## Wednesday January 17, 2001



# Part VIII 

# Department of Energy
Office of Energy Efficiency and Renewable Energy
10 CFR Part 430 Energy Conservation Program for Consumer Products: Energy Conservation Standards for Water Heaters; Final Rule


# /~)/

DEPARTMENT OF ENERGY Avenue, S.W., Washington, D.C. 20585. A.Review Under the National (202) 586-9127. Environmental Policy Act Office of Energy Efficiency and FOR FURTHER INFORMATION CONTACT: B ReviewUnder Executive Order 12866, Renewable Energy Terry Logee, U.S. Department ofEnergy, "Regulatory Planng andReview" C. Review Under the Regulatory Flexibility EE-41, 1000 Independence Avenue, Act 10 CFR Part 430 S.W., Washington, DC 20585-0121, D.Review Underthe Paperwork Reduction [Docket Number EE-RM-97-900] (202) 586-9127 email: Act terry.logee@ee.doe.gov orFrancine E.Review UnderExecutive Order 12988, RIN 1904-AA76 Pinto, Esq., U.S. Department ofEnergy, "Civil Justice Reform' Office ofGeneral Counsel, GC-72, 1000 F "Takings" Assessment Review Energy Conservation Program for Independence Avenue, S.W., G.Review UnderExecutive Order 13132, Consumer Products: Energy Washington DC 20585, (202) 586-7432, "Federalism' Conservation Standards forWater email: francine.pinto@hq.doe.gov or Review Underthe Unfunded Mandates 

### Heaters Reform Act of 1995 Heaters Eugene Margolis, Deputy Assistant I.Review Under theTreasury and General AGENCY: Office ofEnergy Efficiency and General Counsel, GC-72, atthe same Government Appropriations Act of 1999 Renewable Energy, Department of address, (202) 586-9507, email: J.Review Underthe Plain Language Energy (DOE). eugene.margolis@hq.doe.gov. Directives ACTION: Final rule. SUPPLEMENTARY INFORMATION: K. Congressional Notification Table ofContents I. Introduction SUMMARY: The Department of Energy (DOE orDepartment) has determined . Consmer Overview The Energy Policy and Conservation thatrevised energy conservation B.Authority Act, as amended (hereinafter referred to standards for water heaters will result in C.Background as EPCA or the Act), specifies that any significant conservation ofenergy, are 11. General Discussion new or amended energy conservation technologically feasible, and are A.Test Procedures standard theDepartment ofEnergy economicallyjustified. On this basis, B. Technological Feasibility (DOE)prescribes shall be designed to the Department is today amending the C.Lessening ofUtility orPerformance of "achieve the maximum improvement in existing energy conservation standards! Products existing energy conserv n sD. Impact ofLessening ofCompetition energy efficiency * * *which the

- for waterheaters. E.EconomicJustification Secretary determines is technologically EFFECTIVEDATES: The effective date of F. OtherFactors feasible and economically justified." this rule and standard isJanuary 20, III. Methodology Section 325(o)(2)(A), 42 U.S.C. 2004. A.Engineering 6295(o)(2)(A). Furthermore, the B.Life-Cycle Costs (LCC) amended standard must "result in ADDRESSES: You may read copies ofthe C.Manufacturing Impact significant conservation ofenergy." Technical Support Document (TSD) at D.Energy Savings and Net Present Value Section 325(o)(3)(B), 42 U.S.C. the DOE Freedom ofInformation IV.Discussion ofComments e 5(o)( Reading Room, U.S. Department of A.VentingofGas Water Heaters 6295(o)(3)(B). Energy, Forrestal Building, 1000 B.Electric Water Heater Ratings In accordance with the statutory Independence Avenue, S.W., C.Measured vs. Rated Volume criteria discussed in this notice, DOE is Washington, DC. 20585, (202) 586-3142, DEffective Date ofStandards amending the water heater energy between thehours of9:00 a.m. and 4:00

. Itantaneou sAffecter efficiency standards, to go into effect on between the hours of9:00 a.m. and 4:00 F. Instantaneous Water Heaters January 20, 2004. p.m., Monday through Friday, except G.Fuel Switching January 20, 2004. Federal holidays. You may obtain V.Analytical Results and Conclusion A ConsumerOverview copies ofthe TSD from theCodes and A.Economic Impacts on Consumers Standards Internet site at: http:// B.Significance of Energy Savings The Table below summarizes the www.eren.doe.gov/buildings/codes- C.Lessening ofUtility orPerformance of "vital statistics" oftoday's typical gas Products standards/applbrf/waterheater.htm or D.Impact ofLessening of and electric water heater, as well as from the U.S. Department ofEnergy, E.Need of e ion e presenting the cost implication to SaveEnergys for the Office ofEnergy Efficiency and Net NationalEmployment average consumer ofwaterheaters after Renewable Energy, Forrestal Building, F.Conclusion the 2004 water heater standards take Mail Station EE-41, 1000 Independence VI. Procedural Issues and Regulatory Reviews effect.

VITAL STATISTICS OF TODAY'S TYPICAL WATER HEATERS

Current statistics Gas Electric Average Price

........................................ $383

................................... $380 Annual U tility Bill

........................................................................................................... $160

.................................. $256 Life Expectance

............................................................................................................. 9years

............................... 14 years Energy Consumption

..................................................................................................... 234Therms/year

................ 3,459 kWh/year Statistics InYear 2004: Average New Water Heater Price* ........................................ $501

................................... $486 Estimated Price Increase (Efficiency Only)

................................................................... $58

..................................... $101 A

nnual Utility Bill Savings

............................................................... ............................ $12.74

............................... $13.05 Simple Payback Period

................................................................................................. 3.6 years

............................ 7.4 years Average Net Saving Over Appliance Life

...................................................................... $30

..................................... $23 Energy Saving per Year ................................................................................................ 22 therms

........................... 188 kWh

*Includes expected price increases for non-energy efficiency regulations.Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4475

Currently, theaverage typical water or an amount equal to that produced by determine whether amended standards heater costs, $380 for electric and $383 3.9 million cars per year.Additionally, to the existing requirements in Section for gas. The average annual utility bill there will be a cumulative reduction of 325(e) forwater heaters are warranted, for an electric water heater is $256, 273 thousand metric tons of nitrogen and issue a Final Rule. Such while a gas water heater costs $160 a oxides (NOx). In total, we estimate the amendment shall apply to products year to operate. national energy savings to have a manufactured three years on or after the

The waterheater energy efficiency positive net present value toAmerican date ofthis Final Rule. Section standards we are adopting today will business and industry of $2.02 billion 325(e)(4)(A). have a positive impact on consumers. over 26 years. Any new or amended standard must Consumers with electric water heaters be designed to achieve the maximum would save $13.05 per year while those B.Authority improvement in energy efficiency thatis with natural gas waterheaters would Part BofTitle III ofthe Energy Policy technologically feasible and

save about$12.74 per year on average. and Conservation Act, Pub. L. 94-163, economically justified. Section Of course these savings are not free, as amended by the National Energy 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A).
consumers will have topay an average Conservation Policy Act,Pub. L. 95- Section 325(o)(2)(B)(i), 42 U.S.C. increase of $101 for electric and $58 for 619, the National Appliance Energy 6295(o)(2)(B)(i) provides that before gas waterheaters. Note thatthe total Conservation Act, Pub. L. 100-12, the DOE determines whether a standard is average increased cost for electric and National Appliance Energy economically justified, it must first ask gas water heaters are $105 and $118, Conservation Amendments of 1988, forcomments on a proposed standard. respectively, due to thephase out ofthe Pub. L. 100-357, and the Energy Policy After reviewing comments on the current insulating foam blowing agent Act of 1992, Pub. L. 102-486,1 created proposal, DOEmust determine thatthe HCFC-141b and the compliance to the Energy Conservation Program for benefits ofthe standard exceed its resist ignition offlammable vapors on Consumer Products otherthan burdens, based, tothe greatest extent gas waterheaters voluntarily agreed to Automobiles. Water heaters are one of practicable, on a weighing ofthe between the manufacturers and the the consumer products subject to this following seven factors: Consumer Product Safety Commission. program. Section 322(a)(4), 42 U.S.C. (1)The economic impact ofthe The simple payback for cost increases 6292(a)(4). standard on the manufacturers and on due to efficiency standards is 7.4 years Under the Act, the program consists the consumers ofthe products subject to for electric and 3.6 years for gas water essentially ofthree parts: testing, the standard; heaters. The lifetime owning cost or life- labeling, and Federal energy (2)The savings in operating costs cycle costs are lowerthan life-cycle conservation standards. The throughout the estimated average life of costs on current water heaters by $23 for Department, with assistance from the the covered product in the type (or electric andby $30 for gas water heaters. National Institute of Standards and class) compared to anyincrease in the

The design improvements the Technology (NIST), may amend or price of,or in the initial charges for,or Department considered are thicker establish test procedures for each ofthe maintenance expenses of, the covered insulation and heat traps on both gas covered products. Section 323(b)(1)(A)- products which are likely to result from and electric water heaters and an (B), 42 U.S.C. 6293(b)(1)(A)-(B). The test the imposition ofthe standard; improved heat exchanger (fluebaffle) on procedures measure the energy (3)The total projected amount of gas water heaters. These improvements efficiency, energy use, or estimated energy or water savings likely to result result in a four percentincrease in annual operating cost ofa covered directly from the imposition ofthe energy efficiency for electric and an product during a representative average standard; eight percent increase in energy use cycle or period ofuse. They must (4) Any lessening ofthe utility orthe efficiency for gas water heaters. These notbe unduly burdensome toconduct. performance ofthe covered products kinds ofimprovements are already Section 323(b)(3), 42 U.S.C. 6929(b)(3). likely to result from the imposition of available on 26 percent of all water The water heater test procedure appears the standard; heater models. In energy terms, at Title 10 Code of Federal Regulations (5)The impact ofany lessening of households with electric waterheaters (CFR) Part 430, Subpart B,Appendix E. competition, as determined in writing will save on average 188 kWh per year TheFederal Trade Commission (FTC) by the Attorney General, that is likely to and households with gas water heaters prescribes rules governing the labeling result from the imposition ofthe will save 22 therms peryear ofnatural ofcovered products after DOE publishes standard; gas or propane gas. test procedures. Section 324(a). At the (6) The need fornational energy and

Thebenefits to the nation from this present time, there are FTC rules water conservation; and revised energy efficiency standard are requiring labels for water heaters. (7)Other factors the Secretary also significant with energy savings of The National Appliance Energy considers relevant. 4.6 quads ofenergy over26 years. This Conservation Act of 1987 prescribed In addition, Section 325(o)(2)(B)(iii), is equivalent to the total energy Federal energy conservation standards 42 U.S.C. 6295(o)(2)(b)(iii), establishes a consumption ofall U.S. homes over a for water heaters. Section 325(e). The rebuttable presumption ofeconomic period of2.8 months. By 2020, the Act provides that the Department shall justification in instances where the standards will avoid the construction of Secretary determines that "the nine400 megawatt electric generating 1part BofTitleIIIoftheEnergy Policyand additional cost to the consumer of plants. Conservation Act, asamended bytheNational purchasing a product complying with

The amended standards in today's EnergyConservation PolicyAct,theNational an energy conservation standard level rule can be achieved by using HFC- ApplianceEnergy conservationAct, the National will be less than three times the value Applicance Energy Conservation Amendments of ofthe energy, and as applicable, water, 134a, cyclopentane, or HFC-245fa as the 1988, andtheEnergyPolicy Act of 1992is referred ofthe energy, and as applicable, water, blowing agent in the insulation. The4.6 to inthis notice as the "Act." Part B oftitleIIIis savings during thefirst year thatthe quads ofenergy savings will result in codified at42U.S.C. 6291et seq.PartBofTitleIII consumer will receive as a result ofthe cumulative greenhouse gas emission of theEergy Polciyandconservation Act,as standard, as calculated under the amended by the National Energy Conservation applicable test procedure. The reductions of 152 million metric tons PolicyActonly, isreferredtointhis notice asthe applicable test procedure. * * *"

### The (Mt)ofcarbon dioxide (CO2) equivalent, NationalEnergyConservation PolicyAct. rebuttable presumption test is an4476 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

alternative path to establishing to the process used to develop appliance for electric and gas-fired instantaneous economic justification. efficiency standards. As a result,on July waterheaters and amended the

Section 327 ofthe Act,42 U.S.C. 15, 1996, the Department published a definition ofa heat pump waterheater. 6297, addresses the effect ofFederal Final Rule: Procedures for 63 FR 25996 (May 11, 1998). This rules on State laws or regulations Consideration ofNew or Revised Energy revision did not change the test method concerning testing,labeling, and Conservation Standards for Consumer for determining energy efficiency standards. Generally, all such State laws Products (referred to as the Process standards.
or regulations are superseded bythe Rule) 61 FR 36974 (July 15, 1996), Noone has petitioned DOE indicating Act,unless specifically exempted in codified at 10 CFR Part 430, Subpart C, the Department's test procedures are Section 327. The Department can grant Appendix A. inadequate for testing waterheaters.

a waiver ofpreemption in accordance The Process Rule states thatfor Accordingly the Department considers with the procedures and other products, such as waterheaters, for the current Federal test procedures provisions ofSection 327(d) ofthe Act. which DOE issued a proposed rule prior applicable and appropriate for today's 42 U.S.C. 6297(d). to August 14, 1996, DOE will conduct Final Rule.2
C.Background a review to decide whether any ofthe B. TechnologicalFeasibility analytical or procedural steps already 1. CurrentStandards. The existing completed ould ted should beA repeated. 61 FRquires theDepartment, in waterheater efficiency standards have 36974, 36982 (July 15, 1996). DOE considering any new or amended been in effect since 1991. Energy completed this review and decided to standards, to consider those that "shall efficiency is measured in terms ofan use thePrcess Rule, tothe extent be designed toachieve the maximum energy factor (EF), which measures possible, in the development ofthe improvement in energy efficiency overall waterheater efficiency and is revised waterheater standards. which the Secretary determines is determined by the DOE testprocedure. We developed an analytical technologically feasible and 10 CFR, Part430, Subpart B, Appendix framework for the waterheater economically justified." (Section 325 E. The current waterheater efficiency standards rulemaking forour (o)(2)(A)). Accordingly, for each class of standards are as follows: stakeholders, which we presented product considered in this rulemaking, * Electric: EF = 0.93-(0.00132 x rated during a water heater workshop on Junea maximum technologically feasible

volume) 24, 1997. The analytical framework (max tech) design option was identified * Gas-fired: EF= 0.62-(0.0019 x rated d d h e re ana s (e.g, and considered as discussed inthe described the different analyses (e.g., volume) Proposed Rule. 65 FR 25042, 24045 * Oil-fired: EF= 0.59-(0.0019 x rated life-cycle costs (LCC), payback, and (April 28, 2000)

volume) manufacturing impact analyses (MIA)) However, DOE eliminated the heat where ratedvolume is the water storage to be conducted, the method for pump water heater due to issues capacity ofa waterheater in gallons, as co nd u cti onal energy savings (N ) LC concerning thepracticability to specifiedby the manufacturer. n n manufacture, install, and service on the

2.Historyof PreviousRulemakings. spreadsheets, and the relationship scale necessary to serve therelevant On September 28, 1990, DOE published between the various analyses. market at the time oftheeffective date
anAdvance NotiWceel ofPrkoposed l d a w or on November 9 ofthe standard and product utility of Rulemaking announcing the and 10, 1998, to share thepreliminary these units. We eliminated heatpump Department's intention torevnise the an results. We discussed our waterheaters after careful consideration Department's intention to revise the methodology for analyzing national fthecurrent electric resistance and existing water heater efficiencymethodogy environmntal int ofthe current electric resistance and standard. 55 FR 39624 (September 28, energy sav environmental puts, heat pump water heater markets and 1990). On March 4,1994, DOE proposedconsumer sub-group impacts and manufacturing technology, and after

a rule to revise the energy conservation im ts on utilities including fuel applying the factors to be considered in standards for water heaters, aswell as witching There was also a presentaton screening design options contained in

a variety ofother consumer products. 59 ofthe water heater insulation testingby the Process Rule. We also eliminated gas FR 10464 (March 4, 1994). On January NIST. On July 23, 1999 we held another condensing water heaters because we 31, 1995, we published a determination workshop to present the full results of determined they are nottechnologically that1 weould issue a revised notice of our engineering ad economic analysis. feasible. 10 CFR 430, Subpart C, proposed rulemaking (NOPR) for water We discussed the comments fromthe Appendix A(4)(a)(4) and (5)(b). There is heaters. 60 FR 5880 (January 31, 1995). November 1998 workshop and changes a complete discussion of these

