From: Anderson, Wes 

Sent: Monday, June 02, 2008 7:45 PM 

To: 'Douglas Brookman'; Edwards, Brenda; Stas, Eric; Kido, Michael; Lewis, Ronald; McCabe, 

Michael; Friedrichs, Mark; Raymond, Michael; Pinto, Francine; Adam Darlington; Anderson, Wes; 

Bing Liu; Gregory Rosenquist (gjrosenquist@lbl.gov); Michael Scott (michael.scott@pnl.gov); 

Mike Christopher; Parker, Graham B; Sriram Smasundaram (sriram.somasundaram@pnl.gov) 

Subject: Notification of a rulemaking action to be taken on Residential Central Air Conditioners 

and Heap Pumps by the Department of Energy

This email is to inform you that DOE is initiating a rulemaking and data collection process to 

consider establishing amended energy conservation standards for Residential Central Air 

Conditioners & Heat Pumps [Docket No.: EERD-2008-BT-STD-0006], [RIN: 1904-AB47]. There 

will be a Public Meeting held at the Department of Energy’s Headquarters location to discuss and 

receive comments on its planned analytical approach and issues it will address in this rulemaking 

proceeding. Public meeting information is listed below: 

Public Meeting Information:

Time:

09:00 AM- 04:00 PM Eastern Daylight Time 

Date:

June 12, 2008 

Location:

Room 1E245 

1000 Independence Ave. SW, 

Washington, DC 20585-0121 

DOE welcomes written comments from the public on this rulemaking. To inform stakeholders and 

to facilitate this process, DOE has prepared a Framework Document (Attached File: CAC 

Framework_Document06-02-08) which details the analytical approach and identifies several 

issues on which DOE is particularly interested in receiving comment. Also attached to this email 

is the Federal Register’s Notice of Document Availability (Attached File: CAC 

Framework_Fed_Reg_Notice06-02-08) summarizing who to contact and how to submit 

comments. 

EERE-2008-STD-0006 COMMENT 01
[6450-01-P] 

Rulemaking Framework for 

Residential Central Air Conditioners and Heat Pumps 

RIN: 1904-AB47 

United States Department of Energy 

Office of Energy Efficiency and Renewable Energy 

Building Technologies Program 

June 2, 2008 

EERE-2008-STD-0006 COMMENT 01
ii 

TABLE OF CONTENTS

1. INTRODUCTION ..................................................................................................................1 

1.1 The Residential Appliances and Commercial Equipment Standards Program...........2 

1.2 Overview of Central Air Conditioners and Heat Pumps ............................................3 

1.2.1 Product Definitions ......................................................................................4 

1.2.2 Performance Descriptors..............................................................................5 

1.2.3 Test Procedures............................................................................................6 

1.3 Regional Standards .....................................................................................................9 

1.4 Rulemaking Process and Stakeholder Participation .................................................12 

1.4.1 Advance Notice of Proposed Rulemaking.................................................14 

1.4.2 Notice of Proposed Rulemaking ................................................................16 

1.4.3 Final Rule...................................................................................................16 

2. OVERVIEW OF ANALYSES FOR RULEMAKING.........................................................17 

3. MARKET AND TECHNOLOGY ASSESSMENT .............................................................19 

3.1 Market Assessment ...................................................................................................19 

3.2 Product Classes .........................................................................................................20 

3.2.1 Split Systems and Single-Package Systems...............................................20 

3.2.2 Small-Duct High-Velocity Systems...........................................................21 

3.2.3 Space-Constrained Products ......................................................................24 

3.2.4 Ductless Split Systems...............................................................................28 

3.3 Technology Assessment............................................................................................29 

4. SCREENING ANALYSIS ...................................................................................................30 

5. ENGINEERING ANALYSIS...............................................................................................30 

5.1 Engineering Analysis Overview ...............................................................................31 

5.2 Baseline Units ...........................................................................................................31 

5.3 Planned Approach for Determining the Cost-Efficiency Relationship.....................32 

5.4 Efficiency Levels ......................................................................................................33 

5.5 Manufacturer Prices..................................................................................................35 

5.6 Proprietary Designs...................................................................................................35 

5.7 Outside Regulatory Changes Affecting the Engineering Analysis...........................36 

5.7.1 Refrigerant Phase-out.................................................................................36 

6. ENERGY USE ANALYSIS .................................................................................................38 

6.1 Overview of Energy Use Analysis............................................................................38 

6.2 Annual Energy Consumption in Households............................................................39 

6.3 Annual Energy Consumption in Commercial Buildings ..........................................41 

7. MARKUPS FOR EQUIPMENT PRICE DETERMINATION............................................42 

7.1 Description of Distribution Channels .......................................................................42 

8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES .........................................44 

8.1 Overview...................................................................................................................44 

8.2 Electricity Prices .......................................................................................................45 

8.3 LCC Discount Rates .................................................................................................48 

8.4 Maintenance, Repair, and Installation Costs.............................................................49 

8.5 Equipment Lifetime ..................................................................................................50 

9. SHIPMENTS ANALYSIS ...................................................................................................50 

9.1 Base-Case Forecast ...................................................................................................50 

EERE-2008-STD-0006 COMMENT 01
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9.2 Standards Impacts on Product Shipments.................................................................53 

10. NATIONAL IMPACT ANALYSIS .....................................................................................54 

10.1 Inputs to NES and NPV Forecast..............................................................................54 

10.2 Calculation of Energy Savings..................................................................................55 

10.3 Net Present Value .....................................................................................................56 

11. LIFE-CYCLE COST SUBGROUP ANALYSIS .................................................................57 

12. MANUFACTURER IMPACT ANALYSIS.........................................................................57 

12.1 Sources of Information .............................................................................................58 

12.2 Industry Cash Flow Analysis....................................................................................59 

12.3 Manufacturer Subgroup Analysis .............................................................................59 

12.4 Competitive Impacts Assessment .............................................................................60 

12.5 Cumulative Regulatory Burden ................................................................................60 

13. UTILITY IMPACT ANALYSIS..........................................................................................60 

14. EMPLOYMENT IMPACT ANALYSIS..............................................................................61 

15. ENVIRONMENTAL IMPACT ANALYSIS .......................................................................62 

16. REGULATORY IMPACT ANALYSIS ..............................................................................64 

LIST OF FIGURES 

Figure 1. Flow Diagram of Analyses for the Central Air Conditioners and Heat Pumps 

Standards Rulemaking Process .....................................................................................18 

LIST OF TABLES 

Table 1. Planned Product Classes for Central Air Conditioners and Heat Pumps. ......................20 

Table 2. Current Energy Conservation Standards for Central Air Conditioners and Heat 

Pumps. ...........................................................................................................................32 

Table 3 Efficiency Levels for Product Classes of Central Air Conditioners................................34 

Table 4 Efficiency Levels for Product Classes of Central Air Conditioning Heat Pumps...........34 

Table 5. United States R-22 Refrigerant Phase-out Schedule ......................................................37 

EERE-2008-STD-0006 COMMENT 01
iv 

LIST OF ACRONYMS 

AEO Annual Energy Outlook 

AHS American Housing Survey 

ANOPR advance notice of proposed rulemaking 

AHRI Air Conditioning, Heating, and Refrigeration Institute 

ARI Air-Conditioning and Refrigeration Institute 

ARW Air Conditioning & Refrigeration Wholesalers Association 

ASHRAE American Society of Heating, Refrigerating, and Air Conditioning Engineers 

BOM bill-of-materials 

BT Building Technologies Office 

Btu British thermal units 

Btu/h British thermal units per hour 

CAIR Clean Air Interstate Rule 

CAMR Clean Air Mercury Rule 

CBECS Commercial Building Energy Consumption Survey 

CDD cooling degree day 

CFC chlorofluorocarbon 

CFR Code of Federal Regulations 

CO2 carbon dioxide 

COP coefficient of performance 

CSL candidate standard level 

DOE United States Department of Energy 

DOJ Department of Justice 

EERE Energy Efficiency and Renewable Energy 

EEV electronic expansion valve 

EIA Energy Information Administration 

EISA Energy Independence and Security Act of 2007 

EPA Environmental Protection Agency 

EPACT Energy Policy Act of 2005 

EPCA Energy Policy and Conservation Act of 1975 

GAMA Gas Appliance Manufacturers Association 

GRIM Government Regulatory Impact Model 

HARDI Heating, Air Conditioning, and Refrigeration Distributors International 

HCFC hydrochlorofluorocarbons 

HDD Heating degree day 

Hg mercury 

HSPF heating seasonal performance factor 

ImSET Impact of Sector Energy Technologies 

LCC life-cycle cost 

MIA manufacturer impact analysis 

MPC manufacturer production cost 

NAECA National Appliance Energy Conservation Act of 1987 

NEMS National Energy Modeling System 

NEMS-BT a version of the NEMS developed for DOE-Building Technologies office 

NES national energy savings 

EERE-2008-STD-0006 COMMENT 01
v 

NHRAW Northamerican Heating, Refrigeration & Air Conditioning Wholesalers 

NIA national impact analysis 

NIST National Institute of Standards and Technology 

NOPR notice of proposed rulemaking 

NOX oxides of nitrogen 

NPV net present value 

OHA Office of Hearings and Appeals 

OMB Office of Management and Budget 

PBP payback period 

PTAC packaged terminal air conditioner 

R&D research and development 

RECS Residential Energy Consumption Survey 

SDHV small-duct, high-velocity 

SEER seasonal energy efficiency ratio 

SG&A selling, general, and administrative 

SANOPR Supplemental Advance Notice of Proposed Rulemaking 

SNOPR Supplemental Notice of Proposed Rulemaking 

SO2 sulfur dioxide 

SPVU single package vertical unit 

SWEF shipment weighted energy factor 

TMY typical meteorological year 

TSD technical support document 

TSL trial standard level 

TTW through-the-wall 

TXV thermostatic expansion valve 

WACC weighted-average cost of capital 

EERE-2008-STD-0006 COMMENT 01
1 

Rulemaking Framework for Residential Central Air Conditioners and Heat 

Pumps 

1. INTRODUCTION 

The purpose of this document is to describe the procedural and analytical approaches the United 

States Department of Energy (DOE) anticipates using to evaluate and update existing energy 

conservation standards for residential central air conditioners and heat pumps. Residential 

central air conditioners and heat pumps include equipment that are single phase1 and with a rated 

capacity below 65,000 British thermal units per hour (Btu/h). 

The DOE Appliances and Commercial Equipment Standards Program, within the Office of 

Energy Efficiency and Renewable Energy’s (EERE’s) Building Technologies Program (BT), 

develops and promulgates test procedures and energy conservation standards for residential 

appliances and commercial equipment. The process for developing standards involves analysis, 

public notice, and consultation with interested parties. Such parties, collectively referred to as 

“stakeholders,” include manufacturers, consumers and/or customers, energy conservation and 

environmental advocates, State and Federal agencies, and any other groups or individuals with 

an interest in the standards. 

This document is intended to inform stakeholders of the process for the energy conservation 

standards rulemaking for residential central air conditioners and heat pumps, and to encourage 

and facilitate stakeholder input during the rulemaking. This document is the starting point for 

developing standards and is not a definitive statement with respect to any issue to be determined 

in the rulemaking. 

Section 1 provides an overview of the rulemaking process. Sections 2 through 16 discuss the 

analyses DOE intends to conduct to fulfill the statutory requirements for this standards 

rulemaking. DOE will perform a set of separate analyses, including an engineering analysis, 

life-cycle cost and payback period analyses, a national impact analysis, and a manufacturer 

impact analysis for each type of appliance classified into product classes covered by this 

rulemaking.

Information regarding this rulemaking will be maintained on the DOE website at 

http://www.eere.energy.gov/buildings/appliance_standards/

This document contains comment boxes that highlight issues on which DOE seeks 

comment and requests feedback from interested parties. These boxes are also used to ask 

specific questions on the approaches DOE plans to follow in conducting the analyses 

required for the standards rulemaking. Such requests for stakeholder feedback are 

numbered according to the section in which they appear. 

 

1

 “Single-phase” refers to the type of electrical supply. Single-phase electricity is supplied to residential and many 

small commercial buildings and refers to the distribution of electric power using a system in which all the voltages 

of the supply vary in unison. 

EERE-2008-STD-0006 COMMENT 01
2 

1.1 The Residential Appliances and Commercial Equipment Standards Program 

Part A2 of Title III of the Energy Policy and Conservation Act of 1975 (EPCA), Pub. L. 94-163, 

as amended by the National Energy Conservation Policy Act, Pub. L. 95-619, the National 

Appliance Energy Conservation Act of 1987, Pub. L. 100-12, the National Appliance Energy 

Conservation Amendments of 1988, Pub. L. 100-357, and the Energy Policy Act of 1992, Pub. 

L. 102-486, created the “Energy Conservation Program for Consumer Products Other Than 

Automobiles.” (42 U.S.C. 6291-6309) This program includes residential central air conditioners 

and central air conditioning heat pumps (hereafter referred to as central air conditioners and heat 

pumps). 

The National Appliance Energy Conservation Act of 1987 (NAECA) established energy 

conservation standards for central air conditioners and heat pumps as well as requirements for 

determining whether these standards should be amended. Specifically, NAECA established 

energy conservation standards for central air conditioners and heat pumps in the form of 

minimum limits on the seasonal energy efficiency ratio (SEER) for air conditioners and for heat 

pumps operating in the cooling mode, and on the heating seasonal performance factor (HSPF) 

for heat pumps operating in the heating mode. NAECA established the following standards for 

central air conditioners and heat pumps: 10.0 SEER/6.8 HSPF for split systems,3 9.7 SEER/6.6 

HSPF for single-package systems.4

 These standards became effective January 1, 1992 for split 

systems; standards for single-package systems came into effect one year later. See 42 U.S.C. 

6295(d)(1)(A)-(B) and (2)(A)-(B). NAECA also required that DOE conduct two cycles of 

rulemakings to determine if more stringent standards are economically justified and 

technologically feasible. (42 U.S.C. 6295(d)(3)(A)-(B)) 

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

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

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

minimum SEER to 13 and the minimum HSPF to 7.7. Id. This final rule constituted the first 

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

Shortly after the publication of the 2001 final rule, DOE postponed the effective date of the rule 

to take time to reconsider the amended standards for central air conditioners and heat pumps. 

DOE eventually promulgated a 12 SEER standard in a final rule published May 23, 2002 (2002 

final rule), 67 FR 36368, but the U.S. Court of Appeals for the Second Circuit ruled that DOE 

had done so improperly. Natural Resources Defense Council v. Abraham, 355 F.3d 179 (2d Cir. 

2004). As a result, DOE published a technical amendment on August 17, 2004, which 

 

2

 This part was originally titled Part B; however, it was redesignated Part A after Part B was repealed by Pub. L. 

109-58. 

3

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

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

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

conditioned air is conveyed to the home via ducts 

4

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

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

conveyed to the home via ducts. 

EERE-2008-STD-0006 COMMENT 01
3 

established a 13 SEER standard for all central air conditioners and heat pumps, excluding 

through-the-wall and space-constrained systems. 69 FR 50997. 

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

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

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

submitted an implementation report5 to Congress in January 2006. This report specified a 

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

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

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

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

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

(filed November 6, 2006) adopted the schedule for central air conditioners and heat pumps that 

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

Document initiates this second rulemaking cycle for central air conditioners and heat pumps. 

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

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

consider regional standards for central air conditioners and heat pumps (among other products), 

for one or two regions in addition to a base national standard. (42 U.S.C. 6295(o)(6)) EISA 

2007 states that in considering regional standards, DOE may consider regions made up of 

contiguous States only. Further, in Section 310 of EISA 2007, Congress directed DOE to 

consider amended test procedures and standards for standby-mode and off-mode energy 

consumption by covered equipment (such as central air conditioners and heat pumps) for any 

amended standard published after July 1, 2010. (42 U.S.C. 6295(gg)(3)) Because this energy 

conservation standards rulemaking for central air conditioners and heat pumps will be completed 

in 2011, the requirement to incorporate standby-mode and off-mode energy use into the energy 

conservation standards analysis is applicable. 

1.2 Overview of Central Air Conditioners and Heat Pumps 

Residential central air conditioners and heat pumps are used to centrally heat and/or cool 

residential buildings. These products, also called unitary air conditioners and heat pumps, are 

limited to cooling capacities of less than 65,000 Btu/hr (5.4 tons) and do not include room air 

conditioners6 or packaged terminal air conditioners and heat pumps.7 Because of the history of 

 

5

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

website at: http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html. 

6

 “Room air conditioner” is defined in 10 CFR 430.2 as “a consumer product, other than a ‘packaged terminal air 

conditioner,’ which is powered by a single phase electric current which is an encased assembly designed as a unit 

for mounting in a window or through the wall for the purpose of providing delivery of conditioned air to an enclosed 

space. It includes a prime source of refrigeration and may include a means for ventilating and heating.” For more 

information on room air conditioners, see 

http://www.eere.energy.gov/buildings/appliance_standards/residential/room_ac.html. 

7

 “Packaged terminal air conditioner” is defined in 10 CFR 430.2 as “a wall sleeve and a separate unencased 

combination of heating and cooling assemblies specified by the builder and intended for mounting through the wall. 

It includes a prime source of refrigeration, separable outdoor louvers, forced ventilation, and heating availability 

energy.” “Packaged terminal heat pump” is defined in 10 CFR 430.2 as “a packaged terminal air conditioner that 

EERE-2008-STD-0006 COMMENT 01
4 

rulemakings and the existing standards for central air conditioners and heat pumps, product 

definitions and test procedures have already been established, as described in further detail 

below. 

1.2.1 Product Definitions 

Definitions for central air conditioners and heat pumps are codified in the Code of Federal 

Regulations (CFR) at 10 CFR 430.2 and read as follows: 

Central air conditioner means a product, other than a packaged terminal air 

conditioner, which is powered by single-phase electric current, air cooled, rated 

below 65,000 Btu per hour, not contained within the same cabinet as a furnace, 

the rated capacity of which is above 225,000 Btu per hour, and is a heat pump or a 

cooling only unit. 

Heat pump means a product, other than a packaged terminal heat pump, which 

consists of one or more assemblies, powered by single-phase electric current, 

rated below 65,000 Btu per hour, utilizing an indoor conditioning coil, 

compressor, and refrigerant-to-outdoor air heat exchanger to provide air heating, 

and may also provide air cooling, dehumidifying, humidifying circulating, and air 

cleaning. 

Other definitions pertaining to central air conditioners and heat pumps are also provided in 

10 CFR 430.2: 

Basic model means all units of a given type of covered product (or class thereof) 

manufactured by one manufacturer and ... (11) With respect to central air 

conditioners, which have electrical characteristics which are essentially identical 

and which do not have any differing physical or functional characteristics that 

affect energy consumption. 

Coil family means a group of coils with the same basic design features that affect 

the heat exchanger performance. These features are the basic configuration, i.e., 

A-shape, V-shape, slanted or flat top, the heat transfer surfaces on refrigerant and 

air sides (flat tubes vs. grooved tubes, fin shapes), the tube and fin materials, and 

the coil circuitry. When a group of coils has all these features in common, it 

constitutes a "coil family." 

Condenser-evaporator coil combination means a condensing unit made by one 

manufacturer and one of several evaporator coils, either manufactured by the 

same manufacturer or another manufacturer, intended to be combined with that 

particular condensing unit. 

 

utilizes reverse cycle refrigeration as its prime heat source and should have supplementary heating availability by 

builder’s choice of energy.” For more information on package terminal air conditioners and heat pumps, see 

http://www.eere.energy.gov/buildings/appliance_standards/commercial/packaged_ac_hp.html. 

EERE-2008-STD-0006 COMMENT 01
5 

Condensing unit means a component of a central air conditioner which is 

designed to remove the heat absorbed by the refrigerant and to transfer it to the 

outside environment, and which consists of an outdoor coil, compressor(s), and 

air moving device. 

Evaporator coil means a component of a central air conditioner which is designed 

to absorb heat from an enclosed space and transfer the heat to a refrigerant. 

Small duct, high velocity system means a heating and cooling product that 

contains a blower and indoor coil combination that: (1) Is designed for, and 

produces, at least 1.2 inches of external static pressure when operated at the 

certified air volume rate of 220-350 CFM per rated ton of cooling; and (2) When 

applied in the field, uses high velocity room outlets generally greater than 

1000 fpm which have less than 6.0 square inches of free area. 

Space constrained product means a central air conditioner or heat pump: 

(1) That has rated cooling capacities no greater than 30,000 BTU/hr; 

(2) That has an outdoor or indoor unit having at least two overall exterior 

dimensions or an overall displacement that: 

 (i) Is substantially smaller than those of other units that are: 

 (A) Currently usually installed in site-built single family homes; 

and 

 (B) Of a similar cooling, and, if a heat pump, heating capacity; and 

 (ii) If increased, would certainly result in a considerable increase in the 

usual cost of installation or would certainly result in a significant loss in 

the utility of the product to the consumer; and 

(3) Of a product type that was available for purchase in the United States as of 

December 1, 2000. 

Through-the-wall air conditioner and heat pump means a central air conditioner 

or heat pump that is designed to be installed totally or partially within a fixed-size 

opening in an exterior wall, and: 

(1) Is manufactured prior to January 23, 2010; 

(2) Is not weatherized; 

(3) Is clearly and permanently marked for installation only through an exterior 

wall; 

(4) Has a rated cooling capacity no greater than 30,000 Btu/hr; 

(5) Exchanges all of its outdoor air across a single surface of the equipment 

cabinet; and 

(6) Has a combined outdoor air exchange area of less than 800 square inches (split 

systems) or less than 1,210 square inches (single packaged systems) as measured 

on the surface described in paragraph (5) of this definition. 

1.2.2 Performance Descriptors 

Performance descriptors are used to quantify the energy efficiency of central air conditioners and 

heat pumps. For residential products, seasonal performance descriptors (SEER and HSPF) are 

the metric used to determine whether an air conditioner or heat pump is compliant with DOE 

EERE-2008-STD-0006 COMMENT 01
6 

energy conservation standards. Performance descriptors are defined in Appendix M to Subpart B 

of 10 CFR 430, and are as follows: 

Heating Seasonal Performance Factor (HSPF) means the total space heating 

required during the space heating season, expressed in Btu’s, divided by the total 

electrical energy consumed by the heat pump system during the same season, 

expressed in watt-hours. The HSPF used to evaluate compliance with the Energy 

Conservation Standards (see 10 CFR 430.32(c), Subpart C) is based on Region 

IV, the minimum standardized design heating requirement, and the sampling plan 

stated in 10 CFR 430.24(m), Subpart B. 

