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

4474 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations /~)/

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 of Energy, "Regulatory Planng and Review"

C. Review Under the Regulatory Flexibility EE-41, 1000 Independence Avenue, Act

10 CFR Part 430 S.W., Washington, DC 20585-0121, D. Review Under the Paperwork Reduction

[Docket Number EE-RM-97-900] (202) 586-9127 email: Act

terry.logee@ee.doe.gov or Francine E. Review Under Executive Order 12988,

RIN 1904-AA76 Pinto, Esq., U.S. Department of Energy, "Civil Justice Reform'

Office of General Counsel, GC-72, 1000 F "Takings" Assessment Review

Energy Conservation Program for Independence Avenue, S.W., G. Review Under Executive Order 13132,

Consumer Products: Energy Washington DC 20585, (202) 586-7432, "Federalism'

Conservation Standards for Water email: francine.pinto@hq.doe.gov or Review Under the Unfunded Mandates

Heaters Heaters Reform Act of 1995 Eugene Margolis, Deputy Assistant I. Review Under the Treasury and General

AGENCY: Office of Energy Efficiency and General Counsel, GC-72, at the same Government Appropriations Act of 1999

Renewable Energy, Department of address, (202) 586-9507, email: J. Review Under the Plain Language

Energy (DOE). eugene.margolis@hq.doe.gov. Directives

ACTION: Final rule. SUPPLEMENTARY INFORMATION: K. Congressional Notification

Table of Contents I. Introduction

SUMMARY: The Department of Energy

(DOE or Department) has determined . Consmer Overview The Energy Policy and Conservation

that revised 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 of energy, are 11. General Discussion new or amended energy conservation

technologically feasible, and are A. Test Procedures standard the Department of Energy

economically justified. On this basis, B. Technological Feasibility (DOE) prescribes shall be designed to

the Department is today amending the C. Lessening of Utility or Performance of "achieve the maximum improvement in

existing energy conservation standards! Products existing conserv energy n sD. Impact of Lessening of Competition energy efficiency * * * which the -for water heaters. E. Economic Justification Secretary determines is technologically

EFFECTIVE DATES: The effective date of F. Other Factors feasible and economically justified."

this rule and standard is January 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 of the C. Manufacturing Impact significant conservation of energy." Technical Support Document (TSD) at D. Energy Savings and Net Present Value Section 325(o)(3)(B), 42 U.S.C.

the DOE Freedom of Information IV. Discussion of Comments e 5(o)(

Reading Room, U.S. Department of A. Venting of Gas 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, D Effective Date of Standards amending the water heater energy

between the hours of 9:00 a.m. and 4:00 . Itantaneou s Affecter efficiency standards, to go into effect on between the hours of 9:00 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 Consumer Overview

copies of the TSD from the Codes 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 of Utility or Performance of "vital statistics" of today's typical gas Products standards/applbrf/waterheater.htm or D. Impact of Lessening of and electric water heater, as well as

from the U.S. Department of Energy, E. Need of e ion to Save Energys e presenting the cost implication for the

Office of Energy Efficiency and Net National Employment average consumer of water heaters 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

A nnual U tility Bill ........................................................................................................... $160 .................................. $256

Life Expectance ............................................................................................................. 9 years ............................... 14 years

Energy Consum ption ..................................................................................................... 234 Therms/year ................ 3,459 kW h/year

Statistics In Year 2004:

Average New Water Heater Price* ........................................ $501 ................................... $486

Estimated Price Increase (Efficiency Only) ................................................................... $58 ..................................... $101

A nnual Utility Bill Savings ............................................................... ............................ $12.74 ............................... $13.05

Sim ple Payback Period ................................................................................................. 3.6 years ............................ 7.4 years

Average Net Saving Over Appliance Life ...................................................................... $30 ..................................... $23

Energy Saving per Y ear ................................................................................................ 22 therm s ........................... 188 kW h

*Includes expected price increases for non-energy efficiency regulations.

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11 /Wednesday January 17, 2001/Rules and Regulations 4475

Currently, the average 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) for water 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 water heater energy efficiency positive net present value to American date of this 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 that is

with natural gas water heaters would Part B of Title III of the 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 to pay 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 water heaters. Note that the 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, for comments on a proposed standard.

respectively, due to the phase out of the 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, DOE must determine that the

HCFC-141b and the compliance to the Energy Conservation Program for benefits of the standard exceed its

resist ignition of flammable vapors on Consumer Products other than burdens, based, to the greatest extent

gas water heaters voluntarily agreed to Automobiles. Water heaters are one of practicable, on a weighing of the

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 of the

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 of the products subject to

for electric and 3.6 years for gas water essentially of three parts: testing, the standard;

heaters. The lifetime owning cost or life- labeling, and Federal energy (2) The savings in operating costs

cycle costs are lower than 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 and by $30 for gas water heaters. National Institute of Standards and class) compared to any increase 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 of the 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 of the standard;

improved heat exchanger (flue baffle) 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 percent increase in annual operating cost of a covered directly from the imposition of the

energy efficiency for electric and an product during a representative average standard;

eight percent increase in energy use cycle or period of use. They must (4) Any lessening of the utility or the

efficiency for gas water heaters. These not be unduly burdensome to conduct. performance of the covered products

kinds of improvements 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 of any lessening of

households with electric water heaters (CFR) Part 430, Subpart B, Appendix E. competition, as determined in writing

will save on average 188 kWh per year The Federal 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 of the

will save 22 therms per year of natural of covered products after DOE publishes standard;

gas or propane gas. test procedures. Section 324(a). At the (6) The need for national energy and

The benefits 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 of energy over 26 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 of all U.S. homes over a for water heaters. Section 325(e). The rebuttable presumption of economic

period of 2.8 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

nine 400 megawatt electric generating 1part B of Title III of the Energy Policy and additional cost to the consumer of

plants. Conservation Act, as amended by the National purchasing a product complying with

The amended standards in today's Energy Conservation Policy Act, the National an energy conservation standard level

rule can be achieved by using HFC- Appliance Energy conservation Act, the National will be less than three times the value

Applicance Energy Conservation Amendments of of the energy, and as applicable, water,

134a, cyclopentane, or HFC-245fa as the 1988, and the Energy Policy Act of 1992 is referred of the energy, and as applicable, water,

blowing agent in the insulation. The 4.6 to in this notice as the "Act." Part B of title III is savings during the first year that the

quads of energy savings will result in codified at 42 U.S.C. 6291 et seq. Part B of Title III consumer will receive as a result of the

cumulative greenhouse gas emission of the Eergy Polciy and conservation Act, as standard, as calculated under the

amended by the National Energy Conservation applicable test procedure. The

reductions of 152 million metric tons Policy Act only, is referred to in this notice as the applicable test procedure. * * *" The

(Mt) of carbon dioxide (CO2) equivalent, National Energy Conservation Policy Act. rebuttable presumption test is an

EE-RM-97-900 COMMENT 101
4476 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 water heaters and amended the

Section 327 of the Act, 42 U.S.C. 15, 1996, the Department published a definition of a heat pump water heater.

6297, addresses the effect of Federal Final Rule: Procedures for 63 FR 25996 (May 11, 1998). This

rules on State laws or regulations Consideration of New 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 by the Rule) 61 FR 36974 (July 15, 1996), No one 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 water heaters.

a waiver of preemption in accordance The Process Rule states that for Accordingly the Department considers

with the procedures and other products, such as water heaters, for the current Federal test procedures

provisions of Section 327(d) of the 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 of the B. Technological Feasibility analytical or procedural steps already 1. Current Standards. The existing completed should ould beA ted 61 FRquires repeated. the Department, in

water heater 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 of an use the Prcess Rule, to the extent be designed to achieve the maximum

energy factor (EF), which measures possible, in the development of the improvement in energy efficiency

overall water heater efficiency and is revised water heater standards. which the Secretary determines is

determined by the DOE test procedure. We developed an analytical technologically feasible and

10 CFR, Part 430, Subpart B, Appendix framework for the water heater economically justified." (Section 325

E. The current water heater efficiency standards rulemaking for our (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 in the 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 rated volume is the water storage to be conducted, the method for pump water heater due to issues

capacity of a water heater in gallons, as c o

nd u c

ti energy onal savings (N LC ) concerning the practicability to

specified by the manufacturer. n n manufacture, install, and service on the

2. History of Previous Rulemakings. spreadsheets, and the relationship scale necessary to serve the relevant

On September 28, 1990, DOE published between the various analyses. market at the time of the effective date

an Advance NotiWceel of Prkoposed l d a w o r on November 9 of the standard and product utility of

Rulemaking announcing the and 10, 1998, to share the preliminary these units. We eliminated heat pump

Department's intention to revnise the an results. We discussed our water heaters after careful consideration

Department's intention to revise the methodology for analyzing national f the current electric resistance and

existing water heater efficiencymethodogy environmntal int of the 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, as well as witching There was also a presentaton screening design options contained in

a variety of other consumer products. 59 of the water heater insulation testing by 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 not technologically

that1 we ould 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 from the 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 of Interior and we made in our analysis as a result of conclusions in the 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 of proposed The Department has determined that

on proposing or issuing Final Rules for rulemaking to amend water heater the electric and gas water heaters

appliance efficiency standards for the energy efficiency standards. 65 FR considered in today's notice are

remainder of Fiscal Year 1996. See Pub. 25042 (April 28, 2000). We held the technologically feasible as required by

L. 104-134. During the moratorium, the hearing/workshop to discuss comments Section 325(o)(2)(A) of EPCA, as

Department examined the appliance to the proposed rule on June 20, 2000. amended. There are some models of

standards program and how it was II. General Discussion these water heaters in the market that

working. Congress advised DOE to

correct the standards-setting process A. Test Procedures 2 In August and September 2000, DOE conducted

and to bring together stakeholders (such The Act does not allow DOE to set a certification review h

hih uf efficieny elecd t water heaters at five manufacturers. Based on the

as manufacturers and energy standards for a product unless review of these manufacturers' laboratory

environmentalists) for assistance. there is a test procedure in place for that procedures, we believe some clarifications to the

Therefore, we consulted with energy product. The Department published a water heater test procedure may be needed. We are

efficiency groups, manufacturers, trade test procedure on May 11, 1998, that planning to join GAMA and the manufacters in

their water heater test program to determine what

associations, state agencies, utilities and revised the first-hour rating of storage- needs to be clarified in the water heater test

other interested parties to provide input type water heaters, added a new rating procedure.

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4477

meet the new standard levels. Thus, the water heater 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.

