40590 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

DEPARTMENT OF ENERGY 

10 CFR Part 430 

[EERE–2014–BT–STD–0031] 

RIN 1904–AD20 

Energy Conservation Program: Energy 

Conservation Standards for Consumer 

Furnaces 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Notice of proposed rulemaking 

and request for comment. 

SUMMARY: The Energy Policy and 

Conservation Act, as amended 

(‘‘EPCA’’), prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including consumer furnaces. EPCA 

also requires the Department of Energy 

(‘‘DOE’’ or ‘‘the Department’’) to 

periodically determine whether morestringent, amended standards would be 

technologically feasible and 

economically justified, and would result 

in significant energy savings. In this 

notice of proposed rulemaking 

(‘‘NOPR’’), DOE proposes amended 

energy conservation standards for nonweatherized gas furnaces and mobile 

home gas furnaces, and also announces 

a public meeting webinar to receive 

comment on these proposed standards 

and associated analyses and results. 

DATES: 

Comments: DOE will accept 

comments, data, and information 

regarding this NOPR no later than 

September 6, 2022. See section VII, 

‘‘Public Participation,’’ of this document 

for details. 

Comments regarding the likely 

competitive impact of the proposed 

standard should be sent to the 

Department of Justice contact listed in 

the ADDRESSES section on or before 

August 22, 2022. DOE notes that the 

Department of Justice is required to 

transmit its determination regarding the 

competitive impact of the proposed 

standard to DOE no later than 

September 6, 2022. The determination 

and analysis by the Department of 

Justice will be published by DOE in the 

Federal Register. Commenters who 

want to have their comments considered 

by DOE as part of any future rulemaking 

resulting from this NOPR also should 

submit such comments to DOE in 

accordance with the procedures detailed 

in this proposed rulemaking. 

Meeting: DOE will hold a public 

meeting via webinar on Wednesday, 

August 3, 2022, from 12:30 p.m. to 5:00 

p.m. See section VII, ‘‘Public 

Participation,’’ for webinar registration 

information, participant instructions, 

and information about the capabilities 

available to webinar participants. 

ADDRESSES: Interested persons are 

encouraged to submit comments using 

the Federal eRulemaking Portal at 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Alternatively, interested persons may 

submit comments, identified by docket 

number EERE–2014–BT–STD–0031 

and/or regulatory information number 

(‘‘RIN’’) 1904–AD20, by any of the 

following methods: 

(1) Federal eRulemaking Portal: 

www.regulations.gov. Follow the 

instructions for submitting comments. 

(2) Email: 

ResFurnaces2014STD0031@ee.doe.gov. 

Include the docket number EERE–2014– 

BT–STD–0031 in the subject line of the 

message. 

No telefacsimilies (‘‘faxes’’) will be 

accepted. For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see section VII of this document (Public 

Participation). 

Although DOE has routinely accepted 

public comment submissions through a 

variety of mechanisms, including postal 

mail and hand delivery/courier, the 

Department has found it necessary to 

make temporary modifications to the 

comment submission process in light of 

the ongoing coronavirus (‘‘COVID–19’’) 

pandemic. DOE is currently suspending 

receipt of public comments via postal 

mail and hand delivery/courier. If a 

commenter finds that this change poses 

an undue hardship, please contact 

Appliance Standards Program staff at 

(202) 586–1445 to discuss the need for 

alternative arrangements. Once the 

COVID–19 pandemic health emergency 

is resolved, DOE anticipates resuming 

all of its regular options for public 

comment submission, including postal 

mail and hand delivery/courier. 

Docket: The docket for this activity, 

which includes Federal Register 

notices, comments, and other 

supporting documents/materials, is 

available for review at 

www.regulations.gov. All documents in 

the docket are listed in the 

www.regulations.gov index. However, 

not all documents listed in the index 

may be publicly available, such as 

information that is exempt from public 

disclosure. 

The docket web page can be found at 

www.regulations.gov/docket?D=EERE2014-BT-STD-0031. The docket web 

page contains instructions on how to 

access all documents, including public 

comments, in the docket. See section VII 

(Public Participation) for information on 

how to submit comments through 

www.regulations.gov. 

Written comments regarding the 

burden-hour estimates or other aspects 

of the collection-of-information 

requirements contained in this proposed 

rule may be submitted to Office of 

Energy Efficiency and Renewable 

Energy following the instructions at 

www.RegInfo.gov. 

EPCA requires the U.S. Attorney 

General to provide DOE a written 

determination of whether the proposed 

standard is likely to lessen competition. 

The U.S. Department of Justice (‘‘DOJ’’) 

Antitrust Division invites input from 

market participants and other interested 

persons with views on the likely 

competitive impact of the proposed 

standard. Interested persons may 

contact the Antitrust Division at 

energy.standards@usdoj.gov in advance 

of the date specified in the DATES

section. Please indicate in the ‘‘Subject’’ 

line of your email the title and Docket 

Number of this rulemaking. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Julia Hegarty, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Office, EE–5B, 1000 

Independence Avenue SW, Washington, 

DC 20585–0121. Telephone: (240) 597– 

6737. Email: 

ApplianceStandardsQuestions@

ee.doe.gov. 

Mr. Eric Stas, U.S. Department of 

Energy, Office of the General Counsel, 

GC–33, 1000 Independence Avenue SW, 

Washington, DC 20585–0121. 

Telephone: (202) 586–5827. Email: 

Eric.Stas@hq.doe.gov. 

For further information on how to 

submit a comment, review other public 

comments and the docket, or participate 

in the public meeting webinar, contact 

the Appliance and Equipment 

Standards Program staff at (202) 287– 

1445 or by email: 

ApplianceStandardsQuestions@

ee.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Synopsis of the Notice of Proposed 

Rulemaking 

A. Benefits and Costs to Consumers 

B. Impact on Manufacturers 

C. National Benefits and Costs 

1. AFUE Standards 

2. Standby Mode and Off Mode Standards 

3. Combined Results for Proposed AFUE 

Standards and Standby Mode and Off 

Mode Standards 

D. Conclusion 

II. Introduction 

A. Authority 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40591 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

Consumer Furnaces 

3. Current Standards in Canada 

C. Deviation From Appendix A 

III. General Discussion 

A. Product Classes and Scope of Coverage 

B. Test Procedure 

C. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

D. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

E. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Savings in Operating Costs Compared to 

Increase in Price (LCC and PBP) 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Products 

e. Impact of Any Lessening of Competition 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

F. Other Issues 

1. Furnace Sizing Requirements Based on 

ACCA Manual J and Manual S 

2. Compliance Date 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

1. Scope of Coverage and Product Classes 

a. General Approach 

b. Condensing and Non-Condensing 

Furnaces 

c. Mobile Home Gas Furnaces 

d. Standby Mode and Off Mode 

2. Technology Options 

B. Screening Analysis 

1. Screened-Out Technologies 

2. Remaining Technologies 

C. Engineering Analysis 

1. Efficiency Analysis 

a. Baseline Efficiency Level and Product 

Characteristics 

b. Higher Energy Efficiency Levels 

2. Cost Analysis 

a. Teardown Analysis 

b. Cost Estimation Method 

c. Manufacturing Production Costs 

d. Cost-Efficiency Relationship 

e. Manufacturer Mark-Up 

f. Manufacturer Interviews 

3. Electric Furnaces 

D. Mark-Ups Analysis 

E. Energy Use Analysis 

1. Building Sample 

2. Furnace Sizing 

3. Furnace Active Mode Energy Use 

a. Adjustments to Energy Use Estimates 

4. Furnace Electricity Use 

5. Standby Mode and Off Mode 

F. Life-Cycle Cost and Payback Period 

Analyses 

1. General Method 

2. Consumer Product Cost 

3. Installation Cost 

a. Basic Installation Costs 

b. Additional Installation Costs for NonWeatherized Gas Furnaces 

c. Additional Installation Costs for Mobile 

Home Gas Furnaces 

d. Contractor Survey and DOE’s Sources 

e. Summary of Installation Costs 

4. Annual Energy Consumption 

5. Energy Prices 

6. Maintenance and Repair Costs 

7. Product Lifetime 

8. Discount Rates 

9. Energy Efficiency Distribution in the NoNew-Standards Case 

a. Condensing Furnace Market Share in 

Compliance Year 

b. Market Shares of Different Condensing 

Furnace Efficiency Levels 

c. Assignment of Furnace Efficiency to 

Sampled Households 

10. Alternative Size Thresholds for Small 

Consumer Gas Furnaces 

a. Accounting for Impacts of Downsized 

Equipment 

11. Accounting for Product Switching 

Under Potential Standards 

a. Product Switching Resulting From 

Standards for Non-Weatherized Gas 

Furnaces 

b. Switching Resulting From Standards for 

Mobile Home Gas Furnaces 

12. Accounting for Furnace Repair as an 

Alternative to Replacement Under 

Potential Standards 

13. Payback Period Analysis 

G. Shipments Analysis 

1. Shipments Model and Inputs 

a. Historical Shipments Data 

b. Shipment Projections in No-New 

Standards Case 

2. Impact of Potential Standards on 

Shipments 

a. Impact of Equipment Switching 

b. Impact of Repair vs. Replace 

H. National Impact Analysis 

1. Product Efficiency Trends 

2. National Energy Savings 

3. Net Present Value Analysis 

I. Consumer Subgroup Analysis 

1. Low-Income Households 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

and Key Inputs 

a. Manufacturer Production Costs 

b. Shipments Projections 

c. Capital and Product Conversion Costs 

d. Manufacturer Mark-up Scenarios 

3. Manufacturer Interviews 

a. Product Switching 

b. High Installation Costs for Some 

Consumers 

c. Negative Impacts on Industry 

Profitability 

K. Emissions Analysis 

1. Air Quality Regulations Incorporated in 

DOE’s Analysis 

L. Monetizing Emissions Impacts 

1. Monetization of Greenhouse Gas 

Emissions 

a. Social Cost of Carbon 

b. Social Cost of Methane and Nitrous 

Oxide 

2. Monetization of Other Air Pollutants 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash Flow Analysis Results 

b. Direct Impacts on Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Subgroups of Manufacturers 

e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Consumer Costs 

and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance of 

Products 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

8. Summary of National Economic Impacts 

C. Conclusion 

1. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnace and Mobile Home Gas Furnace 

AFUE Standards 

2. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnace and Mobile Home Gas Furnace 

Standby Mode and Off Mode Standards 

3. Benefits and Costs of the Proposed 

Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under the Regulatory Flexibility 

Act 

1. Description of Reasons Why Action Is 

Being Considered 

2. Objectives of, and Legal Basis for, Rule 

3. Description of Estimated Number of 

Small Entities Regulated 

4. Description and Estimate of Compliance 

Requirements Including Differences in 

Cost, if Any, for Different Groups of 

Small Entities 

a. AFUE Standards 

b. Standby Mode and Off Mode Standards 

5. Duplication, Overlap, and Conflict With 

Other Rules and Regulations 

6. Significant Alternatives to the Rule 

C. Review Under the Paperwork Reduction 

Act of 1995 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

VII. Public Participation 

A. Participation in the Public Meeting 

Webinar 

B. Procedure for Submitting Prepared 

General Statements for Distribution 

C. Conduct of the Public Meeting Webinar 

D. Submission of Comments 

E. Issues on Which DOE Seeks Comment 

VIII. Approval of the Office of the Secretary 


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40592 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

1For editorial reasons, upon codification in the 

U.S. Code, Part B was redesignated Part A. 

2All references to EPCA in this document refer 

to the statute as amended through the Energy Act 

of 2020, Public Law 116–260 (Dec. 27, 2020), which 

reflects the last statutory amendments that impact 

Parts A and A–1 of EPCA. 

3The average LCC savings refer to consumers that 

are affected by a standard and are measured relative 

to the efficiency distribution in the no-newstandards case, which depicts the market in the 

compliance year in the absence of new or amended 

standards (see section IV.F.10 of this NOPR). The 

simple PBP, which is designed to compare specific 

efficiency levels, is measured relative to the 

baseline product (see section IV.C of this NOPR). 

I. Synopsis of the Notice of Proposed 

Rulemaking 

Title III, Part B1 of EPCA established 

the Energy Conservation Program for 

Consumer Products Other Than 

Automobiles.2 (42 U.S.C. 6291–6309) 

These products include nonweatherized gas furnaces (‘‘NWGF’’) and 

mobile home gas furnaces (‘‘MHGF’’), 

the subjects of this rulemaking. (42 

U.S.C. 6292(a)(5)) 

Pursuant to EPCA, any new or 

amended energy conservation standard 

must be designed to achieve the 

maximum improvement in energy 

efficiency that DOE determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) Furthermore, the new or 

amended standard must result in 

significant conservation of energy. (42 

U.S.C. 6295(o)(3)(B)) EPCA specifically 

provides that DOE must conduct two 

rounds of energy conservation standard 

rulemakings for NWGFs and MHGFs. 

(42 U.S.C. 6295(f)(4)(B) and (C)) The 

statute also requires that not later than 

6 years after issuance of any final rule 

establishing or amending a standard, 

DOE must publish either a notice of 

determination that standards for the 

product do not need to be amended, or 

a notice of proposed rulemaking 

(‘‘NOPR’’) including new proposed 

energy conservation standards. (42 

U.S.C. 6295(m)(1)) This rulemaking is 

being undertaken pursuant to the 

statutorily-required second round of 

rulemaking for NWGFs and MHGFs, and 

once completed, it will also satisfy the 

statutorily-required 6-year-lookback 

review. 

In accordance with these and other 

relevant statutory provisions discussed 

in this document, DOE is proposing 

amended and new energy conservation 

standards for the subject consumer 

furnaces (i.e., NWGFs and MHGFs). In 

this document, DOE is proposing 

amended active mode energy 

conservation standards for NWGFs and 

MHGFs, which are expressed in terms of 

minimum annual fuel utilization 

efficiency (‘‘AFUE’’), and are shown in 

Table I.1 of this document. DOE is also 

proposing new standby mode and off 

mode energy standards for NWGFs and 

MHGFs, which are expressed in terms of 

watts, and are shown in Table I.2 of this 

document. These proposed standards 

would apply to all NWGFs and MHGFs 

manufactured in, or imported into, the 

United States starting on the date 5 

years after the publication of the final 

rule for this rulemaking. 

TABLE I.1—PROPOSED AFUE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES

Product class AFUE 

(%) 

Non-Weatherized Gas Furnaces ......................................................................................................................................................... 95 

Mobile Home Gas Furnaces ................................................................................................................................................................ 95 

TABLE I.2—PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES

Product class 

Standby mode 

standard: 

PW,SB

(watts) 

Off mode 

standard: 

PW,OFF

(watts) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 8.5 8.5 

Mobile Home Gas Furnaces .................................................................................................................................... 8.5 8.5 

A. Benefits and Costs to Consumers 

Table I.3 and Table I.4 summarize 

DOE’s evaluation of the economic 

impacts of the proposed AFUE 

standards and standby mode/off mode 

standards, respectively, on consumers of 

NWGFs and MHGFs, as measured by the 

average life-cycle cost (‘‘LCC’’) savings 

and the simple payback period 

(‘‘PBP’’).3 The average LCC savings are 

positive for all product classes, and the 

PBP is less than the average lifetime of 

both NWGFs and MHGFs, which is 

estimated to be 21.4 years (see section 

IV.F of this document). 

TABLE I.3—IMPACTS OF PROPOSED AFUE ENERGY CONSERVATION STANDARDS ON CONSUMERS OF NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES

Product class 

Average LCC 

savings 

(2020$) 

Simple 

payback 

period 

(years) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 464 7.2 

Mobile Home Gas Furnaces .................................................................................................................................... 526 7.5 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40593 

4All monetary values in this document are 

expressed in 2020 dollars (2020$). 

5This quantity refers to full-fuel-cycle (‘‘FFC’’) 

energy savings. FFC energy savings includes the 

energy consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, natural gas, 

petroleum fuels), and, thus, presents a more 

complete picture of the impacts of energy efficiency 

standards. For more information on the FFC metric, 

see section IV.H.2 of this NOPR. 

6A metric ton is equivalent to 1.1 short tons. 

Results for emissions other than CO2 are presented 

in short tons. 

7 DOE calculated emissions reductions relative to 

the no-new-standards-case, which reflects key 

assumptions in the Annual Energy Outlook 2021 

(‘‘AEO2021’’). AEO2021 represents current Federal 

and State legislation and final implementation of 

regulations as of the time of its preparation. See 

section IV.K for further discussion of AEO2021 

assumptions that effect air pollutant emissions. The 

increase in emissions of some pollutants is due to 

an increase in electricity consumption. 

8See Interagency Working Group on Social Cost 

of Greenhouse Gases, Technical Support Document: 

Social Cost of Carbon, Methane, and Nitrous Oxide. 

Interim Estimates Under Executive Order 13990, 

Washington, DC (February 2021) (Available at: 

www.whitehouse.gov/wp-content/uploads/2021/02/ 

TechnicalSupportDocument_SocialCostofCarbon

MethaneNitrousOxide.pdf) (Last accessed March 

17, 2022). 

TABLE I.4—IMPACTS OF PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS ON

CONSUMERS OF NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Product class 

Average LCC 

savings 

(2020$) 

Simple 

payback 

period 

(years) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 26 2.0 

Mobile Home Gas Furnaces .................................................................................................................................... 27 1.7 

DOE’s analysis of the anticipated 

impacts of the proposed standards on 

consumers is described in section IV.F 

of this document. 

B. Impact on Manufacturers 

The industry net present value 

(‘‘INPV’’) is the sum of discounted 

industry cash flows starting with the 

publication year (2022) of the NOPR and 

extending over a 30-year period 

following the expected compliance date 

of the standards (2022 to 2058). The 

impacts of the AFUE standards are 

independently considered from the 

impacts of the standby mode and off 

mode standards, as manufacturers 

would utilize different technologies to 

meet these two standards. Using a real 

discount rate of 6.4 percent, DOE 

estimates that the INPV for 

manufacturers of NWGFs and MHGFs in 

the case without new or amended 

standards is $1,411.8 million in 2020$. 

