```

[Federal Register Volume 80, Number 61 (Tuesday, March 31, 2015)]
[Proposed Rules]
[Pages 17221-17305]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06813]

[[Page 17221]]

Vol. 80

Tuesday,

No. 61

March 31, 2015

Part III

 Department of Energy

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10 CFR Part 430

 Energy Conservation Program: Energy Conservation Standards for 
Residential Boilers; Proposed Rule

Federal Register / Vol. 80 , No. 61 / Tuesday, March 31, 2015 / 
Proposed Rules

[[Page 17222]]

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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2012-BT-STD-0047]
RIN 1904-AC88

Energy Conservation Program: Energy Conservation Standards for 
Residential Boilers

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of proposed rulemaking and announcement of public 
meeting.

-----------------------------------------------------------------------

SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
residential boilers. EPCA also requires the U.S. Department of Energy 
(DOE) to periodically determine whether more-stringent, amended 
standards would be technologically feasible and economically justified, 
and would save a significant amount of energy. In this notice, DOE 
proposes amended energy conservation standards for residential boilers. 
The notice also announces a public meeting to receive comment on these 
proposed standards and associated analyses and results.

DATES: 
    Meeting: DOE will hold a public meeting on Thursday, April 30, 2015 
from 9:00 a.m. to 4:00 p.m., in Washington, DC. The meeting will also 
be broadcast as a webinar. See section VII, ``Public Participation,'' 
for webinar registration information, participant instructions, and 
information about the capabilities available to webinar participants.
    Comments: DOE will accept comments, data, and information regarding 
this notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than June 1, 2015. See section VII, ``Public 
Participation,'' for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW., 
Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at 
(202) 586-2945. Please note that foreign nationals visiting DOE 
Headquarters are subject to advance security screening procedures. Any 
foreign national wishing to participate in the meeting should advise 
DOE as soon as possible by contacting Ms. Edwards to initiate the 
necessary procedures. Please also note that any person wishing to bring 
a laptop computer or tablet into the Forrestal Building will be 
required to obtain a property pass. Visitors should avoid bringing 
laptops, or allow an extra 45 minutes. Persons may also attend the 
public meeting via webinar. For more information, refer to section VII, 
``Public Participation,'' near the end of this notice.
    Instructions: Any comments submitted must identify the NOPR for 
Energy Conservation Standards for Residential Boilers, and provide 
docket number EE-2012-BT-STD-0047 and/or regulatory information number 
(RIN) number 1904-AC88. Comments may be submitted using any of the 
following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: ResBoilers2012STD0047@ee.doe.gov. Include the docket 
number and/or RIN in the subject line of the message. Submit electronic 
comments in Word Perfect, Microsoft Word, PDF, or ASCII file format, 
and avoid the use of special characters or any form on encryption.
    3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue 
SW., Washington, DC 20585-0121. If possible, please submit all items on 
a compact disc (CD), in which case it is not necessary to include 
printed copies.
    4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Office, 950 L'Enfant Plaza SW., Suite 
600, Washington, DC 20024. Telephone: (202) 586-2945. If possible, 
please submit all items on a CD, in which case it is not necessary to 
include printed copies.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
Chad_S_Whiteman@omb.eop.gov.
    No telefacsimilies (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see section VII of this document (Public 
Participation).
    Docket: The docket, which includes Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available for review at www.regulations.gov. 
All documents in the docket are listed in the www.regulations.gov 
index. However, some documents listed in the index may not be 
publically available, such as those containing information that is 
exempt from public disclosure.
    A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0047. This Web 
page contains a link to the docket for this notice on the 
www.regulations.gov site. The www.regulations.gov Web page contains 
simple instructions on how to access all documents, including public 
comments, in the docket. See section VII, ``Public Participation,'' for 
further information on how to submit comments through 
www.regulations.gov.
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Ronald Majette, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, 
DC 20585-0121. Telephone: (202) 586-7935. Email: 
residential_furnaces_and_boilers@ee.doe.gov.
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202)-586-9507. Email: Eric.Stas@hq.doe.gov.
    For information on how to submit or review public comments, contact 
Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Summary of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits
    D. Standby Mode and Off Mode
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Residential Boilers
III. General Discussion
    A. Product Classes and Scope of Coverage
    B. Test Procedure
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria

[[Page 17223]]

    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price (LCC 
and PBP)
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
    A. Market and Technology Assessment
    1. Definition and Scope of Coverage
    2. Product Classes
    3. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Levels
    a. Baseline Efficiency Level and Product Characteristics
    b. Other Energy Efficiency Levels
    2. Cost-Assessment Methodology
    a. Teardown Analysis
    b. Cost Model
    c. Manufacturing Production Costs
    d. Cost-Efficiency Relationship
    e. Manufacturer Markup
    f. Shipping Costs
    g. Manufacturer Interviews
    D. Markups Analysis
    E. Energy Use Analysis
    1. Energy Use Methodology
    2. Standby Mode and Off Mode
    3. Comments on Boiler Energy Use Calculation
    F. Life-Cycle Cost and Payback Period Analysis
    1. Inputs To Installed Cost
    2. Inputs To Operating Costs
    a. Energy Consumption
    b. Energy Prices
    c. Maintenance and Repair Costs
    d. Product Lifetime
    e. Base-Case Efficiency
    G. Shipments Analysis
    H. National Impact Analysis
    1. National Energy Savings Analysis
    a. Full-Fuel-Cycle Energy Savings
    2. Net Present Value Analysis
    a. Discount Rates for Net Present Value
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    3. Manufacturer Interviews
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    2. Valuation of Other Emissions Reductions
    M. Utility Impact Analysis
    N. Employment Impact Analysis
    O. General Comments on Residential Boiler Standards
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    1. TSLs for Energy Efficiency
    2. TSLs for Standby Mode and Off Mode
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback Period
    2. Economic Impacts on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Impacts on Direct Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Product Utility or Performance
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    8. Summary of National Economic Impacts
    C. Proposed Standards
    1. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for AFUE Standards
    2. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for Standby Mode and Off Mode
    3. Summary of Benefits and Costs (Annualized) of the Proposed 
Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act of 1995
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Requests to Speak and Prepared 
General Statements For Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified), established the Energy Conservation Program for Consumer 
Products Other Than Automobiles.\2\ These products include residential 
boilers, the subject of today's notice.
---------------------------------------------------------------------------

    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the American Energy Manufacturing Technical 
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
---------------------------------------------------------------------------

    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that is technologically feasible and economically justified. 
(42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must 
result in a significant conservation of energy. (42 U.S.C. 
6295(o)(3)(B)) EPCA specifically provides that DOE must conduct a 
second round of energy conservation standards rulemaking for 
residential boilers. (42 U.S.C. 6295(f)(4)(C)) The statute also 
provides that not later than 6 years after issuance of any final rule 
establishing or amending a standard, DOE must publish either a notice 
of determination that standards for the product do not need to be 
amended, or a notice of proposed rulemaking including new proposed 
energy conservation standards. (42 U.S.C. 6295(m)(1)) DOE initiated 
this rulemaking as required by 42 U.S.C. 6295(f)(4)(C), but once 
complete, this rulemaking will also satisfy the 6-year review provision 
under 42 U.S.C. 6295(m)(1).
    Furthermore, EISA 2007 amended EPCA to require that any new or 
amended energy conservation standard adopted after July 1, 2010, shall 
address standby mode and off mode energy consumption pursuant to 42 
U.S.C. 6295(o). (42 U.S.C. 6295(gg)(3)) If feasible, the statute 
directs DOE to incorporate standby mode and off mode energy consumption 
into a single standard with the product's active mode energy use. If a 
single standard is not feasible, DOE may consider establishing a 
separate standard to regulate standby mode and off mode energy 
consumption.
    In accordance with these and other statutory provisions discussed 
in this notice, DOE proposes amending the existing AFUE energy 
conservation standards and adopting new standby mode off mode 
electrical energy conservation standards for residential boilers. The 
proposed AFUE standards for each product class (described in section 
IV.A.2) are expressed as minimum annual fuel utilization efficiencies 
(AFUE), as determined by the DOE test method (described in section 
III.B), and are shown in Table I.1. Table I.2 shows the proposed 
standards for standby and off mode.

[[Page 17224]]

These proposed standards, if adopted, would apply to all products 
listed in Table I.1 and Table I.2 and manufactured in, or imported 
into, the United States on or after the date 5 years after the 
publication of the final rule for this rulemaking.

                 Table I.1--Proposed AFUE Energy Conservation Standards for Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                              Proposed standard:
              Product class *                     AFUE ** (%)                    Design requirement
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler.................                    85  Constant-burning pilot not permitted.
                                                                    Automatic means for adjusting water
                                                                    temperature required (except for boilers
                                                                    equipped with tankless domestic water
                                                                    heating coils).
Gas-fired steam boiler.....................                    82  Constant-burning pilot not permitted.
Oil-fired hot water boiler.................                    86  Automatic means for adjusting temperature
                                                                    required (except for boilers equipped with
                                                                    tankless domestic water heating coils).
Oil-fired steam boiler.....................                    86  None
Electric hot water boiler..................                  None  Automatic means for adjusting temperature
                                                                    required (except for boilers equipped with
                                                                    tankless domestic water heating coils).
Electric steam boiler......................                  None  None.
----------------------------------------------------------------------------------------------------------------
* Product classes are separated by fuel source--gas, oil, or electricity--and heating medium--steam or hot
  water. See section IV.A.2 for a discussion of product classes.
** AFUE is an annualized fuel efficiency metric that fully accounts for fuel consumption in active, standby, and
  off modes. See section III.B for a discussion of the AFUE test method.

    Table I.2--Proposed Energy Conservation Standards for Residential
     Boilers Standby Mode and Off Mode Electrical Energy Consumption
------------------------------------------------------------------------
                               Proposed standard:    Proposed standard:
        Product class             PW,SB (watts)        PW,OFF (watts)
------------------------------------------------------------------------
Gas-fired hot water boiler..                     9                     9
Gas-fired steam boiler......                     8                     8
Oil-fired hot water boiler..                    11                    11
Oil-fired steam boiler......                    11                    11
Electric hot water boiler...                     8                     8
Electric steam boiler.......                     8                     8
------------------------------------------------------------------------

A. Benefits and Costs to Consumers

    Table I.3 presents DOE's evaluation of the economic impacts of the 
proposed AFUE and standby mode and off mode standards on consumers of 
residential boilers, as measured by the average life-cycle cost (LCC) 
savings and the median payback period (PBP).\3\ Table I.4 presents the 
same results for standby mode and off mode. The average LCC savings are 
positive for all product classes. The estimated PBP for the standard 
levels proposed for all product classes fall below the average boiler 
lifetime, which is approximately 25 years.\4\ DOE has not conducted an 
analysis of an AFUE standard level for electric boilers as the 
efficiency of these products already approaches 100 percent AFUE.
---------------------------------------------------------------------------

    \3\ The average LCC savings and PBP are measured relative to the 
base case efficiency distribution, which depicts the boiler market 
in the compliance year (see section IV.F.2.e). The LCC savings and 
PBP calculations are further described in section IV.F and in 
chapter 8 of the NOPR TSD.
    \4\ DOE used a distribution of boiler lifetimes that ranges from 
2 to 55 years. See appendix 8F of the NOPR TSD for details of the 
derivation of the average boiler lifetime.

  Table I.3--Impacts of Proposed AFUE Energy Conservation Standards on
                    Consumers of Residential Boilers
------------------------------------------------------------------------
                               Average LCC savings     Median payback
        Product class                (2013$)          period (years *)
------------------------------------------------------------------------
Gas-Fired Hot Water Boiler..                   123                   7.7
Gas-Fired Steam Boiler......                    61                   1.3
Oil-Fired Hot Water Boiler..                   257                   7.6
Oil-Fired Steam Boiler......                   723                  10.5
Electric Hot Water Boiler...               \1\ N/A               \1\ N/A
Electric Steam Boiler.......               \1\ N/A               \1\ N/A
------------------------------------------------------------------------
* The average PBP in years is 20.8 for Gas-Fired Hot Water Boiler, 3.7
  for Gas-Fired Steam Boiler, 11.7 for Oil-Fired Hot Water Boiler, and
  13.9 for Oil-Fired Steam Boiler.
\1\ (No Standard).

[[Page 17225]]

   Table I.4--Impacts of Proposed Standby Mode and Off Mode Electrical
    Energy Cunsumption Energy Conservation Standards on Consumers of
                           Residential Boilers
------------------------------------------------------------------------
                               Average LCC savings     Median payback
        Product class                (2013$)           period (years)
------------------------------------------------------------------------
Gas-Fired Hot Water Boiler..                    14                   7.8
Gas-Fired Steam Boiler......                    15                   7.4
Oil-Fired Hot Water Boiler..                    15                   7.4
Oil-Fired Steam Boiler......                    15                   7.4
Electric Hot Water Boiler...                     8                  11.0
Electric Steam Boiler.......                     9                  10.9
------------------------------------------------------------------------

    Estimates of the combined impact of the proposed AFUE and standby 
mode and off mode standards on the consumers are shown in Table I.5.\5\
---------------------------------------------------------------------------

    \5\ The average LCC savings and PBP for both standards are 
calculated for each household. To calculate the PBP, DOE determined 
the combined installed cost to the consumer and the first-year 
operating costs for both standards. The combined LCC savings and PBP 
are compared to the base case efficiency distribution for both 
standards, which depicts the boiler market in the compliance year 
(see section IV.F.2.e). The combined results for all households are 
used to derive the average LCC savings and the median payback period 
values shown in Table I.5.

  Table I.5--Combined Impacts of Proposed AFUE and Standby Mode and Off
 Mode Energy Conservation Standards on Consumers of Residential Boilers
------------------------------------------------------------------------
                               Average LCC savings     Median payback
        Product class                (2013$)           period (years)
------------------------------------------------------------------------
Gas-Fired Hot Water Boiler..                   137                   7.8
Gas-Fired Steam Boiler......                    76                   7.3
Oil-Fired Hot Water Boiler..                   272                   7.4
Oil-Fired Steam Boiler......                   739                   9.9
Electric Hot Water Boiler...                     8                  11.0
Electric Steam Boiler.......                     9                  10.9
------------------------------------------------------------------------

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the base year through the end of the 
analysis period (2014 to 2049). Using a real discount rate of 8.0 
percent, DOE estimates that the INPV for manufacturers is $380.96 
million.\6\ DOE analyzed the impacts of AFUE energy conservation 
standards and standby/off mode electrical energy consumption energy 
conservation standards on manufacturers separately. Under the proposed 
AFUE standards, DOE expects that the change in INPV will range from -
2.10 to 0.20 percent, which is approximately equivalent to a reduction 
of $7.99 million to an increase of $0.77 million. DOE estimates that 
residential boiler manufacturers will incur $4.28 million in conversion 
costs as a result of this proposed AFUE standard. Under the proposed 
standby mode and off mode standards, DOE expects the change in INPV 
will range from -0.28 to 0.06 percent, which is approximately 
equivalent to a decrease of $1.08 million to an increase of $0.22 
million. DOE estimates that residential boiler manufacturers will incur 
$0.21 million in conversion costs as a result of this this proposed 
standby and off mode standard. DOE expects the combined impact of the 
TSLs proposed for AFUE and standby and off mode electrical consumption 
in this NOPR to range from -2.38 to 0.26 percent, which is 
approximately equivalent to a reduction of $9.07 million to an increase 
of $0.99 million. DOE estimates that residential boiler manufacturers 
will incur $4.49 million in conversion costs as a result of both 
proposed standards. Based on DOE's interviews with residential boiler 
manufacturers, DOE does not expect any plant closings or significant 
loss of employment to result from the proposed standards for 
residential boilers. More information on DOE's direct employment impact 
analysis can be found in section V.B.2.b of this NOPR.
---------------------------------------------------------------------------

    \6\ All monetary values in this document are expressed in 2013 
dollars; discounted values are discounted to 2014 unless explicitly 
stated otherwise.
---------------------------------------------------------------------------

C. National Benefits 7
---------------------------------------------------------------------------

    \7\ Energy savings in this section refer to full-fuel-cycle 
savings (see section IV.H for discussion).
---------------------------------------------------------------------------

    DOE's analyses indicate that the proposed AFUE energy conservation 
standards for residential boilers would save a significant amount of 
energy. The lifetime energy savings for residential boilers purchased 
in the 30-year period that begins in the first full year of compliance 
with amended standards (2020-2049) amount to 0.21 quads \8\ of full-
fuel-cycle energy. This is a savings of 0.6 percent relative to the 
energy use of these products in the base case without amended 
standards.
---------------------------------------------------------------------------

    \8\ A quad is equal to 10\15\ British thermal units (Btu).
---------------------------------------------------------------------------

    The cumulative net present value (NPV) of total consumer costs and 
savings for the proposed residential boilers AFUE standards ranges from 
$0.4 billion to $1.3 billion at 7-percent and 3-percent discount rates, 
respectively. This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product costs for 
residential boilers purchased in 2020-2049.
    In addition, the proposed residential boilers AFUE standards would 
have significant environmental benefits. The energy savings would 
result in cumulative emission reductions of 12.9 million metric tons 
(Mt) \9\ of carbon dioxide (CO2), 110.1 thousand tons of 
methane (CH4), 0.1 thousand tons of

[[Page 17226]]

nitrous oxide (N2O), 0.3 thousand tons of sulfur dioxide 
(SO2), 32.07 thousand tons of nitrogen oxides 
(NOX), and -0.001 tons of mercury (Hg).\10\ The cumulative 
reduction in CO2 emissions through 2030 amounts to 1.4 Mt.
---------------------------------------------------------------------------

    \9\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \10\ DOE calculated emissions reductions relative to the Annual 
Energy Outlook 2013 (AEO 2013) Reference case, which generally 
represents current legislation and environmental regulations for 
which implementing regulations were available as of December 31, 
2012. DOE notes that the proposed AFUE standards are estimated to 
cause a very slight increase in mercury emissions due to associated 
increase in boiler electricity use.
---------------------------------------------------------------------------

    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the Social Cost of Carbon, or SCC) developed by a recent Federal 
interagency process.\11\ The derivation of the SCC values is discussed 
in section IV.L. Using discount rates appropriate for each set of SCC 
values, DOE estimates the present monetary value of the CO2 
emissions reduction is between $0.07 billion and $1.14 billion. 
Additionally, DOE estimates the present monetary value of the 
NOX emissions reduction to be $13.5 million to $35.5 million 
at 7-percent and 3-percent discount rates, respectively.\12\
---------------------------------------------------------------------------

    \11\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866, Interagency 
Working Group on Social Cost of Carbon, United States Government 
(May 2013; revised November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
    \12\ DOE is currently investigating valuation of avoided Hg and 
SO2 emissions.
---------------------------------------------------------------------------

    Table I.5 summarizes the national economic benefits and costs 
expected to result from the proposed AFUE standards for residential 
boilers.

 Table I.6--Summary of National Economic Benefits and Costs of Proposed
       AFUE Energy Conservation Standards for Residential Boilers
                                [TSL 3] *
------------------------------------------------------------------------
                                     Present value
             Category               (billion 2013$)   Discount rate  (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings..               0.64                 7
                                                1.82                 3
CO2 Reduction Monetized Value                   0.07                 5
 ($12.0/t case) **...............
CO2 Reduction Monetized Value                   0.37                 3
 ($40.5/t case) **...............
CO2 Reduction Monetized Value                   0.60                 2.5
 ($62.4/t case) **...............
CO2 Reduction Monetized Value                   1.14                 3
 ($119/t case) **................
NOX Reduction Monetized Value (at               0.01                 7
 $2,684/ton) **..................
                                                0.04                 3
                                  --------------------------------------
    Total Benefits [dagger]......               1.03                 7
                                                2.22                 3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed                  0.29                 7
 Costs...........................
                                                0.54                 3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including Emissions Reduction                   0.74                 7
 Monetized Value [dagger]........
                                                1.69                 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
  boilers shipped in 2020-2049. These results include benefits to
  consumers which accrue after 2049 from the products purchased in 2020-
  2049. The results account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be
  incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2013$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series used by DOE incorporate
  an escalation factor. The value for NOX is the average of the low and
  high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using
  the series corresponding to average SCC with a 3-percent discount rate
  ($40.5/t in 2015).

    For the proposed standby mode and off mode standards, the lifetime 
energy savings for residential boilers purchased in the 30-year period 
that begins in the first full year of compliance with amended standards 
(2020-2049) amount to 0.045 quads. This is a savings of 18 percent 
relative to the standby energy use of these products in the base case 
without amended standards.
    The cumulative NPV of total consumer costs and savings for the 
proposed standby mode and off mode standards for residential boilers 
ranges from $0.17 billion to $0.44 billion at 7-percent and 3-percent 
discount rates, respectively. This NPV expresses the estimated total 
value of future operating-cost savings minus the estimated increased 
product costs for residential boilers purchased in 2020-2049.
    In addition, the proposed standby mode and off mode standards would 
have significant environmental benefits. The energy savings would 
result in cumulative emission reductions of 2.1 million metric tons 
(Mt) of carbon dioxide (CO2), 11.8 thousand tons of methane 
(CH4), 0.1 thousand tons of nitrous oxide (N2O), 
2.2 thousand tons of sulfur dioxide (SO2), 1.91 thousand 
tons of nitrogen oxides (NOX), and 0.004 tons of mercury 
(Hg). The cumulative reduction in CO2 emissions through 2030 
amounts to 0.25 Mt.
    As noted above, the value of the CO2 reductions is 
calculated using a range of values per metric ton of CO2 
(otherwise known as the Social Cost of Carbon, or SCC) developed by a 
recent Federal interagency process. The derivation of the SCC values is 
discussed in section IV.L. Using discount rates appropriate for each 
set of SCC values, DOE

[[Page 17227]]

estimates the present monetary value of the CO2 emissions 
reduction is between $0.01 billion and $0.18 billion. Additionally, DOE 
estimates the present monetary value of the NOX emissions 
reduction to be $0.8 million to $2.1 million at 7-percent and 3-percent 
discount rates, respectively.
    Table I.6 summarizes the national economic benefits and costs 
expected to result from the proposed standby mode and off mode 
standards for residential boilers.

 Table I.6--Summary of National Economic Benefits and Costs of Proposed
 Standby Mode and Off Mode Energy Conservation Standards for Residential
                                 Boilers
                                [TSL 3] *
------------------------------------------------------------------------
                                     Present value
             Category               (billion 2013$)   Discount rate  (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings..              0.250                 7
                                               0.596                 3
CO2 Reduction Monetized Value                  0.012                 5
 ($12.0/t case) **...............
CO2 Reduction Monetized Value                  0.058                 3
 ($40.5/t case) **...............
CO2 Reduction Monetized Value                  0.094                 2.5
 ($62.4/t case) **...............
CO2 Reduction Monetized Value                  0.180                 3
 ($119/t case) **................
NOX Reduction Monetized Value (at              0.001                 7
 $2,684/ton) **..................
                                               0.002                 3
                                  --------------------------------------
    Total Benefits [dagger]......              0.309                 7
                                               0.657                 3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed                 0.082                 7
 Costs...........................
                                               0.158                 3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including Emissions Reduction                  0.226                 7
 Monetized Value [dagger]........
                                               0.499                 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
  boilers shipped in 2020-2049. These results include benefits to
  consumers which accrue after 2049 from the products purchased in 2020-
  2049. The results account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be
  incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2013$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series used by DOE incorporate
  an escalation factor. The value for NOX is the average of the low and
  high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using
  the series corresponding to average SCC with a 3-percent discount rate
  ($40.5/t in 2015).

    The benefits and costs of today's proposed energy conservation 
standards, for residential boiler products sold in 2020-2049, can also 
be expressed in terms of annualized values. Benefits and costs for the 
AFUE standards are considered separately from benefits and costs for 
the standby mode and off mode electrical consumption standards, because 
for the reasons explained in section I.D below, it was not technically 
feasible to develop a single, integrated standard. The annualized 
monetary values are the sum of: (1) The annualized national economic 
value of the benefits from consumer operation of products that meet the 
proposed new or amended standards (consisting primarily of operating 
cost savings from using less energy, minus increases in product 
purchase price and installation costs, which is another way of 
representing consumer NPV), and (2) the annualized monetary value of 
the benefits of emission reductions, including CO2 emission 
reductions.\13\
---------------------------------------------------------------------------

    \13\ DOE used a two-step calculation process to convert the 
time-series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2014, the year used for discounting 
the NPV of total consumer costs and savings, for the time-series of 
costs and benefits using discount rates of three and seven percent 
for all costs and benefits except for the value of CO2 
reductions. For the latter, DOE used a range of discount rates, as 
shown in Table I.7. From the present value, DOE then calculated the 
fixed annual payment over a 30-year period (2020 through 2049) that 
yields the same present value. The fixed annual payment is the 
annualized value. Although DOE calculated annualized values, this 
does not imply that the time-series of cost and benefits from which 
the annualized values were determined is a steady stream of 
payments.
---------------------------------------------------------------------------

    Although combining the values of operating savings and 
CO2 emission reductions provides a useful perspective, two 
issues should be considered. First, the national operating savings are 
domestic U.S. consumer monetary savings that occur as a result of 
market transactions, whereas the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and CO2 savings are performed with different methods 
that use different time frames for analysis. The national operating 
cost savings is measured for the lifetime of residential boilers 
shipped in 2020-2049. The SCC values, on the other hand, reflect the 
present value of some future climate-related impacts resulting from the 
emission of one ton of carbon dioxide in each year. These impacts 
continue well beyond 2100.
    Estimates of annualized benefits and costs of the proposed AFUE 
standards are shown in Table I.7. The results under the primary 
estimate are as follows. Using a 7-percent discount rate for benefits 
and costs other than CO2 reduction (for which DOE used a 3-
percent discount rate along with the average SCC series that uses a 3-
percent discount rate ($40.5/t in 2015)), cost of the residential 
boiler standards

[[Page 17228]]

proposed in today's rule is $32.3 million per year in increased 
equipment costs, while the estimated benefits are $73 million per year 
in reduced equipment operating costs, $21.8 million in CO2 
reductions, and $1.53 million in reduced NOX emissions. In 
this case, the net benefit would amount to $64 million per year. Using 
a 3-percent discount rate for all benefits and costs and the average 
SCC series that uses a 3-percent discount rate ($40.5/t in 2015), the 
estimated cost of the residential boiler standards proposed in today's 
rule is $31.7 million per year in increased equipment costs, while the 
estimated benefits are $108 million per year in reduced equipment 
operating costs, $21.8 million in CO2 reductions, and $2.10 
million in reduced NOX emissions. In this case, the net 
benefit would amount to $100 million per year.

                                         Table I.7--Annualized Benefits and Costs of Proposed AFUE Energy Conservation Standards for Residential Boilers
                                                                                             [TSL 3]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (million 2013$/year)
                                                Discount rate  (%)          --------------------------------------------------------------------------------------------------------------------
                                                                                       Primary estimate *                Low net benefits estimate *            High net benefits estimate *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  73...................................  71...................................  75.
                                      3....................................  108..................................  105..................................  112.
CO[ihel2] Reduction Monetized Value   5....................................  6.1..................................  6.1..................................  6.2.
 ($12.0/t case) *.
CO[ihel2] Reduction Monetized Value   3....................................  21.8.................................  21.6.................................  22.0.
 ($40.5/t case) *.
CO[ihel2] Reduction Monetized Value   2.5..................................  32.2.................................  31.9.................................  32.5.
 ($62.4/t case) *.
CO[ihel2] Reduction Monetized Value   3....................................  67.6.................................  66.9.................................  68.2.
 ($119/t case) *.
NOX Reduction Monetized Value (at     7....................................  1.53.................................  1.52.................................  1.53.
 $2,684/ton) **.                      3....................................  2.10.................................  2.08.................................  2.12.
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefits [dagger].........  7 plus CO[ihel2] range...............  80 to 142............................  79 to 140............................  83 to 145.
                                      7....................................  96...................................  94...................................  99.
                                      3 plus CO[ihel2] range...............  116 to 177...........................  113 to 174...........................  121 to 183.
                                      3....................................  132..................................  128..................................  136.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed Costs  7....................................  32.3.................................  38.7.................................  26.8.
                                      3....................................  31.7.................................  38.9.................................  25.6.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Net Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO[ihel2] range...............  48 to 110............................  40 to 101............................  56 to 118.
                                      7....................................  64...................................  56...................................  72.
                                      3 plus CO[ihel2] range...............  84 to 146............................  74 to 135............................  95 to 157.
                                      3....................................  100..................................  89...................................  111.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In
  addition, incremental product costs reflect a medium decline rate for projected product price trends in the Primary Estimate, a low decline rate for projected product price trends in the Low
  Benefits Estimate, and a high decline rate for projected product price trends in the High Benefits Estimate. The methods used to derive projected price trends are explained in section
  IV.F.1.
** The CO[ihel2] values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC
  distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The
  SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows labeled ``7%
  plus CO[ihel2] range'' and ``3% plus CO[ihel2] range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of
  CO[ihel2] values.

    Estimates of annualized benefits and costs of the proposed standby 
mode and off mode standards are shown in Table I.8. The results under 
the primary estimate are as follows. Using a 7-percent discount rate 
for benefits and costs other than CO[ihel2] reduction (for which DOE 
used a 3-percent discount rate along with the average SCC series that 
uses a 3-percent discount rate ($40.5/t in 2015)), the estimated cost 
of the residential boiler standby mode and off mode standards proposed 
in today's rule is $9.31 million per year in increased equipment costs, 
while the estimated benefits are $28 million per year in reduced 
equipment operating costs, $3 million in CO[ihel2] reductions, and 
$0.09 million in reduced NOX emissions. In this case, the 
net benefit would amount to $22 million per year. Using a 3-percent 
discount rate for all benefits and costs and the average SCC series 
that uses a 3-percent discount rate ($40.5/t in 2015), the estimated 
cost of the residential boiler standby mode and off mode standards 
proposed in today's

[[Page 17229]]

rule is $9.35 million per year in increased equipment costs, while the 
estimated benefits are $35 million per year in reduced equipment 
operating costs, $3 million in CO[ihel2] reductions, and $0.12 million 
in reduced NOX emissions. In this case, the net benefit 
would amount to $29 million per year.

                              Table I.8--Annualized Benefits and Costs of Proposed Standby Mode and Off Mode Energy Conservation Standards for Residential Boilers
                                                                                             [TSL 3]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (million 2013$/year)
                                                Discount rate (%)           --------------------------------------------------------------------------------------------------------------------
                                                                                       Primary estimate *                Low net benefits estimate *            High net benefits estimate *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  28...................................  27...................................  29.
                                      3....................................  35...................................  34...................................  36.
CO2 Reduction Monetized Value ($12.0/ 5....................................  1....................................  1....................................  1.
 t case) *.
CO2 Reduction Monetized Value ($40.5/ 3....................................  3....................................  3....................................  4.
 t case) *.
CO2 Reduction Monetized Value ($62.4/ 2.5..................................  5....................................  5....................................  5.
 t case) *.
CO2 Reduction Monetized Value ($119/  3....................................  11...................................  10...................................  11.
 t case) *.
NOX Reduction Monetized Value (at     7....................................  0.09.................................  0.09.................................  0.09.
 $2,684/ton) **.                      3....................................  0.12.................................  0.12.................................  0.13.
    Total Benefits [dagger].........  7 plus CO2 range.....................  29 to 39.............................  28 to 38.............................  30 to 40.
                                      7....................................  32...................................  30...................................  33.
                                      3 plus CO2 range.....................  36 to 46.............................  35 to 44.............................  38 to 47.
                                      3....................................  39...................................  37...................................  40.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed Costs  7....................................  9.31.................................  9.48.................................  9.13.
                                      3....................................  9.35.................................  9.55.................................  9.15.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Net Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO2 range.....................  20 to 30.............................  19 to 28.............................  21 to 31.
                                      7....................................  22...................................  21...................................  24.
                                      3 plus CO2 range.....................  27 to 37.............................  25 to 35.............................  28 to 38.
                                      3....................................  29...................................  28...................................  31.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In
  addition, incremental product costs reflect a medium decline rate for projected product price trends in the Primary Estimate, a low decline rate for projected product price trends in the Low
  Benefits Estimate, and a high decline rate for projected product price trends in the High Benefits Estimate. The methods used to derive projected price trends are explained in section
  IV.F.1.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions
  calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time
  series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows labeled ``7%
  plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values.

    DOE has tentatively concluded that the proposed standards (for both 
AFUE, as well as standby mode and off mode) represent the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified, and would result in the significant 
conservation of energy. DOE further notes that products achieving these 
standard levels are already commercially available for all product 
classes covered by today's proposal. Based on the analyses described 
above, DOE has tentatively concluded that the benefits of the proposed 
standards to the Nation (energy savings, positive NPV of consumer 
benefits, consumer LCC savings, and emission reductions) would outweigh 
the burdens (loss of INPV for manufacturers and LCC increases for some 
consumers).
    DOE also considered more-stringent energy efficiency levels as 
trial standard levels, and is still considering them in this 
rulemaking. However, DOE has tentatively concluded that the potential 
burdens of the more-stringent energy efficiency levels would outweigh 
the projected benefits. Based on consideration of the public comments 
DOE receives in response to this notice and related information 
collected and analyzed during the course of this rulemaking effort, DOE 
may adopt energy efficiency levels presented in this notice that are 
either higher or lower than the proposed standards, or some combination 
of level(s) that incorporate the proposed standards in part.
    DOE also added the annualized benefits and costs from the 
individual annualized tables to provide a combined benefit and cost 
estimate of the proposed AFUE and standby mode and

[[Page 17230]]

off mode standards as shown in Table I.10.\14\ The results under the 
primary estimate are as follows. Using a 7-percent discount rate for 
benefits and costs other than CO2 reduction, for which DOE 
used a 3-percent discount rate along with the average SCC series that 
uses a 3-percent discount rate ($40.5/t in 2015), the estimated cost of 
the residential boilers AFUE and standby mode and off mode standards 
proposed in this rule is $41.7 million per year in increased equipment 
costs, while the estimated benefits are $101 million per year in 
reduced equipment operating costs, $25.3 million per year in 
CO2 reductions, and $1.62 million per year in reduced 
NOX emissions. In this case, the net benefit would amount to 
$86.3 million per year. Using a 3-percent discount rate for all 
benefits and costs and the average SCC series that uses a 3-percent 
discount rate ($40.5/t in 2015), the estimated cost of the residential 
boilers AFUE and standby mode and off mode standards proposed in this 
rule is $41.0 million per year in increased equipment costs, while the 
estimated benefits are $143 million per year in reduced equipment 
operating costs, $25.3 million per year in CO2 reductions, 
and $2.22 million per year in reduced NOX emissions. In this 
case, the net benefit would amount to $129 million per year.
---------------------------------------------------------------------------

    \14\ To obtain the combined results, DOE added the results for 
the AFUE standard in Table I.7 and for the standby standards in 
Table I.8.

                         Table I.10--Annualized Benefits and Costs of Proposed AFUE and Standby Mode and Off Mode Energy Conservation Standards for Residential Boilers
                                                                                             [TSL 3]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (million 2013$/year)
                                                Discount rate (%)           --------------------------------------------------------------------------------------------------------------------
                                                                                       Primary estimate *                Low net benefits estimate *            High net benefits estimate*
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  101..................................  98...................................  104.
                                      3....................................  143..................................  138..................................  149.
CO2 Reduction Monetized Value ($12.0/ 5....................................  7.11.................................  7.04.................................  7.18.
 t case)*.
CO2 Reduction Monetized Value ($40.5/ 3....................................  25.3.................................  25.0.................................  25.6.
 t case)*.
CO2 Reduction Monetized Value ($62.4/ 2.5..................................  37.3.................................  36.8.................................  37.7.
 t case)*.
CO2 Reduction Monetized Value ($119/  3....................................  78.2.................................  77.3.................................  79.1.
 t case)*.
NOX Reduction Monetized Value (at     7....................................  1.62.................................  1.61.................................  1.63.
 $2,684/ton)**.                       3....................................  2.22.................................  2.20.................................  2.24.
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefits [dagger].........  7 plus CO2 range.....................  110 to 181...........................  107 to 177...........................  113 to 185.
                                      7....................................  128..................................  125..................................  131.
                                      3 plus CO2 range.....................  152 to 223...........................  148 to 218...........................  158 to 230.
                                      3....................................  170..................................  165..................................  177.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed Costs  7....................................  41.7.................................  48.2.................................  35.9.
                                      3....................................  41.0.................................  48.5.................................  34.8.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Net Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO2 range.....................  68.1 to 139..........................  58.8 to 129..........................  77.0 to 149.
                                      7....................................  86.3.................................  76.7.................................  95.4.
                                      3 plus CO2 range.....................  111 to 182...........................  99 to 169............................  123 to 195.
                                      3....................................  129..................................  117..................................  142.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions
  calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time
  series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows labeled ``7%
  plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values.

D. Standby Mode and Off Mode

    As discussed in section II.A of this NOPR, any final rule for 
amended or new energy conservation standards that is published on or 
after July 1, 2010 must address standby mode and off mode energy use. 
(42 U.S.C. 6295(gg)(3)) As a result, DOE has analyzed and is proposing 
new energy conservation

[[Page 17231]]

standards for the standby mode and off mode electrical energy 
consumption for residential boilers.
    AFUE, the statutory metric for residential boilers, does not 
incorporate standby mode or off mode use of electricity, although it 
already fully addresses use in these modes of fossil fuels by gas-fired 
and oil-fired boilers. In the October 2010 test procedure final rule 
for residential furnaces and boilers, DOE determined that incorporating 
standby mode and off mode electricity consumption into a single 
standard for residential furnaces and boilers is not technically 
feasible. 75 FR 64621, 64626-64627 (Oct. 20, 2010). DOE concluded that 
a metric that integrates standby mode and off mode electricity 
consumption into AFUE is not technically feasible, because the standby 
mode and off mode energy usage, when measured, is essentially lost in 
practical terms due to rounding conventions for certifying furnace and 
boiler compliance with Federal energy conservation standards. Id. 
Therefore, in this notice, DOE is proposing amended boiler standards 
that are AFUE levels, which exclude standby mode and off mode 
electricity use, and DOE is also proposing separate standards that are 
maximum wattage (W) levels to address the standby mode 
(PW,SB) and off mode (PW,OFF) electrical energy 
use of boilers. DOE also presents corresponding trial standard levels 
(TSLs) for energy consumption in standby mode and off mode. DOE has 
tentatively decided to use a maximum wattage requirement to regulate 
standby mode and off mode for boilers. DOE believes using an annualized 
metric could add unnecessary complexities, such as trying to estimate 
an assumed number of hours that a boiler typically spends in standby 
mode. Instead, DOE believes that a maximum wattage standard is the most 
straightforward metric for regulating standby mode and off mode energy 
consumption of boilers and will result in the least amount of industry 
and consumer confusion.
    DOE is using the metrics just described--AFUE, PW,SB, 
and PW,OFF--in the amended energy conservation standards it 
proposes in this rulemaking for boilers. This approach satisfies the 
mandate of 42 U.S.C. 6295(gg)(3) that amended standards address standby 
mode and off mode energy use. The various analyses performed by DOE to 
evaluate minimum standards for standby mode and off mode electrical 
energy consumption for boilers are discussed further in section IV.E of 
this NOPR.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying today's proposal, as well as some of the relevant historical 
background related to the establishment of standards for residential 
boilers.

A. Authority

    Title III, Part B \15\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified) established the Energy Conservation Program for Consumer 
Products Other Than Automobiles, a program covering most major 
household appliances (collectively referred to as ``covered 
products'').\16\ These products include the residential boilers that 
are the subject of this rulemaking. (42 U.S.C. 6292(a)(5)) EPCA, as 
amended, prescribed energy conservation standards for these products 
(42 U.S.C. 6295(f)(1) and (3)), and directed DOE to conduct further 
rulemakings to determine whether to amend these standards (42 U.S.C. 
6295(f)(4)). Under 42 U.S.C. 6295(m), the agency must periodically 
review established energy conservation standards for a covered product; 
under this requirement, such review must be conducted no later than 6 
years from the issuance of any final rule establishing or amending a 
standard for a covered product. This rulemaking satisfies both 
statutory provisions (42 U.S.C. 6295(f)(4) and 42 U.S.C. 6295(m)).
---------------------------------------------------------------------------

    \15\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \16\ All references to EPCA in this document refer to the 
statute as amended through the American Energy Manufacturing 
Technical Corrections Act, Pub. L. 112-210 (enacted December 18, 
2012).
---------------------------------------------------------------------------

    Pursuant to EPCA, DOE's energy conservation program for covered 
products consists essentially of four parts: (1) Testing; (2) labeling; 
(3) establishing Federal energy conservation standards; and (4) 
certification and enforcement procedures. The Federal Trade Commission 
(FTC) is primarily responsible for labeling, and DOE implements the 
remainder of the program. Subject to certain criteria and conditions, 
DOE is required to conduct a second round of rulemaking under 42 U.S.C. 
6295(f)(4)(C) to consider amended energy conservation standards for 
residential boilers, and DOE is also required to consider amended 
standards under 42 U.S.C. 6295(m)(1) by July 15, 2014 (i.e., with 
either: (1) A NOPR with proposed standards, or (2) a notice of 
determination not to amend the standards within six years of issuance 
of the last final rule for residential boilers). DOE is further 
required to develop test procedures to measure the energy efficiency, 
energy use, or estimated annual operating cost of each covered product 
prior to the adoption of a new or amended energy conservation standard. 
(42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of covered products 
must use the prescribed DOE test procedure as the basis for certifying 
to DOE that their products comply with the applicable energy 
conservation standards adopted under EPCA and when making 
representations to the public regarding the energy use or efficiency of 
those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use 
these test procedures to determine whether the products comply with 
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test 
procedures for residential boilers appear at title 10 of the Code of 
Federal Regulations (CFR) part 430, subpart B, appendix N. In 2012, DOE 
initiated a rulemaking to review the residential furnace and boiler 
test procedure. In March 2015, DOE published a NOPR outlining the 
proposed changes to the test procedure. 80 FR 12876. Details regarding 
this rulemaking are discussed in section III.B.
    DOE must follow specific statutory criteria for prescribing amended 
standards for covered products, including residential boilers. As 
indicated above, any amended standard for a covered product must be 
designed to achieve the maximum improvement in energy efficiency that 
is technologically feasible and economically justified. (42 U.S.C. 
6295(o)(2)(A) and (3)(B)) Furthermore, DOE may not adopt any standard 
that would not result in the significant conservation of energy. (42 
U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard: (1) For 
certain products, including residential boilers, if no test procedure 
has been established for the product, or (2) if DOE determines by rule 
that the proposed standard is not technologically feasible or 
economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding 
whether a proposed standard is economically justified, after receiving 
comments on the proposed standard, DOE must determine whether the 
benefits of the standard exceed its burdens. (42 U.S.C. 
6295(o)(2)(B)(i)) DOE must make this determination by, to the greatest 
extent practicable, considering the following seven statutory factors:

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

[[Page 17232]]

    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price, initial charges, or maintenance 
expenses for the covered products that are likely to result from the 
standard;
    (3) The total projected amount of energy (or as applicable, 
water) savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the 
covered products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary of Energy (Secretary) considers 
relevant.

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

    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of a covered 
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe 
an amended or new standard if interested persons have established by a 
preponderance of evidence that the standard is likely to result in the 
unavailability in the United States of any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    Additionally, 42 U.S.C. 6295(q)(1) specifies requirements when 
promulgating an energy conservation standard for a covered product that 
has two or more subcategories. DOE must specify a different standard 
level for a type or class of covered product that has the same function 
or intended use, if DOE determines that products within such group: (A) 
Consume a different kind of energy from that consumed by other covered 
products within such type (or class); or (B) have a capacity or other 
performance-related feature that other products within such type (or 
class) do not have and such feature justifies a higher or lower 
standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-
related feature justifies a different standard for a group of products, 
DOE must consider such factors as the utility to the consumer of the 
feature and other factors DOE deems appropriate. Id. Any rule 
prescribing such a standard must include an explanation of the basis on 
which such higher or lower level was established. (42 U.S.C. 
6295(q)(2))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers 
of Federal preemption for particular State laws or regulations, in 
accordance with the procedures and other provisions set forth under 42 
U.S.C. 6297(d).
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, 
any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into 
a single standard, or, if that is not feasible, adopt a separate 
standard for such energy use for that product. (42 U.S.C. 
6295(gg)(3)(A)-(B)) DOE's current test procedures for residential 
boilers address standby mode and off mode energy use. In this 
rulemaking, DOE intends to adopt separate energy conservation standards 
to address standby mode and off mode energy use.

B. Background

1. Current Standards
    In a final rule published on July 28, 2008 (2008 final rule), DOE 
prescribed energy conservation standards for residential boilers 
manufactured on or after September 1, 2012. 73 FR 43611. These 
standards are set forth in DOE's regulations at 10 CFR 430.32(e)(2)(ii) 
and are repeated in Table II.1 below.

                Table II.1--Current Federal Energy Conservation Standards for Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                              Minimum annual fuel
              Product class                utilization efficiency (%)             Design requirements
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water Boiler..............  82.........................  No Constant-Burning Pilot, Automatic
                                                                        Means for Adjusting Water Temperature.*
Gas-fired Steam Boiler..................  80.........................  No Constant-Burning Pilot.
Oil-fired Hot Water Boiler..............  84.........................  Automatic Means for Adjusting
                                                                        Temperature.*
Oil-fired Steam Boiler..................  82.........................  None.
Electric Hot Water Boiler...............  None.......................  Automatic Means for Adjusting
                                                                        Temperature.*
Electric Steam Boiler **................  None.......................  None.
----------------------------------------------------------------------------------------------------------------
* Excluding boilers equipped with a tankless domestic water heating coil.
** Although the ``Electric steam boiler'' product class is not included in the table at 10 CFR 430.32(e)(2)(ii),
  according to 42 U.S.C. 6295(f), there are no minimum AFUE or design requirements for these products. DOE
  intends to clarify the standards for these products in this NOPR.

2. History of Standards Rulemaking for Residential Boilers
    Given the somewhat complicated interplay of recent DOE rulemakings 
and statutory provisions related to residential boilers, DOE provides 
the following regulatory history as background leading to the present 
rulemaking. On November 19, 2007, DOE published a final rule in the 
Federal Register (November 2007 final rule) revising the energy 
conservation standards for furnaces and boilers, which addressed the 
first required review of standards for boilers under 42 U.S.C. 
6295(f)(4)(B). 72 FR 65136. Compliance with the standards in the 
November 2007 final rule would have been required by November 19, 2015. 
However, on December 19, 2007, EISA 2007, Public Law 110-140, was 
signed into law, which further revised the energy conservation 
standards for residential boilers. More specifically,

[[Page 17233]]

EISA 2007 amended EPCA to revise the AFUE requirements for residential 
boilers and set design requirements for most product classes. (42 
U.S.C. 6295(f)(3)) EISA 2007 required compliance with the amended 
energy conservation standards for residential boilers beginning on 
September 1, 2012.
    Only July 15, 2008, DOE issued a final rule technical amendment to 
the 2007 final rule, which was published in the Federal Register on 
July 28, 2008, to codify the energy conservation standard levels, the 
design requirements, and compliance dates for residential boilers 
outlined in EISA 2007. 73 FR 43611. For gas-fired hot water boilers, 
oil-fired hot water boilers, and electric hot water boilers, EISA 2007 
requires that residential boilers manufactured after September 1, 2012 
have an automatic means for adjusting water temperature. (42 U.S.C. 
6295(f)(3)(A)-(C); 10 CFR 430.32(e)(2)(ii)-(iv)) The automatic means 
for adjusting water temperature must ensure that an incremental change 
in the inferred heat load produces a corresponding incremental change 
in the temperature of the water supplied by the boiler. EISA 2007 also 
disallows the use of constant-burning pilot lights in gas-fired hot 
water boilers and gas-fired steam boilers.