U .Lesse gy or of Pe of The Oregon Office of Energy (OOE) The Electric Power Research Institute

C. Lessenng of Utility or Performance of claims that after installing tens of (EPRI) claims using 6 kW elements is

Products thousands of high efficiency water not an option for smaller tanks to

This factor is not easily quantified. heaters in the Pacific Northwest, provide the consumer utility of larger

However, DOE has considered the effect physically larger tanks do not impose tanks since these elements are only used

of thicker insulation which might result higher installation costs. Drip pans are in commercial water heaters. They state

in smaller capacity water heaters to be sized for the larger tanks and water that it is generally not possible 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. A loss of first hour rating would 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, if a certain type of water revised analysis, we assume space Code. (EPRI, No. 104 at 3). Dominion

heater would no longer fit in spaces that constraints would only apply in those concurs with EPRI, and states further

it was designed for, we have considered cases where the water heater is installed that there are currently only two models

a new class of products. We have in a conditioned space, e.g., not in a listed in 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 5.5 kW. (Dominion, No. 145

1. Size Constraints. We addressed size apply to small houses or apartments. at 4). The National Rural Electric

constraints in the proposed rule by Therefore, we have excluded houses or Cooperative Association (NRECA) also

estimating approximately 32 percent of apartments with a floor area of more opposes the use of larger heating

electric water heating households and than 1000 square feet. These elements. (NRECA, No. 126 at 1-2).

27 percent of gas water heating assumptions are not intended to Southern Co. and Dominion claim that

households would need to remove the accurately identify every individual increased element size will increase

closet door for water heaters with 3 inch household that would 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 to install new water heater. Rather this estimate should and circuit breakers or electric panels in

heaters in these households. Several roughly identify the number of homes. (Southern Co., No. 142 at 3 and

stakeholders have commented on our households affected. Since this is based Dominion, No.145 at 3).

estimates of costs 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 of compensating for

The American Gas Association (AGA) representative national sample of downsized electric water heaters 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

and gas water heaters. It requested DOE will give us the best estimate of the meet the load in those cases where the

to include the costs shown in the impacts of increased water heater size. downsized water heater would be too

Battelle report that addresses space In its comments, Battelle also small to meet the particular

constraints. (AGA, No. 150 at 5). The assumed a large fraction of closets are requirements of a 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 of electric and

space constraints associated with larger month. We also checked the areas eight percent of the gas water heaters

gas water heaters. Based on a survey of served by 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 of space states are represented, usually the area 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 at C- small part of the state. Therefore, we do detailed computer algorithm we used to

1 to C-5). not believe that this survey is really determine when a tempering valve is

Southern Gas Association stated that representative of the entire United needed can be found in the TSD in

a survey of its members revealed that 18 States. Consequently, we did not add Chapter 9.

percent of single family homes would be any extra costs for small closets for gas 2. New Product Classes. During the

unable to fit a 2 inch larger diameter water heaters. We assumed extra costs hearing and in the comments, several

water heater into the existing space. for removing and replacing closet doors comments claimed that tabletop and

(Southern Gas Association, No. 152 at and door frames for 32 percent of lowboy water heaters would be unable

4). Alagasco indicated that many of its households with electric and 27 percent to fit into existing spaces if their size

customers are renters in mid to low- of households with gas water heaters increased substantially beyond current

income brackets. The proposed gas with 3 inch 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 of these homes. In the proposed rule, DOE asked for these water heaters.

(Alagasco, No. 152 at 2). The National comments or suggestions to minimize GAMA requests DOE to establish a

Propane Gas Association and Atlanta the effects of smaller tanks either by separate product class for lowboy and

Gas Light Co. stated that an increase in increasing the electric element size from tabletop water heaters and not to

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 that

EE-RM-97-900 COMMENT 101
4478 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

lowboy water heaters 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 a lower manufacturing

they are 34 inches high or shorter and of conversion cost than some of the other

have a jacket diameter less than 2mpact of Lessening of Competition alternatives, such as pentane/

inches. GAMA defines tabletop water This factor seeks the views of the cyclopentane. Given the likelihood

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 water heaters are resulting from the imposition of the performance characteristics and

designed to slide into a kitchen proposed energy efficiency standards. increased material and manufacturing

countertop space and provide additional In order to assist the Attorney General costs associated with HFC-245fa to

countertop surface area. (GAMA, No. in making such a determination, the estimate the impact the 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 of the Proposed manufacturers. This was not to imply

of these products will cost consumers Rule and the Technical Support HFC-245fa was the only path to meeting

substantial capital to convert and will Document for review. In a letter the standard and DOE believes that at

impact the replacement market responding to the Proposed Rule, the least three alternative blowing agents

negatively. Lowboy electric models are Department of Justice (DOJ) found only are available to use in meeting the

limited to 34 inches in height and to 26 one area of concern regarding any standards adopted in today's Final Rule.

inches in diameter. (Bradford White, lessening of competition. 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 recomme andlso at new pr t the foam insulation and the possibility conclusion.

Smith also recommtype (also know n asproduc thatonly one chemical, HFC-245fa, 1. Increased Costs Due to a Single

tableass ftop) electric water heaters. (A.O.wn as could be used and that it is a patented Source of Supply for HFC-245fa. In

tabletop) electric water heaters. (A. product with only one supplier. This addition to the Attorney General's letter

Smithl No.79 at 1). The Amefican situation led DOJ to conclude "that the on the anti-competitive effects of the

Council for an Energy-Efficient proposed standards could have an proposed rule, we received several

Economy (ACEEE) commented hat it is adverse affect on competition because comments from stakeholders. They were

not opposed to a new, product class for water heater manufacturers may have to concerned about cost increases due to a

tabletops and lowboys but use an input that 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 of the

30 gallon size. (ACEEE, No.170 at 7) The DOJ letter is printed at the end of material until July, 2002 or later.

DOE has 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 of hot 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 water heater 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 of the lowboys foam insulation. A blowing agent is that, due to uncertainty in availability to

can be increased. We addressed these needed to produce the foam insulation manufacturers and a sole source U.S.

size constrained lowboy water heaters and currently all manufacturers are supplier, DOE should consider only

by adding extra installation costs, see using the chemical HCFC-141b. those blowing agents that are available

Section II, General Discussion, Unfortunately, HCFC-141b is an ozone and proven for water heater

Lessening of Utility or Performance of depleting chemical and will be phased manufacture. (AGA, No. 150 at 5-7).

Products, "Size Constraints" in today's out in January, 2003. Therefore, the To address concerns about the

rule. GAMA data shows that lowboys water heater industry, like all other performance of alternative blowing

make up 18 percent of the electric water industries that use this chemical, must agents, we tested three sets of four

heater market and that 38 percent of find and use a replacement chemical. electric water heaters with different

lowboy shipments are 30 gallon, 48 Options for non-ozone depleting foam insulations. The purpose of these

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 of products and pentane/cyclopentane and HFC 365mfc, 141b, with water blown and HFC-245fa

accounting for cost increases for a as well as potential blends, or blown foam insulation. The results of

percentage of products which will combinations, of these blowing agents. the NIST tests showed that water

require space modification, the The U.S. Environmental Protection heaters insulated with HFC-245fa had

Department does not believe any model Agency's (EPA) Clean Air Act guides the the same energy factors as those

of water heater will become unavailable U.S. appliance industry on replacement insulated with HCFC-141b. Water

as a result of thicker insulation. of HCFC/CFC blowing agents. The heaters insulated with water blown

Therefore, DOE has eliminated any EPA's Significant New Alternatives foam insulation had energy factors

degradation of utility or performance in Program (SNAP) approves chemicals about two percent lower than tanks

the products in today's Final Rule. In and technologies that can be used to insulated with HCFC-141b. We believe

the application for tabletop water replace ozone depleting chemicals. Of the results of these tests demonstrate

heaters, we established a new class with the options listed above, all except 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 be made any larger. 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 the RECS '97 had leaned toward adopting HFC-245fa, water blown foam. (Performance Testing

data that sufficient types and sizes of which performs similarly to HCFC-141b of Alternative Blowing Agents for Foam

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4479

Insulation of Residential Water Heaters, in the insulation. An April 7, 2000, performance reduction for HFC-134a

Fanney et al., Proceedings of the AMC, Bayer press release states most and an estimate of $7 per unit for the

1999). appliance manufacturers in North capitalization costs of cyclopentane in

The DOJ urges DOE to account for the America are considering either HFC- our engineering analyses. These

impact of a single source supplier on 245fa or HFC-134a. Cyclopentane is not analyses show that energy factors are

competition, and to consider altering considered favorably because of the the same for the three blowing agents.

the standard so manufacturers may meet capital investment required to handle Costs for 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 that some manufacturers have costs because the factory cannot examined every possible blowing agent

suggested that DOE underestimated the produce water heaters while converting option, we conclude that at least two

performance capabilities of alternative factory equipment to a cyclopentane additional options to HFC-245fa can be

blowing agents. If this is true, system. However, appliance used to achieve similar performance for

manufacturers may in fact be able to manufacturers are independently similar costs. The blowing agent

comply with the proposed standard deciding which blowing 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 that the proposed to industry and Bayer research, HFC- design options can be found in Chapter

standards would require foam suppliers 245fa exhibits the best insulation value 3.4.1 of the TSD.

to use HFC-245fa as the blowing agent. of the two blowing agents-roughly

This raises an issue about relying on a equal to HCFC-141b-though it is more Table 1 shows 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

its manufacture 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 than HFC-245fa. factors are the same for all trial standard

on insulation technology licensed to a We have examined, through the levels and all blowing 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, to achieve a 245fa, while cyclopentane is the most

conducted additional engineering cost similar energy factor as the proposed expensive blowing agent costing about

analyses with HFC-245fa, HFC-134a levels for HFC-245fa. See Table 1 $9 more per installed electric and $11

and cyclopentane as the blowing agent below. We included the ten percent 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

Plastic Tank + IID.

EE-RM-97-900 COMMENT 101
4480 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

2. Availability of HFC-245fa. Bradford E. Economic Justification the markup for gas water heaters we

White said it has given careful As noted earlier, Section derived in the proposed rule was too

consideration to all of the options 325(o)(2)(B)(i) of the Act provides seven low to support any manufacturer's

available for blowing agents. However, factors to be evaluated in determining production of that product.

since HCFC-141b may be in limited whether an energy conservation The AGA claims DOE's approach to

supply early in 2002 because of facility 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 of HFC-245fa, Bradford the June 20, 2000, hearing, and new data the development of the TSD and

White has no alternative but to pursue from RECS '97 and AEO 2000, DOE has supporting analysis, and is unaware of

water blown insulation. (Bradford developed a revised water heater any comments supporting DOE's

White, No. 175 at 1-2). Stepan has analysis. AGA claims that DOE has

concerns about the overall availability analysis methos are disicussed in provided no consistency checks for this concerns about the overall availability analysis methods are discussed in . ,- . ,

of HFC-245fa. (Stepan, No. 123 at 1-2). Section III, Methodology.and other markups to determine their validity, in spite of criticism it has

Honeywell indicated that over six F. Other Factors received on its analytical results, and

years and $30 million has been invested This provision allows the Secretary of has failed to postulate a market

in the development of HFC-245a. Energy, in determining whether a mechanism or economic model to

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 that the commented that manufactured cost and

is constructing a commercial Secretary deems to be relevant. Section retail price are not independent random

manufacturing facility at its Geismar, 325(o)(2)(B)(i)(VI), 42 U.S.C. variables, and that DOE did not

Louisiana location. The facility is 6295(o)(2)(B)(i)(VI). The Secretary has correlate its cost and price data. This

expected to be online by July 1, 2002. decided that no other factors need to be resulted in 21 percent of the RECS '93

Honeywell expects ample capacity to be considered in this rulemaking. households being constrained to 0

available to water 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 DOE has made some minor changes to 150 at 8-9). Laclede Gas claims DOE

of HFC-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 to the Gas, No. 148 at 9).

has previously decided, in the 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 to use

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 from the 1993 manufacturer costs, i.e., high prices

same decision here. ACEEE suggests RECS data to the 1997 RECS data correlate with high costs. This has

DOE provide for manufacturers to (except for oil-fired water heaters). We eliminated the negative values of

petition for relief if HFC-245fa does not used the energy price projections from markup which occurred in the analysis

become available. (ACEEE, No. 170 at the AEO 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 to use the 4-inch flue model costs with 3-inch flue

alternative if the blowing 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. 3). 142 at factor of water 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 of the 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 is proceeding to secure the costs and the installation costs to heater uses a 3 inch flue. (Dominion

necessary permits to build the HFC- account for comments to the proposed Virginia Power, No. 145 at 6).