Seasonal Energy Efficiency Ratio (SEER) means the total heat removed from the 

conditioned space during the annual cooling season, expressed in Btu’s, divided 

by the total electrical energy consumed by the air conditioner or heat pump during 

the same season, expressed in watt-hours. * * * * * 

1.2.3 Test Procedures 

Under EPCA, DOE is authorized to establish or amend test procedures, as appropriate for each 

of the covered products, including central air conditioners and heat pumps. (42 U.S.C. 6293) 

The test procedures for central air conditioners and heat pumps are codified in 10 CFR 430, 

Subpart B, Appendix M. Most aspects of the existing test procedure for central air conditioners 

and heat pumps — which covers units having rated cooling capacities of less than 65,000 Btu/h 

— date back to its original publication in the Federal Register on December 27, 1979. 44 FR 

76700. DOE modified the test procedure on March 14, 1988, to cover variable-speed central air 

conditioners and heat pumps, to address testing of split non-ducted units, and to change the 

method used for crediting heat pumps that provide a demand defrost capability. 53 FR 8304. 

A further revision of the test procedure for central air conditioners and heat pumps was published 

as a final rule on October 11, 2005 and became effective on April 10, 2006. 70 FR 59122. 

Generally, the October 2005 final rule added new sections, revised several sections, and reorganized the test procedure in order to eliminate the need for several test procedure waivers and 

to make the test procedure more chronological in its progression. The revisions to the test 

procedure did not alter the minimum energy conservation standards in effect for central air 

conditioners and heat pumps. On July 20, 2006, DOE published a proposed rule to consider 

further changes to the test procedure in response to issues raised by stakeholders prior to the 

publication of the October 11, 2005, final rule. 71 FR 41320. DOE determined that it was 

appropriate to consider additional modifications to the test procedure for the following reasons: 

(1) to implement test-procedure revisions that are needed because of new energy conservation 

standards for small-duct, high-velocity (SDHV) systems; (2) to better address test procedure 

waivers for multi-split systems; and (3) to address sampling and rating issues that have been 

raised since new minimum energy conservation standards for these products became effective on 

January 23, 2006.8 Id. at 41321-22 A final rule adopting additional amendments to the central 

air conditioner and heat pump test procedures related to these issues was published on October 

22, 2007, which became effective on April 21, 2008. 72 FR 59906. Subsequent waivers granted 

 

8

 10 CFR 432.32(c)(2) 

EERE-2008-STD-0006 COMMENT 01
7 

for residential modulating multi-split systems terminated on the effective date of the latest test 

procedure final rule. 72 FR at 59906-07. 

More recently, EISA 2007 amended EPCA to direct DOE to consider updated test procedures on 

a regular basis, and to include standby mode and off mode energy consumption. Section 302 of 

EISA 2007 amends section 323(b)(1) of EPCA (42 U.S.C. 6293(b)(1)) by replacing paragraph 

(1) with, 

 (1) TEST PROCEDURES.— 

(A) AMENDMENT.—At least once every 7 years, the Secretary shall review test 

procedures for all covered products and— 

(i) amend test procedures with respect to any covered product, if the 

Secretary determines that amended test procedures would more accurately 

or fully comply with the requirements of paragraph (3); or 

(ii) publish notice in the Federal Register of any determination not to 

amend a test procedure. 

EISA 2007 also directed DOE to amend test procedures for all covered products, including the 

central air conditioners and heat pumps. In addition, EISA 2007 requires DOE to include 

consideration of standby mode and off mode energy consumption in future amendments to both 

its test procedures and energy conservation standards. Specifically, section 310 of EISA 2007 

amends section 325 of EPCA (42 U.S.C. 6295), by adding the following definitions and other 

requirements pertaining to standby and off-mode energy use: 

 (gg) STANDBY MODE ENERGY USE. 

(1) DEFINITIONS.— 

(A) IN GENERAL.—Unless the Secretary determines otherwise pursuant 

to subparagraph (B), in this subsection: 

(i) ACTIVE MODE.—The term "active mode" means the 

condition in which an energy-using product— 

(I) is connected to a main power source; 

(II) has been activated; and 

(III) provides 1 or more main functions. 

(ii) OFF MODE.—The term "off mode" means the condition in 

which an energy-using product— 

(I) is connected to a main power source; and 

(II) is not providing any standby or active mode function. 

(iii) STANDBY MODE.—The term "standby mode" means the 

condition in which an energy-using product— 

(I) is connected to a main power source; and 

(II) offers 1 or more of the following user-oriented or 

protective functions: 

(aa) To facilitate the activation or deactivation of 

other functions (including active mode) by remote 

switch (including remote control), internal sensor, 

or timer. 

EERE-2008-STD-0006 COMMENT 01
8 

(bb) Continuous functions, including information or 

status displays (including clocks) or sensor-based 

functions. 

(B) AMENDED DEFINITIONS.—The Secretary may, by rule, amend the 

definitions under subparagraph (A), taking into consideration the most 

current versions of Standards 62301 and 62087 of the International 

Electrotechnical Commission. 

(2) TEST PROCEDURES.— 

(A) IN GENERAL.—Test procedures for all covered products shall be 

amended pursuant to section 323 to include standby mode and off mode 

energy consumption, taking into consideration the most current versions of 

Standards 62301 and 62087 of the International Electrotechnical 

Commission, with such energy consumption integrated into the overall 

energy efficiency, energy consumption, or other energy descriptor for each 

covered product, unless the Secretary determines that— 

(i) the current test procedures for a covered product already fully 

account for and incorporate the standby mode and off mode energy 

consumption of the covered product; or 

(ii) such an integrated test procedure is technically infeasible for a 

particular covered product, in which case the Secretary shall 

prescribe a separate standby mode and off mode energy use test 

procedure for the covered product, if technically feasible. 

 * * * * * 

(3) INCORPORATION INTO STANDARD.— 

(A) IN GENERAL.—Subject to subparagraph (B), based on the test 

procedures required under paragraph (2), any final rule establishing or 

revising a standard for a covered product, adopted after July 1, 2010, shall 

incorporate standby mode and off mode energy use into a single amended 

or new standard, pursuant to subsection (o), if feasible. 

(B) SEPARATE STANDARDS.—If not feasible, the Secretary shall 

prescribe within the final rule a separate standard for standby mode and 

off mode energy consumption, if justified under subsection (o). 

By the definitions provided in EISA 2007, DOE understands the standby mode and off mode 

energy consumption by the central air conditioners and heat pumps means the energy that is 

consumed when the equipment is not providing cooling, heating, or ventilating functions. There 

was no set deadline by which to amend the test procedure for the central air conditioners and 

heat pumps. However, because this standby mode energy use is required to be incorporated into 

a single amended or new standard (for final rules adopted after July 1, 2010), DOE intends to 

publish its amended test procedure incorporating such provisions in the Federal Register prior to 

publishing the Notice of Proposed Rulemaking for the standards rulemaking (October 2010). 

EERE-2008-STD-0006 COMMENT 01
9 

Item 1–1 What are the standby power modes and the magnitudes of the standby power 

consumption during those modes in the operation of the central air conditioners 

and heat pumps that DOE should consider in this rulemaking? For example, are 

crank case heaters still being used in the product designs and if so, what is their 

typical power consumption? 

Item 1–2 DOE invites comments on whether it would be technically feasible to 

incorporate standby power consumption into the SEER metric or whether it 

instead must be considered as a stand-alone measure for this rulemaking. 

Item 1–3 DOE also invites comments on the necessary changes to the existing DOE test 

procedures for central air conditioners and heat pumps to account for standby 

power consumption and its measurement. 

1.3 Regional Standards 

Regional standards were recently authorized for central air conditioners and heat pumps by EISA 

2007. Specifically, section 306 of EISA 2007 modifies section 325(o) of EPCA (42 U.S.C. 

6295(o)) by adding, in relevant part, the following language: 

(6) REGIONAL STANDARDS FOR FURNACES, CENTRAL AIR 

CONDITIONERS, AND HEAT PUMPS.— 

 (A) IN GENERAL.—In any rulemaking to establish a new or amended 

standard, the Secretary may consider the establishment of separate 

standards by geographic region for...central air conditioners, and heat 

pumps. 

 (B) NATIONAL AND REGIONAL STANDARDS.— 

 (i) NATIONAL STANDARD.—If the Secretary establishes a 

regional standard for a product, the Secretary shall establish a base 

national standard for the product. 

(ii) REGIONAL STANDARDS.—If the Secretary establishes a 

regional standard for a product, the Secretary may establish more 

restrictive standards for the product by geographic region as 

follows: 

* * * * * 

(II) For any cooling product, the Secretary may establish 1 

or 2 additional standards that are applicable in 1 or 2 

geographic regions as may be defined by the Secretary. 

 (C) BOUNDARIES OF GEOGRAPHIC REGIONS.— 

(i) IN GENERAL.—Subject to clause (ii), the boundaries of 

additional geographic regions established by the Secretary under 

this paragraph shall include only contiguous States. 

EERE-2008-STD-0006 COMMENT 01
10 

(ii) ALASKA AND HAWAII.—The States of Alaska and Hawaii 

may be included under this paragraph in a geographic region that 

the States are not contiguous to. 

(iii) INDIVIDUAL STATES.—Individual States shall be placed 

only into a single region under this paragraph. 

 (D) PREREQUISITES.—In establishing additional regional standards 

under this paragraph, the Secretary shall— 

(i) establish additional regional standards only if the Secretary 

determines that— 

(I) the establishment of additional regional standards will 

produce significant energy savings in comparison to 

establishing only a single national standard; and 

(II) the additional regional standards are economically 

justified under this paragraph; and 

(ii) consider the impact of the additional regional standards on 

consumers, manufacturers, and other market participants, including 

product distributors, dealers, contractors, and installers. 

 (E) APPLICATION; EFFECTIVE DATE.— 

* * * * * 

(F) CONTINUATION OF REGIONAL STANDARDS.— 

* * * * * 

(G) ENFORCEMENT.— 

(i) BASE NATIONAL STANDARD.— 

(I) IN GENERAL.—The Secretary shall enforce any base 

national standard. 

(II) TRADE ASSOCIATION CERTIFICATION 

PROGRAMS.— In enforcing the base national standard, 

the Secretary shall use, to the maximum extent practicable, 

national standard nationally recognized certification 

programs of trade associations. 

(ii) REGIONAL STANDARDS.— 

(I) ENFORCEMENT PLAN.—Not later than 90 days after 

the date of the issuance of a final rule that establishes a 

regional standard, the Secretary shall initiate a rulemaking 

to develop and implement an effective enforcement plan for 

regional standards for the products that are covered by the 

final rule. 

(II) RESPONSIBLE ENTITIES.—Any rules regarding 

enforcement of a regional standard shall clearly specify 

which entities are legally responsible for compliance with 

the standards and for making any required information or 

labeling disclosures. 

(III) FINAL RULE.—Not later than 15 months after the 

date of the issuance of a final rule that establishes a 

regional standard for a product, the Secretary shall 

promulgate a final rule covering enforcement of regional 

EERE-2008-STD-0006 COMMENT 01
11 

standards for the product. 

(IV) INCORPORATION BY STATES AND 

LOCALITIES.— A State or locality may incorporate any 

Federal regional standard into State or local building codes 

or State appliance standards. 

(V) STATE ENFORCEMENT.—A State agency may seek 

enforcement of a Federal regional standard in a Federal 

court of competent jurisdiction. 

* * * * * 

In evaluating regional energy conservation standards for central air conditioners and heat pumps, 

EPCA, as amended by EISA 2007, allows DOE to consider establishment of up to two regional 

standards, in addition to a base national standard. In this rulemaking, DOE plans to perform its 

analyses at the regional level, which will allow for calculation of benefits and burdens for any 

given region composed of contiguous States. Any regional standards would apply only to States 

in those regions, and would supersede the base national standard. 

In evaluating the effectiveness of regional standards, DOE believes the selection of appropriate 

regions early in the rulemaking process is critical to completing the rulemaking efficiently. 

Because of the complexity of the analysis even in the absence of regional standards, reaching an 

early consensus on what regions to evaluate is necessary to prevent delays in the rulemaking. 

Accordingly, DOE requests public input on this issue. 

Item 1–4 DOE seeks feedback from interested parties to help determine appropriate 

regions when considering potential regional standards for central air 

conditioners and heat pumps. 

Item 1–5 For an analysis that uses regional standards, what regions (e.g., the hot and dry 

southwest, the hot and wet southeast) would be appropriate for setting 

standards above the base national standard? Which States would be included 

in such regions (keeping in mind the statutory directive to include contiguous 

States only)? 

Item 1–6 How should DOE address impacts to other market participants (distributors, 

dealers, contractors, installers) of the potential adoption of regional standards 

for central air conditioners and heat pumps? 

Section 306(a) of EISA 2007 amended EPCA, in part, by adding a new provision at section 

325(o)(6)(G)(ii) (42 U.S.C. 6295(o)(6)(G)(ii)), which sets forth a requirement for DOE to 

establish an effective enforcement plan for regional standards for central air conditioner and heat 

pumps. DOE realizes there are unique challenges to enforcing regional standards, since there 

must be enforcement of product distribution and installation in addition to the enforcement of 

performance ratings. 

EERE-2008-STD-0006 COMMENT 01
12 

Item 1–7 What groups or organizations would be beneficial for DOE to contact in order 

to begin developing a workable enforcement plan in the event DOE were to 

promulgate regional standards? 

1.4 Rulemaking Process and Stakeholder Participation 

Under EPCA, when DOE evaluates any new or amended standards for “covered products,” any 

standard DOE prescribes for consumer products shall be designed to “achieve the maximum 

improvement in energy efficiency ... which the Secretary [of Energy] determines is 

technologically feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A)) Moreover, 

EPCA states that the Secretary may not establish an amended standard if such standard would 

not result in “significant conservation of energy,” or “is not technologically feasible or 

economically justified.” (42 U.S.C. 6295(o)(3)(B)) In determining whether a standard is 

economically justified, DOE considers, to the greatest extent practicable, the following seven 

factors: 

(1) The economic impact of the standard on the manufacturers and consumers of the products 

subject to such standards; 

(2) The savings in operating costs throughout the estimated average life of the covered products 

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

maintenance expenses of the covered products which are likely to result 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. 

(42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6316(a)) 

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

and (3)–(6) and 42 U.S.C. 6316(a). 

The process for developing efficiency standards involves analysis, public notice, and 

consultation with interested parties. DOE considers stakeholder participation to be a very 

important part of the process for setting energy conservation standards and actively encourages 

the participation and interaction of all interested parties during the comment period at each stage 

EERE-2008-STD-0006 COMMENT 01
13 

of the rulemaking. Beginning with this Framework Document and during every subsequent 

comment period, interactions among interested parties help ensure a balanced discussion of the 

information that is required as part of the standards rulemaking process. 

In conducting the test procedure rulemakings and the energy (and water) conservation standards 

rulemakings, DOE involves stakeholders through a variety of means, including formal public 

notifications (i.e., Federal Register notices) and public meetings. As discussed in further detail 

below, the standards rulemaking process generally involves three Federal Register notices: 

• Advance notice of proposed rulemaking (ANOPR, see section 1.4.1). The ANOPR is 

designed to publicly vet the models and tools that DOE will use in the rulemaking, and to 

facilitate public participation before the proposed rule stage. Candidate standard levels, 

which span the range of efficiencies from baseline products to the most efficient 

technology, are the basis for demonstrating the functionality of the models and tools. 

• Notice of proposed rulemaking (NOPR, see section 1.4.2). The NOPR presents: a 

discussion of comments received in response to the ANOPR; the analysis of the impacts 

of standards on consumers, manufacturers, and the nation; DOE’s weighting of the 

impacts; and the proposed standard levels for public comment. 

• Final rule (see section 1.4.3). The final rule presents a discussion of comments received 

in response to the NOPR, the revised analysis of the impacts of standards based on 

comments and any updated data, DOE’s weighting of the impacts, and the standard levels 

DOE is adopting. The final rule also establishes the effective date of the standards. 

Recently, section 305 of EISA 2007 amended EPCA, by removing the requirement for DOE to 

publish an ANOPR when amending standards for consumer products. Specifically, section 305 

of EISA 2007 replaced the existing section 325(m) of EPCA (42 U.S.C. 6295(m)), with the 

following: 

(m) AMENDMENT OF STANDARDS.— 

(1) IN GENERAL.—Not later than 6 years after issuance of any final rule 

establishing or amending a standard, as required for a product under this part, the 

Secretary shall publish— 

(A) a notice of the determination of the Secretary that standards for the 

product do not need to be amended, based on the criteria established under 

subsection (n)(2); or 

(B) a notice of proposed rulemaking including new proposed standards 

based on the criteria established under subsection (o) and the procedures 

established under subsection (p). 

(2) NOTICE.—If the Secretary publishes a notice under paragraph (1), the 

Secretary shall— 

(A) publish a notice stating that the analysis of the Department is publicly 

available; and 

(B) provide an opportunity for written comment. 

(3) AMENDMENT OF STANDARD; NEW DETERMINATION.— 

EERE-2008-STD-0006 COMMENT 01
14 

(A) AMENDMENT OF STANDARD.—Not later than 2 years after a 

notice is issued under paragraph (1)(B), the Secretary shall publish a final 

rule amending the standard for the product. 

 * * * * * 

While DOE understands that removing a step in the rulemaking process could reduce the total 

time required to issue an amended standard, it believes that the ANOPR is an important step in 

the process that provides an early opportunity for DOE to vet its assumptions and analysis, and 

for interested parties to provide feedback, comments, and data. For these reasons, DOE intends 

to retain this step in the rulemaking process for the development of these standards. 

Item 1–8 DOE requests feedback from interested parties on DOE’s intent to retain the 

ANOPR step in the rulemaking process, both as a general matter and in the 

context of this specific rulemaking. 

1.4.1 Advance Notice of Proposed Rulemaking 

As part of its initial rulemaking activities, DOE typically identifies the available product-design 

options and then subjects them to a screening analysis in which each such equipment technology 

option is analyzed in detail in order to determine whether it should be eliminated from further 

consideration. This process includes a market and technology assessment (see section 3) and a 

screening analysis (see section 4). DOE applies four screening criteria in the screening analysis 

to determine which technology options to eliminate from further consideration. These four 

criteria are: (1) technological feasibility; (2) practicability to manufacture, install, and service; 

(3) adverse impacts on product or equipment utility or availability; and (4) adverse impacts on 

health or safety. Technologies that pass through the screening analysis are referred to as “design 

options” in the engineering analysis. 

These activities include secondary research and consultations with stakeholders and independent 

technical experts who can assist with identifying the key issues and design options or efficiency 

levels to be considered by DOE in the rulemaking. DOE intends this Framework Document, the 

public meeting following its publication, and the opportunity for comment on this Framework 

Document to initiate dialogue with stakeholders, and to provide an opportunity for comment and 

input into the structure and analytical approach planned for this energy conservation standards 

rulemaking. 

At the start of the ANOPR analysis, DOE considers design options or efficiency levels for each 

product class. DOE uses these design options or efficiency levels to collect manufacturer cost 

data, historical shipment data, shipment weighted-average efficiency data, and preliminary 

manufacturer impact data (e.g., manufacturer capital conversion expenditures, marketing costs, 

research and development costs). During the ANOPR stage, DOE presents other principal 

analyses, including: (1) the engineering analysis (see section 5); (2) consumer life-cycle cost 

(LCC) impact and payback period (PBP) results (see section 8); (3) national energy savings 

(NES) and consumer net present value (NPV) results for a range of efficiency or energy use 

EERE-2008-STD-0006 COMMENT 01
15 

levels (see section 10); and (4) a preliminary manufacturer impact analysis (MIA) (see 

section 112). 

Discussion of various candidate standard levels (efficiency levels) in the ANOPR will facilitate 

stakeholder review of the spreadsheet models that underpin the analyses. DOE’s selection of 

efficiency levels to analyze is based on the costs and benefits of efficiency levels or design 

options. DOE will use stakeholder comments to refine the models for the next stage of the 

rulemaking analyses, where DOE will propose specific efficiency levels for adoption. Based on 

the results of the ANOPR analysis, DOE selects candidate standard levels (CSLs) from the 

energy efficiency or energy use levels considered in the ANOPR analysis. In addition to the 

efficiency corresponding to the maximum technologically feasible (“max-tech”) design and the 

efficiency corresponding to the minimum LCC point, DOE generally selects efficiency levels or 

design options for consideration that span the full range of technologically-achievable 

efficiencies, specifically including: 

1. The baseline efficiency level is defined by the product with the lowest energy efficiency 

level currently sold on the market for a given category. For product categories where 

minimum energy standards already exist, the baseline is typically defined by the existing 

energy conservation standard; 

2. The highest efficiency level or lowest energy consumption level that is technologically 

feasible (the “max-tech” level); 

3. The efficiency level with the minimum LCC or greatest LCC savings; and 

4. Efficiency levels that incorporate noteworthy technologies or fill in large gaps between 

other efficiency levels considered. 

The efficiency levels analyzed serve to demonstrate the functions and outputs of the models and 

tools. During the ANOPR, computer models and tools are tested for the different product classes 

at each efficiency or energy use level analyzed. DOE will make the results of the analyses 

available on its website for review and will consider comments on them after the publication of 

the ANOPR.9 When DOE publishes the ANOPR, it will also make available a technical support 

document (TSD) containing the details of all the analyses performed to date. After publication 

of the ANOPR, DOE will provide a public comment period and hold one public meeting. 

In addition, preliminary ANOPR results may facilitate discussions among interested parties on 

potential joint recommendations for standard levels. DOE encourages stakeholders to develop 

joint recommendations for standard levels. DOE supports efforts by interested parties to work 

together to develop and present to DOE joint recommendations on standard levels. Any 

consensus recommendation must satisfy the statutory criteria provided by EPCA in determining 

whether an energy conservation standard is technologically feasible and economically justified 

and will result in significant conservation of energy. (42 U.S.C. 6295(o)(2)(A), (o)(3), (v)) Any 

consensus recommendation should also include information that DOE can use to assess the seven 

statutory factors that determine whether the benefits of the standard exceed its burdens. (42 

U.S.C. 6925(o)(2)(B)(i)) 

 

9

 All materials associated with the residential central air conditioner and heat pump rulemaking are available on 

DOE’s website at: http://www.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html. 

EERE-2008-STD-0006 COMMENT 01
16 

1.4.2 Notice of Proposed Rulemaking 

In developing the NOPR, DOE will first review and consider all the comments it received after 

the publication of the ANOPR. This process may result in revisions or refinement to the 

ANOPR analyses, including the engineering and LCC analyses. After the ANOPR, DOE will 

conduct further economic and environmental impact analyses. These analyses may generally 

include a consumer LCC sub-group analysis (see section 11), a manufacturer impact analysis 

(see section 11), a utility impact analysis (see section 13), an employment impact analysis (see 

section 14), an environmental assessment (see section 15), and a regulatory impact analysis (see 

section 16). 

DOE will describe the methodology used and make the results of all the analyses available on its 

website for review and will consider comments after the publication of the NOPR. This reviewand-comment process may result in revisions to the analyses. This analytical process ends with 

the selection of proposed energy conservation levels (if any) that will be presented in the NOPR. 