The Department ofInterior and we made in our analysis as a result of conclusions inthe proposed rule. 65 FR Related Agencies Appropriations Act for these comments. On April 28, 2000 we 25042, 25047-49 (April 28, 2000). Fiscal Year 1996 included a moratorium published the notice ofproposed The Department has determined that

onproposing orissuing Final Rules for rulemaking to amend waterheater the electric and gas water heaters appliance efficiency standards for the energy efficiency standards. 65 FR considered in today's notice are remainder ofFiscal Year 1996. See Pub. 25042 (April 28, 2000). We held the technologically feasible as requiredby L. 104-134. During the moratorium, the hearing/workshop to discuss comments Section 325(o)(2)(A) ofEPCA, as Department examined the appliance to theproposed rule onJune 20, 2000. amended. There are some models of standards program and how itwas II. General Discussion these water heaters in the market that working. Congress advised DOEto correct the standards-setting process A. TestProcedures 2 In August and September 2000,DOE conducted and tobring together stakeholders (such The Act does not allow DOE to set a certification review h uf hih efficieny elecdt waterheaters at five manufacturers. Basedonthe as manufacturers and energy standards for a product unless review ofthese manufacturers' laboratory environmentalists) for assistance. there is atest procedure in place for that procedures, webelieve someclarifications tothe Therefore, we consulted with energy product. The Department published a waterheater test procedure maybe needed.We are efficiency groups, manufacturers, trade test procedure onMay 11, 1998, that planningtojoinGAMA andthemanufacters in their water heatertest program to determine what associations, state agencies, utilities and revised the first-hourrating of storage- needs tobe clarifiedinthewaterheater test other interested parties toprovide input type water heaters, added anew rating procedure.Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4477

meet the new standard levels. Thus, the waterheater replacements. (National stakeholders opposed larger electric design options DOE considered are Propane Gas Association, No. 165 at 2 elements. There were no comments on technologically feasible. and Atlanta Gas Light Co., No. 178 at 1). increasing the thermostat setpoint. .Lesse g of U y orPe of The Oregon Office ofEnergy (OOE) The Electric Power Research Institute C.LessenngofUtilityorPerformanceof claims that after installing tens of (EPRI) claims using 6 kW elements is Products thousands ofhigh efficiency water not an option for smaller tanks to

This factor isnot easily quantified. heaters in the Pacific Northwest, provide the consumer utility oflarger However, DOEhas considered the effect physically larger tanks do not impose tanks since these elements are only used ofthicker insulation which mightresult higher installation costs. Drip pans are in commercial water heaters. They state in smaller capacity water heaters tobe sized for the larger tanks and water thatit isgenerally notpossible to use 6 used in small existing spaces which connections are almost universally kW elements in "residential" water could cause a reduction in first hour made with flexible copper tubing that heaters because standard household rating. Aloss offirsthour ratingwould easily accommodates a wide range of wiring circuits usually used for water reduce consumer utility.The discussion tank heights and alignments. (OOE, No. heaters cannot carry a 6 kW continuous in the comments on size constraints 174 at 3). load with sufficient safety margin as explains how DOE dealt with this issue. To account for size constraints in our required by the National Electrical Furthermore, ifa certain type ofwater revised analysis, we assume space Code. (EPRI, No. 104 at 3). Dominion heater would no longer fitin spaces that constraints would only apply in those concurs withEPRI, and states further it was designed for,we have considered cases where the water heater is installed thatthere are currently only two models
a new class ofproducts. We have in a conditioned space, e.g., not in a listedin the latest GAMA directory with included a discussion on new product garage or an unconditioned basement or elements above 4.5 kW, and none classes to address this. attic. We also assume this will only greater than 5.5kW. (Dominion, No. 145 1. Size Constraints. We addressed size apply to small houses or apartments. at4). TheNational Rural Electric constraints in theproposed rule by Therefore, we have excluded houses or Cooperative Association (NRECA) also estimating approximately 32 percent of apartments with a floor area ofmore opposes theuse oflarger heating electric water heating households and than 1000 square feet. These elements. (NRECA, No. 126 at 1-2). 27 percent ofgas water heating assumptions are not intended to Southern Co. and Dominion claim that households would need toremove the accurately identify every individual increased element size will increase closet door for water heaters with 3inch household thatwould face space peak electric demand on electric thick insulation. Then, we added a cost constraints when replacing their water utilities and could require new wiring adjustment of$160 toinstall new water heater. Rather this estimate should and circuit breakers or electric panels in heaters in these households. Several roughly identify thenumber of homes. (Southern Co., No. 142 at 3and stakeholders have commented on our households affected. Since this isbased Dominion, No.145 at 3). estimates ofcosts and the number of on the Residential Energy Consumption We are not including 6 kW elements households affected. Survey (RECS) '97 data, we have a as a means ofcompensating for

The American Gas Association (AGA) representative national sample of downsized electric waterheaters in requests that DOE address size households. We believe using the RECS today's Final Rule. Instead, we have constraints consistently across electric '97 database and the assumptions above increased the thermostat setpoint to andgas water heaters. It requested DOE will give us the bestestimate ofthe meetthe loadin those cases where the to include the costs shown in the impacts of increased water heater size. downsized waterheater would be too Battelle report thataddresses space In its comments, Battelle also small to meetthe particular constraints. (AGA, No. 150 at 5). The assumed a large fraction ofclosets are requirements ofa RECS '97 home. In Gas Appliance Manufacturers smaller than 22 x 22 inches.Discussions addition to increasing the thermostat Association (GAMA) supports the with installers report this is a rare setpoint, we added $106 for the costs of Battelle analysis. (GAMA, No. 160 at 4). occurrence; they come upon this tempering valves and check valves for Battelle provided detailed comments on situation approximately once per about fifteen percent ofelectric and space constraints associated with larger month. We also checked the areas eight percent ofthe gas water heaters gas water heaters. Based on asurvey of servedby the gas utilities in the Battelle where we had to increase the thermostat 15 companies, covering areas within 24 survey. We found that although 24 setpoint above 140°F. (Generally, water states, it determined a range ofspace states are represented, usually thearea temperatures above 140°F have the impacts on costs and the percentages of served by the utility covered only a very potential to cause scalding.) The homes affected. (Battelle, No. 127 atC- small part ofthe state. Therefore, we do detailed computer algorithm we used to 1 toC-5). not believe thatthis survey is really determine when a tempering valve is

Southern Gas Association stated that representative ofthe entire United needed can befound in theTSD in
a survey ofits members revealed that 18 States. Consequently, we did not add Chapter 9. percent of single family homes would be any extracosts for small closets for gas 2.New ProductClasses.During the unable to fita 2 inch larger diameter water heaters. We assumed extra costs hearing and inthe comments, several water heater into the existing space. for removing and replacing closet doors comments claimed thattabletop and (Southern Gas Association, No. 152 at and doorframes for 32 percent of lowboy waterheaters would be unable 4). Alagasco indicated that many ofits households with electric and 27 percent to fit into existing spaces iftheir size customers are renters in mid tolow- ofhouseholds with gas water heaters increased substantially beyond current income brackets. The proposed gas with 3inch insulation. See Chapter 9 of dimensions. These comments suggested water heaters would cause space the TSD. DOE create separate product classes for constraints in many ofthese homes. In the proposed rule, DOE asked for these water heaters. (Alagasco, No. 152 at 2). TheNational comments or suggestions to minimize GAMA requests DOE to establish a Propane Gas Association and Atlanta the effects of smallertanks either by separate product class for lowboy and Gas Light Co. stated thatan increase in increasing the electric element size from tabletop water heaters and notto storage tank size will cause significant 4.5 kW to 6 kW or by increasing the increase the efficiency standards for and costly installation problems in thermostat setpoint. Several these products. GAMA states that4478 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

lowboy waterheaters must be able to fit water heaters exist in the market to but at a much higher material cost. under a 36 inch high counter. Therefore, satisfy any size constraints encountered. HFC-245fa has alower manufacturing they are 34 inches high or shorter and of conversion cost than some oftheother have ajacket diameter less than 2mpact of LesseningofCompetition alternatives, such as pentane/ inches. GAMA defines tabletop water This factor seeks the views ofthe cyclopentane. Given thelikelihood heaters as having typical dimensions of Attorney General to determine the HFC-245fa would be adopted by 36 inches high, 25 inches deep and 24 potential impacts on competition manufacturers, the Department used the inches wide. Tabletop waterheaters are resulting from the imposition ofthe performance characteristics and designedto slide into a kitchen proposed energy efficiency standards. increased material and manufacturing countertop space and provide additional In order to assist theAttorney General costs associated with HFC-245fa to countertop surface area. (GAMA,No. in making such a determination, the estimate the impactthe new blowing 160 at 4-5). Bradford White supports Department provided the Attorney agent would have on consumers and GAMA's request stating that elimination General with copies ofthe Proposed manufacturers. This was not to imply ofthese products will cost consumers Rule and the Technical Support HFC-245fa was the only path tomeeting substantial capital to convert and will Document for review. In a letter the standard and DOE believes that at impact thereplacement market responding to the Proposed Rule, the least three alternative blowing agents negatively. Lowboy electric models are Department ofJustice (DOJ) found only are available to use in meeting the limited to 34 inches in height and to 26 one area ofconcern regarding any standards adopted in today's Final Rule. inches in diameter. (Bradford White, lessening ofcompetition. The area of See the following section for the No.175 at 2 and No. 138 at 3). A.O. concern involves the blowing agent for analysis we used to support our No7aSmit2 andlso recomme atnew pr t the foam insulation and thepossibility conclusion. Smith also recommtype (also known asproduc thatonly one chemical, HFC-245fa, 1.IncreasedCostsDuetoa Single tableass ftop) electric waterheaters. (A.O.wn as couldbe used and thatit is a patented SourceofSupply forHFC-245fa.In tabletop) electric waterheaters. (A. product with only one supplier. This addition tothe Attorney General's letter Smithl No.79 at 1). TheAmefican situation ledDOJ to conclude "that the on the anti-competitive effects of the Council for an Energy-Efficient proposed standards could have an proposed rule, wereceived several Economy (ACEEE) commented hat it is adverse affect on competition because comments from stakeholders. They were not opposed toa new,product class for waterheater manufacturers may have to concerned about cost increases due to a tabletops and lowboys but use an inputthat will be produced by single source supplier for HFC-245fa recommended limiting these classes to a only one source." (DOJ, No. 143 at 1). and about the unavailability ofthe 30 gallon size. (ACEEE, No.170 at 7) The DOJ letter is printed at the end of material until July, 2002 or later.

DOEhas decided to establish a today's rule. The AGA position is that DOE should separate product class for tabletop water To reduce heat loss from the stored only consider water blown foams for its heaters due to strict size limitations for reservoir ofhot water, water heaters analytical baseline and standard level these products. However, we have must have insulation. The choice of analysis. AGA pointed out that the concluded that lowboy water heaters do insulation is critical to achieving high blowing agent HFC-245fa has not yet not have as stringent limitations on waterheater efficiency at a reasonable been demonstrated in manufacture of geometry as tabletop water heaters. For cost and essentially all water heaters use water heaters in the U.S. AGA claimed example, the diameter ofthe lowboys foam insulation. Ablowing agent is that, due to uncertainty in availability to canbe increased. We addressed these needed to produce the foam insulation manufacturers and a sole source U.S. size constrained lowboy waterheaters and currently all manufacturers are supplier, DOE should consider only byadding extra installation costs, see using the chemical HCFC-141b. those blowing agents thatare available Section II, General Discussion, Unfortunately, HCFC-141b is an ozone and proven for water heater Lessening ofUtility or Performance of depleting chemical andwill bephased manufacture. (AGA, No. 150 at 5-7). Products, "Size Constraints" intoday's out in January, 2003. Therefore, the To address concerns about the rule. GAMA data shows thatlowboys water heater industry, like all other performance ofalternative blowing make up 18 percent ofthe electric water industries that use this chemical, must agents, we tested three sets offour heater market and that 38 percent of find and use a replacement chemical. electric waterheaters with different lowboy shipments are 30 gallon, 48 Options for non-ozone depleting foam insulations. The purpose ofthese percent are 40 gallon, and 14 percent are blowing agents include HFC-245fa, tests was to compare the performance of 50 gallon tanks. (GAMA, No. 176 at 3). HFC-134a, carbon dioxide (C02)/Water, the current foam insulation, HCFCIn establishing classes ofproducts and pentane/cyclopentane and HFC 365mfc, 141b, withwater blown and HFC-245fa accounting for cost increases for a as well as potential blends, or blown foam insulation. The results of percentage ofproducts which will combinations, oftheseblowing agents. the NIST tests showed that water require space modification, the The U.S. Environmental Protection heaters insulated with HFC-245fa had Department does notbelieve any model Agency's (EPA) Clean Air Act guides the the same energy factors as those ofwater heater will become unavailable U.S. appliance industry on replacement insulated with HCFC-141b. Water

as a result ofthicker insulation. ofHCFC/CFC blowing agents. The heaters insulated with waterblown Therefore, DOE has eliminated any EPA's Significant New Alternatives foam insulation had energy factors degradation ofutility or performance in Program (SNAP) approves chemicals about two percentlower than tanks the products intoday's Final Rule. In and technologies that canbe used to insulated with HCFC-141b. We believe the application fortabletop water replace ozone depleting chemicals. Of the results ofthese tests demonstrate heaters, we established a new class with the options listed above, allexcept that the blowing agents HFC-245fa and

no change in standards because these HFC-365mfc have been approved by the water can be used to insulate water models cannot bemade anylarger. In all EPA/SNAP. heaters and that the insulation other applications, we have determined Initially, the appliance industry, performance is the same with HFCfrom the GAMA directory, GAMA data including water heater manufacturers, 245fa and only slightly reduced with

on shipments, and from theRECS '97 had leaned toward adopting HFC-245fa, water blown foam. (Performance Testing data that sufficient types and sizes of which performs similarly toHCFC-141b ofAlternative Blowing Agents for FoamFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4479

Insulation ofResidential Water Heaters, in the insulation. An April 7, 2000, performance reduction for HFC-134a Fanney et al., Proceedings oftheAMC, Bayer press release states most and an estimate of$7 per unit for the 1999). appliance manufacturers in North capitalization costs ofcyclopentane in

The DOJ urges DOE to account forthe America are considering either HFC- our engineering analyses. These impact ofa single source supplier on 245fa orHFC-134a. Cyclopentane is not analyses show that energy factors are competition, and to consider altering considered favorably because ofthe the same for the threeblowing agents. the standard so manufacturers may meet capital investment required to handle Costsfor all design options are within the standard for all affected models cyclopentane safely (cyclopentane is a few dollars for HFC-245fa, HFC-134a using other blowing agents. DOJ further highly flammable). There are also high and cyclopentane. While we have not noted thatsome manufacturers have costsbecause the factory cannot examined every possible blowing agent suggested thatDOE underestimated the produce water heaters while converting option, we conclude that at least two performance capabilities ofalternative factory equipment to a cyclopentane additional options to HFC-245fa can be blowing agents. Ifthis is true, system. However, appliance used to achieve similar performance for manufacturers may in factbe able to manufacturers are independently similar costs. The blowing agent comply with the proposed standard deciding whichblowing agent to select. performance characteristics and test while using water-based blowing agents. Switching to either HFC-245fa or HFC- results using HFC-245fa, HFC-134a and (DOJ,No. 143 at 1-2). 134a involves capital costs. According cyclopentane blown foam to evaluate

Stepan is concerned thatthe proposed to industry andBayer research, HFC- design options can be found in Chapter standards would require foam suppliers 245fa exhibits the best insulation value 3.4.1 oftheTSD. touse HFC-245fa as theblowing agent. ofthe twoblowing agents-roughly This raises an issue about relying on a equal to HCFC-141b-though it ismore Table 1shows the trial standard sole source supplier for an efficiency costly per pound. HFC-134a levels, design options, energy factor and standard, since Honeywell maintains demonstrates an insulation value installed costs for the three alternative the exclusive North American rights to approximately ten percent lower than blowing agents, HFC-245fa, HFC-134a itsmanufacture and sale. (Stepan, No. HCFC-141b but has a lower per-pound and cyclopentane. Note the energy 123 at 1-2). APGA claims the reliance cost thanHFC-245fa. factors are the same for all trial standard

on insulation technology licensed toa We have examined, through the levels and allblowing agents. There are single company raises new issues and engineering analysis, the impact on small differences in costs; HFC-245fa is antitrust concerns and may be contrary product design and costs using two of the cheapest blowing agent, HFC-134a to the statute. (APGA, No. 167 at 2). the other blowing agent options, HFC- costs about $2/unit more than HFCTo address these comments, we 134a and cyclopentane, toachieve a 245fa, while cyclopentane isthe most conducted additional engineering cost similarenergy factor as the proposed expensive blowing agent costing about analyses withHFC-245fa, HFC-134a levels for HFC-245fa. See Table 1 $9 more per installed electric and $11 and cyclopentane as theblowing agent below. We included the tenpercent more per installed gas water heater.