245fa plant. Furthermore, Vulcan rule. These changes resulted in reduced We separated the retail prices for 3

Chemicals is also planning to build a manufacturers' costs for gas water inch and 4-inch flues on gas water

plant in Geismar, LA to make heaters and slightly higher retail costs heaters. We had our consultant estimate

pentachloropropane, one of the for electric water heaters. the incremental cost difference between

chemicals used in the manufacture of Further testing at NIST and reverse manufacturing water heaters with 3 inch

HFC-245fa. DOE concludes that HFC- engineering of a 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 not believe it needs to (LBNL) allowed DOE to fully validate supplied by GAMA for water heaters

make any provision in today's rule in WATSIM. These tests revealed that with 4 inch flues. Our analysis now

the event of HFC-245fa unavailability. If WATSIM and NIST results for the accounts for these price and cost

Honeywell does not build its plant or if energy factor of a high efficiency electric differences as recommended. Since the

the plant is delayed, DOE believes there water heater were the same. See the retail prices were not changed, this

are still three or more alternative TSD, Chapter 8.2.4 increased the markup on the baseline

blowing agents for water heater 1. Water Heater Markup. DOE's units in the LCC, as well as the markup

manufacturers to use, i.e., water, calculation of gas water heater markup applied to the various design options.

cyclopentane, HFC-134a or blends of was a major concern to stakeholders. Southern Company and the Energy

these three. There was wide spread criticism that Market and Policy Analysis group claim

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4481

the price database is too limited for the DOE: $133.78/($75.07 + $10.74) = 1.56 than 50 percent of the water heater

type of analysis conducted by DOE. Therefore the manufacturing markup market operates that way. Many water

Specifically, Southern Company claims is essentially identical. heaters are sold directly to retail by

the database has a geographic bias, The ACEEE claims the Battelle large cash and carry distributors or they

citing the high number of sample points markups applied to the GAMA are sold to builders or large plumbing

from Washington and Oregon. It claims manufacturing costs yield incredibly companies by large distributors.

that over 23 percent of the 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 the residential water

represent slightly more than three the markups may be too low on some heater market.

percent of the U.S. population. Southern water heaters. (ACEEE, No. 170 at 9). 2. WATSIM Computer Model for

Company suggests using a combined The OOE and the Northwest Power Electric Water Heaters. 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 Energy Market and Policy because the typical margins in the heaters. Most comments stated that

Analysis, No.151, at 5-6). Pacific Northwest are $30-$40 for high W A T SIMof electric werheters gy

DOE's retail price database uses data efficiency water heaters. (OOE, No.174, ac to r oele. her c en aerte

points broadly distributed over the 10 at 2 and NWPPC, No.163, at 2).atsssered

Census regions of the U.S., and DOE In order to address the concerns about a n o o

does not believe 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 of the manufacturer's cost GAMA claims it has no confidence the water heaters in the database are distribution, to match the average of the WATSIM is properly predicting the

from the Pacific Region (see Table 5.3 in low range of the manufacturers' cost eery factors r rulting from the various

the TSD). The Department used a distribution. We also applied this insulation options. (GAMA, No.160 at

slightly higher proportion of water correction to the incremental insl Dominion states that DOE should

heaters from the northwest to ensure an manufacturer costs for heat traps and v y the accuracy of calculated energy

adequate representation of high- increased insulation. We did this to factors for design options with results

efficiency units. DOE will not 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 water heaters

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 of analysis 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 typically be 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 to the 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 its baseline At the June 2,1997, Water Heater

and 1.4 for the retailer. Thus, the overall materials and labor costs 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 and TANK to use in the

materials and labor costs for a design heaters came out to be 2.44. This is in Engineering Analysis. Most of the

option are multiplied by 2.52. excellent agreement with the assumed stakeholders' comments indicated no

To validate this standard approach for standard markup factor of 2.52 stated objections related to the use of the

gas water heaters, Battelle conducted a previously. (Battelle, No. 106 at 1-2). simulation models for the analysis. The

tear down analysis on six water heaters Southern California Gas Co. agrees with following participants supported the use

varying in size among 30, 40, 50, and Battelle's markup factor of 2.52. of WATSIM and TANK: 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. The materials and labor costs for suggests DOE approach this matter with indicated WATSIM and TANK were

the 30, 40, 50, and 75-gallon baseline real-world prices and manufacturers' incorrect to use.

gas water heaters were $80.83, $86.06, costs. (APGA, No. 167 at 2). Bradford White says DOE must test

$90.95, and $139.77, respectively. The In the DOE analysis, the overall products to understand the actual

40-gallon gas water heater cost of $86.06 markup factor consists of manufacturer performance of cavity increases and

is in excellent agreement with the value markup and distributor/retailer markup. new blowing agents. (Bradford White,

of $87.51 supplied by GAMA to DOE. From the LCC 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 too heavily 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 divided by the sum of the materials Battelle assumes that the water heater more precise results. GAMA further

and labor costs for 40 gallon gas-fired market is characterized by large states that, "DOE is expected to test

water heaters. distributors selling to retailers or water heaters to exclude the energyBattelle: $133.78/$86.06 = 1.55 plumbers. DOE has determined that less saving benefits of design options when

EE-RM-97-900 COMMENT 101
4482 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

the agency can do so at reasonable cost, rated efficiency as shown in the GAMA these conductivities by eleven percent

rather then rely on computer modeling," directory. However, several of these to account for losses of insulation

998 F. 2d 1041 (D.C. Cir. 1993). models performed at or above the effectiveness due to the foaming process

Bradford White further comments that standard level adopted in today's rule. and modeling assumptions. In order to

DOE must test at least three storage Therefore, at this time, and while we are keep the baseline efficiency (those with

capacities affected by the standard. still examining this issue, we have HCFC-141b insulation) and the energy

(Bradford White, No.138 at 1). concluded that the WATSIM model use characteristics of water 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 water heaters and thicker insulation. We also increased

is "a useful and often essential tool for continue to use it, without modification the amount and cost of steel used for the

performing the 'Herculean labors"' for this rulemaking. Furthermore, we water heater jacket in addition to adding

imposed by Congress. Gas Appliance believe we have performed sufficient the extra volume and cost of insulation.

Manufacturers Association v. testing to demonstrate that the 5. Analytic Baseline. The current

Department of Energy, 998 F. 2d 1041, minimum efficiency levels can be met. baseline is for water heaters insulated

1045 (D.C. Cir. 1993). The Court also 3. Pipe Insulation. In our proposed 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 of energy efficiency standards from the

connection between the factual inputs, discovered that four manufacturers ship effects of EPA actions to phase out the

modeling assumptions, modeling results the tanks with pipe insulation for their HCFC-141b blowing agent or of the

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 to ignition of flammable

1) heaters to be tested with pipe insulation vapors, DOE has developed an "analytic

DOE provided a detailed explanation if the manufacturer ships the tank with baseline" concept. This concept

of the model, its assumptions, and its pipe insulation. To determine the assumes that by 2003 and before the

results in the proposed rule and impact of pipe insulation on our energy efficiency standards become

accompanying Technical Support analysis, we modeled water heaters with effective, the actions of these other

document. In the proposed rule, we and without pipe insulation in Federal agencies will have taken effect.

stated that comparisons of the WATSIM WATSIM. These results showed that To meet these other agency's

prediction to the NIST test result for an pipe insulation in combination with requirements, manufacturers will have

electric water heater with an efficiency heat traps improves the energy factor by created new designs and made other

at the level proposed was within 0.002 0.005 EF. We performed tests at NIST changes to the production of water

EF. 65 FR 25042, 25053 (April 28, 2000). with and without pipe insulation on heaters. The cost estimates of these

The detailed description of the three different models of electric water production and design changes are

WATSIM model and the assumptions heaters equipped with heat traps, and included in the analytic baseline.

DOE used to model electric water the average increase in the energy factor Several comments state that DOE should

heaters are provided in the TSD for the 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 of pipe baseline. The analytic baseline is used

proposed rule, LBNL tore down (reverse insulation combined with heat traps is in the engineering and LCC analyses.

engineered) one of the American Water small, we have not included the effects APGA claims manufacturers would

Heater Company's (American) 0.93 EF of pipe insulation in our analysis. use heat traps to meet the baseline

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 of the American model that installation, we are not sure how often value of raising the standard. (APGA,

LBNL tore down. Using the reverse it is used. Information from a small No. 21 at 2 and No. 167 at 2). AGA

engineering data in the WATSIM model survey of installers indicated that about suggests DOE should only consider

and comparing to the NIST test results, 50 percent do not install the pipe water blown foam for its analytical

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

were within 0.006 EF of the NIST 4. Blowing Agent Conductivity. Stepan manufacturers will use heat traps to add

results. Therefore, WATSIM has been believes HFC-245fa may not achieve the the 0.01 EF needed to meet the current

validated at the efficiency levels and energy performance results predicted in standards with water blown insulation

with the types of design options that our the proposed rule, and that water blown after 2003. (AGA, No. 150 at 5). GTI

analysis is using. See Chapter 8.2.4.1 in foams may actually exceed modeled claims DOE has defined a virtual

the TSD. Consequently, we believe predictions. Stepan claims it measured baseline water heater that makes it

WATSIM correctly predicts the initial k-factors for water blown foam as easier to justify added insulation. (GTI,

efficiency of electric 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). The NWPPC 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 of higher efficiency electric blown foam k-factors given at the heat traps when installers began

water heaters. In the fall of 1999, NIST workshop. (NWPPC, No. 163 at 3-4). removing the heat traps during water

tested five higher efficiency electric For cost information, Honeywell, the heater installation. (Southern Gas

water heaters, one model from each licensee to manufacture HFC-245fa in Association, No. 152 at 3).

manufacturer. In the fall of 2000, NIST the U.S., provided estimates of HFC- DOE does not believe heat traps

tested six tanks, a sample of two tanks 245fa costs. For efficiency data, we used would be the only design option

of three models of electric water heaters. published laboratory measurements of manufacturers might use to meet the

None of these models achieved their physical parameters but we derated current standard when the HCFC

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4483

blowing agent is phased out. When gas water heater prices in the price usage and energy costs, expected there

asked, during the manufacturer database. would be some consumers with higher

interviews, none of the manufacturers During the time from the water heater life cycle costs. Based on these

indicated they were limited to heat traps hearing/workshop on the proposed rule arguments, the Department strongly

as the only design option. until publication of this Final Rule, disagrees with EEI and the Energy

DOE also does not know what natural gas prices 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 has investigated this increase to percent band of insignificance as an

that manufacturers will likely choose determine if these price increases might indicator of the levels of LCC savings or

different blowing agents or use mixtures continue into the near future because costs where consumers could appreciate

of blowing agents based on what they increased gas prices would mean larger savings or suffer real loss. DOE uses the

believe to be the best business decisions LCC savings and earlier paybacks for percent of households benefitting and

for them. more energy efficient water heaters. The the band of insignificance to help 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 of the benefits and

As discussed in the proposed rule, factors including new gas-fired electric burdens of these amended standards.