Under the proposed AFUE standards, 

the change in INPV is estimated to range 

from ¥26.9 percent to ¥2.2 percent, 

which is a reduction of approximately 

¥$380.3 million to ¥$30.5 million. 

Under the proposed standby mode and 

off mode standards, the change in INPV 

is estimated to range from ¥0.1 percent 

to 0.4 percent, which is a change of 

approximately ¥$2.1 million to $5.0 

million. When evaluating the proposed 

AFUE and proposed standby mode and 

off mode standards together, the INPV 

impacts are additive. The combined 

change in INPV is estimated to range 

from ¥27.1 percent to ¥1.8 percent, 

which is a reduction of approximately 

¥$382.4 million to ¥$25.5 million. In 

order to bring products into compliance 

with the proposed new and amended 

standards, DOE expects industry to 

incur total conversion costs of $150.6 

million. DOE’s analysis of the impacts 

of the proposed energy conservation 

standards on manufacturers is described 

in section IV.J of this document. The 

analytic results of the MIA are presented 

in section V.B.2 of this document. 

C. National Benefits and Costs 4

Benefits and costs for the proposed 

AFUE standards are presented and 

considered separately from benefits and 

costs for the proposed standby mode 

and off mode standards because it was 

not feasible to develop a single, 

integrated standard. As discussed in the 

October 20, 2010, test procedure final 

rule for consumer furnaces and boilers, 

DOE concluded that due to the 

magnitude of the active mode energy 

consumption as compared to the 

standby mode and off mode electrical 

consumption, an integrated metric 

would not be feasible because the 

standby mode and off mode electrical 

consumption would be a de minimis 

portion of the overall energy 

consumption. 75 FR 64621, 64627. 

Thus, an integrated metric could not be 

used to effectively regulate the standby 

mode and off mode energy 

consumption. 

1. AFUE Standards 

DOE’s analyses indicate that the 

proposed energy conservation standards 

for NWGFs and MHGFs would save a 

significant amount of energy. Relative to 

the case without amended AFUE 

standards, the lifetime energy savings 

for NWGFs and MHGFs purchased in 

the 30-year period that begins in the 

anticipated year of compliance with the 

amended AFUE standards (2029–2058), 

are estimated to be amount to 5.48 

quadrillion British thermal units 

(‘‘Btu’’), or ‘‘quads.’’ 5 This represents a 

savings of 3.5 percent relative to the 

energy use of these products in the case 

without amended or new standards 

(referred to as the ‘‘no-new-standards 

case’’). 

The cumulative net present value 

(‘‘NPV’’) of total consumer benefits of 

the proposed standards for NWGFs and 

MHGFs ranges from $6.2 billion (at a 7- 

percent discount rate) to $21.6 billion 

(at a 3-percent discount rate). This NPV 

expresses the estimated total value of 

future operating-cost savings minus the 

estimated increased product and 

installation costs for NWGFs and 

MHGFs purchased in 2029–2058. 

In addition, the proposed AFUE 

standards for NWGFs and MHGFs are 

projected to yield significant 

environmental benefits. DOE estimates 

that the proposed standards would 

result in cumulative emission 

reductions (over the same period as for 

energy savings) of 363 million metric 

tons (‘‘Mt’’) 6 of carbon dioxide (‘‘CO2’’), 

0.8 million tons of nitrogen oxides 

(‘‘NOX’’), and 5.1 million tons of 

methane (‘‘CH4’’). The proposed 

standards would result in cumulative 

emission increases of 52 thousand tons 

of sulfur dioxide (‘‘SO2’’), 0.3 thousand 

tons of nitrous oxide (‘‘N2O’’), and 0.3 

tons of mercury (‘‘Hg’’).7

DOE estimates the value of climate 

benefits from a reduction in greenhouse 

gases using four different estimates of 

the social cost of CO2 (‘‘SC–CO2’’), the 

social cost of methane (‘‘SC–CH4’’), and 

the social cost of nitrous oxide (‘‘SC– 

N2O’’). Together these represent the 

social cost of greenhouse gases (SC– 

GHG). DOE used interim SC–GHG 

values developed by an Interagency 

Working Group on the Social Cost of 

Greenhouse Gases (IWG).8 The 

derivation of these values is discussed 

in section IV.L of this document. For 


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40594 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

9On March 16, 2022, the Fifth Circuit Court of 

Appeals (No. 22–30087) granted the Federal 

government’s emergency motion for stay pending 

appeal of the February 11, 2022, preliminary 

injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth 

Circuit’s order, the preliminary injunction is no 

longer in effect, pending resolution of the Federal 

government’s appeal of that injunction or a further 

court order. Among other things, the preliminary 

injunction enjoined the defendants in that case 

from ‘‘adopting, employing, treating as binding, or 

relying upon’’ the interim estimates of the social 

cost of greenhouse gases—which were issued by the 

Interagency Working Group on the Social Cost of 

Greenhouse Gases on February 26, 2021—to 

monetize the benefits of reducing greenhouse gas 

emissions. In the absence of further intervening 

court orders, DOE will revert to its approach prior 

to the injunction and present monetized benefits 

where appropriate and permissible under law. 

10To convert the time-series of costs and benefits 

into annualized values, DOE calculated a present 

value in 2029, the year used for discounting the 

NPV of total consumer costs and savings. For the 

benefits, DOE calculated a present value associated 

with each year’s shipments in the year in which the 

shipments occur (e.g., 2030), and then discounted 

the present value from each year to 2029. The 

calculation uses discount rates of 3 and 7 percent 

for all costs and benefits, as shown in Table I.6 of 

this document. Using the present value, DOE then 

calculated the fixed annual payment over a 30-year 

period, starting in the compliance year that yields 

the same present value. 

presentational purposes, the climate 

benefits associated with the average SC– 

GHG at a 3-percent discount rate are 

estimated to be $16.2 billion. DOE does 

not have a single central SC–GHG point 

estimate and it emphasizes the 

importance and value of considering the 

benefits calculated using all four SC– 

GHG estimates.9

DOE also estimates health benefits 

from SO2 and NOX emissions 

reductions. DOE estimates the present 

value of the health benefits would be 

$5.9 billion using a 7-percent discount 

rate, and $19.3 billion using a 3-percent 

discount rate. DOE is currently only 

monetizing (for SO2 and NOX) PM2.5

precursor health benefits and (for NOX) 

ozone precursor health benefits but will 

continue to assess the ability to 

monetize other effects such as health 

benefits from reductions in direct PM2.5

emissions. 

Table I.5 summarizes the monetized 

benefits and costs expected to result 

from the proposed AFUE standards for 

NWGFs and MHGFs. There are other 

important unquantified effects, 

including certain unquantified climate 

benefits, unquantified public health 

benefits from the reduction of toxic air 

pollutants and other emissions, 

unquantified energy security benefits, 

and distributional effects, among others. 

TABLE I.5—SUMMARY OF MONETIZED

BENEFITS AND COSTS OF PROPOSED

AFUE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME

GAS FURNACES (TSL 8) 

Billion 2020$ 

3% discount rate 

Consumer Operating Cost 

Savings ............................. 29.7 

Climate Benefits * ................. 16.2 

Net Health Benefits ** ........... 19.3 

Total Benefits † ..................... 65.2 

TABLE I.5—SUMMARY OF MONETIZED

BENEFITS AND COSTS OF PROPOSED

AFUE ENERGY CONSERVATION

STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME

GAS FURNACES (TSL 8)—Continued 

Billion 2020$ 

Consumer Incremental Product Costs ‡ ......................... 8.2 

Net Benefits .......................... 57.1 

7% discount rate 

Consumer Operating Cost 

Savings ............................. 10.2 

Climate Benefits * ................. 16.2 

Net Health Benefits ** ........... 5.9 

Total Benefits † ..................... 32.2 

Consumer Incremental Product Costs ‡ ......................... 4.0 

Net Benefits .......................... 28.2 

Note: This table presents the costs and 

benefits associated with consumer furnaces 

shipped in 2029–2058. These results include 

benefits to consumers which accrue after 2058 

from the products shipped in 2029–2058. 

* Climate benefits are calculated using four 

different estimates of the social cost of carbon 

(SC–CO2), methane (SC–CH4), and nitrous 

oxide (SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 

95th percentile at 3 percent discount rate), as 

shown in Table V.36, Table V.38, and Table 

V.40. Together these represent the global social cost of greenhouse gases (SC–GHG). For 

presentational purposes of this table, the climate benefits associated with the average 

SC–GHG at a 3 percent discount rate are 

shown, but the Department does not have a 

single central SC–GHG point estimate. See 

section. IV.L of this document for more details. 

On March 16, 2022, the Fifth Circuit Court of 

Appeals (No. 22–30087) granted the Federal 

government’s emergency motion for stay 

pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. 

Biden, No. 21–cv–1074–JDC–KK (W.D. La.). 

As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. 

Among other things, the preliminary injunction 

enjoined the defendants in that case from 

‘‘adopting, employing, treating as binding, or 

relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on 

the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of 

reducing greenhouse gas emissions. In the 

absence of further intervening court orders, 

DOE will revert to its approach prior to the injunction and present monetized benefits where 

appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is 

currently only monetizing (for SO2 and NOX) 

PM2.5 precursor health benefits and (for NOX) 

ozone precursor health benefits, but will continue to assess the ability to monetize other 

effects such as health benefits from reductions 

in direct PM2.5 emissions. See section IV.L of 

this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can 

be monetized. For presentation purposes, total 

and net benefits for both the 3-percent and 7- 

percent cases are presented using the average SC–GHG with 3-percent discount rate, but 

the Department does not have a single central 

SC–GHG point estimate. DOE emphasizes the 

importance and value of considering the benefits calculated using all four SC–GHG estimates. See Table V.46 for net benefits using 

all four SC–GHG estimates. 

‡ Costs include incremental equipment 

costs, as well as installation costs. 

The benefits and costs of the proposed 

AFUE standards, for NWGFs and 

MHGFs sold in 2029–2058, can also be 

expressed in terms of annualized values. 

The monetary values for the total 

annualized net benefits are: (1) the 

reduced consumer operating costs, 

minus (2) the increases in product 

purchase costs and installation costs, 

plus (3) the value of climate and health 

benefits of emission reductions, all 

annualized.10

The national operating cost savings 

are domestic private U.S. consumer 

monetary savings that occur as a result 

of purchasing the covered products and 

are measured for the lifetime of NWGFs 

and MHGFs shipped in 2029–2058. The 

health benefits associated with reduced 

emissions achieved as a result of the 

proposed standards are also calculated 

based on the lifetime of NWGFs and 

MHGFs shipped in 2029–2058. Total 

benefits for both the 3-percent and 7- 

percent cases are presented using the 

average GHG social costs with 3-percent 

discount rate. Estimates of SC–GHG 

values are presented for all four 

discount rates in section V.B.8 of this 

document. Table I.6 presents the total 

estimated monetized benefits and costs 

associated with the proposed AFUE 

standard, expressed in terms of 

annualized values. The results under 

the primary estimate are as follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated cost of 

the AFUE standards proposed in this 

rule is $524 million per year in 

increased equipment costs, while the 

estimated annual benefits would be 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40595 

11This quantity refers to FFC energy savings. FFC 

energy savings includes the energy consumed in 

extracting, processing, and transporting primary 

fuels (i.e., coal, natural gas, petroleum fuels), and, 

thus, presents a more complete picture of the 

impacts of energy efficiency standards. For more 

information on the FFC metric, see section IV.H.2 

of this NOPR. 

$1,320 million in reduced equipment 

operating costs, $1,015 million in 

climate benefits, and $760 million in 

health benefits (accounting for reduced 

NOX emissions and increased SO2

emissions). In this case, the net benefit 

amounts to $2,571 million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed AFUE standards for 

NWGFs and MHGFs is $511 million per 

year in increased equipment costs, 

while the estimated annual benefits 

would be $1,865 million in reduced 

operating costs, $1,015 million in 

climate benefits, and $1,213 million in 

health benefits (accounting for reduced 

NOX emissions and increased SO2

emissions). In this case, the net benefit 

would amount to $3,581 million per 

year. 

TABLE I.6—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED AFUE STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 8) 

Million 2020$/year 

Primary 

estimate 

Low-netbenefits 

estimate 

High-netbenefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ............................................................................................. 1,865 1,891 1,937 

Climate Benefits * ......................................................................................................................... 1,015 1,000 1,042 

Health Benefits ** ......................................................................................................................... 1,213 1,197 1,251 

Total Benefits † ............................................................................................................................ 4,093 4,088 4,230 

Consumer Incremental Product Costs ‡ ...................................................................................... 511 508 461 

Net Benefits ................................................................................................................................. 3,581 3,580 3,769 

7% discount rate 

Consumer Operating Cost Savings ............................................................................................. 1,320 1,338 1,352 

Climate Benefits * ......................................................................................................................... 1,015 1,000 1,042 

Health Benefits ** ......................................................................................................................... 760 751 780 

Total Benefits † ............................................................................................................................ 3,095 3,089 3,173 

Consumer Incremental Product Costs ‡ ...................................................................................... 524 516 471 

Net Benefits ................................................................................................................................. 2,571 2,573 2,702 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational 

purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department 

does not have a single central SC–GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using 

all four SC–GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the federal government’s emergency 

motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. 

La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the federal government’s appeal 

of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency 

Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and presents monetized benefits 

where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits infor both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs, as well as installation costs. 

DOE’s analysis of the national impacts 

of the proposed standards is described 

in sections IV.H, IV.K, and IV.L of this 

document. 

2. Standby Mode and Off Mode 

Standards 

For standby mode and off mode 

standards, relative to the case without 

new standards, the lifetime energy 

savings for NWGFs and MHGFs 

purchased in the 30-year period that 

begins in the anticipated year of 

compliance with the new standby mode 

and off mode standards (2029–2058), are 

estimated to be amount to 0.28 quads.11

This represents a savings of 16 percent 

relative to the energy use of these 

products in the no-new-standards case. 

The cumulative NPV of total 

consumer benefits of the proposed 

standby mode and off mode standards 

for NWGFs and MHGFs ranges from 

$1.1 billion (at a 7-percent discount 

rate) to $3.4 billion (at a 3-percent 

discount rate). This NPV expresses the 

estimated total value of future 

operating-cost savings minus the 

estimated increased product costs for 

NWGFs and MHGFs purchased in 2029– 

2058. 

In addition, the proposed standby 

mode and off mode standards for 

NWGFs and MHGFs are projected to 

yield significant environmental benefits. 

DOE estimates that the proposed 

standards would result in cumulative 

emission reductions (over the same 

period as for energy savings) of 9.6 Mt 

of CO2, 4.5 thousand tons of SO2, 13.5 

thousand tons of NOX, 65.9 thousand 

tons of CH4, 0.1 thousand tons of N2O, 

and 0.03 tons of mercury Hg. 

DOE estimates the value of climate 

benefits from a reduction in greenhouse 

gases using four different estimates of 

the SC–CO2, the SC–CH4, and the SC– 

N2O. Together these represent the SC– 


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40596 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

12See Interagency Working Group on Social Cost 

of Greenhouse Gases, Technical Support Document: 

Social Cost of Carbon, Methane, and Nitrous Oxide. 

Interim Estimates Under Executive Order 13990, 

Washington, DC, February 2021. Available at: 

www.whitehouse.gov/wp-content/uploads/2021/02/ 

TechnicalSupportDocument_SocialCostofCarbon

MethaneNitrousOxide.pdf (last accessed March 17, 

2022). 

13On March 16, 2022, the Fifth Circuit Court of 

Appeals (No. 22–30087) granted the Federal 

government’s emergency motion for stay pending 

appeal of the February 11, 2022, preliminary 

injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth 

Circuit’s order, the preliminary injunction is no 

longer in effect, pending resolution of the Federal 

government’s appeal of that injunction or a further 

court order. Among other things, the preliminary 

injunction enjoined the defendants in that case 

from ‘‘adopting, employing, treating as binding, or 

relying upon’’ the interim estimates of the social 

cost of greenhouse gases—which were issued by the 

Interagency Working Group on the Social Cost of 

Greenhouse Gases on February 26, 2021—to 

monetize the benefits of reducing greenhouse gas 

emissions. In the absence of further intervening 

court orders, DOE will revert to its approach prior 

to the injunction and present monetized benefits 

where appropriate and permissible under law. 

14 DOE estimated the monetized value of SO2 and 

NOX emissions reductions associated with site and 

electricity savings using benefit-per-ton estimates 

from the scientific literature. See section IV.L.2 of 

this document for further discussion. 

GHG. DOE used interim SC–GHG values 

developed by an IWG on the Social Cost 

of Greenhouse Gases.12 The derivation 

of these values is discussed in section 

IV.L of this document. For 

presentational purposes, the climate 

benefits associated with the average SC– 

GHG at a 3-percent discount rate are 

estimated to be $0.4 billion. DOE does 

not have a single central SC–GHG point 

estimate and it emphasizes the 

importance and value of considering the 

benefits calculated using all four SC– 

GHG estimates.13

DOE also estimates health benefits 

from SO2 and NOX emissions 

reductions.14 DOE estimates the present 

value of the health benefits would be 

$0.2 billion using a 7-percent discount 

rate, and $0.6 billion using a 3-percent 

discount rate. DOE is currently only 

monetizing (for SO2 and NOX) PM2.5

precursor health benefits and (for NOX) 

ozone precursor health benefits but will 

continue to assess the ability to 

monetize other effects such as health 

benefits from reductions in direct PM2.5

emissions. 

Table I.7 summarizes the monetized 

benefits and costs expected to result 

from the proposed standby mode and off 

mode standards for NWGFs and 

MHGFs. There are other important 

unquantified effects, including certain 

unquantified climate benefits, 

unquantified public health benefits from 

the reduction of toxic air pollutants and 

other emissions, unquantified energy 

security benefits, and distributional 

effects, among others. 

