CHAPTER 7. PRODUCT PRICE DETERMINATION

TABLE OF CONTENTS

7.1 INTRODUCTION ........................................................................................................... 7­1

7.2 METHODOLOGY .......................................................................................................... 7­1

7.2.1 End­User Product Price................................................................................................. 7­1

7.2.2 Sales Tax....................................................................................................................... 7­3

7.3 PRODUCT PRICE DETERMINATION RESULTS...................................................... 7­4

7.3.1 End­User Prices for General Service Fluorescent Lamps............................................. 7­4

7.3.2 End­User Prices for Incandescent Reflector Lamps..................................................... 7­6

7.3.3 Sales Tax Results.......................................................................................................... 7­7

REFERENCES ............................................................................................................................ 7­9

LIST OF TABLES

Table 7.2.1 State and Local Sales Tax Rates.............................................................................. 7­4

Table 7.3.1 End­User Prices for T12 Four­Foot Medium Bipin GSFL...................................... 7­5

Table 7.3.2 End­User Prices for T8 4­Foot Medium Bipin GSFL ............................................. 7­5

Table 7.3.3 End­User Prices for T12 Eight­Foot Single Pin Slimline GSFL............................. 7­5

Table 7.3.4 End­User Prices for T8 Eight­Foot Single Pin Slimline.......................................... 7­6

Table 7.3.5 End­User Prices for T12 Eight­Foot Recessed Double Contact High Output

GSFL.................................................................................................................... 7­6

Table 7.3.6 End­User Prices for T8 Eight­Foot Recessed Double Contact High Output

GSFL.................................................................................................................... 7­6

Table 7.3.7 End­User Prices for PAR38 IRL ............................................................................. 7­7

Table 7.3.8 End­User Prices for PAR30 IRL ............................................................................. 7­7

Table 7.3.9 Regional Average Tax Rates ................................................................................... 7­8

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CHAPTER 7. PRODUCT PRICE DETERMINATION

7.1 INTRODUCTION

This chapter describes the methodology the U.S. Department of Energy (DOE) followed

in developing sales tax and end­user prices for lamps and ballasts considered in the rulemaking

analysis for general service fluorescent lamps (GSFL) and incandescent reflector lamps (IRL).

This chapter also provides initial results for lamp and ballast end­user prices and sales tax.

In energy conservation standard rulemakings, DOE often develops cost­efficiency

relationships in the engineering analysis. Then, DOE applies markups to derive end­user prices.

For this lamps rulemaking, DOE obtained end­user price schedules for the vast majority of lamp

and ballast designs analyzed. Therefore, instead of estimating costs in the engineering analysis

and marking them up to derive end­user prices, DOE derived efficacy levels in the engineering

analysis and end­user prices in the product price determination. By combining the results of the

engineering analysis and the product price determination, DOE derived typical inputs for use in

the life cycle cost (LCC) analysis and the national impact analysis (NIA). In particular, DOE

developed lamp designs that have end­user prices and are associated with a candidate standard

level (CSL).

7.2 METHODOLOGY

The end­user price is the average price a consumer pays before sales tax. DOE obtained

public end­user price schedules from distributors, State contracts, and other publicly available

information sources. In addition, DOE obtained copies of suggested retail and large­user price

lists (sometimes referred to as “blue books”) from manufacturers, and distributor pricing for

commercial, industrial and institutional buyers. Distributor pricing refers to the price that a

distributor would pay. DOE used these pricing sources to derive end­user prices.

To account for variability in pricing, DOE estimated three end­user prices per lamp.

DOE applied sales tax to each end­user price. Then, DOE applied installation costs, where

necessary, to derive total installed costs, which are used in the LCC and NIA. The life cycle cost

analysis in Chapter 8 details installation and total costs.

