. -~ 

Thursday 

November 19, 1998 

Part Ill 

)Q3 

Department of 

Energy 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 430 

c 

Energy Conservation Program for 

Consumer Products: Energy Conservation 

Standards for Clothes Washers; Proposed 

Rule 
• 

• 64344 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 430 

[Docket No. EE-RM-94-403] 

RIN 1904-AA67 

Energy Conservation Program for 

Consumer Products: Energy 

Conservation Standards for Clothes 

Washers 

AGENCY: Office of Energy Efficiency and 

Renewable Energy. Department of 

Energy. 

ACTION: Supplemental Advance Notice 

of Proposed Rulemaking. 

SUMMARY: The Energy Policy and 

Conservation Act, as amended (EPCA or 

Act). requires the Department of Energy 

(DOE or Department) to consider 

amending the energy conservation 

standards for certain major household 

appliances. This supplemental advance 

notice of proposed rulemaking (ANO PR) 

addresses the requirement of EPCA to 

consider amending the energy 

conservation standards for clothes 

washers no later than five years after the 

date of publication of the previous final 

rule (May 14. 1991). 

The purpose of this supplemental 

ANOPR is to provide interested persons 

with an opportunity to comment on: 

First, the product classes that the 

Department is planning to analyze; 

Second, the analytical framework, 

models (e.g .. the Government Regulatory 

Impact Model (GRIM)). and tools (e.g .. a 

Monte Carlo sampling methodology, 

and life·-cycle-cost (LCC) and national 

energy savings (NES) spreadsheets) that 

the Department expects to use hi 

performing analyses of the impacts of 

standards; and 

Third, the results of preliminary 

analyses for life-cycle-cost. payback and 

nationa1 energy savings contained in the 

Preliminary Technical Support 

Document: Energy Efficiency Standards 

for Consumer Products: Clothes 

Washer:; (TSD) and summarized in this 

supplemental ANOPR. 

DATES: Written comments must be 

received by February 2. 1999. The 

Department requests 10 copies of the 

written comments and, if possible, a 

computer disk. The Office of Codes and 

Standards is currently using 

WordPerfect 6.1. 

A public hearing will be held on 

December 14 (1:00-4:00 p.m.) and 15 

(9:00 a.rn.-4:00 p.m.). 1998. See 

SUPPLENIENTARY INFORMATION for further 

details. 

ADDRESSES: Written comments should 

be submitted to: U.S. Department of 

Energy. Attn: Brenda Edwards-Jones. 

Office of Energy Efficiency and 

Renewable Energy, "Energy Efficiency 

Standards for Consumer Products,'' 

(Docket No. EE-RM-94-403), EE-431, 

Forrestal Building. 1000 Independence 

Avenue, SW, Room lj-018, Washington, 

D.C. 20585, (202) 586-9127. 

The public hearing will be held at the 

U.S. Department of Energy. Forrestal 

Building, 1000 Independence Avenue 

SW. Room lE-245, Washington, D.C. 

20585. 

Copies of the Preliminary Technical 

Support Document: Energy Efficiency 

Standards for Consumer Products: 

Clothes Washers (TSD) may also be 

obtained from: U.S. Department of 

Energy. Office of Codes and Standards, 

1000 Independence Avenue, SW, Rm 

lJ-018, Washington, D.C. 20585-0121, 

(202) 586-9127. . 

Public Information: The public may 

access the Freedom of Information 

Reading Room, located at the U.S. 

Department of Energy, Forrestal 

Building. 1000 Independence Avenue, 

SW, Room lE-190, Washington. D.C. 

20585 between the hours of 9:00 a.m. 

and 4:00 p.m .. Monday through Friday. 

(except Federal holidays). Call (202) 

586-6020 for information. 

For more information concerning 

public participation in this rulemaking 

proceeding, see section IV, "Public 

Comment Procedures," of this 

document. 

FOR FURTHER INFORMATION CONTACT: 

Bryan Berringer, U.S. Department of 

Energy. Office of Energy Efficiency and 

Renewable Energy. Forrestal Building. 

Mail Station EE-431, 1000 

Independence Avenue, SW, 

Washington. D.C. 20585-0121. (202) 

586-0371. E-mail: 

Bryan.Berringer@EE.DOE.GOV 

Eugene Margolis, Esq., U.S. Department 

of Energy, Office of General Counsel, 

Forrestal Building. Mail Station GC72. 1000 Independence Avenue, SW. 

Washington, D.C. 20585, (202) 586-

9507, E-mail: 

Eugene.Margolis@HQ.DOE.GOV 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

A. Authority 

B. Background 

I. History 

2. Test Procedure 

3. Process Improvement 

II. Clothes Washers Analyses 

A. Preliminary Market and Technology 

Assessment 

l. Market Assessment a. General 

b. Product Specific 

2. Technology Assessment 

a. General 

b. Product Specific 

3. Preliminary Base Case Shipments 

Forecast 

a. General 

b. Product Specific 

B. Screening Analysis 

I. Product Classes a. General 

b. Product Specific 

2. Baseline Unit a. General 

b. Product Specific 

3. Design Options/Efficiency Level a. General 

b. Product Specific 

4. Proprietary Designs a. General 

b. Product Specific 

C. Engineering Analysis 

l. Energy Savings Potential and 

Manufacturing Costs a. General 

b. Product Specific 

I. Manufacturing Cost-Reverse 

Engineering 

D. Life-Cycle-Cost (LCC) and Payback 

Analysis . I. Life-Cycle-Cost Spreadsheet a. General 

b. Product Specific 

i. LCC Analysis 

ii. Payback Analysis (Distribution of 

Paybacks} 

iii. Rebuttableffest Procedure Payback 

2. Preliminary Results a. General 

b. Product Specific 

E. Preliminary National Impact Analyses 

1. National Energy Savings (NES) 

Spreadsheet Model a. General 

b. Product Specific 

2. Preliminary Results a. General 

b. Product Specific 

3. Indirect Employment Impacts a. General 

b. Product Specific 

F. Consumer Ana!yses 

l. Purchase Price a. General 

b. Product Specific 

2. Consumer Participation a. General . b. Product Specific 

G. Manufacturer Analysis 

l. Industry Cash Flow a. General 

b. Product Specific 

2. Manufacturer Sub-Group Analysis a. General 

b. Product Specific 

3. Interview Process a. General 

b. Product Specific 

H. Competitive Impact Assessment · a. General 

b. Product Specific 

I. Utility Analysis 

l. Proposed Methodology a. General 

b. Product Specific 

i. Assumptions 

ii. Results 

). Environmental Analysis 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64345 

I. Proposed Methodology 

a. General 

b. Product Specific 

K. Regulatory Impact Analysis 

m. Proposed Standards Scenarios 

IV. Public Comment Procedures 

A. Participation in Rulemaking 

B. Written Comment Procedures 

C. Issues for Public Comment 

V. Review Under Executive Order 12866 

I. Introduction 

A. Authority 

Part B of Title ill of the Energy Policy 

and l;:onservation Act, Public Law 94-

163, as amended by the National Energy 

Conservation Policy Act, Public Law 

95-619, the National Appliance Energy 

Conservation Act of 1987, Public Law 

100-12, the National Appliance Energy 

Conservation Amendments of 1988, 

Public Law 100-357, and the Energy 

Policy Act. of 1992, Public Law 102-486 

(the Act or EPCA), created the Energy 

Conservation Program for Various 

Consumer Products other than 

Automobiles. 42 U.S.C. 6291-6309. 

The National Appliance Energy 

Conservation Act of 1987 amended the 

Act to impose prescriptive standards 

(design feature requirements) for clothes 

washers as part of the energy 

conservation program for consumer 

· products. EPCA, Section 325(g), 42 

U.S.C. 6295(g). The design feature 

requirement that clothes washers shall 

have an unheated rinse option was 

effective for appliances manufactured 

on or after January 1. 1988. The Act 

required the Department to conduct a 

rulemaking by January 1, 1990, to 

determine if the above mentioned 

standards should be amended. The Act 

provided that any amendment to the 

standards would apply to products 

manufactured three years after the 

rulemaking. The Final Rule was issued 

on May 14, 1991. and is effective for 

products manufactured on or after May 

14. 1994 (hereinafter referred to as the 

May 1991 Final Rule). 56 FR 22279. The 

Act also requires the Department to 

. conduct a subsequent rulemaking no 

later than five years after the date of 

publication of the previous final rule. 

Before the Department determines 

whether or not an energy conservation 

standard is economically justified, it 

must first solicit comments on the 

proposed standard. EPCA, Section 

325(p). 42 U.S.C. 6295(p). Any new or 

amended standard is required to be 

designed so as to achieve the maximum 

improvement in energy efficiency that is 

technologically feasible and 

economically justified. EPCA, Section 

325(o)(2). 42 U.S.C. 6295(0)(2). After 

reviewing comments on the proposal. 

the Department must then determine 

that the benefits of the standard exceed 

its burdens based to the greatest extent 

practicable, on a weighing of.the 

following seven factors: 

(1) The economic impact of the 

standard on the manufacturers and on 

the consumers of the products subject to 

such standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the covered product in the type (or -

class) compared to any increase in the 

price, initial charges, or maintenance 

expenses for the covered products that 

are likely to result directly from the 

imposition of the standard; 

(3) The total projected amount of 

energy. or as applicable, water, savings 

likely to result directly from the 

imposition of the standard; 

(4) Any lessening of the utility or the 

performance of the covered products 

likely to result from the imposition of 

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 imposition of the 

standard; · 

(6) The need for national energy and 

water conservation; and . 

(7) Other factors the Secretary 

considers relevant. 

B. Background 

l. History 

The Department initiated a clothes 

washer rulemaking to determine if the 

standards (design feature requirements) 

imposed by the Act should be amended. 

The Department published an Advance 

Notice of Proposed Rulemaking 

(ANOPR) (53 FR 17712, May 18, 1988). 

a Notice of Proposed Rulemaking 

(NOPR) (54 FR 32744, August 9, 1989). 

and the May 1991 Final Rule. The May 

1991 Final Rule mandated performancebased energy conservation standards for 

clothes washers. The standards 

specified a minimum energy factor (EF) 

for two of the five classes of clothes 

washers (top-loading standard and toploading compact). The energy 

conservation standards in the May 1991 

Final Rule are effective for products 

manufactured on or after May 14, 1994. 

In the May 1991 Final Rule, the 

Department announced that it was 

accelerating the second review of energy 

efficiency standards for clothes washers 

because it became aware. after the 

rulemaking was closed. of a design 

option (horizontal-axis (H-axis) wash 

tub in a top-loading washer) in use in 

Europe that was not included in the 

proposed rule and upon which no 

comment was received. The Department 

did not consider establishing a standard 

based on the top-loading H-axis design 

option because this information came to 

the attention of the Department after the 

close of the comment period on the 

proposed rule and thus was not subject 

to public debate. 

On September 28. 1990, the 

Department published an ANOPR for 

nine products which included the 

second review of energy efficiency 

standards for clothes washers. 55 FR 

39624. In response to that notice, a 

number of energy efficiency advocates 

and appliance manufacturers requested 

that the Department delay the second 

review until a 1995-1996 time frame. 

The additional time was requested in 

order to allow manufacturers time to 

meet the standards in the May 1991 

Final Rule which became effective on 

May 14. 1994, and to fully evaluate new, 

more energy efficient technologies such 

as top-loading H-axis clothes washers. 

This additional time, manufacturers 

contended, would enable them to 

provide more meaningful and relevant 

comments on the next, legislatively 

required, rulemaking. The Department 

considered the request, and by letter, 

dated February 26, 1992, notified the 

parties requesting the delay that the 

Department had determined that it 

would conduct the rulemaking on the 

later schedule, as requested. 

On November 14, 1994. the 

Department issued an ANOPR to begin 

the second review of energy efficiency 

standards for clothes washers. 

dishwashers and clothes dryers. In this 

ANOPR. the Department presented the 

product classes that the Department 

planned to analyze. the analytical 

framework and models that the 

Department expected to use in 

performing analyses, and issues on 

which the Department was· interested in 

gathering data. The Department received 

comments in response to this ANOPR 

and also collected data from the 

manufacturers which was compiled by 

.the Association of Home Appliance 

Manufacturers (AHAM) on May 8. 1995, 

and July 6. 1995. (AHAM, No. 27 and 

38.) 

2. Test Procedure 

Simultaneous with the rulemaking for 

clothes washer standards, the 

Department was also in the process of 

revising the clothes washer test 

procedure. The Department needed to 

address a number of innovative 

technologies for which there were no 

test procedures. A number of proposals 

were published, one on December 22, 

1993 (58 FR 67710). and another on 

March 23. 1995. 60 FR 15330. In its 

comments to the March. 1995 proposed 

rule. AHAM requested that DOE adopt 

~ 

• 
--------- -----

64346 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

an additional new test procedure. based 

on curr•ent consumer habits, which 

would be used in considering the 

revision of the clothes washer energy 

conservation standards. and would go 

into effect upon issuance of standards. 

On April 22. 1996, the Department 

issued a supplemental NOPR proposing 

such a new test procedure, Appendix JI, 

as well as certain additional revisions to 

the cun-ently applicable test procedure 

in Appendix J to Si.ibpart B of IO CFR 

Part 430. 6I FR I7589. The 

supplemental notice was published to 

seek comments on whether it should 

adopt the AHAM recommended test 

procedure with certain changes. The 

Final Rule, published on August 27, 

1997, adopted this recommendation. 62 

fR 45484. Appendix JI of the revised 

test procedure would go into effect upon 

issuance of standards. Appendix JI 

include.s a modified energy factor (MEF) 

which replaces the EF. Contrasting with 

the previous EF (Energy Factor) 

descriptor, the MEF descriptor 

incorporates clothes dryer energy by 

consideration of the remaining moisture 

content (RMC) of clothes leaving the 

clothes washer. Other substantive 

differences between the test procedures 

include using different water 

temperaitures for testing and using cloth 

loads in Jl and not in J. The issuance 

of the F:inal Rule was a major step in 

accelerating the development of clothes 

washer :standards because it provided 

the basis upon which the energy and 

water consumption, as well as the 

manufacturing costs would be 

submitted. 

3. Process Improvement 

During consideration of the fiscal year 

1996 ·appropriations. there was 

conside:rable debate about the efficacy of 

the standards program. The Department 

of the Interior and Related Agencies 

Appropriations Act for Fiscal Year 1996 

included a moratorium on proposing or 

issuing ,energy conservation appliance 

standards for the remainder of Fiscal 

Year 1996. See Pub. L. 104-134. 

Congress advised DOE to correct the 

standards-setting process and to bring 

together stakeholders (such as 

manufacturers and environmentalists) 

for assistance. In September I995, the 

Department announced a formal effort 

to consider further improvements to the 

process used to develop appliance 

efficiency standards, calling on energy 

efficiency groups, manufacturers, trade 

associations, state agencies, utilities and 

other interested parties to provide input 

to guide the Department. On July 15, 

I996, the Department published a Final 

Rule: Procedures for Consideration of 

New or Revised Energy Conservation 

Standards for Consumer Products 

(hereinafter referred to as the Process 

Rule). 61FR36974. 

The Process Rule outlines the 

procedural improvements identified by 

the interested parties. The process 

improvement effort included a review of 

the: (I) economic models, such as the 

Manufacturer Analysis Model and 

Residential Energy Model; (2) analytical 

tools, such as the use of a Monte Carlo 

sampling methodology; and (3) 

prioritization of future rules. The 

Process Rule includes the accounting for 

uncertainty and variability by doing 

scenario or probability analysis (as 

detailed in the Process Rule, 10 CFR 

430, Subpart C, Appendix A§§ I (t), 

4(d)(2), and lO(t)(l)). In addition, an 

Advisory Committee on Appliance 

Energy Efficiency Standards, consisting 

of a representative group of these 

interested parties, was established to 

make recommendations to the Secretary 

regarding the implementation of the 

Process Rule. 

The clothes washer standards 

rulemaking is the first rule to be 

developed under the Process Rule. 

Although there were two previous 

ANOPRs, the Department made a 

commitment to use the Process Rule to 

the extent possible in the development 

of the new clothes washer standards. In 

this supplemental ANOPR. the 

Department is presenting the framework 

by which it will develop the standards. 

The framework reflects improvements 

and steps detailed in the Process Rule. 

The rulemaking process is dynamic. If 

timely new data. models or tools that 

enhance the development of standards 

become available, they will be 

incorporated into the rulemaking. For 

example the Advisory Committee has 

made several recommendations and the 

Department has proposed responses 

which are discussed in this 

supplemental ANOPR. 

On November 15, 1996, the 

Department held a workshop to discuss 

proposed design options and a 

preliminary engineering analysis for 

clothes washers. Two reports were 

presented: "Draft Report on the 

Preliminary Engineering Analysis for 

Clothes Washers" and "Draft Report on 

Design Options for Clothes Wasner" 

(Clothes Washer Public Workshop, No. 

55 B and C). A number of concerns were 

raised relating to the application of the 

Process Rule to the clothes washer 

rulemaking. including the need for a 

review of the manufacturing impact 

analysis model and methodologies, and 

a review of non-regulatory approaches 

(Thiele. No. 55L, at 80), whether the 

manufacturing cost data collected 

needed to be updated (Topping. No. 

55L, at 52), and whether the Department 

ought to continue relying on the old 

methods of doing the analysis. (Perlis. 

No. 55L at 167.) 

Responding to comments from the 

November 1996 workshop concerning 

the application of the Proces!! Rule to 

the clothes washer rulemaking. the 

Department developed an analytical 

framework for appliance standards 

rulemaking. It was presented during a 

clothes washer workshop held on July 

23, 1997. The analytical framework 

describes the different analyses (e.g .. the 

LCC. payback and national impact 

analyses) to be conducted (See Table 1). 

the method for conducting them, e.g .. 

the use of a new LCC and NES 

spreadsheet and the relationship 

between the various analyses. The 

framework will be tailored to each 

rulemaking. Therefore. the same 

procedures will not necessarily be 

followed in all of the rulemakings. For 

example, although manufacturing cost 

data needs to be collected for each 

rulemaking. the method for collecting 

the data can be customized to the 

specific product. 

TABLE 1.-CLOTHES WASHER ANALYSES UNDER PROCESS RULE. 

ANOPR 

Screenin!~ Analysis ......................................... .. 

Engineering Analysis ....................................... . 

Life-Cyclo-Cost Analysis .................................. . Preliminary National Impacts Analysis ............ . 

NOPR 

Revised Pre·ANOPR Analyses (LCC and National Impacts Analyses) 

Consumer Sub-group Analysis. 

Industry Cash-flow Analysis (GRIM). 

Manufacturer Impact Analysis. 

Utility Impact Analysis. 

Final rule 

Revise Analyses (LCC and National Impacts Analyses). 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64347 

TABLE 1.-CLOTHES WASHER ANALYSES UNDER PROCESS RULE-Continued 

ANO PR 

The Department is in the process of 

developing two new spreadsheet tools 

in an effort to meet the objectives of the 

Process Rule. The first spreadsheet 

calculates LCC. and payback. The 

second one calculates national energy 

savings (NES). Both tools will be 

tailored for specific products. These 

spreadsheets and the results of the 

preliminary·analysis were discussed at 

a clothes washer workshop held on March 1 I. I 998. . 

The Department has reviewed the 

recommendations made by the Advisory 

Committee on Appliance Energy 

Efficiency Standards on April 21. 1998. 

(Advisory Committee, No. 96). These 

recommendations relate to using the full 

range of consumer marginal energy rates 

(CMER) in the LCC analysis (replacing 

the use of national average energy 

prices), defining a range of energy price 

futures for each fuel used in the 

economic analyses and defining a range 

of primary energy conversion factors 

and associated emission reductions. 

based on the generation displaced by 

energy efficiency standards for each 

rulemaking. The Department plans to 

incorporate the recommendations, when 

appropriate, into the various rulemaking 

analyses. 

Today's supplemental ANOPR 

pertains to clothes washers and utilizes 

the framework described in Section II. 

Although the November, 1994 ANOPR 

included clothes dryers and 

dishwashers, clothes wa!!hers are 

considered a high priority product and 

have been separated out to accelerate 

the rulemaking. Comments previously 

received for the September 28, 1990, 

ANOPR and the November 1994 

ANOPR relative to clothes washers are 

being addressed in this document, 

where applicable. 

II. Clothes Washers Analyses 

This section includes a general 

introduction to each analysis section 

and provides a discussion of issues 

relative to the clothes washer rule. 

A. Preliminary Market and Technology 

Assessment 

The preliminary market and 

technology assessment characterizes the 

relevant product markets and existing 

technology options including prototype 

designs. 

