### Energy Conservation Standards

Rulemaking Framework Document for

Residential Clothes Washers

U.S. Department of Energy

Office of Energy Efficiency and Renewable Energy

Building Technologies Program

August 21, 2009TABLE OF CONTENTS

1. INTRODUCTION

................................................................................................................. 1

1.1 Residential Appliances and Commercial Equipment Standards Program

....................... 1

1.2 Overview of the Rulemaking Process

.............................................................................. 3

1.2.1 Test Procedures

......................................................................................................... 3

1.2.2 Rulemaking Process and Participation by Interested Parties

.................................... 6

1.3 Pre­Rulemaking Analyses and Other Activities

............................................................... 7

1.4 Notice of Proposed Rulemaking

...................................................................................... 9

1.5 Final Rule

....................................................................................................................... 10

2. OVERVIEW OF ANALYSES FOR RULEMAKING

........................................................ 10

3. MARKET AND TECHNOLOGY ASSESSMENT

............................................................ 13

3.1 Market Assessment

........................................................................................................ 13

3.2 Product Classes

.............................................................................................................. 13

3.3 Technology Assessment

................................................................................................. 15

4. SCREENING ANALYSIS

.................................................................................................. 16

5. ENGINEERING ANALYSIS

.............................................................................................. 18

5.1 Engineering Analysis Overview

..................................................................................... 18

5.2 Baseline Models

............................................................................................................. 19

5.3 Approach for Determining the Cost­Efficiency Relationship

........................................ 20

5.4 Efficiency Levels

............................................................................................................ 22

5.5 Proprietary Designs

........................................................................................................ 24

5.6 Outside Regulatory Changes Affecting the Engineering Analysis

................................ 24

6. ENERGY AND WATER USE DETERMINATION

.......................................................... 25

7. MARKUPS FOR EQUIPMENT PRICE DETERMINATION

........................................... 26

8. LIFE­CYCLE COST AND PAYBACK PERIOD ANALYSES

........................................ 27

8.1 Approach for Conducting the LCC and PBP Analyses

.................................................. 28

8.2 Energy, Water, and Wastewater Prices

.......................................................................... 30

8.3 Maintenance, Repair, and Installation Costs

.................................................................. 32

8.4 Product Lifetimes

........................................................................................................... 32

8.5 Discount Rates

................................................................................................................ 32

9. SHIPMENTS ANALYSIS

.................................................................................................. 33

9.1 Base Case Forecast

......................................................................................................... 33

9.2 Standards Impacts on Product Shipments

...................................................................... 34

10. NATIONAL IMPACT ANALYSIS

.................................................................................... 35

10.1 Inputs to NES and NPV Forecasts

.............................................................................. 35

10.2 National Energy Savings

............................................................................................ 36

10.3 Net Present Value

....................................................................................................... 37

11. LIFE­CYCLE COST SUBGROUP ANALYSIS

................................................................ 38

12. MANUFACTURER IMPACT ANALYSIS

........................................................................ 39

12.1 Sources of Information for the Manufacturer Impact Analysis

.................................. 39

12.2 Industry Cash­Flow Analysis

..................................................................................... 40

12.3 Manufacturer Subgroup Analysis

............................................................................... 40

12.4 Competitive Impacts Assessment

............................................................................... 41

12.5 Cumulative Regulatory Burden

.................................................................................. 41

i13. UTILITY IMPACT ANALYSIS

......................................................................................... 42

14. EMPLOYMENT IMPACT ANALYSIS

............................................................................. 43

15. ENVIRONMENTAL ASSESSMENT

................................................................................ 44

16. REGULATORY IMPACT ANALYSIS

............................................................................. 47

APPENDIX A

– DRAFT ENGINEERING ANALYSIS DATA REQUEST SHEETS

.............. 48

APPENDIX B

– SAMPLE QUESTIONS FOR ENGINEERING ANALYSIS FOLLOW­UP

AND PRELIMINARY MANUFACTURER IMPACT ANALYSIS INTERVIEWS

....... 53

APPENDIX C

– SUMMARY OF ITEMS FOR COMMENT FROM INTERESTED PARTIES

............................................................................................................................... ............... 56

LIST OF TABLES

Table 1.1. Rulemaking Schedule for Residential Clothes Washer Energy Conservation Standards

............................................................................................................................... ........ 7

Table 3.1 Technology Options for Residential Clothes Washers

................................................ 16

Table 5.1 Efficiency Levels for Top­Loading Standard­Size Residential Clothes Washer

Analysis

....................................................................................................................... 23

Table 5.2 Efficiency Levels for Top­Loading Compact­Size Residential Clothes Washer

Analysis

....................................................................................................................... 23

Table 5.3 Efficiency Levels for Front­Loading Residential Clothes Washer Analysis

............... 23

LIST OF FIGURES

Figure 2.1 Analyses Conducted for the Residential Clothes Washer Energy Conservation

Standards Rulemaking

................................................................................................ 12

iiLIST OF ACRONYMS

AEO Annual Energy Outlook

AHAM Association of Home Appliance Manufacturers

ANOPR advance notice of proposed rulemaking

AWWA American Water Works Association

BT Building Technologies Program

CAIR Clean Air Interstate Rule

CAMR Clean Air Mercury Rule

CEC California Energy Commission

CEE Consortium for Energy Efficiency

CFR Code of Federal Regulations

CO 2 carbon dioxide

CSL candidate standard level

DOE U.S. Department of Energy

DOJ U.S. Department of Justice

EERE Office of Energy Efficiency and Renewable Energy

EF energy factor

EIA Energy Information Administration

EISA 2007 Energy Independence and Security Act of 2007

EPACT 2005 Energy Policy Act of 2005

EPA U.S. Environmental Protection Agency

EPCA Energy Policy and Conservation Act

EU European Union

FR Federal Register

GRIM Government Regulatory Impact Model

HCFC hydrochlorofluorocarbon

ImSET Impact of Sector Energy Technologies

kWh kilowatt­hour

LBNL Lawrence Berkeley National Laboratory

LCC life­cycle cost

MEF modified energy factor

MIA manufacturer impact analysis

NAAQS National Ambient Air Quality Standards

NAECA National Appliance Energy Conservation Act of 1987

NAICS North American Industry Classification System

NCI Navigant Consulting, Inc.

NEMS National Energy Modeling System

NES national energy savings

NOPR notice of proposed rulemaking

NO

x oxides of nitrogen

NPV net present value

NRCan Natural Resources Canada

OMB Office of Management and Budget

PBP payback period

PNNL Pacific Northwest National Laboratory

iiiR&D research and development

RECS Residential Energy Consumption Survey

RMC remaining moisture content

RoHS Reduction of Hazardous Substances directive

SBA U.S. Small Business Administration

SEC Securities and Exchange Commission

SG&A selling, general, and administrative costs

SO 2 sulfur dioxide

SWEF shipment­weighted efficiency

TSD technical support document

TSL trial standard level

U.S. United States

U.S.C. United States Code

WF water factor

iv

### Rulemaking Framework Document for

Residential Clothes Washers

1. INTRODUCTION

The U.S. Department of Energy (DOE) Appliances and Commercial Equipment

Standards Program, within the Office of Energy Efficiency and Renewable Energy (EERE)

Building Technologies Program (BT), develops and promulgates test procedures and energy

conservation standards for consumer appliances and commercial equipment. The process for

developing standards involves analysis, public notice, and consultation with interested parties.

Such parties include manufacturers, consumers, energy conservation and environmental

advocates, State and Federal agencies, and any other groups or individuals with an interest in

these standards and test procedures.

This framework document describes DOE’s anticipated procedural and analytical

approaches for evaluating energy conservation standards for residential clothes washers. It also

informs interested parties of the standards rulemaking process for clothes washers and

encourages input from these parties during the rulemaking and serves as the starting point for

developing standards. The framework document is not a definitive statement about any issue

that the rulemaking will determine.

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

analyses DOE intends to conduct to fulfill the statutory requirements and guidance for this

standards rulemaking. DOE will conduct analyses for this product to determine whether

amended energy conservation standards are technologically feasible and economically justified

and would result in significant conservation of energy. These analyses will include an

engineering analysis, life­cycle cost (LCC) and payback period (PBP) analyses, a national impact

analysis, and a manufacturer impact analysis (MIA).

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

http://www1.eere.energy.gov/buildings/appliance_standards/residential/clothes_washers.html

.

While DOE invites comment from interested parties on all aspects of the material presented

in this document, comment boxes such as this one highlight particular issues on which

DOE seeks comment and requests feedback from interested parties. In addition, DOE uses

these comment boxes to ask specific questions on the approaches it is proposing to follow

to conduct the analyses required for the standards rulemaking. Such requests for feedback

from interested parties are numbered according to the section in which they appear.

1.1 Residential Appliances and Commercial Equipment Standards Program

The Energy Policy and Conservation Act (EPCA) of 1975 (42 U.S.C. 6291–6309)

established an energy conservation program for major household appliances. Amendments to

EPCA have given DOE the authority to regulate the energy efficiency of several products,

1including residential clothes washers—the products that are the focus of this document. The

amendments to EPCA in the National Appliance Energy Conservation Act of 1987 (NAECA)

established prescriptive energy conservation standards for residential clothes washers, as well as

requirements for determining whether these standards should be amended. (42 U.S.C. 6295(g))

NAECA required that all rinse cycles of clothes washers manufactured after January 1,

1988, shall include an unheated water option, but also permitted these products to have a heated

water rinse option. NAECA further required that DOE conduct two cycles of rulemakings to

determine if more stringent standards are justified. 1 (42 U.S.C. 6295(g)(2) and (4)) On May 14,

1991, DOE completed the first rulemaking cycle by publishing a final rule in the Federal

Register (FR) establishing the first set of performance standards for residential clothes washers;

these new standards became effective on May 14, 1994 (hereafter, the “May 1991 Final Rule.”)

56 FR 22250, 22279. In the May 1991 Final Rule, DOE announced that it was accelerating the

second energy conservation standards rulemaking for clothes washers because, after the notice of

proposed rulemaking (NOPR) comment period for the first rulemaking closed, DOE learned of a

design option (horizontal­axis wash tub in a top­loading washer) in use in Europe that was not

included in the proposed rule and upon which no comment was received. 56 FR 22279.

As part of its second rulemaking cycle, DOE published an advance notice of public

rulemaking (ANOPR) covering nine products, including clothes washers. 55 FR 39624 (Sept. 28,

1990). In response to that notice, several interested parties requested that DOE delay completion

of the second rulemaking until a 1995–1996 time frame. The additional time was requested to

allow manufacturers additional time to meet the standards promulgated in the May 1991 Final

Rule and to fully evaluate new, more energy efficient technologies, such as top­loading

horizontal­axis clothes washers. After careful consideration, on February 26, 1992, DOE issued a

letter to interested parties granting their request for a delayed rulemaking schedule.

On November 14, 1994, DOE published a second ANOPR to restart the second energy

conservation standards rulemaking for clothes washers, dishwashers, and clothes dryers

(hereafter, the “November 1994 ANOPR”). 59 FR 56423. However, Congress imposed a

moratorium on proposed or final rules for appliance energy conservation standards for fiscal year

1996. See Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub. L. 104­134,

Sec. 320 (April 26, 1996). During this time, DOE revised the standards­setting process, and on

July 15, 1996, published a final rule documenting this revised process. See 61 FR 36974

(codified and subsequently redesignated as Procedures, Interpretations, and Policies for

Consideration of New or Revised Energy Conservation Standards for Consumer Products at 10

CFR part 430, subpart C, appendix A) DOE decided to use this new process for the second

standards rulemaking affecting residential clothes washers. As part of this rulemaking effort,

DOE issued a supplemental ANOPR that made use of the new process rule. 63 FR 64344 (Nov.

19, 1998) (hereafter, the “November 1998 Supplemental ANOPR”).

On October 5, 2000, DOE published a NOPR, in which it analyzed the energy savings,

benefits, and burdens of amended energy conservation standards for residential clothes washers.

1 DOE defines “clothes washer” under EPCA as “a consumer product designed to clean clothes, utilizing a water

solution of soap and/or detergent and mechanical agitation or other movement, and must be one of the following

classes: automatic clothes washers, semi­automatic clothes washers, and other clothes washers.” 10 CFR 430.2.

265 FR 59550 (hereafter, the “October 2000 NOPR”). The NOPR analysis results had been shared

with interested parties, and several of the major interested parties, including clothes washer

manufacturers and energy efficiency advocates, submitted to DOE a joint proposal for the

highest standard level which they believed to be technically feasible and economically justified.

DOE reviewed the proposal and agreed with the assessment of standards in the proposal. DOE

subsequently proposed to amend the energy conservation standards for clothes washers

accordingly in the October 2000 NOPR.

After receiving and evaluating comments on the October 2000 NOPR, DOE published a

final rule revising the energy conservation standards. 66 FR 3314 (Jan. 12, 2001) (hereafter, the

“January 2001 Final Rule”). These new standards became effective in two phases—on January 1,

2004, and January 1, 2007. By completing this second standards rulemaking, DOE had fulfilled

its obligations under NAECA to conduct two cycles of standards rulemakings.

Subsequently, as part of its priority­setting activities for fiscal year 2006, DOE published

draft data sheets containing energy savings potentials for products covered under EPCA in

October 2005. These data sheets summarize in table format (1) the potential energy savings from

regulatory action in cumulative quads 2 from 2004 to 2030, (2) the potential economic benefits or

burdens, (3) the potential environmental or energy security benefits, (4) the status of required

changes to test procedures, (5) other regulatory actions, (6) recommendations by interested

parties, (7) evidence of market­driven or voluntary efficiency improvements, (8) regulatory

issues, and (9) the 2005 priority. In this analysis, DOE determined that energy savings for

residential clothes washers of 5.5 quads between 2004 and 2030 could potentially be achieved by

amended standards.

The Energy Independence and Security Act of 2007 (EISA 2007), Pub. L. No. 110­140,

revised the energy conservation standards for residential clothes washers. The revised standards

established a maximum water factor (WF) of 9.5 and become effective on January 1, 2011. EISA

2007 further required that DOE publish a final rule no later than December 31, 2011,

determining whether to amend the standards for clothes washers manufactured on or after

January 1, 2015. (42 U.S.C. 6295(g)(9))

1.2 Overview of the Rulemaking Process

1.2.1 Test Procedures

Since the development of the first Federal test procedure for clothes washers in 1977,

DOE has revised the clothes washer test procedure to more accurately measure both the energy

usage and efficiency of these products. See 62 FR 45484 (August 27, 1997) (hereafter, the

“August 1997 Final Rule.”). The most recent version of the procedure, which became effective

on January 1, 2004, made a number of changes: (1) it replaced the energy factor (EF) descriptor,

which only calculated the energy use of the clothes washer itself, with a modified energy factor

(MEF), which accounts for the remaining moisture content (RMC) of clothes leaving the washer,

thereby crediting a reduction in clothes drying energy use; (2) it specified different water

temperatures for testing; (3) it specified test cloth loads for all classes of clothes washers; and (4)

it revised the average number of use cycles in a year to reflect then­current consumer usage

2 A “quad” represents a quadrillion Btu (or 10 15 Btu).

3patterns. In 1998, DOE amended the August 1997 Final Rule by correcting the introductory note

to the new clothes washer test procedure. 63 FR 16669 (April 6, 1998).

In 2001, as part of its energy conservation standards rulemaking for clothes washers,

DOE also amended its clothes washer test procedure by incorporating changes to the energy test

cloth, RMC, and extractor testing. 66 FR 3330. DOE amended its clothes washer test procedure

again in 2003 by (1) replacing the lowest spin cycle speed of 50 gravitation (g) force with a spin

cycle of 100 g for testing the cloth used in the extraction phase of the test procedure, and (2)

specifying the use of additional statistical analysis to qualify the interactive effect between

different test cloth lots and spin speeds to improve consistency with the baseline data. 68 FR

62198 (Oct. 31, 2003).

As amended by EISA 2007, EPCA now requires DOE to consider standby mode and off

mode energy consumption in future amendments to its energy conservation standards and test

procedures for covered products, which include residential clothes washers. Specifically, section

310 of EISA 2007 amends section 325 of EPCA (42 U.S.C. 6295) by adding the following

definitions and other requirements pertaining to standby and off mode energy use:

(gg) STANDBY MODE ENERGY USE.—

(1) DEFINITIONS.—

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

to subparagraph (B), in this subsection:

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

condition in which an energy­using product—

(I) is connected to a main power source;

(II) has been activated; and

(III) provides 1 or more main functions.

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

which an energy­using product—

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

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

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

condition in which an energy­using product—

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

(II) offers 1 or more of the following user­oriented or

protective functions:

(aa) To facilitate the activation or deactivation of

other functions (including active mode) by remote

switch (including remote control), internal sensor,

or timer.

(bb) Continuous functions, including information or

status displays (including clocks) or sensor­based

functions.

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

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

current versions of Standards 62301 and 62087 of the International

Electrotechnical Commission.

4(2) TEST PROCEDURES.—

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

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

energy consumption, taking into consideration the most current versions of

Standards 62301 and 62087 of the International Electrotechnical

Commission, with such energy consumption integrated into the overall

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

covered product, unless the Secretary determines that—

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

account for and incorporate the standby mode and off mode energy

consumption of the covered product; or

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

particular covered product, in which case the Secretary shall

prescribe a separate standby mode and off mode energy use test

procedure for the covered product, if technically feasible.