    DOE initiated today's rulemaking pursuant to 42 U.S.C. 
6295(f)(4)(C), which requires DOE to conduct a second round of amended 
standards rulemaking for residential boilers. EPCA, as amended by EISA 
2007, also requires that not later than 6 years after issuance of any 
final rule establishing or amending a standard, DOE must publish either 
a notice of the determination that standards for the product do not 
need to be amended, or a notice of proposed rulemaking including 
proposed energy conservation standards. (42 U.S.C. 6295(m)(1)) As noted 
above, this rulemaking will satisfy both statutory provisions.
    Furthermore, EISA 2007 amended EPCA to require that any new or 
amended energy conservation standard adopted after July 1, 2010, shall 
address standby mode and off mode energy consumption pursuant to 42 
U.S.C. 6295(o). (42 U.S.C. 6295(gg)(3)) If feasible, the statute 
directs DOE to incorporate standby mode and off mode energy consumption 
into a single standard with the product's active mode energy use. If a 
single standard is not feasible, DOE may consider establishing a 
separate standard to regulate standby mode and off mode energy 
consumption. Consequently, DOE will consider standby mode and off mode 
energy use as part of this rulemaking for residential boilers.
    DOE initiated this current rulemaking by issuing an analytical 
Framework Document, ``Rulemaking Framework for Residential Boilers'' 
(February 11, 2013). DOE published the notice of public meeting and 
availability of the Framework Document for residential boilers in the 
Federal Register on February 11, 2013. 78 FR 9631. The residential 
boiler energy conservation standards rulemaking docket is EERE-2012-BT-
STD-0047. See: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=112.
    The Framework Document explained the issues, analyses, and process 
that DOE anticipated using to develop energy conservation standards for 
residential boilers. DOE held a public meeting on March 13, 2013, to 
solicit comments from interested parties regarding DOE's analytical 
approach. The comment period for the Framework Document closed on March 
28, 2013.
    To further develop the energy conservation standards for 
residential boilers, DOE gathered additional information and performed 
an initial technical analysis. This process culminated in publication 
in the Federal Register on February 11, 2014, of the notice of data 
availability (NODA), which announced the availability of analytical 
results and modeling tools. 79 FR 8122. In that document, DOE presented 
its initial analysis of potential amended energy conservation standards 
for residential boilers, and requested comment on the following matters 
discussed in the analysis: (1) The product classes and scope of 
coverage; (2) the analytical framework, models, and tools that DOE is 
using to evaluate potential standards; and (3) the results of the 
preliminary analyses performed by DOE. Id. DOE also invited written 
comments on these subjects, as well as any other relevant issues, and 
announced the availability of supporting documentation on its Web site 
at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0047-
0015.
    A PDF copy of the supporting documentation is available at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0047-0011. The 
comment period closed on March 13, 2014.
    The supporting documentation in the NODA provided an overview of 
the activities DOE undertook in developing potential amended energy 
conservation standards for residential boilers, and discussed the 
comments DOE received in response to the Framework Document. It also 
described the analytical methodology that DOE used and each analysis 
DOE had performed up to that point. These analyses were as follows:
     A market and technology assessment addressed the scope of 
this rulemaking, identified the potential product classes of 
residential boilers, characterized the markets for these products, and 
reviewed techniques and approaches for improving their efficiency;
     A screening analysis reviewed technology options to 
improve the efficiency of residential boilers, and weighed these 
options against DOE's four prescribed screening criteria;
     An engineering analysis estimated the increase in 
manufacturer selling prices (MSPs) associated with more energy-
efficient residential boilers;
     An energy use analysis estimated the annual energy use of 
residential boilers at various potential standard levels;
     A markups analysis converted estimated MSPs to consumer-
installed prices.
     A life-cycle cost (LCC) analysis calculated, at the 
consumer level, the discounted savings in operating costs throughout 
the estimated average life of the product, compared to any increase in 
installed costs likely to result directly from the adoption of a given 
standard;
     A payback period (PBP) analysis estimated the amount of 
time it would take consumers to recover the higher expense of 
purchasing more-energy-efficient products through lower operating 
costs;
     A shipments analysis estimated shipments of residential 
boilers over the time period examined in the analysis (30 years), which 
were used in performing the national impact analysis;
     A national impact analysis assessed the aggregate impacts 
at the national level of potential energy conservation standards for 
residential boilers, as measured by the net present value of total 
consumer economic impacts and national energy savings;
    The nature and function of the analyses in this rulemaking, 
including the engineering analysis, energy-use characterization, 
markups to determine installed prices, LCC and PBP analyses, and 
national impacts, are summarized in the February 2014 notice. 79 FR 
8122, 8124-28 (Feb. 11, 2014).
    Statements received after publication of the Framework Document, at 
the Framework public meeting, and comments received after the 
publication of the NODA have helped identify issues involved in this 
rulemaking and have provided information that has contributed to DOE's 
resolution of these issues. The Department considered

[[Page 17234]]

these statements and comments in developing revised engineering and 
other analyses for this rulemaking.
    DOE received 30 comments in response to the February 2014 NODA. 
These commenters include: A joint comment from the American Council for 
an Energy-Efficient Economy (ACEEE), the Appliance Standards Awareness 
Project (ASAP), the Alliance to Save Energy (ASE), the Natural 
Resources Defense Council (NRDC), and the Northeast Energy Efficiency 
Partnerships (NEEP); a comment from the Air-Conditioning, Heating, and 
Refrigeration Institute (AHRI); a comment from Edison Electric 
Institute (EEI); and a joint comment from the American Gas Association 
(AGA) and the American Public Gas Association (APGA). Manufacturers 
submitting written comments include: Energy Kinetics, Weil McLain, Weil 
McLain and various contractors and distributors (Weil McLain et al.), 
Crown Boiler, US Boiler, New Yorker Boiler, and HTP. Heating, 
ventilation, and air conditioning professionals and fuel companies who 
submitted written comments include: Belyea Brothers, Fire & Ice Heating 
&Cooling, Westmore Fuel Company, Maritime Energy, Brideau Oil Co., 
Hlavaty Plumb Heat and Cool, Rhoads Energy Corporation, Powers Energy 
Corporation, Sunshine Fuels & Energy Services, Petro Heating & Air 
Conditioning Services, OSI Comfort Specialists, Soundview Heating and 
Air Conditioning Corp, Aiello Home Services, Lombardi Oil, Boehm 
Heating Company, Kafin Oil Company, Wilkinson Oil Company, Santoro Oil 
Company, and Stocker Home Energy Services. This NOPR summarizes and 
responds to the issues raised in these comments. A parenthetical 
reference at the end of a comment quotation or paraphrase provides the 
location of the item in the public record.

III. General Discussion

    DOE developed today's proposed rule after considering verbal and 
written comments, data, and information from interested parties that 
represent a variety of interests. The following discussion addresses 
issues raised by these commenters.

A. Product Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility of the feature to the consumer and other factors 
DOE deems appropriate. (42 U.S.C. 6295(q))
    Existing energy conservation standards divide residential boilers 
into six product classes based on the fuel type (i.e., gas, oil, or 
electricity) and heating medium of the product (i.e., hot water or 
steam). For this rulemaking, DOE proposes to maintain the scope of 
coverage defined by its current regulations for the analysis of 
standards, so as to include six product classes of boilers: (1) Gas-
fired hot water boilers; (2) gas-fired steam boilers; (3) oil-fired hot 
water boilers; (4) oil-fired steam boilers; (5) electric hot water 
boilers; and (6) electric steam boilers. DOE has not conducted an 
analysis of an AFUE standard level for electric boilers as the AFUE of 
these products already approaches 100 percent. DOE also did not conduct 
an analysis of a standard level for combination appliances as the DOE 
test procedure does not include a method with which to test these 
products. These reasons are explained in greater detail in section 
IV.A.1 of this NOPR. However, DOE did include electric boilers within 
the scope of its analysis of standby mode and off mode energy 
conservation standards.
    The scope and product classes analyzed for today's NOPR are the 
same as those initially set forth proposed in the Framework Document 
and examined in DOE's initial analysis. Comments received relating to 
the scope of coverage are described in section IV.A of this proposed 
rule.

B. Test Procedure

    DOE's current energy conservation standards for residential boilers 
are expressed in terms of annual fuel utilization efficiency (see 10 
CFR 430.32(e)(2)(ii)). AFUE is an annualized fuel efficiency metric 
that fully accounts for fuel consumption in active, standby, and off 
modes. The existing DOE test procedure for determining the AFUE of 
residential boilers is located at 10 CFR part 430, subpart B, appendix 
N. The current DOE test procedure for residential boilers was 
originally established by a May 12, 1997 final rule, which incorporates 
by reference the American Society of Heating, Refrigerating and Air-
Conditioning Engineers (ASHRAE)/American National Standards Institute 
(ANSI) Standard 103-1993, Method of Testing for Annual Fuel Utilization 
Efficiency of Residential Central Furnaces and Boilers (1993). 62 FR 
26140, 26157.
    On October 20, 2010, DOE updated its test procedures for 
residential boilers in a final rule published in the Federal Register 
(October 2010 test procedure rule). 75 FR 64621. This rule amended 
DOE's test procedure for residential furnaces and boilers to establish 
a separate metric for measuring the electrical energy use in standby 
mode and off mode for gas-fired, oil-fired, and electric boilers 
pursuant to requirements established by EISA 2007. In the final rule, 
DOE determined that due to the magnitude of the electrical standby/off 
mode vs active mode, a single efficiency metric is technically 
infeasible. The test procedure amendments were primarily based on and 
incorporate by reference provisions of the International 
Electrotechnical Commission (IEC) Standard 62301 (First Edition), 
``Household electrical appliances--Measurement of standby power.'' On 
December 31, 2012, DOE published a final rule in the Federal Register 
which updated the incorporation by reference of the standby mode and 
off mode test procedure provisions to refer to the latest edition of 
IEC Standard 62301 (Second Edition). 77 FR 76831.
    On July 10, 2013, DOE published a final rule in the Federal 
Register (July 2013 final rule) that modified the existing testing 
procedures for residential furnaces and boilers. 78 FR 41265. The 
modification addressed the omission of equations needed to calculate 
AFUE for two-stage and modulating condensing furnaces and boilers that 
are tested using an optional procedure provided by section 9.10 of 
ASHRAE 103-1993 (incorporated by reference into DOE's test procedure), 
which allows the test engineer to omit the heat-up and cool-down tests 
if certain conditions are met. Specifically, the DOE test procedure 
allows condensing boilers and furnaces to omit the heat-up and cool-
down tests provided that the units have no measurable airflow through 
the combustion chamber and heat exchanger (HX) during the burner off 
period and have post-purge period(s) of less than 5 seconds. For two-
stage and modulating condensing furnaces and boilers, ASHRAE 103-1993 
(and by extension the DOE test procedure) does not contain the 
necessary equations to calculate the heating seasonal efficiency (which 
contributes to the ultimate calculation of AFUE) when the option in 
section 9.10 is selected. The July 2013 final rule adopted two new 
equations needed to account for the use of section 9.10 for two-stage 
and modulating condensing furnaces and boilers. Id.
    EPCA, as amended by EISA 2007, requires that DOE must review test 
procedures for all covered products at least once every 7 years. (42 
U.S.C

[[Page 17235]]

6293(b)(1)(A)) Accordingly, DOE must complete the residential furnaces 
and boiler test procedure rulemaking no later than December 19, 2014 
(i.e., 7 years after the enactment of EISA 2007), which is before the 
expected completion of this energy conservation standards rulemaking. 
On March 11, 2015, DOE published a notice of proposed rulemaking for 
the test procedure in the Federal Register (March 2015 Test Procedure 
NOPR), a necessary step toward fulfillment of the requirement under 42 
U.S.C. 6293(b)(1)(A) for residential furnaces and boilers. 80 FR 12876. 
DOE must base the analysis of amended energy conservation standards on 
the most recent version of its test procedures, and accordingly, DOE 
will use any amended test procedure when considering product 
efficiencies, energy use, and efficiency improvements in its analyses. 
Major changes proposed in the March 2015 Test Procedure NOPR included 
proposals to:
     Adopt ANSI/ASHRAE 103-2007 by reference in place of the 
existing reference to ANSI/ASHRAE 103-1993;
     Modify the requirements for the measurement of condensate 
under steady-state conditions;
     Update references to installation manuals;
     Update the auxiliary electrical consumption calculation to 
include additional measurements of electrical consumption;
     Adopt a method for determining if the automatic means 
requirement has been met;
     Adopt a method for qualifying the use of the minimum draft 
factor, and
     Revising the required reporting precision for AFUE.
    DOE received several comments from stakeholders relating to the 
residential furnace and boiler test procedure. These comments were 
considered and addressed in that rulemaking proceeding.

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology and prototype designs that could improve the efficiency of 
the products or equipment that are the subject of the rulemaking. As 
the first step in such an analysis, DOE develops a list of technology 
options for consideration in consultation with manufacturers, design 
engineers, and other interested parties. DOE then determines which of 
those means for improving efficiency are technologically feasible. DOE 
considers technologies incorporated in commercially-available products 
or in working prototypes to be technologically feasible. 10 CFR part 
430, subpart C, appendix A, section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; and (3) adverse impacts on 
health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its 
analysis any proprietary technology that is a unique pathway to 
achieving a certain efficiency level. Section IV.B of this notice 
discusses the results of the screening analysis for residential 
boilers, particularly the designs DOE considered, those it screened 
out, and those that are the basis for the trial standard levels (TSLs) 
in this rulemaking. For further details on the screening analysis for 
this rulemaking, see chapter 4 of the NOPR technical support document 
(TSD).
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (max-tech) improvements in energy efficiency for residential 
boilers, using the design parameters for the most-efficient products 
available on the market or in working prototypes. The max-tech levels 
that DOE determined for this rulemaking include efficiency levels 
currently only achieved through the use of condensing technology for 
both the gas fired hot water and the oil fired hot water product 
classes. Details regarding the max-tech efficiency levels determined 
for this rulemaking are described in section IV.C of this proposed rule 
and in chapter 5 of the NOPR TSD.

D. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from the products that 
are the subject of this rulemaking purchased in the 30-year period that 
begins in the year of compliance with amended standards (2020-
2049).\17\ The savings are measured over the entire lifetime of 
products purchased in the 30-year analysis period.\18\ DOE quantified 
the energy savings attributable to each TSL as the difference in energy 
consumption between each standards case and the base case. The base 
case represents a projection of energy consumption in the absence of 
amended energy conservation standards, and it considers market forces 
and policies that affect demand for more-efficient products.
---------------------------------------------------------------------------

    \17\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
    \18\ In the past, DOE presented energy savings results for only 
the 30-year period that begins in the year of compliance. In the 
calculation of economic impacts, however, DOE considered operating 
cost savings measured over the entire lifetime of products purchased 
in the 30-year period. DOE has chosen to modify its presentation of 
national energy savings to be consistent with the approach used for 
its national economic analysis.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet model to 
estimate energy savings from potential amended standards for the 
products that are the subject of this rulemaking. The NIA spreadsheet 
model (described in section IV.H of this NOPR) calculates energy 
savings in site energy, which is the energy directly consumed by 
products at the locations where they are used. For electricity, DOE 
reports national energy savings on an annual basis in terms of primary 
(source) energy savings, which is the savings in the energy that is 
used to generate and transmit the site electricity. To calculate this 
quantity (i.e., converting site energy to primary energy), DOE derives 
annual conversion factors from the model used to prepare the Energy 
Information Administration's (EIA) most recent Annual Energy Outlook 
(AEO).
    DOE also has begun to estimate full-fuel-cycle (FFC) energy 
savings, as discussed in DOE's statement of policy and notice of policy 
amendment. 76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 
(August 17, 2012). The FFC metric includes the energy consumed in 
extracting, processing, and transporting primary fuels (i.e., coal, 
natural gas, petroleum fuels), and, thus, presents a more complete 
picture of the impacts of energy efficiency standards. DOE's evaluation 
of FFC savings is driven in part by the National Academy of Sciences' 
(NAS) report on FFC measurement approaches for DOE's Appliance 
Standards Program.\19\ The

[[Page 17236]]

NAS report discusses that the FFC metric was primarily intended for 
energy conservation standards rulemakings where multiple fuels may be 
used by a particular product. DOE's approach is based on the 
calculation of an FFC multiplier for each of the energy types used by 
covered products or equipment (oil, gas and electricity in the case of 
residential boilers). Although the addition of FFC energy savings in 
the rulemakings is consistent with the recommendations, the methodology 
for estimating FFC does not project how fuel markets would respond to 
this particular standards rulemaking. The FFC methodology simply 
estimates how much additional energy, and in turn how many tons of 
emissions, may be displaced if the estimated quantity of energy was not 
consumed by the residential boilers covered in this rulemaking. It is 
also important to note that inclusion of FFC savings did not affect 
DOE's choice of proposed standards. For more information on FFC energy 
savings, see section IV.H.1.
---------------------------------------------------------------------------

    \19\ ``Review of Site (Point-of-Use) and Full-Fuel-Cycle 
Measurement Approaches to DOE/EERE Building Appliance Energy-
Efficiency Standards,'' (Academy report) was completed in May 2009 
and included five recommendations. A copy of the study can be 
downloaded at: http://www.nap.edu/catalog.php?record_id=12670.
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt more-stringent standards for a covered product, DOE must 
determine that such action would result in ``significant'' energy 
savings. (42 U.S.C. 6295(o)(3)(B)) Although the term ``significant'' is 
not defined in the Act, the U.S. Court of Appeals for the District of 
Columbia Circuit, in Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended 
``significant'' energy savings in the context of EPCA to be savings 
that were not ``genuinely trivial.'' The energy savings for all of the 
trial standard levels considered in this rulemaking, including the 
proposed standards, are nontrivial, and, therefore, DOE considers them 
``significant'' within the meaning of section 325 of EPCA.

E. Economic Justification

1. Specific Criteria
    EPCA provides seven factors to be evaluated in determining whether 
a potential energy conservation standard is economically justified. (42 
U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The following sections discuss how 
DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential amended standard on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include: (1) Industry net 
present value (INPV), which values the industry on the basis of 
expected future cash flows; (2) cash flows by year; (3) changes in 
revenue and income; and (4) other measures of impact, as appropriate. 
Second, DOE analyzes and reports the impacts on different types of 
manufacturers, including impacts on small manufacturers. Third, DOE 
considers the impact of standards on domestic manufacturer employment 
and manufacturing capacity, as well as the potential for standards to 
result in plant closures and loss of capital investment. Finally, DOE 
takes into account cumulative impacts of various DOE regulations and 
other regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and PBP associated with new or amended standards. These 
measures are discussed further in the following section. For consumers 
in the aggregate, DOE also calculates the national net present value of 
the economic impacts applicable to a particular rulemaking. DOE also 
evaluates the LCC impacts of potential standards on identifiable 
subgroups of consumers that may be affected disproportionately by a 
national standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and 
PBP)
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analyses.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and consumer discount rates. To 
account for uncertainty and variability in specific inputs, such as 
product lifetime and discount rate, DOE uses a distribution of values, 
with probabilities attached to each value. For its analysis, DOE 
assumes that consumers will purchase the covered products in the first 
year of compliance with amended standards.
    The LCC savings and the PBP for the considered conservation levels 
are calculated relative to a base case that reflects projected market 
trends in the absence of amended standards. DOE identifies the 
percentage of consumers estimated to receive LCC savings or experience 
an LCC increase, in addition to the average LCC savings associated with 
a particular standard level. DOE's LCC and PBP analyses are discussed 
in further detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section IV.H, DOE uses the NIA spreadsheet to project 
national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing product classes and in evaluating design options 
and the impact of potential standard levels, DOE evaluates potential 
standards that would not lessen the utility or performance of the 
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data 
available to DOE, the standards proposed in this notice would not 
reduce the utility or performance of the products under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard and to transmit such determination to the 
Secretary within 60 days of the publication of a proposed rule, 
together with an analysis of the nature and extent of the impact. (42 
U.S.C. 6295(o)(2)(B)(ii)) DOE will

[[Page 17237]]

transmit a copy of this proposed rule to the Attorney General with a 
request that the Department of Justice (DOJ) provide its determination 
on this issue. DOE will publish and respond to the Attorney General's 
determination in the final rule.
f. Need for National Energy Conservation
    In evaluating the need for national energy conservation, DOE 
expects that the energy savings from the proposed standards are likely 
to provide improvements to the security and reliability of the nation's 
energy system. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) Reductions in the 
demand for electricity also may result in reduced costs for maintaining 
the reliability of the nation's electricity system. DOE conducts a 
utility impact analysis to estimate how standards may affect the 
nation's needed power generation capacity, as discussed in section 
IV.M.
    The proposed standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production. DOE reports the 
emissions impacts from today's proposed standards and from each TSL it 
considered and discussed in sections IV.K and V.B.6 of this NOPR. DOE 
also reports estimates of the economic value of emissions reductions 
resulting from the considered TSLs, as discussed in section IV.L.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) 
To the extent interested parties submit any relevant information 
regarding economic justification that does not fit into the other 
categories described above, DOE could consider such information under 
``other factors.''
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic analysis that considers 
the full range of impacts to consumers, manufacturers, the Nation, and 
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section V.B.1 of this proposed rule.

IV. Methodology and Discussion of Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to residential boilers. Separate subsections 
will address each component of DOE's analyses.
    DOE used three spreadsheet tools to estimate the impact of today's 
proposed standards. The first spreadsheet calculates LCCs and payback 
periods of potential standards. The second provides shipments 
forecasts, and then calculates national energy savings and net present 
value impacts of potential standards. Finally, DOE assessed 
manufacturer impacts, largely through use of the Government Regulatory 
Impact Model (GRIM). All three spreadsheet tools are available online 
at the rulemaking portion of DOE's Web site: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=112.
    Additionally, DOE estimated the impacts on utilities and the 
environment that would be likely to result from potential amended 
standards for residential boilers. DOE used a version of EIA's National 
Energy Modeling System (NEMS) for the utility and environmental 
analyses.\20\ The NEMS simulates the energy sector of the U.S. economy. 
EIA uses NEMS to prepare its Annual Energy Outlook, a widely-known 
energy forecast for the United States. NEMS offers a sophisticated 
picture of the effect of standards, because it accounts for the 
interactions between the various energy supply and demand sectors and 
the economy as a whole.
---------------------------------------------------------------------------

    \20\ For more information on NEMS, refer to the U.S. Department 
of Energy, Energy Information Administration documentation. A useful 
summary is National Energy Modeling System: An Overview 2009, DOE/
EIA-0581(2009) (October 2009) (Available at: http://www.eia.doe.gov/oiaf/aeo/overview/index.html).
---------------------------------------------------------------------------

A. Market and Technology Assessment

    DOE develops information that provides an overall picture of the 
market for the products concerned, including the purpose of the 
products, the industry structure, manufacturers, market 
characteristics, and technologies used in the products. This activity 
includes both quantitative and qualitative assessments, based primarily 
on publicly-available information. The subjects addressed in the market 
and technology assessment for this residential boilers rulemaking 
include: (1) A determination of the scope of the rulemaking and product 
classes; (2) manufacturers and industry structure; (3) quantities and 
types of products sold and offered for sale; (4) retail market trends; 
(5) regulatory and non-regulatory programs; and (6) technologies or 
design options that could improve the energy efficiency of the 
product(s) under examination. The key findings of DOE's market 
assessment are summarized below. See chapter 3 of the NOPR TSD for 
further discussion of the market and technology assessment.
1. Definition and Scope of Coverage
    EPCA defines residential boilers as a type of furnace. 
Specifically, the term ``furnace'' is defined as ``a product which 
utilizes only single-phase electric current, or single-phase electric 
current or DC current in conjunction with natural gas, propane, or home 
heating oil, and which--

    (A) is designed to be the principal heating source for the 
living space of a residence;
    (B) is not contained within the same cabinet with a central air 
conditioner whose rated cooling capacity is above 65,000 Btu 
[British thermal units] per hour;
    (C) is an electric central furnace, electric boiler, forced- air 
central furnace, gravity central furnace, or low pressure steam or 
hot water boiler; and
    (D) has a heat input rate of less than 300,000 Btu per hour for 
electric boilers and low pressure steam or hot water boilers and 
less than 225,000 Btu per hour for forced-air central furnaces, 
gravity central furnaces, and electric central furnaces.''
    (42 U.S.C. 6291(23))

    DOE has incorporated this definition into its regulations in the 
Code of Federal Regulations (CFR) at 10 CFR 430.2. DOE has generally 
defined an electric boiler as an electrically powered furnace designed 
to supply low pressure steam or hot water for space heating 
applications, including a low pressure steam boiler that operates at or 
below 15 pounds per square inch gauge (psig) steam pressure and a hot 
water boiler that operates at or below 160 psig water

[[Page 17238]]

pressure and 250 [deg]F water temperature. DOE has generally defined a 
low pressure steam or hot water boiler as an electric, gas or oil 
burning furnace designed to supply low pressure steam or hot water for 
space heating applications, including a low pressure steam boiler that 
operates at or below 15 psig steam pressure; a hot water boiler 
operates at or below 160 psig water pressure and 250 [deg]F water 
temperature. See 10 CFR part 430.2.
    For this rulemaking, DOE proposes to maintain the scope of coverage 
as defined by its current regulations for this analysis of new and 
amended standards, which includes six product classes of boilers (gas-
fired hot water boilers, gas-fired steam boilers, oil-fired hot water 
boilers, oil-fired steam boilers, electric hot water boilers, and 
electric steam boilers). DOE has not conducted an analysis of an AFUE 
standard level for electric boilers or combination appliance for the 
reasons explained below.
    Combination appliances provide both space heating and domestic hot 
water to a residence. These products are available on the market in two 
major configurations, including a water heater fan-coil combination 
unit and a boiler tankless coil combination unit. Currently, 
manufacturers certify combination appliances by rating the efficiency 
of the unit when performing their primary function (i.e., space heating 
for boiler tankless coil combination units or water heating for water 
heater fan-coil units). In the March 2015 residential furnaces and 
boilers test procedure NOPR, DOE did not propose a method for which to 
calculate AFUE for combination appliances, because DOE chose not to 
delay or complicate the test procedure rulemaking. Rather, DOE plans to 
continue to seek input about the development of a test procedure for 
combination appliances and may consider a separate rulemaking devoted 
specifically to those products in the future. 80 FR 12876. Without a 
Federal test procedure for combination appliances, DOE was not able to 
perform an AFUE standards analysis for such products.
    DOE did not include electric boilers in the analysis of amended 
AFUE standards. Electric boilers do not have an AFUE requirement under 
10 CFR 430.32(e)(2)(ii). Electric boilers typically use electric 
resistance coils as their heating elements, which are highly efficient. 
Furthermore, the current DOE test procedure for determining AFUE 
classifies boilers as indoor units and, thus, considers jacket losses 
to be usable heat, because those losses would go to the conditioned 
space. The efficiency of these products already approaches 100 percent 
AFUE. Therefore, there are no options for increasing the rated AFUE of 
this product, and the impact of setting AFUE energy conservation 
standards for these products would be negligible. However, DOE has 
considered standby mode and off mode standards for electric boilers.
    The proposed scope used for the analysis for this NOPR is the same 
as the scope used for the NODA analysis. In response to the NODA 
analysis, AGA and AGPA filed a joint comment which stated that DOE 
should clarify that gas-fired boilers that do not have an electrical 
supply requirement are not subject to this regulation. (AGA and AGPA, 
No. 21 at p. 2) DOE agrees that under EPCA, an exception already exists 
for boilers which are manufactured to operate without any need for 
electricity. (42 U.S.C. 6295(f)(3)(C); 10 CFR 430.32(e)(2)(iv)) Thus, 
DOE did not consider such products in the course of this analysis, and 
such products would not be covered by amended standards resulting from 
this process.
2. Product Classes
    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q)) For this 
rulemaking, DOE proposes to maintain the scope of coverage as defined 
by its current regulations for this analysis of standards, which 
includes six product classes of boilers. Table IV.1 lists the six 
proposed product classes.

      Table IV.1--Proposed Product Classes for Residential Boilers
------------------------------------------------------------------------
            Boiler by fuel type                 Heat transfer medium
------------------------------------------------------------------------
Gas-fired Boiler..........................  Steam.
                                            Hot Water.
Oil-fired Boiler..........................  Steam.
                                            Hot Water.
Electric Boiler...........................  Steam.
                                            Hot Water.
------------------------------------------------------------------------

    Several interested parties suggested that the product classes 
should be further subdivided into condensing and non-condensing 
products for gas-fired hot water boilers. (Weil McLain No. 20 at p. 2, 
AGA and APGA No.21 at p. 2, HTP No. 31 at p. 2)
    Weil McLain commented that condensing and noncondensing boilers 
should be in separate product classes because each presents significant 
options to have available for different applications. Weil McLain added 
that each type of boiler can provide a good solution to a residential 
boiler need, but the solution requires the correct application of the 
boiler to a particular home. In particular, Weil McLain commented that 
there are important differences between new installations and 
replacement installations for these products. (Weil McLain No. 20 at p. 
2)
    Similarly, AGA and APGA suggested that the gas-fired hot water 
boiler product class should be subdivided into condensing and non-
condensing subclasses, such that DOE may consider establishing separate 
standards for Category I and Category IV gas boilers based on their 
different venting and condensing characteristics. Category I gas 
boilers are those that operate with a non-positive vent static pressure 
and with a vent gas temperature that avoids excessive condensate 
production in the vent. Category IV gas boilers are those that operate 
with a positive vent static pressure with a vent gas temperature that 
is capable of causing excessive condensation.\21\ AGA and APGA 
commented that in the past, DOE has established separate standards for 
clothes dryers based on venting characteristics. (AGA and APGA No.21 at 
p. 2-3)
---------------------------------------------------------------------------

    \21\ See ANSI Z223.1-2009/NFPA 54, National Fuel Gas Code, 
3.3.6.11.1 and 3.3.6.11.4 (2009). See also 2012 International Fuel 
Gas Code, at p. 16 (2011).
---------------------------------------------------------------------------

    In response to these comments, DOE notes that, in evaluating and 
establishing energy conservation standards, EPCA directs DOE to divide 
covered products into classes based on differences including the type 
of energy used, capacity, or other performance-related feature that 
justifies a different standard for products having such feature. (42 
U.S.C. 6295(q)) In deciding whether a feature justifies a different 
standard, DOE must consider factors such as the utility of the features 
to users. In evaluating Weil McLain's, AGA's, and AGPA's suggestion to 
consider separate product classes for non-condensing and condensing 
boilers (and specifically in AGA's and APGA's comments for boilers 
using Category I and Category IV venting), DOE considered the utility 
to consumers of condensing and non-condensing boilers, including the 
ability to use one venting type versus another. The utility derived

[[Page 17239]]

by consumers from boilers is in the form of the space heating function 
that a boiler performs. Condensing and non-condensing boilers perform 
equally well in providing this function. Likewise, a boiler requiring 
Category I venting and a boiler requiring Category IV venting are 
capable of providing the same heating function to the consumer, and, 
thus, provide virtually the same utility with respect to their primary 
function. AGA and AGPA contend that the ability to vent a boiler with 
Category I venting provides boiler consumers with a special utility due 
to the cost-saving benefits compared to having to retrofit a venting 
system to accommodate a Category IV boiler. DOE does not agree with the 
characterization of reduced costs associated with Category I venting in 
certain installations as a special utility, but rather, it is an 
economic impact on consumers that must be considered in the 
rulemaking's cost-benefit analysis. Rather, the average installation 
cost by efficiency level for gas-fired hot water boilers ranges from 
$3,301 to $3,599; for gas-fired steam boilers, from $3,037 to $3,061; 
for oil-fired hot water boilers, from $3,069 to $3,662; and for oil-
fired steam boilers, from $3,074 to $3,081. Information related to 
installation costs can be found in section IV.F.1 of this NOPR and 
Chapter 8 of the NOPR TSD. DOE also recognizes the merit in Weil 
McLain's comments regarding the important operational differences 
between condensing and non-condensing systems. However, DOE believes 
this issue is also analytical and best addressed in the analyses as DOE 
considers these operational differences. Accordingly, DOE is not 
proposing to establish separate product classes for condensing and non-
condensing boilers, or for boilers utilizing Category I and Category IV 
venting systems. Rather, DOE considered the impacts of these 
characteristics in the relevant analyses performed for the NOPR. DOE 
requests comment on the installation costs cited above.
    HTP suggested that the Department should consider separate 
residential boiler standards for new construction and retrofits. (HTP, 
No. 31 at p.2)
    In response, as set forth in the statutory definition for ``energy 
conservation standard,'' DOE notes that EPCA directs the Department to 
establish performance standards that prescribe minimum levels of energy 
efficiency or maximum levels of energy use for covered products. (42 
U.S.C. 6291(6)(A)) EPCA does not authorize setting multiple levels of 
efficiency for a given covered product, depending on where the product 
is installed in terms of home type (i.e., new or existing). The 
Department does not have the authority to set separate standards for 
residential boilers for new homes and for existing homes and, 
therefore, must reject the suggestion that it consider separate 
standards for new construction and retrofits.
3. Technology Options
    In the NODA analysis, DOE identified 10 technology options that 
would be expected to improve the AFUE of residential boilers, as 
measured by the DOE test procedure: (1) Heat exchanger improvements; 
(2) modulating operation; (3) dampers; (4) direct vent; (5) pulse 
combustion; (6) premix burners; (7) burner derating; (8) low-pressure 
air-atomized oil burner; (9) delayed-action oil pump solenoid valve; 
and (10) electronic ignition.\22\ In addition, DOE identified three 
technologies that would reduce the standby mode and off mode energy 
consumption of residential boilers: (1) Transformer improvements; (2) 
control relay for models with brushless permanent magnet motors; and 
(3) switching mode power supply.
---------------------------------------------------------------------------

    \22\ Although DOE has identified vent dampers and electronic 
ignition as technologies that improve residential boiler efficiency, 
DOE did not consider these technologies further in the analysis as 
options for improving efficiency of baseline units, because they are 
already included in baseline residential boilers.
---------------------------------------------------------------------------

    DOE received no comments suggesting additional technology options 
in response to the NODA analysis, and thus, DOE has maintained the same 
list of technology options in the NOPR analysis. After identifying all 
potential technology options for improving the efficiency of 
residential boilers, DOE performed the screening analysis (see section 
IV.B of this NOPR or chapter 4 of the TSD) on these technologies to 
determine which could be considered further in the analysis and which 
should be eliminated.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:

    1. Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will 
not be considered further.
    2. Practicability to manufacture, install, and service. If it is 
determined that mass production and reliable installation and 
servicing of a technology in commercial products could not be 
achieved on the scale necessary to serve the relevant market at the 
time of the compliance date of the standard, then that technology 
will not be considered further.
    3. Impacts on product utility or product availability. If it is 
determined that a technology would have significant adverse impact 
on the utility of the product to significant subgroups of consumers 
or would result in the unavailability of any covered product type 
with performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as 
products generally available in the United States at the time, it 
will not be considered further.
    4. Adverse impacts on health or safety. If it is determined that 
a technology would have significant adverse impacts on health or 
safety, it will not be considered further.

(10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))

    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the above four criteria, it 
will be excluded from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed 
below.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    During the NODA phase, DOE screened out pulse combustion as a 
technology option for improving AFUE and screened out control relay for 
boiler models with brushless permanent magnet motors as a technology 
option for reducing standby electric losses. DOE decided to screen out 
pulse combustion based on manufacturer feedback during the Framework 
public meeting indicating that pulse combustion boilers have had 
reliability issues in the past, and therefore, manufacturers do not 
consider this a viable option to improve efficiency. Further, 
manufacturers indicated that similar or greater efficiencies than those 
of pulse combustion boilers can be achieved using alternative 
technologies. For this reason, DOE is not including pulse combustion as 
a technology option, as it could reduce consumer utility (reliability). 
DOE decided to screen out using a control relay to depower BPM motors 
due to feedback received during the residential furnace rulemaking 
(which was reconfirmed during manufacturer interviews for the 
residential boiler rulemaking), which indicated that using a control 
relay to depower brushless permanent magnet

[[Page 17240]]

motors could reduce the lifetime of the motors, which would lead to a 
reduction in utility of the product. For this reason, DOE is not 
including control relays for models with brushless permanent magnet 
motors as a technology option, as it could reduce consumer utility. DOE 
did not receive any comments relating to the screening out of these two 
technologies.
    AHRI stated that neither direct vent nor burner derating should be 
included in the analysis since they are not currently practical ways to 
achieve higher levels of efficiency. (AHRI, No. 16 at p. 1)
    In response, DOE agrees that burner derating should be screened 
out, and has done so for the NOPR analysis. Burner derating reduces the 
burner firing rate while keeping heat exchanger geometry and surface 
area and the fuel-air ratio the same, which increases the ratio of heat 
transfer surface area to energy input, and increases efficiency. 
However, the lower energy input means that less heat is provided to the 
user than with conventional burner firing rates. As a result of the 
decreased heat output of boilers with derated burners, DOE has screened 
out burner derating as a technology option, as it could reduce consumer 
utility.
    For direct vent, DOE has found that boilers using this technology 
can improve AFUE by reducing the heat loss through draft, because 
direct vent systems are sealed systems in which combustion air is 
brought in from outside, rather than from the space surrounding the 
boiler. This reduces infiltration losses, and would improve AFUE. In 
addition, this technology has been demonstrated as technologically 
feasible and practicable to manufacture, install, and service, as it is 
currently offered in boiler models available on the market. In 
addition, DOE is not aware of any impacts on product utility or adverse 
impacts on safety that would result from the use of this technology. 
Thus, DOE has maintained direct vent as a technology option. However, 
it should be noted that this technology option was not considered to be 
a primary driver of increased efficiency in the engineering analysis 
(see section IV.C).
2. Remaining Technologies
    Through a review of each technology, DOE found that all of the 
other identified technologies met all four screening criteria and 
consequently, are suitable for further examination in DOE's analysis. 
In summary, DOE did not screen out the following technology options to 
improve AFUE: (1) Heat exchanger improvements; (2) modulating 
operation; (3) direct vent; (4) premix burners; (5) low-pressure air-
atomized oil burner; and (6) delayed-action oil pump solenoid valve. 
DOE also maintained the following technology options to improve standby 
mode and off mode energy consumption: (1) Transformer improvements; and 
(2) switching mode power supply. All of these technology options are 
technologically feasible, given that the evaluated technologies are 
being used (or have been used) in commercially-available products or 
working prototypes. Therefore, all of the trial standard levels 
evaluated in this notice are technologically feasible. DOE also finds 
that all of the remaining technology options also meet the other 
screening criteria (i.e., practicable to manufacture, install, and 
service, and do not result in adverse impacts on consumer utility, 
product availability, health, or safety). For additional details, 
please see chapter 4 of the NOPR TSD. DOE requests further comment from 
interested parties regarding whether there are any technologies which 
have passed the screening analysis that should be screened out based on 
the four screening criteria (i.e., technological feasibility; 
practicability to manufacture, install, and service; impacts on product 
utility or product availability; and adverse impacts on health or 
safety).

C. Engineering Analysis

    In the engineering analysis (corresponding to chapter 5 of the NOPR 
TSD), DOE establishes the relationship between the manufacturer selling 
price (MSP) and improved residential boiler efficiency. This 
relationship serves as the basis for cost-benefit calculations for 
individual consumers, manufacturers, and the Nation. DOE typically 
structures the engineering analysis using one of three approaches: (1) 
Design option; (2) efficiency level; or (3) reverse engineering (or 
cost-assessment). The design-option approach involves adding the 
estimated cost and efficiency of various efficiency-improving design 
changes to the baseline to model different levels of efficiency. The 
efficiency-level approach uses estimates of cost and efficiency at 
distinct levels of efficiency from publicly-available information, and 
information gathered in manufacturer interviews that is supplemented 
and verified through technology reviews. The reverse-engineering 
approach involves testing products for efficiency and determining cost 
from a detailed bill of materials (BOM) derived from reverse 
engineering representative products. The efficiency values range from 
that of a least-efficient boiler sold today (i.e., the baseline) to the 
maximum technologically feasible efficiency level. At each efficiency 
level examined, DOE determines the manufacture production cost (MPC) 
and MSP; this relationship is referred to as a cost-efficiency curve.
    As noted in section III.B, the active mode AFUE metric fully 
accounts for the fuel use consumption in active, standby and off modes 
whereas the standby and off mode metric (maximum wattage) only accounts 
for the electrical energy use in standby and off mode. In analyzing the 
technologies that would be likely to be employed to effect changes in 
these metrics, DOE found that the efficiency changes were mostly 
independent. For example, the primary means of improving AFUE is to 
improve the heat exchanger design, which would likely have little or no 
impact on standby and off mode electrical consumption. Similarly, the 
design options considered likely to be implemented for reducing standby 
mode and off mode electrical consumption are not expected to impact the 
AFUE. Therefore, DOE conducted separate engineering and cost-benefit 
analyses for each of these two metrics and their associated systems 
(fuel and electrical). In order to account for the total impacts of 
both proposed standards, DOE added the monetized impacts from these two 
separate analyses in the NIA, LCC, and MIA as a means of providing a 
cumulative impact on residential boilers. For the PBP, to estimate the 
cumulative impact for both standards, DOE determined the combined 
installed cost to the consumer and the first-year operating costs for 
each household. DOE requests comment on this approach and whether it is 
reasonable to assume that the design changes implemented by 
manufacturers in order to comply with the standby and off mode would be 
independent of those implemented to comply with AFUE standards.
    DOE also requests comment on employing an alternative methodology 
to inform the selection of the appropriate technologically feasible and 
economically justified standard level, which would occur as follows: 
(1) First the agency would first consider the technological feasibility 
and economic justification of one standard (e.g., standby and off mode) 
in the engineering cost model and downstream cost-benefit analysis to 
select a proposed level; and (2) DOE would then incorporate the 
estimated impacts of the proposed level into the baseline of the 
engineering cost model and downstream cost-benefit analysis prior to 
conducting the analysis for the second standard (e.g.

[[Page 17241]]

active mode). DOE recognizes that this methodology would yield the 
exact same incremental costs since the cost and savings are truly 
independent of one another--that is the cost to achieve the savings 
from the AFUE standard are not impacted by the compliance to the 
proposed sand-by and off mode standard.
    For the NODA analysis of AFUE efficiency levels, DOE conducted the 
engineering analysis for residential boilers using a combination of the 
efficiency level and cost-assessment approaches. More specifically, DOE 
identified the efficiency levels for analysis and then used the cost-
assessment approach to determine the technologies used and the 
associated manufacturing costs at those levels.
    For the standby mode and off mode analyses, DOE adopted a design 
option approach, which allowed for the calculation of incremental costs 
through the addition of specific design options to a baseline model. 
DOE decided on this approach because it did not have sufficient data to 
execute an efficiency-level analysis, as manufacturers typically do not 
rate or publish data on the standby mode and or off mode energy 
consumption of their products.
    DOE continued to use the same analytical approaches for the NOPR 
phase of this rulemaking as used in the NODA. In response to the NODA, 
DOE received specific comments from interested parties on certain 
aspects of the engineering analysis. A brief overview of the 
methodology, a discussion of the comments DOE received, DOE's response 
to those comments, and any adjustments made to the engineering analysis 
methodology or assumptions as a result of those comments is presented 
in the sections below. See chapter 5 of the NOPR TSD for additional 
details about the engineering analysis.
1. Efficiency Levels
    As noted above, for analysis of amended AFUE standards, DOE used an 
efficiency-level approach to identify incremental improvements in 
efficiency for each product class. An efficiency-level approach enabled 
DOE to identify incremental improvements in efficiency for efficiency-
improving technologies that boiler manufacturers already incorporate in 
commercially-available models. After identifying efficiency levels for 
analysis, DOE used a cost-assessment approach (section IV.C.2) to 
determine the MPC at each efficiency level identified for analysis. 
This method estimates the incremental cost of increasing product 
efficiency. For the analysis of amended standby mode and off mode 
energy conservation standards, DOE used a design-option approach and 
identified efficiency levels that would result from implementing 
certain design options for reducing power consumption in standby mode 
and off mode.
a. Baseline Efficiency Level and Product Characteristics
    In the analysis presented in the NODA, DOE selected baseline units 
typical of the least-efficient commercially-available residential 
boilers. DOE selected baseline units as reference points for each 
product class, against which it measured changes resulting from 
potential amended energy conservation standards. The baseline 
efficiency level in each product class represents the basic 
characteristics of products in that class. A baseline unit is a unit 
that just meets current Federal energy conservation standards and 
provides basic consumer utility.
    DOE uses the baseline unit for comparison in several phases of the 
analyses, including the engineering analysis, LCC analysis, PBP 
analysis, and the NIA. To determine energy savings that will result 
from an amended energy conservation standard, DOE compares energy use 
at each of the higher energy efficiency levels to the energy 
consumption of the baseline unit. Similarly, to determine the changes 
in price to the consumer that will result from an amended energy 
conservation standard, DOE compares the price of a baseline unit to the 
price of a unit at each higher efficiency level.
    DOE received no comments regarding the baseline efficiency levels 
and characteristics chosen for the NODA analysis of amended AFUE 
standards. Thus, DOE has maintained these baseline efficiency levels, 
which are equal to the current federal minimum standards for each 
product class in the NOPR analysis. Table IV.2 presents the baseline 
AFUE levels identified for each product class. Additional details on 
the selection of baseline efficiency levels may be found in chapter 5 
of the NOPR TSD.

            Table IV.2--Table Baseline AFUE Efficiency Levels
------------------------------------------------------------------------
                        Product class                          AFUE  (%)
------------------------------------------------------------------------
Gas-Fired Hot Water Boilers..................................         82
Gas-Fired Steam Boilers......................................         80
Oil-Fired Hot Water Boilers..................................         84
Oil-Fired Steam Boilers......................................         82
------------------------------------------------------------------------

    AHRI commented that the baseline efficiency levels shown in the 
engineering analysis are assumed to have dampers. AHRI asked for 
clarification as to the type of damper the baseline gas-fired hot water 
boilers are assumed to have in the analysis. (AHRI No. 22 at p. 3) In 
the engineering analysis, DOE assumed baseline gas-fired hot water 
boilers to have stack dampers, as described in chapter 5 of the TSD.
    For the standby mode and off mode analysis, DOE identified baseline 
components as those that consume the most electricity during the 
operation of those modes. Since it would not be practical for DOE to 
test every boiler on the market to determine the baseline and since 
manufacturers do not currently report standby mode and off mode energy 
consumption, DOE ``assembled'' the most consumptive baseline components 
from the models tested to model the electrical system of a boiler with 
the expected maximum system standby mode and off mode power consumption 
observed during testing of boilers and similar equipment. Additional 
boiler standby mode and off mode testing was performed for the NOPR 
analysis and has led DOE to lower the standby mode and off mode 
baseline consumption level for each product class as compared to the 
NODA analysis. The baseline standby mode and off mode consumption 
levels used in the NOPR analysis are presented in Table IV.3.

           Table IV.3--Baseline Standby Mode and Off Mode Power Consumption Used in the NOPR Analyses
----------------------------------------------------------------------------------------------------------------
                                                Standby mode and off mode power consumption  (watts)
                                   -----------------------------------------------------------------------------
             Component               Gas-fired    Oil-fired    Gas-fired    Oil-fired     Electric     Electric
                                     hot water    hot water      steam        steam      hot water      steam
----------------------------------------------------------------------------------------------------------------
Transformer.......................          4            4            4            4            4            4
ECM Burner Motor..................          1          N/A          N/A          N/A          N/A          N/A

[[Page 17242]]

 
Controls..........................          2.5          2.5          2.5          2.5          2.5          2.5
Display...........................          4            4            4            4            4            4
Oil Burner........................        N/A            3          N/A            3          N/A          N/A
                                   -----------------------------------------------------------------------------
    Total (watts).................         11.5         13.5         10.5         13.5         10.5         10.5
----------------------------------------------------------------------------------------------------------------

b. Other Energy Efficiency Levels
    Table IV.4 through Table IV.7 shows the efficiency levels DOE 
selected for the NOPR analysis of amended AFUE standards, along with a 
description of the typical technological change at each level. DOE 
seeks comment from interested parties regarding the typical 
technological change associated with each efficiency level.