NOPR 

Environmental Analysis. 

1. Market Assessment 

a. General. When initiating a 

standards rulemaking, the Department 

develops information on the .present and 

past industry structure and market 

ch~racteristics of the product(s) 

concerned. This activity consists of both 

quantitative and qualitative efforts to 

assess the industry and products based 

on publicly available information. 

Issues to be addressed include: (1) 

manufacturer market share and 

characteristics; (2) trends in the number 

of firms; (3) the financial situation of 

manufacturers; (4) existing nonregulatory efficiency improvement 

initiatives; and (S) trends in product 

characteristics and retail markets. The 

information collected serves as resource 

material to be used throughout the 

rulemaking. 

b. Product Specific. The Department 

reviewed existing literature and data 

sources to get an overall picture of the 

clothes washer market in the United 

States. Information was compiled 

primarily from industry publications 

(trade journals), government agencies, 

trade organizations (AHAM) and 

research reports. The Department 

gathered the following information: (1) 

manufacturer market share; (2) 

historical shipments; (3) washer sales by 

outlet type; (4) top retailers; (5) price 

distribution; (6) market saturation; (7) 

voluntary programs; (8) fuel distribution 

of water heaters; and (9) gas and electric 

sales of dryers (brand names). 

Information relating to consumer impact 

and voluntary programs also was 

obtained. The information described is 

discussed in the sections where it is 

used in the analysis. The Preliminary 

TSD provides additional information. 

2. Technology Assessment 

a. General. Information relative to 

existing technology options and 

prototype designs are used as inputs to 

the screening analysis. In consultation 

with interested parties, the Department 

develops a list of design options for 

consideration. All technologically 

feasible design options are candidates in 

this initial assessment. 

b. Product Specific. This clothes 

washer rulemaking analysis was 

originally performed using the design 

option approach. In this approach, 

information is gathered on all possible 

Final rule 

energy saving design options. The 

Department gathered design option 

information from previous clothes 

washer analyses, trade publications, 

industry research organizations, product 

brochures from domestic and foreign 

manufacturers, and appliance 

conferences, including the International 

Appliance Technical Conference 

(IATC). Fea5ures such as high spin 

speed (allowing for lower remaining 

moisture content) and automatic fill 

control became important due to 

changes in the clothes washer test 

procedure. AHAM provided additional 

information on the energy savings 

potential and viability of these designs. 

The "Draft Report on Design Options for 

Clothes Washers" and "Draft Report on 

the Preliminary Engineering Analysis 

for Clothes Washers" provide details on 

the potential technologies. (Clothes 

Washer Public Workshop. No. 55B and 

SSC). 

The technology assessment began 

with a study of the efficiencies of 

washers currently on the market. To 

gain greater insight and to begin creating 

an efficiency distribution of current 

product offerings, the Department used 

both Appendix J and JI test procedures 

on nine different clothes washers; seven 

vertical-axis (V-axis) models and two Haxis mod.els. Products from all five 

major American manufacturers were 

included. The complete results are 

given in the Preliminary TSD. The 

testing program results show a large 

·variation in MEF values are possible for 

clothes washers with nearly identical EF 

ratings. The Federal Trade Commission 

(FTC) and manufacturers (through 

AHAM) also provided energy efficiency 

labeling information. Further 

descriptions of the most current data are 

provided in the engineering section of 

the Preliminary TSD. 

3. Preliminary Base Case Shipments 

Forecast 

a. General. The Department develops 

a base case forecast of product 

shipments in the absence of new 

standards. This forecast requires an 

assessment of the impacts of past and 

existing non-regulatory efforts by 

manufacturers, utilities and other 

interested parties. DOE considers 

information on the actual impacts of 

such initiatives to date, and also 
64348 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules ~~~~~~~~~~~~~~~~~~~~~~~~~~~ 

considers information presented 

regarding the possible impacts that any 

existing initiatives might have in the · future. Such information could include 

a demonstration of the steps 

manufacturers, distribution channels, 

utilities or others will take to realize 

such voluntary efficiency 

improvements. 

The base case shipments forecast is 

used as input to the national impacts 

analysis, in which a forecast of annual 

shipments and their weighted average 

energy efficiency is needed to the year 

2030. 

b. Product Specific. In order to 

develop its base case forecast for clothes 

washer sales the Department reviewed: 

(1) Federal procurement guidelines: (2) 

voluntary programs (i.e .. utility and 

consortium educational materials and/ 

or rebates); (3) government and industry 

demonstration and information 

programs (e.g .. Energy Star Program); 

and (4) documented discussions with 

organizations and individuals. Clothes 

washer sales will be forecasted by 

efficiency level for the time period of 

2003 to 2030. This forecast will be more 

difficult for the clothes washer 

rulemaking, because the efficiency 

factor (EF) was changed to the modified 

energy factor (MEF). The Department . 

has limited information concerning the 

energy performance of existing product 

offerings using the MEF descript9r. 

Given the vastly different nature of the 

variables and testing methods of the 

current J and future J1 test procedures, 

the EF values cannot be translated to 

MEF values. In addition. the analysis 

revealed a rapidly evolving market 

response to the introduction of new Haxis model clothes washers. In 1997. the 

WashWise consortium interviewed 

manufacturers and asked them to 

estimate the market share of H-axis 

washers in five years. Wash Wise is a 

public/private partnership between 

Pacific Northwest electric, gas, water 

and wastewater utilities, appliance 

manufacturers and local retailers. Their 

goal is to reduce the use of energy and 

water by encouraging consumers in 

Washington, Oregon, Idaho and western 

Montana to purchase resource-efficient 

washers. The results showed a large 

divergence of estimates ranging from a 

low of 5 percent to a high of 25 percent 

(Coming Clean About Resource-Efficient 

Clothes Washers: An Initial Wash Wise 

Program and Market Progress ReportFinal Report, No. E98-003, January 28, 

1998). (March 11, 1998 Workshop 

Material, No. 82 00). 

For the purpose of the base case 

forecast in the preliminary national 

impacts· analysis, the effect of voluntary 

programs has been expressed as the 

percent of new clothes washers sold 

each year that will have efficiencies 

corresponding to those of H-axis 

washers. The H-axis washer is 

characterized using the data submitted 

by AHAM for a 35 percent energy 

reduction from the baseline MEF. The 

spreadsheet uses disaggregated values 

(i.e .. water heater energy. dryer energy 

and mechanical energy) provided by 

AHAM. Disaggregated values provided 

by AHAM for the baseline washer are 

also used for the base case forecast. 

Calculations based on disaggregated 

values reflect the efficiencies of 

machines actually being sold which 

may differ from the minimum required . 

efficiency. The preliminary base case 

assumes a 1.5 percent share of H-axis 

machines in 1995 with a 0.5 percent 

increase in H-axis sales every year 

thereafter, until 2030 (i.e .. 19 percent). 

The NES spreadsheet allows for 

changes in the distribution of 

efficiencies of clothes washers due to 

non-regulatory programs. The user 

specifies the percent of new clothes 

washer sales that will achieve the 

selected energy reduction (relative to 

the baseline washer design) in future 

years. In later analyses (i.e .. the NOPR) 

the Department expects to use a 

distribution of current and forecasted 

efficiencies based on the best available 

information. Information is still being 

gathered for this task. The Department 

seeks comment on this forecast and 

welcomes any available information on 

current product efficiencies. 

B. Screening Analysis 

The screening analysis reviews 

various technologies with regard to 

whether they: (a) are impracticable to 

manufacture, install and service; (b) 

haye an adverse impact on product 

utility or product availability; and (c) 

have adverse impacts on health and 

safety. The screening analysis 

establishes product classes, baseline 

units, and efficiency levels (or 

. combinations of design options) for 

further analysis. 

1. Product Classes 

a. General. Product types are divided 

into classes using the following criteria: 

(a) the type of energy used: (b) capacity; 

and (c) performance-related features that 

affect consumer utility or efficiency. 

Different energy efficiency standards 

will apply to different product classes. 

In general, classes are defined using 

information obtained in discussions 

with appliance manufacturers, trade 

associations. and other interested 

parties. 

b. Product Specific. The Department's 

three proposals regarding clothes 

washer product classes and a discussion 

of related comments follow: 

• Eliminate the Semi-Automatic TopLoading. Front-Loading and Suds 

Saving classes identified in the May 

1991 Final Rule. The Department is 

proposing to eliminate certain 

previously defined classifications 

(Semi-Automatic Top-Loading, FrontLoading and Suds Saving) because they 

do not offer any added utility which is 

inherently less energy efficient and 

therefore would require protection from 

the energy conservation standards. 

EPCA. §325(o)(2)(B)(I)(IV), 42 U.S.C. 

6295 (o)(2)(B) (I) (IV). In the May 1991 

Final Rule, these classes were not 

subject to minimum energy 

conservation standards because they 

represented a small portion of the 

market, and due to a lack of adequate 

information to analyze them. However, 

the 1988 standard requiring an unheated 

rinse option is still applicable to these 

classes. The Department has further 

reviewed this topic and believes that 

these products should be subject to the 

minimum energy conservation 

standards applicable to either compact 

. or standard clothes washers. 

• Divide all products into a Compact 

(less than 2.0 ft.3 capacity) Class and a 

Standard (2.0 ft.3 or greater capacity) 

Class. In its written comments, 

Whirlpool asked the Department to 

maintain the current efficiency 

requirement for the compact class due 

to the limited potential for energyefficient improvements and the small 

market share for these products. 

Whirlpool also indicated that the V-axis 

compact clothes washer market and the 

manufacturing base for these products 

has changed since the current standards 

were developed. The previous standalone 1.6 ft.3 compact V-axis clothes 

washer products have been replaced by 

a product that maintains the small 

cabinet (22" width) utility and 

portability (via castors); however, its 

.basket capacity is slightly larger. 

Because of the limited market size, 

Whirlpool is currently the only 

American manufacturer of these 

products. They also supply them to 

other appliance companies for sale 

under various brand names. For these 

reasons, the Department will revise the 

compact V-axis product class definition 

(1.6 ft.3 capacity) to include all V-axis 

clothes washers less than 2.0 ft.3 

(Whirlpool. No. 69 at 3). The 

Department plans to increase the 

compact class to include all clothes 

washers (both V- and H-axis machines) 

less than 2.0 ft.3 and seeks comments on 

this change. 

• Classify H- and V-Axis clothes 

washers as compact or s.tandard rather 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64349 ~ 

than establish a separate class for these 

products. Based on current information, 

the Department believes that there is no 

basis for separate classes for H- and Vaxis clothes washers. Recent and nearterm product offerings. and working 

prototypes of horizontal and vertical 

axis clothes washers demonstrate large 

energy savings while maintaining 

important product features. The 

Department received comments 

suggesting that it identify V- and H-axis 

machines as a single product class. 

Whirlpool stated that the DOE's 

analyses to date and the recent 

consumer acceptance in the market of 

H-axis products confirm the validity of 

a single product class, irrespective of 

the axis. Whirlpool further stated that 

the concerns over clothes washer 

performance, consumer utility and 

reliability are unfounded in either 

principal or fact. (Whirlpool, No. 93 at 

1.) The Natural Resources Defense 

Council (NRDC) stated that the "H-axis" 

design option does not affect the utility 

of clothes washers and it is not the only 

design option that can comply with the 

standards. According to the NRDC, the 

evidence does not support the 

establishment of different standards 

even if separate classes were 

established. (NRDC. No. 60 at 1.) 

However, other commenters feel that 

the Department should not reject 

separate product classes. General 

Electric Appliances (GEA) indicated 

that the Department is proceeding as if 

all relevant consumer utilities are met 

by H-axis products already on the 

market or by machines planned for 

production. GEA further stated that the 

port of access is not the only relevant 

consumer utility that must be 

addressed. Many other consumer 

utilities, including reliability. must be 

addressed. (GEA. No. 88 at 2.) The 

Department seeks additional comments 

on this issue and is currently working 

with stakeholders to formulate a process 

to gather additional consumer input on 

the issues surrounding clothes washer 

utility. This process is discussed further 

in Section 11.F.2.b. 

2. Baseline Units 

a. General. In order to analyze design 

options for energy efficiency 

improvements. the Department defines a 

baseline unit. For each product class, 

the assumed baseline unit is a unit that 

minimally exceeds the existing 

standard. To determine the 

characteristics of the baseline unit in 

this screening analysis, the Department 

gathered information from trade 

organizations, manufacturers, and 

consultants with expertise in specific 

product types. 

b. Product Specific. The Department 

issue.d two new test procedures during 

the course of this rulemaking: 

Appendices "J" and "Jl." 62 FR 45484. 

(See Section I.B.2. on Test Procedure.) 

The engineering analysis for this 

supplemental ANOPR is based on the 

Appendix Jl test procedure. This test 

procedure calculates a MEF descriptor. 

Unlike its EF predecessor, the MEF uses 

remaining moisture content (RMC) to 

account for energy saved due to lower 

drying times and temperature use 

factors (TUFs). Using cloth loads and 

different water temperatures are among 

the many other substantive differences 

between the J and J 1 test procedures. 

Given these different testing methods 

and variables, there is no computational 

relationship between the EF and MEF 

descriptors. 

In order to determine the MEF value 

for the baseline unit, clothes washer 

manufacturers were asked to take a 

representative clothes washer with an 

EF as close as possible to 1.18 (current 

minimum EF) and perform the new JI 

procedure. If no clothes washer was 

available with an EF value close to 1.18, 

they were asked to adjust the water 

volume, machine energy. and/or hot 

water volume to obtain an EF of 1.18. 

Five manufacturers (Amana, Frigidaire, 

GEA, Maytag and Whirlpool) submitted 

data to AHAM. AHAM mathematically 

averaged these values to derive an 

industry average MEF value of 0.817 for 

the baseline unit (based on an EF=l.18). 

3. Design Options/Efficiency Levels 

a. General. Following the 

development of an initial list of design 

options during the technology 

assessment and the screening analysis, 

the Department, in consultation with 

interested parties, will select 

appropriate efficiency levels (or 

combinations of design options) for 

manufacturing cost and energy use data 

collection. 

b. Product Specific. This clothes 

washer rulemaking analysis was 

originally performed using the design 

option approach. The November 1994 

ANOPR included a list of design options 

that could be oonsidered in determining 

the potential energy savings from new 

clothes washers standards. Data on the 

cost and energy consumption of these 

design options were obtained from U.S. 

clothes washer manufacturers through 

AHAM on May 8. 1995 (AHAM. No. 27). 

At the July 13, 1995, Workshop. DOE · 

presented a detailed design option 

analysis that also ranked the cost 

effectiveness of each option under 

consideration. On July 6, 1995, AHAM 

provided additional design option 

information and comments about the 

way the information should be 

interpreted. (AHAM, No. 38.) 

A report using the updated design 

option information was presented 

during a screening workshop held on 

November 15, 1996. The report entitled. 

"Draft Report on Design Options for 

Clothes Washers," used criteria laid out 

in the Process Rule to screen out design· 

options and preclude them from further 

analysis. After the workshop. AHAM · 

commented that the manufacturers did 

not believe that disclosure of the design 

options used to achieve a given 

efficiency level was practical. had value 

or could be released without disclosure 

of proprietary information. (AHAM. No. 

67 at 1,2.) Since the technical approach 

to achieve any particular efficiency level 

above the baseline likely involves 

multiple design options speci.fic to each 

company, AHAM stated that its 

members believed that supplying cost 

and energy use data for several energy 

levels was sufficient. Several efficiency 

levels were selected which 

corresponded approximately to the 

efficiency levels calculated using the 

design-option approach. These 

efficiency levels were discussed at the 

March I I. 1998, workshop. 

It was agreed that the efficiency level 

approach would be used. Levels were 

established and utilized in the 

engineering analysis (See Section 

II.c.1.b). 

4. Proprietary Designs 

a. General. In its analysis. the 

Department considers all design options 

that are commercially available or 

present in a working prototype. 

including proprietary designs. 

Proprietary designs are fully considered 

in the Department's engineering and 

economic analyses. 

b. Product Specific. At the November 

15, 1996, workshop, it was 

acknowledged that Whirlpool had four 

patented proprietary prototype designs 

that used V- and H-axis platforms. 

Whirlpool indicated that these were 

working prototypes. (Whirlpool. No. 

55L at 77.) On November 29, 1996. the 

Department sent a letter to the · 

stakeholders with the patent numbers 

. for the Whirlpool designs as requested 

during the November workshop. (DOE. 

No. 57.) 

In response to a Department request to 

obtain more information. AHAM stated 

that .it was inappropriate for its 

members to comment on the cost/ 

efficiencies of the Whirlpool designs. 

AHAM asked that prior to seeking cost/ 

efficiency information on these designs. 

DOE should verify that these clothes . 

washer designs were viable, were able to 

perform their intended function and had 
64350 Federal Register I Vol. 63, No. 223 I Thursday, November 19, 1998/ Proposed Rules 

usage patterns and lifetimes similar to 

existing clothes washers. (AHAM No. 67 

at 2.) At the July 1997 workshop. GEA 

expressed concern that the Department 

had not verified that the Whirlpool 

designs met consumer utility 

performance requirements. (GEA. No. 

72L at :~10.) 

In response to these concerns, the 

Department witnessed efficiency testing 

of the prototype design conducted 

accordi.ng to the revised DOE clothes 

washer test procedure. The results of the 

testing demonstrated that the prototype 

could reach efficiency levels 

comparable to H-axis efficiency levels. 

The Department also witnessed other 

performance tests on the Whirlpool 

design. Tests performed include: (1) 

cleanliness testing. using several 

different stains; (2) gentleness of action 

testing: and (3) and rinsability. The test 

results were benchmarked by 

conducting identical tests on two other 

clothes washers: A top selling V-axis 

model .:ind a top selling H-axis model. 

The tests were conducted twice for each 

machine using a seven pound test load. 

The American Standards Testing 

Material ASTM-D4265 standard was 

used for evaluating stain and soil 

removal. Nine different types of stained 

swatches were evaluated, six samples of 

each stain. The cloth used was specified 

in the AHAM test methods in addition 

to various other cloths. The gentleness 

testing was conducted using a material 

with a five hole pattern cut into the 

swatches and was evaluated based on 

the number of strands present after 

washing. The rinsability was 

determined by placing the washed 

cloths :into a high speed exacter and 

analyzi.ng the residual detergent in the 

water E'xacted. In all cases, the 

performance of the Whirlpool design · 

fell within the range of results obtained 

for the. other clothes washers tested. 

The Department will consider the 

Whirlpool prototype design in this 

rulemaking in the engineering and 

economic analyses. However, since the 

manufacturing costs estimates for the 

prototype are derived using a different 

approach than for other efficiency levels 

cost estimates. the economic analysis 

will be conducted separately. Further 

discussion on the costing of the 

Whirlpool prototype can be found in 

Section Il.C. l .b.i. 

C. Eng.fneering Analysis 

The ,engineering analysis first 

determines the maximum 

technologically feasible energy 

efficiency level and then develops costefficiency relationships to show the 

manufacturer costs of achieving 

increased efficiency. 

1. Energy Savings Potential and 

Manufacturing Costs 

a. General. The engineering analysis 

estimates the energy savings potential of 

the individual or combinations of 

design options not eliminated in the 

previous screening analysis. The 

Department, in consultation with 

stakeholders, uses the most appropriate 

means available to determine energy 

consumption, including an overall 

system approach or engineering 

modeling. Ranges and uncertainties in 

performance are established. The energy 

savings measures developed in the 

engineering analysis are combined with 

end-user costs in the LCC analysis. 

The engineering analysis involves 

adding individual or combinations of 

design options to the baseline unit. A 

cost-efficiency relationship is developed 

to show the manufacturer cost of 

achieving increased efficiency. The 

efficiency levels corresponding to 

various design option combinations are 

determined from manufacturer data 

submittals and from DOE engineering 

calculations. 

The Act requires that. in considering 

any new or amended standards, the 

Department must consider those that 

"shall be designed to achieve the 

maximum improvement in energy 

efficiency that the Secretary determines 

is technologically feasible and 

economically justified." EPCA. 

§ 325(1)(2)(A). 42 U .S.C. 6295(1)(2)(A). 

Therefore an essential role of the 

engineering analysis consists of 

identifying the maximum 

technologically feasible level. The 

maximum technologically feasible level 

is one that can be reached by the 

addition of efficiency improveme_nts 

and/or design options, both 

commercially feasible and in 

prototypes. to the baseline units. The 

Department believes that the design 

options comprising the maximum 

technologically feasible level must have 

been physically demonstrated in at least 

a prototype form to be considered 

technologically feasible. 

