CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS 

1.1 PURPOSE OF THE DOCUMENT ................................................................................. 1-1

1.2 OVERVIEW OF RESIDENTIAL ENERGY CONSERVATION STANDARDS FOR

RESIDENTIAL HEATING PRODUCTS....................................................................... 1-1

1.3 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS ................... 1-2

1.4 STRUCTURE OF THE DOCUMENT............................................................................ 1-4

LIST OF TABLES 

Table 1.1 Analyses During Each Rulemaking Stage................................................................... 1-3

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1.1 PURPOSE OF THE DOCUMENT 

This preliminary technical support document (preliminary TSD) is a stand-alone report 

that provides the technical analyses and results supporting the information presented in the 

preliminary notice of public meeting (NOPM) and executive summary for residential water 

heaters, direct heating equipment, and pool heaters (collectively referred to as “residential 

heating products”). This preliminary TSD reports on the preliminary activities and analyses 

conducted in the period preceding the notice of proposed rulemaking (NOPR) of this rulemaking. 

1.2 OVERVIEW OF RESIDENTIAL ENERGY CONSERVATION STANDARDS 

FOR RESIDENTIAL HEATING PRODUCTS 

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

established an energy conservation program for major household appliances. The National 

Energy Conservation Policy Act of 1978 (NECPA) amended EPCA to add Part C of Title III (42 

U.S.C. 6311–6317), which established an energy conservation program for certain industrial 

equipment. The amendments to EPCA in the National Appliance Energy Conservation Act of 

1987 (NAECA) established energy conservation standards for residential water heaters, direct 

heating equipment, and pool heaters, as well as requirements for determining whether these 

standards should be amended. (42 U.S.C. 6291–6309) 

NAECA required DOE to conduct two cycles of rulemakings to determine if more 

stringent standards are economically justified and technologically feasible for these products. (42 

U.S.C. 6295 (e)) Specifically, NAECA directed the Secretary to publish a final rule determining 

whether the standards for residential water heaters, direct heating equipment, and pool heaters 

should be amended by January 1, 1992, and January 1, 2000. (42 U.S.C. 6295 (e)(4)) On 

February 7, 1989 and October 17, 1990, DOE issued a final rule codifying the standards 

prescribed by NAECA, and thereby established the first set of energy conservation standards for 

residential water heaters, direct water heating equipment, and pool heaters. 54 FR 6077 

(February 7, 1989) and 55 FR 42163 (October 17, 1990). 

Pursuant to 42 U.S.C. 6295(e)(4)(A), on January 17, 2001 (the January 2001 final rule), 

DOE published in the Federal Register a final rule, effective on January 20, 2004, amending the 

energy conservation standards for residential water heaters. 66 FR 4474 (January 17, 2001). 

DOE initially analyzed energy conservation standards for direct heating equipment as 

part of an eight-product standards rulemaking. When DOE analyzed direct heating equipment in 

these earlier proceedings, DOE only considered products categorized as vented home heating 

equipment. DOE issued a notice of proposed rulemaking (NOPR) on March 4, 1994, proposing 

to amend the energy conservation standards for direct heating equipment as well as other 

consumer products. 59 FR 10464 (March 4, 1994). The Department of Interior and Related 

Agencies Appropriations Act for Fiscal Year 1996 (Pub. L. 104-134) provided for a moratorium 

on proposing or issuing final rules for appliance standards rulemakings for the remainder of 

Fiscal Year 1996, thereby preventing DOE from finalizing the 1994 proposed standards and 

leaving the existing NAECA energy efficiency levels in place. As with direct heating equipment, 

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DOE initially analyzed standards for pool heaters as part of the eight-product standards 

rulemaking of 1994, 59 FR 10464 (March 4, 1994), but never finalized the proposed standards. 

1.3 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS 

Under EPCA, when DOE studies new or amended standards, it must consider to the 

greatest extent practicable the following seven factors: 

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

products subject to the standard; 

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

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

expense for the products that are likely to result from the imposition of the standard; 

(3) the total projected amount of energy savings likely to result directly from the 

imposition of the standard; 

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

imposition of the standard; 

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

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

(6) the need for national energy conservation; and 

(7) other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)) 

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

and (3)-(4). 

DOE considers the participation of interested parties a very important part of the process 

for setting energy conservation standards. Through formal public notifications (i.e., Federal 

Register notices), DOE encourages the participation of all interested parties during the comment 

period in each stage of the rulemaking. Beginning with the framework document and during 

subsequent comment periods, interactions among interested parties provide a balanced 

discussion of the information that is required for the standards rulemaking. 

