From: Llenza, Charles [mailto:Ch arles.Llenza@ee.doe.gov] Sent: Wednesday, August 20, 2008 7:18 PM To: Edwards, Brenda Cc: Carr, Belinda; Jeffers, Debbie DOE; Dabney, Marcus DOE; Poston, Mona Subject: Notice of Public Meeting: Commercial Refrigerat ion Equipment (CRE) Notice of Proposed Rulemaking (NOPR) - 08/12/2008 Importance: High

Ladies and Gentlemen: On Tuesday, August 12, 2008, the Department of Energy (DOE) issued a Notice of Proposed Rulemaking (NOPR) Regarding Energy Cons ervation Standards for Commercial Ice-Cream Freezers; Self-Contained Commerc ial Refrigerators, Commercia l Freezers, and Commercial Refrigerator-Freezers without Doors; and Remote Condensing Commercial Refrigerators, Commercial Freezers, and Commerc ial Refrigerator-Freezers ( CRE) and a Related Public Meeting notice. Please see the attached issued CRE NO PR for details(CRE_NOPR_2008- 08-12.pdf). DOE will hold an informal public meeting, on Tuesday, Septem ber 23, 2008, to discuss the proposed energy conservation standards as iss ued in the CRE NOPR. The public meeting will be held at the U.S. Depar tment of Energy, Forrestal Building, Room 8E-069, 1000 Independence Avenue, SW, Wash ington, D.C. 20585-0121 from 9:00 AM to 5:00 PM EST.

Additional information is avai lable at the DOE website: http://www1.eere.energy.gov/buildings/appliance_st andards/commercial/refrig_equip_nopr_mtg .html If you have any additional questions please contact: 

### Charles Llenza Project Manager/Engineer Appliance Standards Team Building Technologies Program Energy Efficiency and Renewable Energy US Department of Energy (202)586-2192(work) (202)287-1590(fax) Charles.Llenza@ee.doe.gov

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DEPARTMENT OF ENERGY

10 CFR Part 431 [Docket No. EE-2006-STD-0126]

RIN 1904-AB59

Energy Conservation Program for Commerc ial and Industrial Equipment: Energy

Conservation Standards for Commercial Ice-C ream Freezers; Self-Contained Commercial Refrigerators, Commercial Freezers, and Commercial Refrigerator-Freezers without Doors; and Remote Condensing Commercial Refrigerators, Commercial Freezers, and Commercial Refrigerator-Freezers

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

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

SUMMARY : The Energy Policy and Conservation Act prescribes energy conservation

standards for certain commercia l and industrial equipment, a nd requires the Department of Energy (DOE) to administer an energy conservation program for this equipment. In this notice, DOE is proposing new energy conservation standa rds for commercial ice-cream freezers; selfcontained commercial refrigerators, commercial freezers, and commercial refrigerator- freezers without doors; and remote conde nsing commercial refrigerators , commercial freezers, and2 commercial refrigerator-freezers. DOE is al so announcing a public meeting on its proposed

standards.

DATES : DOE will hold a public meeting on Tuesday, September 23, 2008, from 9:00 a.m. to 5:00 p.m. in Washington, DC. DO E must receive requests to speak at the public meeting no later than 4:00 p.m., Tuesday, September 9, 2008 DO E must receive a signed original and an electronic copy of statements to be given at th e public meeting no later than 4:00 p.m., Tuesday, September 16, 2008.

DOE will accept comments, data, and information regarding the notice of proposed rulemaking (NOPR) before and after the public meeting, but no later than [INSERT DATE 60 DAYS AFTER FEDERAL REGISTER PUBLICATION] . See Section Error! Reference

source not found. , “Public Participation,” of this NOPR for details.

ADDRESSES : The public meeting will be held at th e U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Ave nue, SW, Washington, DC 20585-0121. Please note that foreign nationals visiti ng DOE Headquarters are subject to advance security screening procedures, requiring a 30-day advance notice. If you are a foreign national and wish to participate in the public meeting, please info rm DOE as soon as possible by contacting Ms. Brenda Edwards at (202) 586- 2945 so that the necessary procedures can be completed.Any comments submitted must identify the NOPR for commercial refrigeration equipment, and provide docket number EE- 2006-STD-0126 and/or RI N number 1904-AB59. Comments may be submitted using any of the following methods:

• Federal eRulemaking Portal : http://www.regulations.gov . Follow the instructions for submitting comments.

• E-mail : commercialrefrigeration.rulemaking@ee.doe.gov . Include docket number EE2006-STD-0126 and/or RIN 1904-AB59 in th e subject line of the message.

• Postal Mail : Ms. Brenda Edwards, U.S. Depart ment of Energy, Building Technologies Program, Mailstop EE-2J, 1000 Independen ce Avenue, SW, Washington, DC 20585- 0121. Telephone: (202) 586-2945. Please s ubmit one signed original paper copy.

• Hand Delivery/Courier : Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 950 L’Enfant Plaza, SW, 6 th Floor, Washington, DC 20024. Please submit one signed original paper copy.

For detailed instructions on submitting co mments and additional information on the rulemaking process, see Section VII , “Public Participation,” of this document.

Docket : For access to the docket to read background documents or comments received, visit the U.S. Department of Energy, Resource Room of the Building Technologies Program, 950 L’Enfant Plaza, SW, 6th Floor, Washington, DC, 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal ho lidays. Please call Ms. Brenda Edwards at the above telephone number for additional informa tion regarding visiting the Resource Room.Please note: DOE’s Freedom of Information Reading Room (Room 1E-190 at the Forrestal Building) no longer houses rulemaking materials.

FOR FURTHER INFORMATION CONTACT : Mr. Charles Llenza, U.S. Department of En ergy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW, Wash ington, DC 20585-0121, (202) 586-2192, Charles.Llenza@ee.doe.gov

. Ms. Francine Pinto, Esq., U.S. Department of Energy, Office of Ge neral Counsel, GC-72, 1000 Independence Avenue, SW, Wash ington, DC 20585-0121, (202) 586-9507, Francine.Pinto@hq.doe.gov

.

SUPPLEMENTARY INFORMATION : I. Summary of the Proposed Rule II. Introduction A. Overview B. Authority C. Background 1. Current Standards 2. History of Standards Rulemaking for Commercial Refrigeration Equipment III. General Discussion A. Test Procedures B. Technological Feasibility 1. General 2. Maximum Technologically Feasible Levels C. Energy Savings 1. Determination of Savings 2. Significance of Savings D. Economic Justification 1. Specific Criteria

a. Economic Impact on Manufacturers and Commercial Customers b. Life-Cycle Costs c. Energy Savings d. Lessening of Utility or Performance of Equipment e. Impact of Any Le ssening of Competitionf. Need of the Nation to Conserve Energy g. Other Factors 2. Rebuttable Presumption IV. Methodology and Discussion of Comments A. Market and Technology Assessment 1. Definitions Related to Commer cial Refrigeration Equipment

a. Air Curtain Angle Definition b. Door Angle Definition 2. Equipment Classes B. Engineering Analysis 1. Approach 2. Equipment Classes Analyzed 3. Analytical Models a. Cost Model b. Energy Consumption Model c. Design Options 4. Baseline Models 5. Engineering Analysis Results C. Markups to Determine Equipment Price D. Energy Use Characterization E. Life-Cycle Cost and Payback Period Analyses 1. Manufacturer Selling Price 2. Increase in Selling Price 3. Markups 4. Installation Costs 5. Energy Consumption 6. Electricity Prices 7. Electricity Price Trends 8. Repair Costs 9. Maintenance Costs 10. Lifetime 11. Discount Rate 12. Payback Period F. Shipments Analysis G. National Impact Analysis 1. Base Case and Standards Case Forecasted Efficiencies 2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost , and Repair Costs 3. Escalation of El ectricity Prices 4. Electricity Site-to-Source Conversion H. Life-Cycle Cost Sub-Group Analysis I. Manufacturer Impact Analysis 1. Overview

a. Phase 1, Industry Profile b. Phase 2, Industry Cash-Flow Analysis c. Phase 3, Sub-Group Impact Analysis 2. Government Regulatory Impact Model Analysis3. Manufacturer Interviews a. Key Issues 4. Government Regulatory Impact Model Key Inputs and Scenarios a. Base Case Shipments Forecast b. Standards Case Shipments Forecast c. Markup Scenarios d. Equipment and Capi tal Conversion Costs J. Utility Impact Analysis K. Employment Impact Analysis L. Environmental Assessment V. Analytical Results A. Trial Standard Levels 1. Miscellaneous Equipment B. Economic Justification and Energy Savings 1. Economic Impacts on Commercial Customers

a. Life-Cycle Cost and Payback Period b. Rebuttable Presumption Payback c. Life-Cycle Cost Sub-Group Analysis 2. Economic Impacts on Manufacturers a. Industry Cash-Flow Analysis Results b. Cumulative Regulatory Burden c. Impacts on Employment d. Impacts on Manufacturing Capacity e. Impacts on Sub-Groups of Manufacturers 3. National Impact Analysis a. Amount and Significance of Energy Savings b. Net Present Value c. Impacts on Employment 4. Impact on Utility or Performance of Equipment 5. Impact of Any Lesse ning of Competition 6. Need of the Nation to Conserve Energy 7. Other Factors C. Proposed Standard VI. Procedural Issues and Regulatory Review A. Review Under Executive Order 12866 B. Review Under the Regulatory Flexibility Act/Initial Regulatory Flexibility Analysis C. Review Under the Paperwork Reduction Act D. Review Under the National Environmental Policy Act E. Review Under Executive Order 13132 F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates Reform Act of 1995 H. Review Under the Treasury and Gene ral Government Appropriations Act, 1999 I. Review Under Executive Order 12630 J. Review Under the Treasury and Gene ral Government Appropriations Act, 2001 K. Review Under Executive Order 13211 L. Review Under the Information Quality Bulletin for Peer ReviewVII. Public Participation A. Attendance at Public Meeting B. Procedure for Submitting Requests to Speak C. Conduct of Public Meeting D. Submission of Comments E. Issues on Which DOE Seeks Comment VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule The Energy Policy and Conservation Act, as amended, (EPCA) specifi es that any new or amended energy conservation standa rd the U.S. Department of Energy (DOE) prescribes for the equipment covered by this notice shall be designed to “achieve the maximum improvement in energy efficiency . . . which the Secretary de termines is technologically feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) Furthermore, the new or amended standard must “result in significant co nservation of energy.” (42 U.S.C. 6295(o)(3)(B) and 6316(e)(1)) In accordance with these and other statutory criteria discussed in this notice, DOE proposes to adopt new energy conservation st andards for commercial ice-cream freezers; self-contained commercial refrigerators, comm ercial freezers, and commercial refrigeratorfreezers without doors; and remote condensing co mmercial refrigerators, commercial freezers, and commercial refrigerator-freezers. 1 The proposed standards, shown in Table I-1 , would apply to all commercial refrigeration equipment manu factured on or after Ja nuary 1, 2012, and offered for sale in the United States. 42 U.S.C. 6313(c)(4)(A)

1 These types of equipment are referred to collectivel y hereafter as ‘‘commercial refrigeration equipment.’’Table I-1 Proposed Standard Levels Equipment Class 2 Proposed Standard Level *,** Equipment Class Proposed Standard Level VOP.RC.M 0.82 x TDA + 4.07 VCT.RC.I 0.71 x TDA + 3.05 SVO.RC.M 0.83 x TDA + 3.18 HCT.RC.M 0.16 x TDA + 0.13 HZO.RC.M 0.35 x TDA + 2.88 HCT.RC.L 0.34 x TDA + 0.26 VOP.RC.L 2.28 x TDA + 6.85 HCT.RC.I 0.4 x TDA + 0.31 HZO.RC.L 0.57 x TDA + 6.88 VCS.RC.M 0.11 x V + 0.26 VCT.RC.M 0.25 x TDA + 1.95 VCS.RC.L 0.23 x V + 0.54 VCT.RC.L 0.6 x TDA + 2.61 VCS.RC.I 0.27 x V + 0.63 SOC.RC.M 0.51 x TDA + 0.11 HCS.RC.M 0.11 x V + 0.26 VOP.SC.M 1.74 x TDA + 4.71 HCS.RC.L 0.23 x V + 0.54 SVO.SC.M 1.73 x TDA + 4.59 HCS.RC.I 0.27 x V + 0.63 HZO.SC.M 0.77 x TDA + 5.55 SOC.RC.L 1.08 x TDA + 0.22 HZO.SC.L 1.92 x TDA + 7.08 SOC.RC.I 1.26 x TDA + 0.26 VCT.SC.I 0.73 x TDA + 3.29 VOP.SC.L 4.37 x TDA + 11.82 VCS.SC.I 0.38 x V + 0.88 VOP.SC.I 5.55 x TDA + 15.02 HCT.SC.I 0.56 x TDA + 0.43 SVO.SC.L 4.34 x TDA + 11.51 SVO.RC.L 2.28 x TDA + 6.85 SVO.SC.I 5.52 x TDA + 14.63 VOP.RC.I 2.9 x TDA + 8.7 HZO.SC.I 2.44 x TDA + 9 SVO.RC.I 2.9 x TDA + 8.7 SOC.SC.I 1.76 x TDA + 0.36 HZO.RC.I 0.72 x TDA + 8.74 HCS.SC.I 0.38 x V + 0.88

* “TDA” is the total display area of the case, as measured in the Air-Conditioning and Refrigeration Institute (ARI) Standard 1200-2006, Appendix D.

** “V” is the volume of the case, as measured in ARI Standard 1200-2006, Appendix C. DOE’s analyses indicate that the proposed en ergy conservation standards, trial standard level (TSL) 4 (see Section V.A for a detailed description of TSLs) , would save a significant amount of energy—an estimated 0.83 quadrillion Br itish thermal units (Btu), or quads, of cumulative energy over 30 years (2012-2042). Th e economic impacts on commercial consumers (i.e., the average life-cycle cost (LCC) savi ngs) are positive for all equipment classes.

The cumulative national net present value (NPV) of the proposed standards at TSL 4

2 For this rulemaking, equipment class designations consist of a combination (in sequential order separated by periods) of: (1) an equipment family code (VOP=vertical open, SVO=semivertical open, HZO=horizontal open, VCT=vertical transparent doors, VCS= vertical solid doors, HCT=horizontal transparent doors, HCS=horizontalsolid doors, or SOC=service over counter); (2) an operating mode code (RC=remote condensing or SC=selfcontained); and ( 3) a rating temperature code (M=medium temperature (38°F), L=low te mperature (0°F), or I=icecream temperature (-15°F)). For example, “VOP.RC.M” refers to the “vertical open, remote condensing, medium temperature” equipment class. See discussion below and chapter 3 of the TSD, market and technology assessment, for a more detailed explanation of the equipment class terminology.from 2012 to 2042, ranges from $1.1 billion (at a se ven percent discount rate ) to $3.24 billion (at a three percent discount rate), in 2007$. This is the estimated total value of future operating cost savings minus the estimated increased equipment costs, discounted to 2007$. The benefits and

costs of the standard can also be expressed in terms of annuali zed 2007$ values over the forecast period 2012 through 2062. Using a 7 percent discount rate for the annualized cost analysis, the cost of the standard is estimated to be $109 million per year in increased equipment and

installation costs while the annua lized benefits are expected to be $214 million per year in reduced equipment operating costs. Using a 3 per cent discount rate, the annualized cost of the standard is expected to be $92 million per year wh ile the annualized benef its of today's standard are expected to be $234 million per year. See Section V.B.3 for additional details. If DOE adopts the proposed standards, it expects manufacturers will lose 8 to 35 percent of the industry net present value (INPV), which is approximately $40 to $180 million.

DOE estimates that the proposed standards will have environmental benefits leading to reductions in greenhouse gas emissions (i.e., cumu lative (undiscounted) emission reductions) of 44 million tons (Mt) of carbon dioxide (CO 2 ) from 2012 to 2042. 3 Most of the energy saved is electricity. In addition, DOE expects the en ergy savings from the proposed standards to eliminate the need for approximately 640 mega watts (MW) of generating capacity by 2042. These results reflect DOE’s use of energy price projections from the U.S. Energy Information Administration (EIA)’s Annua l Energy Outlook 2007 (AEO2007). 4

3 Additionally, the standards would result in 17 thousand tons (kt) of nitrogen oxides (NO X ) emissions reductions or generate a similar amount of NO X emissions allowance credits in areas where such emissions are subject to regulatory or voluntary emissions caps. 4 DOE intends to use EIA’s AEO2008 to generate the results for the final rule. The AEO2008 Early Release contains reference case energy price forecasts which shows hi gher commercial electricity prices at the national level compared with the AEO2007 on a real (inflation adjusted) basis. If th ese early release energy prices remainDOE proposes that TSL 4 represents the ma ximum improvement in energy efficiency that is technologically feasible and economically justified. DOE proposes th at the benefits to the Nation of TSL 4 (energy savings, commercial consumer average LCC savings, national NPV increase, and emission reductions) outweigh the costs (loss of manuf acturer INPV) and is therefore proposing TSL 4 as the energy conserva tion standards for commercial refrigeration equipment in this NOPR. TSL 4 is technologically feasible because the technologies required to achieve these levels already exist.

In this NOPR, DOE proposes that TSL 5 is not economically justified because, under the current circumstances, DOE believes that the bene fits to the Nation of TSL 5 (energy savings, commercial consumer average LCC savings, and emission reductions) do not outweigh the costs (national NPV decrease and loss of manufacturer INPV). DOE’s an alyses indicate that TSL 5 would save a greater amount of energy than TSL 4—an estimated 1.21 quadrillion quads of cumulative energy over 30 years (2012-2042). At TSL 5, while the economic impacts on commercial consumers (i.e., LCC savings and NP V) are still positive for the majority of equipment classes, the impacts on commercial customers for five classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M) are negative. The life-cycle cost savings are negative for three classes and NPV results for each of these five classes are negative.

The cumulative NPV at TSL 5, from 2012 to 2042, ranges from -$200 million (at a seven percent discount rate) to $1.16 billion (at a thre e percent discount rate ), in 2007$. Using a 7

unchanged in the final release, then in corporation of the AEO 2008 forecasts would likely result in reduced payback periods and greater life-cycle cost sa vings and greater national net present value for the proposed standards.percent discount rate, the annualized cost of the standard is estimated to be $285 million per year in increased equipment and installation costs whil e the annualized benefits are expected to be $266 million per year in reduced equipment operating costs. Using a 3 percent discount rate, the annualized cost of the standard is expected to be $241 million per year while the annualized benefits are expected to be $292 million per year. See Section V.B.3 for additional details. At TSL 5, DOE expects manufacturers will lose 3 to 56 percent of the industry net present value INPV, which is approximately $18 to $285 million.

DOE based its estimates of the economic imp acts referenced above on current costs for energy improving technologies used in commerci al refrigeration equipment. A key technology for energy savings benefits in most commercial re frigeration equipment is the use of solid state lighting (i.e., light emitting diodes or LEDs). At current LED prices, the life-cycle cost savings at TSL 5 are substantially lower than TSL 3 a nd TSL 4 for several equipment classes. For example, the average per unit LCC savings for the VOP.RC.M equipment class is $1,551 at TSL 3, but this number falls by $1,785 to -$234 when moving to TSL 5. When accounting for the projected volume of sales for these equipment cl asses in 2012, the net effect of moving from TSL 3 to TSL 5 is a decrease in LCC savings of $130 million per year. To achieve the same or greater LCC savings at TSL 5 as other efficien cy levels (e.g., TSL 3 or 4), for all equipment classes, average LED costs would need to decrease by almost 45 percent.

While considerable information is available th at suggests LED costs are likely to decline more than assumed in DOE’s analysis, DOE believ es it must have a higher degree of confidence

of further cost reductions than assumed in toda y’s proposed rule. In th is NOPR, DOE projectedfuture LED costs based on DOE ’s Multi-Year Program Plan 5 , which are consistent with historical LED price reductions between 2000 an d 2007. The Multi-Year Program Plan projects that LED chip costs will conti nue to decrease at a compound annual growth rate (CAGR) of approximately -27 percent between 2007 and 2012, which represents a price reduction of 80 percent over that time period. Sinc e LED chips are only a portion of the total LED system (other components include power supply and the LED fixt ure), the 80 percent reduction in chip costs

contributes to an estimated decr ease in total LED system cost of approximately 50 percent by 2012, assuming the costs of the power supply and LED fixtures do not change significantly.

Such a decrease in cost would be sufficient for TSL 5 to achieve LCC savings equal to or greater

than other TSLs.

DOE examined whether the projected LED costs presented in the Multi-Year Program Plan and used in this NOPR are consistent with p ublicly available empirical historical cost data. DOE reviewed available price data for the LED market and found that between 2000 and 2007, white-light LEDs had a CAGR ranging from approxima tely -18 to -31 percent. DOE’s LED cost projection (i.e., -27 percent C AGR) falls within the range of CAGRs observed. DOE expanded its examination by comparing this projected trend to the red-light LED market, which is a related technology, with cost information spanning appr oximately three decades (i.e., 1973 to 2005).

DOE found that the CAGR of red- light LED costs was -22 percent over this longer time span. The trend in red-light LED costs derived from empirical data over this longer time period is of a similar magnitude to DOE’s projected costs for white-light LEDs. Due to the technological

5 U.S. Department of Energy, Solid-State Lighting Re search and Development, Mu lti-Year Program Plan FY’09- FY’14. This document was prepar ed under the direction of a Techni cal Committee from the Next Generation Lighting Initiative Alliance (NGLIA). Information ab out the NGLIA and its members is available at www.nglia.org

.similarities between red-light LEDs and white-light LEDs, DOE believes that the historical cost reductions for red-light LEDs are indicative of future cost reduc tions for white-light LEDs. Furthermore, the white-light LED market is undergoing a massive expansion and growth phase, with significant investment, new products and innovative applicat ions for LED technology, including illumination of commercial refrigeration equipment. See Section V.C of this NOPR and Appendix B of the technical support document (TSD) for more detail on the cost projection

and DOE's validation of those estimates. DOE s eeks comment on the extent to which these price trends are indicative of what can be expect ed for commercial refrigeration equipment LED lighting from 2007 to 2012 and the extent to whic h the cost reduction observed for red-light LEDs is relevant to DOE’s cost projections fo r white-light LEDs. DOE also seeks comment on the extent to which stakeholders expect project ed LED cost reductions would occur, the timing of the projected LED cost reductions, and the cert ainty of the projected LED cost reductions. Finally, considering the rapid de velopment of LED technology and the steady reductions in cost,

DOE seeks comment on the extent to which manuf acturers would adopt LED technology into the design of commercial refrigeration equi pment in the absence of standards.

DOE also performed sensitivity analyses of the effect of projected cost reductions in LED lighting systems on LCC and NPV. Incorporation of DOE LED lighting syst em cost projections of a 50 percent decline by 2012 shift the calculated NPV, for 2012-2042, from -$200 million to a positive $1.62 billion at a seven percent discount rate, for TSL 5. See Section V.C of this NOPR or Chapter 8 of the TSD for additional details.

TSL 5 is estimated to have environmental benefits leading to reductions in greenhousegas emissions of 63 Mt of CO 2 from 2012 to 2042. Additionally, TSL 5 would result in 23 kt of

NO X emissions reductions or generate a similar amount of NO X emissions allowance credits in areas where such emissions are subject to em issions caps. Most of the energy saved is electricity. In addition, DOE expects the en ergy savings from the proposed standards to eliminate the need for approximately 930 MW of generating capacity by 2042.

Although DOE has tentatively rejected TSL 5 because, under the current circumstances, it tentatively found that the benefits to the Na tion do not outweigh the costs, and therefore does not consider TSL 5 economically justified, DOE expects that LED costs will decline substantially over the next 4-5 years and could have a dramatic effect on the economic impacts described above. Therefore, DOE requests data or information that could provide a greater level of confidence that the projected LED cost redu ctions will occur and DOE will assess that data in determining whether to further consid er TSL 5 in its final rule analysis.

II. Introduction

A. Overview DOE proposes to set energy conservation standards for commercial refrigeration equipment at the levels shown in Table I-1 . The proposed standards would apply to equipment manufactured on or after January 1, 2012, and offe red for sale in the United States. DOE has tentatively found that the standa rds would save a significant amount of energy (see Section

III.C.2 ) and result in a cleaner environment. In the 30-year period af ter the new standard becomes effective, the Nation would tentativ ely save 0.83 quads of primary energy. These energy savings also would tentatively result in significantly reduced emissions of air pollutantsand greenhouse gases associated with electric ity production, by avoiding th e emission of 44 Mt

of CO 2 and 17 kt of NO X . In addition, DOE expects the stan dard to prevent the construction of the new power plants that woul d be necessary to produce appr oximately 640 MW by 2042. In total, DOE tentatively estimates the net present value to the Nati on of this standard to be $1.1 billion from 2012 to 2042 in 2007$.

Commercial customers would see benefits from the proposed standards. Although DOE expects the price of the higher efficiency commercial refrigeration equipment to be approximately 11 percent higher th an the average price of this equipment today, weighted by shipments across equipment classes, the energy efficiency gains would result in lower energy costs, saving customers about 26 percent per year on their energy bills. Based on DOE’s LCC analysis, DOE tentatively estimates that the mean payback period for the higher efficiency commercial refrigeration equipment would be betw een a low of 1.4 to a high of 6.1 years. In addition, when the net results of these price increases and energy cost savings are summed over the lifetime of the higher efficiency equipment, customers could save approximately $690 to $3800, depending on equipment class, compared to their expenditures on today’s baseline commercial refrigeration equipment.

B. Authority

Title III of EPCA sets forth a variet y of provisions designed to improve energy efficiency. Part A of Titl e III (42 U.S.C. 6291-6309) provides for the Energy Conservation Program for Consumer Products Other Than Auto mobiles. Part A-1 of Title III (42 U.S.C. 6311–6317) establishes a similar program for cer tain types of commercial and industrialequipment. 6 The Energy Policy Act of 2005 (E PACT 2005), Pub. L. 109–58, included an amendment to Part A-1 requiring that DOE pr escribe energy conservation standards for the commercial refrigeration equipment that is th e subject of this ru lemaking. (EPACT 2005, Section 136(c); 42 U.S.C. 6313(c)(4)(A)) Hen ce, DOE publishes today’s notice of proposed rulemaking (NOPR) pursuant to Part A-1, which provides definitions, test procedures, labeling provisions, energy conservation st andards, and the authority to require information and reports from manufacturers. The test procedures for co mmercial refrigeration equipment appear at Title 10 Code of Federal Regulations (CFR) Sections 431.63 and 431.64.

EPCA provides criteria for prescribing new or amended standards for covered equipment. As indicated above, any new or amended standard for commercial refrigeration equipment must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. 7 (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) But EPCA precludes DOE from adopting any standard that would not result in significant conservation of energy. (42 U.S.C. 6295(o)(3) a nd 6316(e)(1)) Moreover, DOE ma y not prescribe a standard for certain equipment if no test procedure has been established fo r that equipment, or if DOE determines by rule that the sta ndard is not technologically feasib le or economically justified, and

that such standard will not re sult in significant conservation of energy. (42 U.S.C. 6295(o)(3) and 6316(e)(1)) EPCA also provides that, in deciding whether a standard is economically justified, DOE must determine whether the benef its of the standard exceed its burdens after

6 This part was originally titled Part C, however, it was renamed Part A-1 after Part B of Title III was repealed by EPACT 2005. 7 This notice concerns types of “covered equipment” as that term is defined in EPCA, (42 U.S.C. 6311(1)(E)) in Part A-1, Certain Industrial Equipment. Therefore, when DOE quotes from, paraphrases or describes general provisions in Part A, for instance, 42 U.S.C. 6295(o), it substitutes the te rm “equipment” for “product” when the latter term appears in those provisions. (See 42 U.S.C. 6316 (a)(3))receiving comments on the proposed standard. (42 U.S.C. 6295(o )(2)(B)(i) and 6316(e)(1)) To the greatest extent practicable, DOE must consider the following seven factors:

(I) the economic impact of the standard on ma nufacturers and consumers of the equipment subject to the standard; (II) the savings in operating costs throughout the estimated average life of the covered equipment in the type (or class) compared to an y increase in the price, initial charges, or maintenance expenses for the equipment that ar e likely to result from the imposition of the standard; (III) the total projected amount of energy saving s likely to result directly from the imposition of the standard; (IV) any lessening of the utility or the performance of the covered equipment likely to result from the imposition of the standard; (V) the impact of any lessening of competiti on, as determined in wr iting by the Attorney General, that is likely to result from the imposition of the standard; (VI) the need for nationa l energy conservation; and (VII) other factors the Secretary considers relevant.

Id. Furthermore, the Secretary may not prescribe an amended or new sta ndard if interested persons have established by a prep onderance of the evidence that the standard is likely to result in the unavailability in the United States of a ny equipment type (or class) with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295 (o)(4)and 6316(e)(1)) In addition, there is a rebutta ble presumption that a standard level is economically justified if the Secretary finds th at “the additional cost to the consumer of purchasing equipment complying with an energy c onservation standard leve l will be less than three times the value of the energy . . . savings during the first year that the consumer will

receive as a result of the standa rd, as calculated under the applicab le test procedure . . . .” (42 U.S.C. 6295(o)(2)(B)(iii) and 6316(e)(1)) The rebutta ble presumption test is an alternative path to establishing economic justification.

Section 325(q)(1) of EPCA addresses the situa tion where DOE sets a standard for a type or class of covered equipment that has two or more groups of covered equipment. DOE must specify a different standard level than that whic h applies generally to such equipment “for any group of covered equipment which have the same function or intended use, if . . . equipment within such group – (A) consume a different kind of energy from that consumed by other covered equipment within such type (or class); or (B) have a capacity or other performancerelated feature which other equipment within such type (or class) do not have and such feature justifies a higher or lower standard” than applie s or will apply to the other equipment. (42 U.S.C. 6295(q)(1) and 6316(e)(1)) In determining whether a performa nce-related feature justifies a different standard for a group of equipment, DOE must “consider such factors as the utility to

the consumer of such a feature” and other factor s DOE deems appropriate. Any rule prescribing such a standard must include an explanation of the basis on which a higher or lower level was established. (42 U.S.C. 6295(q)(2) and 6316(e)(1))Finally, Federal energy conser vation requirements for commercial equipment generally supersede State laws or regulations concer ning energy conservation testing, labeling, and standards for such equipment. (42 U.S.C. 6316 (a)–(b)) For the commercial refrigeration equipment covered by this rulemaking, Federal en ergy conservation requirements will supersede all such State laws or regulations beginning on the date of publication of the Federal standards, except that any state or local standard issued before that time will be superseded only when the Federal standards take effect. (42 U.S.C. 6316( e)(3)) Furthermore, DOE can grant waivers of preemption to any State laws or regulations that are superseded in accordance with the procedures and other provisions of Section 327(d) of the Act. (42 U.S.C. 6297(d) and 6316(e)(3))

C. Background

1. Current Standards There are no national energy conservation st andards for the commercial refrigeration equipment covered by this rulemaking. EPAC T 2005 did amend EPCA to establish energy conservation standards that will apply to certain other types of commercial refrigerators, freezers, and refrigerator-freezers when manufactured on or after Janu ary 1, 2010. (42 U.S.C. 6313(c)(2)- (3)) Those standards are not at issue in this rulemaking.

2. History of Standards Rulemaking for Commercial Refrigeration Equipment On August 8, 2005, Section 136(c) of EPACT 2005 amended EPCA, in part to direct DOE to issue energy conservation standards fo r the equipment covered by this rulemaking, which standards would apply to equipment manuf actured on or after January 1, 2012. (42 U.S.C.6313(c)(4)(A)) Section 136(a)(3) of EPACT 20 05 also amended EPCA, by adding definitions for terms relevant to this equipment. (42 U.S.C. 6311(9)) In defi ning the term “commercial refrigerator, freezer, and refriger ator-freezer, EPCA states that this refrigeration equipment is

connected to either a self-contai ned condensing unit or to a remote condensing unit. 42 U.S.C. 6311 (9)(A)(vii). Subsequently, EPCA defines the terms “remote condensing unit” and “selfcontained condensing unit.” 42 U.S.C. 6311 (9)(E)-(F). These are the two condenser configurations of equipmen t covered by this rulemaking.

On December 19, 2006, the Energy Independe nce and Security Act of 2007 (EISA 2007) was signed into law by the President. This legi slation affected some of the products for which DOE had rulemakings underway. However, it did not create any additional requirements for commercial refrigeration equipment.

As an initial step to comply with EPCA’s mandate to issue standards for commercial refrigeration equipment, and to commence this rulemaking, on April 25, 2006, DOE published notice of a public meeting and of the availa bility of its Framework Document for this rulemaking. 71 FR 23876. The Framework Document described the proce dural and analytical approaches that DOE anticipated using to evalua te energy conservation standards for commercial refrigeration equipment, and identified various issues to be resolved in conducting the rulemaking. DOE held a public meeting on Ma y 16, 2006 to present th e contents of the Framework Document, describe the analyses it planned to co nduct during the rulemaking, obtain public comment on these subjects, and inform and facilitate interested persons’ involvement in the rulemaking. DOE also gave interested pers ons an opportunity, after the public meeting, tosubmit written statements in response to the Framework Document. DOE received five

statements.

On July 26, 2007, DOE published an advance notice of proposed rulemaking (ANOPR) concerning energy conservation standards for co mmercial refrigeration equipment. 72 FR 41161. In the ANOPR, DOE described and sought comment on its proposed equipment classes for this rulemaking, and on the analytical framework, models, and tools (e.g., LCC and national energy savings (NES) spreadsheets) that DOE used to analyze the impacts of energy conservation standards for commercial refriger ation equipment. In conjunction with the ANOPR, DOE also published on its website the complete ANOPR TSD. The TSD included the results of DOE’s preliminary (1) engineering analysis, (2) markups an alysis to determine equipment price, (3) energy use characterizati on, (4) LCC and payback period (PBP) analyses, (5) NES and national impact analyses (NIA), and (6) manufacturer impact analysis (MIA). In the ANOPR, DOE requested comment on these results , and on a range of other issues. These issues included equipment classes, definitions for air-curtain angle and door angle, case lighting operating hours, operation and ma intenance practices, equipment lifetime, LCC baseline levels, NIA base case, base case and standards case fo recasts, differential impact of new standards on future shipments, selection of standard le vels for post-ANOPR analysis, the equation that expresses the energy conservation standards, a nd the nature of standards for commercial refrigerator-freezers.

DOE held a public meeting in Washington, DC on August 23, 2007, to present the methodology and results of the ANOPR analyses, a nd to solicit both oral and written commentsfrom the interested persons who attended. Public comment focused on DOE’s assumptions, approach, and equipment class breakdown, and are addressed in detail in this NOPR.

III. General Discussion

A. Test Procedures On December 8, 2006, DOE published a final rule in which it adopted American National Standards Institute (ANSI)/Air-Conditioning and Refrigeration Institute (ARI) Standard 1200- 2006, Performance Rating of Commercial Refriger ated Display Merchandisers and Storage

Cabinets , as the DOE test procedure for this equipment. 71 FR 71340, 71369-70; 10 CFR

431.63-431.64. ANSI/ARI Standard 1200-2006 contains rating temperat ure specifications of

38 ° F (±2 ° F) for commercial refrigerators and refrigerator compartments, 0 ° F (±2 ° F) for commercial freezers and freezer compartments, and -5 ° F (±2 ° F) for commercial ice-cream freezers. The standard also requires performa nce tests to be conducted according to the American Society of Heating, Refrigerat ing, and Air-Conditioning Engineers (ASHRAE) Standard 72-2005, Method of Testing Commercial Refrigerators and Freezers . In this final rule, DOE also adopted a -15 ° F (±2 ° F) rating temperature for commercial ice-cream freezers. 71 FR 71370. In addition, DOE adopted ANSI/Associ ation of Home Appliance Manufacturers (AHAM) Standard HRF-1-2004, Energy, Performance and Capacity of Household Refrigerators, Refrigerator-Freezers and Freezers , for determining compartment volumes for this equipment.

71 FR 71369-70.B. Technological Feasibility

1. General DOE considers design options technologically feasible if industry already uses these options or if research has progressed to the de velopment of a working prototype. “Technologies incorporated in commercially available equipmen t or in working prototypes will be considered technologically feasib le.” 10 CFR Part 430, Subpart C, Appendix A, Section 4(a)(4)(i).

In each standards rulemaking, DOE conducts a screening analysis, which it bases on information it has gathered regarding all current technology options and prototype designs. In consultation with interested parties, DOE devel ops a list of design options for consideration in the rulemaking. All technologica lly feasible design options ar e candidates in this initial assessment. Early in the process, DOE eliminat es from consideration any design option (a) that is not practicable to manufacture, install, or service; (b) that will have adverse impacts on equipment utility or availability; or (c) for which there are health or safety concerns that cannot be resolved. Chapter 4 of the TSD accompanying this notice contains a description of the screening analysis for this rulemaking.

In the ANOPR, DOE eliminated five of the t echnologies considered in the market and technology assessment: (1) air-curtain design, (2 ) thermoacoustic refrigeration, (3) magnetic refrigeration, (4) electro-hydrodynamic heat exch angers, and (5) copper rotor motors. Because all five of these technologies ar e in the research stage, DOE be lieves that they would not be practicable to manufacture, instal l and service on the scale necessary to serve the relevant market

at the time of the effective date of the standard. In addition, because thes e technologies are in theresearch stage, DOE cannot asse ss whether they would have a ny adverse impacts on utility to significant subgroups of consumers, result in the unavailability of any types of equipment, or present any significant adverse im pacts on health or safety. Therefore, DOE did not consider these technologies as design options for impr oving the energy efficiency of commercial refrigeration equipment. DOE believes that all th e efficiency levels discussed in today’s notice are technologically feasible becau se there is equipment either in the market or in working prototypes at all of the efficiency levels analyzed. See Chapter 4 of the TSD for further discussion of the screening analysis.

2. Maximum Technologically Feasible Levels In deciding whether to adopt a new standard for a type or class of commercial refrigeration equipment, DOE must “determine the maximum improvement in energy efficiency or maximum reduction in energy use that is tech nologically feasible” for such equipment. (42 U.S.C. 6295(p)(1) and 6316(e)(1)) If such standard is not designed to achiev e such efficiency or use, the Secretary shall state th e reasons such is the case in th e proposed rule. Id. For this rulemaking, DOE determined that the values in Table III-1 represent the energy use levels that would achieve the maximum reductions in energy us e that are technologically feasible at this time for commercial refrigeration equipment. DOE identified these “max-tech” levels for the equipment classes analyzed as part of the engineer ing analysis (Chapter 5 of the TSD). For each equipment class, DOE applied the most efficien t design options availabl e for energy-consuming components. These levels are set forth in TSL 5.Table III-1 “Max-Tech” Energy Use Levels

Equipment Class “Max-Tech” Level kilowatt hours per day (kWh/day) Equipment Class “Max-Tech” Level kilowatt hours per day (kWh/day) VOP.RC.M 0.68 x TDA + 4.07 VCT.RC.I 0.71 x TDA + 3.05 SVO.RC.M 0.69 x TDA + 3.18 HCT.RC.M 0.16 x TDA + 0.13 HZO.RC.M 0.35 x TDA + 2.88 HCT.RC.L 0.34 x TDA + 0.26 VOP.RC.L 2.28 x TDA + 6.85 HCT.RC.I 0.4 x TDA + 0.31 HZO.RC.L 0.57 x TDA + 6.88 VCS.RC.M 0.11 x V + 0.26 VCT.RC.M 0.25 x TDA + 1.95 VCS.RC.L 0.23 x V + 0.54 VCT.RC.L 0.6 x TDA + 2.61 VCS.RC.I 0.27 x V + 0.63 SOC.RC.M 0.39 x TDA + 0.11 HCS.RC.M 0.11 x V + 0.26 VOP.SC.M 1.57 x TDA + 4.71 HCS.RC.L 0.23 x V + 0.54 SVO.SC.M 1.58 x TDA + 4.59 HCS.RC.I 0.27 x V + 0.63 HZO.SC.M 0.77 x TDA + 5.55 SOC.RC.L 0.83 x TDA + 0.22 HZO.SC.L 1.92 x TDA + 7.08 SOC.RC.I 0.97 x TDA + 0.26 VCT.SC.I 0.73 x TDA + 3.29 VOP.SC.L 3.95 x TDA + 11.82 VCS.SC.I 0.38 x V + 0.88 VOP.SC.I 5.02 x TDA + 15.02 HCT.SC.I 0.56 x TDA + 0.43 SVO.SC.L 3.98 x TDA + 11.51 SVO.RC.L 2.28 x TDA + 6.85 SVO.SC.I 5.06 x TDA + 14.63 VOP.RC.I 2.9 x TDA + 8.7 HZO.SC.I 2.44 x TDA + 9. SVO.RC.I 2.9 x TDA + 8.7 SOC.SC.I 1.35 x TDA + 0.36 HZO.RC.I 0.72 x TDA + 8.74 HCS.SC.I 0.38 x V + 0.88

C. Energy Savings

1. Determination of Savings DOE used the NES spreadsheet to estimate energy savings. The spreadsheet forecasts energy savings over the period of analysis for TSLs relative to the base case. DOE quantified the energy savings attributable to an energy cons ervation standard as the difference in energy consumption between the trial st andards case and the base case. The base case represents the forecast of energy consumption in the absence of new mandatory efficiency standards. The NES spreadsheet model is described in Section IV.G of this notice and in Chapter 11 of the TSD accompanying this notice.The NES spreadsheet model calculates the ener gy savings in site energy or kilowatt hours (kWh). Site energy is the energy directly cons umed at building sites by commercial refrigeration equipment. DOE expresses nati onal energy savings in terms of the source energy savings, which are the energy savings used to generate and tran smit the energy consumed at the site. Chapter 11

of the TSD contains a table of factors used to convert kW h to Btu. DOE derives these conversion factors, which change with time, from DOE’s EIA’s AEO2007.

2. Significance of Savings For commercial refrigeration equipment, EP CA prohibits DOE from adopting a standard that would not result in significant additional energy savings. (42 U.S.C. 6295(o)(3)(B) and 6316(e)(1)) While the term “significant” is not defi ned in the Act, the U.S. Court of Appeals, in Natural Resources Defense Council v. Herrington , 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended si gnificant energy savings in this context to be savings that were not “genuinely trivial.” The estimated energy savings for al l of the trial standard levels considered in this rulemaking are nontrivial , and therefore DOE considers them significant within the meaning of Section 325 of the Act.