Three methodologies can be used to 

generate the manufacturing costs 

needed for the engineering analysis. 

These methods include: (I) The designoption approach. reporting the 

incremental costs of adding design 

options to a baseline model; (2) the 

efficiency-level approach, reporting 

relative costs of achieving energy 

efficiency improvements; and/or (3) the 

cost-assessment approach which 

requires a "bottoms-up" manufacturing 

cost assessment based on a detailed bill 

of materials. The Department considers 

public comments in determining the 

best approach for a rulemaking. If the efficiency-level approach is 

used, the Department will select 

appropriate efficiency levels for data 

collection on the basis of: (I) Energy 

savings potential identified from 

engineering models; (2) observation of 

existing products on the market; and/or 

(3) information obtained for the 

technology assessment. Stakeholders 

will be consulted on the efficiency level 

selection. 

The use of a design-option approach 

provides useful information such as the 

identification of potential technological 

paths manufacturers could use to 

achieve increased product energy 

efficiency. It also allows the use of 

engineering models to simulate the 

energy consumption of different design . 

configurations under various user 

profiles and applications. However, the 

Department recognizes that the 

manufacturer cost information derived 

in the design-option approach does not 

reflect the variability in design strategies 

and cost structures that can exist 

between manufacturers. Therefore, the 

Department may derive additional 

manufacturing cost estimates from other 

approaches developed in consultation 

with interested parties. 

The cost-assessment approach can be 

used to supplement the efficiency-level 

or design option approaches under 

special circumstances when data is not 

publicly available because of 

proprietary reasons, the product is a 

prototype and/or the data is not 

provided by the manufacturers. 

b. Product Specific. At the workshop 

held on November 15. 1996, a report 

entitled, "Draft Report on the 

Preliminary Engineering Analysis for 

Clothes Washers," was presented. This 

report analyzed the engineering.data 

submitted by AHAM concerning the 

manufacturing cost and energy savings 

potential for different design strategies 

that combined design options. 

Stakeholders and peer reviewers at the 

workshop provided guidance on how 

the engineering analysis could be 

improved. Some manufacturers 

requested that the Department accept 

new data in replacement of the data 

originally supplied. (AHAM, No. 6 at 1: 

Whirlpool. No. 65 at 2.) New cost and 

performance data was available owing 

to recent experience in manufacturing 

efficient designs. It was noted that the 

existing data did not, as the process rule 

describes, consider uncertainty and 

variability in manufacturing costs. 

(Perlis, No. 55L at 161-5.) Additionally. 

peer reviewers commented that cost 

effectiveness is manufacturer specific 

and suggested that the Department 
------------·· ----

Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64351 ~~ 

consider soliciting from manufacturers 

cost-efficiency curves that leave them 

· free to select optimal design strategies. 

(Topping, No. SSH at 6.) (Gordon, No. 

SSI at !:i.) 

Following the workshop, the 

Department received a comment from a 

manufacturer which recommended that 

further engineering analyses for the 

rulemaking be focused on energy 

efficiency (MEF) levels and not o·n 

design options. Whirlpool also stated 

that cost-efficiency curves should be 

developed for the industry. (Whirlpool, 

No. 6S, at S). Whirlpool remarked that 

a cost-efficiency approach, which shows 

manufacturer costs for increased 

efficiency, is the most suitable because 

it provi.des a high degree of design 

confidentiality. It recommended that 

this me:thod be used in the engineering 

analysis, and that the Department 

should abandon the practice of adding 

design options or combinations of 

optiom• to the baseline clothes washer. 

(Whirlpool, No. 69 at 3). Whirlpool 

recommended that the data base for the 

engineering analysis be updated where 

large variabilities and/or uncertainties 

existed. They noted that the market has 

continued to evolve as many new 

products had been introduced since the 

development of the current database. 

(Whirlpool, No. 92 at 3). 

Responding to DOE's request for 

comments on an approach to gathering 

data for the engineering analysis; 

AHAM stated that its members believed 

that supplying cost and energy use data 

for several energy levels was sufficient. 

These levels would include baseline 

and efficiencies of S, 10, lS, 20, 3S, 40, 

4S and SO percent above baseline. The 

efficiencies of S, 10, lS and 20 percent 

would apply to a Y-axis clothes washer 

and, th':! efficiencies of 3S, 40, 4S, and 

SO percent would apply to a H-axis 

clothes washer. (AHAM, No. 67 at I). 

These efficiency levels were selected to 

correspond approximately to the 

efficiency levels calculated using the 

design-option approach. The 

Department and the manufacturers later 

agreed to include data for Y-axis clothes 

washers 2S percent above the baseline 

to adju:;t for a revision to the baseline 

MEF from .88 to .817. A complete 

description of the data collection 

methodology including a discussion of 

unceria.inty and variability in 

manufacturing costs, as well as the 

guidelines used to calculate 

manufacturing costs is included in the 

Preliminary TSD. 

ACEEE raised concerns relative to the 

manufacturer cost data provided by 

AHAM. ACEEE stated that. in general, 

the ave:rage incremental retail costs for 

high-efficiency washers (3S percent 

improvement and up) seemed a bit too 

high based on discussions· that it had 

with a variety of manufacturers and 

clothes washer technical experts. More 

specifically, ACEEE expressed concerns 

that these data show a substantial price 

jump between the 40 percent and 4S 

percent improvement cases. ACEEE 

believes that the 4S percent 

improvement level can be met with 

standard H-axis machines with very 

small incremental costs relative to the 

40 percent improvement H-axis 

machines. It recommends that DOE 

collect additional data on 40 percent 

and 4S percent improvement machines. 

including reverse engineering and 

revising the previous measure-based 

engineering analysis. (ACEEE, No. 94 at . 1). . 

The Department notes that the costs 

reported by AHAM at efficiency levels 

40 percent and 4S percent are a 

representation of industry cost 

submitals for these levels. Also, given 

the changes in the test procedure, 

previous data from the design option 

engineering analysis cannot be used 

without causing significant concerns 

about accuracy and relevance. The 

results of the cost assessment 

summarized in Section II.C. l .b.i. will 

however provide a secondary source of 

manufacturing costs for several 

efficiency levels. 

At the March 11, 1998, workshop, the 

Department requested cost and 

consumption data for Y-axis clothes 

washers at efficiencies of 30, 3S, and 40 

percent above the baseline. The 

Department decided to make this 

request after receiving the results of a 

third-party independent testing that was 

conducted on top selling clothes washe·r 

models manufactured and sold in the 

U.S. This testing was held in order to 

determine if there was a correlation 

between the EF and the MEF descriptors 

defined in the test procedure (Appendix 

J and JI) Final Rule for clothes washers. 

62 FR 4S484. Since the test procedure 

was recently finalized, there was no 

information available on the MEF values 

for clothes washers currently on the 

market. This information is needed to 

determine a distribution of shipments. 

The preliminary test results indicated 

that there were at least two currently 

available Y-axis models on the market 

that could reach efficiency levels near a 

30 percent improvement level. 

AHAM responded to this request for 

additional information on April 3 and 8. 

1998. AHAM commented that the 

testing performed for DOE reflects an 

incorrect assessment of energy 

efficiency on current models and 

indicated that manufacturers could not 

achieve these levels with traditional Yaxis clothes washers. (AHAM. No. 84 

and 86). Based on follow-up testing 

conducted for DOE, there appears to be 

a significant variation in the RMC 

values obtained in tests even for clothes 

washers of the same model. DOE plans 

to further review this issue. Since the 

two models approaching a 30 percent 

improvement in efficiency were "super 

capacity" models, the Department will 

try to determine if capacity or volume 

effects the maximum achievable 

efficiency improvement in Y-axis 

designs. The Department seeks 

comment on this issue. 

i. Manufacturing Cost-Reverse 

Engineering. At the November 1996 

workshop, it was acknowledged that 

Whirlpool had four patented 

proprietary, working prototype designs 

which included both vertical and 

horizontal axis platforms. (Whirlpool, 

No. SSL at 77). During the workshop, 

Whirlpool asked that the designs be 

included in tlie rulemaking analysis. It 

also indicated that it would be 

appropriate to conduct an independent 

study to estimate the manufacturing 

costs of the new designs. (Whirlpool. 

No. SSL at 169). Whirlpool did not see 

the practicality of each manufacturer 

estimating the cost of the Whirlpool 

designs. Estimates by other 

manufacturers would only be based on 

patent information. Therefore it could 

not be expected to produce consistency 

in approach or a high degree of 

accuracy. (Whirlpool. No. 69 at 4). 

Maytag commented that the 

Whirlpool designs needed to be 

subjected to a full and complete 

engineering and cost analysis by DOE. 

Maytag requested that all manufacturers 

be given the opportunity to participate 

in this process since the cost of applying 

these designs to a manufacturer's own 

basic washer design varies greatly from 

manufacturer to manufacturer. (Maytag. 

No. 64 at I). GEA also stated that the 

analysis needed to be expanded to cover 

the designs disclosed by Whirlpool. It 

further stated that only a revised 

method focusing on the technical knowhow, manufacturing capabilities and 

economic strengths of individual 

manufacturers would permit the proper 

evaluation of the impacts on "atypical 

manufacturers." (GEA. No. 63 at 7). 

In response the Department 

conducted a "tear-down" manufacturing 

cost assessment of one of the Y-axis 

Whirlpool prototypes. The main 

objective of the manufacturing cost 

assessment is to quantify the differential 

manufacturing costs of producing high 

efficiency clothes washers based on (l) 

the Whirlpool proprietary Y-axis design. 

and (2) commercially available Y- and 
64352 Federal Register/Vol. 63, No. 223/Thursday, November 19. 1998/Proposed Rules 

H-axis designs. The overall project 

consis~; of two phases: 

Phase I provides detailed cost 

estimates for two state-of-art, high 

volume, V-axis washers as a baseline for 

further analysis. The major objective of 

this phase is to obtain stakeholder 

comme111t on the costing methodology 

and baseline costs. Preliminary results 

of Phase I were presented during the 

March 1998 workshop. The Phase I 

methodology and final results are 

presented in the Preliminary TSD. 

Phase II will develop a differential 

cost estimate for the proprietary V-axis 

design and for two commerciallyavailablle H-axis clothes washers, 

relative to the baseline clothes washers 

evaluated in Phase I. This phase is 

current1y in progress. Preliminary 

results will be made available for public 

review prior to publishing the NOPR. 

Raytheon Appliances (now Alliance 

Laundry Systems LLC) had questions · 

regardi111g a number of assumptions in 

the reverse engineering analysis. These 

assumptions concerned work shifts per 

day. equipment depreciation life, 

capacity utilization and production 

volume. After considering Raytheon's 

comments, the Department modified 

some of the assumptions used in the 

manufacturing cost assessment 

approach. 

As suggested by Raytheon, the 

assumption of 2.5 shifts per day was 

reduced to 2.0 shifts per day. The 

Department agrees that 2.5 shifts per 

day is high based on additional visits to 

several clothes washer manufacturing 

plants and further discussions with 

manufacturing staff in the industry. 

Originally. 2.5 shifts per day was chosen 

based on an average of 2 shifts per day 

for asSE!mbly operations and 3.0 shifts 

per day for fabrication processes 

(pressing, machining, injection molding, 

etc.). The baseline manufacturing cost 

analysis has been revised to reflect an 

average of 2.0 shifts per day for the 

plant. 

The assumption of a 15-17 year 

lifetim<~ for baseline equipment 

depreciation life was not changed to 5-

7 years as suggested. Based on the 

Department's industry structure analysis 

from publicly available sources. the 

Department believes a 5-7 year life 

would be considered too short for an 

average equipment depreciation life. 

Although some equipment does have a 

relatively short service life (hand tools 

- 1 year). an average of 15-17 years is 

more appropriate for the overall plant 

and equipment. In the analysis. various 

equipment depreciation lives are used 

depending on the specific type of 

equipment. When summarizing the total 

investment, the overall average is 

approximately 15 years. 

As suggested by Raytheon, the 100 

percent capacity utilization assumption 

was reduced. However it was reduced to 

95 percent not 80-90 percent as· 

proposed. Although 100 percent 

utilization might seem unrealistic, many 

operations run at or above capacity. 

depending on current market 

conditions. Since utilization is 

dependent on the market. the 

Department has reduced the utilization 

to 95 percent to reflect the less than 

ideal situation. The Department did not 

lower the utilization to 80 or 90 percent 

since current market conditions for most 

manufacturers would indicate higher 

production. Furthermore, the theoretical 

"greenfield" (entirely new) plant for the 

baseline unit assumed that construction 

and sizing were based on current sales 

and appropriate market forecasts. 

The current assumption of a 

production rate of 1.5 million units per 

year remains unchanged even though it 

does not represent a smaller 

manufacturer such as Raytheon 

Appliances. The Department is aware 

that 1.5 million units is not 

representative of the smaller (or larger) 

manufacturers, but does represent a 

median volume. At this time, the 

Department is keeping the production 

volume for the "greenfield" plant at 1.5 

million units per year; however, DOE 

will be investigating an alternative 

scenario for a low volume (<500,000 . 

units per year) manufacturer such as 

Raytheon Appliances. It is important to 

note that the baseline value will be used 

to calculate a differential cost for 

production of a higher efficiency washer 

at the same production volume. 

In summary, the Department has 

considered all the suggested corrections 

and made changes to the baseline 

analysis as deemed appropriate at this 

time (2.5 shifts reduced to 2.0 shifts, 

and 100 percent capacity utilization 

reduced to 95 percent). For a baseline 

unit, the Department's industry analysis 

is based on public available data (e.g., 

Census of Manufacturers by U.S. 

Department of Commerce) which 

indicates that equipment depreciation 

life should remain unchanged. The 

Department will be investigating the 

effects of lower production volumes in 

the NOPR analysis. A sensitivity 

analysis was used to evaluate each of 

the assumptions commented on by 

Raytheon. The impact of these changes 

on the estimate of baseline cost is 

approximately 3 to 4 percent. 

D. Life-Cycle-Cost (LCC) and Payback 

Analysis 

In determining economic justification, 

the Act directs the Department to 

consider a number of different factors, 

. including the economic impact of 

potential standards on consumers. The 

Act also establishes a rebuttable 

presumption that a standard is 

economically justified if the additional 

product costs attributed to the standard 

are less than three times the value of the 

first year energy cost savings. EPCA, 

§ 325 (o) (2) (B) (iii). 42 U .S.C. 6295 

(o) (2) (B) (iii). 

To consider these requirements the 

Department calculates changes in LCCs 

to the consumers that are likely to result 

from the proposed standard and two 

different simple payback periods: 

distributions of payback periods and a 

payback period (which follows the test 

procedure without variation). calculated 

for purposes of the rebuttable 

presumption clause. The effect of 

standards on individual consumers 

includes a change in the operating 

expense (usually decreased) and a 

change in the purchase price (usually 

increased). The net effect is analyzed by 

calculating the change in LCC as 

compared to the base case (the current 

analysis compares the LCC of a new 

efficiency level to the AHAM baseline). 

Inputs to the LCC calculation include 

the installed consumer cost (purchase 

price plus installation cost}, operating 

expenses (energy. water, sewer, and 

maintenance costs). lifetime of the 

appliance, and a discount rate. 

The LCC and one of the payback 

periods (distribution payback) are 

calculated using the LCC spreadsheet 

model developed in Microsoft Excel for 

Windows 95, combined with Crystal 

Ball (a commercially available software 

program) based on actual distributions 

of input variables. The second payback, 

test procedure payback. is not 

calculated using Crystal Ball and input 

variable distributions, but is instead 

based on the spreadsheet option 

allowing single input values. 

Based on the results of the LCC 

analysis, DOE selects candidate 

standard levels for a more detailed 

analysis. The range of candidate 

standard levels typically includes: (I) 

the most energy-efficient combination of 

design options or most energy-efficient 

level; (2) the combination of design 

options or efficiency level with the 

lowest LCC: and (3) the combination of 

design options or efficiency levels with 

a payback period of not more than three 

years. Additionally. candidate standard 

levels that incorporate noteworthy 

technologies or fill in large gaps . 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64353 . 

between efficiency levels of other 

candidate standards levels may be 

selected. 

The payback, for purposes of the 

rebuttable presumption test. attempts to 

capture the payback to consumers 

affected if a new standard was 

promulgated. It compares the cost and 

energy use of clothes washers · 

consumers would buy in the year the 

standard becomes effective with what 

they would buy without a new 

efficiency standard. In some cases this 

means comparing the baseline energy 

efficiency and cost with the trial 

standard level, in other cases the trial 

standard level would also be compared 

to a higher efficiency washer purchased 

without new standards (but at a lower 

efficiency than the trial standard level). 

A weighted average of these payback 

periods, in the year a new standard level 

would take effect. is considered the 

payback for purposes of the rebuttable 

presumption clause. In future analyses 

(for the NOPR), all of the consumer 

economic analysis discussed above will 

be based on a projected distribution of 

efficiencies sold at the time a new 

standard becomes effective (i.e .. the base 

case). 

In order to compare the LCCs to the 

distribution of washer efficiencies. the 

LCC spreadsheet will be modified to 

enable the user to input the market 

share of each washer efficiency level in 

5 percent increments. 

1. Life-Cycle-Cost Spreadsheet Model 

a. General. This section describes the 

LCC spreadsheet model used for 

analyzing the economic impacts of 

possible standards on individual · 

consumers. The LCC analysis is 

conducted using a spreadsheet model 

developed in Microsoft Excel for 

Windows 95, combined with Crystal 

Ball (a commercially available software 

program). The Model uses a Monte 

Carlo simulation to perform the analysis 

considering uncertainty and variability. 

The spreadsheet is organized so that 

ranges (distributions) can be entered for 

each input variable needed to perform 

the calculations. 

In recognition that each household is 

unique, variability is explicitly 

accounted for in the model by 

performing the LCC calculation for a 

large number of individual households. 

A Monte Carlo simulation is used to 

sample individual households from the 

Energy Information Administration's 

(EIA) Residential Energy Consumption 

Survey (RECS) database. The results are 

expressed as the number of households 

having impacts of particular 

magnitudes. 

The statistics provided by the 1993 

RECS are based on a sample of 7, 111 

households from the population of all 

primary, occupied residential housing 

units in the United States. Each 

household is weighted so that the data 

properly represents the 96.6 million 

households in the 50 states and the 

District of Columbia. 

The spreadsheet has the capability to 

sample only subsets of households for 

the analysis of particular subpopulations, for example, low income 

households. It also has the capability of 

isolating households in the RECS 

database that have a particular fuel 

combination of appliances (e.g., in the 

case of water heating and clothes drying 

the possible combinations of appliances 

include electric/electric, electric/gas, 

gas/electric, gas/gas, oil/electric, or oil/ 

gas). Alternately a combination of fuel 

types, weighted to observed proportions 

can be specified. representing the entire 

population. The spreadsheet samples 

subsets of the U.S. population from the 

RECS to calculate the effect on subgroup populations. A description of the 

methodology and contents of the RECS 

database is contained in the Preliminary 

TSD. 

Major inputs to the LCC analysis are: 

(1) consumer expense for purchasing an 

appliance; (2) the period of time the 

appliance will provide service 

(lifetime); (3) the value to a residential 

customer of saving electricity. expressed 

as cents per kilowatt-hour; (4) the value 

to a residential customer of saving gas, 

expressed as dollars per million British · Thermal Unit (Btu); (5) the residential 

price of distillate; (6) energy and/or 

water consumption; (7) residential 

customer rate for water and wastewater 

(sewer) ($/thousand gallons), excluding 

fixed charges; and (8) the rate at which 

expenditures (cash flows) are 

discounted to establish their present 

value. A more detailed discussion of the 

spreadsheet is contained in the 

Preliminary TSD. . For LCC analyses the Advisory 

Committee recommended that DOE use 

the full range of consumer marginal 

energy rates instead of national average 

energy prices. Absent consumer 

marginal energy rate information, the 

Committee recommended DOE use a 

range of net energy rates. calculated by 

removing all fixed charges. The 

Department agrees the use of marginal 

energy rates would improve the 

accuracy of the analysis (LCC and NES) 

and will attempt to determine marginal 

rates. The Department believes it is 

unknown at this point if removing fixed 

costs is more or less reflective of 

marginal rates and does not intend to 

take this intermediate step. 

In order to develop consumer 

marginal energy rates. the Department 

proposes to collect data on current rate 

schedules and energy consumption. 

These rates will be assigned to a 

national sample of buildings, weighted 

to represent the total U.S. population of 

buildings. The result will be a weighted 

distribution of consumption by marginal 

rates. This approach will be applied for 

residential and commercial customers. 