(B) DEADLINES.—The test procedure amendments required by

subparagraph (A) shall be prescribed in a final rule no later than the

following dates:

* * * *

(iii) June 30, 2009, for residential clothes washers.

* * * * *

(3) INCORPORATION INTO STANDARD.—

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

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

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

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

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

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

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

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

DOE initiated changes to incorporate residential clothes washer standby mode and off

mode energy consumption in parallel with the current clothes washer energy conservation

standards rulemaking. In accordance with EISA 2007, DOE considered incorporating certain

provisions of an international standby power test procedure, International Electrotechnical

Commission (IEC) Standard 62301, Household electrical appliances—Measurement of standby

power

. DOE is aware that IEC is currently in the process of updating IEC Standard 62301, and

that the revised version is expected to be issued in July 2009. DOE believes that, in order to best

meet Congressional intent for these statutory provisions, the test procedure rulemaking for

residential clothes washers should be deferred until the updated IEC Standard 62301 is issued. A

final rule for the test procedure will be published as soon as possible after the June 30, 2009,

deadline set by EISA 2007 amendments to EPCA. (42 U.S.C. 6295(gg)(2)(B))

Item 1­1 DOE requests input from interested parties on the merits of revising its test

procedures for residential clothes washers and seeks input (including supporting data)

regarding how these procedures can be improved.

51.2.2 Rulemaking Process and Participation by Interested Parties

EPCA, as amended, specifies that any standard DOE prescribes for consumer products

shall be designed to “achieve the maximum improvement in energy efficiency.

. . which the

Secretary [of Energy] determines is technologically feasible and economically justified.” (42

U.S.C. 6295(o)(2)(A)) Moreover, EPCA states that the Secretary may not establish an amended

standard if such standard would not result in the “significant conservation of energy.” (42 U.S.C.

6295(o)(3)(B)) In determining whether a standard is economically justified, DOE considers, to

the greatest extent practicable, the following seven factors:

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

products subject to such standard;

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

products in the type (or class) compared to any increase in the price, or in the initial

charges for, or maintenance expenses of the covered products which are likely to result

from the imposition of the standard;

(3) the total projected amount of energy (or as applicable, water) savings likely to result

directly from the imposition of the standard;

(4) any lessening of the utility or the performance of the covered products likely to result

from the imposition of the standard;

(5) the impact of any lessening of competition, as determined in writing by the Attorney

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

(6) the need for national energy and water conservation; and

(7) other factors the Secretary considers relevant.

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

Additional statutory requirements for prescribing new or amended standards are set forth

in 42 U.S.C. 6295(o)(1)–(2)(A), (2)(B)(ii)­(iii), and (3)–(5) ).

The process for developing energy conservation standards involves analysis, public

notice, and consultation with interested parties. These parties provide valuable comments during

this process and help promote a balanced discussion of critical information required to conduct

the standards rulemaking. Accordingly, DOE actively encourages the participation of all

interested parties during the comment period provided at each stage of the rulemaking.

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

standards rulemakings, DOE involves interested parties through a variety of means, including

formal public notifications ( i.e.

, Federal Register notices) and public meetings. As discussed in

further detail below, the standards rulemaking process involves a preliminary publication of

analyses on the Department’s website, and two major public notices, which are published in the

Federal Register

. The publication of the preliminary analyses as well as the NOPR will be

accompanied by public meetings to solicit comment from interested parties to guide the

rulemaking process.

• Pre­NOPR publication of analyses and public meeting ( section 1.3). The Pre­NOPR

publication of analyses and public meeting is designed to obtain public review of the

models and tools that DOE will use in the rulemaking and to facilitate public

6participation before the proposed rule stage. Candidate standard levels (CSLs), which

span the range of efficiencies from baseline products to the most efficient technology, are

the basis for demonstrating the functionality of the models and tools. 3

• NOPR (section 1.4). The NOPR presents: a discussion of comments received in response

to the Pre­NOPR; DOE’s analysis of the impacts of standards on consumers,

manufacturers, and the nation; DOE’s weighting of the impacts; and the proposed

standard levels for public comment.

• Final rule (section 1.5). The final rule presents a discussion of comments received in

response to the NOPR, the revised analysis of the impacts of standards, DOE’s weighting

of the impacts, the standard levels DOE is adopting. The final rule also establishes the

effective date of the standards.

DOE has prepared and intends to follow the schedule below for the residential clothes

washer energy conservation standards rulemaking.

Table 1.1. Rulemaking Schedule for Residential Clothes Washer Energy Conservation

Standards

Rulemaking Notice Publication Date

Framework Document May 2009

Pre­NOPR June 2010

NOPR March 2011

Final Rule December 31, 2011 (EISA 2007

Deadline)

Any amended standards for residential clothes washers promulgated by the final rule

would apply to products manufactured on or after January 1, 2015. (42 U.S.C. 6295(g)(9))

1.3 Pre­Rulemaking Analyses and Other Activities

DOE’s initial pre­rulemaking activities include identifying available product technology

options and determining whether they warrant detailed analysis or can be eliminated from further

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

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

which technology options to eliminate from further consideration: (1) technological feasibility;

(2) practicability to manufacture, install, and service; (3) adverse impacts on product or

equipment utility or availability; and (4) adverse impacts on health or safety. DOE calls

technologies that pass the screening analysis “design options,” and considers them in the

engineering analysis as methods of improving the efficiency of the covered products.

3 In the past DOE, issued an ANOPR following publication of the framework document. The Energy Independence

and Security Act of 2007 eliminated the requirement that DOE issue ANOPRs as part of the standards rulemaking

process. See EISA, sec. 307. DOE is now using an alternative process to provide the same information and

opportunity for public comment as the ANOPR, but without publication of the detailed analyses in the Federal

Register

.

7Also in the pre­rulemaking stage of the analysis, DOE collects manufacturer cost data,

historical shipment data, shipment­weighted average efficiency data, and preliminary

manufacturer impact data ( e.g.

, capital conversion expenditures, marketing costs, and research

and development costs). Given these data, and the efficiency levels achievable by the design

options developed earlier, DOE estimates the impact of potential standards on individual

consumers and the nation as a whole. These calculations are contained within the following

analyses, explained in subsequent sections of this framework document:

• the engineering analysis (section 5);

• the consumer life­cycle cost (LCC) and payback period (PBP) analysis (section 8);

• the national impact analysis, which considers national energy savings (NES) and

national consumer net present value (NPV) (section 10); and

• a preliminary manufacturer impact analysis (section 12).

DOE will present the results of these analyses in a technical support document (TSD) to be

published prior to the NOPR stage of the rulemaking. The release of the preliminary TSD, which

will be made available on the Department’s website, will be followed by a public meeting. A

meeting agenda, presentation slides, and an executive summary highlighting the issues on which

DOE seeks comment will accompany the TSD on the website. DOE will publish a notice in the

Federal Register announcing this meeting and the availability of these related materials.

Discussion of various CSLs in the preliminary TSD will facilitate review by interested

parties of the spreadsheet models that underpin the analyses. DOE will use comments by these

parties to refine the models for the NOPR stage of the rulemaking analyses, where DOE will

propose specific efficiency levels for adoption. Based on the results, DOE selects CSLs from the

energy­efficiency or energy­use levels considered in the preliminary analyses. In addition to the

efficiency levels corresponding to the maximum technologically feasible (“max­tech”) 4 design

and the minimum LCC point, DOE generally selects levels or design options for consideration

that span the full range of technologically achievable efficiencies. DOE typically analyzes the

following CSLs:

• the baseline CSL ( i.e.

, the minimum level) is represented by the product with the

lowest energy­efficiency level currently sold on the market for a given product class;

for classes where minimum energy­efficiency standards already exist, the baseline

efficiency level is typically defined by the existing energy conservation standard;

• the highest CSL or lowest energy consumption level that is technologically feasible

( i.e.

, the “max­tech” level);

• the level with the minimum LCC or greatest LCC savings; and

4 The “max tech” represents the most efficient design that is commercialized or has been demonstrated in a

prototype with materials or technologies available today. “Max tech” is not constrained by economic justification,

and typically is the most expensive design option considered in the engineering analysis.

8• levels that incorporate noteworthy technologies or fill in large gaps between other

CSLs considered.

The preliminary analyses rely on analytical models and tools to assess the different

product classes at each efficiency or energy use level analyzed. Many of these analytical models

and tools are in the form of spreadsheets, some of which DOE uses to conduct the LCC and PBP

analyses and to determine the NES and NPV of prospective standards. Preliminary results may

facilitate discussions among interested parties on potential joint recommendations for standard

levels.

In addition to the other materials mentioned above, DOE will make the spreadsheet tools

used for the preliminary analyses available on its website for review and will consider comments

after the public meeting. 5 DOE will provide a 60­day public comment period following the

publication of the Pre­NOPR notice. At that point, DOE encourages interested parties to develop

joint recommendations for standard levels to the extent possible.

1.4 Notice of Proposed Rulemaking

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

after the Pre­NOPR public meeting. This process may result in revisions or refinements to the

preliminary analyses, including the engineering and LCC analyses. DOE will also conduct

additional economic and environmental impact analyses at this stage of the rulemaking. These

analyses generally include a consumer LCC subgroup analysis (section 11), a complete

manufacturer impact analysis (section 12), a utility impact analysis (section 13), an employment

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

analysis (section 16).

DOE will describe the methodology it used and post the results of all the analyses on its

website for review and comment. Based on comments by interested parties, further revisions to

the analysis may be undertaken. This analytical process ends with the selection of proposed

standard levels (if any), which DOE will present in the NOPR. DOE selects these proposed

standard levels from the trial standard levels (TSLs) analyzed during the NOPR phase of the

rulemaking, equivalent to the CSLs analyzed during the preliminary analyses. The NOPR,

published in the Federal Register

, will document the evaluation and selection of any proposed

standards levels, along with a discussion of other TSLs considered but not selected (and the

reasons for not selecting them).

The selection process for proposed energy conservation standards generally runs as

follows. For each product class, DOE will identify the maximum improvement in energy

efficiency or maximum reduction in energy use that is technologically feasible. If DOE proposes

a level that is below this max­tech level, it will explain the reasons for eliminating higher levels,

beginning with the highest level considered. DOE will present the analysis results in the NOPR,

with the details of the analysis provided in an accompanying TSD.

5 All materials associated with the residential clothes washer rulemakings are available on DOE’s website at

http://www1.eere.energy.gov/buildings/appliance_standards/residential/clothes_washers.html

.

9DOE considers many factors in selecting proposed standards, as described in section

1.2.2. These factors are established by EPCA and consider the many benefits, costs, and impacts

of energy conservation standards. Additionally, DOE encourages interested parties to develop

joint recommendations for standard levels. DOE will consider such recommendations in its

decision process.

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

with a copy of the NOPR and TSD to solicit feedback on the competitive impact of the proposed

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

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

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

proposed standard on competition in preparing the final rule. The NOPR is followed by a 60­day

public comment period that includes one public meeting.

1.5 Final Rule

After the publication of the NOPR, DOE will consider public comments it receives on the

proposal (including TSLs) and accompanying analyses. On the basis of the public comments,

DOE will review the engineering and economic impact analyses and proposed standards and

make modifications as necessary. Before it issues the final rule, DOE will consider DOJ’s

comments on the NOPR relating to the impacts of the proposed standard levels on competition.

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

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

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

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

2. OVERVIEW OF ANALYSES FOR RULEMAKING

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

that DOE selects energy conservation standards that achieve the maximum improvement in

energy efficiency, that will result in significant energy savings, and that are technologically

feasible and economically justified. The concept of economic justification within this context

includes considering the economic impacts on domestic manufacturers and consumers, national

benefits, including environmental impacts, and issues of consumer utility.

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

major components of the analyses DOE will conduct. DOE will ensure a consistent approach to

analysis throughout the rulemaking by considering each analysis as a part of the overall

standards­setting process.

Figure 2.1 summarizes the analytical components of the standards­setting process. The

analyses are presented in the center column. Each analysis has a set of key inputs. The identified

approaches are the methods that DOE will use to obtain key inputs, which may vary depending

on the information in question. DOE will collect some input from interested parties and other

10experts; DOE will develop other information independently. The results of each analysis are key

outputs, which feed directly into the rulemaking. Arrows indicate the flow of information

between the various analyses.

11A p p r o a c h e s

• C h a r a c t e r i z e I n d u s t r y

• A n a l y s i s o f M a r k e t D a t a

• A n a l y s i s o f P r o d u c t D a t a

• E f

f i c i e n c y

­ L e v e l A p p r o a c h

• D e s i g n O p t i o n A p p r o a c h

• A n a l y s i s o f E n e r g y U s e

D a t a

• R e t a i l P r i c e C o l l e c t i o n a n d

A n a l y s i s

• A c c o u n t i n g A p p r o a c h

• B a c k c a s t a n d F o r e c a s t

• M a r k e t S a t u r a t i o n

• M a n u f a c t u r e r I n t e r v i e w s

• G R I M A n a l y s i s

• N E M S

­ B T

• I m S E T

• N E M S

­ B T K e y I n p u t s

• I d e n t i f y F i r m s / P r o d u c t s

• H i s t o r i c a l S h i p m e n t s

• M a r k e t S e g m e n t a t i o n

• N o n

­ R e g u l a t o r y P r o g r a m s

• P r o d u c t P r o t o t y p e s

• C o m m e r c i a l P r o d u c t s

• E f

f i c i e n c y / P e r f o r m a n c e

E n e r g y U s e

P r o d u c t P r i c e

D e t e r m i n a t i o n

• E n e r g y P r i c e s

• I n s t a l l a t i o n C o s t s

• M a i n t e n a n c e & R e p a i r C o s t s

• E n e r g y

­ E f

f i c i e n c y L e v e l s

S h i p m e n t s

A n a l y s i s

• E n e r g y P r i c e F o r e c a s t s

• S i t e

­ t o

­ S o u r c e F a c t o r s

• M a n u f a c t u r e r P r i c e s

• A v e r a g e C o s t s

• S t a k e h o l d e r C o m m e n t s

• D e m o g r a p h i c s

• M a n u f a c t u r e r P r i c e s

• A v e r a g e C o s t s

• M a n u f a c t u r e r F i n a n c i a l D a t a

• U t i l i t y L o a d F a c t o r s

• N a t i o n a l E n e r g y S a v i n g s

• N a t i o n a l E n e r g y S a v i n g s

• N a t i o n a l P r o d u c t C o s t s

• N a t i o n a l O p e r a t i n g C o s t s

• E m i s s i o n R a t e s

• N a t i o n a l E n e r g y S a v i n g s

• N o n

­ R e g u l a t o r y

A l t e r n a t i v e s

• D e p a r t m e n t o f J u s t i c e R e v i e w

• S t a k e h o l d e r C o m m e n t s K e y O u t p u t s A n a l y s e s

F r a m e w o r k D o c u m e n t

• P r o d u c t C l a s s e s M a r k e t a n d T e c h n o l o g y

• T e c h n o l o g y O p t i o n s

A

s s e s s m e n t

T e c h n o l o g y O p t i o n s P r o d u c t C l a s s e s

• D e s i g n O p t i o n s S c r e e n i n g A n a l y s i s

D e s i g n O p t i o n s

• P r o d u c t D e s i g n s E n g i n e e r i n g A n a l y s i s

D e s i g n E n e r g y / U s e

E n e r g y

­ E f

f i c i e n c y P r o d u c t D e s i g n s L e v e l s

A n n u a l E n e r g y U s e ( U E C )

R e t a i l

P r i c e s

• L i f e

­ C y c l e C o s t s

­ L i f

e C y c l e C o s t a n d

• P a y b a c k P e r i o d s P a y b a c k P e r i o d

A n a l y s e s

• I n s t a l l a t i o n C a n d i d a t e • U E C C o s t s S t a n d a r d

• E n e r g y P r i c e s

• M a i n t C o s t s

L e v e l s

• R e p a i r C o s t s

• N a t i o n a l E n e r g y S a v i n g s N a t i o n a l I m p a c t

A n a l y s i s • N e t P r e s e n t V a l u e s

• C o n v e r s i o n C a p i t a l E x p e n d i t u r e s P r e l i m i n a r y

• D i r e c t E m p l o y m e n t I m p a c t s M a n u f a c t u r e r I m p a c t

A n a l y s i s

Advance Notice of Pr posed Rulemaking (ANO) Publication o o f Pre­Rulemaking Analyses

Revise Pre

­ NOPR T S L s )

• T r i a l S t a n d a r d L e v e l s (

A n a l y s e s T S L s

• L i f e

­ C y c l e C o s t s

• P a y b a c k P e r i o d s L i f

e

­ C y c l e C o s t

• I n d u s t r y C a s h F l o w

­ G r o u p A n a l y s i s S u b

• S u b

­ G r o u p C a s h

­ F l o w

• D i r e c t E m p l o y m e n t I m p a c t s

• C o m p e t i t i v e I m p a c t s M a n u f a c t u r e r I m p a c t

• C u m u l a t i v e R e g u l a t o r y B u r d e n A n a l y s i s

D i r e c t E m p l o y m e n t

I m p a c t s U t i l i t y I m p a c t

• U t i l i t y I m p a c t s

A n a l y s i s

E m p l o y m e n t I m p a c t

• N a t i o n a l E m p l o y m e n t I m p a c t s A n a l y s i s

E n v i r o n m e n t a l

• E m i s s i o n E s t i m a t e s A

s s e s s m e n t

• N a t i o n a l E n e r g y S a v i n g s R e g u l a t o r y I m p a c t

• N e t P r e s e n t V a l u e s A n a l y s i s

N o t i c e o f P r o p o s e d R u l e m a k i n g ( N O P R )

• R e v i s e d R e s u l t s R e v i s e A n a l y s e s

F i n a l R u l e

Figure 2.1 Analyses Conducted for the Residential Clothes Washer Energy Conservation

Standards Rulemaking

123. MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment will provide information about the residential

clothes washer industry and specifics about the performance attributes of this product. DOE will

use this assessment throughout the rulemaking. This assessment is particularly important at the

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

efficiency levels for each product class.