    HTP commented that it does not support an incremental increase in 
AFUE for gas hot water boilers. The commenter stated that appliances 
utilizing combustion technology that operates at efficiencies above 82 
percent and below 90 percent AFUE will likely experience cyclic 
condensation within their venting and periods of high vent 
temperatures. HTP added that the safety and installation cost 
implications of operating within this range should be seriously 
considered. (HTP, No. 31 at p. 1)
    The Department recognizes that efficiency levels within the non-
condensing to condensing range could pose health or safety concerns 
under certain conditions, but the concerns can be resolved with proper 
product installations and venting system design. This is evidenced by 
the high number of models of products that are currently commercially 
available at these efficiency levels, as well as the lack of 
restrictions on the installation of these units (in terms of location) 
in installation manuals. Therefore, due to the significant product 
availability, DOE considered efficiency levels above 82 percent and 
below 90 percent in its analysis. However, DOE requests further comment 
from interested parties on non-condensing levels above 82 percent, as 
well as the appropriateness of considering such levels for amended 
energy conservation standards.

   Table IV.4--AFUE Efficiency Levels for Gas-Fired Hot Water Boilers
------------------------------------------------------------------------
        Efficiency level            AFUE  (%)       Technology options
------------------------------------------------------------------------
0-Baseline.....................              82  Baseline.
1..............................              83  EL0 + Increased Heat
                                                  Exchanger (HX) Area,
                                                  Baffles.
2..............................              84  EL1 + Increased HX
                                                  Area.
3..............................              85  EL2 + Increased HX
                                                  Area.
4..............................              90  Condensing HX.
5..............................              92  EL4 + Improved HX.
6-Max-Tech.....................              96  EL5 + Improved HX.
------------------------------------------------------------------------

     Table IV.5--AFUE Efficiency Levels for Gas-Fired Steam Boilers
------------------------------------------------------------------------
        Efficiency level            AFUE  (%)       Technology options
------------------------------------------------------------------------
0-Baseline.....................              80  Baseline.
1..............................              82  EL0 + Increased HX
                                                  Area.
2-Max-Tech.....................              83  EL1 + Increased HX
                                                  Area.
------------------------------------------------------------------------

   Table IV.6--AFUE Efficiency Levels for Oil-Fired Hot Water Boilers
------------------------------------------------------------------------
        Efficiency level            AFUE  (%)       Technology options
------------------------------------------------------------------------
0-Baseline.....................              84  Baseline.
1..............................              85  EL0 + Increased HX
                                                  Area.
2..............................              86  EL1 + Increased HX
                                                  Area.
3-Max-Tech.....................              91  EL2 + Improved HX,
                                                  baffles and Secondary
                                                  Condensing HX.
------------------------------------------------------------------------

      Table IV.7-AFUE Efficiency Levels for Oil-Fired Steam Boilers
------------------------------------------------------------------------
        Efficiency level            AFUE  (%)       Technology options
------------------------------------------------------------------------
0-Baseline.....................              82  Baseline.

[[Page 17243]]

 
1..............................              84  EL0 + Increased HX
                                                  Area.
2..............................              85  EL1 + Increased HX
                                                  Area.
3-Max-Tech.....................              86  EL2 + Improved HX.
------------------------------------------------------------------------

    In addition, DOE considered whether changes to the residential 
furnaces and boilers test procedure, as proposed by the March 2015 test 
procedure NOPR would necessitate changes to the AFUE levels being 
analyzed. The primary change proposed in the test procedure included 
updating the incorporation by reference to ASHRAE 103-2007. As 
discussed in the March 2015 test procedure NOPR, adopting ASHRAE 103-
2007 would not be expected to change the AFUE rating for single-stage 
products and would result in a de minimis increase in the AFUE ratings 
for two-stage and modulating non-condensing products. Adopting ASHRAE 
103-2007 provisions was assessed to have no statistically significant 
impact on the AFUE for condensing products. 80 FR 12876. DOE has found 
that single-stage (rather than two-stage or modulating) cast iron 
products make up the majority of non-condensing residential boilers 
and, therefore, has tentatively determined that this amendment to the 
test procedure would not be substantial enough to merit a revision of 
the proposed AFUE efficiency levels for residential boilers. 
Consequently, DOE used the same AFUE efficiency levels in the NOPR 
analysis as were used in the NODA analysis.
    Table IV.8 through Table IV.13 show the efficiency levels DOE 
selected for the NOPR analysis of standby mode and off mode standards, 
along with a description of the typical technological change at each 
level. For the NOPR analysis, DOE has modified the baseline standby 
mode and off mode efficiency levels, as discussed in section IV.C.1.a. 
However, DOE has assumed the same impacts from the design options in 
the NOPR analysis, as was assumed for the NODA analysis. As a result, 
the change to the baseline standby mode and off mode power consumption 
have resulted in corresponding changes to the standby mode and off mode 
power consumption at each efficiency level.
    ``Standby mode'' and ``off mode'' power consumption are defined in 
the DOE test procedure for residential furnaces and boilers. DOE 
defines ``standby mode'' as ``the condition during the heating season 
in which the furnace or boiler is connected to the power source, and 
neither the burner, electric resistance elements, nor any electrical 
auxiliaries such as blowers or pumps, are activated.'' 10 CFR part 430, 
subpart B, appendix N, section 2.8. ``Off mode'' is defined as ``the 
condition during the non-heating season in which the furnace or boiler 
is connected to the power source, and neither the burner, electric 
resistance elements, nor any electrical auxiliaries such as the blowers 
or pumps, are activated.'' 10 CFR part 430, subpart B, appendix N, 
section 2.6. A ``seasonal off switch'' is defined as ``the switch on 
the furnace or boiler that, when activated, results in a measurable 
change in energy consumption between the standby and off modes.'' 10 
CFR part 430, subpart B, appendix N, section 2.7.
    Through review of product literature and discussions with 
manufacturers, DOE has found that boilers generally do not have a 
seasonal off switch. Manufactures stated that if a switch is included 
with a product, it is primarily used as a service/repair switch, not 
for turning off the product during the off season. Therefore, DOE 
assumed that the standby mode and the off mode power consumption are 
equal. DOE requests comment on the efficiency levels analyzed for 
standby mode and off mode, and on the assumption that standby mode and 
off mode energy consumption (as defined by DOE) would be equal.

  Table IV.8--Standby Mode and Off Mode Efficiency Levels for Gas-Fired
                            Hot Water Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology Options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            11.5  Linear Power Supply.*
1..............................            10.0  Linear Power Supply
                                                  with Low-Loss
                                                  Transformer (LLTX).
2..............................             9.7  Switching Mode Power
                                                  Supply.**
3-Max-Tech.....................             9.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------
* A linear power supply regulates voltage with a series element.
** A switching mode power supply regulates voltage with power handling
  electronics.

  Table IV.9--Standby Mode and Off Mode Efficiency Levels for Gas-Fired
                              Steam Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            10.5  Linear Power Supply.
1..............................             9.0  Linear Power Supply
                                                  with LLTX.
2..............................             8.7  Switching Mode Power
                                                  Supply.
3-Max-Tech.....................             8.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------

[[Page 17244]]

 Table IV.10--Standby Mode and Off Mode Efficiency Levels for Oil-Fired
                            Hot Water Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            13.5  Linear Power Supply.
1..............................            12.0  Linear Power Supply
                                                  with LLTX.
2..............................            11.7  Switching Mode Power
                                                  Supply.
3-Max-Tech.....................            11.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------

 Table IV.11--Standby Mode and Off Mode Efficiency Levels for Oil-Fired
                              Steam Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            13.5  Linear Power Supply.
1..............................            12.0  Linear Power Supply
                                                  with LLTX.
2..............................            11.7  Switching Mode Power
                                                  Supply.
3-Max-Tech.....................            11.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------

  Table IV.12--Standby Mode and Off Mode Efficiency Levels for Electric
                            Hot Water Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            10.5  Linear Power Supply
1..............................             9.0  Linear Power Supply
                                                  with LLTX.
2..............................             8.7  Switching Mode Power
                                                  Supply.
3-Max-Tech.....................             8.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------

  Table IV.13--Standby Mode and Off Mode Efficiency Levels for Electric
                              Steam Boilers
------------------------------------------------------------------------
                                  Standby mode
                                  and off mode
        Efficiency level              power         Technology options
                                   consumption
                                       (W)
------------------------------------------------------------------------
0-Baseline.....................            10.5  Linear Power Supply.
1..............................             9.0  Linear Power Supply
                                                  with LLTX.
2..............................             8.7  Switching Mode Power
                                                  Supply.
3-Max-Tech.....................             8.0  Switching Mode Power
                                                  Supply with LLTX.
------------------------------------------------------------------------

2. Cost-Assessment Methodology
    At the start of the engineering analysis, DOE identified the energy 
efficiency levels associated with residential boilers on the market 
using data gathered in the market assessment. DOE also identified the 
technologies and features that are typically incorporated into products 
at the baseline level and at the various energy efficiency levels 
analyzed above the baseline. Next, DOE selected products for the 
physical teardown analysis having characteristics of typical products 
on the market at the representative input capacity. DOE gathered 
information by performing a physical teardown analysis (see section 
IV.C.2.a) to create detailed BOMs, which included all components and 
processes used to manufacture the products. DOE used the BOMs from the 
teardowns as an input to a cost model, which was then used to calculate 
the manufacturing production cost (MPC) for products at various 
efficiency levels spanning the full range of efficiencies from the 
baseline to the maximum technology available (``max-tech''). DOE 
reexamined and revised its cost assessment performed for the NODA 
analysis based on additional teardowns and in response to comments 
received on the NODA analysis.
    During the development of the engineering analysis for the NOPR, 
DOE held interviews with manufacturers to gain insight into the 
residential boiler industry, and to request feedback on the engineering 
analysis and assumptions that DOE used. DOE used the information 
gathered from these interviews, along with the information obtained 
through the teardown analysis and public comments, to refine the 
assumptions and data in the cost model. Next, DOE derived manufacturer 
markups using publicly-available residential boiler industry financial 
data in conjunction with manufacturers' feedback. The markups were used 
to convert the MPCs into MSPs. Further information on comments received 
and the analytical methodology is presented in the subsections below. 
For additional detail, see chapter 5 of the NOPR TSD.

[[Page 17245]]

a. Teardown Analysis
    To assemble BOMs and to calculate the manufacturing costs for the 
different components in residential boilers, DOE disassembled multiple 
units into their base components and estimated the materials, 
processes, and labor required for the manufacture of each individual 
component, a process referred to as a ``physical teardown.'' Using the 
data gathered from the physical teardowns, DOE characterized each 
component according to its weight, dimensions, material, quantity, and 
the manufacturing processes used to fabricate and assemble it.
    DOE also used a supplementary method, called a ``virtual 
teardown,'' which examines published manufacturer catalogs and 
supplementary component data to estimate the major physical differences 
between a product that was physically disassembled and a similar 
product that was not. For supplementary virtual teardowns, DOE gathered 
product data such as dimensions, weight, and design features from 
publicly-available information, such as manufacturer catalogs. The 
initial teardown analysis for the NODA included 6 physical and 5 
virtual teardowns of residential boilers. The NOPR teardown analysis 
included 16 physical and 4 virtual teardowns of residential boilers. 
The additional teardowns performed for the NOPR analysis allowed DOE to 
further refine the assumptions used to develop the MPCs.
    DOE selected the majority of the physical teardown units in the gas 
hot water product class because it has the largest number of shipments. 
DOE conducted physical teardowns of twelve gas hot water boilers, five 
of which were non-condensing cast iron boilers, two were non-condensing 
copper boilers, and the remaining five were condensing boilers. DOE 
performed an additional two virtual teardowns of gas hot water boilers.
    DOE also performed physical teardowns on two gas-fired steam 
boilers as well as two oil-fired hot water boilers. DOE conducted one 
virtual teardown of an oil steam boiler as well as a virtual teardown 
of an oil hot water boiler.
    The teardown analysis allowed DOE to identify the technologies that 
manufacturers typically incorporate into their products, along with the 
efficiency levels associated with each technology or combination of 
technologies. The end result of each teardown is a structured BOM, 
which DOE developed for each of the physical and virtual teardowns. The 
BOMs incorporate all materials, components, and fasteners (classified 
as either raw materials or purchased parts and assemblies), and 
characterize the materials and components by weight, manufacturing 
processes used, dimensions, material, and quantity. The BOMs from the 
teardown analysis were then used as inputs to the cost model to 
calculate the MPC for each product that was torn down. The MPCs 
resulting from the teardowns were then used to develop an industry 
average MPC for each product class analyzed.
    In response to the teardown analysis performed for the NODA, AHRI 
stated that it is not appropriate to perform a virtual teardown of a 
baseline 82-percent AFUE gas hot water boiler based on information 
developed by physically tearing down an 85-percent AFUE gas hot water 
boiler. (AHRI, No. 22 at p. 3) AHRI explained that the designs to 
achieve an 85-percent AFUE model are significantly different than that 
to build an 82-percent AFUE model, so it is not appropriate to do a 
virtual teardown of a baseline 82-percent AFUE model, as this approach 
assumes a commonality of design between an 85-percent AFUE model and an 
82-percent AFUE model that is greater than it actually is. In response, 
DOE agrees that it is preferable to conduct a physical teardown at the 
baseline level as to not overstate the similarities between the 
baseline and higher efficiency levels. Accordingly, DOE has 
supplemented the virtual teardown conducted at the 82-percent AFUE 
baseline level for the gas-fired hot water boiler product class during 
the initial analysis with two physical teardowns at the baseline level 
for the NOPR analysis.
    AHRI also stated that conducting a single teardown for the oil-
fired hot water boiler product class is inadequate for this analysis. 
(AHRI, No. 22 at p. 3) In response to this comment, DOE has conducted 
an additional physical teardown for the oil-fired hot water boiler 
product class.
    More information regarding details on the teardown analysis can be 
found in chapter 5 of the NOPR TSD.
b. Cost Model
    The cost model is a spreadsheet that converts the materials and 
components in the BOMs into dollar values based on the price of 
materials, average labor rates associated with manufacturing and 
assembling, and the cost of overhead and depreciation, as determined 
based on manufacturer interviews and DOE expertise. To convert the 
information in the BOMs to dollar values, DOE collected information on 
labor rates, tooling costs, raw material prices, and other factors. For 
purchased parts, the cost model estimates the purchase price based on 
volume-variable price quotations and detailed discussions with 
manufacturers and component suppliers. For fabricated parts, the prices 
of raw metal materials \23\ (e.g., tube, sheet metal) are estimated on 
the basis of 5-year averages (from 2009 to 2014). The cost of 
transforming the intermediate materials into finished parts is 
estimated based on current industry pricing.\24\
---------------------------------------------------------------------------

    \23\ American Metals Market (Available at: http://www.amm.com 
(Last accessed January, 2014).
    \24\ U.S. Department of Labor, Bureau of Labor Statistics, 
Produce Price Indices (Available at:  http://www.bls.gov/ppi/) (Last 
accessed January, 2014).
---------------------------------------------------------------------------

    Burnham subsidiaries Crown Boiler, US Boiler, and New Yorker all 
commented that the material price for cast iron was not shown in 
chapter 5 of the TSD. (Crown Boiler, No. 24 at p. 1; US Boiler, No. 25 
at p. 1; New Yorker, No. 26 at p. 1) DOE acknowledges that a large 
portion of the manufacturer production cost can typically be attributed 
to raw materials and the omission of the cost used for cast iron may 
make it difficult to review how DOE arrived at the MSPs. The omission 
of this value from chapter 5 of the NODA TSD was in error, and chapter 
5 of the NOPR TSD corrects this deficiency.
c. Manufacturing Production Costs
    Once the cost estimates for all the components in each teardown 
unit were finalized, DOE totaled the cost of materials, labor, and 
direct overhead used to manufacture a product in order to calculate the 
manufacturer production cost. The total cost of the product was broken 
down into two main costs: (1) The full manufacturer production cost, 
referred to as MPC; and (2) the non-production cost, which includes 
selling, general, and administration (SG&A) expenses; the cost of 
research and development; and interest from borrowing for operations or 
capital expenditures. DOE estimated the MPC at each efficiency level 
considered for each product class, from the baseline through the max-
tech. After incorporating all of the assumptions into the cost model, 
DOE calculated the percentages attributable to each element of total 
production cost (i.e., materials, labor, depreciation, and overhead). 
These percentages are used to validate the assumptions by comparing 
them to manufacturers' actual financial data published in annual 
reports, along with feedback obtained from manufacturers during 
interviews. DOE uses these production cost percentages in the

[[Page 17246]]

manufacturer impact analysis (MIA) (see section IV.J).
    In developing the MPCs for the NODA analysis, DOE considered the 
draft type (i.e., natural draft or fan-assisted draft) and whether the 
model would have fan-assisted draft at a given efficiency level. Some 
boilers utilize natural draft, in which the natural buoyancy of the 
combustion gases is sufficient to vent those gases. Other boilers 
employ fan-assisted draft to help vent the products of combustion. As 
product efficiency increases, more heat is extracted from the flue 
gases, thereby resulting in less natural buoyancy that can be used to 
vent the flue gases. DOE surveyed the market to determine the 
percentage of models at each efficiency level that currently utilize 
fan-assisted draft, and DOE assumed that under an amended standard, 
that percentage would remain unchanged. DOE received various comments 
in response to the MPCs presented in its NODA analysis, as discussed 
below.
    AHRI stated that it disagrees with the assumption that if the 
minimum efficiency level were to change, the percentage of models using 
inducer fans (i.e., a fan-assisted boiler design) at each efficiency 
level would remain unchanged. AHRI stated that, at higher efficiency 
levels that are non-condensing (such as 84 percent and 85 percent for 
gas-fired hot water boilers), the manufacturer would consider anew the 
question of whether to use a fan-assisted design, if that higher level 
were to become the minimum standard. AHRI added that manufacturers face 
challenges in trying to address the wide range of venting systems that 
are connected to existing residential boiler installations. The 
commenter argued that models developed by manufacturers must be able to 
work safely and properly with existing venting systems that vary widely 
relative to an ideally-sized and configured vent system. AHRI stated 
that today, the models that are available at 84-percent AFUE or 85-
percent AFUE are offered by the manufacturer with the knowledge that in 
cases where such models are not compatible with the existing vent 
system, lower efficiency models are available. Those lower efficiency 
models are more likely to be designed in a manner compatible with the 
existing vent system. If the minimum standard is raised to 84 percent 
or 85 percent, this current market equilibrium would be eliminated, and 
manufacturers would need to reconsider the mix of models they offer. 
For these reasons, AHRI recommended that DOE should increase the 
percentage of fan-assisted models at these levels. (AHRI No. 22 at p. 
3-4)
    In response to AHRI's comment, DOE notes that AHRI did not provide 
any information as to how the mix of products with and without inducers 
might change in response to amended energy conservation standards. As 
mentioned above, for the NODA analysis, DOE used information gathered 
from a survey of models currently on the market to determine the 
percentages of units with and without inducer fans. DOE was unable to 
identify any better source of data or methodology for estimating the 
percentage of products which would have inducer fans under amended 
standards, so DOE maintained this methodology for the NOPR. DOE 
requests comments regarding how the mix of products with and without 
inducers would change under amended energy conservation standards, and 
how to best estimate and account for such changes in this analysis.
    Crown Boiler stated that the incremental MPCs for EL1 and EL2 for 
gas-fired hot water and gas-fired steam boilers are optimistic and 
cannot be analyzed for accuracy. In addition, Crown Boiler stated that 
the incremental costs for the gas-fired product classes imply that DOE 
is assuming simple changes to the heat pin size to increase heat 
exchanger area, but that in reality, this change would be more 
complicated. Crown Boiler added that this is contradicted by the 
assumption of heat exchanger cost increase in non-condensing oil-fired 
boilers. The commenter stated that the use of larger heat transfer pins 
would likely require a wider heat exchanger to avoid excessive flue gas 
pressure drop. In addition, atmospheric boilers would probably require 
a taller draft hood to overcome the increased pressure drop caused by 
larger heat transfer pins. Crown Boiler also stated that the cost of 
sheet metal is not accounted for in the analysis. (Crown Boiler, No. 24 
at p. 1)
    As noted previously, DOE determined the incremental MPC at various 
efficiency levels for each product class by conducting physical and 
virtual teardowns. DOE determined the incremental cost between EL1 and 
EL2 for gas-fired hot water boilers in the NODA analysis using virtual 
teardowns, which are based on physical teardowns of similar units and 
then supplemented with catalog data. For the NOPR, DOE acquired 
additional data by conducting physical teardowns, which confirmed its 
observations from catalog data at the NODA analysis stage. Based on the 
observations from physical teardowns and manufacturer product 
literature and parts list, DOE found that many manufactures are able to 
increase the efficiency of their baseline gas-fired hot water boilers 
through the addition of baffles and/or a modest increase in heat 
transfer surface. Through product literature review, DOE has found it 
is common for manufacturers of non-condensing oil-fired boilers to 
derate the burner input (thereby increasing the ratio of heat transfer 
area to input rating) rather than create new cast iron patterns. 
However, as discussed previously, derating was screened out as a design 
option because it reduces the heating capability of the boiler. 
Therefore, DOE estimated the cost of improving efficiency as an 
increase in heat exchanger size, using information observed to model 
the appropriate amount of heat exchanger increase that would be 
required to improve efficiency. Based upon the different observed 
methods for improving efficiency, DOE's NODA and NOPR analyses reflect 
the different designs and different costs of achieving incremental AFUE 
increases in gas-fired and oil-fired boilers. The differential cost in 
efficiency improvement between gas-fired and oil-fired non-condensing 
boilers is also due in part to the larger representative input capacity 
of oil-fired boilers, as well as the larger heat exchanger design for 
oil-fired boilers (i.e., wet-based rather than dry-based). DOE has also 
accounted for the additional sheet metal cost of increasing the cabinet 
to accommodate an increase in heat exchanger size. Because DOE's 
analysis is based upon observations from teardowns of actual products 
available on the market, DOE did not change its assumptions for how EL1 
and EL2 are achieved in gas-fired or oil-fired boilers, as suggested by 
Crown Boiler.
    In the NOPR analysis, DOE revised the cost model assumptions it 
used for the NODA analysis based on additional teardown analysis, 
updated pricing information (for raw materials and purchased parts), 
and additional manufacturer feedback. These changes resulted in refined 
MPCs and production cost percentages. Table IV.14 through Table IV.17 
present DOE's estimates of the MPCs by AFUE efficiency level for this 
rulemaking.

[[Page 17247]]

                         Table IV.14--Manufacturing Cost for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                       Efficiency level                        Incremental cost
                  Efficiency level                        (AFUE) (%)           MPC * ($)              ($)
----------------------------------------------------------------------------------------------------------------
Baseline............................................                  82                 624
EL1.................................................                  83                 631                   7
EL2.................................................                  84                 637                  13
EL3.................................................                  85                 675                  51
EL4.................................................                  90               1,023                 399
EL5.................................................                  92               1,158                 534
EL6.................................................                  96               1,522                 898
----------------------------------------------------------------------------------------------------------------
* Non-condensing boilers (http://sec.gov).
---------------------------------------------------------------------------

f. Shipping Costs
    In response to the NODA analysis, Crown Boiler, US Boiler, and New 
Yorker commented that the shipping costs were not discussed in chapter 
5 of the TSD nor is it apparent that they were used to calculate MPC in 
the manufacturer markup. These commenters stated that depending on the 
situation, shipping costs may be borne by either the manufacturer or by 
the wholesaler, but either way, the shipping costs eventually become 
part of the installed cost of the boiler and, therefore, need to be 
taken into account. The commenters added that almost all condensing 
gas-fired boiler heat exchangers and burner systems are imported from 
Europe or Asia, and therefore, there are importation costs associated 
with condensing boilers. (Crown Boiler, No. 24 at p. 1; US Boiler, No. 
25 at p. 1; New Yorker, No. 26 at p. 1)
    For residential boilers, the Department has included transportation 
costs in its calculation of manufacturer selling price in both the NODA 
and the NOPR. Outbound freight is normally considered a sales expense 
and not a production cost. As discussed in section IV.C.2.e, when 
translating MPCs to MSPs, DOE applies a manufacturer mark-up to the 
MPC. This mark-up, based on an analysis of manufacturer SEC 10-K 
reports, includes outbound freight costs. Inbound freight costs are 
included in MPCs as a component of costs for purchased parts and raw 
materials. Chapter 5 of the NOPR TSD contains additional details about 
DOE's shipping cost assumptions.
g. Manufacturer Interviews
    Throughout the rulemaking process, DOE has sought and continues to 
seek feedback and insight from interested parties that would improve 
the information used in its analyses. DOE interviewed manufacturers as 
a part of the NOPR manufacturer impact analysis (see section IV.J.3). 
During the interviews, DOE sought feedback on all aspects of its 
analyses for residential boilers. For the engineering analysis, DOE 
discussed the analytical assumptions and estimates, cost model, and 
cost-efficiency curves with residential boiler manufacturers. DOE 
considered all the information manufacturers provided when refining the 
cost model and assumptions. However, DOE incorporated equipment and 
manufacturing process figures into the analysis as averages in order to 
avoid disclosing sensitive information about individual manufacturers' 
products or manufacturing processes. More details about the 
manufacturer interviews are contained in chapter 12 of the NOPR TSD.

D. Markups Analysis

    DOE uses appropriate markups (e.g., manufacturer markups, retailer 
markups, distributors markups, contractor markups), and sales taxes to 
convert the manufacturer selling price (MSP) estimates from the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis and in the manufacturer impact analysis. DOE develops 
baseline and incremental markups based on the product markups at each 
step in the distribution chain. The markups are multipliers that 
represent increases above the MSP for residential boilers. The 
incremental markup relates the change in the manufacturer sales price 
of higher-efficiency models (the incremental cost increase) to the 
change in the consumer price. Before developing markups, DOE defines 
key market participants and identifies distribution channels.
    In the NODA, DOE characterized three distribution channels to 
describe how residential boiler products pass from the manufacturer to 
residential and commercial consumers: (1) Replacement market; (2) new 
construction, and (3) national accounts.\26\ 79 FR 8122, 8124 (Feb. 11, 
2014). The replacement market distribution channel is characterized as 
follows:
---------------------------------------------------------------------------

    \26\ The national accounts channel is an exception to the usual 
distribution channel that is only applicable to those residential 
boilers installed in the small to mid-size commercial buildings 
where the on-site contractor staff purchase equipment directly from 
the wholesalers at lower prices due to the large volume of equipment 
purchased, and perform the installation themselves.

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
---------------------------------------------------------------------------
Consumer

    The new construction distribution channel is characterized as 
follows:

[[Page 17250]]

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
General contractor [rarr] Consumer

    In the third distribution channel, the manufacturer sells the 
product to a wholesaler and then to the commercial consumer through a 
national account:

Manufacturer [rarr] Wholesaler [rarr] Consumer (National Account)

    To develop markups for the parties involved in the distribution of 
the product, DOE utilized several sources, including: (1) The Heating, 
Air-Conditioning & Refrigeration Distributors International (HARDI) 
2012 Profit Report \27\ to develop wholesaler markups; (2) the 2005 Air 
Conditioning Contractors of America's (ACCA) financial analysis for the 
heating, ventilation, air-conditioning, and refrigeration (HVACR) 
contracting industry \28\ to develop mechanical contractor markups, and 
(3) U.S. Census Bureau's 2007 Economic Census data \29\ for the 
commercial and institutional building construction industry to develop 
general contractor markups.
---------------------------------------------------------------------------

    \27\ Heating, Air Conditioning & Refrigeration Distributors 
International 2012 Profit Report (Available at: http://www.hardinet.org/Profit-Report) (Last accessed April 10, 2013).
    \28\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry: 2005 (Available at: 
http://www.acca.org/store/) (Last accessed April 10, 2013).
    \29\ U.S. Census Bureau, 2007 Economic Census Data (2007) 
(Available at: http://www.census.gov/econ/)(Last accessed April 10, 
2013).
---------------------------------------------------------------------------

    In addition to the markups, DOE derived State and local taxes from 
data provided by the Sales Tax Clearinghouse.\30\ These data represent 
weighted-average taxes that include county and city rates. DOE derived 
shipment-weighted-average tax values for each region considered in the 
analysis.
---------------------------------------------------------------------------

    \30\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates, 2013 (Available at: 
http://thestc.com/STrates.stm) (Last accessed Sept. 11, 2013).
---------------------------------------------------------------------------

    DOE did not receive comments on the markups analysis, and 
consequently, it retained the same approach for today's NOPR. Chapter 6 
of the NOPR TSD provides further detail on the estimation of markups.

E. Energy Use Analysis

1. Energy Use Methodology
    The purpose of the energy use analysis is to determine the annual 
energy consumption of residential boilers at different efficiencies in 
representative U.S. single-family homes, multi-family residences, and 
commercial buildings, and to assess the energy savings potential of 
increased boiler efficiency. DOE estimated the annual energy 
consumption of residential boilers at specified energy efficiency 
levels across a range of climate zones, building characteristics, and 
heating applications. The annual energy consumption includes the 
natural gas, liquid petroleum gas (LPG), oil, and/or electricity use by 
the boiler for space and water heating. The annual energy consumption 
of residential boilers is used in subsequent analyses, including the 
LCC and PBP analysis and the national impacts analysis.
    For the residential sector, DOE consulted the Energy Information 
Administration's (EIA) 2009 Residential Energy Consumption Survey (RECS 
2009) to establish a sample of households using residential boilers for 
each boiler product class.\31\ The RECS data provide information on the 
vintage of the home, as well as heating energy use in each household. 
The survey also included household characteristics such as the physical 
characteristics of housing units, household demographics, information 
about other heating and cooling products, fuels used, energy 
consumption and expenditures, and other relevant data. DOE used the 
household samples not only to determine boiler annual energy 
consumption, but also as the basis for conducting the LCC and PBP 
analysis. DOE used data from RECS 2009 \32\ and CBECS 2003 \33\ to 
project household weights and household characteristics in 2020, the 
expected compliance date of any amended energy conservation standards 
for residential boilers.
---------------------------------------------------------------------------

    \31\ U.S. Department of Energy: Energy Information 
Administration, Residential Energy Consumption Survey: 2009 RECS 
Survey Data (2013) (Available at: http://www.eia.gov/consumption/residential/data/2009/) (Last accessed March, 2013).
    \32\ U.S. Department of Energy: Energy Information 
Administration, Residential Energy Consumption Survey: 2009 RECS 
Survey Data (2013) (Available at: http://www.eia.gov/consumption/residential/data/2009/) (Last accessed March, 2014).
    \33\ U.S. Department of Energy: Energy Information 
Administration, Commercial Buildings Energy Consumption Survey 
(2003) (Available at: http://www.eia.gov/consumption/commercial/data/2003/index.cfm?view=microdata) (Last accessed November, 2013).
---------------------------------------------------------------------------

    DOE accounted for applications of residential boilers in commercial 
buildings because the intent of the analysis of consumer impacts is to 
capture the full range of usage conditions for these products. DOE 
considers the definition of ``residential boiler'' to be limited only 
by its capacity.\34\ DOE determined that these applications represent 
about 7 percent of the residential boiler market.
---------------------------------------------------------------------------

    \34\ 42 U.S.C. 6291(23).
---------------------------------------------------------------------------

    For the commercial building sample, DOE used the EIA's 2003 
Commercial Building Energy Consumption Survey \35\ (CBECS 2003) to 
establish a sample of commercial buildings using residential boilers 
for each boiler product class. Criteria were developed to help size 
these boilers using several variables, including building square 
footage and estimated supply water temperature. For boilers used in 
multi-family housing, DOE used the RECS 2009 sample discussed above, 
accounting for situations where more than one residential boiler is 
used to heat a building.
---------------------------------------------------------------------------

    \35\ U.S. Department of Energy: Energy Information 
Administration, Commercial Buildings Energy Consumption Survey 
(2003) (Available at: http://www.eia.gov/consumption/commercial/data/2003/index.cfm?view=microdata) (Last accessed November, 2013).
---------------------------------------------------------------------------

    To estimate the annual energy consumption of boilers meeting higher 
efficiency levels, DOE first calculated the heating load based on the 
RECS and CBECS estimates of the annual energy consumption of the boiler 
for each household. DOE estimated the house heating load by reference 
to the existing boiler's characteristics, specifically its capacity and 
efficiency (AFUE), as well as by the heat generated from the electrical 
components. The AFUE of the existing boilers was determined using the 
boiler vintage (the year of installation of the product) from RECS and 
historical data on the market share of boilers by AFUE. DOE then used 
the house heating load to determine the burner operating hours, which 
are needed to calculate the fossil fuel consumption and electricity 
consumption based on the DOE residential furnace and boiler test 
procedure. To calculate pump and other auxiliary components' 
electricity consumption, DOE utilized data from manufacturer product 
literature.
    Additionally, DOE adjusted the energy use to normalize for weather 
by using long-term heating degree-day (HDD) data for each geographical 
region.\36\ DOE also accounted for change in building shell 
characteristics between 2009 and 2020 by applying the building shell 
efficiency indexes in the National Energy Modeling System (NEMS) based 
on EIA's Annual Energy Outlook 2013 (AEO 2013).\37\ DOE also accounted 
for future climate trends based on AEO 2013 HDD projections.
---------------------------------------------------------------------------

    \36\ National Oceanic and Atmospheric Administration, NNDC 
Climate Data Online (Available at: http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp) (Last accessed March 15, 2013).
    \37\ U.S. Department of Energy--Energy Information 
Administration, Annual Energy Outlook 2013 with Projections to 2040 
(Available at: http://www.eia.gov/forecasts/aeo/).

---------------------------------------------------------------------------

[[Page 17251]]

    DOE is aware that some residential boilers have the ability to 
provide both space heating and domestic water heating, and that these 
products are widely available and may vary greatly in design. For these 
applications, DOE accounted for the boiler energy used for domestic 
water heating, which is part of the total annual boiler energy use. To 
accomplish this, DOE used the RECS 2009 and/or CBECS data to identify 
households or buildings with boilers that use the same fuel type for 
space and water heating, and then assumed that a fraction of these 
identified households/buildings use the boiler for both applications.
    To calculate the annual water-heating energy use for each boiler 
efficiency level, DOE first calculated the water-heating load by 
multiplying the annual fuel consumption for water heating (derived from 
RECS or CBECS) by the AFUE of the existing boiler, adjusted for the 
difference between AFUE and recovery efficiency for water heating. DOE 
then calculated the boiler energy use for each efficiency level by 
multiplying the water-heating load by the AFUE of the selected 
efficiency level, adjusted for the difference between AFUE and recovery 
efficiency for water heating.
    The Department calculated boiler electricity consumption for the 
circulating pump, the draft inducer,\38\ and the ignition system. If a 
household required a condensate pump, which is sometimes installed with 
higher-efficiency products, DOE assumed that the pump consumes 60 watts 
and operated at the same time as the burner. For single-stage boilers, 
the Department calculated the electricity consumption as the sum of the 
electrical energy used during boiler operation for space heating, water 
heating, and standby energy consumption. For two-stage and modulating 
products, this formula includes parameters for the operation at full, 
modulating, and reduced load.
---------------------------------------------------------------------------

    \38\ In the case of modulating condensing boilers, to 
accommodate lower firing rates, the inducer will provide lower 
combustion airflow to regulate the excess air in the combustion 
process. DOE assumed that modulating condensing boilers are equipped 
with inducer fans with PSC motors and two-stage controls. The 
inducers are assumed to run at a 70-percent airflow rate when the 
modulating unit operates at low-fire.
---------------------------------------------------------------------------

2. Standby Mode and Off Mode
    The Department calculated boiler standby mode and off mode 
electricity consumption for times when the boiler is not in use for 
each efficiency level identified in the engineering analysis. DOE 
calculated boiler standby mode and off mode electricity consumption by 
multiplying the power consumption at each efficiency level by the 
number of standby mode and off mode hours. To calculate the annual 
number of standby mode and off mode hours for each sample household, 
DOE subtracted the estimated total burner operating hours (both for 
space heating and water heating) from the total hours in a year 
(8,760). Details of the method are provided in chapter 7 of the NOPR 
TSD.
    AHRI disagreed with DOE's assumption that a residential boiler is 
in standby mode throughout the year. AHRI stated that the time when the 
boiler is in standby should be limited to the heating season; the 
remainder of the year the boiler is ``off.'' (AHRI, No. 22 at p. 5) DOE 
is not aware of any information on the extent to which consumers shut 
off the boiler when the heating season is over. For the NOPR, DOE 
estimated that 25 percent of consumers shut the boiler off.
    See chapter 7 in the NOPR TSD for additional detail on the energy 
analysis and results for standby mode and off mode operation.
3. Comments on Boiler Energy Use Calculation
    Commenting on the NODA, AHRI stated that, in basing the estimated 
energy consumption on RECS 2009 and CBECS 2003 data, the estimated 
energy use must be recalculated to account for the benefit of the 
automatic temperature reset means both for the baseline unit and the 
higher efficiency levels. For residential applications, AHRI suggested 
that an average of 10 percent savings would be a reasonable estimate. 
AHRI predicted that this revised analysis will show a smaller 
incremental energy savings resulting from an increased AFUE rating. 
(AHRI, No. 22 at pp. 5-6)
    For the NOPR, DOE incorporated the impact of automatic temperature 
reset means on boiler energy use by adjusting AFUE based on a reduction 
in average return water temperature (RWT). DOE calculated the reduction 
in average RWT for single-stage boilers based on the duration of burner 
operating hours at reduced RWT. For modulating boilers, DOE used the 
average relationship \39\ between RWT and thermal efficiency to 
establish the magnitude of the efficiency adjustment required for the 
high- and low-temperature applications. See appendix 7B for details on 
how DOE calculated the adjustment for automatic means.
---------------------------------------------------------------------------

    \39\ Appendix 7B includes a list of references used to derive 
the relationship. No information is available about the relationship 
between AFUE and RWT, while manufacturers publish data on the 
relationship between boiler thermal efficiency and the RWT. DOE 
assumed that AFUE scales according to the relationship reported for 
the thermal efficiency.
---------------------------------------------------------------------------

    Energy Kinetics stated that the average oversizing factor of 
between three and four used in the NODA exceeds the 0.7 oversizing 
factor indicated in the AFUE standard. It argued that this oversizing 
has a clear and direct impact on annual efficiency due to idle losses, 
which are virtually ignored in AFUE. (Energy Kinetics, No. 19 at p. 1)
    In the NODA analysis, DOE did not use an average oversizing factor 
of between three and four, but applied an oversize factor of 0.7 as 
specified in the existing DOE test procedure. The oversize factor was 
applied directly to the calculated input capacity of the boiler. DOE 
calculated the input capacity for the existing boiler of each housing/
building unit based on information derived from the RECS and CBECs 
data. The equipment sizing approach determines the heating load of the 
sampled household/building by accounting for building characteristics 
impacting heat load. Following determination of the building heating 
load, equipment efficiency is applied to the heat load to calculate the 
boiler input capacity. Input capacity was then multiplied by an 
oversize factor of 0.7 as specified in the existing DOE test procedure. 
Using the oversized input capacity, DOE then rounded the input capacity 
up to the nearest typical equipment size, which in some cases resulted 
in oversize factors slightly more or less than 1.7. See appendix 7B for 
additional details of the boiler sizing methodology.
    Energy Kinetics stated that temperature reset controls would be 
highly ineffective without accounting for idle loss. Energy Kinetics 
stated that idle loss or energy wasted at the end of the heating cycle 
(not during the burner operation), greatly impacts annual energy 
efficiency. (Energy Kinetics, No. 19 at p. 2)
    Idle loss, as the term applies to residential heating boilers, is 
heat wasted when the burner is not firing. The idle losses are the heat 
from combustion that is not transferred to the heating water, including 
the products of combustion up the flue, the loss out of the heat 
exchanger walls and boiler's jacket (in the form of radiant, 
conductive, or convective transfer), and the loss down the drain as a 
condensate. Since no fuel is being consumed in the off-cycle, off-cycle 
losses, therefore, are important only to the extent that they must be 
replaced during the on-cycle by the burning of extra fuel (i.e., longer 
burner on times or higher firing rates). The DOE test procedure 
accounts for

[[Page 17252]]

idle losses associated with space heating in the heating season 
efficiency value, but the idle losses during non-space heating 
operation (i.e., domestic water heating) are not captured in the 
existing DOE test procedure. For the NOPR analysis, DOE accounted for 
idle losses based on the installation location of the boiler 
(conditioned or unconditioned space) and whether or not the boiler 
served domestic hot water loads (summer hot water use only). For 
boilers that serve only space heating loads, the idle losses are 
accounted for in the heating season efficiency. For boilers that 
provided domestic hot water heating, idle losses occur in both heating 
and non-heating seasons. These idle losses were accounted for by 
applying heat loss values to the boiler and storage tank (when 
necessary) for a fraction of the off-cycle time. DOE also accounted for 
the losses for boilers that are installed with indirect tanks or 
tankless coils. See appendix 7B for additional details on the 
consideration of idle losses.
    Energy Kinetics also stated that AFUE assumes that the boiler is in 
the conditioned space and heat lost is gained in the conditioned space, 
but in practice, much of this heat energy is wasted in basements, up 
chimneys, and out draft hoods and draft regulators. (Energy Kinetics, 
No. 19 at p. 2)
    The AFUE metric incorporates sensible and latent heat lost up 
chimneys and out draft hoods and draft regulators. Regarding losses in 
basements, for the NOPR analysis, DOE accounted for boiler jacket 
losses based on the installation location. For boilers installed in 
unconditioned basements and garages, DOE adjusted AFUE using a jacket 
loss factor, which was derived from the values provided by the existing 
DOE test procedure. For high-mass boilers, DOE used a jacket loss 
factor of 2.4 percent. For low-mass boilers, DOE assumed that the 
jacket losses were only 10 percent of those of a high-mass boiler 
(i.e., 0.24 percent).\40\ See appendix 7B for details of the jacket 
loss factors applied.
---------------------------------------------------------------------------

    \40\ DOE estimated that 75 percent of condensing boilers, and 25 
percent of non-condensing boilers are low-mass. The remainder are 
high-mass.
---------------------------------------------------------------------------

    Energy Kinetics stated that if combined heat and hot water boilers 
are considered to be in the conditioned space, then heat lost in 
summertime while heating domestic water should have an impact on air 
conditioning cooling loads. (Energy Kinetics, No. 19 at p. 2) For the 
NOPR, DOE estimated the share of combined heat and hot water boilers 
that are installed in the conditioned space, and estimated the impact 
of heat lost in summertime on air conditioning cooling loads. Details 
of the method are given in chapter 7 of the NOPR TSD.
    Fire & Ice and Weil McLain et al. stated that installing high-
efficiency condensing boilers in older replacement applications may not 
actually achieve the expected energy savings because the homeowners may 
not be able to afford to make extensive and expensive changes to the 
heat distribution system in an older home that may be needed to achieve 
the rated efficiency. (Fire & Ice, No. 18 at pp. 1-2; Weil McLain et 
al., No. 20-2 at pp. 1-2) Weil McLain stated that if a condensing 
boiler is installed in a heat distribution system that is not 
appropriate for that product (i.e., the return water temperature is too 
high), then the condensing boiler will not be able to operate in the 
``condensing'' mode, but will instead operate in the non-condensing 
mode, achieving much lower efficiencies. (Weil McLain, No. 20-1 at p. 
5) Crown Boiler, U.S. Boiler, and New Yorker Boiler agree with the AFUE 
adjustment for condensing boilers that recognizes 150[emsp14][deg]F 
average return water temperature and resulting operation in a non-
condensing mode during a significant portion of the heating season. 
(Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 2; New Yorker 
Boiler, No. 26 at p. 2)
    DOE accounts for boiler operational efficiency in specific 
installations by adjusting the AFUE of the sampled boiler based on an 
average system return water temperature. The criteria used to determine 
the return water temperature of the boiler system included 
consideration of building vintage, product type (condensing or non-
condensing, single-stage or modulating), and whether the boiler 
employed an automatic means for adjusting water temperature. Using 
product type and system return water temperature, DOE developed and 
applied the AFUE adjustments based on average heating season return 
water temperatures. See appendix 7B for additional details.

F. Life-Cycle Cost and Payback Period Analysis

    In determining whether an energy conservation standard is 
economically justified, DOE considers the economic impact of potential 
standards on consumers. The effect of new or amended energy 
conservation standards on individual consumers usually involves a 
reduction in operating cost and an increase in purchase cost. DOE used 
the following two metrics to measure consumer impacts:
     LCC (life-cycle cost) is the total consumer cost of an 
appliance or product, generally over the life of the appliance or 
product. The LCC calculation includes total installed cost (equipment 
manufacturer selling price, distribution chain markups, sales tax, and 
installation costs), operating costs (energy, repair, and maintenance 
costs), product lifetime, and discount rate. Future operating costs are 
discounted to the time of purchase and summed over the lifetime of the 
appliance or product.
     PBP (payback period) measures the amount of time it takes 
consumers to recover the assumed higher purchase price of a more 
energy-efficient product through reduced operating costs. Inputs to the 
payback period calculation include the installed cost to the consumer 
and first-year operating costs.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the base-case efficiency level. The 
base-case estimate reflects the market in the absence of amended energy 
conservation standards, including market trends for products that 
exceed the current energy conservation standards.
    DOE analyzed the net effect of potential amended residential boiler 
standards on consumers by calculating the LCC and PBP for each 
efficiency level of each sample household using the engineering 
performance data, the energy-use data, and the markups. DOE performed 
the LCC and PBP analyses using a spreadsheet model combined with 
Crystal Ball (a commercially-available software program used to conduct 
stochastic analysis using Monte Carlo simulation and probability 
distributions) to account for uncertainty and variability among the 
input variables (e.g., energy prices, installation cost, and repair and 
maintenance costs). It uses weighting factors to account for 
distributions of shipments to different building types and States to 
generate LCC savings by efficiency level. Each Monte Carlo simulation 
consists of 10,000 LCC and PBP calculations using input values that are 
either sampled from probability distributions and household samples or 
characterized with single point values. The analytical results include 
a distribution of 10,000 data points showing the range of LCC savings 
and PBPs for a given efficiency level relative to the base-case 
efficiency forecast. In performing an iteration of the Monte Carlo 
simulation for a given consumer, product efficiency is chosen based on 
its probability. If the chosen product efficiency is greater than or 
equal to the efficiency of the standard level under consideration, the 
LCC and PBP calculation reveals that a consumer is

[[Page 17253]]

not impacted by the standard level. By accounting for consumers who 
already purchase more-efficient products, DOE avoids overstating the 
potential benefits from increasing product efficiency.
    EPCA establishes a rebuttable presumption that a standard is 
economically justified if the Secretary finds that the additional cost 
to the consumer of purchasing a product complying with an energy 
conservation standard level will be less than three times the value of 
the energy (and, as applicable, water) savings during the first year 
that the consumer will receive as a result of the standard, as 
calculated under the test procedure in place for that standard. (42 
U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determines the value of the first year's energy savings by calculating 
the quantity of those savings in accordance with the applicable DOE 
test procedure, and multiplying that amount by the average energy price 
forecast for the year in which compliance with the amended standards 
would be required.
    DOE calculated the LCC and PBP for all consumers of residential 
boilers as if each were to purchase new product in the year that 
compliance with amended standards is required. As discussed above, DOE 
is conducting this rulemaking pursuant to 42 U.S.C. 6295(f)(4)(C), and 
consistent with that provision, DOE is applying a 5-year lead time for 
compliance with amended standards. (This rulemaking also satisfies 
DOE's 6-year-lookback review requirement under 42 U.S.C. 6295(m), a 
provision which calls for the same 5-year lead time for residential 
boilers.) At the time of preparation of the NOPR analysis, the expected 
issuance date was spring 2014, leading to an anticipated final rule 
publication in 2015. Accordingly, the projected compliance date for 
amended standards is early 2020. Therefore, for purposes of its 
analysis, DOE used January 1, 2020 as the beginning of compliance with 
potential amended standards for residential boilers.