TABLE I.7—SUMMARY OF MONETIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE ENERGY

CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Billion 2020$ 

3% discount rate 

Consumer Operating Cost Savings ..................................................................................................................................................... 3.6 

Climate Benefits * ................................................................................................................................................................................. 0.4 

Health Benefits ** ................................................................................................................................................................................. 0.6 

Total Benefits † .................................................................................................................................................................................... 4.6 

Consumer Incremental Product Costs ‡ .............................................................................................................................................. 0.2 

Net Benefits ......................................................................................................................................................................................... 4.4 

7% discount rate 

Consumer Operating Cost Savings ..................................................................................................................................................... 1.2 

Climate Benefits * ................................................................................................................................................................................. 0.4 

Health Benefits ** ................................................................................................................................................................................. 0.2 

Total Benefits † .................................................................................................................................................................................... 1.8 

Consumer Incremental Product Costs ‡ .............................................................................................................................................. 0.1 

Net Benefits ......................................................................................................................................................................................... 1.7 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate), as shown in Table 

V.37, Table V.39, Table V.41. Together these represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of 

this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have 

a single central SC–GHG point estimate. See section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no 

longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the 

social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 

26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to 

its approach prior to the injunction and present monetized benefits where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can be monetized. For presentation purposes, total and net 

benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department 

does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using 

all four SC–GHG estimates. See Table V.47 for net benefits using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs, as well as installation costs. 

The benefits and costs of the proposed 

standby mode and off mode standards, 

for NWGFs and MHGFs sold in 2029– 

2058, can also be expressed in terms of 

annualized values. The monetary values 

for the total annualized net benefits are: 


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15To convert the time-series of costs and benefits 

into annualized values, DOE calculated a present 

value in 2029, the year used for discounting the 

NPV of total consumer costs and savings. For the 

benefits, DOE calculated a present value associated 

with each year’s shipments in the year in which the 

shipments occur (e.g., 2030), and then discounted 

the present value from each year to 2029. The 

calculation uses discount rates of 3 and 7 percent 

for all costs and benefits, as shown in Table I.8 of 

this document. Using the present value, DOE then 

calculated the fixed annual payment over a 30-year 

period, starting in the compliance year that yields 

the same present value. 

(1) the reduced consumer operating 

costs, minus (2) the increases in product 

purchase prices, plus (3) the value of 

climate and health benefits of emission 

reductions, all annualized.15

The national operating cost savings 

are domestic private U.S. consumer 

monetary savings that occur as a result 

of purchasing the covered products and 

are measured for the lifetime of NWGFs 

and MHGFs shipped in 2029–2058. The 

health benefits associated with reduced 

emissions achieved as a result of the 

proposed standards are also calculated 

based on the lifetime of NWGFs and 

MHGFs shipped in 2029–2058. Total 

benefits for both the 3-percent and 7- 

percent cases are presented using the 

average GHG social costs with 3-percent 

discount rate. Estimates of SC–GHG 

values are presented for all four 

discount rates in section V.B.8 of this 

document. Table I.8 presents the total 

estimated monetized benefits and costs 

associated with the proposed standby 

and off mode standard, expressed in 

terms of annualized values. The results 

under the primary estimate are as 

follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from reduced SO2 and NOX

emissions, and the 3-percent discount 

rate case for climate benefits from 

reduced GHG emissions, the estimated 

cost of the proposed standby mode and 

off mode standards for NWGFs and 

MHGFs is $12.2 million per year in 

increased equipment costs, while the 

estimated annual benefits would be 

$160 million in reduced equipment 

operating costs, $23 million in climate 

benefits, and $25 million in health 

benefits. In this case, the net benefit 

would amount to $196 million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed standby mode and off 

mode standards for NWGFs and MHGFs 

is $12.4 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $224 million 

in reduced operating costs, $23 million 

in climate benefits, and $40 million in 

health benefits. In this case, the net 

benefit would amount to $275 million 

per year. 

TABLE I.8—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE STANDARDS

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Million 2020$/year 

Primary 

estimate 

Low-netbenefits 

estimate 

High-netbenefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ............................................................................................. 224 214 251 

Climate Benefits * ......................................................................................................................... 23 23 24 

Health Benefits ** ......................................................................................................................... 40 40 43 

Total Benefits † ............................................................................................................................ 287 276 318 

Consumer Incremental Product Costs ‡ ...................................................................................... 12 12 13 

Net Benefits ................................................................................................................................. 275 264 305 

7% discount rate 

Consumer Operating Cost Savings ............................................................................................. 160 155 176 

Climate Benefits * ......................................................................................................................... 23 23 24 

Health Benefits ** ......................................................................................................................... 25 25 27 

Total Benefits † ............................................................................................................................ 208 203 227 

Consumer Incremental Product Costs ‡ ...................................................................................... 12 12 13 

Net Benefits ................................................................................................................................. 196 190 214 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational 

purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department 

does not have a single central SC–GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using 

all four SC–GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the federal government’s emergency 

motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. 

La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the federal government’s appeal 

of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency 

Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and presents monetized benefits 

where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs, as well as installation costs. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
40598 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

16To obtain the combined results, DOE added the 

results for the proposed AFUE standards in Table 

I.6 of this document with the results for the 

proposed standby mode and off mode standards in 

Table I.8 of this document. Slight differences in 

totals may reflect the effects of rounding. 

DOE’s analysis of the national impacts 

of the proposed standards is described 

in sections IV.H, IV.K, and IV.L of this 

document. 

3. Combined Results for Proposed AFUE 

Standards and Standby Mode and Off 

Mode Standards 

DOE considers and evaluates these 

standards independently under EPCA 

and the analytical process outlined in 

DOE’s Process Rule (as amended). 

However, DOE is also presenting the 

combined effects of these standards for 

the benefit of the public and in 

compliance with E.O. 12866, as shown 

in Table I.9. and Table I.10 of this 

document 16 The results under the 

primary estimate for Table I.10 are as 

follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated cost of 

the proposed standards in this rule is 

$536 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $1,480 million 

in reduced equipment operating costs, 

$1,038 million in climate benefits, and 

$785 million in health benefits 

(accounting for reduced NOX emissions 

and increased SO2 emissions)., In this 

case, the net benefit amounts to $2,767 

million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed standards in this rule is 

$524 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $2,089 million 

in reduced operating costs, $1,038 

million in climate benefits, and $1,253 

million in health benefits (accounting 

for reduced NOX emissions and 

increased SO2 emissions). In this case, 

the net benefit would amount to $3,856 

million per year. 

TABLE I.9—EMISSIONS REDUCTIONS OF AFUE (TSL 8) AND STANDBY MODE AND OFF MODE (TSL 3) STANDARDS FOR

NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Power Sector Emissions 

CO2 (million metric tons) ..................................................................................................................................................................... 327 

SO2 (thousand tons) ............................................................................................................................................................................ (48) 

NOX (thousand tons) ........................................................................................................................................................................... 137 

Hg (tons) .............................................................................................................................................................................................. (0.3) 

CH4 (thousand tons) ............................................................................................................................................................................ 0.6 

N2O (thousand tons) ............................................................................................................................................................................ (0.3) 

Upstream Emissions 

CO2 (million metric tons) ..................................................................................................................................................................... 45 

SO2 (thousand tons) ............................................................................................................................................................................ (0.3) 

NOX (thousand tons) ........................................................................................................................................................................... 696 

Hg (tons) .............................................................................................................................................................................................. 0.0 

CH4 (thousand tons) ............................................................................................................................................................................ 5,133 

N2O (thousand tons) ............................................................................................................................................................................ (0.05) 

Total FFC Emissions 

CO2 (million metric tons) ..................................................................................................................................................................... 373 

SO2 (thousand tons) ............................................................................................................................................................................ (47) 

NOX (thousand tons) ........................................................................................................................................................................... 833 

Hg (tons) .............................................................................................................................................................................................. (0.3) 

CH4 (thousand tons) ............................................................................................................................................................................ 5,134 

N2O (thousand tons) ............................................................................................................................................................................ (0.2) 

TABLE I.10—MONETIZED BENEFITS AND COSTS OF PROPOSED AFUE (TSL 8) AND STANDBY MODE AND OFF MODE (TSL 

3) STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Annualized 

(million 2020$/yr) 

Total 

present value 

(billion 2020$) 

3% 

Consumer Operating Cost Savings ................................................................................................................. 2,089 33.3 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 1,253 20.0 

Total Benefits † ................................................................................................................................................ 4,380 69.8 

Consumer Incremental Product Costs ‡ .......................................................................................................... 524 8.3 

Net Benefits ..................................................................................................................................................... 3,856 61.5 

7% 

Consumer Operating Cost Savings ................................................................................................................. 1,480 11.4 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 785 6.1 

Total Benefits † ................................................................................................................................................ 3,303 34.0 


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17Procedures, Interpretations, and Policies for 

Consideration in New or Revised Energy 

Conservation Standards and Test Procedures for 

Consumer Products and Commercial/Industrial 

Equipment, 86 FR 70892, 70901 (Dec. 13, 2021). 

TABLE I.10—MONETIZED BENEFITS AND COSTS OF PROPOSED AFUE (TSL 8) AND STANDBY MODE AND OFF MODE (TSL 

3) STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES—Continued 

Annualized 

(million 2020$/yr) 

Total 

present value 

(billion 2020$) 

Consumer Incremental Product Costs ‡ .......................................................................................................... 536 4.1 

Net Benefits ..................................................................................................................................................... 2,767 29.9 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational 

purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department 

does not have a single central SC–GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using 

all four SC–GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the federal government’s emergency 

motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. 

La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the federal government’s appeal 

of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency 

Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and presents monetized benefits 

where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs, as well as installation costs. 

DOE’s analysis of the national impacts 

of the proposed standards is described 

in sections IV.H, IV.K, and IV.L of this 

document. 

D. Conclusion 

DOE has tentatively concluded that 

the proposed AFUE standards and 

standby mode and off mode standards 

represent the maximum improvement in 

energy efficiency that is technologically 

feasible and economically justified, and 

would result in significant conservation 

of energy. Specifically, with regards to 

technological feasibility, products 

achieving these standard levels are 

already commercially available for the 

product classes covered by the proposed 

standards. As for economic justification, 

DOE’s analysis shows that the benefits 

of the proposed standards exceed, to a 

great extent, the burdens of the 

proposed standards. Using a 7-percent 

discount rate for consumer benefits and 

costs and health benefits from SO2 and 

NOX emission changes, and the 3- 

percent discount rate case for climate 

benefits from reduced GHG emissions, 

the estimated cost of the proposed 

standards in this rule is $536 million 

per year in increased equipment costs, 

while the estimated annual benefits are 

$1,480 million in reduced equipment 

operating costs, $1,038 million in 

climate benefits, and $785 million in 

health benefits (accounting for reduced 

NOX emissions and increased SO2

emissions). The net benefit amounts to 

$2,767 million per year. 

The significance of energy savings 

offered by a new or amended energy 

conservation standard cannot be 

determined without knowledge of the 

specific circumstances surrounding a 

given rulemaking.17 For example, the 

United States rejoined the Paris 

Agreement on February 19, 2021. As 

part of that agreement, the United States 

has committed to reducing greenhouse 

(‘‘GHG’’) emissions in order to limit the 

rise in mean global temperature. As 

such, energy savings that reduce GHG 

emissions have taken on greater 

importance. Additionally, some covered 

products and equipment have 

substantial energy consumption occur 

during periods of peak energy demand. 

The impacts of these products on the 

energy infrastructure can be more 

pronounced than products with 

relatively constant demand. 

Accordingly, DOE evaluates the 

significance of energy savings on a caseby-case basis. 

As previously mentioned, the 

standards are projected to result in 

estimated national energy savings of 

5.76 quads and an estimated cumulative 

emissions reduction of 373 Mt of CO2. 

The consumer benefit to the Nation (i.e., 

cumulative net present value of total 

consumer savings less costs) is 

estimated to be between $7.3 billion and 

$25.0 billion (discounted at 7 percent 

and 3 percent, respectively) in 2020$. 

DOE has initially determined the energy 

savings from the proposed standard 

levels are ‘‘significant’’ within the 

meaning of 42 U.S.C. 6295(o)(3)(B). A 

more detailed discussion of the basis for 

these tentative conclusions is contained 

in the remainder of this document and 

the accompanying TSD. 

DOE also considered more-stringent 

energy efficiency levels as potential 

standards, and the Department is still 

considering them in this rulemaking. 

However, DOE has tentatively 

concluded that the potential burdens of 

the more-stringent energy efficiency 

levels would outweigh the projected 

benefits. 

Based on consideration of the public 

comments DOE receives in response to 

this document and related information 

collected and analyzed during the 

course of this rulemaking effort, DOE 

may adopt energy efficiency levels 

presented in this document that are 

either higher or lower than the proposed 

standards, or some combination of 

level(s) that incorporate the proposed 

standards in part. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this NOPR, as well as some 

of the relevant historical background 

related to the proposed standards for 

residential NWGFs and MHGFs. 

A. Authority 

The Energy Policy and Conservation 

Act, as amended, Public Law 94–163 (42 

U.S.C. 6291–6317, as codified) 

authorizes DOE to regulate the energy 

efficiency of a number of consumer 

products and certain industrial 

equipment. Title III, Part B of EPCA 


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established the Energy Conservation 

Program for Consumer Products Other 

Than Automobiles. These products 

include the consumer furnaces that are 

the subject of this document. (42 U.S.C. 

6292 (a)(5)) EPCA prescribed energy 

conservation standards for these 

products (42 U.S.C. 6295(f)(1) and (2)), 

and directs DOE to conduct future 

rulemakings to determine whether to 

amend these standards. (42 U.S.C. 

6295(f)(4)) EPCA further provides that, 

not later than six years after the 

issuance of any final rule establishing or 

amending a standard, DOE must publish 

either a notice of determination that 

standards for the product do not need to 

be amended, or a notice of proposed 

rulemaking including new proposed 

energy conservation standards 

(proceeding to a final rule, as 

appropriate). (42 U.S.C. 6295(m)(1)) 

The energy conservation program 

under EPCA consists essentially of four 

parts: (1) testing, (2) labeling, (3) the 

establishment of Federal energy 

conservation standards, and (4) 

certification and enforcement 

procedures. Relevant provisions of 

EPCA specifically include definitions 

(42 U.S.C. 6291), test procedures (42 

U.S.C. 6293), labeling provisions (42 

U.S.C. 6294), energy conservation 

standards (42 U.S.C. 6295), and the 

authority to require information and 

reports from manufacturers (42 U.S.C. 

6296). 

Federal energy efficiency 

requirements for covered products 

established under EPCA generally 

supersede State laws and regulations 

concerning energy conservation testing, 

labeling, and standards. (42 U.S.C. 

6297(a)–(c)) DOE may, however, grant 

waivers of Federal preemption in 

limited instances for particular State 

laws or regulations, in accordance with 

the procedures and other provisions set 

forth under EPCA. 42 U.S.C. 6297(d). 

Subject to certain statutory criteria 

and conditions, DOE is required to 

develop test procedures that are 

reasonably designed to produce test 

results which measure the energy 

efficiency, energy use, or estimated 

annual operating cost of each covered 

product during a representative average 

use cycle and that are not unduly 

burdensome to conduct. (42 U.S.C. 

6293(b)(3)) Manufacturers of covered 

products must use the prescribed 

Federal test procedure as the basis for: 

(1) certifying to DOE that their products 

comply with the applicable energy 

conservation standards adopted 

pursuant to EPCA and (2) making 

representations about the energy use or 

efficiency of those products. (42 U.S.C. 

6293(c) and 42 U.S.C. 6295(s)) 

Similarly, DOE must use these test 

procedures to determine whether the 

products comply with the relevant 

energy conservation standards 

promulgated under EPCA. (42 U.S.C. 

6295(s)) The DOE test procedures for 

residential furnaces appear at title 10 of 

the Code of Federal Regulations (‘‘CFR’’) 

part 430, subpart B, appendix N. 

DOE must follow specific statutory 

criteria for prescribing new or amended 

energy conservation standards for 

covered products. Any new or amended 

standard for a covered product must be 

designed to achieve the maximum 

improvement in energy efficiency that 

the Secretary of Energy determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A) and 42 U.S.C. 

6295(o)(3)(B)) Furthermore, DOE may 

not adopt any standard that would not 

result in the significant conservation of 

energy. (42 U.S.C. 6295(o)(3)) 

Moreover, DOE may not prescribe a 

standard: (1) for certain products, 

including residential furnaces, if no test 

procedure has been established for the 

product, or (2) if DOE determines by 

rule that the standard is not 

technologically feasible or economically 

justified. (42 U.S.C. 6295(o)(3)(A)–(B)) 

In deciding whether a proposed 

standard is economically justified, DOE 

must determine whether the benefits of 

the standard exceed its burdens. (42 

U.S.C. 6295(o)(2)(B)(i)) DOE must make 

this determination after receiving views 

and comments on the proposed 

standard, and by considering, to the 

greatest extent practicable, the following 

seven factors: 

(1) The economic impact of the 

standard on manufacturers and 

consumers of the products subject to the 

standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the covered products in the type (or 

class) compared to any increase in the 

price, initial charges, or maintenance 

expenses for the covered products that 

are likely to result from the standard; 

(3) The total projected amount of 

energy (or as applicable, water) savings 

likely to result directly from the 

standard; 

(4) Any lessening of the utility or the 

performance of the covered products 

likely to result from the standard; 

(5) The impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the standard; 

(6) The need for national energy and 

water conservation; and 

(7) Other factors the Secretary of 

Energy (‘‘Secretary’’) considers relevant. 

(42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) 

Further, EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy savings 

during the first year that the consumer 

will receive as a result of the standard, 

as calculated under the applicable test 

procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) 

EPCA also contains what is known as 

an ‘‘anti-backsliding’’ provision, which 

prevents the Secretary from prescribing 

any amended standard that either 

increases the maximum allowable 

energy use or decreases the minimum 

required energy efficiency of a covered 

product. (42 U.S.C. 6295(o)(1)) Also, the 

Secretary may not prescribe an amended 

or new standard if the Secretary finds 

(and publishes such finding) that 

interested persons have established by a 

preponderance of the evidence that the 

standard is likely to result in the 

unavailability in the United States in 

any covered product type (or class) of 

performance characteristics (including 

reliability), features, sizes, capacities, 

and volumes that are substantially the 

same as those generally available in the 

United States. (42 U.S.C. 6295(o)(4)) 

Additionally, EPCA specifies 

requirements when promulgating an 

energy conservation standard for a 

covered product that has two or more 

subcategories that warrant separate 

product classes and energy conservation 

standards with a level of energy 

efficiency or energy use either higher or 

lower than that which would apply for 

such group of covered products which 

have the same function or intended use. 