7.2.1 End­User Product Price

Starting from a consistent set of prices in the blue books, DOE looked at publicly

available prices in State procurement contracts, at large electrical supply distributors, homeimprovement/hardware stores, and other sources of publicly available end­user prices such as

Internet retailers. In its review of publicly available market prices, DOE observed a range of

end­user prices paid for a lamp, depending on the distribution channel through which it is

purchased and the volume at which it is purchased. DOE observed that State procurement

contracts typically offered a discount of around 70 to 90 percent off the blue book. In the vast

majority of instances, these discounts apply uniformly to all products on a price schedule

irrespective of the volume of a particular lamp. Consumer prices were generally higher at

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Internet retailers, electrical supply distributors, and home­improvement/hardware stores.

Furthermore, these channels usually apply different discounts to lamps depending on sales

volume. Since many high efficacy lamps are “niche” products, DOE observed that they were

generally less discounted than commodity lamps.

In line with its observation of public pricing, DOE developed three sets of discounts from

the blue books, representing the range of low, medium, and high lamp prices for all three

categories of lamps. For IRL, commercially available products did not span the full range of

efficacies considered. For those lamps for which commercial pricing was unavailable, DOE

extrapolated pricing from available lamps. Subsections 7.2.1.1 through 7.2.1.3 describe the

development of low, medium and high prices specific to each lamp type.

DOE observed that higher efficacy lamps receive higher markups (i.e., lower discounts

off of the blue book list price) than more common, lower efficacy product. However, DOE

recognizes that that once an energy conservation standard is enacted, the higher efficacy lamps

will become the commodity product. Therefore, to reflect future commoditization of higher

efficacy lamps when they become the minimum complying products, DOE applied the same

discount off of the blue book list price to derive low, medium, and high prices for higher efficacy

and lower efficacy lamps. (Baseline incandescent lamps received a slightly larger discount, as

State procurement contracts reflect).

For small diameter IRL (i.e. PAR30), DOE accounted for the future commoditization of

lamps under an energy conservation standard by using the incremental pricing of larger diameter

IRL (i.e., PAR38). DOE’s research indicated that the market for high efficiency larger diameter

IRL is well developed compared to the high efficacy small diameter IRL market. In addition,

both small and larger diameters IRL use the same fundamental technologies. Therefore, by using

the incremental pricing of large diameter IRL to develop pricing for small diameter IRL, DOE is

able to account for the commoditization of high efficacy residential IRL under an energy

conservation standard.

Once DOE calculated end­user prices, DOE added sales tax and, where appropriate,

installation costs, to derive the total, installed end­user cost. DOE used the medium lamp prices

for the reference case in the LCC, and analyzed low and high lamp prices to ascertain the impact

of these other price points (see Chapter 8). In the NIA (Chapter 10), DOE used only the medium

prices. DOE also developed a single average end­user price for the new and replacement ballasts

used and for the reflector compact fluorescent lamps (CFL) and a 65W BR30 lamp analyzed in

the NIA; DOE added sales tax and installation costs to each. Results for pricing impactsof CFL,

the 65W BR30 lamp, and ballasts are available in Appendix 7A.

7.2.1.1 General Service Fluorescent Lamps

To develop low­range prices for GSFL, DOE calculated a discount off the blue book

consistent with prices found in State procurement contracts. DOE mirrored the procurement

discount schedule by using a constant discount across lamp efficacies. As noted above, DOE

believes that this discount schedule reflects currently available pricing and takes into account

commoditization of standards­compliant lamps. Consistent with State procurement contracts,

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DOE assumed that these low­range prices include a distributor markup but no contractor markup.

As such, this is a lower bound of pricing that assumes the most favorable conditions.

For medium­range prices, DOE discounted the blue book price consistent with the

distributor pricing DOE received. This represents a typical discount for commercial institutions

on high volume (commodity) lamps. Again, DOE used a single discount across efficacies. DOE

added a contractor markup of 13 percent so that the resulting price would encompass both a

contractor and distributor markup. DOE obtained this contractor markup estimate from the

th 1 Ballast Rule published on September 19 , 2000. 65 FR 56740.