3.1 Market Assessment

DOE will qualitatively and quantitatively characterize the structure of the residential

clothes washer industry and market. In the market assessment, DOE will identify and

characterize the manufacturers of this product, estimate market shares and trends, address

regulatory and non­regulatory initiatives intended to improve the energy efficiency or reduce the

energy consumption of products covered by this rulemaking, and explore the potential for

technological improvements in the design and manufacturing of such products.

During the market assessment, DOE gathers data to identify important issues later in the

rulemaking ( e.g., potential small business impacts, competitive disruptions, and other factors that

may arise from enacting standards). For example, DOE will use historical product shipments and

prices as an indicator of future shipments and prices. Market structure data will be particularly

useful for assessing competitive impacts as part of the manufacturer impact analysis. This

assessment also allows DOE to start updating design options by reviewing product literature,

industry publications, and company websites.

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

the residential clothes washers covered in this rulemaking (e.g., current product features

and efficiencies, product feature and efficiency trends, and historical product shipments

and prices).

3.2 Product Classes

DOE may develop separate product classes and formulate separate energy conservation

standards for each class. The general criteria for separation into different classes include (1) type

of energy used; (2) capacity; or (3) other performance­related features such as those that provide

utility to the consumer, or others deemed appropriate by the Secretary that would justify the

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

DOE has previously divided residential clothes washers into five product classes based

on location of access, capacity, and such features as suds saving. Existing energy conservation

standards define residential clothes washers in the following classes:

• top­loading, compact (less than 1.6 cubic feet capacity);

• top­loading, standard (1.6 cubic feet or greater capacity);

• top­loading, semiautomatic;

• front­loading; and

13• suds­saving.

In the November 1998 Supplemental ANOPR, DOE proposed to eliminate the toploading semiautomatic and suds­saving product classes because they do not offer any added

utility that would otherwise need to be preserved under the energy conservation standards. See

42 U.S.C. 6295(o)(4). DOE stated it believed that these products should be subject to the

minimum energy conservation standards applicable to either compact or standard clothes

washers. 63 FR 64348. Interested parties did not comment on this proposed elimination. Due to

the absence of information available to analyze these product classes and ensure that they could

meet the proposed standard levels, DOE maintained these classes in the January 2001 Final Rule,

but did not subject them to energy conservation standards. 66 FR 3322. DOE is unaware of any

top­loading semiautomatic or suds­saving clothes washers on the market. Also, the current DOE

test procedure cannot measure the possible energy savings associated with suds savings. For

these reasons, DOE is again considering, and soliciting comment on, the validity of retaining the

top­loading semiautomatic and suds­saving product classes.

Additionally, DOE seeks comment as to whether the method of “loading” clothes

washers, or any other characteristic commonly associated with traditional “top­loading” or

“front­loading” clothes washers are “features” within the meaning of 42 U.S.C. 6295(o)(4) in

EPCA and whether the availability of such feature(s) would likely be affected by eliminating the

separate classes for these product types previously established by DOE. Previously, in the

proposed rule for commercial clothes washers, DOE took the position that EPCA does not permit

adoption of a standard that would eliminate top­loading commercial clothes washers because the

method of loading is a “feature.” 73 FR 62034, 62049–50. Furthermore, in DOE's denial of the

California Energy Commission's (CEC) petition for waiver from Federal preemption (71 FR

78157 (December 28, 2006)) and the ensuing litigation, California Energy Commission v. DOE

, Case. No. 07­71576 (9th Cir.), DOE took the position that it could not waive federal preemption,

in part because the proposed California regulation of residential clothes washer water usage

would result in the unavailability of top­loading residential clothes washers in the California

market, based on DOE's evaluation of the clothes washer market in 2006. DOE is willing,

however, to reconsider these previous conclusions as part of this rulemaking. More specifically,

DOE is soliciting public comments on whether one or more of the characteristics commonly

associated with different types of clothes washers, such as method of loading, presence or

absence of agitators, ability to interrupt cycles and possibly others, provide consumer utility that

should, under existing law, be recognized and protected by DOE through the maintenance or

establishment of separate product classes.

Item 3­2 DOE requests input from interested parties on the proposed product classes

and the criteria used for creating these product classes. What other factors, if any, should

DOE consider beyond those identified above as a basis for developing product classes?

When answering, please explain in detail and cite specific examples to the extent possible.

Item 3­3 DOE seeks comment on the merits of retaining or eliminating the top­ loading

semiautomatic and suds­saving clothes washer product classes.

14Item 3­4 DOE seeks comment as to whether the method of “loading” clothes washers

or any other consumer utility generally associated with the method of loading are “features” within the meaning of 42 U.S.C. 6295(o)(4) in EPCA and whether the

availability of such feature(s) would likely be affected by eliminating the separate classes

for these product types previously established by DOE.

3.3 Technology Assessment

The technology assessment will center on understanding how the product uses energy and

potential changes that could reduce energy consumption. DOE typically uses information about

“technology options”—existing technologies and prototype designs and concepts—to identify

technologies product manufacturers could use to attain higher energy conservation levels. In

consultation with interested parties, DOE will develop a list of technologies to consider in this

analysis. Initially, this list will include all those technologies considered to be technologically

feasible and will help DOE determine the max­tech design based on a review of efficiencies of

available products and their features.

DOE will consider technologies identified in its most recent analysis of amended energy

conservation standards as well as from information published in recent trade publications,

technical reports, and manufacturer literature. Most of the technologies listed in Table 3.1—with

exceptions noted below—are taken from a 1996 report prepared for DOE entitled Design

Options for Clothes Washers. 6 Steam washing and improved front­loading washer drum design

were identified in the September 2005 edition of Appliance Magazine

. Plastic particle cleaning

was identified in the September 2008 edition of Appliance Magazine

. DOE has included spray

rinse and advanced agitator technology options based on comments on the most recent standards

rulemaking for commercial clothes washers. Residential and commercial clothes washer

platform designs and technologies are largely similar, except that commercial clothes washers

are built for more rugged and frequent use. DOE added the low­standby­power design option

based on a review of the International Standby Basket of Products Survey

, 7 which showed a wide

range of standby power consumption for front­loading clothes washers surveyed in the United

States, and on DOE’s review of the controller and display options available for residential

clothes washers currently on the market. DOE also added a hot water circulation loop based on a

review of technical reports. Of the technologies listed below, the current DOE test procedure

cannot measure the possible energy savings of adaptive control systems other than adaptive

water­fill control systems.

6 Design Options for Clothes Washers

, Lawrence Berkeley National Laboratory, LBNL­47888, October 1996.

7 International Basket of Products Survey

, Asia­Pacific Partnership on Clean Development and Climate. Available

at www.energyrating.gov.au/standbydata/app/Default.aspx

.

15Table 3.1 Technology Options for Residential Clothes Washers

1. Adaptive fill controls

2. Added insulation

3. Advanced agitation concepts for top­loading machines

4. Automatic fill control

5. Bubble action

6. Direct­drive motor

7. Electrolytic disassociation of water

8. Horizontal­axis design 8

9. Hot water circulation loop

10. Front­loading design with recirculation

11. Improved fill control

12. Improved front­loading washer drum design

13. Improved water extraction to lower remaining moisture content

14. Increased motor efficiency

15. Low­standby­power design

16. Ozonated laundering

17. Plastic particle cleaning

18. Reduced thermal mass

19. Spray rinse or similar water­reducing rinse technology

20. Steam washing

21. Thermostatically controlled mixing valves

22. Tighter tub tolerance

23. Ultrasonic washing

4. SCREENING ANALYSIS

The purpose of the screening analysis is to screen out technology options that DOE will

not consider in the rulemaking.

DOE will develop a list of technology options (developed through its own research and in

consultation with interested parties) for consideration in the engineering analysis (section 5).

DOE will develop this list based on the technologies shown in Table 3.1. The identified

candidate technology options will encompass all those technologies that may be technologically

feasible. Thereafter, DOE will review each technology option in light of the following four

criteria, as provided in sections 4(a)(4) and 5(b) of Procedures, Interpretations, and Policies for

8 Typically, vertical­axis clothes washers (also known as top­loaders) are accessed from the top, while horizontalaxis clothes washers (also known as front­loaders) are accessed from the front. However, a limited number of

residential horizontal­axis clothes washers that are accessible from the top using a hatch in the wash basket are

currently available. For the purposes of this analysis, such horizontal­axis top­loading clothes washers will be

considered in the top­loading product classes.

16Consideration of New or Revised Energy Conservation Standards for Consumer Products (the

“Process Rule”) 9 and tailored to the current rulemaking:

1. Technological feasibility. DOE will not further consider technologies that are not

incorporated in commercially available products or in working prototypes.

2. Practicability to manufacture, install, and service. If DOE determines that mass

production of a product’s technology and reliable installation and servicing of the

technology could not be achieved on the scale necessary to serve the relevant market by

the time of the effective date of the standard, then it will not consider that technology

further.

3. Adverse impacts on product utility or availability. If DOE determines that a technology

will have significant adverse impact on the utility of the product to significant subgroups

of consumers, or result in the unavailability of any covered product type with

performance characteristics (including reliability), features, size, capacities, and volumes

that are substantially the same as products generally available in the United States at the

time, it will not consider that technology further.

4. Adverse impacts on health or safety. If DOE determines that a technology will have

significant adverse impacts on health or safety, it will not consider that technology

further.

As described in the 1996 report on Design Options for Clothes Washers

, DOE eliminated

six technologies from further analysis: bubble action, electrolytic disassociation of water;

ozonated laundering; reduced thermal mass; suds savings; and ultrasonic washing. DOE will reexamine whether the basis for eliminating these technologies from further analysis is still valid.

DOE will fully document the reasons for eliminating any technology options during the

screening analysis, and will provide this documentation for review and comment by interested

parties as part of the preliminary TSD. DOE will call those technology options that are not

screened out by the above four criteria “design options” and will consider these options in the

development of cost­efficiency curves in the engineering analysis.

Item 4­1 Are there any technologies listed in Table 3.1 that DOE should not consider

because of their impacts on safety, performance, or consumer utility of the product? If so, why?

Item 4­2 Are there other technologies that DOE should consider as technology options

and what, if any, impacts would the technology options be expected to have on safety,

performance, and consumer utility? Why?

9 10 CFR part 430, subpart C, appendix A.

175. ENGINEERING ANALYSIS

After conducting the screening analysis, DOE will analyze the remaining design options

that would improve product efficiency. This engineering analysis consists of estimating the

energy consumption and cost of products at various levels of increased efficiency. This section

provides an overview of the engineering analysis (section 5.1), and discusses baseline units

(section 5.2), DOE’s proposed approach for determining the cost­efficiency relationship (section

5.3), efficiency levels (section 5.4), proprietary designs (section 5.5), and cumulative regulatory

burdens that might affect the engineering analysis (section 5.6).

5.1 Engineering Analysis Overview

The purpose of the engineering analysis is to determine the relationship between

manufacturer cost and energy efficiency for residential clothes washers. In determining the costefficiency relationship, DOE will estimate the increase in manufacturer cost associated with

technological changes that increase the efficiency of these products relative to the baseline

models.

DOE will derive cost estimates for the engineering analysis (which DOE also will use in

the manufacturer impact analysis) from detailed incremental cost data disaggregated into the cost

of incremental material, labor, and overhead. DOE will create an industry­wide analysis based

primarily on the manufacturer­supplied data. DOE may supplement this analysis with cost

estimates of specific design options. To this end, DOE will request design, efficiency, and cost

information from manufacturers to determine the cost of improving the efficiency of the baseline

models. In addition, DOE must identify the model with the highest efficiency that is

technologically feasible within each product class ( i.e., the max­tech model).

DOE will supplement manufacturer­supplied data with a reverse­engineering process.

Reverse engineering entails a detailed product disassembly process, whereby (1) representative

units are torn down; (2) all components, processes, assembly, and manufacturing steps are noted

in an activities­based cost model; and (3) all manufacturing costs are calculated. Representative

units are chosen based on the range of efficiencies, design options, and capacities.

The result is a “green­field” model 10 of the subject unit and the factory in which it would

be built. These unit­specific factory requirements can then be aggregated by market share, unit

shipments, or any other method DOE wishes to use to derive industry­wide estimates.

The industry­wide estimates will consist of detailed incremental cost data, disaggregated

11 12 13 into the incremental costs of material, labor, and overhead. DOE will associate incremental

10 A “green­field” model estimates the cost of a product as if it were built in a brand new facility that had just broken

ground.

11 Direct material costs are the costs of raw materials such as steel, copper, and insulation; they also include the

costs of scrap metal that can be traced to final or end equipment. Direct material costs do not include indirect

material costs that are attributed to supplies that may be used in the production process, but are not assigned to final

pieces of equipment ( e.g.

, lubricating oil for production machinery).

12 Labor costs are the earnings of workers who assemble parts into a finished good or operate machines in the

production process. Direct labor includes the fringe benefits of direct laborers such as group health care, as well as

18costs with efficiency levels or with specific design options or design option combinations

required to achieve a given efficiency level.

5.2 Baseline Models

Once DOE establishes product classes, it will select a baseline model—a reference point

for each product class subject to analysis against which it can measure changes resulting from

energy conservation standards. The baseline model in each product class represents the

characteristics of common or typical equipment in that class. Typically, a baseline model would

be a model that just meets current energy conservation standards.

At a subsequent stage in its analysis, DOE will use the baseline models to conduct the

engineering analysis and the LCC and PBP analyses. To determine energy savings and changes

in manufacturer selling price, DOE will compare each higher efficiency product design against

the baseline model.

Current energy conservation standards for residential clothes washers are based on MEF,

expressed in cubic feet of washer capacity per kilowatt­hour (kWh), and WF, expressed in

gallons per cubic foot of washer capacity. As mentioned earlier, the MEF considers not only the

energy consumption of the washer, but also the amount of energy required to dry the load in a

clothes dryer, which is a function of the RMC of the clothes. EPCA, as amended by EISA 2007,

established energy conservation standards for top­loading and front­loading standard­size

residential clothes washers manufactured on or after January 1, 2011, which must have an MEF

no less than 1.26 and WF no more than 9.50. (42 U.S.C. 6295(g)(9)) DOE intends to use these

energy conservation standards to characterize the baseline unit efficiency for top­loading

standard­size clothes washers. However, a survey of front­loading clothes washers in the CEC

appliance database shows that there are no front­loading washers with efficiencies at the existing

Federal standards level, or, for that matter, any below the ENERGY STAR level (1.72 MEF/8.00

WF). Therefore, DOE is proposing to use the ENERGY STAR criteria to characterize the

baseline unit efficiency for front­loading clothes washers.

The January 2001 Final Rule established that top­loading compact­size residential clothes

washers shall have an MEF no less than 0.65. 66 FR 3333. DOE intends to use the existing

energy conservation standard to characterize the baseline unit MEF for top­loading compact

clothes washers. However, the energy conservation standard does not specify a maximum WF

for this product class. To address this issue, DOE proposes to use the percentage decrease in

baseline MEF that top­loading compact clothes washers exhibit compared to top­loading

standard­sized clothes washers to estimate the baseline WF for top­loading compact clothes

washers. DOE is choosing this approach because MEF and WF are generally inversely related.

Given this relationship, DOE estimates that the WF for top­loading compact clothes washers will

overtime pay. Direct labor does not include indirect labor, which is defined as the earnings of employees who do not

work directly in assembling a piece of equipment—such as supervisors, janitors, stockroom personnel, inspectors,

and forklift operators.

13 Factory overhead excludes depreciation, but includes indirect labor, downtime, set­up costs, indirect material,

expendable tools, maintenance, property taxes, insurance on assets, and utility costs. Factory overhead does not

include selling, general, and administrative costs (SG&A); research and development costs (R&D); interest; or

profit, which DOE accounts for separately.

19increase by the same percentage over the WF for top­loading standard­sized clothes washers as

MEF decreases. DOE plans to propose a scaled WF of 18.40 to characterize the baseline for this

product class. DOE believes that this is a reasonable value when considering top­loading

compact clothes washer survey data compiled by National Resources Canada (NRCan) in its

appliance database. 14 DOE notes that these data cover models with a wider range of energy and

water efficiencies than those in the CEC database.

DOE is unaware of any information on baseline performance of top­loading

semiautomatic or suds­saving clothes washers, and seeks comment from interested parties on

baseline efficiency levels for these product classes.