DOE must specify a different standard 

level for a type or class of products that 

has the same function or intended use 

if DOE determines that products within 

such group: (A) consume a different 

kind of energy from that consumed by 

other covered products within such type 

(or class); or (B) have a capacity or other 

performance-related feature which other 

products within such type (or class) do 

not have and such feature justifies a 

higher or lower standard. (42 U.S.C. 

6295(q)(1)) In determining whether 

capacity or another performance-related 

feature justifies a different standard for 

a group of products, DOE must consider 

such factors as the utility to the 

consumer of such a feature and other 

factors DOE deems appropriate. Id. Any 

rule prescribing such a standard must 

include an explanation of the basis on 

which such higher or lower level was 

established. (42 U.S.C. 6295(q)(2)) 

Pursuant to amendments contained in 

the Energy Independence and Security 


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18Although the November 2007 final rule did not 

explicitly state the standards for oil-fired furnaces 

were applicable only to non-weatherized oil-fired 

furnaces, the NOPR that preceded the final rule 

made clear that DOE did not perform analysis of 

and was not proposing standards for weatherized 

oil-fired furnaces or mobile home oil-fired furnaces. 

71 FR 59203, 52914 (October 6, 2006). Thus, the 

proposed standards that were ultimately adopted in 

the November 2007 final rule only applied to nonweatherized oil-fired furnaces. 

19For NWGFs and MHGFs, the standards were 

amended to a level of 80-percent AFUE nationally 

with a more-stringent 90-percent AFUE requirement 

in the Northern Region. For non-weatherized oilfired furnaces, the standard was amended to 83- 

percent AFUE nationally. 76 FR 37408, 37410 (June 

27, 2011). 

Act of 2007 (EISA 2007), Public Law 

110–140, DOE may consider the 

establishment of regional energy 

conservation standards for furnaces 

(except boilers). (42 U.S.C. 6295(o)(6)) 

Specifically, in addition to a base 

national standard for a product, DOE 

may establish for furnaces a single 

more-restrictive regional standard. (42 

U.S.C. 6295(o)(6)(B)) The regions must 

include only contiguous States (with the 

exception of Alaska and Hawaii, which 

may be included in regions with which 

they are not contiguous), and each State 

may be placed in only one region (i.e., 

an entire State cannot simultaneously be 

placed in two regions, nor can it be 

divided between two regions). (42 

U.S.C. 6295(o)(6)(C)) Further, DOE can 

establish the additional regional 

standards only: (1) where doing so 

would produce significant energy 

savings in comparison to a single 

national standard; (2) if the regional 

standards are economically justified; 

and (3) after considering the impact of 

these standards on consumers, 

manufacturers, and other market 

participants, including product 

distributors, dealers, contractors, and 

installers. (42 U.S.C. 6295(o)(6)(D)) 

Finally, pursuant to the amendments 

contained in EISA 2007, any final rule 

for new or amended energy 

conservation standards promulgated 

after July 1, 2010, is required to address 

standby mode and off mode energy use. 

(42 U.S.C. 6295(gg)(3)) Specifically, 

when DOE adopts a standard for a 

covered product after that date, it must, 

if justified by the criteria for adoption of 

standards under EPCA (42 U.S.C. 

6295(o)), incorporate standby mode and 

off mode energy use into a single 

standard, or, if that is not feasible, adopt 

a separate standard for such energy use 

for that product. (42 U.S.C. 

6295(gg)(3)(A)–(B)) DOE’s current test 

procedures for residential furnaces 

address standby mode and off mode 

energy use for all covered residential 

furnaces. DOE’s energy conservation 

standards address standby mode and off 

mode energy use only for nonweatherized oil-fired and electric 

furnaces. 10 CFR 430.32(e)(1)(iii). In this 

NOPR, DOE is proposing to develop 

separate energy conservation standards 

that would address the standby mode 

and off mode energy use of NWGFs and 

MHGFs. 

B. Background 

1. Current Standards 

EPCA established the energy 

conservation standards that apply to 

most consumer furnaces currently being 

manufactured. The original standards 

established a minimum AFUE of 75 

percent for mobile home furnaces. For 

all other furnaces, the original standards 

generally established a minimum AFUE 

of 78 percent. However, Congress 

recognized the potential need for a 

separate standard based on the capacity 

of a furnace and directed DOE to 

undertake a rulemaking to establish a 

standard for ‘‘small’’ gas furnaces (i.e., 

those having an input of less than 

45,000 Btu per hour). (42 U.S.C. 

6295(f)(1)–(2)) Through a final rule 

published in the Federal Register on 

November 17, 1989, DOE initially 

established standards for small furnaces 

at the same level as furnaces generally 

(i.e., a minimum AFUE of 78 percent). 

54 FR 47916, 47944. 

EPCA also required DOE to conduct 

two rounds of rulemaking to consider 

amended standards for consumer 

furnaces. (42 U.S.C. 6295(f)(4)(B)–(C)). 

In addition, EPCA requires a six-yearlookback review of energy conservation 

standards for all covered products. (42 

U.S.C. 6295(m)(1)) In a final rule 

published in the Federal Register on 

November 19, 2007 (November 2007 

final rule), DOE prescribed amended 

energy conservation standards for 

consumer furnaces manufactured on or 

after November 19, 2015. 72 FR 65136. 

The November 2007 final rule revised 

the energy conservation standards to 80- 

percent AFUE for NWGFs, to 81-percent 

AFUE for weatherized gas furnaces, to 

80-percent AFUE for MHGFs, and to 82- 

percent AFUE for non-weatherized oilfired furnaces.18 72 FR 65136, 65169. 

Based on market assessment and the 

standard levels at issue, the November 

2007 final rule established standards 

without regard to the certified input 

capacity of a furnace. Id. 

Following DOE’s adoption of the 

November 2007 final rule, several 

parties jointly sued DOE in the United 

States Court of Appeals for the Second 

Circuit (‘‘Second Circuit’’) to invalidate 

the rule. Petition for Review, State of 

New York, et al. v. Department of 

Energy, et al., Nos. 08–0311–ag(L); 08– 

0312–ag(con) (2d Cir. filed Jan. 17, 

2008). The petitioners asserted that the 

standards for furnaces promulgated in 

the November 2007 final rule did not 

reflect the ‘‘maximum improvement in 

energy efficiency’’ that ‘‘is 

technologically feasible and 

economically justified’’ under 42 U.S.C. 

6295(o)(2)(A). On April 16, 2009, DOE 

filed with the Court a motion for 

voluntary remand that the petitioners 

did not oppose. The motion did not 

state that the November 2007 final rule 

would be vacated, but indicated that 

DOE would revisit its initial 

conclusions outlined in the November 

2007 final rule in a subsequent 

rulemaking action. DOE also agreed that 

the final rule in that subsequent 

rulemaking action would address both 

regional standards for furnaces, as well 

as the effects of alternate standards on 

natural gas prices. The Second Circuit 

granted DOE’s motion on April 21, 

2009. DOE notes that the Second 

Circuit’s order did not vacate the energy 

conservation standards set forth in the 

November 2007 final rule, and during 

the remand, they went into effect as 

originally scheduled. 

On June 27, 2011, DOE published a 

direct final rule (‘‘DFR’’) in the Federal 

Register (‘‘June 2011 DFR’’) amending 

the energy conservation standards for 

residential central air conditioners and 

consumer furnaces. (76 FR 37408) 

Subsequently, on October 31, 2011, DOE 

published a notice of effective date and 

compliance dates in the Federal 

Register (‘‘October 2011 notice’’) to 

confirm amended energy conservation 

standards and compliance dates 

contained in the June 2011 DFR. 76 FR 

67037. The November 2007 final rule 

and the June 2011 DFR represented the 

first and the second rounds, 

respectively, of the two rulemakings 

required under 42 U.S.C. 6295(f)(4)(B)– 

(C) to consider amending the energy 

conservation standards for consumer 

furnaces. 

The June 2011 DFR and October 2011 

notice of effective date and compliance 

dates amended, in relevant part, the 

energy conservation standards and 

compliance dates for three product 

classes of consumer furnaces (i.e., 

NWGFs, MHGFs, and non-weatherized 

oil furnaces).19 The existing standards 

were left in place for three classes of 

consumer furnaces (i.e., weatherized oilfired furnaces, mobile home oil-fired 

furnaces, and electric furnaces). For one 

class of consumer furnaces (weatherized 

gas furnaces), the existing standard was 

left in place, but the compliance date 

was amended. Electrical standby mode 

and off mode energy consumption 


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20After APGA filed its petition for review on 

December 23, 2011, various entities subsequently 

intervened. 

standards were established for nonweatherized gas and oil-fired furnaces 

(including mobile home furnaces) and 

electric furnaces. Compliance with the 

energy conservation standards 

promulgated in the June 2011 DFR was 

to be required on May 1, 2013, for nonweatherized furnaces and on January 1, 

2015, for weatherized furnaces. 76 FR 

37408, 37547–37548 (June 27, 2011); 76 

FR 67037, 67051 (Oct. 31, 2011). The 

amended energy conservation standards 

and compliance dates in the June 2011 

DFR superseded those standards and 

compliance dates promulgated by the 

November 2007 final rule for NWGFs, 

MHGFs, and non-weatherized oil 

furnaces. Similarly, the amended 

compliance date for weatherized gas 

furnaces in the June 2011 DFR 

superseded the compliance date in the 

November 2007 final rule. 

After publication of the October 2011 

notice, the American Public Gas 

Association (‘‘APGA’’) sued DOE 20 in 

the United States Court of Appeals for 

the District of Columbia Circuit (‘‘D.C. 

Circuit’’) to invalidate that rule as it 

pertained to NWGFs (as discussed 

further in section II.B.2 of this 

document). Petition for Review, 

American Public Gas Association, et al. 

v. Department of Energy, et al., No. 11– 

1485 (D.C. Cir. filed Dec. 23, 2011). The 

parties to the litigation engaged in 

settlement negotiations which 

ultimately led to filing of an unopposed 

motion on March 11, 2014, seeking to 

vacate DOE’s rule in part and to remand 

to the agency for further rulemaking. On 

April 24, 2014, the Court granted the 

motion and ordered that the standards 

established for NWGFs and MHGFs be 

vacated and remanded to DOE for 

further rulemaking. As a result, the 

standards established by the June 2011 

DFR for NWGFs and MHGFs did not go 

into effect, and thus, required 

compliance with the standards 

established in the November 2007 final 

rule for these products began on 

November 19, 2015. As stated 

previously, the AFUE standards for 

weatherized oil-fired furnaces, mobile 

home oil-fired furnaces, and electric 

furnaces were unchanged, and as such, 

the original standards for those product 

classes remain in effect. Further, the 

amended standard for non-weatherized 

oil furnaces were not subject to the 

Court order, and went into effect as 

specified in the June 2011 DFR. 

The AFUE standards currently 

applicable to all residential furnaces, 

including the two product classes for 

which DOE is proposing amended 

standards in this NOPR, are set forth in 

DOE’s regulations at 10 CFR 

430.32(e)(1)(ii). Table II.1 presents the 

currently applicable standards for 

NWGF and MHGF and the date on 

which compliance with that standard 

was required. 

TABLE II.1—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES

Product class 

Minimum 

annual fuel 

utilization 

efficiency 

(%) 

Compliance 

date 

Non-weatherized Gas .............................................................................................................................................. 80 11/19/2015 

Mobile Home Gas .................................................................................................................................................... 80 11/19/2015 

2. History of Standards Rulemaking for 

Consumer Furnaces 

Given the somewhat complicated 

interplay of recent DOE rulemakings 

and statutory provisions related to 

consumer furnaces, DOE provides the 

following regulatory history as 

background leading to this document. 

Amendments to EPCA in the National 

Appliance Energy Conservation Act of 

1987 (NAECA; Pub. L. 100–12) 

established EPCA’s original energy 

conservation standards for furnaces, 

consisting of the minimum AFUE levels 

described above for mobile home 

furnaces and for all other furnaces 

except ‘‘small’’ gas furnaces. (42 U.S.C. 

6295(f)(1)–(2)) Pursuant to 42 U.S.C. 

6295(f)(1)(B), in November 1989, DOE 

adopted a mandatory minimum AFUE 

level for ‘‘small’’ furnaces. 54 FR 47916 

(Nov. 17, 1989). The standards 

established by NAECA and the 

November 1989 final rule for ‘‘small’’ 

gas furnaces are still in effect for mobile 

home oil-fired furnaces, weatherized 

oil-fired furnaces, and electric furnaces. 

Pursuant to EPCA, DOE was required 

to conduct two rounds of rulemaking to 

consider amended energy conservation 

standards for furnaces. (42 U.S.C. 

6295(f)(4)(B) and (C)) In satisfaction of 

this first round of amended standards 

rulemaking under 42 U.S.C. 

6295(f)(4)(B), as noted above, DOE 

published the November 2007 final rule 

that revised these standards for most 

furnaces, but left them in place for two 

product classes (i.e., mobile home oilfired furnaces and weatherized oil-fired 

furnaces). The standards amended in 

the November 2007 final rule were to 

apply to furnaces manufactured or 

imported on and after November 19, 

2015. 72 FR 65136 (Nov. 19, 2007). The 

energy conservation standards in the 

November 2007 final rule consist of a 

minimum AFUE level for each of the six 

classes of furnaces. Id. at 72 FR 65169. 

As previously noted, based on the 

market analysis for the November 2007 

final rule and the standards established 

under that rule, the November 2007 

final rule eliminated the distinction 

between furnaces based on their 

certified input capacity, (i.e., the 

standards applicable to ‘‘small’ furnaces 

were established at the same level and 

as part of their appropriate class of 

furnace generally). Id. 

As described previously in section 

II.B.1 of this document, on June 27, 

2011, DOE published in the Federal 

Register the June 2011 DFR revising the 

energy conservation standards for 

residential furnaces pursuant to the 

voluntary remand in State of New York, 

et al. v. Department of Energy, et al. 76 

FR 37408 (June 27, 2011). In the June 

2011 DFR, DOE considered the 

amendment of the same six product 

classes considered in the November 

2007 final rule analysis plus electric 

furnaces. As discussed in section II.B.1 

of this document, the June 2011 DFR 

amended the existing AFUE energy 

conservation standards for NWGFs, 

MHGFs, and non-weatherized oil 

furnaces, and amended the compliance 


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21This aligns with the direction provided in the 

final rule published in the Federal Register on 

December 13, 2021, regarding the procedures, 

interpretations, and policies for consideration in 

new or revised energy conservation standards and 

test procedures for consumer products and 

commercial/industrial equipment (‘‘December 2021 

Final Rule’’). 86 FR 70892, 70922. 

22 In terms of full-fuel-cycle energy, switching 

from gas to electricity increases energy use because 

of the losses in thermal electricity generation. 

23 DOE initially provided 60 days for comment on 

the SNOPR, and subsequently reopened the 

comment period an additional 30 days. 81 FR 87493 

(Dec. 5, 2016). 

24 DOE published the Gas Industry Petition in the 

Federal Register for comment on November 1, 

2018. 83 FR 54838. 

date (but left the existing standards in 

place) for weatherized gas furnaces. The 

June 2011 DFR also established 

electrical standby mode and off mode 

energy conservation standards for 

NWGFs, non-weatherized oil furnaces, 

and electric furnaces. DOE confirmed 

the standards and compliance dates 

promulgated in the June 2011 DFR in a 

notice of effective date and compliance 

dates published in the Federal Register 

on October 31, 2011. 76 FR 67037. 

As noted earlier, following DOE’s 

adoption of the June 2011 DFR, APGA 

filed a petition for review with the 

United States Court of Appeals for the 

District of Columbia Circuit to 

invalidate the DOE rule as it pertained 

to NWGFs. Petition for Review, 

American Public Gas Association, et al. 

v. Department of Energy, et al., No. 11– 

1485 (D.C. Cir. filed Dec. 23, 2011). On 

April 24, 2014, the Court granted a 

motion that approved a settlement 

agreement that was reached between 

DOE and APGA, in which DOE agreed 

to a partial vacatur and remand of the 

NWGFs and MHGFs portions of the June 

2011 DFR in order to conduct further 

notice-and-comment rulemaking. 

Accordingly, the Court’s order vacated 

the June 2011 DFR in part (i.e., those 

portions relating to NWGFs and 

MHGFs) and remanded to the agency for 

further rulemaking. 

As part of the settlement, DOE agreed 

to use best efforts to issue a notice of 

proposed rulemaking within one year of 

the remand, and to issue a final rule 

within the later of two years of the 

issuance of remand, or one year of the 

issuance of the proposed rule, including 

at least a ninety-day public comment 

period. Due to the extensive and recent 

rulemaking history for residential 

furnaces, as well as the associated 

opportunities for notice and comment 

described previously, DOE forwent the 

typical earlier rulemaking stages (e.g., 

Framework Document, preliminary 

analysis) and instead published a NOPR 

on March 12, 2015 (March 2015 NOPR). 

80 FR 13120. DOE concluded that there 

was a sufficient recent exchange of 

information between interested parties 

and DOE regarding the energy 

conservation standards for residential 

furnaces such as to allow for this 

proceeding to move directly to the 

NOPR stage. Moreover, DOE notes that 

under 42 U.S.C. 6295(p) and 5 U.S.C. 