DOE used new analytical tools in this 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 than recent years but 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 of 2000-2001 because the new manufacturing impacts. The analysis

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 long term increase in gas prices. 25045, 25069-71 (April 28, 2000). The

program) so we can use actual 2. Percent of Consumers Benefitting manufacturing impact analysis

distributions of input variables. The from Standards. EEI and Dominion estimates the financial impact of

ut s fro this prora ar claim the fraction of consumers standards on manufacturers, as well as

LCCange of LCputs from this prograction of the benefitting from the standard level (74 the impacts on competition,

population that will benefit from ener percent for electric, 87 percent for employment, and manufacturing

effipopulation that will beneitnatural gas) is too low for minimum capacity. We used the GRIM

1. Blended Natural Gas and Propane efficiency standards. EEI and Dominion spreadsheet model to perform an

Fuel Costs. In the LCC analysis for the recommend DOE accept only those industry cash flow analysis. Fuel Costs. In the LCC analysis for the standard levels that will provide

proposed rule, DOE used a gas price benefits to at least 90 percent of the D Eergy Savings and Net Present

composed of approximately ten percent population. (EEI, No.124 at 2 and Value

propane and 90 percent natural gas. Dominion, No. 145 at 2). Energy Market DOE uses a variant of the Energy

Many gas utilities and a gas utility and Policy Analysis states that DOE Information Administration (EIA)'s

association objected to this approach. overestimates the percentage of winners National Energy Modeling System, the

AGA and GTI insist that we use and underestimates the losers because it National Energy Modeling Systemnatural gas costs when evaluating gas ignores some costs, uses high estimates Building Research and Standards, called

water heaters, not the blended fuel of future electricity prices, and uses low NEMS-BRS, for the utility and

costs, because our blended 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 7 and GTI, No. Although ACEEE admits the two calculations. 3 The NEMS-BRS permits

141 at 4). ACEEE claims a blended price percent band of insignificance is the modeling of interactions among the

is appropriate if the standard applies arbitrary, it claims this is a very useful various energy supply and demand

equally to both fuels. (ACEEE, No. 170 concept. ACEEE claims that life 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 gas price 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 of electricity deregulation in

higher price. (Dominion, No. 145 at 7). consider life-cycle-cost as one of the its analysis. (EEI No. 124 at 2). The

DOE agrees that use of blended 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 of a IV. Discussion of Comments

DOE has separated natural gas and standard exceed the burdens. Life-cycle- We received numerous comments

propane water heaters and has cost is just one of the factors to be from gas utilities and other gas

considered each of these fuels considered and there is no mathematical

separately in the LCC. To do this, DOE formula for weighing the benefits and a For more information on NEMS, please refer to

asked its consultant to develop a burdens of the various factors. There are the National Energy Modeling System: An

manufacturing cost for propane water also no mathematical thresholds for life Overview 1998. DOE/EIA-0581 (98), February,

heaters from the GAMA manufacturing cycle cost as implied by EEI and the 998. DOE/EAl approves use of the name NEMS to describe only an official version of the model

cost data for natural gas water heaters. Energy Market and Policy Analysis. without any modification to code or data. Because

We estimated the retail price Furthermore, it can be argued that the 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 to the model as used her

costs and the markup for natural gas for appliances where there will BRs is DOE's Building Research and Standards

since there were not enough propane obviously be regional differences in office.

EE-RM-97-900 COMMENT 101
4484 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

consumers, supporting the AGA function of proper installation. category. (CEC, No. 171 at 3 and

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 not pose

believe we have covered their concerns Gas Light Co. believe increased gas any safety threat and 30 percent of the

in our responses 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 this group, 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. Gs Ve g Wof r H s 178 at 2). The NYSEB, National Propane not believe there is any application that

A. of Venting Gas Water HeatersGas Association, Atlanta Gas Light Co, will have a safety problem if the correct

Venting of gas water heaters has been and Southern California Gas Co. state type of water heater 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 of error for installations of gas water 2. NFGC Venting Tables. Bradford

advocated a standard level that included heaters in retrofits. The National White claims the venting tables were

an increase in the recovery 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 of approximately 75 percent.

percent. Most gas utilities 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 of safety 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 percent increase in RE. To Southern California Gas Co., No. 181 at rewriting the current venting tables

make this discussion about venting 2). because it claims the tables were based

easier to follow, we have separated the ACEEE and OOE claim that there on 76 percent RE. (Southern Gas

issue into the following subtopics: should be no safety concern at 78 Association, No. 152 at 4). Battelle

safety, the National Fuel Gas Code percent RE because the Talbert study for claims increasing RE to 78 percent will

(NFGC) venting tables, Type B vent GTI found that a single walled vent require a revision to the current venting

connectors, costs, and direct vent connector is acceptable at flue-loss tables. (Battelle, No. 127 at 26-27). GTI

applications. efficiencies (FLE) up to 80 percent and and Southern California Gas Company

1. Safety. AGA believes DOE is 78 percent RE is equivalent to 79.75 believe that DOE cannot make accurate

incorrect in its analysis concerning percent FLE. (ACEEE, No. 170 at 3 and cost estimates until venting codes are

venting systems for water heaters with OOE, No. 174 at 2). revised. (GTI, No. 141 at 3 and Southern

RE above 76 percent. AGA states DOE DOE did not raise the RE enough to California Gas Company, No. 181 at 2).

can resolve this issue of vent system create a safety concern if the venting The NFGC does not limit its venting

modification by one of the following: 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 in the Battelle the impacts of 78 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 percent RE the flue loss efficiency is heater location and common venting

concerning venting integrity and safety still below 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 the NFGC 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 or the expected benefits cost of Type B vent connectors in eleven potential increases in recovery

of the standard outweigh this safety percent of households and for chimney efficiencies. We also note that there are

consideration as required under the relining in eight percent of households. 37 models of gas water heaters with a

process rule. Type B vent connector is a double recovery efficiency of 76 percent listed

AGA further requests DOE to walled vent connector that reduces in the GAMA directory which can meet

explicitly state its determination and its cooling of the flue gasses and is more the standard levels adopted in today's

underlying rationale if the second or corrosion resistant than steel vent pipe. rule. On that basis, we conclude there

third option is chosen. AGA reiterates Additionally, the California Energy will be designs which can meet the new

its position that DOE should not Commission (CEC) in its comments, standard with 76 percent RE.

promulgate a standard that subjects provided data about the number of 3. Type B Vent Connectors. GAMA

consumers to a potential increase in models of gas water heaters 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

that DOE has not considered the retail water heater standards in the proposed B vent connectors for all installations.

cash and carry market where needed rule. (The CEC maintains its own Bradford White claims manufacturers

vent system upgrades are unlikely to database of gas water heaters.) There are will design to 80 percent RE in order to

occur. (AGA, No 150 at 4 and Atlanta 170 distinct models of gas water heaters satisfy a 78 percent RE level. (GAMA,

Gas Light Co., No. 178 at 2). in the CEC database. A distinct model No. 117 at 2 and Bradford White, No.

Alagasco stated that the ability of gas is a "discreet combination of 108 at 1-2). Dominion claims DOE does

water heaters to deliver outstanding manufacturer, input, volume, energy not completely incorporate the

economy, performance and factor and recovery efficiency." Of additional cost for Type B vent

environmental benefits is dependent on these, 51 models or 30 percent of all connectors. (Dominion, No. 145 at 6).

adequate margins of error in critical distinct models have a RE of 76 or 77 GTI states that DOE relied too heavily

subsystems like venting, gas piping, percent. Furthermore, there are nearly on data from an area of the country with

combustion air and clearances. The an equal number of natural gas and atypical weather conditions. (GTI, No.

overall utility of gas water heating is a propane gas water heaters in this 141 at 3) Battelle claims that increasing

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4485

RE to 78 percent will require Type B Given that there are 66 models of gas small fraction of this market would be

vent connectors in the 75 percent of water heaters with RE at or below 78 installed at the maximum length of vent

installations that currently do not have percent, DOE believes a consumer has a allowed. This tiny fraction of the market

them, which will add to the installed choice between a lower RE and a higher could be served by a product that has

cost. (Battelle, No. 127 at 26-27) The RE with a Type B vent connector. At the not used the improved flue baffle to

New England Gas Association claims a lower RE, the consumer can continue to meet the standard or by a power vented

majority of homes in New England are use a single wall vent connector unit.

older with masonry chimneys which whereas, at the higher RE levels, a B. Electric Water Heater Ratings

could require Type B vent connectors consumer would be advised to use a

and chimney relining costing as much Type B vent connector and/or chimney Issues concerning the efficiency

as $800. (New England Gas Association, relining in those climate areas where ratings of electric water heaters with

No. 139 at 2-3). condensation in the venting system is a energy factors greater than 0.91 were

ACEEE claims DOE overestimated the concern. raised in the workshops that the

number of homes needing Type B vents 4. Vent System Costs. AGA Department conducted prior to the

at 78 percent RE because the AVISTA commented that DOE has proposed rule. Based on the

at 78 percent RE because the AVISTA Department's review of the GAMA

data applies to climates with 7000 underestimated the frequency of needed Department's review of the GAMA

heating degree days (HDDs) and the venting system upgrades. (AGA, No. 150 certification test program, the

NFGC requires Type B vents 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,

at 2). The CEC summarizes its database No. 167 at 2). ACEEE claims DOE's cost i.e., with manufacturer rated energy

of gas water heaters to show the number for vent installations should not include factors greater than 0.91 EF, were

of models of gas water heaters with a factor for the fraction of homes with overrated. Several stakeholders have

recovery efficiencies from 76 percent to gas water heaters. (ACEEE, No. 170 at 2). requested that DOE take specific actions

85 percent. There are 170 models which DOE believes we have 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 water heaters and if this practice

modification or masonry chimney of installing Type-B vent connectors and continues, some of the energy savings of

relining is needed. This data summary to determine the cost to reline masonry the new standard will be lost. ACEEE

shows that a Type B vent connector is chimneys. These estimates are slightly stated that the apparent overrating

not needed until RE 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 of utility demand

sometimes needed when RE gets above an AGA survey in a GTI report, we side management programs. (ACEEE,

78 percent. It is interesting to note there estimated that eleven percent of No. 170 at 1).

are 66 models or 39 percent of gas water households with gas-fired water heaters DOE has conducted a certification

heaters with recovery efficiencies at or in regions with over 5,000 HDDs would review of the five major water heater

below 78 percent which currently meet need Type-B vent connectors for 78 manufacturers and has found that there

the standard and which do not need percent RE gas-fired water heaters. are incorrect energy factor ratings

Type B vent connectors or chimney (GRI-91/0298). DOE determined a cost reported in the GAMA directory. All

relining. (CEC, No. 171 at 3). of $134 for Type-B vent connectors five major manufacturers use GAMA as

DOE does not agree manufacturers based on the replacement market and their third party representative.

will specify that all installations with 78 installers' cost estimates for a typical Therefore, the GAMA directory contains

percent RE gas water heaters will installation. We also estimated that manufacturers' certified ratings. We also

require Type B vent connectors. This is masonry chimney relining would cost found violations of DOE's record

not current practice with gas water $795 for eight percent of the 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 we believe 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 water heaters, and the

manufacturers should advise installers TSD. manufacturers have agreed. The

to use Type B vent connectors in DOE did not include a factor for the corrected ratings will be published in

climates where there are more than fraction of homes with gas water heaters the December, 2000 GAMA directory.