D. Economic Justification

1. Specific Criteria As noted earlier, EPCA provides seven factors to be evaluated in de termining whether an energy conservation standard is economically justified. The following sections discuss howDOE has addressed each factor thus far in th is rulemaking. (42 U.S.C. 6295(o)(2)(B)(i) and 6316 (e)(1))

a. Economic Impact on Manufacturer s and Commercial Customers DOE uses an annual cash-flow approach in de termining the quantitative impacts of a new

or amended standard on manufacturers. This includes both a short-term assessment based on the cost and capital requirements between the annou ncement of a regulation and when the regulation comes into effect, and a long-term assessment. Impacts analyzed include INPV, cash flows by year, and changes in revenue and income. Ne xt, DOE analyzes and reports the impacts on different types of manufacturers, with particul ar attention to impacts on small manufacturers. DOE then considers the impact of standa rds on domestic manufacturer employment, manufacturing capacity, plant clos ures, and loss of capital investme nt. Finally, DOE takes into account the cumulative impact of regulations on manufacturers.

For commercial consumers, measures of ec onomic impact are generally the changes in installed cost and annual operating costs, i.e., the LCC. Chapter 6 of the TSD presents the LCC of the equipment at each TSL. The LCC is one of the seven factors to be considered in determining the economic just ification for a new or ame nded standard. (42 U.S.C. 6295(o)(2)(B)(i)(II) and 6316 (e)(1)) It is discussed in the paragraphs that follow.

b. Life-Cycle Costs The LCC is the sum of the purchase price, including the insta llation and operating expense (i.e., operating energy, maintenance, and repair expenditures) discounted over the lifetime of the equipment. To determine the purchase price including installation, DOEestimated the markups that distributors and cont ractors add to the manufacturer selling price (MSP); DOE also estimated installation costs from an analysis of commercial refrigeration equipment installation costs for each equipment class. DOE determined that preventative maintenance costs do not depend on efficiency but th at repair costs increas e with efficiency and that the cost of replacement lighting fixtures (“lighting maintenance”) increased with higher efficiency. See Sections IV.E.8 and IV.E.9 for more detail. In estimating operating energy costs, DOE used average effective commercial elect ricity prices at the State level from the EIA publication, State Energy Consumption, Price, and Expenditure Estimates . DOE modified the 2006 average commercial electricity prices to reflect the average electricity prices for each of the four types of businesses examined in this analysis. The LCC analysis compares the LCCs of equipment designed to meet possible energy conser vation standards with the LCCs of equipment likely to be installed in the absence of standard s. The LCC analysis al so identifies a range of energy price forecasts for the electricity prices used in the economic analyses and provides results showing the sensitivity of the LCC results to these price forecasts.

Recognizing that each commerc ial building that uses commer cial refrigeration equipment is unique, DOE analyzed variability and uncertainty by performing the LCC and PBP calculations for two prototype commercial buildings (i.e., stores) and four types of businesses (two types of businesses for each prototype store) . The first store prototype is a large grocery store, which encompasses supermarkets and whol esaler/retailer multi-line stores such as big-box stores, warehouse stores, and supercenters. Th e second prototype is a small store, which encompasses convenience stores and small specialty stores such as meat markets; wine, beer, and liquor stores; and convenience stor es associated with gasoline stations. Various types ofcommercial refrigeration equipment can serve a gi ven type of store’s re frigeration needs. DOE gives the LCC savings as a dist ribution, with a mean value and a range. DOE developed average discount rates for each of four business types analyzed, ranging from 5.1 to 8.4 percent for the calculations, and assumed that the customer purch ases the equipment in 2012. Chapter 8 of the

TSD contains the details of the LCC calculations.

c. Energy Savings While significant energy conser vation is a separate statutor y requirement for imposing an energy conservation standard, EPCA requires DOE, in determining the economic justification of such a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)( i)(III) and 6316(e)(1)) DOE used the NES spreadsheet results in its consideratio n of total projected savings. Section IV.G.1 of this notice discusses the savings figures.

d. Lessening of Utility or Performance of Equipment In establishing equipment classes, evaluating design options, and assessing the impact of potential standard levels, DOE tried to avoid having new standards for commercial refrigeration equipment lessen the utility or performance of the equipment under consideration in this rulemaking. (42 U.S.C. 6295(o)(2 )(B)(i)(IV) and 6316(e )(1)) None of the proposed trial

standard levels considered in this rulemaking involve change s in equipment design or unusual installation requirements that would reduce the ut ility or performance of the equipment. See Chapter 4 and Chapter 16 of the TSD for more detail.e. Impact of Any Lessening of Competition EPCA directs DOE to consider any lesseni ng of competition likely to result from

standards. It directs the Atto rney General to determine in wr iting the impact, if any, of any lessening of competition likely to result from im position of a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)and (ii); and 6316(e)(1)) DOE has transmitted a written request to the Attorney General soliciting a writ ten determination on this issue.

f. Need of the Nation to Conserve Energy The non-monetary benefits of the proposed standard are likely to be reflected in improvements to the security and reliability of the Nation’s energy system. Reductions in the overall demand for energy will reduce the Nation’s reliance on foreign sources of energy and increase reliability of the Nation’s electricity sy stem. DOE conducts a utility impact analysis to show the reduction in installed generation cap acity. Reduced power demand (including peak power demand) generally improves the security and reliability of the energy system.

The proposed standard also is likely to resu lt in improvements to the environment. In quantifying these improvements, DOE has defined a range of primary en ergy conversion factors

and associated emission reductions based on the generation that energy conservation standards displaced. DOE reports the environmental effe cts from each trial standard level for this equipment in the environmental assessment in th e TSD. (42. U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(e)(1))g. Other Factors EPCA allows the Secretary of Energy, in dete rmining whether a standard is economically justified, to consider any other factors the S ecretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and 6316(e)(1 )) Under this provision, DOE considered LCC impacts on identifiable groups of customers, such as cust omers of different business types, who may be disproportionately affected by any national energy conservation sta ndard level. In particular, DOE examined the LCC impact on independent small grocery/convenience store businesses where both higher discount rates and lack of access to national account equipment purchases might disproportionately affect those businesses types when compared to the overall commercial refrigeration equipment market.

2. Rebuttable Presumption

Another criterion for determini ng whether a standard level is economically justified is the following rebuttable presumption test:

If the Secretary finds that the additional cost to the consumer of purchasing equipment complying with an energy conservation standa rd level will be less than three times the value of the energy . . . savings during the firs t year that the consumer will receive as a result of the standard, as calcu lated under the applicable test procedure, there shall be a rebuttable presumption that such standa rd level is economically justified. A determination by the Secretary that such criterion is not met shall not be taken into consideration in the Secretary’s determina tion of whether a standard is economically justified. (42 U.S.C. 62 95(o)(2)(B)(iii) and 6316(e)(1))If the initial price of equipment increase s due to a conservation standard, and the consumer would recover the increase in energy savings in less than thr ee years through reduced energy costs resulting from the standard, then DOE presumes that such standard is economically justified. This presumption of economic justif ication can be rebutted upon a proper showing. The rebuttable presumption payback cal culation is discussed in Sections III.D.2 and V.B.1.b of

this NOPR.

IV. Methodology and Discussion of Comments

DOE used two spreadsheet tools to dete rmine the impact of energy conservation

standards on the Nation. The firs t spreadsheet calculates LCCs and payback periods of potential new energy conservation standards. The s econd provides shipments forecasts and then calculates national energy savings and net pr esent value impacts of potential new energy

conservation standards. DOE also assessed ma nufacturer impacts, larg ely through use of the Government Regulatory Impact Model (GRIM).

Additionally, DOE estimated the impacts of energy conservation standards for commercial refrigeration equipment on utilities a nd the environment. DOE used a version of EIA’s National Energy Modeling System (NEMS) fo r the utility and environmental analyses. The NEMS model simulates the energy economy of the United States and has been developed over several years by the EIA prim arily for the purpose of preparing the Annual Energy Outlook (AEO). The NEMS produces a widely known ba seline forecast for the Nation through 2025 thatis available on the DOE website. The version of NEMS used for e fficiency standards analysis is called NEMS-BT, 8 and is based on the AEO2007 version wi th minor modifications. The NEMS offers a sophisticated picture of the effect of standards, since its scope allows it to measure the

interactions between the various energy supply and demand sector s and the economy as a whole.

A. Market and Technology Assessment When beginning an energy conservation standards rulemaking, DOE develops information that provides an overall picture of th e market for the equipment concerned, including the purpose of the equipment, the industry structur e, and market characteristics. This activity includes both quantitative and qua litative assessments based primarily on publicly available information. The subjects addressed in th e market and technology assessment for this rulemaking (Chapter 3 of the TSD) include equi pment classes, manufacturers, quantities, and types of equipment sold and offered for sale , retail market trends, and regulatory and nonregulatory programs.

1. Definitions Related to Commer cial Refrigeration Equipment

a. Air Curtain Angle Definition For equipment without doors, an air curtain divides the refrigerated compartment from the ambient space. DOE stated in the ANOPR that the orientation of the air curtain affects the energy consumption of both remote condensing and self-contained equipment, and that

8 The EIA approves use of the name NEMS to describe only an AEO version of the model without any modification to code or data. Because the present analysis entails some minor code modifications and runs the model under various policy scenarios that deviate from AEO assumptions, the name NEMS-BT refers to the model used here. For more information on NEMS, refer to The National En ergy Modeling System: An Overview 1998. DOE/EIA–0581 (98), February, 1998. BT is DOE’s Building Technologies Program. NEMS-BT was formerly called NEMSBRS.equipment without doors can be broadly catego rized by the angle of the air curtain. DOE considered defining the air-curtain angle as “the a ngle between a vertical line and the line formed by the points at the center of the discharge air grill e and the center of the re turn air grille, when

viewed in cross-section.” DOE presented this definition in the ANOPR, 72 FR 41173, and for discussion at the ANOPR public me eting, and requested feedback.

ARI and Edison Electric Institute (EEI) reco mmended that DOE slightly modify its definition of air-curtain angle to “the angle formed between a vert ical line and the line formed by the points at the inside edge of the discharge air opening and the inside edge of the return air opening, when viewed in cross-section.” For equipment without doors and without a discharge air grille or discharge air honeyc omb, the air curtain should be de fined as “the angle between a

vertical line extended down fr om the highest point on the manufacturer’s recommended load limit line and the same load limit line.” (ARI, No. 18 at p. 2 and EEI, No. 15 at p. 2) DOE recognizes that these proposed definitions are co nsistent with industry-approved standards and is therefore including the suggested m odifications to the definition fo r air-curtain angle in today’s proposed rule.

b. Door Angle Definition For equipment with doors, DOE stated in the ANOPR that the orientation of the doors affects the energy consumption, and that equipmen t with doors can be br oadly categorized by the angle of the door. DOE considered defining door a ngle as “the angle between a vertical line and the line formed by the plane of the door, when viewed in cross-section.” 72 FR 41174. DOEalso presented this definition for discussion at the ANOPR public meeting and requested

feedback.

While stakeholders agreed with DOE’s propos ed definition of door angle flat doors, it

was not clear how DOE would de fine the door angle for curved doors such as those found on

service over-the-counter cases. True stated that curved door angle should be defined by forming a plane between “the end plane and the end peak in-section.” (Public Meeting Transcript, No. 13.5 at p. 59) Southern California Edison (SCE) suggested defining door angle for curved doors in the way air-curtain angle is defined, by the an gle formed between the vertical and a line drawn between the top and bottom edges. (Public Me eting Transcript, No. 13.5 at p. 59) DOE is proposing its original definition of door angle for cases with flat doors. For cases with curved doors, DOE is not clear what True ’s intent was in defining door angle, and no clarification was

made in True’s written comments. DOE believe s the approach suggested by SCE is appropriate because it accounts for the complex geometry of curved doors while still remaining consistent with the existing definition for ai r-curtain angle. Therefore, DOE is proposing to define door angle as “the angle formed between a vertical line and the straight lin e drawn by connecting the top and bottom points where the display area glas s joins the cabinet, when the equipment is

viewed in cross-section.”

2. Equipment Classes When establishing energy conservation st andards, DOE generally divides covered equipment into equipment classes by the type of energy used, capacity, or other performance-related features that affect efficiency. Diffe rent energy conservation standards may apply to different equipment classes. (42 U.S.C. 6295(q) and 6316(e)(1))

Commercial refrigerators, commercial freeze rs, and commercial refrigerator-freezers can be divided into various equipm ent classes categorized largely by physical characteristics that affect energy efficiency. Some of these char acteristics delineate the categories of equipment covered by this rulemaking. 9 Most affect the merchandise that the equipment can be used to display, and how the customer can access that merchandise. Ke y physical characteristics that affect energy efficiency are the operating temperature, the pr esence or absence of doors (i.e., closed cases or open cases), the type of doors used (i.e., transpar ent or solid), the angle of the door or air-curtain (i.e., horizontal, semivertical, or vertical) and the type of condensing unit (i.e., remote or self-contained). As discussed in the ANOPR, 72 FR 41173-77, and below, DOE has developed equipment classes in this rulema king by (1) dividing commercial refrigerators, commercial freezers, and commercial refrigerat or-freezers into equipment families, (2) subdividing these families based on condensing unit configurations and rating temperature designations, and (3) identifying the resulting classes that are within each of the three equipment categories covered by this rulemaking.

DOE divided covered equipment into eight equipment families, which are shown in

Table IV-1 . Following the ANOPR, DOE did not rece ive any comments that it believes

9 “Commercial refrigerators, commercial freezers, and commercial refrigerator-freezers” is a type of covered commercial equipment. For purposes of discussion only in th is proceeding, DOE uses the term “categories” to designate groupings of “comm ercial refrigeration equipment.” The categ ories of equipment are: self-contained commercial refrigerators, commercial freezers, and commercial refrigerato r-freezers without doors; remote condensing commercial refrigerators, commercial freezers, and commercial refrigerator-freezers; and commercial ice-cream freezers. DOE will analyze specific equipment classes that fall w ithin these general categories and set appropriate standards.warranted changes to the eight equipment fam ilies proposed in the ANOPR and therefore, the eight families are unchanged. The two issues related to equipment family designations are

discussed below. Table IV-1 Equipment Family Designations Equipment Family Description Vertical Open (VOP) Equipment without doors and an air-curtain ≥ 0° and < 10° from the vertical Semivertical Open (SVO) Equipment without doors and an air-curtain angle ≥ 10° and < 80° from the vertical Horizontal Open (HZO) Equipment without doors and an air-curtain angle ≥ 80° from the vertical Vertical Closed Transparent (VCT) Equipment with hinged or sliding transparent doors and a door angle < 45° Horizontal Closed Transparent (HCT) Equipment with hinged or sliding transparent doors and a door angle ≥ 45° Vertical Closed Solid (VCS) Equipment with hinged or sliding solid (opaque) doors and a door angle < 45° Horizontal Closed Solid (HCS) Equipment with hinged or sliding solid (opaque) doors and a door angle ≥ 45° Service Over Counter (SOC) Equipment with sliding or hinged doors intended for use by sales personnel and fixed or hinged glass for displaying merchandise

Within each of the eight equipment familie s is equipment that has one of the two condensing unit configurations, which are shown in Table IV-2 . Because these are the only two condensing unit configurations used in commerci al refrigeration equipment, and since DOE did not receive any comments on these configura tions following the ANOPR, DOE did not make any changes.

Table IV-2 Condensing Unit Configuration Condensing Unit Configuration Description Remote Condensing (RC) Condensing unit is remotely located from the refrigerated equipment and consists of one or more refrigerant compressors, refrigerant condensers, condenser fans and motors, an d factory-supplied accessories Self-Contained (SC) Condensing unit is an integral part of the refrigerated equipment and consists of one or more refrigerant compressors, refrigerant condensers, condenser fans and motors, an d factory-supplied accessoriesDOE is also organizing equipment classe s based on the three operating temperature ranges shown in Table IV-3 . Based on the temperature at which the equipment is designed to operate, it will fall into one of these operating temperature ranges. This is identified as Issue 3

under “Issues on Which DOE Seeks Comment” in Section VII.E of this NOPR.

Each temperature range coincides with a rati ng temperature used in the test procedure final rule for the different equipment type s. 10 CFR 431.64. Following the ANOPR, DOE did not receive any comments regarding the rati ng temperature designations proposed in the ANOPR, and therefore DOE did not make any changes to the rati ng temperature designations. Table IV-3 Rating Temperature Designations

Operating Temperature (°F) Rating Temperature (°F) Description ≥ 32 (M) 38 Medium temperature (refrigerators) < 32 and > -5 (L) 0 Low temperature (freezers) ≤ -5 (I) -15 Ice-cream temp erature (ice-cream freezers)

In the ANOPR, DOE responded to several comm ents and presented a discussion (Section II.A.2) of the air-curtain angle ranges used to delineate vertical, semi vertical, and horizontal equipment families without doors (VOP, SVO, and HZO). 72 FR 41173-74. In comments received following the Framework document publi cation, some stakeholders felt that the aircurtain angle ranges used in the data provide d by ARI might encourage manufacturers to redesign equipment to take advant age of less stringent st andards. Specifically, the stakeholders

were concerned that manufacturers of VOP.RC. M equipment (a high-volume equipment class) would make slight alterations in their designs that would shif t the equipment to the SVO.RC.M equipment class. If this shift occurred for a large number of models , and if standards for SVO.RC.M equipment were significantly le ss stringent than standards for VOP.RC.Mequipment, a significant amount of energy saving s would be avoided. In other words, energy savings will be less than if th at equipment was not modified and remained under the vertical classification. DOE responded to these comments in the ANOPR, concurring with stakeholders’ concerns, and requesting any releva nt data or feedback regarding the ranges of air-curtain angle proposed in the ANOPR. No further comment s were received on this issue following the ANOPR. DOE is proposing standards for the S VO.RC.M equipment class that are virtually equivalent to standards for the VOP.RC.M equipm ent class (see the proposed rule language of this NOPR). As a result, DOE believes that the proposed standards eliminate motivation for market shifts between these equipment classes. However, to assure that no changes to the aircurtain ranges for the VOP, SVO, and HZO equipment families are warranted, DOE seeks comment on the possibility of market shifts be tween equipment classes based on the proposed

standards.

As discussed in the ANOPR, 72 FR 41174 and during the ANOPR public meeting, DOE stated that it was considering defining two equipment families each for equipment with solid and transparent doors, based on door angles of 0 ° to 45° (vertical) and 45 ° to 90° (horizontal). EEI stated that DOE should consider revising its defi nition of door angle, because it is unclear whether a door angle of 45° to be vertical or horizontal. (Public Meeti ng Transcript, No. 13.5 at p. 58) DOE agrees with EEI that its previous designa tion did not specify what equipment family a unit with a 45° door angle would fall under. Ther efore, DOE has tentativ ely decided that it will designate vertical equipment w ith transparent or solid doors as “equipment with hinged or sliding doors and a door angle less than 45°,” and horizontal equipment with transparent or solid doors as “equipment with hinged or sliding doors and a door angle gr eater than or equal to 45°.”DOE is considering 38 of the 48 equipment classes shown in Table IV-4

. 10 The equipment classes are organized by equipment family, compressor operating mode, and rating temperature. The right-hand column in Table IV-4 with the heading “Equipment Class Designation” identifies each of the 48 equipment cla sses with a particular set of letters. The first three letters for each class represent its equipmen t family. The next two letters represent the condensing unit configuration. The last letter represents the rating temperature. Table IV-1 through Table IV-3 set forth the meaning of the e quipment class lette ring designations.

10 identifies 48 classes of commercial refri gerators, commercial freezers, and commercial refrigeratorfreezers. Of the 48 classes, 10 classes are identified by asterisks. EPCA has already established energy conservation standards for these 10 classes, (42 U.S.C. 6313 (c)(2)-(3)) which are not covered under this rulemaking. Table IV-4Table IV-4 Commercial Refrigeration Equipment Classes Equipment Family Condensing Unit Configuration Operating Temperature (°F) Equipment Class Designation ≥ 32 VOP.RC.M < 32 and > -5 VOP.RC.L Remote ≤ -5 VOP.RC.I ≥ 32 VOP.SC.M < 32 and > -5 VOP.SC.L Vertical Open Self-Contained ≤ -5 VOP.SC.I ≥ 32 SVO.RC.M < 32 and > -5 SVO.RC.L Remote ≤ -5 SVO.RC.I ≥ 32 SVO.SC.M < 32 and > -5 SVO.SC.L Semivertical Open Self-Contained ≤ -5 SVO.SC.I ≥ 32 HZO.RC.M < 32 and > -5 HZO.RC.L Remote ≤ -5 HZO.RC.I ≥ 32 HZO.SC.M < 32 and > -5 HZO.SC.L Horizontal Open Self-Contained ≤ -5 HZO.SC.I ≥ 32 VCT.RC.M < 32 and > -5 VCT.RC.L Remote ≤ -5 VCT.RC.I ≥ 32 VCT.SC.M* < 32 and > -5 VCT.SC.L* Vertical Closed

Transparent Self-Contained ≤ -5 VCT.SC.I ≥ 32 HCT.RC.M < 32 and > -5 HCT.RC.L Remote ≤ -5 HCT.RC.I ≥ 32 HCT.SC.M* < 32 and > -5 HCT.SC.L* Horizontal Closed Transparent Self-Contained ≤ -5 HCT.SC.I ≥ 32 VCS.RC.M < 32 and > -5 VCS.RC.L Remote ≤ -5 VCS.RC.I ≥ 32 VCS.SC.M* < 32 and > -5 VCS.SC.L* Vertical Closed Solid Self-Contained ≤ -5 VCS.SC.I ≥ 32 HCS.RC.M < 32 and > -5 HCS.RC.L Remote ≤ -5 HCS.RC.I ≥ 32 HCS.SC.M* < 32 and > -5 HCS.SC.L* Horizontal Closed Solid Self-Contained ≤ -5 HCS.SC.I ≥ 32 SOC.RC.M < 32 and > -5 SOC.RC.L Remote ≤ -5 SOC.RC.I ≥ 32 SOC.SC.M* < 32 and > -5 SOC.SC.L* Service Over

Counter Self-Contained ≤ -5 SOC.SC.I * These equipment classes are cove red by standards established in EPCA and are not covered under this rulemaking. (42 U.S.C. 6313(c)(2)-(3))EPCA contains standards for self-contain ed commercial refrigerators, commercial freezers and commercial refrigerator-freezers w ith doors (42 U.S.C. 6313(c)(2)-(3)); this equipment is not included in this rulemaking. Equipment classes already covered by EPCA, and

therefore not included in this rulemaking, are indicated with asterisks in Table IV-4 . DOE has based the designations of these possible equi pment classes on the classification methodology presented in Table IV-1 through Table IV-3

.

Table IV-5 presents the equipment classes cove red under this rulemaking, organized by the three equipment categories.Table IV-5 Commercial Refrigeration Equipment Classes by Category Equipment

Category Condensing Unit Configuration Equipment Family Operating Temperature (°F) Equipment Class Designation ≥ 32 VOP.RC.M Vertical Open < 32 and > -5 VOP.RC.L ≥ 32 SVO.RC.M Semivertical Open < 32 and > -5 SVO.RC.L ≥ 32 HZO.RC.M Horizontal Open < 32 and > -5 HZO.RC.L ≥ 32 VCT.RC.M Vertical Closed Transparent < 32 and > -5 VCT.RC.L ≥ 32 HCT.RC.M Horizontal Closed Transparent < 32 and > -5 HCT.RC.L ≥ 32 VCS.RC.M Vertical Closed Solid < 32 and > -5 VCS.RC.L ≥ 32 HCS.RC.M Horizontal Closed Solid < 32 and > -5 HCS.RC.L ≥ 32 SOC.RC.M Remote Condensing Commercial Refrigerators, Commercial Freezers, and CommercialRefrigeratorFreezers Remote

Service Over Counter < 32 and > -5 SOC.RC.L ≥ 32 VOP.SC.M Vertical Open < 32 and > -5 VOP.SC.L ≥ 32 SVO.SC.M Semivertical Open < 32 and > -5 SVO.SC.L ≥ 32 HZO.SC.M Self-Contained Commercial Refrigerators, Commercial Freezers, and CommercialRefrigeratorFreezers without Doors Self-Contained Horizontal Open < 32 and > -5 HZO.SC.L Vertical Open VOP.RC.I Semivertical Open SVO.RC.I Horizontal Open HZO.RC.I Vertical Closed Transparent VCT.RC.I Horizontal Closed Transparent HCT.RC.I Vertical Closed Solid VCS.RC.I Horizontal Closed Solid HCS.RC.I Remote

Service Over Counter SOC.RC.I Vertical Open VOP.SC.I Semivertical Open SVO.SC.I Horizontal Open HZO.SC.I Vertical Closed Transparent VCT.SC.I Horizontal Closed Transparent HCT.SC.I Vertical Closed Solid VCS.SC.I Horizontal Closed Solid HCS.SC.ICommercial IceCream Freezers

Self-Contained

Service Over Counter ≤ -5

SOC.SC.IB. Engineering Analysis The engineering analysis develops cost -efficiency relations hips to show the manufacturing costs of achievi ng increased efficiency. DOE ha s identified the following three methodologies to generate the manufacturing costs needed for the engineer ing analysis: (1) the design option approach, which pr ovides the incremental costs of adding design options to a baseline model that will improve its efficiency; (2) the efficien cy-level approach, which provides the relative costs of achieving increases in ener gy efficiency levels without regard to the particular design options used to achieve such increases; and (3) the cost-assessment (or reverse engineering) approach, which provides “bottom-up” manufacturing cost assessments for achieving various levels of increased efficien cy based on detailed cost data for parts and material, labor, shipping/packaging, and investme nt for models that operate at particular efficiency levels.

1. Approach In the ANOPR engineering analysis, the prim ary methodology was an efficiency-level approach, supplemented by a design option appro ach. DOE analyzed only the 15 equipment classes with shipment volumes greater than 100 pe r year. The basis of the approach was four industry-supplied cost-efficiency curves for the four equipment classes shipped most frequently (i.e., VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L). See Section IV.F for shipment data. DOE developed these classes using an efficiency-level approa ch. DOE supplemented these industry-supplied curves with 15 curves it developed using a design option approach. Four

of DOE’s curves were intende d only for comparison with the industry-supplied curves, as verification of the industry data. The other 11 curves formed the basis of analysis for the other11 analyzed equipment classes. The ANOPR pr ovides more details on this approach. 72 FR

41180.

During the ANOPR public meeting and subseq uent comment period, stakeholders raised concerns over using industry-supplied data as the basis of the engineering analysis. ARI stated that the intent was to use the industry curves only to validate DOE’s design option analysis, not to use them directly in the analysis. (Public Meeting Transcript, No. 13.5 at p. 91) The American Council for an Energy Efficient Econo my (ACEEE) stated that rulemakings have always used industry curves when they were av ailable. (Public Meeti ng Transcript, No. 13.5 at p. 91) ARI stated that the industry data represen ts an average and covers the range of available equipment, but not all manufacturers’ equipment would span the whole range. ARI also stated that as few as three manufacturers submitted data for some of the cost-efficiency curves, while in the best cases there were up to seven. ARI explained that three manufacturers might not represent the entire i ndustry. (Public Meeting Transcri pt, No. 13.5 at pp. 94-95) Hussmann stated that it doesn’t know, for example, how many shelf lights other manufacturers included in the data they submitted to ARI, and therein lies so me of the danger of using an industry average. (Public Meeting Transcript, No. 13.5 at p. 95) Regarding the HZO.RC.L equipment class, EEI stated that DOE’s data does not appear to have the same range as ARI’s data. (Public Meeting Transcript, No. 13.5 at p. 93) Copeland also ques tioned whether the cost-efficiency curves from industry made sense [because they did not appear to be ordered in terms of increasing payback]. (Public Meeting Transcript, No. 13.5 at p. 149) ACEEE noted that th e analytically derived price points for several equipment classes are signific antly higher than the industry-supplied data at high efficiency, and suggested that DOE reexamin e this data. (ACEEE, No. 16 at p. 2) ARIstated that DOE’s design option approach appears to be technically sound, and that the ARI costefficiency curves are only available for a limited number of equipment classes. For consistency, ARI recommended that DOE base its analysis so lely on DOE’s analytica lly derived curves. (ARI, No. 18 at p. 6)

As mentioned above, DOE used the four cost-efficiency curves 11 provided by ARI as the basis for its ANOPR engineering analysis. DOE was not aware of ARI’s intentthat they be used only to validate DOE’s own analysis, or of AR I’s concerns that the data may have been insufficient for some classes. DOE agrees with stakeholders that using the analytically derived curves (a design option approach ) for all equipment classes would be more consistent and provide more transparency . Although the efficiency-level and design option approaches have been used together in other rulemakings, DOE recognizes the challenges in using the industrysupplied data as the primary engineering analysis approach in this rulemaking. The ARI data cannot be disaggregated for public review, since doing so would disclose sensitive manufacturer information. This prevents a rigorous investigati on of any discrepancies or irregularities in data submitted by the manufacturers. At the ANOPR public meeting, Hussmann mentioned lighting levels as one example of a design feature th at could cause discrepancies among data from different manufacturers. In the design option approach, data on design features that affect performance (such as lighting) are available for interested pe rsons to review and comment on, along with other assumptions and calculations. Th e aggregation of industry data seems to have resulted in cost-efficiency curves that lack th e marked cost increases at higher levels of efficiency that are typical of the cost-efficiency relationshi p. The industry-supplied curves

11 These four curves applied to th e following four equipment classes: VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L. These represent the equipment cl asses with the highest shipment volumes.tended to be “flatter” than thos e developed by DOE, and in some cases appear to have efficiency levels that were not in order of increasing payback, as noted by Copeland. DOE believes the flatness of the industry curves may account for some of the discrepancies in pricing between the industry-supplied and analytically de rived data, as noted by ACEEE.

The extent of the industry-supplied data was al so cause for concern. ARI’s statement that not all manufacturers’ equipment would span the whole range of ef ficiency levels is consistent

with EEI’s concern that the data derived using DOE’s design option approach did not span the same range as the industry data. Because of overl apping ranges of efficien cy of manufacturers’ data, the overall cost-efficiency data reported by ARI spans a range that in some cases is greater than the range covered by DOE’s design option da ta. DOE realizes this could raise a concern that its analysis is incomplete, for example by neglecting design options that could account for additional increases in efficiency, and thus an increase in the span of efficiencies covered. However, based on the comments received, DOE be lieves the extra range in the ARI data is instead largely due to inconsistencies in the manuf acturer data submitted to ARI, such as lighting levels. A smaller portion of the extra range may al so be attributable to subtle aspects of design and manufacturing (e.g., airflow and air-curtain design) that have an insignificant impact on performance and that cannot be modeled accura tely in the design option approach. DOE appreciates the feedback from ARI that the de sign option approach appears sound, and believes that the design option data is more accurate in depicting the cost-efficiency relationship for commercial refrigeration equipment.For the NOPR engineering analysis, DOE anal yzed the same 15 equipment classes as in the ANOPR analysis, but used only a design option approach. That approach is identical to the one used in the ANOPR, involvi ng consultation with outside e xperts, review of publicly available cost and performance information, and modeling of equipment cost and energy consumption, but DOE applied it to all 15 equipment classes an alyzed. The industry-supplied data developed using an efficien cy-level approach is used only as a check on DOE’s data. DOE believes this approach is more reliable, and affords the public fu ll transparency of assumptions and results and the ability to perform independent analyses for verification. See Chapter 5 of the

TSD for more detail.

2. Equipment Classes Analyzed For the NOPR, DOE did not make any changes to the equipment classes directly analyzed in the ANOPR engineering analysis. Because of th e large number of equipment classes in this rulemaking, DOE did not directly analyze a ll equipment classes us ing the design option approach. DOE maintained the same equipmen t class prioritization used in the ANOPR. Equipment classes with more than 100 units shipped per year (“pr imary” classes), as well as the

VOP.RC.L 12 equipment class, were directly analyzed. Table IV-6 lists these equipment classes, which represent approximately 98 percent of the shipments of commercial refrigeration equipment reported by ARI.

12 The VOP.RC.L equipment class was re ported as having zero shipments in the ARI shipment data, but was included in the analysis based on r ecommendations from manufacturers. Du ring interviews conducted for the NOPR, manufacturers reported to DOE their individual shipment numbers for the VOP.RC.L class. Regardless of the actual shipment volume, DOE believes there are signif icantly more than 100 annual shipments of the VOP.RC.L equipment class.Table IV-6 Equipment Classes Directly Analyzed in the Engineering Analysis Equipment Class Description VOP.RC.M Vertical Refrigerator without Doors with a Remote Condensing Unit, Medium Temperature VOP.RC.L Vertical Freezer without Doors with a Remote Condensing Unit, Low Temperature SVO.RC.M Semi-Vertical Refrigerator without Doors with a Remote Condensing Unit, Medium Temperature HZO.RC.M Horizontal Refrigerator withou t Doors with a Remote Condensing Unit, Medium Temperature HZO.RC.L Horizontal Freezer without Doors with a Remote Condens ing Unit, Low Temperature VCT.RC.M Vertical Refrigerator with Tran sparent Doors with a Remote Condensing Unit, Medium Temperature VCT.RC.L Vertical Freezer with Transparent Doors with a Remote Condensing Unit, Low Temperature SOC.RC.M Service Over Counter Refrigerator with a Remote Condensing Unit, Medium Temperature VOP.SC.M Vertical Refrigerator without Doors with a Sel f-Contained Condensing Unit, Medium Temperature SVO.SC.M Semi-Vertical Refrigerator without Doors with a Self-Contained Condensing Unit, Medium Temperature HZO.SC.M Horizontal Refrigerator without Doors with a Self-Contained Condensing Unit, Medium Temperature HZO.SC.L Horizontal Freezer without Do ors with a Self-Contained Cond ensing Unit, Low Temperature VCT.SC.I Vertical Ice-Cream Freezer with Transparent Do ors with a Self-Contained Condensing Unit, IceCream Temperature VCS.SC.I Vertical Ice-Cream Freezer with Solid Doors with a Self-Contained Cond ensing Unit, Ice-Cream Temperature HCT.SC.I Horizontal Ice-Cream Freezer with Transparent Do ors with a Self-Contain ed Condensing Unit, IceCream Temperature

3. Analytical Models In the design option approach, DOE used mode ls to develop estimates of cost and energy consumption for each equipment class at each efficiency level. DOE used a cost model to estimate the manufacturer producti on cost (MPC) in dollars, and an energy consumption model to estimate the daily energy consumption in kW h for each of the 15 primary equipment classes analyzed.

a. Cost Model Development of the cost model involved the di sassembly of a self-contained refrigerator with transparent doors, an analysis of the ma terials and manufacturi ng processes, and the development of a parametric spreadsheet model fl exible enough to cover a ll equipment classes. The manufacturing cost model estimated MPC and reported it in aggregated form to maintainconfidentiality of sensitive cost data. DOE obtained input from st akeholders on the MPC estimates and assumptions to confirm accuracy. The cost model was used for 7 of the 15 examined equipment classes and the results we re extended to 6 of th e remaining examined equipment classes. The cost of the remaining two equipment classes was estimated using available manufacturer list price (MLP) informa tion discounted to MPC. Details of the cost model are provided in ch apter 5 of the TSD.

Following the ANOPR, no comments were receiv ed regarding DOE’s cost model, and therefore no significant changes were made to th e methodology used in the NOPR analysis. One change was made to the manufacturer mar kup assumption, which is discussed below.

One key element of DOE’s cost model conc erned features and st ructural elements common in commercial refrigeration equipment, but that would not affect the energy use of the equipment. Development of this part of the cost model involved disass embling a self-contained refrigerator with transparent doors, analyzing the materials and manufact uring processes, and developing a parametric spreadsheet model flexib le enough to cover all equipment classes. The other key part of the cost model estimated the costs of particular features or design options that would affect the energy use of the equipment. DOE obtained input from stakeholders on the MPC estimates and assumptions to confirm their accu racy. DOE used the cost model for 7 of the 15 examined equipment classes and extended th e results to 6 of the remaining examined equipment classes. DOE estimated the cost of the remaining two equipment classes using available manufacturer list price (MLP) informa tion reduced to MPC. Chapter 5 of the TSD provides details of the cost model.A manufacturer markup is applied to the MPC estim ates to arrive at the MSP. This is the price of equipment sold at which the manu facturer can recover both production and nonproduction costs and can earn a profit. DOE calcu lated the manufacturer markup as the market share weighted average value for the indus try. For the ANOPR, DOE developed this manufacturer markup by examining several major commercial refrigeration equipment manufacturers’ gross margin information from annual reports and the S ecurities and Exchange Commission (SEC) 10-K reports. The manufactur ers DOE analyzed account for approximately 80 percent of the market, and each company is a subsidiary of a more diversified parent company that manufactures equipment other than commerci al refrigeration equipment. Because the 10-K reports do not provide gross margin information at the subsidiary level, the estimated markups represent the average markups that the parent company applies over its entire range of equipment offerings and does not necessarily represent the manufacturer markup of the subsidiary.

The ANOPR analysis indicated that the aver age manufacturer markup is 1.39. However, DOE adjusted the markups to be more representa tive of the industry following discussions with manufacturers during the MIA inte rviews (Chapter 13). An aggregation of the MIA interview responses gives a market share weighted aver age manufacturer markup value of 1.32. For the NOPR, DOE used this revised manufacturer mar kup with the MPC values from the engineering analysis to arrive at the M SP values used in the GRIM.

As explained in the ANOPR, DOE received i ndustry-supplied curves from ARI in the form of daily energy consumption versus MLP, both normalized by total display area (TDA).Since DOE developed its analytic ally derived curves in the fo rm of calculated daily energy consumption (CDEC) versus MSP, it was necessary for DOE to estimate an industry list price markup so that it could make comparisons between the two sets of curves. The industry list price markup is a markup to the selling price that pr ovides the list price. To make comparisons between the analytically derived and industry- supplied cost-efficiency curves, DOE discounted the industry data with the list price markup and normalized th e analytically derived curves by

TDA.

Manufacturers typically offer a di scount from the MLP, which depends on factors such as the relationship with th e customer and the volume and type of equipment being purchased. For the estimate of list price ma rkup, DOE relied on information gathered on self-contained commercial refrigeration equipment, since list pri ce information is readily available and typically published by manufacturers of this equipment. A review of the data shows that the list price markup is typically 2.0 (i.e., manufacturers will typically sell their equipment for 50 percent off the published list price). DOE fu rther verified the estimate by obtaining list price quotes from several remote condensing equipment manufacturer s. During manufactur er interviews, some commercial refrigeration equipm ent manufacturers agreed with the 2.0 markup estimate, while

others stated the estimate was somewhat hi gh. Although the list price markup can vary significantly by manufacturer and by customer, DOE believes the es timated list price markup of 2.0 is representative of the industry. DOE a pplied this markup to all equipment classes.DOE did not receive any additi onal comments or information indicating that revision of the cost model used in the ANOPR analysis is warranted. Therefore DOE has adhered to that model in the NOPR analysis.

b. Energy Consumption Model The energy consumption model estimates the daily energy consumption of commercial refrigeration equipment at various performance levels using a design options approach. The model is specific to the categories of e quipment covered under this rulemaking, but is sufficiently generalized to model the energy consum ption of all covered equipment classes. For a given equipment class, the model estimates th e daily energy consumption for the baseline and the energy consumption of several levels of performance above the baseline. The model is used to calculate each performa nce level separately.

In developing the energy consumption mode l, DOE made general assumptions about the analysis methodology and specific numerical assu mptions regarding load components and design options. DOE based its energy consumption estim ates on new equipment te sted in a controlledenvironment chamber in accordance with ANSI/ARI Standard 1200-2006, the DOE test procedure for commercial refrigeration equi pment, which references the ANSI/ASHRAE

Standard 72-2005 test method. 13 Once Federal standards for this equipment become operative, manufacturers will be required to test units wi th this test method, which specifies a certain ambient temperature, humidity, light level, and other requirements. This test method, however, contains no specification as to the operating hours of the display case lighti ng, and DOE’s energy consumption model considers the operating hours to be 24 hours per day (i.e., that lights are on

13 The test procedures are found at 10 CFR 431.64.continuously). This assumption is consistent wi th the lighting operating time assumption used in the energy use characterization (see Section IV.D ). Chapter 5 of the TS D discusses further the assumptions used in the energy consumption model.

The energy consumption model calculates CD EC as having two ma jor components: compressor energy consumption and component en ergy consumption (expressed as kWh/day). Component energy consumption is the sum of the direct electrical ener gy consumption of fan motors, lighting, defrost and drai n heaters, anti-sweat heaters, and pan heaters. Compressor energy consumption is calculated from the total re frigeration load (expressed in Btu/h) and oneof two compressor models: one version for remote condensing equipment and one for selfcontained equipment. The total refrigeration lo ad is a sum of the component load and the nonelectric load. The component load is the sum of the heat emitted by evaporator fan motors, lighting, defrost and drain heaters, and anti-sweat heaters inside and adjacent to the refrigerated space (condenser fan motors and pan heaters are outside of the refrigerated space and do not contribute to the component heat lo ad). The non-electric load is the sum of the heat contributed by radiation through glass and openings, heat co nducted through walls and doors, and sensible and latent loads from warm, moist air infilt ration through openings. Chapter 5 of the TSD discusses component energy consumption, comp ressor energy consumption, and load models.

DOE made one change to the methodology of calculating the radia tion load for cases without doors (VOP, SVO, and HZO equipment families). In the ANOPR analysis, the view

factor 14 from the interior of the case to the walls of the test chamber was estimated as 0.025. This value was kept as a constant for all cases and sizes in the ANOPR an alysis, but it is clear

14 A view factor is the proportion of all radia tion that leaves one surface and strikes another.this value should change somewhat as the geometry and the overall size of the case changes. For the NOPR, DOE calculated the view factor separa tely for each equipment class depending on the geometry specific to the baseline design specifications of that cl ass. The view factor from the

case to the room is calculated as the ratio of TD A (i.e., the area of the plane separating the case from the room) to the test chamber wall surface area.