553(b) and (c), DOE is only required to 

publish a notice of proposed rulemaking 

and accept public comments before 

amending energy conservation 

standards in a final rule (i.e., DOE is not 

required to conduct any earlier 

rulemaking stages).21

In the March 2015 NOPR, DOE 

proposed adopting a national standard 

of 92-percent AFUE for all NWGFs and 

MHGFs. 80 FR 13120, 13198 (March 12, 

2015). In response, while some 

stakeholders supported the national 92- 

percent AFUE standard, others opposed 

the proposed standards and encouraged 

DOE to withdraw the March 2015 

NOPR. 

Multiple parties suggested that DOE 

should create a separate product class 

for furnaces based on input capacity and 

set lower standards for ‘‘small furnaces’’ 

in order to mitigate some of the negative 

impacts of the proposed standards. 

Among other reasons, commenters 

suggested that such an approach would 

reduce the number of low-income 

consumers switching to electric heat 

due to higher installation costs, because 

those consumers typically have smaller 

homes in which a furnace with a lower 

input capacity would be installed and, 

therefore, would not be impacted if a 

condensing standard were adopted only 

for higher-input-capacity furnaces. To 

explore the potential impacts of such an 

approach, DOE published a notice of 

data availability (‘‘NODA’’) in the 

Federal Register on September 14, 2015 

(September 2015 NODA). 80 FR 55038. 

The September 2015 NODA contained 

analysis that considered thresholds for 

defining the small NWGF product class 

from 45 kBtu/h to 65 kBtu/h certified 

input capacity and maintaining a noncondensing 80-percent AFUE standard 

for that product class, while increasing 

the standard to a condensing level (i.e., 

either 90-percent, 92-percent, 95- 

percent, or 98-percent AFUE) for large 

NWGFs. Id. at 80 FR 55042. The results 

indicated that life-cycle cost savings 

increased and the share of consumers 

with net costs decreased as a result of 

an 80-percent AFUE standard for a 

small NWGF product class. Id. at 80 FR 

55042–55044. It also showed that 

national energy savings increased 

because fewer consumers switched to 

electric heat.22 Id. at 80 FR 55308, 

55044. 

Therefore, DOE published a 

supplemental notice of proposed 

rulemaking (‘‘SNOPR’’) in the Federal 

Register on September 23, 2016 

(September 2016 SNOPR) that proposed 

separate standards for small and large 

NWGF.23 81 FR 65720. For NWGF with 

input capacities of 55 kBtu/h or less, 

DOE proposed to maintain the standard 

at 80-percent AFUE. Id. at 81 FR 65852. 

For all other NWGF and for all MHGF, 

DOE proposed a standard of 92-percent 

AFUE. Id. As was the case in the 

September 2015 NODA, a small NWGF 

product class was shown to reduce the 

number of consumers experiencing net 

costs due to higher installation costs for 

condensing furnaces or switching to 

electric heat. In the September 2016 

SNOPR, DOE initially determined that 

the combination of a 55 kBtu/h product 

class threshold and a 92-percent AFUE 

standard for all NWGF above that size 

appropriately balanced the costs and 

benefits. DOE also noted in that SNOPR 

that a 60 kBtu/h threshold may also be 

economically justified based on the 

analysis, and sought further comment 

regarding the particular size threshold 

proposed. 81 FR 65720, 65755 (Sept. 23, 

2016). 

In addition, for the March 2015 NOPR 

and September 2016 SNOPR, DOE 

analyzed energy conservation standards 

for the standby mode and off mode 

energy use of NWGF and MHGF, as 

required by EPCA. (42 U.S.C. 

6295(gg)(3); 80 FR 13120, 13198; 81 FR 

65720, 65759–65760) In both the March 

2015 NOPR and the September 2016 

SNOPR, DOE proposed a maximum 

energy use of 8.5 watts in both standby 

mode and off mode for NWGF and 

MHGF. 80 FR 13120, 13198 (March 12, 

2015) and 81 FR 65720, 65852 (Sept. 23, 

2016). 

On January 15, 2021, in response to a 

petition for rulemaking 24 submitted by 

the American Public Gas Association, 

Spire, Inc., the Natural Gas Supply 

Association, the American Gas 

Association, and the National Propane 

Gas Association (the ‘‘Gas Industry 

Petition’’), DOE published a final 

interpretive rule (‘‘the January 2021 

final interpretive rule’’) in the Federal 

Register, determining that, in the 

context of residential furnaces, 

commercial water heaters, and 

similarly-situated products/equipment, 

use of non-condensing technology (and 

associated venting) constitutes a 

performance-related ‘‘feature’’ under 

EPCA that cannot be eliminated through 

adoption of an energy conservation 

standard. 86 FR 4776. Correspondingly, 


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on the same day, DOE published in the 

Federal Register a notification 

withdrawing the March 2015 NOPR and 

the September 2016 SNOPR for NWGFs 

and MHGFs. 86 FR 3873 (Jan. 15, 2021). 

On January 20, 2021, the White House 

issued Executive Order 13990, 

‘‘Protecting Public Health and the 

Environment and Restoring Science to 

Tackle the Climate Crisis.’’ 86 FR 7037 

(Jan. 25, 2021). Section 1 of that Order 

lists several policies related to the 

protection of public health and the 

environment, including reducing 

greenhouse gas emissions and bolstering 

the Nation’s resilience to climate 

change. Id. at 86 FR 7037. Section 2 of 

the Order also instructs all agencies to 

review ‘‘existing regulations, orders, 

guidance documents, policies, and any 

other similar agency actions (agency 

actions) promulgated, issued, or 

adopted between January 20, 2017, and 

January 20, 2021, that are or may be 

inconsistent with, or present obstacles 

to, [these policies].’’ Id. Agencies are 

then directed, as appropriate and 

consistent with applicable law, to 

consider suspending, revising, or 

rescinding these agency actions and to 

immediately commence work to 

confront the climate crisis. Id. In light 

of E.O. 13990, DOE undertook a reevaluation of the final interpretation 

and withdrawal of proposed 

rulemakings published in the Federal 

Register on January 15, 2021, and the 

Department published a proposed 

interpretive rule in the Federal Register 

on August 27, 2021, to once again 

address this matter. 86 FR 48049. 

Following the re-evaluation of the 

January 2021 final interpretive rule and 

consideration of public comments, DOE 

published a final interpretive rule in the 

Federal Register on December 29, 2021 

(‘‘December 2021 final interpretive 

rule’’) that returns to the Department’s 

previous and long-standing 

interpretation (in effect prior to the 

January 15, 2021 final interpretive rule), 

under which the technology used to 

supply heated air or hot water is not a 

performance-related ‘‘feature’’ that 

provides a distinct consumer utility 

under EPCA. 86 FR 73947. Residential 

furnaces were one of the two primary 

focuses of the December 2021 final 

interpretive rule (along with commercial 

water heaters), and in that document, 

the Department offered an extensive 

explanation as to its rationale for why 

it does not view noncondensing 

technology and associated venting to be 

a performance-related feature 

warranting a separate product class for 

furnaces. Among these are the consumer 

utility of the product (i.e., providing 

heat, irrespective of venting type) and 

the availability of technological 

alternatives for difficult installation 

situations (which are costs concerns 

properly addressed under consideration 

of a standard’s economic justification). 

However, DOE has stated that it will 

consider any particular concerns 

regarding specific installation 

circumstances in the context of 

individual rulemakings, and the 

Department welcomes such comments 

in response to this NOPR. 

Consistent with the December 2021 

final interpretive rule, in conducting the 

analysis for this NOPR, DOE does not 

divide product classes based on 

condensing technologies and associated 

venting systems when analyzing 

potential energy conservation standards. 

As illustrated by the preceding 

discussion, the rulemaking for 

consumer furnaces has been subject to 

multiple rounds of public comment, 

including public meetings, and 

extensive records have been developed 

in the relevant dockets. (See Docket 

Number EERE–2011–BT–STD–0011). 

Consequently, the information obtained 

through those earlier rounds of public 

comment, information exchange, and 

data gathering have been considered in 

this rulemaking, and DOE is building 

upon the existing record through further 

analysis and further notice and 

comment. DOE has tentatively found 

that the relevant furnaces market has 

stayed sufficiently similar since the time 

of these past rulemakings such that 

much of the previously-collected 

feedback and data continue to be 

relevant. However, as discussed in 

section IV of this NOPR, DOE has 

updated analytical inputs in its analyses 

where appropriate and welcomes 

further data, information, and 

comments. 

In the withdrawn September 2016 

SNOPR, DOE preliminarily addressed 

the comments received in response to 

the March 2015 NOPR and September 

2015 NODA. In response to the 

withdrawn September 2016 SNOPR, 

DOE received a number of written 

comments from interested parties 

during the comment period on that 

document. Table II.2 identifies those 

commenters. Although DOE withdrew 

the September 2016 SNOPR, DOE 

considered these comments, as well as 

comments from the September 2016 

SNOPR public meeting, to the extent 

relevant in preparing this document. 

TABLE II.2—INTERESTED PARTIES PROVIDING WRITTEN COMMENT ON THE WITHDRAWN SEPTEMBER 2016 SNOPR FOR

NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Name Acronyms/ 

abbreviation Type 

A Ware Productions .......................................................................................................................................... A Ware ............................. CR 

African American Environmentalist Association ............................................................................................... AAEA ................................ CR 

American Gas Association and American Public Gas Association .................................................................. AGA and APGA ............... U 

American Gas Association, American Public Gas Association, and Gas Technology Institute ...................... AGA, APGA, and GTI ...... U 

AGL Resources ................................................................................................................................................. .......................................... U 

Air Conditioning Contractors of America .......................................................................................................... ACCA ............................... TA 

Air-Conditioning, Heating, and Refrigeration Institute ...................................................................................... AHRI ................................. TA 

Alliance to Save Energy ................................................................................................................................... ASE .................................. EA 

Allied Air ............................................................................................................................................................ .......................................... M 

American Association of Blacks in Energy ....................................................................................................... AABE ................................ CR 

American Council for an Energy-Efficient Economy ........................................................................................ ACEEE ............................. EA 

American Council for an Energy-Efficient Economy, Appliance Standards Awareness Project, and Alliance 

to Save Energy.

ACEEE, ASAP, & ASE .... EA 

American Council for an Energy-Efficient Economy, Appliance Standards Awareness Project, Alliance to 

Save Energy, Natural Resource Defense Council, Northeast Energy Efficiency Partnerships, Northwest 

Energy Efficiency Alliance.

Efficiency Advocates ........ EA 

American Energy Alliance ................................................................................................................................. AEA .................................. EA 

American Gas Association ................................................................................................................................ AGA .................................. U 

American Public Gas Association ..................................................................................................................... APGA ............................... U 

American Public Power Association ................................................................................................................. APPA ................................ U 


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TABLE II.2—INTERESTED PARTIES PROVIDING WRITTEN COMMENT ON THE WITHDRAWN SEPTEMBER 2016 SNOPR FOR

NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES—Continued 

Name Acronyms/ 

abbreviation Type 

Anonymous ....................................................................................................................................................... .......................................... I 

Appliance Standards Awareness Project ......................................................................................................... ASAP ................................ EA 

Austell Natural Gas System .............................................................................................................................. Austell .............................. U 

Borough of Chambersburg, PA ........................................................................................................................ Chambersburg ................. G 

California Energy Commission ......................................................................................................................... CEC .................................. G 

Cato Institute ..................................................................................................................................................... .......................................... PP 

CenterPoint Energy ........................................................................................................................................... .......................................... U 

City of Adairsville, Georgia ............................................................................................................................... Adairsville ......................... G 

City of Cairo, Georgia ....................................................................................................................................... Cairo ................................. G 

City of Camilla, Georgia .................................................................................................................................... Camilla ............................. G 

City of Cartersville, Georgia .............................................................................................................................. Cartersville ....................... G 

City of Commerce, Georgia .............................................................................................................................. Commerce ........................ G 

City of Covington, Georgia ............................................................................................................................... Covington ......................... G 

City of Dublin, Georgia ..................................................................................................................................... Dublin ............................... G 

City of Lawrenceville, Georgia .......................................................................................................................... Lawrenceville ................... G 

City of Louisville, Georgia ................................................................................................................................. Louisville .......................... G 

City of Monroe, Georgia ................................................................................................................................... Monroe ............................. G 

City of Moultrie, Georgia ................................................................................................................................... Moultrie ............................ G 

City of Sugar Hill, Georgia ................................................................................................................................ Sugar Hill ......................... G 

City of Sylvania, Georgia .................................................................................................................................. Sylvania ............................ G 

City of Thomasville, Georgia ............................................................................................................................ Thomasville ...................... G 

City of Tifton, Georgia ....................................................................................................................................... Tifton ................................ G 

City of Toccoa/Toccoa Natural Gas ................................................................................................................. Toccoa ............................. G/U 

Clearwater Gas System .................................................................................................................................... CGS ................................. U 

Members of the U.S. Congress * ...................................................................................................................... Joint Congress Members G 

Gregory W. Meeks (Member of Congress) ...................................................................................................... Meeks ............................... G 

Sanford D. Bishop, Jr. (Member of Congress) ................................................................................................. Bishop .............................. G 

Donald M. Payne, Jr. (Member of Congress) .................................................................................................. Payne ............................... G 

Consumer Federation of America, National Consumer Law Center, Massachusetts Union of Public Housing Tenants, and Texas Ratepayers’ Organization to Save Energy.Joint Consumer Commenters.CR 

Contractor Advisors .......................................................................................................................................... .......................................... C 

Arthur Corbin ..................................................................................................................................................... Corbin ............................... I 

Jim Darling ........................................................................................................................................................ Darling .............................. I 

DC Jobs or Else ................................................................................................................................................ DC Jobs or Else ............... CR 

Earthjustice ....................................................................................................................................................... .......................................... EA 

Edison Electric Institute .................................................................................................................................... EEI ................................... U 

Energy Association of Pennsylvania ................................................................................................................ .......................................... U 

Environmental Defense Fund, Institute for Policy Integrity at NYU School of Law, Natural Resources Defense Council, and Union of Concerned Scientists.Joint Advocates ................ EA 

Fitzgerald Utilities .............................................................................................................................................. Fitzgerald ......................... U 

Catherine Fletcher ............................................................................................................................................ Fletcher ............................ I 

Florida Natural Gas Association ....................................................................................................................... FNGA ............................... U 

Gas Technology Institute .................................................................................................................................. GTI ................................... U 

Goodman Global, Inc ........................................................................................................................................ Goodman ......................... M 

Heating, Air-Conditioning & Refrigeration Distributors International ................................................................ HARDI .............................. TA 

Jennifer Hombach ............................................................................................................................................. Hombach .......................... I 

Ingersoll Rand ................................................................................................................................................... Ingersoll Rand .................. M 

David Johnson .................................................................................................................................................. Johnson ............................ I 

Johnson Controls, Inc ....................................................................................................................................... JCI .................................... M 

Jointly Owned Natural Gas ............................................................................................................................... .......................................... U 

Aaron Kelly ........................................................................................................................................................ Kelly ................................. I 

The Laclede Group, Inc/Spire, Inc. ** ............................................................................................................... Laclede/Spire ................... U 

Law Offices of Barton Day, PLLC *** ................................................................................................................ Day ................................... U 

Lennox International Inc ................................................................................................................................... Lennox ............................. M 

Liberty Utilities ................................................................................................................................................... .......................................... U 

Manufactured Housing Institute ........................................................................................................................ MHI ................................... TA 

Mark Nayes ....................................................................................................................................................... Nayes ............................... I 

Mercatus Center at George Mason University ................................................................................................. Abdukadirov et al ............. I 

Metal-Fab .......................................................................................................................................................... .......................................... CS 

Metropolitan Utilities District, Omaha, NE ........................................................................................................ Metropolitan Utilities District.U 

Don Meyers ....................................................................................................................................................... Meyers ............................. I 

Cameron Moore ................................................................................................................................................ Moore ............................... I 

Mortex Products, Inc ......................................................................................................................................... Mortex .............................. M 

Municipal Gas Authority of Georgia .................................................................................................................. Gas Authority ................... U 

National Association of Home Builders ............................................................................................................ NAHB ............................... TA 

National Energy & Utility Affordability Coalition ................................................................................................ NEUAC ............................. CR 

National Multifamily Housing Council, National Apartment Association, National Leased Housing Association.NMHC, NAA, NLHA ......... TA 

National Propane Gas Association ................................................................................................................... NPGA ............................... U 


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25The parenthetical reference provides a 

reference for information located in the docket of 

DOE’s rulemaking to develop energy conservation 

standards for NWGF and MHGF. (Docket No. EERE– 

2014–BT–STD–0031, which is maintained at 

www.regulations.gov). The references are arranged 

as follows: (commenter name, comment docket ID 

number, page of that document). 

26See Canada Gazette, Part II, Vol. 142, No. 26, 

pp. 2512–2570. (Available at: www.gazette.gc.ca/rppr/p2/2008/2008-12-24/pdf/g2-14226.pdf) (Last 

accessed Feb. 15, 2022). 