    As noted above, DOE's LCC and PBP analyses generate values that 
calculate the payback period for consumers of potential energy 
conservation standards, which includes, but is not limited to, the 
three-year payback period contemplated under the rebuttable presumption 
test. However, DOE routinely conducts a full economic analysis that 
considers the full range of impacts, including those to the consumer, 
manufacturer, Nation, and environment, as required under 42 U.S.C. 
6295(o)(2)(B)(i). The results of this analysis serve as the basis for 
DOE to definitively evaluate the economic justification for a potential 
standard level (thereby supporting or rebutting the results of any 
preliminary determination of economic justification).
1. Inputs to Installed Cost
    The primary inputs for establishing the total installed cost are 
the baseline consumer product price, standard-level consumer price 
increases, and installation costs (labor and material cost). Baseline 
consumer prices and standard-level consumer price increases were 
determined by applying markups to manufacturer price estimates, 
including sales tax where appropriate. The installation cost is added 
to the consumer price to arrive at a total installed cost.
    Weil McLain stated that lumping all condensing and non-condensing 
boilers together to determine the average or median cost of a type of 
boiler does not provide the correct basis for making a decision. (Weil 
McLain, No. 20-1 at p. 3) In response, DOE's product cost analysis 
considers condensing and non-condensing boilers as separate efficiency 
levels and accounts for the specific characteristics of these designs. 
Details of the method are provided in chapter 8 of the NOPR TSD.
    For the NODA, DOE projected future prices of residential boilers 
using inflation-adjusted producer price index (PPI) data for ``heating 
equipment'' from the Bureau of Labor Statistics.\41\ AHRI stated that 
the analysis conducted for the residential furnace rulemaking and the 
PPI data for heating equipment from the Bureau of Labor Statistics are 
not directly transferable to residential boilers. AHRI stated that the 
unique factors of the relatively small size of the residential boiler 
market and the relatively higher cost of residential boilers minimize 
the applicability of the general PPI data in this analysis. (AHRI, No. 
22 at p. 5)
---------------------------------------------------------------------------

    \41\ Series ID PCU333414333414 (Available at: http://www.bls.gov/ppi/).
---------------------------------------------------------------------------

    DOE agrees that the broad category ``heating equipment'' may not be 
the best measure to apply to residential boilers. For the NOPR, DOE 
examined the PPI for cast iron heating boilers from 1987 to 2013 and 
for steel heating boilers from 1980 to 2013.\42\ The inflation-adjusted 
PPI shows a strongly rising trend over this period. DOE has concerns 
about using this trend, however. During much of the period, the 
inflation-adjusted PPI for iron and steel mills (which indicates the 
price of the primary materials that go into cast iron heating boilers) 
was also sharply rising. This rise mirrors the increase in prices of 
various industrial commodities, which resulted from rapid 
industrialization in China, India, and other emerging economies. Prior 
to 2004, the inflation-adjusted PPI for iron and steel mills was in a 
long downtrend that began in the early 1980s. In the recent global 
economic environment of slower growth, iron ore prices have been 
declining since the beginning of 2011. Given the past trend and the 
current situation, DOE is not confident that extrapolating the trend in 
the PPI for cast iron heating boilers in 1999-2013 would provide a 
sound projection. Nor is DOE confident that the recent downward trend 
in iron ore prices will continue in the future. Given the uncertainty 
in commodities pricing and other factors, DOE concluded that including 
a price trend in the main analysis cases would not be justified by the 
data, instead choosing to maintain a constant manufacturer selling 
price (in real dollars) for residential boilers.
---------------------------------------------------------------------------

    \42\ Cast iron heating boiler PPI series ID: PCU 3334143334141; 
Steel heating boiler PPI series ID: PCU 3334143334145 (Available at: 
www.bls.gov/ppi/).
---------------------------------------------------------------------------

    The Joint Commenters stated that it is expected that the installed 
cost of condensing boilers would decline between now and the compliance 
date of amended standards (2020). The Joint Commenters stated that the 
new ENERGY STAR specification, which requires condensing levels from 
gas-fired boilers, are expected to increase the market share of 
condensing gas boilers, resulting in a decline in equipment costs. 
Furthermore, the Joint Commenters encouraged DOE to explore ways to 
estimate learning rates for condensing technology. The Joint Commenters 
stated that analyzing price trends of whole categories of equipment 
fails to capture the price trends of the actual technologies that are 
employed to improve efficiency. The Joint Commenters would expect the 
price of condensing boilers to decline much faster than the price of 
all boilers. The Joint Commenters stated that the use of historic price 
trends of heating equipment to estimate learning rates for boilers 
implicitly assumes that prices of non-condensing and condensing boilers 
will change at the same rate, and will likely significantly 
underestimate future declines in the incremental cost of condensing 
boilers. (Joint Commenters, No. 27 at pp. 2-3)
    DOE acknowledges that the product cost of condensing boilers may 
decline between now and the compliance date of amended standards as 
production increases and the technology matures. It also recognizes 
that experience in the manufacturing sector generally indicates

[[Page 17254]]

that the price of new products declines in the early years of adoption. 
However, DOE could not find data that would allow a projection of the 
magnitude of likely decline for condensing boilers. Thus, for the NOPR, 
it used the same price trend projection for condensing and non-
condensing boilers. Currently, information about price trends related 
to different boiler technologies is not available, but DOE is exploring 
ways to estimate learning rates for different technologies.\43\
---------------------------------------------------------------------------

    \43\ Taylor, M. and K. S. Fujita, Accounting for Technological 
Change in Regulatory Impact Analyses: The Learning Curve Technique, 
Lawrence Berkeley National Laboratory, Report No. LBNL-6195E (2013) 
(Available at: http://efficiency.lbl.gov/sites/all/files/accounting_for_tech_change_in_rias_-_learning_curves_lbnl.pdf).
---------------------------------------------------------------------------

    DOE estimated the costs associated with installing a boiler in a 
new housing unit or as a replacement for an existing boiler. 
Installation costs account for labor and material costs and any 
additional costs, such as venting and piping modifications and 
condensate disposal that might be required when installing products at 
various efficiency levels.
    For replacement installations, DOE included a number of additional 
costs (``adders'') for a fraction of the sample households. For non-
condensing boilers, these additional costs may account for updating of 
flue vent connectors, vent resizing, chimney relining, and, for a 
fraction of installations, the costs for a stainless steel vent. For 
condensing boilers, these additional costs included adding a new 
polyvinylchloride (PVC) flue vent, combustion air venting for direct 
vent installations (PVC), concealing vent pipes for indoor 
installations, addressing an orphaned water heater (by updating flue 
vent connectors, vent resizing, or chimney relining), and condensate 
removal.
    Weil McLain stated that changes to the heat distribution system in 
an older home can include: Installing new piping and venting; lining 
the existing chimney; installing a more powerful circulating pump; 
installing a different, larger electrical service; and/or installing a 
condensate neutralizer to prevent damage to a cast iron drain or 
installing a condensate pump. Weil McLain stated that quotations from 
qualified contractors for the complete installation of a condensing 
boiler in a replacement application are generally at least 30-60 
percent higher than the installation cost of a non-condensing boiler in 
the same application. (Weil McLain, No. 20-1 at pp. 3-4)
    In response, DOE's analysis does account for venting, condensate, 
and electrical related costs to determine the overall installation cost 
for condensing boilers. According to the available data, the total 
installed cost, which is the sum of the installation cost and the 
product price, is on average 23 percent higher for condensing boilers 
compared to baseline products. See appendix 8D of the NOPR TSD for 
details on how DOE calculated the installation costs.
    Crown Boiler, U.S. Boiler, and New Yorker Boiler stated that the 
LCC spreadsheet does not include the total cost of masonry chimneys, 
chimney relining, vent resizing, and orphaned water heaters (except for 
condensing boiler venting cost). They also suggested that DOE should 
consider vent system changes based on input from building inspectors 
and code officials. (Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 
at p. 2; New Yorker Boiler, No. 26 at p. 2)
    Gathering input from a representative sample of building inspectors 
and code officials was not possible in the time frame of the NOPR 
preparation. However, for the NOPR, DOE included disaggregated costs 
associated with different installation scenarios and requirements. 
These costs included the cost of chimney relining, vent resizing, 
orphaned water heaters, and condensate withdrawal. These costs can be 
found in appendix 8D of the NOPR TSD.
    Crown Boiler, U.S. Boiler, and New Yorker Boiler stated that a 100 
Mbh gas boiler would use a 5'' vent, not a 4'' Type B vent as shown in 
the LCC spreadsheet. They also stated that a 140 Mbh oil boiler would 
use a 6'' vent and cannot use a 4'' Type B vent as shown in the LCC 
spreadsheet. (Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 
2; New Yorker Boiler, No. 26 at p. 2) DOE agrees that the vent size is 
correlated with boiler capacity. For the NOPR, DOE included a 
methodology that sized vent material based on the capacity of the 
boiler to be installed and accounted for the subsequent change in 
installation cost. Specifically, DOE modified the analysis to include 
the costs of 5'' and 6'' vent material where appropriate. Appendix 8D 
of the NOPR TSD contains more details on the installation cost 
methodology.
    Crown Boiler, U.S. Boiler, and New Yorker Boiler stated that the 
National Fuel Gas Code (ANSI Z223.l/INFPA 54, 2012 Edition, paragraph 
12.6.4.3) suggests EL0 gas boilers can be installed without vent 
modification. (Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 
2; New Yorker Boiler, No. 26 at p. 2) DOE's LCC analysis accounts for 
an estimated fraction of 81 percent of boiler replacement installations 
that do not require vent modifications for EL 0 (baseline) for hot 
water gas boilers. The baseline may require chimney relining or vent 
resizing for boilers installed before 1995. See appendix 8D of the NOPR 
TSD for more details.
    The Joint Commenters stated that the installation costs for 
condensing boilers will decline as contractors gain more experience 
installing condensing boilers, competition increases, and new venting 
systems for retrofits (including flexible polypropylene) are introduced 
to the market. The Joint Commenters encouraged DOE to evaluate whether 
polypropylene venting systems, which are designed for easy retrofit 
installations, would represent the lowest-cost venting option for some 
portion of installations. (Joint Commenters, No. 27 at pp. 2-3)
    In response, DOE notes that condensing boilers already comprise 
more than one-third of boiler installations, so it is not clear that 
costs will decline due to experience and competition. DOE conducted a 
literature review to assess the polypropylene venting market in the 
U.S. For this rulemaking, DOE applied polypropylene venting as a 
venting option for the fraction of installations involving models or 
applications for which PVC piping is not recommended.
    DOE also included installation adders for new construction 
installations related to potential amended standards. For non-
condensing boilers, the only adder is a new metal flue vent (including 
a fraction with stainless steel venting). For condensing gas boilers, 
the adders include a new flue vent, combustion air venting for direct 
vent installations, accounting for a commonly-vented water heater, and 
condensate removal.
    Crown Boiler, U.S. Boiler, and New Yorker Boiler stated that the 
only difference in residential boiler installation cost between 
retrofit and new construction applications in terms of placement and 
set-up should be the cost of removing the old boiler; trip charge, unit 
startup, check, and cleanup should apply equally to both types of 
installation. (Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 
2; New Yorker Boiler, No. 26 at p. 2)
    For the NOPR analysis, DOE assumes that boiler placement, set-up, 
start-up, check, trip charge, and cleanup costs are included in labor 
hours based on RS Means data for both new construction and 
replacements. The cost of removing the old boiler was only applied for 
replacement installations and not applied to new construction.
    With regards to near-condensing boiler installations, for the NODA, 
DOE

[[Page 17255]]

accounted for the installation costs of the near-condensing products by 
considering the additional cost of using stainless steel venting. AHRI 
stated that boilers with AFUE ratings in the range of 83.5 percent to 
87 percent should be considered near-condensing products from an 
installation perspective (in terms of vent requirements). AHRI stated 
that DOE has underestimated the increased installation cost for vent 
system rework or upgrade at the 84-percent and 85-percent AFUE levels 
for gas-fired hot water boiler models. (AHRI, No. 22 at pp. 1-2) HTP 
stated that the safety and installation cost implications of operating 
at efficiencies between 82-percent and 90-percent AFUE should be 
seriously considered. (HTP, No. 31 at p. 1)
    For the NOPR, DOE included additional venting cost associated with 
stainless steel venting for a fraction of installations between 82-
percent AFUE and 86-percent AFUE that require such venting. Such 
inclusion addresses potential safety concerns by preventing the 
corrosive impacts of condensation in the venting system. Because use of 
an inducer or forced draft fan creates conditions under which stainless 
steel venting is necessary to avoid condensation in some cases, DOE 
based the fraction requiring stainless steel venting on the percentage 
of models with inducer or forced draft fans and manufacturer 
literature.\44\ The fraction of stainless steel venting installations 
ranged from 11 percent for the baseline efficiency models to 32 percent 
for the 85-percent AFUE models. See appendix 8D of the NOPR TSD for 
more details.
---------------------------------------------------------------------------

    \44\ DOE did not consider any efficiency levels above 86-percent 
AFUE and below 90-percent AFUE.
---------------------------------------------------------------------------

2. Inputs to Operating Costs
    The primary inputs for calculating the operating costs are product 
energy consumption, product efficiency, energy prices and forecasts, 
maintenance and repair costs, product lifetime, and discount rates. DOE 
uses discount rates 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. Much of 
the data used for determining consumer discount rates comes from the 
Federal Reserve Board's triennial Survey of Consumer Finances.\45\
---------------------------------------------------------------------------

    \45\ Available at www.federalreserve.gov/econresdata/scf/scfindex.htm.
---------------------------------------------------------------------------

a. Energy Consumption
    The product energy consumption is the site energy use associated 
with providing space heating (and water heating in some cases) to the 
building. DOE utilized the methodology described in section IV.E to 
establish product energy use.
    DOE considered whether boiler energy use would likely be impacted 
by a direct rebound effect, which occurs when a product that is made 
more efficient is used more intensively, such that the expected energy 
savings from the efficiency improvement may not fully materialize. For 
the NODA, DOE conducted a review of information that included a 2009 
study examining empirical estimates of the rebound effect for various 
energy-using products.\46\ Based on this review, DOE tentatively 
concluded that the inclusion of a rebound effect of 20 percent for 
residential boilers is warranted.
---------------------------------------------------------------------------

    \46\ S. Sorrell, J. D., and M. Sommerville, ``Empirical 
estimates of the direct rebound effect: a review,'' Energy Policy 
(2009) 37: pp. 1356-71.
---------------------------------------------------------------------------

    The Joint Commenters stated that a 20-percent rebound effect is too 
high. The Joint Commenters stated that a 2012 ACEEE paper concluded 
that the most widely applicable estimates of rebound rates in the 
studies reviewed by Sorrell (referenced above) range from 1-12 percent. 
The Joint Commenters stated that a similar range is provided in a 2013 
paper by Thomas and Azevedo which lists five space-heating studies with 
rebound rates ranging from 1-15 percent. (Joint Commenters, No. 27 at 
p. 4)
    For the NOPR, DOE reviewed the 2012 ACEEE paper \47\ and the 
article by Thomas and Azevedo.\48\ Both of these publications examined 
the same studies that were reviewed by Sorrell, as well as by Greening 
et al,\49\ and identified methodological problems with some of the 
studies. The studies believed to be most reliable by Thomas and Azevedo 
show a direct rebound effect for heating products in the 1-percent to 
15-percent range, while Nadel concludes that a more likely range is 1 
to 12 percent, with rebound effects sometimes higher than this range 
for low-income households who could not afford to adequately heat their 
homes prior to weatherization. These assessments are described in 
further detail in chapter 10 of the NOPR TSD. Based on DOE's review of 
these recent assessments, DOE reduced the rebound effect for 
residential boilers to 15 percent for the NOPR. Although a lower value 
might be warranted, DOE prefers to be conservative and not risk 
understating the rebound effect.
---------------------------------------------------------------------------

    \47\ Steven Nadel, ``The Rebound Effect: Large or Small?'' ACEEE 
White Paper (August 2012) (Available at: http://www.aceee.org/white-paper/rebound-effect-large-or-small).
    \48\ Brinda Thomas and Ines Azevedo, ``Estimating direct and 
indirect rebound effects for U.S. households with input-output 
analysis Part 1: Theoretical framework,'' Ecological Economics Vol. 
86, pp. 199-201 (Feb. 2013) (Available at: http://www.sciencedirect.com/science/article/pii/S0921800912004764).
    \49\ Greening, L.A., Greene, D.L., Difiglio, C., Energy 
efficiency and consumption--the rebound effect--a survey, (2002) 
Energy Policy 28(6-7), 389-401.
---------------------------------------------------------------------------

    AHRI recommended that the LCC and PBP analysis should incorporate 
the energy savings reduction attributable to the rebound effect. AHRI 
stated that the TSD does not provide information to explain what the 
increase in the consumer's utility is that offsets the 20-percent 
rebound effect identified in the analysis. Additionally, AHRI stated 
that the consumer's utility is not a quantifiable, monetary value, and 
it does not affect the cost of operation of the boiler. (AHRI, No. 22 
at p. 5)
    In response, the most likely reason for a direct rebound effect 
associated with higher-efficiency boilers is that the consumer would 
maintain a higher indoor temperature than before, or extend the heating 
season for longer periods. It is reasonable to presume that such a 
consumer receives greater indoor comfort than before. The increased 
comfort has a cost that is equal to the monetary value of the higher 
energy use. DOE could reduce the energy cost savings to account for the 
rebound effect, but then it would have to add the value of increased 
comfort in order to conduct a proper economic analysis. The approach 
that DOE uses--not reducing the energy cost savings to account for the 
rebound effect and not adding the value of increased comfort--assumes 
that the value of increased comfort is equal to the monetary value of 
the higher energy use. Although DOE cannot measure the actual value to 
the consumers of increased comfort, the monetary value of the higher 
energy use represents a lower bound for this quantity.
b. Energy Prices
    Using the most current data from the Energy Information 
Administration 50 51 52 (described in chapter 8 of the NOPR 
TSD), DOE

[[Page 17256]]

assigned an appropriate energy price to each household or commercial 
building in the sample, depending on its location. For future prices, 
DOE used the projected annual changes in average residential and 
commercial natural gas, LPG, electricity, and fuel oil prices in the 
Reference case projection in AEO 2013.\53\
---------------------------------------------------------------------------

    \50\ U.S. Department of Energy--Energy Information 
Administration, Form EIA-826 Database Monthly Electric Utility Sales 
and Revenue Data (2013) (Available at: http://www.eia.doe.gov/cneaf/electricity/page/eia826.html).
    \51\ U.S. Department of Energy--Energy Information 
Administration, Natural Gas Navigator (2013) (Available at: http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm).
    \52\ U.S. Department of Energy--Energy Information 
Administration, 2012 State Energy Consumption, Price, and 
Expenditure Estimates (SEDS) (2013) (Available at: http://www.eia.doe.gov/emeu/states/_seds.html).
    \53\ DOE plans to use AEO 2014 when it becomes available.
---------------------------------------------------------------------------

    AGA and APGA contended that the Department should use a marginal 
price analysis, which reflects the incremental gas costs most closely 
associated with changes in the amount of gas consumed by appliances of 
different efficiencies, when evaluating the impact of natural gas 
prices on the life-cycle-cost savings associated with standards. (AGA, 
APGA, No. 21 at p. 5) In response, in the analyses performed for the 
NODA and for the NOPR, average electricity and natural gas prices from 
the EIA data were adjusted using seasonal marginal price factors to 
derive monthly marginal electricity and natural gas prices. For a 
detailed discussion of the development of marginal energy price 
factors, see appendix 8C of the NOPR TSD.
c. Maintenance and Repair Costs
    The maintenance cost is the routine annual cost to the consumer of 
general maintenance for product operation. The frequency with which the 
maintenance occurs was derived from a consumer survey \54\ that 
provided the frequency with which owners of different types of boilers 
perform maintenance. For oil-fired boilers, the high quantity of sulfur 
in the fuel in States without regulation of sulfur content results in 
frequent cleaning of the heat exchanger, which DOE included in its 
analysis.
---------------------------------------------------------------------------

    \54\ Decision Analysts, 2008 American Home Comfort Study: Online 
Database Tool (2009) (Available at: http://www.decisionanalyst.com/Syndicated/HomeComfort.dai>).
---------------------------------------------------------------------------

    The repair cost is the cost to the consumer for replacing or 
repairing components in the boiler that have failed. DOE estimated 
repair costs at each considered efficiency level using a variety of 
sources, including 2013 RS Means Facility Repair and Maintenance 
Data,\55\ manufacturer literature, and information from expert 
consultants.
---------------------------------------------------------------------------

    \55\ RS Means Company Inc., RS Means Facilities Maintenance & 
Repair Cost Data (2013) (Available at http://www.rsmeans.com/).
---------------------------------------------------------------------------

    Weil McLain, Crown Boiler, U.S. Boiler, and New Yorker Boiler 
stated that condensing boilers generally cost more to maintain and 
repair than non-condensing boilers because condensing boilers have more 
complex and costly component parts that need more frequent service, 
adjustment, and repair. (Weil McLain, No. 20-1 at p. 3; Crown Boiler, 
No. 24 at p. 2; U.S. Boiler, No. 25 at p. 2; New Yorker Boiler, No. 26 
at p. 2) In response, DOE's analysis does account for additional 
maintenance and repair costs for condensing boilers. Maintenance costs 
include checking the condensate withdrawal system, replacing the 
neutralizer filter, and flushing the secondary heat exchanger for 
condensing oil boilers in high-sulfur oil-fuel regions. In addition, 
higher repair costs for ignition, controls, gas valve, and inducer fan 
are included. For more details on DOE's methodology for calculating 
maintenance and repair costs, see appendix 8E of the NOPR TSD.
d. Product Lifetime
    Product lifetime is the age at which an appliance is retired from 
service. DOE conducted an analysis of boiler lifetimes using a 
combination of historical boiler shipments (see section IV.G), American 
Housing Survey data on historical stock of boilers,\56\ and RECS data 
\57\ on the age of the boilers in homes. The data allowed DOE to 
develop a Weibull lifetime distribution function, which results in a 
lifetime ranging from 2 to 55 years. The resulting average and median 
lifetimes for the NOPR analysis are 25 years for all boiler product 
classes. In addition, DOE reviewed a number of sources to validate the 
derived boiler lifetime, including research studies (from the U.S. and 
Europe) and field data reports (see appendix 8F of the NOPR TSD for 
details).
---------------------------------------------------------------------------

    \56\ U.S. Census Bureau: Housing and Household Economic 
Statistics Division, American Housing Survey, Multiple Years (1974, 
1975, 1976, 1977, 1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989, 
1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 2007, 2009, and 
2011). (Available at: www.census.gov/programs-surveys/ahs/) (Last 
accessed January, 2014).
    \57\ U.S. Department of Energy: Energy Information 
Administration, Residential Energy Consumption Survey: 2009 RECS 
Survey Data (2013) (Available at: http://www.eia.gov/consumption/residential/data/2009/>) (Last accessed March, 2013).
---------------------------------------------------------------------------

    A number of commenters stated that condensing boilers generally 
have a shorter lifespan than non-condensing boilers. Weil McLain stated 
that condensing boilers generally have a shorter lifespan than non-
condensing boilers because the condensing boilers are exposed to the 
corrosive effects of condensation, and because there are many more 
component parts to wear out. (Weil McLain, No. 20-1 at p. 3) Crown 
Boiler, U.S. Boiler, and New Yorker Boiler believe that there is a 
significant difference between expected lifetimes for non-condensing 
and condensing boilers, with the latter typically lasting less than 15 
years. (Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 2; New 
Yorker Boiler, No. 26 at p. 2) Weil McLain, Crown Boiler, U.S. Boiler, 
and New Yorker Boiler stated that manufacturers generally offer shorter 
warranties for condensing boilers than for non-condensing boilers, 
indicating that manufacturers have found that condensing boilers have a 
shorter life expectancy than non-condensing boilers. (Weil McLain, No. 
20-1 at pp. 4; Crown Boiler, No. 24 at p. 2; U.S. Boiler, No. 25 at p. 
2; New Yorker Boiler, No. 26 at p. 2) AHRI stated that the 22-year 
median lifetime used for all boilers in the analysis is an invalid 
assumption for condensing gas boilers. AHRI stated that deriving 
lifetimes from a combination of shipment data, boiler stock, and RECS 
data assumes that there is an established population of units in the 
field that reflect the full range of lifetimes that apply to the 
product. AHRI stated that this is not the case, as condensing gas hot 
water boilers were just beginning to be introduced 22 years ago. AHRI 
stated that it is not possible to conclude from field data that 
condensing gas boilers have a median lifetime of 22 years when the 
number of such units installed 22 years ago likely accounts for 1 
percent or less of all residential gas boilers currently in use. (AHRI, 
No. 22 at p. 2)
    In response, DOE notes that in developing Boilers Specification 
Version 3.0 for the ENERGY STAR program in 2013, the Environmental 
Protection Agency (EPA) held numerous discussions with manufacturers 
and technical experts to explore the concern that condensing boilers 
may have a shorter lifetime. In the absence of data showing otherwise, 
EPA concluded that if condensing boilers are properly installed and 
maintained, the life expectancy should be similar to non-condensing 
boilers.\58\ EPA also discussed boiler life expectancy with the 
Department for Environment, Food & Rural Affairs (DEFRA) in the UK, and 
stated that DEFRA has no data which contradict EPA's conclusion that 
with proper maintenance, condensing and non-condensing modern boilers 
have similar life expectancy.\59\ The commenters provided no data to 
support their opinion regarding a lower condensing boiler lifetime vis-
[agrave]-vis non-

[[Page 17257]]

condensing boilers. Therefore, for the NOPR, DOE did not apply 
different lifetimes for non-condensing and condensing boilers. However, 
DOE did conduct a sensitivity analysis to investigate the impact of 
different lifetime values on consumer impacts. For more details on how 
DOE derived the boiler lifetime and on the lifetime sensitivity 
analysis, see appendix 8F of the NOPR TSD.
---------------------------------------------------------------------------

    \58\ See: http://www.energystar.gov/products/specs/sites/products/files/Stakeholder%20Comment%20Response%20Summary%20Boilers%20Draft%201%20Version%203%200_0.pdf.
    \59\ Energy Efficiency Best Practice in Housing, Domestic 
Condensing Boilers--`The Benefits and the Myths' (2003) (Available 
at: http://www.west-norfolk.gov.uk/pdf/CE52.pdf) (Last accessed 
April 16, 2014).
---------------------------------------------------------------------------

e. Base-Case Efficiency
    To estimate the share of consumers affected by a potential energy 
conservation standard at a particular efficiency level, DOE's LCC and 
PBP analysis considers the projected distribution (i.e., market shares) 
of product efficiencies that consumers will purchase in the first 
compliance year under the base case (i.e., the case without amended 
energy conservation standards).
    For residential boilers, DOE first developed data on the current 
share of models in each product class that are of the different 
efficiencies based on the latest AHRI certification directory.\60\ To 
estimate shares in 2020, DOE took into account the potential impacts of 
the ENERGY STAR program, which is working on new performance criteria: 
90-percent AFUE for gas-fired boilers and 87-percent AFUE for oil-fired 
boilers.\61\
---------------------------------------------------------------------------

    \60\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (September 2013) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed September, 2013).
    \61\ Energy Star, Boiler Specification Version 3.0 (Last 
accessed September, 2013) (Available at: https://www.energystar.gov/products/specs/boilers_specification_version_3_0_pd).
---------------------------------------------------------------------------

    For the boiler standby mode and off mode, DOE assumed that 50 
percent of shipments would be at the baseline efficiency level and 50 
percent would be at the max-tech efficiency level (EL 3) for all 
product classes, based on characteristics of available models.\62\
---------------------------------------------------------------------------

    \62\ Air Conditioning, Heating, and Refrigeration Institute, 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment (AHRI Directory) (September 2013) (Available 
at: http://www.ahridirectory.org/ahridirectory/pages/home.aspx) 
(Last accessed September, 2013).
---------------------------------------------------------------------------

    No comments were received on the base-case efficiency 
distributions, and DOE retained the same approach for the NOPR.

G. Shipments Analysis

    DOE uses forecasts of product shipments to calculate the national 
impacts of potential amended energy conservation standards on energy 
use, NPV, and future manufacturer cash flows. DOE develops shipment 
projections based on historical data and an analysis of key market 
drivers for each product. DOE estimated boiler shipments by projecting 
shipments in three market segments: (1) Replacements; (2) new housing; 
and (3) new owners in buildings that did not previously have a boiler. 
DOE also considered whether standards that require more-efficient 
boilers would have an impact on boiler shipments.
    To project boiler replacement shipments, DOE developed retirement 
functions from the boiler lifetime estimates and applied them to the 
existing products in the housing stock. The existing stock of products 
is tracked by vintage and developed from historical shipments 
data.63 64 The shipments analysis uses a distribution of 
residential boiler lifetimes to estimate boiler replacement shipments.
---------------------------------------------------------------------------

    \63\ U.S. Appliance Industry Statistical Review, Appliance 
Magazine, various years.
    \64\ Air-Conditioning, Heating, and Refrigeration Institute 
(AHRI), Confidential Shipment data for 2003-2012.
---------------------------------------------------------------------------

    To project shipments to the new housing market, DOE utilized a 
forecast of new housing construction and historic saturation rates of 
various boiler product types in new housing. DOE used AEO 2013 for 
forecasts of new housing. Boiler saturation rates in new housing were 
estimated based on a weighted-average of values in 1990-2013 presented 
in the U.S. Census Bureau's Characteristics of New Housing.\65\
---------------------------------------------------------------------------

    \65\ Available at: http://www.census.gov/const/www/charindex.html.
---------------------------------------------------------------------------

    To estimate future shipments to new owners, DOE determined the 
fraction of residential boiler shipments that are to new owners with no 
previous boiler, based on a proprietary consumer survey.\66\ The new 
owners primarily consist of households that during a major remodel add 
hydronic heating using a gas-fired hot water boiler and households that 
choose to install a boiler for a hydronic air handler to replace a gas 
furnace. New owners also include households switching between different 
boiler product classes (i.e., from the steam to hot water boiler 
product classes and from the oil-fired to gas-fired boiler product 
classes).
---------------------------------------------------------------------------

    \66\ Decision Analysts, 2008 American Home Comfort Study: Online 
Database Tool (2009) (Available at: http://www.decisionanalyst.com/Syndicated/HomeComfort.dai>).
---------------------------------------------------------------------------

    Commenting on the NODA, AHRI stated that DOE's estimate that 80 
percent of all gas-fired hot water boiler installations are 
replacements may be too low. (AHRI, No. 22 at p. 4) Based on this 
comment, DOE reexamined the available shipments data, and for the NOPR, 
DOE estimated that 93 percent of gas-fired hot water boiler 
installations are replacements or new owners, with the remaining 7 
percent installed in new homes.
    To estimate the impact of the projected price increase for the 
considered efficiency levels, DOE used a relative price elasticity 
approach. This approach gives some weight to the operating cost savings 
from higher-efficiency products. As is typical, the impact of higher 
boiler prices (at higher efficiency levels) is expressed as a 
percentage drop in market share for each year during the analysis 
period.
    Weil McLain stated that a typical homeowner facing the prospect of 
installing a condensing high-efficiency boiler at a much higher product 
and installation cost (plus the cost of upgrading the heat distribution 
system) may decide to repair an older system instead. (Weil McLain, No. 
20-1 at p. 5) In response, DOE acknowledges that if the amended 
standard were to require purchase of a condensing boiler, some 
consumers would choose to repair and thereby extend the life of their 
existing system. Because the proposed standards would not require the 
use of a condensing boiler, DOE concludes that any incremental shift 
towards repair instead of replacement would be minimal. DOE applied a 
relative price elasticity in the shipments model to estimate the change 
in shipments under potential amended standards at different efficiency 
(and installed cost) levels.
    AGA and APGA stated that the Department should include a fuel 
switching analysis as part of the process of evaluating possible 
amended standards for residential boilers to help ensure that when 
evaluating different levels of efficiency for gas-fired hot water 
boilers, fuel switching to other energy sources that produce higher 
emissions and use more overall energy is not encouraged. (AGA, APGA, 
No. 21 at p. 5)
    For the NOPR, DOE evaluated the potential for switching from gas-
fired hot water boilers to other heating systems. Incentive for such 
switching would only exist if the amended standards were to require 
efficiency for gas-fired hot water boilers that would entail a 
significantly higher installed cost than the other heating options. 
Because DOE is not proposing an amended standard that would require 
condensing technology, DOE has tentatively concluded that consumer 
switching from gas-fired hot water boilers would be rare. Even if DOE 
were to adopt an amended standard that

[[Page 17258]]

would require condensing technology for gas-fired hot water boilers, it 
is likely that switching would be minimal for the following reasons. 
First, although electric boilers may have a much lower product cost, 
they would be expected to have far higher operating costs (especially 
in the Northeast). Moreover, electric boiler installation would require 
upgrading the electrical system in the house. Finally, switching from a 
hydronic heating system using a gas-fired boiler to an air-distribution 
heating system using a furnace would be expensive, and would likely 
only be done as part of a major renovation.
    The details and results of the shipments analysis can be found in 
chapter 9 of the NOPR TSD.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the net 
present value (NPV) from a national perspective of total consumer costs 
and savings expected to result from new or amended energy conservation 
standards at specific efficiency levels. DOE determined the NPV and NES 
for the potential standard levels considered for the residential boiler 
product classes analyzed.
    To make the analysis more accessible and transparent to all 
interested parties, DOE used a computer spreadsheet model (as opposed 
to probability distributions) to calculate the energy savings and the 
national consumer costs and savings at each TSL.\67\ The NIA 
calculations are based on the annual energy consumption and total 
installed cost data from the energy use analysis and the LCC analysis. 
To assess the effect of input uncertainty on NES and NPV results, DOE 
developed its spreadsheet model to conduct sensitivity analyses by 
running scenarios on specific input variables. In the NIA, DOE 
forecasted the lifetime energy savings, energy cost savings, product 
costs, and NPV of consumer benefits for each product class over the 
lifetime of products sold from 2020 through 2049.
---------------------------------------------------------------------------

    \67\ DOE's use of spreadsheet models provides interested parties 
with access to the models within a familiar context. In addition, 
the TSD and other documentation that DOE provides during the 
rulemaking help explain the models and how to use them, and 
interested parties can review DOE's analyses by changing various 
input quantities within the spreadsheet.
---------------------------------------------------------------------------

    To develop the NES, DOE calculates annual energy consumption for 
the base case and the standards cases. DOE calculates the annual energy 
consumption using per-unit annual energy use data multiplied by 
projected shipments. As explained in section IV.E, DOE incorporated a 
rebound effect for residential boilers, which is implemented by 
reducing the NES in each year.
    To develop the national NPV of consumer benefits from potential 
energy conservation standards, DOE calculates annual energy 
expenditures and annual product expenditures for the base case and the 
standards cases. DOE calculates annual energy expenditures from annual 
energy consumption by incorporating forecasted energy prices, using 
shipment projections and average energy efficiency projections. DOE 
calculates annual product expenditures by multiplying the price per 
unit times the projected shipments. The aggregate difference each year 
between energy bill savings and increased product expenditures is the 
net savings or net costs. As discussed in section IV.F, DOE chose to 
not apply a trend to the manufacturer selling price (in real dollars) 
of residential boilers. For the NIA, DOE developed a sensitivity 
analysis that considered one scenario with a lower rate of price 
decline than the reference case and one scenario with a higher rate of 
price decline than the reference case. These scenarios are described in 
appendix 10C of the NOPR TSD.
    A key component of the NIA is the energy efficiency forecasted over 
time for the base case (without new standards) and each of the 
standards cases. As discussed in section IV.F, DOE developed a 
distribution of efficiencies in the base case for 2020 (the year of 
anticipated compliance with an amended standard) for each residential 
boiler product class. Regarding the efficiency trend in the years after 
compliance, for the base case, DOE estimated that the overall market 
share of condensing gas-fired hot water boilers would grow from 44 
percent to 63 percent by 2049, and the overall market share of 
condensing oil-fired hot water boilers would grow from 7 percent to 13 
percent. DOE estimated that the base-case market shares of condensing 
gas-fired and oil-fired steam boilers will be negligible during the 
period of analysis. DOE assumed similar trends for the standards cases 
(albeit starting from a higher point). Details on how these efficiency 
trends were developed are provided in appendix 8H of the NOPR TSD.
    To estimate the impact that amended energy conservation standards 
may have in the year compliance becomes required, DOE uses ``roll-up'' 
or ``shift'' scenarios in its standards rulemakings. Under the ``roll-
up'' scenario, DOE assumes: (1) Product efficiencies in the base case 
that do not meet the new or amended standard level under consideration 
would ``roll up'' to meet that standard level; and (2) products at 
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 or amended minimum energy conservation standard. 
Because there is no reason to expect a shift, DOE used the ``roll-up'' 
scenario for the standards cases.
1. National Energy Savings Analysis
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products in each 
potential standards case (TSL) with consumption in the base case with 
no new or amended energy conservation standards. DOE calculated the 
national energy consumption by multiplying the number of units (stock) 
of each product (by vintage or age) by the unit energy consumption 
(also by vintage). Vintage represents the age of the product. DOE 
calculated annual NES based on the difference in national energy 
consumption for the base case (without amended efficiency standards) 
and for each higher efficiency standard. DOE estimated energy 
consumption and savings based on site energy and converted the 
electricity consumption and savings to primary energy using annual 
conversion factors derived from the AEO 2013 version of NEMS. 
Cumulative energy savings are the sum of the NES for each year over the 
timeframe of the analysis.
a. Full-Fuel-Cycle Energy Savings
    DOE has historically presented NES in terms of primary energy 
savings. In the case of electricity use and savings, this quantity 
includes the energy consumed by power plants to generate delivered 
(site) electricity.
    In response to the recommendations of a committee on ``Point-of-Use 
and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency 
Standards'' appointed by the National Academy of Sciences, DOE 
announced its intention to use full-fuel-cycle (FFC) measures of energy 
use and greenhouse gas and other emissions in the national impact 
analyses and emissions analyses included in future energy conservation 
standards rulemakings. 76 FR 51281 (August 18, 2011). After evaluating 
the approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in the Federal Register in which DOE 
explained its determination that NEMS is the most appropriate tool for 
its FFC analysis and

[[Page 17259]]

its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 
2012).
    AGA and APGA stated that it is not clear if the NEMS-based 
methodology provides the most complete and accurate methodology for 
incorporating the full-fuel-cycle analysis in energy conservation 
standards because all the assumptions used in the program are not fully 
disclosed. AGA and APGA urged the Department to hold a public workshop 
to provide all stakeholders the opportunity to review and discuss the 
assumptions and analyses included in the model, and to make the model 
publically available for anyone who wishes to run the analysis. (AGA, 
APGA, No. 21 at p. 4)
    In response, DOE notes that its Notice of Policy Amendment 
Regarding Full-Fuel-Cycle Analyses explains in some detail the 
reasoning for DOE's determination that NEMS is the most appropriate 
tool to calculate FFC measures of energy use and greenhouse gas and 
other emissions. 77 FR 49701 (August 17, 2012). The method and 
assumptions used to develop the FFC analysis are described in appendix 
10B of the NOPR TSD, and are discussed in detail in the report 
referenced in that appendix. DOE does not have a separate FFC model, as 
it utilizes NEMS to derive multipliers that allow estimation of the FFC 
impacts of the energy savings identified for a given product. The 
methods and assumptions used in NEMS are fully described in the 
documentation provided by EIA.\68\ DOE has used the FFC measures in 
several recent rulemakings, thereby providing interested parties with 
opportunities to review the approach and the associated documentation. 
Furthermore, the August 17, 2012 notice stated that the public is free 
to send in comments on this policy amendment at any time. 77 FR 49701, 
49702 (August 17, 2012).
---------------------------------------------------------------------------

    \68\ See http://www.eia.gov/oiaf/aeo/overview/.
---------------------------------------------------------------------------

    In the case of natural gas, the FFC measure includes losses in 
transmission and distribution, as well as energy use and losses 
(including methane leakage) in natural gas production.
    AHRI stated that the FFC NES values do not seem to reflect the 
greater FFC consumption of electricity because the primary and FFC 
energy savings in standby mode, which only uses electricity, are nearly 
the same. (AHRI, No. 22 at p. 5) In response, the primary energy 
savings for site use of electricity include the primary energy 
consumption by the electric generation sector. The FFC measure adds in 
energy that is used ``upstream'' in the production and transport of the 
primary fuels. This quantity, expressed as a percentage of the primary 
energy consumption, is relatively small. Hence, the FFC energy savings 
are only slightly larger than the primary energy savings.
2. Net Present Value Analysis
    The inputs for determining NPV are: (1) Total annual installed 
cost; (2) total annual savings in operating costs; (3) a discount 
factor to calculate the present value of costs and savings; (4) present 
value of costs; and (5) present value of savings. DOE calculated net 
savings each year as the difference between the base case and each 
standards case in terms of total savings in operating costs versus 
total increases in installed costs. DOE calculated savings over the 
lifetime of products shipped in the forecast period. DOE calculated NPV 
as the difference between the present value of operating cost savings 
and the present value of total installed costs. DOE used a discount 
factor based on real discount rates of 3 percent and 7 percent to 
discount future costs and savings to present values.
    For the NPV analysis, DOE calculates increases in total installed 
costs as the difference in total installed cost between the base case 
and standards case (i.e., once the new or amended standards take 
effect).
    DOE expresses savings in operating costs as decreases associated 
with the lower energy consumption of products bought in the standards 
case compared to the base efficiency case. Total savings in operating 
costs are the product of savings per unit and the number of units of 
each vintage that survive in a given year.
a. Discount Rates for Net Present Value
    DOE estimates the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\69\
---------------------------------------------------------------------------

    \69\ OMB Circular A-4 (Sept. 17, 2003), section E, ``Identifying 
and Measuring Benefits and Costs.''
---------------------------------------------------------------------------

    The Joint Commenters stated that in recent rulemakings for other 
products, it appears that DOE has placed significant emphasis on NPV at 
a 7-percent discount rate. They stated that DOE must consider NPV at 
both 3 percent and 7 percent as directed in OMB guidance, and it should 
weigh the NPV at a 3-percent discount rate more heavily. As noted in 
the Joint Comment, NRDC has explained why a 3-percent discount rate is 
more appropriate to use when considering national economic benefits in 
comments on previous rulemakings. NRDC stated in a previous comment 
that investments in energy efficiency reduce overall societal risk, and 
that the average rate of return on all investments is far below 7 
percent.\70\ (Joint Commenters, No. 27 at pp. 3-4)
---------------------------------------------------------------------------

    \70\ See comment submitted by NRDC to docket EE-RM/STD-01-350 on 
January 15, 2007, Comment 131, pp. 16-17.
---------------------------------------------------------------------------

    OMB Circular A-4 states that the 7-percent discount rate is an 
estimate of the average before-tax rate of return to private capital in 
the U.S. economy. It approximates the opportunity cost of capital, and 
it is the appropriate discount rate whenever the main effect of a 
regulation is to displace or alter the use of capital in the private 
sector. Circular A-4 also states that when regulation primarily and 
directly affects private consumption, a lower discount rate is 
appropriate. The alternative most often used is sometimes called the 
``social rate of time preference,'' which means the rate at which 
``society'' discounts future consumption flows to their present value. 
If one takes the rate that the average saver uses to discount future 
consumption as a measure of the social rate of time preference, then 
the real rate of return on long-term government debt may provide a fair 
approximation. Over the last thirty years, this rate has averaged 
around 3 percent in real terms on a pre-tax basis. Energy conservation 
standards for appliances and equipment affect both the use of capital 
and private consumption. Accordingly, DOE believes that it would be 
inappropriate to weight the NPV at either discount rate more heavily 
than the other.

I. Consumer Subgroup Analysis

    In the NOPR stage of a rulemaking, DOE conducts a consumer subgroup 
analysis. A consumer subgroup comprises a subset of the population that 
may be affected disproportionately by new or revised energy 
conservation standards (e.g., low-income consumers, seniors). The 
purpose of a subgroup analysis is to determine the extent of any such 
disproportional impacts.
    For today's NOPR, DOE evaluated impacts of potential standards on 
two subgroups: (1) Senior-only households and (2) low-income 
households. DOE identified these households in the RECS sample and used 
the LCC and PBP spreadsheet model to estimate the impacts of the 
considered efficiency levels on these subgroups. To the extent 
possible, it utilized inputs appropriate for these subgroups. The 
consumer subgroup results for the residential boilers TSLs are 
presented in section

[[Page 17260]]

V.B.1.b of this notice and chapter 11 of the NOPR TSD.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to determine the financial impact of amended 
energy conservation standards on manufacturers of residential boilers 
and to estimate the potential impact of such standards on employment 
and manufacturing capacity. The MIA has both quantitative and 
qualitative aspects. The quantitative part of the MIA primarily relies 
on the Government Regulatory Impact Model (GRIM), an industry cash-flow 
model with inputs specific to this rulemaking. The key GRIM inputs are 
industry cost structure data, shipment data, product costs, and 
assumptions about markups and conversion costs. The key output is the 
industry net present value (INPV). DOE used the GRIM to calculate cash 
flows using standard accounting principles and to compare changes in 
INPV between a base case and various TSLs (the standards case). The 
difference in INPV between the base case and standards cases represents 
the financial impact of amended energy conservation standards on 
residential boiler manufacturers. DOE used different sets of 
assumptions (markup scenarios) to represent the uncertainty surrounding 
potential impacts on prices and manufacturer profitability as a result 
of amended standards. These different assumptions produce a range of 
INPV results. The qualitative part of the MIA addresses the proposed 
standard's potential impacts on manufacturing capacity and industry 
competition, as well as any differential impacts the proposed standard 
may have on any particular sub-group of manufacturers. The qualitative 
aspect of the analysis also addresses product characteristics, as well 
as any significant market or product trends. The complete MIA is 
outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In the 
first phase of the MIA, DOE prepared an industry characterization based 
on the market and technology assessment, preliminary manufacturer 
interviews, and publicly available information. As part of its profile 
of the residential boilers industry, DOE also conducted a top-down cost 
analysis of manufacturers in order to derive preliminary financial 
inputs for the GRIM (e.g., sales, general, and administration (SG&A) 
expenses; research and development (R&D) expenses; and tax rates). DOE 
used public sources of information, including company SEC 10-K 
filings,\71\ corporate annual reports, the U.S. Census Bureau's 
Economic Census,\72\ and Hoover's reports \73\ to conduct this 
analysis.
---------------------------------------------------------------------------

    \71\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html).
    \72\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (2011) 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
    \73\ Hoovers Inc. Company Profiles, Various Companies (Available 
at: http://www.hoovers.com).
---------------------------------------------------------------------------

    In the second phase of the MIA, DOE prepared an industry cash-flow 
analysis to quantify the potential impacts of amended energy 
conservation standards. In general, energy conservation standards can 
affect manufacturer cash flow in three distinct ways. These include: 
(1) Creating a need for increased investment; (2) raising production 
costs per unit; and (3) altering revenue due to higher per-unit prices 
and possible changes in sales volumes. DOE estimated industry cash 
flows in the GRIM at various potential standard levels using industry 
financial parameters derived in the first phase and the shipment 
scenario used in the NIA. The GRIM modeled both impacts from the AFUE 
energy conservation standards and impacts from standby mode and off 
mode energy conservation standards (i.e., standards based on standby 
mode and off mode wattage). The GRIM results from the two standards 
were evaluated independent of one another.