Stakeholders raised questions regarding DOE’s method of calculating the infiltration

load 15 for commercial refrigeration equipment. Carrier asserted that DOE’s method of using defrost water to model infiltration has limitations. Carrier pointed out that as the case is run at higher suction temperatures, the coil has a tendency to run as a wet coil and does not retain much of the moisture on its exterior. Typically on ma nufacturer specification sh eets, defrost meltwater is only the water that comes out during a defrost period, and Carri er noted that there may be

additional water that would come off the coil between defrost periods. Carrier believes DOE may be underestimating the infiltration load using information from the specification sheets, and

estimated that the infilt ration load is typically around 75 percen t of total cooling water. Carrier questioned whether or not DOE comp ared its estimates with the calculated infiltration loads. (Public Meeting Transcript, No. 13.5 at p. 83) Hu ssmann stated that when it publishes data for defrost meltwater, it does so for the sole purpose of sizing sewer lines and not for estimating the infiltration load. (Public Meeting Transcript, No. 13.5 at p. 85)

In the ANOPR analysis, DOE calculated infi ltration load using empirical defrost

meltwater data obtained from manufacturers’ de tailed specification sheets. DOE assumed that

defrost meltwater could be correlated with infi ltration load, given certai n known parameters such

15 The mass of warm ambient store air that displaces the cold air inside of the case.as ambient relative humidity. This methodology wa s calibrated with detaile d refrigeration load

data obtained from Southern California Edison for several large-volume equipment classes. DOE agrees with the assessment made by st akeholders and has al tered its methodology accordingly. In the NOPR engineering design sp ecifications, defrost meltwater (in pounds per hour, lbs/hr) is replaced with infiltrated air (als o in lbs/hr) for all equipment classes. DOE estimated infiltrated air by using manufacturers’ detailed specification sheets, recognizing that infiltration load is the only load component that cannot be directly calc ulated. Using physical parameters about each case, the other load compon ents (internal load, conduction load, radiation load) are calculated. DOE subtracted these load components from the listed total refrigeration load, and it is assumed that the remaining load is due to infiltration. Chapter 5 of the TSD provides more details of the change to this methodology.

At the public meeting, stakeholders expressed concern over the refrigerants DOE used in the analysis. EEI asked if hydrofluorocarbon (HFC) refrigerants were already assumed to be in use in the baseline. (Public M eeting Transcript, No. 13.5 at p. 97) ARI stated that most of the data it provided to DOE was based on such refr igerants and no changes are expected in that regard. (Public Meeting Transc ript, No. 13.5 at p. 97) In its analysis, DOE assumed that HFC refrigerants are already fully in use for commer cial refrigeration equipment. For all remote condensing equipment, in accordance with the DOE test procedure in ANSI/ARI Standard 1200- 2006, DOE assumes the use of a compressor using an HFC refrigerant (i.e., R-404A). Likewise, all of the compressors DOE used in modeling se lf-contained equipment use either R-404A or R134A, another HFC refrigerant.c. Design Options

In the market and technology assessment for the ANOPR, DOE defined an initial list of technologies that have the pot ential to reduce the energy consumption of commercial refrigeration equipment. In the screening anal ysis for the ANOPR, DOE screened out some of these technologies based on four screening criteria: technological feasibility; practicability to manufacture, install and service; impacts on eq uipment utility or availability; and impacts on health or safety. 72 FR 41179-80. The remaining technologies became inputs to the ANOPR engineering analysis as design options. However, for reasons described in the ANOPR, DOE did not incorporate all of these tec hnologies as design options in the energy consumption model. 72

FR 41182-83. Stakeholders commented that some of these technologies should be included in the NOPR engineering analysis, and recomm ended additional design options DOE should consider. Comments pertaining to each sugge sted technology and DOE’s response are provided below. As a general comment about design options , ACEEE stated that so me design options that

were screened out should be considered for further analysis and that prevalence in the marketplace is not necessarily a good reason to screen out a design option. (Public Meeting Transcript, No. 13.5 at p. 62) DOE screened out five technol ogies in the ANOPR screening analysis. These are ai r-curtain design, thermoacoustic refr igeration, magnetic refrigeration, electro-hydrodynamic heat exchangers, and copper rotor motors. All five of these design options were screened out because they are in the re search stage and would not be practical to manufacture, install, and service. Since the publication of the ANOPR, DOE is not aware of any significant changes to the status of these technologies, and ha s not included them in the NOPR analysis.ACEEE recommended that variable-speed co mpressors be included in the analysis. (ACEEE, No. 16 at p. 2) EEI also suggested that DOE consider the use of variable-speed drives for compressors. (EEI, No. 15 at p. 2) Variable-s peed compressors could potentially improve the efficiency of commercial refrigeration equipmen t classes that are self -contained units without

doors and self-contained ice-cream freezers. Va riable-speed compressors can reduce energy consumption under real-world conditions by matchi ng cooling capacity to the refrigeration load, which can change due to variations in ambi ent conditions and product loading. This load matching allows for a more constant temperat ure inside the case, eliminating the large fluctuations in temperature that are typical of single-speed compressors. The stability in temperature allows manufacturers to design equi pment with higher evaporator temperatures, improving compressor efficiency. However, th e energy-saving benefit of variable-speed compressors is not clear under ANSI/ASHRAE Standard 72-2005, because it is a steady-state test for commercial refrigeration equipment. Furt her, DOE is not aware of any test data showing the energy savings benefit of variable speed compressors in the types of equipment covered in

this rule. Certain test data does exist for walk-i ns and residential refrig erators, but DOE does not believe that this data can be used to predict the performance of variable-speed compressors in commercial refrigeration equipment. Theref ore, DOE did not include variable-speed compressors as a design option in its engineering analysis.

ACEEE recommended that variable-speed evapor ator fans be include d in the analysis. (ACEEE, No. 16 at p. 2) San Diego Gas & Elec tric Company (SDGE) also recommended that DOE include in its analysis the energy savings, cost -effectiveness, and feasibility of such fans for enclosed refrigeration equipment served by remo te refrigeration compressors. (SDGE, No. 22 atp. 2) SCE recommended that DOE consider the co st-effectiveness of variable-speed evaporator fans for this equipment. SCE asserted that va riable-speed fan control was a very effective and cost-effective means of increasing refrigerated warehouse efficiency and should be applicable to commercial refrigeration equipment as well. SCE stated that this reduces the energy consumption of the fan and the amount of load that the refrigerant must reject. SCE also noted that its work in support of Ca lifornia building and appliance st andards showed variable-speed controls on evaporator fans had approximately one-year simple paybacks in both refrigerated warehouses and small walk-in coolers. (Public Meeting Transcript, No. 13.5 at p. 69 and SCE, No. 19 at p. 3) EEI also suggest ed that DOE consider the use of variable-speed drives for evaporator fans and compressors. (EEI, No. 15 at p. 2)

Variable-speed evaporator fans can operate at speeds that match changing conditions in the case. DOE recognizes that the use of these fans provides some opportunity for energy savings, because the buildup and removal of fros t creates differing pressure drops across the evaporator coil. Theoretically, less fan power is required when the coil is free of frost. Additionally, when an evaporator fan operates at variable speeds, the coil would operate at a more stable temperature during th e period of frost build-up. Howe ver, the effectiveness of the air curtain in equipment without doors is very sensitive to changes in airflow, so fan motor controllers would likely disrupt air curtains. DOE believes the likely disturbance to the air curtain, which would lead to higher infiltrati on loads and higher overall energy consumption, would negate the use of evaporator fan motor c ontrollers in equipment without doors, even if there were some reduction in fan energy use. In addition, the ANSI/AS HRAE Standard 72-2005 test method is a steady-state test for commercial re frigeration equipment, so similar to variable-speed compressors, the energy-saving benefit of va riable-speed fans is not clear. Therefore, DOE did not include variable-speed fans as a design option in its engineering analysis.

ACEEE recommended that remote ballast locatio n be included in the analysis. (ACEEE, No. 16 at p. 2) Fluorescent lamp ballasts ge nerate heat, and their relocation outside the refrigerated space can reduce energy consump tion by lessening the refrigeration load on the compressor. However, for the majority of commercial refrigeration equipment currently manufactured, ballasts are already lo cated in electrical trays outside of the refrigerated space, in either the base or top of the equipment. The notable exceptions are the equipment classes in the VCT equipment family, where ballasts are most often located on the in terior of each door mullion. Most commercial refrig eration equipment manufacturer s purchase doors for VCT units that are preassembled with the enti re lighting system in place rather than configured for separate

ballasts. DOE believes that most commercia l refrigeration equipment manufacturers choose

these kinds of doors because it would be labor in tensive and time consuming to relocate these ballasts at the factory, and because of the additiona l cost and labor of wiring separate ballasts.

Manufacturers have indicated that the potential energy savings ar e also small, since modern electronic ballasts are very efficient and typica lly contribute only a few watts (W) each to the refrigeration load. Because (1) lamp ballasts ar e already located externally on most equipment; (2) most units that have internally located la mp ballasts use preassembled lighting systems; and (3) potential energy savings are small, DOE did not consider remote relocation of ballasts as a design option in its e ngineering analysis.ACEEE recommended that improved insulation be included in the analysis. (ACEEE, No. 15 at p. 2) Potential improvements to insula tion material used in commercial refrigeration equipment cabinets include better polyurethane fo ams and vacuum panels. In consultation with insulation material manufacturers, DOE determined that there are no significant differences in “grades” of insulation material, so equipm ent manufacturers are already using the best commercially available foam materials in their eq uipment. Vacuum panels are an alternative form of insulation; however, they may degrade in performance in time as small leaks develop. Based on knowledge of typical manufacturing pr actices, DOE also believes it would be impractical to use vacuum panels to construct commercial refrigeration equipment, because they cannot be penetrated by fasteners, and do not provide the rigidity of “foamed-in-place” polyurethane insulation panels. Thicker insula tion is another possibl e option, but could be problematic because it would likely result in eith er a reduced volume for the refrigerated space

or an increase in the overall size of the e quipment cabinet. Reducing the volume of the refrigerated space could affect th e utility of the equipment, and because the outer dimensions of commercial refrigeration equipment are often lim ited (e.g., by interior dimensions of shipping containers), it is often not practical to increase the overall size of the cabinet. For all these reasons, DOE did not consider insulation thickne ss increases or improvements as a design option in its ANOPR engineering analysis.

However, DOE did add increases in insula tion thickness as a design option in the NOPR engineering analysis, because it now believes this is a cost-effective option in several equipment types, most notably self-contained ice-cream fr eezers with doors. DOE understands that in equipment classes where conduction makes up a si gnificant portion of the total refrigerationload, a modest increase in insulati on thickness can lead to small, but significan t energy savings. . In relatively large units, which make up the la rgest portion of the shipments of commercial refrigeration equipment, even if such added in sulation results in reducti on of the refrigerated volume, any such reduction would not be substantial. DOE does not foresee any impact on the availability of this type of equipment from the use of increas ed insulation that would trigger EPCA’s prohibition at 42 U.S.C. 6295(o)(4) and 6316(e)(1). As to smaller units, DOE assumes

that their outer dimensions are less constrained than the dimensions of larger units, and that

therefore manufacturers could accommodate a sm all increase in insulation thickness, and maintain the amount of refrigerated volume, by making a small increase in the overall size of the cabinet. Therefore, in the NOPR, DOE modeled a 1⁄2-inch increase in insulation thickness for all equipment classes. When implemented as a desi gn option, this increase in thickness was added

to the baseline value of insulation thickness and DOE recalculated the conduction load. DOE based the cost of increasing th e insulation thickness on a sunk cost per unit , considering foam fixture engineering and tooling costs, production line lifetime, a nd number of fixtures and units produced. Chapter 5 of the TSD provides details of the assumptions DOE used to calculate the

additional cost of insulation thickness increases.

ACEEE recommended that DOE include defrost cycle control in the analysis. (ACEEE, No. 16 at p. 2) Defrost cycle control can re duce energy consumption by reducing the frequency and duration of defrost periods. The majority of equipment currently manufactured already uses partial defrost cycle control in the form of cycl e termination control. However, defrost cycle

initiation is still scheduled at regular intervals. Full defr ost cycle control would involve detecting frost buildup and init iating defrost. As described in the market and technologyassessment (Chapter 3 of the TSD), this could be accomplished through an optical sensor or by sensing the temperature differential across the evaporator coil. However, both methods are unreliable due to problems with fouling of the coil from dust and other surface contaminants. This becomes more of an issue as the display case ages. Because of these issues, DOE did not consider defrost cycle control as a de sign option in its engineering analysis.

SCE asserted that doors should be consider ed a design option for open units, and that open units without doors should be held to energy consumption standards at levels warranted for units with doors. (Public Meeting Transcript, N o. 13.5 at p. 44) SCE advocat es, in essence, that manufacture of new, open commercial refrigeration equipment be discontinued and replaced by manufacture of equipment with doors. It stated that this would be a cost-effective way of saving substantial amounts of energy. (SCE, No. 19 at p. 2) Although SCE did not state it explicitly, DOE understands that its main argument for advoca ting that doors be considered for open cases is that doors should be regarded as a design opti on and not a feature, su ch that there are not separate equipment classes for equipment with and without doors.

DOE acknowledges SCE’s position. Substantial, cost-effective energy savings might well result from standards that would, in e ffect, require the manufacture of commercial refrigeration equipment with doors instead of w ithout. DOE has not considered such standards in this proceeding, however, nor has it studie d their potential ener gy savings or economic justification (including the extent of their impact on product util ity), because it believes EPCA precludes their adop tion. First, DOE believes that, for co mmercial refrigeration equipment, the existence or lack of doors (i.e., whether the case is open or closed ) does affect the utility of theequipment to its owner and user, an d therefore is a “feature” as that term is used in 42 U.S.C. 6295(o)(4) and 6316(e)(1). Because a standard based on combining open and closed equipment classes would result in the unavailability of ope n cases, as described above, such a standard would violate EPCA’s prohibition against any standard that woul d “result in the unavailability” of equipment with “features . . . that are substa ntially the same” as those currently available in the United States. (42 U.S.C. 6295(o)(4) and 6316(e)(1)) Second, EPCA prescribes energy conservation standards for self-contained equipm ent with doors, and mandates that DOE issue

standard levels for “self-contained commercial re frigerators, freezers, a nd refrigerator- freezers without doors.” (42 U.S.C. 6313(c)(2)-(4)) The latt er equipment is one of the subjects of this rulemaking. Hence, the plain la nguage of EPCA covers standard s for commercial refrigeration equipment with and without doors. DOE must follo w this legislative manda te. For these reasons, DOE did not consider doors as a design option fo r open equipment in its engineering analysis.

The design options DOE considered in the NOPR engineering analysis are:

• higher efficiency lighting and ballasts fo r the VOP, SVO, HZO, and SOC equipment families (horizontal fixtures);

• higher efficiency lighting and ballasts for th e VCT equipment family (vertical fixtures);

• higher efficiency evaporator fan motors;

• increased evaporator surface area;

• increased insulation thickness;

• improved doors for the VCT equipment family, low temperature;

• improved doors for the VCT equipment family, medium temperature;

• improved doors for the HCT equipment family, ice-cream temperature;• improved doors for the SOC equipment family, medium temperature;

• higher efficiency condenser fan motors (for self-containe d equipment only);

• increased condenser surface area (for self-contained equipment only); and

• higher efficiency compressors (for self-contained equipment only). 16

At the public meeting and during the comment period, stakeholders ra ised concerns about some of the design option data DOE used in its analysis and about DOE’s depiction of some of the design options. Several stakeholders were concerned with the lighting design option data. Zero Zone stated that DOE’s estimate of the incremental increase in cost for light emitting diode (LED) lighting was too low. (Public Meeting Transcript, No. 13.5 at p. 89) ARI seemed to agree with Zero Zone’s assessment, stati ng that DOE appears to have significantly

underestimated the incremental cost for LED lighting by about 50 percent.

DOE revised its cost assumption for LED li ghting used in the VOP, SVO, HZO, and SOC equipment families (horizontal four-foot fixtures) and the VCT equipment family (vertical 5-foot fixtures). For the ANOPR, DOE based LED lighting costs on an LED retrofit case study, but DOE revised some of its assumptions for the NOPR based on conversations with manufacturers of LED chips and LED fixtures. Specifically, DOE revised its assumptions on the relative weight of the co sts of LED chips, power supplies, and the balance of fixture (which includes labor). These changes cause the original equipment manufacturer (OEM) cost (i.e., the cost to commercial refrigeration equipment manuf acturers) of LED fixtures to increase for both

horizontal and vertical fixtures. DOE believes th e cost estimates for LED fixtures are now more

16 Improvements to the condensing unit are not considered for remote co ndensing equipment, since the test procedure and standard apply only to the cabinet and not the condensing unit.accurate and are consistent with the costs comm ercial refrigeration equipment manufacturers would experience in today’s market at mass-pr oduction volumes. Furt her discussion of the assumptions used to calculate LED fixture co sts are provided in Chapter 5 of the TSD.

Although DOE found that current LED costs are higher than originally estimated in the ANOPR analysis, through a closer examination of cost data for currently available LEDs, DOE recognizes that LED technology has hi storically exceeded DOE’s efficiency and cost targets. In this NOPR, DOE conducted a sensitivity study th at analyzed future LED costs based on DOE’s Multi-Year Program Plan 17 , which are consistent with historical LED pr ice reductions between 2000 and 2007 (see Appendix B of the TSD). The Mu lti-Year Program Plan projects that LED chip costs will continue to decrease at a com pound annual growth rate (CAGR) of approximately -27 percent between 2007 and 2012, which represen ts a price reduction of 80 percent over that time period. Also in agreement, EIA’s NEMS uses a technology characte rization for LED light sources, which show that LED chip costs are ex pected to decline by approximately 71 percent for the same time period. Since LED chips are only a portion of the to tal LED system (other components include power supply and the LED fixt ure), the 80 percent reduction in chip costs

contributes to an estimated decr ease in total LED system cost of approximately 50 percent by 2012, assuming the costs of the power supply and LED fixtures do not change significantly.

DOE examined whether the projected LED costs presented in the Multi-Year Program Plan and used in this NOPR are consistent with p ublicly available empirical historical cost data.

17 U.S. Department of Energy, Solid-State Lighting Re search and Development, Mu lti-Year Program Plan FY’09- FY’14. This document was prepar ed under the direction of a Techni cal Committee from the Next Generation Lighting Initiative Alliance (NGLIA). Information ab out the NGLIA and its members is available at www.nglia.org

.DOE reviewed available price data for the LED market and found that between 2000 and 2007, white-light LEDs had a CAGR ranging from approxima tely -18 to -31 percent. DOE’s LED cost projection (i.e., -27 percent CAGR) falls within the ra nge of CAGRs observed.

DOE expanded its examination by comparing th is projected trend to the red-light LED market, which is a related technology, with pr ice information spanning approximately three decades (i.e., 1973 to 2005). DOE found that the CAGR of red-light LED costs was -22 percent over this longer time span. The trend in red- light LED costs derived from empirical data over this longer time period is of a similar magnitude to DOE’s projected cost s for white-light LEDs. Due to the technological similarities between red-light LEDs and white-light LEDs, DOE

believes that the historical cost reductions fo r red-light LEDs are indicative of future cost reductions for white-light LEDs. Furthermore, the white-light LED market is undergoing a massive expansion and growth phase, with sign ificant investment, new products and innovative applications for LED technology, including illumina tion of commercial refrigeration equipment.

See Section V.C of this NOPR and Appendix B of the TS D for more detail on the cost projection

and DOE's validation of those estimates. DOE s eeks comment on the extent to which these price trends are indicative of what can be expect ed for commercial refrigeration equipment LED lighting from 2007 to 2012 and the extent to whic h the cost reduction observed for red-light LEDs is relevant to DOE’s cost projections for white -light LEDs. Also, in order to consider that LED costs are to decline more than assumed in this analysis, DOE will need more information than currently available on the extent, timing, a nd certainty of such fu rther price reductions. Finally, DOE seeks comment on the extent to which manufacturers would adopt LED technology into the design of commercial refrigeration equi pment in the absence of standards consideringthe rapid development of LED technology and th e steady reductions in cost. See Section VII.E.1

for details.

The design option data for doors on VCT equi pment were another area of concern for

stakeholders. Zero Zone stated that the increm ental increase in cost for high-efficiency doors (particularly cooler doors) seemed too high. (Public Meeting Transcript, No. 13.5 at p. 89) ACEEE also indicated that DOE’s costs for high- efficiency doors are t oo high. (ACEEE, No. 16 at p. 2) ARI stated that it does not believe that the door used in DOE’s analysis (one that uses no energy) is available in the ma rket today. According to ARI, high-efficiency door models currently in the market have no heat in the door, but the frame installed in the case uses at least 40 W per door. ARI also stated that this opti on is not available to manufacturers in all applications because it is not intended for st ores that operate outside a condition of 75 ° F dry bulb and 55 percent relative humidity, which requ ires higher wattage anti-condensate heaters in the doors/frames. (ARI, No. 18 at p. 6) Zero Zone made similar comments, stating that building humidity could be an issue in the use and f unctionality of higher efficiency doors without

heaters. Zero Zone also recommended that DOE revise its analysis and use 40 W per door for the high-efficiency medium temperature frame, and that high-efficiency doors should be dropped from the analysis because they can result in conde nsate and water on the floor, such that they are not safe to use in a number of stores. (Public Meeting Transcript, N o. 13.5 at p. 119 and Zero Zone, No. 17 at p. 2)

DOE did not revise its costs for doors on VCT equipment. After reviewing the information collected for the ANOPR analysis, DOE concluded that its preliminary costestimates were reasonable. Notwithstanding the stakeholder observations just set forth, none of them provided any specific additional data that would warrant revision of DOE’s cost assessments, and DOE is not aware of such data. However, DOE revised the values for the antisweat heater power for glass doors for VCT. RC.L and VCT.RC.I equipment in the NOPR engineering analysis. Based on discussion with manufacturers and data from manufacturer specification sheets, the anti-swea t heater power for both the base line and high-efficiency doors was increased (from 160 W to 200 W for ba seline doors and from 60 W to 110 W for highefficiency doors). DOE also revised the anti-s weat heater power for glass doors for VCT.RC.M equipment in the NOPR engineering analysis based on comments and data received from manufacturer specification sheets. DOE increased the anti-sw eat heater power for both the baseline doors (from 60 W to 100 W) and high- efficiency doors (from 0 W to 50 W). See Chapter 5 of the TSD for more detail.

Regarding the compressor design options, Em erson noted that possible efficiency improvements for compressors in self-contained units may be too optimistic. True believes that because the test procedure is not steady-state (due to door openings), variable-speed compressors may be an effective design option. (Public Me eting Transcript, No. 13.5 at p. 75) However, True also noted that few variable-speed comp ressors are available in the appropriate power range, but that their development is continuing. (Public Meeting Transc ript, No. 13.5 at p. 76) Emerson also believes that high-efficiency compre ssors may not be readily available and that it may be particularly hard to find compressors capable of this level of increased efficiency for low temperature equipment. (Public Meeting Tran script, No. 13.5 at p. 65) For the NOPR, DOE revised the assumptions it used to estimate the cha nges in cost and efficiency for high-efficiency,single-speed compressors. Based on discussions with manufacturers and other experts, DOE concluded that the assumptions used in the ANOPR analysis (a 10 percent increase in cost results in a 20 percent reduction in ener gy use) overstated the actual effi ciency gains that are possible for today’s compressors. Theref ore, DOE now assumes that a fi ve percent increase in cost would result in a 10 percent reduction in compresso r energy use. Per-dollar efficiency gains are equivalent with these new assumptions, but th e overall magnitude of power reduction and the cost premium are reduced. This change aff ects only the self-contained equipment classes analyzed in the engineering analysis.

Additionally, in the NOPR analysis, DOE revised the capacity values used to select selfcontained compressors in the energy consumpti on model. DOE’s energy consumption model selects the most appropriate compressor by comp aring each compressor’s capacity to the total refrigeration load in the case multiplied by the compressor oversize factor. Because compressor capacity is dependent on the conditions the comp ressor is tested at (compressor manufacturers provide capacity data over a range of conditi ons), it is important to select the compressor capacity based on the same conditions used to ca lculate total refrigera tion load. For the ANOPR analysis, DOE listed capacity at standard ASHR AE rating conditions. However, the standard rating conditions used in the ASHRAE 540-2004 st andard differ from the operating conditions used in the model, and each set of conditi ons results in different capacity values. 18 Because the

standard conditions and modele d conditions differed, the model typically overestimated the capacity of the selected compressors. To comp ensate, DOE adjusted the compressor oversize

18 ASHRAE Standard 540-2004 lists standard rating conditions for hermetic refrigeration compressors. For medium-temperature equipment, compressors are rated at 20°F suction dewpoint, 120°F discharge dewpoint, 40°F return gas, and 0°F subcooling. For low-temperature equipment, compressors are rated at -10°F suction dewpoint, 120°F discharge dewpoint, 40°F return gas, and 0°F subcooling. For ice-cream-temperature equipment, compressors are rated at -25°F suction dewpoint, 105°F discharge dewpoint, 40°F return gas, and 0°F subcooling.factor to an unrealistic level (t ypically 1) in order for the ANOP R model to select the correct compressor. For the NOPR, DOE used capacities based on the same conditions used to calculate total refrigeration load and revised the oversize f actor (typically 1.4 in the NOPR model) for all self-contained equipment classes to maintain the selection of the correct compressor size. See Chapter 5 of the TSD for more detail.

In the analysis for the ANOPR, the calcula tion of LED energy use assumed that the LED lighting fixtures at the ends of VCT cases we re identical to those between doors. With fluorescent fixtures, manufacturers install the same lamp regardless of whether it is at the end of the case (attached to an end mullion) or between doors (attached to an interior mullion). This causes excess light at the ends of the case. The light output of a single lamp between two doors is directed in both directions (i.e., behind two door s), whereas lamps at the ends direct light only

on the contents behind the end door. LED fixtures are inherently scalable , so manufacturers can

install an LED fixture in the end mullion that uses fewer LEDs than fixtures in interior mullions. In the NOPR analysis, the calculation assumes single-row LED fixtures are used in the end

mullions and that these fixtures use roughly 75 percent of the en ergy of double-row fixtures in interior mullions. See Chapter 5 of the TSD for more detail.

4. Baseline Models As mentioned above, the engineering analys is estimates the incremental costs for equipment with efficiency levels above the base line in each equipment class. DOE was not able to identify a voluntary or indus try standard that provided a minimum baseline efficiency requirement for commercial refr igeration equipment. Therefore, it was necessary for DOE todetermine baseline specifications for each equipm ent class to define the energy consumption and cost of the typical, baseline equipment. Thes e specifications include dimensions, number of components, temperatures, nominal power ratings, and other case features that affect energy consumption, as well as a basic case cost (the cost of a piece of equipment not including the major efficiency-related components such as lights, fan motors, and evaporator coils).

DOE established baseline specifications for each equipment class modeled in the engineering analysis by reviewi ng available manufacturer data, selecting several representative units from available manufacturer data, and then aggregating the physical characteristics of the selected units. This process created a unit repr esentative of commercial refrigeration equipment currently being offered for sale in each equipment class, with av erage characteristics for physical parameters (e.g., volume, TDA), and minimum performance of energy-consuming components (e.g., fans, lighting). DOE used the cost model to develop the basic case cost for each equipment class. See Appendix B of the TSD for these specifications.

Zero Zone expressed concern over DOE’s method for calculating the internal case volume. Zero Zone suggested that DOE update its analysis to use ARI Standard 1200 for calculating the internal volume of a case. This standard calculates internal volume using the internal height and depth of the case from the insi de of the door to the rear wall or rear duct. This is typically how the industry calculates in ternal volume. (Zero Zone, No. 17 at p. 1)

In its engineering analysis, DOE follo wed the methodology in ANSI/ARI STANDARD 1200-2006 when calculating the refrigerated volume parameter used in the baseline designspecifications. DOE used the internal height and de pth of the case from insi de of the door to the

rear wall. No subtractions were made for shelvi ng or other protrusions within the case interior envelope.

At the public meeting, Zero Zone expresse d concern over the ligh ting technology for the baseline models in each equipment class. Zero Z one stated that T12 lighting is no longer used in closed cases, and that T8 lighting is now the baseline for those cases. (Public Meeting Transcript, No. 13.5 at p. 88) Further, Zero Zone reiterated in writing that the baseline lighting for cases with a vertical transparent door shoul d be T8. (Zero Zone, No. 17 at p. 3) DOE has changed the baseline specifications and is now using T8 lighting in the analysis of baseline

models.

Stakeholders raised concerns over the accuracy of some of the data used for the baseline models. Zero Zone stated that the TDA for VCT.RC.L and VCT.RC.M cases may be incorrect,

and that the sum of the TDA for each door did no t equal the TDA of the entire case for these two equipment classes. (Zero Zone, No. 17 at p. 3)

In the NOPR analysis, DOE made several re visions to the baseline specifications. Appendix B of the TSD shows changes to baselin e design specifications relative to the ANOPR analysis. DOE revised the TDA for VCT.RC.L and VCT.RC.M equipment so that the sum of the display area of the doors matches the TDA of the case. The baseline models used in the NOPR analysis are more representative of actua l equipment than those DOE used in the ANOPR analysis, but in some situations, the changes to baseline characteristic s affected the baselineenergy consumption significantly compared to the ANOPR. Four equipment classes (HZO.RC.M, HZO.SC.M, HZO.SC.L, and VCS.SC.I) had changes that resulted in a significant increase in the baseline energy consumption, an d one equipment class (SOC.RC.M) had changes

that resulted in a decrease in the baseline energy consumption. See Appendix B of the TSD for

more detail.

For the ANOPR analysis, DOE calculated a baseline energy usage of 0.16 kWh/ft 2 for the HZO.RC.M equipment class. Du ring manufacturer inte rviews, some manufacturers stated that this seemed unreasonably low. DOE reviewed th e data it presented in the ANOPR TSD, as to the energy consumption of equipment on the mark et and realized that its figure for baseline energy usage for HZO.RC.M cases was well below the amounts indicated by the market data. DOE identified problems with the ANOPR design specifications for the HZO.RC.M equipment class, namely a lack of electric defrost and a mismatch between the size of the case (TDA) and

the amount of infiltration load. For the NOP R analysis, DOE revised its baseline design specifications for this equipment to include electric defrost based on discussions with manufacturers during the MIA interv iews and a review of market data. Although electric defrost is not always required on HZO.RC.M cases, about two-thirds of such equipment on the market

use electric defrost. Base d on manufacturer interviews, DOE understands there are lower infiltration loads (on a per-TDA basis) in horizonta l open cases because of the natural “well” of

cold air that tends to sit inside the case. In contrast, for a verti cal or semivertical open case, the cold air tends to spill out of the opening under the influence of gravity. With a lower infiltration load for a given TDA, there is less heat available to melt frost from the ev aporator coil using offcycle defrost. Thus, most HZO.RC.M case designs necessitate the use of electric resistanceheating for defrost. DOE also revised the spec ifications for the HZO.RC.M equipment class to include a higher infiltration load (in accordance with the updated infiltration methodology), and updated dimensions. In the ANOP R analysis, DOE used defrost meltwater to estimate the

infiltration load. In accordance with th e updated infiltration methodology, DOE used refrigeration load data to calculate the baseline infiltration load, which was higher than the load estimated using meltwater data in the ANOPR analys is (Chapter 5 for detail s). DOE also revised

the dimensions of the HZO.RC.M class to reflect a somewhat smaller case size that was more representative of cases currently on the mark et. This change involved reducing the TDA, volume, wall area, and case interior surface area , all of which DOE matc hed to the infiltration load and other case components. See A ppendix B of the TSD for more detail.

For the HZO.SC.M and HZO.SC.L equipment classes, DOE made changes similar to those described in the preceding paragraph. Th ese two equipment classes are in the same equipment family as the HZO.RC.M equipment class, so they share similari ties to that class (e.g., having the same cabinet). Because of a lack of detailed data for the HZO.SC.M and HZO.SC.L equipment classes, DOE based its baseline specifications on the HZO.RC.M equipment class, making reasonable adjustments for design features specific to self-contained equipment. In particular, self-contained equipment has a lower compressor energy efficiency ratio (EER), and an added drain pan heater to evaporate defrost meltwater. Similar to th e HZO.RC.M class, the change in infiltration load calculation led to a higher infiltration load for the HZO.SC.M class.

DOE also added electric defrost to the HZO.SC.M class and increase d the anti-sweat heater load. For the HZO.SC.L class, electric defrost was already included, since it is necessary for lowtemperature equipment. However, DOE revised the infiltration load in accordance with thechange in methodology and increased the anti-sw eat heater load. See Appendix B of the TSD

for more detail.

Discussions during the manufactur er interviews revealed that in the ANOPR analysis, the baseline energy usage for the VCS.SC.I equipment class was unrealistically low. Therefore, in the NOPR analysis, DOE made revisions that incr eased energy usage in the baseline equipment for this class. DOE was unable to verify the ac curacy of the baseline specifications in the ANOPR analysis, because of a lack of publicly ava ilable performance data for this class. For the NOPR, DOE revised its baseline assumptions to reflect a two-door case instead of the three-door model analyzed in the ANOPR. DOE believes this change more accurately reflects the current

market for VCS.SC.I cases and is more in line with the electric defrost power level. DOE

increased infiltration load some what relative to the ANOPR speci fications and added anti-sweat power. See Appendix B of the TSD for more detail.

5. Engineering Analysis Results The results of the engineering analysis are repo rted as cost-efficiency data (or “curves”) in the form of CDEC (in kWh) versus MSP (in dollars), both normalized by TDA (or volume for the VCS.SC.I equipment class). DOE created 15 cost-efficiency curves in the engineering analysis. Table IV-7 presents data for these curves. See Chapter 5 of the TSD for additional detail on the engineering analysis and comparis ons of DOE’s analytica lly derived curves to industry-supplied curves. See Appendix B of th e TSD for complete cost-efficiency results.Table IV-7 Engineering Analysis Cost-Efficiency Results Efficiency Level Baseline 1 2 3 4 5 6 7 8 9 10 MSP/TDA

[$/ft 2 ] $113.17 $113.61 $114.67 $134.42 $135.24 $147.83 $149.55 - - - - VCT.RC.L CDEC/TDA [kWh/day/ft 2 ] 1.07 1.04 1.01 0.72 0.71 0.65 0.64 - - - -

MSP/TDA

[$/ft 2 ] $79.12 $79.76 $81.30 $82.90 $87.59 $88.58 $129.36 - - - - VOP.RC.M CDEC/TDA [kWh/day/ft 2 ] 1.09 1.04 0.98 0.95 0.89 0.89 0.76 - - - -

MSP/TDA

[$/ft 2 ] $95.10 $95.67 $97.04 $98.56 $102.91 $141.73 $143.06 - - - - SVO.RC.M CDEC/TDA [kWh/day/ft 2 ] 1.09 1.04 0.99 0.96 0.91 0.78 0.77 - - - -

MSP/TDA

[$/ft 2 ] $93.63 $94.12 $95.31 $97.40 $98.56 - - - - - - HZO.RC.L CDEC/TDA [kWh/day/ft 2 ] 0.83 0.80 0.77 0.73 0.72 - - - - - -

MSP/TDA

[$/ft 2 ] $129.23 $129.92 $131.58 $133.95 $135.56 - - - - - - HZO.RC.M CDEC/TDA [kWh/day/ft 2 ] 0.59 0.54 0.48 0.45 0.44 - - - - - -

MSP/TDA

[$/ft 2 ] $103.23 $103.67 $104.72 $120.28 $121.10 $133.69 $134.71 - - - - VCT.RC.M CDEC/TDA [kWh/day/ft 2 ] 0.51 0.49 0.46 0.35 0.34 0.29 0.28 - - - -

MSP/TDA

[$/ft 2 ] $143.54 $145.32 $149.62 $156.20 $157.02 $158.21 $179.07 - - - - VOP.RC.L CDEC/TDA [kWh/day/ft 2 ] 2.99 2.84 2.65 2.54 2.52 2.51 2.44 - - - -

MSP/TDA

[$/ft 2 ] $146.36 $146.81 $147.88 $149.08 $150.33 $180.77 $181.81 $187.79 - - - SOC.RC.M CDEC/TDA [kWh/day/ft 2 ] 0.62 0.59 0.55 0.53 0.51 0.41 0.41 0.40 - - -

MSP/TDA

[$/ft 2 ] $145.66 $146.49 $147.25 $148.39 $150.23 $155.87 $157.96 $160.71 $179.11 $226.80 $230.37 VOP.SC.M CDEC/TDA [kWh/day/ft 2 ] 2.65 2.54 2.50 2.46 2.41 2.30 2.27 2.24 2.06 1.89 1.89

MSP/TDA

[$/ft 2 ] $138.92 $139.82 $140.27 $140.71 $141.78 $146.81 $147.88 $149.57 $165.98 $205.92 $210.08 SVO.SC.M CDEC/TDA [kWh/day/ft 2 ] 2.59 2.47 2.44 2.43 2.40 2.30 2.28 2.26 2.09 1.95 1.94

MSP/TDA

[$/ft 2 ] $154.04 $155.38 $155.85 $156.99 $161.97 $162.44 $178.69 $179.83 $184.26 - - HZO.SC.L CDEC/TDA [kWh/day/ft 2 ] 3.22 3.03 3.00 2.96 2.80 2.79 2.54 2.53 2.51 - -

MSP/TDA

[$/ft 2 ] $132.19 $132.87 $133.34 $134.48 $134.96 $137.83 $147.19 $148.33 $152.76 - - HZO.SC.M CDEC/TDA [kWh/day/ft 2 ] 1.60 1.52 1.49 1.45 1.44 1.38 1.26 1.24 1.23 - -

MSP/TDA

[$/ft 2 ] $202.29 $203.93 $205.04 $225.93 $228.61 $239.00 - - - - - HCT.SC.I CDEC/TDA [kWh/day/ft 2 ] 1.42 1.29 1.24 0.72 0.69 0.65 - - - -

MSP/TDA

[$/ft 2 ] $134.76 $135.45 $135.88 $136.94 $138.95 $145.51 $165.26 $165.70 $181.45 $182.50 $184.55 VCT.SC.I CDEC/TDA [kWh/day/ft 2 ] 1.75 1.66 1.61 1.55 1.45 1.32 0.97 0.97 0.87 0.87 0.86

MSP/V r [$/ft 3 ] $43.38 $43.61 $43.91 $44.48 $45.03 $46.82 $47.06 $48.17 $48.74 - - VCS.SC.I CDEC/V r [kWh/day/ft 3 ] 0.57 0.54 0.51 0.47 0.45 0.41 0.41 0.40 0.40 - -C. Markups to Determine Equipment Price This section explains how DOE developed the distribution channel markups it used (Chapter 6 of the TSD). DOE used these markups , along with sales taxes, installation costs, and the MSPs developed in the engineer ing analysis, to arrive at the final installed equipment prices for baseline and higher efficiency commercial refrigeration equipm ent. As explained in the ANOPR, 72 FR 41184, and as shown in Table IV-8 , DOE defined three dist ribution channels for commercial refrigeration equipment to desc ribe how the equipment passes from the

manufacturer to the customer.

Table IV-8 Distribution Channel Market Sha res for Commercial Refrigeration Equipment Channel 1 Channel 2 Channel 3 Manufacturer Manuf acturer, Wholesaler Manufacturer, Wholesaler, Contractor Customer Customer Customer Remote Condensing Equipment 70% 15% 15% Self-Contained

Equipment 30% 35% 35%

For the ANOPR analysis, DOE estimated shares of 86 percent, 7 percent, and 7 percent for the manufacturer, manufacturer/wholesaler, an d manufacturer/wholesaler/contractor channels respectively, for all commercial refrigerati on equipment, based on market estimates from consultants. At the ANOPR public meeting, AR I and Carrier commented that the breakdown should be changed to 70 percent, 15 percen t, and 15 percent among the three channels, respectively, for remote condensing equipment and 30 percent, 35 percent, and 35 percent, respectively, for self-contained equipment. (Public Meeting Tr anscript, No. 13.5 at p. 122; ARI, No. 18 at p. 7) No other alternative estimat es were provided of shipments through thesedistribution channels. Therefor e, in the NOPR, DOE decided to modify the breakdown and it recalculated the overall markups using the sa me procedure describe d in the ANOPR (72 FR 41184), but based upon the industry comments from ARI and Carrier. The new overall baseline and incremental markups for sales to supermarkets within each distributio n channel are shown in

Table IV-9 , Table IV-10 , Table IV-11 , and, Table IV-12 respectively. Chapter 6 of the TSD provides additional details on markups. Table IV-9 Baseline Markups by Distribut ion Channel Including Sales Tax for SelfContained Equipment in Supermarkets

Wholesaler Mechanical Contractor

(includes wholesaler) National Account(manufacturerdirect) Overall

Distributor(s) Markup 1.436 2.182 1.218 1.631 Sales Tax 1.068 1.068 1.068 1.068 Overall Markup 1.533 2.330 1.300 1.742 Table IV-10 Baseline Markups by Distributio n Channel Including Sales Tax for Remote Condensing Equipment in Supermarkets

Wholesaler Mechanical Contractor

(includes wholesaler) National Account(manufacturerdirect) Overall

Distributor(s) Markup 1.436 2.182 1.218 1.395 Sales Tax 1.068 1.068 1.068 1.068 Overall Markup 1.533 2.330 1.300 1.490 Table IV-11 Incremental Markups by Distribu tion Channel Including Sales Tax for SelfContained Equipment in Supermarkets

Wholesaler Mechanical Contractor

(includes wholesaler) National Account(manufacturerdirect) Overall

Distributor(s) Markup 1.107 1.362 1.054 1.180 Sales Tax 1.068 1.068 1.068 1.068 Overall Markup 1.182 1.454 1.125 1.260Table IV-12 Incremental Markups by Distribution Channel Including Sales Tax for Remote Condensing Equipment in Supermarkets

Wholesaler Mechanical Contractor

(includes wholesaler) National Account(manufacturerdirect) Overall

Distributor(s) Markup 1.107 1.362 1.054 1.108 Sales Tax 1.068 1.068 1.068 1.068 Overall Markup 1.182 1.454 1.125 1.183

D. Energy Use Characterization The energy use characterization estimates the annual energy consumption of commercial refrigeration equipment systems (including the remo te condensing units). This estimate is used in the subsequent LCC and PBP analyses (Chapt er 8 of the TSD) and NIA (Chapter 11 of the TSD). DOE estimated the energy consumption of the 15 equipment classes analyzed in the engineering analysis (Chapter 5 of the TSD) using the relevant test procedure. DOE then validated these energy consumption estimates with annual whole-building simulation modeling of selected equipment classes and efficiency le vels. One of the key assumptions in both the engineering analysis and the w hole-building simulation in the ANOPR analysis was that the display case lighting operated 24 hou rs per day. DOE conducted a lim ited sensitivity analysis to explore how variation in displa y case lighting operating hours affect ed the energy savings. The sensitivity analysis showed that energy savings fell as lighting operating hours were reduced for all equipment classes that used display case light ing. The magnitude of this effect depended on the equipment class.