DOE selects the proposed energy conservation standard levels from the trial standard levels 

(TSLs) analyzed. The NOPR, published in the Federal Register, will document the evaluation 

and selection of any proposed standards, along with a discussion of other TSLs considered but 

not selected (and the reasons for not selecting them). 

The selection process for proposed efficiency standards generally runs as follows. For each 

product class, DOE will identify the maximum improvement in energy efficiency or maximum 

reduction in energy use that is technologically feasible. If DOE proposes a level that is below 

this “max-tech” level, it will explain the reasons for eliminating higher levels, beginning with the 

highest level considered. DOE will present the results of the analysis in the NOPR and the 

details of the analysis in an accompanying TSD. DOE considers many factors in selecting 

proposed standards. These factors or criteria are established by statute and capture the many 

benefits, costs, and impacts of the energy conservation standards. DOE will carefully consider 

any joint recommendations in its decision process. 

When DOE publishes the NOPR, it will provide the U.S. Department of Justice (DOJ) with a 

copy of the NOPR and TSD and will solicit feedback on the impact of the proposed standard 

levels on competition. DOJ will review these standard levels in light of any lessening of 

competition that is likely to result from the imposition of standards. (42 U.S.C. 

6295(o)(2)(B)(i)(V) and (ii)) DOE will consider DOJ’s determination on the impacts of the 

proposed standard on competition in preparing the final rule. The NOPR is followed by a public 

comment period that includes one public meeting. 

1.4.3 Final Rule 

Revisions to the analyses may result from the public comments on the NOPR. On the basis of 

the public comments, DOE will review the engineering and economic impact analyses and 

proposed standards and make modifications as necessary. After the publication of the NOPR, 

DOE will conduct a thorough review of all analyses performed and of the trial standard levels. 

Final revisions to the analyses and trial standard levels will be made as appropriate. 

EERE-2008-STD-0006 COMMENT 01
17 

In addition, before the final rule is issued, DOE will consider DOJ's comments on the NOPR 

relating to the impacts of the proposed standard levels on competition to determine whether 

changes to these standard levels are needed. 

The standards rulemaking will conclude with the publication of the final rule. DOE will select 

the final standard levels based on the complete record of the standards rulemaking. The final 

rule will promulgate the final standard levels and their effective date and explain the basis for 

their selection. The final rule will be accompanied by a final TSD. 

2. OVERVIEW OF ANALYSES FOR RULEMAKING 

The purpose of the analyses conducted in support of the standards rulemaking will be to ensure 

that DOE selects the final energy conservation standards that achieve the maximum energy 

savings that satisfy the criteria of technological feasibility and economic justification. Economic 

justification includes consideration of the economic impacts on domestic manufacturers and 

consumers, national benefits (including environmental impacts), issues of consumer utility, and 

impacts from any lessening of competition. 

This section offers an overview of DOE’s analytical methodology and discusses the major 

components of the analyses DOE will conduct. A consistent approach to analysis throughout the 

rulemaking will be ensured through the consideration of each analysis as a part of the overall 

standards-setting process. 

Figure 1 summarizes the analytical components of the standards-setting process. The “analyses” 

are presented in the center column. Each analysis has a set of “key inputs,” which are data and 

information required for the analysis. “Approaches” are the methods that will be used to obtain 

key inputs, which may vary depending on the information in question. For example, some key 

inputs exist in public databases, some will be collected from interested parties or others with 

special knowledge; some will be developed by the project team in support of the rulemaking. 

The results of each analysis are “key outputs,” which feed directly into the rulemaking. Arrows 

connecting one analysis to another indicate the flow of information. 

EERE-2008-STD-0006 COMMENT 01
18 

Utility Impact

Analysis 

Notice of Proposed Rulemaking (NOPR)

Final Rule

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups for

Product Price

Determination Life-Cycle Cost and 

Payback Period 

Analysis

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost 

Sub-Group Analysis

Manufacturer Impact 

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Cost-Efficiency Relationship

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

Framework Document

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products 

• Historical Shipments

• Define Distribution Channels

• Economic Census Data

Analysis

• Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail Prices

Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR)

• Efficiency/Performance

• Manufacturing Cost

Candidate

Standard 

Levels

• Analysis of Energy Use 

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment 

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

• Annual Energy Use (UEC)

Preliminary 

Manufacturer Impact 

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency 

Levels

• Department of Justice Review

Utility Impact

Analysis 

Notice of Proposed Rulemaking (NOPR)

Final Rule

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups for

Product Price

Determination Life-Cycle Cost and 

Payback Period 

Analysis

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost 

Sub-Group Analysis

Manufacturer Impact 

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Cost-Efficiency Relationship

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

Framework Document

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products 

• Historical Shipments

• Define Distribution Channels

• Economic Census Data

Analysis

• Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail Prices

Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR)

• Efficiency/Performance

• Manufacturing Cost

Candidate

Standard 

Levels

• Analysis of Energy Use 

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment 

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

• Annual Energy Use (UEC)

Preliminary 

Manufacturer Impact 

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency 

Levels

• Department of Justice Review

Figure 1. Flow Diagram of Analyses for the Central Air Conditioners and Heat Pumps 

Standards Rulemaking Process 

EERE-2008-STD-0006 COMMENT 01
19 

3. MARKET AND TECHNOLOGY ASSESSMENT 

The market and technology assessment will provide information about the central air conditioner 

and heat pump industry and market and specifics about the performance attributes of these 

products that DOE will use throughout the rulemaking. This assessment is particularly important 

at the outset of the rulemaking to determine product classes and to identify potential design 

options or efficiency levels for each product class. This section discusses the market assessment 

(section 3.1), product classes (section 3.2), and the technology assessment (section 3.3). 

3.1 Market Assessment 

DOE will qualitatively and quantitatively characterize the structure of the central air conditioner 

and heat pump industry and market. In the market assessment, DOE will identify and 

characterize the manufacturers of central air conditioners and heat pumps, estimate market shares 

and trends in the market, and address regulatory and non-regulatory initiatives intended to 

improve the energy efficiency or reduce the energy consumption of residential central air 

conditioners and heat pumps. It will also explore the potential for technological improvements 

in the design and manufacturing of such equipment. 

The market assessment phase allows DOE to gather data that will assist in identifying important 

issues later in the rulemaking, such as potential small business impacts, competitive disruptions, 

and other factors that may arise from enacting standards. For example, DOE will use historical 

equipment shipments and prices as an indicator of future shipments and prices. Market structure 

data will be particularly useful for assessing competitive impacts as part of the manufacturer 

impact analysis. This phase also allows DOE to start updating design options by reviewing 

product literature, industry publications, and company websites. 

Because the products covered under this rulemaking have been subject to standards for nearly 

two decades, DOE understands that there are considerable data available on manufacturers, 

market shares, and other information. Such data are essential to the development of 

technologically feasible, economically justified energy conservation standards. Stakeholders are 

encouraged to submit any available, applicable data to DOE. The Air Conditioning, Heating and 

Refrigeration Institute (AHRI)10 is the trade association for manufacturers of central air 

conditioners and heat pumps. DOE expects that AHRI will play an important role in providing 

market information, including information on manufacturers, market shares, and trends in the 

market. 

Item 3–1 DOE seeks information that would contribute to the market assessment for 

residential central air conditioners and heat pumps, including information on 

manufacturers, market shares, trends in the market, and any other applicable 

information that is available. 

 

10 On January 1, 2008, the Air-Conditioning and Refrigeration Institute (ARI) and the Gas Appliance Manufacturers 

Association (GAMA) merged to become AHRI. 

EERE-2008-STD-0006 COMMENT 01
20 

3.2 Product Classes 

DOE intends to separate central air conditioners and heat pumps into different product classes. 

The criteria for separation into different product classes are: (1) the type of energy used; (2) 

capacity; or (3) other performance-related features, such as those that provide utility to the 

consumer or other features deemed appropriate by the Secretary that would justify the 

establishment of a separate energy conservation standard. (42 U.S.C. 6295(q)) 

DOE plans to continue to use the existing product classes for central air conditioners and heat 

pumps, which were developed during previous rulemakings.11 However, as of January 23, 2010, 

(i.e., before the end of this rulemaking) through-the-wall split and package systems, the separate 

product class for through-the-wall units will have been eliminated.12 Therefore, the product 

classes that will be considered in this rulemaking are listed in Table 1. The current energy 

conservation standards for these products are codified in 10 CFR 430.32(c)(2), and are also listed 

in Table 2, section 5.2. 

Table 1. Planned Product Classes for Central Air Conditioners and Heat Pumps. 

Split-system air conditioners 

Split-system heat pumps 

Single-package air conditioners 

Single-package heat pumps 

Small-duct high-velocity (SDHV) systems 

Space-constrained products – air conditioners

Space-constrained products – heat pumps 

Item 3–2 DOE requests feedback on the product classes proposed in Table 1. 

Item 3–3 Are there other product classes that should be considered? Should all of the 

identified product classes be considered? 

3.2.1 Split Systems and Single-Package Systems 

Central air conditioners are initially divided into product classes based on whether units make up 

a single package or are part of a split system (i.e., with separate indoor and outdoor components 

connected by refrigeration and electrical lines). Certain households cannot accommodate split 

 

11 Product classes are discussed in numerous rulemaking notices going as far back as 1979. See for example 44 FR 

at 50, 45 FR at 5602, 58 FR at 47326, and 65 FR 59590. See, e.g., 44 FR 49 (Jan. 2, 1979); 45 FR 5602 (Jan. 23, 

1980); 58 FR 47326 (Sept. 8, 1993), and 65 FR 59590 (Oct. 5, 2000). The current product classes are codified by 

the 2004 Technical Amendment. 69 FR 50997 (August 17, 2004). 

12 As defined in 10 CFR 430.2 (see section 1.2.1of this document), the through-the-wall product class applies only to 

products manufactured prior to January 23, 2010. This “sunset” provision eliminates through-the-wall units as a 

separate product class as of this date. 

EERE-2008-STD-0006 COMMENT 01
21 

systems because suitable space is not available for the outdoor unit, so a single-package system 

is used. Single-package systems are also often used in retrofit applications. 

In contrast to cooling-only air conditioners, heat pumps offer both air conditioning and electric 

heating. This unique feature and the different energy use that results continue to support separate 

classifications for heat pumps.

3.2.2 Small-Duct High-Velocity Systems 

SDHV air conditioning systems currently marketed in the U.S. are similar to conventional 

split-system air conditioners that consist of an outdoor condensing unit and an indoor coil unit, 

with or without an integral blower. Manufacturers of SDHV systems typically pair the SDHV 

fan coil with condensing units in the range of 13 to 18 SEER. Manufacturers of SDHV systems 

certifying their products in the AHRI Unitary Directory13 are SpacePak, Unico, and Energy 

Saving Products, Ltd. SDHV systems target primarily the retrofit market, where they are 

installed in attics or closet spaces and distribute conditioned, pressurized air through round ducts 

small enough to fit inside stud walls. The air-distribution system, together with the blower-coil 

unit, is usually installed in attic spaces of older homes that were not designed for forced-aircirculation heating or cooling. Such homes lack conventional ducts (i.e., large-size, lowvelocity), which are costly and difficult to install in retrofit applications. Thus, installation of an 

SDHV system helps satisfy the air conditioning needs for these older homes, replacing lessefficient window air conditioners. The outdoor condensing units used in SDHV systems are 

typically sourced from a full-line manufacturer of conventional split systems. These condensing 

units are identical to those used by the full-line manufacturers in their product lines of 

conventional systems. 

Compared with conventional air conditioners and heat pumps that use large ducts, the indoor coil 

section of an SDHV system is compactly designed to facilitate retrofit installation in tight spaces, 

resulting in smaller face area and more rows of tubing than conventional systems. The compact 

fan coil design and small ducts contribute to high static-pressure loss that must be overcome by 

the blower, thereby requiring greater fan power. Manufacturers claim that the greater energy 

consumption of the blower motors and the limited space for installing the fan coils make it more 

difficult for SDHV systems to increase energy efficiency. To mitigate the burden on the 

blowers, designers reduce the required air volume by cooling it more than a conventional air 

conditioner, which offers an associated benefit of enhanced humidity removal, but increases cost. 

DOE initially sought to create a separate product class for SDHV systems. DOE reasoned that 

SDHV systems have design considerations (confined installation spaces, high pressure drops, 

and blower motor power) that warrant special consideration in the analytical and standardssetting process. In the 1999 Supplemental Advance Notice of Proposed Rulemaking (1999 

SANOPR; 64 FR 66306 (Nov. 24, 1999)) for central air conditioners, DOE proposed the creation 

of a separate class of “space-constrained” products that included SDHV systems and requested 

feedback from stakeholders on the proposal to create a separate product class for SDHV systems. 

However, DOE received feedback on the 1999 SANOPR that indicated some SDHV units were 

 

13 http://www.ahridirectory.org. 

EERE-2008-STD-0006 COMMENT 01
22 

capable of reaching 12 SEER, and that manufacturers were making investments to produce more 

efficient SDHV systems. 

For these reasons, in the October 5, 2000, NOPR (2000 NOPR; 65 FR 59590), DOE proposed 

not to create a separate SDHV product class, instead requiring SDHV systems to meet the 

standards for conventional split- and single-package systems.14 However, DOE also proposed to 

allow SDHV systems the option to test as coil-only products. This additional provision in the 

test procedure was estimated to provide an additional 1 to 2.5 SEER points for SDHV systems, 

making it easier for manufacturers to meet the standard. DOE again requested feedback from 

stakeholders on this proposal. 

On January 22, 2001, DOE published the 2001 final rule, establishing a 13 SEER standard for 

conventional split- and single-package systems and reiterating that the characteristics of 

available SDHV systems did not warrant the creation of a separate product class. 66 FR at 7197 

DOE explained that revisions to the test procedure would allow testing as coil-only products, and 

stated that SDHV systems were, therefore, subject to the 13 SEER standards being adopted for 

all split- and single-package air conditioners and heat pumps. 

On July 25, 2001, in response to a petition for reconsideration and as a result of review under the 

President’s Regulatory Review Plan,15 DOE reopened the standards rulemaking and published a 

Supplemental Notice of Proposed Rulemaking (SNOPR), in which DOE proposed to withdraw 

its January 22, 2001 final rule. 66 FR 38822. As a substitute, DOE proposed standards in that 

SNOPR which would have set a 12 SEER standard for all split- and single-package air 

conditioners and heat pumps, thereby resulting in a 20 percent increase in the minimum energy 

efficiency levels over prior levels. Again, DOE proposed not to establish a separate class for 

SDHV systems on the grounds that they would be able to meet the 12 SEER standard. 

In the subsequent May 23, 2002 final rule, DOE adopted the 12 SEER standard for split- and 

single-package air conditioners and heat pumps, and responded to additional comments from 

stakeholders on SDHV systems. 67 FR 36368. Further information submitted by stakeholders 

led DOE to conclude that separate standards for SDHV systems were indeed warranted, and 

DOE stated it would perform a separate analysis to determine appropriate standard levels. A 

new product class and definition for SDHV systems were established, and standards were set at 

the 10 SEER NAECA level until a full analysis could be performed. Further, DOE stated it 

would consider stakeholders’ requests that the DOE test procedure be amended to allow special 

testing provisions for SDHV products. At the time of drafting the 2002 final rule, DOE had 

begun a separate engineering and life-cycle cost analysis to determine appropriate standard levels 

for SDHV products. 

However, DOE’s efforts to reopen its rulemaking setting energy conservation standard levels for 

central air conditioners and heat pumps were challenged by a number of advocacy groups. In its 

 

14 Standards for conventional systems were proposed at 12 SEER standard for split- and single-package air 

conditioners and 13 SEER for split and packaged heat pumps. 

15 The Regulatory Review Plan, which called for agencies to (among other things) withdraw or postpone the 

effective dates of regulations pending review by the White House, was published in the Federal Register at 66 FR 

7702 (Jan. 24, 2001). 

EERE-2008-STD-0006 COMMENT 01
23 

decision in Natural Resources Defense Council, et al. v. Abraham, the Second Circuit Court 

concluded that “the May 23, 2002, final rules promulgated by DOE withdrawing the standards it 

published as a final rule on January 22, 2001, and replacing them with less stringent standards, 

were not a valid exercise of DOE's authority under the EPCA,” in light of the “anti-backsliding” 

provision in 325(o)(1) of EPCA. Section 325(o)(1) of EPCA states that “[t]he Secretary may not 

prescribe any new or amended standard which increases the maximum allowable energy use...of 

a covered product.” 355 F.3d 179, 206 (2d Cir. 2004). Accordingly, DOE published a technical 

amendment on August 17, 2004 (2004 Technical Amendment; 69 FR 50997). This technical 

amendment replaced standard levels established by the 2002 final rule (12 SEER) with the 13 

SEER standards established in the 2001 final rule. 

Because the 2001 final rule did not establish a separate class or separate standards for SDHV 

systems, and because SDHV systems are not considered “space constrained” (see discussion in 

66 FR at 7197 and 65 FR at 59609-10), they are covered by the 13 SEER/7.7 HSPF standard 

adopted in that rule. The Court’s ruling prohibits DOE from adopting a standard of less than 13 

SEER for SDHV systems, despite DOE’s more recent conclusion that SDHV systems have a 

maximum technologically feasible efficiency of just over 13 SEER.16

Further, in the test procedures detailed in the October 11, 2005 final rule, DOE stated that test 

procedure revisions to allow SDHV systems to test as coil-only units would result in unrealistic 

SEER ratings and would discourage manufacturers from making efficiency improvements to 

blower motors. 70 FR at 59124. Therefore, DOE did not amend the test procedure to allow 

testing of SDHV systems as coil-only units, making it more likely that SDHV products would be 

unable to meet even the 12 SEER standard. DOE advised manufacturers of SDHV systems of 

the procedure available under section 504 of the DOE Organization Act (42 U.S.C. 7194), which 

allows them to request relief from hardship or inequity caused by a regulation issued under 

EPCA. 

On May 24, 2004, SpacePak and Unico, Inc., filed a joint application with the Office of Hearings 

and Appeals (OHA) for exception from the 13 SEER standard, arguing that they would suffer a 

“serious hardship and unfair distribution of burdens” if forced to comply with the 13 SEER rule 

(case nos. TEE-0010 and TEE-0011) The OHA granted the exception to SpacePak and Unico, 

citing technological constraints (compact indoor coils, high static-pressure losses, and higher fan 

motor power) that make it more difficult for SDHV systems to increase energy efficiency. Also 

cited was the serious hardship to SpacePak and Unico that would result should exception relief 

not be granted, possibly resulting in “the loss of all sales within the United States.” The OHA 

further noted that the unavailability of SDHV systems would negatively impact domestic 

consumers, and that granting exception relief would not have a significant impact upon 

competition in the air conditioner industry. On October 14, 2004, the OHA granted exception 

relief to SpacePak and Unico, Inc., authorizing them to manufacture and sell SDHV systems that 

 

16 In 2002, DOE performed a separate engineering analysis for SDHV systems by evaluating the incremental costs 

and efficiency improvements associated with design changes to blower coil units and pairing of existing SDHV 

blower coil units with higher-efficiency outdoor units. In that analysis, DOE found that the maximum 

technologically feasible (“max-tech”) efficiency of SDHV systems was just over 13 SEER. 

http://eere.energy.gov/buildings/appliance_standards/residential/pdfs/engineering_analysis_112602.pdf 

EERE-2008-STD-0006 COMMENT 01
24 

meet an 11 SEER/6.8 HSPF standard. This decision became effective January 23, 2006, and 

remains in effect until DOE establishes a different standard for SDHV systems. 

On September 28, 2005, Energy Savings Products, Ltd. (ESP), filed its own application for 

exception relief with the OHA (case no. TEE-0026). ESP asserted that it would suffer a gross 

inequity, serious hardship, and an unfair distribution of burdens if forced to comply with the 13 

SEER standard. On December 20, 2005, the OHA granted the exception relief to ESP, citing the 

same reasons given in the SpacePak/Unico decision and authorizing Energy Savings Products to 

manufacture and sell SDHV systems that meet an 11 SEER/6.8 HSPF standard. This decision 

also became effective January 23, 2006, and remains in effect until DOE establishes a different 

standard for SDHV systems. 

DOE is considering maintaining a separate product class for SDHV systems and conducting a 

detailed analysis to determine the appropriate standards for this type of equipment. 

Item 3–4 DOE requests that stakeholders submit any available, applicable data to DOE 

concerning SDHV systems, including market shares, shipments, cost and 

performance data, and design specifications. 

3.2.3 Space-Constrained Products 

Certain types of central air conditioners and heat pumps are manufactured for applications with 

space constraints and, therefore, have features that distinguish them from the majority of 

products available. Sometimes these products are not able to meet standards for regular split and 

packaged air conditioners and heat pumps, or are able to, but place a disproportionate burden on 

manufacturers and consumers in doing so. In the 1999 SANOPR, DOE first suggested separate 

product classes as a way to set standards for these niche products. 64 FR at 66310. Originally, 

these products included ductless split systems, SDHV systems, single-package vertical units 

(SPVU), and through-the-wall (TTW) split systems. In the subsequent 2000 NOPR, throughthe-wall packaged and non-weatherized single-package products were also considered space 

constrained. 65 FR at 59597. DOE’s efforts to establish standards for each of these types of 

products is explained below. 

In the 2004 Technical Amendment, DOE established a separate product class for spaceconstrained systems and required them to meet a 12 SEER/7.4 HSPF standard. Product classes 

were also set for through-the-wall split- and single-package systems, with standards at 10.9 

SEER/7.1 HSPF and 10.6 SEER/7.0 HSPF, respectively. The separate product class for throughthe-wall products is set to expire January 23, 2010, which will return those products to the spaceconstrained product class and require them to meet the 12 SEER/7.4 HSPF standard. 

Currently, ductless split systems are not considered a space-constrained product and are not 

given special consideration. They are, therefore, required to meet the 13 SEER/7.7 HSPF 

standards for split- and single-package air conditioners and heat pumps. Small-duct highvelocity systems are also not considered space constrained, and are required to meet the 13 

SEER/7.7 HSPF standards. 

EERE-2008-STD-0006 COMMENT 01
25 

As part of the recent EISA 2007 legislation, statutory standards and definitions for singlepackage vertical units were adopted, removing them from consideration in this rulemaking. 

Therefore, only through-the-wall systems and non-weatherized single-package products are 

currently considered space-constrained products. 

In this rulemaking, DOE is reevaluating whether to give special consideration to these spaceconstrained products. Below, the history of each type of product is reviewed, and DOE’s 

approach for how to handle each type in this rulemaking is presented. 

3.2.3.1 Single-Package Vertical Units (SPVUs) 

SPVUs, also referred to as “vertical-package wall-mounted” units, are factory-assembled, singlepackaged, vertically-oriented air conditioners and heat pumps using single-phase power, but such 

units are designed and intended for use in commercial and industrial heating and cooling 

applications. DOE understands that SPVUs are not distributed for personal use or consumption 

by individuals, and are, therefore, not considered a residential product. In the 2000 NOPR, DOE 

stated that SPVUs are not covered by standards for residential products. 65 FR at 59610. 