DOE proposes to obtain a sample of 

residential buildings from existing 

surveys. such as the RECS or from a 

commercially available database. The 

commercially available database is more 

expensive, but has significant added 

value in terms of assigning the buildings 

to states or to utilities, including a 

broader sample of the population, and 

permitting stratification of this larger 

sample to distinguish among some 

subpopulations. Each building will be 

assigned to a geographic region (e.g., 

state or utility service territory). Energy 

consumption by month will be included 

in the database for each building, in 

ordertotreatseasonalchangesin 

consumption and rates. Peak demand 

will be included for commercial 

buildings. 

Recent Federal surveys (RECS, 

Commercial Building Energy 

Consumption Survey (CBECS)) gather 

information by fuel on annual energy 

consumption and total expenditures. 

Total expenditures included customer 

and other fixed charges, energy rates, 

demand charges, taxes, etc. but these are 

not tabulated separately from each 

other. These surveys gathered customer 

bills but did not extract information on 

rate schedules, fixed charges or 

marginal rates. The Department 

proposes to explore the feasibility of 

extracting historical information on rate 

schedules, including the relationship 

between fixed charges and marginal 

rates to average prices. This effort, if 

successful, will provide information 

about the extent to which marginal rates 

differ from average prices, or from 

average prices less fixed charges. 

Given restructuring of parts of the 

energy supply sector, customers may 

have more than one bill (e.g., one from 

the distribution company, and one or 

more from generators or suppliers). To 

capture complete information. future 

surveys are expected to gather energy 

pricing information directly from 

customers. rather than from utilities or 

local distribution companies. The most 

efficient means to collect energy pricing 

information in the future involves 

changing the current processing of the 

billing information so as to gather more 

detail from the bills. to include 

consumption by month and pricing 
-64354 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

information. The pricing information 

would have for each customer the rate 

schedu:te including the marginal rates, 

fixed charges, demand charges for 

commercial and industrial customers, or 

time-of-use rates where applicable. The 

Department will express the need for 

these data in discussions with EIA 

concerning the design of future surveys. 

Residential electricity rate schedules 

will be collected from Federal databases 

where available, or state regulatory 

agencies. The information obtained for 

each rate schedule will include any 

fixed charges (customer charges, etc.), 

block s;tructure, and rate per kilowatthour (kWh) by block. Information from 

utilities or local distribution companies 

will be examined to determine: 

confim1ation of the set of rate schedules, 

the number of customers by state using 

each rate schedule. the total electricity 

sales by state by rate schedule, and (if 

possible) monthly electricity sales by 

state by rate schedule. 

Residential natural gas rate schedules 

will be collected from Federal databases 

where available, or state regulatory 

agencies. The information obtained for 

each rate schedule will include any 

fixed charges (customer charges. etc.), 

block structure. and rate per therm by 

block. Information from utilities or local 

distribution companies will be 

examined to determine: confirml}tion of 

the set of rate schedules, the number of 

customers by state using each rate 

schedule, the total gas sales by state by 

rate schedule, and (if possible) monthly 

gas sales by state by rate schedule. 

Commercial and industrial electricity 

rate schedules will be examined in a 

similar process as for residential 

electricity rates, but with additional 

information to account for demand 

charges. The information obtained for 

each rate schedule will distinguish any 

fixed charges (customer charges, etc.), 

block structure, rate per kWh by block, 

and demand charges. 

In the database of buildings. such 

characteristics as energy consumption 

and expenditures and number of 

customers by state or utility will be used 

to map a rate schedule onto each of the 

buildings in the national sample. The 

marginal rate for each building will be 

the block from the rate schedule 

corresponding to that building's 

month:ty energy consumption. 

For life cycle savings calculations. 

monthiy energy savings will be 

estimated for each building. These 

savings will be evaluated for each 

building at the monthly marginal rate, 

using the· rate schedule assigned to each 

building. 

Until a time series of marginal rates is 

available, future trends in energy prices 

will be used to derive estimates of 

CMER to be used in the economic 

analysis of possible energy performance 

standards. The trend in average price 

(by fuel and sector) will be used to 

create an index relative to current prices 

and applied to the current range of 

marginal rates. In other words, it will be 

assumed that the marginal rates will 

change in proportion to the expected 

change in average price. 

Given the uncertainty of projections 

of future energy prices. scenario 

analysis will be used to examine the 

robustness of possible energy efficiency 

standards under different energy price 

conditions. These scenarios will be used 

in the LCC and the NES calculations 

discussed in Section II.E. l. Each 

scenario will provide a self-consistent 

projection, integrating energy supply 

and demand. The scenarios will differ 

from each other in the energy prices that 

result. The Committee suggested the use 

of three scenarios. While many 

scenarios can be envisioned, 

specification of three scenarios should 

be sufficient to bound the range of 

energy prices. 

The most recent DOE Annual Energy 

Outlook 1998 (AEO 1998) reference case 

provides a well-defined middle 

scenario. In addition, the range of 

scenarios used in the AEO will be 

examined to establish the scenarios with 

the highest and lowest energy prices in 

the sector and fuel of interest. As an 

example, for commercial products such 

as fluorescent lamp ballasts, commercial 

and industrial electricity prices will be 

examined. AEO scenarios will serve as 

the fall back high and low scenarios, 

and the focus of discussion with 

stakeholders on further refinements to 

the high and low bounds. The range of 

energy prices represented by these 

scenarios and the underlying 

assumptions will be made available to 

stakeholders for comment. Independent 

estimates of future energy prices will 

also be considered. Based upon 

stakeholder input. the underlying 

assumptions may be further revised. 

This process will result in defining a 

likely high and low bound on the energy 

price trends. 

The economic analysis will be 

conducted using a spreadsheet for LCC, 

and one for NES. The future trend in 

energy prices assumed in each of the 

three scenarios will be clearly labeled 

and accessible in each spreadsheet. DOE 

and stakeholders will be able to easily 

substitute alternative assumptions in the 

spreadsheets to examine additional 

scenarios as needed. 

· Two approaches are proposed to 

estimate forecast marginal rates: 

(I) For now, the trends from the three 

scenarios will be converted to indexes 

and applied to the current range of 

consumer marginal energy rates to 

estimate future consumer marginal 

energy rates. So if the trend in average 

residential electricity prices were to 

decline by 20 percent over some period 

of time. then the marginal rate for each 

household would be assumed to decline 

from its initial observed value by 20 

percent over that same period of time. 

(2) Restructuring is expected to 

simplify rates and to homogenize rates 

to some extent. That is. rates are 

expected to move toward the middle of 

the range. The iJ;ldex approach is subject 

to question if the change in the range of 

marginal rates varies depending upon 

the initial marginal rate. The current 

range of average residential prices is 

from about 2 to 14 cents per kWh. If in 

the future the highest current rates 

decline, but the lowest current rates fail 

to decline (or even increase) over time, 

then the index approach fails. A second 

approach can account for the differences 

in trends by using regional data. 

National Energy Modeling System 

(NEMS) provides regional information 

on average prices by sector over time. 

The rates for buildings. including 

residential households. in each region 

will be scaled to correspond to the 

future trend in average prices for that 

region. 

b. Product Specific. This section 

discusses the approaches for analyzing 

the economic impacts on individual 

consumers from potential new clothes 

washer standards. A spreadsheet as 

described in Section II.D. l.a. is used to 

calculate these economic values. In 

future analyses. all three of the · 

economic metrics will be compared to a 

base case of washer efficiencies sold in 

the year the new standard would take 

effect. In this preliminary analysis, only 

the test procedure payback is compared 

to a distribution of efficiencies 

forecasted to the year 2003. 

i. LCC Analysis. Table 2 summarizes 

some of the major assumptions used to 

calculate the consumer economic 

impacts of various energy-efficiency 

levels. In addition a number of 

assumptions are discussed in more 

detail. 
~-----------------------------

Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64355 . 

TABLE 2.-ASSUMPTIONS USED IN THE LCC PRELIMINARY ANALYSIS 

Start year (effective date of standard) 2003. 

Retail Prices: Baseline Clothes Washer .................................................. . Retail Price-$421 including tax; from retail price survey. 

Lifetime .................................................................................................... . Distribution (12-17 years). 

Cycles Per Year ....................................................................................... . Distribution from RECS database (207-645). 

Energy Price Trend .................................................................................. . AEO 1998 reference case to the year 2020 with extrapolations to the 

year 2030. 

Water Price .............................................................................................. . Distribution from Ems! & Young, 1994 National Water and Wastewater 

Annual Real change in Water and Sewer Cost (Water Price Escalator) 

Rate Survey ($0.00 to $7.84 per 1000 gallons). 

0 percent.. 

Discount Rate .......................................................................................... . 

Energy Consumption Per Cycle .............................................................. . 

Distribution (C>-15 percent). 

AHAM data. 

Variation in Household Energy Prices, Energy Use, and Water Heater RECS data. 

Shares. 

Retail Prices: The analysis 

accompanying this supplemental 

ANOPR uses a 2-step mark-up approach 

to estimate retail prices. First, the 

manufacturing costs (i.e., full 

production costs) are marked up to the 

manufacturer price using a 

manufacturer mark-up. Then the 

manufacturer price is marked up by a 

retail mark-up to arrive at the retail 

price. The price paid by the consumer 

includes the sales tax in addition to the 

retail price. This sales tax is accounted 

for by using a sales tax mark-up over the 

retail price of the clothes washers. 

In the Preliminary TSD, the 

Department used a fixed retail mark-up 

of 1.40, and a fixed mark-up of 1.052 to 

cover the sales tax. The manufacturer 

mark-up over full production costs was 

bound by a maximum value of 1.35, 

which maintains industry 

(manufacturer) cost structure, and a 

minimum value of 1.00, which 

represents a pass-through of full 

production costs. The latter includes 

depreciation of new capital. 

Recuperation of non-production costs 

are not included. In order to 

characterize the uncertainty in 

manufacturer mark-ups. the Department 

used a triangular distribution 

characterized by a maximum 

manufacturer mark-up of 1.35, a 

minimum manufacturer mark-up of 

1.00, and a most likely mark-up of I°.18 

(the average). Using a fixed retail markup of 1.40 and a sales tax mark-up of 

1.052, the total mark-up from full 

production costs to consumer price 

ranges from a minimum of 1.473 to a 

maximum of 1.990. 

The Preliminary TSD presents a 

detailed discussion on retail mark-ups. 

The TSD also outlines the Department's 

methodology for estimating 

manufacturer mark-ups. 

In the future NOPR analyses, the 

Department will use a consistent set of 

assumptions for prices across all 

analysis sections (manufacturer impact, 

national benefits, and consumer 

impacts). Manufacturer prices will be 

marked up by a fixed retail mark-up 

(currently estimated at 1.40). and a sales 

tax mark-up (1.052) to arrive at the 

consumer price. Whereas the 

development of price scenarios for· the 

manufacturer impact analysis will be 

the subject of a future workshop, the 

Department is considering an approach . 

used in the 1991 Arthur D. Little report 1 

to AHAM. This approach entails 

creating manufacturer mark-up 

scenarios by conducting a financial 

analysis using the Government 

Regulatory Impact Model (GRIM). The 

GRIM is a standard annual cash flow 

analysis which uses price, quantity, and 

cost information to assess the impact of 

regulatory conditions on manufacturer 

income and cash flow. The model 

calculates the actual cash flows, by year, · 

and then determines the present value 

of those cash flows. both without 

regulations and with regulations. The 

post-standard retail prices required in 

order to achieve several scenarios will 

be found by running the GRIM and 

treating manufacturer price as a 

variable. Additional price (mark-up) 

scenarios that might be considered 

include: (1) the price (mark-up) 

resulting in maintenance of current 

industry value; (2) the price (mark-up) 

reducing industry value to zero; and (3) 

. the price (mark-up) resulting from passthrough of incremental material, labor. 

and burden costs only. 

The Department received three 

comments on the subject of 

manufacturer mark-up. Raytheon 

commented that the low end of 1.00 for 

the range of manufacturer mark-up 

should not be used. It recommended 

that the economic justification involve 

not only full production costs but all 

anticipated costs. (Raytheon .. No. 91. at 

•Arthur D. Little. Inc., Financial Impact of DOE 

Top Loading Horizontal Axis Standards on U.S. 

Washing Machine Manufacturers. Report to 

Association of Home Appliance Manufacturers 

Horizontal Axis Task Force. August 1991. Page 19. 

(Speed Queen Company, No. 15, Appendix G) 

1). GEA commented that the 

Department's conclusion on the 

estimated manufacturer price was 

erroneous. GEA pointed out that the 

Department had inexplicably 

transformed an average manufacturer 

mark-up of 1.35 into an upper bound. 

(GEA, No. 88 at 3-4). Whirlpool 

submitted that an estimation of average 

manufacturer mark-up of 1.18 is 

acceptable at this point in the 

rulemaking. (Whirlpool. No. 93, at 4). In 

response to these comments, the 

Department notes that a simple pass 

through of incremental material costs 

coupled with declining volumes has 

been suggested in a previous industry 

submital as the "the most likely . 

scenario." As described previously, the 

Department proposes to use the GRIM 

model to conduct scenario analysis on 

manufacturer mark-ups to keep the set 

of assumptions for all analysis sections 

consistent with one another. The GRIM 

will use price-volume interactions and 

manufacturers will be able to comment 

on the likely price scenario .for different 

efficiency levels. Shipment data will be 

obtained from the NES spre.adsheet 

model described in Section 11.E. l. lt may 

be reasonable to assume that the ability 

to pass through incremental costs will 

vary as costs increase and/or product 

attributes are changed. 

· The American Council for an EnergyEfficient Economy (ACEEE) commented 

that, at the March 1998 workshop. the 

Circuit City representative suggested 

that assuming an average 40 percent 

retail markup is probably too high. A 25 

percent retail markup was more typical 

of the industry. The 40 percent estimate 

may have factored in higher markups on 

extended warranties and other services. 

(ACEEE. No. 94 at 3). In reviewing 

Circuit City's comment, the Departm~nt 

understands that the statement referred 

to a gross margin of 25 percent which 

represents a mark-up of 1.33. This is in 

close agreement with the Department 

analysis of retailer financial statements 

having an important component of 
·64356 Federal Register/Vol. 63, No. 223/Thursqay, November 19, 1998/Proposed Rules 

appliances in their product mix ( 25.2 

percent to 26.3 percent gross margin). 

Also, as referenced in the Preliminary 

TSO, this gross margin is the net of 

some buying and warehousing costs. At 

present the Department has no basis for 

changing the retail mark-up assumption. 

DOE willl continue to research data 

sources and seeks comment on this 

issue. 

Energy Prices: The LCC spreadsheet 

model Hamples the individual prices 

paid by households in RECS(93) (latest 

published version of RECS). These 

prices are updated (scaled up or down 

based on AEO 1998 national prices) and 

converted to 1997 dollars. 

Energy Price Trend: Several possible 

fuel price scenarios are built into the 

LCC spreadsheet model, including: (1) 

constant; (2) AEO 1998 reference case; 

(3)Gas Research Institute 1998 (GRI 

1998); (4) high growth; and (5) low 

growth. High growth and low growth 

currently refer to AEO 1998 fuel price 

scenarios for high and low economic 

growth. GEA indicated that the 

Department needs to take additional 

steps in revising the LCC analysis. 

Everything in recent experience shows 

that energy prices continue to decline 

faster than the forecasters' ability to 

discern, but the Department continues 

to build in high price assumptions. 

ACEEE indicated that the EIA 

residential electricity price forec~st used 

in the analysis is too low. It 

recommends that DOE focus on the EIA 

"high economic growth" case price 

projections. This case calls for an 

average residential electricity price 

decrease of 8.3 percent over the 1996-

2010 period. (ACEEE. No. 94, at 3). 

In the future, as discussed in the 

Department's response to the Advisory 

Commi1ttee, the Department will review 

the range of scenarios used in the AEO 

to establish the scenarios with the 

highest and lowest energy prices in the 

sector and fuel of interest. The most 

recent DOE AEO 1998 reference case 

provides a well-defined scenario. 

Sensitivities both above and below these 

values can also be modeled in the AEO 

low and high growth cases. For the 

above rieasons AEO 1998 was used as 

the forecast used in the preliminary 

analysis. The range of energy prices 

represented by these scenarios and the 

underlying assumptions will be made 

availabl.e to stakeholders for comments. 

This process will result in defining a 

likely high and low bound on the energy 

price trend. 

Water and Sewer Prices: Information 

on water prices is not as readily 

available as fuel prices information. 

Some utilities have large fixed charges, 

while others are subsidized or paid for 

through taxes. Furthermore, there are no 

standard approaches to calculating 

water and sewer costs. In some locations 

the price of water increases as . 

consumption increases. In other areas. 

water price decreases with increasing 

consumption. Additional consideration 

must be given to consumers who are not 

connected to a municipality water 

supply or sewage system. In some cases, 

only one or the other is connected. As 

with other variables. the Department 

plans to use a range of water prices in 

the economic analysis to account for the 

variability among different households. 

The main source of data on water and 

sewer prices is from a 1994 survey of 

water prices in major metropolitan areas 

by Ernst & Young. The Ernst and Young 

data was adjusted for service 

population, base utility charges and 

average household use by Al Dietemann 

of Seattle Water. These adjusted values 

are the basis for the water price used in 

the preliminary analysis. For the NOPR 

analysis DOE plans to update the 1994 

prices. 

Water Price Escalator: The 

Department has found no national level 

water price forecasts. Currently. DOE's 

analysis assumes that future water rates 

are constant. Whirlpool stated that 

recent studies (Ernst & Young. 1994 

National Water and Wastewater Rate 

Survey; Raftelis Environmental 

Consulting Group, 1996 Water and 

Wastewater Rate Survey) show that 

water and wastewater charges have 

increased steadily each year during the 

period from 1986 to 1996. This trend 

should be expected to continue and 

should be reflected in the LCC 

calculations. (Whirlpool, No. 93 at 2). 

ACEEE stated that the present 

analysis is much too conservative 

because it assumes that water prices 

will not increase in real terms. 

Submitted for the docket was a justpublished study by Osann and Young 

which summarized typical water/sewer 

bills over the 1986-1996 period. ACEEE 

recommended that a water/sewer bill 

inflation rate in the 1.1-2.7 percent 

range (real) be incorporated into the 

economic analysis. (ACEEE, No. 94 at 

2-3). 

The study referred to in the ACEEE 

comment (Osann and Young) shows an 

average annual increase of 5.7 % for a 

residential water/sewer bill over the 

1986-1996 time period. Since the 

underlying inflation rate given was 

3.1 % this provided an annual increase 

in water/sewer bills of approximately 

2.6% real. In another analysis, using 

EPA data, in the (Osann and Young) 

report, infrastructure needs were 

estimated to be $280 billion. Accounting 

for the total gallons used and a discount 

rate. a rate increase of 1.1 % (real) was 

estimated. The ACEEE comment refers 

to total cost increases and does not 

specify what portion of the increase can 

be assigned to an increase in marginal 

rate. The ACEEE comment recommends 

a water/wastewater escalation rate of 1.1 

to 2. 7% real but does not provide a 

single value or a distribution. 

The Department agrees that future 

water prices should not be assumed to 

be constant and is therefore in the 

process of further analyzing both 

current prices and future escalation 

rates. The proposed analysis is on going 

and will be completed after the ANOPR 

is released. The proposed analysis 

consists of updating previous data from 

Ernst and Young report as adjusted by 

Al Dietemann, as well as the use of new 

data obtained from the American Water 

Works Association (A WW A). The Ernst 

and Young data is being updated by 

calling 125 utilities, getting their water 

rate schedules and their forecasts for the 

future, as well as any historical 

information available. The Department 

is working on combining these two data 

sources into one database. This data will 

be organized by utility and can be 

mapped onto either individual RECs 

households or onto regional areas. A 

distribution of water prices (as in the 

current analysis) will be used, as well as 

a distribution of escalation rates. In an 

attempt to be consistent with the 

methodology being developed for fuel 

rates, the Department will attempt to 

establish marginal water rates and water 

prices and escalation rates that vary 

with the water/wastewater utility. The 

Department is seeking comments 

concerning this approach. 

Energy consumption per cycle: The 

energy use information used to calculate 

LCC is taken from the engineering 

analysis and adjusted to account for 

variability in field conditions. This 

adjustment is for the loads of laundry 

washed per week, which varies from 

house to house. It is expressed as a 

distribution of wash cycles per year that 

is obtained from the RECS. 