TABLE 1.-ENGINEERING RESULTS FOR ALTERNATIVE BLOWING AGENTS

Trial standard level Design options Energy factor Installed costs
HFC-245fa: 1

......................... Electric: Heat Traps +Tank Bottom Insulation

............................................................... 0.88 367.52 Natural Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

.......................... 0.59 431.57 2

......................... Electric: Heat Traps +Tank Bottom Insulation +2 Inch Insulation

................................ 0.89 403.69 Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

................................... 0.60 456.79 3

......................... Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

............................. 0.90 440.69 Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

...................................... 0.59 431.57 4

......................... Electric: Heat Traps +3 Inch Insulation +Plastic Tank

.................................................. 0.91 547.04 Gas: Heat Traps +Flue Baffles (80% RE) +3 Inch Insulation + Side Arm Heater + 0.71 751.31

Plastic Tank +IID. HFC-134a: 1

......................... Electric: Heat Traps +Tank Bottom Insulation

............................................................... 0.87 363.06 Natural Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

.......................... 0.59 428.65 2

......................... Electric: Heat Traps +Tank Bottom Insulation +2 Inch Insulation

................................ 0.89 391.60 Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

................................... 0.60 454.39 3

......................... Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

............................. 0.90 428.01 Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

...................................... 0.59 428.65 4

......................... Electric: Heat Traps +3 Inch Insulation +Plastic Tank

.................................................. 0.91 531.45 Gas: Heat Traps +Flue Baffles (80% RE) + 3 Inch Insulation +Side Arm Heater + 0.71 749.41

Plastic Tank + IID. Cyclopentane: 1

......................... Electric: Heat Traps +Tank Bottom Insulation

............................................................... 0.88 368.11 Natural Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

.......................... 0.59 432.14 2

......................... Electric: Heat Traps +Tank Bottom Insulation +2 Inch Insulation

................................ 0.89 394.70 Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

................................... 0.60 456.10 3

......................... Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

............................. 0.90 428.79 Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

...................................... 0.59 432.14 4

......................... Electric: Heat Traps +3 Inch Insulation +Plastic Tank

.................................................. 0.91 529.79 Gas: Heat Traps + Flue Baffles (80% RE) +3 Inch Insulation + Side Arm Heater + 0.72 749.25

PlasticTank + IID.4480 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

2. AvailabilityofHFC-245fa.Bradford E.EconomicJustification the markup forgas water heaters we White said it has given careful As noted earlier, Section derived in theproposed rule wastoo consideration to all ofthe options 325(o)(2)(B)(i) ofthe Actprovides seven low to support anymanufacturer's available forblowing agents. However, factors tobe evaluated in determining production ofthatproduct. since HCFC-141b may be in limited whether an energy conservation The AGA claims DOE's approach to supply early in 2002 because offacility standard is economically justified. Sincecalculating markups has been roundly phase-outs and with the uncertainty in there were significant comments from criticized by stakeholders throughout availability ofHFC-245fa, Bradford theJune 20,2000, hearing, and new data the development ofthe TSD and White has no alternative but topursue from RECS '97 and AEO2000, DOE has supporting analysis, and is unaware of waterblown insulation. (Bradford developed a revised water heater any comments supporting DOE's White, No. 175 at 1-2). Stepan has analysis. AGA claims that DOEhas
concerns about the overall availability analysis methos are disicussed in provided no consistency checks for this concerns about theoverall availability analysis methods are discussed in

. ,- . , ofHFC-245fa. (Stepan, No. 123 at 1-2). Section III, Methodology.and other markups to determine their validity, in spite ofcriticism it has Honeywell indicated that over six F.OtherFactors received on its analytical results, and years and $30 million hasbeen invested This provision allows the Secretary of has failed to postulate amarket in the development ofHFC-245a. Energy, in determining whether a mechanism or economic modelto Honeywell has received all the standard is economically justified, to justify its numbers. Furthermore, AGA necessary U.S. regulatory approvals and consider any other factors thatthe commented that manufactured cost and is constructing a commercial Secretary deems to be relevant. Section retail price are not independent random manufacturing facility atits Geismar, 325(o)(2)(B)(i)(VI), 42 U.S.C. variables, and thatDOE did not Louisiana location. The facility is 6295(o)(2)(B)(i)(VI). The Secretary has correlate its cost and price data.This expected tobe online byJuly 1, 2002. decided thatno other factors need tobe resulted in 21 percent ofthe RECS '93 Honeywell expects ample capacity to be considered in this rulemaking. households being constrained to 0 available towater heater manufacturers. markup. AGA believes DOE should (Honeywell, No. 114 at 2). II. Methodology adopt the Battelle markups. (AGA, No.

The OOE claims adequate quantities DOEhas made some minor changes to 150 at 8-9). Laclede Gas claims DOE ofHFC-245fa are available now for the engineering and LCC analysis for should not limit the markup algorithm optimizing production processes. (OOE, this Final Rule. We discuss these to prevent negative markups. (Laclede No. 174 at 3). The ACEEE states DOE changes below in response tothe Gas, No. 148 at 9). haspreviously decided, inthe comments on markup, the WATSIM To address the comments about refrigerator standard rulemaking, that computer model, blowing agents and correlating prices and costs, DOE has HFC-245fa will be available and can be blended fuel prices. Additionally, the changed its LCC analysis touse
an energy-efficient and cost effective household characteristics data used in correlated retail prices and blowing agent. DOE should make the the analysis were updated fromthe 1993 manufacturer costs, i.e.,high prices

same decision here. ACEEE suggests RECS datato the 1997 RECS data correlate with high costs. This has DOEprovide for manufacturers to (except for oil-fired water heaters). We eliminated the negative values of petition for reliefifHFC-245fa does not used the energy price projections from markup which occurred in the analysis become available. (ACEEE, No. 170 at theAEO 2000 as well. for the proposed rule. GAMA and Bradford White claim the 8). Southern Company also asks why A. Engineering markup for gas water heaters combines DOE made no provisions for an DOE is continuing touse the 4-inch flue model costs with 3-inch flue alternative if theblowing agent does not WATSIM and TANK computer models model prices. According to GAMA, become available. (Southern Company, become a vailable. (Southern a in its analysis to evaluate the energy using the DOE database and only 4-inch



### ~~No. 142 at 3). factor ofwater heaters with various flue models, the markup increases from DOE has investigated the issue of the design options. These models were 1.22 to 1.5. (GAMA, No. 117 at 2-3 and availability of HFC-245fa. discussed in the engineering Bradford White, No. 108 at 7). Dominion Announcements in The Advocate, a methodology section ofthe proposed Virginia Power states that the DOE gas Baton Rouge, LA newspaper (May 11, rule. 65 FR 25042, 25052-53 (April 28, water heater base line assumes a 4 inch 2000 and October 6, 2000), indicate that 2000). We adjusted the manufacturers' flue yet the typical 40 gallon gas water Honeywell isproceeding to secure the costs and theinstallation costs to heater uses a 3inch flue. (Dominion necessary permits tobuild the HFC- account for comments tothe proposed Virginia Power, No. 145 at 6). 245fa plant. Furthermore, Vulcan rule. These changes resulted in reduced We separated theretail prices for 3 Chemicals is also planning tobuild a manufacturers' costsfor gas water inch and 4-inch flues on gas water plant in Geismar, LA tomake heaters and slightly higher retail costs heaters. We had our consultant estimate pentachloropropane, one ofthe for electric water heaters. the incremental cost difference between chemicals used in themanufacture of Furthertesting atNIST andreverse manufacturing waterheaters with 3 inch HFC-245fa. DOE concludes that HFC- engineering ofa water heater at the and 4 inch flues. We then subtracted 245fa will be available as planned and Lawrence Berkeley National Laboratory this cost from the manufacturer cost therefore does notbelieve it needs to (LBNL) allowed DOE tofully validate supplied byGAMA forwater heaters make any provision in today's rule in WATSIM. These tests revealed that with 4 inch flues. Our analysis now the event ofHFC-245fa unavailability. If WATSIM and NIST results forthe accounts forthese price and cost Honeywell does not build itsplant or if energy factor ofa high efficiency electric differences as recommended. Since the the plant is delayed,DOE believes there water heater were the same. See the retail prices werenot changed, this

are still three ormore alternative TSD, Chapter 8.2.4 increased the markup on thebaseline blowing agents for waterheater 1. WaterHeater Markup.DOE's units inthe LCC, as well as the markup manufacturers to use, i.e.,water, calculation ofgas water heater markup applied to thevarious design options. cyclopentane, HFC-134a or blends of was a major concern to stakeholders. Southern Company and theEnergy these three. There was wide spread criticism that Market and Policy Analysis group claimFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4481

theprice database is too limited forthe DOE: $133.78/($75.07 +$10.74) = 1.56 than 50 percent ofthe water heater type ofanalysis conducted by DOE. Therefore the manufacturing markup market operates thatway. Many water Specifically, Southern Company claims is essentially identical. heaters are sold directly to retail by the database has a geographic bias, TheACEEE claims the Battelle large cash and carry distributors or they citing the high number ofsample points markups applied to the GAMA are sold to builders or largeplumbing from Washington and Oregon. It claims manufacturing costs yield incredibly companies by large distributors. that over23 percent ofthe sample high retail prices. ACEEE concludes the Therefore, the standard markup factors points are from these two states, which manufacturers' costs are too high and are not correct for theresidential water represent slightly more than three the markups may be too low on some heater market. percent ofthe U.S. population. Southern waterheaters. (ACEEE, No. 170 at 9). 2. WATSIM ComputerModel for Company suggests using a combined TheOOE and the Northwest Power ElectricWaterHeaters.DOE received markup for gas and electric water Planning Council (NWPPC) do not several comments about the WATSIM heaters. (Southern Company, No. 142 at accept GAMA's manufacturing costs computer model for electric water 1-2 and EnergyMarket and Policy because the typical margins in the heaters. Most comments stated that Analysis, No.151, at 5-6). Pacific Northwest are $30-$40 forhigh W A T SIM of electric wer heters gy DOE's retail price database uses data efficiency water heaters. (OOE, No.174, actor oele. her c en aerte points broadly distributed over the 10 at 2 andNWPPC, No.163, at 2).atsssered Census regions oftheU.S., and DOE In order to address the concerns about a n o o does notbelieve the database has a manufacturers' costs DOE adjusted the compare actual performance to geographic bias. Only 10.9 percent of higher range of the manufaWATSIM predictions. geographic bias. Only 10.9 percent of higher range ofthe manufacturer's cost GAMA claims ithas no confidence the water heaters in the database are distribution, to match the average ofthe WATSIM isproperly predicting the from the Pacific Region (see Table 5.3 in low range ofthe manufacturers' cost eery factorsr rulting from the various the TSD). The Department used a distribution. We also applied this insulation options. (GAMA, No.160 at slightlyhigher proportion ofwater correction tothe incremental inslDominion states thatDOE should heaters from thenorthwest toensure an manufacturer costs for heat traps and v y theaccuracy ofcalculated energy adequate representation ofhigh- increased insulation. We did this to factors for design options with results efficiency units. DOE willnot be using bring manufacturers' costs in line with from commercially available products.
a combined markup, since each fuel known appliance manufacturing costs, (Dominion, No. 145 at 3). EPRI claims type must be evaluated individually. derived from publicly available SEC WATSIM can predict energy The design option approach requires reports. It also ensures consistency consumption of electric waterheaters distinct costs for each fuel type. within the data. Since the overall retail typically within 3-6 percent accuracy.

Battelle estimated the cost of prices remain constant, the change For the type ofanalysis represented by materials and labor for the design eliminates the occurrences of DOE energy factor tests, the accuracy options under consideration and unreasonably low markups on the would typicallybe around the 3-4 applied standard industry markup baseline gas and electric water heaters. percent range. (EPRI, No.104 at 1). factors to determine the cost tothe This reduced the average values of Southern Company supports EPRI's
consumer. Battelle assumed standard baseline costs for electric and gas water remarks. (Southern Company, No. 142 at industry markup factors were 1.5 for the heaters by $9.55 and $6.22 respectively.2). manufacturer, 1.2 for the distributor, Battelle claims that when itsbaseline AttheJune 2,1997, Water Heater and 1.4 for theretailer. Thus, the overall materials and laborcosts were used in Workshop, the Department sought markup factor is 2.52 (1.5 x 1.2 x 1.4 = conjunction with the DOE database of comments on the selection of 2.52). Therefore, to determine the cost to retail water heater prices, the average appropriate engineering models such as the consumer, the manufacturer's overall markup factor for gas water WATSIM andTANK to use in the materials and labor costs for a design heaters came out tobe 2.44. This is in Engineering Analysis. Most ofthe option aremultiplied by 2.52. excellent agreement with the assumed stakeholders' comments indicated no

Tovalidate this standard approach for standard markup factor of 2.52 stated objections related to the use ofthe gas water heaters, Battelle conducted a previously. (Battelle, No. 106 at 1-2). simulation models for the analysis. The tear down analysis on sixwater heaters Southern California Gas Co. agrees with following participants supported theuse varying in size among 30, 40, 50, and Battelle's markup factor of2.52. ofWATSIM andTANK: C. Hiller (EPRI), 75-gallon capacities. BDI Design for (Southern California Gas, No. 181, at 2). J.Ranfone (AGA), J.Langmead (Water Manufacture software was used to The American Public Gas Association Heater Consortium), S. Nadel (ACEEE), catalog the components and estimate (APGA) claims there is an obvious R. Hemphill (Gas Technology Institute materials and labor costs for each water problem with the markup analysis. It (GTI)). There were no comments that heater. Thematerials and labor costs for suggests DOEapproach this matter with indicated WATSIM and TANK were the 30, 40, 50, and 75-gallon baseline real-world prices andmanufacturers' incorrect to use. gas water heaters were $80.83, $86.06, costs. (APGA, No. 167 at 2). Bradford White says DOE musttest $90.95, and $139.77, respectively. The In the DOE analysis, the overall products tounderstand the actual 40-gallon gas water heater cost of$86.06 markup factor consists ofmanufacturer performance ofcavity increases and is in excellent agreement withthe value markup and distributor/retailer markup. newblowing agents. (Bradford White, of$87.51 supplied by GAMA toDOE. From theLCC analysis, we have an No.108 at 2-6). GAMA concurs, saying (Battelle, No. 106 at 1-2). overall markup of 1.59 for gas and 1.94 DOE has relied tooheavily on computer

DOE compared its manufacturer for electric water heaters. These modeling to establish insulation markup to Battelle's standard markup markups differ from the Battelle performance when actual testing of factor. This is the total manufacturer markups in an important respect. water heaters would have provided cost dividedby the sum ofthe materials Battelle assumes thatthe water heater more precise results. GAMA further and labor costs for40gallon gas-fired market ischaracterized by large states that, "DOE is expected to test waterheaters. distributors selling to retailers or water heaters to exclude the energyBattelle: $133.78/$86.06 = 1.55 plumbers. DOE has determined thatless saving benefits ofdesign options when4482 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

the agency can do so at reasonable cost, ratedefficiency as shown in the GAMA these conductivities by eleven percent rather then rely on computer modeling," directory. However, several ofthese to account forlosses ofinsulation 998 F. 2d 1041 (D.C. Cir. 1993). models performed at or above the effectiveness due tothe foaming process Bradford White further comments that standard level adopted in today's rule. and modeling assumptions. In orderto DOE must test at least three storage Therefore, at this time, and while we are keep thebaseline efficiency (those with capacities affected by the standard. still examining this issue, wehave HCFC-141b insulation) and the energy (BradfordWhite, No.138 at 1). concluded thatthe WATSIM model use characteristics ofwater heaters with

We reviewed the court case that correctly accounts for the maximum HFC-245fa insulation the same, we GAMA cited in its comments. The Court technically feasible design options for modeled them with appropriately acknowledges that computer modeling electric resistance waterheaters and thicker insulation. We also increased is "a useful and often essential toolfor continue to use it, without modification the amount and cost of steel used forthe performing the 'Herculean labors"' for this rulemaking. Furthermore, we water heaterjacket in addition to adding imposed by Congress. GasAppliance believe wehave performed sufficient the extra volume and cost ofinsulation. Manufacturers Associationv. testing to demonstrate that the 5.Analytic Baseline.The current DepartmentofEnergy,998 F. 2d 1041, minimum efficiency levels can be met. baseline is forwater heaters insulated 1045 (D.C. Cir. 1993). The Court also 3. PipeInsulation.In ourproposed with HCFC-141b and without any stated that when computer modeling is rule,the Department did not consider design to prevent the ignition of used, an agency must sufficiently insulation on water heater inlet and flammable vapors on gas water heaters. explain the assumptions and outlet pipes. In recent visits to the five In order to analyze separately the effects methodology so that there is a rational water heater manufacturers, we ofenergy efficiency standards from the connection between the factual inputs, discovered thatfour manufacturers ship effects ofEPA actions to phase out the modeling assumptions, modeling results the tanks with pipe insulation fortheir HCFC-141b blowing agentor ofthe and conclusions drawn from these high efficiency water heaters. The DOE CPSC actions to make gas water heaters results. Id. at 1046. (GAMA, No. 160 at water heater test procedure allows water more resistant toignition offlammable 1) heaters to be tested with pipe insulation vapors, DOE has developed an "analytic

DOE provided a detailed explanation ifthemanufacturer ships the tank with baseline" concept. This concept ofthemodel, its assumptions, and its pipe insulation. To determine the assumes thatby 2003 and before the results in theproposed rule and impact ofpipe insulation on our energy efficiency standards become accompanying Technical Support analysis, we modeled waterheaters with effective, the actions ofthese other document. In the proposed rule, we and without pipe insulation in Federal agencies will have taken effect. stated that comparisons oftheWATSIM WATSIM. These results showed that Tomeet these other agency's prediction to the NIST testresult for an pipe insulation in combination with requirements, manufacturers will have electric waterheater with anefficiency heat traps improves the energy factorby created new designs and made other atthe level proposed was within 0.002 0.005 EF. We performed tests at NIST changes to the production ofwater EF. 65 FR 25042, 25053 (April 28, 2000). with and without pipe insulation on heaters. The cost estimates ofthese The detailed description ofthe three different models ofelectric water production and design changes are WATSIM model and the assumptions heaters equipped with heat traps, and included in the analytic baseline. DOEused to model electric water the average increase in theenergy factor Several comments state that DOE should heaters are provided in theTSD forthe with pipe insulation was 0.007. Since have included different designs or proposed rule in Chapter 8.2.4.1. both the WATSIM computer model and production changes in its analytic