At the ANOPR public meeting, SCE stated that it was studying disp lay case lighting and will gladly share results of th e study with DOE as soon as the study is done. (Public Meeting Transcript, No. 13.5 at p. 117) Hussman stated that with today’s low-temp erature cabinets, storeowners won’t turn those lights o ff because they may not come back on when they are so cold. (Public Meeting Transcript, No. 13.5 at p. 118) H ill Phoenix stated that turning off fluorescent lights at night can lead to mainte nance issues because of moisture infiltration, so it is typical to leave the lights on all night. LEDs don’t have that problem. They agreed that 24- hour lighting is not a bad assumption. (Public Meeting Transcript, No. 13.5 at p. 118) Another manufacturer, Zero Zone, also agreed that 24 hours is a valid assumption for case lighting operating hours. (Zero Zone, No. 17 at p. 4) ARI recommended th at the DOE analysis be based on 24 hours perday-operation as this represents the worst-case scenario and many stores are open for 24 hours. (ARI, No. 18 at p. 4) Based on these comments, DOE decided to leave the assumption of display case lighting operating hours of 24 hours per day unchanged for the NOPR analysis. Additional detail on the energy use characterization can be found in Chapter 7 of the TSD.

DOE also requested comments on other operational factors that might be encountered in

the field that would differ from th at found in the relevant test pro cedure, the relative frequency of these factors, and how it could account for th em in its energy analysis. DOE received a comment from the Chinese delegation to the Wo rld Trade Organization st ating that it should

consider all kinds of on-site factors in operation and maintena nce practices of the commercial refrigerating equipment when evaluating the optiona l standard class of the equipment. (China, No. 20 at pp. 3-4) No specifics on what these fact ors might be or how to take them into account were provided, however. Chapter 7 of the TSD provides additional detail on the energy use

characterization.E. Life-Cycle Cost and Payback Period Analyses In response to the requirements of Sec tion 325(o)(2)(B)(i) of EPCA, DOE conducted LCC and PBP analyses to evaluate the ec onomic impacts of possible new commercial refrigeration equipment standards on individual customers. This section describes the LCC and PBP analyses and the spreadsheet model DOE used for analyzing the economic impacts of possible standards on indivi dual commercial customers. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, ar e in TSD Chapter 8. DOE conducted the LCC and PBP analyses using a spreadsheet model developed in Microsoft Excel for Windows 2003.

The LCC is the total cost for a unit of commercial refrigeration equipment, over the life of the equipment, including purchase and inst allation expense and operating costs (energy expenditures and maintenance). To compute th e LCC, DOE summed the installed price of the equipment and its lifetime operating costs discount ed to the time of purchase. The PBP is the change in purchase expense due to a given ener gy conservation standard divided by the change in first-year operating cost that results from the standard. DOE expresses PBP in years. Otherwise stated, the payback period is the number of years it would take for the customer to recover the increased costs of a higher-effi ciency product through energy savings. DOE measures the changes in LCC and in PBP associ ated with a given energy use standard level relative to a base case forecast of equipment en ergy use. The base case forecast reflects the market in the absence of mandatory energy conservation standards.

The data inputs to the PBP calculation are th e purchase expense (otherwise known as the total installed customer cost or first cost) and the annual operating costs for each selected design.The inputs to the equipment purchase expense were the equipment price and the installation cost, with appropriate markups. The inputs to th e operating costs were the annual energy consumption, the electricity price, and the repa ir and maintenance costs. The PBP calculation uses the same inputs as the LCC analysis but, si nce it is a simple payback, the operating cost is for the year the standard takes effect, assumed to be 2012. For each efficiency level analyzed, the LCC analysis required input da ta for the total installed cost of the equipment, the operating cost, and the discount rate.

Table IV-13 summarizes the inputs and key assumptions used to calculate the customer economic impacts of various energy consumption levels. Equipment price, installation cost, and baseline and standard design selection affect the installed cost of the equipment. Annual energy use, electricity costs, electric ity price trends, and repair a nd maintenance costs affect the operating cost. The effective date of the st andard, the discount rate , and the lifetime of equipment affect the calculation of the present value of annual operati ng cost savings from a proposed standard. Table IV-13 also shows how DOE modified these inputs and key assumptions for the NOPR, relative to the ANOPR.Table IV-13 Summary of Inputs and Key Assu mptions Used in the LCC and PBP Analyses Input Description Changes for NOPR Baseline Manufacturer Selling Price Price charged by manufacturer to either a wholesaler or large customer for baseline equipment. Data reflects updated engineering analysis

Standard-Level Manufacturer Selling Price Increases Incremental change in manufacturer selling price for equipment at each of the higher effi ciency standard levels. Data reflects updated engineering analysis

Markups and Sales Tax Associated with converting the manufacturer selling price to a customer price (Chapter 6 of TSD). Markups updated based on revised distribution channel shipment estimates

Installation Price Cost to the customer of installing the equipment. This includes labor, overhead, and any miscellaneous materials and parts. The total installed cost equals the customer equipment price plus the installation price. Installation prices for remote condensing and self-contained equipment revised based on ANOPR comments.

Equipment Energy Consumption Site energy use associated with the use of commercial refrigeration equipment, which includes only the use of electricity by the equipment itself. Data reflects updated engineering analysis for each efficiency level.

Electricity Prices Average commercial electricity price ($/kWh) in each State and for four classes of commercial customers, as determined from EIA data for 2003$ converted to 2006$. Electricity prices updated to 2007$ using Electricity EIA Monthly Electricity Database for base commercial electricity prices; and AEO2007 to convert 2006 prices to 2007 prices. Electricity Price Trends Used the AEO2006 reference case to forecast future electricity prices. Used the AEO2007 reference case to forecast future electricity prices.

Maintenance Costs Labor and material costs associated with maintaining the commercial refrigeration equipment (e.g., cleaning heat exchanger coils, checking refrigerant charge levels, lamp replacement). No change in methodology. Lamp replacement costs reflect updated engineering analysis costs and are in 2007$

Repair Costs Labor and material costs associated with repairing or replacing components that have failed. Based on a fixed percentage of baseline equipment costs Repair costs in NOPR reflect estimates of individual component life and cost to replace. Repair costs increase with incr easing component costs.

Equipment Lifetime Age at which the commercial refrigeration equipment is retired from service (estimated to be 10 years). Average equipment life for small grocery and convenience stores adjusted to 15 years.

Discount Rate Rate at which future costs are discounted to establish their present value to commercial refrigeration equipment users. Updated to 2007 version of the Damodaran website with very little change to discount rates.

Rebound Effect A rebound effect was not taken into account in the LCC analysis No changeThe following sections contain brief discussions of the me thods underlying each input and key assumption in the LCC analysis. Wh ere appropriate, DOE al so summarizes comments on these inputs and assumptions and explains how it took these comments into consideration.

1. Manufacturer Selling Price The baseline MSP is the price charged by manufacturers to eith er a wholesaler/distributor or very large customer for equipment meeting ex isting energy use (or base line) levels. The MSP includes a markup that converts the MPC to M SP. DOE obtained the baseline MSPs through industry-supplied efficiency-level data supplemen ted with a design option analysis. Refer to Chapter 5 of the TSD for details.

DOE developed MSPs for equipment classe s consisting of eight possible equipment families, two possible condensing unit configura tions (remote condensing and self-contained), and three possible operating te mperature ranges. Not all co vered equipment classes have significant actual shipments (C hapter 3 of the TSD). DOE carried out the LCC and PBP analyses on the 15 primary equipment classes id entified earlier. DOE estimated the MSP for each primary equipment class between the baseli ne efficiency level and for four to seven

additional more-efficient levels. Refer to Chapter 5 of the TSD for details.

DOE was not able to identify data on re lative shipments for equipment classes by efficiency level, and DOE did not find equivale nt data in the litera ture or studies. DOE designated the equipment with the highest energy us e as Level 1, and selected this as the baseline equipment.In the ANOPR analysis, DOE requested feedba ck on whether the Level 1 baseline is valid for the LCC analysis, and if not, what chan ges should be made to provide a more realistic

baseline level. DOE also asked whether a distribu tion of efficiencies should be used to establish the baseline for the LCC analysis. 72 FR 41193, 41208. DOE received comments on the engineering analysis and the use of the analytic ally derived curves versus the industry-supplied curves. DOE modified the engineering analysis, which resulted in a modified Level 1 baseline.

See Section IV.B for details.

ARI stated that it would try to provide energy efficiency distribution data to DOE, but was unable to provide that data in time for the NOPR. (Public Meeting Transcript, No. 13.5 at p. 143) EEI stated that Electric Power Research Institute (EPRI) end use studies might provide

some data that could be used to establish dist ributions. (Public Meeti ng Transcript, No. 13.5 at p. 141) ACEEE suggested that DOE check with the Northwest Energy Efficiency Alliance for possible energy efficiency distri bution data. (Public Meeting Transcript, No. 13.5 at p. 142) However, ARI agreed with DOE’s approach to use the Level 1 data established in the engineering analysis as the a ppropriate baseline for DOE’s LCC analysis. DOE was able to explore some of the data available with the Northwest Energy Efficiency Alliance; however, the available data generally provide s only frequency of use of sp ecific design features and not energy use. Based on this, DOE chose to continue to use the Level 1 energy efficiency level as the baseline efficiency level for the LCC analysis. See Chapter 8 of the TSD.2. Increase in Selling Price

The standard level MSP increase is the change in MSP associated with producing equipment at lower energy consumption levels associated with higher standards. DOE developed MSP increases associated with decr easing equipment energy consumption (or higher efficiency) levels through a combination of energy consumption level and design-option analyses. See Chapter 5 of the TSD for details. DOE developed MSP incr eases as a function of equipment energy consumption for each of the 15 equipment classes. Although the engineering analysis produced up to 11 energy consumption levels, depending on equipment class, the LCC and PBP analyses used only up to eight selected energy consumption levels.

3. Markups As discussed earlier, overall markups are base d on one of three dist ribution channels and

the calculation of baseline and incremental mar kups. The distribution channels defined in the

ANOPR were also used for th e NOPR analysis, but DOE modifi ed the relative fractions of shipments through each distribution channel based on stakeholder input. See Section IV.C , Markups to Determine Equipment Price, for details.

4. Installation Costs In the ANOPR, DOE derived installation cost s for commercial refrigeration equipment from data provided in RS Means Mechanical Cost Data. 19 RS Means provides estimates on the person-hours required to insta ll commercial refrigeration equipment and the labor rates associated with the type of cr ew required to install the equipment. DOE developed separate

19 RS Means Company, Inc. 2005. Mechanical Cost Data 28th Annual Edition. Kingston, Massachusetts.installation costs for self-contai ned and remote condensing equipment. DOE considered the installation costs to be fixed, i ndependent of the cost or efficiency of the equipment. Although the LCC spreadsheet allows for alternative scen arios, DOE did not find a basis for changing its basic premise for the ANOPR analysis.

DOE received comments on the RS Means instal lation costs. Zero Zone commented that the installation costs seem low, and that it track s installation costs and w ould provide installation cost data to DOE. (Public Meeting Transcri pt, No. 13.5 at p. 133) Separately, Zero Zone provided installation costs of $2,000 and $750, resp ectively, for remote condensing and selfcontained equipment. DOE has d ecided to use these cost data in the NOPR analysis. Zero Zone also stated that a high-efficiency case installa tion isn’t going to cost significantly more than a

standard case unless there are more controls to tune and adjust. SCE stated that if the installation cost doesn’t change with the equipment efficiency , then it doesn’t affect the relative life-cycle cost. (Public Meeting Transcript, No. 13.5 at p. 117)

The total installed cost is the sum of the e quipment price and the installation cost. DOE derived the customer equipment price for any gi ven standard level by multiplying the baseline MSP by the baseline markup and adding to it the product of the incremental MSP and the incremental markup. Because MSPs, markups, and th e sales tax can take on a variety of values depending on location, the resulting total installed cost fo r a particular standard level will not be a single-point value, but a distribution of values. S ee Chapter 8 of the TSD.5. Energy Consumption The electricity consumed by the commercial refrigeration equipment was based on the engineering analysis estimates as described previously in Section IV.B . No change was made to the ANOPR methodology.

6. Electricity Prices Electricity prices are necessary to convert the electric energy savings into energy cost savings. Because of the wide variation in electr icity consumption patterns, wholesale costs, and retail rates across the country, it is important to c onsider regional differences in electricity prices. DOE used average commercial electricity prices at the State level from the EIA Monthly Electricity Database. 20 The 2006 prices were then converted to 2007$ using AEO2007.

Different kinds of businesses typically use el ectricity in different amounts at different times of the day, week, and year, and therefore fa ce different effective prices. To make this adjustment, DOE used the 2003 Commercial Building Energy Consumption Survey (CBECS) data to identify the average prices the four kinds of businesses in this analysis paid compared with the average prices all commercial customer s paid. The ratios of pr ices paid by the four types of businesses to the national average comm ercial prices seen in the 2003 CBECS were used as multiplying factors to increase or decrease the average commercial 2006 price data previously developed. Once the electricity prices for the four types of businesses were adjusted, the resulting prices were used in the analysis.

20 EIA form 826. Annual 1991 through 2006, Jan-Feb 2007. http://www.eia.doe.gov/cneaf/electricity/page/data.html . Accessed May 29, 2007.To obtain a weighted-average national electric ity price, the prices paid by each business in each State was weighted by the estimated sa les of frozen and refrigerated food products,

which also serves as the distri bution of commercial re frigeration equipment units in each State, to each prototype building. The State/business t ype weights are the probabilities that a given commercial refrigeration equipment unit shipped will be operated with a give n electricity price. For evaluation purposes, the prices and weights ca n be depicted as a cumulative probability

distribution. The effective elec tricity prices range from appr oximately 5 cents per kWh to approximately 22 cents per kWh.

During the ANOPR public meeting, EEI conc urred with the DOE analysis that shows grocery stores and food markets having lower electri c prices than typical commercial facilities. (EEI, No. 15 at p. 3) DOE continued to use the sa me approach to develop electric prices for the NOPR analysis; however, DOE updated electric cost s to 2007$. The section below describes the development and use of State-average electricit y prices by building type ; Chapter 8 of the TSD provides more detail.

7. Electricity Price Trends The electricity price trend provides the relativ e change in electricity prices for future years to 2030. Estimating future electricity prices is difficult, especially considering that many States are attempting to restructure the elec tricity supply industry. DOE applied the AEO2007

reference case as the default s cenario and extrapolated the tre nd in values from 2020 to 2030 of the forecast to establish prices in 2030 to 2042. This method of extrapolation is in line with methods the EIA uses to forecast fuel prices for the Federal Energy Management Program(FEMP). DOE provided a sensitivit y analysis of the life-cycle cost savings and PBP results to future electricity price scenarios using both th e AEO2007 high-growth and low-growth forecasts in Chapter 8 of the TSD. ACEEE suggested th at the NOPR economic analysis be recalculated using AEO2008 price forecasts. (ACEEE, No. 16 at p. 2) However, the AEO2008 was not available when DOE was completing the NOPR analysis. DOE used the most recent AEO forecast available (AEO2007) when it perf ormed the LCC analysis for the NOPR.

8. Repair Costs The equipment repair cost is the cost to the customer of replacing or repairing components in commercial refrigeration equipmen t that have failed. For the ANOPR analysis, DOE calculated the annualized repair cost for ba seline efficiency equipment using the following expression:

RC = k x EQP/LIFE

where

RC = repair cost in dollars

k

= fraction of equipment price (estimated to be 0.5) EQP = baseline equipment price in dollars, and

LIFE = average lifetime of the equipment in years (estimated to be 10 years for large grocery and multi-line retail chains and 15 years for small grocery and convenience stores)DOE placed replacement of lighting component s (lamps and ballasts) under maintenance expenses since the typical la mp life is known and commonly c onsidered a maintenance item by customers of commercial refrigeration equipment.

Because data were not available for how repa ir costs vary with equipment efficiency, DOE held repair costs constant as the default scenario for the ANOPR LCC and PBP analyses.

DOE received several comments on the use of c onstant repair costs for higher efficiency equipment. Carrier stated that while it had no data to support this, hi gher efficiency design options--like adding controls--coul d cost more to repair, and it encouraged DOE to find more accurate repair costs that would correlate with more sophisticated controls. (Public Meeting Transcript, No. 13.5 at p. 135) Carr ier felt that making repair co sts proportional was better than making them flat. ARI stated that the assumption that repair costs are co nstant and do not vary with equipment efficiency is incorrect. (ARI, N o. 18 at p. 7) Industry ex perience indicates that higher efficiency equipment is more expensive to repair because it uses more sophisticated and more expensive components. If actual cost da ta are not available, ARI recommended that DOE assume the repair cost to increase as a function of equipment cost. True stated that many routine maintenance items are affected by higher efficien cy fan motors and lighting systems. (Public Meeting Transcript, No. 13.5 at p. 136) Hill Phoe nix stated that higher maintenance costs would be incurred with almost any new technology. (Public Meeting Transcript, No. 13.5 at p. 136) However, True Manufacturing also stated that no data exists as to whether components such as energy efficient motors would have the same life time or costs as existing components. (Public Meeting Transcript, No. 13.5 at p. 138) ACEEE stated that it w ould caution against a straight ratio of repair cost to initial pu rchase cost; for controls this might be appropriate, but it shouldn’taffect repair costs for heat exchangers. (P ublic Meeting Transcript, No. 13.5 at p. 137) ACEEE suggested that any measures requ iring increased repair costs be treated on a measure-by-measure basis. (ACEEE, No. 16 at p. 3)

To address comments on repair costs, DOE contacted users and manufacturers of commercial refrigeration equipment to determine typical repair frequenc y for components used in commercial refrigeration equipment. Based on this review, DOE estimated replacement frequencies for five key components that appear to represent the most common repairs, and for which higher efficiency and more costly component s were used in the en gineering analysis for higher efficiency commercial re frigeration equipment. DOE then annualized the expected costs for these components at each efficiency level and added these component costs to the baseline repair cost estimates. This resulted in repair costs that increase with higher efficiency equipment. Refer to Chapter 8 of the TSD for details.

9. Maintenance Costs

DOE estimated the annualized maintenance co sts for commercial refrigeration equipment from data in RS Means Facilities Maintenance & Repair Cost Data. 21 RS Means provides estimates on the person-hours, labor rates, and materials requ ired to maintain commercial refrigeration equipment on a semi-annual basis. DOE used a single figu re of $160/year (2007$) for preventive maintenance for all classes of co mmercial refrigeration equipment based on data

from RS Means. Because data were not av ailable to indicate whether, and if so, how, maintenance costs vary with equipment effici ency, DOE held preventive maintenance costs

21 RS Means Company, Inc. 2006. Means Costworks 20 06: Facility Maintenance & Repair Cost Data. Kingston, Massachusetts.constant even as equipment efficiency in creased. Lamp replacement and other lighting maintenance activities are required maintenance for commercial refrigeration equipment, which DOE considered to be separate from preventive maintenance, and were not itemized in the preventive maintenance activities described by RS Means. Different commercial refrigeration equipment classes have different numbers of la mps (and ballasts), and many of the efficiency options DOE considered in the engineering analysis involved changes to the lighting configuration (lamp, ballast, or use of LED lighting systems). Because the lighting configurations can vary by energy consumption level, DOE estimated the relative maintenance costs for lighting for each case type for which a design-option analysis was performed. DOE estimated the frequency of failure and replacement of individual lighting components, estimated the cost of replacement in the field, and devel oped an annualized maintenance cost based on the sum of the total lighting maintenance costs (in 2007$) over the estimated life of the equipment divided by the estimated life of the equipment.

DOE based costs for fluorescent lamp and ba llast replacements on a review of the OEM costs used in the engineering analysis, RS Mean s estimates, cost data from Grainger, Inc., and previous studies. DOE estimated the costs of fi eld replacement using labor cost hours from RS

Means Electrical Cost Data 22 for typical lamp or ballast repl acement for other lighting fixtures using a 150-percent multiplier on OEM costs for la mps and ballasts (provided in the engineering analysis spreadsheets) to refl ect retail pricing. See Chapter 8 of the TSD for details.

Fluorescent lamp and ballast technology is matu re, so DOE made no change in inflationadjusted costs for these components. However, because of rapid technological improvement,

22 RS Means Company, Inc. 2005. 2005 RS Means Electrical Cost Data. Kingston, Massachusetts.costs for LED lamps are declining. DOE estim ated the cost for fi eld replacement of LED lighting fixtures (believed to occu r approximately 6 years after the effective date of the standard, or 2018) at 140 percent of the OEM cost of LED lighting fixt ures (2007 MPC cost in 2007$), plus installation. This estimate includes instal lation labor and all retail markups for replacement fixtures. This estimate of replacement LED costs was based on 2007 OEM prices for LED fixtures, but with additional contractor markups fo r replacement fixtures similar to that used for fluorescent light ballasts and lamps (150 percent of OEM costs). In a ddition, because of the rapid development of LED technology and the projected OEM cost reductions for LED systems, DOE performed an LCC sensitivity analysis that ex amined the impact of re ducing the cost of the LED replacement fixtures in 2018 by 50 percent of the cost used in the base analysis. 23 DOE recognizes that both life and co st estimates for LED replaceme nt are projections and seeks comment on how it can best estimate the price for replacement LED fixture costs in the LCC analysis. This is identified as Issue 1 under “Issues on Which DOE Seeks Comment” in Section

VII.E of this NOPR. Chapter 8 of the TSD provides details on th e development of maintenance

costs.

10. Lifetime DOE defines lifetime as the age when a co mmercial refrigeration equipment unit is retired from service. In its ANOPR analysis, DOE based equipment lifetime on discussions with industry experts and other stakeholde rs, as well as a review of estim ates in the subject literature. DOE concluded that a typical lif etime of 10 years is appropriat e for commercial refrigeration equipment. In commenting on the ANOPR analysis, ARI stated that, on average, equipment

23 DOE anticipates a reduction in installed cost of LED systems over time. The projected reduction in price for LED systems is provided and discussed in Sections V.C and IV.B.3.c of this NOPR and Appendix B of the TSD.lifetime is approximately 10 years. ARI noted, however, that properly in stalled and maintained equipment typically has a useful life longer than end-use customer s retain it due to retail store customer business models and competitive demands to upgrade and remodel stores. (ARI, No. 18 at p. 5) Zero Zone stated that door cases ma y be changed in store re models every 10 years at larger chains, but small independent chains will use cases for 20 years. (Zero Zone, No. 17 at p. 4) True stated that most self-contained equi pment has a life expectan cy of 7 to 12 years, although it regularly services equipment that is 25 years old. (Public Meeting Transcript, No. 13.5 at p. 98) For the NOPR analysis, DOE used an average life of 10 years for large grocery and multi-line retailers, but modified the lifetime in the LCC analysis to use a longer average 15- year life for the small grocery and convenience st ore business types, consistent with stakeholder comments and equipment life estimates from i ndustry experts regarding smaller stores and independent grocers and chains. See Chap ter 3 of the TSD for more detail.

Commercial refrigeration equipment units are typically replaced when stores are renovated, which is before the units would have phys ically worn out. Therefore, there is a used equipment market for commercial refrigeration equipment. Due to the difficulty of incorporating used equipment into grocery store display cas e line-ups, the salvage value to the original purchaser is very low. Theref ore, the ANOPR LCC analysis di d not take the used equipment market into account. This methodology was al so maintained in the NOPR LCC analysis.11. Discount Rate

The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived the discount rates for the LCC analysis by estimating the cost of capital for companies that purchase commercial refr igeration equipment. The cost of capital is commonly used to estimate the present value of cash flows to be derived from a typical company project or investment. Most co mpanies use both debt and equity capital to fund investments, so their cost of capital is the weighted average of the cost to the company of equity and debt financing.

DOE estimated the cost of equity financi ng by using the Capital Asset Pricing Model (CAPM). The CAPM, among the most widely used models to estimate the cost of equity financing, considers the cost of equity to be proportional to the amount of systematic risk associated with a company. The cost of equity financing tends to be high when a company faces a large degree of systematic ris k, and it tends to be low when the company faces a small degree of systematic risk.

To estimate the weighted average cost of capital (WACC) (inc luding the weighted average cost of debt and equity financing) of commercial refrigeration equipment purchasers, DOE used a sample of companies involved in grocery and multi-line re tailing drawn from a database of 7,319 U.S. companies on the Dam odaran Online website. The WACC approach

taken to determine discount rates takes into account the current tax status of the individual firms on an overall corporate basis. DOE did not evalua te the marginal effects of increased costs (and thus depreciation due to higher cost equipment on the overall tax status).DOE used a sample of 17 companies to represent the purchasers of commercial refrigeration equipment. For each company in th e sample, DOE derived the cost of debt, percent debt financing, and systematic company risk fr om information provided by Damodaran Online. DOE estimated the cost of debt financing from the long-term Government bond rate (4.39 percent) and the standard deviation of the stock pr ice. The cost of capital for small, independent grocers; convenience store franchisees; gasoline station owner-operators; and others with more limited access to capital is more difficult to dete rmine. Individual credit-worthiness varies considerably, and some franchisees have access to the financial resources of the franchising corporation. However, personal contacts with a sample of commercial bankers yielded an estimate for the small operator weighted cost of capital of about 200 to 300 basis points (2 percent to 3 percent) above the rates for large grocery chains. A central value equal to the weighted average of large grocer y chains, plus 250 basis points ( 2.5 percent), was used for small operators. Deducting expected infl ation from the cost of capital provides the estimates of the real discount rate by ownership category. The average after-tax discount rate, weighted by the percentage shares of total purch ases of commercial refrigerati on equipment, is 5.87 percent for large grocery stores, 5.11 percent for multi-line re tailers, and 8.37 percent for convenience stores and convenience stores associated with gasoli ne stations. DOE received no comments on the discount rates developed in the ANOPR but took a dvantage of the availab ility of 2007 financial data to update the discount rate assumptions in the NOPR. See Chapter 8 of the TSD.12. Payback Period

The PBP is the amount of time it takes the cu stomer to recover the incrementally higher purchase cost of more energy efficient equipm ent as a result of lower operating costs. Numerically, the PBP is the ratio of the increas e in purchase cost (i.e., from a less efficient design to a more efficient design ) to the decrease in annual operati ng expenditures. This type of calculation is known as a “simple” PBP, because it does not take into account changes in operating cost over time or the time value of mo ney, that is, the calculation is done at an effective discount rate of zero percent.

The equation for PBP is:

PBP =

∆ IC / ∆ OC

where

PBP = payback period in years,

∆ IC = difference in the total installed cost between the more efficient standard level equipment (energy consumption levels 2, 3, etc.) and the baseline (energy consumption level 1) equipment, and

∆ OC = difference in annual operating costs.

The data inputs to the PBP analysis are the total installed cost of the equipment to the customer for each energy consumption level a nd the annual (first-year) operating costs for each energy consumption level. The i nputs to the total installed cost are the equipment price and the installation cost. The inputs to the operating co sts are the annual energy cost, the annual repaircost, and the annual maintenance cost. The PB P uses the same inputs as the LCC analysis, except that electricity price tr ends and discount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the re quired electricity cost is only for the year in which a new energy conservation standard is to take effect—in this case, 2012. The electricity price used in the PBP calculation of electricity cost was th e price projected for 2012, expressed in 2007$, but

not discounted to 2007. Discount rates are not used in the PBP calculation.

PBP is one of the economic indicators that DOE uses when assessing economic impact to

a customer. PBP does not take into account the time value of money explicitly ( e.g. , through a discount factor), the life of the efficiency measure, or changing fuel costs over time. In addition, because PBP takes into account the cumulative energy and first-cost impact of a set of efficiency measures, it can be sensitive to the baseline level a ssumed. In addition, what is deemed an acceptable payback period can vary. By contrast, when examining LCC savings by efficiency levels, there is generally a maximum LCC savings point (min imum LCC efficiency level)

indicative of maximum economic benefit to the customer. The selection of the baseline efficiency level does not affect the identification of the minimu m LCC efficiency level, although a baseline efficiency is used when calculati ng net LCC savings or costs. DOE considers both

LCC and PBP as related to the se ven factors discussed in Section II.B to determine whether a standard is economically justified and whether th e benefits of an energy conservation standard will exceed its burdens to the greatest extent practicable. However, because LCC uses an explicit discount rate, takes into account changing energy prices, a nd does not require selection of a baseline efficiency level, it is considered by DOE to be a better in dicator of the likely economic impacts on consumers.F. Shipments Analysis One of the more important components of any estimate of the future impact of a standard is equipment shipments. DOE developed forecasts of shipments for the base case and standards

cases and includes those forecasts in the NES spreadsheet. The shipments portion of the spreadsheet forecasts shipments of commerci al refrigeration equipment from 2012 to 2042. DOE developed shipments forecasts for the 15 pr imary equipment classes by accounting for the shipments to replace the existing stock of comm ercial refrigeration equipment, commercial refrigeration shipments into new commercial floor spaces, and old equipment removed through demolitions. Chapter 10 of the TSD provides additional details on the shipments forecasts.

The results of the shipments analysis are driv en primarily by historical shipments data for the 15 equipment classes of commercial refrig eration equipment, DOE estimates of average equipment life, relative shipment estimates to eac h of the four business ty pes, the existing total floor space in food sales buildings, and the anticipa ted growth in food sales floor space estimated in EIA’s NEMS. The model estimates that, in each year, the existing stock of commercial refrigeration equipment either ages by one year or is worn out and replaced. In addition, new equipment can be shipped into new commercial floor space, and old equipment can be removed through demolitions. DOE chose to preserve the capability to analyze all efficiency levels analyzed in the LCC in the NIA.

The shipments analysis is a description of commercial refrigeration equipment stock flows as a function of year and age. While ther e are 15 equipment classes, the shipment analysistreats each category of equipmen t independently such that future shipments in any one class are unaffected by shipments in any other equipment cla sses and the relative frac tion of shipments in each product class compared to a ll commercial refrigeration equi pment shipments is assumed to

be constant over time. DOE rec ognizes that a retailer of refrig erated or frozen food can choose

to use different classes of comm ercial refrigeration equipment to sell the same food product as long as the equipment is in the required temperatur e range (i.e. refrigerator, freezer, or ice-cream temperature range). The decision to adopt one equipment class over another within the same temperature range will depend on first costs, operating costs, and the perceived ability to merchandise product. In addition, relative sales refr igerated versus frozen foods could change in the future. However, DOE had no information w ith which to develop and calibrate a shipments model incorporating these factors.

DOE formulated the equations used in the anal ysis as updates of the distribution of stock in any given year, as a function of age, to th e following year using th e following steps:

1. DOE first converted the equipment units to linear feet of display space cooled by those units by taking the na tional statistics on sales of equipment and calculating equipment capacity per linear foot of retail grocery building display space.

2. DOE used this calculation of existing stock, and the average age of the equipment, as a basis for calculating replacement sales.

3. DOE subtracted replacement sales from histor ical total sales statistics to calculate new sales of commercial refrigeration equipment.

4. DOE forecasted new sales as a function of ne w construction of retail food sales space.5. DOE recorded sales of new and repla cement equipment by the year sold, and depreciated each annual vintage over th e estimated life of the equipment.

6. DOE allocated sales in each year to the 15 equipment classes in proportion to their

relative historical sales.

In response to DOE’s presentation of the ANOP R shipment analysis, the public made two primary comments. True stated that while food sales buildings are probab ly representative of remote condensing equipment, as much as 25 pe rcent of the self-contai ned market goes into unusual conditions, but that the majority does end up in some sort of food-sa les type application. (Public Meeting Transcript, No. 13.5 at p. 165) However, in a follow-up conversation, True agreed that for self-contained equipment without doors, which is the majority of the selfcontained equipment covered in this rulemaki ng, the amount of equipment not shipped to food sales buildings represents a very small fraction of the total mark et. DOE concluded that it was therefore unnecessary to include other business types or building categories for the analysis of self-contained equipment to be valid and representative.

Other stakeholders commented on the assu mption of zero shipments in the ANOPR for the VOP.RC.L equipment class based on the subm itted ARI shipment data. (Public Meeting Transcript, No. 13.5 at p. 164) ARI, in turn, stated that zero values in it s data submittal to DOE may represent an equipment class where only one or two manufacturers ha ve shipments. These

data were excluded to maintain confidentiality. (Public Meeti ng Transcript, No. 13.5 at p. 52) To address these issues, DOE estimated the ship ments for the VOP.RC.L equipment class at fivepercent of the similarly designed VOP.RC.M equi pment class based on information provided in

manufacturer interviews.

Finally, DOE received comments on the imp act of the used equipment market on shipments in the presence of new equipment standards. True stated th at DOE should consider how long existing low-efficiency equipment will be in service. (Public Meeting Transcript, No. 13.5 at p. 98) As you drive the cost higher, the li fe expectancy of existing equipment increases. ACEEE countered, however, that the issue of used equipment has come up in other rulemakings. Customers may use existing equipment longer, but the average was only one or two years more, which has a small impact on the energy savings projected through 2042. It may be more of a factor in the manufacturer impact analysis, because that could aff ect sales in at least the first year. (Public Meeting Transc ript, No. 13.5 at p. 102)

True stated that the used equipment market is often ignored. As you drive costs of capital up, you drive the need for low-end users to buy used equipment and that the higher the cost per unit, the more the used equipment ma rket thrives. True stated that this is very significant in the restaurant industry, where studies suggest that 90 percent of al l new non-chain restaurants fail within the first year. Most of these busine sses are buying used equipment. (Public Meeting Transcript, No. 13.5 at p. 202-207) EEI suggested that, if possible, DOE should investigate the use of used versus new equipment in restaurant s, and make sure that new standards do not increase the purchase of older, less effi cient equipment. (EEI, No. 15 at p. 2)Follow-up conversations with True lead DOE to believe that it is unnecessary to take the restaurant business type into ac count since it is not a large market for the equipment covered under this rulemaking. DOE determined that it w ould not try to account for life extension in the NIA. While DOE recognizes that there may be some initial life extension for existing markets for some customers, no data are available to fo recast the frequency and amount of life extension that might occur within the industry. DOE agr ees with ACEEE that th is would result in a relatively small impact on energy savings and, give n that it would also reduce expenditures for new equipment, would have an even smaller imp act on calculated NPV. For the NOPR analysis, DOE did not assume an initial decrease in sales and life extension for commercial refrigeration equipment covered in this rulemaking.

Table IV-14 shows the results of the shipment s analysis for the 15 commercial refrigeration equipment classes for the base case (baseline efficiency level or Level 1). As equipment purchase price increases with higher efficiency levels , a drop in shipments can be expected relative to the base case. However, as annual energy consumption is reduced, there is potentially a countering effect of increased equipment sales due to more frequent installations and use of commercial refrig eration equipment by retailers (a potential rebound effect). Although there is a provisi on in the spreadsheet for a change in projected shipments in response to efficiency level increases (or energy cons umption level decreases), DOE has no information with which to calibrate such a relationship. No such data was provided in comments on the ANOPR analysis. Therefore, for the NOPR anal ysis, DOE assumed that the overall shipments do not change in response to the changing TSLs . Additional details on the shipments analysis can be found in Chapter 10 of the TSD.Table IV-14 Forecasted Shipments for Commercial Refrigeration Equipment, 2012

− 2042, (Base Case) Thousands of Linear Feet Shippe d by Year and Equipment Class Equipment Class 2012 2015 2020 2025 2030 2035 2040 2042 Cumulative VOP.RC.M 451 436 451 464 497 531 582 604 15,270 VOP.RC.L 23 22 23 23 25 27 29 30 763 VOP.SC.M 30 29 30 31 33 36 39 41 1,027 VCT.RC.M 32 31 32 33 35 38 42 43 1,091 VCT.RC.L 448 433 448 461 494 527 578 600 15,167 VCT.SC.I 11 11 11 11 12 13 14 15 374 VCS.SC.I 3 3 3 3 3 3 4 4 93 SVO.RC.M 344 332 344 354 379 405 444 460 11,647 SVO.SC.M 45 44 45 47 50 53 59 61 1,537 SOC.RC.M 87 84 87 89 96 102 112 116 2,936 HZO.RC.M 53 51 53 54 58 62 68 71 1,790 HZO.RC.L 166 161 166 171 183 196 214 222 5,627 HZO.SC.M 4 4 4 4 4 5 5 5 132 HZO.SC.L 8 8 8 8 9 10 10 11 274 HCT.SC.I 36 35 36 37 39 42 46 48 1,214

G. National Impact Analysis

The NIA assesses future NES and the nationa l economic impacts of different efficiency levels. The analysis measures economic imp acts using the NPV metric (i.e., future amounts discounted to the present) of tota l commercial customer costs and sa vings expected to result from new standards at specif ic efficiency levels.

To make the analysis more accessible and transparent to the public, DOE used an Excel spreadsheet model to calculate the energy savi ngs and the national economic costs and savings from new standards. Excel is the most widely used spreadsheet calcula tion tool in the United States and there is general familiarity with its basic features. Thus, DOE’s use of Excel as the basis for the spreadsheet models provides interested persons with access to the models within a familiar context. In addition, the TSD and ot her documentation that DOE provides during therulemaking help explain the models and how to use them, and interested persons can review DOE’s analyses by changing various input quantities within the spreadsheet.

Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or outputs. DOE examined sensitivities by applying different scenarios. DOE used the NES spreadsheet to perform calculations of national energy savings and NPV using the annual energy consumption and total installed cost data from the LCC analysis and estimates of national shipments for each of the 15 primary commercial refrigeration equipment classes. DOE forecasted the energy savings, energy cost savings, equipment costs, and NPV of benefits for all primary commercial refrigeration equipment classes from 2012 through 2062. The forecasts provided annual and cumulative values for all four output parameters.

DOE calculated the NES by subtracting ener gy use under a standards scenario from energy use in a base case (no ne w standards) scenario. Energy use is reduced when a unit of commercial refrigeration equipment in the base case efficiency distribution is replaced by a more efficient piece of equipment. Energy savings for each equipment class are the same national average values as calculated in the LCC and payback period spreadsheet. However, these results are normalized on a per-unit-length basis by equi pment class and applied to the total annual estimated shipments in terms of line-up length of all equipment with the class. Table IV-15 shows key inputs to the NIA. Chapter 11 of th e TSD provides additional information about the NES spreadsheet.Table IV-15 Summary of National Energy Savings and Net Present Value Inputs Input Data Description Changes for NOPR

Shipments Annual shipments from shipments model (Chapter 10, Shipments Analysis). Shipments model modified to use a distribution of equipment lifetimes based on a 10-year average life in large grocery and multi-line retail, and a 15-year average life in small grocery and convenience stores. Estimates for shipments for the VOP.RC.L equipment class were added and are provided. Effective Date of Standard 2012 No change.

Base Case Efficiencies Distribution of base case shipments by efficiency level. No change in methodology to derive base case shipments by efficiency level.

Standards Case Efficiencies Distribution of shipments by efficiency level for each standards case. Standards case annual market shares by efficiency level remain constant over time for the base case and each standards case. No change in methodology to derive shipments by efficiency level in each standards case.

Annual Energy Consumption per Linear Foot Annual weighted-average values are a function of energy consumption level, which are established in the engineering analysis (Chapter 5 of the TSD). Converted to a per linear foot basis. No change in methodology. Energy consumption estimates reflect updates to NOPR engineering analysis.

Total Installed Cost per Linear Foot Annual weighted-average values are a function of energy consumption level (Chapter 8 of the TSD). Converted to a per linear foot basis. No change in methodology. Installed costs reflect updates to NOPR LCC.

Repair Cost per Linear Foot Annual weighted-average values are constant with energy consumption level (Chapter 8 of the TSD). Converted to a per linear foot basis. No change in methodology. Repair costs reflected updates to NOPR LCC.

Maintenance Cost per Linear Foot Annual weighted-average value equals $156 (Chapter 8 of the TSD), plus lighting maintenance cost. Converted to a per linear foot basis. No change in methodology, but annual weighted-average value updated to $160 in 2007$.

Escalation of Electricity Prices EIA AEO2006 for ecasts (to 2030) and extrapolation for beyond 2030 (Chapter 8 of the TSD). EIA AEO2007 for ecasts (to 2030) and extrapolation for beyond 2030 (Chapter 8 of the TSD).

Electricity Site-to-Source Conversion Conversion varies yearly and is generated by DOE/EIA’s NEMS* program (a time series conversion factor; includes electric generation, transmission, and distribution losses). Conversion factor varies yearly and is generated by EIA’s NEMS model. Includes the impact of electric generation, transmission, and distribution losses.

Discount Rate 3 and 7 percent real. No change. Present Year Future costs are di scounted to year 2007. Future costs are di scounted to year 2008.

Rebound Effect A rebound effect (due to changes in shipments resulting from standards) was not considered in the NIA. No change.1. Base Case and Standards Ca se Forecasted Efficiencies A key component of DOE’s estimates of NE S and NPV are the energy efficiencies for shipped equipment that it forecasts over time fo r the base case (without new standards) and for

each standards case. The forecasted efficiencies re present the distribution of energy efficiency of the equipment under consideration that is sh ipped over the forecast period (i.e., from the

assumed effective date of a new standard to 30 years after the standard becomes effective).

The annual per-unit energy consumption is th e site energy consumed by a commercial refrigeration equipment unit per year. The annua l energy consumption is directly tied to the efficiency of the unit. Thus, knowing the effi ciency of a commercial refrigeration equipment unit determines the corresponding annual ener gy consumption. DOE determined annual forecasted market shares by efficiency level that , in turn, enabled determination of shipmentweighted annual energy consumption values.

Because no data were available on market sh ares broken down by efficiency level, DOE determined market shares by efficiency leve l for commercial refrigeration based on its own analysis. DOE first converted 2005 shipment info rmation by equipment class into market shares by equipment class, and then adap ted a cost-based method similar to that used in the NEMS to estimate market shares for each equipment class by efficiency level. This cost-based method relied on cost data developed in the engineering and life-cycle cost analyses, as well as economic purchase criteria data taken dire ctly from NEMS. From those ma rket shares and projections of shipments by equipment class, DOE developed the future efficiency scenarios for a base case (i.e., without new standards) and for various stan dards cases (i.e., with new standards). DOE didnot have data to calibrate this approach to ac tual market shipments by efficiency level. DOE requested comment on this approach to generatin g market shares by efficiency level in the

ANOPR.