Several comments were received on 

the subject of RECS data. The use of 

outdated RECS data, especially that 

related to family size and annual loads, 

must be discontinued if a truer picture 

of potential savings is to be drawn. 

(GEA, No. 88, at 3). Whirlpool noted 

that a concern was raised at the March, 

1998 workshop about the use of 1993 

RECS data for the distribution of gas vs. 

electric water heaters and dryers, family 

size and number of wash loads per year. 

Whirlpool agrees that the RECS data 

could be brought up to date, but this is 

not a high priority. Whirlpool argues · 

that the use of the currently available 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64357 . 

RECS data will not weaken any of the 

analyses for this rulemaking. 

(Whirlpool, No. 93 at 1). DOE intends to 

use updated RECS data when it becomes 

available. 

Manufacturing cost: The LCC 

spreadsheet is organized so that a range 

(incorporating variability and 

uncertainty) can be entered to describe 

the manufacturing costs associated with 

increases in energy efficiency. 

Efficiency improvements over the 

baseline model can be selected in 

increments of 5 percent up to a 50 

percent effkiency improvement. The 

cost data used was provided by 

manufacturers. It was then compiled 

and reported to the Department by 

AHAM. 

Operating cost: ACEEE stated that the 

present analysis ignores the possibility 

that some consumers will use less 

detergent with new high-efficiency 

machines than with standard machines. 

It recommends that DOE construct two 

alternative scenarios (one in which no 

detergent will be saved and the other 

that assumes some consumers will use 

less detergent). ACEEE indicated that 

the Bern Kansas study provided.some 

evidence for detergent savings. (ACEEE. 

No. 94 at 2). Procter and Gamble 

commented that the perception that 

detergent dosage will be reduced in 

horizontal axis or drum washers· 

proportionally to water volume is 

invalid. While this appears to be a 

popular belief, the detergent dosage is 

not substantiated by the facts. Procter 

and Gamble further stated that the 

important impact is that users of new 

lower water use/energy efficient 

washers cannot expect to find detergent 

cost savings. (Procter & Gamble, No. 9 

at 1). DOE seeks additional data on this 

issue. 

ii. Payback Analysis (Distribution of 

Paybacks). Payback is calculated based 

on the same inputs used for the LCC 

analysis (with the difference that the 

values are based only on the first year 

the standard takes effect). The output is 

a distribution of payback periods. The 

mean payback period is also reported. 

Additional information is available in 

the LCC spreadsheet but is not reported 

in the Supplemental ANOPR or 

Preliminary TSD. This data includes 

charts of cash flow taking into account 

the changing annual fuel prices. 

In order to compare the Payback 

Periods to the distribution of washer 

efficiencies, the LCC spreadsheet will be 

modified to enable the user to input the 

market share of each washer efficiency 

level in 5 percent increments. 

iii. Rebuttable/Test Procedure 

Payback. The payback for purposes of 

the rebuttable presumption clause is 

calculated on the LCC spreadsheet but 

without using any distributions or 

Crystal Ball. Payback periods are first 

calculated between the new standard 

level and each washer efficiency being 

sold in the year 2003. The paybacks are 

then weighted and averaged according 

to the percentage of each washer 

efficiency sold before a new standard is 

enacted. Rather than distributions, 

single point values for the inputs are 

used. These values (including cycles per 

year, electric fuel source. etc.) will 

correspond to those outlined in the DOE 

test procedure, Appendix J 1. The result 

is a single payback value and not a 

distribution. The payback is calculated 

for the expected effective year of the 

standard (e.g .. 2003). Examples and 

further details are presented in the TSD. 

With the presently available data, the 

baseline efficiency level is weighted 

with market shares of 94.5 percent for 

vertical axis washers (baseline) and 5.5 

percent for horizontal axis washers (35 

percent efficiency improvement). If 

available, data on a forecasted 

distribution of washer efficiencies in the 

year 2003 will be used to refine the 

above calculations for the NOPR 

analysis. 

2. Preliminary Results 

a. General. Calculation of LCC 

captures the tradeoff between the 

purchase price and operating expenses 

for appliances. In addition, two other 

measures of economic impact are 

calculated: distributions of payback 

periods and a payback period calculated 

for purposes of the rebuttable 

presumption clause. The outputs of the 

LCC spreadsheet include distributions 

of the impact for each energy efficiency 

level compared to the baseline. A 

variety of graphic displays illustrate the 

implications of the analysis results. 

These include: (1) A cumulative 

probability distribution showing the 

percentage of U.S. households which 

would have a net saving by owning a 

more energy efficient appliance, and (2) 

a chart depicting the variation in LCC 

for each efficiency level considered. 

b. Product Specific. This section 

presents preliminary results for LCCs 

and payback periods for all efficiency 

levels in the engineering analysis. Since 

the value of most inputs are uncertain 

and must be represented by a 

distribution of values rather than a 

discrete value, the results presented in 

the Preliminary TSD are also described 

by a distribution of values. Tables 3. and 

4 provide a brief overview by showing 

percentile LCCs and payback periods, 

respectively. for the efficiency level 

irriprovements. These tables are 

generated with the current LCC 

spreadsheet and have not yet taken into 

account a distribution of pre-newstandard washer efficiencies. but 

instead are based on the AHAM baseline 

value. Greater detail is provided in the 

Preliminary TSD. 

The LCC spreadsheet calculates and 

reports changes in LCC (delta LCC). The 

output is a distribution best illustrated 

by the cumulative charts for LCC 

difference shown in the Preliminary 

TSO.The convention is used whereby 

all values in parentheses are negative. 

Negative delta LCCs mean that the LCC 

after standards is lower than that 

without standards (i.e .. the base case). 

Table 3 showing the percentiles of 

LCC change is best described by an 

example. The 0 percent value means 

that all delta LCCs are greater than the 

value shown. The value for the 50th 

percentile means half of the delta LCCs 

are higher and half are lower. The 100 

percent value means that 100 percent of 

the calculated values of delta LCC are 

less than the shown value. 

Taking the first row (5 percent 

efficiency level) as an example, the 

values are interpreted as follows. The 

value shown for 0 percent means that 

there is a 0 percent probability that a 

household will have a reduction in LCC 

larger than the $83 in absolute value. 

Toward the middle, there is a 50 percent 

probability that a household will have a 

reduction in LCC larger than $16. The 

100 percent column indicates that there 

is a 100 percent probability that a 

household will have a reduction in LCC 

larger than $2. 

The column labeled "mean" refers to 

the mean of the distribution. In other 

words, the average of all of the results 

of the Monte Carlo runs. 

The column labeled "percent with 

LCC less than the baseline" establishes 

at what percentile there will not be any 

difference in LCC between the standards 

case and AHAM baseline (i.e., the delta 

LCC is 0). For example, for the first row 

of the table (5 percent energy efficiency 

increase level). there is a 100 percent 

probability that households will have a 

lower LCC if a standard were enacted. 

For the 50 percent efficiency level. there 

is a 74.2 percent probability that 

households will have a lower LCC (In 

other words, 74.2 percent of households 

will have a lower LCC if a 50 percent 

standard level is enacted). 
64358 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

TABLE 3.-PERCENTILE LCC 

Change Percent with LCC less than baseline 

inLCC 

from 

baseline, 

shown by 

Percent efficiency level percentiles of the 90 100 Mean distribu- 0 10 25 50 75 

tion of re- sults 2 

(values in 

$) 

5 ................................................... ($83) ($33) ($24) ($16) ($11) ($8) ($2) ($19) 100.0 

10 .................................................... ($232) ($82) ($55) ($36) ($23) ($15) $13 ($43) 99.5 

15 ................................................... ($402) ($140) ($90) ($55) ($33) ($19) $63 ($68) 95.6 

20 ................................................... ($504) ($161) ($98) ($55) ($26) $10 $129 ($67) 86.7 

25 ................................................... ($1,486) ($465) ($303) ($164) ($67) $4 $137 ($205) 89.2 

35 ................................................... ($1,997) ($639) ($408) ($211) ($59) $79 $570 ($252) 83.4 

40 ................................................... ($2,039) ($649) ($412) ($207) ($64) $75 $645 ($253) 83.7 

45 ................................................... ($2,068) ($606) ($365) ($155) $9 $159 $666 ($199) 73.6 

50 ................................................... ($2,075) ($617) ($374) ($156) $6 $153 $571 ($204) 74.2 

, The baseline LCC, based on SWA of the most likely costs, is $1,554. 

2For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for 

water price. 

TABLE 4.-PAYBACK PERIOD 

Payback period in years shown by percentiles of the distribution of results , 

Percent efficiency level 

0 10 25 50 75 90 100 Mean 

5 ....................................................................... o.o 0.0 0.0 0.0 0.0 0.2 3.7 0.1 

10 ······································································· o.o 0.0 0.0 0.1 0.5 1.6 15.8 0.6 

15 ······································································· o.o 0.0 0.1 0.2 0.6 4.1 40.7 1.4 

20 ······································································· 0.0 0.1 0.2 0.5 5.2 10.8 57.9 3.6 

25 ······································································· o.o 0.8 1.8 3.6 6.0 8.8 34.5 4.4 

35 ....................................................................... 0.8 2.0 2.8 4.2 6.9 11.4 49.8 5.8 

40 ....................................................................... 0.7 2.0 2.8 4.3 6.9 11.4 57.8 5.8 

45 ....................................................................... 0.7 2.4 3.6 5.8 9.3 13.9 54.0 7.2 

50 ······································································· 0.9 2.7 3.8 5.9 9.1 13.5 54.5 7.2 

, For sample size of 10,000 trials. Energy price trends are for AEO 1998. Operating costs include water prices. No escalator is assumed for 

water price. 

Table 5 below shows the simple 

payback for purposes of the rebuttable 

presumption clause. This means it 

follows test procedure assumptions for 

electric water heaters and dryers. 

TABLE 5.-REBUTTABLE PRESUMPTION 

PAYBACK INYEARS1 

Percent effi- o per- 35 per- Weightciency level cent to cent to ed paystandard standard back 

5 ................ 0.1 NA 0.1 

10 ................ 0.2 NA 0.2 

15 ................ 0.6 NA 0.6 

20 ................ 1.8 NA 1.8 

25 ................ 2.7 NA 2.7 

35 ................ 3.7 NA 3.7 

40 ................ 3.7 3.7 3.7 

45 ................ 4.9 29.2 6.2 

50 ................ 5.0 19.6 5.8 

, Market shares of 94.5 percent V-axis and 

5.5 percent H-axis are assumed for the year 2003. . 

E. Preliminary National Impacts 

Analysis 

The national impacts analysis 

assesses the net present value (NPV) of 

total consumer LCC. energy (and water, 

if appropriate) savings and indirect 

employment impacts. A preliminary 

assessment of the aggregate impacts at 

the national level is conducted for the 

ANOPR. Analyzing impacts of Federal 

energy-efficiency standards requires a 

comparison of projected U.S. residential 

energy consumption with and without 

standards. The base case, which is the 

projected U.S. residential energy 

consumption without standards, 

includes the mix of efficiencies being 

sold at the time the standard becomes 

effective. Sales projections together with 

efficiency levels of the washers sold, are 

important inputs to determine the total 

energy consumption due to clothes 

washers under both base case and 

standards case scenarios. The· 

differences between the base case and 

standards case provides the energy and 

cost savings. Depending on the analysis 

method used, the sales under a 

standards case projection may differ 

from those of a base case projection. 

The Department estimates national 

energy and water, if applicable. 

consumption for each year beginning 

with the expected effective date of the 

standards. National annual energy and 

water savings are calculated as the 

difference between two projections: a 

base case and a standards case. Analysis. 

includes estimated energy savings by 

fuel type for electricity. natural gas, and 

oil. Energy consumption and savings are 

estimated based on site energy (kWh of 

electricity. million Btu of natural gas or 

oil used in the home). then the 

electricity consumption and savings are 

converted to source energy . DOE agrees with the Advisory 

Committee's recommendation that the 

assumption of a constant conversion 

factor should be dropped in favor of a 

conversion factor that changes from year 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64359 

to year. The conversion factor would be 

calculated for each year of the analysis 

based on the generating capacity 

displaced and the amount of site energy 

saved (see detail procedure below). For 

future conversion factors, DOE proposes 

to use the following method: 

(1) Start with an integrated projection 

of electricity supply and demand (e.g., 

the NEMS Annual Energy Outlook 

reference case), and extract the source 

energy consumption. 

(2) Estimate projected energy savings 

due to possible standards for each year 

(e.g., using the NES spreadsheet). 

(3) Feed these energy savings back to 

NEMS as a new scenario, specifically a 

deviation from the reference case, to 

obtain the corresponding source energy 

consumption. 

(4) Obtain the difference in source 

energy consumption between this 

standard level scenario and the 

reference case. (5) Divide the source energy savings 

in Btu, adjusted for class specific 

transmission and distribution losses, by 

the site energy savings in kilowatt-hours 

to provide the time series of conversion 

factors in Btu per kilowatt-hour. 

The resulting conversion factors will 

change over time, and will account for 

the displacement of generating sources. 

Furthermore, the NES spreadsheet 

models will include a clearly defined 

column of conversion factors, one for 

each year of the projection. DOE and 

stakeholders can examine the effects of 

alternative assumptions by replacing 

this column of numbers. 

Measures of impact reported include 

the NPV of total consumer LCC, NES 

and water savings, if appropriate, and 

indirect employment impacts. Each of 

the above are determined for selected 

trial standard levels. These calculations 

are done by the use of a spreadsheet tool 

called the NES Spreadsheet Model, 

which has been developed for all the 

standard rulemakings and tailored to 

each specific appliance rulemaking. 

1. National Energy Savings (NES) 

Spreadsheet Model 

a. General. In order to make the 

analysis more accessible and 

transparent to all stakeholders, a 

spreadsheet model was developed using 

Microsoft Excel in Windows 95 to 

calculate the national energy and water 

savings, and the national economic 

costs and savings from new standards. 

Input quantities can be changed within 

the spreadsheet. For example, the 

markup factor to determine retail price 

from the manufacturing cost can be 

easily changed in the spreadsheet. 

Unlike the LCC analysis, in the NES 

Spreadsheet, distributions ate not used 

for inputs or outputs. Sensitivities can 

be demonstrated by running different 

scenarios. 

One of the more important 

components of any estimate of future 

impact is shipments. Forecasts of 

shipments for the base case and the 

standard case need to be obtained as an 

input to the NES. 

The most basic method for forecasting 

future shipments is a simple saturationbased method which assumes 

saturations remain unchanged and 

solves for a growth rate in shipments 

sufficient to keep saturations constant in 

light of population growth. There are 

several factors that can make this 

estimate inaccurate. These factors 

include possible changes in: the number 

of households, saturation levels, 

appliance lifetimes, prices (including 

. operating costs), and consumer 

decisions about whether to repair rather 

than replace an appliance. Because of 

these complexities, and to improve on 

the forecasts, the following four 

different statistical models were 

studied. 

Auto-Regressive Moving Average 

(ARIMA) Model 

Under this model, a univariate time 

series data analysis approach is used to 

predict future values of a time series 

using only its current and past data. The 

advantage of the ARIMA univariate 

approach is that only time series data is 

needed to run the model. The 

disadvantages of this approach are that 

(1) historical trends may not be a good 

guide to the future. and (2) the model 

cannot explicitly account for changes in 

the number of households, percent of 

household owning washers. price. or 

operating expense. 

AHAM has commented that it 

'believes that the use of regression 

analysis is inappropriate to project 

shipments of washers to the year 2030. 

AHAM suggests that a time series 

(ARIMA) type model is better. AHAM 

commented that since the method 

presented at the July 23, 1997, 

workshop seems to be heavily based on 

assumptions regarding the saturation of · 

certain housing types, the Department 

needs to provide these underlying 

assumptions prior to any calculation of 

NES. (AHAM, No. 76.) An ARIMA type 

model is among those being analyzed to 

obtain shipment forecasts by the 

Department. 

Multi-Variate Time Series Fit 

In addition to the ARIMA univariate 

process for projecting sales, a multivariate time series data analysis was 

also reviewed. This analysis is based not 

only on sales but new housing starts as 

well. The advantage of the multi-variate 

time series method is that only two time 

series are needed to build the model 

(i.e., shipments from the previous year 

and the change in the number of 

households from the previous year). The 

disadvantages of this approach are that 

(1) again, historical trends may not be a 

good guide to the future, and (2) the 

model cannot explicitly account for 

replacement sales, changes in 

saturation, price, and operating cost. 

Saturation/Lifetime Model 

A saturation/lifetime (SIL) model was 

developed as yet another alternative for 

forecasting sales. The S/L model 

assumes that the saturation of an 

appliance varies with time. Appliance 

removals are based upon assumptions 

regarding the distribution of the 

appliance lifetimes, and the above 

functional form of the model allows for 

flexibility in that different assumptions 

regarding saturations and lifetimes can 

be used in an attempt to get the best fit 

to historical data. The advantages of the 

saturation/lifetime methoq are that (1) 

the method explicitly accounts for 

lifetimes. (2) housing and saturation 

stocks are based only on time-series 

data, so that different housing and 

saturation fits can be used to get "good" 

fits to historical sales. The 

disadvantages of this approach are that 

(I) removals must be based on 

assumptions about lifetimes, and (2) the 

model cannot explicitly account for the 

impact of price and operating cost on 

housing and saturation stocks. 

Accounting Model 

The accounting model seeks to 

forecast shipments by determining sales 

destined for new homes plus the 

additional sales meant to replace 

appliances being retired from service. 

For those sales meant for the 

replacement market, the model accounts 

for. the impact of homes which are being 

retired from the existing housing stock. 

The advantages of the accounting model 

are that (1) it is a straightforward and 

simple model, (2) it explicitly accounts 

for new appliances separately in new 

houses and replacements, and (3) price 

and operating costs can be incorporated 

into saturation terms. The disadvantages 

of the accounting model are that (1) 

saturations of appliances in new and 

stock homes must be forecasted. (2) 

housing starts must be forecasted (e.g .. 

based on AEO projections), and 

removals must be based on assumptions 

about lifetimes. 

Table 6 shows the degree to which 

each approach accounts for different 

variables that impact actual shipments. 
·6436(]1 Federal Register/Vol. 63, No. 223/Thursday. November 19, 1998/Proposed Rules 

TABLE 6.-VARIABLES ACCOUNTED FOR BY DIFFERENT FORECAST APPROACHES 

Variable accounted for: 

Model Washer 

sales 

Number of 

households Saturation Washer lifetime 

Price and 

operating 

cost 

ARIMA ...................................................................................................... . x 

x 

x 

x 

Multi-variate ............................................................................................. . x 

x 

x 

Saturatkm/Life .......................................................................................... . 

Accounting ..... : ......................................................................................... . 

Among the important drivers of 

energy consumption are: voluntary 

programs promoting higher energy 

efficiency products and consumers 

response to changes in price and 

operating expense. The extent to which 

voluntary programs may increase the 

share of energy efficient products, prior 

to the implementation date of any new 

standards, is estimated in the base case. 

How consumers respond to changes in 

prices and operating expenses can be 

expressed by means of elasticities. An 

elasticity is the percent change in one 

quantity in response to a percent change 

in a driving variable. Elasticity will be 

taken i:nto account if a method of 

quantifying the price elasticity can be 

developed or perhaps several scenarios 

can be modeled. 

Other quantities in the NES 

spreadsheet are: energy price 

projections including an analysis of 

consumer marginal energy rates for each 

fuel (See Section 11.D. l .a); effective date 

of the standard (start year); discount rate 

and the year of the NPV (1997); 

manufacturing cost; appliance purchase 

price; water cost and escalation rate; 

baseline energy use;, impacts of other 

appliances applicable to the rulemaking 

analysis; lifetime; fuel mix; and the 

conversion factor from site to source 

energy. 

The energy savings and NPV are 

calculated from the expected date any 

standard level would take effect to the 

x 

x 

x 

x x 

year 2030. Both individual year and 

cumulative data are generated. Output 

charts and tables provide: cumulative 

energy and water savings. (where 

applicable), the cost and savings per 

year (in a chart) and the cost and NPV 

due to standards. 

b. Product Specific. The model to be 

used for the clothes washer rulemaking 

is the one described above in Section 

11.E. l.a. Following is a discussion of the 

application of this model for the clothes 

washer rulemaking analysis. 

Table 7 shows the assumptions used 

in NES for the preliminary analysis 

which are summarized below and 

discussed in greater detail in the 

Preliminary TSD. 

TABLE ?.-ASSUMPTIONS USED FOR GENERATING PRELIMINARY NATIONAL IMPACTS 

Fuel Price ................................................................................................. . EIA Annual Energy Outlook 1998 to the year 2020 and extrapolated to 

the year 2030. 

