7, 2011). The collectionof-information requirement for the 

certification and recordkeeping is 

subject to review and approval by OMB 

under the Paperwork Reduction Act 

(PRA). This requirement has been 

approved by OMB under OMB control 

number 1910–1400. Public reporting 

burden for the certification is estimated 

to average 20 hours per response, 

including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act (NEPA) of 

1969, DOE has determined that the 

proposed rule fits within the category of 

actions included in Categorical 

Exclusion (CX) B5.1 and otherwise 

meets the requirements for application 

of a CX. See 10 CFR part 1021, App. B, 

B5.1(b); 1021.410(b) and Appendix B, 

B(1)–(5). The proposed rule fits within 

the category of actions because it is a 

rulemaking that establishes energy 

conservation standards for consumer 

products or industrial equipment, and 

for which none of the exceptions 

identified in CX B5.1(b) apply. 

Therefore, DOE has made a CX 

determination for this rulemaking, and 

DOE does not need to prepare an 

Environmental Assessment or 

Environmental Impact Statement for 

this proposed rule. DOE’s CX 

determination for this proposed rule is 

available at http://cxnepa.energy.gov/. 

E. Review Under Executive Order 13132 

Executive Order 13132, ‘‘Federalism,’’ 

64 FR 43255 (Aug. 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 

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it will follow in the development of 

such regulations. 65 FR 13735. DOE has 

examined this proposed rule and has 

tentatively 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 

proposed rule. 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 Executive Order 13132. 

F. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 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. 61 FR 4729 (Feb. 

7, 1996). Regarding the review required 

by section 3(a), section 3(b) of Executive 

Order 12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) Clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this 

proposed rule meets the relevant 

standards of Executive Order 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 

proposed 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)) 

The 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 http://energy.gov/gc/officegeneral-counsel. 

Although this proposed rule, which 

proposes amended energy conservation 

standards for residential furnaces, does 

not contain a Federal intergovernmental 

mandate, it may require expenditures of 

$100 million or more on the private 

sector. Specifically, the proposed rule 

would likely result in a final rule that 

could require expenditures of $100 

million or more, including: (1) 

Investment in research and 

development and in capital 

expenditures by residential furnace 

manufacturers in the years between the 

final rule and the compliance date for 

the new standards, and (2) incremental 

additional expenditures by consumers 

to purchase higher-efficiency residential 

furnaces, starting at the compliance date 

for the applicable standard. 

Section 202 of UMRA authorizes a 

Federal agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. (2 U.S.C. 1532(c)) 

The content requirements of section 

202(b) of UMRA relevant to a private 

sector mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(o) of EPCA and 

Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of 

the NOPR and the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for this 

proposed rule respond to those 

requirements. 

Under section 205 of UMRA, the 

Department is obligated to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating a rule for which a written 

statement under section 202 is required. 

(2 U.S.C. 1535(a)) DOE is required to 

select from those alternatives the most 

cost-effective and least burdensome 

alternative that achieves the objectives 

of the proposed rule unless DOE 

publishes an explanation for doing 

otherwise, or the selection of such an 

alternative is inconsistent with law. As 

required by 42 U.S.C. 6295(f) and (o), 

this proposed rule would establish 

amended energy conservation standards 

for residential furnaces that are 

designed to achieve the maximum 

improvement in energy efficiency that 

DOE has determined to be both 

technologically feasible and 

economically justified. A full discussion 

of the alternatives considered by DOE is 

presented in the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for this 

proposed rule. 

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 rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights,’’ 53 FR 8859 (March 15, 1988), 

DOE has determined that this proposed 

rule 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 

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FR 62446 (Oct. 7, 2002). DOE has 

reviewed this NOPR 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 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to 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 (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has tentatively concluded that 

this regulatory action, which sets forth 

amended energy conservation standards 

for residential furnaces, is not a 

significant energy action because the 

proposed standards are not likely to 

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. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on this proposed rule. 

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 2667. 

In response to OMB’s Bulletin, DOE 

conducted formal in-progress peer 

reviews of the energy conservation 

standards development process and 

analyses and has prepared a Peer 

Review Report pertaining to the energy 

conservation standards rulemaking 

analyses. 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. The ‘‘Energy Conservation 

Standards Rulemaking Peer Review 

Report,’’ dated February 2007, has been 

disseminated and is available at the 

following Web site: 

www1.eere.energy.gov/buildings/

appliance_standards/peer_review.html. 