Commenting on the distribution of market effi ciency, ARI stated that experience with other equipment tells us that the majority of th e shipments are usually at the lower end of the curve of the highest efficiency. ARI was surpri sed that DOE had only 25 percent or 30 percent of the shipments at that efficiency level. They also cautioned DOE that the industry-supplied

curves are cost curves and do not mean that such equipment is on the market today. As Section

IV.E , Life-Cycle Cost, discusses, ARI offered to try to provide data on the distribution of efficiencies in current equipment but was not ab le to do so. (Public Meeting Transcript, No. 13.5 at p. 143) Other stakeholders, such as EEI and ACEEE, suggested possible avenues that DOE

could examine but did not have data DOE could us e to establish a distribution of efficiencies. (Public Meeting Transcript, No. 13.5 at p. 141-142; p. 173) Because of the lack of data on market shipments by efficiency level, DOE chos e to continue to use the ANOPR approach to estimate shipments by efficiency level.

DOE developed base case efficiency forecasts based on the estimated market shares by equipment class and efficiency level. Because there are no historical data to indicate how equipment efficiencies or relative equipment class preferences have changed over time, DOE predicted that forecasted market shares would remain frozen at the 2012 efficiency level until the end of the forecast period (30 years after the effective date, 2042). DOE requested comments on this assumption.Copeland commented that since DOE plans to update the forecast in five years, no one can really figure out what that di stribution of efficiency in the fu ture looks like. (Public Meeting Transcript, No. 13.5 at p. 175) EEI suggested DOE make further contacts with national accounts that use commercial refrigeration equipment. No suggestions for improving this assumption were received. For the NOPR, DOE continued to use the assumption of flat market shares by efficiency level for the forecast period.

For its determination of sta ndards case forecasted efficiencies, DOE used a “roll-up”

scenario to establish the mark et shares by efficiency level for 2012, the year that standards

become effective. Information available to DOE suggests that equipment shipments with

efficiencies in the base case th at did not meet the standard le vel under consideration would roll up to meet the new standard level, and that all e quipment efficiencies in the base case that were

above the standard level under consideration woul d not be affected. Emerson commented that a standard brings some compression in the distributi on of efficiencies. (Public Meeting Transcript, No. 13.5 at p. 175) However, ARI stated the roll-up scenario best represen ts what is likely to happen when energy conservation standards take eff ect. (ARI, No. 18 at p. 5) DOE continued to use the roll-up scenario for the NOPR analysis.

Finally, DOE recognizes that base line efficiency trends can ch ange if equipment costs are different than those projected. For example, if LED prices drop more than assumed in the engineering analysis, consumer demand for e quipment with LEDs could change. DOE seekscomment on whether shipments of equipment with LEDs would change if LED costs drop and if so, the extent and timing of such shipment changes. See Section VII.E.1

.

2. Annual Energy Consumption, Tota l Installed Cost, Ma intenance Cost, and Repair Costs The difference in shipments by equipment efficiency level between the base and

standards cases was the basis for determin ing the reduction in per-unit annual energy consumption that could result from new standards. The commercial refrigeration equipment stock in a given year is the to tal linear footage of commercial refrigeration equipment shipped from earlier years that survive in the given year . The NES spreadsheet m odel keeps track of the total linear footage of commercial refrigeration e quipment units shipped each year and estimates the total commercial refrigeration equipment stock for each year. The annual energy consumption by efficiency level for each equipment category comes from the LCC analysis and is converted to a per-linear-f oot basis by dividing by the length of the specific equipment analyzed in the engineering analysis. Similarl y, the total installed cost, maintenance cost, and repair costs for each efficiency level for each eq uipment class analyzed in the LCC are converted to a per linear foot basis. Using the total estimated shipments and total estimated stock by equipment category and efficiency level, DOE calculates the annual energy consumption for the commercial refrigeration equipment stock in e ach year, the maintenance and repair costs associated with the equipment stock, and the total installed costs associated with new shipments in each year based on the standards scenario and associated distribution of shipments by efficiency level.3. Escalation of Electricity Prices DOE uses the most recent AEO reference case to forecast energy prices for standard rulemakings. For the ANOPR, DOE used the AEO2006 reference case forecasts to estimate future electricity prices. ACEEE commented that it would like DOE to use the AEO2008 forecasts for the NOPR analysis. (ACEEE, No. 16 at p. 2) However, this forecast was not available when DOE completed the NOPR anal ysis. DOE used the AEO2007 reference case forecasts for future electricity prices, extende d out to the end of the analysis period. DOE extrapolated the trend in values from 2020 to 2030 of the forecast to establish prices for the remainder of the analysis period. DOE intends to update its analysis for the final rule to reflect the AEO 2008 electricity price forecasts when fi nal versions of these price forecasts are available. An AEO Revised Early Release fo r the AEO 2008 reference ca se only has indicated that the reference case electricity prices are higher in real (inflation adjusted) terms and if this holds true in the final release it would genera lly result in more favorable economics for higher efficiency standard levels (i.e. shorter payback periods, greater life-cy cle cost savings, and greater national net present value).

4. Electricity Site-t o-Source Conversion The site-to-source conversion factor is a multiplier used for converting site energy consumption, expressed in kWh, into primary or source energy consumption, expressed in quadrillion Btu (quads). The s ite-to-source conversion factor acc ounts for losses in electricity generation, transmission, and distribution. For the ANOPR, DOE used site-to-source conversion factors based on U.S. average values for th e commercial sector, calculated from AEO2006, Table A5. The average conversion factors vary over time, due to projected changes in electricitygeneration sources (i.e., the power plant types projected to provide electricity to the country). For the NOPR, DOE developed marginal site-source conversion factors that relate the national electrical energy savings at the po int of use to the fuel savings at the power plant. These factors

use the NEMS model and the examination of th e corresponding energy savings from standards

scenarios considered in DOE’s u tility analysis (Chapter 14 of th e TSD). The conversion factors vary over time, due to projected changes in elect ricity generation sources (i.e., the power plant types projected to provide electr icity to the country) and power plant dispatch scenarios. Average U.S. conversion factors were used in the ANOPR because the util ity analysis which is used to determine marginal conversion factors ap propriate to efficiency standards for commercial refrigeration equipment occurs in the NOPR stage of DOE’s analysis.

To estimate NPV, DOE calculated the net im pact each year as the difference between total operating cost savings (inc luding electricity, repair, and ma intenance cost savings) and

increases in total installed cost s (including MSP, sales taxes, distribution channel markups, and installation cost). DOE calculated the NPV of each TSL over the life of the equipment using three steps. First, DOE determined the diffe rence between the equipm ent costs under the TSL and the base case to calculate the net equipment cost increase resulting from the TSL. Second,

DOE determined the difference between the ba se case operating costs and the TSL operating costs to calculate the net opera ting cost savings from the TSL. Third, DOE determined the difference between the net operating cost savi ngs and the net equipment cost increase to calculate the net savings (or expense) for each ye ar. DOE then discounted the annual net savings (or expenses) for commercial refrigeration eq uipment purchased on or after 2012 to 2008, and

summed the discounted values to determine the NPV of a TSL. An NPV greater than zero showsnet savings (i.e., the TSL would reduce overall cust omer expenditures relative to the base case in present value terms). An NPV less than zero in dicates that the TSL would result in a net increase in customer expenditures in present value terms.

H. Life-Cycle Cost Sub-Group Analysis In analyzing the potential impact of new or amended standards on commercial customers, DOE evaluates the impact on identifiable groups (i.e., sub-groups) of customers, such as different types of businesses that may be disp roportionately affected by a National standard level. For this rulemaking, DOE identified inde pendent small grocery a nd convenience stores as a commercial refrigeration equipment customer sub-group that could be disproportionately affected, and examined the impact of proposed standards on this group.

DOE determined the impact on this commerci al refrigeration equipment customer subgroup using the LCC spreadsheet model. DOE conducted the LCC and PBP analyses for commercial refrigeration equipment customers. The standard LCC and PBP analyses (described

in Section IV.E ) includes various types of businesse s that use commercial refrigeration equipment. The LCC spreadsheet model allows fo r the identification of one or more sub-groups of businesses, which can then be analyzed by sa mpling only each such sub-group. The results of DOE’s LCC sub-group analysis are summarized in Section V.B.1.c and described in detail in Chapter 12 of the TSD.I. Manufacturer Impact Analysis

1. Overview DOE performed an MIA to estimate the financial impact of energy conservation standards on manufacturers of commercial refriger ation equipment, and to assess the impact of such standards on employment and manufacturi ng capacity. The MIA ha s both quantitative and qualitative aspects. The quantit ative part of the MIA relies on the GRIM, an industry-cash-flow model customized for this rulemaking. The GRIM inputs are information regarding the industry cost structure, shipments, and revenues. This includes information from many of the analyses described above, such as manuf acturing costs and prices from the engineering analysis and shipments forecasts. The key GRIM output is th e industry net present va lue (INPV). The model estimates the financial impact of energy conser vation standards by comparing changes in INPV

between the base case and the various trial sta ndard levels. Different sets of assumptions (scenarios) will produce different results. The qualitative part of the MIA addresses factors such as equipment characteristics, characteristics of particular firms, and market and equipment trends, and includes assessment of the impacts of standards on sub-group s of manufacturers. Chapter 13 of the TSD outlines the complete MIA.

DOE conducted the MIA for co mmercial refrigeration equipm ent in three phases. Phase 1, Industry Profile, consisted of preparing an industry characte rization, including data on market share, sales volumes and trends, pricing, employment, and financia l structure. Phase 2, Industry Cash Flow Analysis, focused on th e industry as a whole. In this phase, DOE used the GRIM to prepare an industry cash-flow analysis. Using publicly available information developed in Phase 1, DOE adapted the GRIM's generic structure to pe rform an analysis of commercial refrigerationequipment energy conservation standards. In Phase 3, Sub-Group Impact Analysis, DOE conducted interviews with manufacturers repres enting the majority of domestic commercial refrigeration equipment sales. This group incl uded large and small manuf acturers, providing a representative cross-section of the industry. During these interviews, DOE discussed engineering, manufacturing, procur ement, and financial topics specific to each company and

obtained each manufacturer's view of the indus try. The interviews provided valuable information DOE used to evaluate the imp acts of an energy conservation standard on manufacturer cash flows, manufact uring capacities, and employment levels. For more detail on the manufacturer impact analysis, refer to Chapter 13 of the TSD.

a. Phase 1, Industry Profile In Phase 1 of the MIA, DOE prepared a profile of the commercial refrigeration equipment industry based on the market and technology assessm ent prepared for this rulemaking. Before initiating the detailed impact studies, DOE collected information on the present and past

structure and market characteri stics of the commercial refrig eration equipment industry. The

information DOE collected at that time included market share, equipment shipments, markups,

and cost structure for various manufacturers. The industry profile includes further detail on equipment characteristics, estim ated manufacturer market shar es, the financial situation of manufacturers, trends in the number of firms, the market, and equipment characteristics of the commercial refrigeration equipment industry.

The industry profile included a top-down co st analysis of comme rcial refrigeration equipment manufacturers that DOE used to derive cost and preliminary financial inputs for theGRIM (e.g., revenues; material, labor, overhead, a nd depreciation expenses; selling, general, and administrative expenses (SG&A); and research and development (R&D) expenses). DOE also used public sources of informati on to further calibrate its initia l characterization of the industry, including U.S. Securities and Exchange Comm ission (SEC) 10–K reports, Standard & Poor’s (S&P) stock reports, and corporate annual reports.

b. Phase 2, Industry Cash-Flow Analysis

Phase 2 of the MIA focused on the financial impacts of energy conservation standards on the industry. Higher energy conservation standa rds can affect a manufacturer’s cash flow in three distinct ways, resulting in : (1) a need for increased inve stment; (2) higher production costs per unit; and (3) altered revenue by virtue of highe r per-unit prices and chan ges in sales values. To quantify these impacts in Phase 2 of the MI A, DOE used the GRIM to perform a cash-flow analysis of commercial refriger ation equipment manufacturers. In performing these analyses, DOE used the financial values derived during Ph ase 1 and the shipment scenarios used in the NES analyses.

c. Phase 3, Sub-Group Impact Analysis Using average cost assumptions to develop an industry-cash-flow estim ate is not adequate for assessing differential impacts among sub-gro ups of manufacturers. For example, small manufacturers, niche equipment ma nufacturers, or manufacturers ex hibiting a cost structure that largely differs from the industry average could be more negatively affected. DOE used the results of the industry characteri zation analysis (in Phase 1) to group manufacturers that exhibit

similar characteristics.During the interview process, DOE discu ssed the potential su b-groups and sub-group members it identified for the analysis. DOE en couraged the manufactur ers to recommend subgroups or characteristics that ar e appropriate for the sub-group analysis. DOE identified small commercial refrigeration equipment manufactur ers as a potential manufacturing sub-group. DOE found that small business manufacturers gene rally have the same concerns as large manufacturers regarding energy conservation standards. In addition, DOE found no significant differences in the R&D emphasis or marketing strategies between small business manufacturers and large manufacturers. Therefore, for the e quipment classes comprised primarily of small business manufacturers, DOE believes the GRIM analysis, which models each equipment class separately, is representative of the small business manufacturers affected by standards.

2. Government Regulatory Impact Model Analysis As mentioned above, DOE uses the GRIM to qua ntify changes in cash flow that result in a higher or lower industry value. The GRIM analys is uses a standard annu al cash-flow analysis that incorporates manufacturer prices, manufact uring costs, shipments, and industry financial information. The GRIM models changes in costs, distribution of shipments, investments, and associated margins that would result from ne w regulatory conditions (i n this case, standard levels). The GRIM spreadsheet uses a number of inputs to arrive at a series of annual cash flows, beginning with the base year of the analysis, 2007, and continuing to 2042. DOE calculated INPVs by summing the stream of annu al discounted cash flows during this period.DOE used the GRIM to calculate cash flows using standard accounting principles and compare changes in INPV between a base case and different TSLs (the standards cases). Essentially, the difference in INPV between the base case and a standards case represents the financial impact of the energy conservation st andards on manufacturers. DOE collected this information from a number of sources, including publicly available data and interviews with manufacturers (Chapt er 13 of the TSD).

3. Manufacturer Interviews As part of the MIA, DOE discussed potenti al impacts of energy conservation standards with manufacturers responsible for a majority of commercial refrigeration equipment sales. The

manufacturers interviewed manu facture close to 90 percent of the commercial refrigeration equipment on the market. These interviews were in addition to those DOE conducted as part of the engineering analysis. The interviews provided valuable information that DOE used to evaluate the impacts of energy conservati on standards on manufacturers’ cash flows, manufacturing capacities, and employment levels.

a. Key Issues Manufacturers identified the following key i ssues for DOE to consider in developing energy conservation standards:

• Meeting Standards. Manufacturers expressed conc ern that they would have difficulty meeting certain efficiency levels for certain equipment classes. First, some manufacturers stated that they could not meet or would have extremedifficulty meeting any of the possible efficiency levels presented during interviews for self-contained equipm ent (e.g., horizontal open units). One

manufacturer stated that due to the small number of parts in the self-contained equipment, efficiency improvements ar e constrained to these parts and are

therefore limited. The same manufacturer stated that it already implements the most efficient options on the market that are available within its price range. For some manufacturers, self-contained equi pment represents only a small portion of

their business. These manufacturers ma ke more remote condensing equipment and simply convert the design into self-contained units. Second, some

manufacturers stated that they could not meet effici ency levels 3 and 4 for medium-temperature equipment (e.g., SOC.RC.M, VCT.RC.M, VOP.RC.M), and that they would need advances in te chnology to achieve these levels by 2012.

One manufacturer stated th at it does not manufacture any equipment in the VOP.RC.M equipment class that meets DOE’s baseline level.

• Customer Needs. Manufacturers are concerne d that increased equipment efficiency will come at the expense of equipment functionality, utility, and customizability. The commercial refriger ation equipment industry is focused on customers’ need to sell products, and customers place a higher priority on marketing and displaying their goods th an they do on energy efficiency. Customers demand high levels of customiza tion to differentiate themselves from other retail stores. They do not want to lose any functi onality or utility in their equipment, such as display area, that aff ects their ability to sell products. Often,• Customer Awareness. Manufacturers expressed concern that their retail customers are not sufficiently aware of pending energy conservation standards and the impacts these standards may ha ve on their purchasing decisions. The supermarket industry is a low-margin industry, which places much emphasis on low-first-cost equipment. Manufacturers believe that many customers may not be able to handle an increase in equipment price effectively since they operate with a fixed budget, or a fixed amount of capita l available for purchasing commercial refrigeration equipment. Manufacturers stat ed that customers with a fixed capital budget would tend to extend refurbishment periods and cut back on equipment growth to deal with the in crease in price of higher efficiency equipment, which manufacturers say will reduce annual sales of commercial refrigerationequipment. Manufacturers expect that sm aller stores and even small regional chains will feel significant financial pr essure when faced with the increase in prices. Single family-owned stores and local stores in large cities may have no capital budget with which to replace existi ng cases with cases that are 30 percent to 50 percent higher in price. Manufacturer s stated that a reduction in sales would lead to employee layoffs since labor is proportional to units sold, not equipment price. Manufacturers also stated that customers have usually been unwilling to adopt energy efficiency improvements unl ess there is a 12-month payback period

or less.

• Equipment Classes. Manufacturers expressed con cern regarding how equipment they manufacture would be categoriz ed in DOE’s equipment classes. Manufacturers stated that certain pi eces of low-volume equipment they manufacture do not easily fit into DOE’s equipment classes, and other pieces of equipment are excluded from coverage. For example, custom pieces of equipment, especially hybrid or combin ation units, do not easily fall within the DOE equipment classes since they could be classified in more than one category.

A self-contained case with a service over counter upper portion and an open lower portion could be classified as a self-contai ned service over counter unit as well as a self-contained open unit. Another example is wedges—transition pieces placed at the corners of a case lineup. These do not have a reasonable TDA and therefore do not have meaningful energy consumption levels when normalized to

TDA. Some manufacturers st ated that low-volume equi pment that cannot meet• Component Manufacturers . Manufacturers expressed conc ern that they have little control over the options available and the price they pay for components used to manufacture commercial refrigeration e quipment. Commercial refrigeration equipment manufacturers purchase many of the components needed to build the equipment and therefore rely heavily on component manufacturers to deliver parts, such as doors, motors, fans, and lights. However, commercial refrigeration equipment manufacturers st ate that higher efficiency components may not be readily available to meet standards. Fo r example, the high-efficiency compressors needed for self-contained equipment to meet energy conservation standards may not be readily available. Manufacturers sa id that the compressors they purchase for commercial refrigerati on are left over from the white goods (home appliances) industry since that industry has a mu ch higher sales volume compared to commercial refrigeration equipment. Als o, manufacturers stated that componentsuppliers set their own pric ing, and manufacturers have no control over this. Manufacturers are concerned about what pri ces they would have to pay for higher efficiency components in the future.

4. Government Regulatory Impact Model Key Inputs and Scenarios

a. Base Case Shipments Forecast

The GRIM estimates manufacturer revenues ba sed on total unit shipment forecasts and the distribution of these values by efficiency le vel. Changes in the efficiency mix at each standard level are a key driver of manufacturer finances. For th is analysis, the GRIM used the NES shipments forecasts from 2007 to 2042. Total shipments forecasted by the NES for the

base case in 2012 are shown in Table IV-16 and further discussed in this section of today’s

Notice.

Table IV-16 Total NES-Forecasted Shipments in 2012 (Number of Units) Equipment Class Total Industry Shipments

VOP.RC.M 37,607 VOP.RC.L 1,880 VOP.SC.M 7,585 VCT.RC.M 2,533 VCT.RC.L 35,184 VCT.SC.I 2,571 VCS.SC.I 637 SVO.RC.M 28,685 SVO.SC.M 11,357 SOC.RC.M 7,231 HZO.RC.M 4,408 HZO.RC.L 13,859 HZO.SC.M 976 HZO.SC.L 2,024 HCT.SC.I 10,487In the shipments analysis, DOE also estimated the distribution of effi ciencies in the base case for commercial refrigeration equipment (Chapter 10 of the TSD). Table IV-17 shows one example of the distribution of efficiencies in the base case for the VOP.RC.M equipment class. The distribution of efficiencies in the base case for other equipment classes are shown in Chapter

10 of the TSD.

Table IV-17 GRIM Distribution of Shipm ents in the Base Case for VOP.RC.M TSL (CDEC/TDA - kWh/day/ft 2 ) Baseline 1.09 TSL 1 0.98 TSL 2 0.95 TSL 3 0.89 TSL 4* 0.89 TSL 5 0.76 Distribution of Shipments (%) 17.6 36.3 16.6 14.0 14.0 15.6 * For VOP.RC.M, TSL 4 is set at the same efficiency level as TSL 3. Therefore, the shipment distribution is the same for both of these TSLs.

b. Standards Case Shipments Forecast For each standards case, DOE assumed that ship ments at efficiencies below the projected

standard levels were most likel y to roll up to those efficiency levels in response to an energy

conservation standard. This scenario assumes that demand for high-efficiency equipment is a function of its price without re gard to the standard level. See Chapter 12 of the TSD for

additional details.

c. Markup Scenarios To understand how baseline and more efficient equipment are differentiated, DOE reviewed manufacturer catalogs an d information gathered by manufacturers. To estimate the manufacturer price of the equipment sold, DOE a pplied markups to the production costs. For the analysis, DOE considered different markup s cenarios, based on manufacturer input, for commercial refrigeration equipment. Scenario s were used to bound the range of expected equipment prices following new energy conservati on standards. For each equipment class, DOE used the markup scenarios that best characterized the prevailing markup conditions anddescribed the range of market responses manuf acturers expect as a result of new energy

conservation standards. DOE learned from interv iews with manufacturers that the majority of manufacturers only offer one equipment line. A single equipment line means that there is no markup used to differentiate baseline e quipment from premium equipment.

After discussions with manufacturers, DOE believes its adoption of standards for commercial refrigeration equipment would likely result in one of two distinct markup scenarios: preservation-of-gross-margin-percentage or preservation-of-operati ng-profit. Under the preservation-of-gross-margin-percentage scenar io, DOE applied a single uniform gross margin percentage markup across all effici ency levels. As production cost increases with efficiency, this scenario implies that the absolute dollar mar kup will increase. DOE assumed the non-production cost markup—which includes SG&A expenses, R&D expenses, interest, and profit—to be 1.32. Manufacturers believe it is optimistic to assume that as their production costs increase in response to an efficiency standa rd, they would be able to ma intain the same gross margin percentage markup. Therefore, DOE assumes th at this scenario represents a high bound to industry profitability under an energy conservation standard.

Gross margin is defined as revenues less co st of goods sold. The implicit assumption behind this markup scenario is th at the industry can maintain its gross margin from the baseline (in absolute dollars) af ter the standard. The industry would do so by passing through its increased production costs to customers withou t passing through its incr eased R&D and selling, general, and administrative expenses so the gross profit per unit is the same in absolute dollars. DOE implemented this scenario in the GRIM by setting the production cost markups for eachTSL to yield approximately the same gross margin in the standards cases in the year standard are effective (2012) as is yielded in the base case.

d. Equipment and Capital Conversion Costs New efficiency standards t ypically cause manufacturers to incur one-time conversion costs to bring their production facilities and equipment designs into compliance with the new regulation. For the purpose of the MIA, DOE cl assified these one-time conversion costs into three major groups. Capital conversion expenditure s are one-time investments in property, plant, and equipment to adapt or change existing production f acilities so that new equipment designs

can be fabricated and assembled under the new regulation. Equipment conversion expenditures are one-time investments in research, developm ent, testing, and marketing focused on creating equipment designs that comply with the new effi ciency standard. Strande d assets are equipment or tooling that become obsolete as a result of new regulation.

During the MIA interviews, DOE asked manu facturers for their estimates of the conversion costs they would incur due to new ener gy conservation standards. DOE then used the costs provided by each manufacturer and their respective market sh ares to develop estimates for the conversion costs of the entire industry at varying TSLs. Chapter 13 of the TSD summarizes

these estimates.

J. Utility Impact Analysis The utility impact analysis estimates the e ffects of reduced energy consumption due to improved equipment efficiency on the utility indu stry. This utility analysis consists of acomparison between forecast results for a case co mparable to the AEO2007 reference case and forecasts for policy cases incorporating each of th e commercial refrigeration equipment TSLs.

DOE analyzed the effects of proposed standa rds on electric utility industry generation capacity and fuel consumption using a variant of the EIA's NEMS. NEMS, which is available on the DOE website, is a large, multi-sector, partial- equilibrium model of the U.S. energy sector. EIA uses NEMS to produce its AEO, a widely r ecognized baseline energy forecast for the United

States. DOE used a variant known as NEMS-B T. The NEMS-BT is run similarly to the AEO2007 NEMS, except that commercial refrigerat ion equipment energy usage is reduced by the amount of energy (by fuel type) saved due to the TSLs. DOE obtained the inputs of national energy savings from the NES spreadsheet model. For the final rule, DOE intends to report utility analysis results using a version of NEMS-BT based on the AEO2008 NEMS.

DOE conducted the utility analysis as polic y deviations from th e AEO2007, applying the same basic set of assumptions. In the utility analysis, DOE reported th e changes in installed capacity and generation by fuel type that result for each TSL, as well as changes in end-use electricity sales. Chapter 14 of the TSD provide s details of the utility analysis methods and

results.

K. Employment Impact Analysis Employment impact is one of the factors th at DOE considers in selecting a standard. Employment impacts include direct and indirect impacts. Direct employment impacts are any changes in the number of employees for commer cial refrigeration equipment manufacturers,their suppliers, and related servi ce firms. Indirect impacts are those changes of employment in the larger economy that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more efficient comm ercial refrigeration equipment. The MIA in this rulemaking addresses only th e direct employment impacts on manufacturers of commercial refrigeration equipment. Chapter 15 of the TSD describes other, primaril y indirect, employment impacts.

Indirect employment impacts from commercial refrigeration equipment standards consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, as a consequence of (1) reduced spending by end users on electricity (offset to some degree by the increased spe nding on maintenance and repair); (2) reduced spending on new energy supply by the utility indu stry; (3) increased spending on the purchase price of new commercial refrigeration equipmen t; and (4) the effects of those three factors throughout the economy. DOE expects the net moneta ry savings from standards to be redirected to other forms of economic activity. DOE also expects these shifts in spending and economic activity to affect the demand for labor.

In developing this proposed rule, DOE estim ated indirect national employment impacts using an input/output model of the U.S. ec onomy, called ImSET (Impact of Sector Energy Technologies), developed by DOE’s Building Te chnologies Program. ImSET is a personalcomputer-based, economic-analysis model that characterizes the inte rconnections among 188 sectors of the economy as national input/output st ructural matrices, using data from the U.S. Department of Commerce’s 1997 Benchmark U.S. input-output table. The ImSET modelestimates changes in employment, industry out put, and wage income in the overall U.S. economy resulting from changes in expenditure s in various sectors of the economy. DOE estimated changes in expenditures using the NES spreadsheet. ImSET then estimated the net national indirect employment imp acts of potential commercial refrigeration equipment efficiency standards on employment by sector. In commen ts on the ANOPR, Zero Zone asked if DOE was going to contact second tier suppliers (e.g., door s uppliers, fluorescent lighting suppliers, shaded pole motor suppliers) regarding employment imp acts. (Public Meeting Transcript, No. 13.5 at pp. 230-231) ARI noted that this had been done in the central air conditioning rulemaking. (Public Meeting Transcript, No. 13.5 at p. 231)

DOE stated that the ImSET tool would not be ab le to address this in detail, but that it has been done within the MIA for other equipment. In the public meeting, DOE commented that there would be impacts from standards, but the e ffective date is different from the issuance date partly to allow time for adju stments in manufacturing.

The ImSET input/output model suggests that the proposed commercial refrigeration equipment efficiency standards could increase the net demand for labor in the economy and the gains would most likely be very small relative to total national employment. DOE therefore concludes that the proposed commercial refriger ation equipment standards are only likely to produce employment benefits that are sufficient to fully offset any adverse impacts on employment in the commercial refrigeration equipment industry. For more details on the employment impact analysis, see Chapter 15 of the TSD.L. Environmental Assessment DOE has prepared a draft Environmental A ssessment (EA) pursua nt to the National Environmental Policy Act and the requireme nts of 42 U.S.C. 6295( o)(2)(B)(i)(VI) and 6316(e)(1)(A), to determine the environmental imp acts of the proposed standards. Specifically,

DOE estimated the reduction in power plant emissions of CO 2 , NOx, and mercury (Hg) using the NEMS-BT computer model. However, the Envi ronmental Assessment (Chapter 16 of the TSD)

does not include the estimated reducti on in power plant emissions of SO 2 because, 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 woul d not affect the overall level

of SO 2 emissions in the United States.

The NEMS-BT is run similarly to the AEO2007 NEMS, except that commercial refrigeration equipment energy use is reduced by the amount of energy saved (by fuel type) due to the TSLs. DOE obtained the inputs of na tional energy savings from the NES spreadsheet model. For the environmental analysis, the out put is the forecasted physical emissions. The net

benefit of the standard is the difference between emissions estimated by NEMS-BT and the

AEO2007 Reference Case. The NEMS-BT tracks CO 2 emissions using a detailed module that provides results with broad coverage of all sectors and inclusion of interactive effects. For the final rule, DOE intends to revise the emissions analysis using the AEO2008 NEMS model using the process outlined above.

The Clean Air Act Amendments of 1990 set an emissions cap on SO 2 for all power generation. The attainment of th is target, however, is flexible among generators and is enforcedthrough the use of emissions allowa nces and tradable permits. As a result, accurate simulation of

SO 2 trading tends to imply that the effect of en ergy conservation standa rds on physical emissions will be near zero because emissions will always be at, or near, the ceiling. Thus, it is unlikely

that there will be an SO 2 environmental benefit from electricity savings 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.

Like SO 2 , future emissions of NOx and Hg woul d have been subject to emissions caps

under the Clean Air Interstate Act and Clean Air Me rcury Rule. As discu ssed later, these rules have been vacated by a Federal court. DOE calculated a forecast of reductions for these emissions under an uncapped scenario. DOE a ssumes that the uncapped emissions reduction estimate would have corresponded generally to th e generation of emissi ons allowance credits under an emissions cap scenario.

V. Analytical Results

A. Trial Standard Levels DOE selected between four and eight ener gy consumption levels for each commercial refrigeration equipment class in the LCC analys is. Based on the results of the LCC analysis,DOE selected five trial standard levels above th e baseline level for each equipment class for the NOPR stage of the rulemaking. The range of TSLs selected includes the most energy efficient combination of design options with a positive NP V at the seven percent discount rate, and the combination of design options with the minimum LCC. Additionally, TSLs were selected that filled large gaps between the baseline and the level with the minimum LCC.

Because of the size variation within each equipment class and the use of daily energy consumption as the efficiency metric, DOE presented a methodology to express efficiency standards in terms of a normalizing metric. This allows for a single energy conservation

standard to be used for a broa d range of equipment sizes within a given equipment class. DOE proposed the use of TDA as the normalizing metric for equipment with display capability. For equipment classes without display capability (e .g., equipment with solid doors), DOE proposed the use of internal volume as the normalizing metr ic. See Chapter 9 of the TSD for more detail.

True commented that all self-contained units (including any open units) should be testedusing volume as a normalizing factor to provide a straight comparison between open and closeddoor self-contained units. (Public Meet ing Transcript, No. 13.5 at pp. 202-207) DOE

understands the usefulness of comparing self-contained equipm ent with and without doors on the basis of volume. However, the self-containe d equipment covered in this rulemaking is frequently installed in supermarkets and conve nience stores, where its primary purpose is to display and merchandise food. The most common application of remote condensing equipment is also in supermarkets and convenience stores. Therefore, DOE believes that, with respect to the purpose of equipment, the self-contained e quipment covered in this rulemaking is moresimilar to remote condensing equipment than other self-contained equipment (i.e., equipment with doors). DOE discussed this issue with manufacturers, and de termined that TDA is the most appropriate normalization metric for the self-c ontained equipment covered in this rulemaking,

since that is the metric used for remote condensing equipment.

DOE expressed the ANOPR efficiency levels in terms of a normalized energy consumption using these normalization factors. DOE proposed equations for final standards that would have maximum energy consumption for equipment whose display area is directly proportional to TDA. DOE also suggested that for equipment normalized to volume, it might be necessary to develop equations that use offset factors to account for a potential non-linear variation of energy consumption with volume. At the ANOPR public meeting and during the comment period, stakeholders expressed concerns about the size of equipment DOE analyzed as the representative model for each equipment class. Zero Zone stated that its analysis indicates that using a two-door case as th e baseline (for the VCT.RC.L cla ss) is more reasonable because

of the end effects in those cases. Zero Z one reported a 10 percent increase in energy consumption per door for a two-door case with the same design features as a five-door case. A two-door case consumes more energy per door th an a five-door case because of the lighting and

end effects. Zero Zone noted that if the standa rd is based on a five-door case, it will penalize any smaller cabinet, and could eliminate smaller cases from production due to their size. (Public Meeting Transcript, No. 13.5 at p. 87) At the public meeting, Zero Zone stated that it would give some thought to what should be used for a representative model

⎯ a two-door case, or some

combination of two-door and five-door cases. Zero Zone also noted that not all manufacturers make all case sizes. (Public Meeting Transcript, No. 13.5 at p. 88) Later, in a written comment,Zero Zone recommended that DOE base its anal ysis on the smaller case models instead of the larger case models to avoid accidentally outlawi ng smaller cases. (Zero Zone, No. 17 at p. 3) ARI commented that it genera lly agrees with the approach proposed by DOE for characterizing energy conservation standards for co mmercial refrigeration equipmen t, and offered to work with DOE in developing appropriate offset factors. (ARI, No. 18 at p. 6)

For the NOPR, DOE developed offset factors as a way to adjust the energy efficiency requirements for smaller-sized equipment in each e quipment class analyzed. These offset factors account for certain components of the refrigeration load (such as the conduc tion end effects) that remain constant even when equipment sizes vary. These constant loads affect smaller cases disproportionately. The offset factors are intended to approxim ate these constant loads and provide a fixed end point, corresponding to a zero TDA or zero volume case, in an equation that describes the relationship between energy cons umption and the corresponding TDA or volume metric. See Chapter 5 of the TSD for further details on the development of these offset factors for each equipment class. This is identified as Issue 4 under “Issues on Which DOE Seeks

Comment” in Section VII.E of this NOPR.

DOE preserved the general methodology and themes it used for the selection of efficiency levels in the ANOPR in establishing sp ecific efficiency levels for equipment classes.

These levels are based on the re sults of the updated LCC analysis and make up the TSLs used in

the NOPR. Table V-1 shows the TSL levels DOE selected for energy use for the equipment classes analyzed. TSL 5 is the max-tech level for each equipment class. TSL 4 is the maximum efficiency level with a positive NPV at the se ven percent discount rate, except for VOP.RC.M,where the minimal difference in energy efficiency between the minimum life cycle cost level as determined by the LCC analysis and the maximum efficiency level with positive NPV prompted DOE to select the minimum life-cycle cost leve l in preference to the maximum level with positive NPV. TSL 4 is a combination of the efficiency levels selected for TSL 3 and TSL 5. For a given equipment class, the efficiency levels selected for TSL 4 are either equivalent to that

of TSL 3 or that of TSL 5. TSL 3 is the effi ciency level that provide s the minimum life-cycle cost as determined by the LCC analysis. TSL 2 a nd TSL 1 represent lower efficiency levels that fill in the gap between the current baseline and the levels determined to have the minimum LCC.

Table V-2 shows the same TSL levels in terms of proposed equations that establish a maximum daily energy consumption (MEC) li mit through a linear equation of the form:

MEC = A x TDA + B (for equipment using TDA as a normalizing metric)

or MEC = A x V + B (for equipment usi ng volume as a normalizing metric)

Coefficients A and B are uniquely derived for each equipment class based on the

calculated offset factor B (see Chapter 5 of the TSD for offset factors) and the equation slope A,

which would be used to describe the efficiency requirements fo r equipment of different sizes within the same equipment cla ss. Chapter 9 of the TSD explains the methodology DOE used for selecting trial standard levels and developing the coefficients shown in Table V-2

.Table V-1 Trial Standard Levels for Analyz ed Equipment Expressed in Terms of Daily Energy Consumption Trial Standard Level in Order of Efficiency Trial Standard Levels for Equipment Analyzed Expressed in Terms of Energy Consumption (kWh/day) Equipment

Class Test Metric Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 VOP.RC.M CDEC kWh/day Level 1 Level 3 Level 4 Level 5 Level 5 Level 7 57.90 51.99 50.68 47.69 47.69 40.26

VOP.RC.L CDEC kWh/day Level 1 Level 3 Level 4 Level 6 Level 7 Le vel 7 133.60 118.44 113.28 112.00 108.77 108.77

VOP.SC.M TDEC* kWh/day Level 1 Level 3 Level 5 Level 6 Level 6 Level 8 39.60 35.95 33.38 30.70 30.70 28.17

VCT.RC.M CDEC kWh/day Level 1 Level 2 Level 3 Level 5 Level 7 Level 7 33.18 31.77 30.00 22.27 18.51 18.51

VCT.RC.L CDEC kWh/day Level 1 Level 3 Level 4 Level 5 Level 7 Level 7 69.31 65.73 46.90 46.36 41.85 41.85

VCT.SC.I TDEC kWh/day Level 1 Level 4 Level 5 Level 7 Level 8 Level 8 45.63 34.40 25.31 22.74 22.37 22.37

VCS.SC.I TDEC kWh/day Level 1 Level 3 Level 5 Level 8 Level 8 Level 8 16.95 14.53 12.24 10.19 10.19 10.19

SVO.RC.M CDEC kWh/day Level 1 Level 3 Level 4 Level 5 Level 5 Level 7 43.56 39.58 38.59 36.34 36.34 30.97

SVO.SC.M TDEC kWh/day Level 1 Level 3 Level 5 Level 6 Level 6 Level 8 33.11 30.66 28.87 26.74 26.74 24.87

SOC.RC.M CDEC kWh/day Level 1 Level 2 Level 3 Level 5 Level 5 Level 8 31.70 30.01 27.93 26.24 26.24 20.17

HZO.RC.M CDEC kWh/day Level 1 Level 2 Level 3 Level 4 Level 5 Level 5 19.63 17.89 15.73 14.69 14.54 14.54

HZO.RC.L CDEC kWh/day Level 1 Level 3 Level 4 Level 5 Level 5 Level 5 38.38 35.30 33.41 32.97 32.97 32.97

HZO.SC.M TDEC kWh/day Level 1 Level 3 Level 5 Level 7 Level 8 Level 8 19.23 17.85 16.51 14.93 14.81 14.81

HZO.SC.L TDEC kWh/day Level 1 Level 3 Level 5 Level 7 Level 8 Level 8 38.69 36.02 33.52 30.31 30.14 30.14

HCT.SC.I TDEC kWh/day Level 1 Level 3 Level 4 Level 5 Level 6 Level 6 7.25 6.37 3.70 3.53 3.32 3.32 * “TDEC” is total daily energy consumption of the case.

Table V-2 Trial Standard Levels Expressed in Terms of Equations and Coefficients for Each Primary Equipment Class Trial Standard Levels for Primary Equipment Classes Analyzed Equipment

Class Test Metric Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 VOP.RC.M CDEC kWh/day 1.01 x TDA + 4.07 0.9 x TDA + 4.07 0.87 x TDA + 4.07 0.82 x TDA + 4.07 0.68 x TDA + 4.07 0.82 x TDA + 4.07 VOP.RC.L CDEC kWh/day 2.84 x TDA + 6.85 2.5 x TDA + 6.85 2.38 x TDA + 6.85 2.35 x TDA + 6.85 2.28 x TDA + 6.85 2.28 x TDA + 6.85 VOP.SC.M TDEC kWh/day 2.34 x TDA + 4.71 2.09 x TDA + 4.71 1.92 x TDA + 4.71 1.74 x TDA + 4.71 1.57 x TDA + 4.71 1.74 x TDA + 4.71 VCT.RC.M CDEC kWh/day 0.48 x TDA + 1.95 0.46 x TDA + 1.95 0.43 x TDA + 1.95 0.31 x TDA + 1.95 0.25 x TDA + 1.95 0.25 x TDA + 1.95 VCT.RC.L CDEC kWh/day 1.03 x TDA + 2.61 0.97 x TDA + 2.61 0.68 x TDA + 2.61 0.67 x TDA + 2.61 0.6 x TDA + 2.61 0.6 x TDA + 2.61 VCT.SC.I TDEC kWh/day 1.63 x TDA + 3.29 1.2 x TDA + 3.29 0.85 x TDA + 3.29 0.75 x TDA + 3.29 0.73 x TDA + 3.29 0.73 x TDA + 3.29 VCS.SC.I TDEC kWh/day 0.55 x V + 0.88 0.49 x V + 0.88 0.43 x V + 0.88 0.38 x V + 0.88 0.38 x V + 0.88 0.38 x V + 0.88 SVO.RC.M CDEC kWh/day 1.01 x TDA + 3.18 0.91 x TDA + 3.18 0.89 x TDA + 3.18 0.83 x TDA + 3.18 0.69 x TDA + 3.18 0.83 x TDA + 3.18 SVO.SC.M TDEC kWh/day 2.23 x TDA + 4.59 2.04 x TDA + 4.59 1.9 x TDA + 4.59 1.73 x TDA + 4.59 1.58 x TDA + 4.59 1.73 x TDA + 4.59 SOC.RC.M CDEC kWh/day 0.62 x TDA + 0.11 0.59 x TDA + 0.11 0.55 x TDA + 0.11 0.51 x TDA + 0.11 0.39 x TDA + 0.11 0.51 x TDA + 0.11 HZO.RC.M CDEC kWh/day 0.51 x TDA + 2.88 0.45 x TDA + 2.88 0.39 x TDA + 2.88 0.36 x TDA + 2.88 0.35 x TDA + 2.88 0.35 x TDA + 2.88 HZO.RC.L CDEC kWh/day 0.68 x TDA + 6.88 0.62 x TDA + 6.88 0.58 x TDA + 6.88 0.57 x TDA + 6.88 0.57 x TDA + 6.88 0.57 x TDA + 6.88 HZO.SC.M TDEC kWh/day 1.14 x TDA + 5.55 1.02 x TDA + 5.55 0.91 x TDA + 5.55 0.78 x TDA + 5.55 0.77 x TDA + 5.55 0.77 x TDA + 5.55 HZO.SC.L TDEC kWh/day 2.63 x TDA + 7.08 2.41 x TDA + 7.08 2.2 x TDA + 7.08 1.94 x TDA + 7.08 1.92 x TDA + 7.08 1.92 x TDA + 7.08 HCT.SC.I TDEC kWh/day 1.33 x TDA + 0.43 1.16 x TDA + 0.43 0.64 x TDA + 0.43 0.61 x TDA + 0.43 0.56 x TDA + 0.43 0.56 x TDA + 0.43In addition to the 15 primary equipment classes analyzed, DOE intends to establish standards for the remaining 23 secondary equipment classes of commercial refrigeration equipment covered in this rulemaking that were not directly analyzed in the engineering analysis due to low annual shipments (less than 100 units per year). DOE’s approach involves extension multipliers developed using both the 15 primary equi pment classes analyzed and a set of focused matched-pair analyses. In a ddition, DOE believes that standards for certain primary equipment classes can be directly applied to other similar secondary equipment classes. Chapter 5 of the TSD discusses the development of the extension multipliers and the set of focused matched-pair analyses.