Water Price .............................................................................................. . Average-$3. 18 per 1000 gallons. 

Discount Rate and the Year of the NPV ................................................. . 

Start Year for New Standards ................................................................. . 

7 percent discounted to the year 1997. 

2003. 

Annual 1Real Change in Water & Sewer Cost (water price escalator) ... .. O percent. 

Manufac:turing Cost .................................................................................. . 

Total Mark up on Manufacturer Costs ..................................................... . 

Shipment-weighted average of the most likely (from AHAM data}. 

1.731. 

Energy Consumption Data ..................................................................... . AHAM data. 

Clothes Washer Shipments ..................................................................... . Assumed same for standards and base case (inelastic to price and energy savings). 

Percent Horizontal-Axis Washers ........................................................... .. 

Primary Energy Conversion Factors ....................................................... . 

1.5 percent In 1995, increasing by 0.5 percent each year. 

AEO 1998. 

Fuel Price: The energy price scenarios 

to be considered for the clothes washer 

analysi.s include: AEO 1998 reference; 

GRI 1998; and high and low cases 

(which are currently AEO high and low 

economic cases.) Other boundary cases 

may be analyzed in response to the 

Advisory Committee on Appliance 

Energy Efficiency Standards 

recommendations relating to defining a 

range of energy price futures for each 

fuel used in the rulemaking economic 

analysi.s. (Advisory Committee, No. 96 

at 2) (See Section II.D.1.a). See 

Preliminary TSD for more information 

on extrapolation of prices between 2020 

and 2030. The Department is planning 

to revise the method contained in the 

current spreadsheet used for the 

preliminary ANOPR analysis. AEO 1998 

forecasts only go out to the year 2020. 

Since the analysis needs projections to 

the year 2030, other methods must be 

used for this time period. The 

Department plans to use the EIA 

approach to forecast fuel prices for the 

Federal Energy Management Program 

(FEMP). For petroleum prices, EIA uses 

the average annual growth rate of the 

world oil price over the years 2010 to 

2020 and then adds the implied refinery 

and distribution markups for each 

petroleum product to arrive at the 

regional prices for the 2021 to 2030 

period. Natural gas prices are similarly 

derived· using the average annual growth 

of wellhead natural gas over 2010 to 

2020 and adding on regional markups. 

Electricity prices are assumed to be 

constant after 2020 on the assumption 

that the transition to a restructured 

industry will have been completed. 

Annual Real Change in Water and 

Sewer Cost (water price escalator): For 

the preliminary analysis the cost of 

water and the escalation rate of water 

prices used in the analysis is specified 

in Table 7. For the NOPR analysis. DOE 

plans to update prices and estimate 

future prices and escalation rates. (See 

Section Il.D.b.i.) 

AHAM commented that the 

Department cannot use water savings in 

its economic justification of standards. 

Under the provisions of NAECA, this is 

not a specified consideration and is no 

more than a side-benefit of the energy 

savings. (AHAM, No. 76 at 1.) The 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64361 

Department believes that water savings 

should be accounted for. EPCA states 

that in determining whether a standard 

is economically justified the Secretary 

shall determine whether the benefits of 

the standard exceed its burdens by, to 

the greatest extent practicable 

considering "the total project amount of 

energy or as applicable, water savings 

likely to result directly from the · 

imposition of the standard," "the need 

for national energy and water 

conservation" and "other factors the 

Secretary considers relevant.'' EPCA, 

§ 325 (o)(2)(B)(0 (IIO (VI) (VII). 42 U .s.c. 

6295(0) (2) (B) (I) (IIO (VO (VII). 

Clothes Washer Shipments: In the 

analysis presented in the Preliminary 

TSD the sales forecast for the base case 

and the standard case are assumed to be 

the same. While DOE is reviewing the 

different models to forecast shipments, 

shipment forecasts were created using 

the Residential Energy Model (REM). 

The purpose for using this data is to 

provide some data to demonstrate the 

NES methodology. This data does not 

reflect how shipments will be 

determined. These forecasts will be 

changed for the NOPR analysis. The accounting model is still under 

development as price and operating cost 

effects have yet to be incorporated. 

Research is on-going to develop new 

estimates of price and operating expense 

elasticities to account for: (1) cha.nging 

the definition of operating expense to 

include water and wastewater rates; (2) 

changing the definition of the value of 

energy savings from average prices to 

marginal rates; and (3) a longer time 

series to include more recent data. 

Inasmuch as the accounting model is 

the only approach that will take into 

account price and operating costs, the 

Department believes it should be the 

primary tool for forecasting clothes 

washer shipments. The Department . 

seeks comments about the 

determination of price and operating 

cost elasticities. 

The base case assumes that clothes 

washers efficiencies will increase due to 

non-regulatory reasons. Voluntary 

programs are expected to increase the 

share of higher energy efficiency clothes 

washers sold. The Department has 

reviewed existing literature relating to 

voluntary programs (e.g .. the Energy __ 

Star and WashWise Programs). See the 

voluntary programs section of the 

Preliminary TSD for a summary of this 

review. 

Based on this review, in the 

preliminary analysis the impact of 

voluntary programs is expressed as the 

percent of new clothes washers each 

year that have efficiencies 

corresponding to those of H-axis 

washers (35 percent energy reduction 

from the baseline MEF). The initial 

share of H-axis machines is estimated to 

be 1.5 percent of total washer sales in 

1995. The 'impact of voluntary programs 

is estimated to cause a ·o.5 percent 

increase in H-axis share every year 

thereafter. The current assumption is 

that in 2003 the percentage of horizontal 

axis washers will be 5.5 percent. The 

energy information used in the 

spreadsheet is taken from the 

disaggregated data provided by AHAM 

for the standard level with the lowest 

efficiency H-axis model (35 percent 

increase in energy efficiency). 

Additional work is underway to . 

estimate future efficiencies under the 

base case scenario. Current estimates 

will be revised as additional data 

becomes available. The Department 

welcomes any additional data useful for 

forecasting future sales of highefficiency washers due to nonregulatory reasons. 

Primary Energy Conversion Factors: In 

the spreadsheet DOE is using the AEO 

1998 projections. 

Clothes Washer Lifetime: To account 

for the savings over the lifetime of new 

clothes washer sales, the analysis 

continues to the year 2030. Clothes 

washers are expected to have a lifetime 

of about 12-16 years. Some washers 

bought in 2002-prior to the new 

standards-are expected to be replaced 

as late as 2018. In those cases, one 

lifetime for washers meeting the new 

standards will end in 2030-2034. 

2. Preliminary Results 

a. General. National energy 

consumption is calculated for the base 

case and each candidate standards level 

by multiplying the number of clothes 

washers by vintage times unit energy 

consumption by vintage. The vintage is 

the age of the washer (one-year old up 

to sixteen-years old). National annual 

energy savings are calculated as the 

difference between two projections: a 

base case (without new standards) and 

a standards case. Cumulative energy and 

· water savings, if appropriate, are the 

sum of the annual national energy or 

water savings, respectively, over several 

time periods (e.g .. 2003-2010. 2003-

2020, and 2003-2030). 

Once the energy savings have been 

determined, economic impacts are 

calculated. The primary metric for 

measuring national economic impact is 

the NPV. NPV (of total life-cycle costs) 

is the difference between the present 

value of the energy savings over the life 

of the appliance and the present value 

of (usually increased) initial costs of a 

more efficient appliance. The NPV 

calculations also captures any 

differences in installation or 

maintenance costs. On a national level 

the efficiencies and number of 

appliances sold each year are also taken 

into account. Another way of describing 

NPV is to determine the LCCs (for all 

appliances sold) with and without 

standards and take the difference. 

Costs are typically increases in the 

purchase price associated with the 

higher energy efficiency of appliances 

purchased in the standards case 

compared to the base case. Costs are 

calculated as the difference in the 

purchase price between the base case 

and standards case for new appliances 

purchased each year multiplied by the 

appliance sales in the standards case. Price increases appear as negative 

values in the NPV. 

Savings are typically decreases in 

operating costs associated with the 

higher energy efficiency of appliances 

purchased in the standards case 

compared to the base case. Total 

operating cost savings is the product of 

savings per unit and the number of units 

of each vintage surviving in a particular 

year. Savings appear as positive values 

in the NPV. 

Net savings each year are calculated 

as the difference between Total 

Operating Cost Savings and Total 

Equipment Costs. The savings are 

calculated over the life of the appliance, 

accounting for the differences in yearly 

energy rates. 

Future annual costs and savings are 

discounted to the present time and 

summed. The NPV is the difference 

between the present value of increased 

costs of a more efficient appliance and 

the present value of energy savings. 

relative to the base case expenditures. In 

other words the NPV resembles the 

difference in total consumer LCC 

between the base case and standards 

case, after correcting for any change in 

sales of clothes washers. NPV greater 

than zero indicates net savings (i.e .. that 

the standard reduces consumer 

expenditures in the standards case 

relative to the base case). NPV less than 

zero indicates that the standard incurs 

net costs. 

The elements of the NPV can be 

expressed in another form, as the 

benefit/cost ratio. The benefit is the 

savings in decreased energy expenses, 

while the cost is the increase in the 

purchase price due to standards relative 

to the base case. When the NPV is 

greater than zero, the benefit/cost ratio 

is reater than one . . Product Specific. The results shown 

in Table 8 below. are based on a single 

shipment weighted average (SWA) cost 

instead of a cost distribution. Below is 

a description of the columns in the 
64362 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

Preliminary National Energy Savings 

Results, Table 8. 

The fi.rst column shows the efficiency 

improv(~ment over the base case. This is 

the value of energy efficiency 

improvement based on the baseline 

MEF prnvided by AHAM. 

The second column shows the energy 

savings in quads. This represents the 

amount of primary energy savings 

accumulated from the years 2003 to 

2030. The energy savings are a result of 

consumers buying more efficient 

washen; than they would normally have 

bought had no new standard levels been 

enacted. 

The third column shows the water 

savings in trillions of gallons at the 

corresponding efficiency level. 

The fourth column, NPV, shows the 

dollar savings corresponding to the 

energy and water savings and 

accounting for increase in the purchase 

price. The energy prices change from 

year to year and AEO 1998 projections 

of future prices are used. 

The Preliminary TSD explains the 

results variables in greater detail and 

has charts to accompany the tables. 

TABLE :S.-PRELIMINARY NATIONAL ENERGY SAVINGS RESULTS (2003 TO 

203(1 CUMULATIVE) 

Percent effi- Net 

Water . present ciency im- Energy savings benefit provement savings (trillion (NPV) over the base (quads) gallons) (billion caso 1997$) 

5 ·················· 0.36 0.46 1.02 

10 ................ 1.18 0.46 2.41 

15 ················ 2.18 0.45 3.80 

20 ................ 2.66 0.59 3.67 

25 ················ 5.09 10.13 11.07 

35 ················ 7.85 14.62 13.47 

40 ................ 7.90 14.62 13.53 

45 ················ 9.49 12.47 8.81 

50 ................ 10.06 12.47 9.07 

3. Indirect Employment Impacts 

a. Gweral. The July 1996 Process 

Rule includes employment impacts 

among the factors to be considered in 

selecting a proposed standard. The 

Department estimates the impacts of 

standards on employment for appliance 

manufacturers, relevant service 

industries, energy suppliers, and the 

economy in general. Employment 

impacts are separated into indirect and 

direct impacts. Direct employment 

impact; would result if standards lead 

to a change in the number of employees 

at manufacturing plants and related 

supply and service firms. Direct impacts 

will be further discussed in the section 

on manufacturing analysis. Indirect 

impacts are impacts on the national 

economy other than in the 

manufacturing sector being regulated. 

Indirect impacts may result from both 

expenditures shifting among goods 

(substitution effect). and income 

changing. which will lead to a change 

in overall expenditure levels (income 

effect). 

Indirect employment impacts from 

standards are defined as net jobs 

eliminated or created in the general 

economy as a consequence of increased 

spending on the purchase price of 

appliances and reduced household 

spending on energy. New appliance 

standards are expected to increase the 

purchase price of appliances (retail 

price plus sales tax, and installation). 

The same standards are also expected to 

decrease energy consumption, and 

therefore reduce household 

expenditures for energy. Over time, the 

increased purchase price is paid back 

through energy savings. The savings in 

energy expenditures may be spent on 

other items. Using an input/output 

model of the U.S. economy, this 

analysis seeks to estimate the effects on 

different sectors. and the net impact on 

jobs. National impacts will be estimated 

for major sectors of the U.S. economy. 

Public and commercially available data 

sources and software will be utilized to 

estimate employment impacts. At least 

three scenarios will be analyzed to 

bound the range of uncertainty in future 

energy prices. All methods and 

documentation will be made available 

for review. 

b. Product Specific. For purposes of· 

national impact analysis, possible 

indirect employment impacts for 

appliance manufacturers, relevant 

service industries, energy suppliers, and 

the economy in general (i.e., national 

employment) due to efficiency 

standards will be analyzed. The 

Department is proposing to use a model. 

which focuses on those sectors of the 

economy most relevant to buildings. 

developed by the Office of Building 

Technologies and State Programs. This 

software, IMBUILD. is a PC-based 

economic analysis system that 

characterizes the interconnections 

among 35 sectors as national inputoutput structural matrices. The model 

can be applied to future time periods. 

The IMBUILD output includes 

employment, industry output, and wage 

income. The impacts of new appliance 

standards are estimated in the NES 

spreadsheet as household eriergy 

savings (reduced energy expenditures). 

and increased appliance purchase price. 

These impacts are output from NES and 

input to IMBUILD. Additional detail is 

provided in the Preliminary TSD. 

F. Consumer Analyses 

The consumer analysis evaluates 

impacts to any identifiable groups. such 

as consumers of different income levels, 

who may be disproportionately affected 

by any national energy efficiency 

standard level. 

The Department could evaluate 

variations in regional energy prices, 

water and sewer prices, variations in 

energy use and variations in installation 

costs that might affect the NPV of a 

standard to consumer sub-populations. 

To the extent possible. DOE obtains 

estimates of the variability in each input 

quantity and considers this variability 

in its calculation of consumer impacts. 

The analysis is structured to answer 

questions such as: How many 

households are better off with standards 

and by how much? How many 

households are not better off and by 

how much? The variability in each 

input quantity and likely sources of 

information are discussed with 

stakeholders. 

Variations in energy use for a 

particular appliance can depend on 

factors such as: climate, type of 

household. people in household, etc. 

Annual energy use can be estimated by 

a calculation based on an accepted test 

procedure or it can be measured directly 

in the field. The Department could 

perform sensitivity analyses to consider 

how differences in energy use will affect 

sub-groups of consumers. 

The impact on consumer sub-groups 

will be determined using the LCC 

spreadsheet model. Details of this model 

are explained in the LCC section of the 

Preliminary TSD. Of particular interest 

is the potential effect of standards on 

households with different income 

levels. 

1. Purchase Price 

a. General. The Department will be 

sensitive to increases in the purchase 

price to avoid negative impacts to 

identifiable population groups, such as 

consumers of different income levels. 

Additionally. the Department will 

assess the likely impacts of an increased 

purchase price on product sales and fuel 

switching. 

b. Product Specific. In order to 

determine the effect of an increase in 

the purchase price, it would be useful 

to know what the elasticity of clothes 

washer prices is. The Department is still 

determining how these data could be . 

obtained. While preliminary analyses 

indicate that factors, such as the current 

state of the economy have a greater 

correlation to sales of washers than do 

an increase in clothes washer prices, it 

is still important to estimate the impact 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64363 

of changing prices on the sales of 

clothes washers. In making estimates of 

these price effects, the Department 

needs to gauge the difference in clothes 

washer sales from a change in the price 

of all clothes washers, as could result 

from revised energy efficiency 

standards. In addition, the Department 

will be estimating how price changes 

from revised energy efficiency standards 

for clothes washers will affect the 

behavior of consumers. 

2. Consumer Participation 

a. General. The Department seeks to 

inform and involve consumers and 

consumer representatives in the process 

of developing standards. This includes 

notification of consumer representatives 

during the rulemaking process and 

where appropriate, seeking direct 

consumer input. 

b. Product Specific. The Act requires 

that "the Secretary consider, among 

other factors, if any lessening of the 

utility or the performance of the 

products is likely to result from the 

imposition of the standard. EPCA. § 325 

(o)(2)(B)(I)(3), 42 U.S.C. 6295 

(o)(2) (B) (I) (3). In this rulemaking 

because comments have been received 

specifically to the consumer utility and 

performance ofV- and H-axis clothes 

washers, the Department reviewed 

existing literature pertaining to these 

issues. . The Department has made available a 

"Draft Report on Consumer Research for 

Clothes Washers." This document is 

included in the appendix of the 

Preliminary TSD. The report 

summarizes research relative to 

consumer satisfaction with H-axis 

washing machines. Sources and projects 

summarized in the report include: 

• Major studies by consortia, 

• Individual utility demand side 

management & market transformation 

studies, 

• Consumer test publications, 

• Trade organizations, and 

• Government projects. 

Based on the December 1997 

Advisory Committee meeting. the 

Consumer Subcommittee made two key 

recommendations to obtain consumer 

input: 

(1) Adopt a three-step process: 

• Obtain background research 

• Hold focus groups 

• Conduct interviews/surveys. 

(2) Initiate the consumer analysis 

process in the clothes washer rule. 

In accordance with the Advisory 

Committee's recommendations, the 

Department reviewed background 

information regarding consumer issues 

related to clothes washers as discussed 

in the "'Draft Report on Consumer 

Research for Clothes Washers." At the 

March 11 , 1998. Clothes Washer 

Workshop, the background research 

findings were presented and a working 

group was formed to develop a method 

for obtaining additional consumer input 

pertinent to the rule. Two comments 

were received on the subject of 

additional consumer research. ACEEE 

found the body of existing studies to be 

fairly compelling, and did not see a 

need for extensive additional work. 

(ACEEE, No. 94 at 4). Raytheon 

recommended that consumer purchase 

studies should involve consumers at all 

income levels and be made using 

existing retail prices excluding rebate 

incentives, for both V-axis and H-axis 

clothes washers. (Raytheon, No. 91 at 2). 

The working group held a conference 

call on April 30, 1998, to evaluate 

different techniques for obtaining 

consumer input. Focus groups, surveys. 

and a conjoint analysis were all 

considered. The working group 

recommended a three-step approach for 

obtaining additional consumer input: 

(1) Develop a list of attributes. Based 

on the working groups' individual 

members' research and knowledge. Each 

member has submitted a list of clothes 

washer attributes valued by consumers, 

(2) Conduct a consumer survey to 

refine the list of attributes that would be 

included in a quantitative consumer 

analysis study, 

(3) Conduct a conjoint analysis to 

quantitatively estimate the value 

consumers place on the clothes washer 

attributes. 

The Department must first announce 

the process to use for 'conducting any 

type of public survey in the Federal 

Register notice in accordance with the 

requirements of the Paperwork 

Reduction Act of 1995, Public Law 104-

13 (44 U.S.C. 3506(c)(2)(A)). This will 

be a, separate notice which is in process 

of being published. The Department will 

then solicit bids for a marketing 

research firm to conduct the focus 

groups to refine the list of attributes and 

to conduct the conjoint analysis. 

G. Manufacturer Impact Analysis 

The manufacturer impact analysis 

estimates the financial impact of 

standards on manufacturers and 

calculates impacts on competition. 

employment, and manufacturing 

capacity. 

Prior to initiating the detailed 

manufacturing impact analysis the 

Department will prepare an approach 

document and have it available for 

review. While the general framework 

will serve as a guide, the Department 

intends to tailor the methodology for 

each rule on the basis of stakeholder 

comments. The document will outline 

procedural steps and outline issues for 

consideration. Three important 

elements of the approach consist of the 

preparation of an industry cash-flow, 

the development of a process to 

consider sub-group cash-flow, and the 

design of an interview guide. 

The policies outlined in the process 

rule required substantial revisions to the 

analytical framework to be used in 

performing manufacturer impact 

analysis for each rulemaking. In the 

approach document, the Department 

will describe and obtain comments on 

the methodology to be used in 

performing the manufacturer impact 

analyses. The manufacturer impact 

analyses will be conducted in three 

phases. Phase 1 consists of two 

activities, namely, preparation of an 

industry characterization and 

identification of issues. The second 

phase has as its focus the larger 

industry. In this phase. the GRIM will 

be used to perform an industry cash 

flow analysis. Phase 3 involves 

repeating the process described in Phase 

2 (the industry cash-flow analysis) but 

on different sub-groups of 

manufacturers. Phase 3 also entails 

calculating additional impacts on 

competition, employment, and 

manufacturing capacity. 