TABLE II.2—INTERESTED PARTIES PROVIDING WRITTEN COMMENT ON THE WITHDRAWN SEPTEMBER 2016 SNOPR FOR

NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES—Continued 

Name Acronyms/ 

abbreviation Type 

Natural Gas Association of Georgia ................................................................................................................. NGA ................................. U 

Natural Resources Defense Council ................................................................................................................ NRDC ............................... EA 

New Jersey Natural Gas ................................................................................................................................... NJNG ............................... U 

NiSource Inc ..................................................................................................................................................... NiSource .......................... U 

Nortek Global HVAC ......................................................................................................................................... Nortek ............................... M 

Northeast Energy Efficiency Partnerships ........................................................................................................ NEEP ............................... EA 

ONE Gas, Inc .................................................................................................................................................... ONE Gas .......................... U 

Pacific Gas and Electric Company ................................................................................................................... PG&E ............................... U 

Pennsylvania Chamber of Business and Industry ............................................................................................ .......................................... TA 

Pennsylvania Department of Environmental Protection ................................................................................... PA DEP ............................ G 

Philadelphia Gas Works ................................................................................................................................... PGW ................................. U 

Plumbing-Heating-Cooling Contractors ............................................................................................................ PHCC ............................... C 

Prime Energy Partners, LLC ............................................................................................................................. Prime Energy Partners .... EA 

Questar Gas Company ..................................................................................................................................... Questar Gas ..................... U 

Rheem Manufacturing Company ...................................................................................................................... Rheem .............................. M 

David Schroeder ............................................................................................................................................... Schroeder ......................... I 

Terry Small ........................................................................................................................................................ Small ................................ I 

Southern California Gas Company ................................................................................................................... SoCalGas ......................... U 

Southern Company ........................................................................................................................................... .......................................... U 

Southern Gas Association ................................................................................................................................ SGA .................................. U 

Southside Heating and Air Conditioning ........................................................................................................... .......................................... C 

State of Indiana ................................................................................................................................................. Indiana ............................. G 

Kimberly Swanson ............................................................................................................................................ Swanson .......................... I 

Town of Rockford, Alabama ............................................................................................................................. Rockford ........................... G 

Ubuntu Center of Chicago ................................................................................................................................ Ubuntu .............................. CR 

United Technologies Building and Industrial Systems—Carrier Corporation ................................................... Carrier .............................. M 

United States Joint Representatives † .............................................................................................................. Joint Representatives ...... G 

University of Pennsylvania, Kleinman Center for Energy Policy ...................................................................... Kleinman Center .............. EI 

U.S. Chamber of Commerce, the American Chemistry Council, the American Coke and Coal Chemicals 

Institute, the American Forest & Paper Association, the American Fuel & Petrochemical Manufacturers, 

the American Petroleum Institute, the Brick Industry Association, the Council of Industrial Boiler Owners, 

the National Association of Home Builders, the National Association of Manufacturers, the National Mining Association, the National Oilseed Processors Association, and the Portland Cement Association.

Associations ..................... TA 

Vectren Corporation .......................................................................................................................................... Vectren ............................. U 

John von Harz ................................................................................................................................................... von Harz ........................... I 

Washington Gas Light Company ...................................................................................................................... Washington Gas .............. U 

Walter Wood ..................................................................................................................................................... Wood ................................ I 

C: Mechanical Contractor; CR: Consumer Representative; CS: Component Supplier; EA: Efficiency/Environmental Advocate; EI: Educational 

Institution; G: Government; I: Individual; M: Manufacturer; PP: Public Policy Research Organization; TA: Trade Association; U: Utility or Utility 

Trade Association. 

* Paul D. Tonka, Rau ́l M. Grijalva, Michael M. Honda, Scott H. Peters, Alan S. Lowenthal, Jerrold Nadler, Sander M. Levin, Chris Van Hollen, 

Alan S. Lowenthal, Rep.Ted Lieu, Donald S. Beyer, Jr., Louise M. Slaughter, Rep. Lois Capps, and Donna F. Edwards. 

** The Laclede Group, Inc. changed its name to Spire, Inc. during this rulemaking. 

*** Representing Spire Inc., a gas utility. 

† Mo Brooks, Tom Price, Lou Barletta, Bradley Byrne, Glenn ‘GT’ Thompson, Steve Russell, Joe Heck, Gary Palmer, Kevin Yoder, Jim

Bridenstine, Scott Tipton, Robert Pittenger, Chuck Fleischmann, Robert Aderholt, Mimi Walters, Barry Loudermilk, Gregg Harper, Mark Walker, 

Brian Babin, Candice S. Miller, Chris Stewart, Mike D. Rogers, Jim Renacci, Bob Gibbs, Dave Brat, Jeff Miller, Phil Roe, David Schweikert, Tom 

Marino, David B. McKinley, Scott DesJarlais, Marc Veasey, Ralph Abraham, Matt Salmon, David Rouzer, Richard Hudson, Cresent Hardy, 

Buddy Carter, Mike Pompeo, Martha Roby, Glenn Grothman, Tom Emmer, Paul Gosar, Ted S. Yoho, Rick Allen, Dan Benishek, David Young, 

Randy Weber, Mark Meadows, Kay Granger, Blake Farenthold, Bill Flores, Kevin Cramer, Daniel Webster, Tim Huelskamp, Markwayne Mullin, 

Chris Collins, Jason Smith, Steve Womack, Diane Black, Keith Rothfus, Sean P. Duffy, Renee Ellmers, Alex X. Mooney, Jim Costa, Brad 

Wenstrup, Sam Graves, Charles W. Boustany, Jr., Andy Barr, Mike Bost, Doug Collins, Jody Hice, Mike Kelly, Jim Jordan, Lynn Jenkins, Andy 

Harris, Billy Long, Bill Johnson, Rob Woodall, David W. Jolly, Rodney Davis, Joe Barton, Gus M. Bilirakis, Pete Olson, Randy Forbes, Ed Whitfield, Ken Calvert, John Duncan, Henry Cuellar, Steve King, John Shimkus, Jeb Hensarling, Pete Sessions, Vicky Hartzler, Adrian Smith, Louie 

Gohmert, Marsha Blackburn, Sam Johnson, Tom McClintock, Walter Jones, Patrick T. McHenry, Steve Chabot, Doug Lamborn, Frank D. Lucas, 

Sanford D. Bishop, Jr., Lamar Smith, Austin Scott, Mick Mulvaney, Steve Pearce, Brett Guthrie, Trent Franks, Blaine Luetkemeyer, Tom Graves, 

Mike Coffman, Robert E. Latta, F. James Sensenbrenner, Jr., Stephen Fincher, Tom Cole, Lynn Westmoreland, John Ratcliffe, and John 

Moolenaar. 

A parenthetical reference at the end of 

a comment quotation or paraphrase 

provides the location of the item in the 

public record.25

3. Current Standards in Canada 

Consumer furnaces are a regulated 

product in Canada and are subject to 

energy efficiency regulations. On 

December 24, 2008, Natural Resources 

Canada published regulations in the 

Canada Gazette, Part II amending the 

energy efficiency regulations for 

consumer furnaces, among other 

appliances and equipment.26 The 

revised regulation, required on or after 

December 31, 2009, sets a minimum 


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27See Canada Gazette, Part II, Vol. 153, No. 12, 

pp. 2423–2517. (Available at: www.gazette.gc.ca/rppr/p2/2019/2019-06-12/pdf/g2-15312.pdf) (Last 

accessed Feb. 15, 2022). 

28 ‘‘Gas furnace for relocatable buildings’’ is 

defined in that regulation as a gas furnace that is 

intended for use in a temporary modular building 

that can be relocated from one site to another and 

is marked for use in relocatable buildings. 

29 DOE issued the March 2015 NOPR on February 

10, 2015. 80 FR 13120, 13197. Therefore, the later 

of the two dates is April 24, 2016. 

efficiency of 90-percent AFUE for gas 

furnaces. This standard is applicable to 

gas furnaces, other than those with an 

integrated cooling component that are 

outdoor or through-the-wall gas 

furnaces, that have an input rate no 

greater than 65.92 kW (225,000 Btu/h), 

and that use single-phase electric 

current. 

On June 12, 2019, Natural Resources 

Canada published regulations in the 

Canada Gazette, Part II amending the 

energy efficiency regulations for 

consumer furnaces, among other 

appliances and equipment.27 The 

definition of gas furnaces was clarified 

to exclude gas furnaces for relocatable 

buildings (e.g., MHGFs). The revised 

regulation, required on or after July 3, 

2019, sets a minimum efficiency of 95- 

percent AFUE for gas furnaces. 

Furthermore, the revised regulation also 

sets a minimum efficiency of 80-percent 

AFUE for gas furnaces for relocatable 

buildings.28

C. Deviation From Appendix A 

In accordance with section 3(a) of 10 

CFR part 430, subpart C, appendix A 

(‘‘appendix A’’), DOE notes that it is 

deviating from the provision in 

appendix A regarding the pre-NOPR 

stages for an energy conservation 

standards rulemaking. Section 6(a)(2) of 

appendix A states that if the Department 

determines it is appropriate to proceed 

with a rulemaking, the preliminary 

stages of a rulemaking to issue or amend 

an energy conservation standard that 

DOE will undertake will be a framework 

document and preliminary analysis, or 

an advance notice of proposed 

rulemaking. For the reasons that follow, 

DOE finds it necessary and appropriate 

to deviate from this step in appendix A 

and to instead publish this NOPR 

without once again conducting these 

preliminary stages. Completion of this 

furnaces rulemaking is overdue under 

the relevant statutory deadline, so DOE 

seeks to complete its statutory 

obligations as expeditiously as possible. 

Moreover, DOE finds that there would 

be little benefit in repeating the 

preliminary stages of this rulemaking. 

The earlier stages of a rulemaking are 

intended to introduce the various 

analyses DOE conducts during the 

rulemaking process, present preliminary 

results, and request initial feedback 

from interested parties to seek early 

input. Although the most recent 

rulemaking notices for NWGFs and 

MHGFs (the March 2015 NOPR and 

September 2016 SNOPR) have been 

withdrawn, as discussed in section 

II.B.2 of this document, this analysis 

builds upon the previous rulemaking 

stages. As DOE is using similar 

analytical methods in this NOPR (with 

differences described in the sections 

that follow), publication of a framework 

document, preliminary analysis, or 

ANOPR would be largely redundant of 

previously published documents. 

Stakeholders have previously provided 

numerous rounds of input on these 

methodologies in the most recent 

rulemaking. Further, as discussed in 

section II.A, EPCA provides that DOE 

must conduct two rounds of energy 

conservation standard rulemakings for 

NWGFs and MHGFs. (42 U.S.C. 

6295(f)(4)(B) and (C)) The statute also 

requires that not later than 6 years after 

issuance of any final rule establishing or 

amending a standard, DOE must publish 

either a notice of determination that 

standards for the product do not need to 

be amended, or a NOPR including new 

proposed energy conservation 

standards. (42 U.S.C. 6295(m)(1)) The 

energy conservation standards for 

NWGF and MHGF were last amended in 

the November 2007 final rule. 

Additionally, as discussed in section 

II.B.2 of this document, in settling the 

lawsuit filed by APGA following the 

June 2011 DFR (Petition for Review, 

American Public Gas Association, et al. 

v. Department of Energy, et al., No. 11– 

1485 (D.C. Cir. filed Dec. 23, 2011)), 

DOE agreed to use best efforts to issue 

a NOPR within one year of the remand 

(i.e., by April 24, 2015), and to issue a 

final rule within the later of two years 

of the issuance of remand, or one year 

of the issuance of the proposed rule (i.e., 

by April 24, 2016).29 As it has been 

more than 8 years since the settlement 

agreement and over 6 years past the 

original target date for issuance of a 

final rule, DOE has determined that 

moving as expeditiously as is 

reasonably practical is the approach 

most consistent with the terms of the 

settlement agreement as well as the 

requirements of EPCA. As such, DOE is 

not publishing pre-NOPR documents. 

DOE has tentatively found that the 

portions of analysis done for previous 

rulemakings continue to apply to the 

current market for the furnaces at issue. 

However, as discussed in section IV of 

this NOPR, DOE has updated analytical 

inputs in its analyses where appropriate 

and welcomes submission of additional 

data, information, and comments. 

Section 6(f)(2) of appendix A provides 

that the length of the public comment 

period for the NOPR will be at least 75 

days. For this NOPR, DOE finds it 

necessary and appropriate to provide a 

60-day comment period. As stated 

previously, DOE faces an overdue 

statutory deadline for this rulemaking 

and, furthermore, the analytical 

methods used for this NOPR are similar 

to those used in previous rulemaking 

notices. Consequently, DOE has 

determined it is necessary and 

appropriate to provide a 60-day 

comment period, which the Department 

has determined provides sufficient time 

for interested parties to review the 

NOPR and develop comments. 

III. General Discussion 

DOE developed this proposed rule 

after considering comments, data, and 

information from interested parties that 

represent a variety of interests. This 

NOPR addresses all relevant issues 

raised by commenters since the last 

published proposal in this rulemaking 

proceeding. 

A. Product Classes and Scope of 

Coverage 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered products into product 

classes by the type of energy used, or by 

capacity or other performance-related 

features that justify differing standards. 

In making a determination whether a 

performance-related feature justifies a 

different standard, DOE must consider 

such factors as the utility of the feature 

to the consumer and other factors DOE 

determines are appropriate. (42 U.S.C. 

6295(q)) 

In this proposed rule, DOE is only 

analyzing a subset of consumer furnace 

classes. DOE agreed to the partial 

vacatur and remand of the June 2011 

DFR, specifically as it related to energy 

conservation standards for NWGFs and 

MHGFs in the settlement agreement to 

resolve the litigation in American Public 

Gas Ass’n v. U.S. Dept. of Energy (No. 

11–1485, D.C. Cir. Filed Dec 23, 2011). 

80 FR 13120, 13130–13132 (March 12, 

2015). Therefore, in this proposed rule, 

DOE is only proposing amended 

standards for NWGFs and for MHGFs. 

For a detailed discussion of the product 

classes considered for this NOPR, see 

section IV.A.1 of this document. 

B. Test Procedure 

EPCA sets forth generally applicable 

criteria and procedures for DOE’s 

adoption and amendment of test 


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30 DOE also presents a sensitivity analysis that 

considers impacts for products shipped in a 9-year 

period. 

31The FFC metric is discussed in DOE’s 

statement of policy and notice of policy 

amendment. 76 FR 51282 (August 18, 2011), as 

amended at 77 FR 49701 (August 17, 2012). 

procedures. (42 U.S.C. 6293) 

Manufacturers of covered products must 

use these test procedures to certify to 

DOE that their product complies with 

energy conservation standards and to 

quantify the efficiency of their product. 

(42 U.S.C. 6295(s)) DOE’s current energy 

conservation standards for consumer 

furnaces are expressed in terms of AFUE 

(see 10 CFR 430.32(e)(1)). AFUE is an 

annualized fuel efficiency metric that 

accounts for fossil fuel consumption in 

active, standby, and off modes. The 

existing DOE test procedure for 

determining the AFUE of consumer 

furnaces is located at 10 CFR part 430, 

subpart B, appendix N. The DOE test 

procedure for consumer furnaces was 

originally established by a May 12, 1997 

final rule, which incorporates by 

reference the American Society of 

Heating, Refrigerating and AirConditioning Engineers (‘‘ASHRAE’’)/ 

American National Standards Institute 

(‘‘ANSI’’) Standard 103–1993, Method of 

Testing for Annual Fuel Utilization 

Efficiency of Residential Central 

Furnaces and Boilers (1993). 62 FR 

26140, 26157. 

Since the initial adoption of the 

consumer furnaces test procedure, DOE 

has undertaken a number of additional 

rulemakings related to that test 

procedure, including ones to account for 

measurement of standby mode and off 

mode energy use (see 75 FR 64621 (Oct. 

20, 2010); 77 FR 76831 (Dec. 31, 2012)) 

and to supply necessary equations 

related to optional heat-up and cooldown tests (see 78 FR 41265 (July 10, 

2013)). 

Most recently, DOE published a final 

rule in the Federal Register on January 

15, 2016, that further amended the test 

procedure for consumer furnaces 

(January 2016 TP final rule). 81 FR 

2628. The revisions included: 

• Clarification of the electrical power 

term ‘‘PE’’; 

• Adoption of a smoke stick test for 

determining use of minimum default 

draft factors; 

• Allowance for the measurement of 

condensate under steady-state 

conditions; 

• Reference to manufacturer’s 

installation and operation manual and 

clarifications for when that manual does 

not specify test set-up; 

• Specification of ductwork 

requirements for units that are installed 

without a return duct; and 

• Revision of the requirements 

regarding AFUE reporting precision. 

81 FR 2628, 2629–2630. 

As such, the most current version of 

the test procedure (published in January 

2016) has now been in place for several 

years and is available to commenters 

when considering the proposals 

presented in this NOPR. 

C. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially-available products or in 

working prototypes to be 

technologically feasible. See 10 CFR 

part 430, subpart C, appendix A 

(‘‘Process Rule’’), sections 6(b)(3)(i) and 

7(b)(1). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) practicability to 

manufacture, install, and service; (2) 

adverse impacts on product utility or 

availability; (3) adverse impacts on 

health or safety; and (4) unique-pathway 

proprietary technologies. Sections 

6(b)(3)(ii)–(v) and 7(b)(2)–(5) of the 

Process Rule. Section IV.B of this 

document discusses the results of the 

screening analysis for NWGF and 

MHGF, particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the potential 

standards considered in this 

rulemaking. For further details on the 

screening analysis for this rulemaking, 

see chapter 4 of the technical support 

document (‘‘TSD’’). 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered product, it must determine the 

maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such product. (42 U.S.C. 

6295(p)(1)) Accordingly, in the 

engineering analysis, DOE determined 

the maximum technologically feasible 

(‘‘max-tech’’) improvements in energy 

efficiency for NWGFs and MHGFs, 

using the design parameters for the most 

efficient products available on the 

market or in working prototypes. The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C.1.b of this NOPR and in 

chapter 5 of the TSD. 

D. Energy Savings 

1. Determination of Savings 

For each trial standard level (‘‘TSL’’), 

DOE projected energy savings from 

application of the TSL to NWGFs and 

MHGFs purchased in the 30-year period 

that begins in the expected first year of 

compliance with the proposed amended 

or new standards (2029–2058).30 The 

savings are measured over the entire 

lifetime of products purchased in the 

30-year analysis period. DOE quantified 

the energy savings attributable to each 

TSL as the difference in energy 

consumption between each standards 

case and the no-new-standards case. 

The no-new-standards case represents a 

projection of energy consumption that 

reflects how the market for a product 

would likely evolve in the absence of 

amended or new energy conservation 

standards. 

DOE used its national impact analysis 

(‘‘NIA’’) spreadsheet models to estimate 

national energy savings (‘‘NES’’) from 

potential amended and new standards 

for NWGFs and MHGFs. The NIA 

spreadsheet model (described in section 

IV.H of this NOPR) calculates) energy 

savings in terms of site energy, which is 

the energy directly consumed by 

products at the locations where they are 

used. For electricity, DOE reports 

national energy savings in terms of 

primary (source) energy savings, which 

is the savings in the energy that is used 

to generate and transmit the site 

electricity. For natural gas, the primary 

energy savings are considered to be 

equal to the site energy savings. To 

calculate the primary energy impacts, 

DOE derives annual conversion factors 

from the model used to prepare the 

Energy Information Administration’s 

(‘‘EIA’’) most recent Annual Energy 

Outlook (‘‘AEO’’) currently AEO 2021. 