In response to these comments on the NIST testing indicate the effects ofpipe baseline. The analyticbaseline isused proposed rule, LBNL tore down (reverse insulation combined withheat traps is in the engineering and LCC analyses. engineered) one ofthe American Water small, we have not included the effects APGA claims manufacturers would Heater Company's (American) 0.93 EF ofpipe insulation in our analysis. use heat traps to meet thebaseline products to assess what design options Furthermore, since pipe insulation must standards in 2003. Furthermore, the

were used. In addition, NIST tested the be applied during water heater DOE analytic baseline overstates the two units ofthe American model that installation, we arenot surehow often value ofraising the standard. (APGA, LBNL tore down.Using the reverse itis used. Information from a small No. 21 at 2 and No. 167 at 2). AGA engineering data inthe WATSIM model survey ofinstallers indicated that about suggests DOE should only consider and comparing to theNIST testresults, 50 percent do not install thepipe waterblown foam for its analytical

we obtained results from WATSIM that insulation. baseline. AGA suggests that

were within 0.006 EFofthe NIST 4. BlowingAgent Conductivity.Stepan manufacturers will use heat traps toadd results. Therefore, WATSIM hasbeen believes HFC-245fa may not achieve the the 0.01 EF needed to meetthe current validated at the efficiency levels and energy performance results predicted in standards withwater blown insulation withthe types ofdesign options thatour the proposed rule, andthat waterblown after 2003. (AGA, No. 150 at 5). GTI analysis isusing. See Chapter 8.2.4.1 in foams may actually exceed modeled claims DOEhas defined a virtual the TSD. Consequently, webelieve predictions. Stepan claims itmeasured baseline waterheater thatmakes it WATSIM correctly predicts the initial k-factors for water blown foam as easier tojustify added insulation. (GTI, efficiency ofelectric water heaters. low as 0.175 BTU/hr-°F-in. (Stepan, No. No. 141 at 4). The Southern Gas

DOE did not rely on computer 123 at 2-3). TheNWPPC suggests DOE Association's experience with noisy modeling alone to demonstrate the recalculate the LCC using the water heat traps led them to discontinue using performance ofhigher efficiency electric blown foam k-factors given at the heat traps wheninstallers began water heaters. In thefall of 1999, NIST workshop. (NWPPC, No. 163 at 3-4). removing the heattraps during water tested five higher efficiency electric Forcost information, Honeywell, the heater installation. (Southern Gas waterheaters, one model from each licensee to manufacture HFC-245fa in Association, No. 152 at 3). manufacturer. In the fall of2000, NIST the U.S., provided estimates ofHFC- DOE does notbelieve heat traps tested six tanks, a sample oftwo tanks 245fa costs. Forefficiency data, weused wouldbe the only design option ofthree models ofelectric water heaters. published laboratory measurements of manufacturers might use to meetthe None ofthese models achieved their physical parameters but we derated current standard when the HCFCFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4483

blowing agent isphased out. When gas waterheater prices in the price usage and energy costs, expected there asked, during themanufacturer database. would be some consumers with higher interviews, none ofthemanufacturers During the time from the water heater life cycle costs. Based on these indicated theywere limited toheat traps hearing/workshop on theproposed rule arguments, the Department strongly

as the only design option. untilpublication ofthis Final Rule, disagrees with EEIand the Energy

DOE also does notknow what natural gasprices have risen Market and Policy Analysis comments. blowing agent any particular dramatically for many consumers. DOE The Department has used the two manufacturer would use. We believe hasinvestigated this increase to percent bandofinsignificance as an that manufacturers will likely choose determine ifthese price increases might indicator ofthe levels ofLCC savings or different blowing agents or usemixtures continue into the near future because costs where consumers could appreciate ofblowing agents based on what they increased gasprices would mean larger savings or suffer real loss. DOE uses the believe to bethe bestbusiness decisions LCC savings and earlier paybacks for percent ofhouseholds benefitting and for them. more energy efficient water heaters. The the band ofinsignificance tohelp it EIA has determined natural gas demand weigh the LCC effects and in its B. Life-Cycle Costs has increased in 2000 due to several consideration ofthe benefits and

As discussed in theproposed rule, factors including new gas-fired electric burdens ofthese amended standards. DOE used new analytical tools inthis generators and new home construction.

. rulemaking. We used a spreadsheet Natural gas prices will continue at g model to calculate LCC and payback. 65 higher levels thanrecent yearsbut will We use the Government Regulatory FR 25042, 25059-64 (April 28, 2000). In return to more normal levels after the Impact Model (GRIM) to determine the the LCC spreadsheet model, we use winter of2000-2001 because thenew manufacturing impacts. Theanalysis Microsoft Excel for Windows 95, gas wells should be in production by methodology is discussed in the combined with Crystal Ball (a then. The AEO 2000 does not forecast proposed rule and the TSD. 65 FR combined with Crystal Ball (are commercially available software any longterm increase in gas prices. 25045, 25069-71 (April 28, 2000). The program) so we can use actual 2. PercentofConsumersBenefitting manufacturing impact analysis distributions ofinput variables. The from Standards.EEI andDominion estimates the financial impact of ut s fro this prora ar claim the fraction ofconsumers standards on manufacturers, as well as LCCange ofLCputs from this prograction ofthe benefitting from the standard level (74 the impacts on competition, population that willbenefit from ener percent for electric, 87 percent for employment, and manufacturing effipopulation that willbeneitnatural gas) is too low for minimum capacity. We used the GRIM 1. BlendedNaturalGasandPropane efficiency standards. EEI and Dominion spreadsheet model to perform an FuelCosts.In theLCC analysis for the recommend DOE accept only those industry cash flow analysis. FuelCosts.In the LCC analysis for the standard levelsthat willprovide proposed rule, DOE used a gasprice benefits to at least 90 percent ofthe D EergySavingsandNetPresent composed ofapproximately ten percent population. (EEI, No.124 at 2 and Value propane and 90percent natural gas. Dominion, No. 145 at 2). Energy Market DOEuses a variant ofthe Energy Manygas utilities and agas utility and Policy Analysis states thatDOE Information Administration (EIA)'s association objected to this approach. overestimates the percentage ofwinners National Energy Modeling System, the

AGA and GTI insistthat we use and underestimates the losers because it National Energy Modeling Systemnatural gas costs when evaluating gas ignores some costs, uses high estimates BuildingResearch and Standards, called waterheaters, not the blended fuel offuture electricity prices, and uses low NEMS-BRS, for the utility and costs, because ourblended fuel costs discount rates. (Energy Market and environmental analyses, together with make natural gas prices ten percent Policy Analysis, No. 151 at 2). some scaling and interpolation higher. (AGA, No. 150 at 7and GTI, No. Although ACEEE admits the two calculations. 3 The NEMS-BRS permits 141 at 4). ACEEE claims ablended price percentband ofinsignificance is the modeling ofinteractions among the is appropriate ifthe standard applies arbitrary, it claims this is a very useful various energy supply and demand equally to both fuels. (ACEEE, No. 170 concept. ACEEEclaims thatlife cycle sectors and the economy as a whole, so at 10). Dominion stated that a blended costs probably must differ by$100 or it produces a sophisticated picture of propane and natural gasprice will $10/year before they are significant. the effects of appliance standards. EEI artificially increase savings for natural (ACEEE, No. 170 at 11). claimed that DOE does not account for gas equipment because propane has a The Act requires the Department to the effects ofelectricity deregulation in higher price. (Dominion, No. 145 at 7). consider life-cycle-cost as one ofthe its analysis. (EEI No. 124 at 2). The

DOE agrees that use ofblended fuel seven factors in determining economic effects of deregulation are built into the costs is inappropriate when calculating justification. In determining economic NEMS-BRS 2000 model. gas water heater life-cycle-costs and justification, the Secretary shall national net present value, therefore, determine whether the benefits ofa IV. Discussion ofComments DOEhas separated natural gas and standard exceed the burdens. Life-cycle- We received numerous comments propane water heaters and has cost isjustone ofthe factors to be from gas utilities and other gas considered each ofthese fuels considered and there is no mathematical separately in the LCC. To do this, DOE formula for weighing thebenefits and aFor more information on NEMS, please refer to asked its consultant to develop a burdens ofthe various factors. There are the National EnergyModeling System: An manufacturing cost for propane water also nomathematical thresholds for life Overview 1998. DOE/EIA-0581 (98), February, heaters from the GAMA manufacturing cycle cost as impliedby EEI andthe 998. DOE/EAl approves use ofthe name NEMS to describe only an official version ofthe model cost data for natural gas water heaters. Energy Market and Policy Analysis. without anymodification to code ordata. Because We estimated the retail price Furthermore, it canbe argued thatthe our analysis entails some minor code modifications distribution for liquid petroleum gas Act, in requiring DOE to set national and the model is run under various policy scenarios water heaters from the manufacturers' standards that maximize energy savings a ae NEMS-RS refers tothe modelas used her costs andthe markup for natural gas for appliances where there will BRs isDOE's Building Research and Standards since there were notenough propane obviously be regional differences in office.4484 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

consumers, supporting the AGA function ofproper installation. category. (CEC, No. 171 at 3and position and the Battelle analyses. We (Alagasco, No. 162 at 1). The New Attachment A). Since gas water heaters appreciate these comments and we England Gas Association and Atlanta with a RE below 78 percent do notpose believe we have covered their concerns Gas Light Co.believe increased gas any safety threat and 30percent ofthe in ourresponses to the comments from water heater efficiency from improved models that can meet the standard are the Gas Technology Institute (GTI; flue loss efficiency can lead to increased in thisgroup, installers will have formerly GRI), AGA, Battelle, and others condensation and chimney degradation. choices among lower RE models in in our responses to comments on (New England Gas Association, No. 139 those applications where there may be markups, venting, and size constraints. at 2-3 and Atlanta Gas Light Co., No. safety concerns. Therefore, DOE does A. Ve g of

Gs W rH s 178 at 2). TheNYSEB, National Propane notbelieve there is any application that A. Venting ofGas WaterHeatersGas Association, Atlanta Gas Light Co, willhave a safety problem if the correct Venting ofgas water heaters has been and Southern California Gas Co. state type ofwaterheater and the proper
an issue throughout the water heater that DOE's proposal reduces the margin installation procedures are followed. rulemaking. In our proposed rule, we oferror forinstallations ofgas water 2.NFGCVenting Tables.Bradford advocated a standard level that included heaters in retrofits. TheNational White claims the venting tables were
an increase in therecovery efficiency Propane Gas Association adds that developed around water heaters with a (RE)to 78 percent from the current 76 existing vent systems are more likely to RE ofapproximately 75 percent. percent. Most gasutilities and develop condensate problems and vent (Bradford White, No. 108 at 1-2). manufacturers are concerned about the failures. (NYSEB, No. 164 at 1, National Southern Gas Association believes reduction in the margin ofsafety Propane Gas Association, No. 165 at 2, increasing RE to 78 percent would regarding venting system corrosion with Atlanta Gas Light Co., No. 178 at 1; and require retesting water heaters and this two percentincrease in RE. To Southern California Gas Co., No. 181 at rewriting the current venting tables make this discussion about venting 2). because itclaims the tables were based easier to follow, wehave separated the ACEEE and OOE claim thatthere on 76 percent RE. (Southern Gas issue into the following subtopics: should be no safety concern at 78 Association, No. 152 at4). Battelle safety, theNational Fuel Gas Code percent RE because theTalbert study for claims increasing RE to 78 percent will (NFGC)venting tables, Type Bvent GTI foundthat a single walled vent require a revision to the current venting connectors, costs, and direct vent connector is acceptable atflue-loss tables. (Battelle, No. 127 at 26-27). GTI applications. efficiencies (FLE) up to 80percent and and Southern California Gas Company 1.Safety. AGA believes DOE is 78 percent RE is equivalent to 79.75 believe thatDOE cannot make accurate incorrect in its analysis concerning percent FLE. (ACEEE, No. 170 at 3and cost estimates until venting codes are venting systems for waterheaters with OOE, No. 174 at 2). revised. (GTI, No. 141 at 3and Southern RE above 76 percent. AGA states DOE DOE didnot raise the RE enough to California Gas Company, No. 181 at 2).

can resolve this issue ofvent system create a safety concern ifthe venting The NFGC does not limit its venting modification by one ofthefollowing: system is correctly installed. DOE used tables to any specific gas water heater *By fully accounting for the vent the data from the GTI reports to estimate recovery efficiency. The NFGC venting system costs as reflected inthe Battelle the impacts of78 percent RE gas water tables are based on specific conditions analysis; heaters on venting systems. At 78 for each application such as water

* By determining that the comments percentRE the flue loss efficiency is heater location and commonventing concerning ventingintegrity and safety stillbelow 80 percent, the level at with a furnace. We do agree with beyond its current analysis approach are which condensation begins. Since the Battelle that theNFGC should revisit its without merit; and increased RE may reduce the margin of venting tables and make whatever

* By determining that safety concerns error, DOE's analysis accounts for the revisions are necessary to account for

are insignificant orthe expected benefits cost ofType Bventconnectors in eleven potential increases in recovery ofthe standard outweigh this safety percent ofhouseholds and for chimney efficiencies. We also note thatthere are consideration as required under the relining in eight percent ofhouseholds. 37 models ofgas waterheaters with a process rule. Type Bvent connector is a double recovery efficiency of76 percent listed

AGA further requests DOEto walled vent connector thatreduces in the GAMA directory which can meet explicitly stateits determination andits cooling ofthe flue gasses and is more the standard levels adopted in today's underlying rationale ifthe second or corrosion resistant than steel ventpipe. rule. On thatbasis, we conclude there third option is chosen. AGA reiterates Additionally, the California Energy willbe designs which canmeet the new its position thatDOE should not Commission (CEC)in its comments, standard with 76 percentRE. promulgate a standard that subjects provided data about the number of 3. Type B Vent Connectors.GAMA

consumers to a potential increase in models ofgas waterheaters that have and Bradford White claim each water safety risk. (AGA, No. 150 at 3-5). AGA energy factors at 76 percent RE and heater manufacturer will change the and the Atlanta Gas Light Co. believe above that would comply with the gas installation instructions to require Type thatDOEhas not considered the retail water heater standards inthe proposed Bvent connectors for all installations. cash and carry market where needed rule. (The CECmaintains its own Bradford White claims manufacturers vent system upgrades are unlikely to database ofgas waterheaters.) There are will design to 80 percent RE in order to

occur. (AGA, No 150 at4 and Atlanta 170 distinct models ofgas water heaters satisfy a 78 percentRE level. (GAMA, Gas Light Co., No. 178 at 2). in the CEC database. A distinct model No. 117 at 2and Bradford White, No.