1. Industry Cash Flow 

a. General. A change in standards 

affects the analysis in three distinct 

ways. Increased levels of standards will 

require additional investment. will raise 

production costs, and will affect 

revenue through higher prices and, 

possibly. lower quantities sold. To 

quantify these changes the Department 

performs an industry cashflow analysis 

using the GRIM. Usually this analysis 

will use manufacturing costs, shipments 

forecasts, and price forecasts developed 

for the other analyses. Financial 

information. also required as an input to 

GRIM, will be developed based on 

publicly available data and 

confidentially submitted manufacturer 

information. 

The GRIM analysis uses a number of 

factors-annual expected revenues: 

manufacturer costs such as cost of sales. 

selling and general administration costs, 

taxes, and capital expenditures related 

to depreciation, new standards, and 

maintenance-to arrive at a series of 

annual cash flows beginning from before 

implementation of standards and 

continuing explicitly for several years 

after implementation. The measure of 

industry net present values are 

calculated by discounting the annual 

cash flows from the period before 

implementation of standards to some 
~. 

•I 

·64364 Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

future point in time. The Preliminary 

TSD describes the GRIM's operating 

principles and presents alternative 

approaches to developing the 

information necessary to perform the 

computations. 

b. Product Specific. The Department 

has received manufacturing cost data 

from manufacturers which was 

compiled and reported by AHAM. This 

data wm be used to conduct an industry 

cash flow analysis for the NOPR. A draft 

document "Financial Inputs to GRIMfor 

the Clothes Washer Rulemaking 

Analysis" has been prepared for 

stakeholder review. This document 

outlines and documents the financial 

assumptions to be used in GRIM when 

performing the industry cash flow 

analyses. The Department intends to use 

the ma:nufacturing costs, retail prices, 

and sh!ipment values from the 

prelim:tnary analysis in the GRIM 

model. This will be distributed to 

interested parties prior to the workshop 

to be held after publication of this 

Supplemental ANOPR. 

2. Manufacturer Sub-Group Analysis 

a. General. Using industry "average" 

cost values is not adequate for assessing 

the variation in impacts among subgroups of manufacturers. Smaller 

manufacturers, niche players or 

manufacturers exhibiting a cost 

structure largely different from industry 

averages could be more negatively 

impacted. Ideally. the Department 

would consider the impact on every 

firm individually. In highly 

concentrated industries this may be 

possible. In industries having numerous 

participants, the Department will use 

the results of the industry 

charac1terization to group manufacturers 

exhibiting similar characteristics. The 

financial analysis of the "prototypical" 

firm performed in the Phase 2 industry 

analysi.s can serve as a benchmark 

against: which manufacturer sub-groups 

can be analyzed. 

The manufacturing cost data collected 

for the engineering analysis will be used 

to the extent practical in the sub-group 

impact analysis. To be useful .. however, 

this data should be disaggregated to 

reflect the variability in costs between 

relevant sub-groups of firms. 

The Department will conduct detailed 

interviews with as many manufacturers 

as is possible to gain insight into the 

potenUal impacts of standards. During 

these i:nterviews, the Department will 

solicit the information necessary to 

evalua1ce cashflows and to assess 

competitive, employment and capacity 

impacts. Firm-specific cumulative 

burden will also be considered. 

b. Product Specific. In order to 

conduct a manufacturer sub-group 

analysis, it will be·necessary to define 

representative sub-groups and conduct 

separate cash flow analysis for each. For 

example, one option consists of 

conducting separate cash flows for all 

manufacturers. Another option, could 

entail conducting cash flow analysis 

only for those manufacturers which 

believe their impacts are more severe 

then industry average. The ~epartment 

will outline and discuss these and other 

approaches at the post supplemental 

ANOPR analysis workshop. 

Whirlpool proposed that the GRIM 

model be changed from input to output 

aggregation. Each industry member 

would develop its own inputs to the 

GRIM inodel over a range of MEF levels 

proposed by the DOE. The GRIM models 

would be run by industry members to 

generate a range of individual company 

outputs. The outputs of the individual 

companies could then be aggregated to 

determine industry impact. Individual 

companies would not be required to 

submit detailed input assumptions, but 

only changes in revenues, shipments, 

profit after tax, and cash flow, capital 

investment and design and marketing 

spending could also be provided. A 

third party could do the aggregation and 

then conduct a reality check by 

comparing the aggregated output to 

currently available industry data. 

(Whirlpool No. 66 at 3). The Department 

seeks further input as to how the data 

for the GRIM analysis should be 

collected from the manufacturers and 

how it should be utilized. 

3. Interview Process 

a. General. The revised rulemaking 

process provides for greater public input 

and for improved analytical approaches. 

with particular emphasis on earlier and 

more extensive information gathering 

from interested parties. The proposed 

three-phase manufacturer impact 

analysis process will draw on multiple 

information sources, including 

structured interviews with 

manufacturers and a broad cross-section 

of interested parties. Interviews may be 

conducted in any and all phases of the 

analyses as determined in Phase 1. 

The interview process has a key role 

in the manufacturer impact analyses. 

since it provides an opportunity for 

interested parties to privately express 

their views on important issues. A key 

characteristic of the interview process is 

that it is designed to allow confidential 

information to be considered in the 

rulemaking decision. . The initial industry characterization 

will collect information from relevant 

industry and market publications, 

industry trade organizations, company 

financial reports, and product literature. 

This information will aid in the 

development of detailed and focused 

questionnaires, as needed, to perform all 

phases of the manufacturer impact 

analyses. It is the intention of the 

Department that the contents of 

questionnaires and the list of interview 

participants be publicly vetted prior to 

initiating the interview process. 

The Phase 3 (sub-group analysis) 

.questionnaire will solicit information on 

the possible impacts of potential 

efficiency levels on manufacturing 

costs, product prices, and sales. 

Evaluation of the possible impacts on 

direct employment, capital assets. and 

industry competitiveness will also draw 

heavily on the information gathered 

during the interviews. The 

questionnaires will solicit both 

qualitative and quantitative information. 

Supporting information will be 

requested whenever applicable. 

Interviews will be conducted 

according to DOE procedures. 

Interviews will be scheduled well in 

advance in order to provide every 

opportunity for key individuals to be 

available for comment. Although a 

written response to the questionnaire is 

acceptable, an interactive interview 

process is preferred because it helps 

clarify responses and provides the 

opportunity for additional issues to be 

identified. 

Interview participants will be 

requested to identify all confidential 

information provided in writing or 

orally. Approximately two weeks 

following the interview, an interview 

summary will be provided to give 

participants the opportunity to confirm 

the accuracy and protect the 

confidentiality of all collected 

information. All the information 

transmitted will be considered, when 

appropriate, in DOE's decision-making 

process. However, confidential 

information will not be made available 

in the public record. 

DOE.will collate the completed 

interview questionnaires and prepare a 

summary of the major issues and 

outcomes. The Department will seek 

comment on the outcome of the 

interview process. 

b. Product Specific. The Department 

is developing an interview guide to 

supplement the sub-group GRIM cashflow analysis. The interview will solicit 

information on the possible impacts of 

potential efficiency levels on 

manufacturing costs. product prices. 

and sales. As such it will contribute to 

the Department's understanding of how 

sub-groups may have different values 

for these quantities compared with the 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64365 ' 

overall industry. This will allow the· 

Department to report and explain 

significant variances when publishing 

the analysis results. 

Evaluation of the possible impacts on 

direct employment, capital assets, and 

industry competitiveness will also draw 

heavily on the information gathered 

during the interviews. The 

questionnaires will solicit both 

qualitative and quantitative information. 

Supporting information will be 

requested whenever applicable. 

The Department plans to make a draft 

· of the questionnaire available prior to 

the post-supplemental ANOPR analysis 

workshop. 

H. Competitive Impact Assessment 

a. General. Legislation directs the 

Department to consider any lessening of 

competition that is likely to result from 

standards. It further directs the Attorney 

General to gauge the impacts, if any. of 

any lessening of competition. DOE will 

make a determined effort to gather and 

report firm-specific financial 

information and impacts. The 

competitive analysis will focus on 

assessing the impacts to smaller; yet 

significant, manufacturers. The 

assessment will be based on 

manufacturing cost data and on 

information collected from interviews 

with manufacturers, consistent with 

Phase 3 of the manufacturer impact 

analyses. The Department of Justice 

(DOJ) has offered to help in drafting 

questions to be used 'in the · 

manufacturer interviews. These. 

questions will pertain to the assessment 

of the likelihood of increases in market 

concentration levels and other market 

conditions that could lead to anticompetitive pricing behavior. The 

manufacturer interviews will focus on 

gathering information that would help 

in assessing asymmetrical cost increases 

to some manufacturers, increased 

proportion of fixed costs potentially 

increasing business risks, and potential 

barriers to market entry (proprietary 

technologies, etc.). 

b. Product Specific. The Department 

met with DOJ on June 11, 1998. for 

initial discussions pertaining to the 

manufacturer impacts of potential 

clothes washers standards. DOJ has 

agreed to review the manufacturer 

questionnaire prior to discussions with 

the manufacturers. 

I. Utility Analysis 

The utility analysis estimates the 

effects of proposed standards on electric· 

and gas utilities. · 

1. Proposed Methodology 

a. General. The Department proposes 

to use a version of EIA's widely 

recognized NEMS for the utility and 

environmental analyses. NEMS is a 

large multi-sectoral partial equilibrium 

model of the U.S. energy sector that has 

been developed over several years by 

the EIA primarily for the purpose of 

preparing the Annual Energy Outlook 

(AEO). NEMS produces a widely 

recognized baseline forecast for the U.S. 

through 2020 and is available in the 

public domain. The version of NEMS to 

be used for appliance standards analysis 

will be called NEMS-NAECA. and will 

be based on the AEO 1998 version with 

minor modifications.2 

NEMS offers a sophisticated picture of 

the effect of appliance standards since 

its scale allows it to measure the 

interactions between the various energy 

supply and demand sectors and the 

economy as a whole. In addition, the 

scale of NEMS permits analysis of the 

effects of standards on both the electric 

and gas utility industries. 

To analyze the effect of standards, 

NEMS-NAECA is first run exactly as it 

would be to produce an AEO forecast, 

then a second run is conducted with 

residential energy usage reduced by the 

amount of energy (gas. oil, and 

electricity) saved due to appliance 

standards for the appliance being 

analyzed. The energy savings input is 

obtained from the NES spreadsheet. 

Outputs available are the same as those 

in the original NEMS model including 

residential energy prices, generation and 

installed capacity (and in the case of· 

electricity, which primary fuel is used 

for generation). · 

b. Product Specific. I. Assumptions. 

Other than the difference in energy 

consumption due to clothes washer 

standards, input assumptions into 

NEMS-NAECA will follow those used 

to produce AEO 1998. The entire utility 

analysis will be conducted as a policy 

deviation from the AEO 1998, and the 

assumptions will be the basic set of 

assumptions applied. For example. the 

operating characteristics (energy 

conversion efficiency, emissions rates, 

etc.) of future electricity generating 

plant will be exactly those used in AEO 

1998, and the prospects for natural gas 

supply will be exactly those assumed in 

AEO 1998. 

2 EIA approves use of the name NEMS only to 

·describe an AEO version of the model without any 

modification to code or data. Since, in this work. 

there will be some minor code modifications and 

the model will be run under various policy 

scenarios that deviate from AEO assumptions. DOE 

proposes use of the name NEMS-NAECA for the 

model as used here. 

Since the AEO 1998 version of 

NEMS-NAECA forecasts only to the 

year 2020. a method for extrapolating 

price data to 2030 is required. The 

adopted method uses the EIA approach 

to forecast fuel prices for the Federal 

Energy Management Programs (FEMP). 

These are the prices used by FEMP to 

estimate life-cycle costs of Federal 

equipment procurements. For petroleum 

products, the average growth rate for the 

world oil price over the years 2010 to 

2020 is used in combination with the 

refinery and distribution markups from 

the year 2020 to determine the regional 

price forecasts. Similarly, natural gas 

prices are derived from an average 

growth rate figure in combination with 

regional price margins from the year 

2020. Electricity prices are held 

constant at 2020 levels on the 

assumption that ~e transition to a 

restructured utility industry will have 

been completed. 

ii. Results. In principle, any of the 

forecasts that appear in AEO 1998 could 

be estimated by NEMS-NAECA to take 

into account the effects of a particular 

clothes washer standard level. The 

Department intends to report the major 

results on residential sales of fuels, 

prices of fuels, and generating sources 

displaced by energy savings. As might 

be expected, as the total energy use of 

America is much larger than that 

possible due to the savings from clothes 

washers. there is little expected · 

difference in the forecasted price of 

energy. 

]. Environmental Analysis 

An Environmental Assessment is 

required pursuant to the National 

Environmental Policy Act of 1969 

(NEPA) (42 U.S.C. 4321 et seq.). 

regulations of the Council on 

Environmental Quality (49 CFR parts 

1500-' 1508), the Department regulations 

for compliance with NEPA (10 CFR part 

1021), and the Secretarial Policy on the 

National Environmental Policy Act 

Oune 1994). The Environmental 

Assessment will be presented as part of 

the NOPR and an opportunity will be 

provided for comments prior to the final 

rule. 

The main environmental concern 

addressed is emissions from fossil fuelfired electricity generation. Power plant 

emissions include oxides of nitrogen 

(NOx) and sulfur (S02), as well as 

carbon dioxide (C02). The first two are 

major causes of acid precipitation, 

which can affect humans by reducing 

the productivity of farms, forests and 

fisheries, decreasing recreational 

opportunities and degrading susceptible 

buildings and monuments. NOx is also 

a precursor gas to urban smog and is 

-.. 
·6436U Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 

particularly detrimental to air quality 

during hot, still weather. C02 emissions 

contribute to raising the global 

temperature via the "greenhouse effect." 

The long-term consequences of higher 

temperatures may include perturbed air 

and ocean currents, perturbed 

precipltation patterns. changes in the 

gaseous equilibrium between the 

atmosphere and the biosphere. and the 

melting of some of the ice now covering 

polar lands and oceans. causing a rise in 

sea level. 

1. Proposed Methodology 

a. General. The Department proposes 

to use 1the EIA widely recognized NEMS 

for the appliance environmental 

. analyses (as well as the utility analyses). 

The version of NEMS to be .used for 

appliance standards analysis will be 

called NEMS-NAECA. and will be 

based on the AEO 1998 version with 

minor modifications. NEMS-NAECA is 

run exactly the same as the original 

NEMS except that residential energy 

usage is reduced by the amount of 

energy (gas. oil, and electricity) saved 

due to appliance standards for the 

appliance being analyzed. The input of 

energy savings is obtained from the NES 

spreadsheet. For the environmental 

analysts, the output is the forecasted 

physical emissions. The net benefits of 

a standard will be the difference 

between emissions estimated by.the 

AEO 1998 version of NEMS-NAECA 

and those it estimates with a standard 

in place. 

b. Product Specific. The 

environmental analysis should be 

relatively straightforward using NEMSNAECA. Carbon emissions are tracked 

in NEMS using quite a detailed carbon 

module that provides good results 

because of its broad coverage of all 

sectors and inclusion of interactive 

effects. The only form of carbon tracked 

by NEMS-NAECA is C02. so the carbon 

discussed in this report is only in the 

form of C02 but is reported as elemental 

carbon to remain consistent with the 

AEO 1998.3 

The :two airborne pollutant emissions 

that have been reported in past analyses, 

S02 and NOx. are reported by NEMS-

. NAECA. In the case of S02, the Clean 

Air Acr. Amendments of 1990 set an S02 

emissions cap on all power generation. 

The attainment of this target is flexible 

among generators through the use of 

emissions allowances and tradable 

permits. NEMS includes a module for 

S02 allowance trading and delivers a 

forecast of S02 allowance prices. Please 

note that accurate simulation of S02 

J The canverslon factor from carbon to C02 is 

approximately 3.6667. 

trading tends to imply that physical 

emissions effects will be zero because 

emissions will always be at the ceiling. 

This fact has caused considerable 

confusion in the past. However. there is 

an S02 benefit from conservation in the 

form of a lower allowance price and, if 

big enough to be calculable by NEMSNAECA. this value will be reported. 

Please see TSD for further discussion of 

this issue. One small effect that NEMSNAECA must consider in addition to 

AEO 1998 calculations is the effect of 

standards on S02 emissions from inhouse combustion of oil, since the 

emissions cap does not apply to 

households. This effect is calculated 

using simple emissions factors . The NEMS algorithm for estimating 

NOx emissions also does not estimate 

in-house emissions. nor are the 

emissions calculated for ozone nonattainment areas. In-house emissions 

account for the combustion of fossil 

fuels. primarily natural gas, within 

individual homes. Since households 

that use natural gas, fuel oil or coal do 

contribute to NOx emissions. the effect 

on in-home NOx emissions will be 

calculated externally to NEMS-NAECA. 

using simple emissions factors. 

Energy use for selected appliance 

efficiency levels will be the same as 

those in the NES spreadsheet. Other · 

input assumptions into NEMS-NAECA 

will follow those used to produce AEO 

1998. In principle, any of the forecasts 

that appear in AEO 1998 could be 

estimated by NEMS-NAECA to take into 

account the effects of a particular 

clothes washer standard level. but in the 

standard reporting, the Department 

intends to report emissions of S02, NOx 

and C02. The time horizon of NEMSNAECA is 2020. Beyond this point. 

results will be extrapolated using a 

simple formula (for methodology. see 

preliminary TSD) to extend the forecast 

to 2030. Alternative price forecasts 

corresponding to the side cases found in 

AEO 1998 will also be generated for use 

by NES and will be explored in a similar 

fashion with NEMS-NAECA runs. 

K. Regulatory Impact Analysis 

DOE will be preparing a draft 

regulatory analysis pursuant to E.O. 

12866, "Regulatory Planning and 

Review," which will be subject to 

review under the Executive Order by the 

Office of Information and Regulatory 

Affairs (OIRA) 58 FR 51735 (October 4. 

1993). Six major alternatives were 

identified by DOE as representing 

feasible policy options to achieve 

consumer product energy efficiency. 

Each alternative will be evaluated in 

terms of ability to achieve significant 

energy savings at a reasonable cost and 

will be compared to the effectiveness of 

the rule. 

As part of the docket for the 

Refrigerator Products Energy 

Conservation Standards (Docket No. EERM93-80 l) AHAM stated that the 

Department needs to improve the 

evaluation of non-regulatory means of 

achieving energy savings. (AHAM. No. 

207 at 7). 

Under the Process Rule policies, the 

Department is committed to continually 

explore non-regulatory alternatives to 

standards. In the table below is a 

discussion of what was examined in 

1994 and what is being proposed for 

this rulemaking. The Department is 

seeking comments on this approach. 

This approach is further discussed in 

the TSD. 

Alternatives examined 

in 1994 

-No action ............. .. 

-Consumer tax credits. 

-Manufacturer tax 

credits. 

-Perfonnance standards. 

-Consumer rebates 

-Prescriptive standards 

-Voluntary standard 

-Enhanced labeling. 

and consumer education 

Alternatives to examine in 1998 

-No new regulatory 

action. 

--consumer tax credits. 

-Manufacturer tax 

credits. 

-Perfonnance standards. 

-Rebates. 

-Voluntary energy 

efficiency targets. 

-Earty replacement. 

-Mass government 

purchases. 

ill. Standards Scenarios 

Upon reviewing the preliminary LCC 

and NES results, the Department 

observes that the efficiency levels 

analyzed, 5 to 50 percent efficiency 

improvement over baseline efficiency. 

produced a range of impacts. For 

example, the NES impacts show a range 

from 0.36-10.06 quads of energy saved 

over the 2003 to 2030 period. As 

expected, the higher the efficiency level. 

the greater the savings. Similarly, the 

analysis shows an increase in water 

savings from 0.46 to 12.47 trillions of 

gallons saved. On the other hand, the 

NPV shows an increase from $1.02 

billion at the 5 percent level, to a 

maximum of $13.53 billion at the 40 

percent level. and then a reduction to 

$9.07 billion at the 50 percent level. The 

LCC and payback analyses show results 

similar to the NPV analysis where the 

greatest economic benefit is at the 40 

percent level. 