5,000 HDD or some reasonably in the vent installation cost calculation. Some manufacturers' testing appears

conservative level of heating degree The factor used in the vent installation to show that some 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 the NFGC requirements. all homes with gas water heaters in the acknowledges that recent tests of high

DOE uses HDD as an indicator for U.S. that are in the Northeast or efficiency electric water heaters at

determining where venting systems may Midwest. DOE was not double counting Intertek Testing Services (ITS) have

be subject to damage from the amount the number of gas water heaters as shown several models with 0.92 or 0.93

of time vent connectors may have ACEEE states. EF. This testing was ordered by GAMA

condensate on their inside surfaces. 5. Direct Vent Applications. Dominion on a sample of four electric water

This indicator considers both the effect claims DOE does not account for the heaters for each model. However, NIST

of time and temperature. We use 5,000 decreased vent length a 78 percent RE has tested several of these models and

HDD as a conservative approach since gas water heater will have for direct has not been able to replicate the ITS

no incidence of vent system failures is vent equipment. (Dominion, No. 145 at test results.

associated with the installation of high 6). Testing of 11 high efficiency electric

efficiency gas water heaters 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 of the market. Only a can achieve a 0.93 EF. The difference

EE-RM-97-900 COMMENT 101
4486 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, it will

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

EF below the rated 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 an effective 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 be numerous reasons why should be effective 5 years after standards will have been in place 9

we cannot confirm the higher ratings. publication. GAMA believes the three years longer than envisioned by the

There could be an improper application year lead-time for the effective date statute. For these reasons as well, a

of the DOE test procedure due to applies only to a Final Rule published three-year effective date for today's rule

differences in interpretation of the by January 1, 1992. (GAMA, No.113 at is more consistent with the statutory

requirements or due to selection of a 2). Southern Co. and Dominion state scheme than the five-year period

different option for making some of the that NAECA requires a 5 year advocated by some commenters.

measurements. There could be problems implementation time. Southern Co. also Accordingly, today's rule will become

in the sampling procedures used by suggests that refrigerant availability will effective three years after the date of

GAMA or the manufacturers to obtain become more manageable with two publication as originally proposed.

their sample tanks for testing. (The test additional years. (Southern Co., No. 142 Water Heater Models Affected

procedure requires tanks for testing be at 3 and Dominion, No. 145 at 3). On the

representative of production.) There other hand, ACEEE asserts the first GAMA commented that if the

could be some design improvements in revision has a three year effective date proposed standard levels were adopted,

some of these high efficiency models and since today's rule is the first few current models listed in the GAMA

that DOE did 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 of current residential

cannot determine if the difference in our is the way the NAECA revisions have water heater shipments meet the

testing and the manufacturers' rating is been interpreted. (ACEEE, No. 170 at proposed levels. (GAMA, No. 160 at 5).

real or not. 10-11). GAMA stated that 26 percent of the

DOE interprets the language in EPCA current models of gas and electric water

C. Measured vs. Rated Volume at 42 U.S.C. 6295(e)(4)(A) to mean that, heaters can meet the proposed standard.

CEC, NWPPC, and ACEEE commented where the schedule specified in the This number drops to 18 percent if only

that DOE should use the measured statute for the two required rulemakings 30, 40 and 50 gallon models are

volume of water heaters because has not been met, the first amendment considered. (GAMA, No. 176 at 1).

manufacturers, by using the rated to the standards should be effective Dominion suggests DOE should identify

volume, can gain a 0.01 EF three years after publication, and the existing equipment that will meet the

improvement by maximizing the second amendment to the standards, revised standards and designs it uses.

tolerances allowed by UL (+/ - 10 five years after publication. We believe Additionally, Dominion claims DOE

percent for electric) or by ANSI Z21.10.1 that this interpretation is the one most 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 of the 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 of rulemakings mandated by identified for the recommended

proposed rule, where it addressed this Congress in the statute. We recognize standard level. (Dominion, No.145 at 3).

same issue, and suggested that DOE that DOE has failed to implement the The CEC claims that, based on its

should continue to use rated volume rulemaking schedule in EPCA, but we directory of certified water heaters, of

because that is the basis of the extant see no reason why such failure would the 170 models of gas water heaters

standards set by NAECA. (GAMA, No. justify a departure from the time periods listed, 51 meet the proposed standard.

160 at 5). the statute contemplates for an (CEC, No. 171 at 2). DOE's review of the

EPCA, as amended, by the 1987 amendment to the standards to become April, 2000 GAMA Directory shows 37

NAECA amendment, uses the rated effective. We believe we are adhering to gas-fired water heater 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 of today's rule, the first DOE recognizes that standards will

rated tank volume to determine the amended standard, conform to the eliminate current manufacturers'

performance of the design options. amount of time the statute designates for offerings which would affect the

Therefore, DOE will continue to use the the effective date after publication of the individual firms and industry's net

rated volume in its water heater 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 DOE has missed Furthermore, DOE rejects Dominion's

D. Effective Date of Standards dates, it has used such an approach. comment that the Department should

Several stakeholders have taken the (Transcript, No. 120FF at 295-296). identify technologies that can be used to

position that the effective date of today's Moreover, the statute contemplated meet the standard. The standard is a

rule should be five years from its that the original efficiency standards performance standard, not a design

publication. EPCA prescribes efficiency specified in EPCA could be in effect for standard. DOE's analysis identified a

standards for water heaters only five years before an amended path, with different insulation blowing

manufactured on or after January 1, standard would take effect. To date, the agents, which could be used to meet the

1990, and requires two subsequent original standards have been in effect standard. However, DOE believes there

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4487

are a number of approaches individual consumers replacing gas water heaters We performed an engineering analysis

manufacturers may elect to pursue to to switch to electric water heaters. on both of these alternative insulation

meet the standard. It is not up to the Laclede claims this is especially true blowing agents to determine if the

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 3 and blowing agents and to estimate the

Laclede Gas, No. 148 at 3). AGA claims relative manufacturer and consumer

F. Instantaneous Water HeatersDOE needs to include a detailed cost impacts. HFC-134a is a blowing

Controlled Energy Corporation analysis of fuel switching among gas agent that is less expensive per pound

(Controlled Energy) claims and electric utilities in the than HFC-245fa, but it also is ten

instantaneous water heaters should not environmental impacts analysis. (AGA, percent less effective as an insulation

be included in the Final Rule without 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 to HFC-245fa,

clearly includes both storage and of acquiring natural gas service where it but it is flammable and would require

instantaneous water heaters, and DOE does not exist, to buy a gas furnace, and expensive modifications to production

does not have any option to exempt this in some cases to install a duct system facilities to meet the OSHA safety

type of water heater since that would be where one does not exist. (OOE, No. 174 regulations. The engineering analyses

equivalent to a reduction of energy at 2). for HFC-134a and cyclopentane show

efficiency. (CEC, No. 171 at 4). GAMA The LCC analysis is one of the seven that water heater cost and performance

claims DOE should clearly state the factors DOE is required by statute to is within two percent of the results for

proposed standards do not apply to consider when it makes its decision HFC-245fa See Table in Section II,

instantaneous water heaters. GAMA standard levels. Included in the LCC General Discussion, "Impact of

claims the minimum energy factor for sandard the installed costs of Lessening of Competition." Therefore,

instantaneous water heaters has been electric and ga water heaters. These DOE believes that manufacturers have a

inadvertently raised withoutcosts provide an indication of whether choice among atleastthree blowing

discussion or any analysis. Currently, a particu tandard leve i the agents, water, HFC-134a and

instantaneous water heaters must meet a paricular sandard level would cause agents, water, HFC34a and fuel switching. Furthermore, in the NES, cyclopentane. When designing products

a minimum of 0.62 EF. (GAMA, ' to meet the new standard,

Transcript, No. 120 at 38 and 177-178.). DOE estimates the shipments of each manufacturers will be faced with a

make up a very small fraction of one Chapter 11 of the TSD. For example, range of choices to consider. For

percent of the watery small fractio n ts, DOE estimates that the standards example, water heaters with

DOE did not include t hem in its adopted today will increase the toatal loeane-blown foam insulation

DOE did not include them in its siadopted todays will increatsers t t have lower material costs, as compared

analysis. Although the statutory shipments of gas water heaters by 8 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 of electric water heaters by 7 this scenario, they may weigh the

water heater, the statute does million over the next 26 years. DOE has investment costs and material costs to

distinguish between storage and taken fuel switching into account 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. The HFC-blown

distinguish between the definition of foams have higher material costs,

storage water heaters and instantaneous The choice of insulation blowing compared to water, but better insulation

gas water heaters by BTU input rates agent is critical to achieving 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, DOE based its manufacturers may find a design using

standards for instantaneous and storage analysis on HFC-245fa and water blown other blowing agents or blends of these

water heaters. There is, moreover, a insulation. There were many comments materials to be more cost effective. In

provision in EPCA, as amended, in from manufacturers, utilities and the summary, DOE believes there are a

Section 325(q), 42 U.S.C. 6295(q) for DOJ that a standard based on HFC-245fa number of insulation blowing agents to

establishing a new class if the capacity alone could be anti-competitive due to meet today's standards. Manufacturers

or performance related features of a its single source of supply. There were will, DOE believes, weigh the cost and

product justifies it. The volume ranges also issues about venting system margin efficiency trade-offs, as well as other

of storage water heaters are much larger of error, size constraints for water factors, in selecting the insulation

and do not include the volumes of heaters with thicker insulation, and the blowing material to use.

instantaneous water heaters as defined energy factor overrating of high

in DOE's regulation. Since DOE's efficiency electric water heaters. To A. Economic Impacts on 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 to meet the standard level economic impact on consumers, we

heaters, DOE is establishing a new class adopted by today's Final Rule, we conducted an LCC analysis for gas and

for instantaneous 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, that the and information from comments

at the current levels. proposed rule identified as potential pertaining to installation costs for size

alternatives for the HCFC-141.65 FR constraints on fourteen percent of

G. Fuel Switching 25042, 25049-50 (April 28, 2000). This electric water heaters. This accounts for

The New England Gas Association issue is briefly described in Section II, extra costs that consumers in small

(NEGA) and Laclede Gas claim higher General Discussion, "Impact of apartments and homes may have to pay

first costs for gas water heaters will Lessening of Competition" in today's for water heaters with thicker

encourage builders in new homes and rule. insulation. We also included

EE-RM-97-900 COMMENT 101
4488 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 of households benefitting ranges

the comments on gas water heaters. electric water heaters with the HFC- from 59 percent to 90 percent for the

Table 2 shows the average LCC savings 245fa blowing agent. We do not show trial standard levels analyzed. At trial

and percent of households benefitting oil-fired water heaters because we are standard level four, where the LCC

for each of the trial standard levels for not making any revisions to the 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 water heaters will benefit.

electric and gas-fired water heaters, 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.