Item 5­1 DOE seeks input from interested parties on whether the above energy efficiency levels are appropriate for characterizing the performance of baseline units.

Item 5­2 DOE seeks information on baseline efficiency levels appropriate for toploading semiautomatic and suds­saving clothes washers.

Item 5­3 DOE seeks information on the specific technological characteristics of the

baseline model for each product class, including the technologies described in section 3.3.

Examples of the types of information DOE seeks include the type of wash basket drive

motor and the typical input wattage, as well as the type of fill control system.

5.3 Approach for Determining the Cost­Efficiency Relationship

In support of this rulemaking, DOE will seek to obtain incremental cost data for

residential clothes washers. This data is intended to represent the average incremental production

cost to improve a baseline model to a specified efficiency level. This methodology constitutes an

efficiency­level approach to the engineering analysis because DOE will examine the aggregated

incremental increases in manufacturer selling price at specified levels of energy efficiency. DOE

plans to use an efficiency­level approach because data contained within the CEC product

database, for example, demonstrate a significant range of efficiencies for most of the product

classes. Drafts of the engineering analysis data­request sheets are contained in appendix A.

To be useful in the manufacturer impact analysis, manufacturer cost information should

reflect the variability in the baseline models, design strategies, and cost structures that can exist

among manufacturers. DOE will attempt to qualify the cost­efficiency data supplied by

interested parties through engineering expertise and consultation with interested parties and/or

technical experts. Specifically, DOE will supplement these cost data with information obtained

through follow­up manufacturer interviews. These confidential interviews will provide a deeper

understanding of the various combinations of technologies used to increase product efficiency

and their associated manufacturing costs. Sample questions to be asked during the follow­up

interviews are contained in appendix B.

14 Available online at http://oee.nrcan.gc.ca/residential/personal/appliances.cfm?attr=4

.

20If DOE is unable to reconcile information collected during the manufacturer interviews

with the collected cost data, or with information contained in the market and technology

assessment, DOE will supplement the collected data through a design­option approach. This

involves consulting with outside experts and/or further review of publicly available cost and

performance information.

DOE will supplement the manufacturer­supplied data with a reverse­engineering

analysis, as described above, to identify the incremental cost and efficiency improvement

associated with each design option or design option combination—in effect, supplementing the

efficiency­level approach with a design­option approach as needed. DOE will conduct reverse

engineering through physical teardowns and testing on residential clothes washer models at key

efficiency levels to determine baseline manufacturing cost as well as incremental manufacturing

costs above the baseline. DOE proposes to perform reverse engineering on units rated at baseline

and improved (for example, ENERGY STAR) energy consumption levels for each analyzed

product class.

DOE may supplement the reverse­engineering data with information from catalogs,

websites, and trade publications to create a wider set of units for its cost­efficiency analysis.

DOE will estimate the contribution of the depreciation of conversion capital expenditures

to the incremental overhead. During the manufacturer interviews, DOE will gather information

about the capital expenditures that would be necessitated by increasing the efficiency of the

baseline models to various efficiency levels ( i.e.

, conversion capital expenditures by efficiency

or energy­use level). DOE will also request information about the depreciation method used to

expense the conversion capital.

The approach proposed above will allow DOE to represent residential clothes washers

throughout the entire efficiency range without depending on time­consuming simulation

modeling. DOE will maintain confidentiality of proprietary data while allowing the public to

examine the cost and design assumptions that underlie the cost­efficiency estimates.

Item 5­4 DOE requests feedback on the use of an efficiency­level approach to

determine the relationship between manufacturer cost and energy efficiency for residential

clothes washers, supplemented, as needed, by a design­option approach.

For each of the proposed product classes presented in section 3.2 that are appropriate to

analyze, DOE will suggest efficiency levels and attempt to obtain incremental cost data at each

of these levels. DOE will select appropriate efficiency levels for data collection on the basis of

(1) energy savings potential identified from engineering models; (2) observation of existing

products on the market; and/or (3) information obtained for the technology assessment. DOE

proposes to conduct the engineering analysis (and LCC and PBP analyses) on residential clothes

washer product classes for which there are sufficient information and representative units on the

market, and extend the results analytically to the remaining product classes as appropriate.

21Item 5­5 DOE requests input on the selection of appropriate product classes for

reverse­engineering analysis, and any product classes for which it is appropriate to extend

these results analytically.

5.4 Efficiency Levels

For each of the product classes presented in section 3.2 that are appropriate to analyze,

DOE will undertake analyses to determine potential efficiency levels and seek to develop

incremental cost data at each of these levels. DOE plans to conduct an engineering analysis (and

LCC and PBP analyses) on all product classes for which it suggests efficiency levels.

Table 5.1 through Table 5.3 present the efficiency levels DOE proposes to analyze for

residential clothes washers. The “maximum available” efficiency levels in the tables correspond

to models with the maximum efficiency currently available in the market, but may not

necessarily correspond to the max­tech levels. Models with maximum available efficiency may

not incorporate all possible design options for increasing efficiency and, therefore, may not

achieve an efficiency level as high as the max­tech level. Also, some of the design options that

have met the screening criteria ( i.e.

, passed the screening analysis) may not yet be commercially

available ( e.g.

, are only in working prototypes or are available technologies that are not currently

in production) and, therefore, would not be found in today’s products with maximum available

efficiency. Because of the potential dichotomy between max­tech and maximum available

efficiencies, and because DOE is required to analyze max­tech, it will seek input from interested

parties to determine appropriate max­tech efficiency levels. (42 U.S.C. 6295(p)(2))

To analyze the cost­efficiency relationship of this product, DOE proposes to use

efficiency levels based on the MEF and WF specifications prescribed by ENERGY STAR and

the Consortium for Energy Efficiency (CEE)’s Super­Efficient Home Appliances Initiative,

along with the maximum levels that are currently available in the market. For top­loading clothes

washers, DOE did not include CEE Tier 3 as an efficiency level because the difference between

the Tier 3 criteria (2.20 MEF/4.50 WF) and the maximum available level (2.25 MEF/4.45 WF)

was so small. For top­loading standard­size clothes washers, DOE proposes to add a level to fill

the gap between the baseline and the ENERGY STAR criteria. For front­loading clothes

washers, DOE proposes to add a level to fill the gap between the CEE Tier 3 criteria and the

maximum available level. It will set these gap­fill levels at combinations of MEF and WF that

are strongly represented in the CEC product listing.

For both top­ and front­loading clothes washers, DOE recognizes that MEF and WF

pairings may not simultaneously achieve max­tech levels. That is, a clothes washer with the

highest possible MEF may not achieve the lowest possible WF. Similarly, a clothes washer with

the lowest WF may not achieve the highest MEF. DOE considered several models in each

product class to determine max­tech values that best represent optimal performance for clothes

washers on the market. DOE did not suggest max­tech levels that represent a “hybrid” of the

highest possible MEF and the lowest possible WF for each product class.

For top­loading compact­size clothes washers, DOE did not establish efficiency levels for

analysis in previous rulemakings. Based on a review of the top­loading compact­size clothes

221 washers in the CEC database, which revealed little difference between the maximum available

efficiency and the baseline DOE standard, DOE proposes to analyze one efficiency level above

the baseline represented by the currently available maximum technology.

DOE seeks timely input from interested parties on clothes washer efficiencies to enable it

to decide on the efficiency levels for analysis as quickly as possible.

Table 5.1 Efficiency Levels for Top­Loading Standard­Size Residential Clothes Washer

Analysis

Level Efficiency Level Source Efficiency Level

MEF WF

Baseline DOE Standard 1.26 9.50

1 Gap Fill 1.40 9.50

2 ENERGY STAR 1.72 8.00

3 CEE Tier 1 1.80 7.50

4 CEE Tier 2 2.00 6.00

5 Max Available 2.26 4.48

Table 5.2 Efficiency Levels for Top­Loading Compact­Size Residential Clothes Washer

Analysis

Level Efficiency Level Source Efficiency Level

MEF WF

Baseline DOE Standard 0.65 18.40

Max Available 0.78 13.90

Table 5.3 Efficiency Levels for Front­Loading Residential Clothes Washer Analysis

Level Efficiency Level Source

MEF Efficiency Level

WF

Baseline ENERGY STAR 1.72 8.00

1 CEE Tier 1 1.80 7.50

2 CEE Tier 2 2.00 6.00

3 CEE Tier 3 2.20 4.50

4 Gap Fill 2.40 4.20

5 Max Available 2.89 3.36

23Item 5­6 DOE seeks input from interested parties about the adequacy of the proposed

efficiency levels for requesting incremental cost data from manufacturers. DOE also seeks

input from interested parties on appropriate maximum technologically feasible efficiency

levels and the basis for why those levels should be selected.

5.5 Proprietary Designs

DOE will consider in its engineering and economic analyses all design options that are

commercially available or present in a working prototype, including proprietary designs and

technologies. However, DOE will consider a proprietary design in the subsequent analyses only

if the achieved efficiency level can also be reached using other non­proprietary design options. If

the proprietary design is the only approach available to achieve a given efficiency level, then

DOE will reject that efficiency level, as the analytical results would appear to favor one

manufacturer over others.

DOE is sensitive to manufacturer concerns about proprietary designs and will attempt to

maintain the confidentiality of any proprietary data submitted by manufacturers or discussed

during manufacturer interviews. These data may be provided under a confidentiality agreement

with DOE’s contractor responsible for this part of the rulemaking analysis, Navigant Consulting,

Inc. (NCI). As in other rulemakings, NCI regularly works with confidential data from

manufacturers and other organizations, preparing aggregated results for DOE’s analysis that do

not divulge sensitive raw data, but that enable other interested parties to review and comment on

the aggregated dataset. Alternatively, interested parties may submit confidential data to DOE,

indicating in writing which data should remain confidential. To prevent public disclosure of the

data due to actions taken by a third party, interested parties providing confidential information to

DOE must submit that data according to 10 CFR 1004.11. This information will provide input to

the manufacturer impact analysis and other economic analyses.

Item 5­7 Are there proprietary designs or technologies for residential clothes washers

of which DOE should be aware in this rulemaking? If so, what are these designs or technologies and how should DOE acquire the cost data necessary for evaluating them?

5.6 Outside Regulatory Changes Affecting the Engineering Analysis

In conducting an engineering analysis, DOE considers the effects of regulatory changes

outside DOE’s statutory energy conservation standards rulemaking process that can affect the

manufacturers of the covered equipment. Some of these changes can also affect the energy

efficiency or energy consumption of the products covered under this rulemaking. In addition to

the efficiency regulations on residential clothes washers, several other Federal regulations and

pending regulations apply to other products these manufacturers make. For example, some

manufacturers in the residential clothes washer industry are subsidiaries of larger parent

companies that manufacture other products subject to Federal regulations, including the phaseout

24of hydrochlorofluorocarbon (HCFC) refrigerants mandated by the U.S. Environmental Protection

Agency (EPA).

DOE will attempt to identify all cumulative engineering issues that could affect the

engineering analysis. Consideration of these issues is closely related to the cumulative regulatory

burden assessment that DOE will conduct as part of the manufacturer impact analysis. DOE will

consider the comments received on the engineering analysis described in the preliminary TSD

and make any necessary changes. The updated analysis will be presented in the NOPR TSD.

Item 5­8 Are there additional outside regulatory issues that DOE should consider in its

analysis of residential clothes washers? If so, identify what they are and how DOE should

consider them for purposes of its analysis.

6. ENERGY AND WATER USE DETERMINATION

The energy and water use determination establishes the annual energy consumption of the

appliance and assesses the energy­savings potential of different product efficiencies. As part of

the energy and water use analysis, certain engineering assumptions may be required regarding

product application, including how often the product is operated and under what conditions.

DOE uses the annual energy consumption and energy­ and water­savings potential in the LCC

and PBP analyses to establish the consumer operating cost savings of product efficiency levels.

DOE will use data from the Energy Information Administration (EIA)’s Residential

Energy Consumption Survey 15 (RECS) as a basis for estimating the annual energy and water

consumption of clothes washers. From RECS, DOE will develop a household sample that uses

only homes with clothes washers; i.e.

, households without clothes washers will be excluded.

RECS specifies the use cycles of the washer, thereby allowing DOE to determine the washer’s

annual energy and water consumption.

DOE will determine the annual energy and water consumption by multiplying the total

per­cycle energy consumption developed from the engineering analysis by the number of usecycles in a year for each washer in the household sample developed from RECS. Annual energy

use includes both clothes washer and clothes dryer energy use, taking into account the RMC of

the washed clothes. Clothes washer energy use includes the energy to heat water. When the

RECS data are used to perform the energy and water use analysis, households with different fuel

types for the water heater and clothes dryer will be selected. Some selected households will not

have clothes dryers, so RMC changes will not influence the energy consumption in those cases.

As noted in section 1.2, DOE recently revised its clothes washer test procedure to more

accurately reflect the average number of annual use cycles. 62 FR 45484. Assuming the average

number of use cycles in the RECS household sample is not significantly different, DOE plans to

rely on the assumptions in this test procedure to establish the typical clothes washer annual

energy and water consumption. DOE will use the RECS household data to establish the high

variability in clothes washer use, and, in turn, washer annual energy and water use.

15 Available at www.eia.doe.gov/emeu/recs/contents.html

.

25DOE also plans to use the RECS household sample as a basis for conducting the LCC

and PBP analyses (see section 8).

Item 6­1 DOE seeks input from interested parties on the approaches presented for

estimating both the typical values and variability in the annual energy and water

consumption of residential clothes washers.

DOE intends to account for the rebound effect in its determination of annual energy

consumption. The rebound effect occurs when a piece of equipment, made more efficient and

used more intensively, does not yield the expected energy savings from the efficiency

improvement. In the case of more efficient domestic residential clothes washers, limited research

has been conducted to show that there is no rebound effect for home appliances, although the

consumer may choose to purchase larger models with more features that would result in higher

16 energy use.

Item 6­2 DOE seeks comments on the rebound effect associated with more efficient

residential clothes washers. In other words, DOE seeks input on what portion of the

energy savings resulting from more efficient equipment may be lost due to increased usage

or consumers purchasing larger or more feature­laden clothes washers. DOE is interested

in receiving any data that may support these comments.

7. MARKUPS FOR EQUIPMENT PRICE DETERMINATION

DOE requires retail (consumer) prices for the baseline efficiency level and all other

efficiency levels under consideration for use in the LCC and PBP analyses and the national

impact analysis. DOE uses manufacturer­to­consumer markups to convert the manufacturer

selling price estimates from the engineering analysis to consumer prices. The manufacturer­toconsumer markups are in addition to the markups on production costs that DOE uses to estimate

manufacturer selling price in the engineering analysis. To validate these markups, DOE will

collect data on existing prices in the market by either purchasing large data sets or downloading

data from retailer Internet sites.

However, before it can develop markup information, DOE must first identify distribution

channels ( i.e.

, how the product is distributed from the manufacturer to the consumer). AHAM’s

2005 Fact Book (the latest available version) shows that over 93 percent of all appliances are

distributed from the manufacturer directly to some type of retailer. Retailers identified in

AHAM’s 2005 Fact Book include home improvement stores (such as Lowe’s and Home Depot),

membership warehouse clubs/stores (such as Sam’s Club and Costco), department stores (such

16 L.A. Greening, D.L. Greene, and C. Difiglio. Energy efficiency and consumption

– the rebound effect

– a survey

. Energy Policy 28 (2000) 389–401. Available for purchase at www.elsevier.com/locate/enpol

.

26as Sears and Kohl’s), discount stores (such as Wal­Mart and Kmart), and appliance and

consumer electronics stores. Because an overwhelming majority of appliances are sold through

retail stores, DOE plans to analyze residential clothes washer product sales based on the

assumption that these appliances are sold in a manufacturer­to­consumer distribution channel

consisting of three parties: (1) the manufacturers producing the products, (2) retailers purchasing

the products from manufacturers and selling them to consumers, and (3) the consumers that

purchase the products.

DOE plans to determine an average manufacturer markup by examining the annual

Securities and Exchange Commission (SEC) 10­K reports filed by publicly traded manufacturers

whose product range includes clothes washers. DOE will determine an average retailer markup

by analyzing both economic Census data from the U.S. Census Bureau as well as the annual SEC

10­K reports filed by publicly traded retailers.

In addition to developing the manufacturer and retailer markups, DOE will develop and

include sales taxes to calculate appliance retail prices. The Sales Tax Clearinghouse 17 is an

Internet source that DOE intends to use to calculate applicable sales taxes.

To the extent possible, DOE also will use collected retail price data to validate the overall

manufacturer­to­consumer markup. One source for retail price data is the NPD Group, Inc.,

which sells sales­weighted retail price data for clothes washers for specific years. As an

alternative to purchasing retail price data, DOE may rely on retailers’ Internet sites, although the

representativeness of any given price data point is unknown.

This analysis will generate retail prices for each possible efficiency level, assuming that

each level represents a new efficiency standard. DOE makes this assumption to capture the effect

new standards have on retail price, i.e.

, higher manufacturer production volumes of more

efficient products. Because DOE expects to develop a range of price estimates, it may describe

new retail prices within a range of uncertainty. If the range of retail prices for each product is

large enough, DOE will develop retail price probability distributions to use as inputs to the LCC

and PBP analyses to determine the impact of the uncertainty on the economic feasibility of

amended energy conservation standards.