    In the third phase of the MIA, DOE conducted structured, detailed 
interviews with a variety of manufacturers that represent approximately 
46 percent of domestic residential boiler sales covered by this 
rulemaking. During these interviews, DOE discussed engineering, 
manufacturing, procurement, and financial topics to validate 
assumptions used in the GRIM. DOE also solicited information about 
manufacturers' views of the industry as a whole and their key concerns 
regarding this rulemaking. See section IV.J.3 for a description of the 
key issues manufacturers raised during the interviews.
    Additionally, in the third phase, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
standards or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash-flow analysis. For 
example, small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that largely differs from the industry 
average could be more negatively affected by amended energy 
conservation standards. DOE identified one subgroup (small 
manufacturers) for a separate impact analysis.
    To identify small businesses for this analysis, DOE applied the 
small business size standards published by the Small Business 
Administration (SBA) to determine whether a company is considered a 
small business. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 
53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. To be 
categorized as a small business under North American Industry 
Classification System (NAICS) code 333414, ``Heating Equipment (except 
Warm Air Furnaces) Manufacturing,'' a residential boiler manufacturer 
and its affiliates may employ a maximum of 500 employees. The 500-
employee threshold includes all employees in a business's parent 
company and any other subsidiaries. Based on this classification, DOE 
identified at least 13 residential boiler companies that qualify as 
small businesses. The residential boiler small manufacturer subgroup is 
discussed in section VI.B of this notice and in chapter 12 of the NOPR 
TSD.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the potential changes in cash flow 
due to amended standards that result in a higher or lower industry 
value. The GRIM was designed to conduct an annual cash-flow analysis 
using standard accounting principles that incorporates manufacturer 
costs, markups, shipments, and industry financial information as 
inputs. DOE thereby calculated a series of annual cash flows, beginning 
in 2014 (the base year of the analysis) and continuing to 2049. DOE 
summed the stream of annual discounted cash flows during this period to 
calculate INPVs at each TSL. For residential boiler manufacturers, DOE 
used a real discount rate of 8.0 percent, which was derived from 
industry financial information and then modified according to feedback 
received during manufacturer interviews. DOE also used the GRIM to 
model changes in costs, shipments, investments, and manufacturer 
margins that could result from amended energy conservation standards.
    After calculating industry cash flows and INPV, DOE compared 
changes in INPV between the base case and each standards case. The 
difference in INPV between the base case and a standards case 
represents the financial impact of the amended energy conservation

[[Page 17261]]

standard on manufacturers at a particular TSL. As discussed previously, 
DOE collected this information on GRIM inputs from a number of sources, 
including publicly-available data and confidential interviews with a 
number of manufacturers. GRIM inputs are discussed in more detail in 
the next section. The GRIM results are discussed in section V.B.2. 
Additional details about the GRIM, the discount rate, and other 
financial parameters can be found in chapter 12 of the NOPR TSD.
    For consideration of standby mode and off mode regulations, DOE 
modeled the impacts of the technology options for reducing electricity 
usage discussed in the engineering analysis (chapter 5 of the TSD). The 
GRIM analysis incorporates the incremental additions to the MPC of 
standby mode and off mode features and the resulting impacts on 
markups.
    Due to the small cost of standby mode and off mode components 
relative to the overall cost of a residential boiler, DOE assumes that 
standards regarding standby mode and off mode features alone would not 
impact product shipment numbers. Additionally, DOE has tentatively 
concluded that the incremental cost of standby mode and off mode 
features would not have a differentiated impact on manufacturers of 
different product classes. Consequently, DOE models the impact of 
standby mode and off mode for the industry as a whole.
    The electric boiler product classes were not analyzed in the GRIM 
for AFUE energy conservation standards. As a result, quantitative 
numbers for those product classes are not available in the GRIM 
analyzing standby mode and off mode standards. However, the standby 
mode and off mode technology options considered for electric boilers 
are identical to the technology options for all other residential 
boiler product classes. As a result, DOE expects the standby mode and 
off mode impacts on electric boilers to be of the same order of 
magnitude as the impacts on all other residential boiler product 
classes.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing a higher-efficiency product is typically more 
expensive than manufacturing a baseline product due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the MPCs of the analyzed products can affect 
the revenues, gross margins, and cash flow of the industry, making 
these product cost data key GRIM inputs for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
calculated in the engineering analysis, as described in section IV.C 
and further detailed in chapter 5 of the NOPR TSD. In addition, DOE 
used information from its teardown analysis (described in chapter 5 of 
the TSD) to disaggregate the MPCs into material, labor, and overhead 
costs. To calculate the MPCs for products at and above the baseline, 
DOE performed teardowns and cost modeling that allowed DOE to estimate 
the incremental material, labor, and overhead costs for products above 
the baseline. These cost breakdowns and product markups were validated 
and revised with input from manufacturers during manufacturer 
interviews.
Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis from 2014 (the base year) to 2049 (the end year of the 
analysis period). The shipments model divides the shipments of 
residential boilers into specific market segments. The model starts 
from a historical base year and calculates retirements and shipments by 
market segment for each year of the analysis period. This approach 
produces an estimate of the total product stock, broken down by age or 
vintage, in each year of the analysis period. In addition, the product 
stock efficiency distribution is calculated for the base case and for 
each standards case for each product class. The NIA shipments forecasts 
are, in part, based on a roll-up scenario. The forecast assumes that a 
product in the base case that does not meet the standard under 
consideration would ``roll up'' to meet the amended standard beginning 
in the compliance year of 2020. See section IV.G and chapter 9 of the 
NOPR TSD for additional details.
Product and Capital Conversion Costs
    Amended energy conservation standards would cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and product designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each product class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Capital conversion costs; and (2) product conversion costs. Capital 
conversion costs are one-time investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new compliant product designs can be fabricated and 
assembled. Product conversion costs are one-time investments in 
research, development, testing, marketing, and other non-capitalized 
costs necessary to make product designs comply with amended energy 
conservation standards.
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with amended energy 
conservation standards, DOE used manufacturer interviews to gather data 
on the anticipated level of capital investment that would be required 
at each efficiency level. Based on manufacturer feedback, DOE developed 
a market-share-weighted manufacturer average capital expenditure which 
it then applied to the entire industry. DOE also made assumptions about 
which manufacturers would develop their own condensing heat exchanger 
production lines, in the event that efficiency levels using condensing 
technology were proposed. DOE supplemented manufacturer comments and 
tailored its analyses with estimates of capital expenditure 
requirements derived from the product teardown analysis and engineering 
analysis described in chapter 5 of the TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
estimate product conversion costs (e.g., R&D expenditures, 
certification costs) and validated those numbers against engineering 
estimates of redesign efforts. DOE combined this information with 
product listings to estimate how much manufacturers would have to spend 
on product development and product testing at each efficiency level. 
Manufacturer data were aggregated to better reflect the industry as a 
whole and to protect confidential information.
    In general, DOE assumes that all conversion-related investments 
occur between the year of publication of the final rule and the year by 
which manufacturers must comply with the amended standards. The 
conversion cost figures used in the GRIM can be found in section 
V.B.2.a of this notice. For additional information on the

[[Page 17262]]

estimated product and capital conversion costs, see chapter 12 of the 
NOPR TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
    As discussed in the previous section, MSPs include direct 
manufacturing production costs (i.e., labor, materials, and overhead 
estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, 
and interest), along with profit. To calculate the MSPs in the GRIM, 
DOE applied non-production cost markups to the MPCs estimated in the 
engineering analysis for each product class and efficiency level. 
Modifying these markups in the standards case yields different sets of 
impacts on manufacturers. For the MIA, DOE modeled two standards-case 
markup scenarios to represent the uncertainty regarding the potential 
impacts on prices and profitability for manufacturers following the 
implementation of amended energy conservation standards: (1) A 
preservation of gross margin percentage markup scenario; and (2) a 
preservation of per-unit operating profit markup scenario. These 
scenarios lead to different markup values that, when applied to the 
inputted MPCs, result in varying revenue and cash-flow impacts.
    Under the preservation of gross margin percentage markup scenario, 
DOE applied a single uniform ``gross margin percentage'' markup across 
all efficiency levels, which assumes that following amended standards, 
manufacturers would be able to maintain the same amount of profit as a 
percentage of revenue at all efficiency levels within a product class. 
As production costs increase with efficiency, this scenario implies 
that the absolute dollar markup will increase as well. Based on 
publicly-available financial information for manufacturers of 
residential boilers, as well as comments from manufacturer interviews, 
DOE assumed the average non-production cost markup--which includes SG&A 
expenses, R&D expenses, interest, and profit--to be 1.41 for all 
product classes. This markup scenario represents the upper bound of the 
residential boiler industry's profitability in the standards case 
because manufacturers are able to fully pass through additional costs 
due to standards to consumers.
    DOE decided to include the preservation of per-unit operating 
profit scenario in its analysis because manufacturers stated that they 
do not expect to be able to mark up the full cost of production in the 
standards case, given the highly competitive nature of the residential 
boiler market. In this scenario, manufacturer markups are set so that 
operating profit one year after the compliance date of amended energy 
conservation standards is the same as in the base case on a per-unit 
basis. In other words, manufacturers are not able to garner additional 
operating profit from the higher production costs and the investments 
that are required to comply with the amended standards; however, they 
are able to maintain the same operating profit in the standards case 
that was earned in the base case. Therefore, operating margin in 
percentage terms is reduced between the base case and standards case. 
DOE adjusted the manufacturer markups in the GRIM at each TSL to yield 
approximately the same earnings before interest and taxes in the 
standards case as in the base case. The preservation of per-unit 
operating profit markup scenario represents the lower bound of industry 
profitability in the standards case. This is because manufacturers are 
not able to fully pass through to consumers the additional costs 
necessitated by residential boiler standards, as they are able to do in 
the preservation of gross margin percentage markup scenario.
3. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 55 percent 
of the residential boiler market by revenue. DOE contractors endeavor 
to conduct interviews with a representative cross section of 
manufacturers (including large and small manufacturers, covering all 
equipment classes and product offerings). DOE contractors reached out 
to all the small business manufacturers that were identified as part of 
the analysis, as well as larger manufacturers that have significant 
market share in the residential boilers market. These interviews were 
in addition to those DOE conducted as part of the engineering analysis. 
The information gathered during these interviews enabled DOE to tailor 
the GRIM to reflect the unique financial characteristics of the 
residential boiler industry. The information gathered during these 
interviews enabled DOE to tailor the GRIM to reflect the unique 
financial characteristics of the residential boiler industry. All 
interviews provided information that DOE used to evaluate the impacts 
of potential amended energy conservation standards on manufacturer cash 
flows, manufacturing capacities, and employment levels.
    In interviews, DOE asked manufacturers to describe their major 
concerns with potential standards arising from a rulemaking involving 
residential boilers. Manufacturer interviews are conducted under non-
disclosure agreements (NDAs), so DOE does not document these 
discussions in the same way that it does public comments in the comment 
summaries and DOE's responses throughout the rest of this notice. The 
following sections highlight the most significant of manufacturers' 
statements that helped shape DOE's understanding of potential impacts 
of an amended standard on the industry. Manufacturers raised a range of 
general issues for DOE to consider, including a diminished ability to 
serve the replacement market, concerns that condensing boilers may not 
perform as rated without heating system modifications, and concerns 
about reduced product durability. (DOE also considered all other 
concerns expressed by manufacturers in this analysis.) Below, DOE 
summarizes these issues, which were raised in manufacturer interviews, 
in order to obtain public comment and related data.
Diminished Ability To Serve the Replacement Market
    In interviews, several manufacturers pointed out that over 90 
percent of residential boiler sales are transacted in the replacement 
channel, rather than the new construction channel. They stated that the 
current residential boiler market is structured around the legacy 
venting infrastructures that exist in the vast majority of homes and 
that any regulation that eliminated 82 to 83-percent efficient products 
would be very disruptive to the market. Manufacturers argued that under 
this scenario, consumers would face much higher installation costs, as 
well as complex challenges in changing the layout of the boiler room 
and upgrading their venting and heat distribution systems. 
Manufacturers argued that these considerations may induce consumers to 
explore other HVAC options and may cause them to leave the boiler 
market entirely. Manufacturers also asserted that the elimination of 82 
to 83-percent efficient products could be disruptive to the market 
because several manufacturers would have to eliminate commodity 
products that generate a majority of their sales and be forced to sell 
products for which they are less vertically integrated, which may cause 
them to exit the market entirely. Some manufacturers speculated that if 
this scenario were to play out, it could result in the loss of a 
substantial number of American manufacturing jobs.

[[Page 17263]]

    Accordingly, DOE has considered this feedback when developing its 
analysis of installation costs (see section IV.F.1), shipments analysis 
(see section IV.G), and employment impacts analysis (see section 
(V.B.2.b).
Condensing Boilers May Not Perform As Rated Without System Improvements
    Several manufacturers argued out that condensing boilers may have 
overstated efficiencies in terms of actual results in the field if they 
are installed as replacements in legacy distribution systems that were 
designed to maintain hot water supply temperatures of 180-200 [deg]F. 
Manufacturers stated that in these systems, return water temperatures 
will often be too high for condensing boilers to operate in condensing 
mode, thereby causing the boiler to be less efficient than its express 
rating. Manufacturers also stated that because condensing boilers are 
designed for lower maximum supply water temperatures, the heat 
distribution output of the heating system as a whole is often reduced, 
and the boiler may not be able to meet heat distribution requirements. 
This may require the implementation of additional heat distribution 
equipment within a particular system. Some manufacturers pointed out 
that reducing the supply water temperature also reduces the radiation 
component of some heat distribution units, which is essential for 
comfort and allows consumers to maintain a lower thermostat setting. 
Reducing the radiation component may require a higher thermostat 
setting to maintain comfort, thereby reducing overall system 
efficiency.
    DOE recognizes this issue and considered it in the energy use 
analysis for residential boilers. See chapter 7 of the NOPR TSD for 
additional details.
Reduced Product Durability and Reliability
    Several manufacturers commented that higher-efficiency condensing 
boilers on the market have not demonstrated the same level of 
durability and reliability as lower-efficiency products. Manufacturers 
stated that condensing products require more upkeep and maintenance and 
generally do not last as long as non-condensing products. Several 
manufacturers pointed out that they generally incur large after-sale 
costs with their condensing products because of additional warranty 
claims. Maintenance calls for these boilers require more skilled 
technicians and occur more frequently than they do with non-condensing 
boilers.
    DOE considered these comments when developing its estimates of 
repair and maintenance costs for residential boilers (see section 
IV.F.2.c) and product lifetime (IV.F.2.d).

K. Emissions Analysis

    In the emissions analysis, DOE estimated the reduction in power 
sector emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential amended energy conservation standards for residential 
boilers. In addition to estimating impacts of standards on power sector 
emissions, DOE estimated emissions impacts in production activities 
(extracting, processing, and transporting fuels) that provide the 
energy inputs to power plants. These are referred to as ``upstream'' 
emissions. Together, these emissions account for the full-fuel-cycle 
(FFC). In accordance with DOE's FFC Statement of Policy (76 FR 51281 
(Aug. 18, 2011) as amended at 77 FR 49701 (August 17, 2012)), the FFC 
analysis also includes impacts on emissions of methane (CH4) 
and nitrous oxide (N2O), both of which are recognized as 
greenhouse gases. The combustion emissions factors and the method that 
DOE used to derive upstream emissions factors are described in chapter 
13 of the NOPR TSD. The cumulative emissions reduction estimated for 
residential boilers is presented in section V.B.6.
    Today's proposed standards would reduce use of fuel at the site and 
slightly reduce electricity use, thereby reducing power sector 
emissions. However, the highest efficiency levels (i.e., the max-tech 
levels) considered for residential boilers would increase the use of 
electricity by the furnace. For the considered TSLs, DOE estimated the 
change in power sector and upstream emissions of CO2, 
NOX, SO2, and Hg.\74\
---------------------------------------------------------------------------

    \74\ Note that in these cases, the reduction in site emissions 
of CO2, NOX, and SO2 is larger than 
the increase in power sector emissions.
---------------------------------------------------------------------------

    DOE primarily conducted the emissions analysis using emissions 
factors for CO2 and most of the other gases derived from 
data in AEO 2013. Combustion emissions of CH4 and 
N2O were estimated using emissions intensity factors 
published by the Environmental Protection Agency (EPA) in its GHG 
Emissions Factors Hub.\75\ Site emissions of CO2 and 
NOX were estimated using emissions intensity factors from a 
separate EPA publication.\76\ DOE developed separate emissions factors 
for power sector emissions and upstream emissions. The method that DOE 
used to derive emissions factors is described in chapter 13 of the NOPR 
TSD.
---------------------------------------------------------------------------

    \75\ See http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
    \76\ U.S. Environmental Protection Agency, Compilation of Air 
Pollutant Emission Factors, AP-42, Fifth Edition, Volume I: 
Stationary Point and Area Sources (1998) (Available at: http://www.epa.gov/ttn/chief/ap42/index.html).
---------------------------------------------------------------------------

    For CH4 and N2O, DOE calculated emissions 
reduction in tons and also in terms of units of carbon dioxide 
equivalent (CO2eq). Gases are converted to CO2eq 
by multiplying each ton of the greenhouse gas by the gas's global 
warming potential (GWP) over a 100-year time horizon. Based on the 
Fifth Assessment Report of the Intergovernmental Panel on Climate 
Change,\77\ DOE used GWP values of 28 for CH4 and 265 for 
N2O.
---------------------------------------------------------------------------

    \77\ IPCC, 2013: Climate Change 2013: The Physical Science 
Basis. Contribution of Working Group I to the Fifth Assessment 
Report of the Intergovernmental Panel on Climate Change [Stocker, 
T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. 
Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge 
University Press, Cambridge, United Kingdom and New York, NY, USA. 
Chapter 8.
---------------------------------------------------------------------------

    EIA prepares the Annual Energy Outlook using the National Energy 
Modeling System (NEMS). Each annual version of NEMS incorporates the 
projected impacts of existing air quality regulations on emissions. AEO 
2013 generally represents current legislation and environmental 
regulations, including recent government actions, for which 
implementing regulations were available as of December 31, 2012.
    Because the on-site operation of residential boilers requires use 
of fossil fuels and results in emissions of CO2, 
NOX, and SO2 at the sites where these appliances 
are used, DOE also accounted for the reduction in these site emissions 
and the associated upstream emissions due to potential standards.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and DC were also limited under the 
Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), which 
created an allowance-based trading program that operates along with the 
Title IV program. CAIR was remanded to the U.S. Environmental 
Protection Agency (EPA) by the U.S. Court of Appeals for the District 
of Columbia Circuit, but it remained in effect.\78\ In 2011, EPA

[[Page 17264]]

issued a replacement for CAIR, the Cross-State Air Pollution Rule 
(CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the D.C. 
Circuit issued a decision to vacate CSAPR.\79\ The court ordered EPA to 
continue administering CAIR. The emissions factors used for today's 
NOPR, which are based on AEO 2013, assume that CAIR remains a binding 
regulation through 2040.\80\
---------------------------------------------------------------------------

    \78\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); 
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
    \79\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
    \80\ On April 29, 2014, the U.S. Supreme Court reversed the 
judgment of the D.C. Circuit and remanded the case for further 
proceedings consistent with the Supreme Court's opinion. The Supreme 
Court held in part that EPA's methodology for quantifying emissions 
that must be eliminated in certain States due to their impacts in 
other downwind States was based on a permissible, workable, and 
equitable interpretation of the Clean Air Act provision that 
provides statutory authority for CSAPR. See EPA v. EME Homer City 
Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). 
Because DOE is using emissions factors based on AEO 2013 for today's 
NOPR, the NOPR assumes that CAIR, not CSAPR, is the regulation in 
force. The difference between CAIR and CSAPR is not relevant for the 
purpose of DOE's analysis of SO2 emissions.
---------------------------------------------------------------------------

    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Beginning in 2016, however, SO2 emissions will 
decline significantly as a result of the Mercury and Air Toxics 
Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the 
final MATS rule, EPA established a standard for hydrogen chloride as a 
surrogate for acid gas hazardous air pollutants (HAP), and also 
established a standard for SO2 (a non-HAP acid gas) as an 
alternative equivalent surrogate standard for acid gas HAP. The same 
controls are used to reduce HAP and non-HAP acid gas; thus, 
SO2 emissions will be reduced as a result of the control 
technologies installed on coal-fired power plants to comply with the 
MATS requirements for acid gas. AEO 2013 assumes that, in order to 
continue operating, coal plants must have either flue gas 
desulfurization or dry sorbent injection systems installed by 2016. 
Both technologies, which are used to reduce acid gas emissions, also 
reduce SO2 emissions. Under the MATS, emissions will be far 
below the cap established by CAIR, so it is likely that the increase in 
electricity demand associated with the highest residential boiler 
efficiency levels would increase SO2 emissions.
    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\81\ Thus, it is unlikely that the 
increase in electricity demand associated with the highest residential 
boiler efficiency levels would increase NOX emissions in 
those States covered by CAIR. However, these levels would be expected 
to increase NOX emissions in the States not affected by the 
caps, so DOE estimated NOX emissions increases for these 
States.
---------------------------------------------------------------------------

    \81\ CSAPR also applies to NOX, and it would 
supersede the regulation of NOX under CAIR. As stated 
previously, the current analysis assumes that CAIR, not CSAPR, is 
the regulation in force. The difference between CAIR and CSAPR with 
regard to DOE's analysis of NOX is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, the increase in electricity demand 
associated with the highest residential boiler efficiency levels would 
be expected to increase Hg emissions. DOE estimated mercury emissions 
using emissions factors based on AEO 2013, which incorporates the MATS.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this proposed rule, DOE considered 
the estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation similar to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of products 
shipped in the forecast period for each TSL. This section summarizes 
the basis for the monetary values used for each of these emissions and 
presents the values considered in this rulemaking.
    For today's NOPR, DOE is relying on a set of values for the social 
cost of carbon (SCC) that was developed by a Federal interagency 
process. A summary of the basis for these values is provided below, and 
a more detailed description of the methodologies used is provided as an 
appendix to chapter 14 of the NOPR TSD.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services. Estimates of the SCC are provided 
in dollars per metric ton of carbon dioxide. A domestic SCC value is 
meant to reflect the value of damages in the United States resulting 
from a unit change in carbon dioxide emissions, while a global SCC 
value is meant to reflect the value of damages worldwide.
    Under section 1(b)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, ``assess both the costs and the benefits 
of the intended regulation and, recognizing that some costs and 
benefits are difficult to quantify, propose or adopt a regulation only 
upon a reasoned determination that the benefits of the intended 
regulation justify its costs.'' The purpose of the SCC estimates 
presented here is to allow agencies to incorporate the monetized social 
benefits of reducing CO2 emissions into cost-benefit 
analyses of regulatory actions. The estimates are presented with an 
acknowledgement of the many uncertainties involved and with a clear 
understanding that they should be updated over time to reflect 
increasing knowledge of the science and economics of climate impacts.
    As part of the interagency process that developed the SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    When attempting to assess the incremental economic impacts of 
carbon dioxide emissions, the analyst faces a number of challenges. A 
recent report from the National Research Council \82\ points out that 
any assessment will suffer from uncertainty, speculation, and lack of 
information about: (1) Future emissions of greenhouse gases; (2) the 
effects of past and future emissions on the climate system; (3) the 
impact of changes in climate on the physical and biological 
environment; and (4) the translation of these environmental impacts 
into economic damages. As a result, any effort to quantify and monetize 
the harms associated with climate change will raise questions of 
science, economics, and ethics and should be viewed as provisional.
---------------------------------------------------------------------------

    \82\ National Research Council. Hidden Costs of Energy: Unpriced 
Consequences of Energy Production and Use. National Academies Press: 
Washington, DC (2009).

---------------------------------------------------------------------------

[[Page 17265]]

    Despite the limits of both quantification and monetization, SCC 
estimates can be useful in estimating the social benefits of reducing 
carbon dioxide emissions. The agency can estimate the benefits from 
reduced (or costs from increased) emissions in any future year by 
multiplying the change in emissions in that year by the SCC value 
appropriate for that year. The net present value of the benefits can 
then be calculated by multiplying each of these future benefits by an 
appropriate discount factor and summing across all affected years.
    It is important to emphasize that the interagency process is 
committed to updating these estimates as the science and economic 
understanding of climate change and its impacts on society improves 
over time. In the meantime, the interagency group will continue to 
explore the issues raised by this analysis and consider public comments 
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing carbon dioxide emissions. To ensure consistency in how 
benefits are evaluated across agencies, the Administration sought to 
develop a transparent and defensible method, specifically designed for 
the rulemaking process, to quantify avoided climate change damages from 
reduced CO2 emissions. The interagency group did not 
undertake any original analysis. Instead, it combined SCC estimates 
from the existing literature to use as interim values until a more 
comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approach and Key Assumptions
    After the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specifically, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC: the FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and were used in the last 
assessment of the Intergovernmental Panel on Climate Change (IPCC). 
Each model was given equal weight in the SCC values that were 
developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models, while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models: Climate sensitivity, socio-economic and emissions 
trajectories, and discount rates. A probability distribution for 
climate sensitivity was specified as an input into all three models. In 
addition, the interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the interagency group selected four sets of SCC values for 
use in regulatory analyses. Three sets of values are based on the 
average SCC from three integrated assessment models, at discount rates 
of 2.5 percent, 3 percent, and 5 percent. The fourth set, which 
represents the 95th-percentile SCC estimate across all three models at 
a 3-percent discount rate, is included to represent higher-than-
expected impacts from climate change further out in the tails of the 
SCC distribution. The values grow in real terms over time. 
Additionally, the interagency group determined that a range of values 
from 7 percent to 23 percent should be used to adjust the global SCC to 
calculate domestic effects, although preference is given to 
consideration of the global benefits of reducing CO2 
emissions.\83\ Table IV.24 presents the values in the 2010 interagency 
group report,\84\ which is reproduced in appendix 14A of the NOPR TSD.
---------------------------------------------------------------------------

    \83\ It is recognized that this calculation for domestic values 
is approximate, provisional, and highly speculative. There is no a 
priori reason why domestic benefits should be a constant fraction of 
net global damages over time.
    \84\ Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. Interagency Working Group on Social Cost of 
Carbon, United States Government (February 2010) (Available at: 
http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table IV.24--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                      [In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                              Discount rate
                                                       ---------------------------------------------------------
                         Year                                5%           3%          2.5%             3%
                                                       ---------------------------------------------------------
                                                          Average      Average      Average     95th percentile
----------------------------------------------------------------------------------------------------------------
2010..................................................          4.7         21.4         35.1               64.9
2015..................................................          5.7         23.8         38.4               72.8
2020..................................................          6.8         26.3         41.7               80.7
2025..................................................          8.2         29.6         45.9               90.4
2030..................................................          9.7         32.8         50.0              100.0
2035..................................................         11.2         36.0         54.2              109.7
2040..................................................         12.7         39.2         58.4              119.3
2045..................................................         14.2         42.1         61.7              127.8
2050..................................................         15.7         44.9         65.0              136.2
----------------------------------------------------------------------------------------------------------------

[[Page 17266]]

    The SCC values used for today's notice were generated using the 
most recent versions of the three integrated assessment models that 
have been published in the peer-reviewed literature. Table IV.25 shows 
the updated sets of SCC estimates from the 2013 interagency update \85\ 
in five-year increments from 2010 to 2050. Appendix 14B of the NOPR TSD 
provides the full set of values. The central value that emerges is the 
average SCC across models at a 3-percent discount rate. However, for 
purposes of capturing the uncertainties involved in regulatory impact 
analysis, the interagency group emphasizes the importance of including 
all four sets of SCC values.
---------------------------------------------------------------------------

    \85\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866. Interagency 
Working Group on Social Cost of Carbon, United States Government 
(May 2013; revised November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).

                     Table IV.25--Annual SCC Values From 2013 Interagency Update, 2010-2050
                                      [In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                              Discount rate
                                                       ---------------------------------------------------------
                         Year                                5%           3%          2.5%             3%
                                                       ---------------------------------------------------------
                                                          Average      Average      Average     95th percentile
----------------------------------------------------------------------------------------------------------------
2010..................................................           11           32           51                 89
2015..................................................           11           37           57                109
2020..................................................           12           43           64                128
2025..................................................           14           47           69                143
2030..................................................           16           52           75                159
2035..................................................           19           56           80                175
2040..................................................           21           61           86                191
2045..................................................           24           66           92                206
2050..................................................           26           71           97                220
----------------------------------------------------------------------------------------------------------------

    It is important to recognize that a number of key uncertainties 
remain, and that current SCC estimates should be treated as provisional 
and revisable since they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned above points out that there is tension between 
the goal of producing quantified estimates of the economic damages from 
an incremental ton of carbon and the limits of existing efforts to 
model these effects. There are a number of analytical challenges that 
are being addressed by the research community, including research 
programs housed in many of the Federal agencies participating in the 
interagency process to estimate the SCC. The interagency group intends 
to periodically review and reconsider those estimates to reflect 
increasing knowledge of the science and economics of climate impacts, 
as well as improvements in modeling.
    In summary, in considering the potential global benefits resulting 
from reduced CO2 emissions, DOE used the values from the 
2013 interagency report, adjusted to 2013$ using the Gross Domestic 
Product price deflator. For each of the four SCC cases specified, the 
values used for emissions in 2015 were $12.0, $40.5, $62.4, and $119 
per metric ton avoided (values expressed in 2013$). DOE derived values 
after 2050 using the relevant growth rates for the 2040-2050 period in 
the interagency update.
    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SCC value for that year in each of the four cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the four cases using the specific 
discount rate that had been used to obtain the SCC values in each case.
2. Valuation of Other Emissions Reductions
    As noted above, DOE has taken into account how amended energy 
conservation standards would reduce site NOX emissions 
nationwide and increase power sector NOX emissions in those 
22 States not affected by the CAIR. DOE estimated the monetized value 
of net NOX emissions reductions resulting from each of the 
TSLs considered for today's NOPR based on estimates found in the 
relevant scientific literature. Estimates of monetary value for 
reducing NOX from stationary sources range from $476 to 
$4,893 per ton in 2013$.\86\ DOE calculated monetary benefits using a 
medium value for NOX emissions of $2,684 per short ton (in 
2013$), and real discount rates of 3 percent and 7 percent.
---------------------------------------------------------------------------

    \86\ U.S. Office of Management and Budget, Office of Information 
and Regulatory Affairs, 2006 Report to Congress on the Costs and 
Benefits of Federal Regulations and Unfunded Mandates on State, 
Local, and Tribal Entities (2006) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf).
---------------------------------------------------------------------------

    DOE is evaluating appropriate monetization of avoided 
SO2 and Hg emissions in energy conservation standards 
rulemakings. DOE has not included monetization of those emissions in 
the current analysis.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the power 
generation industry that would result from the adoption of new or 
amended energy conservation standards. In the utility impact analysis, 
DOE analyzes the changes in installed electrical capacity and 
generation that would result for each trial standard level. The utility 
impact analysis uses a variant of NEMS,\87\ which is a public domain, 
multi-sectored, partial equilibrium model of the U.S. energy sector. 
DOE uses a variant of this model, referred to as NEMS-BT,\88\ to 
account for selected utility impacts of new or amended

[[Page 17267]]

energy conservation standards. DOE's analysis consists of a comparison 
between model results for the most recent AEO Reference Case and for 
cases in which energy use is decremented to reflect the impact of 
potential standards. The energy savings inputs associated with each TSL 
come from the NIA. Chapter 15 of the NOPR TSD describes the utility 
impact analysis in further detail.
---------------------------------------------------------------------------

    \87\ For more information on NEMS, refer to the U.S. Department 
of Energy, Energy Information Administration documentation. A useful 
summary is National Energy Modeling System: An Overview 2003, DOE/
EIA-0581 (2003) (March 2003).
    \88\ DOE/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 DOE/EIA assumptions, DOE refers to it by the name 
``NEMS-BT'' (``BT'' is DOE's Building Technologies Program, under 
whose aegis this work has been performed).
---------------------------------------------------------------------------

N. Employment Impact Analysis

    Employment impacts from new or amended energy conservation 
standards include direct and indirect impacts. Direct employment 
impacts are any changes in the number of employees of manufacturers of 
the products subject to standards; the MIA addresses those impacts. 
Indirect employment impacts are changes in national employment that 
occur due to the shift in expenditures and capital investment caused by 
the purchase and operation of more-efficient appliances. Indirect 
employment impacts from standards consist of the jobs created or 
eliminated in the national economy, other than in the manufacturing 
sector being regulated, due to: (1) Reduced spending by end users on 
energy; (2) reduced spending on new energy supply by the utility 
industry; (3) increased consumer spending on the purchase of new 
products; and (4) the effects of those three factors throughout the 
economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. Data from BLS indicate that 
expenditures in the utility sector generally create fewer jobs (both 
directly and indirectly) than expenditures in other sectors of the 
economy.\89\ There are many reasons for these differences, including 
wage differences and the fact that the utility sector is more capital-
intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. Because reduced consumer expenditures for energy likely lead to 
increased expenditures in other sectors of the economy, the general 
effect of efficiency standards is to shift economic activity from a 
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase because of shifts in economic activity resulting from amended 
standards for residential boilers.
---------------------------------------------------------------------------

    \89\ See Bureau of Economic Analysis, ``Regional Multipliers: A 
Handbook for the Regional Input-Output Modeling System (RIMS II),'' 
U.S. Department of Commerce (1992).
---------------------------------------------------------------------------

    For the amended standard levels considered in this NOPR, DOE 
estimated indirect national employment impacts using an input/output 
model of the U.S. economy called Impact of Sector Energy Technologies, 
Version 3.1.1 (ImSET).\90\ ImSET is a special-purpose version of the 
``U.S. Benchmark National Input-Output'' (I-O) model, which was 
designed to estimate the national employment and income effects of 
energy-saving technologies. The ImSET software includes a computer-
based I-O model having structural coefficients that characterize 
economic flows among the 187 sectors. ImSET's national economic I-O 
structure is based on a 2002 U.S. benchmark table, specially aggregated 
to the 187 sectors most relevant to industrial, commercial, and 
residential building energy use. DOE notes that ImSET is not a general 
equilibrium forecasting model, and understands the uncertainties 
involved in projecting employment impacts, especially changes in the 
later years of the analysis. Because ImSET does not incorporate price 
changes, the employment effects predicted by ImSET may over-estimate 
actual job impacts over the long run. For the NOPR, DOE used ImSET only 
to estimate short-term (through 2023) employment impacts.
---------------------------------------------------------------------------

    \90\ M.J. Scott, O.V. Livingston, P.J. Balducci, J.M. Roop, and 
R.W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies, PNNL-
18412, Pacific Northwest National Laboratory (2009) (Available at: 
www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------

    For more details on the employment impact analysis, see chapter 16 
of the NOPR TSD.

O. General Comments on Residential Boiler Standards

    Fire & Ice, Weil McLain, and Weil McLain et al. stated that amended 
energy conservation standards for residential boilers would not achieve 
significant additional conservation of energy, would not be 
technologically feasible, and would not be economically justified. 
(Fire & Ice, No. 18 at p. 1; Weil McLain, No. 20-1 at pp. 1-2; Weil 
McLain et al., No. 20-2 at p. 1) Crown Boiler, U.S. Boiler, and New 
Yorker Boiler do not believe that DOE can economically justify a 
minimum efficiency level for gas-fired hot water boilers any higher 
than the current 82-percent AFUE level. (Crown Boiler, No. 24 at p. 3; 
U.S. Boiler, No. 25 at p. 2; New Yorker Boiler, No. 26 at p. 2) Fire & 
Ice and Weil McLain et al. stated that amending the standards would 
reduce the choices available to consumers that will properly operate in 
the field. (Fire & Ice, No. 18 at pp. 1-2; Weil McLain et al., No. 20-2 
at pp. 1-2) Weil McLain stated that for replacement installations where 
a condensing boiler would not present an economically and 
technologically feasible method of actually achieving greater energy 
conservation, the non-condensing boilers allowed under the current 
standards can achieve significant energy savings when older, low-
efficiency boilers are replaced. (Weil McLain, No. 20-1 at p. 5)
    HTP stated that it does not support an incremental increase in the 
allowable minimum efficiency of residential boilers, because appliances 
which operate at efficiencies between 82-percent and 90-percent AFUE 
are very likely to experience cyclic condensation within their venting 
and periods of high vent temperatures. (HTP, No. 31 at p. 1) 
Condensation in the venting system causes corrosion that may lead to 
safety concerns.
    The Joint Commenters urged DOE to strongly consider condensing-
level standards for both gas-fired and oil-fired hot water boilers, as 
the analysis found that such standards would yield positive average LCC 
savings for consumers. The Joint Commenters stated that the LCC savings 
for consumers at condensing levels may be higher than indicated in the 
analysis for the NODA, in part because of lower installation costs due 
to the introduction of advanced venting systems and declining equipment 
costs. (Joint Commenters, No. 27 at p. 1) Belyea Bros. stated that all 
furnaces sold and installed in Canada must have an AFUE of 90 or above, 
and it is illogical to not treat boilers the same as furnaces. (Belyea 
Bros., No. 17 at p. 1)
    DOE examined the impacts of condensing-level standards for both 
gas-fired and oil-fired hot water boilers. Its analysis accounted for 
applicable venting system technology and expected product costs for 
condensing boilers. Although condensing-level standards would save a 
substantial amount of energy, DOE concluded that such standards are 
likely not economically justified. DOE has tentatively concluded that, 
at the TSLs that include condensing efficiency levels (TSL 4 and TSL 
5), the benefits would be outweighed by the large reduction in

[[Page 17268]]

industry value and the high number of consumers experiencing a net LCC 
cost for gas-fired hot water boilers and oil-fired hot water boilers, 
as well as the negative NPV at a 7-percent discount rate (TSL 5 only). 
See section V.C for further details.
    A number of parties stated that much greater savings than indicated 
with AFUE or combustion efficiency tests are seen when replacing 
conventional heating equipment with integrated heat and hot water 
systems. (Breda, No. 29 at p. 1; Hlavaty Plumb Heat Cool, No. 29 at p. 
1; Maritime Energy, No. 29 at p. 1; OSI Comfort Specialists, No. 29 at 
p. 1; Petro Heating & Air Conditioning Services, No. 29 at p. 1; 
Sunshine Fuels & Energy Services, No. 29 at p. 1; Aiello Home Services, 
No. 29 at p. 1; Lombardi Oil, No. 29 at p. 1; Soundview Heating and Air 
Conditioning, No. 29 at p. 1; Stocker Home Energy Services, No. 29 at 
p. 1) DOE agrees that integrated heat and hot water systems can provide 
significant overall energy savings compared to use of separate heat and 
hot water systems, but DOE does not have authority to adopt standards 
that would require the use of integrated heat and hot water systems.

V. Analytical Results and Conclusions

A. Trial Standard Levels

    DOE developed trial standard levels (TSLs) that combine efficiency 
levels for each product class of residential boilers. The following 
section addresses the trial standard levels examined by DOE, the 
projected impacts of each of these levels if adopted as energy 
conservation standards for residential boilers, and the standards 
levels that DOE is proposing in today's NOPR. Additional details 
regarding the analyses conducted by DOE are contained in the publicly-
available NOPR TSD supporting this notice.
1. TSLs for Energy Efficiency
    Table V.1 presents the efficiency levels for each product class in 
each TSL that DOE has identified for residential boilers. TSL 5 
consists of the max-tech efficiency levels. TSL 4 consists of those 
efficiency levels that provide the maximum NES with an NPV greater than 
zero at a 7-percent discount rate (see section V.B.3 for NPV results). 
TSL 3 consists of the efficiency levels that provide the highest NPV 
using a 7-percent discount rate, and that also result in a higher 
percentage of consumers that receive an LCC benefit than experience an 
LCC loss (see section V.B.1 for LCC results). TSL 2 consists of the 
intermediate efficiency levels. TSL 1 consists of the most common 
efficiency levels in the current market. Table V.1 and Table V.2 
present the TSLs and the corresponding product class efficiency levels 
and AFUE levels that DOE considered for residential boilers.

                  Table V.1--Trial Standard Levels for Residential Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard levels
                Product class *                 ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler.....................            1            2            3            5            6
Gas-Fired Steam Boiler.........................            1            1            1            1            2
Oil-Fired Hot Water Boiler.....................            1            2            2            3            3
Oil-Fired Steam Boiler.........................            1            3            3            3            3
----------------------------------------------------------------------------------------------------------------
* As discussed in section IV.A.1, although electric hot water and electric steam boilers are in the scope of
  this rulemaking, these products were not analyzed for AFUE energy conservation standards and accordingly are
  not shown in this table.

                        Table V.2--Trial Standard Levels for Residential Boilers by AFUE
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard levels
                Product class *                 ----------------------------------------------------------------
                                                    1 (%)        2 (%)        3 (%)        4 (%)        5 (%)
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler.....................           83           84           85           92           96
Gas-Fired Steam Boiler.........................           82           82           82           82           83
Oil-Fired Hot Water Boiler.....................           85           86           86           91           91
Oil-Fired Steam Boiler.........................           84           86           86           86           86
----------------------------------------------------------------------------------------------------------------
* As discussed in section IV.A.1, electric hot water and electric steam boilers were not analyzed for AFUE
  energy conservation standards and accordingly are not shown in this table.

2. TSLs for Standby Mode and Off Mode
    Table V.3 presents the TSLs and the corresponding product class 
efficiency levels (by efficiency level) that DOE considered for boiler 
standby mode and off mode power consumption. Table V.4 presents the 
TSLs and the corresponding product class efficiency levels (expressed 
in watts) that DOE considered for boiler standby mode and off mode 
power consumption. For boiler product classes, DOE considered three 
efficiency levels.

     Table V.3--Standby Mode and Off Mode Trial Standard Levels for
                 Residential Boilers by Efficiency Level
------------------------------------------------------------------------
                                                               Trial
                                                              standard
                      Product class                            levels
                                                          --------------
                                                            1    2    3
------------------------------------------------------------------------
Gas-Fired Hot Water Boiler...............................    1    2    3
Gas-Fired Steam Boiler...................................    1    2    3
Oil-Fired Hot Water Boiler...............................    1    2    3
Oil-Fired Steam Boiler...................................    1    2    3
Electric Hot Water Boiler................................    1    2    3
Electric Steam Boiler....................................    1    2    3
------------------------------------------------------------------------

     Table V.4--Standby Mode and Off Mode Trial Standard Levels for
                      Residential Boilers by Watts
------------------------------------------------------------------------
                                                   Trial standard levels
                  Product class                  -----------------------
                                                     1       2       3
------------------------------------------------------------------------
Gas-Fired Hot Water Boiler......................    10.0     9.7     9.0
Gas-Fired Steam Boiler..........................     9.0     8.7     8.0
Oil-Fired Hot Water Boiler......................    12.0    11.7    11.0
Oil-Fired Steam Boiler..........................    12.0    11.7    11.0
Electric Hot Water Boiler.......................     9.0     8.7     8.0

[[Page 17269]]

 
Electric Steam Boiler...........................     9.0     8.7     8.0
------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on residential boilers consumers 
by looking at the effects potential amended standards would have on the 
LCC and PBP. DOE also examined the impacts of potential standards on 
consumer subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of potential amended energy 
conservation standards on consumers of residential boilers, DOE 
conducted LCC and PBP analyses for each TSL. In general, higher-
efficiency products would affect consumers in two ways: (1) annual 
operating expense would decrease, and (2) purchase price would 
increase. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs), product lifetime, and 
discount rates.
    The key outputs of the LCC analysis are a mean LCC savings (or 
cost) and a median PBP relative to the base-case efficiency 
distribution for each product class of residential boilers, as well as 
the percentage of consumers for whom the LCC under an amended standard 
would decrease (net benefit), increase (net cost), or exhibit no change 
(no impact). No impacts occur when the base-case efficiency of the 
boiler of a particular household equals or exceeds the efficiency at a 
given TSL.
    DOE also performed a PBP analysis as part of the consumer impact 
analysis. The PBP is the number of years it would take for the consumer 
to recover the increased costs of higher-efficiency product as a result 
of energy savings based on the operating cost savings. The PBP is an 
economic benefit-cost measure that uses benefits and costs without 
discounting. Chapter 8 of the NOPR TSD provides detailed information on 
the LCC and PBP analyses.
    DOE's LCC and PBP analyses provide five key outputs for each 
efficiency level above the baseline, as reported in Table V.5 through 
Table V.8 for the considered AFUE TSLs. (Results for all efficiency 
levels are reported in chapter 8 of the NOPR TSD.) These outputs 
include the proportion of residential boiler purchases in which the 
purchase of a boiler compliant with the amended energy conservation 
standard creates a net LCC increase, no impact, or a net LCC savings 
for the consumer. Another output is the average LCC savings from 
standard-compliant products, as well as the median PBP for the consumer 
investment in standards-compliant products. Savings are measured 
relative to the base-case efficiency distribution (see section IV.F.2), 
not the baseline efficiency level.

                     Table V.5--Summary AFUE Life-Cycle Cost and Payback Period Results for Gas-Fired Hot Water Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost (2013$)                    Life-cycle cost savings              Payback
                                                         -------------------------------------------------------------------------------------   period
                                                                                                            % of consumers that experience *    (years)
            Trial  standard level               AFUE (%)     Total     Discounted                Average  ----------------------------------------------
                                                           installed   operating       LCC       savings    Net cost   No impact  Net benefit
                                                             cost         cost                   (2013$)      (%)         (%)         (%)        Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................................         83      $5,447      $21,837     $27,284         $35          4          79           18        1.6
2............................................         84       5,461       21,616      27,077         100          3          68           29        1.6
3............................................         85       5,585       21,431      27,016         123         13          57           30        7.7
4............................................         92       6,768       20,022      26,790         201         38          29           33       18.8
5............................................         96       7,523       19,338      26,860         134         57           7           36       22.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

                       Table V.6--Summary AFUE Life-Cycle Cost and Payback Period Results for Gas-Fired Steam Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost (2013$)                    Life-cycle cost savings              Payback
                                                         -------------------------------------------------------------------------------------   period
                                                                                                            % of consumers that experience *    (years)
            Trial  standard level               AFUE (%)     Total     Discounted                Average  ----------------------------------------------
                                                           installed   operating       LCC       savings    Net cost   No impact  Net benefit
                                                             cost         cost                   (2013$)      (%)         (%)         (%)        Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................................         82      $5,621      $21,472     $27,093         $61          1          86           14        1.3
2............................................         82       5,621       21,472      27,093          61          1          86           14        1.3
3............................................         82       5,621       21,472      27,093          61          1          86           14        1.3
4............................................         82       5,621       21,472      27,093          61          1          86           14        1.3
5............................................         83       5,928       21,287      27,215         250         28          11           61       11.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

[[Page 17270]]

                     Table V.7--Summary AFUE Life-Cycle Cost and Payback Period Results for Oil-Fired Hot Water Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost (2013$)                    Life-cycle cost savings              Payback
                                                         -------------------------------------------------------------------------------------   period
                                                                                                            % of consumers that experience *    (years)
            Trial  standard level               AFUE (%)     Total     Discounted                Average  ----------------------------------------------
                                                           installed   operating       LCC       savings    Net cost   No impact  Net benefit
                                                             cost         cost                   (2013$)      (%)         (%)         (%)        Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................................         85      $7,332      $49,200     $56,532         $72          4          81           15        8.3
2............................................         86       7,527       48,648      56,175         257          9          49           42        7.6
3............................................         86       7,527       48,648      56,175         257          9          49           42        7.6
4............................................         91       9,555       46,600      56,155         273         54           8           38       21.4
5............................................         91       9,555       46,600      56,155         273         54           8           38       21.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

                       Table V.8--Summary AFUE Life-Cycle Cost and Payback Period Results for Oil-Fired Steam Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost (2013$)                    Life-cycle cost savings              Payback
                                                         -------------------------------------------------------------------------------------   period
                                                                                                            % of consumers that experience *    (years)
            Trial  standard level               AFUE (%)     Total     Discounted                Average  ----------------------------------------------
                                                           installed   operating       LCC       savings    Net cost   No impact  Net benefit
                                                             cost         cost                   (2013$)      (%)         (%)         (%)        Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................................         84      $7,422      $48,429     $55,850        $259          3          71           27        6.3
2............................................         86       7,873       47,345      55,218         723         23          10           67       10.5
3............................................         86       7,873       47,345      55,218         723         23          10           67       10.5
4............................................         86       7,873       47,345      55,218         723         23          10           67       10.5
5............................................         86       7,873       47,345      55,218         723         23          10           67       10.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

    Table V.9 through Table V.14 show the key LCC and PBP results for 
each product class for standby mode and off mode.