Another LCC analysis we conducted change in LCC and by calculating the households, two consumer subgroups of

is the Consumer Subgroup analysis. fraction of households 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 of standards for households with low the results of the 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 spopulation Ave. (1998$) . opulation population level Ave. (1998$) 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 of households. In households senior-only households have greater

similar trend in 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 1 and 3 We have noted the LCC savings for

households. In the case of electric water and less benefit for trial standard levels the senior-only subgroup are similar to

heaters, the low income consumer group 2 and 4 than the total sample of those of the general population. Since

has less benefit at all trial standard households. The senior-only households the elderly use 30 percent less hot water

levels than the total sample of with natural gas water heaters have on average than the general population,

households while the senior-only greater benefits at all trial standard one would expect their costs to be

consumer group has greater benefit at all levels than the total sample of lower, and as a result, the LCC effect to

trial standard levels than the total households. Both low income and be different. However, the standby

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4489

losses of water heaters, which are not 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 the general were. paybacks for each trial standard level in

population. Therefore, since most of the 2. Median Payback. A part of the LCC Table 4. The median payback is the

design options considered affect analysis is the payback analysis. The median number of years 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 of the 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 + Plastic Tank ..................................................................................... 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. Rebuttable Presumption. The Act insulation, tank bottom insulation on vapors. Additionally, we examined the

states that if the Department determines electric and improved flue baffles on ability of manufacturers to recover the

that the payback period is less than gas-fired water heaters. None of the investments required for each of the

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 of business The potential value of the water

rebuttable presumption that such trial as a result of standard levels that would he potential vue the

standard level is economically justified. require energy factors below plastic heater industry, represented by the

In Table 4, we list the payback periods tanks or side-arm heaters (i.e., trial Industry Net Present Value (INPV) ($325

by fuel type (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 to the manufacturers' price to

that if this three year payback is not with four of the five major water heater the dealer/distributor. Since all five of

met, this determination shall not be manufacturers. (The fifth manufacturer the major manufacturers produce both

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 99 percent of the U.S. of manufacturer's pricing. Manufacturer

U.S.C. 6295(o)(2)(B)(iii). residential water heater 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 one through

with heat traps 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 test procedure. employment levels. will raise prices enough to recover the

There are no trial standard levels for We analyzed the water heater costs of materials, labor and

natural gas water heaters that have a industry using two business scenarios. tsportation and 75 percent of their

payback of three years or less. The standards scenario represents the transportation anufactud 75 percnt of theireased

4. Economic Impact on investments needed to meet the energy vestet. If manufacturers i ncr

Manufacturers. We performed an MIA efficiency level of a trial standard level. water heater 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 for trial standard level four,

in Chapter 13 of the TSD. In general, efficiency improvement, changes to a they would recover all of their

manufacturers stated they would be able new blowing agent and the development investment. Table 5 shows the results of

to manufacture any of the design and manufacture of a gas-fired water the cash flow analysis with these

options with heat traps, thicker heater resistant to ignition of flammable assumptions.

EE-RM-97-900 COMMENT 101
4490 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

TABLE 5.-MANUFACTURER IMPACT ANALYSIS

INPV ($ mil- Change in INPV Investment reTrial std level lions) ' -quired ($ ($ millions) (%) ($ millions) lions)

Standard Scenario, HFC-245ta blown Insulation

B ase C ase ................................................................................................................... 325 0 0 0

1 ................................................................................................................................. 3 1 7 - 3 - 8 3 3

2 ........................................................................................................ 310 -5 -15 60

3 ................................................................................................................................... 3 10 - 5 - 15 5 9

4 ..................................................................................................................... 268 -1 8 -5 7 22 9

Cumulative Scenario, HFC-245fa blown insulation

B ase C ase .................................................................................................................. 325 0 0 0

1 ................................................................................................................................... 28 8 - 1 2 - 3 7 14 9

2 ................................................................................................. 281 -14 -4 4 176

3 ..................................................................................................................... 281 -1 4 -4 4 176

4 ..................................................................................................................... 239 -2 7 -8 6 345

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 has far more manufacturing in 2030. Furthermore, a replacement

losses of industry net present value from capacity than the domestic market can market that increases 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 is operating at approximately future demand.

$33 million to $229 million. However, 80 percent of total capacity. Due to the.

even if DOE did not revise energy phase-out of HCFC-141b insulation B. Significance of Energy Savings

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 or before January 1, 2003, will result ignition of flammable vapors, it is likely if that 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 of DOE'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

As required by the Process Rule, 10 CFR indicated a preference to retool for new defined in the Act, the U.S. Court of

Part 430, Subpart C, Appendix A blowing agents, energy-efficiency Appeals, in Natural Resources Defense

10(g)(1), DOE considered the cumulative standards and flammable vapor-resistant Council v. Herrington, 768 F.2d 1355,

impacts of other 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 limit costs.Congressional intent in using the word

including the phase out of HCFC-141b We also used the manufacturers' Congressiona ni a tent n using the word

and the CPSC initiative to prevent 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 of the trial

fired water heaters. These cumulative efficiency standard. Manufacturers anar e n i nd the

losses range from $37 million to 86 expected the impact of new blowing rulemaking are non-trivial and therefore

million. The investments to prevent agents and flammable vapor resistant we consider them "significant" within

ignition of flammable vapors and for designs on labor to be minimal, neither the meaning of Section 325 of the Act.

new blowing agents are $116 million. increasing nor reducing employment 1. National Energy Savings. To

The investments for cumulative levels by more than a few employees. estimate the energy savings through the

regulations are potentially large given Since the revised efficiency levels do year 2030 due to amended standards,

the current after tax profitability of the not require the adoption of side arm we compared the energy consumption

water heater industry, estimated to be heaters or plastic tanks, manufacturers of water heaters in the 2004 base case

$45 million (1998) on revenues of $1.5 do not anticipate significant changes in to the energy consumption of water

billion. employment levels or training heaters complying with the trial

Based on DOE's interviews, requirements. Additionally, we believe standard levels. DOE calculates these

manufacturers expect little impact on market growth of 2.5 percent per 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 the revised gains ensure current employment levels losses. Table 6 shows these results for

standards are not based on side-arm gas- for the foreseeable future. In our water heaters with HFC-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 12.09

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4491

All of the trial standard levels 2. National Net Present Value (NPV). combined discounted energy savings

considered in this rulemaking have Additionally, we analyzed the economic minus increased consumer costs of the

significant energy savings, ranging from impact on the nation to the year 2030. four fuel types of equipment 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 the trial 2000 reference energy prices. Table 7 this calculation on all expenses and

standard level. lists the NPV for HFC-245fa blown savings occurring between 2004 and

insulation. The NPV considers 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 .9 4

The national NPV is positive for trial Therefore, the consumer will not lose conclude "that the proposed standards

standard levels one and three and any utility or performance. could have an adverse affect on

essentially 0 for trial standard level 2. In To eliminate the possibility of any competition because water heater

this analysis, a positive NPV means that water heater models becoming manufacturers may have to use an input

the estimated energy savings are greater unavailable as a result of thicker that will be produced by only one

than the increased costs due to insulation, we created a new class for source." (DOJ, No. 143 at 1).

standards. Among the trial 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 at least four

three has the highest NPV. 6295(q) in the Act. These issues are blowing agents are available to use in

discussed in Section II. General meeting the standards adopted in

C. Lessening of Utility or Performance of Discussion, "Lessening of Utility or today's Final Rule. Therefore, the

Products Performance of Products." Department concludes there will be

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

performance of water the ~~~~~~~~Dreduces TeAtdrcsheDptmnto Section II, General Discussion, "Impact reduces the performance of water The Act directs the Department to of Lessening of Competition" for the

heaters. Generally, the trial standard consider any lessening of competition complete discussion of this topic. levels reduce heat losses and improve that is likely to result from standards. It c heat exchanger effectiveness. These urther directs the Attorney General to E. Need of the Nation to Save Energy

changes improve energy and water teri the t ny oand Net National Employment

heating performance and may increase determine the impact, if any, on heating performance and may increase competition likely to result from such 1. Environmental Impacts. Enhanced

the amount of water 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, to reduce heat losses, it may after the publication of a proposed rule economy and reduces the

be necessary to use thicker insulation. to the Secretary, together with an environmental impacts of energy

At the trial standard level adopted in analysis of the nature and extent of such production. The energy savings from

today's rule, DOE contemplates impact. Section 325(o)(2)(B)(i)(V), 42 water heater standards result in reduced

insulation thicknesses of 2-2.5 inches U.S.C. 6295(o)(2)(B)(i)(V). emissions of CO2 and 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 of insulation in making such a determination, the reducing air pollution. 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 of the Proposed emission reductions to 2030 range from

when replacing a water heater. DOE Rule and the Technical Support 149-354 Mt for carbon equivalent, 175-

added costs for tempering valves for a Document for review. In a letter 459 thousand metric tons (kt) for NOx,

number of gas and electric water heaters responding to the Proposed Rule, the and - 3 to - 64 kt for SO 2. The large

where we believed there could be some Department of Justice (DOJ) found only reductions in CO2 and NOx at all

loss of utility due to the need to one area of concern regarding any standard levels are a positive benefit to

downsize a water heater. Tempering lessening of competition. 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 the possibility small increases in the number of oilof cold water used to provide a that only one blowing agent, HFC- fired water heaters from our shipment

comfortable and safe usable water 245fa, could be used and that it is a forecasts. We show actual cumulative

temperature. The addition of cold 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

C arbon (M t) ...................................................................................................... 14939 152 354

EE-RM-97-900 COMMENT 101
4492 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 O x (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 only be negligibly affected by water heater standards.