VII. Public Participation 

A. Attendance at the Public Meeting 

The time, date, and location of the 

public meeting are listed in the DATES

and ADDRESSES sections at the beginning 

of this notice. If you plan to attend the 

public meeting, please notify Ms. 

Brenda Edwards at (202) 586–2945 or 

Brenda.Edwards@ee.doe.gov . As 

explained in the ADDRESSES section, 

foreign nationals visiting DOE 

Headquarters are subject to advance 

security screening procedures. Any 

foreign national wishing to participate 

in the meeting should advise DOE of 

this fact as soon as possible by 

contacting Ms. Brenda Edwards to 

initiate the necessary procedures.X 

In addition, you can attend the public 

meeting via webinar. Webinar 

registration information, participant 

instructions, and information about the 

capabilities available to webinar 

participants will be published on DOE’s 

Web site at: http://www1.eere.energy.

gov/buildings/appliance_standards/

rulemaking.aspx?ruleid=62. 

Participants are responsible for 

ensuring their systems are compatible 

with the webinar software. 

B. Procedure for Submitting Requests to 

Speak and Prepared General Statements 

for Distribution 

Any person who has an interest in the 

topics addressed in this notice, or who 

is representative of a group or class of 

persons that has an interest in these 

issues, may request an opportunity to 

make an oral presentation at the public 

meeting. Such persons may handdeliver requests to speak to the address 

shown in the ADDRESSES section at the 

beginning of this notice between 9:00 

a.m. and 4:00 p.m., Monday through 

Friday, except Federal holidays. 

Requests may also be sent by mail or 

email to: Ms. Brenda Edwards, U.S. 

Department of Energy, Building 

Technologies Office, Mailstop EE–5B, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121, or 

Brenda.Edwards@ee.doe.gov. Persons 

who wish to speak should include with 

their request a computer diskette or CD– 

ROM in WordPerfect, Microsoft Word, 

PDF, or text (ASCII) file format that 

briefly describes the nature of their 

interest in this rulemaking and the 

topics they wish to discuss. Such 

persons should also provide a daytime 

telephone number where they can be 

reached. 

DOE requests persons scheduled to 

make an oral presentation to submit an 

advance copy of their statements at least 

one week before the public meeting. 

DOE may permit persons who cannot 

supply an advance copy of their 

statement to participate, if those persons 

have made advance alternative 

arrangements with the Building 

Technologies Program. As necessary, 

requests to give an oral presentation 

should ask for such alternative 

arrangements. 

C. Conduct of the Public Meeting 

DOE will designate a DOE official to 

preside at the public meeting and may 

also use a professional facilitator to aid 

discussion. The meeting will not be a 

judicial or evidentiary-type public 

hearing, but DOE will conduct it in 

accordance with section 336 of EPCA 

(42 U.S.C. 6306). A court reporter will 

be present to record the proceedings and 

prepare a transcript. DOE reserves the 

right to schedule the order of 

presentations and to establish the 

procedures governing the conduct of the 

public meeting. There shall not be 

discussion of proprietary information, 

costs or prices, market share, or other 

commercial matters regulated by U.S. 

anti-trust laws. After the public meeting, 

interested parties may submit further 

comments on the proceedings, as well 

as on any aspect of the rulemaking, until 

the end of the comment period. 

The public meeting will be conducted 

in an informal, conference style. DOE 

will present summaries of comments 

received before the public meeting, 

allow time for prepared general 

statements by participants, and 

encourage all interested parties to share 

their views on issues affecting this 

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rulemaking. Each participant will be 

allowed to make a general statement 

(within time limits determined by DOE), 

before the discussion of specific topics. 

DOE will allow, as time permits, other 

participants to comment briefly on any 

general statements. 

At the end of all prepared statements 

on a topic, DOE will permit participants 

to clarify their statements briefly and 

comment on statements made by others. 

Participants should be prepared to 

answer questions by DOE and by other 

participants concerning these issues. 

DOE representatives may also ask 

questions of participants concerning 

other matters relevant to this 

rulemaking. The official conducting the 

public meeting will accept additional 

comments or questions from those 

attending, as time permits. The 

presiding official will announce any 

further procedural rules or modification 

of the above procedures that may be 

needed for the proper conduct of the 

public meeting. 