For the high­range prices, DOE deduced discounts on commodity lamps from blue book

prices for small quantity purchasers by observing Internet pricing and obtaining distributor

quotes. These prices also encompass both a contractor and a distributor markup. DOE obtained

data on actual prices for all GSFL it considered in the analyses.

7.2.1.2 Incandescent Reflector Lamps

For IRL, DOE modeled the residential and commercial markets as being comprised of

parabolic reflector (PAR)30 IRL and PAR38 IRL. DOE calculated the low­range price for large

diameter IRL as it did for GSFL. DOE compared State procurement contracts to blue books to

develop an average discount. For the medium­range price, DOE discounted the blue book price

to represent shipment weighted­average prices consumers paid for commonly available lamps.

For the high­range prices, DOE discounted the blue book price so that prices are in line with

observed Internet pricing.

For PAR 30 IRL, DOE used a slight variation to the methodology followed for GSFL and

PAR 38 IRL. In particular, to develop the PAR30 baseline lamp price, DOE used the price

differential between an incandescent (non­halogen) BR40 lamp and halogen PAR38 lamp. DOE

added this price differential to a incandescent (non­halogen) BR30 lamp price to obtain the

baseline halogen PAR30 lamp price. By developing prices for the baseline lamps from the

incandescent replacement lamps (BR 30 and BR 40 lamps), DOE is recognizing that the highvolume product currently being shipped may be a lower­efficacy (non­halogen) incandescent

lamp. Therefore, basing prices off of this lamp will most accurately represent the

commoditization of the halogen PAR 30 by 2012 (the effective date of the amended standard).

Similarly for higher­efficacy lamp designs, DOE developed a list price to discount from based on

the incremental blue book prices of PAR38 IRL. As such, DOE added the incremental end­user

blue book price of PAR38 lamps to the baseline PAR30 lamp price to derive higher­efficacy

PAR30 lamp list prices. DOE chose this methodology for PAR30 IRL because for PAR30

lamps, two of the standards­compliant lamps were not commercially available. In addition,

PAR30 lamps use the same fundamental technologies as PAR38 lamps, which serve a more

developed market.

7.2.2 Sales Tax

The sales tax represents State and local sales taxes applied to the end­user product price.

It is a multiplicative factor that increases the end­user product price. DOE obtained information

2

on State and local sales tax from the Sales Tax Clearinghouse. Table 7.2.1 shows the rates.

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These data represent weighted averages that include county and city rates. DOE then calculated

population­weighted average tax values for each Census division and four large States.

Developing this distribution allowed DOE to correlate the sales tax distribution with the

electricity price distribution (see Chapter 8), and the operating hour distribution (see Chapter 6)

DOE uses in the LCC spreadsheet. DOE also calculated a national, population­weighted average

sales tax for use as a single­value input to the LCC, should users want single­average results. 3 DOE also used this result in the NIA, where DOE did not use a distribution of inputs.

Table 7.2.1 State and Local Sales Tax Rates

State

Combined

State and

Local Tax

Rate

%

State

Combined

State and

Local Tax

Rate

%

State

Combined

State and

Local Tax

Rate

%

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

Dist. Of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

8.00

1.25

7.80

8.00

7.95

6.20

6.00

0.00

5.75

6.70

6.95

4.40

6.05

7.60

6.00

6.60

7.00

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

6.00

8.65

5.00

5.00

5.00

6.00

6.70

7.00

7.00

0.00

6.35

7.50

0.00

6.95

6.60

8.25

6.80

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

5.40

6.75

8.20

0.00

6.25

7.00

6.90

5.15

9.35

7.95

6.60

6.05

5.00

8.45

6.00

5.40

5.40

7.3 PRODUCT PRICE DETERMINATION RESULTS

Sections 7.3.1 and 7.3.2 present the low­, medium­, and high­range end­user prices DOE

used to analyze each lamp design it considered in the LCC and NIA. The prices do not include

tax. Section 7.3.3 provides the sales taxes DOE used in its analyses.

7.3.1 End­User Prices for General Service Fluorescent Lamps

The following tables present the end­user price results for GSFL.