           Table V.9--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Gas-Fired Hot Water Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $196        $198          $14           0          51          49          1.1
2.......................................            2          22          190         212            7          11          51          38         10.4
3.......................................            3          23          176         199           14           6          51          44          7.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

            Table V.10--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Gas-Fired Steam Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $187        $189          $15           0          51          49          1.1
2.......................................            2          21          181         202            9           9          51          41         10.3
3.......................................            3          23          166         188           15           4          51          45          7.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

[[Page 17271]]

          Table V.11--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Oil-Fired Hot Water Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $253        $255          $15           0          51          49          1.0
2.......................................            2          21          247         268            9           9          51          41         10.2
3.......................................            3          22          232         254           15           4          51          45          7.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

            Table V.12--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Oil-Fired Steam Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $247        $249          $14           0          51          49          1.3
2.......................................            2          21          241         262            8           9          51          41         10.7
3.......................................            3          22          226         249           15           4          51          45          8.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

           Table V.13--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Electric Hot Water Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $141        $143          $11           0          51          49          2.0
2.......................................            2          21          136         158            3          19          51          30         17.7
3.......................................            3          23          126         148            8          11          51          38         11.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

             Table V.14--Summary Standby Mode and Off Mode Life-Cycle Cost and Payback Period Results for Electric Steam Residential Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Life-cycle cost (2013$)                    Life-cycle cost savings                Payback
                                                      --------------------------------------------------------------------------------------    period
                                                                                                          % of consumers that experience *     (years)
          Trial standard level             Efficiency     Total     Discounted                Average   ------------------------------------------------
                                             level      installed   operating       LCC       savings                                Net
                                                          cost         cost                   (2013$)     Net cost    No impact    benefit      Median
                                                                                                             (%)         (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................            1          $2         $144        $146          $11           0          51          49          2.0
2.......................................            2          21          139         161            4          19          51          31         10.5
3.......................................            3          23          128         151            9          11          51          38         10.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impacts of the 
considered AFUE TSLs on low-income and senior-only households. The 
average LCC savings and median payback periods for low-income and 
senior-only households are shown in Table V.15. Chapter 11 of the NOPR 
TSD presents detailed results of the consumer subgroup analysis.

[[Page 17272]]

                        Table V.15--Comparison of Impacts for Consumer Subgroups With All Consumers, Gas-Fired Hot Water Boilers
                                                                       [AFUE TSLs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Average life-cycle cost savings (2013$)                 Median payback period (years)
                  TSL                     AFUE (%) -----------------------------------------------------------------------------------------------------
                                                      Senior-only       Low-income     All consumers     Senior-only       Low-income     All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................         83              $27              $24              $35              1.8              1.5              1.6
2......................................         84               76               79              100              1.9              1.5              1.6
3......................................         85               73               82              123              9.9              9.1              7.7
4......................................         92             (34)            (128)              201             20.6             22.3             18.8
5......................................         96            (202)            (294)              134             24.5             23.7             22.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

                          Table V.16--Comparison of Impacts for Consumer Subgroups With All Consumers, Gas-Fired Steam Boilers
                                                                       [AFUE TSLs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Average life-cycle cost savings (2013$)                 Median payback period (years)
                  TSL                     AFUE (%) -----------------------------------------------------------------------------------------------------
                                                      Senior-only       Low-income     All consumers     Senior-only       Low-income     All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................         82              $50              $53              $61              1.7              1.3              1.3
2......................................         82               50               53               61              1.7              1.3              1.3
3......................................         82               50               53               61              1.7              1.3              1.3
4......................................         82               50               53               61              1.7              1.3              1.3
5......................................         83              160              180              250             13.0             11.1             11.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table V.17--Comparison of Impacts for Consumer Subgroups with All Consumers, Oil-Fired Hot Water Boilers
                                                                       [AFUE TSLs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Average life-cycle cost savings (2013$)                 Median payback period (years)
                  TSL                     AFUE (%) -----------------------------------------------------------------------------------------------------
                                                      Senior-only       Low-income     All consumers     Senior-only       Low-income     All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................         85              $58              $25              $72              7.9              9.8              8.3
2......................................         86              234              103              257              6.3             10.9              7.6
3......................................         86              234              103              257              6.3             10.9              7.6
4......................................         91               75          (1,019)              273             19.8             47.5             21.4
5......................................         91               75          (1,019)              273             19.8             47.5             21.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

                          Table V.18--Comparison of Impacts for Consumer Subgroups with All Consumers, Oil-Fired Steam Boilers
                                                                       [AFUE TSLs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Average life-cycle cost savings (2013$)                 Median payback period (years)
                  TSL                     AFUE (%) -----------------------------------------------------------------------------------------------------
                                                      Senior-only       Low-income     All consumers     Senior-only       Low-income     All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................         84               $8             $120             $259              1.0              9.5              6.3
2......................................         86               13              247              723              1.0             15.7             10.5
3......................................         86               13              247              723              1.0             15.7             10.5
4......................................         86               13              247              723              1.0             15.7             10.5
5......................................         86               13              247              723              1.0             15.7             10.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback Period
    As discussed in section III.E.2, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for a product that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. Accordingly, DOE calculated a 
rebuttable-presumption PBP for each TSL for residential boilers based 
on average usage profiles. As a result, DOE calculated a single 
rebuttable-presumption payback value, and not a distribution of PBPs, 
for each TSL. However, DOE routinely conducts an economic analysis that 
considers the full range of impacts to the consumer, manufacturer, 
Nation, and environment, as required by EPCA under 42 U.S.C. 
6295(o)(2)(B)(i). The results of that analysis serve as the basis for 
DOE to

[[Page 17273]]

definitively evaluate the economic justification for a potential 
standard level, thereby supporting or rebutting the results of any 
preliminary determination of economic justification. Table V.19 shows 
the rebuttable-presumption PBPs for the considered AFUE TSLs for the 
residential boilers product classes. Table V.20 shows the rebuttable-
presumption PBPs for the considered TSLs for standby mode and off mode 
for the residential boilers product classes.

     Table V.19--Rebuttable-Presumption Payback Periods (Years) for Residential Boilers for Analysis of AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                      Rebuttable  presumption payback (years)
          Product class          -------------------------------------------------------------------------------
                                       TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers.....             6.1             3.4             6.1            10.6            12.5
Gas-fired steam boilers.........             1.8             1.8             1.8             1.8             8.4
Oil-fired hot water boilers.....             7.3             5.9             5.9             9.4             9.4
Oil-fired steam boilers.........             3.4             4.8             4.8             4.8             4.8
----------------------------------------------------------------------------------------------------------------

  Table V.20--Standby Mode and Off Mode Rebuttable-Presumption Payback
                 Periods (Years) for Residential Boilers
------------------------------------------------------------------------
                                                  Rebuttable presumption
                                                      payback (years)
                  Product class                  -----------------------
                                                   TSL 1   TSL 2   TSL 3
------------------------------------------------------------------------
Gas-fired hot water boilers.....................     1.7    15.0    11.4
Gas-fired steam boilers.........................     1.5    12.9     9.9
Oil-fired hot water boilers.....................     1.5    12.7     9.7
Oil-fired steam boilers.........................     1.5    12.8     9.8
Electric hot water boilers......................     1.3    11.7     8.9
Electric steam boilers..........................     1.3    11.7     8.9
------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    As noted previously, DOE performed an MIA to estimate the impact of 
amended energy conservation standards on manufacturers of residential 
boilers. The following section describes the expected impacts on 
manufacturers at each considered TSL. DOE first discusses the impacts 
of potential AFUE standards and then turns to the impacts of potential 
standby mode and off mode standards. Chapter 12 of the NOPR TSD 
explains the analysis in further detail.
a. Industry Cash-Flow Analysis Results
Cash-Flow Analysis Results for Residential Boilers AFUE Standards
    Table V.21 and Table V.22 depict the estimated financial impacts 
(represented by changes in INPV) of amended energy conservation 
standards on manufacturers of residential boilers, as well as the 
conversion costs that DOE expects manufacturers would incur for all 
product classes at each TSL. To evaluate the range of cash-flow impacts 
on the residential boiler industry, DOE modeled two different markup 
scenarios using different assumptions that correspond to the range of 
anticipated market responses to amended energy conservation standards: 
(1) The preservation of gross margin percentage scenario; and (2) the 
preservation of per-unit operating profit scenario. Each of these 
scenarios is discussed immediately below.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of per-unit operating profit 
markup scenario, which assumes that manufacturers would not be able to 
generate greater operating profit on a per-unit basis in the standards 
case as compared to the base case. Rather, as manufacturers make the 
necessary investments required to convert their facilities to produce 
new standards-compliant products and incur higher costs of goods sold, 
their percentage markup decreases. Operating profit does not change in 
absolute dollars and decreases as a percentage of revenue.
    As noted in the MIA methodology discussion (see IV.J.2), in 
addition to markup scenarios, the MPC, shipments, and conversion cost 
assumptions also affect INPV results.
    The results in Table V.21 and Table V.22 show potential INPV 
impacts for residential boiler manufacturers; Table V.21 reflects the 
lower bound of impacts, and Table V.22 represents the upper bound.
    Each of the modeled scenarios in the AFUE standards analysis 
results in a unique set of cash flows and corresponding industry values 
at each TSL. In the following discussion, the INPV results refer to the 
difference in industry value between the base case and each standards 
case that results from the sum of discounted cash flows from the base 
year 2014 through 2049, the end of the analysis period.
    To provide perspective on the short-run cash flow impact, DOE 
discusses the change in free cash flow between the base case and the 
standards case at each TSL in the year before new standards would take 
effect. These figures provide an understanding of the magnitude of the 
required conversion costs at each TSL relative to the cash flow 
generated by the industry in the base case.

[[Page 17274]]

     Table V.21--Manufacturer Impact Analysis for Residential Boilers for AFUE Standards--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                         Units                Base case ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.....................................  2013$ millions..................      380.96      380.91       383.35       381.73       369.87       380.46
Change in INPV...........................  2013$ millions..................  ..........       (0.04)        2.39         0.77       (11.08)       (0.50)
                                           %...............................  ..........       (0.01)        0.63         0.20        (2.91)       (0.13)
Product Conversion Costs.................  2013$ millions..................  ..........        1.32         1.69         3.38        25.04        36.59
Capital Conversion Costs.................  2013$ millions..................  ..........  ...........        0.90         0.90        60.13        68.41
Total Conversion Costs...................  2013$ millions..................  ..........        1.32         2.59         4.28        85.16       105.00
Free Cash Flow (base case = 2019)........  2013$ millions..................       25.83       25.44        24.92        24.41        (8.73)      (15.92)
Change in Free Cash Flow (change from      2013$ millions..................  ..........       (0.40)       (0.90)       (1.40)      (34.60)      (41.80)
 base case).
                                           %...............................  ..........       (1.53)       (3.54)       (5.49)     (133.80)     (161.64)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    Table V.22--Manufacturer Impact Analysis for Residential Boilers for AFUE Standards--Preservation of Per-Unit Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                         Units                Base case ----------------------------------------------------------------
                                                                                              1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.....................................  2013$ millions..................      380.96      379.17       378.31       372.97       284.75       241.69
Change in INPV...........................  2013$ millions..................  ..........       (1.79)       (2.65)       (7.99)      (96.21)     (139.26)
                                           %...............................  ..........       (0.47)       (0.70)       (2.10)      (25.25)      (36.56)
Product Conversion Costs.................  2013$ millions..................  ..........        1.32         1.69         3.38        25.04        36.59
Capital Conversion Costs.................  2013$ millions..................  ..........  ...........        0.90         0.90        60.13        68.41
Total Conversion Costs...................  2013$ millions..................  ..........        1.32         2.59         4.28        85.16       105.00
Free Cash Flow (base case = 2019)........  2013$ millions..................       25.83       25.44        24.92        24.41        (8.73)      (15.92)
Change in Free Cash Flow (change from the  2013$ millions..................  ..........       (0.40)       (0.90)       (1.40)      (34.60)      (41.80)
 base case).
                                           %...............................  ..........       (1.53)       (3.54)       (5.49)     (133.80)     (161.64)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    TSL 1 represents EL 1 for all product classes. At TSL 1, DOE 
estimates impacts on INPV for residential boiler manufacturers to range 
from -0.47 percent to -0.01 percent, or a change in INPV of -$1.79 
million to -$0.04 million. At this potential standard level, industry 
free cash flow would be estimated to decrease by approximately 1.53 
percent to $25.44 million, compared to the base-case value of $25.83 
million in 2019, the year before the compliance date.
    At TSL 1, DOE does not anticipate manufacturers would lose a 
significant portion of their INPV. This is largely due to the fact that 
the vast majority of shipments would already meet or exceed the 
efficiency levels prescribed at TSL 1. DOE projects that in 2020, the 
expected year of compliance, approximately 80 percent of residential 
boiler shipments would meet or exceed the efficiency levels at TSL 1. 
As a result, only a small percentage of residential boiler shipments 
would need to be converted at TSL 1, so DOE expects low conversion 
costs at this TSL. DOE expects residential boiler manufacturers to 
incur $1.32 million in product conversion costs for boiler redesign and 
testing. DOE does not expect the modest efficiency gains at this TSL to 
require any major product upgrades or capital investments.
    At TSL 1, under the preservation of gross margin percentage 
scenario, the shipment-weighted average MPC increases by approximately 
1 percent relative to the base-case MPC. Manufacturers are able to 
fully pass on this cost increase to consumers by design in this markup 
scenario. This slight price increase would not mitigate the $1.32 
million in conversion costs estimated at TSL 1, resulting in slightly 
negative INPV impacts at TSL 1 under the this scenario.
    Under the preservation of per-unit operating profit markup 
scenario, manufacturers earn the same operating profit as would be 
earned in the base case, but do not earn additional profit from their 
investments. The 1-percent MPC increase is outweighed by a slightly 
lower average markup and $1.32 million in conversion costs, resulting 
in small negative impacts at TSL 1.
    TSL 2 sets the efficiency level at EL 1 for one product class (gas-
fired steam boilers), EL 2 for two product classes (gas-fired hot water 
boilers and oil-fired hot water boilers) and EL 3 for one product class 
(oil-fired steam boilers). At TSL 2, DOE estimates impacts on INPV for 
residential boilers manufacturers to range from -0.70 percent to 0.63 
percent, or a change in INPV of -$2.65 million to $2.39 million. At 
this potential standard level, industry free cash flow would be 
estimated to decrease by approximately 3.54 percent to $24.92 million, 
compared to the base-case value of $25.83 million in 2019, the year 
before the compliance date.
    DOE does not anticipate manufacturers would lose a substantial 
portion of their INPV, because a large percentage of shipments would 
still meet or exceed the efficiency levels prescribed at this TSL. At 
TSL 2, DOE estimates that in 2020, 63 percent of residential boiler 
shipments would meet or exceed the efficiency levels analyzed. The drop 
in the percentage of compliant products is largely due to the fact that 
the oil-fired hot water product class would move to EL 2 and the oil-
fired steam product class would move to EL 3. At these efficiency 
levels, DOE projects only 41 percent and 10 percent of shipments of hot 
water and steam oil-fired boilers, respectively, would meet

[[Page 17275]]

or exceed the levels at TSL 2 in 2020, the year of compliance. These 
figures do not have a large impact on INPV, however, because oil-fired 
boilers would only comprise approximately 30 percent of residential 
boiler shipments in 2020 according to DOE projections, while gas-fired 
boilers would comprise over 70 percent of shipments.
    DOE expects conversion costs would increase, but would still remain 
small compared to total industry value, as most manufacturers have gas-
fired boilers at the prescribed efficiency levels on the market and 
would only have to make minor changes to their production processes. 
While the percentage of oil-fired boilers at these efficiency levels on 
the market is lower, manufacturers did not cite any major investments 
that would have to be made to reach the efficiency levels at EL 2 for 
hot water products and EL 3 for steam products. Manufacturers also 
pointed out that gas-fired boiler shipments vastly out-pace oil-fired 
boiler shipments and that the market is continuing to trend towards 
gas-fired products. Overall, DOE estimates manufacturers would incur 
$1.69 million in product conversion costs for product redesign and 
testing and $0.90 million in capital conversion costs to make minor 
changes to their production lines.
    At TSL 2, under the preservation of gross margin percentage 
scenario, the shipment-weighted average MPC increases by 2 percent 
relative to the base-case MPC. In this scenario, INPV impacts are 
slightly positive because of manufacturers' ability to pass the higher 
production costs to consumers outweighs the $2.59 million in conversion 
costs. Under the preservation of per-unit operating profit markup 
scenario, the 2-percent MPC increase is outweighed by a slightly lower 
average markup and $2.59 million in total conversion costs, resulting 
in minimally negative impacts at TSL 2.
    TSL 3 represents EL 1 for one product class (gas-fired steam 
boilers), EL 2 for one product class (oil-fired hot water boilers), and 
EL 3 for two product classes (gas-fired hot water boilers and oil-fired 
steam boilers). At TSL 3, DOE estimates impacts on INPV for residential 
boiler manufacturers to range from -2.10 percent to 0.20 percent, or a 
change in INPV of -$7.99 million to $0.77 million. At this potential 
standard level, industry free cash flow would be estimated to decrease 
by approximately 5.49 percent in 2019, the year before compliance, to 
$24.41 million compared to the base-case value of $25.83 million.
    While more significant than the impacts at TSL 2, the impacts on 
INPV at TSL 3 would still be relatively minor compared to the total 
industry value. Percentage impacts on INPV would be slightly positive 
to slightly negative at TSL 3. DOE does not anticipate that 
manufacturers would lose a significant portion of their INPV at this 
TSL. While less than the previous TSLs, DOE projects that in 2020, over 
half of total shipments would already meet or exceed the efficiency 
levels prescribed at TSL 3. DOE expects conversion costs to remain 
small at TSL 3 compared to the total industry value. DOE estimates that 
product conversion costs would increase as manufacturers would have to 
redesign a larger percentage of their offerings and may have to design 
new products to replace lower-efficiency commodity products. At this 
TSL, DOE estimates that residential boiler manufacturers would incur 
$3.38 million in product conversion costs. Manufacturers, however, did 
not cite any major changes that would need to be made to production 
equipment to achieve the efficiency levels at this TSL. DOE, therefore, 
estimates that capital conversion costs would remain at $0.90 million 
for the industry.
    At TSL 3, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by 4 percent 
relative to the base-case MPC. In this scenario, INPV impacts are 
slightly positive because manufacturers' ability to pass the higher 
production costs to consumers outweighs the $4.28 million in total 
conversion costs. Under the preservation of per-unit operating profit 
markup scenario, the 4 percent MPC increase is slightly outweighed by a 
slightly lower average markup and $4.28 million in total conversion 
costs, resulting in minimally negative impacts at TSL 3.
    TSL 4 represents EL 1 for one product class (gas-fired steam 
boilers), EL 3 for two product classes (oil-fired hot water boilers and 
oil-fired steam boilers), and EL 5 for one product class (gas-fired hot 
water boilers). At TSL 4, DOE estimates impacts on INPV for residential 
boiler manufacturers to range from -25.25 percent to -2.91 percent, or 
a change in INPV of -$96.21 million to -$11.08 million. At this 
potential standard level, industry free cash flow would be estimated to 
decrease by approximately 133.8 percent in the year before compliance 
(2019) to -$8.73 million relative to the base-case value of $25.83 
million.
    Percentage impacts on INPV are moderately to significantly negative 
at TSL 4. DOE projects that in 2020, only 28 percent of residential 
boiler shipments would meet or exceed the efficacy levels at TSL 4. DOE 
expects that conversion costs would increase significantly at this TSL 
due to the fact that manufacturers would meet these efficiency levels 
by using condensing heat exchangers in their gas-fired and oil-fired 
hot water boiler products.\91\ Currently, the majority of gas-fired hot 
water boilers on the market is made from cast iron, carbon steel, or 
copper and contains noncondensing heat exchangers, because if these 
boilers were designed to condense, the acidic condensate from the flue 
gas would corrode these metals and cause the boiler to fail 
prematurely. If standards were set where manufacturers of gas-fired hot 
water boiler products could only meet the efficiency levels with 
condensing technology, companies that produce their own cast iron 
sections or their own carbon steel or copper heat exchangers would have 
to eliminate many of their commodity products, close foundries and 
casting facilities, and restructure their businesses. Domestic 
manufacturers who currently offer condensing products import their 
condensing heat exchangers (constructed from either stainless steel or 
aluminum) from Europe. DOE believes that if standards were set where 
manufacturers of gas-fired hot water boiler products could only meet 
the efficiency levels with condensing technology, some manufacturers 
may choose to develop their own condensing heat exchanger production 
capacity in order to gain a cost advantage and remain vertically 
integrated. This would require large capital investments in higher-
tech, more-automated production lines and new equipment to handle the 
different metals that are required. Companies that are currently 
heavily invested in lower-efficiency products may not be able to make 
these investments and may choose to exit the market. As noted above, 
these companies also may choose to source condensing heat exchangers 
and assemble a product designed around the sourced part, rather than 
invest in their own heat exchanger production capacity. This strategy 
would remove a significant piece of the value chain for these 
companies.
---------------------------------------------------------------------------

    \91\ At these efficiency levels, manufacturers would also use a 
condensing heat exchanger for oil-fired hot water boiler products; 
however, these models are much less common, and DOE believes that 
the majority of the conversion costs at this TSL would be driven by 
gas-fired hot water boiler products.
---------------------------------------------------------------------------

    While condensing products and condensing technology are not 
entirely unfamiliar to the companies that already make condensing 
products domestically, most manufacturers in the residential boiler 
industry have

[[Page 17276]]

relatively little experience in manufacturing the heat exchanger 
itself. If manufacturers choose to develop their own heat exchanger 
production capacity, a great deal of testing, prototyping, design, and 
manufacturing engineering resources will be required to design the heat 
exchanger and the more advanced control systems found in more-efficient 
products.
    These capital and production conversion expenses lead to the large 
reduction in cash flow in the years preceding the standard. DOE 
believes that only a few domestic manufacturers have the resources for 
this undertaking and believes that some large manufacturers and many 
smaller manufacturers would continue to source their heat exchangers. 
Ultimately, DOE estimates that manufacturers would incur $25.04 million 
in product conversion costs, as some manufacturers would be expected to 
attempt to add production capacity for condensing heat exchangers and 
others would have to design baseline products around a sourced 
condensing heat exchanger. In addition, DOE estimates that 
manufacturers would incur $60.13 million in capital conversion costs, 
which would be driven by capital investments in heat exchanger 
production lines.
    At TSL 4, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by 37 percent 
relative to the base-case MPC. In this scenario, INPV impacts are 
slightly negative because manufacturers' ability to pass the higher 
production costs to consumers is slightly outweighed the $85.16 million 
in total conversion costs. Under the preservation of per-unit operating 
profit markup scenario, the 37-percent MPC increase is outweighed by a 
lower average markup of 1.37 (compared to 1.41 in the preservation of 
gross margin percentage markup scenario) and $85.16 million in total 
conversion costs, resulting in significantly negative impacts at TSL 4.
    TSL 5 represents EL 2 for one product class (gas-fired steam 
boilers), EL 3 for two product classes (oil-fired hot water boilers and 
oil-fired steam boilers), and EL 6 for one product class (gas-fired hot 
water boilers). TSL 5 represents max-tech for all product classes. At 
TSL 5, DOE estimates impacts on INPV for residential boiler 
manufacturers to range from -36.59 percent to -0.13 percent, or a 
change in INPV of -$139.26 million to -$0.50 million. At this potential 
standard level, industry free cash flow would be estimated to decrease 
by approximately 161.64 percent in the year before compliance (2019) to 
-$15.92 million relative to the base-case value of $25.83 million.
    At TSL 5, percentage impacts on INPV range from slightly negative 
to significantly negative. DOE estimates that in 2020, only 7 percent 
of residential boiler shipments would already meet or exceed the 
efficiency levels prescribed at TSL 5. DOE expects conversion costs to 
continue to increase at TSL 5, as almost all products on the market 
would have to be redesigned and new products would have to be 
developed. As with TSL 4, DOE believes that at these efficiency levels, 
some manufacturers would choose to develop their own condensing heat 
exchanger production, rather than continuing to source these 
components. DOE estimates that product conversion costs would increase 
to $36.59 million as manufacturers would have to redesign a larger 
percentage of their offerings, implement complex control systems, and 
meet max-tech for all product classes. DOE estimates that manufacturers 
would incur $68.41 million in capital conversion costs due to some 
manufacturers choosing to develop their own heat exchanger production 
and others having to increase the throughput of their existing 
condensing boiler production lines.
    At TSL 5, under the preservation of gross margin percentage markup 
scenario, the shipment-weighted average MPC increases by 58 percent 
relative to the base-case MPC. In this scenario, INPV impacts are 
negative because manufacturers' ability to pass the higher production 
costs to consumers is outweighed by the $105.0 million in total 
conversion costs. Under the preservation of per-unit operating profit 
markup scenario, the 58-percent MPC increase is outweighed by a lower 
average markup of 1.36 and $105.0 million in total conversion costs, 
resulting in significantly negative impacts at TSL 5.
Cash-Flow Analysis Results for Residential Boilers in Standby Mode and 
Off Mode
    Standby mode and off mode standards results are presented in Table 
V.23 and Table V.24. The impacts of standby mode and off mode features 
were analyzed for the same product classes as the amended AFUE 
standards, but at different efficiency levels, which correspond to a 
different set of technology options for reducing standby mode and off 
mode energy consumption. Therefore, the TSLs in the standby mode and 
off mode analysis do not correspond to the TSLs in the AFUE analysis. 
Also, the electric boiler product classes were not analyzed in the GRIM 
for AFUE standards. As a result, quantitative numbers are also not 
available for the GRIM analyzing standby mode and off mode standards. 
However, the standby mode and off mode technology options considered 
for electric boilers are identical to the technology options for all 
other residential boiler product classes. Consequently, DOE expects the 
standby mode and off mode impacts on electric boilers to be of the same 
order of magnitude as the impacts on all other boiler product classes.
    The impacts of standby mode and off mode features were analyzed for 
the same two markup scenarios to represent the upper and lower bounds 
of industry impacts for residential boilers that were used in the AFUE 
analysis: (1) A preservation of gross margin percentage scenario; and 
(2) a preservation of per-unit operating profit scenario. As with the 
AFUE analysis, the preservation of gross margin percentage represents 
the lower bound of impacts, while the preservation of per-unit 
operating profit scenario represents the upper bound of impacts.
    Each of the modeled scenarios in the standby mode and off mode 
analyses results in a unique set of cash flows and corresponding 
industry values at each TSL. In the following discussion, the INPV 
results refer to the difference in industry value between the base case 
and each standards case that results from the sum of discounted cash 
flows from the base year 2014 through 2049, the end of the analysis 
period.
    To provide perspective on the short-run cash flow impact, DOE 
discusses the change in free cash flow between the base case and the 
standards case at each TSL in the year before new standards would take 
effect. These figures provide an understanding of the magnitude of the 
required conversion costs at each TSL relative to the cash flow 
generated by the industry in the base case.

[[Page 17277]]

   Table V.23--Manufacturer Impact Analysis for Residential Boilers for Standby Mode and Off Mode Standards--
                            Preservation of Gross Margin Percentage Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                                    Trial standard level
                                               Units            Base case --------------------------------------
                                                                                1            2            3
----------------------------------------------------------------------------------------------------------------
INPV................................  2013$ millions.........      380.96      380.88       381.16       381.17
Change in INPV......................  2013$ millions.........  ..........       (0.07)        0.20         0.22
                                      %......................  ..........       (0.02)        0.05         0.06
Product Conversion Costs............  2013$ millions.........  ..........        0.21         0.21         0.21
Capital Conversion Costs............  2013$ millions.........  ..........  ...........  ...........  ...........
Total Conversion Costs..............  2013$ millions.........  ..........        0.21         0.21         0.21
Free Cash Flow (base case = 2019)...  2013$ millions.........       25.83       25.77        25.77        25.77
Change in Free Cash Flow (change      2013$ millions.........  ..........       (0.06)       (0.06)       (0.06)
 from base case).
                                      %......................  ..........       (0.24)       (0.24)       (0.24)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

   Table V.24--Manufacturer Impact Analysis for Residential Boilers for Standby Mode and Off Mode Standards--
                           Preservation of Per-Unit Operating Profit Markup Scenario *
----------------------------------------------------------------------------------------------------------------
                                                                                    Trial standard level
                                               Units            Base case --------------------------------------
                                                                                1            2            3
----------------------------------------------------------------------------------------------------------------
INPV................................  2013$ millions.........      380.96      380.77       379.94       379.88
Change in INPV......................  2013$ millions.........  ..........       (0.19)       (1.02)       (1.08)
                                      %......................  ..........       (0.05)       (0.27)       (0.28)
Product Conversion Costs............  2013$ millions.........  ..........        0.21         0.21         0.21
Capital Conversion Costs............  2013$ millions.........  ..........  ...........  ...........  ...........
Total Conversion Costs..............  2013$ millions.........  ..........        0.21         0.21         0.21
Free Cash Flow (base case = 2019)...  2013$ millions.........       25.83       25.77        25.77        25.77
Decrease in Free Cash Flow (change    2013$ millions.........  ..........       (0.06)       (0.06)       (0.06)
 from base case).
                                      %......................  ..........       (0.24)       (0.24)       (0.24)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    TSL 1 represents EL 1 for all product classes. At TSL 1, DOE 
estimates impacts on INPV for residential boiler manufacturers to 
decrease by less than one tenth of a percent in both markup scenarios, 
which corresponds to a change in INPV of -$0.19 million to -$0.07 
million. At this potential standard level, industry free cash flow is 
estimated to decrease by approximately 0.24 percent to $25.77 million, 
compared to the base-case value of $25.83 million in 2019, the year 
before the compliance date.
    At TSL 1, DOE does not anticipate that manufacturers would lose a 
significant portion of their INPV. This is largely due to the small 
incremental costs of standby mode and off mode components relative to 
the overall costs of residential boiler products. DOE expects 
residential boiler manufacturers to incur $0.21 million in product 
conversion costs at TSL 1, primarily for testing. DOE does not expect 
that manufacturers would incur any capital conversion costs, as the 
product upgrades will only involve integrating a purchase-part.
    TSL 2 sets the efficiency level at EL 2 for all product classes. At 
TSL 2, DOE estimates impacts on INPV for residential boilers 
manufacturers to range from -0.27 percent to 0.05 percent, or a change 
in INPV of -$1.02 million to $0.20 million. At this potential standard 
level, industry free cash flow is estimated to decrease by 
approximately 0.24 percent to $25.77 million, compared to the base-case 
value of $25.83 million in 2019, the year before the compliance date.
    At TSL 2, DOE does not anticipate that manufacturers would lose a 
significant portion of their INPV. This is largely due to the small 
incremental costs of standby mode and off mode components relative to 
the overall costs of residential boiler products. DOE expects 
residential boiler manufacturers to incur $0.21 million in product 
conversion costs at TSL 2, primarily for testing. DOE does not expect 
that manufacturers would incur any capital conversion costs, as the 
product upgrades will only involve integrating a purchase-part.
    TSL 3 represents EL 3 for all product classes. At TSL 3, DOE 
estimates impacts on INPV for residential boiler manufacturers to range 
from -0.28 percent to 0.06 percent, or a change in INPV of -$1.08 
million to $0.22 million. At this potential standard level, industry 
free cash flow is estimated to decrease by approximately 0.24 percent 
in the year before compliance to $25.77 million compared to the base 
case value of $25.83 million.
    At TSL 3, DOE does not anticipate that manufacturers would lose a 
significant portion of their INPV. As with TSLs 1 and 2, this is 
largely due to the small incremental costs of standby mode and off mode 
components relative to the overall costs of residential boiler 
products. DOE expects residential boiler manufacturers to incur $0.21 
million in product conversion costs at TSL 3, primarily for testing. 
DOE does not expect that manufacturers would incur any capital 
conversion costs, as the product upgrades will only involve integrating 
a purchase-part.
Combining Cash-Flow Analysis Results for Residential Boilers (AFUE 
Standard and in Standby Mode and Off Mode Standard)
    As noted in section III.B, DOE analyzed the AFUE standard and the 
standby and off mode standard independently. The AFUE metric accounts 
for the fuel use consumption whereas the standby and off mode metric 
accounts for the electrical energy use in standby and off mode. There 
are five trial standard levels under consideration for the AFUE 
standard

[[Page 17278]]

and three trial stand levels under consideration for the standby and 
off mode standard.
    Both the AFUE standard and the standby and off mode standard could 
necessitate changes in manufacturer production costs, as well as 
conversion cost investments. The assumed design changes for the two 
standards in the engineering analysis are independent, therefore 
changes in manufacturing production costs and the conversion costs are 
additive. DOE expects that the costs to manufacturers would be 
mathematically the same regardless of whether or not the stand-by and 
off mode standards were combined or analyzed separately. However, DOE 
requests comment on whether an analysis that considers the cumulative 
costs of both standards when making technology choices would be more 
reflective of manufacturer decision making.
    Using the current approach that considers AFUE and standby and off 
mode standards separately, the range of potential impacts of combined 
standards on INPV is determined by summing the range of potential 
changes in INPV from the AFUE standard and from the standby and off 
mode standard. Similarly, to estimate the combined conversion costs, 
DOE sums the estimated conversion costs from the two standards. DOE 
does not present the combined impacts of all possible combinations of 
AFUE and standby and off mode TSLs in this notice. However, DOE expects 
the combined impact of the TSLs proposed for AFUE and standby and off 
mode electrical consumption in this NOPR to range from -2.38 to 0.26 
percent, which is approximately equivalent to a reduction of $9.07 
million to an increase of $0.99 million.
b. Impacts on Direct Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the residential boiler industry, DOE 
used the GRIM to estimate the domestic labor expenditures and number of 
employees in the base case and at each TSL in 2020. DOE used 
statistical data from the U.S. Census Bureau's 2011 Annual Survey of 
Manufacturers (ASM),\92\ the results of the engineering analysis, and 
interviews with manufacturers to determine the inputs necessary to 
calculate industry-wide labor expenditures and domestic employment 
levels. Labor expenditures related to manufacturing of the product are 
a function of the labor intensity of the product, the sales volume, and 
an assumption that wages remain fixed in real terms over time. The 
total labor expenditures in each year are calculated by multiplying the 
MPCs by the labor percentage of MPCs.
---------------------------------------------------------------------------

    \92\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (2011) 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM are converted to domestic 
production employment levels by dividing production labor expenditures 
by the annual payment per production worker (production worker hours 
times the labor rate found in the U.S. Census Bureau's 2011 ASM). The 
estimates of production workers in this section cover workers, 
including line-supervisors who are directly involved in fabricating and 
assembling a product within the manufacturing facility. Workers 
performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking. The total direct employment impacts calculated in the 
GRIM are the sum of the changes in the number of production workers 
resulting from the amended energy conservation standards for 
residential boilers, as compared to the base case. In general, more-
efficient boilers are more complex and more labor intensive and require 
specialized knowledge about control systems, electronics, and the 
different metals needed for the heat exchanger. Per-unit labor 
requirements and production time requirements increase with higher 
energy conservation standards. As a result, the total labor 
calculations described in this paragraph (which are generated by the 
GRIM) are considered an upper bound to direct employment forecasts.
    On the other hand, some manufacturers may choose not to make the 
necessary investments to meet the amended standards for all product 
classes. Alternatively, they may choose to relocate production 
facilities where conversion costs and production costs are lower. To 
establish a lower bound to negative employment impacts, DOE estimated 
the maximum potential job loss due to manufacturers either leaving the 
industry or moving production to foreign locations as a result of 
amended standards. In the case of residential boilers, most 
manufacturers agreed that higher standards would probably not push 
their production overseas due to shipping considerations. Rather, high 
enough standards could force manufacturers to rethink their business 
models. Instead of vertically integrated manufacturers, they would 
become assemblers and would source most of their components from 
overseas. This would mean any workers involved in casting metals that 
would be corroded in a condensing product would likely lose their jobs. 
These lower bound estimates were based on GRIM results, conversion cost 
estimates, and content from manufacturers interviews. The lower bound 
of employment is presented in Table V.25 below.
    DOE estimates that in the absence of amended energy conservation 
standards, there would be 785 domestic production workers in the 
residential boiler industry in 2020, the year of compliance. DOE 
estimates that 90 percent of residential boilers sold in the United 
States are manufactured domestically. Table V.25 shows the range of the 
impacts of potential amended energy conservation standards on U.S. 
production workers of residential boilers.

                           Table V.25--Potential Changes in the Total Number of Residential Boilers Production Workers in 2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Trial standard level *
                                 -----------------------------------------------------------------------------------------------------------------------
                                       Base case               1                   2                   3                   4                   5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic          785...............  785 to 793........  777 to 801........  769 to 821........  393 to 1,024......  196 to 1,035.
 Production Workers in 2020
 (without changes in production
 locations).

[[Page 17279]]

 
Potential Changes in Domestic     ..................  0 to 8............  (8) to 16.........  (16) to 36........  (392) to 239......  (589) to 250.
 Production Workers in 2020*.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.

    At the upper end of the range, all examined TSLs show positive 
impacts on domestic employment levels. Producing more-efficient boilers 
tends to require more labor, and DOE estimates that if residential 
boiler manufacturers chose to keep their current production in the 
U.S., domestic employment could increase at each TSL. In interviews, 
several manufacturers who produce high-efficiency boiler products 
stated that a standard that went to condensing levels could cause them 
to hire more employees to increase their production capacity. Others 
stated that a condensing standard would require additional engineers to 
redesign production processes, as well as metallurgy experts and other 
workers with experience working with higher-efficiency products. DOE, 
however, acknowledges that particularly at higher standard levels, 
manufacturers may not keep their production in the U.S. and also may 
choose to restructure their businesses or exit the market entirely.
    DOE does not expect any significant changes in domestic employment 
at TSL 1 or TSL 2. Most manufactures agreed that these efficiency 
levels would require minimal changes to their production processes and 
most employees would be retained. DOE estimates that there could be a 
small loss of domestic employment at TSL 3 due to the fact that some 
manufacturers would have to drop their 82 to 83-percent-efficient 
products, which several commented were their commodity products and 
drove a high percentage of their sales. Several manufacturers expressed 
that they could lose a significant number of employees at TSL 4 and TSL 
5, due to the fact that these TSLs contain condensing efficiency levels 
for the gas-fired hot water boiler product class. These manufacturers 
have employees who work on production lines that produce cast iron 
sections and carbon steel or copper heat exchangers for lower to mid-
efficiency products. If amended energy conservation standards were to 
require condensing efficiency levels, these employees would no longer 
be needed for that function, and manufacturers would have to decide 
whether to develop their own condensing heat exchanger production, 
source heat exchangers from Asia or Europe and assemble higher-
efficiency products, or leave the market entirely.
    DOE notes that its estimates of the impacts on direct employment 
are based on the analysis of amended AFUE energy efficiency standards 
only. Standby mode and off mode technology options considered in the 
engineering analysis would result in component swaps, which would not 
make the product significantly more complex and would not be difficult 
to implement. While some product development effort would be required, 
DOE does not expect the standby mode and off mode standard to 
meaningfully affect the amount of labor required in production. 
Consequently, DOE does not anticipate that the proposed standby mode 
and off mode standards will have a significant impact on direct 
employment.
    DOE notes that the employment impacts discussed here are 
independent of the indirect employment impacts to the broader U.S. 
economy, which are documented in chapter 15 of the NOPR TSD.
c. Impacts on Manufacturing Capacity
    Most residential boiler manufacturers stated that their current 
production is only running at 50-percent to 70-percent capacity and 
that any standard that does not propose efficiency levels where 
manufacturers would use condensing technology for hot water boilers 
would not have a large effect on capacity. The impacts of a potential 
condensing standard on manufacturer capacity are difficult to quantify. 
Some manufacturers who are already making condensing products with a 
sourced heat exchanger said they would likely be able to increase 
production using the equipment they already have by utilizing a second 
shift. Others said a condensing standard would idle a large portion of 
their business, causing stranded assets and decreased capacity. These 
manufactures would have to determine how to best increase their 
condensing boiler production capacity. DOE believes that some larger 
domestic manufacturers may choose to add production capacity for a 
condensing heat exchanger production line.
    Manufacturers stated that in a scenario where a potential standard 
would require efficiency levels at which manufacturers would use 
condensing technology, there is concern about the level of technical 
resources required to redesign and test all products. The engineering 
analysis shows that increasingly complex components and control 
strategies are required as standard levels increase. Manufacturers 
commented in interviews that the industry would need to add electrical 
engineering and control systems engineering talent beyond current 
staffing to meet the redesign requirements of higher TSLs. Additional 
training might be needed for manufacturing engineers, laboratory 
technicians, and service personnel if condensing products were broadly 
adopted. However, because TSL 3 (the proposed level) would not require 
condensing standards, DOE does not expect manufacturers to face long-
term capacity constraints due to the standard levels proposed in this 
notice.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. Using 
average cost assumptions developed for an industry cash-flow estimate 
is inadequate to assess differential impacts among manufacturer 
subgroups.
    For the residential boiler industry, DOE identified and evaluated 
the impact of amended energy conservation standards on one subgroup--
small manufacturers. The SBA defines a ``small business'' as having 500 
employees or less for NAICS 333414, ``Heating Equipment (except Warm 
Air Furnaces) Manufacturing.'' Based on this definition, DOE identified 
13 manufacturers in the residential boiler industry that qualify as 
small businesses. For a discussion of the impacts on the small 
manufacturer subgroup, see the regulatory flexibility

[[Page 17280]]

analysis in section VI.B of this notice and chapter 12 of the NOPR TSD.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden. In addition 
to energy conservation standards, other regulations can significantly 
affect manufacturers' financial operations. Multiple regulations 
affecting the same manufacturer can strain profits and lead companies 
to abandon product lines or markets with lower expected future returns 
than competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency.
    For the cumulative regulatory burden analysis, DOE looks at other 
regulations that could affect residential boiler manufacturers that 
will take effect approximately three years before or after the 2020 
compliance date of amended energy conservation standards for these 
products. In interviews, manufacturers cited Federal regulations on 
equipment other than residential boilers that contribute to their 
cumulative regulatory burden. The compliance years and expected 
industry conversion costs of relevant amended energy conservation 
standards are indicated in the Table V.26. DOE has included certain 
Federal regulations in the Table V.26 that have compliance dates beyond 
the three-year range of DOE's analysis, because those regulations were 
cited multiple times by manufacturers in interviews and written 
comments; they are included here for reference.

Table V.26--Compliance Dates and Expected Conversion Expenses of Federal
       Energy Conservation Standards Affecting Residential Boilers
                              Manufacturers
------------------------------------------------------------------------
                                                       Estimated total
 Federal energy conservation       Approximate       industry conversion
          standards              compliance date           expense
------------------------------------------------------------------------
2007 Residential Furnaces &                   2015        * $88M (2006$)
 Boilers, 72 FR 65136 (Nov.
 19, 2007)..................
2011 Residential Furnaces,                    2015      ** $2.5M (2009$)
 76 FR 37408 (June 27,
 2011); 76 FR 67037 (Oct.
 31, 2011)..................
Commercial Refrigeration                      2017       $184.0M (2012$)
 Equipment..................
Dishwashers ***.............                  2018                   TBD
Commercial Packaged Air                       2018                   TBD
 Conditioners and Heat Pumps
 ***........................
Commercial Warm-Air Furnaces                  2018                   TBD
 ***........................
Furnace Fans................                  2019        $40.6M (2013$)
Miscellaneous Residential                     2019                   TBD
 Refrigeration ***..........
Single Package Vertical Air                   2019                   TBD
 Conditioners and Heat Pumps
 ***........................
Commercial Water Heaters ***                  2019                   TBD
Packaged Terminal Air                         2019                   TBD
 Conditioners and Heat Pumps
 ***........................
Kitchen Ranges and Ovens ***                  2020                   TBD
Commercial Packaged Boilers                   2020                   TBD
 ***........................
Non-weatherized Gas-fired                     2021                   TBD
 Furnaces and Mobile Home
 Furnaces ***...............
Direct Heating Equipment/                     2021                   TBD
 Pool Heaters ***...........
Residential Water Heaters                     2021                   TBD
 ***........................
Clothes Dryers ***..........                  2022                   TBD
Central Air Conditioners ***                  2022                   TBD
Residential Refrigerators                     2022                   TBD
 and Freezers ***...........
Room Air Conditioners ***...                  2022                   TBD
Commercial Packaged Air                       2023                   TBD
 Conditioning and Heating
 Equipment (Evaporatively
 and Water Cooled) ***......
Residential Clothes Washers                   2023                   TBD
 ***........................
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and gas-
  fired and oil-fired boilers associated with the November 2007 final
  rule for residential furnaces and boilers are excluded from this
  figure. The 2011 direct final rule for residential furnaces sets a
  higher standard and earlier compliance date for oil furnaces than the
  2007 final rule. As a result, manufacturers will be required design to
  the 2011 direct final rule standard. The conversion costs associated
  with the 2011 direct final rule are listed separately in this table.
  EISA 2007 legislated higher standards and earlier compliance dates for
  residential boilers than were in the November 2007 final rule. As a
  result, gas-fired and oil-fired boiler manufacturers were required to
  design to the EISA 2007 standard beginning in 2012. The conversion
  costs listed for residential gas-fired and oil-fired boilers in the
  November 2007 residential furnaces and boilers final rule analysis are
  not included in this figure.
** Estimated industry conversion expenses and approximate compliance
  date reflect a court-ordered April 24, 2014 remand of the residential
  non-weatherized and mobile home gas furnaces standards set in the 2011
  Energy Conservation Standards for Residential Furnaces and Residential
  Central Air Conditioners and Heat Pumps. The costs associated with
  this rule reflect implementation of the amended standards for the
  remaining furnace product classes (i.e., oil-fired furnaces).
*** The NOPR and final rule for this energy conservation standard have
  not been published. The compliance date and analysis of conversion
  costs are estimates and have not been finalized at this time.

    In addition to Federal energy conservation standards, DOE 
identified other regulatory burdens that would affect manufacturers of 
residential boilers:
Revised DOE Test Procedure for Residential Boilers
    DOE is currently considering revisions to its test procedure for 
residential furnaces and boilers, and it is expected that a revised 
test procedure would increase testing burden for manufacturers. On July 
28, 2008, DOE published a technical amendment to the 2007 furnaces and 
boilers final rule, whose purpose was to add design requirements 
established in the Energy Independence and Security Act of 2007 (EISA 
2007). 73 FR 43611. These requirements prohibit constant-burning pilot 
lights for gas-fired hot water boilers and gas-fired steam boilers, and 
require an automatic means for adjusting the water temperature for gas-
fired hot water boilers, oil-fired hot water boilers, and electric hot 
water boilers. The test procedure is expected to be revised to include 
two test methods to verify the functionality of

[[Page 17281]]

the automatic means of adjusting the water temperature, which would 
increase the testing burden for residential boiler manufacturers and 
thereby the cumulative regulatory burden.
3. National Impact Analysis
a. Significance of Energy Savings
    For each TSL, DOE projected energy savings for residential boilers 
purchased in the 30-year period that begins in the year of anticipated 
compliance with amended standards (2020-2049). The savings are measured 
over the entire lifetime of product purchased in the 30-year period. 