As noted above, EISA 2007 added definitions17 and standards18 for SPVUs. Because 

EISA 2007 defined SPVUs as a commercial product, SPVUs are not part of this 

rulemaking. 

3.2.3.2 Through-the-Wall Systems 

There are two main types of through-the-wall products: (1) through-the-wall split systems 

(condensers) and (2) through-the-wall package systems. Through-the-wall condensers were 

popular in new multi-story residential construction in the 1960s and 1970s. Major manufacturers 

have since abandoned the replacement market, providing an opportunity for lower-volume 

manufacturers, such as First Company, National Comfort Products, and EnviroMaster 

International to serve the replacement market. Most equipment is in the 1-1/2 to 2-1/2 ton 

(18,000 Btu/h to 30,000 Btu/h) capacity range. New through-the-wall condensers must fit within 

the same wall opening as the original units, even though original units may be half as efficient as 

the new ones. Residents and building owners are particularly sensitive to any increase in price, 

or to the cost of enlarging the wall opening to accommodate a larger condenser. Since repair is 

the only other cost-effective alternative to replacement, a new standard that increases cabinet size 

 

17 Section 314 of EISA 2007 codifies definitions for “single package vertical air conditioner” and “single package 

vertical heat pump.” The term “single package vertical air conditioner” means “air-cooled commercial package air 

conditioning and heating equipment that (A) is factory-assembled as a single package that (i) has major components 

that are arranged vertically; (ii) is an encased combination of cooling and optional heating components; and (iii) is 

intended for exterior mounting on, adjacent interior to, or through an outside wall; (B) is powered by a single- or 3-

phase current; (C) may contain 1 or more separate indoor grilles, outdoor louvers, various ventilation options, indoor 

free air discharges, ductwork, well plenum, or sleeves; and (D) has heating components that may include electrical 

resistance, steam, hot water, or gas, but may not include reverse cycle refrigeration as a heating means.” The term 

“single package vertical heat pump” means “a single package vertical air conditioner that (A) uses reverse cycle 

refrigeration as its primary heat source; and (B) may include secondary supplemental heating by means of electrical 

resistance, steam, hot water, or gas.’’ (42 U.S.C. 6311(22)-(23)) 

18 Section 314 of EISA 2007 set standards at 9.0 EER for single-package vertical air conditioners and 9.0 EER/3.0 

coefficient of performance (COP) for single-package vertical heat pumps. 

EERE-2008-STD-0006 COMMENT 01
26 

or results in a significant price increase could be counterproductive, preventing the turnover of 

old, inefficient equipment. 

Through-the-wall packaged equipment is similar to packaged terminal air conditioners (PTACs), 

but is typically installed in a closet with an exterior wall and ducted to the interior space. Like 

through-the-wall condensers, they serve primarily multi-family high-rise residential-building 

applications. However, unlike today’s through-the-wall condensing units, through-the-wall 

packaged units are targeted to new construction without prior wall-opening constraints. 

Manufacturers of packaged through-the-wall equipment include First Company, Skymark 

(Johnson Controls), and Armstrong (Lennox). 

In the 2000 NOPR, DOE recognized through-the-wall products as being a niche category of 

products with space constraints, and proposed adopting an 11 SEER standard for them. 65 FR at 

59610. However, in light of stakeholders’ concerns that through-the-wall products would not be 

able to meet the 13 SEER standard, the 2001 Final Rule did not set standards for through-thewall products, pending completion of later rulemaking proceedings. Prior to the subsequent 

2001 SNOPR, DOE performed engineering and life-cycle cost analyses for through-the-wall 

products to determine appropriate standard levels. Based on those analyses, DOE concluded that 

10.9 SEER/7.1 HSPF and 10.6 SEER/7.0 HSPF were the appropriate standards for split- and 

single-package through-the-wall products, respectively, and adopted those standards in the 2002 

final rule. 67 FR 36368 In the 2004 Technical Amendment, DOE explained that the standards 

for through-the-wall products, which fall within the definition of “space-constrained product,” 

would be those set in the 2002 final rule. 

The definition of “through-the-wall air conditioner and heat pump” that DOE adopted in 

10 CFR 430.2 provides that this product class exists only for products manufactured prior to 

January 23, 2010. After that date, the standards for space-constrained products (12 SEER/7.4 

HSPF) will apply to through-the-wall split and packaged air conditioners and heat pumps. 

Because this “sunset” provision takes place well before the effective date of this rule (2016), 

DOE will evaluate standards for through-the-wall products based on an assumed baseline of 

12 SEER/7.4 HSPF. Manufacturers will have six years between the time through-the-wall 

products must meet the 12 SEER/7.4 HSPF standard and the time new standards adopted in this 

rule become effective. 

In this rulemaking, DOE is considering maintaining separate product classes for 

space-constrained products that would include through-the-wall systems, and developing 

standards using a 12 SEER/7.4 HSPF baseline. 

Item 3–5 DOE requests submission of any available, applicable data concerning 

through-the-wall systems, including market shares, shipments, cost and 

performance data, and design specifications. 

EERE-2008-STD-0006 COMMENT 01
27 

3.2.3.3 Single-Package Non-Weatherized Units 

Another niche product is single-package non-weatherized units, which are mounted entirely 

within a structure (in an attic, basement, or closet), with outdoor air ducted to and from the unit. 

The fact that air is ducted to and from the unit differentiates single-package non-weatherized 

units from through-the-wall products, which penetrate an exterior wall directly. Single-package 

non-weatherized products are used in high-rise and garden apartments, manufactured homes, and 

other residential applications where locations for placement of outdoor units may be unavailable 

or too remote, where architectural aesthetics may be compromised by visible outdoor units, 

where vandalism or theft of outdoor units is a potential problem, or where compliance with local 

sound ordinances restricts the placement of outdoor air conditioning equipment. 

Single-package non-weatherized units have space constraints, but because they do not have to fit 

in a predefined wall opening, those constraints are not as severe as those on through-the-wall 

products. In the 2000 NOPR, DOE recognized single-package non-weatherized units as having 

space constraints, but due to the availability of models at the 12 SEER level (the proposed 

standard level for conventional air conditioners in that rule), DOE did not propose a separate 

class for them. 65 FR at 59610. Additionally, DOE concluded it would be difficult to define 

these products in such a way that would avoid the creation of a loophole whereby conventional 

products could take advantage of lower standards. In the 2001 final rule, DOE again made 

mention of single-package non-weatherized units, but DOE decided to include them as a type of 

space-constrained product. The 2001 final rule established a new product class for spaceconstrained products, but did not set standards in that rule pending completion of later 

rulemaking proceedings. In the subsequent 2001 SNOPR and the 2002 final rule, no specific 

mention was made of single-package non-weatherized units, but DOE still considered them as a 

type of space-constrained product. In the 2002 final rule, DOE concluded that space-constrained 

products (excluding through-the-wall products) would be able to meet the 12 SEER standard for 

conventional products, and did not adopt separate standards for those considered space 

constrained. Ultimately, in the 2004 Technical Amendment, DOE explained that the ruling by 

the Second Circuit Court of Appeals in Natural Resources Defense Council v. Abraham did not 

affect the standards established for space-constrained products in the 2002 final rule, since the 

2001 final rule did not establish any standards for space-constrained products. Therefore, the 12 

SEER standard established in the 2002 final rule was adopted for all space-constrained products, 

except those with through-the-wall condensers. 

The only manufacturer of single-package non-weatherized units DOE was able to identify was 

Consolidated Technology Corporation, manufacturer of the “Insider” unit.19 However, DOE 

understands that Consolidated Technology Corporation is no longer in business, having been 

liquidated under Chapter 7 bankruptcy.20 DOE is not aware of any other manufacturer that 

currently produces a unit that is single-package and non-weatherized, and seeks comment from 

stakeholders on whether any such products exist in the market today and whether single-package 

non-weatherized units should be considered in this rulemaking. 

 

19 http://www.mechreps.com/news/insider.htm 

20 http://www.bardhvac.com/ind_base_esg_isg.shtml 

EERE-2008-STD-0006 COMMENT 01
28 

3.2.4 Ductless Split Systems 

Ductless split systems, or “mini-splits,” dominate the international market, but hold only a small 

fraction of the domestic market. They consist of a single outdoor unit and an indoor fan coil unit 

discharging directly into the conditioned space. Ductless systems with multiple fan coil units are 

often called “multi-splits.” Mini-splits and multi-splits are attractive in many applications 

because tubing and electrical service can often be installed for less cost—and in less space—than 

can the equivalent ducting. This makes them particularly attractive for the retrofit market. They 

also offer the possibility of individual temperature control. Key manufacturers of ductless split 

systems include Mitsubishi Electronics, Carrier, Sanyo Fisher, and EnviroMaster International. 

Ductless split systems were included in the revisions to the DOE test procedure in the March 14, 

1987, Final Rule. 53 FR 8304. In the 1999 SANOPR, DOE first suggested separate product 

classes as a way to set standards for niche products, including ductless split systems. 64 FR at 

66310. Since consumers may consider the interior units of mini- and multi-splits to be more 

intrusive than ducted systems, manufacturers strive to make them as compact as possible. After 

receiving stakeholder feedback, DOE decided that a separate product class was not warranted, 

and ultimately in the final rule that set the current standards, ductless split systems were required 

to meet the 13 SEER standards developed for regular split-system air conditioners and heat 

pumps. 66 FR at 7197. 

Prior to the latest revision to the test procedure, manufacturers of ductless split systems applied 

for and received waivers from the test procedure because of the differences between multi-split 

systems and traditional split-system air conditioners and heat pumps. In the most recent final 

rule revising the central air conditioner and heat pump test procedure, DOE responded to 

stakeholder comments regarding changes to the test procedure for multi-splits. See generally 72 

FR 59906, 59908-11 and 59913-14 (Oct. 22, 2007). Stakeholders asserted that multi-split 

systems should be rated using EER if those systems compete primarily with room air 

conditioners and SEER if they compete primarily with ducted residential systems. DOE 

responded in the October 2007 rule that it believes residential-size multi-split systems compete 

primarily with ducted systems, and that consumers will best be served if multi-split systems are 

rated using SEER. This will allow consumers to make direct comparisons of efficiency levels 

when considering system options. 

In the present rulemaking, DOE is considering maintaining the status of ductless split systems, 

and not creating a separate product class with separate standards. Ductless split systems would, 

therefore, be required to meet the same standards adopted for conventional split systems, unless 

they meet the definition of “space constrained.” 

Item 3–6 DOE requests submission of any available, applicable data concerning ductless 

split systems, including market shares, shipments, cost and performance data, 

and design specifications. 

EERE-2008-STD-0006 COMMENT 01
29 

3.3 Technology Assessment 

Typically, DOE uses information about existing and past technology options and prototype 

designs as input in identifying technologies manufacturers could use to meet and/or exceed 

energy conservation standards. In consultation with interested parties, DOE intends to develop a 

list of technologies that should be considered in the analysis. Initially, this list will include all 

those technologies considered to be technologically feasible and will serve to establish the 

maximum technologically feasible (max-tech) design. DOE is currently considering the specific 

technologies and design options listed below. 

The following design options and technologies are relevant to all product classes: 

1. Higher-efficiency expansion valves (e.g., dual-port thermostatic expansion valves 

(TXVs) and electronic expansion valves (EEVs)); 

2. Higher-efficiency evaporator and condenser fan motors (e.g., electronically-commutated 

motors (ECM)); 

3. Increased evaporator and condenser coil surface area (with a possible increase in fan 

energy consumption); 

4. Evaporator and condenser fan motor controllers; 

5. Higher-efficiency evaporator and condenser fan blades; 

6. Higher-efficiency compressors (e.g., variable-speed compressors); 

7. Micro-channel heat exchangers; 

8. Liquid-to-suction heat exchangers (LSHX) (sub-cool liquid refrigerant with suction line); 

and 

9. Flat tube heat exchangers. 

The following design options and technologies are relevant only to heat pumps: 

1. High-efficiency defrost mechanism (e.g., “frost-less” heat pumps, hot water defrost); and 

2. Improved defrost timer control (demand-based defrost cycles). 

Item 3–7 What technologies or design options, if any, should DOE add to or remove from 

the above lists? Please provide rationale for any such recommendations. 

EERE-2008-STD-0006 COMMENT 01
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4. SCREENING ANALYSIS 

The purpose of the screening analysis is to screen out design options and technologies that will 

not be considered further in the analysis. Following development of the initial list of design 

options and technologies, DOE will review each design option and technology based on the 

following four criteria, as addressed in sections 4(a)(4) and 5(b) of the Process Rule21: 

1. Technological feasibility. Design options and technologies that are not incorporated in 

commercially-available products or in working prototypes will not be considered further. 

2. Practicability to manufacture, install, and service. If it is determined that mass 

production of a design option or technology in commercially available products and 

reliable installation and servicing of the technology could not be achieved on the scale 

necessary to serve the relevant market at the time of the effective date of the standard, 

that design option or technology will not be considered further. 

3. Impacts on product or equipment utility to consumers or availability. If a design option 

or technology is determined to have significant adverse impact on the utility of the 

product to significant subgroups of consumers, or result in the unavailability of any 

covered product type with performance characteristics (including reliability), features, 

size, capacities, and volumes that are substantially the same as products generally 

available in the United States at the time, it will not be considered further. 

4. Adverse Impacts on Health or Safety. If it is determined that a design option or 

technology will have significant adverse impacts on health or safety, it will not be 

considered further. 

The reasons for eliminating any design options or technologies during the screening analysis will 

be fully documented and published as part of the ANOPR and will be available for stakeholder 

review and comment. 

5. ENGINEERING ANALYSIS 

After conducting the screening analysis, DOE performs an engineering analysis based on the 

remaining design options that would improve product efficiency. The engineering analysis 

consists of estimating the energy consumption and cost of products at various levels of increased 

efficiency. In this section, DOE discusses an overview of the engineering analysis (section 5.1), 

baseline units (section 5.2), the approach for determining the cost-efficiency relationship 

(section 5.3), efficiency levels (section 5.4), manufacturer prices (section 5.5), proprietary 

designs (section 5.6), and regulatory changes outside the realm of DOE’s energy conservation 

standards process, or outside regulatory changes, that affect the engineering analysis 

(section 5.7). 

 

21 Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for 

Consumer Products, (“The Process Rule”), guides DOE in the consideration of new or revised appliance efficiency 

standards under EPCA. 10 CFR Part 430, Subpart C, Appendix A. 

EERE-2008-STD-0006 COMMENT 01
31 

5.1 Engineering Analysis Overview 

The engineering analysis estimates the cost-efficiency relationship, which is the cost of 

equipment at various levels of increased energy efficiency above a baseline (i.e., equipment that 

just meets the minimum energy conservation standards). This relationship serves as the basis for 

the subsequent cost-benefit calculations in terms of individual consumers, manufacturers, and the 

Nation. In determining the cost-efficiency relationship, DOE will estimate the increase in 

manufacturer cost associated with the options and technologies available to manufacturers for 

increasing the efficiency of equipment above the baseline. 

Residential central air conditioners and heat pumps are somewhat unique among the products 

regulated by DOE in that manufacturers: (1) structure their product lines around efficiency 

levels; (2) sell significant volumes of higher efficiency equipment; and (3) offer, or have studied, 

most of the design options available for increasing product efficiency. These characteristics 

make it possible to largely determine the cost-efficiency relationship for central air conditioners 

and heat pumps by examining actual products in the marketplace instead of estimating the cost 

and performance of individual design options using theoretical models. 

5.2 Baseline Units 

Once DOE establishes product classes, it will select a baseline model as a reference point for 

each product class, against which it can estimate changes resulting from energy conservation 

standards. The baseline model in each product class represents the typical characteristics of 

equipment in that class. DOE will use the baseline models in the engineering analysis and the 

life-cycle cost and payback-period analyses. To determine energy savings and changes in 

manufacturer selling price, DOE will compare each higher-efficiency level against a baseline 

model. For central air conditioners and heat pumps, DOE will select a model for each product 

class that just meets current energy conservation standards for that class. 

The energy conservation standards for central air conditioners and heat pumps are codified at 10 

CFR 430.32(c), which sets forth the existing standard levels for each of the product classes of 

central air conditioners and heat pumps (see Table 2). For central air conditioners and heat 

pumps in the cooling mode, standards are in the form of minimum levels of the SEER. For heat 

pumps in the heating mode, standards are in the form of minimum levels of the HSPF. 

DOE seeks comment on what is the industries’ typical 13 SEER design for models that are 

currently on the market. This design will become the new baseline for this rulemaking. For the 

standard22 that took affect on January 23, 2006, DOE based that efficiency level of 13 SEER on a 

theoretical model; in other words, DOE set a standard level without specifying the technologies 

to be used in meeting that standard. DOE now is interested in information in terms of what 

manufacturers have actually designed for a 13 SEER product. 

 

22 69 FR 50997 (August 17, 2004). 

EERE-2008-STD-0006 COMMENT 01
32 

Table 2. Current Energy Conservation Standards for Central Air Conditioners and Heat 

Pumps. 

10 CFR 430.32 

Product Class Current Standard Level

Split-system air conditioners 13 SEER 

Split-system heat pumps 13 SEER/7.7 HSPF 

Single-package air conditioners 13 SEER 

Single-package heat pumps 13 SEER/7.7 HSPF 

SDHV systems 13 SEER/7.7 HSPF23

Space-constrained products – air conditioners24 12 SEER 

Space-constrained products – heat pumps 12 SEER/7.4 HSPF 

 

Item 5–1 DOE seeks information on what particular components and features (e.g., 

materials, dimensions, compressors, coils, expansion devices, fans, motors, and 

controls) characterize the baseline model in each product class. 

5.3 Planned Approach for Determining the Cost-Efficiency Relationship 

DOE recognizes that manufacturers may use different paths to meet a given efficiency level. In 

recognition of this fact, DOE plans to use an efficiency-level approach in this rulemaking. In an 

efficiency-level approach, analysis is performed in terms of product efficiency levels rather than 

solely focusing on design options. Thus, this approach estimates the cost of achieving a 

particular efficiency level without specifying which path is taken. For each product class, the 

engineering analysis will estimate manufacturer production costs (MPCs) at each potential 

efficiency level. DOE will supplement this analysis by investigating the cost and efficiency 

impacts of individual design options.

DOE will obtain cost estimates for the engineering analysis using a reverse-engineering 

methodology. This approach involves the selection and disassembly of several central air 

conditioners and heat pumps, creation of bills-of-materials (BOMs), and formation of a cost 

model to estimate the MPC of each unit. The MPC includes material, labor, factory overhead, 

and depreciation associated with the manufacture of air conditioning equipment. DOE will 

supplement this analysis with cost estimates of specific design options. In addition, DOE must 

identify the model with the highest efficiency that is technologically feasible within each product 

class (i.e., the “max tech” model).

For each product class, DOE will select a range of models to analyze, including the baseline 

model and models at efficiency levels above the baseline. DOE does not intend to differentiate 

 

23 The OHA has granted exception relief to the three manufacturers of SDHV systems (case numbers TEE-0010, 

TEE-0011, and TEE-0026), and has required that SDHV air conditioners and heat pumps must meet standards of 11 

SEER/6.8 HSPF. See Section 3.2.2. 

24 As of January 23, 2010, space-constrained air conditioners and heat pumps will include split- and single-package 

through-the-wall systems. See section 3.2.3.2. 

EERE-2008-STD-0006 COMMENT 01
33 

product classes by system capacity, because this would unnecessarily complicate the analysis, 

and provide little additional differentiation between products in terms of potential energy 

efficiency improvements. Instead, DOE will select models at a representative cooling capacity 

within each product class, while giving consideration to the design constraints for products at 

very small and very large capacities. For conventional split- and single-package air conditioners 

and heat pumps and for SDHV systems, the maximum cooling capacity is 5.4-tons (65,000 

Btu/h). DOE has used 3 tons (36,000 Btu/h) as the representative cooling capacity in past 

rulemakings, and intends to base its analysis in this rulemaking on 3-ton models. For spaceconstrained products (including through-the-wall systems), the maximum cooling capacity is, by 

definition, 2.5 tons (30,000 Btu/h). DOE previously analyzed 1.5- and 2.5-ton models in 

determining the current standard levels for through-the-wall products. For the space-constrained 

products in this rulemaking, DOE is seeking feedback from manufacturers on an appropriate 

representative capacity (i.e., the most-common or highest-volume capacity). DOE understands 

that it may be more difficult for manufacturers to design and produce equipment at capacities 

other than the representative capacity. In this rulemaking, DOE will take into consideration the 

capacity-related limitations of very small and very large capacity products in its analysis. 

DOE may supplement the reverse-engineering data with information pulled from catalogs, 

websites, and trade publications to create a wider set of units for its efficiency-cost analysis. 

DOE will quantify disaggregated energy consumption during testing to analyze the link between 

specific technologies and efficiency levels, in effect supplementing the efficiency-level approach 

with a design-option approach as needed. 

Item 5–2 DOE requests feedback on the use of an efficiency level approach to determine 

the relationship between manufacturer production cost and energy- efficiency 

levels for central air conditioners and heat pumps. 

Item 5–3 For each product class, DOE seeks feedback on what representative cooling 

capacity to use (i.e., what is the most common, or most appropriate size air 

conditioner or heat pump to analyze). 

Item 5–4 DOE seeks information on the limitations of products at very small and very 

large capacities, and how to consider these limitations in its analysis. 

5.4 Efficiency Levels 

For each of the product classes presented in section 3.2, DOE will undertake analyses to 

determine potential efficiency levels and seek to develop incremental cost data at each of these 

levels. DOE plans to conduct an engineering analysis (and LCC and PBP analyses) on all 

product classes. 

For each product class of split and single-package residential central air conditioners and heat 

pumps, DOE will analyze a baseline efficiency level (i.e., current standards listed in 10 CFR 

EERE-2008-STD-0006 COMMENT 01
34 

430.32(c)(2)) and a maximum technologically feasible (“max-tech”) efficiency level (42 U.S.C. 

6295 (p)(2)). Table 3 and 

Table 4 present several other efficiency levels DOE also intends to analyze. Included in these 

tables are those levels that represent the “maximum available”25 efficiency, and levels from the 

ENERGYSTAR Program26 and the Consortium for Energy Efficiency (CEE) Residential Central 

Air Conditioning and Heat Pump Initiative.27 In addition, DOE may analyze other levels not 

included in these lists. 

Table 3 Efficiency Levels for Product Classes of Central Air Conditioners 

Level Split System Air Conditioners Packaged Air 

Conditioners 

ENERGYSTAR & CEE Tier 1 14 SEER 14 SEER 

CEE Tier 2 15 SEER 14 SEER or higher 

CEE Tier 3 16 SEER or higher N/A 

Maximum available 21 SEER 16.6 

Note: ENERGYSTAR & CEE guidelines include EER levels as well, but they are omitted here because they are 

not part of the efficiency metric for central air conditioners and heat pumps.