Alagasco stated that the ability ofgas is a "discreet combination of 108 at 1-2). Dominion claims DOE does waterheaters todeliver outstanding manufacturer, input, volume, energy not completely incorporate the economy, performance and factor and recovery efficiency." Of additional cost forType Bvent environmental benefits is dependent on these, 51 models or 30percent ofall connectors. (Dominion,No. 145 at 6). adequate margins oferror in critical distinct models have a RE of 76 or 77 GTI states that DOErelied too heavily subsystems like venting, gas piping, percent. Furthermore, there are nearly on data from an area ofthecountry with combustion air and clearances. The an equal number ofnatural gas and atypical weather conditions. (GTI, No. overall utility ofgas waterheating is a propane gas waterheaters in this 141 at 3)Battelle claims that increasingFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4485

RE to 78 percent will require Type B Given thatthere are 66 models ofgas small fraction of this market would be ventconnectors in the 75 percent of waterheaters with RE at or below 78 installed at the maximum length ofvent installations that currently do not have percent, DOEbelieves a consumer has a allowed. This tiny fraction ofthe market them, which will add to the installed choice between a lowerRE and a higher could be served by a product that has cost. (Battelle, No. 127 at 26-27) The RE with a Type Bvent connector. Atthe not used the improved fluebaffle to NewEngland Gas Association claims a lower RE, the consumer can continue to meet the standard orby a power vented majority ofhomes in NewEngland are use a single wall vent connector unit. older with masonry chimneys which whereas, at the higher RE levels, a B. ElectricWaterHeaterRatings could require Type B vent connectors consumer would be advised to use a and chimney relining costing as much Type Bvent connector and/or chimney Issues concerning the efficiency

as $800. (New England Gas Association, relining in those climate areas where ratings ofelectric water heaters with No. 139 at 2-3). condensation in the venting system is a energy factors greater than 0.91 were

ACEEE claims DOEoverestimated the concern. raised in the workshops thatthe number ofhomes needing Type Bvents 4. Vent System Costs.AGA Department conducted priorto the at 78 percent RE because the AVISTA commented that DOEhas proposed rule. Based on the at 78 percent RE becausethe AVISTA Department's review oftheGAMA data applies to climates with 7000 underestimated the frequency ofneeded Department's review ofthe GAMA heating degree days (HDDs) and the venting system upgrades. (AGA, No. 150 certification testprogram, the NFGC requires Type Bvents in at 3). APGA claims DOE has Department noted the possibility that unconditioned spaces. (ACEEE, No. 170 underestimated venting costs. (APGA, high efficiency electric water heaters, at2). The CEC summarizes its database No. 167 at 2). ACEEE claims DOE's cost i.e., with manufacturer rated energy ofgas water heaters to show the number for vent installations should not include factors greater than 0.91 EF, were ofmodels of gas water heaters with a factor for the fraction ofhomes with overrated. Several stakeholders have
recovery efficiencies from 76 percent to gas waterheaters. (ACEEE, No. 170 at 2). requested that DOE take specific actions 85 percent. There are 170 models which DOEbelieves wehave accounted for to avoid any future overrating. 85 percent. There a 0 models wich the installation costs associated with ACEEE is concerned that currently meet the standards. CEC also higher RE gas water heaters. We used manufacturers may be overrating shows whether a vent connection installers' estimates to calculate the cost electric waterheaters and ifthis practice modification or masonry chimney ofinstalling Type-B vent connectors and continues, some ofthe energy savings of relining is needed. This data summary to determine the cost toreline masonry the new standard will be lost. ACEEE shows that a Type Bvent connector is chimneys. These estimates are slightly stated thatthe apparent overrating not needed untilRE gets above 83 higher than the GTI estimates. Using affects not only the standards program, percent, and chimney relining is information from comments and from but also the efficacy ofutility demand sometimes needed when RE gets above an AGA survey in a GTI report, we sidemanagement programs. (ACEEE, 78 percent. Itis interesting tonote there estimated that eleven percent of No. 170 at 1). are66 models or 39percent of gas water households with gas-fired water heaters DOEhas conducted a certification heaters with recovery efficiencies at or in regions with over 5,000 HDDs would review ofthe five major water heater below 78 percent which currently meet need Type-B vent connectors for 78 manufacturers and has found thatthere the standard and which do not need percentRE gas-fired water heaters. are incorrect energy factor ratings Type Bvent connectors or chimney (GRI-91/0298). DOE determined a cost reported in the GAMA directory. All relining. (CEC, No. 171 at 3). of$134 forType-B vent connectors five major manufacturers use GAMA as

DOE doesnot agree manufacturers based on thereplacement market and their third party representative. will specify that all installations with 78 installers' cost estimates for a typical Therefore, the GAMA directory contains percentRE gas water heaters will installation. We also estimated that manufacturers' certified ratings. We also require Type Bventconnectors. This is masonry chimney relining would cost found violations ofDOE'srecord not current practice withgas water $795 for eightpercent ofthe keeping requirements at several heaters with RE greater than 76 percent. households. This is nearly the same cost manufacturers. The Department has Manufacturers have relied on the NFGC ($800) for chimney relining given by the requested these manufacturers correct venting tables, and webelieve they will New England Gas Association in its their ratings on these high efficiency continue to do so. We believe comments. See Appendix D-3 in the electric waterheaters, and the manufacturers should advise installers TSD. manufacturers have agreed. The to use Type Bventconnectors in DOE did not include a factor for the corrected ratings willbe published in climates where there are more than fraction ofhomes with gas water heaters the December, 2000 GAMA directory. 5,000HDD or some reasonably in the ventinstallation cost calculation. Some manufacturers' testing appears conservative level ofheating degree The factor used in thevent installation to show thatsome 50 gallon electric days, and otherwise follow local codes cost calculation included the fraction of water heaters reach a 0.93 EF level. DOE and theNFGC requirements. allhomes with gas water heaters inthe acknowledges thatrecent tests ofhigh

DOEuses HDD as an indicator for U.S. that are inthe Northeast or efficiency electric water heaters at determining where venting systems may Midwest. DOE was not double counting Intertek Testing Services (ITS) have be subjectto damage from the amount the number ofgas water heaters as shown several models with 0.92 or 0.93 oftime vent connectors may have ACEEE states. EF. This testing was ordered byGAMA condensate on theirinside surfaces. 5.DirectVentApplications.Dominion on a sample offour electric water This indicator considers both the effect claims DOE does not account for the heaters for each model. However, NIST oftime and temperature. We use 5,000 decreased vent length a 78 percent RE has tested several ofthese models and HDD as a conservative approach since gas water heater will have for direct has notbeen able to replicate the ITS

no incidence ofvent system failures is ventequipment. (Dominion, No. 145 at test results. associated with the installation ofhigh 6). Testing of 11 high efficiency electric efficiency gas waterheaters in the Dominion is correct; however, DOE water heaters at NIST has not Northwest, even in climates as cold as notes this equipment accounts for less demonstrated that electric water heaters

or colder than 7,000 HDD. than two percent ofthe market. Only a can achieve a 0.93 EF. The difference4486 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

between efficiency ratings listed in the rulemakings to consider amendments to for 11 years. By making today's new GAMA Directory and NIST measured the water heater efficiency standards. standards effective in three years, itwill efficiencies ranged from 0.012 EF to The statute provides in effect that any be 14 years, not 5 years,before amended 0.052 EF for an average difference of amendment to the standards that results standards become effective. A five-year 0.029 EF. In other words, the average of from the first rulemaking shall be effective date would lengthen this the 11 tanks NIST tested was nearly 0.03 effective three years after publication. period to 16 years, further delaying the EFbelow therated values from the For the second rulemaking cycle, to benefits new standards will provide to manufacturer. We are continuing to amend the standards then in effect, the consumers and the nation. Furthermore, evaluate additional units and the testing statute provides aneffective date five the water heater industry never had an performed to understand why the NIST years after publication. expectation that the original standards and ITS test results do not agree. GAMA claims today's Final Rule would be in effect so long. The original

There may benumerous reasons why should beeffective 5years after standards will have been in place 9

we cannot confirm the higher ratings. publication. GAMA believes the three years longerthan envisioned by the There could be an improper application year lead-time for the effective date statute. For these reasons as well, a ofthe DOE testprocedure due to applies only to a Final Rule published three-year effective date for today's rule differences in interpretation ofthe by January 1, 1992. (GAMA, No.113 at is more consistent with the statutory requirements or due to selection ofa 2). Southern Co. and Dominion state scheme than the five-year period different option for making some ofthe that NAECA requires a 5year advocated by some commenters. measurements. There could beproblems implementation time. Southern Co. also Accordingly, today's rule will become in the sampling procedures used by suggests thatrefrigerant availability will effective three years after the date of GAMA or the manufacturers to obtain become more manageable withtwo publication as originally proposed. their sample tanks fortesting. (The test additional years. (Southern Co., No. 142 WaterHeater ModelsAffected procedure requires tanks for testing be at 3 and Dominion, No. 145 at 3). On the representative ofproduction.) There other hand, ACEEE asserts the first GAMA commented that ifthe could be some design improvements in revision has a three year effective date proposed standard levels were adopted,

some ofthese high efficiency models and since today's rule is the first few current models listedin the GAMA that DOEdid not consider in its amended standard, the three year directory would survive, and only a analysis. Therefore, at this time we effective date applies. ACEEE states this small percentage ofcurrent residential
cannot determine ifthe difference in our is the way theNAECA revisions have water heater shipments meetthe testing and the manufacturers' rating is been interpreted. (ACEEE, No. 170 at proposed levels. (GAMA, No. 160 at 5). real ornot. 10-11). GAMA stated that 26 percent ofthe DOE interprets the language in EPCA current models ofgas and electric water C.Measuredvs. RatedVolume at 42 U.S.C. 6295(e)(4)(A) to mean that, heaters can meetthe proposed standard.

CEC, NWPPC, and ACEEE commented where the schedule specified in the This number drops to 18 percent ifonly that DOE should use themeasured statute for the two required rulemakings 30, 40 and 50 gallon models are volume ofwaterheaters because has not been met, the first amendment considered. (GAMA, No. 176 at 1). manufacturers, by using therated to the standards should be effective Dominion suggests DOE should identify volume, can gain a 0.01 EF three years after publication, andthe existing equipment thatwill meet the improvement by maximizing the second amendment tothe standards, revised standards and designs it uses. tolerances allowed by UL (+/

- 10 five years after publication. We believe Additionally, Dominion claims DOE percentfor electric) orby ANSI Z21.10.1 that this interpretation is the onemost should evaluate these models and (+/ -5 percent for gas). (CEC, No. 171 at consistent with the statutory scheme. provide data verifying the achievability 4-5; NWPPC, No. 163 at 3; and ACEEE, DOE has the authority and ofthe proposed minimum efficiency No. 170 at 16-17). GAMA referred to its responsibility to complete the two standards using design options July 18, 1994, comments on the 1994 cycles ofrulemakings mandated by identified for the recommended proposed rule, where it addressed this Congress inthe statute.We recognize standard level. (Dominion, No.145 at 3).

same issue, and suggested thatDOE thatDOE hasfailed to implement the The CEC claims that,based on its should continue touse ratedvolume rulemaking schedule in EPCA, butwe directory ofcertified waterheaters, of because that is thebasis ofthe extant see no reason why such failure would the 170 models ofgaswater heaters standards set by NAECA. (GAMA, No. justify a departure from the time periods listed, 51 meet theproposed standard. 160 at 5). the statute contemplates for an (CEC, No. 171 at 2). DOE's review ofthe

EPCA, as amended, by the 1987 amendment tothe standards tobecome April, 2000 GAMA Directory shows 37 NAECA amendment, uses therated effective. We believe we are adhering to gas-fired waterheater models that could volume as the coefficient in the the statutory scheme by making the meet the proposed standards. standard levels. Our analysis uses the effective date oftoday's rule, the first DOErecognizes that standards will rated tank volume todetermine the amended standard, conform tothe eliminate current manufacturers' performance ofthe design options. amount oftime the statute designates for offerings which would affect the Therefore, DOE will continue to use the the effective date afterpublication ofthe individual firms and industry's net rated volume in its waterheater final rule. As ACEEE pointed out at the present value. These effects are captured standards. public hearing on June 20, 2000, in all in the Manufacturer Impact Analysis. the rulemakings where DOEhas missed Furthermore, DOE rejects Dominion's D.Effective DateofStandards dates, ithas used such an approach. comment that the Department should

Several stakeholders have taken the (Transcript, No. 120FF at295-296). identify technologies that can be used to position that the effective date oftoday's Moreover, the statute contemplated meet the standard. The standard is a rule shouldbe five years from its thatthe original efficiency standards performance standard, not a design publication. EPCAprescribes efficiency specified in EPCA could be in effect for standard. DOE's analysis identified a standards for water heaters onlyfive years before an amended path, with different insulation blowing manufactured on or afterJanuary 1, standard would take effect. To date, the agents, which could be used to meetthe 1990, and requires two subsequent original standards have been in effect standard. However, DOE believes thereFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4487

are a number ofapproaches individual consumers replacing gas waterheaters We performed an engineering analysis manufacturers may elect to pursue to to switch to electric water heaters. on both ofthese alternative insulation meet the standard. It is not up to the Laclede claims this is especially true blowing agents to determine ifthe Department to mandate any one when a consumer faces a $433 chimney standard could be met with these approach. relining cost. (NEGA, No. 139 at 3and blowing agents and to estimate the Laclede Gas, No. 148 at 3). AGA claims relative manufacturer and consumer F.InstantaneousWaterHeatersDOE needs to include a detailed cost impacts. HFC-134a is ablowing

Controlled Energy Corporation analysis offuel switching amonggas agent thatis less expensive per pound (Controlled Energy)claims and electric utilities in the than HFC-245fa, but italso is ten instantaneous water heaters should not environmental impacts analysis. (AGA, percent less effective as an insulation be included in theFinal Rulewithout No. 150 at 10). OOE claims that the material. Cyclopentane is a very further analysis. (Controlled Energy, No. incremental costs for a 0.62 EF gas water inexpensive blowing agent, has similar 125 at 1). The CEC claims NAECA heater are trivial compared to the costs insulation effectiveness toHFC-245fa, clearly includes both storage and ofacquiring natural gas service where it butit is flammable and would require instantaneous water heaters, and DOE does not exist, tobuy a gas furnace, and expensive modifications to production does not have any optionto exempt this in some cases to install a duct system facilities to meetthe OSHA safety type ofwater heater since that would be where one does not exist. (OOE, No. 174 regulations. The engineering analyses equivalent to a reduction ofenergy at2). for HFC-134a and cyclopentane show efficiency. (CEC,No. 171 at 4). GAMA TheLCC analysis is one ofthe seven that waterheater cost and performance claims DOE should clearly state the factors DOEis required by statuteto is within two percent ofthe results for proposed standards do not apply to consider when it makes its decision HFC-245fa SeeTable in Section II, instantaneous waterheaters. GAMA standard levels. Included in the LCC General Discussion, "Impact of claims theminimum energy factor for sandard theinstalled costs of Lessening ofCompetition." Therefore, instantaneous waterheaters hasbeen electric and ga water heaters. These DOE believes that manufacturers have a inadvertently raised withoutcosts provide an indication ofwhether choice among atleastthree blowing discussion or any analysis. Currently, a particu tandard leve i the agents, water, HFC-134a and instantaneous waterheaters must meet aparicular sandard level would cause agents, water, HFC34a and fuel switching. Furthermore, in theNES, cyclopentane. When designing products aminimum of0.62 EF. (GAMA, ' to meet the new standard, Transcript, No. 120 at 38 and 177-178.). DOE estimates the shipments ofeach manufacturers will be faced with a
make up a very small fraction ofone Chapter 11 of theTSD. For example, range ofchoices to consider. For percent ofthe watery small fractio n ts, DOE estimates that the standards example, water heaters with DOE did not include t heminits adopted today will increase the toatal loeane-blown foam insulation DOE didnot include them in its siadoptedtodays will increatsers t t have lower material costs, as compared analysis. Although the statutory shipments ofgas water heaters by8 to HFC-245fa, however, the capital definition includes instantaneous water million and decrease the total investment is significantly greater. In heaters within the general definition of shipments ofelectric water heaters by 7 this scenario, they may weigh the water heater, the statute does million over the next26 years. DOE has investment costs andmaterial costs to distinguish between storage and taken fuel switching intoaccount in determine the approach that is costinstantaneous water heaters based on reaching its final decision. No further effective for them. Similarly, they may input rate. The DOE regulations at 10 analysis is required. weigh either HFC-245fa and HFC-134a CFR 430 Subpart B, Appendix E(1.7), V.Analytical Results and Conclusion with water-blown foam. TheHFC-blown distinguish between the definition of foams have higher material costs, storage water heaters and instantaneous The choice ofinsulation blowing compared to water, butbetter insulation gas water heaters by BTU input rates agent is critical toachieving high water performance. Alternatively, at the and storage capacity. However, EPCA, heater efficiency at a reasonable cost. In standard levels adopted today, some
as amended, provides the same the proposed rule, DOEbased its manufacturers may finda design using standards for instantaneous and storage analysis on HFC-245fa and waterblown other blowing agents or blends ofthese waterheaters. There is, moreover, a insulation. There were many comments materials tobe more cost effective. In provision in EPCA, as amended, in from manufacturers, utilities and the summary, DOEbelieves there are a Section 325(q), 42 U.S.C. 6295(q)for DOJ that a standard based on HFC-245fa number ofinsulation blowing agents to establishing a new class ifthe capacity alone couldbe anti-competitive dueto meet today's standards. Manufacturers

orperformance related features ofa its single source of supply. There were will, DOEbelieves, weigh the cost and productjustifies it.The volume ranges also issues about venting system margin efficiency trade-offs, as well as other of storage waterheaters are much larger of error, size constraints forwater factors, in selecting the insulation and do not include the volumes of heaters with thicker insulation, and the blowing material touse. instantaneous waterheaters as defined energy factor overrating of high in DOE's regulation. Since DOE's efficiency electric waterheaters. To A. EconomicImpactson Consumers
current regulations use the capacity and determine whether there are alternative 1.Life-Cycle-Cost.To evaluate the input rate to define instantaneous water approaches tomeet the standard level economic impact on consumers, we heaters, DOE is establishing a new class adopted by today's Final Rule, we conducted anLCC analysis for gas and forinstantaneous gas and electric water evaluated two other blowing agents, electric water heaters. We included data heaters and we will leave the standards HFC-134a and cyclopentane, thatthe and information from comments atthe current levels. proposed rule identified aspotential pertaining to installation costs for size alternatives fortheHCFC-141.65 FR constraints on fourteen percent of G.FuelSwitching 25042, 25049-50 (April 28, 2000). This electric water heaters. This accounts for

The New England Gas Association issue isbriefly described inSection II, extra costs that consumers in small (NEGA) and Laclede Gas claim higher General Discussion, "Impact of apartments and homes may have topay first costs for gas waterheaters will Lessening ofCompetition" in today's for water heaters with thicker encourage builders in new homes and rule. insulation. We also included4488 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

information and costs for drip pans from three are positive for gas-fired and percent ofhouseholds benefitting ranges the comments on gas water heaters. electric waterheaters with the HFC- from 59 percent to 90percent for the Table 2 shows the average LCC savings 245fa blowing agent. We do not show trial standard levels analyzed. At trial and percent ofhouseholds benefitting oil-fired water heaters because we are standard level four, where theLCC for each ofthe trial standard levels for not making any revisions tothe savings are negative, 18-26 percent of each fuel class. The average LCC savings standards for that class. households with electric or gas-fired for trial standard levels one, two and Where LCC savings are positive for waterheaters will benefit. electric and gas-fired waterheaters, the

TABLE 2.-LIFE-CYCLE-COST SAVINGS AND PERCENT BENEFITTING [HFC-245fa blown insulation]

Percent ben Life-cycle Trial standard level Design options efitting cost savings ($)

1

............................. Electric: Heat Traps +Tank Bottom Insulation

....................................................................... 90 36 Natural Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

................................ 78 30 LP Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

....................................... 89 97 2

............................. Electric: Heat Traps +Tank Bottom Insulation +2 Inch Insulation

....................................... 68 32 Natural Gas: Heat Traps +Flue Baffles (78 %RE) +2.5 Inch Insulation

............................. 64 11 LP Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

.................................... 78 77 3

............................. Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

.................................... 59 23 Natural Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

................................ 78 30 LP Gas: Heat Traps +Flue Baffles (78 % RE) +2 Inch Insulation

....................................... 89 97 4

............................. Electric: Heat Traps + 3 Inch Insulation +Plastic Tank

......................................................... 26 -82 Natural Gas: Heat Traps +Flue Baffles (80 % RE) + 3 Inch Insulation + Side Arm Heater 18 -244

+Plastic Tank +IID. LP Gas: Heat Traps +Flue Baffles (80 % RE) + 3 Inch Insulation + Side Arm Heater + 37 -122

Plastic Tank +IID.