DOE welcomes comments on its proposed approach for developing estimates of future

retail prices.

8. LIFE­CYCLE COST AND PAYBACK PERIOD ANALYSES

The effects of increased energy conservation standards on a consumer of clothes washers

include changes in operating expenses (usually decreased) and changes in purchase prices

(usually increased). DOE analyzes the net effect on consumers by calculating the LCC and PBP

using engineering performance data (section 5), energy and water consumption data (section 6),

and equipment retail prices (section 7). Inputs to the LCC and PBP calculation include the total

installed cost to the consumer (purchase price plus installation cost) and operating cost (energy

17 Sales Tax Clearinghouse, Inc., State sales tax rates along with combined average city and county rates

. Available

at http://thestc.com/STrates.stm

.

27expenses and, if applicable, water expenses, repair costs, and maintenance costs). Additional

inputs to the LCC calculation include energy price forecasts, the lifetime of the appliance or

other defined period of analysis, and discount rates.

8.1 Approach for Conducting the LCC and PBP Analyses

In the pre­rulemaking stage, DOE will conduct the LCC and PBP analyses by modeling

both the uncertainty and variability in the inputs using Monte Carlo simulations and probability

distributions. The Monte Carlo approach provides a significant advantage over less sophisticated

approaches ( e.g.

, an approach using typical or average values to characterize inputs) by

identifying the percent of consumers benefiting and being burdened by a prospective standard.

LCC and PBP models developed by DOE incorporate both Monte Carlo simulations and

probability distributions by using Microsoft Excel spreadsheets combined with Crystal Ball (a

commercially available add­in program). Each Monte Carlo simulation will consist of 10,000

LCC and PBP calculations. The models will perform each calculation using input values that are

either sampled from probability distributions and household samples or characterized with single

point values. The analysis results will be a distribution of 10,000 data points showing the range

of LCC savings and PBPs for a given efficiency level relative to the baseline level.

Except for repair and maintenance costs, DOE will use probability distributions to

characterize the operating cost inputs to the LCC and PBP analyses, including product lifetimes

and consumer discount rates. As described in section 6, DOE will use RECS to establish a

sample of individual households for the LCC and PBP analyses. DOE will perform the LCC and

PBP calculations on each household to account for the variability in energy and water

consumption, and energy, water, and wastewater pricing associated with the household sample.

Therefore, the household sample for each product becomes, in effect, a probability distribution

for annual energy and water consumption, and energy, water, and wastewater prices. DOE may

describe maintenance and repair costs with single point values. The methodology for developing

maintenance and repair costs is described in more detail below.

After gathering the necessary data DOE will decide whether to use point values to

characterize most of the total installed cost inputs, including the manufacturer markup, the

retailer markup, and the installation costs. If the manufacturer cost estimates developed in the

engineering analysis are uncertain or variable, DOE will use probability distributions to capture

this uncertainty and variability; otherwise, DOE will use single point values for this input

. DOE

intends to characterize sales taxes with probability distributions to capture their regional

variability.

Another factor in identifying which consumers benefit from or are burdened by a

prospective standard is the distribution of product efficiencies in the marketplace, referred to as

base case efficiency distributions or market­share efficiency data. Assuming these data are

available, DOE can characterize the current product mix with probability distributions. DOE will

then assign specific appliance efficiencies to each household in its household sample based on

the efficiency’s sales weight. Because DOE intends to perform the LCC and PBP calculations on

a household­by­household basis, DOE expects to determine the LCC and PBP for a particular

standard level based on the appliance efficiency in a given household. For example, if a

28household is assigned a product efficiency that is greater than or equal to the efficiency of the

standard level under consideration, the LCC and PBP calculation would reveal that the

household would not be affected by a new standard level. By accounting for the households that

already purchase more efficient products, DOE will not overstate the potential benefits from

increasing product efficiency. To enable DOE to use this methodology, DOE expects to ask

interested parties—presumably either AHAM or individual manufacturers—to provide data on

the current mix of product efficiencies to account for those households already purchasing highefficiency products.

As discussed in section 6, DOE intends to consider the rebound effect associated with

more efficient clothes washers. The net impact on consumers is the sum of the change in the

cost of owning the clothes washer ( i.e., life­cycle cost) and the increased value for the enhanced

product features or usage patterns. DOE estimates that if it were able to monetize the increased

value to consumers added by the rebound effect, this value would be similar to the monetary

value of added energy use. Therefore, the economic impacts on consumers with or without the

rebound effect, as measured in the LCC analysis, are the same.

DOE intends to conduct the LCC and PBP analyses for the following residential clothes

washer product classes: (1) top­loading compact, (2) top­loading standard, and (3) front­loading.

To identify the consumers that benefit from, or are burdened by, a prospective standard, DOE

requests base case efficiency distributions or market­share efficiency data from the industry.

Table A­3 in appendix A identifies the market­share efficiency data that DOE is seeking.

During the NOPR­stage consumer analysis, DOE may evaluate additional parameters not

included in the preliminary analysis pertaining to information provided by interested parties or

that otherwise becomes available to the Department.

Based on the results of the LCC analysis, DOE will select CSLs for the preliminary

analysis. The range of CSLs typically will include the efficiency level with the minimum LCC,

the highest efficiency level that is technologically feasible, and other intermediate levels DOE

has not yet determined.

The following sections discuss the methodologies DOE plans to use to develop several of

the inputs to the LCC and PBP analyses, including (1) energy, water, and wastewater prices; (2)

maintenance, repair, and installation costs; (3) product lifetimes; and (4) discount rates. The

other inputs to the LCC and PBP analyses—namely, manufacturer costs (section 5), annual

energy consumption (section 6), and markups for the determination of consumer retail prices

(section 7)—have been discussed previously.

DOE is also required to perform a PBP analysis to determine whether the 3­year

rebuttable presumption of economic justification applies (in essence, whether the purchaser will

recover the higher installed cost of more energy efficient equipment through lowered operating

costs within 3 years.) (42 U.S.C. 6295(o)(2)(B)(iii)) To determine the rebuttable­presumption

PBP, DOE will determine the value of the first year’s energy savings by calculating the quantity

of those savings in accordance with DOE’s test procedure, rather than the field­based energy

consumption data from RECS. Although DOE will examine the rebuttable­presumption criteria,

29it will determine economic justification of selected CSLs through a more detailed analysis of the

economic impacts of increased efficiency pursuant to section 325(o)(2)(B)(i) of EPCA. (42

U.S.C. 6295(o)(2)(B)(i))

For the NOPR, DOE will review all of the comments it receives on the preliminary LCC

analysis, make any necessary revisions to the analysis, and evaluate additional parameters not

included in the preliminary analysis, if necessary.

Item 8­1 DOE seeks input from interested parties on the planned approach of using

Monte Carlo simulation and probability distributions to conduct the LCC and PBP

analyses.

Item 8­2 DOE requests data from interested parties to characterize the current mix of

residential clothes washer efficiencies in the market.

8.2 Energy, Water, and Wastewater Prices

For consumers of residential clothes washers, DOE plans to review residential energy

price data from the EIA to establish electricity, natural gas, and oil prices. All fuel types must be

considered in the LCC and PBP analyses, as U.S. households use electric, gas­fired, and oil­fired

water heaters to provide heated water for clothes washer operation. DOE will review the water

and wastewater rates survey data from the American Water Works Association (AWWA) and

Raftelis Financial Consultants, Inc. ( a water and wastewater financial consulting firm) as a

potential means for establishing residential water and wastewater prices.

DOE plans on developing average energy prices from EIA data for 13 geographic

areas—the nine U.S. Census divisions, four large States (New York, Florida, Texas, and

California) treated separately. DOE is separating out these four large States to analyze the impact

of standards on 32 percent of the U.S. general population and to develop energy prices at the

smallest geographic area as the data permit. Looking at smaller geographic areas enables DOE to

examine additional regional differences in the variability of energy prices. For those Census

divisions containing one of these large States, DOE intends to leave out the data for these States

to avoid double­counting when calculating the regional average values. For example, the Pacific

region average will not include California, and the West South Central region average will not

include Texas. As described in section 8.1 above, DOE plans to use RECS to develop a sample

of individual households that use residential clothes washers. Depending on the household’s

geographic location, DOE will assign the appropriate energy price from one of the 13 geographic

areas. Therefore, DOE will be able to assess the variability of energy prices at the regional level

for residential clothes washers.

To calculate electricity prices for residential consumers in each of the above geographic

areas, DOE intends to use information provided by electric utilities as summarized in the most

recent EIA Form 861 data. 18 These data are published annually and include annual electricity

sales in kWh; revenues from electricity sales; and number of consumers, for the residential,

18 Available at www.eia.doe.gov/cneaf/electricity/page/eia861.html

.

30commercial, and industrial sectors for every utility serving final consumers. The calculation of

an average residential electricity price will proceed in two steps: (1) for each utility, estimate an

average residential price by dividing the residential revenues by residential sales; and (2)

calculate a regional average price, weighting each utility with customers in a region by the

number of residential consumers served in that region.

To calculate natural gas and oil prices for residential consumers in each of the above

geographic areas, DOE intends to use data from the EIA publications Natural Gas Monthly 19 and

Petroleum Navigator. 20 These publications include a compilation of monthly fuel delivery

volumes and average consumer prices by State for residential, commercial, and industrial

customers. DOE plans to use the complete annual data for the most recent year available to

calculate an average price for each area. The calculation of natural gas and oil average prices will

proceed in two steps: (1) calculate the annual prices for each State using a simple average over

the appropriate months; and (2) calculate a regional price, weighting each State in a region by its

population. This method differs from the method used to calculate electricity prices because EIA

does not provide consumer­ or utility­level data on gas and oil consumption and prices.

To calculate water and wastewater prices for residential consumers, DOE intends to use

data from the most recent Water and Wastewater Survey 21 conducted by Raftelis and AWWA.

The survey covers approximately 300 water utilities and 200 wastewater utilities, with each

industry analyzed separately. For each utility, the water and wastewater survey includes the cost

to consumers of purchasing a given volume of water and producing a given volume of

wastewater. Because a sample of 200–300 utilities is not large enough to calculate regional

prices for all U.S. Census divisions and large States, 22 DOE intends to calculate regional values

at the Census region level (Northeast, South, Midwest, and West). The calculation of average

per­unit­volume residential prices will proceed in three steps: (1) calculate the per­unit­volume

price for each utility by dividing the total volumetric cost by the volume delivered or produced

(as in the case of wastewater); (2) calculate a State­level average price by weighting each utility

in a given State by the number of residential consumers it serves; and (3) calculate a regional

average by combining the State­level averages, weighting each by the population of that State.

If the EIA and AWWA/Raftelis data demonstrate a large variability in energy, water and

wastewater prices, DOE will conduct a sensitivity analysis to determine how high and low

energy, water, and wastewater price estimates affect the economic feasibility of amended energy

conservation standards.

DOE will use projections of national average energy prices to residential consumers to

estimate future energy prices in its LCC analysis. DOE will use the most recent available edition

of EIA’s Annual Energy Outlook ( AEO ) as the default source of projections for future energy

prices. DOE will base projections of future water and wastewater prices on an examination of

trends in historical prices.

19 Available at www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.htm

. 20 Available at http://tonto.eia.doe.gov/dnav/pet/pet_pri_dist_dcu_nus_a.htm

. 21 Available for purchase at www.raftelis.com/ratessurvey.html

. 22 By comparison, the EIA Form 861 data include more than 3,000 utilities.

31Item 8­3 DOE seeks input from interested parties on the planned approach for

estimating current and forecasted energy, water, and wastewater prices.

8.3 Maintenance, Repair, and Installation Costs

DOE will consider any expected changes to maintenance, repair, and installation costs for

the residential clothes washers covered in this rulemaking. Typically, small incremental changes

in product efficiency incur little or no changes in repair and maintenance costs over baseline

products. There is a greater probability that products with efficiencies that are significantly

higher than the baseline will incur increased repair and maintenance costs, since such products

are more likely to incorporate technologies that are not widely available. DOE will rely on input

from manufacturers and other interested parties in developing appropriate repair and

maintenance cost estimates, as necessary.

Regarding installation costs, unless the efficiency increases considered for this

rulemaking result in significantly larger or heavier products, DOE expects that more efficient

clothes washers will not incur increased installation costs.

Item 8­4 DOE seeks input from interested parties on whether it is correct to assume

that changes in maintenance, repair, and installation costs will be negligible for more efficient residential clothes washers. If it is incorrect, DOE is interested in the reasons why

this is so and specific ways to correct this assumption.

8.4 Product Lifetimes

DOE’s previous energy conservation standards rulemakings have established the product

lifetimes of residential clothes washers. In the December 2000 TSD for clothes washers, DOE

estimated an average product lifetime of 14.1 years.

DOE will use information from various literature sources ( e.g

., Appliance Magazine

, handbooks published by AHAM) as well as input from manufacturers and other interested

parties to establish whether the above product lifetimes are still representative.

Item 8­5 DOE seeks input from interested parties on appropriate lifetimes for the

residential clothes washer product classes covered in this rulemaking.

8.5 Discount Rates

The calculation of consumer LCC requires the use of an appropriate discount rate. DOE

uses the discount rate to determine the present value of lifetime operating expenses. The discount

rate used in the LCC analysis represents the rate from an individual consumer’s perspective. 23

23 The consumer discount rate is in contrast to the discount rates used in the national impact analysis, which are

intended to represent the rate of return of capital in the U.S. economy as well as the societal rate of return on private

consumption. See section 10.3 for additional information.

32For consumers of residential clothes washers, DOE plans to use the same approach that it relied

on to develop discount rates for residential furnaces and boilers— i.e.

, deriving the discount rates

from estimates of the interest or “finance cost” to purchase residential products. Following

financial theory, the finance cost of raising funds to purchase these products can be interpreted as

(1) the financial cost of any debt incurred to purchase products (principally interest charges on

debt), or (2) the opportunity cost of any equity used to purchase products (principally interest

earnings on household equity). Household equity is represented by holdings in assets such as

stocks and bonds, as well as the return on homeowner equity. Much of the data required to

determine the cost of debt and equity come from the Federal Reserve Board’s triennial Survey of

Consumer Finances

. 24

Item 8­6 DOE seeks input from interested parties on the planned approach for

estimating discount rates for residential consumers.

Based on consideration of the comments received on the LCC and PBP analyses

documented for the preliminary TSD, DOE will make changes as needed to the analysis. It will

reflect those changes in the documentation of the NOPR.

9. SHIPMENTS ANALYSIS

Shipments forecasts are required to calculate the national impacts of standards (NES and

NPV) and to calculate the future cash flows of manufacturers. DOE plans to develop shipments

forecasts based on an analysis of key market drivers for the particular products.

9.1 Base Case Forecast

To evaluate the various impacts of standards, DOE develops a base case forecast against

which to compare forecasts for higher efficiency levels. (Higher efficiency level forecasts are

also referred to as standards case forecasts.) DOE designs the base case to depict what would

likely happen to energy and water consumption and costs over time if DOE does not adopt

energy conservation standards. In determining the base case for each set of products, DOE plans

to calibrate its forecasts against historical shipments. DOE will also consider the mix of

efficiencies sold in the absence of new standards and how that mix might change over time. As a

result, DOE will need to collect data on historical product shipments and the market shares of the

different efficiency levels offered in each product class. Based on detectable trends in the

collected efficiency data, DOE will forecast base case shipment­weighted efficiencies (SWEF)

by product class. Forecasts of SWEFs are discussed in greater detail in section 10.1.

DOE plans to determine annual shipments in the base case by primarily accounting for

sales to two market segments: new construction and replacements. DOE intends to determine

shipments to new construction by accounting for new housing construction and historical rates of

product ownership (saturation rates). DOE plans to rely on the latest available edition of EIA’s

AEO to forecast new residential construction. Regarding historical product saturation rates, both

24 Available at www.federalreserve.gov/pubs/oss/oss2/scfindex.html

.

33AHAM’s 2005 Fact Book and EIA’s RECS provide relevant data. DOE plans to use both sources

to establish product saturation rates. DOE will also consider other input interested parties

provide. To determine replacement shipments, DOE will use the same product lifetimes and

retirement functions that it generates for the LCC and PBP analyses. In addition, DOE will

consider other market segments as appropriate, such as households that may retire their

appliances early, and existing households that do not already own the appliance.

Item 9­1 DOE seeks data on representative saturation rates for residential clothes

washers.

For residential clothes washers, DOE intends to develop a base case shipments forecast

for three product classes: (1) top­loading compact, (2) top­loading standard, and (3) frontloading. Therefore, for purposes of developing calibrated base case forecasts, DOE is seeking

historical product shipments data for each product class. The AHAM 2005 Fact Book and

Appliance Magazine offer historical shipments, but the data are not disaggregated by product

class. DOE hopes to collect from the industry disaggregated shipments data dating back at least 5

years. Table A­1 in appendix A identifies the specific years for which DOE seeks historical

shipments data.

Item 9­2 DOE seeks historical shipments data broken down by product class.

9.2 Standards Impacts on Product Shipments

For each product, DOE will develop a set of shipments forecasts for the covered products

for each set of efficiency levels analyzed. It will use these standards case forecasts to evaluate

the impacts of standards on product shipments. DOE will derive standards case forecasts using

the same data sets as it used for the base case forecasts. However, because the standards case

forecasts consider the increase in purchase price and the decrease in operating costs caused by

standards, forecasted shipments typically deviate from the base case. Household income also

factors into consumer purchase decisions. Therefore, the magnitude of the difference between the

standards case and base case shipments forecasts depends on the estimated purchase price

increase and the operating cost savings caused by the standard, relative to household income.