Table 4 Efficiency Levels for Product Classes of Central Air Conditioning Heat Pumps 

Level Split System Heat Pumps Packaged Heat Pumps 

ENERGYSTAR 14 SEER 8.2 HSPF 14 SEER 8 HSPF 

CEE Tier 1 14 SEER 8.5 HSPF 14 SEER 8 HSPF 

CEE Tier 2 15 SEER or 

higher 

8.5 HSPF or 

higher 

14 SEER or 

higher 

8 HSPF or 

higher 

Maximum Available 19.5 SEER 10.8 HSPF 16.4 SEER 9 HSPF 

Note: ENERGYSTAR & CEE guidelines include EER levels as well, but they are omitted here because they are 

not part of the efficiency metric for central air conditioners and heat pumps.

 

25 The “maximum available” level refers to the maximum efficiency of all the models for each product class, as 

listed in the AHRI directory of certified performance for residential HVAC systems. It should be noted that the 

“maximum available” efficiency levels in the tables correspond to models with the maximum efficiency currently 

available in the market, but may not necessarily correspond to the “maximum technology” level. “Maximum 

available” models may not incorporate all possible design options for increasing efficiency and, therefore, may not 

achieve an annual energy use as low as the “maximum technology” level. Also, it is possible that some of the 

design options that have met the screening criteria (i.e., passed the screening analysis) may not yet be commercially 

available and, therefore, would not be found in today’s “maximum available” products. In light of this potential 

dichotomy between maximum technology and maximum available, and because DOE is required to analyze the 

maximum technology level, it will seek stakeholder input to determine appropriate max-tech efficiency levels. (42 

U.S.C. 6295 (p)(2)) 

26 http://www.energystar.gov/index.cfm?c=cac.pr_central_ac

27 http://www.cee1.org/resid/rs-ac/rs-ac-main.php3

EERE-2008-STD-0006 COMMENT 01
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Item 5–5 DOE seeks input from stakeholders concerning the efficiency levels it plans to 

use for collecting incremental cost data from manufacturers. DOE also seeks 

input from stakeholders on appropriate maximum technologically feasible 

efficiency levels. 

Item 5–6 DOE seeks input on appropriate levels to analyze for SDHV systems, and for 

space constrained products. DOE also seeks input from stakeholders on 

appropriate maximum technologically feasible efficiency levels for SDHV 

systems and space constrained products. 

5.5 Manufacturer Prices 

DOE plans to apply a manufacturer markup to convert manufacturer production cost to 

manufacturer selling price. DOE will estimate this manufacturer markup from publicly available 

financial information (e.g., Securities and Exchange Commission 10-K reports). 

Item 5–7 DOE seeks comment on the planned markup approach for developing estimates 

of manufacturer selling prices. 

5.6 Proprietary Designs 

DOE will consider in its engineering and economic analyses all design options that have not 

been screened out, including proprietary designs. DOE will consider proprietary designs in the 

subsequent analyses only if it is not a unique path to a given efficiency level. This protects 

manufacturers without intellectual property rights from having to rely upon particular 

technologies and designs when they have no other route for reaching the efficiency level in 

question. If the proprietary design is the only approach available to achieve a given efficiency 

level, then DOE will reject that efficiency level from further analysis, as the analytical results 

would appear to favor one manufacturer over others. 

Furthermore, DOE is sensitive to manufacturer concerns regarding proprietary designs and will 

make provisions to maintain the confidentiality of any proprietary data submitted by 

manufacturers or discussed during manufacturer interviews. This data may be provided under a 

confidentiality agreement with DOE’s contractor responsible for this part of the rulemaking 

analysis, Navigant Consulting, Inc. (NCI). As in other rulemakings, NCI regularly works with 

confidential data from manufacturers and other organizations, preparing aggregated results for 

DOE’s analysis that do not divulge sensitive raw data, but that enable other stakeholders to 

review and comment on the aggregated dataset. Alternatively, stakeholders may submit 

confidential data to DOE, indicating in writing which data should remain confidential. In order 

to prevent public disclosure of the data due to actions taken by a third party, stakeholders 

providing confidential information to DOE must submit that data according to 10 CFR 1004.11. 

This information will provide input to the competitive impacts assessment and other economic 

analyses. 

EERE-2008-STD-0006 COMMENT 01
36 

Item 5–8 Are there proprietary designs or technologies that DOE should consider for any 

of the products under consideration by this rulemaking? If so, how should DOE 

acquire the cost data necessary for evaluating these designs? 

5.7 Outside Regulatory Changes Affecting the Engineering Analysis 

In conducting an engineering analysis, DOE must consider the effects of regulatory changes 

outside DOE’s statutory energy conservation standards rulemaking process that can impact the 

manufacturers of central air conditioners and heat pumps. Some of these changes can also affect 

the energy efficiency or energy consumption of the products covered under this rulemaking. In 

particular, because the Environmental Protection Agency (EPA) has mandated the phase-out of 

chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs) in all new equipment for 

sale in the U.S. by 2010, the industry must transition to non-ozone-depleting refrigerants such as 

hydrofluorocarbons (HFCs), which may negatively affect the energy efficiency of air 

conditioning and heat pump units due to different properties such as pressure and heat capacity. 

DOE will attempt to identify all such outside engineering issues that could impact the 

engineering analysis. The consideration of these issues is closely related to the cumulative 

regulatory burden assessment that DOE will carry out as part of the manufacturer impact 

analysis. 

Based on consideration of the comments received on the engineering analysis documented in the 

ANOPR, DOE will make the necessary changes to the analysis. It will reflect those changes in 

the documentation of the NOPR. 

5.7.1 Refrigerant Phase-out 

Because of its potential to deplete the ozone layer, the EPA has begun a systematic phase-out of 

HCFC refrigerants, in implementation of the Montreal Protocol.28 The EPA, under the Clean Air 

Act,29 will phase out R-22 in two major steps, as shown in Table 5. EPA published a final rule in 

the Federal Register on January 21, 2003 to effect this HCFC phase-out (68 FR 2820). This 

phase-out schedule was updated on September 21, 2007, when, pursuant to the Montreal 

Protocol, the U.S. agreed to accelerate the phase-out of HCFC refrigerants. As of this update, 

the phase-out of R-22 is scheduled to begin January 1, 2010, with a ban on the production and 

importation of R-22, except for use in equipment manufactured before this date. Effectively, this 

bans the production or importation of R-22 for equipment manufactured after January 1, 2010. 

This step in the phase-out is expected to reduce R-22 consumption to 25 percent of original 

consumption levels. Then, on January 1, 2020, step two of the phase-out bans the production 

and importation of R-22 completely, which is expected to lower R-22 consumption to 0.5 percent 

of baseline consumption, leaving enough R-22 for servicing existing equipment. In the current 

schedule, this baseline allowance continues until 2030, although the parties of the Montreal 

Protocol agreed to review this allowance in 2015. 

 

28 The Montreal Protocol is an international agreement originally signed in 1987 in which signatory Nations agree 

to phase out the production and consumption of ozone-damaging chemicals. 

29 42 U.S.C. 7401 et seq. 

EERE-2008-STD-0006 COMMENT 01
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Table 5. United States R-22 Refrigerant Phase-out Schedule 

Year to be Implemented Implementation of R-22 Phase-out through Clean Air Act Regulations 

2010 

No production and no importing of R-22, except for use in equipment 

manufactured before 1/1/2010 (so no production or importing for NEW 

equipment that uses these refrigerants) 

2020 No production and no importing of R-22 

Source: EPA HCFC Phase-out Schedule, http://www.epa.gov/Ozone/title6/phaseout/hcfc.html

The ban on production and importation of R-22 in new equipment that goes into effect in 2010 

will directly impact manufacturers of central air conditioners and heat pumps. By this date 

manufacturers will no longer be able to produce new equipment with R-22, and, as a practical 

matter, they will have had to begin preparations for this date some years before. It appears likely 

that R-410A (an HFC) will be the refrigerant of choice to replace R-22 in central air conditioners 

and heat pumps, although R-407C (an HFC) and several hydrocarbon refrigerants have become 

popular in Europe. Based on research at the National Institute of Standards and Technology 

(NIST), DOE expects the refrigerant transition to result in a net system efficiency decrease of at 

least 5 to 7 percent.30 

The final rule for the present rulemaking is scheduled to be published by June 2011, with the 

relevant energy conservation standards becoming effective June 2016, should the analysis show 

that higher standards are warranted. This effective date is more than six years after the ban on R22 for use in new equipment goes into effect, giving manufacturers time to adjust to the R-22 ban 

and allowing them to prepare for new energy conservation standards. 

Although the ban on R-22 occurs well before the effective date of this rule, it is likely that the R22 phase-out will affect stakeholders in other ways. According to DuPont, demand for R-22 in 

the United States continues to grow, in part because of the increased use of R-22 to meet the 13 

SEER standards enacted in the 2004 final rule technical amendment.31 It is projected that 

shortages could occur by 2010 if current service practices and the reduced availability of 

reclaimed R-22 continue. An increase in demand for R-22 would likely result in increased 

prices. 

DOE is interested in understanding the impact of limitations on the availability of alternative 

HFC refrigerants such as R-410A, For example, DOE is interested in information on additional 

burdens on manufacturers, who have already begun to transition to R-410A. 

Item 5–9 DOE seeks feedback from interested parties on the potential impacts of reduced 

availability R-410A? 

 

30 Calm, J., and Domanski, P., R22 Replacement Status, AMERICAN SOCIETY OF HEATING, REFRIGERATING AND 

AIRCONDITIONING ENGINEERS (ASHRAE) JOURNAL, August 2004, 46(8):29-39. 

31 www.epa.gov/ozone/title6/phaseout/hcfc.html 

EERE-2008-STD-0006 COMMENT 01
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Item 5–10 Are there additional outside regulatory issues that DOE should consider in its 

analysis of central air conditioners and heat pumps? 

6. ENERGY USE ANALYSIS 

6.1 Overview of Energy Use Analysis 

The purpose of the energy use analysis is to determine the annual energy consumption of central 

air conditioners and heat pumps and to assess the energy-savings potential of increased product 

efficiencies. DOE will estimate the annual energy consumption of central air conditioners and 

heat pumps at specified energy efficiency levels across a range of climate zones. For central air 

conditioners, the annual energy consumption is the annual site energy use associated with 

providing space-cooling. For heat pumps, the annual energy consumption is the annual site 

energy use associated with providing both space-cooling and space-heating. The annual energy 

consumption of central air conditioners and heat pumps will be used in subsequent analyses, 

including the LCC, PBP, and National Impact Analyses. 

In its last rulemaking for central air conditioners and heat pumps, DOE used the data from the 

Energy Information Administration’s (EIA) Residential Energy Consumption Survey (RECS)32

to determine the energy consumption of households using the covered equipment. Specifically, 

DOE used the 1997 version of the RECS data for the energy use analysis, which was the most 

current information available at that time. From RECS, DOE will develop household samples 

for each product. Because there is enough detail in RECS to specify or determine the usage of 

each product, DOE can determine the product’s annual energy consumption. Details on how 

DOE will use RECS to determine the annual energy consumption of central air conditioners and 

heat pumps are provided below. DOE plans to use the household samples not only to establish 

each product’s annual energy consumption but also as the basis for conducting the LCC and PBP 

analysis (see section 8). 

In determining the annual energy consumption of central air conditioners and heat pumps used in 

households, DOE plans to use the latest available RECS data. RECS survey data provide 

information on the age of the equipment, as well as associated energy use in residential housing 

units in the United States. The survey includes information on the physical characteristics of 

housing units, demographic characteristics of households, heating and cooling equipment used, 

fuels used, energy consumption and expenditures, and other data on residential characteristics. 

RECS data are available for the four Census regions, the nine Census divisions, and the four 

most populous States: California, Florida, New York, and Texas. The most recently published 

RECS version is from the survey conducted in 2001. The 2001 RECS is based on a sample of 

4,822 households statistically selected to represent the 107 million housing units in the United 

States. A more recent survey was conducted in 2005. The results of the 2005 RECS are due to 

be released in the summer of 2008. If the 2005 RECS version is not available in time to conduct 

 

32 See http://www.eia.doe.gov/emeu/. 

EERE-2008-STD-0006 COMMENT 01
39 

the analyses for the ANOPR, DOE will use the 2001 version for the ANOPR analysis and will 

update the analyses to the 2005 version at the NOPR stage. 

6.2 Annual Energy Consumption in Households 

As indicated above, DOE intends to use the RECS data to estimate the annual energy 

consumption of central air conditioners and heat pumps used in existing households. Central air 

conditioners and heat pump energy efficiencies in existing households (i.e., the residential stock 

equipment efficiency) will be based primarily on data from RECS as well. To estimate the 

annual energy consumption associated with a baseline or a particular standard level, the ratio of 

the building stock’s efficiency to the baseline or standard-level efficiency will be multiplied by 

the building’s annual energy consumption. In particular, the annual baseline space-cooling 

energy use or the unit energy consumption (UECres_base_c) is defined by the following equation: 

base

stockres

cbaseres cstockres

SEER

SEER

UEC UEC _

__ = _ _ × Eq. 1 

Where, 

UECres_base_c = annual space-cooling energy use of equipment at baseline 

efficiency level (kWh/year), 

UECres_stock_c = annual space-cooling energy use associated with the stock 

equipment in the RECS household (kWh/year), 

SEERres_stock = the SEER associated with the stock equipment in the RECS 

household, and 

 SEERbase = the SEER associated with the baseline equipment (i.e., 13 SEER) 

The approach to first determining UECres_stock_c and SEERres_stock is as follows: 

The stock annual space-cooling energy consumption is based on data from the 2001 RECS. For 

each household with a central air conditioner or a heat pump, RECS estimates the equipment’s 

annual energy consumption from the household’s utility bills. It is important to note that the 

estimated annual energy consumption corresponds to the household’s stock equipment, 

specifically its capacity and efficiency. In order to mitigate the effect of annual weather 

fluctuations on the annual energy consumption values in the 2001 RECS, the household stock 

annual energy use values are adjusted based on 30-year average cooling degree day (CDD) data 

for the specific Census Division or one of the large State location of the RECS household, as 

shown below. 

stockres

yravg

cstockres adjnoncstockres

CDD

CDD

UEC UEC

_

30

__ = ___ − × Eq. 2 

Where, 

UECres_stock_c = weather-adjusted annual space-cooling energy use 

associated with the stock equipment in the RECS 

household (kWh/year), 

EERE-2008-STD-0006 COMMENT 01
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UECres_stock_c_non-adj = annual space-cooling energy use associated with the stock 

equipment in the RECS household (kWh/year), 

CDDres_stock = the CDD associated with the stock equipment in the RECS 

household, and 

CDD30yravg = the 30-year average CDD for the specific Census Division 

or State location of the RECS household. 

The SEERres_stock is determined using the air conditioner vintage33 from RECS and the average 

shipped efficiency data by year at a national level that has been published by AHRI in trade 

publications.34

Item 6–1 DOE seeks comments on the accuracy and additional specificity of the annual 

shipped efficiency (SEER) data by vintage year as published in the HVAC&R 

News. Also, are there regional distributions of the SEER data by vintage 

available? If so, where can these data be found? 

In a similar manner, the standard-level annual energy use is directly proportional to the energy 

use associated with the stock air-conditioning or heat pump equipment in the specific RECS 

household being analyzed. Furthermore, the annual space-heating energy use of a heat pump 

(baseline and standard level) will be determined and adjusted to mitigate the annual weather 

effects using the same method as above for space-cooling energy use, with exceptions that the 

SEER in the above equations is substituted with HSPF and the CDD is substituted with the 

heating degree day (HDD) data. 

Item 6–2 DOE seeks stakeholder input on the planned approach of using RECS data for 

determining the energy consumption of central air conditioners and heat pumps 

in residential buildings. 

DOE will consider the “rebound effect” in its determination of annual energy consumption. A 

rebound effect occurs when a piece of equipment that is made more efficient is used more 

intensively, so that the expected energy savings from the efficiency improvement may not fully 

materialize. Based on limited research, the rebound effect for residential space-cooling appears 

to be highly variable, ranging from zero to 50 percent (i.e., consumers may utilize more efficient 

air-conditioning equipment zero to 50 percent more than baseline equipment).35 DOE seeks 

comments on the rebound effect, if any, associated with more efficient central air conditioners 

and heat pumps. 

 

33 The term “vintage” refers to the year of installation of the air conditioner in question. 

34 Air Conditioning, Heating & Refrigeration News is the reference source for the shipped efficiency data by 

vintage year. Available at: www.achrnews.com.

35 L.A. Greening, D.L. Greene, and C. Difiglio. Energy efficiency and consumption – the rebound effect – a survey, 

Energy Policy 28 (2000) 389—401. <www.elsevier.com/locate/enpol> 

EERE-2008-STD-0006 COMMENT 01
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Item 6–3 Because the rebound effect for residential space-cooling appears to be highly 

variable, DOE seeks comments on the rebound effect that may be associated 

with more efficient central air conditioners and heat pumps. 

6.3 Annual Energy Consumption in Commercial Buildings 

During the previous rulemaking for central air conditioners and heat pumps, DOE was asked by 

interested parties to consider installations of the covered products in commercial buildings as 

part of the energy consumption analysis. Stakeholders indicated at that time to DOE that 

approximately ten percent of single-phase central air conditioners and heat pumps were typically 

installed in commercial buildings. (65 FR 59590, 59601 (Oct. 5, 2000)) DOE performed a 

simulation-based analysis using seven commercial building types (across a range of climate 

zones) in that rulemaking to determine the annual energy consumption in the commercial 

building sector. 

If the ten percent assumption is still an accurate estimate of the fraction of the covered products 

that are installed in commercial buildings, DOE is considering performing a whole-building 

simulation-based analysis for a representative commercial building type. Recognizing the 

diversity of commercial building types that use central air conditioners and heat pumps, DOE 

assessed the EIA’s Commercial Building Energy Consumption Survey (CBECS) data from 

2003.36 Based on this assessment, DOE believes that a “small office building,” as defined by 

CBECS, is the predominant building type that uses central air conditioners and heat pumps. 

Therefore, DOE plans to conduct a whole-building simulation of a small office building 

prototype in different climate regions to capture the energy consumption and peak-demand 

impacts on the commercial building sector. This analysis approach is similar to what was done 

for the recent standards NOPR for packaged terminal air conditioners and heat pumps (73 FR 

18858, 18876 (April 7, 2008)). 

Item 6–4 DOE specifically requests comment on whether 10 percent is an accurate 

estimate of the fraction of single-phase central air conditioners and heat pumps 

installed in commercial buildings. 

Item 6–5 DOE requests input on whether, as defined by CBECS, the “small office 

building” is the appropriate building type to be used for this analysis. If so, 

DOE further requests comment on its planned approach of using a small office 

building prototype to estimate the annual energy consumption and peak-demand 

impacts of the covered equipment installed in commercial buildings. 

 

36 Available at: Energy Information Administration. 

http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/2003set1/2003pdf/b1.pdf. June 2006 

EERE-2008-STD-0006 COMMENT 01
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7. MARKUPS FOR EQUIPMENT PRICE DETERMINATION 

The LCC and PBP analyses require among its inputs: (1) the price consumers pay for baseline 

equipment, and (2) the incremental prices consumers must pay to purchase higher-efficiency 

equipment assuming energy conservation standards are set at those levels. DOE uses 

manufacturer-to-consumer markups to convert the manufacturer selling price from the 

engineering analysis to consumer prices. In the central air conditioning market, dealers sell 

equipment as part of an installation package and do not list retail equipment prices separately 

from installation cost. Furthermore, differences in local markets, weather conditions, demand, 

and many other factors can affect the price contractors charge for air conditioning equipment. 

DOE will determine typical markups along the distribution chain from the manufacturer through 

to the consumer. The markup approach makes it possible to estimate a retail price from the 

manufacturing cost. Representative markups will be determined from a broader market-wide 

perspective using publicly-available corporate and industry data. This approach is transparent 

and has been used by DOE in the recent standards rulemaking analyses for other air conditioning 

products. 

7.1 Description of Distribution Channels 

Before it can develop markup information, DOE must first identify distribution channels (i.e., 

how the product is distributed from the manufacturer to the consumer). Most residential central 

air conditioning equipment passes through a two-step distribution channel: (1) manufacturer to 

distributor (or wholesaler), and (2) distributor to dealer (or contractor). The one notable 

exception is Lennox, which uses one-step distribution (manufacturer to dealer) for its Lennoxbrand products. In addition, large retailers (e.g., Sears, Home Depot) replace the distributor in 

the channel for some equipment manufacturers. A snapshot of the industry shows roughly two 

dozen equipment manufacturers, several hundred distributors, and more than 30,000 dealers 

operate in the United States. However, due to a wave of consolidation over the last 20 years, the 

top seven manufacturers control approximately 97 percent of the market. Most remaining 

manufacturers produce only indoor coils or niche products. 

Generally, equipment manufacturers sell most of their products directly to distributors (also 

called wholesalers). Distributors sell to dealers at the distributor (wholesale) price. Distributors 

absorb short-term imbalances in supply and demand, allowing manufacturers to operate more 

efficiently and satisfying consumer needs for fast installation. Distributors may specialize in 

HVAC equipment or may deal in other products as well, and they are also important sources for 

after-market parts, an aspect of the business that tends to boost profit margins. Distributors 

compete on price and service, although geographic boundaries and relationships prevent margins 

from being squeezed to commodity levels. 

Most dealers compete at the local level. Many dealers carry more than one brand, and most 

install the products they sell. Some dealers are engaged in other contracting business, and most 

do commercial work. Dealers are consolidating rapidly in the wake of similar trends at the 

wholesale and manufacturer levels. There are now several large, national, publicly-traded 

HVAC dealers. Lennox has also acquired dealers to complement the vertical integration of its 

distribution channels. In new construction, the builders who are assumed to purchase their 

EERE-2008-STD-0006 COMMENT 01
43 

equipment from distributors rather than directly from the manufacturers, would mark up the cost 

of the property, including the air conditioning equipment. This suggests the following three 

distribution channels for the central air conditioners and heat pumps market. 

Manufacturer  Distributor (Wholesaler)  Dealer (Contractor)  Consumer 

Manufacturer  Distributor (Wholesaler)  Builder  Consumer 

Manufacturer  Large Retailer (e.g., Sears, Home Depot)  Consumer 

DOE understands that the relative fractions of equipment distributed in each path of the 

distribution channel could be different depending on the product class. 

Item 7–1 DOE requests information from stakeholders on whether the distribution 

channels for the central air conditioners and heat pumps would be similar to 

those described above and, if not, how they might be different. Also, what might 

be the differences in the distribution channels for the new versus replacement 

market? And are there any regional differences in the distribution channels? 