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Table 7.3.1 End­User Prices for T12 Four­Foot Medium Bipin GSFL

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI* Light Output Price Price Price

lm/W** W hrs lm $ $ $

T12 40W Baseline 80.0 40 20,000 70 2,880 1.41 2.35 3.28

T12 34W Baseline 77.9 34 20,000 62 2,300 0.89 1.49 2.09

1 82.5 40 20,000 80 3,000 2.64 4.41 6.17

1 82.4 34 20,000 70 2,460 1.58 2.64 3.70

2 85.0 40 24,000 80 3,060 3.51 5.86 8.20

2 85.3 34 20,000 80 2,610 2.90 4.83 6.76

3 90.0 40 24,000 85 3,250 3.57 5.95 8.33

3 91.2 34 24,000 85 2,790 3.50 5.83 8.16

* CRI = color rendering index

** lm/W = lumens per Watt

Table 7.3.2 End­User Prices for T8 4­Foot Medium Bipin GSFL

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI Light Output Price Price Price

lm/W W hrs lm $ $ $

T8 32W Baseline/CSL

2 86.2 32.5 20,000 75 2,520 1.03 1.72 2.41

3 90.8 32.5 20,000 82 2,710 1.61 2.69 3.77

4 92.3 32.5 24,000 85 2,850 1.69 2.82 3.95

4 95.0 30 18,000 82 2,680 1.85 3.09 4.32

5 95.4 32.5 24,000 82 2,915 1.99 3.31 4.63

5 97.3 28 18,000 82 2,560 1.74 2.9 4.06

5 96.0 25 240,00 85 2,280 2.56 4.26 5.96

Table 7.3.3 End­User Prices for T12 Eight­Foot Single Pin Slimline GSFL

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI Light Output Price Price Price

lm/W W hrs lm $ $ $

T12 75W Baseline 85.6 75 12,000 70 5,906 3.28 5.47 7.66

1 87.3 75 12,000 80 6,157 5.07 8.45 11.83

T12 60W Baseline/CSL 1 87.6 60.5 12,000 62 4,664 1.93 3.21 4.49

2 92.0 75 15,000 80 6,370 5.60 9.34 13.07

2 92.6 60.5 12,000 70 5,152 3.24 5.40 7.56

3 97.5 60.5 15,000 73 5,480 4.20 7.00 9.80

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Table 7.3.4 End­User Prices for T8 Eight­Foot Single Pin Slimline

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI Light Output Price Price Price

lm/W W hrs lm $ $ $

T8 59W Baseline / CSL 3 94.8 60.1 15,000 75 5,130 2.32 3.87 5.42

4 98.2 60.1 15,000 82 5,428 3.55 5.92 8.28

5 101.5 60.1 18,000 85 5,795 4.03 6.72 9.41

5 101.8 57 24,000 81 5,450 3.66 6.10 8.54

5 103.6 55 18,000 82 5,415 3.43 5.72 8.00

Table 7.3.5 End­User Prices for T12 Eight­Foot Recessed Double Contact High Output

GSFL

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI Light Output Price Price Price

lm/W W hrs lm $ $ $

T12 110W Baseline 82.3 110 12,000 70 8,145 3.86 6.44 9.02

T12 95W Baseline 82.5 97 12,000 62 6,950 2.23 3.72 5.20

1 85.5 110 12,000 80 8,648 7.10 11.84 16.57

1 86.1 97 12,000 70 7,515 3.95 6.59 9.22

2 87.6 97 12,000 80 7,650 7.41 12.35 17.29

2 88.9 97 12,000 85 7,750 7.59 12.64 17.70

Table 7.3.6 End­User Prices for T8 Eight­Foot Recessed Double Contact High Output

GSFL

Lamp Lamp Lamp Mean Lamp Low Medium High

CSL Efficacy Power Lifetime CRI Light Output Price Price Price

lm/W W hrs lm $ $ $

3 91.9 86 24,000 78 7,100 3.94 6.57 9.19

3 93.0 86 18,000 75 7,200 4.03 6.72 9.41

4 95.3 86 18,000 86 7,800 4.84 8.07 11.30

7.3.2 End­User Prices for Incandescent Reflector Lamps

Within the range of IRL lamp wattages analyzed, DOE observed that lamp price did not

vary significantly by wattage. As a result, DOE did not vary price by wattage in its analysis.