Because the purchase price tends to have a larger impact than operating cost on appliance

purchase decisions, standards case forecasts typically show a drop in product shipments relative

to the base case.

DOE’s past standards analyses have attempted to quantify the sensitivity of shipments to

increased purchase prices and operating cost savings as well as to changes in household income.

For example, DOE has conducted literature reviews and analyses of historical appliance price

and efficiency data to develop sensitivities. DOE will attempt to develop purchase price and

operating cost sensitivities for residential clothes washers. However, because the data required to

develop these sensitivities are limited and often difficult to obtain, DOE will also consider

modeling standards case shipments forecasts with scenarios ( i.e.

, specified impacts to product

shipments) if necessary.

34Market­pull programs, such as consumer rebate programs that encourage the purchase of

more­efficient products and manufacturer tax credits that encourage the production of more

efficient products, also affect standards case shipments forecasts. To the extent that such

programs exist, DOE considers their impact on the forecast of both base case and standards case

shipments.

Item 9­3 As part of its preliminary manufacturer impact analysis, DOE seeks input

from manufacturers and other interested parties on the potential impact of new energy

conservation standards on product shipments.

Item 9­4 DOE also requests input on any market­pull programs that promote the

adoption of more efficient residential clothes washer products.

10. NATIONAL IMPACT ANALYSIS

This section discusses DOE’s assessment of the aggregate impacts of potential energy

conservation standards at the national level. Measures of impact that DOE will report include the

future NES from candidate standards and the NPV of total consumer life­cycle costs.

10.1 Inputs to NES and NPV Forecasts

Analyzing impacts of Federal energy conservation standards for residential clothes

washers requires a comparison of projected U.S. energy consumption with and without new or

amended energy conservation standards. The forecasts contain projections of annual appliance

shipments (section 9), the annual energy and water consumption of new appliances (section 6),

and the purchase price of new appliances (section 7).

A key component of DOE’s estimates of NES and NPV are the product energy

efficiencies forecasted over time for the base case (without new standards) and each standards

case. For residential clothes washers, the forecasted efficiencies represent the annual shipmentweighted annual energy and water consumption, and wastewater production of the products

under consideration over the forecast period ( i.e.

, from the assumed effective date of a new

standard to 30 years after the standard becomes effective). Because key inputs to the calculation

of the NES and NPV (annual energy consumption for the NES, and retail prices and annual

operating costs for the NPV) depend on the estimated efficiencies, these efficiencies are

important to the analysis.

DOE intends to rely on input from interested parties, in particular AHAM and appliance

manufacturers, to develop base case historical shipment­weighted average efficiencies. For past

home appliance standards rulemakings, AHAM was able to provide SWEF data. DOE hopes that

AHAM and manufacturers will provide similar historical shipment­weighted average efficiency

data (EF or MEF and WF) for as many of the clothes washer product classes as possible.

If AHAM is unable to provide historical SWEF data by product class, DOE will make its

own estimates based on the aggregated historical SWEF data, past and current energy

conservation standards, and historical shipments data disaggregated by product class. To forecast

35base case efficiencies, in addition to determining detectable trends in any historical SWEF data

provided, DOE intends to review data from the ENERGY STAR program to determine the effect

that the program has had on increasing product efficiency. Based on the trends in the historical

SWEF data and the ENERGY STAR program’s success at transforming the clothes washer

market, as well its potential for future impacts on product efficiency, DOE will forecast base

case efficiency trends for each product class.

To develop shipment­weighted efficiencies for the various standards cases, DOE expects

to collect market­share efficiency data ( i.e.

, data on the distribution of product shipments by

efficiency) for the various product classes of each appliance. These are the same market­share

efficiency data (otherwise known as base case efficiency distributions) that DOE is requesting

for the LCC and PBP analyses. These data would allow DOE to accurately quantify the percent

of consumers that benefit from an increase in the energy conservation standard. Realizing that

this information may be difficult to collect, DOE hopes to obtain market­share efficiency data for

at least the most predominant product classes from a recent year ( i.e.

, 2005 or 2006).

The market­share efficiency data will allow DOE to estimate the efficiency impact that

standards may have in the year they become effective. For example, DOE has assumed a “rollup” scenario for past standards rulemakings. 25 Under this scenario, DOE assumes (1) product

efficiencies in the base case that do not meet the standard level under consideration would “roll

up” to meet the new standard level, and (2) product efficiencies above the standard level under

consideration would not be affected. Once DOE establishes the shipment­weighted efficiency for

the assumed effective date of the standard, it will estimate future shipment­weighted efficiencies

using the same rate of forecasted efficiency growth as in the base case efficiency trend.

Appendix A identifies the efficiency data DOE is requesting from the industry. As

identified in Table A­2, DOE is seeking historical SWEF (EF or MEF and WF) data for as many

of the five product classes identified in section 3.2 as interested parties can provide. For the

market­share efficiency data that DOE seeks, the efficiency bins encompass the efficiency levels

listed in Table A­3. In the cases where market­share efficiency data are not available, DOE will

use efficiency distributions based on available models as a proxy.

Item 10­1 DOE seeks historical SWEF (EF or MEF and WF) data by product class.

DOE also seeks historical market share data showing the percentage of product shipments

by efficiency level for as many product classes as possible.

10.2 National Energy Savings

DOE intends to calculate national energy consumption for each year beginning with the

expected effective date of the standards. It will calculate national energy consumption for the

base case and each standard level analyzed. DOE plans to perform this calculation using a

25 For example, the residential central air conditioner standards rulemaking considered a roll­up scenario when

estimating the impact of standards. See chapter 7 of the central air conditioner TSD for more details, which is

available at www.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_r.html

.

36spreadsheet model that effectively multiplies annual shipments forecasts by unit energy savings,

accounting for the stock of appliances affected by standards.

In response to comments by interested parties who asked for a simple, transparent model,

DOE has developed NES spreadsheet models for its standards rulemakings since 1996, to

forecast energy savings and to demonstrate how to account for the growth in efficiency over

time. 26 Although these models are specific to each product, DOE can apply their general

structure to the entire residential clothes washer market. DOE expects the NES spreadsheet

model it develops for this rulemaking to provide a credible, stand­alone forecast of NES and

NPV for residential clothes washers.

As discussed in section 6, DOE intends to consider the rebound effect associated with

more efficient clothes washers. DOE will incorporate the rebound effect used in the energy use

analysis into its calculation of national energy savings by diminishing the SWEFs in the

standards case forecasted efficiency trends.

Based on comments DOE receives on the preliminary phase of this rulemaking, DOE

may make changes to the analysis. It will reflect those changes in the documentation for the

NOPR.

Item 10­2 DOE seeks input on its plan to develop NES spreadsheet models for

estimating national impacts of amended energy conservation standards for residential

clothes washers. For example, are spreadsheet models still the preferred approach for

estimating national impacts?

10.3 Net Present Value

DOE calculates the national NPV of energy conservation standards in conjunction with

the NES. DOE calculates annual energy expenditures from annual energy consumption by

incorporating forecasted energy prices, using the shipment and average energy efficiency

forecasts described in section 9. DOE calculates annual product expenditures by multiplying the

price per unit by the number of forecasted shipments. The difference between a base case and a

standards case scenario gives the national energy bill savings and increased product expenditures

in dollars. The difference each year between energy bill savings and increased product

expenditures is the net savings (if positive) or net costs (if negative). DOE discounts these annual

values to the present time and sums them to give a net present value. According to U.S. Office of

Management and Budget (OMB) requirements, DOE will conduct two NPV calculations, one

using a real discount rate of 3 percent and another using a real discount rate of 7 percent (OMB,

Circular A­4: Regulatory Analysis. (Sept. 17, 2003)). The discount rates for the determination of

NPV are in contrast to the discount rates used in the LCC analysis, which are developed from a

consumer’s perspective. The 7­percent real value is an estimate of the average before­tax rate of

return to private capital in the U.S. economy. The 3­percent real value represents the “societal

rate of time preference,” which is the rate at which society discounts future consumption flows to

26 Several NES spreadsheet models from previous rulemakings, including the rulemaking for residential clothes

washers, can be found on DOE’s website at www.eere.energy.gov/buildings/appliance_standards

.

37their present value. Based on consideration of the comments received in response to the

preliminary phase of this rulemaking, DOE will make any necessary changes to the analysis and

the CSLs.

As noted in section 10.2, DOE intends to consider the rebound effect associated with

more efficient clothes washers in its determination of national energy savings. As discussed in

section 8, DOE believes that if it were able to monetize the increased value to consumers added

by the rebound effect, this value would be similar in value to foregone energy savings. For this

standards rulemaking, DOE estimates that this increased value to the consumer is equivalent to

the monetary value of the energy savings that would have occurred without the rebound effect.

Therefore, the economic impacts on consumers with or without the rebound effect, as measured

in the NPV, are the same.

11. LIFE­CYCLE COST SUBGROUP ANALYSIS

This section describes how DOE analyzes consumer impact of any new standards by

dividing consumers into subgroups and accounting for variations in key inputs to the LCC

analysis. A consumer subgroup comprises a subset of the population that is likely to be affected

disproportionately by new or revised energy conservation standards. The purpose of a subgroup

analysis is to determine the extent of this disproportional impact. DOE will work with interested

parties early in the rulemaking process to identify any subgroups for consideration. In the case of

residential clothes washers, some possible subgroups DOE may consider are low­income

households and senior citizens. However, DOE will not analyze the consumer subgroups until

the NOPR stage of the analysis.

In comparing potential impacts on the different consumer subgroups, DOE will evaluate

variations in regional energy prices, energy use profiles, and installation costs that might affect

the LCC of an energy conservation standard to certain consumer subgroups. To the extent

possible, DOE will obtain estimates of the variability in each input and consider these ranges in

its calculation of consumer impacts. It will discuss with interested parties the variability ranges

in each input and likely sources of information.

Item 11­1 DOE requests input as to which consumer subgroups, if any, it should

consider when devising standards for residential clothes washers.

3812. MANUFACTURER IMPACT ANALYSIS

DOE announced changes to the manufacturer impact analysis format in a report issued to

Congress, Energy Conservation Standards Activities 27 (“Standards Activities”), on January 31,

2006 (as required by section 141 of the Energy Policy Act of 2005 (EPACT 2005)).

Under this new format, DOE will collect, evaluate, and report preliminary information

and data on manufacturer impacts in the preliminary TSD. (See Standards Activities, p. 48.)

Such preliminary information includes the anticipated conversion capital expenditures by

efficiency level and the corresponding anticipated impacts on employment. DOE will solicit

further information during the preliminary engineering analysis manufacturer interviews.

Preliminary manufacturer impact analysis data needs are contained in appendix B.

DOE intends the manufacturer impact analysis to provide an assessment of the potential

impacts of energy conservation standards on manufacturers of residential clothes washers. In

addition to financial impacts, a wide range of quantitative and qualitative effects may occur

following adoption of a standard that may require changes to the manufacturing practices for

these products. DOE will identify these effects through interviews with manufacturers, as well as

other interested parties and experts.

For the NOPR, DOE will supplement the results of the preliminary MIA conducted as

part of the preliminary analyses with more detailed analyses, described in sections 12.1 through

12.5. Specifically, DOE will carry out an industry­wide cash­flow analysis using the

Government Regulatory Impact Model (GRIM), identify and analyze subgroups of

manufacturers whose business varies significantly from the industry as a whole, perform a

competitive impacts assessment, and review the cumulative regulatory burden for the industry.

12.1 Sources of Information for the Manufacturer Impact Analysis

Many of the analyses described earlier provide important information that DOE uses as

inputs for the manufacturer impact analysis. Such information includes financial parameters

developed in the market assessment (section 3.1), manufacturing costs from the engineering

analysis (section 5.3), retail price forecasts (section 7), and shipments forecasts (section 9). DOE

supplements this information with information gathered during manufacturer interviews.

DOE will conduct detailed interviews with manufacturers to gain insight into the range of

potential impacts of standards. The interview process plays a key role in the manufacturer impact

analysis, since it provides an opportunity for directly affected parties to express their views on

important issues. During the interviews, DOE will solicit information on the possible impacts of

standards on manufacturing costs, equipment prices, sales, direct employment, capital assets, and

industry competitiveness. Both qualitative and quantitative information are valuable in terms of

this analysis. DOE will schedule interviews well in advance to provide every opportunity for key

individuals to be available to participate. In addition, DOE will provide manufacturers with the

questionnaire before the interviews to facilitate the gathering of the appropriate information.

27 A copy of this report is available at:

www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html

.

39Although a written response to its questionnaire is acceptable, DOE prefers an interactive

interview process, because it helps clarify responses and provides the opportunity to identify

additional issues.

DOE will ask interview participants to identify all confidential information provided in

writing or orally, and DOE will determine whether the information submitted is entitled to

confidential treatment. It will consider information gathered, as appropriate, in the energy

conservation standards decision­making process. However, DOE will not make confidential

information available in the public record. DOE also will ask participants to identify all

information that they wish to have included in the public record but that they do not want to have

associated with their interview that would identify that particular manufacturer; DOE will

incorporate this information into the public record, but will report it without attribution.

DOE will collate the completed interview questionnaires and prepare a summary of the

major issues and outcomes. This summary will become part of the TSD produced for this

rulemaking.

12.2 Industry Cash­Flow Analysis

The industry cash­flow analysis relies primarily on the GRIM. DOE uses the GRIM to

analyze the financial impacts of new or more stringent energy conservation standards on the

industries that produce the products covered by the standard.

The GRIM analysis uses a number of inputs—annual expected revenues; manufacturer

costs such as costs of goods sold; selling, general, and administrative costs; taxes; and capital

expenditures (both ordinary capital expenditures and those related to standards)—to determine a

series of annual cash flows beginning from the announcement of the new standard and

continuing for several years after its implementation. DOE compares the results against base case

projections that involve no new standards. The financial impact of new standards is the

difference between the two sets of discounted annual cash flows. Other performance metrics,

such as return on invested capital, also are available from the GRIM.

DOE will gather the inputs needed for the GRIM from two primary sources: the analyses

conducted to this point and interviews with manufacturers and other interested parties.

Information gathered from previous analyses will include financial parameters, manufacturing

costs, price forecasts, and shipments forecasts. Interviews with manufacturers and other

interested parties will be essential in supplementing this information.

12.3 Manufacturer Subgroup Analysis

Average industry cost values may not adequately assess differential impacts among

subgroups of manufacturers. DOE recognizes that smaller manufacturers, niche players, and

manufacturers exhibiting a cost structure that differs significantly from the industry average may

be affected differently by the imposition of standards. Ideally, DOE would consider the impact

on every firm individually. In highly concentrated industries, this may be possible. In industries

having numerous participants, however, DOE uses the results of the market and technology

assessment to group manufacturers into subgroups, as appropriate.

40Small businesses, as defined by the U.S. Small Business Administration (SBA) for

household laundry equipment manufacturers, which includes residential clothes washers, are

enterprises with 1,000 employees or fewer. Small business size standards are listed by North

American Industry Classification System (NAICS) code and industry description. Household

laundry equipment manufacturing is classified under NAICS 335224. A search of small

businesses of this NAICS code listed in the SBA website indicates that there is at least one small

business that manufactures residential clothes washers that would be covered by this rulemaking.

As part of its subgroup analysis, DOE will identify small businesses that manufacture these

products and interview small businesses affected by the rulemaking to determine if there are

differential impacts on these companies that may result from new energy conservation standards.

DOE will examine publicly available data and contact manufacturers, when needed, to determine

if they meet the SBA’s definition of a small manufacturing facility and if their manufacturing

facilities are located within the United States.

The detailed manufacturer subgroup impact analysis will entail calculating cash flows

separately for each defined class of manufacturer.

Item 12­1 DOE seeks comment on appropriate manufacturer subgroups, if any, that

DOE should consider in a manufacturer subgroup analysis for residential clothes washers.

12.4 Competitive Impacts Assessment

EPCA directs DOE to consider any lessening of competition likely to result from an

imposition of standards. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It further directs the Attorney General

to determine in writing the impacts, if any, of any lessening of competition. (42 U.S.C.

6295(o)(2)(B)(ii))

DOE will make a determined effort to gather and report firm­specific financial

information and impacts, and it will then report the aggregated impact of the standard on

manufacturers. The competitive impacts analysis will focus on assessing the impacts to smaller,

yet significant, manufacturers. DOE will base the assessment on manufacturing cost data and on

information collected from interviews with manufacturers. The manufacturer interviews will

focus on gathering information that will help in assessing asymmetrical cost increases to some

manufacturers, increased proportion of fixed costs potentially increasing business risks, and

potential barriers to market entry ( e.g.

, proprietary technologies). DOE will provide the Attorney

General with a copy of the NOPR for consideration in his/her evaluation of the impact of

standards on the lessening of competition.