DOE also calculates NES in terms of 

full-fuel-cycle (‘‘FFC’’) energy savings. 

The FFC metric includes the energy 

consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, 

natural gas, petroleum fuels), and, thus, 

presents a more complete picture of the 

impacts of energy conservation 

standards.31 DOE’s approach is based on 


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32The numeric threshold for determining the 

significance of energy savings, which was 

established in a final rule published in the Federal 

Register on February 14, 2020 (85 FR 8626, 8705), 

was subsequently eliminated in a final rule 

published in the Federal Register on December 13, 

2021 (86 FR 70892, 70901–70906). 

33See Executive Order 14008, ‘‘Tackling the 

Climate Crisis at Home and Abroad,’’ 86 FR 7619 

(Feb. 1, 2021). 

the calculation of an FFC multiplier for 

each of the energy types used by 

covered products or equipment. For 

more information on FFC energy 

savings, see section IV.H.2 of this 

NOPR. 

2. Significance of Savings 

To adopt any new or amended 

standards for a covered product, DOE 

must determine that such action would 

result in significant energy savings. (42 

U.S.C. 6295(o)(3)(B)) 

The significance of energy savings 

offered by a new or amended energy 

conservation standard cannot be 

determined without knowledge of the 

specific circumstances surrounding a 

given rulemaking.32 For example, the 

United States has rejoined the Paris 

Agreement and will exert leadership in 

confronting the climate crisis.33

Additionally, some covered products 

and equipment have most of their 

energy consumption occur during 

periods of peak energy demand. The 

impacts of these products on the energy 

infrastructure can be more pronounced 

than products with relatively constant 

demand. In evaluating the significance 

of energy savings, DOE considers 

differences in primary energy and FFC 

effects for different covered products 

and equipment when determining 

whether energy savings are significant. 

Primary energy and FFC effects include 

the energy consumed in electricity 

production (depending on load shape), 

in distribution and transmission, and in 

extracting, processing, and transporting 

primary fuels (i.e., coal, natural gas, 

petroleum fuels), and, thus, present a 

more complete picture of the impacts of 

energy conservation standards. 

Accordingly, DOE is evaluating the 

significance of energy savings on a caseby-case basis, taking into account the 

significance of cumulative FFC national 

energy savings, the cumulative FFC 

emissions reductions, and the need to 

confront the global climate crisis, among 

other factors. As discussed in section 

V.C of this document, DOE is proposing 

to adopt TSL 8 for AFUE, which would 

save an estimated 5.76 quads of energy 

(FFC) over 30 years, and TSL 3 for 

standby mode and off mode, which 

would save an estimated 0.28 quads 

over 30 years. Based on this amount of 

FFC savings, the corresponding 

reduction in emissions, and need to 

confront the global climate crisis, DOE 

has initially determined the energy 

savings from the proposed standard 

levels are ‘‘significant’’ within the 

meaning of 42 U.S.C. 6295(o)(3)(B). 

E. Economic Justification 

1. Specific Criteria 

As noted previously, EPCA provides 

seven factors to be evaluated in 

determining whether a potential energy 

conservation standard is economically 

justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)– 

(VII)) The following sections discuss 

how DOE has addressed each of those 

seven factors in this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of 

potential amended standards on 

manufacturers, DOE conducts an MIA, 

as discussed in section IV.J of this 

document. DOE first uses an annual 

cash-flow approach to determine the 

quantitative impacts. This step includes 

both a short-term assessment—based on 

the cost and capital requirements during 

the period between when a regulation is 

issued and when entities must comply 

with the regulation—and a long-term 

assessment over a 30-year period. The 

industry-wide impacts analyzed include 

(1) INPV, which values the industry on 

the basis of expected future cash flows; 

(2) cash flows by year; (3) changes in 

revenue and income; and (4) other 

measures of impact, as appropriate. 

Second, DOE analyzes and reports the 

impacts on different types of 

manufacturers, including impacts on 

small manufacturers. Third, DOE 

considers the impact of standards on 

domestic manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other product-specific 

regulatory requirements on 

manufacturers. 

For individual consumers, measures 

of economic impact include the changes 

in LCC and PBP associated with new or 

amended standards. These measures are 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the consumer costs and 

benefits expected to result from 

particular standards. DOE also evaluates 

the LCC impacts of potential standards 

on identifiable subgroups of consumers 

that may be affected disproportionately 

by a national standard. 

b. Savings in Operating Costs Compared 

to Increase in Price (LCC and PBP) 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product in the type (or class) compared 

to any increase in the price of, or in the 

initial charges for, or maintenance 

expenses of, the covered product that 

are likely to result from a standard. (42 

U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts 

this comparison in its LCC and PBP 

analyses. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating expense 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the product. The LCC 

analysis requires a variety of inputs, 

such as product prices, product energy 

consumption, energy prices, 

maintenance and repair costs, product 

lifetime, and discount rates appropriate 

for consumers. To account for 

uncertainty and variability in specific 

inputs, such as product lifetime and 

discount rate, DOE uses a distribution of 

values, with probabilities attached to 

each value. 

The PBP is the estimated amount of 

time (in years) it takes consumers to 

recover the increased purchase cost 

(including installation) of a moreefficient product through lower 

operating costs. In general, DOE 

calculates the PBP by dividing the 

change in purchase cost due to a morestringent standard by the change in 

annual operating cost for the year that 

standards are assumed to take effect. 

For its LCC and PBP analyses, DOE 

assumes that consumers will purchase 

the covered products in the first year of 

compliance with new or amended 

standards. The LCC savings for the 

considered efficiency levels are 

calculated relative to the case that 

reflects projected market trends in the 

absence of new or amended standards. 

DOE’s LCC and PBP analyses is 

discussed in further detail in section 

IV.F of this document. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) 

As discussed in section IV.H of this 

document, DOE uses the NIA 

spreadsheet models to project national 

energy savings. 


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34AGA presented this information in a 

PowerPoint slide deck titled, ‘‘Additional 

Information for OIRA Staff DOE Furnace SNOPR’’ 

(June 30, 2016). This presentation is located at the 

docket at: www.regulations.gov/document?D=EERE2014-BT-STD-0031-0209. 

35AGA provided results for four building types at 

two levels of efficiency and in five locations. The 

four building types were: two-story townhome with 

basement; two-story townhome without basement; 

three-story townhome without basement; and small 

single family detached home. The two efficiency 

levels were a highly efficient home built to 2015 

code and a highly inefficient home built to 1950s 

era practices and standards. The five locations were 

Atlanta, Chicago, Minneapolis, Salt Lake City, and 

Oklahoma City. 

36See: www.regulations.gov/document?D=EERE2014-BT-STD-0031-0209. 

37See: www.regulations.gov/document/EERE2014-BT-STD-0031-0236. 

d. Lessening of Utility or Performance of 

Products 

In establishing product classes, and in 

evaluating design options and the 

impact of potential standard levels, DOE 

evaluates potential standards that would 

not lessen the utility or performance of 

the considered products. (42 U.S.C. 

6295(o)(2)(B)(i)(IV)) Based on data 

available to DOE, the standards 

proposed in this document would not 

reduce the utility or performance of the 

products under consideration in this 

rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider the 

impact of any lessening of competition, 

as determined in writing by the 

Attorney General, that is likely to result 

from a proposed standard. (42 U.S.C. 

6295(o)(2)(B)(i)(V)) It also directs the 

Attorney General to determine the 

impact, if any, of any lessening of 

competition likely to result from a 

proposed standard and to transmit such 

determination to the Secretary within 60 

days of the publication of a proposed 

rule, together with an analysis of the 

nature and extent of the impact. (42 

U.S.C. 6295(o)(2)(B)(ii)) DOE will 

transmit a copy of this proposed rule to 

the Attorney General with a request that 

the Department of Justice (‘‘DOJ’’) 

provide its determination on this issue. 

DOE will publish and respond to the 

Attorney General’s determination in the 

final rule. DOE invites comment from 

the public regarding the competitive 

impacts that are likely to result from 

this proposed rule. In addition, 

stakeholders may also provide 

comments separately to DOJ regarding 

these potential impacts. See the 

ADDRESSES section for information to 

send comments to DOJ. 

f. Need for National Energy 

Conservation 

DOE also considers the need for 

national energy and water conservation 

in determining whether a new or 

amended standard is economically 

justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) 

The energy savings from the proposed 

standards are likely to provide 

improvements to the security and 

reliability of the Nation’s energy system. 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

Nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how potential standards may 

affect the Nation’s needed power 

generation capacity, as discussed in 

section IV.M of this document. 

DOE maintains that environmental 

and public health benefits associated 

with the more efficient use of energy are 

important to take into account when 

considering the need for national energy 

conservation. The proposed standards 

are likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and GHGs 

associated with energy production and 

use. DOE conducts an emissions 

analysis to estimate how potential 

standards may affect these emissions, as 

discussed in section IV.K of this 

document; the estimated emissions 

impacts are reported in section V.B.6 of 

this document. DOE also estimates the 

monetized value of health benefits of 

certain emissions reductions resulting 

from the considered TSLs, as discussed 

in section IV.L of this document. 

g. Other Factors 

In determining whether an energy 

conservation standard is economically 

justified, DOE may consider any other 

factors that the Secretary deems to be 

relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) 

To the extent DOE identifies any 

relevant information regarding 

economic justification that does not fit 

into the other categories described 

above, DOE could consider such 

information under ‘‘other factors.’’ 

2. Rebuttable Presumption 

As set forth in 42 U.S.C. 

6295(o)(2)(B)(iii), EPCA creates a 

rebuttable presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first full year’s energy 

savings resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effect potential amended 

energy conservation standards would 

have on the payback period for 

consumers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the Nation, and the environment, as 

required under 42 U.S.C. 

6295(o)(2)(B)(i). The results of this 

analysis serve as the basis for DOE’s 

evaluation of the economic justification 

for a potential standard level (thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification). The rebuttable 

presumption payback calculation is 

discussed in section IV.F of this 

proposed rule. 

F. Other Issues 

1. Furnace Sizing Requirements Based 

on ACCA Manual J and Manual S 

On June 30, 2016, AGA presented 

information to DOE and the Office of 

Information and Regulatory Affairs 

(‘‘OIRA’’) that AGA asserted supports a 

70 kBtu/h maximum capacity threshold 

for small furnaces.34 Specifically, AGA 

submitted calculations performed by a 

consultant, HTR Engineering, that used 

the ACCA Manual J methodology to 

determine the heating load for various 

types of houses in various locations.35

For each scenario, AGA submitted 

Microsoft Excel worksheets and PDF 

‘‘J1–ALP’’ forms with the summary 

inputs, assumptions, and corresponding 

components of the overall heating load 

to DOE.36 In addition to the Manual J 

results for each scenario, in its 

presentation, AGA also provided 

information on the appropriate furnace 

size for each scenario based on ACCA 

Manual S. DOE subsequently presented 

a slide at the October 2016 public 

meeting covering the September 2016 

SNOPR that summarized the 

information provided by AGA for 

further discussion among all interested 

parties.37 DOE noted that Manual S 

requires that furnaces be sized at 

between 1.0 and 1.4 times the Manual 

J calculated load, and the ‘‘appropriate 

furnace size’’ presented by AGA based 

on the Manual S requirement did not 

appear to be within that range, based on 

the Manual J data provided by AGA. 

In their subsequent written 

comments, AGA stated that DOE 

misrepresented the information from the 

HTR Engineering furnace sizing study to 

support the proposed standard. First, 

AGA commented that DOE incorrectly 

described the data in the table presented 

at the SNOPR public meeting as AGA’s 

data and AGA’s methodology, even 


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38See 79 FR 38130 (July 3, 2014). 

though the analysis was done by a thirdparty consultant. Second, AGA stated 

that the numbers DOE presented in the 

public meeting only included the results 

from the building envelope efficiency 

assessment of the HTR study and 

excluded the load associated with the 

duct system efficiency assessment and 

the outdoor air requirements presented 

in the study, thereby significantly 

understating the actual building heating 

loads. Third, AGA asserted that due to 

the use of what it stated are the 

incorrect building load numbers, the 

calculated preferred output and input 

capacity, as presented by DOE, were 

also incorrect. Fourth, AGA commented 

that if DOE had used what AGA deemed 

to be the correct building load numbers, 

the ‘‘AGA’’ oversize factors (as 

presented by DOE) would reflect the 1.4 

oversize factor from ACCA Manual S. 

AGA presented a revised version of the 

table shown in the public meeting with 

corrected values. Lastly, AGA asserted 

that if DOE were to use what AGA 

understood to be the correct building 

heating load, a 55,000 Btu/h NWGF 

would not be able to serve the heating 

needs of the type of home assessed. 

(AGA, No. 306–1 at pp. 13, 52–54) 

PHCC stated that the heating loads 

submitted by AGA and presented on 

DOE’s slide 30 of the October 17, 2016 

Public Meeting are understated. PHCC 

commented that it appears that 

infiltration losses and the possibility of 

unoccupied space may not have been 

fully accounted for in these 

calculations. As a result, PHCC stated 

that this analytical flaw puts in question 

the calculations used to justify the input 

capacity limit for exemption from the 

proposed standard. PHCC presented 

alternative calculations based on a 1,500 

square foot townhouse, which it 

asserted show that a 1500 square foot 

townhouse similar to the one analyzed 

by AGA would not be a candidate for a 

55,000 Btu/h furnace on a 25 °F day. 

(PHCC, No. 298 at p. 2) 

In response, DOE notes that in the 

summary spreadsheets provided by 

AGA, the output from the Manual J load 

calculation, as listed on the J1–ALP 

forms, is used for the Manual S furnace 

sizing. In other words, Manual S 

specifies that the appropriate equipment 

size be based on the load calculation 

resulting from Manual J. When 

compared to the information presented 

by AGA regarding the appropriate 

furnace size for each scenario 

(Additional Information for OIRA Staff 

DOE Furnace SNOPR, June 30, 2016 

presented in slide #7), these values 

imply an oversize factor of 

approximately 2, which is inconsistent 

with the Manual S requirement for an 

oversize factor of 1.0–1.4 for these 

buildings. In their written comments, 

AGA provided a table (AGA, No. 306– 

1 at p. 52) which includes heating load 

numbers (labeled Heating Load 

Numbers from HTR Furnace Sizing 

Study); however, these values were not 

previously provided as the basis for the 

furnace sizing requirements for the 

scenarios by AGA. More specifically, 

AGA did not provide information to 

DOE regarding its assumptions or 

calculations for the load associated with 

the duct system efficiency assessment or 

the outdoor air requirements. Therefore, 

DOE maintains that its characterization 

of the original data submittal compared 

to the presented data is appropriate. 

However, when considering AGA’s 

‘‘corrected’’ version of the table, DOE 

notes that for the ranges presented in 

the column for ‘‘ACCA Manual S 

preferred input capacity ’’ show that in 

most cases (all but one—Minneapolis), a 

55,000 Btu/h furnace could meet the 

required load. While AGA’s ‘‘corrected’’ 

table shows the ‘‘Appropriate Furnace 

Size for a 1,500 s.f. Inefficient 

Townhouse presented in AGA slide 

deck to OMB (kBtu/h)’’ is based on a 1.4 

oversize factor, DOE notes that Manual 

S specifies that the factor can be 

anywhere from 1.0 to 1.4, and Manual 

S recommends sizing the furnace as 

close to 1.0 as possible. Thus, while 

oversizing a furnace up to 40 percent is 

acceptable, it is preferred to size it 

appropriately according to the 

calculated load in Manual S. Therefore, 

the ‘‘preferred’’ input capacity would be 

the low end of the range presented in 

AGA’s table, which for four of the five 

scenarios presented is below 55,000 

Btu/h (and in the fifth case is 62,200 

Btu/h). Thus, based on the data 

submitted by AGA, a threshold of 

55,000 Btu/h would alleviate impacts in 

the majority of situations, except in the 

most extreme cases (such as 

Minneapolis). Even in these situations, 

such as in Minneapolis, a 55,000 Btu/h 

furnace would likely be able to meet the 

majority of the heating load, with a 

small amount of supplemental heating 

required from other sources. Therefore, 

DOE maintains its position that 55 kBtu/ 

h is appropriate for consideration as a 

potential threshold for defining small 

furnaces, and further discusses its 

decision with regard to this in sections 

IV.A.1.a and V.C.1 of this document. 

Furnaces at or above this threshold 

would represent approximately 86% of 

furnace shipments in the no-newstandards case. In response to PHCC, 

DOE notes that the files submitted by 

AGA do appear to account for 

infiltration losses, and some scenarios 

include unoccupied basement space. 

However, some of the assumptions used 

by PHCC in its calculations appear to 

differ from those made in the data 

submitted by AGA, including the 

dimensions of exterior walls and area 

and type of windows, among other 

parameters, which may account for the 

difference in results. 

2. Compliance Date 

As discussed in the withdrawn 

September 2016 SNOPR, missed 

deadlines in the furnace rulemaking 

history have resulted in ambiguity in 

terms of the applicable statutory 

compliance date for any potential 

amended standards that result from this 

rulemaking. 81 FR 65720, 65746 (Sept. 

23, 2016). DOE explained that, in light 

of this ambiguity, it is informed by 

Congress’s most recent direction 

regarding the lead time specific to 

furnace rulemakings (i.e., 5 years) under 

the 6-year review requirement (42 

U.S.C. 6295(m)(4)(A)(ii)). 81 FR 65720, 

65747 (Sept. 23, 2016). DOE posited that 

a lead time for compliance of 5 years 

after publication of the final rule for 

amended furnaces standards, consistent 

with the requirements of both 42 U.S.C. 

6295(f)(4)(C) and (m)(4)(A)(ii), would be 

in alignment with the provision in the 

6-year-lookback authority that 

manufacturers shall not be subject to 

new standards for a covered product for 

which other new standards have been 

required in the past 6 years. (42 U.S.C. 