Item 7–2 DOE also requests information on the relative fractions of shipments expected 

for each channel in an appropriate distribution channel for new and 

replacement central air conditioners and heat pumps. Are there any regional 

differences in the relative fractions of shipments? 

Once it establishes proper distribution channels for each of the product classes, DOE will rely on 

economic census data from the United States Census Bureau37 and input from the industry trade 

associations such as the Heating, Air-Conditioning, and Refrigeration Distributors International 

(HARDI) to define how products are marked up from the manufacturer to the consumer. 

HARDI represents wholesalers for the central air conditioners and heat pumps as well as other 

HVAC products. At each point in the distribution chain, companies mark up the price of the 

equipment to cover their business costs and profit margin. In financial statements, gross margin 

is the effective markup on a company's cost of sales. It includes all corporate overhead costs; 

sales, general, and administration costs; research and development and interest expenses; 

depreciation and taxes; and profits. In order for sales of a product to contribute positively to 

company cash flow, its markup must be greater than the corporate gross margin less the 

company's operating profit margin. Individual products may command a lower or higher markup 

depending on their perceived added value and the competition they face. DOE generally 

assumes that gross margins on baseline residential unitary equipment are lower than the average 

gross margin of a diversified company. 

 

37 U.S. Census Bureau. 2002. Plumbing, Heating, and Air-Conditioning Contractors: 2002. Report EC02-231-

238220. 

EERE-2008-STD-0006 COMMENT 01
44 

DOE intends to develop both an overall baseline markup (for obtaining the consumer cost of 

baseline efficiency products) as well as an overall incremental markup to obtain the incremental 

cost of higher-efficiency products. Both of these overall markups will include an average 

multiplier to account for State sales tax applied at the last stage of the distribution channel. The 

State Tax Clearinghouse38 is an Internet source that DOE intends to use to calculate applicable 

sales taxes. 

Item 7–3 DOE requests feedback on its plan to use baseline and incremental distribution 

channel markups for the LCC and PBP analysis. 

Item 7–4 DOE seeks comment on other sources of relevant data that could be used to 

characterize markups for the central air conditioners and heat pumps covered 

under this rulemaking. 

8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES 

8.1 Overview 

The effects of new energy conservation standards on equipment result in changes in operating 

expenses—usually a decrease—and changes in purchase price—usually an increase. DOE will 

analyze the net effect of new standards on consumers by evaluating the net LCC using the costefficiency relationship derived in the engineering analysis, as well as the energy costs derived 

from the energy use and end-use load characterization analysis, and the equipment retail prices. 

Inputs to the LCC and PBP analyses include the installed cost to the consumer (purchase price 

plus installation cost), operating expenses (energy costs, maintenance costs, and, if applicable, 

repair costs), the lifetime of the appliance, energy price forecasts, and discount rates. 

The installed and operating costs of the appliance typically change in response to new energy 

conservation standards (installed cost typically increases while operating cost typically 

decreases). Thus, there is a specific time in the life of higher-than-baseline efficiency appliances 

when the net operating cost benefit (in dollars) from the time of purchase is equal to the 

incremental first cost of purchasing the higher efficiency appliance. The length of time required 

for the appliance to reach this cost-equivalence point is known as the payback period (PBP). 

DOE considers both LCC and PBP as discussed in section 1.4 to determine whether a standard is 

economically justified and whether the benefits of an energy conservation standard will exceed 

its burdens to the greatest extent practicable. However, because LCC uses an explicit discount 

rate (that depend on customers’ cost of financing), takes into account changing energy prices, 

and does not require selection of a baseline efficiency level, it is considered by DOE to be a 

better indicator of the likely economic impacts on consumers. For the ANOPR, DOE will 

conduct the LCC and PBP analysis using appropriate values for equipment life, equipment retail 

price, national or regional energy costs, and discount rates. 

 

38 Sales Tax Clearinghouse, Inc., State sales tax rates along with combined average city and county rates. 

Available at: http://thestc.com/STrates.stm. 

EERE-2008-STD-0006 COMMENT 01
45 

DOE will perform the LCC and PBP analyses using a spreadsheet model combined with Crystal 

Ball (a commercially available software add-on program to Microsoft Excel to conduct 

stochastic analysis using Monte Carlo simulation and probability distributions) to account for 

uncertainty and variability among the input variables. Each Monte Carlo simulation will consist 

of 10,000 LCC and PBP calculations. The models will perform each calculation using input 

values that are either sampled from probability distributions and household samples or 

characterized with single point values. The analysis results will be a distribution of 10,000 data 

points showing the range of LCC savings and PBPs for a given efficiency level relative to the 

baseline level. For any sensitivity analyses it conducts, DOE will account for correlations that 

may exist between inputs (e.g., there may be a correlation between energy usage and energy 

prices). 

As discussed in section 6, DOE intends to take into account the rebound effect associated with 

more efficient central air conditioners and heat pumps. The take-back in energy consumption 

associated with the rebound effect provides consumers with increased value (e.g., a cooler or 

warmer indoor environment). The net impact on consumers is thus the sum of the change in the 

cost of owning the space-conditioning equipment (i.e., life-cycle cost) and the increased value 

for the more comfortable indoor environment. DOE believes that, if it were able to monetize the 

increased value to consumers added by the rebound effect, this value would be similar in value to 

the foregone energy savings. For this standards rulemaking, DOE estimates that this value is 

equivalent to the monetary value of the energy savings that would have occurred without the 

rebound effect. Therefore, the economic impacts on consumers with or without the rebound 

effect, as measured in the LCC analysis, are the same. 

Based on the results of the LCC analysis, DOE will select candidate standard levels (CSLs) for 

the ANOPR analysis. The range of CSLs typically will include the efficiency level with the 

minimum LCC, the highest efficiency level that is technologically feasible, and other 

intermediate levels DOE has not yet determined. 

The following sections discuss the methodologies DOE plans to use to develop several of the 

inputs to the LCC and PBP analysis, including: (1) electricity prices; (2) discount rates; (3) 

maintenance, repair, and installation costs; and (4) equipment lifetime. The other inputs to the 

LCC and PBP analysis—namely, manufacturer costs (section 5), annual energy consumption 

(section 6), and markups for the determination of consumer retail prices (section 7)—have been 

discussed previously. 

As noted above, for central air conditioners and heat pumps, it will be necessary to determine 

several values for the LCC estimation, including retail prices, electricity prices, discount rate, 

maintenance, service and installation costs, and appliance lifetimes. The following sections 

discuss the methodologies DOE plans to use in determining these values. 

8.2 Electricity Prices 

Electricity prices are used to evaluate the energy cost savings determined from the energy use 

analysis. Electricity prices can be characterized with average and marginal values. Average 

electricity prices reflect the average prices paid by consumers over the course of a billing 

period. To calculate average electricity prices for residential and commercial consumers, DOE 

EERE-2008-STD-0006 COMMENT 01
46 

can use information provided for electric utilities as summarized in the most recent EIA Form 

861 data.39 These data are published annually for all electric utilities in the U.S. and include 

each utility’s annual revenues, electricity sales (in kWh), and the number of customers served for 

each customer class (i.e., residential, commercial, and industrial). The calculation of a utility’s 

average electricity price for a given customer class is estimated by dividing the utility’s revenues 

by its sales for that segment. Regionally-based weighted-average prices (where regions, if 

necessary, can be specified down to the State level) will be determined by weighting each 

utility’s average price within the defined region by the number of customers that the utility 

serves. 

But rather than using average electricity prices in its analysis of central air conditioners and heat 

pumps, DOE intends to use marginal electricity prices as they offer a more accurate way to value 

air conditioner energy savings. This is because for electricity loads that are not flat (i.e., not 

operated over a 24-hour period), the average electricity price does not reflect the actual price of 

operating the appliance. In the case of air conditioning, the appliance’s load primarily occurs 

during utility "on peak" periods during the summer, a time for many utilities when it is more 

costly to provide electrical service to their customers.40 Assuming that the way customers are 

charged reflects the utility's cost of supplying electricity, the electricity price during "on peak" 

periods for these utilities should be higher than during "off peak" periods. Therefore, using 

average electricity prices to value what consumers pay for using air conditioning undervalues 

their actual price for operating the air conditioner. In contrast, marginal electricity prices reflect 

the prices paid by consumers for the last kWh of electricity purchased. In the case of air 

conditioning savings that are achieved through energy conservation standards, the marginal price 

reflects what consumers avoid spending on air conditioning during “on peak” periods. Although 

the use of marginal electricity prices is a more accurate means of valuing air conditioning energy 

savings, their calculation can be more difficult than calculating the average prices. 

DOE can use one of two data sources to develop marginal electricity prices: (1) EIA’s RECS 

(applicable to residential consumers only) or (2) electric utility tariffs. Each of these sources is 

discussed in turn immediately below. 

RECS data were used in the last central air conditioner and heat pump standards rulemaking to 

establish marginal electricity prices.41 RECS has also been used in recent DOE standards 

rulemakings to establish marginal energy prices for other residential products (e.g., residential 

furnaces and boilers).42 RECS provides utility bill data (i.e., monthly household consumption 

and expenditures) for a majority of the households surveyed. Plotting the monthly expenditures 

against the monthly consumption data, the household’s marginal energy price for the summer 

 

39 Available at: http://www.eia.doe.gov/cneaf/electricity/page/eia861.html. 

40 In the case of heat pumps used for space-heating, loads occur during the winter and are obviously markedly 

different than air conditioning loads that occur during the summer. 

41 U.S. DOE, Technical Support Document: Energy Efficiency Program for Consumer Products: Residential Central 

Air Conditioners and Heat Pumps, May 2002, Washington, DC. Chapter 5. 

Available at: http://www.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_r.html. 

42 U.S. DOE, Technical Support Document: Energy Efficiency Program for Consumer Products: Energy 

Conservation Standards for Residential Furnaces and Boilers, September 2007, Washington, DC. Chapter 8. 

Available at: http://www.eere.energy.gov/buildings/appliance_standards/residential/fb_tsd_0907.html. 

EERE-2008-STD-0006 COMMENT 01
47 

months and winter months can be derived.43 Therefore, marginal summer prices (for air 

conditioning) and marginal winter prices (for heat pumps) can be developed for most households 

in RECS that use a central air conditioner and heat pump. With marginal prices developed at the 

household level, DOE can aggregate prices to a regional level based on the geographic location 

and weighting of each household. The most recent version of RECS is from the year 2001. The 

2005 version is due for release in the summer of 2008, but the utility billing data that 

accompanies it will likely not be available until six months after the release of RECS. If the 

2005 utility bill data from RECS are not available in time to conduct analyses for the ANOPR, 

DOE will use the 2001 RECS utility bill data and adjust the resultant marginal prices to reflect 

more recent prices using adjustment factors developed from Edison Electric Institute (EEI) 

reports on summer-time and winter-time typical bills and average rates.44 DOE will use the 2005 

RECS utility bill data to determine marginal prices assuming the 2005 RECS data is available at 

the time that the analyses for the NOPR need to be performed. 

Electric utility tariffs serve as another data source for developing marginal electricity prices. 

Tariffs are the set of rules that utilities use to calculate a consumer’s utility bill. These rules are 

proposed by the utility and approved by the State public utilities commission for that jurisdiction. 

Tariff-based marginal prices were utilized for DOE’s commercial unitary air conditioner and 

heat pump standards rulemaking.45 With this approach, a representative sample of private and 

public utilities are first established. From the sample of utilities, the default tariffs for each 

utility are then collected and analyzed to determine the marginal electricity price. Default tariffs 

are those that apply to a typical customer with no special rules or requirements. Residential 

tariffs are typically fairly simple, consisting of monthly fixed charges and energy charges. 

Energy charges often use block rates, in which the price per unit kWh of energy consumed varies 

with the amount of energy consumed. The marginal price is the energy charge that corresponds 

to the highest block for that customer’s monthly energy consumption. DOE can aggregate 

marginal prices developed at the utility level to regional values based on the weighting of each 

utility within a given region. 

If the use of central air conditioners and heat pumps in commercial buildings needs to be 

addressed, the results from DOE’s commercial unitary air conditioner and heat pump standards 

rulemaking tariff analysis can be utilized. From this prior analysis, marginal prices were found 

to be a function of two parameters: (1) the monthly energy consumption in kWh, and (2) the 

monthly energy demand in kW for the customer. Based on the tariff formula and the customer’s 

baseline load, a simple formula is developed that expresses the customer’s marginal change in 

expenditures as a function of the customer’s marginal change in energy consumption and 

 

43 U.S. DOE, DRAFT Marginal Energy Prices Report, July 1999. Washington, DC. Available at: 

http://www.eere.energy.gov/buildings/appliance_standards/pdfs/marg_eprice_0799.pdf 

44 Edison Electric Institute. Typical Bills and Average Rates Report – Summer 2007, 

http://www.eei.org/products_and_services/descriptions_and_access/typ_bills_report.htm and 

Typical Bills and Average Rates Report – Winter 2007, 

http://www.eei.org/products_and_services/descriptions_and_access/typ_bill_winter_5.htm. 

45 U.S. DOE, Technical Support Document: Energy Efficiency Program for Commercial and Industrial Equipment: 

Commercial Unitary Air Conditioners and Heat Pumps, July 2004, Washington, DC. Chapter 8. Available at: 

http://www.eere.energy.gov/buildings/appliance_standards/commercial/cuac_tsd_060904.html. 

EERE-2008-STD-0006 COMMENT 01
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demand.46 DOE has already collected commercial tariffs from the year 2004 for its standards 

rulemaking on distribution transformers.47 Therefore, a representative set of marginal energy 

and demand charges are already available from which marginal electricity prices can be 

developed. If necessary, DOE can collect tariffs from a more recent year and update this set of 

energy and demand charges. In any case, as described for residential electricity prices, 

customer-level marginal prices will be aggregated to regional values based on the weighting of 

each utility and tariff customer class within a given region. 

DOE will use projections of national average electricity prices to residential and commercial 

consumers to estimate future marginal electricity prices or electricity bill savings in its LCC 

analysis. DOE will use the most recent available edition of EIA’s Annual Energy Outlook 

(AEO) as the default source of projections for future electricity prices. 

Item 8–1 DOE seeks comments on which data source (RECS or electric utility tariffs) 

should be used to estimate marginal electricity prices. 

Item 8–2 DOE seeks comments on its planned use of EIA’s AEO to project future 

marginal electricity prices. 

8.3 LCC Discount Rates 

The calculation of consumer LCC requires the use of an appropriate discount rate. DOE uses the 

discount rate to determine the present value of lifetime operating expenses. The discount rate 

used in the LCC analysis represents the rate from an individual consumer’s perspective.48 

For residential consumers of central air conditioners and heat pumps, DOE plans to use the same 

approach that it relied on to develop discount rates for its recent residential furnaces and boilers 

standards rulemaking (i.e., deriving the discount rates from estimates of the interest or “finance 

cost” to purchase residential products). The finance cost of raising funds to purchase these 

products can be interpreted as: (1) the financial cost of any debt incurred to purchase products 

(principally interest charges on debt), or (2) the opportunity cost of any equity used to purchase 

products (principally interest earnings on household equity). Household equity is represented by 

holdings in assets such as stocks and bonds, as well as the return on homeowner equity. Much of 

the data required determining the cost of debt and equity comes from the Federal Reserve 

Board’s triennial Survey of Consumer Finances.

49

 

 

46 K. Coughlin et al, Tariff-Base Analysis of Commercial Marginal Electricity Prices, April 2008, Lawrence 

Berkeley National Laboratory, Berkeley, CA. 

47 U.S. DOE, Technical Support Document: Energy Efficiency Program for Commercial and Industrial Equipment: 

Electric Distribution Transformers, September 2007, Washington, DC. Chapter 8. Available at: 

http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_fr_tsd.html. 

48 The consumer discount rate is in contrast to the discount rates used in the national impact analysis, which are 

intended to represent the rate of return of capital in the U.S. economy as well as the societal rate of return on private 

consumption. Refer to section 10.3 for additional information. 

49 Available at: http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html. 

EERE-2008-STD-0006 COMMENT 01
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In the event that commercial customers installing residential central air conditioners and heat 

pumps need to be addressed in the analysis, DOE will use the same approach it relied on for 

developing discount rates for commercial unitary air conditioners and commercial customers of 

distribution transformers.50 This approach involves deriving the discount rates for commercial 

customers by estimating the cost of capital of companies that purchase central air conditioners 

and heat pumps. The cost of capital is commonly used to estimate the present value of cash 

flows to be derived from a typical company project or investment. Most companies use both 

debt and equity capital to fund investments, so the cost of capital is the weighted-average cost to 

the firm of equity and debt financing. This corporate finance approach is referred to as the 

weighted-average cost of capital (WACC). The set of companies purchasing central air 

conditioners and heat pumps may differ from those who purchase commercial unitary air 

conditioners or distribution transformers, which may result in different discount rates. 

Item 8–3 DOE seeks comment on the planned approaches for estimating discount rates 

for residential consumers and commercial customers of central air conditioners 

and heat pumps. 

8.4 Maintenance, Repair, and Installation Costs 

DOE will consider expected changes to maintenance, repair, and installation costs for the central 

air conditioners and heat pumps covered in this rulemaking. Typically, small incremental 

changes in appliance efficiency incur no, or only very small, changes in repair and maintenance 

costs over baseline efficiency products. There is a greater probability that appliances with 

efficiencies that are significantly greater than the baseline efficiency appliances will incur 

increased repair and maintenance costs since such appliances are more likely to incorporate 

technologies that are not currently widely available. DOE will rely on input from manufacturers 

and other stakeholders in developing appropriate repair and maintenance cost estimates, as 

necessary. 

Unless the efficiency increases considered for this rulemaking result in significantly larger or 

heavier products, DOE expects that more efficient central air conditioners and heat pumps will 

not incur increased installation costs. 

Item 8–4 DOE seeks feedback on whether it is correct to assume that changes in 

maintenance, repair, and installation costs will be negligible for more efficient 

equipment. 

Item 8–5 If it is not appropriate to assume that changes in maintenance, repair, or 

installation costs would be negligible for more efficient equipment, DOE seeks 

 

50 U.S. DOE, Technical Support Document: Energy Efficiency Program for Commercial and Industrial Equipment: 

Commercial Unitary Air Conditioners and Heat Pumps, July 2004, Washington, DC. Chapter 8. Available at: 

http://www.eere.energy.gov/buildings/appliance_standards/commercial/cuac_tsd_060904.html. 

EERE-2008-STD-0006 COMMENT 01
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comment on appropriate methodologies for assessing changes to each of these 

costs. 

8.5 Equipment Lifetime 

Equipment lifetime is the age at which the central air conditioner or heat pump is retired from 

service. In the prior standards rulemaking, DOE conducted a comprehensive analysis on 

equipment lifetime showing that the average lifetime for central air conditioners and heat pumps 

was 18.4 years. The analysis also demonstrated that compressors failed and were replaced, on 

average, in the fourteenth year of the system’s life. For this rulemaking, DOE will take a similar 

approach to use most recent information from various literature sources (e.g., Appliance 

Magazine, handbooks published by the American Society of Heating, Refrigerating, and AirConditioning Engineers (ASHRAE)) and input from manufacturers and other stakeholders to 

determine the most relevant and accurate lifetime of central air conditioners and heat pumps. 

Item 8–6 DOE seeks comments on appropriate equipment lifetimes for the central air 

conditioners and heat pumps. 

9. SHIPMENTS ANALYSIS 

Shipment forecasts are required to calculate the national impacts of standards (NES and NPV) 

and future manufacturer cash flows. DOE will develop shipment forecasts based on an analysis 

of key market drivers for central air conditioners and heat pumps. 

9.1 Base-Case Forecast 

To evaluate the various impacts of standards, DOE will develop a base-case forecast against 

which to compare forecasts for higher efficiency levels. (Higher efficiency level forecasts are 

also referred to as standards-case forecasts.) DOE designs the base-case forecast to depict what 

would be anticipated to happen to energy consumption and costs over time if DOE does not 

adopt new energy conservation standards for the equipment covered under this rulemaking. In 

determining base-case shipments, DOE plans to calibrate its forecasts against historical 

shipments. DOE will also consider the mix of efficiencies sold in the absence of new standards 

and how that mix might change over time. As a result, DOE will need to collect data on 

historical product shipments and the market shares of the different efficiency levels offered in 

each product class. 

Central air conditioners and heat pumps subject to this rulemaking are primarily utilized in 

residential applications. DOE plans to determine split-system and single-package annual 

shipments in the base-case by primarily accounting for sales to two market segments: (1) new 

construction and (2) the replacement market. 

To forecast shipments to the new construction market, DOE plans to utilize estimates of 

forecasted new housing and apply historical rates of product ownership in new construction (i.e., 

EERE-2008-STD-0006 COMMENT 01
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new housing saturation rates) to the forecasts. DOE plans to rely on the latest available edition 

of EIA’s AEO for forecasts of new residential construction. New housing historical saturation 

rates dating back to 1973 are provided by the U.S. Census Bureau’s Characteristics of New 

Housing.

51 Both EIA’s residential construction forecasts and the Census Bureau’s historical 

product saturation rates are broken down by Census Region (i.e., Northeast, Midwest, South, and 

West), thereby allowing DOE to estimate regional residential construction shipments. 

To forecast replacement shipments to the residential sector, DOE plans to develop the product’s 

retirement function from the lifetime estimated in the LCC and PBP analysis and apply it to the 

existing units in the housing stock. The existing stock of units will be tracked by vintage and 

will be developed from historical shipments data dating back to the late 1970s. To establish 

historical shipments by product class, DOE plans to rely on public sources including Appliance 

Magazine52 and the AHRI’s Industry Statistical Profile.

53 The publicly-available data provides 

shipments of unitary air-conditioning and heat pump equipment but does not identify the 

percentage of equipment that are 3-phase and greater than or equal to 65,000 Btu/hr in cooling 

capacity (equipment which does not fall under this rulemaking). Therefore, DOE requests 

shipments data from the industry to ensure that the analysis accounts for only those shipments 

that are regulated under this rulemaking (i.e., single-phase and less than 65,000 Btu/hr in cooling 

capacity). DOE also requests regional data from the industry so that the national shipments data 

can be disaggregated into the four Census Regions. 

After the historical shipments data have been compiled, DOE plans to validate the existing 

equipment stock developed from the historical shipments data with historical household 

saturations. Historical saturations at the Census Region level are provided by the Census 

Bureau’s American Housing Survey (AHS).54 Because the AHS does not distinguish between 

which homes are cooled by central air conditioners and heat pumps, DOE plans to also use EIA’s 

RECS to develop saturations specific to both central air conditioners and heat pumps. 

As discussed earlier in section 6, although central air conditioners and heat pumps are utilized 

primarily in residential applications, DOE recognizes that some equipment is installed in 

commercial buildings. For example, in the previous standards rulemaking for central air 

conditioners and heat pumps, AHRI estimated that ten percent of central air conditioner and heat 

pump shipments are to commercial applications. 