12.5 Cumulative Regulatory Burden

DOE is aware that other regulations may apply to equipment covered under this

rulemaking, as well as to other equipment produced by the same manufacturers of equipment

covered under this rulemaking. Multiple regulations may result in a significant, cumulative

regulatory burden on these manufacturers. Accordingly, DOE will analyze and seek to mitigate

the overlapping effects of amended DOE standards and other regulatory actions on

41manufacturers of residential clothes washers. DOE is aware that home appliance manufacturers

and trade groups have issued public comments concerning the excessive regulation of the home

appliance industry in comparison to other industries. DOE will consider these issues during the

manufacturer impact analysis.

Regulations that could affect the industries impacted by this rulemaking include:

• DOE standards for residential clothes washers. Manufacturers have gone through

redesign cycles mandated by standards since 1990. Most recently, EISA 2007 prescribed

standards for residential clothes washers that will take effect in 2011.

• EPA­mandated phase­out of HCFCs. Some manufacturers in the residential clothes

washer industry are subsidiaries to large parent companies that manufacture products

subject to the EPA­mandated phase­out of HCFC refrigerants ( i.e.

, refrigerators, room

air­conditioners, dehumidifiers), requiring manufacturers to switch to non­ozonedepleting refrigerants.

• Reduction of Hazardous Substances (RoHS) directive. The Directive on the Restriction of

the Use of Certain Hazardous Substances in Electrical and Electronic Equipment was

adopted in February 2003 by the European Union (EU) and became effective July 1,

2006. 28 RoHS identifies specific categories of products that can contain no more than

threshold amounts of mercury, lead, cadmium, hexavalent chromium, and two fire

retardants. While this legislation does not extend to products in the United States,

domestic manufacturers selling to the EU market must produce RoHS­compliant

appliances. These manufacturers may choose to promulgate the associated design

changes across their entire product line.

Item 12­2 What other regulations or pending regulations should DOE consider in its

examination of cumulative regulatory burden?

13. UTILITY IMPACT ANALYSIS

To estimate the effects of energy conservation standards for residential clothes washers

on electric utility industries, DOE plans to use a variant of the EIA’s National Energy Modeling

System (NEMS) called NEMS­BT. BT refers to DOE’s Building Technologies Program. NEMS

is a large, multisectoral, partial­equilibrium model of the U.S. energy sector that EIA has

developed over several years, primarily for the purpose of preparing the AEO

. NEMS produces a

widely recognized reference case forecast for the United States through 2030 and is available in

the public domain. 29

28 Available at http://ec.europa.eu/environment/waste/weee/index_en.htm

. 29

National Energy Modeling System: An Overview 2000

available at http://tonto.eia.doe.gov/ftproot/forecasting/05812000.pdf

42The utility impact analysis is a comparison between the NEMS­BT model results for the

base case and standards cases. Outputs of the utility impact analysis usually parallel results that

appear in the latest AEO

, with some additions. Typical outputs of the utility impact analysis

include forecasts of electricity and gas sales, price, and avoided capacity. DOE plans to conduct

the utility impact analysis as a scenario departing from the latest AEO reference case. In other

words, DOE will model the energy savings impacts from amended energy conservation

standards using NEMS­BT to generate forecasts that deviate from the AEO reference case. 30

Item 13­1 DOE seeks input from interested parties on its plans to use NEMS­BT to

conduct the utility impact analysis. Is the NEMS­BT model appropriate for assessment of

utility impacts of energy conservation standards? If not, why? What would be a more

appropriate model for DOE to use?

14. EMPLOYMENT IMPACT ANALYSIS

DOE estimates the impacts of standards on employment for equipment manufacturers,

relevant service industries, energy suppliers, and the economy in general. This analysis covers

both direct and indirect employment impacts. Direct employment impacts would result if

standards led to a change in the number of employees at manufacturing plants and related supply

and service firms. DOE will evaluate direct employment impacts in the manufacturer impact

analysis, as described in section 12.

Indirect employment impacts are impacts on the national economy other than in the

manufacturing sector being regulated. Indirect impacts may result both from expenditures

shifting among goods (the substitution effect) and changes in income that lead to a change in

overall expenditure levels (the income effect). DOE defines indirect employment impacts from

standards as net jobs eliminated or created in the general economy as a result of increased

spending driven by the increased product prices and reduced spending on energy.

DOE will investigate the combined direct and indirect employment impacts in the

employment impact analysis using the Pacific Northwest National Laboratory (PNNL)’s Impact

of Sector Energy Technologies (ImSET) model. PNNL developed ImSET for DOE’s Office of

Planning, Budget, and Analysis. The model estimates the employment and income effects of

energy­saving technologies in buildings, industry, and transportation. Compared to simple

economic multiplier approaches, ImSET allows for more complete and automated analysis of the

economic impacts of energy efficiency investments. Although DOE intends to use ImSET for its

analysis of employment impacts, it welcomes input on other tools and factors it might consider.

30 Several NEMS­BT models from previous rulemakings, including residential clothes washers, can be found on

DOE’s website at www.eere.energy.gov/buildings/appliance_standards

.

43Item 14­1 DOE welcomes feedback on its planned approach for assessing national

employment impacts, both direct and indirect, and is interested in whether other tools or factors should be considered as part of its analysis. If other tools or factors should be

considered, please identify them and explain why, and how, they should be integrated into

DOE’s analysis.

15. ENVIRONMENTAL ASSESSMENT

DOE will prepare its draft environmental assessment (EA) pursuant to the National

Environmental Policy Act and the requirements under 42 U.S.C. 6295(o)(2)(B)(i)(VI) and

6316(a), to determine the environmental impacts of the amended standards. The intent of the

environmental assessment is to provide emissions results estimates and to fulfill requirements to

properly quantify and consider the environmental effects of the proposed amended standards.

The environmental assessment will focus on the impact of possible energy conservation

standards on the pollutants and emissions from electricity­generating power plants. Specifically,

the environmental assessment for this rulemaking will consider three types of energy­related

emissions

— oxides of nitrogen (NO

x ), mercury (Hg), and carbon dioxide (CO 2 ). An additional

emission, sulfur dioxide (SO 2 ), was previously considered. However, DOE has determined that

due to the presence of national caps on SO 2 emissions as addressed below, any such reduction

resulting from an energy conservation standard would not affect the overall level of SO 2

emissions in the United States.

DOE will estimate the reduction in total emissions of CO 2 , NO

x , and Hg using the

NEMS­BT computer model. As noted earlier in the discussion of the Utility Impact Analysis,

NEMS­BT is a variant of NEMS which is used to produce EIA’s AEO. In the Environmental

Assessment, DOE will consider the incremental impact on emissions from several energy

conservation standards for clothes washers. In considering the environmental impacts of each

possible standard, DOE will rely on the data and assumptions in the most current version of the

AEO.

The NEMS­BT is run similarly to the latest AEO version of NEMS, except the energy

use is reduced by the amount of energy saved due to the CSLs. DOE obtains the inputs of

national energy savings from the NIA spreadsheet model. For the Environmental Assessment,

the output is the forecasted physical emissions. The net benefit of the standard is the difference

between emissions estimated by NEMS­BT and the Reference Case. The NEMS­BT tracks CO 2

emissions using a detailed module that provides results with a broad coverage of all sectors and

inclusion of interactive effects.

Item 15­1 DOE invites comments on how to estimate monetary values associated with

CO 2 emissions reductions or on any widely accepted values that might be used in DOE’s

analyses.

44The Clean Air Act Amendments of 1990 set an emissions cap on SO 2 for power

generation that would be affected by the amended standards. 31 The attainment of this target,

however, is flexible among generators and is enforced through the use of emissions allowances

and tradable permits. In other words, with or without a standard, total cumulative SO 2 emissions

will always be at or near the ceiling, while there may be some timing differences among yearly

forecasts. Thus, it is unlikely that there will be an SO 2 environmental benefit from standards as

long as there is enforcement of the emissions ceilings. Although there may not be an actual

reduction in SO 2 emissions from electricity savings, there still may be an economic benefit from

reduced demand for SO 2 emission allowances. Electricity savings decrease the generation of SO 2

emissions from power production, which can decrease the need to purchase or generate SO 2

emissions allowance credits, and decrease the costs of complying with regulatory caps on

emissions.

NO

x emissions from 28 eastern States and the District of Columbia (D.C.) are limited

under the Clean Air Interstate Rule, published in the Federal Register on May 12, 2005.

Although the rule has been remanded to EPA by the D.C. Circuit, it will remain in effect until it

is replaced by a rule consistent with the Court's opinion in North Carolina v. EPA. Because all

States covered by CAIR opted to reduce NO

x emissions through participation in cap­and­trade

programs for electric generating units, emissions from these sources are capped across the CAIR

region. As with the SO 2 emissions cap, energy conservation standards are not likely to have a

physical effect on NO

x emissions in those States. However, the standards created by a final rule

that may result from this framework document might produce an environmentally related

economic impact in the form of lower prices for emissions allowance credits if they were large

enough. DOE believes that such standards would not produce such an impact because the

estimated reduction in NO

x emissions or the corresponding increase in available allowance

credits in States covered by the CAIR cap would be too small to affect allowance prices for NO

x .

In contrast, new or amended energy conservation standards would reduce NO

x emissions

in those 22 States that are not affected by the CAIR, and these emissions could be estimated from

NEMS­BT. As a result, DOE will use NEMS­BT to forecast emission reductions from any

standards that DOE ultimately proposes in a NOPR for the products covered by this framework

document.

Item 15­2 DOE seeks input from interested parties on how it should address NO

x

emissions in this rulemaking consistent with the current CAIR requirements.

Future emissions of Hg would have been subject to emission caps under the Clean Air

Mercury Rule (CAMR). 32 The CAMR would have permanently capped emissions of Hg for

new and existing coal­fired plants in all States by 2010, but was vacated by the D.C. Circuit in its

February 8, 2008, decision in New Jersey v. Environmental Protection Agency

. 33 As a result,

DOE plans to use NEMS­BT to forecast Hg emission reductions from any standards that DOE

31 Information available at www.epa.gov/air/caa

. 32 The EPA’s Clean Air Mercury Rule was published on May 18, 2005. 70 FR 28606.

33 New Jersey v. EPA

, 517 F.3d 574 (D.C. Cir. 2008).

45ultimately proposes in a NOPR for the products covered by this framework document.

Regarding mercury emissions from electric power generation, as it has done in the past,

DOE will estimate the physical quantity of mercury emissions reductions associated with an

energy conservation standard. For past rulemakings issued by DOE in 2008, it had assumed that

these emissions would be subject to EPA’s Clean Air Mercury Rule (CAMR), 34 which would

have capped Hg emissions for new and existing coal­fired power plants in all States by 2010. As

with SO 2 and NO

x emissions, a cap on Hg emissions would have been interpreted by DOE as

having no physical effect on these emissions, but would instead be expected to result in an

environmental­related economic benefit in the form of a lower price for emission allowance

credits. However, as described above, on February 8, 2008, the D.C. Circuit court vacated the

CAMR. Although DOE plans to use NEMS­BT to forecast Hg emission reductions, DOE will

consider other approaches for addressing Hg emissions.

Item 15­3 Because court actions have vacated the CAMR, DOE seeks input from

interested parties on how it should address Hg emissions in this rulemaking.

While NEMS­BT contains provisions for estimating emissions of NO

x and SO 2 from

power generation, it does not estimate household emissions from gas and oil appliances (e.g.,

emissions directly from gas and oil water heaters used to heat water for clothes washers).

Therefore, DOE plans to conduct an analysis that includes separate estimates of the effect of

energy conservation standards on household NO

x and SO 2 emissions, based on simple emissions

factors derived from the literature. Although small, household­SO 2 and NO

x emissions savings

will be reported because the SO 2 and emissions caps and NO

x emission caps (in the States where

CAIR is in effect) do not apply to the residential sector.

DOE will calculate the possible monetary benefit of CO 2 , NO

x , and Hg reductions.

Cumulative monetary benefits will be determined using discount rates of 3 and 7 percent. DOE

will monetize reductions in CO 2 emissions due to the potential standards based on a range of

monetary values drawn from studies that attempt to estimate the present value of the marginal

economic benefits (based on the avoided marginal social costs of carbon) likely to result from

reducing greenhouse gas emissions. The marginal social cost of carbon is an estimate of the

monetary value to society of the environmental damages of CO 2 emissions.

There are markets for allowances that represent SO2 emissions from certain sources. The

market clearing price of SO 2 emissions is roughly the marginal cost of meeting the regulatory

cap, not the marginal value of the cap itself. Further, because SO 2 (for the nation) is regulated by

a cap and trade system, the effect of the need to meet these caps is already included in the price

of energy or energy savings. With a cap on SO 2 , the value of energy savings already includes the

value of SO 2 control for those consumers experiencing energy savings. The economic cost

savings associated with SO 2 emissions caps is approximately equal to the change in the price of

traded allowances resulting from energy savings multiplied by the number of allowances that

34 The EPA’s Clean Air Mercury Rule was published on May 18, 2005. 70 FR 28606.

46would be issued each year. That calculation is uncertain because the energy savings for clothes

washers would most likely be so small relative to the entire electricity generation market that the

resulting emissions savings would have almost no impact on price formation in the allowances

market and likely would be outweighed by uncertainties in the marginal costs of compliance with

the SO 2 emissions caps.

In sum, the methodology for the environmental impact analysis will be similar to the

methodology DOE used to estimate the environmental impacts published in EIA’s AEO

. These

results include power sector emissions for SO 2 , NO

x , Hg, and CO 2 in 5­year forecasted

increments extrapolated to 2046. The outcome of the analysis for each trial standard level will be

reported as a deviation from the AEO reference (base) case, with the analysis being conducted at

the NOPR stage of the rulemaking. DOE will also estimate SO2 and NO

x emission impacts at

the site where gas and oil water heaters are used to heat water for clothes washing.

Item 15­4 DOE seeks input from interested parties on its plans to use NEMS­BT to

conduct the environmental impact analysis on the equipment covered by this rulemaking.

DOE is particularly interested in whether there are any other approaches to the

environmental assessment that it should consider and the advantages and disadvantages of

each of those approaches.

Item 15­5 Are there any other environmental factors DOE should consider in this

rulemaking? If so, what are they and why should they be considered?

16. REGULATORY IMPACT ANALYSIS

In the NOPR stage of this rulemaking, DOE will prepare a regulatory impact analysis that

will address the potential for non­regulatory approaches to supplant or augment energy

conservation standards to improve the efficiency of residential clothes washers on the market.

DOE recognizes that voluntary or other non­regulatory efforts by manufacturers, utilities, and

other interested parties can result in substantial efficiency improvements. DOE intends to

analyze the likely effects of non­regulatory initiatives on product energy use, consumer utility,

and LCCs. DOE will attempt to base its assessment on the actual impacts of any such initiatives

to date, but also will consider information on the impacts that an existing initiative might have in

the future.

If DOE proposes energy conservation standards for residential clothes washers and the

NOPR constitutes a significant regulatory action, DOE would submit to OMB the assessment of

costs and benefits required under section 6(a)(3) of Executive Order 12866, Regulatory Planning

and Review, 58 FR 51735 (October 4, 1993).

47APPENDIX A

– DRAFT ENGINEERING ANALYSIS DATA REQUEST SHEETS

DOE seeks average incremental production cost to take basic models in the categories

shown from the current DOE minimum efficiency level (or proposed baseline level) to the

specified efficiency level. For those product classes where more than one basic model may exist,

please indicate the minimum and maximum incremental costs that would be incurred across the

array of basic models.

The data sheets are divided by product and contain tables requesting shipment and

manufacturer cost data.

The shipment­weighted energy use data of Table A­2 should be based on the DOE

clothes washer test procedure (10 CFR 430, subpart B, appendix J, J1).

Shipments

For residential clothes washers, the AHAM 2005 Fact Book offers historical shipments

data, but the information is not disaggregated by product class. As shown in the “shipment

request” tables below, DOE hopes to collect both shipments data and shipment­weighted average

efficiency data dating back to 1993. In addition, DOE hopes to collect market share efficiency

( i.e.

, data on the distribution of product shipments by efficiency) for each product class.

Manufacturer Costs

Incremental cost data (in U.S. dollars) include the materials, labor, and overhead needed

to take basic models from the current minimum DOE baseline efficiency standard to each higher

efficiency level. The depreciation of the conversion capital expenditures is an important

component of the overhead for DOE to understand. Therefore, DOE is requesting information

about conversion capital expenditures by efficiency level.

DOE requests notification from those interested parties planning to submit data by the

close of the framework comment period, specifically October 16, 2009. DOE will not accept any

data submitted after this date.

48­

­

­ ­

­

­

­ ­ APPENDIX A ­ ENGINEERING ANALYSIS DATA REQUEST SHEETS

Aggregated industry data is requested for Table A­1 through Table A­5.

Table A­1 Residential Clothes Washer Shipments

Year Shipments, Domestic + Imports

(Thousands of Units)

Top Loading Front

Loading Compact Standard Semi

automatic Suds Saving

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Table A­2 Shipment­Weighted Average Efficiency Data

Year Shipment Weighted Average Efficiency

Top Loading Front Loading Suds Saving Compact Standard Semiautomatic

(MEF or EF) (WF) (MEF or EF) (WF) (MEF or EF) (WF) (MEF or EF) (WF) (MEF or EF) (WF)

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

49­  ­ ­  ­ ­ Table A­3 Market Share Efficiency Data: Top­Loading

– Compact and Standard, and

Front­Loading

Top Loading Standard Front Loading Top Loading Compact

Efficiency Bins Market Share for

2005 or 2006* Efficiency Bins Market Share for

2005 or 2006* Efficiency Bins Market Share for

2005 or 2006*

(Percent) (MEF) (WF) (Percent) (MEF) (WF) (Percent) (MEF) (WF)

0.65 18.40 1.26 9.50 1.72 8.00

0.78 13.90 1.40 9.50 1.80 7.50

1.72 8.00 2.00 6.00

1.80 7.50 2.20 4.50

2.00 6.00 2.40 4.20

2.25 4.45 2.89 3.36

* Total market share percentages should equal 100%.