AnotherLCC analysis we conducted change in LCC and by calculating the households, two consumer subgroups of is the Consumer Subgroup analysis. fraction ofhouseholds that would interest identified by DOE and This analysis examines the economic benefit. We analyzed the potential effect supported by stakeholders. We present impacts on different groups of ofstandards for households with low theresults ofthe analysis in Table 3.
consumers by estimating the average income levels and for senior-only

TABLE 3.-CONSUMER SUBGROUP LCC SAVINGS AND PERCENT OF HOUSEHOLDS BENEFITTING

Total sample Delta LCC Low-income Delta LCC Senior-only Delta LCC
Trial Fraction of Fraction of Fraction of Product classlev Ave. (1998$) spopulation

. opulation population

level Ave. (1998$) enefitting Ave. (1998) enefitting Ave. (998$) benefitting (%) (%) (%)
Electric

....................................... 1 36 90 35 90 39 92 2 32 68 28 67 39 72 3 23 59 7 54 33 64 4 -82 26 -105 22 -60 31 Natural Gas

................................ 1 30 78 30 78 34 82 2 11 64 -1 55 17 68 3 30 78 30 78 34 82 4 -244 18 -268 15 -194 20 LPG

............................................ 1 97 89 110 93 108 92 2 77 78 88 80 87 80 3 97 89 110 93 108 92 4 -122 37 -53 37 -34 38

The two consumer subgroups show a sample ofhouseholds. In households senior-only households have greater similar trendin average LCC savings with natural gas-fired water heaters, low benefits at all trial standard levels with and percent of sample households income households have the same propane gas. benefitting as the total sample of benefit for trial standard levels 1and 3 We have noted the LCC savings for households. In the case ofelectric water and lessbenefit for trial standard levels the senior-only subgroup are similar to heaters, the low income consumer group 2and 4 than thetotal sample of those ofthegeneral population. Since has less benefit at all trial standard households. The senior-only households the elderly use 30percent less hot water levels than the total sample of withnatural gas water heaters have on average than the general population, households while the senior-only greaterbenefits at alltrial standard one would expect their costs to be
consumer group has greaterbenefit at all levels than the total sample of lower, andas a result,the LCC effect to trial standard levels than the total households. Both low income and be different. However, the standbyFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4489

losses ofwater heaters, which arenot LCC impacts for the elderly to be similar each RECS household. We report the affected by hot water usage, are the to the general population, which they median payback from the distribution of

same for the elderly and thegeneral were. paybacks for each trial standard level in population. Therefore, since most ofthe 2.MedianPayback.Apart oftheLCC Table 4. The median payback isthe design options considered affect analysis is thepayback analysis. The median number ofyears required to standby losses and not water heating LCC payback analysis considers all of recover, in energy savings, the increased efficiency, we expect the distribution of the design option combinations for each costs ofthe efficiency improvements. fuel type and calculates a payback for
TABLE 4.-MEDIAN AND TEST PROCEDURE PAYBACK (YEARS) [HFC-245fa blown insulation]

Trial stand- Median Test pro-

ard level Design options payback cedure

1

............... Electric: Heat Traps +Tank Bottom Insulation

................................................................................................... 2.9 1.5 Natural Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

............................................................ 3.6 3.4 LP Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

................................................................... 2.8 2

............... Electric: Heat Traps +Tank Bottom Insulation +2 Inch Insulation

......................................... 6.5 3.7 Natural Gas: Heat Traps +Flue Baffles (78 %RE) +2.5 Inch Insulation

......................................................... 5.0 4.9 LP Gas: Heat Traps +Flue Baffles (78 %RE) +2.5 Inch Insulation

................................................................ 4.0 3

............... Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

................................................................. 7.4 5.2 Natural Gas: Heat Traps + Flue Baffles (78 %RE) +2 Inch Insulation

............................................................ 3.6 3.4

LP Gas: Heat Traps +Flue Baffles (78 %RE) +2 Inch Insulation

................................................................... 2.8 4

............... Electric: Heat Traps +3 Inch Insulation +PlasticTank

..................................................................................... 14.4 9.8 Natural Gas: Heat Traps + Flue Baffles (80 %RE) +3 Inch Insulation +Side Arm Heater +Plastic Tank + 12.1 10.5

IID. LP Gas: Heat Traps +Flue Baffles (80 %RE) +3 Inch Insulation +Side Arm Heater +Plastic Tank +IID 8.3 'Electric-50 gallon; Gas-40 gallon

3.RebuttablePresumption. The Act insulation, tankbottom insulation on vapors. Additionally, we examined the states thatifthe Department determines electric and improved flue baffles on ability ofmanufacturers torecover the that thepayback period is less than gas-fired waterheaters. None ofthe investments required for each ofthe three years, as calculated with the DOE manufacturers indicated they would scenarios and trial standard levels. test procedure, there shall be a leave the industry or go out ofbusiness The potential value ofthe water rebuttable presumption that such trial as a result ofstandard levels that would he potential vue the standard level is economically justified. require energy factors belowplastic heater industry, represented by the In Table 4, we listthe payback periods tanks or side-arm heaters (i.e., trial Industry Net Present Value (INPV) ($325 by fueltype (product class) and trial standard levels one through three). million in 1998 dollars), is directly standard levels. The Act further states We conducted detailed interviews related tothe manufacturers' price to that ifthis three year payback is not with four ofthe five major water heater the dealer/distributor. Since all five of met, this determination shall notbe manufacturers. (The fifth manufacturer the majormanufacturers produceboth taken into consideration in deciding declined to participate in our second gas-fired and electric water heaters, the whether a standard is economically interviews.) The five together supply industry is highly competitive in terms justified. Section 325(o)(2)(B)(iii), 42 more than 99percent ofthe U.S. ofmanufacturer's pricing. Manufacturer U.S.C. 6295(o)(2)(B)(iii). residential waterheater market. The prices are expected to increase from the

Only electric water heaters at trial interviews provided valuable current average cost to the dealer/ standard level one satisfy the rebuttable information used to evaluate the distributor of $157 to a range of$187- presumption. Electric water heaters impacts of an amended standard on 292 for trial standard levels onethrough with heattraps and insulated tank manufacturers' cash flows, four. Based on comments from the bottoms have a 1.9 year payback manufacturing capacities and interviews, we assume manufacturers calculated under the testprocedure. employment levels. will raise prices enough to recover the There are no trial standard levels for We analyzed the water heater costs ofmaterials, labor and natural gaswater heaters that have a industry using two business scenarios. tsportation and 75 percent oftheir payback ofthree years or less. The standards scenario represents the transportation anufactud 75 percnt oftheireased 4. EconomicImpacton investments needed to meetthe energy vestet.Ifmanufacturers i ncr Manufacturers.We performed an MIA efficiency level of atrial standard level. waterheater distributor prices slightly to determine the impact of standards on The cumulative scenario includes the more, from $0.13 for trial standard level manufacturers. The complete analysis is investments required for energy one to $2.00 fortrial standard level four, in Chapter 13 ofthe TSD. In general, efficiency improvement, changes to a they would recover all oftheir manufacturers stated they would be able new blowing agent and the development investment. Table 5 shows theresults of tomanufacture any ofthe design and manufacture ofa gas-fired water the cash flow analysis with these options with heat traps, thicker heater resistant to ignition offlammable assumptions.4490 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

TABLE 5.-MANUFACTURER IMPACT ANALYSIS
INPV ($mil- Change inINPV Investment reTrial std level lions) ($ ' -quired ($millions) (%) ($millions) lions)
Standard Scenario, HFC-245ta blown Insulation

B

ase Case

................................................................................................................... 325 0 0 0 1

................................................................................................................................. 317
-3
-8 33 2

........................................................................................................ 310 -5 -15 60 3

................................................................................................................................... 3 10

- 5

- 15 5 9 4

..................................................................................................................... 268 -18 -57 229
Cumulative Scenario, HFC-245fa blown insulation

B

ase Case

.................................................................................................................. 325 0 0 0 1

................................................................................................................................... 28 8

- 12

-37 149 2

................................................................................................. 281 -14 -44 176 3

..................................................................................................................... 281 -14 -44 176 4

..................................................................................................................... 239 -27 -86 345

From Table 5, we note energy electric units. Currently, the U.S. range from 9.7 million in 2000 to 19.2 efficiency standards could result in industry hasfar more manufacturing in 2030. Furthermore, a replacement losses ofindustry net present value from capacity than the domestic market can market thatincreases by about 1/1Oth of about $8 million to$57 million (3- absorb. Manufacturers estimated the the new home market each year ensures 18%), while requiring investments of industry isoperating at approximately future demand. $33 million to $229 million. However, 80 percent oftotal capacity. Due to the.
even ifDOEdid not revise energy phase-out ofHCFC-141b insulation B. Significanceof EnergySavings efficiency standards, other Federal blowing agent and a requirement for a The Act prohibits the Department regulatory actions that will take effect gas-fired water heater resistant to from adopting a standard for a product
on orbefore January 1, 2003, will result ignition offlammable vapors, it is likely ifthat standard would not result in in a $29 million loss (9%) in industry that nearly every product line would "significant" energy savings. Section NPV. This loss exceeds any ofDOE's have to be redesigned, retested and re- 325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B). trial standard levels except level four. certified. Several manufacturers While the term "significant" is not Asrequired by the Process Rule, 10 CFR indicated a preference toretool for new defined in the Act, the U.S. Court of Part 430, Subpart C, Appendix A blowing agents, energy-efficiency Appeals, in Natural ResourcesDefense 10(g)(1), DOEconsidered the cumulative standards and flammable vapor-resistant Councilv. Herrington,768 F.2d 1355, impacts ofother Federal regulatory designs at the same time, to avoid 1373 (D.C. Cir. 1985) concluded that actions on the trial standard levels, redundant efforts and limitcosts.Congressional intent in using the word including thephase outofHCFC-141b We also used the manufacturers' Congressiona ni tent a nusing the word and the CPSCinitiative toprevent the interviews to assess employmentsignificant was to mean non-triv ignition of flammable vapors on gas- impacts due to an amended energy The energy savings for all ofthe trial fired water heaters. These cumulative efficiency standard. Manufacturers 

### anar e n i 

### ndthe losses range from $37 million to 86 expected the impact ofnewblowing rulemaking are non-trivial and therefore million. The investments toprevent agents and flammable vapor resistant we consider them "significant" within ignition offlammable vapors and for designs on labortobe minimal, neither the meaning ofSection 325 ofthe Act.

new blowing agents are $116 million. increasing nor reducing employment 1.National EnergySavings.To The investments for cumulative levels by more than a few employees. estimate the energy savings through the regulations are potentially large given Since therevised efficiency levels do year 2030 due to amended standards, the current after tax profitability ofthe not requirethe adoption ofside arm we compared the energy consumption water heater industry, estimated tobe heaters or plastic tanks, manufacturers ofwater heaters in the 2004 base case $45 million (1998) on revenues of $1.5 do not anticipate significant changes in to the energy consumption ofwater billion. employment levels or training heaters complying with thetrial

Based on DOE's interviews, requirements. Additionally, webelieve standard levels. DOE calculates these manufacturers expect little impact on market growth of2.5 percentper year energy savings at the source using the manufacturing capacity and expect to for new homes and modest productivity NEMS-BRS distribution and generation meet future demand since therevised gains ensure current employment levels losses. Table 6 shows these results for standards are notbased on side-arm gas- for the foreseeable future. In our waterheaters withHFC-245fa blown fired water heaters and plastic tank analysis, yearly water heater shipments insulation.

TABLE 6.-SOURCE ENERGY SAVINGS WITH HFC-245FA BLOWN INSULATION (QUADS)
Trial std 1 Trial std 2 Trial std 3 Trial std 4 Total quads saved

........................................................................................... 3.33 4.47 4.61 11.46 Total exajoules saved ...................................................................................... 3.51 4.72 4.86 12.09Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4491

All ofthe trial standard levels 2.NationalNetPresentValue(NPV). combined discounted energy savings considered in this rulemaking have Additionally, we analyzed the economic minus increased consumer costs ofthe significant energy savings, ranging from impact on the nation tothe year 2030. fourfuel types ofequipment at a 3.3 quads (3.5 Exajoules (EJ)) to 11.5 This is an NPV analysis using the AEO particular trial standard level. We base quads (12.1 EJ), depending on thetrial 2000 reference energy prices. Table 7 this calculation on all expenses and standard level. lists theNPV for HFC-245fa blown savings occurring between 2004 and insulation. The NPVconsiders the 2030.

TABLE 7.-NATIONAL NET PRESENT VALUE

NPV--HFC-245fa Trial standard level ($billions)

1

........................................ .................................................................................................. 1.20 2

...................................................................... -0.13 3

....................................................................................................................................................................... 2.0 2 4

....................................................................................................................................................................... -2 4 .94

The national NPV ispositive for trial Therefore, the consumer will not lose conclude "that theproposed standards standard levels one and three and any utility or performance. couldhave an adverse affect on essentially 0 for trial standard level 2. In To eliminate the possibility ofany competition because water heater this analysis, a positive NPV means that water heater models becoming manufacturers may have to use aninput the estimated energy savings aregreater unavailable as a result ofthicker thatwill beproduced by only one than the increased costs due to insulation, we created a new class for source." (DOJ,No. 143 at 1). standards. Among thetrial standard tabletop water heaters based on the DOE examined other possible blowing levels analyzed, trial standard level criteria in Section 325(q), 42 U.S.C. agents and concluded that atleast four three has the highest NPV. 6295(q) in the Act. These issues are blowing agents are available touse in discussed in Section II. General meeting the standards adopted in C.LesseningofUtilityorPerformanceof Discussion, "Lessening ofUtility or today's Final Rule. Therefore, the Products Performance ofProducts." Department concludes there will be

None ofthe trial standard levels D.little to no impact on competition. See 

### ~~~~~~~~Dreduces the performance ofwater TeAtdrcsheDptmnto Section II, General Discussion, "Impact reduces the performance ofwater The Act directs the Department to ofLessening ofCompetition" for the heaters. Generally, the trial standard consider any lessening ofcompetition complete discussion ofthis topic. levels reduce heat losses and improve that is likely to resultfrom standards. It c heat exchanger effectiveness. These urtherdirects theAttorney General to E.NeedoftheNationtoSave Energy changes improve energy and water teri the t ny oand NetNationalEmployment heating performance and may increase determine the impact, ifany, on heating performance and may increase competition likely to result from such 1.EnvironmentalImpacts.Enhanced the amount ofwater available in one standard and transmit such energy efficiency improves the Nation's hour, i.e.,the first hour rating. determination, not later than 60 days energy security, strengthens the

However, toreduce heat losses, itmay after the publication ofa proposed rule economy and reduces the be necessary to usethicker insulation. to the Secretary, together with an environmental impacts ofenergy At the trial standard level adopted in analysis ofthenature and extent of such production. The energy savings from today's rule, DOE contemplates impact. Section 325(o)(2)(B)(i)(V), 42 waterheater standards result in reduced insulation thicknesses of2-2.5 inches U.S.C. 6295(o)(2)(B)(i)(V). emissions ofCO2and NOx and aids in
versus the 1-2 inches in common use In order to assist the Attorney General addressing global climate change and today. This extra thickness ofinsulation in making sucha determination, the reducing airpollution. At the standard will make water heaters larger and more Department provided the Attorney levels analyzed, the actual cumulative difficult to squeeze into tight spaces General with copies oftheProposed emissionreductions to 2030 range from when replacing a waterheater. DOE Rule and the Technical Support 149-354 Mt for carbon equivalent, 175- added costs for tempering valves for a Document forreview. In a letter 459 thousand metric tons (kt)for NOx, number of gas and electric water heaters responding tothe Proposed Rule, the and - 3to

- 64 kt for SO2. The large where webelieved there couldbe some Department ofJustice (DOJ)found only reductions inCO2 and NOx at all loss ofutility due to the need to one area ofconcern regarding any standard levels are a positivebenefit to downsize a water heater. Tempering lessening ofcompetition. The area of the nation. The small increases valves allow the consumer to increase concern involves the blowing agent for (negative reductions) in SO2 are due to the setpoint, thus increasing the amount the foam insulation and thepossibility small increases in the number of oilofcold water used toprovide a that only one blowing agent, HFC- fired water heaters from our shipment comfortable and safe usable water 245fa, could be used and that itis a forecasts. We show actual cumulative temperature. The addition ofcold water patented product with only one emissions savings from 2004-2030 in increases the first hour rating. supplier. This situation led DOJ to Table 8.