The Department makes no effort to often perceived to have a greater value used the same seven percent discount

monetize the benefits of the actual if they occur sooner, rather than later. rate for these calculations that we used

emission reductions, but there may be To the extent that the different trial for discounting monetized benefits.

time-related differences in the perceived standard levels have slightly different Since the discounted emission

value of the 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 3 to trial standard

benefits that accumulate over time. slightly higher proportion of earlier level 1, this indicates trial standard

Emission reductions that occur sooner emission reductions than another trial level 1 has a slight timing improvement

are often more desirable than equivalent standard level, in emission reductions. There is no

reductions that occur later. Like To show the possible effect of the similar shift in either the NOx or S02

monetary benefits, the health, different timing patterns of the levels. We show the discounted

recreational and ecosystem benefits that emissions, the Department is also cumulative emission savings from

result from emission reductions 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

N O 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. Net National Employment. In the the jobs being lost. The benefits from feasible. In the formula for water heater

Process Rule, DOE committed to any potential employment gains would standards, the letter "V" stands for rated

develop estimates of the employment be reduced if job quality and pay are volume as given in the statute.

impacts of revised standards in the reduced. The American Gas Association

economy in general. The standard * The net benefits from potential recommended EF =0.64-0.0019V for

adopted in today's rule will have a employment changes are a result of the gas water heaters. (AGA, No. 110 at 2)

positive impact on employment. The estimated net present value of benefits ACEEE recommended EF =0.98-

results of the Department's analysis are or losses likely to result from the revised 0.00132V for electric and EF =0.69-

shown in Chapter 15 of the TSD. standards; it may not be appropriate to 0.0019V for gas water heaters. (ACEEE,

While both this input/output model separately identify and consider any No. 71 at 9). The water heater

and the direct use of Bureau of Labor employment impacts beyond the manufacturer Bradford White

Statistics (BLS) employment data calculation of net present value. recommended EF =0.94-0.0013V for

suggest the revised water heater 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 the economy, the interpretation and use of the (Bradford White, No. 108 at 7) The City

gains would most likely be very small employment impacts analysis, the of Palo Alto recommended EF =0.64-

relative to total national employment. Department concludes only that the 0.0019V for gas water heaters. (City of

For several reasons, however, even these proposed water heater standards are Palo Alto, No. 136 at 2) The Edison

modest benefits for national likely to produce employment benefits Electric Institute recommended EF

employment are in doubt: that are sufficient to offset fully any =0.66-0.0019V for gas water heaters.

* Unemployment is now at the lowest adverse impacts on employment in the (EEI, No. 105 at 3). The Electric Power

rate in 30 years. If unemployment water heater or energy industries. Research Institute recommended EF

remains very low during the period =0.95-0.00132V for electric water

when the revised standards are put into F. Conclusl

on heaters. (EPRI, No. 104 at 3). GAMA

effect, it is unlikely that the standards 1. Comments on Standard Levels. recommended EF =0.95-0.00132V for

could result in any net increase in Several stakeholders made specific electric and EF =0.65-0.0019V for gas

national employment levels. recommendations for standard levels water heaters. (GAMA, No. 71 at 3 & 4).

* Neither the BLS data nor the input- during the workshops held prior to The Northwest Power Planning Council

output model used by DOE include the publication of the proposed rule or after recommended EF =0.97-0.00132V for

quality or wage level of the jobs. One publication of the proposed rule. We list electric and EF =0.68-0.0019V for gas

reason that the demand for labor these below to show the range of water heaters. (NWPPC, No. 163 at 4).

increases in the model may be that the standard levels stakeholders believe are The efficiency standards recommended

jobs expected to be created pay less than economically justified and technically in these comments are based on the

EE-RM-97-900 COMMENT 101
Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations 4493

analysis for the proposed rule and other of energy." Section 325(o)(2(B)(iii)(3)(B), are the same, though at lower efficiency

information available to these 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), of the 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 are no 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) of covered product shall be of the design options included in our included in the analysis. By combining

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 s abl to evaluat 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 of different combinations of

economically justified. In determining of four 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 of different

justified, the Secretary must determine level four. We then consider less efficiency combinations.

whether the benefits of the standard efficient levels. Standard levels two and To aid the reader as we discuss the

exceed its burdens. Section three are different combinations of benefits or burdens of the trial standard

325(o)(2)(B)(i), 42 U.S.C. efficiency levels for electric and gas levels we have included a summary of

6295(o)(2)(B)(i). The amended standard water heater classes. For gas-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 Q uads 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

N O x (kt) .............................................................................................. 175 215 273 459

SO 2 (kt) .... ....................................................................... 11 - 13 - 64

Cumulative Change in INPV ($ Million) .................................................... -8 -15 -15 -57

Life Cycle Cost ($):

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 most efficient 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 of energy, a For electric water heaters, the analysis

saves about 11.5 quads of energy, a significant amount. The emissions predicts that 41 percent of all

significant amount. The emissions reductions are significant: 152 Mt of consumers would experience no change

reductions of 354 Mt of carbon carbon equivalent and 273 kt of NOx. or some net cost with more efficient

equivalent and 459 kt of NOx are There is a 13 kt increase in household electric water heaters. However, we

significant. There is a 64 kt increase in emissions of SO 2 due to a slight increase believe that there are costs or savings

household emissions of SO 2 due to in shipments of oil-fired water heaters. near the point of zero change in LCC

increased shipments of oil-fired water The national NPV of trial standard level that consumers would be 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 of average

impacts. They would lose $82 with are significant. The average LCC savings baseline LCC as the band of no

electric water heaters, $244 with natural for consumers with electric, natural gas consumer impact. We believe this small

gas water heaters and $122 with and propane gas water heaters are $23, percentage, regardless of the 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 level three, 78 percent of because these LCC costs or savings are

the water heater industry would lose 27 households with natural gas-fired water spread over monthly utility bills for the

percent of its value and the nation heaters have LCC savings, for an average life of the water heater. By applying a

would have a loss in NPV of nearly $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 water heaters, the average LCC trial standard level. This permits a more

by the negative economic impacts on savings are $117 for 89 percent of the 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 of consumer impact. The resulting

Department concludes trial standard households with electric water heaters, ranges are shown in Figure 9.6.2 in the

level four is not economically justified. 59 percent have average LCC savings of TSD.

EE-RM-97-900 COMMENT 101
4494 Federal Register/Vol. 66, No. 11/Wednesday January 17, 2001/Rules and Regulations

We will use ±2 percent of baseline determined the benefits of trial standard to review under the Executive Order by

LCC to indicate no impact, positively or level three outweigh its burdens and is the Office of Information and Regulatory

negatively, on consumers. Therefore, economically justified. The Department Affairs (OIRA) of the Office of

only fifteen percent of consumers with also concludes trial standard level three Management and Budget.

electric water heaters or twelve percent saves a significant amount of energy and There were no substantive changes

of consumers with natural gas water is technologically feasible. 5 Therefore, between the draft we submitted to OIRA

heaters or five percent of consumers 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 to OIRA for

any significant net costs under standard heaters at trial standard level three. review are a part of the rulemaking

level 3. Similarly, 30 percent of record and are available for public

consumers with electric water heaters or VIProcedural Issues and Regulatory review in the Department's Freedom of

52 percent of consumers with natural eviewsInformation Reading Room, 1000

gas water heaters or 69 percent of A. Review Under the National Independence Avenue, SW,

consumers with propane gas water Environmental Policy Act Washington, DC 20585, between the

heaters have significant net savings. hours of 9:00 a.m. and 4:00 p.m.,

Two percent of average baseline LCC In issung the March 4, 1994,Monday through Friday, except Federal

equals $56 for electric water heaters. Propsed Rle for energy efficiency holidays, telephone (202) 586-3142.

Over the average life of 14 years for an tadards for eight products, one ofThe proposed rule contained a

electric water heater, this is less than $4 which was water heaters, the summary of the Regulatory Impact

per year. For consumers with natural 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 of consumer products. The

life of 9 years for gas water heaters, this November 1993). We found the reader is referred 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 per year for propane various standard levels for water as indicated at the beginning of this

gas. We believe this is a small amount heaters, as well as the other seven notice. It consists of: (1) a statement of

in terms of yearly expenditures and will products, to be not significant, and we the problem addressed by this

not adversely impact consumers' published a Finding of No Significant regulation, and the mandate for

purchase decisions about water heaters, Impact (FONSI). 59 FR 15868 (April 5, government action; a (2) description and

or their financial positions. 1994).analysis of the feasible 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 of the impacts

similar distributions of costs and Final Rule is based, the DOE evaluated alternatives and (4) the economic

savings. A similar small percentage of several design options suggested in impact of the proposed standard.

low-income or senior only consumers comments to the 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

The industry will lose about five and resulting environmental effects heater energy efficiency standards, and

percent ($15 million) of its 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 of the alternatives. We

losses are more than balanced by NPV somewhat from those presented for evaluate each alternative in terms of its

gains to the nation of $2.0 billion, or 135 water heaters in the 1994 Proposed ability to achieve significant energy

times the industry losses. Industry Rule. Nevertheless, the environmental savings at reasonable costs, and we

losses for trial standard level three due effects expected from today's Final Rule compare it to th e ctiveness of trial

to all Federal actions (CPSC, EPA and fall within the ranges of environmental standard level 3 adopted by today's

DOE) are fourteen percent of its INP, or impacts from the revised energyFinal Rule

$44 million. Even this level of losses is efficiency standards for water heaters W created the RIA using a series of

offset by gains to the nation that are 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 we used as input

manufacturer interviews, DOE believes ecutive Order 12866,to the shipments model for water

there will not be any plant closures or "Regulatory Planning and Review's heaters. We used the results 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 of trial standard level three, today's regulatory action is an identified the follo g seve

the Department has weighed the "economically significant regulatory m pi alternatives for achieving

benefits of energy 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 the burdens of a loss in Accordingly, today's action was subject Informational Action.

manufacturer net present value, and · Product Labeling.

consumer LCC increases for some SThe final standard is based on insulation blown *Consumer Education.

households. After carefully considering with HFC-245fa. We also compared the engineeringrescriptie Standards

the results of the analysis, DOE has cost and performance for two alternative blowing the results of the analysis, DOE has agents, HFC-134a and cyclopentane. All three Financial Incentives.

blowing agents are EPA-SNAP approved but there -Tax credits

4 As DOE has determined, the benefits of today's are concerns about availability and a single source -Rebates

final rule outweigh the $15 million loss to the supplier with HFC-245fa. However, since -Low income and seniors subsidy

industry. To review the support for this engineering results are within two percent of HFC- Voluntary Energy Efficiency Targets

determination, see the TSD at Chapters 12.5 and 245fa, we conclude that the use of either of these

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.