Using this approach, DOE developed an additional set of TSLs for these secondary equipment classes that corresponds to each of the equations shown in Table V-2 at each TSL.

Table V-3 shows this additional set of corresponding TSL levels. The levels shown in Table V-3 do not necessarily reflect the minimum life-cycle co st or max-tech efficiency levels for these equipment classes, and do not reflect TSLs that DOE has analyzed in its impact analyses. The primary purpose of presenting these le vels in this section is to provide interested persons with the range of efficiency standards that DOE is cons idering for these secondary equipment classes.

This is identified as Issue 5 under “Issues on Which DOE Seeks Comment” in Section VII.E of

this NOPR.Table V-3 Trial Standard Levels Expressed in Terms of Equations and Coefficients for Each Secondary Equipment Class Trial Standard Levels for Secondary Equipment Classes Analyzed Equipment

Class Test Metric Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 SVO.RC.L CDEC kWh/day 2.84 x TDA + 6.85 2.5 x TDA + 6.85 2.38 x TDA + 6.85 2.35 x TDA + 6.85 2.28 x TDA + 6.85 2.28 x TDA + 6.85 VOP.RC.I CDEC kWh/day 3.6 x TDA + 8.7 3.17 x TDA + 8.7 3.03 x TDA + 8.7 2.99 x TDA + 8.7 2.9 x TDA + 8.7 2.9 x TDA + 8.7 SVO.RC.I CDEC kWh/day 3.6 x TDA + 8.7 3.17 x TDA + 8.7 3.03 x TDA + 8.7 2.99 x TDA + 8.7 2.9 x TDA + 8.7 2.9 x TDA + 8.7 HZO.RC.I CDEC kWh/day 0.87 x TDA + 8.74 0.78 x TDA + 8.74 0.73 x TDA + 8.74 0.72 x TDA + 8.74 0.72 x TDA + 8.74 0.72 x TDA + 8.74 VCT.RC.I CDEC kWh/day 1.2 x TDA + 3.05 1.14 x TDA + 3.05 0.8 x TDA + 3.05 0.79 x TDA + 3.05 0.71 x TDA + 3.05 0.71 x TDA + 3.05 HCT.RC.M CDEC kWh/day 0.39 x TDA + 0.13 0.34 x TDA + 0.13 0.19 x TDA + 0.13 0.18 x TDA + 0.13 0.16 x TDA + 0.13 0.16 x TDA + 0.13 HCT.RC.L CDEC kWh/day 0.81 x TDA + 0.26 0.71 x TDA + 0.26 0.39 x TDA + 0.26 0.37 x TDA + 0.26 0.34 x TDA + 0.26 0.34 x TDA + 0.26 HCT.RC.I CDEC kWh/day 0.95 x TDA + 0.31 0.83 x TDA + 0.31 0.46 x TDA + 0.31 0.43 x TDA + 0.31 0.4 x TDA + 0.31 0.4 x TDA + 0.31 VCS.RC.M CDEC kWh/day 0.16 x V + 0.26 0.14 x V + 0.26 0.13 x V + 0.26 0.11 x V + 0.26 0.11 x V + 0.26 0.11 x V + 0.26 VCS.RC.L CDEC kWh/day 0.33 x V + 0.54 0.3 x V + 0.54 0.26 x V + 0.54 0.23 x V + 0.54 0.23 x V + 0.54 0.23 x V + 0.54 VCS.RC.I CDEC kWh/day 0.39 x V + 0.63 0.35 x V + 0.63 0.31 x V + 0.63 0.27 x V + 0.63 0.27 x V + 0.63 0.27 x V + 0.63 HCS.RC.M CDEC kWh/day 0.16 x V + 0.26 0.14 x V + 0.26 0.13 x V + 0.26 0.11 x V + 0.26 0.11 x V + 0.26 0.11 x V + 0.26 HCS.RC.L CDEC kWh/day 0.33 x V + 0.54 0.3 x V + 0.54 0.26 x V + 0.54 0.23 x V + 0.54 0.23 x V + 0.54 0.23 x V + 0.54 HCS.RC.I CDEC kWh/day 0.39 x V + 0.63 0.35 x V + 0.63 0.31 x V + 0.63 0.27 x V + 0.63 0.27 x V + 0.63 0.27 x V + 0.63 SOC.RC.L CDEC kWh/day 1.3 x TDA + 0.22 1.23 x TDA + 0.22 1.15 x TDA + 0.22 1.08 x TDA + 0.22 0.83 x TDA + 0.22 1.08 x TDA + 0.22 SOC.RC.I CDEC kWh/day 1.52 x TDA + 0.26 1.44 x TDA + 0.26 1.34 x TDA + 0.26 1.26 x TDA + 0.26 0.97 x TDA + 0.26 1.26 x TDA + 0.26 VOP.SC.L TDEC kWh/day 5.87 x TDA + 11.82 5.25 x TDA + 11.82 4.82 x TDA + 11.82 4.37 x TDA + 11.82 3.95 x TDA + 11.82 4.37 x TDA + 11.82 VOP.SC.I TDEC kWh/day 7.45 x TDA + 15.02 6.68 x TDA + 15.02 6.13 x TDA + 15.02 5.55 x TDA + 15.02 5.02 x TDA + 15.02 5.55 x TDA + 15.02 SVO.SC.L TDEC kWh/day 5.59 x TDA + 11.51 5.11 x TDA + 11.51 4.76 x TDA + 11.51 4.34 x TDA + 11.51 3.98 x TDA + 11.51 4.34 x TDA + 11.51 SVO.SC.I TDEC kWh/day 7.11 x TDA + 14.63 6.5 x TDA + 14.63 6.05 x TDA + 14.63 5.52 x TDA + 14.63 5.06 x TDA + 14.63 5.52 x TDA + 14.63 HZO.SC.I TDEC kWh/day 3.34 x TDA + 9. 3.06 x TDA + 9. 2.8 x TDA + 9. 2.46 x TDA + 9. 2.44 x TDA + 9. 2.44 x TDA + 9. SOC.SC.I TDEC kWh/day 2.13 x TDA + 0.36 2.02 x TDA + 0.36 1.88 x TDA + 0.36 1.76 x TDA + 0.36 1.35 x TDA + 0.36 1.76 x TDA + 0.36 HCS.SC.I TDEC kWh/day 0.55 x V + 0.88 0.49 x V + 0.88 0.43 x V + 0.88 0.38 x V + 0.88 0.38 x V + 0.88 0.38 x V + 0.88

1. Miscellaneous Equipment In the ANOPR, DOE proposed as part of its commercial refrigeration equipment test procedure that all equipment be tested at one of three rating temperatures: 38 ° F for refrigerators, 0 ° F for freezers, and -15 ° F for ice-cream freezers. Zero Zone, Hill Phoenix, Carrier/Tyler Refrigeration, and Tr ue expressed concern because th ey produce equipment that is not designed to operate at these designated rati ng temperatures. (Public Meeting Transcript, No. 13.5 at pp. 28-33) ARI stated that DOE should not require all equipment to be tested at thesethree rating temperatures alone. Doing so may require manufacturers to produce equipment that is less efficient solely for the purpose of meeting a specific rating condition, thus defeating the intent of the regulation. (ARI, No. 18 at p. 4) Hill Phoenix and True stated that the equipment they manufacture that is unable to meet these rating temperatures is on ly one percent to two percent of their shipments. Hill Phoenix added that, if possible, it would prefer to avoid the excessive paperwork of applying for waivers fo r equipment that cannot meet the three rating temperatures in the test procedure. (P ublic Meeting Transcript, No. 13.5 at p. 33)

Zero Zone recommended developing regulations that apply to the special circumstances of the rating temperature (Zero Zone, No. 17 at p. 2) and that DOE s hould consider developing additional rating temperatures. (Public Me eting Transcript, No. 13.5 at p. 28) ACEEE suggested that DOE develop a method to interpolat e the standard based on the standards at the three official rating temperat ures. (ACEEE, No. 16 at p. 2) ARI recommended that any equipment specifically designed to hold temperat ures higher than the rating temperature should be tested at its application temp erature, but must still meet the energy standard for its respective equipment class. (ARI, No. 18 at p. 4)

The DOE test procedure for co mmercial refrigeration equi pment specifies three rating temperatures, 38 ° F, 0 ° F, and -15 ° F, that are required to be used in the testing of this equipment, each applied to designated equipm ent classes. 71 FR 71357. Since all of this equipment must be tested at one of these thr ee rating temperatures, any manufacturer that is unable to test such equipment at its designated ra ting temperature, must re quest a test procedure waiver from DOE pursuant to the provisions de scribed in 10 CFR 431.401. If the equipment isunable to meet the maximum daily energy c onsumption (MDEC) limit for its designated equipment class, a manufacturer can petition DOE’s Office of Hearing and Appeals (OHA) for exception relief from the energy conservation standard pursuant to OHA’s authority under section 504 of the DOE Organiza tion Act (42 U.S.C. 7194), as implemented at subpart B of 10 CFR part 1003. OHA grants such relief on a cas e-by-case basis if it determines that a manufacturer has demonstrated that meeting th e standard would cause hardship, inequity, or

unfair distributions of burdens. DOE believes th at the majority of equipment covered by this rulemaking can be tested using the th ree specified rating temperatures (38 ° F, 0 ° F, and -15 ° F) provided in the test procedure.

Certain types of equipment meet the defin ition of “commercial refrigeration equipment” (Section 136(a)(3) of EPAC T 2005), but do not fall dire ctly into any of the 38 equipment classes defined in the market and technology assessment. One of these types is hybrid cases, where two or more compartments are in different equipment families and are contained in one cabinet. Another is refrigerator-freezers, which have two compartments in the same equipment family but with different operating temperatures. Hybrid refrigerator-freezers, where two or more compartments are in different equipment familie s and have different operating temperatures, may also exist. Another is wedge cases, which form miter transitions (a corner section between two refrigerated display merchandisers) between sta ndard display case lineups. DOE is proposing language that will allow manufactur ers to determine appropriate st andard levels for these types of equipment.An example of a pure hybrid case (one with two or more compartments in different equipment families and at the same temperature) is a unit with one open and one closed mediumtemperature compartment, such as those seen in coffee shops that merchandise baked goods and beverages. These hybrid cases may be either self-contained or remote condensing, and may be cooled by one or more condensing units. They may also have one ev aporator cooling both compartments or one evaporator feeding each compartment separately.

An example of a refrigerato r-freezer is a unit with doors where one compartment operates at medium temperature and one compartment opera tes at low temperature. Remote condensing commercial refrigerator-freezers (with and with out doors) and self-contained commercial refrigerator-freezers without doors may operate in one of two ways. First, they may operate as separate chilled and frozen compartments with ev aporators fed by two sets of refrigerant lines or two compressors. Second, they may operate as sepa rate chilled and frozen compartments fed by one set of low-temperature refrigerant lines (with evaporator pressure regulator (EPR) valves or

similar devices used to raise the eva porator pressure) or one compressor.

An example of a hybrid refrigerator-freeze r is a unit with one open compartment at medium temperature and one closed compartmen t at low temperature. As with pure hybrid cases, these cases may be either self-contained or remote condensing, and may be cooled by one or more condensing units. In the case of remo te condensing equipment, they may operate as separate chilled and frozen compartments with ev aporators fed by two sets of refrigerant lines or two compressors. Or they may operate as separa te chilled and frozen compartments fed by oneset of low-temperature refrigerant lines (with EP R valves or similar devices used to raise the evaporator pressure of one compartment) or one compressor.

During the ANOPR public meeting, stakeh olders commented on how to handle these types of cases. True suggested that for self -contained refrigerator-freezer equipment, DOE should use a weighted average of the minimum standard requirements for the freezer and refrigerator. This is the pres ent standard used in Californi a and Canada, and [EPACT] 2005 for self-contained equipment with doors: 1.63 times freezer volume plus the refrigerated volume gives you a number [adjusted volume]. (Public Meeting Transcript, No. 13.5 at p. 215) Copeland followed up on the True comment on refrigerator-freezers, suggesting that a refrigerator-freezer standard for remote cases should be simple, and that they should be treated as if they have two separate comp ressors. (Public Meeting Transc ript, No. 13.5 at p. 215) Zero Zone stated that a manufacturer could build equipm ent with one or two sepa rate suction lines. If it is built with one, measure the suction pressure for that one and base the EER on that suction pressure, without concern for what is happe ning upstream of the cas e. (Public Meeting Transcript, No. 13.5 at p. 215)

DOE has reviewed the comments and is proposing the following language for requiring manufacturers to meet standards for hybrid cases , refrigerator-freezers, and hybrid refrigerator

freezers:

• For commercial refrigeration equipment w ith two or more compartments (hybrid refrigerators, hybrid freezers, hybrid refr igerator-freezers, and non-hybrid refrigeratorfreezers), the MDEC for each model shall be th e sum of the MDEC values for all of its compartments. For each compartment, measure the TDA or volume of that compartment, and determine the appropriate equipment class based on that compartment’s equipment family, condensing unit configuration, and de signed operating temperature. The MDEC limit for each compartment shall be the cal culated value obtained by entering that compartment’s TDA or volume into the standa rd equation in subsect ion (d)(1) for that compartment’s equipment class. Measure the calculated daily energy consumption (CDEC) or total daily energy consumption (TDEC) for the entire case as follows:

o For remote condensing commercial hybrid refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refr igerator-freezers, where two or more independent condensing units each sepa rately cool only one compartment, measure the total refrigeration load of each compartment separately according to

the ANSI/ASHRAE Standard 72-2005 test procedure. Calculate compressor energy consumption (CEC) for each compartment using Table 1 in ANSI/ARI Standard 1200-2006 using the saturated evaporator temperature for that compartment. The calculated daily ener gy consumption (CDEC) for the entire

case shall be the sum of the CEC for each compartment, fan energy consumption (FEC), lighting energy consumption (LEC ), anti-condensate energy consumption (AEC), defrost energy consumption (D EC), and condensate evaporator pan energy consumption (PEC) (as measur ed in ANSI/ARI Standard 1200-2006).o For remote condensing commercial hybrid refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refr igerator-freezers, where two or more compartments are cooled collectively by one condensing unit, measure the total refrigeration load of the entire case a ccording to the ANSI/ASHRAE Standard 72- 2005 test procedure. Calculate a weighted saturated evaporator temperature for the entire case by (i) multiplying the saturated evaporator temperature of each compartment by the volume of that compartment (as measured in ANSI/ARI Standard 1200-2006), (ii) summing the resu lting values for all compartments, and (iii) dividing the resulting total by the total volume of all compartments.

Calculate the CEC for the entire case using Table 1 in ANSI/ARI Standard 1200- 2006, using the total refrigeration load and the weighted average saturated evaporator temperature. The CDEC for the entire case shall be the sum of the CEC, FEC, LEC, AEC, DEC, and PEC.

o For self-contained commercial hybrid refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refrig erator-freezers, measure the total daily energy consumption (TDEC) for the entire case according to the ANSI/ASHRAE Standard 72-2005 test procedure.

• For remote-condensing and self-contained wedge cases, measure the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-20 05 test procedure. The MDEC for each model shall be the amount derived by inco rporating into the st andards equation in subsection (d)(1) for the appropriate equipmen t class a value for th e TDA that is theproduct of (1) the vertical height of the air- curtain (or glass in a transparent door) and (2) the largest overall width of the case, when viewed from the front. This is identified as

Issue 6 under “Issues on Which DOE Seeks Comment” in Section VII.E of this NOPR.

B. Economic Justification and Energy Savings

1. Economic Impacts on Co mmercial Customers

a. Life-Cycle Cost and Payback Period To evaluate the economic impact of the TSLs on customers, DOE conducted an LCC analysis for each level. More efficient co mmercial refrigeration equipment would affect customers in two ways: annual operating expe nse would decrease and purchase price would increase. DOE analyzed the net effect by calcul ating the LCC. Inputs used for calculating the LCC include total installed costs (i.e., equipmen t price plus installation costs), annual energy savings, average electricity costs by customer, energy price trends, repair costs, maintenance costs, equipment lifetime, and discount rates.

DOE’s LCC and PBP analyses provided five outputs for each TSL that are reported in

Table V-4 through Table V-18 . The first three outputs are the proportion of commercial refrigeration equipment purchases where the purchase of a standard -compliant piece of equipment would create a net LCC increase, no im pact, or a net LCC savings for the customer.

DOE used the estimated distributi on of shipments by efficiency level for each equipment class to

determine the affected customers. The fourth output is the average net LCC savings from standard-compliant equipment. The fifth output is the average PBP for the customer investment in standard-compliant equipment. The payback period is the number of years it would take forthe customer to recover through energy savings the increased costs of higher efficiency equipment compared with the purchase of baseline efficiency equipment.

Table V-4 Summary LCC and PBP Re sults for VOP.RC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 63 Equipment with No Change in LCC (%) 65 47 30 30 2 Equipment with Net LCC Savings (%) 35 53 70 70 34 Mean LCC Savings ($) 1,201 1,143 1,551 1,551 -234 Mean Payback Period (years) 0.9 1.5 2.2 2.2 9.7 Table V-5 Summary LCC and PBP Resu lts for VOP.RC.L Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 68 52 22 8 8 Equipment with Net LCC Savings (%) 32 48 78 92 92 Mean LCC Savings ($) 3,132 4,005 4,089 3,364 3,364 Mean Payback Period (years) 0.8 1.2 1.3 3.0 3.0 Table V-6 Summary LCC and PBP Resu lts for VOP.SC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 19 Equipment with No Change in LCC (%) 65 32 17 17 3 Equipment with Net LCC Savings (%) 35 68 83 83 78 Mean LCC Savings ($) 758 1,065 1,342 1,342 703 Mean Payback Period (years) 0.8 1.8 2.7 2.7 5.9 Table V-7 Summary LCC and PBP Re sults for VCT.RC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 19 19 Equipment with No Change in LCC (%) 79 57 25 7 7 Equipment with Net LCC Savings (%) 21 43 75 74 74 Mean LCC Savings ($) 286 581 1,107 867 867 Mean Payback Period (years) 0.9 1.4 4.6 6.1 6.1 Table V-8 Summary LCC and PBP Re sults for VCT.RC.L Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 60 40 28 8 8 Equipment with Net LCC Savings (%) 40 60 72 92 92 Mean LCC Savings ($) 676 3,594 3,662 3,546 3,546 Mean Payback Period (years) 1.2 2.6 2.6 3.7 3.7Table V-9 Summary LCC and PBP Results for VCT.SC.I Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 52 37 15 7 7 Equipment with Net LCC Savings (%) 48 63 85 93 93 Mean LCC Savings ($) 2,305 3,806 3,841 3,818 3,818 Mean Payback Period (years) 1.1 1.7 2.4 2.5 2.5 Table V-10 Summary LCC and PBP Results for VCS.SC.I Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 76 49 11 11 11 Equipment with Net LCC Savings (%) 24 51 89 89 89 Mean LCC Savings ($) 640 1,191 1,565 1,565 1,565 Mean Payback Period (years) 0.4 0.6 1.4 1.4 1.4 Table V-11 Summary LCC and PBP Results for SVO.RC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 62 Equipment with No Change in LCC (%) 62 42 24 24 4 Equipment with Net LCC Savings (%) 38 58 76 76 34 Mean LCC Savings ($) 810 782 1,106 1,106 -170 Mean Payback Period (years) 0.8 1.5 2.1 2.1 9.7 Table V-12 Summary LCC and PBP Resu lts for SVO.SC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 17 Equipment with No Change in LCC (%) 67 34 19 19 4 Equipment with Net LCC Savings (%) 33 66 81 81 79 Mean LCC Savings ($) 527 756 988 988 516 Mean Payback Period (years) 0.7 1.6 2.6 2.6 5.9 Table V-13 Summary LCC and PBP Re sults for SOC.RC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 71 Equipment with No Change in LCC (%) 83 66 32 32 5 Equipment with Net LCC Savings (%) 17 34 68 68 24 Mean LCC Savings ($) 363 759 819 819 -673 Mean Payback Period (years) 0.6 0.9 1.9 1.9 12.6Table V-14 Summary LCC and PBP Resu lts for HZO.RC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 80 60 39 19 19 Equipment with Net LCC Savings (%) 20 40 61 81 81 Mean LCC Savings ($) 376 792 942 917 917 Mean Payback Period (years) 0.6 0.9 1.4 1.8 1.8 Table V-15 Summary LCC and PBP Resu lts for HZO.RC.L Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 59 39 19 19 19 Equipment with Net LCC Savings (%) 41 61 81 81 81 Mean LCC Savings ($) 593 927 971 971 971 Mean Payback Period (years) 1.1 1.5 1.8 1.8 1.8 Table V-16 Summary LCC and PBP Resu lts for HZO.SC.M Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 73 45 21 10 10 Equipment with Net LCC Savings (%) 27 55 79 90 90 Mean LCC Savings ($) 312 551 759 721 721 Mean Payback Period (years) 0.4 1.1 2.0 2.5 2.5 Table V-17 Summary LCC and PBP Resu lts for HZO.SC.L Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 73 45 21 10 10 Equipment with Net LCC Savings (%) 27 55 79 90 90 Mean LCC Savings ($) 610 1,094 1,585 1,559 1,559 Mean Payback Period (years) 0.4 0.9 1.6 1.9 1.9 Table V-18 Summary LCC and PBP Resu lts for HCT.SC.I Equipment Class Trial Standard Level 1 2 3 4 5 Equipment with Net LCC Increase (%) 0 0 0 0 0 Equipment with No Change in LCC (%) 64 46 30 14 14 Equipment with Net LCC Savings (%) 36 54 70 86 86 Mean LCC Savings ($) 192 692 710 693 693 Mean Payback Period (years) 0.7 1.5 1.6 2.1 2.1

For three equipment classes (VOP.RC.M, SVO.RC.M, and SOC.RC.M) TSL 5 resulted in a negative LCC savings compared with the pu rchase of baseline equipment. For all other equipment classes, TSL 5 showed positive LCC sa vings. DOE noted that for equipment classeswith lighting, the inclusion of LED lighting at TSL 5 had a significant impact on the calculated LCC savings. For equipment classes without lighting (i.e., VCS.SC.I , HZO.RC.L, HZO.SC.M, HZO.SC.L, HCT.SC.I), the LCC savings at TSL 5 wa s either identical to that of TSL 3, or less (between $17 and $38 over the life of the equipment). However, for equipment classes with lighting the difference in the LCC calculated be tween TSL 3 and TSL 5 varied from $23 for VCT.SC.I to $1785 for VOP.RC.M. When compar ed to TSL 3, the estimated reduction in LCC savings for TSL 5 was most pronounced for the three medium temperature equipment classes identified above as having negative LCC compar ed to the baseline (VOP.RC.M, SOC.RC.M, and SVO.RC.M), varying between $1276 and $1785 dollars . For three additional equipment classes (VOP.RC.L, SVO.SC.M, and VOP.SC.M), when compared to TSL 3, the difference in LCC was greater than $500. DOE noted that these are all medium temperat ure cases with the exception of VOP.RC.L, which is a small sales volume unit, similar in design to a medium temperature

VOP.RC.M case.

The inclusion of LED lighting systems result in an incremental increase in installed price. It also increases annualized lighting maintenan ce cost, since LED lights were assumed to be replaced after 50,000 hours or 5.7 years of st eady operation. DOE performed two sensitivity analyses of the effect of projected cost re ductions in LED lighting systems on LCC. These analyses involved five equipment classes: VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M,

and SOC.RC.M. In the first sens itivity analysis, DOE determined the reduction in LED fixture cost, applied to the installed price in 2012, that would be nece ssary to reduce the average LCC for TSL 5 to a level equivalent to the LCC sa vings at TSL 3, the maximum LCC level. DOE determined that for these five equipment classe s, a LED cost reduction ra nging from 37 percentto 44 percent, depending on equipm ent class, would provide an LCC at TSL 5 equivalent to that

at TSL 3.

In the second sensitivity analysis, DOE presumed that the cost for replacement LED

fixtures in 2018 would be reduced by 50 percent of th e cost assumed in the base LCC analysis,

and then calculated the reduction in LED fixt ure cost necessary by 2012 to reduce the average LCC for TSL 5 to a level that pr ovided equivalent LCC savings as TSL 3. DOE determined that for these five equipment classes an LED cost re duction ranging from 29 percent to 40 percent, depending on equipment class, would provide a L CC at TSL 5 equivalent to that at TSL 3.

Based on these analyses, DOE concluded th at a reduction in LED fixture costs of approximately 45 percent would be sufficient to result in the maximum LCC savings for all five equipment classes at TSL 5. DOE estimated that this reduction in LED fi xture costs would also increase LCC savings for all other equipment cl asses with installed lighting at TSL 5. DOE estimates that for all equipment classes to achieve their maximum LCC savings at TSL 5, LED fixture costs must decrease by at least 45 percen t. DOE concluded that a reduction in LED costs of less than 45 percent could re sult in only certain commercial refrigeration equipment classes achieving their maximum LCC savings at TSL 5.

b. Rebuttable Presumption Payback As discussed above, EPCA provides a re buttable presumption that an energy

conservation standard is economical ly justified if the increased purchase cost for the equipment

that meets the standard is less than three times th e value of the first year energy savings resultingfrom the standard. DOE calculated a rebuttabl e presumption payback period for each TSL to determine if DOE could presume that a standard at that level is economically justified. Rather than using distributions for input values, DOE used discrete values and, as required by EPCA,

based the calculation on the DOE commercial refrigeration equipment test procedure assumptions. As a result, DOE calculated a si ngle rebuttable presumption payback value for each standard level, and not a di stribution of payback periods.

To evaluate the rebuttable presumption, DOE estimated the additional customer price of a more efficient, standard-compliant unit using the average customer markup, and compared this cost to the value of the energy saved during th e first year of operation of the equipment as determined by ANSI/ARI Standard 1200-2006. DOE interprets that the increased cost of purchasing a standard-compliant unit includes the cost of installing the equi pment for use by the purchaser. DOE calculated the rebuttable presump tion PBP, or the ratio of the value of the increased installed price above the baseline efficiency level to the first year’s energy cost savings. When this PBP is less than three years, the rebuttable presumption is satisfied; when this PBP is equal to or more than three years, the rebuttable presumption is not satisfied.

Rebuttable presumption PBPs were calculate d based on single-point national average

values for installed costs and en ergy prices appropriate to commerc ial refrigeration equipment. Equipment prices are based on a shipment-wei ghted average distribut ion markup for remote condensing equipment or self-contained equipmen t, as applied to the MSP for each equipment

class. The installed cost is based on the na tional average equipment price and the national average installation cost for remote condensing or self-contained equipment as appropriate.Average first-year energy costs were calculated as the product of the annual energy consumption used in the LCC and the shipment-weighted na tional-average electricity price, which was calculated using the shipment weights for the f our business types using commercial refrigeration equipment.

The equation for the rebuttable PBP is:

PBP =

∆ IC / ∆ EC

where

PBP = payback period in years,

∆ IC = difference in the total installed cost between the more efficient standard level equipment (energy consumption levels 2, 3, etc.) and the baseline (energy consumption level 1) equipment, and

∆ EC = difference in annual energy costs.

PBPs are expressed in years. PBPs greater th an the life of the equipment means that the

increased total installed cost of the more e fficient equipment is not recovered in reduced operating costs for the more efficient equipment. The rebuttable presumption PBPs differ from

the other PBPs calculated in the LCC analysis (see Section IV.E.12 of this NOPR) because they do not include maintenance or repair costs and th ey are based on single point values instead of

distributions for installation co sts or energy costs. The base line efficiency level for the rebuttable presumption calculation is the baseline established in the engi neering analysis.Table V-19 shows the nationally averaged rebutta ble presumption paybacks calculated for all equipment classes and efficiency levels. The highest efficiency level with a rebuttable presumption payback of less than three years is also shown in Table V-19 for each equipment class. For eight equipment classe s, the rebuttable presumption criter ia were satisfied at all TSLs. At TSL 4, the rebuttable presumption criteria are satisfied for 13 equipment classes. At TSL 3, the rebuttable presumption criteria are satisf ied for 14 equipment classes. At TSL 2, the rebuttable presumption criteria were satisfied fo r all equipment classes. However, while DOE has examined the rebuttable presumption PBPs, DOE has not determined economic justification for any of the standard levels analyzed base d on the ANOPR rebuttable presumption analysis. The economic justification for each TSL for each equipment cla ss will take into account the more detailed analysis of the economic impact s of increased efficiency pursuant to Section 325(o)(2)(B)(i) of EPCA. (42 U.S. C. 6295(o)(2)(B)(i) and 6316(e)(1))Table V-19 Rebuttable Presumption Payback P eriods by Efficiency Level and Equipment Class Rebuttable Presumption Payback Period (Years)

Equipment Type Level 1 Level 2 Level 3 Level 4 Level 5 Highest TSL with PBP < 3 Years VOP.RC.M 0.8 1.1 1.7 1.7 5.9 4 VOP.RC.L 0.7 1.1 1.2 2.5 2.5 5 VOP.SC.M 0.8 1.5 2.3 2.3 4.5 4 VCT.RC.M 0.8 1.2 4.1 5.4 5.4 2 VCT.RC.L 1.0 2.4 2.4 3.3 3.3 3 VCT.SC.I 1.0 1.6 2.2 2.3 2.3 5 VCS.SC.I 0.4 0.6 1.3 1.3 1.3 5 SVO.RC.M 0.8 1.1 1.7 1.7 5.9 4 SVO.SC.M 0.6 1.3 2.2 2.2 4.5 4 SOC.RC.M 0.5 0.8 1.4 1.4 7.1 4 HZO.RC.M 0.5 0.8 1.2 1.6 1.6 5 HZO.RC.L 1.0 1.3 1.6 1.6 1.6 5 HZO.SC.M 0.4 1.0 1.9 2.3 2.3 5 HZO.SC.L 0.3 0.8 1.5 1.7 1.7 5 HCT.SC.I 0.7 1.4 1.5 2.0 2.0 5

c. Life-Cycle Cost Sub-Group Analysis Using the LCC spreadsheet model, DOE estimated the impact of the TSLs on the following customer sub-group: small businesses. For the retail food sale s business, the Small Business Association (SBA) defines as small busin esses supermarkets and other grocery stores and convenience stores with less than $25 million in total annual sales. For specialty stores (e.g. meat markets, bakeries, fish and seafood market s), this limit is set at less than $6.5 million in annual sales. According to th e Food Marketing Institute, the av erage supermarket had sales of approximately $15 million in 2006, so a small business could be represented by one to two average-size supermarkets or a chain of sma ller grocery or convenience stores. The Food Marketing Institute defines independent stores as a retailer with one to ten stores, so most small supermarkets or grocery businesses as define d by SBA would be classified as independentgrocery stores by the industry. A somewhat larg er chain of convenience stores could still be

classified as a small business.

DOE estimated the LCC and PBP for sma ll food sales businesses defined by SBA by presuming that most small business customers c ould be represented by the analysis performed for small grocery and convenien ce store owners. DOE assumed, however, that the smaller, independent grocery and convenien ce store chains may not have access to national accounts, but would instead purchase equipment primarily thro ugh distributors and grocery wholesalers. DOE

modified the distribution channe ls for remote condensing and self-contained equipment to these

small businesses as follows:

• For remote condensing equipment, 15 per cent of the sales were assumed to pass through a manufacturer-to-dist ributor-to-contractor-to-cu stomer channel, and 85 percent were assumed to be purchased through a manufacturer-to-distributor-tocustomer channel.

• For self-contained equipment, 35 percent of sales were assumed to pass through a

manufacturer-to-distributo r-to-contractor-to-customer channel, and 65 percent were assumed to be purchased through a manufacturer-to-dist ributor-to-customer

channel.

In both cases, the distri bution chain markups were calculated accordingly. Table V-20 shows the mean LCC savings from proposed energy conservation standards for the small business sub-group, and Table V-21 shows the mean payback peri od (in years) for this sub-group. More detailed discussion on the LCC sub- group analysis and results can be found in Chapter 12 of the TSD.

Table V-20 Mean Life-Cycle Cost Saving s for Commercial Refrigeration Equipment Purchased by LCC Sub-Group (Small Business) (2007$) * Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 VOP.RC.M 1,536 1,524 2,096 2,096 564 VOP.RC.L 3,995 5,158 5,301 4,688 4,688 VOP.SC.M 968 1,413 1,840 1,840 1,308 VCT.RC.M 366 757 1,689 1,625 1,625 VCT.RC.L 876 4,842 4,941 5,042 5,042 VCT.SC.I 2,957 4,981 5,155 5,151 5,151 VCS.SC.I 805 1,511 2,031 2,031 2,031 SVO.RC.M 1,036 1,044 1,492 1,492 400 SVO.SC.M 669 994 1,346 1,346 953 SOC.RC.M 461 973 1,107 1,107 (175) HZO.RC.M 476 1,013 1,221 1,202 1,202 HZO.RC.L 766 1,206 1,274 1,274 1,274 HZO.SC.M 393 708 1,005 974 974 HZO.SC.L 766 1,394 2,069 2,052 2,052 HCT.SC.I 244 898 925 919 919

* Numbers in parentheses indicate negative savings Table V-21 Mean Payback Period for Commercial Refrigeration Equipment Purchased by LCC Sub-Group (Small Business) (Years) Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 VOP.RC.M 0.8 1.3 2.0 2.0 8.5 VOP.RC.L 0.7 1.1 1.2 2.7 2.7 VOP.SC.M 0.8 1.6 2.4 2.4 5.2 VCT.RC.M 0.8 1.3 4.2 5.6 5.6 VCT.RC.L 1.1 2.4 2.4 3.4 3.4 VCT.SC.I 1.0 1.6 2.1 2.2 2.2 VCS.SC.I 0.4 0.6 1.3 1.3 1.3 SVO.RC.M 0.8 1.3 1.9 1.9 8.5 SVO.SC.M 0.6 1.4 2.3 2.3 5.2 SOC.RC.M 0.5 0.8 1.7 1.7 10.8 HZO.RC.M 0.5 0.8 1.2 1.6 1.6 HZO.RC.L 1.0 1.4 1.7 1.7 1.7 HZO.SC.M 0.4 1.0 1.8 2.3 2.3 HZO.SC.L 0.3 0.8 1.5 1.7 1.7 HCT.SC.I 0.6 1.3 1.4 1.9 1.9For commercial refrigeration equipment, th e LCC and PBP impacts for small businesses

are similar to those of all customers as a whole. While the discount rate for small grocery stores is higher than that for commercial refrigerati on equipment customers as a whole and equipment prices are higher due to the hi gher markups, these small business customers appear to retain commercial refrigeration equipment over longer pe riods, and generally, smaller stores tend to pay higher electrical prices. The average LCC savings for the small business sub-group is slightly higher than that calculated for the aver age commercial refrigeration equipment customer, and the average PBP is slightly shorter than th e national average. DOE tentatively concluded

that the small food sales businesses as define d by SBA will not experience economic impacts significantly different or more negative than those impacts on food sales businesses as a whole.

2. Economic Impacts on Manufacturers DOE performed an MIA to estimate the impact of amended energy conservation standards on commercial refrigeration equipment ma nufacturers (Chapter 13 of the TSD).

a. Industry Cash-Flow Analysis Results

Table V-22 and Table V-23 show the MIA results for each TSL using both markup

scenarios described above for co mmercial refrigeration equipment. 24

24 The MIA estimates the impacts on commercial refrigeration equipment manufacturers of equipment in the entire range of equipment classes (i.e., the MI A results in Table V-22 and Table V-23 take into consideration the impacts on manufacturers of equipment from all equipment classes).Table V-22 Manufacturer Impact Analysis fo r the Commercial Refrigeration Equipment Industry Under the Preservation of Gr oss Margin Percentage Markup Scenario Preservation of Gross Margin Percentage Markup Scenario with a Rollup Shipment Scenario Efficiency Level Units Base Case 1 2 3 4 5 INPV 2007$ Millions 510 510 517 493 471 493 2007$ Millions - (0) 6 (17) (40) (18) Change in INPV (%) - 0.00% 1.22% -3.30% -7.76% -3.49% Energy Conservation Standards Equipment Conversion Expenses 2007$ Millions - 0.5 2.8 20.6 40.4 51.6

Energy Conservation Standards Capital Investments 2007$ Millions - 0.8 5.0 36.3 71.2 90.8

Total Investment Required 2007$ Millions - 1.3 7.8 57.0 111.6 142.4 Table V-23 Manufacturer Impact Analysis fo r the Commercial Refrigeration Equipment Industry Under the Preservation of Operating Profit Markup Scenario Preservation of Operating Profit Markup Scenario with a Rollup Shipment Scenario Efficiency Level Units Base Case 1 2 3 4 5 INPV 2007$ Millions 510 447 423 382 330 226 2007$ Millions - (63) (88) (129) (180) (285) Change in INPV (%) - -12.34% -17.16% -25.20% -35.32% -55.77% Energy Conservation Standards Equipment Conversion Expenses 2007$ Millions - 0.5 2.8 20.6 40.4 51.6

Energy Conservation Standards Capital Investments 2007$ Millions - 0.8 5.0 36.3 71.2 90.8

Total Investment Required 2007$ Millions - 1.3 7.8 57.0 111.6 142.4

At TSL 1, the impact on INPV and cash flow varies greatly depending on the manufacturers and their ability to pass on MPC in creases to the customer. DOE estimated the impacts in INPV at TSL 1 to range from appr oximately no impact to -$63 million, which is a change in INPV of zero percent to -12.34 percent. At this level, the industry cash flow is $50.9 million, which is nearly the same as the base cas e value of $51.4 million in the year leading up to

the standards. Since DOE estimates that more than 80 percent of the equipment being sold is already at or above this level, manufacturers th at currently meet TSL 1 will not have to makeadditional modifications to their equipment lin es to conform to th e energy conservation standards. DOE expects the lower end of the im pacts to be reached, becau se manufacturers will be able to fully recover the incr ease in manufacturer production cost from customers. Therefore, DOE expects that industry revenues and costs will not be significan tly negatively affected at TSL

1.

At TSL 2, the impact on INPV and cash fl ow continues to vary depending on the manufacturers and their ability to pass on MPC in creases to the customer. DOE estimated the impacts in INPV at TSL 2 to range from appr oximately $6 million to -$88 million, which is a change in INPV of 1.22 percent to -17.16 percent. At this level, the industry cash flow decreases by approximately 6 percent, to $48.2 million, compar ed to the base case value of $51.4 million in the year leading up to the standa rds. DOE estimates that roug hly 45 percent of the equipment being sold is already at or above this level. The required higher level of efficiency will cause some manufactures to modify their equipmen t lines to conform to the energy conservation standards. DOE does not expect industry revenues and costs to be affected significantly as long as manufacturers fully recover the increase in manufacturer produc tion cost from customers. The positive INPV value is explained by the assu mption that MSP increases due to higher costs of the equipment, so that manufacturers fully rec over and even surpass the investments needed to

achieve this level.

At TSL 3, DOE estimated the impacts in INPV to range from approximately -$17 million to -$129 million, which is a change in INPV of -3.3 percent to -25.2 percent. At this level, the industry cash flow decreases by approximately 45.5 percent, to $28 million, compared to thebase case value of $51.4 million in the year leading up to the standards. Based on information submitted by industry, the majority of manufacturer s would require a complete redesign of their equipment, and therefore DOE expects that co mmercial refrigeration equipment manufacturers will have some difficulty fully passing on larger MPC increases to customers. Manufacturers expect that the actual impacts will be closer to the higher end of the range of impacts (i.e., a drop of 25.2 percent in INPV).

At TSL 4, DOE estimated the impacts on INPV to range from -$40 million to -$180 million, which is a change in INPV of approximate ly -7.76 percent to -35.32 percent. At this level, the industry cash flow decreases by a pproximately 89.3 percent to $5.5 million, compared to the base case value of $51.4 million in the ye ar leading up to the standards. TSL 4 was created as a combination of TSL 3 (minimum L CC) and TSL 5 (max-tech). Manufacturers were not directly asked about this combination TSL during interviews. However, DOE estimated the range of impacts at TSL 4 based on the expected impacts manufacturers reported for TSL 3 and TSL 5. Since manufacturers expect that the actual impacts will be closer to the higher range of impacts at TSL 3 and TSL 5, DOE expects that the actual impacts for TSL 4 will also be at the higher range (i.e., a drop of 35.32 percent in INPV).

At TSL 5 (max-tech), DOE estimated the impa cts in INPV to range from -$18 million to -$285 million, which is a change in INPV of appr oximately -3.49 percent to -55.77 percent. At this level, the industry cash flow decreases by approximately 114 percent to -$7.2 million, compared to the base case value of $51.4 million in the year leading up to the standards. Athigher TSLs, manufacturers have more difficulty fully passing on larger MPC increases to customers, and therefore manufacturers expect that the actual impacts will be closer to the higher end of the range of impacts (i.e., a drop of 55.77 pe rcent in INPV). Curre ntly, there is only one model being manufactured at these efficiency le vels for most equipment classes, and some equipment classes have no equipment at these leve ls. At TSL 5, DOE recognizes that there is a risk of very large negative impacts if manufact urers’ expectations ar e accurate about reduced profit margins. During the interviews, manufacturers expressed great concern at the possibility of requiring an entire equipment line to be manufactured at the max- tech levels.

b. Cumulative Regulatory Burden While any one regulation may not impose a significant burden on manufacturers, the

combined effects of several im pending regulations may have se rious consequences for some manufacturers, groups of manufactur ers, or an entire i ndustry. Assessing the impact of a single regulation may overlook this cu mulative regulatory burden.