A transcript of the public meeting will 

be included in the docket, which can be 

viewed as described in the Docket 

section at the beginning of this notice 

and will be accessible on the DOE Web 

site. In addition, any person may buy a 

copy of the transcript from the 

transcribing reporter. 

D. Submission of Comments 

DOE will accept comments, data, and 

information regarding this proposed 

rule before or after the public meeting, 

but no later than the date provided in 

the DATES section at the beginning of 

this proposed rule. Interested parties 

may submit comments, data, and other 

information using any of the methods 

described in the ADDRESSES section at 

the beginning of this NOPR. 

Submitting comments via 

www.regulations.gov. The 

www.regulations.gov Web page will 

require you to provide your name and 

contact information. Your contact 

information will be viewable to DOE 

Building Technologies staff only. Your 

contact information will not be publicly 

viewable except for your first and last 

names, organization name (if any), and 

submitter representative name (if any). 

If your comment is not processed 

properly because of technical 

difficulties, DOE will use this 

information to contact you. If DOE 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, DOE may not be 

able to consider your comment. 

However, your contact information 

will be publicly viewable if you include 

it in the comment itself or in any 

documents attached to your comment. 

Any information that you do not want 

to be publicly viewable should not be 

included in your comment, nor in any 

document attached to your comment. 

Otherwise, persons viewing comments 

will see only first and last names, 

organization names, correspondence 

containing comments, and any 

documents submitted with the 

comments. 

Do not submit to www.regulations.gov 

information for which disclosure is 

restricted by statute, such as trade 

secrets and commercial or financial 

information (hereinafter referred to as 

Confidential Business Information 

(CBI)). Comments submitted through 

www.regulations.gov cannot be claimed 

as CBI. Comments received through the 

Web site will waive any CBI claims for 

the information submitted. For 

information on submitting CBI, see the 

Confidential Business Information 

section below. 

DOE processes submissions made 

through www.regulations.gov before 

posting. Normally, comments will be 

posted within a few days of being 

submitted. However, if large volumes of 

comments are being processed 

simultaneously, your comment may not 

be viewable for up to several weeks. 

Please keep the comment tracking 

number that www.regulations.gov 

provides after you have successfully 

uploaded your comment. 

Submitting comments via email, hand 

delivery/courier, or postal mail. 

Comments and documents submitted 

via email, hand delivery, or postal mail 

also will be posted to 

www.regulations.gov. If you do not want 

your personal contact information to be 

publicly viewable, do not include it in 

your comment or any accompanying 

documents. Instead, provide your 

contact information in a cover letter. 

Include your first and last names, email 

address, telephone number, and 

optional mailing address. The cover 

letter will not be publicly viewable as 

long as it does not include any 

comments. 

Include contact information each time 

you submit comments, data, documents, 

and other information to DOE. If you 

submit via mail or hand delivery/

courier, please provide all items on a 

CD, if feasible, in which case, it is not 

necessary to submit printed copies. No 

telefacsimiles (faxes) will be accepted. 

Comments, data, and other 

information submitted to DOE 

electronically should be provided in 

PDF (preferred), Microsoft Word or 

Excel, WordPerfect, or text (ASCII) file 

format. Provide documents that are not 

secured, that are written in English, and 

that are free of any defects or viruses. 

Documents should not contain special 

characters or any form of encryption 

and, if possible, they should carry the 

electronic signature of the author. 

Campaign form letters. Please submit 

campaign form letters by the originating 

organization in batches of between 50 to 

500 form letters per PDF or as one form 

letter with a list of supporters’ names 

compiled into one or more PDFs. This 

reduces comment processing and 

posting time. 

Confidential Business Information. 

Pursuant to 10 CFR 1004.11, any person 

submitting information that he or she 

believes to be confidential and exempt 

by law from public disclosure should 

submit via email, postal mail, or hand 

delivery/courier two well-marked 

copies: One copy of the document 

marked ‘‘confidential’’ including all the 

information believed to be confidential, 

and one copy of the document marked 

‘‘non-confidential’’ with the information 

believed to be confidential deleted. 

Submit these documents via email or on 

a CD, if feasible. DOE will make its own 

determination about the confidential 

status of the information and treat it 

according to its determination. 