50­–­  –­TableA­4ManufacturerCostData:Top­Loading–CompactandStandardProductClass�TopLoadingCompactTopLoadingStandardEfficiencyLevel112345MEF0.781.401.721.802.002.25WF13.909.508.007.506.004.45AverageIncrementalCosts($PerUnit)*MaterialLaborOverhead#MinimumIncrementalCosts($PerUnit)*MaterialLaborOverhead#MaximumIncrementalCosts($PerUnit)*MaterialLaborOverhead#ConversionCapitalExpenditures($,Millions)BuildingCAPXTooling/EquipmentCAPXOneTimeProductConversionExpenses($,Millions)R&DMarketing#DepreciationontheconversioncapitalexpenditureshouldNOTbeincludedintheincrementaloverhead.*Incrementalcostsperunitshouldbereportedrelativetothebaselineunit’scost.ThebaselineunitcomplieswiththefederalstandardforresidentialclotheswashersandisequaltoanMEFof1.26andWFof9.50forTop­Loading–StandardandanMEFof0.65forTop­Loading­ Compact.ThebaselineWFof18.40forTop­Loading–CompactwasselectedbasedonasurveyofclotheswasherslistedintheNRCanproductdatabase.OtherInformation:1.Whatdepreciationmethodwouldyourcompanyusetodepreciatetheconversioncapitalexpenditures?_______________________________________________.Directmaterial–Costsofrawmaterialsincludingscrapthatcanbetracedtofinalorendproducts.Directmaterialcostsdonotincludeindirectmaterialcostswhichareattributedtosuppliesthatmaybeusedintheproductionprocessbutarenotassignedtofinalproducts(e.g.,lubricatingoilforproductionmachinery).Directlabor–Theearningsofworkerswhoassemblepartsintoafinishedgoodforoperatemachinesintheproductionprocess.Directlaborincludesthefringebenefitsofdirectlaborerssuchasgrouphealthcare,aswellasovertimepay.Directlabordoesnotincludeindirectlaborwhichisdefinedastheearningsofemployeeswhodonotworkdirectlyinassemblingaproduct,suchassupervisors,janitors,stockroompersonnel,inspectors,andforkliftoperators.Overhead–Factoryoverheadexcludingdepreciation.Factoryoverheadincludesindirectlabor,downtime,set­upcosts,indirectmaterial,expendabletools,maintenance,propertytaxes,insuranceonassets,andutilitycosts.Factoryoverheaddoesnotincludeselling,general,andadministrativecosts(SG&A);R&D;interest;orprofit(accountedforbyDOE separately).FullProductionCost=DirectMaterial+DirectLabor+Overhead(factory)+DepreciationFullCostofProduct=FullProductionCost+Non­productionCosts(SG&A,R&D,interest,andprofit)51­

­ Table A­5 Manufacturer Cost Data: Front­Loading

Product Class � Front Loading

Efficiency Level 1 2 3 4 5

MEF 1.80 2.00 2.20 2.40 2.89

WF 7.50 6.00 4.50 4.20 3.36

Average Incremental Costs ($ Per Unit)*

Material

Labor

Overhead#

Minimum Incremental Costs ($ Per Unit)*

Material

Labor

Overhead#

Maximum Incremental Costs ($ Per Unit)*

Material

Labor

Overhead#

Conversion Capital Expenditures ($, Millions)

Building CAPX

Tooling/ Equipment

CAPX

One Time Product Conversion Expenses ($, Millions)

R&D

Marketing

# Depreciation on the conversion capital expenditure should NOT be included in the incremental overhead.

* Incremental costs per unit should be reported relative to the baseline unit’s cost. The baseline unit complies with the current

ENERGY STAR level for residential clothes washers and is equal to an MEF of 1.72 and WF of 8.00.

Other Information:

2. What depreciation method would your company use to depreciate the conversion capital expenditures?

_______________________________________________.

Direct material

– Costs of raw materials including scrap that can be traced to final or end products. Direct material costs do not include indirect

material costs which are attributed to supplies that may be used in the production process but are not assigned to final products ( e.g

., lubricating

oil for production machinery).

Direct labor

– The earnings of workers who assemble parts into a finished good for operate machines in the production process. Direct labor

includes the fringe benefits of direct laborers such as group health care, as well as overtime pay. Direct labor does not include indirect labor

which is defined as the earnings of employees who do not work directly in assembling a product, such as supervisors, janitors, stockroom

personnel, inspectors, and forklift operators.

Overhead

– Factory overhead excluding depreciation. Factory overhead includes indirect labor, downtime, set­up costs, indirect material,

expendable tools, maintenance, property taxes, insurance on assets, and utility costs. Factory overhead does not include selling, general, and

administrative costs (SG&A); research and development (R&D); interest; or profit (accounted for by DOE separately).

Full Production Cost

= Direct Material + Direct Labor + Overhead (factory) + Depreciation

Full Cost of Product

= Full Production Cost + Non­production Costs (SG&A, R&D, interest, and profit)

52APPENDIX B

– SAMPLE QUESTIONS FOR ENGINEERING ANALYSIS

FOLLOW­UP AND PRELIMINARY

MANUFACTURER IMPACT ANALYSIS INTERVIEWS

DESIGN FOR ENERGY IMPROVEMENT INFORMATION REQUEST

DOE would like to confirm information on the incremental costs of increasing product efficiency

by understanding the design options involved in the efficiency improvement.

1. Which design features impacting energy use are generally incorporated into a “baseline”

clothes washer in the following product classes:

a. Top­Loading, Compact­size?

b. Top­Loading, Standard­size?

c. Front­Loading?

2. Are you aware of any top­loading semiautomatic or suds­saving units on the market?

3. Which design changes are associated with converting a baseline top­loading standardsized clothes washer (1.26 MEF, 9.50 WF) to the maximum available level (2.25 MEF,

4.45 WF)? Are these design changes comparable for top­loading compact­sized clothes

washers? What are the costs of the individual design options selected? Are the aggregated

industry costs representative of your firm’s costs?

4. Which design changes are associated with converting a baseline front­loading standardsized clothes washer (1.72 MEF, 8.00 WF) to the maximum available level (2.89 MEF,

3.36 WF)? Are these design changes comparable for other product classes? What are the

costs of the individual design options selected? Are the aggregated industry costs

representative of your firm’s costs?

5. Do you believe that the gap­fill efficiency levels defined by DOE for top­loading

compact­sized, top­loading standard­sized, and front­loading clothes washers are

representative? If not, can you suggest appropriate gap­fill values? If you believe the toploading semiautomatic and suds­saving clothes washer product classes should be

analyzed, can you suggest baseline, gap­fill, and max­tech efficiency levels for those

product classes?

6. Are there fundamental differences between required design changes that make the cost

increment much higher for some product classes than others?

7. Would you help DOE understand and estimate the conversion capital investments that

would be necessary at each candidate standard level? What is the nature of the capital

investments?

53PRELIMINARY MANUFACTURER IMPACT ANALYSIS TOPICS

1 Issues

1.1 What are the key issues for your company regarding a possible future product rulemaking?

2 Shipment Projections

2.1 What is your company’s approximate market share in each of the product classes?

2.2 Would you expect your market share to change once standards become effective? Does

your outlook change with higher efficiency levels?

2.3 How would you expect shipments to change for the industry as a whole as a function of

standards and why?

2.4 Looking at price/cost effects only, how would you expect shipments to change for a 25%,

50%, 100%, or 200% manufacturer price/cost increase?

3 Conversion Costs

3.1 What level of capital expenditure and product conversion costs would you anticipate to

make at higher standard levels? Please describe what they are and provide your best

estimate of their respective magnitudes.

3.2 How would the imposition of new energy conservation standards affect capacity utilization

and manufacturing assets at your domestic production facilities? Would a new standard

result in stranded capital assets? Would any facilities be closed or downsized? Added or

upgraded?

3.3 How might a new standard impact product innovation?

4 Product Mix and Profitability

4.1 How would your company’s product mix and marketing strategy change with changes in

the efficiency standard?

4.2 Would the current percentage of shipments at the ENERGY STAR level for residential

clothes washers be the same under a new standard?

4.3 What distribution channels are used from the manufacturer to the retail outlet? What is the

share of product going through each distribution channel?

4.4 Generally how would new product standards impact your customer mix, distribution

channels, and corresponding profit margins?

4.5 For residential clothes washers, how might a new standard impact the ENERGY STAR

program, and consequently your firm?

4.6 What is the approximate percentage of shipments ( i.e.

, market share) for each product, or

more specifically, for each product class?

5 Market Shares and Industry Consolidation

5.1 In the absence of new standards, do you expect any industry consolidation?

545.2 How would new standards affect your ability to compete?

5.3 Could new standards disproportionately advance or harm the competitive positions of

some firms?

5.4 Are there concerns over intellectual property?

5.5 Could new standards result in disproportionate economic or performance penalties for

particular consumer/user subgroups?

5.6 Beyond price and energy efficiency, could new standards result in products that will be

more or less desirable to consumers due to changes in product functionality, utility, or

other features?

6 Cumulative Regulatory Burden

6.1 Are there recent or impending regulations on your specific product or other products that

impose a cumulative burden on the industry?

6.2 If so, what is the total expected impact of those other regulations?

55APPENDIX C

– SUMMARY OF ITEMS FOR COMMENT FROM INTERESTED

PARTIES

DOE requests comments from interested parties on the following issues:

Item 1­1 DOE requests input from interested parties on the merits of revising its test

procedures for residential clothes washers and seeks input (including supporting data)

regarding how these procedures can be improved........................................................ 5

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

residential clothes washers covered in this rulemaking ( e.g.

, current product features

and efficiencies, product feature and efficiency trends, and historical product

shipments and prices).................................................................................................. 13

Item 3­2 DOE requests input from interested parties on the proposed product classes and the

criteria used for creating these product classes. What other factors, if any, should

DOE consider beyond those identified above as a basis for developing product

classes? When answering, please explain in detail and cite specific examples to the

extent possible............................................................................................................. 14

Item 3­3 DOE seeks comment on the merits of retaining or eliminating the top­ loading

semiautomatic and suds­saving clothes washer product classes................................. 14

Item 3­4 DOE seeks comment as to whether the method of “loading” clothes washers or any

other consumer utility generally associated with the method of loading are “features”

within the meaning of 42 U.S.C. 6295(o)(4) in EPCA and whether the availability of

such feature(s) would likely be affected by eliminating the separate classes for these

product types previously established by DOE............................................................ 15

Item 4­1 Are there any technologies listed in Table 3.1 that DOE should not consider because

of their impacts on safety, performance, or consumer utility of the product? If so,

why?............................................................................................................................ 17

Item 4­2 Are there other technologies that DOE should consider as technology options and

what, if any, impacts would the technology options be expected to have on safety,

performance, and consumer utility? Why?

................................................................. 17

Item 5­1 DOE seeks input from interested parties on whether the above energy efficiency

levels are appropriate for characterizing the performance of baseline units.

............. 20

Item 5­2 DOE seeks information on baseline efficiency levels appropriate for top­loading

semiautomatic and suds­saving clothes washers.

....................................................... 20

Item 5­3 DOE seeks information on the specific technological characteristics of the baseline

model for each product class, including the technologies described in section 3.3.

Examples of the types of information DOE seeks include the type of wash basket

drive motor and the typical input wattage, as well as the type of fill control system. 20

Item 5­4 DOE requests feedback on the use of an efficiency­level approach to determine the

relationship between manufacturer cost and energy efficiency for residential clothes

washers, supplemented, as needed, by a design­option approach.

............................. 21

Item 5­5 DOE requests input on the selection of appropriate product classes for reverseengineering analysis, and any product classes for which it is appropriate to extend

these results analytically.

............................................................................................ 22

56Item 5­6 DOE seeks input from interested parties about the adequacy of the proposed

efficiency levels for collecting incremental cost data from manufacturers. DOE also

seeks input from interested parties on appropriate maximum technologically feasible

efficiency levels and the basis for why those levels should be selected

..................... 24

Item 5­7 Are there proprietary designs or technologies for residential clothes washers of which

DOE should be aware in this rulemaking? If so, what are these designs or

technologies and how should DOE acquire the cost data necessary for evaluating

them?

........................................................................................................................... 24

Item 5­8 Are there additional outside regulatory issues that DOE should consider in its analysis

of residential clothes washers? If so, identify what they are and how DOE should

consider them for purposes of its analysis.

................................................................. 25

Item 6­1 DOE seeks input from interested parties on the approaches presented for estimating

both the typical values and variability in the annual energy and water consumption of

residential clothes washers

.......................................................................................... 26

Item 6­2 DOE seeks comments on the rebound effect associated with more efficient residential

clothes washers. In other words, DOE seeks input on what portion of the energy

savings resulting from more efficient equipment may be lost due to increased usage

or consumers purchasing larger or more feature­laden clothes washers. DOE is

interested in receiving any data that may support these comments

............................ 26

Item 8­1 DOE seeks input from interested parties on the planned approach of using Monte

Carlo simulation and probability distributions to conduct the LCC and PBP analyses..

............................................................................................................................... ..... 30

Item 8­2 DOE requests data from interested parties to characterize the current mix of

residential clothes washer efficiencies in the market

.................................................. 30

Item 8­3 DOE seeks input from interested parties on the planned approach for estimating

current and forecasted energy, water, and wastewater prices

..................................... 32

Item 8­4 DOE seeks input from interested parties on whether it is correct to assume that

changes in maintenance, repair, and installation costs will be negligible for more

efficient residential clothes washers. If it is incorrect, DOE is interested in the reasons

why this is so and specific ways to correct this assumption

....................................... 32

Item 8­5 DOE seeks input from interested parties on appropriate lifetimes for the residential

clothes washer product classes covered in this rulemaking

........................................ 32

Item 8­6 DOE seeks input from interested parties on the planned approach for estimating

discount rates for residential consumers

..................................................................... 33

Item 9­1 DOE seeks data on representative saturation rates for residential clothes washers

.... 34

Item 9­2 DOE seeks historical shipments data broken down by product class

......................... 34

Item 9­3 As part of its preliminary manufacturer impact analysis, DOE seeks input from

manufacturers and other interested parties on the potential impact of new energy

conservation standards on product shipments

............................................................. 35

Item 9­4 DOE also requests input on any market­pull programs that promote the adoption of

more efficient residential clothes washer products

..................................................... 35

Item 10­1 DOE seeks historical SWEF (EF or MEF and WF) data by product class. DOE also

seeks historical market share data showing the percentage of product shipments by

efficiency level for as many product classes as possible.

........................................... 36

Item 10­2 DOE seeks input on its plan to develop NES spreadsheet models for estimating

national impacts of amended energy conservation standards for residential clothes

57washers. For example, are spreadsheet models still the preferred approach for

estimating national impacts?....................................................................................... 37

Item 11­1 DOE requests input as to which consumer subgroups, if any, it should consider when

devising standards for residential clothes washers.

.................................................... 38

Item 12­1 DOE seeks comment on appropriate manufacturer subgroups, if any, that DOE should

consider in a manufacturer subgroup analysis for residential clothes washers.

......... 41

Item 12­2 What other regulations or pending regulations should DOE consider in its

examination of cumulative regulatory burden?

.......................................................... 42

Item 13­1 DOE seeks input from interested parties on its plans to use NEMS­BT to conduct the

utility impact analysis. Is the NEMS­BT model appropriate for assessment of utility

impacts of energy conservation standards? If not, why? What would be a more

appropriate model for DOE to use?

............................................................................ 43

Item 14­1 DOE welcomes feedback on its planned approach for assessing national employment

impacts, both direct and indirect, and is interested in whether other tools or factors

should be considered as part of its analysis. If other tools or factors should be

considered, please identify them and explain why, and how, they should be integrated

into DOE’s analysis.

................................................................................................... 44

Item 15­1 DOE invites comments on how to estimate monetary values associated with CO 2

emissions reductions or on any widely accepted values that might be used in DOE’s

analyses....................................................................................................................... 44

Item 15­2 DOE seeks input from interested parties on how it should address NO

x emissions in

this rulemaking consistent with the current CAIR requirements................................ 45

Item 15­3 Because court actions have vacated the CAMR, DOE seeks input from interested

parties on how it should address Hg emissions in this rulemaking.

........................... 46

Item 15­4 DOE seeks input from interested parties on its plans to use NEMS­BT to conduct the

environmental impact analysis on the equipment covered by this rulemaking. DOE is

particularly interested in whether there are any other approaches to the environmental

assessment that it should consider and the advantages and disadvantages of each of

those approaches.

........................................................................................................ 47

Item 15­5 Are there any other environmental factors DOE should consider in this rulemaking? If

so, what are they and why should they be considered?

.............................................. 47

58