Before DOE determines whether to adopt a proposed energy conservation standard, it 

must first solicit comments on the proposed standard. (42 U.S.C 6313(a)(6)(B)(i)) Any new or 

amended standard must be designed to achieve significant additional conservation of energy and 

be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)) To determine 

whether economic justification exists, DOE must review comments on the proposal and 

determine that the benefits of the proposed standard exceed its burdens to the greatest extent 

practicable, weighing the seven factors listed above. (42 U.S.C. 6295(o)(2)(B)(i)) 

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After the publication of the framework document, the energy conservation standards 

rulemaking process involves three additional, formal public notices, which DOE publishes in the 

Federal Register. The first of the rulemaking notices is a NOPM, which is designed to publicly 

vet the models and tools used in the preliminary rulemaking and to facilitate public participation 

before the NOPR stage. The second notice is the NOPR, which presents a discussion of 

comments received in response to the NOPM and the preliminary analyses and analytical tools; 

analyses of the impacts of potential amended energy conservation standards on consumers, 

manufacturers, and the Nation; DOE’s weighting of these impacts of amended energy 

conservation standards; and the proposed energy conservation standards for each product. The 

third notice is the final rule, which presents a discussion of the comments received in response to 

the NOPR; the revised analyses; DOE’s weighting of these impacts; the amended energy 

conservation standards DOE is adopting for each product; and the effective dates of the amended 

energy conservation standards. 

In November 2006, DOE published a notice of public meeting and availability of the 

framework document. 71 FR 67825 (November 24, 2006). The framework document, 

Rulemaking Framework for Residential Water Heaters, Direct Heating Equipment, and Pool 

Heaters, describes the procedural and analytical approaches DOE anticipated using to evaluate 

the establishment of amended energy conservation standards for these products. This document 

is available at: 

www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/heating_equipment_ 

framework_092706.pdf. 

Subsequently, DOE held a public meeting on January 16, 2007, to discuss procedural and 

analytical approaches to the rulemaking. In addition, DOE used the public meeting to inform and 

facilitate involvement of interested parties in the rulemaking process. The analytical framework 

presented at the public meeting described the different analyses, such as the engineering analysis 

and the consumer economic analyses (i.e., the life-cycle cost (LCC) and payback period (PBB) 

analyses), the methods proposed for conducting them, and the relationships among the various 

analyses. 

Table 1.1 Analyses During Each Rulemaking Stage 

Preliminary Analyses NOPR Final Rule 

Market and Technology Assessment Revised Preliminary Analyses Revised Analyses 

Screening Analysis Life-Cycle Cost Sub-Group Analysis 

Engineering Analysis Manufacturer Impact Analysis 

Energy Use Determination Utility Impact Analysis 

Markups for Equipment Price 

Determination 

Environmental Assessment 

Life-Cycle Costs and Payback 

Period Analyses 

Employment Impact Analysis 

Shipments Analysis Regulatory Impact Analysis 

National Impact Analysis 

Preliminary Manufacturer Impact 

Analysis 

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During the January 2007 public meeting, interested parties commented about numerous 

issues relating to each one of the analyses listed in Table 1.1. Due to the extensive scope of 

material and issues raised at the meeting, some interested parties at the public meeting requested 

an extension to the comment period. DOE extended the comment period until February 13, 2007, 

to better provide opportunity for public review and comment on DOE's rulemaking approaches. 

72 FR 4219 (January 30, 2007). Comments from interested parties submitted during the 

framework document comment period elaborated on the issues raised during the public meeting. 

DOE attempted to address these issues during its preliminary analyses and summarized the 

comments and DOE’s responses in chapter 2 of the preliminary TSD. 

As part of the information gathering and sharing process, DOE organized and held 

interviews with manufacturers of the residential heating products considered in this rulemaking 

as part of the engineering analysis. DOE selected companies that represented production of all 

types of products, ranging from small to large manufacturers, and included the Air-Conditioning, 

Heating, and Refrigerating Institute (AHRI) (formerly the Gas Appliance Manufacturers 

Association) member companies. DOE had four objectives for these interviews: (1) solicit 

manufacturer feedback on the draft engineering analysis (including methodology, product costs, 

manufacturing processes, and findings); (2) solicit feedback on topics related to the preliminary 

manufacturer impact analysis; (3) provide an opportunity, early in the rulemaking process, to 

express manufacturers’ concerns to DOE; and (4) foster cooperation between manufacturers and 

DOE. 

DOE incorporated the information gathered during the engineering interviews with 

manufacturers into its engineering analysis (Chapter 5) and the preliminary manufacturer impact 

analysis (Chapter 12). Following the publication of the preliminary analyses and the NOPM 

public meeting, DOE intends to hold additional meetings with manufacturers as part of the 

consultative process for the manufacturer impact analysis conducted during the NOPR phase of 

the rulemaking. 