TABLE 8.-ACTUAL CUMULATIVE EMISSIONS REDUCTIONS THROUGH 2030
_~~~~Emission .Trial std level Trial std level Trial std level Trial std level Emission 2 3 4 Carbon (Mt)

......... 1

........................................ 2 3 54 Carbon (M t)

...................................................................................................... 149 39 152 3544492 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

TABLE 8.-ACTUAL CUMULATIVE EMISSIONS REDUCTIONS THROUGH 2030-Continued

Emission Trial std level Trial std level Trial std level Trial std level Emission 1234 

### 1 2 3 4

N

Ox (kt)

.......................................................................................................... 175 215 273 459 S02 (kt)

.......................................................................... 3 11 **"- 13 " -64 **Results only include household SO2 emissions reductions because S02 emissions from power plants are capped by clean air legislation. Thus, S02 emissions will onlybe negligibly affected by water heater standards.

The Department makes no effortto often perceived to have a greater value used thesame seven percent discount monetize the benefits ofthe actual if they occur sooner, rather than later. rate for these calculations that weused emission reductions, but there may be To the extent that the different trial for discounting monetized benefits. time-related differences intheperceived standard levels have slightly different Since the discounted emission value ofthe emissions depending on shipment distributions over time, some reductions in carbon shift slightly from when they occur, as with monetized trial standard levels might have a trial standard level 3to trial standard benefits thataccumulate over time. slightly higher proportion ofearlier level 1,this indicates trial standard Emission reductions that occur sooner emission reductions than another trial level 1has a slight timing improvement
are often more desirable than equivalent standard level, in emission reductions. There isno reductions that occur later. Like To show the possible effect ofthe similar shift in either the NOx or S02 monetary benefits, thehealth, different timing patterns ofthe levels. We showthe discounted recreational and ecosystem benefits that emissions, the Department is also cumulative emission savings from result from emissionreductions are presenting discounted emissions. We 2004-2030 in Table 9.
TABLE 9.-DISCOUNTED CUMULATIVE EMISSIONS REDUCTIONS THROUGH 2030
Trial std Trial std Trial std Trial std Emission level 1 level 2 level 3 level 4

Carbon (Mt)

........ .................................................................................... 51 46 50 118 NO x (kt)

.......................................................................................................... 53 67 90 131 S02 (kt)

.................................................................................................. 1 -3 4 -17

**Results only include household S02 emissions reductions because SO0 emissions from power plants are capped by clean air legislation. Thus, S02 emissions will only be negligibly affected by water heater standards.

2. NetNationalEmployment.In the thejobs being lost.The benefits from feasible. In the formula for water heater Process Rule, DOE committed to anypotential employment gains would standards, the letter "V" stands for rated develop estimates ofthe employment be reduced ifjob quality and pay are volume as given inthe statute. impacts ofrevised standards in the reduced. The American Gas Association economy in general. The standard * The netbenefits from potential recommended EF =0.64-0.0019V for adopted in today's rule will have a employment changes are a result ofthe gas waterheaters. (AGA, No. 110 at 2) positive impact on employment. The estimated net present value ofbenefits ACEEErecommended EF =0.98- results ofthe Department's analysis are or losses likely to result fromthe revised 0.00132V for electric and EF =0.69- shown in Chapter 15 ofthe TSD. standards; it maynot be appropriate to 0.0019V for gas water heaters. (ACEEE,

Whileboth this input/output model separately identify and consider any No. 71 at 9). The water heater and the direct use ofBureau ofLabor employment impacts beyond the manufacturer Bradford White Statistics (BLS) employment data calculation ofnet presentvalue. recommended EF =0.94-0.0013V for suggest the revised waterheater Taking into consideration these electric, EF =0.65-0.0019V for gas and standards could increase the net legitimate concerns regarding the no change for oil-fired water heaters. demand for labor in theeconomy, the interpretation and use ofthe (Bradford White, No. 108 at 7) TheCity gains would mostlikely be very small employment impacts analysis, the ofPalo Alto recommended EF=0.64- relative to total national employment. Department concludes only thatthe 0.0019V forgas water heaters. (City of For several reasons, however, even these proposed water heater standards are PaloAlto, No. 136 at 2) The Edison modest benefits fornational likely to produce employment benefits Electric Institute recommended EF employment arein doubt: that are sufficient to offset fully any =0.66-0.0019V for gas waterheaters.

* Unemployment isnow at the lowest adverse impacts on employment inthe (EEI, No. 105 at 3). TheElectric Power rate in 30 years. Ifunemployment water heater or energy industries. Research Institute recommended EF remains very low during theperiod =0.95-0.00132V for electric water when therevised standards are putinto F. Conclus lon heaters. (EPRI, No. 104 at 3). GAMA effect, it isunlikely that the standards 1. Comments on Standard Levels. recommended EF =0.95-0.00132V for could result in any netincrease in Several stakeholders made specific electric and EF =0.65-0.0019V for gas national employment levels. recommendations for standard levels waterheaters. (GAMA, No. 71 at 3 &4). * Neitherthe BLS data nor the input- during the workshops heldprior to The NorthwestPower Planning Council output modelused byDOE include the publication ofthe proposed rule or after recommended EF =0.97-0.00132V for quality or wage level ofthejobs. One publication ofthe proposed rule. We list electric and EF =0.68-0.0019V for gas reasonthat the demand for labor these below to show the range of water heaters. (NWPPC, No. 163 at 4). increases inthe model may be that the standard levels stakeholders believe are The efficiency standards recommended jobs expected tobe created pay less than economically justified and technically in these comments are based on theFederal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4493

analysis for the proposed rule and other ofenergy." Section 325(o)(2(B)(iii)(3)(B), are the same, though at lower efficiency information available tothese 42 U.S.C. 6295(o)(B)(iii)(3)(B). The than that found in standard level two. organizations making recommendations. Secretary has eliminated the maximum For electric water heaters, no standard

2. Proposed Revised Standard. technologically feasible levels for levels are repeated and the efficiency of Section 325(o)(2)(A), 42 U.S.C. electric and gas-fired water heaters and each succeeding standard level is 6295(o)(2)(A), ofthe Act specifies that has eliminated any revised standard higher. For oil fired water heaters, there any new or amended energy levels for oil-fired water heaters based areno changes from the current levels conservation standard for any type (or on the analysis in the proposed rule. All so this class is not shown but they were class) ofcovered product shall be ofthe design options included in our included in the analysis. Bycombining designed to achieve the maximum analysis are technologically feasible efficiency levels in this way, the improvement in ehergy efficiency which since they are commercially available. Departent sabl toevaluat the the Secretary determines is We consider the impacts of standards Department is able to evaluate the technologically feasible and on gas and electric water heaters at each impacts ofdifferent combinations of economicallyjustified. In determining offour standard levels, beginning with standard levels to make an informed whether a standard is economically the most efficient level, i.e., standard decision on the merits ofdifferent justified, the Secretary must determine level four. We then consider less efficiency combinations. whether thebenefits ofthe standard efficient levels. Standard levels two and To aid the reader as we discuss the exceed itsburdens. Section three are different combinations of benefits orburdens ofthe trial standard 325(o)(2)(B)(i), 42 U.S.C. efficiency levels for electric and gas levels wehave included a summary of 6295(o)(2)(B)(i). The amended standard waterheater classes. Forgas-fired water the analysis results in Table 10. must "result in significant conservation heaters, standard levels one and three

TABLE 10.-SUMMARY ANALYSIS RESULTS BASED ON HFC-245FA BLOWN INSULATION

Trial Std Trial Std Trial Std Trial Std 1 2 3 4

Total Quads Saved

......................................................................................... 3. 4.5 4.6 11.5 NPV ($Billion)

......... ............................................................................... 1.2 -0.1 2.0 -24.9 Emissions: Carbon Equivalent (Mt)

........................................................................... 149 139 152 354 NO x (kt)

.............................................................................................. 175 215 273 459 SO2 (kt)

........................................................................... 11

- 13

- 64 Cumulative Change inINPV ($Million)

.................................................... -8 -15 -15 -57 Life CycleCost ($): Electric

........ .................................................................................... 36 32 23 -82 Natural Gas

......... ............................................................................. 30 11 30 -244 Propane Gas

.............................................. ........... 97 77 97

- 122

*Results only include household S02 emissions reductions because S02 emissions from power plants are capped by clean air legislation. Thus, SO2 emissions will only be negligibly affected by possible water heater standards.

We first considered trial standard Next,we considered trial standard $80, while 41 percent experience an level four, the mostefficient level for level three. This trial standard level average LCC loss of$59. the two classes. Trial standard level four saves about 4.6 quads ofenergy, a For electric water heaters, the analysis

saves about 11.5 quads of energy, a significant amount. The emissions predicts that41 percent ofall significant amount. The emissions reductions are significant: 152 Mt of consumers would experience no change reductions of 354 Mt ofcarbon carbon equivalent and 273 kt ofNOx. or some net cost with more efficient equivalent and 459kt ofNOx are There is a 13 kt increase inhousehold electric water heaters. However, we significant. There is a 64 kt increase in emissions ofSO2 due to a slightincrease believe thatthere are costs orsavings household emissions ofSO2 due to in shipments ofoil-fired waterheaters. nearthe point ofzero change inLCC increased shipments of oil-fired water The national NPV oftrial standard level that consumers wouldbe unable to heaters. However, at this level, three is $2.0 billion from 2004-2030. distinguish in their yearly expenses. We

consumers experience negative LCC The economic benefits to consumers have chosen ±2 percent ofaverage impacts. They would lose $82 with are significant. The average LCC savings baseline LCC as theband ofno electric waterheaters, $244 with natural for consumers with electric, natural gas consumer impact. We believe this small gas waterheaters and $122 with and propane gas water heaters are $23, percentage, regardless ofthe actual total propane gas water heaters. Furthermore $30 and $97, respectively. In trial LCC, is insignificant to the consumer propane gas water heaters. Furthermore, standard levelthree, 78 percent of because these LCC costs or savings are thewater heater industry would lose 27 households with natural gas-fired water spread over monthly utility bills for the percent ofits value and the nation heaters have LCC savings, for an average life ofthe water heater. By applying a would have a loss in NPV ofnearly $25 savings of $55, while 22 percent two percent band of average LCC, we billion. The Department concludes the experience LCC losses, for an average can clearly show the significant net resulting energy savings and emission loss of$54. In households with propane savings and net costs associated with a reductions at this level are outweighed gas waterheaters, the average LCC trial standard level. This permits a more by the negative economic impacts on savings are $117 for 89 percent ofthe informed decision based on weighing the nation, consumers and households while only eleven percent the significant benefits and burdens in manufacturers. Consequently, the experience an average loss of$61. For terms ofconsumer impact. Theresulting Department concludes trial standard households with electric water heaters, ranges are shown in Figure 9.6.2 in the level four is not economicallyjustified. 59percenthave average LCC savings of TSD.4494 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

We will use ±2percent ofbaseline determined thebenefits oftrial standard to review under theExecutive Order by LCC toindicate no impact, positively or level three outweigh itsburdens and is the Office ofInformation and Regulatory negatively, on consumers. Therefore, economically justified. TheDepartment Affairs (OIRA) ofthe Office of only fifteen percent ofconsumers with also concludes trial standard level three Management and Budget. electric water heaters or twelve percent saves a significant amount ofenergy and There were no substantive changes ofconsumers with natural gas water is technologically feasible.5 Therefore, between the draft we submitted to OIRA heaters or five percent ofconsumers the Department today adopts amended and today's action. The draft and other with propane gas water heaters sustain energy conservation standards for water documents we submitted toOIRA for any significant net costs under standard heaters at trial standard levelthree. review are apart oftherulemaking level 3. Similarly, 30percent of record and are available forpublic
consumers with electric water heaters or VIProcedural Issues andRegulatory review in the Department's Freedom of 52 percent ofconsumers withnatural eviewsInformation Reading Room, 1000 gas water heaters or 69percent of A. Review Underthe National Independence Avenue, SW,
consumers with propane gas water EnvironmentalPolicy Act Washington, DC 20585, between the heaters have significant net savings. hours of9:00 a.m. and 4:00 p.m.,

Two percent ofaveragebaseline LCC In issung the March 4, 1994,Monday through Friday, exceptFederal equals $56 for electric water heaters. Propsed Rle forenergy efficiency holidays, telephone (202) 586-3142. Overthe average life of 14 years for an tadards for eight products, one ofThe proposedrule contained a electric water heater, this isless than $4 which was waterheaters, the summary ofthe Regulatory Impact per year. For consumers withnatural Department prepared an Environmental Analysis (RIA), which focused on the gas and propane gas water heaters, two Assessment (DOE/EA-0819) that was major alternatives considered in arriving percent of average baseline LCC is $31 published within the TSD for that at the approach to improving the energy and $47, respectively. Over the average Proposed Rule. (DOE/E-ooo9, efficiency ofconsumer products. The life of9 years for gas water heaters, this November 1993). We found the reader isreferred to the complete RIA, is less than $4 per year for natural gas environmental effects associated with which is contained in the TSD, available and less than $6 peryear for propane various standard levels for water as indicated at thebeginning ofthis gas. We believe this is a small amount heaters, as well as the other seven notice. Itconsists of: (1)a statement of in terms ofyearly expenditures and will products, to be not significant, and we theproblem addressed by this not adversely impact consumers' published a Finding ofNo Significant regulation, andthe mandate for purchase decisions about waterheaters, Impact (FONSI). 59 FR 15868 (April 5, government action; (2) a description and
or their financial positions. 1994).analysis ofthefeasible policy Additionally, low-income and senior- In conducting the analysis for the anastivs to thi reasglabon (3) a only consumer subgroups exhibit Proposed Rule upon which today's quantitative comparison ofthe impacts similar distributions ofcosts and Final Rule is based,the DOE evaluated alternatives and (4) theeconomic savings. A similar small percentage of several design options suggested in impact oftheproposed standard. low-income or senior only consumers comments tothe screening document. The RIA calculates the effects of
are affected by higher costs. As a result, the energy savings estimates feasible policy alternatives to water

Theindustry will lose about five and resulting environmental effects heater energy efficiency standards, and percent ($15 million) ofits INPV due to from revised energy efficiency standards provides a quantitative comparison of energy efficiency standards. These for water heaters in that analysis differ the impacts ofthe alternatives. We losses are more thanbalanced by NPV somewhat from those presented for evaluate each alternative in terms ofits gains to the nation of$2.0 billion, or 135 waterheaters inthe 1994 Proposed ability to achieve significant energy times the industrylosses. Industry Rule. Nevertheless, the environmental savingsat reasonablecosts, and we losses fortrial standard level three due effects expected from today's Final Rule compare it to th e ctivenessoftrial to allFederal actions (CPSC, EPA and fall within the ranges ofenvironmental standard level 3adopted by today's DOE) are fourteen percent ofits INP, or impacts from the revised energyFinal Rule $44 million. Even this level oflosses is efficiency standards for water heaters W created the RIA using a series of offset by gains to the nation thatare 46 that DOE found in the 1994 FONSI not regulatory scenarios (with various times the industry losses.4 Based on the to be significant. assumptions), which weused as input manufacturer interviews, DOEbelieves ecutive Order12866,tothe shipments model for water there will not be any plant closures or "RegulatoryPlanningandReview's heaters. We used theresults from the employee layoffs. employee f r shipments model as inputs to the NES

In determining the economic The Department has determined spreadsheet calculations. justification oftrial standard level three, today's regulatory action is an identifiedthe follo g seve the Department has weighed the "economically significant regulatory m pi alternatives for achieving benefits ofenergy savings, reduced action" under Executive Order 12866, consumer product energy efficiency. average consumer LCC, significant and "Regulatory Planning and Review." 58 These alternatives include: positive NPV, and emissions reductions FR 51735 (October 4, 1993). *No New Regulatory Action. and theburdens ofaloss in Accordingly, today's action was subject Informational Action. manufacturer net present value, and

· Product Labeling.
consumer LCC increases for some SThefinal standard isbased on insulationblown *Consumer Education. households. After carefully considering with HFC-245fa. We also compared the engineeringrescriptie Standards the results ofthe analysis, DOEhas cost andperformance fortwo alternative blowing the results of the analysis, DOEhas agents, HFC-134a and cyclopentane. All three Financial Incentives. blowing agents are EPA-SNAP approved but there -Tax credits 4As DOE has determined, the benefits of today's are concerns about availability and a single source -Rebates finalrule outweigh the $15 millionloss to the supplier with HFC-245fa. However, since -Low income and seniors subsidy industry. Toreview the support for this engineering results arewithin two percent ofHFC- Voluntary Energy Efficiency Targets determination, see the TSD at Chapters 12.5 and 245fa, we conclude that the useofeither ofthese Table 12.1, 13.3.3.5 and Table 13.8, 13.3.4, and alternative blowing agents would not change our (5 Years, 10 Years). 13.3.5. decision. * Mass Government Purchases.Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4495