If DOE verifies that a significant share of product shipments are to commercial buildings, similar 

to the forecasts for residential buildings, DOE will determine split-system and single-package 

annual shipments in the base-case by primarily accounting for sales to two commercial building 

market segments: (1) new construction and (2) the replacement market. If there is a significant 

share of product shipments to commercial buildings, this should be reflected in DOE’s crosscheck of historical household saturations with historical shipments. 

 

51 Available at: http://www.census.gov/const/www/charindex.html.

52 Available at: http://www.appliancemagazine.com/. 

53 Available at: http://www.ari.org/Content/EquipmentStatistics_118.aspx. 

54 See http://www.census.gov/hhes/www/housing/ahs/ahs.html. 

EERE-2008-STD-0006 COMMENT 01
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To forecast shipments to the new commercial construction market, DOE plans to determine 

shipments by utilizing the same type of method that it plans to use for the residential construction 

market—namely, by relying on estimates of forecasted new commercial construction (by 

building type) and applying historical rates of new construction saturation rates to the forecasts. 

DOE plans to rely on the latest available edition of EIA’s AEO for forecasts of new commercial 

construction. DOE plans to develop new commercial building product saturation rates from past 

editions of EIA’s CBECS. Both the new commercial construction forecast and the product 

saturation rates are broken down by Census Region, thereby allowing DOE to estimate regional 

commercial construction shipments. 

To forecast replacement shipments to the commercial building sector, DOE plans to develop the 

product’s retirement function (from the lifetime estimated in the LCC and PBP analysis) and 

apply it to the existing units in the housing stock. As DOE plans to do for the residential sector, 

the existing commercial stock of units will be tracked by vintage and will be developed from the 

historical shipments to the commercial sector. On an annual basis, DOE will allot ten percent of 

total historical shipments (or an updated percentage if provided by the industry) to commercial 

buildings. DOE plans to validate the existing equipment stock developed from the historical 

shipments data with historical commercial building saturations developed from past editions of 

EIA’s CBECS. 

In addition to the new construction and replacement market segments, DOE plans to consider the 

market segment consisting of existing buildings that do not already own the product (i.e., the 

“existing” market). DOE plans to use the “existing” market segment to calibrate the base-case 

historical forecasts (i.e., backcasts) to historical shipments. In order to reduce the discrepancy 

between the backcasts and historical shipments, DOE plans to derive a historical rate of product 

adoption for the “existing” market. After historical rates of adoption have been determined, 

DOE plans to project future adoption rates from the historical trend. 

For central air conditioners and heat pumps, DOE plans to develop four sets of base-case 

shipments forecasts based on the above accounting methodology for the following four product 

classes: (1) split-system air conditioners; (2) split-system heat pumps; (3) single-package air 

conditioners; and (4) single-package heat pumps. DOE plans to develop base-case forecasts for 

each of the four Census Regions that, in turn, can be aggregated to produce a single national 

forecast. As mentioned above, in order to calibrate its base-case forecasts as well as develop an 

existing stock of equipment, DOE requires and requests historical shipments data from the 

industry that are disaggregated by Census Region for each of the above four product classes. 

If DOE analyzes SDHV and through-the-wall systems, because product shipments for these 

product classes are very small relative to the four primary product classes, DOE does not plan to 

use an accounting methodology that identifies shipments to the new construction, replacement, 

and “existing” market segments. Rather, DOE plans to extrapolate data from historical 

shipments trends. To utilize such an approach, DOE requests historical shipments data from the 

industry for SDHV systems, through-the wall air conditioners, and through-the-wall heat pumps. 

EERE-2008-STD-0006 COMMENT 01
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Item 9–1 DOE seeks historical shipments data, including shipment weighted energy 

factor (SWEF), for each of the following product classes: (1) split-system air 

conditioners; (2) split-system heat pumps; (3) single-package air conditioners; 

(4) single-package heat pumps; (5) SDHV systems; (6) through-the-wall air 

conditioners; and (7) through-the-wall heat pumps. Within each product class, 

DOE also requests shipments data, including SWEF, disaggregated regionally 

by Census Region. 

9.2 Standards Impacts on Product Shipments 

For each product, DOE will develop a set of shipment forecasts for the covered equipment for 

each set of efficiency levels analyzed. These standards-case forecasts will be used to evaluate 

the impacts of standards on product shipments. Standards-case forecasts are derived using the 

same data sets as base-case forecasts; however, because the standards-case forecasts take into 

account the assumed increase in purchase price and the decrease in operating costs caused by 

standards, forecasted shipments typically deviate from the base case. Household income also 

factors into consumer purchase decisions. Therefore, the magnitude of the difference between 

the standards-case and base-case shipment forecasts depends on the estimated purchase price 

increase, as well as the operating cost savings caused by the energy conservation standard, 

relative to household income. Because the purchase price tends to have a larger impact than 

operating cost on equipment purchase decisions, standards-case forecasts typically show a drop 

in product shipments relative to the base case. 

DOE’s past energy conservation standards analyses have attempted to quantify the sensitivity of 

shipments to increased purchase price and operating cost savings, as well as to changes in 

household income. Because the data required to develop these sensitivities are limited and often 

difficult to obtain, DOE will consider modeling standards-case shipments forecasts with 

scenarios (i.e., specified impacts to product shipments) rather than developing sensitivities to 

purchase price or operating cost savings. 

Irrespective of the methodology used to estimate the impacts of standards on shipments, for splitsystem and single-package heat pumps, DOE plans to account for fuel and equipment switching. 

That is, DOE will allocate any forecasted drop in heat pump shipments to increased sales of gasfired and electric-resistance forced-air furnaces. DOE will account for the composition of the 

space-heating equipment stock to determine how increases in non-heat pump sales will be 

allocated to gas-fired and electric-resistance forced-air furnaces. DOE plans to capture fuel and 

equipment switching because of the potentially significant impact it can have on diminishing the 

national energy savings and economic impacts due to a proposed heat pump energy conservation 

standard. Although allocating the forecasted drop in heat pump shipments in the manner 

described above reflects the maximum possible amount of fuel and equipment switching, the 

resulting impacts on national energy and economic savings will indicate how critical such 

switching is. If modeling fuel and equipment switching under a “maximum” scenario results in 

significant impacts to national energy consumption, DOE will conduct a more detailed analysis 

based on the findings from economic literature to better assess the potential for fuel and 

equipment switching. 

EERE-2008-STD-0006 COMMENT 01
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Market-pull programs, such as consumer rebate programs or State tax credits to consumers (such 

as in Oregon) that encourage the purchase of more efficient products and manufacturer tax 

credits that encourage the production of more efficient products, also affect standards-case 

shipment forecasts. When such programs exist, DOE plans to consider their impact on the 

forecast of both standards-case and base-case shipments. 

Item 9–2 As part of its preliminary manufacturer impact analysis, DOE seeks input from 

manufacturers on the potential impact of new energy conservation standards on 

central air conditioner and heat pump shipments. DOE also seeks input from 

other stakeholders on the potential impact of standards on product shipments. 

Item 9–3 DOE also requests input on any market-pull programs that currently exist to 

promote the purchase or manufacture of more efficient central air conditioner 

and heat pump equipment. 

10. NATIONAL IMPACT ANALYSIS 

Section 8 discusses methods for estimating the LCC savings and payback period for individual 

consumers. This section discusses DOE’s assessment of the aggregate impacts of the amended 

standards at the national level. Measures of impact to be reported include the NPV of total 

consumer LCCs and future national energy savings from candidate standards. 

10.1 Inputs to NES and NPV Forecast 

Analyzing impacts of Federal energy conservation standards for central air conditioners and heat 

pumps requires a comparison of projected U.S. energy consumption with, and without, new or 

amended energy conservation standards. The forecasts contain projections of annual appliance 

shipments (as discussed in section 9), the annual energy consumption (and efficiency) of new 

appliances (as discussed in sections 6 and 9), and the purchase price of new appliances (as 

discussed in section 7). 

A key component of DOE’s estimates of NES and NPV is the energy efficiencies forecasted over 

time for the base case (without new standards) and each of the standards cases. The forecasted 

efficiencies represent the annual shipment-weighted energy efficiency of the products under 

consideration over the forecast period (i.e., from the assumed effective date of a new standard to 

30 years after the standard becomes effective). Because key inputs to the calculation of the NES 

and NPV (annual energy consumption for the NES, and retail prices and annual operating costs 

for the NPV) are dependent on the estimated efficiencies, these efficiencies are critical to the 

analysis. 

DOE plans to rely on input from stakeholders to develop base-case historical shipment-weighted 

average efficiencies for each of the central air conditioner and heat pump product classes. For 

the last standards rulemakings on central air conditioners and heat pumps, AHRI was able to 

provide historical shipment-weighted efficiency data. DOE hopes that AHRI and manufacturers 

will provide similar historical shipment-weighted average efficiency data for as many of the 

EERE-2008-STD-0006 COMMENT 01
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product classes as possible for this standards rulemaking. [Note that, although AHRI’s Industry

Statistical Profile does provide historical shipment-weighted efficiency data, these data are not 

disaggregated by product class.] DOE also hopes that for each product class, AHRI and 

manufacturers will provide historical efficiency data for each of the four Census Regions. To 

forecast base-case efficiencies, DOE intends to extrapolate from the historical trends as 

necessary to supplement manufacturer data. 

To develop shipment-weighted efficiencies for the various standards cases, DOE expects to 

collect market-share efficiency data (i.e., data on the distribution of product shipments by 

efficiency) for the various product classes. Realizing that this information may be difficult to 

collect, DOE plans to obtain market-share efficiency data for at least the most predominant 

product classes (i.e., split- and single-package air conditioners and heat pumps) from a recent 

year (i.e., 2005 or 2006). 

The market-share efficiency data will allow DOE to estimate the efficiency impact that standards 

may have in the year they become effective. For example, DOE has assumed “roll-up” and 

“shift” scenarios for the prior central air conditioner and heat pump standards rulemaking.55 

Under the “roll-up” scenario, DOE assumes: (1) product efficiencies in the base case that do not 

meet the standard level under consideration would “roll up” to meet the new standard level; and 

(2) product efficiencies above the standard level under consideration would not be affected. 

Under the “shift” scenario, DOE retains the pattern of the base-case efficiency distribution but 

re-orients the distribution at and above the new minimum energy conservation standard. Once 

DOE establishes the shipment-weighed efficiency for the assumed effective date of the standard, 

it plans to estimate future shipment-weighted efficiencies using the same rate of forecasted 

efficiency growth as in the base-case efficiency trend. 

Item 10–1 DOE seeks historical shipment-weighted efficiency data by product class and by 

the four Census Regions. DOE also seeks historical market share data showing 

the percentage of product shipments by efficiency level for as many product 

classes as possible. 

Item 10–2 DOE seeks comments on the use of the “roll-up” and “shift” efficiency 

scenarios to characterize the impact that potential standards will have on the 

product distributions. 

10.2 Calculation of Energy Savings 

DOE intends to calculate national energy consumption for each year beginning with the expected 

effective date of the standards. DOE will calculate national energy consumption by fuel type for 

the base case and each standard level analyzed. DOE plans to perform this calculation through 

the use of a spreadsheet model that multiplies the stock of equipment (i.e., annual shipping 

 

55 Refer to the Chapter 7 of the central air conditioner TSD for more details, which is available at: 

http://www.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_r.html. 

EERE-2008-STD-0006 COMMENT 01
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forecasts) by unit energy savings, accounting for the stock of equipment affected by the energy 

conservation standards. 

In response to comments by stakeholders who asked for a simple, transparent model, DOE has 

developed National Impact Analysis (NIA) spreadsheet models for its standards rulemakings 

since 1996, to forecast energy savings and to demonstrate how the growth in efficiency can be 

accounted for over time.56 Although these models are specific to each product, DOE can apply 

their general structure to the entire central air conditioner and heat pump market. DOE expects 

the NIA spreadsheet model it develops for this rulemaking to provide a credible, stand-alone 

forecast of NES and NPV for residential central air conditioners and heat pumps. 

As discussed in section 6, DOE intends to take into account the rebound effect associated with 

more efficient central air conditioners and heat pumps. DOE will incorporate the rebound effect 

utilized in the energy use analysis into its calculation of national energy savings. 

Based on consideration of the comments DOE may receive on the ANOPR, DOE will make any 

necessary changes to the analysis. It will reflect those changes in the documentation for the 

NOPR. 

Item 10–3 DOE seeks comment on its plan to develop NIA spreadsheet models for 

estimating national impacts of amended energy conservation standards for 

residential central air conditioners and heat pumps. 

10.3 Net Present Value 

DOE calculates the national NPV of energy conservation standards in conjunction with the NES. 

It calculates annual energy expenditures from annual energy consumption by incorporating 

forecasted energy prices, using the shipment and average energy efficiency forecasts described in 

section 6 and section 9, respectively. DOE calculates annual equipment expenditures by 

multiplying the price per unit times the forecasted shipments. The difference between a basecase and a standards-case scenario gives the national energy bill savings and increased 

equipment expenditures in dollars. The difference each year between energy bill savings and 

increased equipment expenditures is the net savings (if positive) or net costs (if negative). DOE 

discounts these annual values to the present time and sums them to give a net present value. 

According to U.S. Office of Management and Budget (OMB) requirements, DOE will conduct 

two NPV calculations, one using a real discount rate of three percent and another using a real 

discount rate of seven percent (OMB, Circular A-4: Regulatory Analysis. 2003).57 The discount 

rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis 

(which are developed from a consumer’s perspective). The seven percent real value is an 

estimate of the average before-tax rate of return to private capital in the U.S. economy. The 

three percent real value represents the “societal rate of time preference,” which is the rate at 

 

56 Several NIA spreadsheet models from previous rulemakings, including the rulemaking for residential clothes 

washers, can be found on DOE’s website at: 

http://www.eere.energy.gov/buildings/appliance_standards/residential/clothes_washers.html. 

57 Available at: http://www.whitehouse.gov/omb/memoranda/m03-21.html. 

EERE-2008-STD-0006 COMMENT 01
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which society discounts future consumption flows to their present value. Based on consideration 

of the comments received on the ANOPR, DOE will make any necessary changes to the analysis 

and the efficiency levels. 

As noted above in section 10.2, DOE intends to take into account the rebound effect associated 

with more efficient central air conditioners and heat pumps in its determination of national 

energy savings. As discussed in section 8, because the rebound effect provides consumers with 

increased value (i.e., a more comfortable environment), DOE believes that, if it were able to 

monetize the increased value to consumers added by the rebound effect, this value would be 

similar in value to the foregone energy savings. For this standards rulemaking, DOE estimates 

that this value is equivalent to the monetary value of the energy savings that would have 

occurred without the rebound effect. Therefore, the economic impacts on consumers with or 

without the rebound effect, as measured in the NPV, are the same. 

11. LIFE-CYCLE COST SUBGROUP ANALYSIS 

This section describes how DOE analyzes consumer impacts by dividing consumers into 

subgroups and accounting for variations in key inputs to the life-cycle cost analysis. A consumer 

subgroup comprises a subset of the population that is likely, for one reason or another, to be 

impacted disproportionately by new or revised energy conservation standards. The purpose of a 

subgroup analysis is to determine the extent of this disproportional impact. DOE will work with 

stakeholders early in the rulemaking process to identify any subgroups for consideration. 

However, it will not analyze the consumer subgroups until the NOPR stage of the rulemaking. 

In comparing potential impacts on the different consumer subgroups, DOE will evaluate 

variations in regional energy prices, variations in energy use profiles, and variations in 

installation costs that might affect the NPV of a standard to consumer subgroups. In evaluating 

variations in energy use, DOE will take into account the effects of climate, specifically, how the 

climate associated with the consumer’s geographic location impacts the energy consumption of 

the equipment. To the extent possible, DOE may obtain estimates of the variability in each input 

variable and consider this variability in its calculation of consumer impacts. It will discuss the 

variability in each input variable and likely sources of information with stakeholders. 

DOE intends to consider the impact of any new standards on consumer subgroups. 

Item 11–1 DOE seeks input on which of the consumer subgroups DOE should consider 

in this rulemaking. Examples of possible subgroups DOE could consider for 

this rulemaking include low-income consumers, senior citizens, or persons 

living in different climate zones that might be subject to the same standards. 

12. MANUFACTURER IMPACT ANALYSIS 

DOE announced changes to the manufacturer impact analysis format through a report issued to 

Congress on January 31, 2006 (as required by section 141 of EPACT 2005). This report, titled 

EERE-2008-STD-0006 COMMENT 01
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“Energy Conservation Standards Activities,” (Standards Activities) is available on the DOE 

website at: 

http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html. 

Previously, DOE did not report any manufacturer impact analysis results during the ANOPR 

phase; however, under this new format, DOE will collect, evaluate, and report preliminary 

information and data in the ANOPR. (Standards Activities, page 48) Such preliminary 

information includes the anticipated conversion capital expenditures by efficiency level and the 

corresponding, anticipated impacts on employment. DOE will solicit this information during the 

ANOPR engineering analysis manufacturer interviews. 

The analysis of impacts on manufacturers is intended to provide DOE with an assessment of the 

potential impacts of energy conservation standards on manufacturers. In addition to financial 

impacts, a wide range of quantitative and qualitative effects may occur following adoption of a 

standard that may require changes to the manufacturing practices for these products. DOE will 

identify these effects through interviews with manufacturers and other stakeholders. 

For the NOPR, DOE intends to supplement the results of the preliminary manufacturer impact 

analysis conducted as part of the ANOPR with more detailed analyses. Specifically, DOE will 

carry out an industry-wide cash flow analysis using the Government Regulatory Impact Model 

(GRIM), identify and analyze subgroups of manufacturers whose business varies significantly 

from the industry as a whole, perform a competitive impacts assessment, and review the 

cumulative regulatory burden for the industry. 

12.1 Sources of Information 

Many of the analyses described earlier provide important information that DOE uses as inputs 

for the manufacturer impact analysis. Such information includes financial parameters developed 

in the market assessment (section 3.1), manufacturing costs and prices from the engineering 

analysis (section 5), retail price forecasts (section 7), and shipments forecasts (section 9). DOE 

supplements this information with information gathered during manufacturer interviews. The 

interview process will play a key role in the manufacturer impact analysis, as it provides an 

opportunity for interested parties to express their views on important issues. 

DOE will conduct detailed interviews with manufacturers to gain insight into the range of 

potential impacts of energy conservation standards on the covered equipment. During the 

interviews, DOE will solicit information on the possible impacts of standards on manufacturing 

costs, equipment prices, sales, direct employment, capital assets, and industry competitiveness. 

Both qualitative and quantitative information are valuable in terms of this analysis. DOE will 

schedule interviews well in advance to provide every opportunity for key individuals to be 

available. In addition, an interview guide will be provided before the interviews to allow the 

manufacturers to gather the appropriate information. Although a written response to the 

questionnaire is acceptable, DOE prefers an interactive interview process because it helps clarify 

responses and provides the opportunity for additional issues to be identified. 

DOE will ask that interview participants identify all confidential information provided, both in 

writing and orally, and DOE will determine whether the information submitted is entitled to 

EERE-2008-STD-0006 COMMENT 01
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confidential treatment. While it will consider information gathered, as appropriate, in its 

decision-making process, DOE will not make confidential information available in the public 

record. DOE will also ask participants to identify all information that they wish included in the 

public record, but that they do not want to have associated with their interview. DOE will 

incorporate this information into the public record, but will report it without attribution. 

DOE will collate the completed interview questionnaires and prepare a summary of the major 

issues and outcomes. This summary will become part of the technical support document 

produced for this rulemaking. 

12.2 Industry Cash Flow Analysis 

The industry cash flow analysis relies primarily on the Government Regulatory Impact Model 

(GRIM). DOE uses the GRIM to analyze the financial impacts of more stringent energy 

conservation standards on the industry that produces the products covered by the standard. 

The GRIM analysis uses a number of factors — annual expected revenues; manufacturer costs 

such as costs of goods sold; selling, general, and administrative costs; taxes; and capital 

expenditures (both ordinary capital expenditures related to depreciation and those related to 

standards), new standards, and maintenance costs — to arrive at a series of annual cash flows 

beginning from the announcement of the new standard and continuing for several years after its 

implementation. DOE compares the results against base-case projections that involve no new 

standards. The financial impact of new standards is the difference between the two sets of 

discounted annual cash flows. Other performance metrics, such as return on invested capital, 

also are available from the GRIM. 

DOE will gather this information from two primary sources: (1) the analyses conducted to this 

point, and (2) interviews with manufacturers and information from other stakeholders. 

Information gathered from previous analyses will include financial parameters, manufacturing 

costs, price forecasts, and shipments forecasts. Interviews with manufacturers and information 

from other stakeholders will be essential in supplementing this information. 

12.3 Manufacturer Subgroup Analysis 

It is possible that the use of average industry cost values may not adequately assess differential 

impacts among subgroup manufacturers. DOE recognizes that smaller manufacturers, niche 

players, and manufacturers exhibiting a cost structure that differs significantly from the industry 

average may be impacted differently by any new standards. Ideally, DOE would consider the 

impact on every firm individually. In highly concentrated industries, this may be possible. In 

industries having numerous participants, however, DOE will use the results of the market and 

technology assessment to group manufacturers into subgroups, as appropriate. 

Small businesses, as defined by the Small Business Administration (SBA) for residential central 

air conditioning manufacturers, are enterprises with 750 employees or fewer. Small business 

size standards are listed by North American Industry Classification System (NAICS) code and 

industry description. Air conditioner manufacturing is classified under NAICS 333415. As part 

of its subgroup analysis, DOE will attempt to identify whether there are any small businesses 

EERE-2008-STD-0006 COMMENT 01
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affected by the rulemaking, and if so, determine if there are differential impacts on these 

companies that may result from new energy conservation standards. DOE will examine publicly 

available data and contact manufacturers, when needed, to determine if they meet the SBA’s 

definition of a small business and if their manufacturing facilities are located within the United 

States. The detailed manufacturer subgroup impact analysis will entail calculating cash flows 

separately for each defined class of manufacturer. 

Item 12–1 DOE seeks comment on appropriate manufacturer subgroups for residential 

central air conditioners and heat pumps, if any, that DOE should consider in a 

manufacturer subgroup analysis. 

12.4 Competitive Impacts Assessment 

EPCA directs DOE to consider any lessening of competition that is likely to result from the 

imposition of standards. (42 U.S.C. 6295(o)(2)(B)(i)(V) and 6316(a)) It further directs the 

Attorney General to determine, in writing, the impacts, if any, of any lessening of competition. 

(42 U.S.C. 6295(o)(2)(B)(ii) and 6316(a)) DOE will make a determined effort to gather firmspecific financial information and impacts. DOE will then report the aggregated impact of the 

standard on manufacturers. DOE will provide the Attorney General with a copy of the NOPR 

for consideration in evaluation of the impact of standards on the lessening of competition. DOE 

will base the assessment on manufacturing cost data and on information collected from 

interviews with manufacturers. 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 (e.g., proprietary technologies). 