In addition to the energy conservatio n regulations on commercial refrigeration equipment, several other Fede ral regulations and pending regu lations apply to commercial refrigeration equipment and other equipment pr oduced by the same manufacturers or parent companies. DOE recognizes that each regula tion can significantly affect manufacturers’ financial operations. Multiple regulations affecting the same manufacturer can quickly strain manufacturers’ profits and possi bly cause an exit from the market. An example of these additional regulations is the U.S. Environmenta l Protection Agency (EPA)-mandated phaseout of hydrochlorofluorocarbons (HCFCs) and the potential residential central air conditioners and heatpumps Federal energy c onservation standard. Table V-24 provides the timetables for these mandatory or potential regulati ons. DOE believes that the cumulative burden of the HCFC phaseout is minimal because much of the co mmercial refrigeration equipment industry has already initiated the transition to HFC refrigerants. As shown in Section IV.B.3 above, ARI stated that the data it provided to DOE was ba sed on HFC refrigerants, and DOE therefore used HFC refrigerants in its analysis. DOE is aware of the industry’s transition to HFC refrigerants, but requests comment on any cumu lative regulatory burdens from the combined effects of impending regulations that may affect manufacturers.

Table V-24 Federal Regulation Timetables Regulation Key Affected Appliance Effective Date Potential DOE energy conservation standards Central air conditioners and heat pumps (residential) 06/2011 Potential DOE energy conservation standards Room air conditioners 06/2011 EPA phaseout of HCFC refrigerant on new equipment Room and residential central air conditioners, and commercial air conditioners 01/2010

EPA phaseout of HCFC blowing agents on new equipment Commercial refrigeration equipment 01/2010

Production of foam insulation uses a blowing agent. The EPA strategy for meeting U.S. obligations under the Montreal Pr otocol requires the United St ates to phase out the production and use of HCFC blowing agents. HCFC-22 a nd HCFC-142b will be phased out on January 1, 2010. This affects equipment manufacturing in th e United States after this date and causes

manufacturers to switch to other blowing agents with no ozone depletion potential.

DOE recognizes that some parent compan ies of commercial refrigeration equipment manufacturers could also be affected by the pot ential energy conservation standards for central air conditioners and heat pumps and for room ai r conditioners. Additional investments necessaryto meet these potential standards could have si gnificant impacts on manufacturers of commercial refrigeration equipment. DOE seeks comment on the magnitude of impacts for cumulative regulatory burden on manufacturers for potential energy conservation standards for central air conditioners and heat pumps and for room air conditioners.

c. Impacts on Employment DOE used the GRIM to assess the impacts of energy conservation standards on commercial refrigeration equipment employment. DOE used statistical data from the U.S. Census Bureau’s 2006 Annual Survey of Manufacture s, the results of the engineering analysis,

and interviews with manufactur ers to estimate the inputs necessa ry to calculate industry-wide labor expenditures and employment levels.

Currently the vast majority of commercial re frigeration equipment is manufactured in the

U.S. Based on the GRIM results and intervie ws with manufactures, DOE expects that there would be positive direct employment impact s among domestic commercial refrigeration equipment manufacturers for TSL 1 through TSL 5. This conclusion ignores the possible relocation of domestic jobs to lower-labor-cost countries which may occu r independently of new standards or may be influenced by the level of investments required by new standards. Because the labor impacts in the GRIM do not take relocation into account, the labor impacts would be

different if manufacturers chose to relocate to lower cost countries. Manufactures stated that, although there are no current plans to relocate pro duction facilities, at hi gher TSLs there would be increased pressure to cut costs, which c ould result in relocation. Chapter 13 of the TSDfurther discusses the employment impacts and exhib its the actual changes in employment levels by TSL.

The conclusions in this section are in dependent of any conclusions regarding employment impacts from the broader U.S. economy estimated in the Employment Impact Analysis. These impacts are documented in Chapter 15 of this TSD.

d. Impacts on Manufacturing Capacity According to the majority of commercial refrigeration equipment manufacturers, new energy conservation standards will not significantly affect manuf acturers’ production capacity. Any necessary redesign of commercial refrigeration equipment will not change the fundamental assembly of the equipment. However, manufactur ers anticipate some mino r changes to tooling. Thus, DOE believes manufacturers will be able to maintain manufacturing capacity levels and

continue to meet market demand unde r new energy conservation standards.

e. Impacts on Sub-Groups of Manufacturers As discussed above, using average cost a ssumptions to develop an industry cash-flow estimate is not adequate for assessing differentia l impacts among sub-groups of manufacturers. Small manufacturers, niche equipment manufact urers, or manufacturers exhibiting a cost structure that differs largely fr om the industry average could be affected differently. DOE used the results of the industry characterization to group ma nufacturers exhibiting similar

characteristics.DOE evaluated the impact of new energy c onservation standards on small businesses, as defined by the SBA for the commercial refrig eration equipment indus try, as manufacturing enterprises with 750 or fewer employees. DOE shared the interview guides with small commercial refrigeration equipment manufacturer s and tailored specific questions for them. During DOE’s interviews, small manufacturers sugge sted that the impacts of standards on them would not differ from impacts on larger companie s within the industry (Chapter 13 of the TSD).

3. National Impact Analysis

a. Amount and Significance of Energy Savings To estimate the energy savings through 2042 due to new energy conservation standards, DOE compared the energy consumption of commer cial refrigeration equipment under the base case to energy consumption of commercial refr igeration equipment under a new standard. The energy consumption calculated in the NIA is so urce energy, taking into account energy losses in the generation and transmission of el ectricity as discussed in Section IV.J

.

DOE tentatively determined the amount of en ergy savings at each of the 5 TSLs being considered for the 15 primary equipment cla ss analyzed and aggregated the results. Table V-25 shows the forecasted aggregate national energy savi ngs for all 15 equipment classes at each TSL. The table also shows the magnitude of the estimat ed energy savings if the savings are discounted at seven percent and three percen t. Each TSL considered in this rulemaking would result in significant energy savings, and the amount of savings increases with higher energy conservation standards (Chapter 11 of the TSD).Table V-25 Summary of Cumulative Na tional Energy Savings for Commercial Refrigeration Equipment (Energy Savings for Units Sold from 2012 to 2042) Primary National Energy Savings (quads) (sum of all equipment classes) Trial Standard Level Undiscounted 3% Discounted 7% Discounted 1 0.141 0.073 0.034 2 0.545 0.284 0.132 3 0.715 0.372 0.173 4 0.832 0.433 0.201 5 1.208 0.630 0.292 DOE reports both undiscounted and discounted values of energy savings. Each TSL analyzed results in additional energy savings , ranging from an estimated 0.141 quads to 1.208 quads for TSLs 1 through 5 (undiscounted).

b. Net Present Value The net present value analysis is a measure of the cumulative benefit or cost of standards

to the Nation. In accordance with the Office of Management and Budget (OMB)’s guidelines on regulatory analysis (OMB Circ ular A-4, Section E, Septem ber 17, 2003), DOE calculated an estimated NPV using both a seven percent and a th ree percent real discount rate. The seven percent rate is an estimate of the average before-tax rate of return to private capital in the U.S. economy, and reflects the returns to real estate and small busine ss capital as well as corporate capital. DOE used this discount ra te to approximate the opportunity cost of capital in the private sector, since recent OMB analysis has found the averag e rate of return to cap ital to be near this rate. In addition, DOE used the th ree percent rate to capture the potential effects of standards on private consumption (e.g., through higher prices for equipment and purchase of reduced amounts of energy). This rate represents the rate at which society disc ounts future consumption flows to their present value. This rate can be approxi mated by the real rate of return on long-term Government debt (e.g., the yiel d on Treasury notes minus the a nnual rate of change in theConsumer Price Index), which has averaged about three percent on a pre-tax basis for the last 30

years.

Table V-27 shows the estimated cumulative NPV fo r commercial refrigeration equipment resulting from the sum of the NPV calculated for each of the 15 primary equipment classes analyzed. Table V-27 assumes the AEO2007 reference case for ecast for electricity prices. At a seven percent discount rate, TSL 1-4 show pos itive cumulative NPVs. The highest NPV is provided by TSL 3 at $1.20 billion. TSL 4 provided $1.10 billion, close to that of TSL 3. TSL 5 showed a negative NPV at -$200 million, the result of negative NPV observed in five equipment classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, S VO.SC.M, and SOC.RC.M). DOE determined through a sensitivity analysis that a 50 percen t reduction in LED fixture costs, applied to equipment sold during the analysis period star ting in 2012, would yield a NPV of $1.62 billion

for TSL 5. 25

At a three percent discount ra te, all TSLs showed a positiv e NPV, with the highest NPV provided at TSL 3 (i.e., $3.25 billio n). TSL 4 provided a near e quivalent NPV at $3.24 billion. TSL 5 provided a NPV of $1.16 billion dollars . Three equipment classes (VOP.RC.M, SVO.RC.M, and SOC.RC.M) were estimated to have negative NPVs at a three percent discount rate at TSL 5. DOE determined through a sensitiv ity analysis that a 50 percent reduction in LED fixture costs, applied to all equipment sold during the analysis period starting in 2012, would result in the greatest NPV at TSL 5 with $4.76 billion.

25 DOE anticipates a reduction in installed cost of LED sy stems over time. The projected reduction in price for LED systems is provided and discussed in Sections V.C and IV.B.3.c of this NOPR and Appendix B of the TSD.DOE also determined that a six percent re duction in LED system costs by 2012 would be sufficient to provide a positive NPV at TSL 5 in aggregate across all equipment classes at a seven percent discount rate. DOE recognizes th at the aggregate six percent reduction in LED system costs could be attained by 2012 because of the rapid development of LED technology. In addition, DOE expects that a 50 percent reduction in LED system costs is possible in 2012, given the projections discussed prev iously, and considers a 50 percent reduction likely to occur by 2018 as examined in the LCC LED replacement cost sensitivity analysis.

Table V-26 shows the estimated NPV results at TSL 5, for projected LED system cost reductions of six percent and 50 percent.

Table V-26 Summary of Net Present Value Re sults with LED System Cost Sensitivity* TSL 5 TSL 5 Including 6% LED System Cost Reduction TSL 5 Including 50% LED System Cost Reduction (0.20) 0.03 1.62 NPV (2007$billion):

7% Discount Rate 3% Discount Rate 1.16 1.62 4.76 * Parentheses indicate negative (-) values.

In addition to the reference case, DOE examined the NPV under the AEO2007 highgrowth and low-growth electricity price forecasts. The results of this examination can be found in Chapter 11 of the TSD.Table V-27 Summary of Cumulative Net Present Value for Commercial Refrigeration Equipment - AEO2007 Reference Case NPV* (billion 2007$) Trial Standard Level 7% Discount Rate 3% Discount Rate 1 0.33 0.82 2 0.98 2.59 3 1.20 3.25 4 1.10 3.24 5 (0.20) 1.16 * Numbers in parentheses indicate negative NPV, i.e., a net cost.

c. Impacts on Employment DOE develops general estimates of the i ndirect employment impacts of proposed standards on the economy. As discussed above, DOE expects energy conservation standards for commercial refrigeration equipment to reduce en ergy bills for commercial customers, and the resulting net savings to be redire cted to other forms of economic ac tivity. DOE also realizes that these shifts in spending and ec onomic activity could affect the demand for labor. To estimate these effects, DOE used an input/output model of the U.S. economy using Bureau of Labor Statistics (BLS) data (as described in Section IV.K ; see Chapter 15 of the TSD for details).

This input/output model suggests the propos ed commercial refrigeration equipment energy conservation standards are likely to sligh tly increase the net demand for labor in the economy. Neither the BLS data nor the input/out put model used by DOE includes the quality or wage level of the jobs. As shown in Table V-28 , DOE estimates that ne t indirect employment impacts from a proposed commercial refrigeration equipment standard are likely to be very small. The net increase in jobs is so small th at it would be impercep tible in national labor statistics and might be offset by other, unanticipated effects on employment.Table V-28 Net National Change in Indirect Employment, Jobs in 2042 Net National Change in Jobs Trial Standard Level 2012 2022 2032 2042 1 0 324 448 505 2 -6 1,270 1,744 1,970 3 -15 1,680 2,312 2,606 4 -94 2,204 3,047 3,434 5 -315 3,317 4,607 5,187 Maximum Job Impact -315 3,317 4,607 5,187

4. Impact on Utility or Performance of Equipment In performing the engineering analysis, DOE considered design options that would not lessen the utility or performa nce of the individual classes of equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV) an d 6316(e)(1)) As presented in the sc reening analysis (Chapter 4 of the TSD), DOE did not consider design options that reduce the utility of the equipment. Because no design options were considered th at reduce utility, DOE tentativel y concluded that none of the efficiency levels proposed for commercial refrigeration equipment reduce the utility or performance of the equipment.

5. Impact of Any Lessening of Competition EPCA directs DOE to consider any lessening of competition that is likely to result from

standards. It directs the Atto rney General to determine in wr iting the impact, if any, of any lessening of competition likely to result fr om a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V) and 6316(e)(1 )) To assist the Attorney General in making such a determination, DOE has provided the Department of Justice (DOJ) with copies of this Notice and the TSD for review. During MIA interviews, do mestic manufacturers indicated that foreign manufacturers have entered the commercial refrig eration equipment market over the past several years. Manufacturers also stated that while there has been significant consolidation withsupermarket chains, little or no consolidation has occurred among commercial refrigeration manufacturers in recent years. DOE believes that these trends will continue to happen in this market regardless of the proposed standard level chosen.

6. Need of the Nation to Conserve Energy An improvement in the energy efficiency of commercial refrigeration equipment is likely to improve the security of the Nation’s energy system by reducing overall demand for energy, and thus reduce the Nation’s reliance on foreign sources of energy. Reduced demand may also improve the reliability of the electricity system, particularly during peak-load periods. As a measure of this reduced demand, DOE expects th e proposed standards (TSL 4) to prevent the need for the construction of new power plants totaling approximately 643 MW of electricity generation capacity in 2042.

Enhanced energy efficiency also produces e nvironmental benefits. The expected energy savings from higher commercial refrigeration e quipment standards will reduce the emissions of air pollutants and greenhouse gases associated with energy production and fossil fuel usage.

Table V-29 shows estimated cumulative CO 2 , NOx, and Hg emissions reductions for all the commercial refrigeration equipment classes ove r the forecast period. The expected energy savings from commercial refrigeration equipment standards will reduce the emissions of greenhouse gases associated with energy production, and it may re duce the cost of maintaining

nationwide emissions standards and constraints.Table V-29 Summary of Emissions Reduction s for Commercial Refrigeration Equipment (cumulative reductions for equipment, 2012 to 2042) Trial Standard Levels TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Emissions Reductions CO 2 (Mt) 7.37 28.47 37.37 43.50 63.17 NOx (kt) 2.74 10.58 13.88 16.16 23.47 Hg (t) 0.09 0.36 0.47 0.54 0.80 Mt = million metric tons kt = thousand tons t = tons

The estimated cumulative CO 2 , NOx, and Hg emission reductions for the proposed standard are 43.5 Mt, 16.16 kt, and 0.54 t, respectively, for all 15 equipment classes over the period from 2012 to 2042. However, TSL 5 provides the greatest re duction of emissions of all

the TSLs considered. In the environmental a ssessment (Chapter 16 of the TSD), DOE reports estimated annual changes in CO 2 , NOx, and Hg emissions attributable to each TSL. As

discussed in Section IV.L , DOE does not report SO 2 emissions reduction from power plants because reductions from an energy conservation st andard would not affect the overall level of

SO 2 emissions in the United States due to the emissions caps for SO 2 .

The NEMS-BT modeling assumed that NO X would be subject to th e Clean Air Interstate Rule (CAIR) issued by the U.S. Envir onmental Protection Agency on March 10, 2005. 26 70 FR 25162 (May 12, 2005). On July 11, 2008, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued its decision in North Carolina v. Environmental Protection Agency , 27 in which the court vacated the CAIR. If left in place, the CAIR would have permanently capped emissions of NO X in 28 eastern States and the District of Columbia. As

with the SO 2 emissions cap, a cap on NO X emissions would have meant that equipment energy conservation standards are not likely to have a physical effect on NO X emissions in States

26 See http://www.epa.gov/cleanairinterstaterule/

. 27 Case No. 05-1244, 2008 WL 2698180 at *1 (D.C. Cir. July 11, 2008).covered by the CAIR caps. While the caps would have meant that physical emissions reductions in those States would not have resulted from the energy conservation standards we are proposing today, the standards might have produced an envi ronmental-related economic impact in the form of lower prices for emissions al lowance credits, if la rge enough. DOE notes that the estimated

total reduction in NO X emissions, including projected em issions or corresponding allowance credits in States covered by the CAIR cap was between 0.004 and 0.034 percent of the nationwide NOx emissions as a whole, percentages that DOE estimated were too small to affect allowance prices for NOx under the CAIR.

Even though the D.C. Circuit vacated the CA IR, DOE notes that the D.C. Circuit left

intact EPA's 1998 NO X SIP Call rule, which capped seas onal (summer) NOx emissions from electric generating units and othe r sources in 23 jurisdictions a nd gave those jurisdictions the option to participate in a cap and trade program for those emissions. See 63 Fed. Reg. 57356, 57359 (Oct. 27, 1998). 28 Accordingly, DOE is considering whether changes are needed to its plan for addressing the issue of NO X reduction. DOE invites public comment on how the agency

28 In the NO x SIP Call rule, EPA found that sources in the District of Columbia and 22 “upwind” states (States) were emitting NO x (an ozone precursor) at levels that significantly contributed to “downwind” states not attaining the ozone NAAQS or at levels that interfered with states in a ttainment maintaining the ozone NAAQS. In an effort to ensure that “downwind” states attain or continue to a ttain the ozone NAAQS, EPA established a region-wide cap for NO x emissions from certain large combustion sources and set a NO x emissions budget for each State. Unlike the cap that CAIR would have established, the NOx SIP Ca ll Rule’s cap only constrains seasonal (summer time) emissions. In order to comply with the NO x SIP Call Rule, States could elect to participate in the NO x Budget Trading Program. Under the NO x Budget Trading Program, each emission source is required to have one allowance for each ton of NO x emitted during the ozone season. States have flexibility in how they allocate allowances through their State Implementation Plan s but States must remain within th e EPA-established budget. Emission sources are allowed to buy, sell and bank NO x allowances as appropriate. It shou ld be noted that, on April 16, 2008, EPA determined that Georgia is no longer subject to the NO x SIP Call rule.should address this issue, in cluding how it might value NO X emissions for States now that the

CAIR has been vacated. 29

With regard to mercury emissions, DOE is able to report an estimate of the physical quantity changes in mercury emissions associated with an energy conservation standard. Based on the NEMS-BT modeling, Hg emissions show a slight decrease in the period from 2012 to 2042. These changes in Hg emissions, as shown in Table V-29 , are extremely small with a range of between 0.02 and 0.14 percent of national ba se case emissions depending on TSL.

The NEMS-BT model assumed that mercury em issions would be subject to EPA’s Clean Air Mercury Rule 30 (CAMR), which would have permanently capped emissions of mercury for new and existing coal-fired plants in all States by 2010. Similar to SO 2 and NO x , DOE assumed that under such a system, energy conservation st andards would result in no physical effect on these emissions, but might result in an environmen tal-related economic bene fit in the form of a lower price for emissions allowance credits, if large enough. DOE estimated that the change in Hg emissions from standards would not be la rge enough to influence allowance prices under

CAMR.

On February 8, 2008, the D.C. Circuit issued its decision in New Jersey

. v. Environmental Protection Agency , 31 in which the Court, among other actions, vacated the CAMR referenced above. Accordingly, DOE is c onsidering whether changes are needed to its

29 In anticipation of CAIR replacing the NOx SIP Call Rule, many States adopted sunset provisions for their plans implementing the NOx SIP Call Rule. The impact of the NOx SIP Call Rule on NOx emissions will depend, in part, on whether these implementa tion plans are reinstated. 30 70 FR 28606 (May 18, 2005). 31 No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8, 2008).plan for addressing the issue of mercury emissions in light of the D.C. Circuit’s decision. DOE invites public comment on addressing me rcury emissions in this rulemaking.

DOE is considering taking into account a monetary benefit of CO 2 emission reductions associated with this rulemaking. During the prepar ation of its most recent review of the state of climate science, the Intergovernmental Pane l on Climate Change (IPCC) identified various estimates of the present value of reducing carbon-dioxide emissi ons by one ton over the life that these emissions would remain in the atmosphere. The estimates reviewed by the IPCC spanned a range of values. In the absence of a consensus on any single estimate of the monetary value of

CO 2 emissions, DOE used an estimate identi fied by the study cited in Summary for Policymakers prepared by Working Group II of the IPCC’s Fourth Assessment Report to estimate the potential monetary value of the CO 2 reductions likely to result from the standards under consideration in this rulemaking.

The estimated year-by-year reductions in CO 2 emissions were converted into monetary values ranging from the $0 and $14 per ton. These monetary estimates were based on an assumption of no benefit to an average benefit value reported by the IPCC and the values include a range of discount factors used in their development. 32 Based on DOE’s consideration of the

32 According to the IPCC, the mean soci al cost of carbon (SCC) reported in studies published in peer-reviewed journals was US$43 per ton of carbon. This translates into about $12 per ton of carbon dioxide. The social costs estimated represented the discounted present value of increasing (or decreasing) current emissions of carbon dioxide (or an equivalent greenhouse gas) by one ton. The litera ture review (Tol 2005) from which this mean was derived did not report the year in which these dollars are denominated. However, since the underlying studies spanned several years on either side of 2000, the estimate is often treated as year 2000 dollars. Updating that estimate to 2007 dollars yields a SCC of $14 per ton of carbon dioxide. Tol concluded that when only peer-reviewed studies published in recognized journals are considered, “...climate change impacts may be very uncertain but is unlikely that the marginal damage costs of carbon dioxide emissions exceed $50 per tonne carbon [about $14 per metric ton of CO 2 or about $12.66 per short ton][emphasis added].” He also concluded that the costs may be substantially lower than $50 per tonne of C. Tol’s survey showed that 10 percent of the SCC estimates were actually negative, so that a lower bound of zero is not unreasonable..IPCC report, DOE escalated the average benefit value per ton in real 2007$ at 2.4 percent per year. The resulting estimates of the potential range of benefits associated with the reduction of

CO 2 emissions are reflected in Table V-30

.

Table V-30 Preliminary Esti mates of Savings from CO 2 Emissions Reductions under Considered Commercial Refrigeration E quipment Trial Standard Levels TSL Estimated Total CO 2 (Mt) Emission Reductions Value of Estimated CO 2 Emission Reductions Based on IPCC Range (Million $) at 7% Discount Rate Value of Estimated CO 2 Emission Reductions Based on IPCC Range (Million $) at 3% Discount Rate 1 7.37 0 to 43 0 to 93 2 28.47 0 to 166 0 to 361 3 37.37 0 to 218 0 to 473 4 43.50 0 to 253 0 to 551 5 63.17 0 to 368 0 to 800

DOE relied on the average of the IPCC re ported estimate as an upper bound on the benefits resulting from reducing each metric ton of U.S. CO 2 emissions. It is important to note that estimate of the $14 per ton of CO 2 represents an average valu e of worldwide impacts from potential climate impacts caused by CO 2 emissions, and is not confined to impacts likely to occur within the U.S. In contrast, mo st of the other estima tes of costs and benefits of increasing the efficiency of commercial refrigeration equipmen t discussed in this pr oposal include only the economic values of impacts that would be expe rienced in the U.S. Consequently, as DOE considers a monetary value for CO 2 emission reductions, the valu e might be restricted to a representation of those cost/benef its likely to be experienced in the United States. Currently,

there are no estimated values for the U. S. benefits likely to result from CO 2 emission reductions. However, DOE expects that, if such values we re developed, DOE would use those U.S. benefit values, and not world benefit valu es, in its analysis. DOE further expects that, if such valueswere developed, they would be lower than comp arable global values. DOE invites public

comment on the above discussion of CO 2 .

DOE also investigated the potential moneta ry impact resulting from the impact of today’s efficiency standards on SO 2 , NOx, and mercury (Hg) emissi ons. As previously stated, DOE’s analysis assumed the presence of nationwide emission caps on SO 2 and caps on NOx emissions in the 28 states covered by the CAIR caps. In the presence of emission caps, DOE concluded that no physical reductions in total sector emissions would occur, however DOE’s

estimates for reduction of these emissions could correspond to incremental changes in the prices of emissions allowances in cap-and-trade emissions markets rather than to physical emissions

reductions. For SO 2 , the changes in annual emissions from today’s rule would be less than 0.03 percent of the annual SO 2 allowances, a change that DOE estimated is too small to influence allowance prices. Similarly, for NOx, in the 28 CAIR states, the emissi ons savings from today’s rule would be less than 0.018 percent of NOx allo wances, also a change that DOE also estimated is too small to influence allowance prices.

In DOE’s analysis, for 22 non-CAIR states emissions of NOx from electricity generation were not controlled by a regulatory cap. By 2012, DOE projected that the NOx emissions in the

non-CAIR states would be about 25 percent of the national total. 33 Mercury emissions are also

33 U.S. NOx emissions have been trending downward steadily since 1995, falling from 31.5 million tons in 1995 to 15.2 million in 2006 (EIA 2007). Although non-CAIR states’ emissions have also fallen, the emissions in the CAIR states have fallen more rapidly; thus, the CAIR states’ percentage of the total has also fallen from 87.4% in 1997 to 80.9% in 2006. For purposes of this analysis, DOE assumed that the CAIR states percentage of emissions continues to decline until it reaches 75 percent in 2012. Seventy-five percent of emissions reductions are allocated to the CAIR states thereafter. Consequently non-CAIR state emis sions would be about 25% of the total. [Reference: EIA (Energy Information Administration). 2007. Estimated Emissions for U.S. Electric Power Industry by State, 1990- 2006. State Historical Tables for 2006not controlled by a regulatory cap. For thes e two emissions, DOE estimated the national

monetized benefits of emissions reductions from today’s rule based on environmental damage

estimates from the literature. Non-CAIR emissi ons would not be controlled by an emissions cap so those emissions would actually be reduced by the PTAC-PTHP energy savings. Available estimates suggest a very wide range of monetary values for NOx emissions, ranging from $370 per ton to $3,800 per ton of NOx from stationary sources , measured in 2001 dollars 34 or a range of $432 per ton to $4,441 pe r ton in 2007 dollars. The basic science linking mercury emissions from power plants to impacts on humans is considered highly uncertain. However, DOE located two

estimates of the environmental damages of mercury ba sed on two estimates of the adverse impact of childhood exposure to methyl mercury on IQ for American children, and subsequent loss of lifetime economic productivity resulting fr om these IQ losses. The high end estimate is

based on an estimate of the current aggregate cost of the loss of IQ that results from exposure of American children of U.S. power plant origin of $1.3 billion per year in year 2000$, which works out to $32.6 million per ton emitted per year (2007$). 35 The low-end estimate was $664,000 per ton emitted in 2004$ or $729,000 per ton in 2007$), which DOE derived from a published evaluation of mercury control using diffe rent methods and assumptions from the first study, but also based on the present value of the lifetime earnings of children exposed. 36 The resulting estimates of the potential range of th e present value benefits associated with the

Released: October 26, 2007. Next Update: October 2008 http://www.eia.doe.gov/cneaf/el ectricity/epa/emission_state.xls] 34 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. Office of Management and Budget Office of Information and Regulatory Affairs, Washington, D.C. 35 Trasande, L., et al., “Applying Cost Analyses to Drive Policy that Prot ects Children” 1076 ANN. N.Y. ACAD. SCI. 911 (2006). 36 Ted Gayer and Robert Hahn, Designing Environmental Policy: Lessons from the Regulation of Mercury Emissions, Regulatory Analysis 05-01. AEI-Brookings Joint Center For Regulatory Studies, Washington, D.C., 31 pp., 2004. A version of this paper was published in the Journal of Regulatory Economics in 2006. The estimate was derived by back-calculating the annual benefits per ton from the ne t present value of benefits reported in the study.reduction of NOx in the 22 non-CAIR states a nd national reductions in Hg emissions are

reflected in Table V.31 and Table V.32

Table V.31 Preliminary Estimates of Monetary Savings from Reductions of Hg (Nation) and NOx (Non-CAIR States) by Trial Standard Level at a 7% Discount Rate.

Standard Size TSL Estimated Cumulative NOx

(kt) Emission Reductions* Value of Estimated NOx Emission Reductions (Million 2007$) Estimated Cumulative Hg (tons) Emission

Reductions* Value of Estimated Hg Emission Reductions

(Million 2007$)

1 2.74 $0.1 - $0.6 0.09 $0.0 - $0.1 2 10.58 $0.2 - $2.3 0.36 $0.0 - $0.5 3 13.88 $0.3 - $3.0 0.47 $0.0 - $0.6 4 16.16 $0.3 - $3.5 0.54 $0.0 - $0.7 5 23.47 $0.5 - $5.1 0.80 $0.0 - $1.0 * Values in Table V.31 may not appear to sum to the cumulative values in Table V-29 due to rounding.

Table V.32 Preliminary Estimates of Monetary Savings from Reductions of Hg (Nation) and NOx (Non-CAIR States) by Trial Standard Level at a 3% Discount Rate.

Standard Size TSL Estimated Cumulative NOx

(kt) Emission Reductions* Value of Estimated NOx Emission Reductions (Million 2007$) Estimated Cumulative

Hg (tons) Emission Reductions Value of Estimated Hg Emission Reductions (Million 2007$)

1 2.74 $0.1 - $1.5 0.09 $0.0 - $1.0 2 10.58 $0.5 - $5.6 0.36 $0.1 - $3.9 3 13.88 $0.7 - $7.4 0.47 $0.1 - $5.1 4 16.16 $0.8 - $8.6 0.54 $0.1 - $5.9 5 23.47 $1.2 - $12.5 0.80 $0.2 - $8.6 * Values in Table V.32 may not appear to sum to the cumulative values in Table V-29 due to rounding.

As discussed above, with the D.C. Circuit vacating the CAIR, DOE is considering how it

should address the issue of NO X reduction and corresponding mone tary valuation. DOE invites public comment on how the agency should addre ss this issue, includ ing how to value NO X emissions for States in the absence of the CAIR.7. Other Factors EPCA allows the Secretary of Energy, in de termining whether a standard is economically justified, to consider any other factors that th e Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and 6316(e)(1 )) Under this provision, DOE considered LCC impacts on identifiable groups of customers, such as cust omers of different business types, who may be disproportionately affected by a ny national energy conservation standard level. DOE also considered the reduction in generated capacity that could result from the imposition of any national energy conservation standard level.

C. Proposed Standard EPCA specifies that any new or amended ener gy conservation standard for any type (or class) of covered equipment shall be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible a nd economically justified. (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) In de termining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(e)(1)) The new or amende d standard must “result in significant conservation of energy.” (42 U.S.C. 6295(o)(3)(B) and 6316(e)(1))

DOE considered the impacts of standards at each of five trial standard levels, beginning with the most efficient level (TSL 5) and wo rked down to a level where DOE determined the benefits of potential standards outweighed the burdens of potential standards. To aid the reader as DOE discusses the benefits and/or burdens of each TSL, Table V-33 presents a summary of quantitative analysis results fo r each TSL based on the assump tions and methodology discussedabove. This table presents the re sults or, in some cases, a range of results, for each TSL. The range of values reported in this table for industr y impacts represents the results for the different markup scenarios that DOE used to estimate manufacturer impacts.

Table V-33 Summary of Results Based Upon the AEO2007 Reference Case Energy Price Forecast* TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Primary Energy Saved (quads) 0.141 0.545 0.715 0.832 1.208 7% Discount Rate 0.034 0.132 0.173 0.201 0.292 3% Discount Rate 0.073 0.284 0.372 0.433 0.603 Generation Capacity Reduction (GW)** 0.109 0.421 0.552 0.643 0.934

0.33 0.98 1.20 1.10 (0.20) NPV (2007$billion):

7% Discount Rate 3% Discount Rate 0.82 2.59 3.25 3.24 1.16 Industry Impacts

Industry NPV (2007$ million) Industry NPV (% Change) 0 – (63) 0 – (12) 6 – (88) 1 – (17) (17) – (129) (3) – (25) (40) – (180) (8) – (35) (18) – (285) (3) – (56) Cumulative Emissions Impacts † : CO 2 (Mt) 7.37 28.47 37.37 43.50 63.17 NOx (kt) 2.74 10.58 13.88 16.16 23.47 Hg (t) 0.09 0.36 0.47 0.54 0.80 Life-Cycle Cost Net Savings (%) 17 - 48 34 - 68 61 - 89 68 – 93 24 – 93 Net Increase (%) 0 0 0 0 – 19 0 – 71 No Change (%) 52 - 83 32 - 66 11 – 39 7 – 32 2 – 19 Mean LCC Savings (2007$) 192 - 3132 551 - 4005 710 - 4089 693 - 3818 (673) - 3818 Mean PBP (yrs) 0.4 - 1.2 0.6 - 2.6 1.3 - 4.6 1.4 – 6.1 1.4 - 12.6 * Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the amount indicated. ** Change in installed generation capacity by the year 2042 based on AEO2007 Reference Case. † CO 2 emissions impacts include physical reductio ns at power plants. NOx emissions imp acts include physical reductions at power plants as well as production of emissions allowance cred its where NOx emissions are s ubject to emissions caps. First, DOE considered TSL 5, the most effici ent level for all equipment classes. TSL 5 would likely save an estimated 1.208 quads of energy through 2042, an amount DOE considers significant. Discounted at seve n percent, the projected ener gy savings through 2042 would be 0.292 quads. For the Nation as a whole, DOE project s that TSL 5 would result in a net decrease of $200 million in NPV, using a discount rate of seven percent. Five equipment classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M) show negative NPV at TSL

5. The emissions reductions at TSL 5 are 63.17 Mt of CO 2 and up to 23.47 kt of NOx. DOEalso estimates that under TSL 5, total generating capacity in 2042 will decrease compared to the base case by 0.934 gigawatts (GW).

At TSL 5, DOE projects that the average comm ercial refrigeration equipment customer will experience a reduction in LCC compared to the baseline for 12 of the 15 equipment classes analyzed, while three equipment classes (VOP .RC.M, SVO.RC.M, SOC.RC.M) experienced an increase in LCC. These three equipment classe s are among the five identified above that DOE showed had negative NPV. The two additional classes, SVO.SC.M and VOP.SC.M, had positive LCC savings at TSL 5, but at substantially reduced values compared to those shown at TSL 4 or TSL 3. LCC savings for all 15 equipment classe s vary from negative (-$673) to positive $3,818. At TSL 5, DOE estimates the fraction of cust omers experiencing LCC increases will vary between 0 and 71 percent depending on equipmen t class. The mean payback period for the average commercial refrigeration equipment custom er at TSL 5 compared to the baseline level is projected to be between 1.4 and 12.6 year s, depending on equipment class.

At higher TSLs, manufacturers have a mo re difficult time fully passing on larger increases in MPC to customers, and therefore manufacturers expect the higher end of the range of impacts to be reached at TSL 5 (i.e., a drop of 55.77 percent in INPV). At TSL 5, there is the risk of very large negative impacts on the industr y if manufacturers’ profit margins are reduced. Manufacturers expressed gr eat concern at the possibility of having to manufacture an entire equipment line at the max-tech levels, because customers put a much higher priority on marketing and displaying their goods than they do on energy efficiency. For this reason, manufacturers fear that they will be unable to recover the additional cost incurred fromproducing the most efficient equi pment possible. See Section IV.I for additional manufacturer

concerns. After carefully considering the analysis and weighing the benefits and burdens of TSL 5, DOE tentatively concludes that the estimated be nefits of energy savings and related benefits would not outweigh the potential $200 million ne t economic cost to the Nation (at the seven percent discount rate), as well as the economic burden on consumers and the potential negative impact on manufacturers through reduction in INPV.

As discussed above, DOE proposes to reject TSL 5 because DOE finds that the benefits to the Nation of TSL 5 (energy savings, co mmercial consumer average LCC savings, and emission reductions) do not outweigh the costs (n ational NPV decrease and loss of manufacturer INPV), and, therefore, DOE proposes that TSL 5 is not economically justified. This proposal

reflects DOE’s tentative conclusion that there re mains too much uncertainty regarding the timing and extent of anticipated reductions in LED costs to justify standards at the TSL 5 level. While considerable information is available that sugges ts LED costs are likely to decline more than assumed in DOE’s analysis (see discussion in sections IV.B.3.c , V.B.1.a , and V.B.3.b ), DOE believes that it must have a higher degree of confid ence that the timing and extent of such further costs reductions will warrant higher standards before it imposes such requirements. DOE is soliciting public comments on these and other issues, and wi ll reconsider this tentative conclusion during the development of its final rule. (See Section VII.E.1 )

As mentioned above, if LED system costs ach ieve the 50 percent reduction projection by 2012, the estimated NPV at TSL 5 would be a po sitive $1.62 billion at a seven percent discountrate and $4.76 billion at the three percent discount rate, and is likely to result in a net benefit. DOE requests comment on whether the benefits of TSL 5 would outweigh the burdens of TSL 5, considering the potential impacts of future LED cost projections. This is identified as Issue 7

under “Issues on Which DOE Seeks Comment” in Section VII.E of this NOPR. DOE also seeks comment on the extent to which stakeholders exp ect projected LED cost reductions would occur, the timing of the projected LED cost reductions, and the certainty of the projected LED cost reductions. Also, consideri ng the rapid development of LED technology and the steady reductions in cost, DOE seeks comment on the ex tent to which manufacturers would adopt LED technology into the design of comm ercial refrigeration equipment in the absence of standards.

DOE then considered TSL 4, which provide s for all equipment classes the maximum efficiency levels that the analysis showed to have positive NPV to the Nation. TSL 4 would likely save an estimated 0.832 quads of energy through 2042, an amount DOE considers significant. Discounted at seve n percent, the projected ener gy savings through 2042 would be 0.201 quads. For the Nation as a whole, DOE project s that TSL 4 would result in a net increase of $1.10 billion in NPV, using a discount rate of seven percent. The estimated emissions

reductions at TSL 4 are 43.50 Mt of CO 2 and up to 16.16 kt of NOx. Total generating capacity in 2042 is estimated to decrease compared to the base case by 0.643 GW under TSL 4.

At TSL 4, DOE projects that the average comm ercial refrigeration equipment customer will experience a reduction in LCC compared to the baseline for all 15 equipment classes analyzed, ranging from $693 to $3,818 depending on equipment class. The mean paybackperiod for the average commercial refrigeration equi pment customer at TSL 4 is projected to be between 1.4 and 6.1 years compared to the purchase of baseline equipment.

As is the case with TSL 5, DOE believes the majority of manufact urers would need to completely redesign most equipment offered for sale, and therefore DOE expects that commercial refrigeration manufactur ers will have some difficu lty fully passing on larger MPC increases to customers. Similar to TSL 5, manuf acturers expect the highe r end of the range of impacts to be reached at TSL 4 (i.e., a drop of 35.3 percent in INPV). However, compared to the baseline, all 15 equipment classes showed significant positive life-cycle cost savings on a national average basis and few customers experienced an increase in LCC with a standard at TSL 4 compared with purchasing baseline equipment. The payback periods calculated for all equipment classes were lower th an the life of the equipment.

After carefully considering the analysis and weighing the benefits and burdens of TSL 4, DOE proposes that TSL 4 represents the maximu m improvement in energy efficiency that is technologically feasible and economically justified and that the estimated benefits to the Nation outweigh the costs. DOE proposes that TSL 4 is technologically feasible because the technologies required to achieve these levels are already in ex istence. Therefore, DOE is proposing TSL 4 as the energy conservation standard s for commercial refrig eration equipment in

this NOPR.

However, for the reasons discussed above, DOE also requests comments on whether it should adopt TSL 5 for all or some of the equipment classes.VI. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866 DOE has determined that today’s regulatory action is an “economically significant” action under Section 3(f)(1) of Executive Order 12866, “Regulator y Planning and Review.” 58 FR 51735 (October 4, 1993). The Executive Order requ ires that each agency identify in writing the specific market failure or other specific prob lem that it intends to address that warrants new agency action, as well as assess the significance of that problem to determine whether any new regulation is warranted. Ex ecutive Order 12866, §1(b)(1).

In the ANOPR for this rulemaking, DOE reque sted feedback and data on a number of

issues related to Executive Orde r 12866 and the existence of a ma rket failure in the commercial refrigeration equipment industry. This request included 1) data on, and suggestions for testing the existence and extent of, poten tial market failures to complete an assessment in the proposed rule of the significance of any failures; 2) data on the efficiency levels of existing commercial refrigeration equipment in use by store t ype; 3) comment on the Federal ENERGYSTAR program and its penetration into the commercial refrigeration equipment market as a resource on the availability and benefits of energy effici ent refrigeration units; 4) data on owner-occupied buildings versus leased/non-owner occupied buildings for given st ore types and their associated use of high-efficiency equipment; and 5) comment on the weight that should be given to these

factors in DOE’s determination of the maximum e fficiency level at which the total benefits are likely to exceed the total burdens resulting from a DOE standard. Following publication of theANOPR and subsequent public comment period, DOE did not receive any feedback related to these requests.

Much of the industry segment that uses comm ercial refrigeration equipment tends to be large grocery stores, multi-line retailers, small grocery stores , or convenience stores. DOE believes that these owners may lack corporate direction on energy policy. The transaction costs for these owners to research, purchase, and inst all optimum efficiency equipment options are too high to make such action commonplace. DOE believes that there is a lack of information about energy efficiency opportunities in the commercial refrigeration equipment market available to these owners. Unlike residential heating and air conditioning equipment, commercial refrigeration equipment is not included in ener gy labeling programs such as the Federal Trade Commission’s energy labeling program . Furthermore, the energy use of this equipment depends on usage. Information is not readily availabl e for the owners to make a decision on whether improving the energy efficiency of commercial re frigeration equipment is cost-effective. DOE seeks data on the efficiency levels of existing commercial refrigeration equipment in use by owners, electricity price, and equipment class. Being part of the food merchandising industry, energy efficiency and energy cost savings are no t the primary drivers of the business, as is selling food products to shoppers. This may incu r transaction costs, thus preventing access to capital to finance energy efficiency investment.

Today’s action also required a regulatory impact analysis (RIA) and, under the Executive Order, was subject to review by the Office of Information and Regulatory Affairs (OIRA) in the OMB. DOE presented to OIRA for review the dr aft proposed rule and other documents prepared for this rulemaking, including the RIA, and ha s included these documents in the rulemakingrecord. They are available for public review in the Resource Room of the Building Technologies Program, 950 L’Enfant Plaza, SW, 6th Floor, Washington, DC 20024, (202) 586-9127, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays.