The Proposed Approach We have evaluated each alternative in (Table 11), and have compared it to the (Performance Standards). terms ofits ability to achieve significant effectiveness ofthis Final Rule. energy savings at reasonable costs
TABLE 11.-ALTERNATIVES CONSIDERED

NPV Energy savings Policy alternatives $in Energy savings $inbillions quads

Consumer Product Labeling

...................................................................... -$0.003 0.08 C onsumer Education

....................................................................................................................................... 0.40 0.49 Prescriptive Standards

. ......................................................................................................... 0.99 0.74 C onsumer T ax Credits

..................................................................................................................................... 0.18 0.14 Consumer Rebates High Efficiency

................................................................................................................. 0.18 0.14 Consumer Rebates Heat Pump

...................................................................................................................... 0.85 0.50 Low Income and Seniors Subsidy

.............. .................................................................. 0.05 0.37 M anufacturer Tax Credits

................................................................................................................................ 0.04 0.03 Voluntary Efficiency Target (5 year delay)

..................................................................................................... 0.92 2.8 Voluntary Efficiency Target (10 year delay)

.................................................................................................... 0.47 2.1 Mass Govemment Purchases

...................................................................... 0.01 0.06 Performance Standards

......... ............................................................... 2.0 4.6

NPV = Net Present Value (2003-2030, inbillion 1998 $)(does not include government expenses) Savings = Energy Savings (Source Quads)

For a complete discussion ofthe the GAMA directory, these firms only Reform," 61 FR4729 (February 7, 1996), assumptions used to develop the list electric water heaters thatmeet or imposes on Executive agencies the alternative regulatory impacts, see the exceed the standard level in this rule. general dutyto adhere tothe following proposed rule. 65 FR 25042, 25080- Although the rule raisesthe standard requirements: (1)Eliminate drafting 25081 (April 28, 2000). All ofthese level enough to impact their niche errors and ambiguity; (2) write alternatives mustbe gauged against the market forhigh efficiency electric water regulations tominimize litigation; (3) performance standards in this Final heaters, these manufacturers also provide a clear legal standard for Rule. The results in Table 11 above manufacture very long life products that affected conduct rather than a general show that none ofthe alternative incorporate other features which will standard; and (4) promote simplification regulatory approaches meet or exceed help them preserve their niche market. and burden reduction. the estimated national cost and energy The Department has taken this into With regard to thereview required by savings from revised energy efficiency consideration in this rulemaking. Section 3(a), Section 3(b) ofExecutive standards. Additionally, several ofthe The Department prepared a Order 12988 specifically requires that alternatives would require new enabling manufacturing impact analysis thatit Executive agencies make every legislation, since authority to carry out shared with all the water heater reasonable effort to ensure that the those alternatives does not exist manufacturers. The smaller regulation: (1)Clearly specifies the presently. manufacturers did not choose to discuss preemptive effect, ifany; (2)clearly C.Review Underthe Regulatory the impacts ofthe trial standard levels specifies any effect on existing Federal Flexibility Act on their firms. law or regulation; (3)provides a clear In view ofthe information discussed legal standard for affected conduct The Regulatory Flexibility Act of above, the Department has determined while promoting simplification and 1980, 5 U.S.C. 601-612 requires an and hereby certifies pursuant to Section burden reduction; (4) specifies the assessment ofthe impact ofregulations 605(b) oftheRegulatory Flexibility Act retroactive effect, ifany; (5) adequately on small businesses. The Small that, for this particular industry, the defines key terms; and (6) addresses Business Administration's definition for standard levels in today's Final Rule other important issues affecting clarity

a small business inthe waterheater will not "have a significant economic and general draftsmanship under any industry is onethat employs 500 or impact on a substantial number of small guidelines issued by the Attorney fewer employees, entities," and itis not necessary to General. Section 3(c) of Executive Order

The water heater industry is prepare aregulatory flexibility analysis. 12988 requires Executive agencies to characterized by five firms accounting review regulations in light ofapplicable for nearly 99 percent ofsales. Smaller D.Review UnderthePaperwork standards in Section 3(a) and Section businesses and firms, which make ReductionAct 3(b) to determine whether they aremet specialty water heaters and supply No new information or recordkeeping or itis unreasonable tomeet one or niche markets, share one percent ofthe requirements are imposedby this more ofthem. DOE reviewed today's market. We are aware ofthree small rulemaking that would require Office of Final Rule under the standards of firms: BockWater Heaters, Heat Management and Budget clearance Section 3 oftheExecutive Order and Transfer Products, and Vaughn. under thePaperwork Reduction Act. 44 determined that, to the extent permitted Ofthe three small firms, Bock U.S.C. 3501 etseq. by law, the final regulations meet the manufactures oil-fired water heaters that

. Executive Order12988 relevant standards. E.Review Under Executive Order 12988, have not been affected by this rule. "CivilJusticeReform" F. "Takings"Assessment Review Therefore, Bock will not suffer any adverse impacts due to the rule.The With respect tothe review ofexisting The Department has determined other two firms, HeatTransfer and regulations andthe promulgation of pursuant toExecutive Order 12630, Vaughn, both make electric water new regulations, Section 3(a) of "Governmental Actions and Interference heaters that are affected by this rule. In Executive Order 12988, "Civil Justice with Constitutionally Protected Property4496 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

Rights," 53 FR 8859 (March 18,1988) various levels of government. No further DOE has determined isboth that this regulation would not result in action isrequired by Executive Order technologically feasible and any takings thatmight require 13132. economically justified. A full discussion compensation under the Fifth Rviw nr the Unfundedof the alternatives considered byDOE is Amendment to theUnited States Revdew er At nfun epresented in the "Regulatory Impact Constitution. andatesReformAct of 995Analysis" section ofthe TSD for this With respect to a proposed regulatory Final Rule. G.Review UnderExecutive Order action thatmay result in the 13132, "Federalism" expenditure by State, local, andtribal LReview Underthe Treasuryand

Executive Order 13132, 64 FR43255 governments, in the aggregate, orby the GeneralGovernmentAppropriations (August 4, 1999)requires agencies to private sector, of$100 million or more Act of1999 develop an accountable process to (adjusted annually for inflation) inany Section 654 ofthe Treasury and

ensure meaningful and timely inputby one year, Section 202(a)ofthe General Government Appropriations State and local officials in the Unfunded Mandates Reform Act of1995 Act, 1999 (Pub. L. No. 105-277) requires development ofregulatory policies that (UMRA), 2U.S.C. 1531 etseq., requires Federal agencies toissue a Family have "federalism implications." Policies a Federal agency to publish a written Policymaking Assessment for any thathave federalism implications are statement concerning estimates ofthe proposed rule orpolicy that may affect defined in the Executive Order to resulting costs, benefits and other effects family well-being. Today's Final Rule include regulations that have on the national economy. 2 U.S.C. would not have any impact on the "substantial direct effects on the States, 1532(a), (b). UMRA alsorequires each autonomy or integrity ofthe family as on therelationship between the national Federal agency to develop an effective an institution. Accordingly, DOE has government and the States, or on the process to permit timely inputby state, concluded that it is not necessary to distribution ofpower and local, and tribal governments on a prepare a Family Policymaking responsibilities among the various proposed significant intergovernmental Assessment. levels ofgovernment." Under Executive mandate. The Department's consultation Order 13132, DOE may not issue a process is described in a notice J.Review Underthe PlainLanguage regulation thathas federalism published inthe Federal Register. 62 FR Directives implications, that imposes substantial 12820 (March 18, 1997). Today's Final Section 1(b)(12) ofExecutive Order direct costs, and that is not requiredby Rule may impose expenditures of $100 12866 requires that each agency draft its statute, unless theFederal government million or more in a year in the private regulations so thatthey are simple and provides thefunds necessary topay the sector. It does not contain a Federal easy to understand, withthe goal of direct compliance costs incurred by the intergovernmental mandate. minimizing the potential for uncertainty State and local governments, orDOE Section 202 ofUMRA authorizes an and litigation arising from such consults with State and local officials agency torespond to the content uncertainty. Similarly, thePresidential early in theprocess ofdeveloping the requirements ofUMRA in any other memorandum directs theheads of proposed regulation. DOE also may not statement or analysis that accompanies executive departments and agencies to issue a regulation that has federalism this Final Rule. 2U.S.C. 1532(c). The use plain language in all proposed and implications and that preempts State contentrequirements of Section 202(b) Final Rulemaking documents published lawunless it consults with State and ofUMRA relevant to the private sector in the Federal Register.63 FR 31883 local officials early in theprocess of mandate substantially overlap the (June 1, 1998). developing theproposed regulations. economic analysis requirements that Today's rule uses the following

The statutory authority under which apply under Section 325(o) ofEPCA, as general techniques to abideby Section this Final Rule isbeing promulgated amended, and Executive Order 12866. 1b)(12) ofExecutive Order 12866 and specifically addresses the effect of The Supplementary Information section the Presidential memorandum. 63 FR Federal rules on State laws or oftheNotice ofFinal Rulemaking and 31883 June 1, 1998): regulations concerning testing, labeling the analysis contained in the · Organization ofthe material to and standards. Section 327 ofEPCA, as "Regulatory Impact Analysis" section of serve the needs ofthe readers amended, 42 U.S.C. 6297. Generally all theTSD for this Final Rule respond to (stakeholders). such State laws or regulations are those requirements. * Use of common, everyday words. superceded by EPCA, unless specifically DOE is obligated by Section 205 of * Shorter sentences and sections. exempted in Section 327. The UMRA, 2U.S.C. 1535, toidentify and Department can grant a waiver of consider a reasonable number of K. Congressional Notification preemption in accordance with the regulatory alternatives before As required by 5U.S.C. 801, DOE will procedures and otherprovisions of promulgating arule for which a written submit to Congress a report regarding Section 327(d) ofthe Act, as amended. statement under Section 202 is required. the issuance oftoday's Final Rule prior 42 U.S.C. 6297(d). States can file From those alternatives, DOE must tothe effective date set forth atthe petitions forexemption from select the least costly, most cost- outsetofthis notice. DOE also will preemption with the Secretary and have effective or leastburdensome alternative submit the supporting analyses tothe their request reviewed on a case-by-case that achieves the objectives ofthe rule, Comptroller General (GAO) and make basis. unless DOE publishes an explanation of them available to each House of DOEhas examined today's Final Rule why a different alternative is selected or Congress. The report will state thatit andhas determined that although the selection ofsuch an alternative is hasbeen determined that the rule is a revised water heater standards would inconsistent with law. As required by "major rule" as defined by 5U.S.C. preempt State laws inthis area, they Section 325(o) ofEPCA, as amended, 42 804(2). would not have a substantial direct U.S.C. 6295(o), today's Final Rule effect on the States, on therelationship establishes energy conservation Lst ofS u bj ects n 10 CFRPart430 between the national government and standards for water heaters that are Administrative practice and the States, or onthe distribution of designed to achieve the maximum procedure, Energy conservation, power and responsibilities among the improvement in energy efficiency that Household appliances.Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4497

Issued in Washington, DC, on December Authority:42 U.S.C. 6291-6309, 28 U.S.C. dimensions of36 inches high, 25 inches 26, 2000. 2461 note. deep and 24 inches wide. Dan Reicher, 2. Section 430, Appendix E to Subpart * * * * * AssistantSecretary, EnergyEfficiency and B ofPart 430 is amended in Section 1 3. Section 430.32(d) ofsubpart C is RenewableEnergy. by adding paragraph 1.16 toread as amended by revising paragraph (d) to

For the reasons set forth in the follows: read as follows: preamble, Part 430 ofTitle 10, Code of Appendix E to subpartB ofPart430- §430.32 Energy and water Federal Regulations, is amended as set Uniform Test Method forMeasuring the conservation standards and effective forth below. Energy Consumption ofWaterHeaters dates.
PART 430-ENERGY CONSERVATION 1. Definitions * * * * PROGRAM FOR CONSUMER * * * * *(d) Waterheaters. PRODUCTS 1.16 Tabletopwaterheater'meansa The energy factor of water heaters water heater in a rectangular box shall notbe less than the following for 1. The authority citation for Part 430 enclosure designed to slide into a products manufactured on or after the continues to read as follows: kitchen countertop space with typical indicated dates.
Product class Energy factor as of January 1, Energy factor as of of April 15, Energy factor as of January 20, 1990 1991 2004

1.Gas-fired Water Heater

............. 0.62

- (.0019 x Rated Storage 0.62

- (.0019 x Rated Storage 0.67

- (0.0019 x Rated Storage Volume ingallons). Volume ingallons). Volume ingallons). 2. Oil-fired Water Heater

................ 0.59

- (.0019 x Rated Storage 0.59

- (.0019 x rated Storage 0.59-(0.0019 x Rated Storage Volume ingallons). Volume ingallons). Volume ingallons). 3.Electric Water Heater

................ 0.95

- (0.00132 x Rated Storage 0.93

- (0.00132 x Rated Storage 0.97-(0.00132 x Rated Storage Volume ingallons). Volume ingallons. Volume ingallons). 4. Tabletop Water Heater

.............. 0.95

- (0.00132 x Rated Storage 0.93

- (0.00132 x Rated Storage 0.93

- (0.00132 x Rated Storage Volume ingallons). Volume ingallons). Volume ingallons). 5. Instantaneous Gas-fire Water 0.62

- (0.0019 x Rated Storage 0.62

- (0.0019 x Rated Storage 0.62
- (0.0019 x Rated Storage

Heater. Volume ingallons). Volume ingallons). Volume ingallons). 6. Instantaneous Electric Water 0.95

- (0.00132 x Rated Storage 0.93

- (0.00132 x Rated Storage 0.93

- (0.00132 x Rated Storage

Heater. Volume ingallons). Volume ingallons). Volume ingallons).
Note: The Rated Storage Volume equals the water storage capacity of a water heater, ingallons, as specified by the manufacturer.

* * * * * delegated tothe Assistant Attorney General them vulnerable to supply disruptions and for the Antitrust Division in 28 CFR 0.40 (g). monopoly pricing. Based on the analysis that Appendix We havereviewed the proposed standards, DOE published, the concerns ofwater heater [The following letterfrom the Department of the supplementary information published in manufacturers regarding HFC-245fa, and our Justice will not appear in the Code of Federal the Federal Register notice, the Technical interviews with industry participants, the Regulations.] Support Document, and information from Antitrust Division has concluded that

Regulartie ons.] Just, waterheater manufacturers, their suppliers, competition could be adversely affected by Department ofJustice, and other interested parties. The Antitrust the adoption ofthe proposed standard.' The AntitrustDivision,JoelI.KleinAssistant Division has concluded that the proposed Department urges the Department ofEnergy Attorney General standards could have an adverse effect on to take into account this impact on Main Justice Building, 950Pennsylvania competition because water heater competition in determining its final energy Avenue, NW, Washington,DC20530- manufacturers may have touse an input that efficiency standard for water heaters and to 0001, (202)514-2401/(202)616-2645(f), will be produced by only one source. We do consider altering the standard so that Antitrust@justice.usdoj.gov not anticipate that theproposed standard manufacturers may meet the standard for all July 10, 2000. will affect competition among water heater affected models using blowing agents for Mary Anne Sullivan, manufacturers. Rather, competition to insulation other than HFC-245fa without GeneralCounsel,DepartmentofEnergy, provide heater manufacturers with blowing adding significantly to the costs of Washington,DC20585 agents could be adversely affected, with manufacturing water heaters. Dear General Counsel Sullivan: I am resulting cost increases to consumers. Dear General Cto younsel Sullivan: Iam letter In the analysis ofthe proposed standard Sincerely, responding to yourMay th10 2000Attorney Gener that the Department ofEnergy published in Joel I.Klein aboutthe potential impact on competition of the Federal Register, the only design options [FR Doc. 01-1081 Filed 1-16-01; 8:45 am] theproposed energy efficiency standards for foraffected electric waterheaters that meet BILLING CODE water heaters, Docket No. EE-RM-97-900. f theDOE's proposed standard require use of waterheaters, DocketNo. EE-RM-97-900. HFC-245fa as ablowing agent forinsulation. Yourrequest was submitted pursuant to Insulation is an e ssential part of awater We note thatsome manufacturers have Section 325(o)(2)(B)(i) oftheEnergy Policy heater, and HFC245fais apatented product suggested thatDOE underestimated the and Conservation Act, 42 U.S.C. 6291, 6295, thathasonlyonesupplier. DOE's published performance capabilities ofalternative blowing which requires the Attorney General to make that has only one supplier. DOE's published I f t hese gtions prove correct,water which requires the AttorneyGeneral tomake analysis further concludes that gas-fired agents. If tahe turse sugg m est i n fac t be able to compwater adtermanufactues may tion foabe ablepcto cmapy lessening ofcompetition th at is likely to water heaters have design options that would with the proposed standard formore models, while lessening ofcompetition that islikely to eliminate the need for HFC-245fa, but at in tersed b ant W o oe h result from the imposition ofproposed sinificant added costs. using water-based blowing agents. We also note that energy efficiency standards. The Attorney heate r manufacturers have objected it's possible thatmanufacturers may in fact be able General's responsibility for responding to W at er h eat er manufacturers have objected to engineer design options using water-based requests from other departments about the to the proposed standard on the grounds that blowing agents with agreater performance

e ffect of a program o n competition s abeen their need to rely on a sole source will make capability orlower cost than they now anticipate. effect ofa program on competition has been rne orl