DOE developed spreadsheets for the engineering, LCC, PBP, and national impact 

analyses for each product. For each product, DOE developed an LCC spreadsheet that calculates 

the LCC and PBP at various energy efficiency levels. DOE also developed a national impact 

analysis spreadsheet that calculates the national energy savings (NES) and national net present 

values (NPVs) at various energy efficiency levels. This spreadsheet includes a model that 

forecasts the impacts of amended energy conservation standards at various levels on product 

shipments. All of these spreadsheets are available on the DOE website 

(www.eere.energy.gov/buildings/appliance_standards/) within the specific pages for each of 

product. 

1.4 STRUCTURE OF THE DOCUMENT 

This preliminary TSD outlines the analytical approaches used in this preliminary 

rulemaking. The preliminary TSD consists of 14 chapters, an executive summary, an 

environmental assessment, a regulatory impact analysis, and appendices. 

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Executive Summary: Describes the rulemaking process, identifies the key results of the 

preliminary analyses, and identify the key issues for which DOE seeks 

public comment that resulted from the preliminary analyses. 

Chapter 1 Introduction: Provides an overview of the appliance standards program, 

describes how the program applies to the residential heat products 

rulemaking, and outlines the structure of the document. 

Chapter 2 Analytical Framework, Comments from Interested Parties, and DOE 

Responses: Describes the analytical framework of the preliminary 

analyses, identifies the comments raised by interested parties during the 

framework document comment period, and includes DOE’s responses to 

those comments. 

Chapter 3 Market and Technology Assessment: Characterizes the residential heating 

products market and the technologies available for increasing product 

energy efficiency. 

Chapter 4 Screening Analysis: Determines which technology options are viable for 

consideration in the engineering analysis. 

Chapter 5 Engineering Analysis: Discusses the methods used for developing the 

relationship between increased manufacturer price and increased energy 

efficiency. 

Chapter 6 Markups to Determine Product Price: Discusses the methods used for 

establishing markups for converting manufacturer prices to customer 

product prices. 

Chapter 7 Energy Use Characterization: Discusses the process used for generating 

energy use estimates for a variety of building types, climate locations, and 

standard levels. 

Chapter 8 Life-Cycle Cost and Payback Period Analyses: Discusses the economic 

effects of standards on individual customers and users of the products and 

compares the LCC and PBP of products with and without higher energy 

conservation standards. 

Chapter 9 Shipments Analysis: Discusses the methods used for forecasting 

shipments with and without higher energy conservation standards. 

Chapter 10 National Impact Analysis: Discusses the methods used for forecasting 

national energy consumption and national economic impacts based on 

annual product shipments and estimates of future product energy 

efficiency distributions in the absence and presence of higher energy 

conservation standards. 

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Chapter 11 Life-Cycle Cost Sub-Group Analysis: Outlines how the effects of 

amended energy conservation standards on a sub-group of consumers of 

residential heating products and compares the LCC and PBP of products 

with and without higher energy conservation standards for these 

consumers. 

Chapter 12 Preliminary Manufacturer Impact Analysis: Discusses the effects of 

energy conservation standards on the finances and profitability of product 

manufacturers. 

Chapter 13 Utility Impact Analysis: Outlines how the effects of energy conservation 

standards on the installed generation capacity of electric utilities. 

Chapter 14 Employment Impact Analysis: Outlines how the effects of energy 

conservation standards on national employment. 

Environmental Assessment for Residential Heating Products: Outlines how the effects of 

energy conservation standards on airborne emissions of electric utilities. 

Regulatory Impact Analysis for Residential Heating Products: Outlines how the impact of 

non-regulatory alternatives to energy conservation standards. 

Appendix 6-A Detailed Data for Product Price Markups 

Appendix 7-A RECS 2001 Values and Variables 

Appendix 7-B Hot Water Draw Model 

Appendix 7-C LCC Energy Use Calculations 

Appendix 7-D Weather Data and Temperature Parameters for LCC Analysis 

Appendix 7-E Derivation of Heating Load for Pool Heaters and Direct Heating 

Equipment 

Appendix 8-A Installation Cost Determination 

Appendix 8-B Maintenance and Repair Cost Determination 

Appendix 8-C Lifetime Distributions 

Appendix 8-D Distributions Used for Discount Rates 

Appendix 8-E Monthly Energy Price Factor Calculations 

Appendix 8-F Rebuttable Payback Analysis Results 

Appendix 8-G User Instructions for the Rebuttable Payback Analysis Spreadsheet 

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Appendix 8-H User Instructions for the LCC Analysis Spreadsheet 

Appendix 8-I Uncertainty and Variability 

Appendix 9-A User Instructions for Shipments and National Energy Savings 

Spreadsheet 

Appendix 12-A Preliminary Manufacturer Interview Guides 

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