Factors of interest to DOE when 

evaluating requests to treat submitted 

information as confidential include: (1) 

A description of the items; (2) whether 

and why such items are customarily 

treated as confidential within the 

industry; (3) whether the information is 

generally known by or available from 

other sources; (4) whether the 

information has previously been made 

available to others without obligation 

concerning its confidentiality; (5) an 

explanation of the competitive injury to 

the submitting person which would 

result from public disclosure; (6) when 

such information might lose its 

confidential character due to the 

passage of time; and (7) why disclosure 

of the information would be contrary to 

the public interest. 

It is DOE’s policy that all comments 

may be included in the public docket, 

without change and as received, 

including any personal information 

provided in the comments (except 

information deemed to be exempt from 

public disclosure). 

E. Issues on Which DOE Seeks Comment 

Although DOE welcomes comments 

on any aspect of this proposal, DOE is 

particularly interested in receiving 

comments and views of interested 

parties concerning the following issues: 

1. The efficiency levels analyzed for 

standby mode and off mode, and on the 

assumption that standby mode and off 

mode energy consumption (as defined 

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by DOE) would be equal (see section 

IV.C.1.b). 

2. The fraction of NWGFs and MHGFs 

that are used in commercial 

applications (see section IV.G.1). 

3. The fraction of consumers that shut 

the furnace off during the non-heating 

season (see section IV.C.1.b). 

4. Installation costs for condensing 

NWGFs and MHGFs. Specifically, the 

estimated fraction of houses that would 

see a large impact for installing a 

condensing furnace because of venting 

and/or condensate withdrawal issues 

(see section IV.F.2). 

5. DOE’s current approach for 

determining NWGF and MHGF lifetime 

distribution (see section IV.F.3.d). 

6. DOE’s current approach for 

calculating the fraction of NWGF 

consumers that would be expected to 

switch to other products in the 

standards cases (see section IV.F.4). 

7. The estimated market share of 

condensing NWGFs and MHGFs in 2021 

in the absence of amended energy 

conservation standards (see section 

IV.F). 

8. The estimated market share of 

NWGFs and MHGFs that are used at 

each standby efficiency level in 2021 in 

the absence of amended energy 

conservation standards (see section 

IV.F). 

9. The reasonableness of its 

assumption to apply a decreasing trend 

to the manufacturer selling price (in real 

dollars) of NWGFs and MHGFs, as well 

as any information that would support 

the use of alternative assumptions (see 

section IV.F.1). 

10. Data that would allow for use of 

different price trend projections for 

condensing and non-condensing 

NWGFs and MHGFs (see section IV.F.1). 

11. The methodology and data sources 

used for projecting the future shipments 

of NWGFs and MHGFs in the absence of 

amended energy conservation standards 

(see section IV.G.1). 

12. The potential impacts on product 

shipments related to fuel and product 

switching (see section IV.G.2). 

13. The reasonableness of the value 

that DOE used to characterize the 

rebound effect with higher-efficiency 

NWGFs and MHGFs (see section IV.E.1). 

14. The approach for conducting the 

emissions analysis for NWGFs and 

MHGFs (see section IV.K). 

15. DOE’s approach for estimating 

monetary benefits associated with 

emissions reductions (see section IV.L). 

16. Comments, information, and data 

on the capital conversion costs and 

product conversion costs estimated for 

each AFUE standard TSL (see section 

IV.J.2.a). 

17. Comments, information, and data 

on the capital conversion costs and 

product conversion costs estimated for 

each standby mode and off mode TSL 

(see section IV.J.2.a). 

18. Comments on the identified 

regulations and their contribution to 

cumulative regulatory burden. 

Additionally, DOE requests feedback on 

product-specific regulations that take 

effect between 2018 and 2024 that were 

not listed, including identification of 

the specific regulations and data 

quantifying the associated burdens (see 

section V.B.2.e and V.C.1). 

19. Comments, information, and data 

on the number of small businesses in 

the industry, the names of those small 

businesses, and their role in the market 

and the market share of small 

manufacturers in the NWGF and MHGF 

markets (see section VI.B.1 and VI.B.2). 

20. Comment on the potential impacts 

of the proposed AFUE standard and 

standby mode and off mode requirement 

on small manufacturers (see section 

VI.B.2). 