12.5 Cumulative Regulatory Burden 

DOE is aware that other regulations may apply to products covered under this rulemaking, as 

well as on other equipment produced by the same manufacturers affected by this rulemaking. 

Multiple regulations may result in a cumulative regulatory burden on these manufacturers. DOE 

will analyze and seek to mitigate the overlapping effects on manufacturers of amended DOE 

standards and other regulatory actions affecting the same equipment or companies. 

Item 12–2 What regulations or pending regulations should DOE consider in the analysis 

of cumulative regulatory burdens on manufacturers of covered equipment for 

this rulemaking? 

13. UTILITY IMPACT ANALYSIS 

To estimate the effects of energy conservation standards for central air conditioners and heat 

pumps on the electric utility industry, DOE plans to use a variant of the EIA’s National Energy 

Modeling System (NEMS), called NEMS-BT (BT refers to DOE’s Building Technologies 

EERE-2008-STD-0006 COMMENT 01
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Program).58 NEMS is a large, multi-sectoral, partial-equilibrium model of the U.S. energy sector 

that EIA has developed over several years, primarily for the purpose of preparing the AEO. 

NEMS produces a widely-recognized reference case forecast for the United States through 2030 

and is available in the public domain. 

The utility impact analysis is a comparison between the NEMS-BT model results for the base 

case and standards cases. Outputs of the utility impact analysis usually parallel results that 

appear in the latest AEO, with some additions. Typical outputs of the utility impact analysis 

include forecasts of electricity sales, price, and avoided capacity. DOE plans to conduct the 

utility impact analysis as a scenario departing from the latest AEO reference case. In other 

words, DOE will model the energy savings impacts from amended energy conservation 

standards using NEMS-BT to generate forecasts that deviate from the AEO reference case.59

Item 13–1 DOE seeks input from stakeholders on its plans to use NEMS-BT to conduct the 

utility impact analysis on the equipment covered under this rulemaking. 

14. EMPLOYMENT IMPACT ANALYSIS 

DOE estimates the impacts of standards on employment for equipment manufacturers, relevant 

service industries, energy suppliers, and the economy in general. This analysis covers both 

direct and indirect employment impacts. Direct employment impacts are changes in the number 

of employees at the plants that produce the covered equipment, along with the affiliated 

distribution and service companies, resulting from the standards. DOE will evaluate direct 

employment impacts in the manufacturer impact analysis, as described in section 11. 

Indirect employment impacts may result from expenditures shifting between goods (the 

substitution effect) and changes in income and overall expenditure levels (the income effect) that 

occur due to the standards. DOE defines indirect employment impacts from standards as net jobs 

eliminated or created in the general economy as a result of increased spending driven by the 

increased equipment prices and reduced spending on energy. 

The combined direct and indirect employment impacts will be investigated in the employment 

impact analysis using the Pacific Northwest National Laboratory’s “Impact of Sector Energy 

Technologies” (ImSET) model. The ImSET model was developed for DOE’s Office of 

Planning, Budget, and Analysis, and estimates the employment and income effects of energy-

 

58 For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000, 

DOE/EIA-0581(March 2000) and is available at: http://tonto.eia.doe.gov/ftproot/forecasting/05812000.pdf. EIA 

approves use of the name NEMS to describe only an official version of the model without any modification to code 

or data. Because this analysis entails some minor code modifications and the model is run under various policy 

scenarios that are variations on EIA assumptions, DOE refers to the model by the name NEMS-BT (“BT” refers to 

DOE’s Building Technologies Program, under whose aegis this work has been performed). 

59 Several descriptions of NEMS-BT models from previous rulemakings, including residential furnaces and boilers, 

can be found on DOE’s website at: 

http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/fb_fr_tsd/chapter_13.pdf. 

EERE-2008-STD-0006 COMMENT 01
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saving technologies in buildings, industry, and transportation. In comparison with simple 

economic multiplier approaches, ImSET allows for more complete and automated analysis of the 

economic impacts of energy conservation investments. 

Item 14–1 DOE requests feedback on this approach to assessing employment impacts on 

the equipment covered under this rulemaking. 

15. ENVIRONMENTAL IMPACT ANALYSIS 

The intent of the environmental impact analysis is to provide emissions results estimates and to 

fulfill requirements to properly quantify and consider the environmental effects of all new 

Federal rules. The primary environmental effects of energy conservation standards for central air 

conditioners and heat pumps are likely to be reduced emissions resulting from reduced electrical 

energy consumption. The environmental impact analysis will focus on the impact of possible 

energy conservation standards on the significant pollutants and emissions of electricitygenerating power plants. Specifically, the environmental assessment for this rulemaking will 

consider three types of energy-related emissions — oxides of nitrogen (NOx), sulfur dioxide 

(SO2), and mercury (Hg); it will also consider one other emission — carbon dioxide (CO2). 

DOE intends to base this analysis on the NEMS-BT modeling work planned for the utility 

impact analysis. This approach has the advantage of examining the marginal impact of standards 

for central air conditioners and heat pumps on the utility generation mix and the subsequent 

environmental emissions. 

DOE will conduct each portion of the environmental impact analysis performed under this 

rulemaking as in incremental policy impact (i.e., an energy conservation standard for central air 

conditioners and heat pumps) of EIA’s AEO forecast, applying the same basic set of assumptions 

used in the latest version of AEO available for use in this analysis. Also, forecasts conducted 

with NEMS-BT consider the supply-side and demand-side effects on the electric utility industry. 

Thus, DOE’s analysis will account for any factors affecting the type of electricity generation and, 

in turn, the type an amount of airborne emissions the utility industry generates. 

The NEMS-BT model tracks CO2 emissions with a specialized carbon emissions estimation 

subroutine, producing reasonably accurate results due to the broad coverage of all sectors and 

inclusion of interactive effects. Past experience with carbon dioxide emission results from 

NEMS-BT suggests that emissions estimates are somewhat lower than emissions based on 

simple average factors. One of the reasons for this divergence is that NEMS-BT tends to predict 

that conservation measures displace generating capacity growth in future years, and new 

generating capacity is expected to be more efficient than existing capacity. On the whole, 

NEMS-BT provides carbon dioxide emission results of reasonable accuracy, at a level consistent 

with other Federal published results. In addition to providing estimates of quantitative impacts 

of central air conditioner and heat pump standards on carbon dioxide emissions, DOE will 

consider the use of monetary values to represent the potential value of such emissions reductions. 

EERE-2008-STD-0006 COMMENT 01
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Item 15–1 DOE invites comments on how to estimate such monetary values associated 

with CO2 emissions reductions or on any widely accepted values which might be 

used in DOE’s analyses. 

NEMS-BT also reports SO2, NOX, and Hg, which DOE has reported in past rulemaking analyses. 

The Clean Air Act Amendments of 199060 set an SO2 emissions cap on fossil fuel-fired power 

generation units of 25 megawatts or greater. The attainment of this target, however, is flexible 

among generators through the use of emissions allowances and tradable permits. Although 

NEMS-BT includes a module for SO2 allowance trading and delivers a forecast of SO2

allowance prices, accurate simulation of SO2 trading implies that the effect of energy 

conservation standards on physical emissions will be zero because emissions will always be at or 

near the ceiling. However, there may be an SO2 benefit from energy conservation, in the form of 

a lower SO2 allowance price. But since the impact of any one standard on the allowance price is 

likely small and highly uncertain, DOE does not plan to monetize any potential SO2 benefit. 

NEMS-BT also has an algorithm for estimating NOx emissions from power generation. The 

impact of these emissions, however, will be affected by the Clean Air Interstate Rule (CAIR), 

which the EPA issued on May 12, 2005. 70 FR 25162 (May 12, 2005). CAIR will permanently 

cap emissions of NOx in 28 eastern States and the District of Columbia. As with SO2 emissions, 

a cap on NOx emissions means that equipment efficiency standards may have little or no physical 

effect on NOx emissions in States covered by the CAIR caps. When NOx emissions are subject 

to emissions caps, DOE’s emissions reduction estimate corresponds to incremental changes in 

the prices of emissions allowances in cap-and-trade emissions markets rather than physical 

emissions reductions. Therefore, while the emissions cap may mean that physical emissions 

reductions in those States will not result from standards, standards could produce an 

environmental-related economic benefit in the form of lower prices for emissions allowance 

credits. However, as with SO2 allowance prices, DOE does not plan to monetize this benefit 

because the impact on the NOx allowance price from any single energy conservation standard is 

likely small and highly uncertain. DOE seeks comment on how it might value NOx emissions for 

the 22 States not covered by CAIR. 

With regard to mercury emissions from electric power generation, the NEMS-BT model has an 

algorithm for estimating these emissions, and, as it has done in the past, DOE is able to report an 

estimate of the physical quantity of mercury emissions reductions associated with an energy 

conservation standard. Furthermore, DOE had assumed that these emissions would be subject to 

EPA’s Clean Air Mercury Rule (CAMR),61 which would have capped Hg emissions for new and 

existing coal-fired power plants in all States by 2010. As with SO2 and NOx emissions, a cap on 

Hg emissions would have been interpreted by DOE as having no physical effect on these 

emissions, but would instead be expected to result in an environmental-related economic benefit 

in the form of a lower price for emission allowance credits. However, on February 8, 2008, the 

U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued its decision in 

New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008),in which the Court, among other actions, 

 

60 Information available at: http://www.epa.gov/air/caa/.

61 The EPA’s Clean Air Mercury Rule was published on May 18, 2005. 70 FR 28606. 

EERE-2008-STD-0006 COMMENT 01
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vacated the CAMR referenced above. Accordingly, DOE is considering changes to its approach 

addressing the issue of Hg emissions in light of the D.C. Circuit’s decision. 

Item 15–2 Because court actions have vacated the CAMR, DOE seeks stakeholder input on 

how it should address Hg emissions in this rulemaking. In addition, DOE seeks 

comment on how it might value NOx emissions for the 22 States not covered by 

the CAIR. 

In sum, the methodology for the environmental impact analysis will be similar to the 

methodology (i.e., based on NEMS) used to estimate the environmental impacts published in 

EIA’s AEO. These results include power sector emissions for SO2, NOX, Hg, and CO2 in fiveyear forecasted increments extrapolated to 2046. The outcome of the analysis for each trial 

standard level will be reported as a deviation from the AEO reference (base) case, with such 

analysis being conducted at the NOPR stage of the rulemaking. 

Item 15–3 DOE seeks input from stakeholders on its plans to use NEMS-BT to conduct the 

environmental impact analysis on the equipment covered by this rulemaking. 

Are there any other approaches to the environmental assessment that DOE 

should consider? 

Item 15–4 Are there any other environmental factors DOE should consider in this 

rulemaking? 

16. REGULATORY IMPACT ANALYSIS 

In the NOPR and final rule stages of this rulemaking, DOE will prepare a regulatory impact 

analysis, which addresses the potential for non-regulatory approaches to supplant or augment 

energy conservation standards to improve the efficiency of central air conditioners and heat 

pumps on the market. DOE recognizes that voluntary or other non-regulatory efforts by 

manufacturers, utilities, and other interested parties can result in substantial efficiency 

improvements. DOE intends to analyze the likely effects of non-regulatory initiatives on product 

energy use, consumer utility, and LCCs. DOE will attempt to base its assessment on the actual 

impacts of any such initiatives to date, but will also consider information presented regarding the 

impacts that any existing initiative might have in the future. 

If DOE determines that amended energy conservation standards for central air conditioners and 

heat pumps would constitute a significant regulatory action, DOE will prepare and submit to 

OMB for review the assessment of costs and benefits required under section 6(a)(3) of Executive 

Order 12866, “Regulatory Planning and Review,” 58 FR at 51735 (October 4, 1993). 

EERE-2008-STD-0006 COMMENT 01
1 

[6450-01-P] 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and Renewable Energy 

10 CFR Part 430 

[Docket No. EERE-2008-BT-STD-0006] 

RIN: 1904-AB47 

Energy Efficiency Program for Consumer Products: Public Meeting and Availability of the 

Framework Document for Residential Central Air Conditioners and Heat Pumps 

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

ACTION: Notice of public meeting and availability of the Framework Document. 

SUMMARY: The Department of Energy (DOE) is initiating the rulemaking and data collection 

process to consider establishing amended energy conservation standards for residential central 

air conditioners and heat pumps. Accordingly, DOE will hold an informal public meeting to 

discuss and receive comments on its planned analytical approach and issues it will address in this 

rulemaking proceeding. DOE welcomes written comments from the public on this rulemaking. 

To inform stakeholders and to facilitate this process, DOE has prepared a Framework Document 

which details the analytical approach and identifies several issues on which DOE is particularly 

interested in receiving comment. A copy of the Framework Document is available at: 

http://www.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html 

EERE-2008-STD-0006 COMMENT 01
2 

DATES: The Department will hold a public meeting on June 12, 2008, from 9:00 a.m. to 4:00 

p.m. in Washington, DC. Any person requesting to speak at the public meeting should submit 

such request along with a signed original and an electronic copy of the statement to be given at 

the public meeting before 4:00 p.m., June 9, 2008. Written comments on the Framework 

Document are welcome, especially following the public meeting, and should be submitted by 

[INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL 

REGISTER]. 

ADDRESSES: The public meeting will be held at the U.S. Department of Energy, Forrestal 

Building, Room 1E-245, 1000 Independence Avenue, SW, Washington, DC 20585-0121. 

Please note that foreign nationals participating in the public meeting are subject to advance 

security screening procedures. If a foreign national wishes to participate in the public meeting, 

please inform DOE of this fact as soon as possible by contacting Ms. Brenda Edwards at (202) 

586-2945 so that the necessary procedures can be completed. 

Stakeholders may submit comments, identified by docket number EERE-2008-BT-STD0006 and/or Regulation Identifier Number (RIN) 1904-AB47, by any of the following methods: 

• Federal eRulemaking Portal: http://www.regulations.gov Follow the instructions for 

submitting comments. 

• E-mail: Brenda.Edwards@ee.doe.gov Include EERE-2008-BT-STD-0006 and/or RIN 

1904-AB47 in the subject line of the message. 

EERE-2008-STD-0006 COMMENT 01
3 

• Mail: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies 

Program, Mailstop EE-2J, Framework Document for Central Air Conditioners and Heat 

Pumps, EERE-2008-BT-STD-0006 and/or RIN 1904-AB47, 1000 Independence Avenue, 

SW, Washington, DC 20585-0121. Please submit one signed paper original. 

• Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of Energy, Building 

Technologies Program, Sixth Floor, 950 L’Enfant Plaza, SW, Washington, DC 20024. 

Please submit one signed paper original. 

 Instructions: All submissions received must include the agency name and docket number 

or RIN for this rulemaking found at the beginning of this notice. 

 Docket: For access to the docket to read background documents, a copy of the transcript 

of the public meeting, or comments received, go to the U.S. Department of Energy, Resource 

Room of the Building Technologies Program, Sixth Floor, 950 L’Enfant Plaza, SW, Washington, 

DC 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except 

Federal holidays. Please call Ms. Brenda Edwards first at the above telephone number for 

additional information regarding visiting the Resource Room. 

FOR FURTHER INFORMATION CONTACT: Mr. Wes Anderson, U.S. Department of 

Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies, EE-2J, 

1000 Independence Avenue, SW, Washington, DC 20585-0121. Telephone: (202) 586-7335. 

E-mail: Wes.Anderson@ee.doe.gov.

EERE-2008-STD-0006 COMMENT 01
4 

 Mr. Eric Stas or Mr. Michael Kido, U.S. Department of Energy, Office of the General 

Counsel, GC-72, 1000 Independence Avenue, SW, Washington, DC 20585-0121. Telephone: 

(202) 586-9507. E-mail: Eric.Stas@hq.doe.gov or Michael.Kido@hq.doe.gov. 

 For information on how to submit or review public comments and on how to participate 

in the public meeting, contact Ms. Brenda Edwards, U.S. Department of Energy, Office of 

Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 

Independence Avenue, SW, Washington, DC, 20585-0121. Telephone (202) 586-2945. E-mail: 

Brenda.Edwards@ee.doe.gov. 

SUPPLEMENTARY INFORMATION: Part A1 of Title III of the Energy Policy and 

Conservation Act of 1975 (EPCA), Pub. L. 94-163, as amended by the National Energy 

Conservation Policy Act, Pub. L. 95-619, the National Appliance Energy Conservation Act of 

1987, Pub. L. 100-12, the National Appliance Energy Conservation Amendments of 1988, Pub. 

L. 100-357, and the Energy Policy Act of 1992, Pub. L. 102-486, created the “Energy 

Conservation Program for Consumer Products Other than Automobiles.” (42 U.S.C. 6291-6309) 

The consumer products subject to this program include residential central air conditioners and 

central air conditioning heat pumps (hereafter referred to as central air conditioners and heat 

pumps). 

 

1

 This part was originally titled Part B; however, it was redesignated Part A after Part B was repealed by Pub. L. 

109-58. 

EERE-2008-STD-0006 COMMENT 01
5 

The National Appliance Energy Conservation Act of 1987 (NAECA) established energy 

conservation standards for central air conditioners and heat pumps as well as requirements for 

determining whether these standards should be amended. Specifically, NAECA established 

energy conservation standards for central air conditioners and heat pumps in the form of 

minimum limits on the seasonal energy efficiency ratio (SEER) for air conditioners and for heat 

pumps operating in the cooling mode, and on the heating seasonal performance factor (HSPF) 

for heat pumps operating in the heating mode.2 NAECA established the following standards for 

central air conditioners and heat pumps: 10.0 SEER/6.8 HSPF for split systems and 9.7 

SEER/6.6 HSPF for single-package systems. These standards became effective January 1, 1992 

for split systems; standards for single-package systems came into effect one year later. See 42 

U.S.C. 6295(d)(1)(A)-(B) and (2)(A)-(B). NAECA also required that DOE conduct two cycles 

of rulemakings to determine if more stringent standards are economically justified and 

technologically feasible. (42 U.S.C. 6295(d)(3)(A)-(B)) 

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

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

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

minimum SEER to 13 and the minimum HSPF to 7.7. Id. This final rule constituted the first 

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

 

2

 NAECA established the following standards for central air conditioners and heat pumps: 10.0 SEER/6.8 HSPF for 

split systems, 9.7 SEER/6.6 HSPF for single-package systems. 

EERE-2008-STD-0006 COMMENT 01
6 

Shortly after the publication of the 2001 final rule, DOE postponed the effective date of 

the rule to take time to reconsider the amended standards for central air conditioners and heat 

pumps. DOE eventually promulgated a 12 SEER standard in a final rule published in the 

Federal Register May 23, 2002 (2002 final rule; 67 FR 36368), but the U.S. Court of Appeals 

for the Second Circuit ruled that DOE had done so improperly. Natural Resources Defense 

Council v. Abraham, 355 F.3d 179 (2d Cir. 2004). As a result, DOE published a technical 

amendment in the Federal Register on August 17, 2004, which established a 13 SEER standard 

for all central air conditioners and heat pumps, excluding through-the-wall and space-constrained 

systems. 69 FR 50997. 

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

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

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

submitted an implementation report3 to Congress in January 2006. This report specified a 

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

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

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

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

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

decree (filed November 6, 2006) adopted the schedule for central air conditioners and heat 

 

3

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

website at: http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html. 

EERE-2008-STD-0006 COMMENT 01
7 

pumps that DOE published in the January 2006 report to Congress (i.e., publication of a final 

rule by June 30, 2011). This Framework Document initiates this second rulemaking cycle for 

central air conditioners and heat pumps. 

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

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

consider regional standards for central air conditioners and heat pumps (among other products), 

for one or two regions in addition to a base national standard. (42 U.S.C. 6295(o)(6)) EISA 

2007 states that in considering regional standards, DOE may consider regions made up of 

contiguous States only. Further, in section 310 of EISA 2007, Congress directed DOE to 

consider amended test procedures and standards for standby-mode and off-mode energy 

consumption by covered equipment (such as central air conditioners and heat pumps) for any 

standard published after July 1, 2010. (42 U.S.C. 6295(gg)(3)) Because this energy 

conservation standards rulemaking for central air conditioners and heat pumps will be completed 

in 2011, the requirement to incorporate standby-mode and off-mode energy use into the energy 

conservation standards analysis is applicable. 

To initiate the second rulemaking cycle to consider amended energy conservation 

standards for central air conditioners and heat pumps, DOE has prepared a Framework 

Document to explain the issues, analyses, and processes it anticipates using for the development 

of potential energy conservation standards for central air conditioners and heat pumps. As noted 

EERE-2008-STD-0006 COMMENT 01
8 

above, DOE will hold a public meeting on June 12, 2008 in Washington, D.C., the main focus of 

which will be to discuss the analyses presented and issued identified in the Framework 

Document. At the public meeting, the Department will make a number of presentations, invite 

discussion on the rulemaking process as it applies to central air conditioners and heat pumps, and 

solicit public comments, data, and information from participants and other stakeholders. 

The Department encourages those who wish to participate in the public meeting to obtain 

the Framework Document and to be prepared to discuss its contents. A copy of the draft 

Framework Document is available at:

http://www.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html 

Public meeting participants need not limit their comments to the issues identified in the 

Framework Document. The Department is also interested in receiving views concerning other 

relevant issues that participants believe would affect energy conservation standards for these 

products and applicable test procedures. Furthermore, the Department welcomes all interested 

parties, whether or not they participate in the public meeting, to submit in writing by [INSERT 

DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER],

comments and information on matters addressed in the Framework Document and on other 

matters relevant to consideration of standards for central air conditioners and heat pumps. 

The public meeting will be conducted in an informal, facilitated, conference style. There 

shall be no discussion of proprietary information, costs or prices, market shares, or other 

EERE-2008-STD-0006 COMMENT 01
9 

commercial matters regulated by U.S. antitrust laws. A court reporter will record the 

proceedings of the public meeting, after which a transcript will be made available for purchase 

from the court reporter and available on the above-referenced website. 

After the public meeting and the close of the comment period on the Framework 

Document, DOE will begin collecting data, conducting the analyses as discussed in the 

Framework Document and at the public meeting, and reviewing the comments received. 

 DOE considers public participation to be a very important part of the process for setting 

energy conservation standards. DOE actively encourages the participation and interaction of the 

public during the comment period in each stage of the rulemaking process. Beginning with the 

Framework Document, and during each subsequent public meeting and comment period, 

interactions with and between members of the public provide a balanced discussion of the issues 

to assist DOE with the standards rulemaking process. Accordingly, anyone who would like to 

participate in the public meeting, receive meeting materials, or be added to the DOE mailing list 

to receive future notices and information regarding this rulemaking on central air conditioners 

and heat pumps, should contact Ms. Brenda Edwards at (202) 586-2945, or via e-mail at: 

Brenda.Edwards@ee.doe.gov. 

 Issued in Washington, DC, on 

 _________________________________ 

 Alexander A. Karsner 

 Assistant Secretary 

 Energy Efficiency and Renewable Energy 

EERE-2008-STD-0006 COMMENT 01