The RIA is contained in the TSD prepared for the rulemaking. The RIA consists of (1) a statement of the problem addressed by this re gulation and the mandate for Government action; (2) a description and analysis of the feasible policy alternatives to this regulation; (3) a quantitative comparison of the impacts of the al ternatives; and (4) the national economic impacts of the proposed standard.

The RIA calculates the effects of feasible po licy alternatives to co mmercial refrigeration equipment standards and provides a quantitative comparison of the impacts of the alternatives.

DOE evaluated the alternatives in terms of thei r ability to achieve signi ficant energy savings at reasonable cost, and compared it to the effectiv eness of the proposed rule. DOE analyzed these alternatives using a series of regulatory scenarios as input to the NES/shipments model for commercial refrigeration equipment, which DOE m odified to provide inpu ts for these voluntary

measures.

DOE identified the following major policy alternatives for achieving increased commercial refrigeration equipment energy efficiency:

• No new regulatory action

• Commercial customer rebates• Commercial customer tax credits

DOE evaluated each alternative’s ability to achieve significant energy savings at reasonable cost ( Table VI-1 ), and compared it to the effec tiveness of the proposed rule.

Table VI-1 Non-Regulatory Alternatives to Standards Net Present Value** (billion 2007$) Policy Alternatives Energy Savings * (quads) 7% Discount Rate 3% Discount Rate No New Regulatory Action 0 0 0 Commercial Customer Rebates 0.099 0.139 0.315 Commercial Customer Tax Credits † 0.084 0.178 0.381 Today's Standards at TSL 4 0.832 1.10 3.24

* Energy savings are in source quads.

** Net present value is the value in the present of a time se ries of costs and savings. DOE determined the net present value from 2012 to 2062 in billions of 2007$. † These are example values for TSL 3. The net present value amounts shown in Table VI-1 refer to the NPV for commercial customers. The following paragraphs di scuss each policy alternative listed in Table VI-1 . (See Chapter 17 of the TSD, Regulatory Imp act Analysis, for further details.)

No new regulatory action. The case in which no regul atory action is taken for commercial refrigeration equipment constitutes th e base case (or No Action) scenario. By definition, no new regulatory acti on yields zero energy savings a nd a net present value of zero

dollars.

Commercial Customer Rebates . DOE modeled the impact of the customer rebate policy by determining the increased customer participa tion rate due to the rebates (i.e., the percent increase in customers purchasing high-efficiency equipment). DOE modeled a national rebate program after existing utility re bate programs that provide in centives for inco rporating high-efficiency technologies into commer cial refrigeration equipment. The reduction in retail cost of the higher efficiency cases was calculated and the methodology de veloped for the NIA used to assess relative shipments by effici ency level was used to assess relative shipments by efficiency

level under the rebate scenario. DOE applied the resulting increase in market share of efficient units to the NES spreadsheet model to estima te the resulting NES and NPV for the rebate scenario with respect to the base case.

Commercial Customer Tax Credits. DOE assumed a commercial or industrial customer Federal tax credit patterned after the tax cr edits created in EPACT 2005. EPACT 2005 provided tax credits to customers who purchase and instal l specific products such as energy efficient windows, insulation, doors, roofs, and heating and cooling equipment. DOE presumed the presence of a certification or other program that could be used to identify high-efficiency commercial refrigeration equipment by energy consumption, and assumed TSL 3 as a likely candidate level for a tax credit incentive, given that it was the minimum LCC level. DOE then

reviewed the incremental custom er price increase to reach TSL 3 from the baseline for all 15 equipment classes. For 12 of the equipment cl asses, the incremental cost was between 6.1 and 21.3 percent. For three equipment classe s (SOC.RC.M, HZO.RC.M, HZO.RC.L), the incremental cost was less than five percent. In its tax credit analysis, DOE assumed a flat tax credit equal to five percent of the customer price for equipment sold at TSL 3 or higher for each primary equipment class, with the exception of SOC.RC.M, HZO.RC.M, and HZO.RC.L. DOE assumed a 100 percent applica tion rate for the tax credit from commercial refrigeration equipment customers and reduced the retail equi pment price by five percent for TSL 3, TSL 4, and TSL 5 for the 12 equipment classes. The reductions in retail cost of commercialrefrigeration equipment at these levels was calculated and the methodology developed for the NIA used to assess relative shipments by efficiency level under the tax credit scenario. DOE applied the resulting increase in market share of efficient units to the NES spreadsheet model to estimate the resulting NES and NPV for the tax credit scenario with respect to the base case. To see results for tax credits for equipment meeting or exceeding TSL 5, see the Regulatory Impact Analysis of the TSD.

Performance Standards. Each of the non-regulatory alternatives must be gauged against the performance standards DOE is proposing in th is proposed rule. DOE also considered, but did not analyze, the potential of bulk Government purchases and early replacement incentive programs as alternatives to the proposed standards. In the case of bulk Government purchases, commercial refrigeration equipment is a very sma ll part of the total ma rket and the volume of high-efficiency equipment purchases that the Fe deral Government might make would have very limited impact on improving the overall market efficiency of commer cial refrigeration equipment. In the case of replacement incentives , several policy options exist to promote early replacement, including a direct national program of customer incentive s, incentives paid to utilities to promote an earl y replacement program, market promotions through equipment manufacturers, and replacement of Federally owne d equipment. Previous analysis by DOE of methods to promote early replacement for othe r covered equipment have suggested that the energy savings realized through a one-time early replacement of existing stock equipment has not resulted in energy savings comme nsurate to the cost to run and administer the program. As a consequence, DOE did not anal yze this option in detail.As Table VI-1 indicates, none of the alternatives DOE examined would save as much energy as today’s proposed rule. Also, several of the alternatives would require new enabling legislation, since authority to carry out those alternatives does not exist. The tax credit scenario would also require the development of a database of commercial refrigeration equipment that would meet or exceed the TSL 3 efficiency level in order to determine compliance with the tax

credit.

B. Review Under the Regulatory Flexibility Ac t/Initial Regulatory Fl exibility Analysis The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires prepar ation of an initial regulatory flexibility analysis (IRFA) for any rule that by law must be proposed for public comment, unless the agency certifies that the rule , if promulgated, will not have a significant economic impact on a substantial number of sm all entities. As re quired by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking” 67 FR 53461 (August 16, 2002), DOE published procedures and policie s on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly co nsidered during the rulemaking process. 68 FR 7990. DOE has made its proced ures and policies available on the Office of General Counsel’s website, http://www.gc.doe.gov

.

Small businesses, as defined by the Sma ll Business Administration (SBA) for the commercial refrigeration equipm ent manufacturing industry, are manufacturing enterprises with 750 employees or fewer. DOE used the small business size standards published on January 31, 1996, as amended, by the SBA to determine whethe r any small entities would be required to comply with the rule. 61 FR 3286 and codified at 13 CFR Part 121. The size standards are listedby North American Industry Classification Syst em (NAICS) code and industry description. Commercial refrigeration equipment manuf acturing is classified under NAICS 333415.

Prior to issuing this no tice of proposed rulemaking, DOE interviewed two small businesses affected by the rulemaking. DOE al so obtained information about small business impacts while interviewing manufacturers that exceed the small busine ss size threshold of 750 employees.

DOE reviewed ARI’s listing of its commerc ial refrigeration equipment manufacturer members and surveyed the industry to develop a list of all domestic ma nufacturers. DOE also asked stakeholders and ARI representatives within the industry if they we re aware of any other

small business manufacturers. DOE then exam ined publicly available data and contacted manufacturers, when needed, to determine if they meet the SBA’s definition of a small manufacturing facility a nd if their manufacturing facilities are located within the United States. Based on this analysis, DOE identified nine sm all manufacturers of commercial refrigeration equipment. DOE conducted on-si te interviews with two small manufacturers who agreed to be

interviewed to determine if there are differen tial impacts on these companies that may result from new energy conservation standards.

DOE found that, in general, small manufacturers have the same concerns as large manufacturers regarding new ener gy conservation standards. DOE summarized the key issues for commercial refrigeration equi pment manufacturers in Section IV.I.3.a of today’s notice.

Both manufacturers echoed the same concerns regarding new energy conservation standards asthe larger manufacturers, including investments needed to meet standards, meeting customer needs, equipment sales, and coverage of niche equipment. Sp ecifically, DOE found no significant differences in the R&D emphasis or marketing strategies between small business manufacturers and large manufact urers. Therefore, for the equipment classes manufactured primarily by the small businesses, DOE believes the GRIM analysis, which models each equipment class separately, is representative of the small businesses affected by standards. The qualitative and quantitative GRIM results are summarized in Section V.B.2 of today’s notice.

DOE reviewed the standard levels consider ed in today’s notice of proposed rulemaking under the provisions of the Regulatory Flexibilit y Act and the procedures and policies published on February 19, 2003. Based on this review, DOE ha s prepared an IRFA for this rulemaking. The IRFA describes potential impacts on sma ll businesses associated with commercial refrigeration equipment design and manufacturing.

The potential impacts on commercial refr igeration equipment manufacturers are discussed in the following sections. DOE has transmitted a copy of this IRFA to the Chief Counsel for Advocacy of the Small Business Administration for review.

1. Reasons for the proposed rule

Part A-1 of Title III of EPCA addresses the energy efficiency of certain types of commercial and industrial equipment. ( 42 U.S.C. 6311-6317) EPACT 2005, Pub. L. 109–58, included an amendment to Part A-1 requiring th at DOE prescribe energy conservation standards for the commercial refrigeration equipment that is the subject of this rulemaking. (EPACT 2005,Section 136(c); 42 U.S.C. 6313(c)(4)(A)) Hence, DOE is proposing in today’s notice, energy

conservation standards for commercial ice- cream freezers; self-contained commercial refrigerators, commercial freezers, and commerc ial refrigerator- freezers without doors; and remote condensing commercial refrigerators, co mmercial freezers, and commercial refrigeratorfreezers.

2. Objectives of, and legal basis for, the proposed rule EPCA provides that any new or amended standard for commercial refrigeration equipment must be designed to achieve the maxi mum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) But EPCA precludes DOE from adopting any stan dard that would not result in significant conservation of energy. (42 U.S.C. 6295(o )(3) and 6316(e)(1)) Mo reover, DOE may not prescribe a standard for certain equipment if no test procedure has been established for that equipment, or if DOE determines by rule that the standard is not tec hnologically feasible or economically justified, and that such standard will not result in significant conservation of energy. (42 U.S.C. 6295(o)(3) and 6316(e)(1)) EPCA also provides that, in deciding whether a standard is economically justified, DOE must de termine whether the benefits of the standard exceed its burdens after receiving comment s on the proposed standard. (42 U.S.C. 6295(o)(2)(B)(i) and 6316( e)(1)) To determine whether eco nomic justifica tion exists, DOE reviews comments received and conducts analysis to determine whether the economic benefits of the proposed standard exceed the burdens to the greatest extent pr acticable, taking into

consideration seven factors se t forth in 42 U.S.C. 6295(o)(2)( B) and 6316(e)(1) (see Section II.B of this preamble).EPCA also states that the Secretary may not prescribe an amended or new standard if interested persons have established by a preponder ance of the evidence that the standard is likely to result in the unavailability in the United St ates of any equipment type (or class) with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295 (o)(4) and 6316(e)(1)) Further information concerning the background of this rulemaking is provided in Chapter 1 of the TSD.

3. Description and estimated number of small entities regulated DOE reviewed ARI’s listing of commercial refrigeration equipment manufacturer members and surveyed the industry to develop a list of every manufacturer. DOE also asked stakeholders and ARI representatives within the industry if they were aware of any other small

business manufacturers. DOE then looked at publicly available data and contacted manufacturers, where needed, to determine if they meet the SBA’ s definition of a small business manufacturing facility and have their manufacturing facilities loca ted within the U.S. Based on this analysis, DOE estimates that there are nine small commercial refrigeration equipment manufacturers. See Chapter 13 of the TSD for further discussion about the methodology used in DOE’s manufacturer impact analysis and its analysis of small-business impacts.

4. Description and estimate of compliance requirements Potential impacts on manufacturers, includi ng small businesses, come from impacts associated with commercial refrigeration e quipment design and manufacturing. The marginsand/or market share of manufacturers, in cluding small businesses, in the commercial refrigeration equipment industry co uld be negatively impacted in the long term by the standard

levels under consideration in th is notice of proposed rulemaking, specifically TSL 4. The level of research and development needed to meet en ergy conservation standards increases with more stringent energy conservation standards. DOE e xpects that small manufacturers will have more difficulty funding the required research and deve lopment necessary to meet energy conservation standards than larger manufactur ers. Therefore, at proposed TSL 4, as opposed to lower TSLs, small manufacturers would have less flexibility in choosing a design path. However, as discussed under subsection 6 (Signi ficant alternatives to the rule ) below, DOE expects that the differential impact on small commercial refrig eration equipment manufacturers (versus large businesses) would be smaller in moving from proposed TSL 1 to proposed TSL 2 than it would be in moving from proposed TSL 4 to proposed TS L 5. The rationale for DOE’s expectation is best discussed in a comparative context and is therefore elaborated upon in subsection 6 (Significant alternatives to the rule). As discussed in the introduction to this IRFA, DOE expects that the differential impact associated with commercial refrigeration equipment design and manufacturing on small busine sses would be negligible.

5. Duplication, overlap, and conflict with other rules and regulations DOE is not aware of any rules or regulations that duplicate, overlap, or conflict with the rule being considered today.

6. Significant altern atives to the rule The primary alternatives to the proposed ru le considered by DOE are the other TSLsbesides the one being considered today, propos ed TSL 4. In addition to the other TSLs considered, the TSD associated with this proposed rule includes a report referred to in Section

VI.A in the preamble as the regulatory impact anal ysis (RIA- discussed earlier in this report and in detail in the TSD). This report discusse s the following policy alternatives: 1) no new regulatory action, 2) commercial customer rebates, and 3) commercial customer tax credits. The energy savings of these regulatory alternatives ar e one to two orders of magnitude smaller than those expected from the standard levels under co nsideration. The range of economic impacts of these regulatory alternatives is an order of magni tude smaller than the ra nge of impacts expected

from the standard levels under consideration.

The commercial refrigeration equipment i ndustry is highly customized. Customers demand high levels of customization from commer cial refrigeration equipment manufacturers to

differentiate themselves from other retail stores. They do not want to lo se any functionality or utility in their equipment, such as display area, because this affects their ability to merchandise products. Often, the customer’s desire for easy consumer access requires equipment that is less energy efficient. They also do not want to lose any flexibility in design choices, such as lighting options. All manufacturers, including small busine sses, would have to develop designs to enable compliance to higher TSLs. Product redesign costs tend to be fixed and do not scale with sales volume. Thus, small manufacturers would be at a relative disadvantage at higher TSLs because research and development efforts would be on the same scale as those for larger companies, but these expenses would be recoupe d over smaller sales volumes.

At proposed TSL 5, the max-tech level, manuf acturers stated thei r concerns over theability to be able to produce equipment by the futu re effective date of th e standard. At proposed TSL 5, DOE estimates that the majority of manufac turers would be negatively impacted. Based

on manufacturer interviews , some manufacturers stat ed that they could not meet proposed TSL 5 for medium-temperature equipment, and that they would need technological innovation to achieve these levels by 2012. Ma nufacturers believe that setting standards at the maximum level will affect their customers’ ability to merchandi se products by limiting the flexibility in choosing design options. For example, at TSL 5 specifica lly, the use of LED ligh ting technology may be necessary to meet the proposed le vels for many equipment classes. Manufacturers expect that having limited choices in design options w ould commoditize the industry and reduce profit margins. This concern was echoed by all manuf acturers, not just small business manufacturers.

For the proposed standard, TSL 4, and fo r alternative TSLs, TSL 1 through 3, DOE expects that impacts to small ma nufacturers would be less than the impacts described above for TSL 5. At lower TSLs, the differential impacts to small manufacturers are diminished because research and development efforts are less at lower TSLs. Chapter 12 of the TSD contains

additional information about the impact of this rulemaking on manufacturers. As mentioned above, the other policy alternatives (no new regul atory action, commercial customer rebates, and

commercial customer tax credit s) are described in Section VI.A of the preamble and in the Regulatory Impact Analysis, Chapter 17 of th e TSD. Since the impacts of these policy

alternatives are lower th an the impacts described above for TSL 5, DOE expects that the impacts

to small manufacturers would also be less than the impacts described above for the proposed standard levels. DOE requests comment on the impacts to small business manufacturers for these and any other possible alternatives to th e proposed rule. DOE will consider any commentsreceived regarding impacts to small business ma nufacturers for all the al ternatives identified, including those in the RIA, for the Final Rule.

C. Review Under the Paperwork Reduction Act This rulemaking will impose no new information or record keeping requirements. Accordingly, OMB clearance is not required under the Paperwork Reduction Act. (44 U.S.C. 3501 et seq.)

D. Review Under the National Environmental Policy Act DOE is preparing an environmental assessment of the impacts of the proposed rule. DOE is preparing an environmental assessment of th e impacts of the proposed rule. The assessment will include an examination of the potential eff ects of emission reductions likely to result from the rule in the context of global climate change as well as other types of environmental impacts. DOE anticipates completing a Finding of No Si gnificant Impact (FONSI) before publishing the final rule on commercial refrigeration equipment, pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), the regula tions of the Council on Environmental Quality (40 CFR Parts 1500–1508), and DOE’s regulati ons for compliance with the National Environmental Policy Act (10 CFR Part 1021).

E. Review Under Executive Order 13132 Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implem enting policies or regulations that preempt

State law or that have federalism implications. The Execu tive Order requires agencies toexamine the constitutional and statutory aut hority supporting any action that would limit the policymaking discretion of the St ates and carefully assess the n ecessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local o fficials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will fo llow in the development of such regulations. 65 FR 13735. DOE has examined today’s proposed rule and has determined that it would not

have a substantial direct effect on the St ates, on the relationship between the National Government and the States, or on the distri bution of power and re sponsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the equi pment that is the subject of today’s proposed rule. States can petition DOE for exemption fr om such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d) and 6316(b)(2(D)) No further action is required by Executive Order 13132.

F. Review Under Executive Order 12988 With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Ex ecutive Order 12988, Civil Justice Reform (61 FR 4729, February 7, 1996) imposes on Federal agencies the general dut y to adhere to the following requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected condu ct rather than a genera l standard and promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable e ffort to ensure that the regulation (1) clearlyspecifies the preemptive effect, if any; (2) clearl y specifies any effect on existing Federal law or regulation; (3) provides a cl ear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive e ffect, if any; (5) adequately defines key terms; and (6) addresses other im portant issues affecting clarity and general draftsmanship under any guidelines issued by the A ttorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in Section 3(a) and Section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the require d review and determined that, to the extent permitted by law, this proposed rule meets th e relevant standards of Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995 DOE reviewed this regulatory action under Ti tle II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) (UMRA), which requires each Federal agency to assess the effects of Federal regulatory actions on State, local and Tribal governme nts and the private sector. Today’s final rule may impose expenditures of $100 million or more on the private sector. It

does not contain a Federal in tergovernmental mandate.

Section 202 of UMRA authorizes an agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C. 1532(c). The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overlap the economic analysis re quirements that apply under section 325(o) of EPCA and Executive Order 12866. The Supplementary Information section of the notice of finalrulemaking and the "Regulatory Impact Analysis" section of the TSD for this final rule respond to those requirements.

Under section 205 of UMRA, the Department is obligated to identify and consider a reasonable number of regulatory alternatives be fore promulgating a rule for which a written statement under section 202 is requ ired. DOE is required to select from those alternatives the

most cost-effective and least burdensome alternat ive that achieves the objectives of the rule unless DOE publishes an explanation for doing otherw ise or the selection of such an alternative is inconsistent with law. As required by sect ions 325(o), 345(a) and 342( c)(4)(A) of EPCA (42 U.S.C. 6295(o), 6316(a) and 6313(c)(4)(A)), toda y’s proposed rule would establish energy conservation standards for commercial refrigera tion equipment that are designed to achieve the maximum improvement in energy efficiency that DOE has determined to be both technologically feasible and economically justified. A full discussi on of the alternatives considered by DOE is presented in the "Regulatory Impact Analysis " section of the TSD fo r today’s final rule.

H. Review Under the Treasury and General Government Appropriations Act, 1999 Section 654 of the Treasury and General Gove rnment Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Fam ily Policymaking Assessment for any rule that may affect family well-being. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.I. Review Under Executive Order 12630 DOE has determined, under Executive Order 12630, Governmental Actions and

Interference with Constitutiona lly Protected Property Rights , 53 FR 8859 (March 18, 1988), that this regulation would not result in any takings that might requi re compensation under the Fifth

Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 2001 The Treasury and General Government Appr opriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disse minations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. The OMB’s guidelines were publishe d at 67 FR 8452 (February 2 2, 2002), and DOE’s guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today’s Notice under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

K. Review Under Executive Order 13211 Executive Order 13211, Actions Concerning Regu lations That Significantly Affect Energy Supply, Distribution, or Use, 66 FR 28355 (May 22, 2001) requires Federal agencies to prepare and submit to the OIRA, OMB, a St atement of Energy Effects for any proposed significant energy action. A signifi cant energy action is defined as any action by an agency that promulgated or is expected to lead to promulgati on of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any su ccessor order; and (2 ) is likely to have a significant adverse effect on th e supply, distribution, or use of energy, or (3) is designated bythe Administrator of OIRA as a significant en ergy action. For any proposed significant energy action, the agency must give a detailed statem ent of any adverse effects on energy supply, distribution, or use should the proposal be implem ented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.

Today’s regulatory action would not have a significant adverse effect on the supply, distribution, or use of energy a nd, therefore, is not a signific ant energy action. Accordingly, DOE has not prepared a Stat ement of Energy Effects.

L. Review Under the Information Q uality Bulletin for Peer Review On December 16, 2004, the OMB, in consul tation with the Office of Science and Technology (OSTP), issued its Final Information Qu ality Bulletin for Peer Review (Bulletin). 70 FR 2664 (January 14, 2005). The Bulletin establis hes that certain scien tific information shall be peer reviewed by qualified specialists before it is disseminated by the Federal Government, including influential scientific information rela ted to agency regulatory actions. The purpose of the bulletin is to enhance the quality and credibi lity of the Government’s scientific information. Under the Bulletin, the energy conservation stan dards rulemakings analyses are “influential

scientific information.” The Bulletin defines “inf luential scientific information” as “scientific information the agency reasonably can determine will have, or does have, a clear and substantial impact on important public polic ies or private sector decisions.” 70 FR 2667 (January 14, 2005).

In response to OMB’s Bulletin, DOE conducted formal, in-progress peer reviews of the energy conservation standards development proc ess and analyses and has prepared a PeerReview Report pertaining to the energy cons ervation standards rulemaking analyses. The Energy Conservation Standards Rulemaking Peer Review Report dated February 2007 has been

disseminated and is available at http://www.eere.energy.gov/build ings/appliance_standards/ peer_review.html

.

VII. Public Participation

A. Attendance at Public Meeting The time, date and location of the public meeting are provided in the DATES and

ADDRESSES sections at the be ginning of this document. Anyone who wants to attend the public meeting must notify Ms. Brenda Edward s at (202) 586-2945. As explained in the ADDRESSES section, foreign natio nals visiting DOE headquarte rs are subject to advance security screening procedures.

B. Procedure for Submitting Requests to Speak Any person who has an interest in today's Noti ce, or who is a representative of a group or class of persons that has an inte rest in these issues, may request an opportunity to make an oral presentation. Please hand-deliver requests to speak to the address shown under the heading

“ Hand Delivery/Courier ” in the ADDRESSES section of this NOPR, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal ho lidays. Also, requests may be sent by mail to the address shown under the heading “ Postal Mail ” in the ADDRESSES section of this NOPR, or by e-mail to Brenda.Edwards@ee.doe.gov

.Persons requesting to speak should briefly desc ribe the nature of th eir interest in this rulemaking and provide a telephone nu mber for contact. DOE asks persons selected to be heard to submit a copy of their statements at least two weeks before the public meeting, either in person, by postal mail, or by e-mail as described in the preceding paragrap h. Please include an electronic copy of your statement on a computer di skette or compact disk when delivery is by postal mail or in person. Electronic copies must be in WordPerfect, Microsoft Word, Portable Document Format (PDF), or text (American Standard Code for Information Interchange (ASCII)) file format. At its discretion, DOE may permit any person who cannot supply an advance copy of his or her statement to par ticipate, if that person has made alternative arrangements with the Building Technologies Program. In such situations, the request to give an oral presentation should ask for alternative arrangements.

C. Conduct of Public Meeting DOE will designate a DOE official to presid e at the public meeting and may also use a professional facilitator to aid discussion. The mee ting will not be a judicial or evidentiary-type public hearing, but DOE will c onduct it in accordance with 5 U. S.C. 553 and Section 336 of EPCA. (42 U.S.C. 6306) A court reporter will be present to record and transcribe the proceedings. DOE reserves the right to schedule the order of presentations and to establish the procedures governing the conduct of the public meeting. After the public meeting, interested parties may submit further comments about the proceedings, and any other aspect of the rulemaking, until the end of the comment period.The public meeting will be conducted in an informal, conference style. DOE will present

summaries of comments received before the public meeting, allow tim e for presentations by participants, and encourage all interested partie s to share their views on issues affecting this rulemaking. Each participant will be allowed to make a prepared general statement (within time limits determined by DOE) before discussion of a particular topic. DOE will permit other participants to comment briefl y on any general statements.

At the end of all prepared statements on a topic, DOE will permit participants to clarify their statements briefly and comment on statemen ts made by others. Participants should be prepared to answer questions by DOE and by othe r participants concerning these issues. DOE representatives may also ask questions of partic ipants concerning other ma tters relevant to the public meeting. The official conducting the pub lic meeting will accept additional comments or questions from those attending, as time permits. The presiding official will announce any further procedural rules or modification of the above pr ocedures that may be needed for proper conduct of the public meeting.

DOE will make the entire record of this proposed rulemaking, including the transcript from the public meeting, available for inspectio n at the U.S. Department of Energy, Resource Room of the Building Technologies Program, 950 L’Enfant Plaza, SW, 6 th Floor, Washington, DC, 20024, (202) 586-2945, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. Any person may purchase a copy of the transcript from the transcribing reporter.D. Submission of Comments DOE will accept comments, data, and information regarding all aspects of this NOPR before or after the public meeti ng, but no later than the date pr ovided at the beginning of this notice of proposed rulemaking. Please submit co mments, data, and information electronically to the following e-mail address: commercialrefrigeration.rulemaking@ee.doe.gov . Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format and avoid the use of special characters or any form of encryp tion. Comments in electronic format should be identified by the docket number EE-2006- STD-0126 and/or RIN 1904- AB59, and whenever possible carry the electronic signature of the au thor. Absent an elec tronic signature, comments submitted electronically must be followed and authenticated by submitting a signed original paper document. No telefacsimiles (faxes) will be accepted.

Under 10 CFR Part 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public di sclosure should submit two copies: one copy of the document including all the information believe d to be confidential, and one copy of the

document with the information believed to be confidential deleted. DOE will make its own

determination about the confiden tial status of the information and treat it according to its

determination.

Factors of interest to DOE when evaluati ng requests to treat submitted information as confidential include (1) a desc ription of the items; (2) whet her and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known by, or available from, othe r sources; (4) whether the info rmation has previously beenmade available to others without obligation conc erning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) when such information might lose its confidential character due to the passage of time; and (7) why disclosure of the information would be contrary to the public interest.

E. Issues on Which DOE Seeks Comment DOE is particularly interested in receivi ng comments and views of interested parties concerning:

1. LED Price Projections TSL 5 has an estimated -$200 million burde n on the Nation. DOE recognizes that anticipated reductions in LED lighting costs by the e ffective date of the rule could shift the NPV, at the seven percent discount rate, for TSL 5 from a negative NPV (-$200 million) to a positive

NPV. DOE calculated that a reduc tion in LED system cost of six percent would be sufficient to ensure a slightly positive aggregate NPV at TS L 5, at the seven per cent discount rate, when compared with the base case. DOE fully expect s that the aggregate six percent reduction in LED system costs could be attained and even exceeded by 2012 because of the rapid development of LED technology. Furthermore, if LED system co sts achieve the 50 perc ent reduction projection, the NPV at a seven percent discount rate for TSL 5 would be substantially positive. DOE requests data or information on projected LED co st reductions and basis for such projections.

DOE also seeks comment on its consideration of projected LED prices. DOE also seeks comment on the extent to which stakeholders exp ect projected LED cost reductions would occur, the timing of the projected LED cost reductions, and the certainty of the projected LED costreductions. Also, consideri ng the rapid development of LED technology and the steady reductions in cost, DOE seeks comment on the ex tent to which manufacturers would adopt LED technology into the design of comm ercial refrigeration equipment in the absence of standards. DOE recognizes that LED system replacement costs assumed in its LCC analysis would also be affected by projected LED cost re ductions and seeks comment on how it can best predict the cost for LED fixture replacements in the LCC analysis. (See Section V.C of this NOPR for further details.)

2. Base Case Efficiency DOE recognizes that baseline efficiency tr ends can change if equipment costs are different than those projected. For example, if LED prices drop more than assumed in the engineering analysis, consumer demand for LED -equipped equipment could change. DOE seeks comment on whether shipments of LED-equipped equipment would change if LED costs drop and if so, the extent and timing of su ch shipment changes. See Section IV.G.1

.

3. Operating Temperature Ranges One factor in determining which equipment class a commercial refrigeration equipment unit belongs to is its designed operating temperature. DOE is organizing equipment classes based on three operating temperature ranges. Me dium temperature equipment operates at or above 32° F, low temperature equipment operates at temperatures below 32° F and greater than 5 ° F, and ice-cream temperature equipment opera tes at or below -15° F. DOE seeks comment on the temperatures selected to categor ize equipment classes. (See Section IV.A.2 of this NOPR for further details.)4. Offset Factors For the NOPR, DOE developed offset factors as a way to adjust the energy efficiency requirements for smaller-sized equipment in each e quipment class analyzed. These offset factors account for certain components of the refrigeration load (such as the conduc tion end effects) that remain constant even when equipment sizes vary. These constant loads affect smaller cases disproportionately. The offset factors are intended to approxim ate these constant loads and provide a fixed end point, corresponding to a zero TDA or zero volume case, in an equation that describes the relationship between energy cons umption and the corresponding TDA or volume

metric. DOE seeks comment on the use of offset factors and the methodology used to calculate them. (See Section V.A of this NOPR and Chapter 5 of the TSD for further details.)

5. Extension of Standards DOE developed an extension approach to a pplying the standards developed for these 15 primary equipment classes to the remaining 23 secondary classes. This approach involves extension multipliers developed using both the 15 primary equipment classes analyzed and a set of focused matched-pair analyses. DOE believe s that standards for certain primary equipment classes can be directly applie d to other similar secondary equipment classes. DOE seeks comment on its approach to extend ing the results of the engineering analysis to the 23 secondary equipment classes. (See Section V.A of this NOPR and Chapter 5 of the TSD for further details.)6. Standards for Hybrid Cases and Wedges There are certain types of equipment that m eet the definition of co mmercial refrigeration equipment (Section 136(a)(3) of EPACT 2005), but do not fall easily into any of the 38 equipment classes defined in the market and technology assessment. One of these types is hybrid cases, where two or more compartments are in different equipment families and contained

in one cabinet. Another is refr igerator-freezers, which have two compartments in the same equipment family but with different operating temperatures. There ma y also exist hybrid refrigerator-freezers, where two or more compartments are in different equipment families and have different operating temperatures. Another is wedge cases, which form miter transitions between standard display case lineups. DOE seeks comment on proposed language that will allow manufacturers to determine ap propriate standard levels for these types of equipment. (See

Section V.A.1 of this NOPR for further details.)

7. Standard Levels If, based on comment, DOE were to revise the LED system costs as described above (section V.C ) the economic impacts of TSL 5 woul d change. DOE seeks comments on its

consideration of TSL 5 and whether the benefits would outweigh the burdens.List of Subjects in 10 CFR Part 431 Administrative practice and procedure, Energy conserva tion, Household appliances.

For the reasons set forth in the preamble, Chap ter II of Title 10, Code of Federal Regulations, Part 431 is proposed to be amended to read as set forth below.

PART 431 - ENERGY EFFICIENCY PROG RAM FOR CERTAIN COMMERCIAL AND INDUSTRIAL EQUIPMENT

1. The authority citation for part 43 1 continues to read as follows: Authority: 42 U.S.C. 6291-6317.

2. Section 431.62 of subpart C is amended by addi ng in alphabetical order new definitions for “air-curtain angle,” “door angle,” “commercial hy brid refrigerator, free zer, and refrigeratorfreezer,” “vertical closed,” “vertical open,” and “wedge case” to read as follows:

§ 431.62 Definitions concerning commercial refri gerators, freezers and refrigerator-

freezers.

Air-curtain angle means: 1) For equipment without doors and without a discharge air grille or discharge air honeycomb, the angle between a vertical lin e extended down from the highest point on themanufacturer’s recommended load limit line and th e load limit line itself, when the equipment is viewed in cross-section; and 2) For all other equipment without doors, the angle formed between a vertical line and the straight line drawn by connecting th e point at the inside edge of the discharge air opening with the point at inside edge of the return air opening, when the equipm ent is viewed in cross-section.

* * * * * Commercial hybrid refrigerator, freezer, and refrigerator-freezer means a commercial refrigerator, freezer, or refrigerator-freezer th at has two or more chilled and/or frozen compartments that are (1) in two or more different equipment families, (2) contained in one cabinet and (3) sold as a single unit.

* * * * * Door angle means: 1) For equipment with flat doors, the angle between a vertical line and the line formed by the plane of the door, when the equipmen t is viewed in cross-section; and 2) For equipment with curved doors, the a ngle formed between a vertical line and the straight line drawn by connecting the top and bottom points where th e display area glass joins the cabinet, when the equipment is viewed in cross-section.

* * * * *

Horizontal Closed means equipment with hinged or sliding doors and a door angle greater than or equal to 45°.

* * * Horizontal Open means equipment without doors and an air-curtain angle greater than or equal to 80° from the vertical.* * * * * Semivertical Open means equipment without doors and an air-curtain angle greater than or equal to 10° and less than 80° from the vertical.

* * * * *

Vertical Closed means equipment with hinged or slid ing doors and a door angle less than

45°. Vertical Open means equipment without doors and an air-curtain angle greater than or equal to 0° and less than 10° from the vertical. Wedge case means a commercial refrigerator, freezer , or refrigerator-freezer that forms

the transition between two re gularly-shaped display cases.

3. Section 431.66 of subpart C is amended by adding new paragraphs (a)(3) and (d) to read as

follows:

§431.66 Energy conservation standards and their effective dates.

(a) * * * (3) The term “TDA” means the total display area (ft 2 ) as defined in the AirConditioning and Refrigerati on Institute Standard 1200-2006.

* * * * *(d) Each commercial refrigerator, freez er, and refrigerator-freezer with a selfcontained condensing unit and without doors; comme rcial refrigerator, fr eezer, and refrigeratorfreezer with a remote condensing unit; and comm ercial ice-cream freezer, manufactured on or after January 1, 2012, shall have a daily energy c onsumption (in kilowatt hours per day) that does not exceed the levels specified:

(1) For equipment other than hybrid equipm ent, refrigerator-freezers or wedge cases:Equipment Category Condensing Unit Configuration Equipment Family Rating Temp. (°F) Operating Temp. (°F) Equipment Class Designation* Maximum Daily Energy Consumption

(kWh/day) 38 (M) ≥ 32 VOP.RC.M 0.82 x TDA + 4.07 Vertical Open (VOP) 0 (L) > -5 and < 32 VOP.RC.L 2.28 x TDA + 6.85 38 (M) ≥ 32 SVO.RC.M 0.83 x TDA + 3.18 Semivertical Open (SVO) 0 (L) > -5 and < 32 SVO.RC.L 2.28 x TDA + 6.85 38 (M) ≥ 32 HZO.RC.M 0.35 x TDA + 2.88 Horizontal Open (HZO) 0 (L) > -5 and < 32 HZO.RC.L 0.57 x TDA + 6.88 38 (M) ≥ 32 VCT.RC.M 0.25 x TDA + 1.95 Vertical Closed Transparent (VCT) 0 (L) > -5 and < 32 VCT.RC.L 0.6 x TDA + 2.61 38 (M) ≥ 32 HCT.RC.M 0.16 x TDA + 0.13 Horizontal Closed Transparent (HCT) 0 (L) > -5 and < 32 HCT.RC.L 0.34 x TDA + 0.26 38 (M) ≥ 32 VCS.RC.M 0.11 x V + 0.26 Vertical Closed Solid (VCS) 0 (L) > -5 and < 32 VCS.RC.L 0.23 x V + 0.54 38 (M) ≥ 32 HCS.RC.M 0.11 x V + 0.26 Horizontal Closed

Solid (HCS) 0 (L) > -5 and < 32 HCS.RC.L 0.23 x V + 0.54 38 (M) ≥ 32 SOC.RC.M 0.51 x TDA + 0.11 Remote Condensing Commercial Refrigerators and Commercial Freezers Remote (RC)

Service Over Counter (SOC) 0 (L) > -5 and < 32 SOC.RC.L 1.08 x TDA + 0.22 38 (M) ≥ 32 VOP.SC.M 1.74 x TDA + 4.71 Vertical Open (VOP) 0 (L) > -5 and < 32 VOP.SC.L 4.37 x TDA + 11.82 38 (M) ≥ 32 SVO.SC.M 1.73 x TDA + 4.59 Semivertical Open (SVO) 0 (L) > -5 and < 32 SVO.SC.L 4.34 x TDA + 11.51 38 (M) ≥ 32 HZO.SC.M 0.77 x TDA + 5.55 Self-Contained Commercial Refrigerators and Commercial Freezers without Doors Self-Contained (SC) Horizontal Open 0 (L) > -5 and < 32 HZO.SC.L 1.92 x TDA + 7.08 Vertical Open (VOP) VOP.RC.I 2.9 x TDA + 8.7 Semivertical Open (SVO) SVO.RC.I 2.9 x TDA + 8.7 Horizontal Open (HZO) HZO.RC.I 0.72 x TDA + 8.74 Vertical Closed Transparent (VCT) VCT.RC.I 0.71 x TDA + 3.05 Horizontal Closed Transparent (HCT) HCT.RC.I 0.4 x TDA + 0.31 Vertical Closed Solid (VCS) VCS.RC.I 0.27 x V + 0.63 Horizontal Closed

Solid (HCS) HCS.RC.I 0.27 x V + 0.63 Remote

(RC)

Service Over Counter (SVO) SOC.RC.I 1.26 x TDA + 0.26 Vertical Open (VOP) VOP.SC.I 5.55 x TDA + 15.02 Semivertical Open (SVO) SVO.SC.I 5.52 x TDA + 14.63 Horizontal Open (HZO) HZO.SC.I 2.44 x TDA + 9. Vertical Closed Transparent (VCT) VCT.SC.I 0.73 x TDA + 3.29 Horizontal Closed Transparent (HCT) HCT.SC.I 0.56 x TDA + 0.43 Vertical Closed Solid (VCS) VCS.SC.I 0.38 x V + 0.88 Horizontal Closed

Solid (HCS) HCS.SC.I 0.38 x V + 0.88 Commercial Ice-Cream Freezers

Self-Contained (SC)

Service Over Counter (SVO) -15 (I) ≤ -5

SOC.SC.I 1.76 x TDA + 0.36 *The meaning of the letters in this column is indicated in the three columns to the left.(2) For commercial refrigeration equipment with two or more compartments (hybrid refrigerators, hybrid freezers, hybrid refriger ator-freezers, and non-hybrid refrigerator freezers), the maximum daily energy consumption (MDEC) fo r each model shall be the sum of the MDEC values for all of its compartments. For each co mpartment, measure the TDA or volume of that compartment, and determine the appropriate equipment class based on that compartment’s equipment family, condensing unit configuration, and designed operating temperature. The MDEC value for each compartment shall be the amount derived by entering that compartment’s TDA or volume into the standard equation in paragraph (d)(1) of this section for that compartment’s equipment class. Measure the ca lculated daily energy consumption (CDEC) or total daily energy consumption (TDEC) for the entire case:

(i) For remote condensing commercial hybrid refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refrigerat or-freezers, where two or more independent condensing units each separately cool only one co mpartment, measure the to tal refrigeration load of each compartment separately according to the ANSI/ASHRAE Standard 72-2005 test procedure. Calculate compresso r energy consumption (CEC) for each compartment using Table 1 in ANSI/ARI Standard 1200-2006 using the evaporat or temperature for that compartment. The calculated daily energy consumption (CDEC) for th e entire case shall be the sum of the CEC for each compartment, fan energy consumption (FEC ), lighting energy consumption (LEC), anticondensate energy consumption (AEC), defros t energy consumption (DEC), and condensate evaporator pan energy consumption (PEC) (as measured in ANSI/ARI Standard 1200-2006).223 (ii) For remote condensing commercial hyb rid refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-freezers, where two or more compartments are cooled collectively by one condensing unit, measure the total refriger ation load of the entire case according to the ANSI/ASHRAE Standard 72-2005 test procedure. Calculated a weighted saturated evaporator temperature for the entire case by (A) multiplying the saturated evaporator temperature of each compartment by the volume of that compartment (as measured in ANSI/ARI Standard 1200-2006), (B) summing the resulting va lues for all compartments, and (C) dividing the resulting total by the total volume of all comp artments. Calculate the CEC for the entire case using Table 1 in ANSI/ARI St andard 1200-2006, using the total refrigeration load and the weighted average saturated evaporator temperatur e. The CDEC for the entire case shall be the sum of the CEC, FEC, LEC, AEC, DEC, and PEC.

(iii) For self-contained commercial hybr id refrigerators, hybrid freezers, hybrid refrigerator-freezers, and non-hybrid refrigerat or-freezers, measure the total daily energy consumption (TDEC) for the entire case accord ing to the ANSI/ASHRAE Standard 72-2005 test procedure.

(3) For remote-condensing and self-containe d wedge cases, measure the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-2005 te st procedure. The MDEC for each model shall be the amount derived by incorporating into the standards equation in paragraph (d)(1) of this section for the appropriate equipment class a value for the TDA that is the product of (i) the vertical height of the air-curtai n (or glass in a transparent door) and (ii) the largest overall width of the case, when viewed from the front.