21. Data, information, and feedback to 

enhance the estimate conversion costs 

for small manufacturers in the NWGF 

and MHGF to develop or adjust current 

product lines to meet the proposed 

standards (see section VI.B.2). 

22. Comment on the potential impacts 

of the proposed AFUE standard and 

standby mode and off mode requirement 

on small manufacturers (see section 

VI.B.2). 

VIII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of today’s notice of 

proposed rulemaking. 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Intergovernmental relations, Small 

businesses. 

Issued in Washington, DC, on February 10, 

2015. 

David T. Danielson, 

Assistant Secretary, Energy Efficiency and 

Renewable Energy. 

For the reasons set forth in the 

preamble, DOE proposes to amend part 

430 of chapter II, subchapter D, of title 

10 of the Code of Federal Regulations, 

as set forth below: 

PART 430—ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

■ 1. The authority citation for part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 

2461 note. 

■ 2. Appendix N to subpart B of part 

430 is amended by revising the note 

after the heading to read as follows: 

Appendix N to Subpart B of Part 430— 

Uniform Test Method for Measuring the 

Energy Consumption of Furnaces and 

Boilers 

Note: The procedures and calculations that 

refer to standby mode and off mode energy 

consumption (i.e., sections 8.6 and 10.11 of 

this appendix N) need not be performed to 

determine compliance with energy 

conservation standards for furnaces and 

boilers until required as specified below. 

However, any representation related to 

standby mode and off mode energy 

consumption of these products made after 

July 1, 2013 must be based upon results 

generated under this test procedure, 

consistent with the requirements of 42 U.S.C. 

6293(c)(2). For non-weatherized oil-fired 

furnaces (including mobile home furnaces) 

and electric furnaces manufactured on and 

after May 1, 2013, compliance with the 

applicable provisions of this test procedure is 

required in order to determine compliance 

with energy conservation standards. For nonweatherized gas furnaces (including mobile 

home furnaces) manufactured on and after 

(compliance date of final rule), compliance 

with the applicable provisions of this test 

procedure is required in order to determine 

compliance with energy conservation 

standards. For boilers manufactured on and 

after (compliance date of residential boilers 

final rule), compliance with the applicable 

provisions of this test procedure is required 

in order to determine compliance with 

energy conservation standards. 

* * * * * 

■ 3. Section 430.32 is amended by 

■ a. Redesignating paragraph (e)(1)(iii) 

as (e)(1)(iv); 

■ b. Adding a new paragraph (e)(1)(iii); 

and 

■ c. Revising newly redesignated 

paragraph (e)(1)(iv). 

The additions and revisions read as 

follows: 

§ 430.32 Energy and water conservation 

standards and their compliance dates. 

* * * * * 

(e) * * * 

(1) * * * 

(iii) The AFUE of non-weatherized 

gas-fired and mobile home gas furnaces 

shall not be less than the following 

starting on the compliance date 

indicated in the table below: 

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13198 Federal Register / Vol. 80, No. 48 / Thursday, March 12, 2015 / Proposed Rules 

Product class AFUE 

(percent) 1 Compliance date 

(A) Non-weatherized gas furnaces (not including mobile home furnaces) ........... 92 date 5 years after publication of final rule. 

(B) Mobile home gas furnaces .............................................................................. 92 date 5 years after publication of final rule. 

1Annual Fuel Utilization Efficiency, as determined in § 430.23(n)(2) of this part. 

(iv) Furnaces manufactured on and 

after the compliance date listed in the 

table below shall have an electrical 

standby mode power consumption 

(PW,SB) and electrical off mode power 

consumption (PW,OFF) not more than the 

following: 

Product class 

Maximum 

standby 

mode 

electrical 

power 

consumption, 

(PW,SB) 

(watts) 

Maximum off 

mode 

electrical 

power 

consumption, 

(PW,OFF) 

(watts) 

Compliance date 

(A) Non-weatherized oil-fired furnaces (including mobile home furnaces).11 11 May 1, 2013. 

(B) Electric furnaces ................................................................................ 10 10 May 1, 2013. 

(C) Non-weatherized gas-fired furnaces (including mobile home furnaces).8 .5 8 .5 date 5 years after publication of 

final rule. 

* * * * * 

[FR Doc. 2015–03275 Filed 3–11–15; 8:45 am] 

BILLING CODE 6450–01–P 

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