DOE quantified the energy savings attributable to each TSL as the 
difference in energy consumption between each standards case and the 
base case. Table V.27 presents the estimated primary energy savings for 
each considered TSL for AFUE standards, and Table V.28 presents the 
estimated FFC energy savings for each TSL for AFUE standards. Table 
V.29 presents the estimated primary energy savings for each considered 
TSL for standby mode and off mode, and Table V.30 presents the 
estimated FFC energy savings for each TSL for standby mode and off 
mode. The approach for estimating national energy savings is further 
described in section IV.H.

  Table V.27--Cumulative National Primary Energy Savings for Residential Boiler AFUE Trial Standard Levels for
                                             Units Sold in 2020-2049
----------------------------------------------------------------------------------------------------------------
                                                              Trial standard level (quads)
            Product class             --------------------------------------------------------------------------
                                             1              2              3              4              5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers..........          0.030          0.076          0.134          0.735          1.231
Gas-fired steam boilers..............          0.006          0.006          0.006          0.006          0.023
Oil-fired hot water boilers..........          0.012          0.043          0.043          0.274          0.274
Oil-fired steam boilers..............          0.003          0.009          0.009          0.009          0.009
                                      --------------------------------------------------------------------------
    Total--All Classes *.............          0.05           0.13           0.19           1.02           1.54
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

Table V.28--Cumulative National Full-Fuel-Cycle Energy Savings for Residential Boiler AFUE Trial Standard Levels
                                           for Units Sold in 2020-2049
----------------------------------------------------------------------------------------------------------------
                                                              Trial standard level (quads)
            Product class             --------------------------------------------------------------------------
                                             1              2              3              4              5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers..........          0.033          0.084          0.148          0.812          1.357
Gas-fired steam boilers..............          0.006          0.006          0.006          0.006          0.025
Oil-fired hot water boilers..........          0.014          0.050          0.050          0.321          0.321
Oil-fired steam boilers..............          0.003          0.011          0.011          0.011          0.011
                                      --------------------------------------------------------------------------
    Total--All Classes *.............          0.06           0.15           0.21           1.15           1.71
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

  Table V.29--Cumulative National Primary Energy Savings for Residential Boiler Standby Mode and Off Mode Trial
                                   Standard Levels for Units Sold in 2020-2049
----------------------------------------------------------------------------------------------------------------
                                                                             Trial standard level (quads)
                           Product class                            --------------------------------------------
                                                                           1              2              3
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boilers........................................         0.020          0.024          0.033
Gas-Fired Steam Boilers............................................         0.0023         0.0027         0.0027
Oil-Fired Hot Water Boilers........................................         0.0071         0.0071         0.0071
Oil-Fired Steam Boilers............................................         0.0005         0.0005         0.0005
Electric Hot Water Boilers.........................................         0.0006         0.0006         0.0006
Electric Steam Boilers.............................................         0.0001         0.0001         0.0001
                                                                    --------------------------------------------
    Total--All Classes *...........................................         0.020          0.024          0.033
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

 Table V.30--Cumulative National Full-Fuel-Cycle Energy Savings for Residential Boiler Standby Mode and Off Mode
                                Trial Standard Levels for Units Sold in 2020-2049
----------------------------------------------------------------------------------------------------------------
                                                                             Trial standard level (quads)
                           Product class                            --------------------------------------------
                                                                           1              2              3
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boilers........................................         0.020          0.024          0.034

[[Page 17282]]

 
Gas-Fired Steam Boilers............................................         0.0023         0.0028         0.0028
Oil-Fired Hot Water Boilers........................................         0.0072         0.0072         0.0072
Oil-Fired Steam Boilers............................................         0.0005         0.0005         0.0005
Electric Hot Water Boilers.........................................         0.0006         0.0006         0.0006
Electric Steam Boilers.............................................         0.0001         0.0001         0.0001
                                                                    --------------------------------------------
    Total--All Classes *...........................................         0.031          0.035          0.045
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

    OMB Circular A-4 \93\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE undertook a sensitivity analysis using nine, rather than 30, years 
of product shipments. The choice of a nine-year period is a proxy for 
the timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\94\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to residential boilers. Thus, such 
results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology. The NES 
results based on a nine-year analytical period are presented for the 
AFUE TSLs in Table V.31.\95\ The impacts are counted over the lifetime 
of residential boilers purchased in 2020-2028.
---------------------------------------------------------------------------

    \93\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/)
    \94\ Section 325(m) of EPCA requires DOE to review its standards 
at least once every 6 years, and requires, for certain products, a 
3-year period after any new standard is promulgated before 
compliance is required, except that in no case may any new standards 
be required within 6 years of the compliance date of the previous 
standards. While adding a 6-year review to the 3-year compliance 
period adds up to 9 years, DOE notes that it may undertake reviews 
at any time within the 6 year period and that the 3-year compliance 
date may yield to the 6-year backstop. A 9-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some consumer products, 
the compliance period is 5 years rather than 3 years.
    \95\ DOE presents results based on a nine-year analytical period 
only for the AFUE TSLs, because the corresponding impacts for the 
standby mode and off mode TSLs are very small.

  Table V.31--Cumulative National FFC Energy Savings for Trial Standard Levels for Residential Boilers Sold in
                                            2020-2028, AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                              Trial standard level (quads)
            Product class             --------------------------------------------------------------------------
                                             1              2              3              4              5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers..........          0.012          0.030          0.054          0.301          0.381
Gas-fired steam boilers..............          0.002          0.002          0.002          0.002          0.008
Oil-fired hot water boilers..........          0.006          0.021          0.021          0.146          0.123
Oil-fired steam boilers..............          0.001          0.005          0.005          0.005          0.004
                                      --------------------------------------------------------------------------
    Total--All Classes *.............          0.02           0.06           0.08           0.45           0.52
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for residential 
boilers. In accordance with OMB's guidelines on regulatory 
analysis,\96\ DOE calculated the NPV using both a 7-percent and a 3-
percent real discount rate.
---------------------------------------------------------------------------

    \96\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------

    Table V.32 shows the consumer NPV results for each AFUE TSL 
considered for residential boilers. In each case, the impacts cover the 
lifetime of products purchased in 2020-2049.

 Table V.32--Cumulative Net Present Value of Consumer Benefits for Trial Standard Levels for Residential Boilers
                                        Sold in 2020-2049, AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                             Trial standard level (billion 2013$ **)
          Product class              Discount  -----------------------------------------------------------------
                                     rate (%)        1            2            3            4             5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler.......                      0.17         0.48         0.65         1.86         2.33
Gas-fired steam boiler...........                      0.03         0.03         0.03         0.03         0.01

[[Page 17283]]

 
Oil-fired hot water boiler.......       3              0.13         0.49         0.49         1.42         1.42
Oil-fired steam boiler...........                      0.03         0.11         0.11         0.11         0.11
                                  ------------------------------------------------------------------------------
    Total--All Classes *.........  ...........         0.37         1.12         1.28         3.42         3.87
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler.......                      0.05         0.16         0.18         0.12        (0.24)
Gas-fired steam boiler...........                      0.01         0.01         0.01         0.01        (0.02)
Oil-fired hot water boiler.......       7              0.04         0.14         0.14         0.02         0.02
Oil-fired steam boiler...........                      0.01         0.03         0.03         0.03         0.03
                                  ------------------------------------------------------------------------------
    Total--All Classes *.........  ...........         0.11         0.34         0.36         0.19        (0.20)
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.
** Parentheses indicate negative values.

    The NPV results based on the aforementioned nine-year analytical 
period are presented in Table V.33 for AFUE standards. The impacts are 
counted over the lifetime of products purchased in 2020-2028. As 
mentioned previously, such results are presented for informational 
purposes only and is not indicative of any change in DOE's analytical 
methodology or decision criteria.

 Table V.33--Cumulative Net Present Value of Consumer Benefits for Trial Standard Levels for Residential Boilers
                                        Sold in 2020-2028, AFUE Standards
----------------------------------------------------------------------------------------------------------------
                                                             Trial standard level (billion 2013$ **)
           Product class              Discount  ----------------------------------------------------------------
                                      rate (%)        1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler........                      0.07         0.19         0.26         0.84        1.11
Gas-fired steam boiler............                      0.01         0.01         0.01         0.01        0.01
Oil-fired hot water boiler........       3              0.06         0.24         0.24         1.00        1.00
Oil-fired steam boiler............                      0.02         0.06         0.06         0.06        0.06
                                   -----------------------------------------------------------------------------
    Total--All Classes *..........  ...........         0.16         0.50         0.57         1.90        2.18
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler........                      0.03         0.08         0.09         0.12        0.00
Gas-fired steam boiler............                      0.01         0.01         0.01         0.01       (0.01)
Oil-fired hot water boiler........       7              0.02         0.09         0.09         0.18        0.18
Oil-fired steam boiler............                      0.01         0.02         0.02         0.02        0.02
                                   -----------------------------------------------------------------------------
    Total--All Classes *..........  ...........         0.06         0.20         0.21         0.33        0.20
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.
** Parentheses indicate negative values.

    The above results reflect the use of a flat trend to estimate the 
change in price for residential boilers over the analysis period (see 
section IV.H). DOE also conducted a sensitivity analysis that 
considered one scenario with a lower rate of price decline than the 
reference case and one scenario with a higher rate of price decline 
than the reference case. The results of these alternative cases are 
presented in appendix 10C of the NOPR TSD.
    Table V.34 shows the consumer NPV results for each standby mode and 
off mode TSL considered for residential boilers. In each case, the 
impacts cover the lifetime of products purchased in 2020-2049.

 Table V.34--Cumulative Net Present Value of Consumer Benefits for Trial Standard Levels for Residential Boilers
                             Sold in 2020-2049, Standby Mode and Off Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                         Trial standard level (billion 2013$)
                    Product class                     Discount rate --------------------------------------------
                                                            %              1              2              3
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler..........................                        0.25           0.21           0.33
Gas-Fired Steam Boiler..............................                        0.031          0.027          0.027
Oil-Fired Hot Water Boiler..........................                        0.104          0.073          0.071
Oil-Fired Steam Boiler..............................         3              0.008          0.006          0.006
Electric Hot Water Boiler...........................                        0.006          0.003          0.003
Electric Steam Boiler...............................                        0.0006         0.0005         0.0005
                                                     -----------------------------------------------------------

[[Page 17284]]

 
    Total--All Classes *............................                        0.401          0.325          0.437
----------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boiler..........................                        0.10           0.08           0.13
Gas-Fired Steam Boiler..............................                        0.013          0.010          0.010
Oil-Fired Hot Water Boiler..........................                        0.044          0.027          0.026
Oil-Fired Steam Boiler..............................         7              0.003          0.002          0.002
Electric Hot Water Boiler...........................                        0.002          0.001          0.001
Electric Steam Boiler...............................                        0.0003         0.0002         0.0002
                                                     -----------------------------------------------------------
    Total--All classes *............................                        0.167          0.121          0.167
----------------------------------------------------------------------------------------------------------------
* Note: Components may not sum due to rounding.

c. Indirect Impacts on Employment
    DOE expects that amended energy conservation standards for 
residential boilers would reduce energy costs for consumers, with the 
resulting net savings being redirected to other forms of economic 
activity. Those shifts in spending and economic activity could affect 
the demand for labor. As described in section IV.N, DOE used an input/
output model of the U.S. economy to estimate indirect employment 
impacts of the TSLs that DOE considered in this rulemaking. DOE 
understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term time frames 
(2020 to 2025), where these uncertainties are reduced.
    The results suggest that the proposed standards would be likely to 
have a negligible impact on the net demand for labor in the economy. 
The net change in jobs is so small that it would be imperceptible in 
national labor statistics and might be offset by other, unanticipated 
effects on employment. Chapter 16 of the NOPR TSD presents detailed 
results regarding anticipated indirect employment impacts.
4. Impact on Product Utility or Performance
    DOE has tentatively concluded that the amended standards it is 
proposing in this NOPR would not lessen the utility or performance of 
residential boilers.
5. Impact of Any Lessening of Competition
    DOE considered any lessening of competition that is likely to 
result from new or amended standards. The Attorney General determines 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard, and transmits such determination in writing 
to the Secretary, together with an analysis of the nature and extent of 
such impact.
    To assist the Attorney General in making such determination, DOE 
has provided DOJ with copies of this NOPR and the TSD for review. DOE 
will consider DOJ's comments on the proposed rule in preparing the 
final rule, and DOE will publish and respond to DOJ's comments in that 
document.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Energy savings from 
amended standards for the residential boilers covered in this NOPR 
could also produce environmental benefits in the form of reduced 
emissions of air pollutants and greenhouse gases associated with 
electricity production. Table V.35 provides DOE's estimate of 
cumulative emissions reductions projected to result from the AFUE TSLs 
considered. Table V.36 provides DOE's estimate of cumulative emissions 
reductions projected to result from the TSLs considered in this 
rulemaking for standby mode and off mode boiler efficiency. The tables 
include both power sector emissions and upstream emissions. The 
emissions were calculated using the multipliers discussed in section 
IV.K. DOE reports annual emissions reductions for each TSL in chapter 
13 of the NOPR TSD.

   Table V.35--Cumulative Emissions Reduction Estimated for Residential Boiler Trial Standard Levels for AFUE
                                                    Standards
----------------------------------------------------------------------------------------------------------------
                                                                  Trial standard level
                                      --------------------------------------------------------------------------
                                             1              2              3              4              5
----------------------------------------------------------------------------------------------------------------
                                        Site and Power Sector Emissions *
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............          3.04           8.31         11.4           61.8           88.8
SO2 (thousand tons)..................          0.088          0.600         0.165         (0.297)         0.193
NOX (thousand tons)..................          2.73           7.35         10.3           57.2           80.5
Hg (tons)............................          0.000          0.000        (0.001)        (0.006)        (0.005)
CH4 (thousand tons)..................          0.069          0.224         0.243          1.18           1.79
N2O (thousand tons)..................          0.026          0.093         0.090          0.488          0.555
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............          0.404          1.12          1.52           8.34          11.6
SO2 (thousand tons)..................          0.042          0.151         0.147          0.852          0.873

[[Page 17285]]

 
NOX (thousand tons)..................          5.77          15.6          21.7          119            169
Hg (tons)............................          0.000          0.000         0.000          0.000          0.000
CH4 (thousand tons)..................         28.5           66.3         110            584            938
N2O (thousand tons)..................          0.002          0.007         0.007          0.041          0.047
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............          3.45           9.43         12.9           70.2          100
SO2 (thousand tons)..................          0.130          0.751         0.312          0.555          1.07
NOX (thousand tons)..................          8.50          23.0          32.1          176            250
Hg (tons)............................          0.000          0.000        (0.001)        (0.005)        (0.004)
CH4 (thousand tons)..................         28.6           66.5         110            585            940
CH4 (thousand tons CO2eq) **.........        800          1,863         3,084         16,381         26,325
N2O (thousand tons)..................          0.028          0.100         0.097          0.529          0.602
N2O (thousand tons CO2eq) **.........          7.35          26.4          25.7          140            160
----------------------------------------------------------------------------------------------------------------
* Primarily site emissions. Values include the increase in power sector emissions from higher electricity use at
  TSLs 4 and 5.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
Note: Parentheses indicate negative values.

  Table V.36--Cumulative Emissions Reduction Estimated for Residential Boiler Trial Standard Levels for Standby
                                           Mode and Off Mode Standards
----------------------------------------------------------------------------------------------------------------
                                                                              Trial standard level
                                                              --------------------------------------------------
                                                                      1                2                3
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................................           1.32             1.51             1.92
SO2 (thousand tons)..........................................           1.49             1.71             2.16
NOX (thousand tons)..........................................           0.016            0.018            0.021
Hg (tons)....................................................           0.002            0.003            0.003
CH4 (thousand tons)..........................................           0.203            0.232            0.294
N2O (thousand tons)..........................................           0.040            0.046            0.059
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................................           0.09             0.11             0.14
SO2 (thousand tons)..........................................           0.020            0.023            0.029
NOX (thousand tons)..........................................           1.300            1.490            1.886
Hg (tons)....................................................           0.0001           0.0001           0.0001
CH4 (thousand tons)..........................................           7.91             9.06            11.47
N2O (thousand tons)..........................................           0.001            0.001            0.001
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................................           1.42             1.62             2.05
SO2 (thousand tons)..........................................           1.51             1.73             2.19
NOX (thousand tons)..........................................           1.32             1.51             1.91
Hg (tons)....................................................           0.002            0.003            0.004
CH4 (thousand tons)..........................................           8.1              9.3             11.8
CH4 (thousand tons CO2eq) *..................................         227.1            260.2            329.4
N2O (thousand tons)..........................................           0.041            0.047            0.060
N2O (thousand tons CO2eq) *..................................          11.0             12.6             15.9
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).

    As part of the analysis for this proposed rule, DOE estimated 
monetary benefits likely to result from the reduced emissions of 
CO2 and NOX that DOE estimated for each of the 
TSLs considered for residential boilers. As discussed in section IV.L, 
for CO2, DOE used the most recent values for the SCC 
developed by an interagency process. The four sets of SCC values for 
CO2 emissions reductions in 2015 resulting from that process 
(expressed in 2013$) are represented by $12.0/metric ton (the average 
value from a distribution that uses a 5-percent discount rate), $40.5/
metric ton (the average value from a distribution that uses a 3-percent 
discount rate), $62.4/metric ton (the average value from a distribution 
that uses a 2.5-percent discount rate), and $119/metric ton (the 95th-
percentile value from a distribution that uses a 3-percent discount 
rate). The values for later years are higher due to increasing damages 
(emissions-related costs) as the projected magnitude of climate change 
increases.

[[Page 17286]]

    Table V.37 presents the global value of CO2 emissions 
reductions at each TSL for AFUE standards. Table V.38 presents the 
global value of CO2 emissions reductions at each TSL for 
standby and off mode. For each of the four cases, DOE calculated a 
present value of the stream of annual values using the same discount 
rate as was used in the studies upon which the dollar-per-ton values 
are based. DOE calculated domestic values as a range from 7 percent to 
23 percent of the global values, and these results are presented in 
chapter 14 of the NOPR TSD.

  Table V.37--Estimates of Global Present Value of CO2 Emissions Reduction Under Residential Boiler AFUE Trial
                                                 Standard Levels
----------------------------------------------------------------------------------------------------------------
                                                                   SCC Case* (million 2013$)
                                              ------------------------------------------------------------------
                     TSL                                                                           3% Discount
                                                 5% Discount     3% Discount     2.5% Discount      rate, 95th
                                                rate, average   rate, average    rate, average      percentile
----------------------------------------------------------------------------------------------------------------
                                        Site and Power Sector Emissions**
----------------------------------------------------------------------------------------------------------------
1............................................           17.4              86.9            140              269
2............................................           47.8             238              384              736
3............................................           65.4             326              525            1,008
4............................................          356             1,770            2,853            5,477
5............................................          507             2,530            4,082            7,831
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................            2.32             11.5             18.6             35.8
2............................................            6.44             32.1             51.7             99.3
3............................................            8.69             43.3             69.9            134
4............................................           48.0             239              385              739
5............................................           66.3             331              534            1,024
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1............................................           19.7              98.4            159              305
2............................................           54.3             270              435              836
3............................................           74.1             369              595            1,142
4............................................          404             2,009            3,238            6,216
5............................................          573             2,861            4,616            8,855
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119
  per metric ton (2013$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** Includes the increase in power sector emissions from higher electricity use at TSLs 4 and 5.

 Table V.38--Estimates of Global Present Value of CO2 Emissions Reduction Under Residential Boiler Standby Mode
                                       and Off Mode Trial Standard Levels
----------------------------------------------------------------------------------------------------------------
                                                                   SCC Case* (million 2013$)
                                              ------------------------------------------------------------------
                     TSL                                                                           3% Discount
                                                 5% Discount     3% Discount     2.5% Discount      rate, 95th
                                                rate, average   rate, average    rate, average      percentile
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1............................................            7.5              37.6             60.7            116.3
2............................................            8.6              43.0             69.5            133.2
3............................................           10.9              54.4             87.7            168.1
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................            0.52              2.6              4.3              8.1
2............................................            0.59              3.0              4.9              9.3
3............................................            0.75              3.8              6.2             11.8
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1............................................            8.1              40.2             64.9            124.5
2............................................            9.2              46.1             74.3            142.5
3............................................           11.6              58.2             93.9            179.9
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119
  per metric ton (2013$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).

[[Page 17287]]

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other greenhouse gas (GHG) emissions 
to changes in the future global climate and the potential resulting 
damages to the world economy continues to evolve rapidly. Thus, any 
value placed on reducing CO2 emissions in this rulemaking is 
subject to change. DOE, together with other Federal agencies, will 
continue to review various methodologies for estimating the monetary 
value of reductions in CO2 and other GHG emissions. This 
ongoing review will consider the comments on this subject that are part 
of the public record for this and other rulemakings, as well as other 
methodological assumptions and issues. However, consistent with DOE's 
legal obligations, and taking into account the uncertainty involved 
with this particular issue, DOE has included in this proposed rule the 
most recent values and analyses resulting from the interagency review 
process.
    DOE also estimated a range for the cumulative monetary value of the 
economic benefits associated with NOX emissions reductions 
anticipated to result from amended standards for the residential boiler 
products that are the subject of this NOPR. The dollar-per-ton values 
that DOE used are discussed in section IV.L. Table V.39 presents the 
cumulative present values for NOX emissions reductions for 
each AFUE TSL calculated using the average dollar-per-ton values and 
seven-percent and three-percent discount rates. Table V.40 presents the 
cumulative present values for NOX emissions reductions for 
each standby mode and off mode TSL calculated using the average dollar-
per-ton values and seven-percent and three-percent discount rates.

 Table V.39--Estimates of Present Value of NOX Emissions Reduction Under
              Residential Boiler AFUE Trial Standard Levels
------------------------------------------------------------------------
                                                   Million 2013$
                                         -------------------------------
                   TSL                      3% Discount     7% Discount
                                               rate            rate
------------------------------------------------------------------------
                    Site and Power Sector Emissions*
------------------------------------------------------------------------
1.......................................            3.03            1.15
2.......................................            8.17            3.13
3.......................................           11.4             4.36
4.......................................           63.7            24.5
5.......................................           88.8            33.8
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................            6.38            2.42
2.......................................           17.3             6.60
3.......................................           24.0             9.15
4.......................................          132              51.0
5.......................................          186              71.0
------------------------------------------------------------------------
                          Total FFC Emissions**
------------------------------------------------------------------------
1.......................................            9.40            3.58
2.......................................           25.5             9.73
3.......................................           35.5            13.5
4.......................................          196              75.6
5.......................................          275             105
------------------------------------------------------------------------
* Includes the increase in power sector emissions from higher
  electricity use at TSLs 4 and 5.
** Components may not sum to total due to rounding.

 Table V.40--Estimates of Present Value of NOX Emissions Reduction Under
   Residential Boiler Standby Mode and Off Mode Trial Standard Levels
------------------------------------------------------------------------
                                                   Million 2013$
                                         -------------------------------
                   TSL                      3% Discount     7% Discount
                                               rate            rate
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1.......................................            0.08            0.07
2.......................................            0.09            0.08
3.......................................            0.11            0.10
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................            1.37            0.49
2.......................................            1.56            0.56
3.......................................            1.97            0.70
------------------------------------------------------------------------
                          Total FFC Emissions**
------------------------------------------------------------------------
1.......................................            1.44            0.56
2.......................................            1.65            0.64
3.......................................            2.08            0.80
------------------------------------------------------------------------
** Components may not sum to total due to rounding.

7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.41 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of consumer savings calculated for each AFUE TSL for residential 
boilers considered in this rulemaking, at both a seven-percent and 
three-percent discount rate. Table V.42 presents the NPV values that 
result from adding the estimates of the potential economic benefits 
resulting from reduced CO2 and NOX emissions in 
each of four valuation scenarios to the NPV of consumer savings 
calculated for each standby mode and off mode TSL for residential 
boilers considered in this rulemaking, at both a seven-percent and 
three-percent discount rate. The CO2 values used in the 
columns of each table correspond to the four sets of SCC values 
discussed above.

[[Page 17288]]

Table V.41--Residential Boiler TSLs (AFUE): Net Present Value of Consumer Savings Combined With Present Value of
                            Monetized Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% discount rate added with:
                                                 ---------------------------------------------------------------
                                                  SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                       TSL                          metric ton      metric ton      metric ton      metric ton
                                                     CO2* and        CO2* and        CO2* and        CO2* and
                                                   medium value    medium value    medium value    medium value
                                                      for NOX         for NOX         for NOX         for NOX
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................             0.4             0.5             0.5             0.7
2...............................................             1.2             1.4             1.6             2.0
3...............................................             1.4             1.7             1.9             2.5
4...............................................             4.0             5.6             6.9             9.8
5...............................................             4.7             7.0             8.8            13.0
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 7% discount rate added with:
                                                 ---------------------------------------------------------------
                       TSL                        SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                                                    metric ton      metric ton      metric ton      metric ton
                                                       CO2*            CO2*            CO2*            CO2*
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................             0.1             0.2             0.3             0.4
2...............................................             0.4             0.6             0.8             1.2
3...............................................             0.4             0.7             1.0             1.5
4...............................................             0.7             2.3             3.5             6.5
5...............................................             0.5             2.8             4.5             8.8
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium
  value, which corresponds to $2,684 per ton.

  Table V.42--Table Residential Boiler TSLs (Standby Mode and Off Mode): Net Present Value of Consumer Savings
             Combined With Present Value of Monetized Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% discount rate added with:
                                                 ---------------------------------------------------------------
                                                  SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                       TSL                          metric ton      metric ton      metric ton      metric ton
                                                     CO2* and        CO2* and        CO2* and        CO2* and
                                                   medium value    medium value    medium value    medium value
                                                      for NOX         for NOX         for NOX         for NOX
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................            0.41            0.44            0.47            0.53
2...............................................            0.34            0.37            0.40            0.47
3...............................................            0.45            0.50            0.53            0.62
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 7% discount rate added with:
                                                 ---------------------------------------------------------------
                       TSL                        SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
                                                    metric ton      metric ton      metric ton      metric ton
                                                       CO2*            CO2*            CO2*            CO2*
----------------------------------------------------------------------------------------------------------------
                                                                           Billion 2013$
                                                 ---------------------------------------------------------------
1...............................................            0.18            0.21            0.23            0.29
2...............................................            0.13            0.17            0.20            0.26
3...............................................            0.18            0.23            0.26            0.35
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium
  value, which corresponds to $2,684 per ton.

    Although adding the value of consumer savings to the values of 
emission reductions provides a valuable perspective, two issues should 
be considered. First, the national operating cost savings are domestic 
U.S. consumer monetary savings that occur as a result of market 
transactions, while the value of CO2 reductions is based on 
a global value. Second, the assessments of operating cost savings and 
the SCC are performed with different methods that use different time 
frames for analysis. The national operating cost savings is measured 
for the lifetime of products shipped in 2020-2049. The SCC values, on 
the other hand, reflect the present value of future climate-related 
impacts resulting from the emission of one metric ton of CO2 
in each year; these impacts continue well beyond 2100.

C. Proposed Standards

    When considering proposed standards, the new or amended energy

[[Page 17289]]

conservation standards that DOE adopts for any type (or class) of 
covered product, including residential boilers, shall be designed to 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified. (42 U.S.C. 
6295(o)(2)(A)) As discussed previously, in determining whether a 
standard is economically justified, the Secretary must determine 
whether the benefits of the standard exceed its burdens by, to the 
greatest extent practicable, considering the seven statutory factors 
discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or amended 
standard must also ``result in significant conservation of energy.'' 
(42 U.S.C. 6295(o)(3)(B))
    For this NOPR, DOE considered the impacts of amended standards for 
residential boilers at each TSL, beginning with the maximum 
technologically feasible level, to determine whether that level was 
economically justified. Where the max-tech level was not justified, DOE 
then considered the next most efficient level and undertook the same 
evaluation until it reached the highest efficiency level that is both 
technologically feasible and economically justified and saves a 
significant amount of energy.
    To aid the reader in understanding the benefits and/or burdens of 
each TSL, tables in this section summarize the quantitative analytical 
results for each TSL, based on the assumptions and methodology 
discussed herein. The efficiency levels contained in each TSL are 
described in section V.A. In addition to the quantitative results 
presented in the tables, DOE also considers other burdens and benefits 
that affect economic justification. These include the impacts on 
identifiable subgroups of consumer who may be disproportionately 
affected by a national standard (see section V.B.1.b), and impacts on 
employment. DOE discusses the impacts on direct employment in 
residential boiler manufacturing in section V.B.2.b, and discusses the 
indirect employment impacts in section V.B.3.c.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of: (1) A lack of 
information; (2) a lack of sufficient salience of the long-term or 
aggregate benefits; (3) a lack of sufficient savings to warrant 
delaying or altering purchases; (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments; (5) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs; and (6) a divergence in incentives (for example, renter 
versus owner or builder versus purchaser). Other literature indicates 
that with less than perfect foresight and a high degree of uncertainty 
about the future, consumers may trade off at a higher than expected 
rate between current consumption and uncertain future energy cost 
savings. This undervaluation suggests that regulation that promotes 
energy efficiency can produce significant net private gains (as well as 
producing social gains by, for example, reducing pollution).
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego a 
purchase of a product in the standards case, this decreases sales for 
product manufacturers and the cost to manufacturers is included in the 
MIA. Second, DOE accounts for energy savings attributable only to 
products actually used by consumers in the standards case; if a 
standard decreases the number of products purchased by consumers, this 
decreases the potential energy savings from an energy conservation 
standard. DOE provides estimates of changes in the volume of product 
purchases in chapter 9 of the NOPR TSD. DOE's current analysis does not 
explicitly control for heterogeneity in consumer preferences, 
preferences across subcategories of products or specific features, or 
consumer price sensitivity variation according to household income.\97\
---------------------------------------------------------------------------

    \97\ P.C. Reiss and M.W. White, Household Electricity Demand, 
Revisited, Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance standards, and 
potential enhancements to the methodology by which these impacts are 
defined and estimated in the regulatory process.\98\ DOE welcomes 
comments on how to more fully assess the potential impact of energy 
conservation standards on consumer choice and how to quantify this 
impact in its regulatory analysis.
---------------------------------------------------------------------------

    \98\ Alan Sanstad, Notes on the Economics of Household Energy 
Consumption and Technology Choice. Lawrence Berkeley National 
Laboratory (2010) (Available at: http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (Last 
accessed May 3, 2013).
---------------------------------------------------------------------------

1. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for AFUE Standards
    Table V.43 and Table V.44 summarize the quantitative impacts 
estimated for each AFUE TSL for residential boilers. The national 
impacts are measured over the lifetime of residential boilers purchased 
in the 30-year period that begins in the year of compliance with 
amended standards (2020-2049). The energy savings, emissions 
reductions, and value of emissions reductions refer to full-fuel-cycle 
results. The efficiency levels contained in each TSL are described in 
section IV.A.

                              Table V.43--Summary of Analytical Results for Residential Boilers AFUE TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Category                      TSL 1                    TSL 2                    TSL 3                   TSL 4                   TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           National FFC Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                0.06...................  0.15...................  0.21..................  1.15..................  1.71
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        NPV of Consumer Benefits (2013$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate..............  0.37...................  1.12...................  1.28..................  3.42..................  3.87
7% discount rate..............  0.11...................  0.34...................  0.36..................  0.19..................  (0.20)
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 17290]]

 
                                                 Cumulative Emissions Reduction (Total FFC Emissions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).....  3.45...................  9.43...................  12.9..................  70.2..................  100
SO2 (thousand tons)...........  0.130..................  0.751..................  0.312.................  0.555.................  1.07
NOX (thousand tons)...........  8.50...................  23.0...................  32.1..................  176...................  250
Hg (tons).....................  0.000..................  0.000..................  (0.001)...............  (0.005)...............  (0.004)
N2O (thousand tons)...........  0.028..................  0.100..................  0.097.................  0.529.................  0.602
N2O (thousand tons CO2eq).....  7.35...................  26.4...................  25.7..................  140...................  160
CH4 (thousand tons)...........  28.6...................  66.5...................  110...................  585...................  940
CH4 (thousand tons CO2eq) **..  800....................  1,863..................  3,084.................  16,381................  26,325
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2013$ billion) [dagger]..  0.020 to 0.30..........  0.054 to 0.84..........  0.074 to 1.14.........  0.404 to 6.22.........  0.573 to 8.86
NOX--3% discount rate (2013$    9.4....................  25.5...................  35.5..................  196...................  275
 million).
NOX--7% discount rate (2013$    3.58...................  9.73...................  13.5..................  75.6..................  105
 million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Includes the increase in power sector emissions from higher electricity use at TSLs 4 and 5.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
[dagger] Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Note: Parentheses indicate negative values.

                     Table V.44--Summary of Analytical Results for Residential Boilers AFUE TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Category                      TSL 1                    TSL 2                    TSL 3                   TSL 4                   TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2013$ million)..  379.17 to 380.91.......  378.31 to 383.35.......  372.97 to 381.73......  284.75 to 369.87......  241.69 to 380.46
Base Case = 380.96............
Change in Industry NPV (2013$   (1.79) to (0.04).......  (2.65) to 2.39.........  (7.99) to 0.77........  (96.21) to (11.08)....  (139.26) to (0.50)
 million).
Change in Industry NPV (%)      (0.47) to (0.01).......  (0.70) to 0.63.........  (2.1) to 0.20.........  (25.25) to (2.91).....  (36.56) to (0.13)
 [dagger].
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Consumer Mean LCC Savings (2013$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers...  35.....................  100....................  123...................  201...................  134
Gas-fired steam boilers.......  61.....................  61.....................  61....................  61....................  250
Oil-fired hot water boilers...  72.....................  257....................  257...................  273...................  273
Oil-fired steam boilers.......  259....................  723....................  723...................  723...................  723
Shipment-Weighted Average **..  52.....................  155....................  169...................  221...................  195
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Consumer Median PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers...  1.58...................  1.58...................  7.72..................  18.77.................  22.13
Gas-fired steam boilers.......  1.32...................  1.32...................  1.32..................  1.32..................  11.58
Oil-fired hot water boilers...  8.34...................  7.59...................  7.59..................  21.36.................  21.36
Oil-fired steam boilers.......  6.31...................  10.51..................  10.51.................  10.51.................  10.51
Shipment-Weighted Average **..  3.54...................  3.43...................  7.23..................  17.88.................  20.79
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Distribution of Consumer LCC Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers *
    Consumers with Net Cost     4......................  3......................  13....................  38....................  57
     (%).
    Consumers with Net Benefit  18.....................  29.....................  30....................  33....................  36
     (%).
    Consumers with No Impact    79.....................  68.....................  57....................  29....................  7
     (%).
Gas-fired steam boilers *
    Consumers with Net Cost     1......................  1......................  1.....................  1.....................  28
     (%).
    Consumers with Net Benefit  14.....................  14.....................  14....................  14....................  61
     (%).
    Consumers with No Impact    86.....................  86.....................  86....................  86....................  11
     (%).
Oil-fired hot water boilers *
    Consumers with Net Cost     4......................  9......................  9.....................  54....................  54
     (%).
    Consumers with Net Benefit  15.....................  42.....................  42....................  38....................  38
     (%).
    Consumers with No Impact    81.....................  49.....................  49....................  8.....................  8
     (%).
Oil-fired steam boilers *
    Consumers with Net Cost     3......................  23.....................  23....................  23....................  23
     (%).
    Consumers with Net Benefit  27.....................  67.....................  67....................  67....................  67
     (%).
    Consumers with No Impact    71.....................  10.....................  10....................  10....................  10
     (%).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items to not total 100 percent.
[dagger] Note: Parentheses indicate negative values.
** Weighted by shares of each product class in total projected shipments in 2020.
[dagger] Note: Parentheses indicate negative values.

[[Page 17291]]

    First, DOE considered TSL 5, the most efficient level (max-tech), 
which would save an estimated total of 1.71 quads of energy, an amount 
DOE considers significant. TSL 5 has an estimated NPV of consumer 
benefit of -$0.2 billion using a 7-percent discount rate, and $3.87 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 5 are 100 million metric 
tons of CO2, 250 thousand tons of NOX, 1.07 
thousand tons of SO2, 0.602 thousand tons of N2O, 
940 thousand tons of CH4, and -0.004 tons of Hg.\99\ The 
estimated monetary value of the CO2 emissions reductions at 
TSL 5 ranges from $0.57 billion to $8.86 billion.
---------------------------------------------------------------------------

    \99\ TSL 5 is estimated to cause a very slight increase in 
mercury emissions due to associated increase in boiler electricity 
use.
---------------------------------------------------------------------------

    At TSL 5, the average LCC savings are $134 for gas-fired hot water 
boilers, $250 for gas-fired steam boilers, $273 for oil-fired hot water 
boilers, and $723 for oil-fired steam boilers. The median PBP is 22.1 
years for gas-fired hot water boilers, 11.6 years gas-fired steam 
boilers, 21.4 years for oil-fired hot water boilers, and 10.5 years for 
oil-fired steam boilers. The share of consumers experiencing a net LCC 
benefit is 36 percent for gas-fired hot water boilers, 61 percent for 
gas-fired steam boilers, 38 percent for oil-fired hot water boilers, 
and 67 percent for oil-fired steam boilers, while the share of 
consumers experiencing a net LCC cost is 57 percent for gas-fired hot 
water boilers, 28 percent for gas-fired steam boilers, 54 percent for 
oil-fired hot water boilers, and 23 percent for oil-fired steam 
boilers.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$139.26 million to a decrease of $0.5 million. If the decrease of 
$139.26 million were to occur, TSL 5 could result in a net loss of 
36.56 percent in INPV to manufacturers of covered residential boilers.
    The Secretary tentatively concludes that, at TSL 5 for residential 
boilers, the benefits of energy savings, positive NPV of total consumer 
benefits at a 3-percent discount rate, average consumer LCC savings, 
emission reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the large reduction in industry value 
at TSL 5, the negative NPV of total consumer benefits at a 7-percent 
discount rate, and the high number of consumers experiencing a net LCC 
cost for gas-fired hot water boilers and oil-fired hot water boilers. 
Consequently, DOE has concluded that TSL 5 is not economically 
justified.
    Next, DOE considered TSL 4, which would save an estimated total of 
1.15 quads of energy, an amount DOE considers significant. TSL 4 has an 
estimated NPV of consumer benefit of $0.19 billion using a 7-percent 
discount rate, and $3.42 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 4 are 70.2 million 
metric tons of CO2, 176.12 thousand tons of NOX, 
0.55 thousand tons of SO2, 0.529 thousand tons of 
N2O, 585 thousand tons of CH4, and -0.005 tons of 
Hg.\100\ The estimated monetary value of the CO2 emissions 
reductions at TSL 4 ranges from $0.40 billion to $6.22 billion.
---------------------------------------------------------------------------

    \100\ TSL 4 is estimated to cause a very slight increase in 
mercury emissions due to associated increase in boiler electricity 
use.
---------------------------------------------------------------------------

    At TSL 4, the average LCC savings are $201 for gas-fired hot water 
boilers, $61 for gas-fired steam boilers, $273 for oil-fired hot water 
boilers, and $723 for oil-fired steam boilers. The median PBP is 18.8 
years for gas-fired hot water boilers, 1.3 years gas-fired steam 
boilers, 21.4 years for oil-fired hot water boilers, and 10.5 years for 
oil-fired steam boilers. The share of consumers experiencing a net LCC 
benefit is 33 percent for gas-fired hot water boilers, 14 percent for 
gas-fired steam boilers, 38 percent for oil-fired hot water boilers, 
and 67 percent for oil-fired steam boilers, while the share of 
consumers experiencing a net LCC cost is 38 percent for gas-fired hot 
water boilers, 1 percent for gas-fired steam boilers, 54 percent for 
oil-fired hot water boilers, and 23 percent for oil-fired steam 
boilers.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$96.21 million to a decrease of $11.08 million. If the decrease of 
$96.21 million were to occur, TSL 4 could result in a net loss of 25.25 
percent in INPV to manufacturers of covered residential boilers.
    DOE strongly considered TSL 4, but based on the information 
available, the Secretary tentatively concludes that, at TSL 4 for 
residential boilers, the benefits of energy savings, positive NPV of 
total consumer benefits, average consumer LCC savings, emission 
reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the large reduction in industry value 
at TSL 4 and the high number of consumers experiencing a net LCC cost 
for gas-fired hot water boilers and oil-fired hot water boilers. 
Consequently, DOE has tentatively concluded that TSL 4 is not 
economically justified. However, DOE requests comments and data from 
interested parties that would assist DOE in making a final decision on 
the weighting of benefits and burdens for TSL 4, and DOE intends to 
reconsider adoption of TSL 4 in the final rule in light of any comments 
received.
    Next, DOE considered TSL 3, which would save an estimated total of 
0.21 quads of energy, an amount DOE considers significant. TSL 3 has an 
estimated NPV of consumer benefit of $0.36 billion using a 7-percent 
discount rate, and $1.28 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3 are 12.9 million 
metric tons of CO2, 32.1 thousand tons of NOX, 
0.31 thousand tons of SO2, 0.097 thousand tons of 
N2O, 110 thousand tons of CH4, and -0.001 tons of 
Hg.\101\ The estimated monetary value of the CO2 emissions 
reductions at TSL 3 ranges from $0.07 billion to $1.14 billion.
---------------------------------------------------------------------------

    \101\ TSL 3 is estimated to cause a very slight increase in 
mercury emissions due to the associated increase in boiler 
electricity use.
---------------------------------------------------------------------------

    At TSL 3, the average LCC savings are $123 for gas-fired hot water 
boilers, $61 for gas-fired steam boilers, $257 for oil-fired hot water 
boilers, and $723 for oil-fired steam boilers. The median PBP is 7.7 
years for gas-fired hot water boilers, 1.3 years gas-fired steam 
boilers, 7.6 years for oil-fired hot water boilers, and 10.5 years for 
oil-fired steam boilers. The share of consumers experiencing a net LCC 
benefit is 30 percent for gas-fired hot water boilers, 14 percent for 
gas-fired steam boilers, 42 percent for oil-fired hot water boilers, 
and 67 percent for oil-fired steam boilers, while the share of 
consumers experiencing a net LCC cost is 13 percent for gas-fired hot 
water boilers, 1 percent for gas-fired steam boilers, 9 percent for 
oil-fired hot water boilers, and 23 percent for oil-fired steam 
boilers.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$7.99 million to an increase of $0.77 million. If the decrease of $7.99 
million were to occur, TSL 3 could result in a net loss of 2.1 percent 
in INPV to manufacturers of covered residential boilers.
    After considering the analysis and weighing the benefits and the 
burdens, DOE has tentatively concluded that at TSL 3 for residential 
boilers, the benefits of energy savings, positive NPV of consumer 
benefit, positive impacts on consumers (as indicated by positive 
average LCC savings, favorable PBPs, and a higher percentage of 
consumers who would experience LCC benefits as opposed to costs), 
emission reductions, and the estimated monetary value of the emissions 
reductions would outweigh the potential reductions in INPV for 
manufacturers. Accordingly, the

[[Page 17292]]

Secretary of Energy has tentatively concluded that TSL 3 would save a 
significant amount of energy and is technologically feasible and 
economically justified. However, as noted above, based on comments 
received, DOE plans to reconsider TSL 4 in the final rule. Because DOE 
has not yet reached a final conclusion regarding the weighting of 
benefits and burdens at TSL 4, it seeks a more complete understanding 
of the benefits and burdens of moving forward at both TSL 3 and 4, as 
well as any implementation problems that might be reasonably foreseen.
    Based on the above considerations, DOE today proposes to adopt the 
AFUE energy conservation standards for residential boilers at TSL 3. 
Table V.45 presents the proposed energy conservation standards for 
residential boilers.

             Table V.45--Proposed Amended AFUE Energy Conservation Standards for Residential Boilers
----------------------------------------------------------------------------------------------------------------
                                         Proposed standard:
             Product class                     AFUE %                         Design requirement
----------------------------------------------------------------------------------------------------------------
Gas-fired hot water boiler............                    85  Constant-burning pilot not permitted. Automatic
                                                               means for adjusting water temperature required
                                                               (except for boilers equipped with tankless
                                                               domestic water heating coils).
Gas-fired steam boiler................                    82  Constant-burning pilot not permitted.
Oil-fired hot water boiler............                    86  Automatic means for adjusting temperature required
                                                               (except for boilers equipped with tankless
                                                               domestic water heating coils).
Oil-fired steam boiler................                    86  None.
Electric hot water boiler.............                  None  Automatic means for adjusting temperature required
                                                               (except for boilers equipped with tankless
                                                               domestic water heating coils).
Electric steam boiler.................                  None  None.
----------------------------------------------------------------------------------------------------------------

2. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Boilers for Standby Mode and Off Mode
    Table V.46 through Table V.47 summarize the quantitative impacts 
estimated for each TSL considered for residential boiler standby mode 
and off mode power. The national impacts are measured over the lifetime 
of residential boilers purchased in the 30-year period that begins in 
the year of compliance with amended standards (2020-2049). The energy 
savings, emissions reductions, and value of emissions reductions refer 
to full-fuel-cycle results. The efficiency levels contained in each TSL 
are described in section V.A.

                    Table V.46--Summary of Analytical Results for Residential Boiler Standby Mode and Off Mode TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Category                               TSL 1                                  TSL 2                                  TSL 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           National FFC Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     0.031................................  0.035................................  0.045.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        NPV of Consumer Benefits (2013$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate...................  0.401................................  0.325................................  0.437.
7% discount rate...................  0.167................................  0.121................................  0.167.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Cumulative Emissions Reduction (Total FFC Emissions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)..........  1.42.................................  1.62.................................  2.05.
SO2 (thousand tons)................  1.51.................................  1.73.................................  2.19.
NOX (thousand tons)................  1.32.................................  1.51.................................  1.91.
Hg (tons)..........................  0.002................................  0.003................................  0.004.
CH4 (thousand tons)................  8.1..................................  9.3..................................  11.8.
CH4 (thousand tons CO2eq)..........  227.1................................  260.2................................  329.4.
N2O (thousand tons)................  0.041................................  0.047................................  0.060.
N2O (thousand tons CO2eq)..........  11.0.................................  12.6.................................  15.9.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2013$ billion) *..............  0.008 to 0.124.......................  0.009 to 0.142.......................  0.012 to 0.180.
NOX--3% discount rate (2013$         1.44.................................  1.65.................................  2.08.
 million).
NOX--7% discount rate (2013$         0.56.................................  0.64.................................  0.80.
 million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Range of the value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.

           Table V.47--Summary of Analytical Results for Residential Boiler Standby Mode and Off Mode TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Category                               TSL 1                                  TSL 2                                  TSL 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2013$ million) Base    380.77 to 380.88.....................  379.94 to 381.16.....................  379.88 to 381.17.
 Case = 380.96.

[[Page 17293]]

 
Change in Industry NPV (2013$        (0.19) to (0.07).....................  (1.02) to 0.20.......................  (1.08) to 0.22.
 million) [dagger].
Changes in Industry NPV (%)          (0.05) to (0.02).....................  (0.27) to 0.05.......................  (0.28) to 0.06.
 [dagger].
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Consumer Mean LCC Savings (2013$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boilers........  14...................................  7....................................  14.
Gas-Fired Steam Boilers............  15...................................  9....................................  15.
Oil-Fired Hot Water Boilers........  15...................................  9....................................  15.
Oil-Fired Steam Boilers............  14...................................  8....................................  15.
Electric Hot Water Boilers.........  11...................................  3....................................  8.
Electric Steam Boilers.............  11...................................  4....................................  9.
Shipment-Weighted Average **.......  14...................................  8....................................  14.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Consumer Median PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-Fired Hot Water Boilers........  1.06.................................  10.43................................  7.83.
Gas-Fired Steam Boilers............  1.06.................................  10.30................................  7.39.
Oil-Fired Hot Water Boilers........  1.04.................................  10.24................................  7.39.
Oil-Fired Steam Boilers............  1.31.................................  10.71................................  8.35.
Electric Hot Water Boilers.........  1.97.................................  17.65................................  10.98.
Electric Steam Boilers.............  1.96.................................  10.54................................  10.88.