In establishing baseline IRL prices, DOE noted a difference in the blue book prices of the

large diameter IRL and small diameter IRL, though they both use the same technologies. DOE

incorporated this observation in its pricing by discounting the two observed blue book prices

separately, and maintaining a price differential in the baselines of those sectors. As noted above,

for PAR30 lamps, two lamp designs (improved halogen and HIR) were not commercially

available. Therefore DOE could not directly discount blue book prices for these lamps.

However, PAR30 lamps use the same fundamental technologies as PAR38 lamps—higher

efficacy lamps characteristic of the commercial sector that serve a more developed market. DOE

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was able to derive prices for higher efficacy PAR30 lamps by adding the same incremental enduser price for the PAR38 lamps.

Table 7.3.7 presents the end­user price results for the two lamp shapes it considered for

the commercial sector. Table 7.3.8 presents the end­user price results for the two lamp shapes it

considered for the residential sector.

Table 7.3.7 End­User Prices for PAR38 IRL

Lamp Lamp

4.07

4.18

Low Medium High Lamp Type CSL Shape Lifetime Price Price Price

hrs $ $ $

Halogen PAR38 Baseline 2,500 3.20 4.80 6.40

PAR38 CSL 1 3,000 6.10 8.13

PAR38 CSL 2 3,000 6.26 8.35

Improved Halogen

HIR

Improved HIR PAR38 CSL 3 4,000 5.00 7.50 10.00

Table 7.3.8 End­User Prices for PAR30 IRL

Lamp Lamp Low Medium High Lamp Type CSL Shape Lifetime Price Price Price

hrs $ $

PAR30 Baseline 3,000 4.23 5.64

PAR30 CSL 1 3,000 5.53 7.38

PAR30 CSL 2 3,000 5.70 7.60

Halogen

Improved Halogen

HIR

Improved HIR PAR30 CSL 3 4,000

$

3.01

3.88

3.99

4.81 6.93 9.24

7.3.3 Sales Tax Results

Table 7.3.9 shows the distribution of sales tax rates DOE developed for the LCC and payback

period (PBP) analyses. The distribution ranges from a minimum of zero percent to a maximum

of 9.35 percent with a weighted average value of 6.9 percent. DOE used the average value of 6.9

percent in the NIA.

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Table 7.3.9 Regional Average Tax Rates

Division or Large State Name Division Weighted Sales Tax (%)

New England 4.98

Mid Atlantic 6.54

East North Central 6.56

West North Central 6.68

South Atlantic 6.03

East South Central 7.82

West South Central 8.33

Mountain 6.60

Pacific 5.02

New York State 8.25

California 7.95

Texas 7.95

Florida 6.70

U.S. Average 6.90

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REFERENCES

1 U.S. Department of Energy­Office of Energy Efficiency and Renewable Energy.

Energy Conservation Program for Consumer Products: Technical Support Document:

Energy Efficiency Standards for Consumer Products: Fluorescent Lamp Ballast

Proposed Rule. January, 2000. Washington, D.C.

http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/chap3.pdf

2 Sales Tax Clearinghouse. Aggregate State Tax Rates. 2007. (Last accessed May 25,

2007). http://thestc.com/STrates.stm The May 25, 2007 material from this website is

available in Docket # EE–2006–STD–0131. For more information, contact Brenda

Edwards Jones at (202) 586 2945.

3 U.S. Census Bureau: Interim Projections: Ranking of Census 2000 and Projected 2030

State Population and Change: 2000 to 2030. May, 2007. Washington, D.C.

http://www.census.gov/population/projections/PressTab1.xls

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