EE-RM-97-900 COMMENT 101
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 of its ability to achieve significant effectiveness of this Final Rule.

energy savings at reasonable costs

TABLE 11.-ALTERNATIVES CONSIDERED

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

Consumer Product Labeling ...................................................................... -$0.003 0.08

C onsum er Education ....................................................................................................................................... 0.40 0.49

Prescriptive Standards . ......................................................................................................... 0.99 0.74

C onsum er T ax C red its ..................................................................................................................................... 0 .18 0 .14

Consum er R ebates High Efficiency ................................................................................................................. 0.18 0.14

C onsum er R ebates H eat Pum p ...................................................................................................................... 0.85 0.50

Low Income and Seniors Subsidy .............. .................................................................. 0.05 0.37

M anufacturer Tax C redits ................................................................................................................................ 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, in billion 1998 $) (does not include government expenses)

Savings = Energy Savings (Source Quads)

For a complete discussion of the the GAMA directory, these firms only Reform," 61 FR 4729 (February 7, 1996),

assumptions used to develop the list electric water heaters that meet or imposes on Executive agencies the

alternative regulatory impacts, see the exceed the standard level in this rule. general duty to adhere to the following

proposed rule. 65 FR 25042, 25080- Although the rule raises the standard requirements: (1) Eliminate drafting

25081 (April 28, 2000). All of these level enough to impact their niche errors and ambiguity; (2) write

alternatives must be gauged against the market for high efficiency electric water regulations to minimize 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 of the 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 the review required by

savings from revised energy efficiency consideration in this rulemaking. Section 3(a), Section 3(b) of Executive

standards. Additionally, several of the The Department prepared a Order 12988 specifically requires that

alternatives would require new enabling manufacturing impact analysis that it 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, if any; (2) clearly

C. Review Under the Regulatory the impacts of the trial standard levels specifies any effect on existing Federal

Flexibility Act on their firms. law or regulation; (3) provides a clear

In view of the 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 of the impact of regulations 605(b) of the Regulatory Flexibility Act retroactive effect, if any; (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 in the water heater will not "have a significant economic and general draftsmanship under any

industry is one that employs 500 or impact on a substantial number of small guidelines issued by the Attorney

fewer employees, entities," and it is not necessary to General. Section 3(c) of Executive Order

The water heater industry is prepare a regulatory flexibility analysis. 12988 requires Executive agencies to

characterized by five firms accounting review regulations in light of applicable

for nearly 99 percent of sales. Smaller D. Review Under the Paperwork standards in Section 3(a) and Section

businesses and firms, which make Reduction Act 3(b) to determine whether they are met

specialty water heaters and supply No new information or record keeping or it is unreasonable to meet one or

niche markets, share one percent of the requirements are imposed by this more of them. DOE reviewed today's

market. We are aware of three small rulemaking that would require Office of Final Rule under the standards of

firms: Bock Water Heaters, Heat Management and Budget clearance Section 3 of the Executive Order and

Transfer Products, and Vaughn. under the Paperwork Reduction Act. 44 determined that, to the extent permitted

Of the three small firms, Bock U.S.C. 3501 et seq. by law, the final regulations meet the

manufactures oil-fired water heaters that . Executive Order 12988 relevant standards.

E. Review Under Executive Order 12988, have not been affected by this rule. "Civil Justice Reform" F. "Takings" Assessment Review

Therefore, Bock will not suffer any

adverse impacts due to the rule. The With respect to the review of existing The Department has determined

other two firms, Heat Transfer and regulations and the promulgation of pursuant to Executive 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 Property

EE-RM-97-900 COMMENT 101
4496 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 is both

that this regulation would not result in action is required by Executive Order technologically feasible and

any takings that might require 13132. economically justified. A full discussion

compensation under the Fifth Rviw nr the Unfundedof the alternatives considered by DOE is

Amendment to the United States Revdew er At nfun epresented in the "Regulatory Impact

Constitution. andates Reform Act of 995Analysis" section of the TSD for this

With respect to a proposed regulatory Final Rule.

G. Review Under Executive Order action that may result in the

13132, "Federalism" expenditure by State, local, and tribal L Review Under the Treasury and

Executive Order 13132, 64 FR 43255 governments, in the aggregate, or by the General Government Appropriations

(August 4, 1999) requires agencies to private sector, of $100 million or more Act of 1999

develop an accountable process to (adjusted annually for inflation) in any Section 654 of the Treasury and

ensure meaningful and timely input by one year, Section 202(a) of the General Government Appropriations

State and local officials in the Unfunded Mandates Reform Act of 1995 Act, 1999 (Pub. L. No. 105-277) requires

development of regulatory policies that (UMRA), 2 U.S.C. 1531 et seq., requires Federal agencies to issue a Family

have "federalism implications." Policies a Federal agency to publish a written Policymaking Assessment for any

that have federalism implications are statement concerning estimates of the proposed rule or policy 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 also requires each autonomy or integrity of the family as

on the relationship 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 input by state, concluded that it is not necessary to

distribution of power and local, and tribal governments on a prepare a Family Policymaking

responsibilities among the various proposed significant intergovernmental Assessment.

levels of government." Under Executive mandate. The Department's consultation

Order 13132, DOE may not issue a process is described in a notice J. Review Under the Plain Language

regulation that has federalism published in the Federal Register. 62 FR Directives

implications, that imposes substantial 12820 (March 18, 1997). Today's Final Section 1(b)(12) of Executive Order

direct costs, and that is not required by Rule may impose expenditures of $100 12866 requires that each agency draft its

statute, unless the Federal government million or more in a year in the private regulations so that they are simple and

provides the funds necessary to pay the sector. It does not contain a Federal easy to understand, with the goal of

direct compliance costs incurred by the intergovernmental mandate. minimizing the potential for uncertainty

State and local governments, or DOE Section 202 of UMRA authorizes an and litigation arising from such

consults with State and local officials agency to respond to the content uncertainty. Similarly, the Presidential

early in the process of developing the requirements of UMRA in any other memorandum directs the heads 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. 2 U.S.C. 1532(c). The use plain language in all proposed and

implications and that preempts State content requirements of Section 202(b) Final Rulemaking documents published

law unless it consults with State and of UMRA relevant to the private sector in the Federal Register.63 FR 31883

local officials early in the process of mandate substantially overlap the (June 1, 1998).

developing the proposed regulations. economic analysis requirements that Today's rule uses the following

The statutory authority under which apply under Section 325(o) of EPCA, as general techniques to abide by Section

this Final Rule is being promulgated amended, and Executive Order 12866. 1b)(12) of Executive Order 12866 and

specifically addresses the effect of The Supplementary Information section the Presidential memorandum. 63 FR

Federal rules on State laws or of the Notice of Final Rulemaking and 31883 June 1, 1998):

regulations concerning testing, labeling the analysis contained in the · Organization of the material to

and standards. Section 327 of EPCA, as "Regulatory Impact Analysis" section of serve the needs of the readers

amended, 42 U.S.C. 6297. Generally all the TSD 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, 2 U.S.C. 1535, to identify 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 5 U.S.C. 801, DOE will

procedures and other provisions of promulgating a rule for which a written submit to Congress a report regarding

Section 327(d) of the Act, as amended. statement under Section 202 is required. the issuance of today's Final Rule prior

42 U.S.C. 6297(d). States can file From those alternatives, DOE must to the effective date set forth at the

petitions for exemption from select the least costly, most cost- outset of this notice. DOE also will

preemption with the Secretary and have effective or least burdensome alternative submit the supporting analyses to the

their request reviewed on a case-by-case that achieves the objectives of the rule, Comptroller General (GAO) and make

basis. unless DOE publishes an explanation of them available to each House of

DOE has examined today's Final Rule why a different alternative is selected or Congress. The report will state that it

and has determined that although the selection of such an alternative is has been determined that the rule is a

revised water heater standards would inconsistent with law. As required by "major rule" as defined by 5 U.S.C.

preempt State laws in this area, they Section 325(o) of EPCA, 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 the relationship establishes energy conservation Lst o f Su bj

e cts n 10 CFR Part 430

between the national government and standards for water heaters that are Administrative practice and

the States, or on the distribution of designed to achieve the maximum procedure, Energy conservation,

power and responsibilities among the improvement in energy efficiency that Household appliances.

EE-RM-97-900 COMMENT 101
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 of 36 inches high, 25 inches

26, 2000. 2461 note. deep and 24 inches wide.

Dan Reicher, 2. Section 430, Appendix E to Subpart * * * * *

Assistant Secretary, Energy Efficiency and B of Part 430 is amended in Section 1 3. Section 430.32(d) of subpart C is

Renewable Energy. by adding paragraph 1.16 to read as amended by revising paragraph (d) to

For the reasons set forth in the follows: read as follows:

preamble, Part 430 of Title 10, Code of Appendix E to subpart B of Part 430- § 430.32 Energy and water

Federal Regulations, is amended as set Uniform Test Method for Measuring the conservation standards and effective

forth below. Energy Consumption of Water Heaters dates.

PART 430-ENERGY CONSERVATION 1. Definitions * * * *

PROGRAM FOR CONSUMER * * * * *(d) Water heaters.

PRODUCTS 1.16 Tabletop water heater'means a The energy factor of water heaters

water heater in a rectangular box shall not be 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 in gallons). Volume in gallons). Volume in gallons).

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 in gallons). Volume in gallons). Volume in gallons).

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 in gallons). Volume in gallons. Volume in gallons).

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 in gallons). Volume in gallons). Volume in gallons).

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 in gallons). Volume in gallons). Volume in gallons).

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 in gallons). Volume in gallons). Volume in gallons).

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

* * * * * delegated to the 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 have reviewed the proposed standards, DOE published, the concerns of water heater

[The following letter from 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, water heater manufacturers, their suppliers, competition could be adversely affected by Department of Justice, and other interested parties. The Antitrust the adoption of the proposed standard.' The

Antitrust Division, Joel I. Klein Assistant Division has concluded that the proposed Department urges the Department of Energy

Attorney General standards could have an adverse effect on to take into account this impact on

Main Justice Building, 950 Pennsylvania competition because water heater competition in determining its final energy

Avenue, NW, Washington, DC 20530- manufacturers may have to use 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 the proposed 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

General Counsel, Department of Energy, provide heater manufacturers with blowing adding significantly to the costs of

Washington, DC 20585 agents could be adversely affected, with manufacturing water heaters.

Dear General Counsel Sullivan: I am resulting cost increases to consumers.

Dear General younsel Cto Sullivan: I letter am In the analysis of the proposed standard Sincerely,

responding to your May th10 2000Attorney Gener that the Department of Energy published in Joel I. Klein

about the potential impact on competition of the Federal Register, the only design options [FR Doc. 01-1081 Filed 1-16-01; 8:45 am]

the proposed energy efficiency standards for for affected electric water heaters that meet BILLING CODE

water heaters, Docket No. EE-RM-97-900. f the DOE's proposed standard require use of water heaters, Docket No. EE-RM-97-900. HFC-245fa as a blowing agent for insulation.

Your request was submitted pursuant to Insulation is an e part ssential of a water We note that some manufacturers have

Section 325(o)(2)(B)(i) of the Energy Policy heater, and HFC245fa is a patented product suggested that DOE underestimated the

and Conservation Act, 42 U.S.C. 6291, 6295, that has only one supplier. DOE's published performance capabilities of alternative 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 Attorney General to make analysis further concludes that gas-fired agents. If tahe turse sugg m est i n fac t b e able to compwater adtermanufactues may tion foa be ablepcto cmapy

lessening of competition th at is likely to water heaters have design options that would with the proposed standard for more models, while

lessening of competition that is likely to eliminate the need for HFC-245fa, but at in tersed b ant W o oe h

result from the imposition of proposed sinificant added costs. using water-based blowing agents. We also note that

energy efficiency standards. The Attorney heate manufacturers r have objected it's possible that manufacturers 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 a greater performance

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

EE-RM-97-900 COMMENT 101