Based on the analyses performed, the 

40 percent efficiency level standard 

would appear to result in the greatest 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64367 

economic benefit to the Nation. (See 

Tables 3, 4 and 8.) The national net 

present benefit at the 40 percent 

efficiency level (which represents an 

equivalent to a moderate H-axis level) is 

$13.53 billion. This is approximately 22 

percent higher than the NPV benefit at 

the 25 percent efficiency level (which 

represents the current highest V-axis 

level) and 49 percent higher than the 50 

percent level, the maximum 

technologically feasible level. The LCC 

results in Table 3 indicate that a 40 

percent efficiency level has the greatest 

consumer mean LCC savings. At 40 

percent, the consumer mean LCC 

savings is $253, or $48 and $49 greater 

than the 25 and 50 percent levels, 

respectively. In addition, at the 40 

percent level, the range in LCC impacts 

is a savings of $2,039 (0th percentile) to 

an increase of $645 (lOOth percentile}. 

The LCC analysis further shows that at 

the 40 percent level approximately 83. 7 

percent of consumers will experience a 

LCC savings; and that only 16.3 percent 

of the Nation's population will 

experience an increase in LCC. Whereas, 

the LCC analysis indicates that at the 25 

percent efficiency level, standards will 

negatively impact 10.8 percent of the 

Nation's population and at the 50 

percent level, standards will adversely 

impact 25.8 percent of the population. 

(See Table 3.) 

Also, the rebuttable presumption 

payback periods shown in Table 5 

indicate that all efficiency levels from 5 

percent up to 25 percent show a less 

than 3 year payback. The 40 percent 

efficiency level shows a 3. 7 year 

payback which represents a reasonable 

payback period considering the 

increased energy savings at this level. 

There is a significant jump in the 

payback period at the 45 and 50 percent 

efficiency levels therefore making these 

efficiency levels look less attractive. 

These observations are based on 

preliminary LCC and NES results which 

will be updated and revised in the 

NOPR and final rule analyses. These 

observations, however, do not include 

analyses results from the manufacturer 

impact or consumer subgroup and 

survey information. 

The following are examples of 

possible alternative standards scenarios 

for consideration by the Department: 

• A moderate standard at an early 

effective date. For example, a level at a 

25 percent improvement, effective three 

years after the publication of the Final 

Rule. 

• A stringent standard. at a later 

effective date. For example, a level at 45 

percent improvement effective five 

years after the publication of the Final 

Rule. 

• A two phase approach. For 

example. a level at 20 percent effective 

three years after the publication of the 

Final Rule (projected effective dateOctober, 2002) and a level at 40 percent 

effective eight years after publication of 

the Final Rule. 

The Department seeks comments on 

the alternative standard scenarios for 

consideration in the analysis for the 

proposed rule. 

IV. Public Comment Procedures 

A. Participation in Rulemaking 

The Department encourages the . maximum level of public participation 

possible in this rulemaking. Individual 

consumers, representatives of consumer 

groups. manufacturers, associations, 

States or other governmental entities, 

utilities. retailers. distributors, 

manufacturers, and others are urged to 

submit written statements on the 

proposal. 

The Department has established a 

period of 75 days following publication 

of this document for persons to 

comment on this proposal. All public 

comments received will be available for 

review in the Department's Freedom of 

Information Reading Room. In addition, 

the following data is available in the 

Department's Freedom of Information 

Reading Room: 

• Copies of the Preliminary TSD 

• Transcripts of the public hearings 

• Copies of the public comments 

received by the Department 

• Previous Federal Register notices 

relating to this clothes washer 

rulemaking - . · A public hearing will be held on 

December 14 (I :00-4:00 p.m.) and 15 

(9:00 a.m.-4:00 p.m.), 1998, at the U.S. 

Department of Energy, Forrestal · 

Building, 1000 Independence Avenue 

SW, Room lE-245, Washington. D.C. 

20585. The December 14 session will be 

a training session for the Government 

Regulatory Impact Model (GRIM). More 

detailed information about this hearing 

will be on the Office of Codes and· 

Standards web site beginning in 

November. The web site address is as 

follows: http://www.eren.doe.gov/ 

buildings/codes_standards/index.htm. 

B. Written Comment Procedures 

Interested persons are invited to 

participate in this proceeding by 

submitting written data, views, or 

arguments with respect to the subjects 

set forth in this document. Comments 

will not be ~ccepted by fax or e-mail. 

Instructions for submitting written 

comments are set forth at the beginning 

of this document and below. 

Comments should be labeled both on 

the envelope and on the documents. 

"Clothes Washer Rulemaking (Docket 

No. EE-RM-94-403)." and must be 

received by the date specified at the 

beginning of this document. Ten copies 

are requested to be submitted. 

Additionally, the Department wpuld 

appreciate an electronic copy of the 

comments to the extent possible. The 

Department is currently using 

WordPerfectTM 6.1. All comments and 

other relevant information received by 

the date specified at the beginning of 

this document will be considered by the 

Department in the proposed rule. 

All written comments received on the 

supplemental Advance Notice of 

Proposed Rulemaking will be available 

for public inspection at the Freedom of 

Information Reading Room, as provided 

at the beginning of this document. 

Pursuant to the provisions of 10 CFR 

1004.11, any person submitting 

information or data that is believed to be 

confidential, and exempt by law from 

public disclosure, should submit one 

complete copy of the document and ten 

(IO) copies. if possible, from which the 

information believed to be confidential 

has been deleted. The Department will 

make its own determination with regard 

to the confidential status of the 

information or data and treat it 

according to its determination. 

Factors of interest to the Department, 

when evaluating requests to treat 

information as confidential. include: (1) 

a description of the item; (2) an 

indication as to whether and why such 

items of information have been treated 

by the submitting party as confidential. 

and whether and why such items are 

customarily treated as confidential, and 

whether and why such items are 

customarily treated as confidential 

within the industry; (3) whether the 

information is generally known or 

available from other sources; (4) 

whether the information has previously 

been available to others without 

obligation concerning its 

confidentiality; (5) an explanation of the 

competitive injury to the submitting 

person that would result from public 

disclosure; (6) an indication as to when 

such information might lose its 

confidential character due to the 

passage of time; and (7) whether 

disclosure of the information would be 

in the public interest. 

C. Issues for Public Comment 

The Department is interested in 

receiving comments and data to 

improve its preliminary analysis. In 

particular, the Department is interested 

in seeking response to the following 

questions and/or concerns that were 

addressed In this rulemaking. 
Federal Register/Vol. 63, No. 223/Thursday. November 19, 1998/Proposed Rules 

Information on the energy efficiency 

and relative market shares of current 

products on the market as described by 

the Modified Energy Descriptor (MEF): 

• The Department has limited 

information concerning the energy 

performance of existing product 

offerings using the MEF descriptor. 

Given the vastly different nature of the 

variables and testing methods of the 

current ] and future ] 1 test procedures, 

the EF values cannot be translated to 

MEFvalues. 

Proposed product classes for products 

in this rulemaking: 

• In their written comments, 

Whirlpool asked the Department to 

mainta:ln the current efficiency 

requirement for the compact class due 

to the limited potential for energyefficient improvements and the small 

market share for these products. 

Whirlpool also indicated that the V-axis 

compact clothes washer market and the 

manufacturing base for these products 

has changed since the current standards 

were developed. The previous standalone 1.6 ft.3 compact V-axis clothes 

washer products have been replaced by 

a product that maintains the small 

cabinet (22" width) utility and 

portability (via castors); however, its 

basket 1:apacity is slightly larger. 

Because of the limited market size, 

Whirlpool is currently the only 

manufocturer of these products. J'hey 

also supply them to other appliance 

companies for sale under various brand 

names. For these reasons, the 

Department will revise the compact Vaxis product class definition (1.6 ft.3 

capacity) to include all V-axis clothes 

washers less than 2.0 ft.3 (Whirlpool. 

No. 69 at 3). The Department plans to 

increase the compact class to include all 

clothes washers (both V- and H-axis 

machines) less than 2.0 ft.3 and seeks 

comments on this change. 

• The Department received comments 

suggesting that it identify V- and H-axis 

machines as a single product class. 

Whirlpool stated that the DOE's 

analyses to date and the recent 

consumer acceptance in the market of 

H-axis products confirm the validity of 

a single product class, irrespective of 

the axis. Whirlpool further stated that 

the concerns over clothes washer 

performance, consumer utility and 

reliability are unfounded in either 

principle or fact. (Whirlpool. No. 93 at 

I.) The Natural Resources Defense 

Council (NRDC) stated that the "H-axis" 

design option does not affect the utility 

of clothes washers and it is not the only 

design option that can comply with the 

standards. According to the NRDC, the 

evidence does not support the 

establishment of different standards 

even if separate classes were 

established. (NRDC, No. 60 at 1.) 

However, other commenters feel that 

the Department should not reject 

separate product classes. General 

Electric Appliances (GEA) indicated 

that the Department is proceeding as if 

all relevant consumer utilities are met 

by H-axis products already on the 

market or by machines planned for 

production. GEA further stated that the 

port of access is not the only relevant 

consumer utility that must be 

addressed. Many other consumer 

utilities, including reliability, must be 

addressed. (GEA, No. 88 at 2.) The 

Department seeks additional comments 

on this issue and is currently working 

with stakeholders to formulate a process 

to gather additional consumer input on 

the issues surrounding clothes washer 

utility. This process is discussed further 

in Section 11.F.2.b. 

The relationship between clothes 

washer capacity and the maximum 

achievable efficiency using 

conventional V-axis designs: 

• AHAM commented that the testing 

performed for DOE reflects an incorrect 

assessment of energy efficiency on 

current models and indicated that 

manufacturers could not achieve these 

levels with traditional V-axis clothes 

washers. (AHAM. No. 84 and 86). Based 

on follow-up testing conducted for DOE, 

there appears to be a significant 

variation in the RMC values obtained in 

tests even for clothes washer5 of the 

same model. DOE plans to further 

review this issue. Since the two models 

approaching a 30 percent improvement 

in efficiency were "super capacity" 

models, the Department will try to 

determine if capacity or volume effects · 

the maximum achievable efficiency 

improvement in V-axis designs. The 

Department seeks comment on this 

issue. 

Data as to whether detergent use is a 

factor in consumer operating cost and 

savings: 

• ACEEE stated that the present 

analysis ignores the possibility that 

some consumers will use less detergent 

with new high-efficiency machines than 

with standard machines. They 

recommend that DOE construct two 

alternative scenarios (one that no 

detergent will be saved and the other 

that some consumers will use less 

detergent). ACEEE indicated that the 

Bern Kansas study provided some 

evidence for detergent savings. (ACEEE. 

No. 94 at 2). Proctor and Gamble 

commented that the perception that 

detergent dosage will reduce in 

horizontal axis or drum washers 

essentially proportionally to water 

volume is invalid. This appears to be a 

popular belief, but it is not substantiated 

by the facts. The important impact is 

that users of new lower water/energy 

efficient washers cannot expect to find 

detergent cost savings. (Proctor & 

Gamble, No. 9 at 1). DOE seeks 

additional data on this issue. 

Data on retail mark-up assumption: 

• The American Council for an 

Energy-Efficient Economy (ACEEE) 

commented that at the March 1998 

workshop the Circuit City representative 

suggested that assuming an average 40 

percent retail markup is probably too 

high. A 25 percent retail markup was 

more typical of the industry. The 40 

percent estimate may have factored in 

higher markups on extended warranties 

and other services. (ACEEE, No. 94 at 3). 

In reviewing Circuit City's comment, the 

Department understands that the 

statement referred to a gross margin of 

25 percent which represents a mark-up 

of 1.33. This is in close agreement with 

the Department analysis of retailer 

financial statements having an 

important component of appliances in 

their product mix (25.2 percent to 26.3 

percent gross margin). Also, as 

referenced in the Preliminary TSD, this 

gross margin is the net of some buying 

and warehousing costs. At present the 

Department has no basis for changing 

the retail mark-up assumption. DOE will 

continue to research data sources and 

seeks comment on this issue. 

Information on national level 

historical. current, and projections of 

water and sewer rates: 

• Information on water prices is not 

as readily available as fuel prices 

information. Some utilities have large 

fixed charges, while others are 

subsidized or paid for through taxes. 

Furthermore, there are no standard 

approaches to calculating water and 

sewer costs. In some locations the price 

of water increases as consumption 

increases. In other areas, water price 

decreases with increasing consumption. 

Additional consideration must be given 

·to consumers who are not connected to 

a municipality water supply or sewage 

system. In some cases, only one or the 

other is connected. As with other 

variables, the Department plans to use a 

range of water prices in the economic 

analysis to account for the variability 

among different households. DOE seeks 

information on national level historical. 

current, and projections of water and 

sewer rates. 

• The Department agrees that future 

water prices should not be assumed to 

be constant and is therefore in the 

process offurther analyzing both 

current prices and future escalation 

rates. The proposed analysis is on going 

and will be completed after the ANOPR 
Federal Register/Vol. 63, No. 223/Thursday, November 19, 1998/Proposed Rules 64369 .. 

is released. The proposed analysis 

consists of updating previous data from 

Ernst and Young report as adjusted by 

Al Dietemann, as well as the use of new 

data obtained from the American Water 

Works Association (AWWA). The Ernst 

and Young data is being updated by 

calling 125 utilities, getting their water 

rate schedules and their forecasts for the 

future, as well as any historical 

information available. The Department 

is working on combining these two data 

sources into one database. This data will 

be organized by utility and can be 

mapped onto either individual RECs 

households or onto regional areas. A 

distribution of water prices (as in the 

current analysis) will be used, as well as 

a distribution of escalation rates. In an 

attempt to be consistent with the 

methodology being developed for fuel 

rates, the Department will attempt to 

establish marginal water rates and water 

prices and escalation rates that vary 

with the water/wastewater utility. The 

Department is seeking comments 

concerning this approach. 

Information relating to the' 

determination of price and operating 

cost elasticities: 

• In order to determine the effect of 

an increase in the purchase price. it 

would be useful to know what the 

elasticity of clothes washer ~rices is. 

The Department is still determining 

how these data could be obtained. 

While preliminary analyses indicate 

that factors, such as the current state of 

the economy have a greater correlation 

to sales of washers than do an increase 

in clothes washer prices. it is still 

i~portant to estimate the impact of 

changing prices on the sales of clothes 

washers. In making estimates of these 

price effects, the Department needs to 

gauge the difference in clothes washer 

sales from a change in the price of all 

clothes washers, as could result from 

revised energy efficiency standards. In 

addition, the Department will be 

estimating how price changes from 

revised energy efficiency standards for 

clothes washers will affect the behavior 

of consumers. . · Information on how the data for the 

GRIM analysis should be collected from 

the manufacturers: 

• Whirlpool proposed that the GRIM 

model be changed from inpu,t to output 

aggregation. Each industry member 

would develop their own inputs to the 

GRIM model over a range of MEF levels 

proposed by the DOE. The GRIM models 

would be run by industry members to 

generate a range of individual company 

outputs. The outputs of the individual 

companies could then be aggregated to 

determine industry impact. Individual 

companies would not be required to 

submit detailed input assumptions, but 

only changes in revenues, shipments, 

profit after tax, and cash flow, capital 

investmer:it and design and marketing 

spending could also be provided. A 

third party could do the aggregation and 

then conduct a reality check by 

comparing the aggregated output to 

currently available industry data. 

(Whirlpool No. 66 at 3). The Department 

seeks further input as to how the data 

for the GRIM analysis should be 

collected from the manufacturers and 

how it should be utilized. 

Comments on the proposed DOE 

approach for determining shipments: 

• In as much as the accounting model 

is the only approach that will take into 

account price and operating costs, the 

Department believes it should be the 

primary tool for forecasting clothes 

washer shipments. The Department 

seeks comments about the 

determination of price and operating 

cost elasticities. 

• For the purpose of the base case 

forecast in the preliminary analysis, the 

impact of voluntary programs has been 

expressed as the percent of new clothes 

washers sold each year that will have 

efficiencies corresponding to those of Haxis washers. The H-axis washer is 

characterized using the data submitted 

by AHAM for a 35 percent energy 

reduction from the baseline MEF. The 

spreadsheet uses disaggregated values 

(i.e., water heater energy, dryer energy 

and mechanical energy) provided by 

AHAM. Disaggregated values provided 

by AHAM for the baseline washer are 

also used for the base case forecast. 

Calculations based on disaggregated 

values reflect the efficiencies of 

machines actually being sold which 

may differ from the minimum required 

efficiency. The preliminary base case 

assumes a 1.5 percent share of H-axis 

machines in 1995 with a 0.5 percent 

increase in H-axis sales every year 

thereafter, until 2030 (i.e., 19 percent). 

The NES spreadsheet allows for 

changes in the distribution of 

efficiencies of clothes washers due to 

non-regulatory programs. The user 

specifies the percent of new clothes 

washer sales that will achieve the 

selected energy reduction (relative to 

the baseline washer design) in future 

years. In later analyses (i.e., the NOPR) 

the Department expects to use a 

distribution of current and forecasted 

efficiencies based on the best available 

information. Information is still being 

gathered for this task. The Department 

seeks comment on this forecast and 

welcomes any available information on 

current product efficiencies. 

Data on the possible adverse affects of 

standards on identifiable groups of 

consumers that experience belowaverage utility or usage rates: 

• The consumer analysis evaluates 

impacts to any identifiable groups. such 

as consumers of different income levels, 

who may be disproportionately affected 

by any national energy efficiency 

standard level. 

Information on what non-regulatory 

alternatives to standards need to be 

reviewed: 

• Under the Process Rule policies. the 

Department is committed to continually 

explore non-regulatory alternatives to 

standards. In the table below is a 

discussion of what was examined in 

1994 and what is being proposed for 

this rulemaking. The Department is 

seeking comments on this approach. 

This approach is further discussed in 

theTSD. . 

Alternatives examined 

in 1994 

-No action .............. . 

-Consumer tax credits. 

-Manufacturer tax 

credits. 

-Performance standards. 

-Consumer rebates 

-Prescriptive standards. 

-Voluntary standards 

-Enhanced labeling 

and consumer education .. 

Alternatives to examined 

-No new regulatory 

action. 

-Consumer tax credits. 

-Manufacturer tax 

credits. 

-Performance standards. 

-Rebates. 

-Voluntary energy 

efficiency targets. 

-Ear1y replacement. 

-Mass government 

purchases. 

Comments on the alternative standard 

scenarios: 

• The following are examples of 

possible alternative standards scenarios 

for consideration by the Department: 

• A moderate standard at an early 

effective date. For example, a level at a 

25 percent improvement, effective three 

years after the publication of the Final 

Rule. 

• A stringent standard, at a later 

effective date. For example, a level at 45 

percent improvement effective five 

years after the publication of the Final 

Rule. 

• A two phase approach. For 

example, a level at 20 percent effective 

three years after the publication of the 

Final Rule (projected effective dateOctober, 2002) and a level at 40 percent 

effective eight years after publication of 

the Final Rule. 

V. Review Under Executive Order 

12866 

DOE provided to the Office of 

Information and Regulatory Affairs 
<64370 Federal Register /Vol. 63, No. 223 /Thursday, November 19, 1998 I Proposed Rules 

(OIRA) in the Office of Management and 

Budget a copy of this document for 

comment. At the proposal stage for this 

rulemaking. DOE and OIRA will 

determi.ne whether this rulemaking is a 

significant regulatory action under 

Executive Order 12866, Regulatory 

Planning and Review. 58 FR 51735 

(Octobe·r 4, 1993). Were DOE to propose 

amendments to the energy conservation 

standards for clothes washer, the 

rulemaking could constitute an 

economically significant regulatory 

action and DOE would prepare and 

submit to OIRA for review the 

assessment of costs and benefits 

required by Section 6(a)(3) of Executive 

Order 12866. Other procedural and 

analysis requirements in other 

Executive Orders and statutes also may 

apply to such future rulemaking action, 

including the requirements of the 

Regulatory Flexibility Act, 5 U.S. C. 601 

et seq.; the Paperwork Reduction Act, 44 

U.S.C. 3501 et seq.; and the Unfunded 

Mandates Act of 1995, Pub. L. 104-4; 

and the National Environmental Policy 

Act of 1969, 42 U.S. C. 4321 et seq. 

The draft of today's action and any 

other documents submitted to OIRA for 

review have been made a part of the 

rulemaking record and are available for 

public review in the Department's 

Freedom of Information Reading Room. 

1000 Independence Avenue, SW. Room 

lE-190, Washington, DC 20585 between 

the hours of 9:00 and 4:00, Monday 

through Friday, telephone (202) 586-

6020. 

Issued in Washington, DC, on October 23. 

1998. 

Dan W. Reicher, 

Assistant Secretary. Energy Efficiency and 

Renewable Energy. 

[FR Doc. 98-30555 Filed 11-18-98; 8:45 am] 

BILLING CODE 6450--01-P