Shipment-Weighted Average **.......  1.08.................................  10.52................................  7.74.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Distribution of Consumer LCC Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gas-fired hot water boilers *
    Consumers with Net Cost (%)....  0....................................  11...................................  6.
    Consumers with Net Benefit (%).  49...................................  38...................................  44.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
Gas-fired steam boilers *
    Consumers with Net Cost (%)....  0....................................  9....................................  4.
    Consumers with Net Benefit (%).  49...................................  41...................................  45.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
Oil-fired hot water boilers*
    Consumers with Net Cost (%)....  0....................................  9....................................  4.
    Consumers with Net Benefit (%).  49...................................  41...................................  45.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
Oil-fired steam boilers *
    Consumers with Net Cost (%)....  0....................................  9....................................  4.
    Consumers with Net Benefit (%).  49...................................  41...................................  45.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
Electric hot water boilers *
    Consumers with Net Cost (%)....  0....................................  19...................................  11.
    Consumers with Net Benefit (%).  49...................................  30...................................  38.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
Electric steam boilers *
    Consumers with Net Cost (%)....  0....................................  19...................................  11.
    Consumers with Net Benefit (%).  49...................................  31...................................  38.
    Consumers with No Impact (%)...  51...................................  51...................................  51.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounding may cause some items not to total 100 percent.
** Weighted by shares of each product class in total projected shipments in 2020.
[dagger] Parentheses indicate negative (-) values.

    First, DOE considered TSL 3, the most efficient level (max-tech), 
which would save an estimated total of 0.045 quads of energy, an amount 
DOE considers significant. TSL 3 has an estimated NPV of consumer 
benefit of $0.167 billion using a 7-percent discount rate, and $0.437 
billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3 are 2.05 million 
metric tons of CO2, 1.91 thousand tons of NOX, 
2.19 thousand tons of SO2, and 0.004 tons of Hg, 0.060 
thousand tons of N2O, and 11.8 thousand tons of 
CH4. The estimated monetary value of the CO2 
emissions reductions at TSL 3 ranges from $0.012 billion to $0.180 
billion.
    At TSL 3, the average LCC savings are $14 for gas-fired hot water 
boilers, $15 for gas-fired steam boilers, $15 for oil-fired hot water 
boilers, $15 for oil-fired steam boilers, $8 for electric hot water 
boilers, and $9 for electric steam boilers. The median PBP is 7.83 
years for gas-fired hot water boilers, 7.39 years gas-fired steam 
boilers, 7.39 years for oil-fired hot water boilers, 8.35 years for 
oil-fired steam boilers, 10.98 years for electric hot water boilers, 
and 10.88 years for electric steam boilers. The share of consumers 
experiencing a net LCC benefit is 44 percent for gas-fired hot water 
boilers, 45 percent for gas-fired steam boilers, 38 percent for oil-
fired hot water boilers, 45 percent for oil-fired steam boilers, 45 
percent for electric hot water boilers, and 38 percent for electric 
steam boilers, while the share of consumers experiencing a net LCC cost 
is 6 percent for gas-fired hot water boilers, 4 percent for gas-fired

[[Page 17294]]

steam boilers, 4 percent for oil-fired hot water boilers, 4 percent for 
oil-fired steam boilers, 11 percent for electric hot water boilers, and 
11 percent for electric steam boilers.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$1.08 million to an increase of $0.22 million, depending on the 
manufacturer markup scenario. If the larger decrease is realized, TSL 3 
could result in a net loss of 0.28 percent in INPV to manufacturers of 
covered residential boilers.
    Accordingly, the Secretary tentatively concludes that at TSL 3 for 
residential boiler standby mode and off mode power, the benefits of 
energy savings, positive NPV of consumer benefits at both 7-percent and 
3-percent discount rates, positive impacts on consumers (as indicated 
by positive average LCC savings, favorable PBPs, and a higher 
percentage of consumers who would experience LCC benefits as opposed to 
costs), emission reductions, and the estimated monetary value of the 
CO2 emissions reductions would outweigh the economic burden 
on a small fraction of consumers due to the increases in product cost. 
After considering the analysis and the benefits and burdens of TSL 3, 
the Secretary has tentatively concluded that this trial standard level 
offers the maximum improvement in energy efficiency that is 
technologically feasible and economically justified, and will result in 
the significant conservation of energy. Therefore, DOE proposes to 
adopt TSL 3 for residential boiler standby mode and off mode. The 
proposed energy conservation standards for standby mode and off mode, 
expressed as maximum power in watts, are shown in Table V.48.

   Table V.48--Proposed Energy Conservation Standards for Residential
                    Boiler Standby Mode and Off Mode
------------------------------------------------------------------------
                                                      PW,SB      PW,OFF
                   Product class                     (watts)    (watts)
------------------------------------------------------------------------
Gas-fired hot water...............................          9          9
Gas-fired steam...................................          8          8
Oil-fired hot water...............................         11         11
Oil-fired steam...................................         11         11
Electric hot water................................          8          8
Electric steam....................................          8          8
------------------------------------------------------------------------

3. Summary of Benefits and Costs (Annualized) of the Proposed Standards
    The benefits and costs of today's proposed standards can also be 
expressed in terms of annualized values. The annualized monetary values 
are the sum of: (1) The annualized national economic value (expressed 
in 2013$) of the benefits from operating products that meet the 
proposed standards (consisting primarily of operating cost savings from 
using less energy, minus increases in product purchase costs, which is 
another way of representing consumer NPV), and (2) the annualized 
monetary value of the benefits of emission reductions, including 
CO2 emission reductions.\102\ The value of CO2 
reductions, otherwise known as the Social Cost of Carbon (SCC), is 
calculated using a range of values per metric ton of CO2 
developed by a recent interagency process.
---------------------------------------------------------------------------

    \102\ DOE used a two-step calculation process to convert the 
time-series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2013, the year used for discounting 
the NPV of total consumer costs and savings, for the time-series of 
costs and benefits using discount rates of three and seven percent 
for all costs and benefits except for the value of CO2 
reductions. For the latter, DOE used a range of discount rates. From 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period (2018 through 2047) that yields the same present 
value. The fixed annual payment is the annualized value. Although 
DOE calculated annualized values, this does not imply that the time-
series of costs and benefits from which the annualized values were 
determined is a steady stream of payments.
---------------------------------------------------------------------------

    Although combining the values of operating savings and 
CO2 emission reductions provides a useful perspective, two 
issues should be considered. First, the national operating savings are 
domestic U.S. consumer monetary savings that occur as a result of 
market transactions, while the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and CO2 savings are performed with different methods 
that use different time frames for analysis. The national operating 
cost savings is measured for the lifetime of residential boiler 
products shipped in 2020-2049. The SCC values, on the other hand, 
reflect the present value of some future climate-related impacts 
resulting from the emission of one metric ton of carbon dioxide in each 
year; these impacts continue well beyond 2100.
    Estimates of annualized benefits and costs of the proposed 
standards for residential boilers are shown in Table V.49. The results 
under the primary estimate are as follows. Using a 7-percent discount 
rate for benefits and costs other than CO2 reduction (for 
which DOE used a 3-percent discount rate along with the average SCC 
series that uses a 3-percent discount rate), the estimated cost of the 
residential boiler standards proposed in today's rule is $32 million 
per year in increased equipment costs, while the estimated benefits are 
$73 million per year in reduced equipment operating costs, $22 million 
per year in CO2 reductions, and $1.53 million per year in 
reduced NOX emissions. In this case, the net benefit would 
amount to $64 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series, the estimated cost of the residential boiler 
standards proposed in today's rule is $32 million per year in increased 
equipment costs, while the estimated benefits are $108 million per year 
in reduced equipment operating costs, $22 million per year in 
CO2 reductions, and $2.10 million per year in reduced 
NOX emissions. In this case, the net benefit would amount to 
$100 million per year.

                                             Table V.49--Annualized Benefits and Costs of Proposed AFUE Standards (TSL 3) for Residential Boilers *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (Million 2013$/year)
                                                Discount rate (%)           --------------------------------------------------------------------------------------------------------------------
                                                                                        Primary estimate                  Low net benefits  estimate            High net benefits  estimate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  73...................................  71...................................  75.
                                      3....................................  108..................................  105..................................  112.
CO2 Reduction Monetized Value ($12.0/ 5....................................  6.1..................................  6.1..................................  6.2.
 t case) **.
CO2 Reduction Monetized Value ($40.5/ 3....................................  21.8.................................  21.6.................................  22.0.
 t case) **.

[[Page 17295]]

 
CO2 Reduction Monetized Value ($62.4/ 2.5..................................  32.2.................................  31.9.................................  32.5.
 t case) **.
CO2 Reduction Monetized Value ($119/  3....................................  67.6.................................  66.9.................................  68.2.
 t case) **.
NOX Reduction Monetized Value (at     7....................................  1.53.................................  1.52.................................  1.53
 $2,684/ton) **.                      3....................................  2.10.................................  2.08.................................  2.12.
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefits [dagger].........  7 plus CO2 range.....................  80 to 142............................  79 to 140............................  83 to 145.
                                      7....................................  96...................................  94...................................  99.
                                      3 plus CO2 range.....................  116 to 177...........................  113 to 174...........................  121 to 183.
                                      3....................................  132..................................  128..................................  136.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment Costs  7....................................  32.3.................................  38.7.................................  26.8.
                                      3....................................  31.7.................................  38.9.................................  25.6.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Net Benefits/Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO2 range.....................  48 to 110............................  40 to 101............................  56 to 118.
                                      7....................................  64...................................  56...................................  72.
                                      3 plus CO2 range.....................  84 to 146............................  74 to 135............................  95 to 157.
                                      3....................................  100..................................  89...................................  111.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Economic Growth case, and High Economic Growth
  case, respectively. In addition, incremental product costs reflect a medium decline rate for projected product price trends in the Primary Estimate, a low decline rate for projected product
  price trends in the Low Benefits Estimate, and a high decline rate for projected product price trends in the High Benefits Estimate. The methods used to derive projected price trends are
  explained in section IV.F.1.
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the three integrated assessment models, at
  discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, is included to represent
  higher-than-expected impacts from temperature change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate an
  escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows
  labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of
  CO2 values.

    Estimates of annualized benefits and costs of the proposed 
standards for residential boiler standby mode and off mode power are 
shown in Table V.50. The results under the primary estimate are as 
follows. Using a 7-percent discount rate for benefits and costs other 
than CO2 reduction (for which DOE used a 3-percent discount 
rate along with the average SCC series that uses a 3-percent discount 
rate), the estimated cost of the residential boiler standards proposed 
in today's rule is $9.31 million per year in increased equipment costs, 
while the estimated benefits are $28 million per year in reduced 
equipment operating costs, $3 million per year in CO2 
reductions, and $0.09 million per year in reduced NOX 
emissions. In this case, the net benefit would amount to $22 million 
per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series, the estimated cost of the residential boiler 
standards proposed in today's rule is $9.35 million per year in 
increased equipment costs, while the estimated benefits are $35 million 
per year in reduced equipment operating costs, $3 million per year in 
CO2 reductions, and $0.12 million per year in reduced 
NOX emissions. In this case, the net benefit would amount to 
$29 million per year.

                                   Table V.50--Annualized Benefits and Costs of Proposed Standby Mode and Off Mode Standards (TSL 3) for Residential Boilers *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (Million 2013$/year)
                                                Discount rate (%)           --------------------------------------------------------------------------------------------------------------------
                                                                                        Primary estimate                  Low net benefits estimate             High net benefits  estimate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  28...................................  27...................................  29
                                      3....................................  35...................................  34...................................  36
CO2 Reduction Monetized Value ($12.0/ 5....................................  1....................................  1....................................  1.
 t case) **.

[[Page 17296]]

 
CO2 Reduction Monetized Value ($40.5/ 3....................................  3....................................  3....................................  4.
 t case) **.
CO2 Reduction Monetized Value ($62.4/ 2.5..................................  5....................................  5....................................  5.
 t case) **.
CO2 Reduction Monetized Value ($119/  3....................................  11...................................  10...................................  11.
 t case) **.
NOX Reduction Monetized Value (at     7....................................  0.09.................................  0.09.................................  0.09.
 $2,684/ton) **.                      3....................................  0.12.................................  0.12.................................  0.13.
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefits [dagger].........  7 plus CO2 range.....................  29 to 39.............................  28 to 38.............................  30 to 40.
                                      7....................................  32...................................  30...................................  33.
                                      3 plus CO2 range.....................  36 to 46.............................  35 to 44.............................  38 to 47.
                                      3....................................  39...................................  37...................................  40.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment Costs  7....................................  9.31.................................  9.48.................................  9.13.
                                      3....................................  9.35.................................  9.55.................................  9.15.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Net Benefits/Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO2 range.....................  20 to 30.............................  19 to 28.............................  21 to 31.
                                      7....................................  22...................................  21...................................  24.
                                      3 plus CO2 range.....................  27 to 37.............................  25 to 35.............................  28 to 38.
                                      3....................................  29...................................  28...................................  31.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Economic Growth case, and High Economic Growth
  case, respectively.
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the three integrated assessment models, at
  discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, is included to represent
  higher-than-expected impacts from temperature change further out in the tails of the SCC distribution. The values in parentheses represent the SCC in 2015. The SCC time series incorporate an
  escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows
  labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of
  CO2 values.

    Estimates of the combined annualized benefits and costs of the 
proposed AFUE and standby mode and off mode standards are shown in 
Table V.51. The results under the primary estimate are as follows. 
Using a 7-percent discount rate for benefits and costs other than 
CO2 reduction, for which DOE used a 3-percent discount rate 
along with the average SCC series that uses a 3-percent discount rate 
($40.5/t in 2015), the estimated cost of the residential boilers AFUE 
and standby mode and off mode standards proposed in this rule is $41.7 
million per year in increased equipment costs, while the estimated 
benefits are $101 million per year in reduced equipment operating 
costs, $25.3 million per year in CO2 reductions, and $1.62 
million per year in reduced NOX emissions. In this case, the 
net benefit would amount to $86.3 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series that uses a 3-percent discount rate ($40.5/t in 
2015), the estimated cost of the residential boilers AFUE and standby 
mode and off mode standards proposed in this rule is $41.0 million per 
year in increased equipment costs, while the estimated benefits are 
$143 million per year in reduced equipment operating costs, $25.3 
million per year in CO2 reductions, and $2.22 million per 
year in reduced NOX emissions. In this case, the net benefit 
would amount to $129 million per year.

                     Table V.51--Annualized Benefits and Costs of Proposed AFUE and Standby Mode and Off Mode Energy Conservation Standards for Residential Boilers (TSL 3)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             (million 2013$/year)
                                                Discount rate (%)           --------------------------------------------------------------------------------------------------------------------
                                                                                       Primary estimate *                Low net benefits  estimate *          High net benefits  estimate *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7....................................  101..................................  98...................................  104.
                                      3....................................  143..................................  138..................................  149.

[[Page 17297]]

 
CO2 Reduction Monetized Value ($12.0/ 5....................................  7.11.................................  7.04.................................  7.18.
 t case) *.
CO2 Reduction Monetized Value ($40.5/ 3....................................  25.3.................................  25.0.................................  25.6.
 t case) *.
CO2 Reduction Monetized Value ($62.4/ 2.5..................................  37.3.................................  36.8.................................  37.7.
 t case) *.
CO2 Reduction Monetized Value ($119/  3....................................  78.2.................................  77.3.................................  79.1.
 t case) *.
NOX Reduction Monetized Value (at     7....................................  1.62.................................  1.61.................................  1.63.
 $2,684/ton) **.                      3....................................  2.22.................................  2.20.................................  2.24.
                                     -----------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Benefits [dagger].........  7 plus CO2 range.....................  110 to 181...........................  107 to 177...........................  113 to 185.
                                      7....................................  128..................................  125..................................  131.
                                      3 plus CO2 range.....................  152 to 223...........................  148 to 218...........................  158 to 230.
                                      3....................................  170..................................  165..................................  177.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed Costs  7....................................  41.7.................................  48.2.................................  35.9.
                                      3....................................  41.0.................................  48.5.................................  34.8.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Net Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger]..................  7 plus CO2 range.....................  68.1 to 139..........................  58.8 to 129..........................  77.0 to 149.
                                      7....................................  86.3.................................  76.7.................................  95.4.
                                      3 plus CO2 range.....................  111 to 182...........................  99 to 169............................  123 to 195.
                                      3....................................  129..................................  117..................................  142.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential boilers shipped in 2020-2049. These results include benefits to consumers which accrue after 2049 from the
  products purchased in 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation
  for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions
  calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time
  series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows labeled ``7%
  plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems these proposed standards address are as follows:
    (1) There is a lack of consumer information and/or information 
processing capability about energy efficiency opportunities in the home 
appliance market.
    (2) There is asymmetric information (one party to a transaction has 
more and better information than the other) and/or high transactions 
costs (costs of gathering information and effecting exchanges of goods 
and services).
    (3) There are external benefits resulting from improved energy 
efficiency of residential boilers that are not captured by the users of 
such equipment. These benefits include externalities related to 
environmental protection and energy security that are not reflected in 
energy prices, such as reduced emissions of greenhouse gases.
    In addition, this regulatory action is an ``economically 
significant regulatory action'' under section 3(f)(1) of Executive 
Order 12866. Accordingly, section 6(a)(3) of the Executive Order 
requires that DOE prepare a regulatory impact analysis (RIA) on this 
rule and that the Office of Information and Regulatory Affairs (OIRA) 
in the Office of Management and Budget (OMB) review this rule. DOE 
presented to OIRA for review the draft rule and other documents 
prepared for this rulemaking, including the RIA, and has included these 
documents in the rulemaking record. The assessments prepared pursuant 
to Executive Order 12866 can be found in the technical support document 
for this rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011 (76 FR 3281 (Jan. 21, 2011)). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of

[[Page 17298]]

cumulative regulations; (3) select, in choosing among alternative 
regulatory approaches, those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity); (4) to the 
extent feasible, specify performance objectives, rather than specifying 
the behavior or manner of compliance that regulated entities must 
adopt; and (5) identify and assess available alternatives to direct 
regulation, including providing economic incentives to encourage the 
desired behavior, such as user fees or marketable permits, or providing 
information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, the Office of Information and Regulatory Affairs has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. For the reasons stated in the preamble, 
DOE believes that this NOPR is consistent with these principles, 
including the requirement that, to the extent permitted by law, 
benefits justify costs and that net benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE 
has prepared the following IRFA for the products that are the subject 
of this rulemaking.
    For manufacturers of residential boilers, the Small Business 
Administration (SBA) has set a size threshold, which defines those 
entities classified as ``small businesses'' for the purposes of the 
statute. DOE used the SBA's small business size standards to determine 
whether any small entities would be subject to the requirements of the 
rule. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 
53544 (Sept. 5, 2000) and codified at 13 CFR part 121. The size 
standards are listed by North American Industry Classification System 
(NAICS) code and industry description and are available at http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/small-business-size-standards. Manufacturing of residential 
boilers is classified under NAICS 333414, ``Heating Equipment (except 
Warm Air Furnaces) Manufacturing.'' The SBA sets a threshold of 500 
employees or less for an entity to be considered as a small business 
for this category.
1. Description and Estimated Number of Small Entities Regulated
    To estimate the number of companies that could be small business 
manufacturers of products covered by this rulemaking, DOE conducted a 
market survey using publically-available information to identify 
potential small manufacturers. DOE's research involved industry trade 
association membership directories (including AHRI), public databases 
(e.g., AHRI Directory,\103\ the California Energy Commission Appliance 
Efficiency Database \104\), individual company Web sites, and market 
research tools (e.g., Hoovers reports) to create a list of companies 
that manufacture or sell products covered by this rulemaking. DOE also 
asked stakeholders and industry representatives if they were aware of 
any other small manufacturers during manufacturer interviews and at DOE 
public meetings. DOE reviewed publicly-available data and contacted 
select companies on its list, as necessary, to determine whether they 
met the SBA's definition of a small business manufacturer of covered 
residential boilers. DOE screened out companies that do not offer 
products covered by this rulemaking, do not meet the definition of a 
``small business,'' or are foreign owned and operated.
---------------------------------------------------------------------------

    \103\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
    \104\ See http://www.energy.ca.gov/appliances/.
---------------------------------------------------------------------------

    DOE initially identified 36 potential manufacturers of residential 
boilers sold in the U.S. DOE then determined that 23 are large 
manufacturers, manufacturers that are foreign owned and operated, or 
manufacturers that do not produce products covered by this rulemaking. 
DOE was able to determine that 13 manufacturers meet the SBA's 
definition of a ``small business.'' Of these 13 small businesses, nine 
manufacture boilers covered by this rulemaking, while the other four 
rebrand imported products or products manufactured by other small 
companies.
    Before issuing this NOPR, DOE attempted to contact all the small 
business manufacturers of residential boilers it had identified. Two of 
the small businesses agreed to take part in an MIA interview. DOE also 
obtained information about small business impacts while interviewing 
large manufacturers.
    DOE estimates that small manufacturers control approximately 17 
percent of the residential boiler market. Based on DOE's research, 
three small businesses manufacture all four product classes of boilers 
domestically; four small businesses primarily produce condensing boiler 
products (most of which source heat exchangers from Europe or Asia); 
and two manufacturers primarily produce oil-fired hot water boiler 
products. The remaining four small businesses wholesale or rebrand 
products that are imported from Europe or Asia, or design products and 
source manufacturing to a domestic firm.
2. Description and Estimate of Compliance Requirements
    The proposed standards for residential boilers could cause small 
manufacturers to be at a disadvantage relative to large manufacturers. 
For example, small manufacturers may be disproportionately affected by 
product conversion costs. Product redesign, testing, and certification 
costs tend to be fixed and do not scale with sales volume. When 
confronted with new or amended energy conservation standards, small 
businesses must make investments in research and development to 
redesign their products, but because they have lower sales volumes, 
they must spread these costs across fewer units. Moreover, smaller 
manufacturers may experience higher testing costs relative to larger 
manufacturers, as they may not possess their own test facilities and, 
therefore, must outsource all testing at a higher per-unit cost. In 
general, the three small manufacturers that offer all four product 
classes have product lines that are similar to those of larger 
competitors with similar market share. However, because these small 
manufacturers have fewer engineers and product development resources, 
they may have greater difficulty bringing their portfolio of products 
into compliance with

[[Page 17299]]

amended energy conservation standards within the allotted timeframe. 
They also may have to divert engineering resources from customer and 
new product initiatives for a longer period of time. These 
considerations would also apply to the four manufacturers that only 
produce one or two product classes and small businesses that rebrand 
boilers that do their own design work.
    Smaller manufacturers also may lack the purchasing power of larger 
manufacturers. For example, suppliers of bulk purchase parts and 
components (such as gas valves) give boiler manufacturers discounts 
based on the quantities purchased. Therefore, larger manufacturers may 
have a pricing advantage because they have higher volume purchases. 
This purchasing power differential between high-volume and low-volume 
orders applies to other residential boiler components as well, such as 
ignition systems and inducer fan assemblies.
    In order to meet the proposed standard, manufacturers may have to 
seek outside capital to cover expenses related to testing and product 
design equipment. Smaller firms typically have a higher cost of 
borrowing due to higher perceived risk on the part of investors, 
largely attributed to lower cash flows and lower per-unit 
profitability. In these cases, small manufacturers may observe higher 
costs of debt than larger manufacturers.
    While DOE does not expect high capital conversion costs at TSL 3, 
DOE does expect smaller businesses would have to make significant 
product conversion investments relative to larger manufacturers. As 
previously noted, some of these smaller manufacturers are heavily 
weighted toward baseline products and other products below the 
efficiency levels proposed in today's notice. As Table VI.1 
illustrates, smaller manufacturers would have to increase their R&D 
spending to bring products into compliance and to develop new products 
at TSL 3, the proposed level.

                                             Table VI.1--Impacts of Conversion Costs on a Small Manufacturer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Capital conversion cost
                                                         as a percentage of    Product conversion cost   Total conversion cost    Total conversion cost
                                                           annual capital         as a percentage of       as a percentage of       as a percentage of
                                                            expenditures          annual R&D expense         annual revenue           annual EBIT *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average Large Manufacturer..........................                        5                       21                        0                        6
Average Small Manufacturer..........................                       23                      145                        3                       38
--------------------------------------------------------------------------------------------------------------------------------------------------------
* EBIT means earnings before interest and taxes.

    At TSL 3, the level proposed in this notice, DOE estimates capital 
conversion costs of $0.02 million and product conversion costs of $0.09 
million for an average small manufacturer. DOE estimates that an 
average large manufacturer will incur capital conversion costs of $0.03 
million and product conversion costs of $0.09 million. Based on the 
results in Table VI.1, DOE recognizes that small manufacturers will 
generally face a relatively higher conversion cost burden than larger 
competitors.
    Manufacturers that have the majority of their products and sales at 
efficiency levels above today's standard may have lower conversion 
costs than those listed in Table VI.1. In particular, the four small 
manufacturers that primarily sell condensing products are unlikely to 
be affected by the efficiency levels at TSL 3, as all of their products 
are already above the efficiency levels proposed.
    Furthermore, DOE recognizes that small manufacturers that primarily 
sell low-efficiency products today will face a greater burden relative 
to the small manufacturers that primarily sell high-efficiency 
products. At TSL 3, the level proposed in this notice, DOE believes 
that the three manufacturers that manufacture across all four product 
classes would have higher conversion costs because the majority of 
their products do not meet the standard proposed in today's notice and 
would require redesign. DOE estimates that 63 percent of these 
companies' product offerings do not meet the standard levels at TSL 3. 
Consequently, these manufacturers would have to expend funds to 
redesign their commodity products, or develop a new, higher-efficiency 
baseline product.
    The two companies that primarily produce oil-fired hot water 
boilers could also be impacted, as they are generally much smaller than 
the small businesses that produce all product classes, have fewer 
shipments and smaller revenues, and are likely to have limited R&D 
resources. Both of these companies, however, do have oil-fired hot 
water boiler product listings that meet the proposed efficiency 
standards in this notice.
    DOE estimates that one of the four companies that rebrands imported 
or sourced products does its own design work, while the other three 
import high-efficiency products from Europe or Asia. It is possible 
that the company that designs its own products could be affected by 
product conversion costs at TSL 3, while it is unlikely that the other 
three would be greatly impacted.
    Based on this analysis, DOE notes that on average, small businesses 
will experience total conversion costs on the order of $0.11 million. 
However, some companies will fall below the average. In particular, DOE 
has identified 6 small manufacturers that could experience greater 
conversion costs burdens than indicated by the average.
    DOE seeks further information and data regarding the sales volume 
and annual revenues for small businesses so the agency can be better 
informed concerning the potential impacts to small business 
manufacturers of the proposed energy conservation standards, and would 
consider any such additional information when formulating and selecting 
standard levels for the final rule.
3. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the rule being proposed today.
4. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from DOE's proposed rule. In addition to the other TSLs 
being considered, the proposed rulemaking TSD includes a regulatory 
impact analysis (RIA) in chapter 17. For residential boilers, the RIA 
discusses the following policy alternatives: (1) No change in standard; 
(2) consumer rebates; (3) consumer tax credits; (4) manufacturer tax 
credits; (5) voluntary energy efficiency targets; and (6) bulk 
government purchases. While these alternatives may mitigate to some 
varying extent the economic impacts on small entities compared to the 
proposed standards, DOE does not intend to consider these alternatives 
further

[[Page 17300]]

because in several cases, they would not be feasible to implement 
without authority and funding from Congress, and in all cases, DOE has 
determined that the primary energy savings of these alternatives are 
significantly smaller than those that would be expected to result from 
adoption of the proposed standard levels (ranging from approximately 
0.5 percent to 30.5 percent of the primary energy savings from the 
proposed standards). Accordingly, DOE is declining to adopt any of 
these alternatives and is proposing the standards set forth in this 
rulemaking. (See chapter 17 of the NOPR TSD for further detail on the 
policy alternatives DOE considered.)
    Additional compliance flexibilities may be available through other 
means. For example, individual manufacturers may petition for a waiver 
of the applicable test procedure. (See 10 CFR 431.401.) Further, EPCA 
provides that a manufacturer whose annual gross revenue from all of its 
operations does not exceed $8,000,000 may apply for an exemption from 
all or part of an energy conservation standard for a period not longer 
than 24 months after the effective date of a final rule establishing 
the standard. Additionally, Section 504 of the Department of Energy 
Organization Act, 42 U.S.C. 7194, provides authority for the Secretary 
to adjust a rule issued under EPCA in order to prevent ``special 
hardship, inequity, or unfair distribution of burdens'' that may be 
imposed on that manufacturer as a result of such rule. Manufacturers 
should refer to 10 CFR part 430, subpart E, and part 1003 for 
additional details.

C. Review Under the Paperwork Reduction Act of 1995

    Manufacturers of residential boilers must certify to DOE that their 
products comply with any applicable energy conservation standards. In 
certifying compliance, manufacturers must test their products according 
to the DOE test procedures for residential boilers, including any 
amendments adopted for those test procedures. DOE has established 
regulations for the certification and recordkeeping requirements for 
all covered consumer products and commercial equipment, including 
residential boilers. 76 FR 12422 (March 7, 2011). The collection-of-
information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). This requirement has been approved by OMB under OMB control 
number 1910-1400. Public reporting burden for the certification is 
estimated to average 20 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act (NEPA) of 1969, 
DOE has determined that the proposed rule fits within the category of 
actions included in Categorical Exclusion (CX) B5.1 and otherwise meets 
the requirements for application of a CX. See 10 CFR part 1021, App. B, 
B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). The proposed rule fits 
within the category of actions because it is a rulemaking that 
establishes energy conservation standards for consumer products or 
industrial equipment, and for which none of the exceptions identified 
in CX B5.1(b) apply. Therefore, DOE has made a CX determination for 
this rulemaking, and DOE does not need to prepare an Environmental 
Assessment or Environmental Impact Statement for this proposed rule. 
DOE's CX determination for this proposed rule is available at http://cxnepa.energy.gov/.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
imposes certain requirements on Federal agencies formulating and 
implementing policies or regulations that preempt State law or that 
have Federalism implications. The Executive Order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. The Executive Order 
also requires agencies to have an accountable process to ensure 
meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications. 
On March 14, 2000, DOE published a statement of policy describing the 
intergovernmental consultation process it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
proposed rule and has tentatively determined that it would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. EPCA 
governs and prescribes Federal preemption of State regulations as to 
energy conservation for the products that are the subject of this 
proposed rule. States can petition DOE for exemption from such 
preemption to the extent, and based on criteria, set forth in EPCA. (42 
U.S.C. 6297) Therefore, no further action is required by Executive 
Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' imposes on Federal agencies the general duty 
to adhere to the following requirements: (1) Eliminate drafting errors 
and ambiguity; (2) write regulations to minimize litigation; (3) 
provide a clear legal standard for affected conduct rather than a 
general standard; and (4) promote simplification and burden reduction. 
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 
3(a), section 3(b) of Executive Order 12988 specifically requires that 
Executive agencies make every reasonable effort to ensure that the 
regulation: (1) Clearly specifies the preemptive effect, if any; (2) 
clearly specifies any effect on existing Federal law or regulation; (3) 
provides a clear legal standard for affected conduct while promoting 
simplification and burden reduction; (4) specifies the retroactive 
effect, if any; (5) adequately defines key terms; and (6) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. Section 3(c) of 
Executive Order 12988 requires Executive agencies to review regulations 
in light of applicable standards in section 3(a) and section 3(b) to 
determine whether they are met or it is unreasonable to meet one or 
more of them. DOE has completed the required review and determined 
that, to the extent permitted by law, this proposed rule meets the 
relevant standards of Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed regulatory action likely to result in a rule that may 
cause the

[[Page 17301]]

expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector of $100 million or more in any one year 
(adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
http://energy.gov/gc/office-general-counsel.
    This proposed rule, which proposes amended energy conservation 
standards for residential boilers, does not contain a Federal 
intergovernmental mandate, and it does not require expenditures of $100 
million or more by the private sector. Specifically, the proposed rule 
would likely result in a final rule that could require expenditures 
estimated to range from $$26 to $39 million per year (See Table I.7). 
Including: (1) Investment in research and development and in capital 
expenditures by residential boilers manufacturers in the years between 
the final rule and the compliance date for the new standards, and (2) 
incremental additional expenditures by consumers to purchase higher-
efficiency residential boilers, starting at the compliance date for the 
applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. (2 U.S.C. 1532(c)) The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory 
Impact Analysis'' section of the TSD for this proposed rule respond to 
those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(f) 
and (o), this proposed rule would establish amended energy conservation 
standards for residential boilers that are designed to achieve the 
maximum improvement in energy efficiency that DOE has determined to be 
both technologically feasible and economically justified. A full 
discussion of the alternatives considered by DOE is presented in the 
``Regulatory Impact Analysis'' section of the TSD for this proposed 
rule.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

    Pursuant to Executive Order 12630, ``Governmental Actions and 
Interference with Constitutionally Protected Property Rights,'' 53 FR 
8859 (March 15, 1988), DOE has determined that this proposed rule would 
not result in any takings that might require compensation under the 
Fifth Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review 
most disseminations of information to the public under information 
quality guidelines established by each agency pursuant to general 
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 
(Oct. 7, 2002). DOE has reviewed this NOPR under the OMB and DOE 
guidelines and has concluded that it is consistent with applicable 
policies in those guidelines.

K. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA 
at OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgates or is expected to lead to promulgation of 
a final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
sets forth amended energy conservation standards for residential 
boilers, is not a significant energy action because the proposed 
standards are not likely to have a significant adverse effect on the 
supply, distribution, or use of energy, nor has it been designated as 
such by the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects on this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have or does have a clear and 
substantial impact on important public policies or private sector 
decisions.'' Id. at 2667.

[[Page 17302]]

    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. Generation of this 
report involved a rigorous, formal, and documented evaluation using 
objective criteria and qualified and independent reviewers to make a 
judgment as to the technical/scientific/business merit, the actual or 
anticipated results, and the productivity and management effectiveness 
of programs and/or projects. The ``Energy Conservation Standards 
Rulemaking Peer Review Report,'' dated February 2007, has been 
disseminated and is available at the following Web site: 
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.

VII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this notice. If 
you plan to attend the public meeting, please notify Ms. Brenda Edwards 
at (202) 586-2945 or Brenda.Edwards@ee.doe.gov. As explained in the 
ADDRESSES section, foreign nationals visiting DOE Headquarters are 
subject to advance security screening procedures. Any foreign national 
wishing to participate in the meeting should advise DOE of this fact as 
soon as possible by contacting Ms. Brenda Edwards to initiate the 
necessary procedures.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=112. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Requests To Speak and Prepared General 
Statements for Distribution

    Any person who has an interest in the topics addressed in this 
notice, or who is representative of a group or class of persons that 
has an interest in these issues, may request an opportunity to make an 
oral presentation at the public meeting. Such persons may hand-deliver 
requests to speak to the address shown in the ADDRESSES section at the 
beginning of this NOPR between 9:00 a.m. and 4:00 p.m., Monday through 
Friday, except Federal holidays. Requests may also be sent by mail or 
email to: Ms. Brenda Edwards, U.S. Department of Energy, Building 
Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., 
Washington, DC 20585-0121, or Brenda.Edwards@ee.doe.gov. Persons who 
wish to speak should include with their request a computer diskette or 
CD-ROM in WordPerfect, Microsoft Word, PDF, or text (ASCII) file format 
that briefly describes the nature of their interest in this rulemaking 
and the topics they wish to discuss. Such persons should also provide a 
daytime telephone number where they can be reached.
    DOE requests persons scheduled to make an oral presentation to 
submit an advance copy of their statements at least one week before the 
public meeting. DOE may permit persons who cannot supply an advance 
copy of their statement to participate, if those persons have made 
advance alternative arrangements with the Building Technologies 
Program. As necessary, requests to give an oral presentation should ask 
for such alternative arrangements.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 
6306). A court reporter will be present to record the proceedings and 
prepare a transcript. DOE reserves the right to schedule the order of 
presentations and to establish the procedures governing the conduct of 
the public meeting. There shall not be discussion of proprietary 
information, costs or prices, market share, or other commercial matters 
regulated by U.S. anti-trust laws. After the public meeting, interested 
parties may submit further comments on the proceedings, as well as on 
any aspect of the rulemaking, until the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE), 
before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to this rulemaking. The official conducting the public 
meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this notice and will be accessible on the DOE Web site. In addition, 
any person may buy a copy of the transcript from the transcribing 
reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this proposed rule.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov Web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment.

[[Page 17303]]

Otherwise, persons viewing comments will see only first and last names, 
organization names, correspondence containing comments, and any 
documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the Web site will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section below.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery, or mail also 
will be posted to www.regulations.gov. If you do not want your personal 
contact information to be publicly viewable, do not include it in your 
comment or any accompanying documents. Instead, provide your contact 
information in a cover letter. Include your first and last names, email 
address, telephone number, and optional mailing address. The cover 
letter will not be publicly viewable as long as it does not include any 
comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case, it is not necessary to submit printed copies. No facsimiles 
(faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked ``confidential'' including all the 
information believed to be confidential, and one copy of the document 
marked ``non-confidential'' with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential 
status of the information and treat it according to its determination.
    Factors of interest to DOE when evaluating requests to treat 
submitted information as confidential include: (1) A description of the 
items; (2) whether and why such items are customarily treated as 
confidential within the industry; (3) whether the information is 
generally known by or available from other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person which would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    1. DOE requests further comment from interested parties regarding 
whether there are any technologies which have passed the screening 
analysis that should be screened out based on the four screening 
criteria. (i.e., technological feasibility; practicability to 
manufacture, install, and service; impacts on product utility or 
product availability; and adverse impacts on health or safety). (See 
section IV.B.2 and chapter 3 of the NOPR TSD.)
    2. DOE seeks comment from interested parties regarding the typical 
technological change associated with each efficiency level. (See 
section IV.C.1.b and chapter 5 in the NOPR TSD.)
    3. DOE does not expect manufacturers will need to use condensing 
technology in order to meet the proposed standard. However, DOE 
requests further comment from interested parties regarding AFUE levels 
above 82 percent whether non-condensing boilers can exceed that level 
and to what extent and for which applications. DOE requests information 
on any additional costs (e.g. repair, maintenance, installation) ad 
information on other potential impacts to product performance or 
features (e.g. lifetime) associated with any non-condensing boiliers 
achieving AFUE levels above 82 percent. DOE requests comment on the the 
appropriateness of considering AFUE levels above 82 percent for non-
condensing boilers for amended energy conservation standards for 
residential boilers and any potential trade-offs that should be 
considered when compared to employing condensing boilers at these 
efficiency levels(. (See section IV.C.1.b.)
    4. DOE requests comment on the efficiency levels analyzed for 
standby mode and off mode, and on the assumption that standby mode and 
off mode energy consumption (as defined by DOE) would be equal. (See 
section IV.C.1.b.)
    5. DOE requests comments regarding how the mix of residential 
boilers with and without inducers would change under amended energy 
conservation standards, and how to best estimate and account for such 
changes in this analysis. (See section IV.C.1.b.)
    6. DOE's approach seeks to account for the energy performance of 
residential boilers installed in the field by considering automatic 
means, jacket losses, and return water temperatures. DOE requests 
comments on the reasonableness of its assumptions regarding these 
factors. (See section IV.E.1.)
    7. DOE makes the assumption that most consumers are unlikely to set 
their boilers to the off mode during the non-heating season. 
Specifically, DOE requests comments on its estimate that 25 percent of 
consumers shut the boiler off during the non-heating season, as well as 
any information that might support a different estimate. (See section 
IV.E.2 and chapter 7 in the NOPR TSD.)

[[Page 17304]]

    8. DOE requests comment on residential boiler lifetimes, 
particularly the lifetime of condensing boilers, whether the lifetimes 
assumed in the analysis are reflective of residential boiler equipment 
covered by this rule. In addition, the agency is seeking comment on 
whether the energy efficiency standards would be expected to affect the 
lifetime of the products covered by the proposed standards and any 
information supporting this affect. (See section IV.F.2.d and appendix 
8-F of the NOPR TSD.)
    9. DOE requests comment on the fraction of residential boilers:
    a. That are used for domestic water heating (see section IV.E);
    b. that are used in commercial applications (see section IV.E);
    c. that are used in low-temperature vs. high-temperature 
applications (see section IV.E);
    d. at each standby efficiency level (see section IV.E);
    e. that use polypropylene, PVC, or chlorinated polyvinyl chloride 
(CPVC) venting (see section IV.F.1);
    f. that require stainless steel venting (by efficiency level) (see 
section IV.F.1); and
    g. that require a draft inducer (by efficiency level) (see section 
IV.F.1).
    10. DOE requests comment on installation costs for condensing 
boilers. (See section IV.F.1 and chapter 8 of the NOPR TSD.)
    11. DOE requests comment on the fraction of oil-fired hot water 
boiler shipments that would be expected to switch to gas-fired hot 
water boiler shipments due to the proposed standards. (See section IV.G 
and chapter 9 of the NOPR TSD.)
    12. DOE requests comment on its projections of the market share of 
high-efficiency (condensing) boilers in 2020 in the absence of amended 
energy conservation standards, as well as the long-term market 
penetration of higher-efficiency residential boilers. (See section IV.H 
and appendix 8-H of the NOPR TSD.)
    13. DOE requests comment on the reasonableness of its assumption to 
not apply a trend to the manufacturer selling price (in real dollars) 
of residential boilers, as well as any information that would support 
the use of alternative assumptions. (See section IV.H and appendix 10-C 
of the NOPR TSD.)
    14. DOE requests data that would allow for use of different price 
trend projections for condensing and non-condensing boilers. (See 
section IV.F.1.)
    15. DOE requests comment on DOE's methodology and data sources used 
for projecting the future shipments of residential boilers in the 
absence of amended energy conservation standards. (See section IV.G.)
    16. To estimate the impact on shipments of the price increase for 
the considered efficiency levels, DOE used a relative price elasticity 
approach. DOE welcomes stakeholder input on the effect of amended 
standards on future residential boiler shipments. (See section IV.G.)
    17. DOE requests comment on the potential impacts on product 
shipments related to fuel and equipment switching. (See section IV.G.)
    18. DOE requests comment on the reasonableness of the revised 
values that DOE used to characterize the rebound effect with higher-
efficiency residential boilers. Specifically, the agency lowered the 
assumed rebound affect in this proposed rule to 15 percent compared to 
the NODA in which the agency assumed a 20 percent rebound effect. (See 
section IV.F.2.a.)
    19. DOE requests comment on the approach for conducting the 
emissions analysis for residential boilers. (See section IV.K.)
    20. DOE requests comment on DOE's approach for estimating monetary 
benefits associated with emissions reductions. (See section IV.L.)
    21. DOE requests comment on the technical feasibility of the 
proposed standards and whether any proprietary technology that would be 
a unique pathway to achieving any of these efficiency levels would be 
required. (See section IV.B.)
    22. DOE seeks comment regarding any potential impacts on small 
business manufacturers from the proposed standards. In particular, DOE 
seeks further information and data regarding the sales volume and 
annual revenues for small businesses so the agency can be better 
informed concerning the potential impacts to small business 
manufacturers of the proposed energy conservation standards, and would 
consider any such additional information when formulating and selecting 
AFUE and standby/off-mode electrical energy conservation standards for 
the final rule and whether any feasible compliance flexibilities that 
the agency may consider. (See section IV.J.)
    23. DOE seeks further information in order to balance the benefits 
and burdens of adopting TSL4 rather than TSL3 in the final rule. (See 
section V.C.1.)
    24. DOE requests comment on whether manufacturers make their 
engineering design decisions for the two standards (i.e. standby and 
active mode) independently, therefore changes in manufacturing 
production costs and the conversion costs are additive. DOE requests 
comment on whether their engineering design decisions are integrated 
for the two standards and if an incremental analysis that 
simultaneously considers the manufacturing production costs and 
conversion costs would be more reflective of manufacturer decision 
making.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of today's notice 
of proposed rulemaking.

List of Subjects in 10 CFR Part 430

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Small businesses.

    Issued in Washington, DC, on March 13, 2015.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble, DOE proposes to amend 
part 430 of chapter II, subchapter D, of title 10 of the Code of 
Federal Regulations, as set forth below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
1. The authority citation for part 430 continues to read as follows:

    Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

0
2. Appendix N to subpart B of part 430 is amended by revising the note 
after the heading to read as follows:

Appendix N to Subpart B of Part 430--Uniform Test Method for Measuring 
the Energy Consumption of Furnaces and Boilers

    Note: The procedures and calculations that refer to standby mode 
and off mode energy consumption (i.e., sections 8.6 and 10.11 of 
this appendix N) need not be performed to determine compliance with 
energy conservation standards for furnaces and boilers until 
required as specified below. However, any representation related to 
standby mode and off mode energy consumption of these products made 
after July 1, 2013 must be based upon results generated under this 
test procedure, consistent with the requirements of 42 U.S.C. 
6293(c)(2). For furnaces, the statute requires that after July 1, 
2010, any adopted energy conservation standard shall address standby 
mode and off mode energy consumption for these products, and upon 
the compliance date for such standards, compliance with the

[[Page 17305]]

applicable provisions of this test procedure will be required. For 
boilers manufactured on and after (compliance date of final rule), 
compliance with the applicable provisions of this test procedure is 
required in order to determine compliance with energy conservation 
standards.
* * * * *
0
3. Section 430.32 is amended by:
0
a. Adding in paragraph (e)(2)(ii), the words ``and before (compliance 
date of final rule),'' after ``2012,'';
0
b. Redesignating paragraphs (e)(2)(iii) and (e)(2)(iv) as paragraphs 
(e)(2)(iv) and (e)(2)(v), respectively;
0
c. Adding a new paragraph (e)(2)(iii) to read as follows:

Sec.  430.32  Energy and water conservation standards and their 
compliance dates.

* * * * *
    (e) * * *
    (2) * * *
    (iii)(A) Except as provided in paragraph (e)(2)(v) of this section, 
the AFUE of residential boilers, manufactured on and after (compliance 
date of final rule), shall not be less than the following and must 
comply with the design requirements as follows:

 
----------------------------------------------------------------------------------------------------------------
                                               AFUE \1\
               Product class                  (percent)                     Design requirements
----------------------------------------------------------------------------------------------------------------
(1) Gas-fired hot water boiler.............           85  Constant-burning pilot not permitted. Automatic means
                                                           for adjusting water temperature required (except for
                                                           boilers equipped with tankless domestic water heating
                                                           coils).
(2) Gas-fired steam boiler.................           82  Constant-burning pilot not permitted.
(3) Oil-fired hot water boiler.............           86  Automatic means for adjusting temperature required
                                                           (except for boilers equipped with tankless domestic
                                                           water heating coils).
(4) Oil-fired steam boiler.................           86  None.
(5) Electric hot water boiler..............         None  Automatic means for adjusting temperature required
                                                           (except for boilers equipped with tankless domestic
                                                           water heating coils).
(6) Electric steam boiler..................         None  None.
----------------------------------------------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.   430.23(n)(2) of this part.

    (B) Except as provided in paragraph (e)(2)(v) of this section, the 
standby mode power consumption (PW,SB) and off mode power 
consumption (PW,OFF) of residential boilers, manufactured on 
and after (compliance date of final rule), shall not be more than the 
following:

------------------------------------------------------------------------
                                                      PW,SB      PW,OFF
                   Product class                     (watts)    (watts)
------------------------------------------------------------------------
(1) Gas-fired hot water boiler....................          9          9
(2) Gas-fired steam boiler........................          8          8
(3) Oil-fired hot water boiler....................         11         11
(4) Oil-fired steam boiler........................         11         11
(5) Electric hot water boiler.....................          8          8
(6) Electric steam boiler.........................          8          8
------------------------------------------------------------------------

* * * * *
[FR Doc. 2015-06813 Filed 3-30-15; 8:45 am]
BILLING CODE 6450-01-P
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