6295(m)(4)(B); the relevant date being 

November 19, 2015—the compliance 

date of the last amendments applicable 

to NWGFs and MHGFs.) Id. Further, 

DOE asserted that the compliance date 

of the July 2014 Furnace Fan Final 

Rule 38 (i.e., July 3, 2019) is not relevant 

to the minimum 6-year period required 

under 42 U.S.C. 6295(m)(4)(B), stating 

that furnace fan standards are to be 

treated as a separate covered product 

and are not to be understood as a 

standard on furnaces. Id. DOE continues 

to adhere to this view and is proposing 

a five-year lead time for compliance 

with any amended energy conservation 

standards for NWGFs and MHGFs, for 

the reasons that follow. 

DOE interprets furnaces and furnace 

fans as separate products under EPCA. 

The 6-year period under 42 U.S.C. 

6295(m)(4)(B) is applicable in the 

context of standards directly applicable 

to the product in question. As such, the 

standards for furnace fans are not a 

consideration when applying the 6-year 

period to new or amended standards for 

furnaces. DOE acknowledges that 


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‘‘furnace fan’’ is not expressly defined 

by EPCA as a ‘‘covered product.’’ 

However, EPCA, and the relevant 

amending statutes, provide for the 

treatment of furnace fans as a product 

separate from furnaces, and DOE’s 

standards for furnace fans are separate 

and distinct from the standards for 

furnaces. DOE is expressly authorized to 

establish energy conservation standards 

for electricity used for purpose of 

circulating air through duct work. (42 

U.S.C. 6295(f)(4)(D)) An energy 

conservation standard is a performance 

standard ‘‘which prescribes a minimum 

level of energy efficiency or a maximum 

quantity of energy use . . . for a covered 

product.’’ (42 U.S.C. 6291(6)) DOE has 

interpreted EPCA as providing direction 

to the Department to establish an energy 

conservation standard for furnace fans, 

which are to be treated as a separate 

consumer product. 

Further, the authority to establish 

such standards was added to EPCA by 

section 135, of the Energy Policy Act of 

2005, which was titled ‘‘Energy 

Conservation Standards for Other 

Products,’’ again indicating that the 

standards are to be treated as standards 

applicable to a product separate from 

furnaces. Public Law 109–58, section 

135 (August 8, 2005); 119 Stat. 594, 624. 

The establishment of such standards 

was made mandatory under section 304 

of the Energy Independence and 

Security Act of 2007 (EISA 2007), which 

was titled ‘‘Furnace Fan Standard 

Process,’’ further indicating that furnace 

fans are to be considered as a covered 

product separate from furnaces. Public 

Law 110–140, section 304 (Dec. 19, 

2007); 121 Stat. 1492, 1553. 

The authority to establish energy 

conservation standards for ‘‘electricity 

used for purposes of circulating air 

through duct work’’ does not expressly 

reference furnaces. (See 42 U.S.C. 

6295(f)(4)(D)) Where EPCA has required 

the establishment of standards for 

furnaces, it has done so expressly. 

‘‘Furnaces (other than furnaces designed 

solely for installation in mobile homes) 

manufactured on or after January 1, 

1992, shall have an annual fuel 

utilization efficiency of not less than 78 

percent[.]’’ (42 U.S.C. 6295(f)(1)); 

‘‘Furnaces which are designed solely for 

installation in mobile homes and which 

are manufactured on or after September 

1, 1990, shall have an annual fuel 

utilization efficiency of not less than 75 

percent.’’ (42 U.S.C. 6295(f)(2)); ‘‘The 

Secretary shall publish a final rule no 

later than January 1, 1994, to determine 

whether the standards established by 

this subsection for furnaces (including 

mobile home furnaces) should be 

amended.’’ (42 U.S.C. 6295(f)(4)(C)) 

Instead of directing DOE to establish 

furnace standards for electricity used for 

the purpose of circulating air, or 

standards for electricity used by 

furnaces for the purpose of circulating 

air through duct work, EPCA directs 

DOE to establish standards for 

electricity used for purposes of 

circulating air through duct work 

without reference to furnaces in that 

paragraph. Further, DOE has found that 

this language could be interpreted as 

encompassing electrically-powered 

devices used in any residential heating, 

ventilation, and air-conditioning 

(‘‘HVAC’’) product to circulate air 

through duct work, not just furnaces. 79 

FR 500, 504 (Jan. 3, 2014). 

Consistent with treating the furnace 

fan standards and the furnace standards 

as standards on separate products, 

EPCA established two separate 

timeframes for the furnace fan and 

furnace rulemakings. Section 304 of 

EISA 2007, Furnace Fan Standard 

Process, amended the provision 

regarding standards for electricity used 

for the purpose of circulating air 

through duct work by requiring DOE to 

establish such standards by December 

31, 2013. EISA 2007, Public Law 110– 

140, section 304 (Dec. 19, 2007); 121 

Stat. 1492, 1553; 42 U.S.C. 6295(f)(4)(D). 

In the section immediately following the 

Furnace Fan Standard Process section, 

EISA 2007 amended EPCA to establish 

the 6-year-lookback review requirement 

for energy conservation standards. EISA 

2007, Public Law 110–140, section 305 

(Dec. 19, 2007); 121 Stat. 1492, 1553; 42 

U.S.C. 6295(m). EPCA required DOE to 

establish an amended final rule for 

furnaces no later than January 1, 2007, 

with a compliance date of January 1, 

2012. (42 U.S.C. 6295(f)(4)(C)) As a 

result of the 6-year review provision 

added under EISA 2007, DOE had to 

either a publish a determination that no 

amendment of the furnace standards is 

needed or issue a notice of proposed 

rulemaking to amend the furnace 

standards by January 1, 2013. Instead of 

aligning the furnace fan rulemaking 

with the furnace rulemaking schedule, 

EPCA, as amended by EISA 2007, 

established a distinct December 1, 2013 

deadline, further indicating that furnace 

fans are to be treated separately from 

furnaces. 

As DOE acknowledged in a 2013 

notice of proposed rulemaking for 

furnace fan energy conservation 

standards, standards for furnace fans 

may require manufacturers to redesign 

the furnaces in which the fans are 

installed. 78 FR 64068, 64103 (Oct. 25, 

2013). However, the compliance date 

mandated by EPCA for amendments to 

standards under the 6-year review 

requirement does not permit DOE to 

account for standards applicable to 

other products, even if such standards 

for other products may impact the 

product subject to the amendment. (42 

U.S.C. 6295(m)(4)) EPCA directs DOE to 

prescribe a compliance date in 

consideration of both the publication 

date of the final rule and the date of the 

last amended standards with which that 

product was required to comply. (42 

U.S.C. 6295(m)(4)(A)–(B)) Standards 

with which furnaces are not required to 

comply are not a consideration under 42 

U.S.C. 6295 (m)(4)(A)–(B) even if those 

standards have an impact on furnaces. 

As discussed, EPCA treats furnaces and 

furnace fans as two separate products. 

As such, DOE has not considered the 

furnace fan standards when establishing 

the compliance date of furnace 

standards under 42 U.S.C. 

6295(m)(4)(A)–(B). 

IV. Methodology and Discussion of 

Related Comments 

This section addresses the analyses 

DOE has performed for this rulemaking 

with regard to NWGFs and MHGFs. 

Separate subsections address each 

component of DOE’s analyses. 

Comments on the methodology and 

DOE’s responses are presented in each 

section. 

DOE used several analytical tools to 

estimate the impact of the standards 

considered in this document. The first 

tool is a spreadsheet that calculates the 

LCC savings and PBP of potential 

amended or new energy conservation 

standards. The national impacts 

analysis uses a second spreadsheet set 

that provides shipments projections and 

calculates national energy savings and 

net present value of total consumer 

costs and savings expected to result 

from potential energy conservation 

standards. DOE uses the third 

spreadsheet tool, the Government 

Regulatory Impact Model (‘‘GRIM’’), to 

assess manufacturer impacts of potential 

standards. These three spreadsheet tools 

are available on the DOE website for this 

rulemaking: www1.eere.energy.gov/ 

buildings/appliance_standards/ 

standards.aspx?productid=59&action=

viewlive. Additionally, DOE used output 

from AEO 2021 for the emissions and 

utility impact analyses. 

A. Market and Technology Assessment 

DOE develops information in the 

market and technology assessment that 

provides an overall picture of the 

market for the products concerned, 

including the purpose of the products, 

the industry structure, manufacturers, 

market characteristics, and technologies 

used in the products. This activity 


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39 DOE published the Gas Industry Petition in the 

Federal Register for comment on November 1, 

2018. 83 FR 54883. 

includes both quantitative and 

qualitative assessments, based primarily 

on publicly-available information. The 

subjects addressed in the market and 

technology assessment for this 

rulemaking include: (1) a determination 

of the scope of the rulemaking and 

product classes; (2) manufacturers and 

industry structure; (3) existing 

efficiency programs; (4) shipments 

information; (5) market and industry 

trends, and (6) technologies or design 

options that could improve the energy 

efficiency of NWGFs and MHGFs. The 

key findings of DOE’s market 

assessment are summarized below. See 

chapter 3 of the TSD for further 

discussion of the market and technology 

assessment. 

1. Scope of Coverage and Product 

Classes 

a. General Approach 

EPCA defines a ‘‘furnace’’ as ‘‘a 

product which utilizes only singlephase electric current, or single-phase 

electric current or DC current in 

conjunction with natural gas, propane, 

or home heating oil, and which: 

(1) Is designed to be the principal 

heating source for the living space of a 

residence; 

(2) Is not contained within the same 

cabinet with a central air conditioner 

whose rated cooling capacity is above 

65,000 Btu per hour; 

(3) Is an electric central furnace, 

electric boiler, forced-air central 

furnace, gravity central furnace, or low 

pressure steam or hot water boiler; and 

(4) Has a heat input rate of less than 

300,000 Btu per hour for electric boilers 

and low pressure steam or hot water 

boilers and less than 225,000 Btu per 

hour for forced-air central furnaces, 

gravity central furnaces, and electric 

central furnaces.’’ (42 U.S.C. 6291(23)) 

DOE has incorporated this definition 

into its regulations in the Code of 

Federal Regulations (‘‘CFR’’) at 10 CFR 

430.2. 

EPCA’s definition of a ‘‘furnace’’ 

covers the following types of products: 

(1) gas furnaces (non-weatherized and 

weatherized); (2) oil-fired furnaces (nonweatherized and weatherized); (3) 

mobile home furnaces (gas and oilfired); (4) electric resistance furnaces; 

(5) hot water boilers (gas and oil-fired); 

(6) steam boilers (gas and oil-fired); and 

(7) combination space/water heating 

appliances (water-heater/fancoil 

combination units and boiler/tankless 

coil combination units). As discussed in 

section II.B.1 of this document, DOE 

agreed to the partial vacatur and remand 

of the June 2011 DFR, specifically as it 

related to energy conservation standards 

for NWGFs and MHGFs in the 

settlement agreement to resolve the 

litigation in American Public Gas Ass’n 

v. U.S. Dept. of Energy (No. 11–1485, 

D.C. Cir. Filed Dec. 23, 2011). 80 FR 

13120, 13130–13132 (March 12, 2015). 

Therefore, DOE only considered 

amending the energy conservation 

standards for these two product classes 

of residential furnaces (i.e., NWGFs and 

MHGFs) for this NOPR. 

At various rulemaking stages, 

interested parties have raised concerns 

pertaining to potential impacts of a 

national condensing standard on certain 

consumers as a result of either increased 

installation costs (due to the increased 

cost of the condensing furnace itself 

and/or related venting modifications) or 

switching to electric heat (potentially 

resulting in higher monthly bills). In 

response to these concerns, DOE first 

published the September 2015 NODA, 

which contained analyses examining 

the potential impacts of a separate 

product class for furnaces with a lower 

input capacity, one of the statutory 

bases for establishing a separate product 

class. Such an approach was suggested 

by stakeholders as a potential way to 

reduce negative impacts on some 

furnace consumers while maintaining 

the overall economic and environmental 

benefits of amended standards for 

consumer furnaces. 80 FR 55038, 

55038–55039 (Sept. 14, 2015). In 

response to the September 2015 NODA, 

DOE received further comments from 

several stakeholders recommending that 

DOE establish separate product classes 

based on furnace capacity, in order to 

preserve the availability of noncondensing NWGF for buildings with 

lower heating loads, thereby helping to 

alleviate the negative impacts of the 

proposed standards. DOE responded to 

these comments in the withdrawn 

September 2016 SNOPR, in which the 

Department tentatively concluded that 

the establishment of a small furnace 

class would have merit. Accordingly, 

after considering energy savings and 

economic benefits of several potential 

input capacity thresholds, DOE 

proposed to establish a separate product 

class for small NWGF, defined as those 

furnaces with a certified input capacity 

of less than or equal to 55 kBtu/h, and 

the Department proposed to retain a 

minimum standard of 80-percent AFUE 

for this class. 81 FR 65720, 65752 and 

65837 (Sept. 23, 2016). 

For the current NOPR analysis, DOE 

again considered whether a ‘‘small 

furnace’’ product class is justified for 

NWGFs and MHGFs and evaluated 

several input capacity thresholds, 

including the 55 kBtu/h threshold that 

was proposed in the withdrawn 2016 

SNOPR, along with several others. DOE 

analyzed a range of potential input 

capacity cut-offs and considered the 

benefits and burdens of each. However, 

as discussed in section V.C.1 of this 

document, after considering the benefits 

and burdens of the various approaches, 

DOE is not proposing to divide furnace 

product classes by capacity in this 

document. 

b. Condensing and Non-Condensing 

Furnaces 

DOE has recently considered whether 

different venting technologies should be 

considered a necessary feature. On 

January 15, 2021, in response to a 

petition for rulemaking 39 submitted by 

the American Public Gas Association, 

Spire, Inc., the Natural Gas Supply 

Association, the American Gas 

Association, and the National Propane 

Gas Association (the ‘‘Gas Industry 

Petition’’), DOE published the January 

2021 final interpretive rule in the 

Federal Register determining that, in 

the context of residential furnaces, 

commercial water heaters, and 

similarly-situated products/equipment, 

use of non-condensing technology (and 

associated venting) constitutes a 

performance-related ‘‘feature’’ under 

EPCA that cannot be eliminated through 

adoption of an energy conservation 

standard. 86 FR 4776. Correspondingly, 

on the same day, DOE published in the 

Federal Register a notification 

withdrawing the March 2015 NOPR and 

the September 2015 SNOPR for NWGFs 

and MHGFs. 86 FR 3873 (Jan. 15, 2021). 

However, as explained in section 

II.B.2 of this document, DOE 

subsequently published a final 

interpretive rule in the Federal Register 

that returns to the Department’s 

previous and long-standing 

interpretation (in effect prior to the 

January 15, 2021 final interpretive rule), 

under which the technology used to 

supply heated air or hot water is not a 

performance-related ‘‘feature’’ that 

provides a distinct consumer utility 

under EPCA. 86 FR 73947 (Dec. 29, 

2021). Accordingly, for purposes of the 

analyses conducted for this NOPR, DOE 

did not analyze separate equipment 

classes for non-condensing and 

condensing furnaces. However, as 

discussed in section IV.A.1.a of this 

document, the current analysis does 

consider various capacity thresholds to 

establish a separate product class for 

small NWGFs for which DOE would 

propose less stringent energy 

conservation standards. The 


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40AHRI and Nortek also provided more specific 

arguments stating that: (1) replacing a noncondensing MHGF with a condensing MHGF is not 

a simple drop-in; (2) a condensing furnace, with the 

added heat exchanger needed to achieve 

condensing operation, may not be dimensionally 

the same as the original non-condensing furnace 

installed in the mobile home when it was 

manufactured; (3) rework may be needed to install 

the new PVC venting system; and (4) there will be 

the added cost of the labor to remove the old 

venting system. 

consideration of capacity-based product 

classes for MHGFs is discussed in 

section IV.A.1.c of this document. 

c. Mobile Home Gas Furnaces 

In response to the September 2016 

SNOPR (subsequently withdrawn), 

some stakeholders requested that DOE 

establish a small furnace product class 

for MHGFs. MHI suggested that DOE 

should exempt all MHGFs from this 

rule, but it stated that if MHGFs are 

included, DOE should adopt a small 

furnace MHGFs product class with a 

threshold of 80 kBtu/h. Nortek and MHI 

commented that tight construction of 

manufactured homes reduces the 

structure’s air leakage, which results in 

lower heating loads and negates the 

need for a more expensive 92-percent 

AFUE furnace in many climates, 

especially in the South. (Nortek, No. 300 

at p. 2; MHI, No. 282 at p. 2) Nortek and 

MHI further stated that because the 

majority of manufactured home buyers 

are low- to median-income consumers, 

it is important that any increase in home 

cost resulting from new energy 

conservation standards be economically 

justified and not burden affordability by 

increasing up-front costs without 

mitigating resulting access barriers. 

Nortek stated that without a small 

MHGFs product class, potential 

homebuyers with modest incomes will 

be forced to purchase MHGFs that are 

unnecessary for their home. (Nortek, No. 

300 at pp. 5–6; MHI, No. 282 at p. 4) 

Mortex argued that the standard level 

for MHGFs should not be changed due 

to the small market size, and the 

commenter also stated that an input 

capacity threshold for MHGFs at any 

level does not make sense because it 

would create a smaller, less significant 

market size for each class (above and 

below the threshold). (Mortex, No. 305 

at p. 2) 

AHRI stated that DOE must reevaluate 

its analysis for MHGFs so as to set an 

appropriate breakpoint for such 

products that maintains a noncondensing option for that market. 

(AHRI, No. 303 at p. 1) AHRI and Nortek 

noted that in previous comments 

submitted by AHRI in response to the 

September 2015 NODA, AHRI had 

requested that DOE analyze potential 

separate standard levels for small and 

large MHGF in order to minimize 

potential negative aspects of the 

proposed standard in the (now 

withdrawn) March 2015 NOPR. (AHRI, 

No. 303 at p. 18; Nortek, No. 300 at p. 

3) In particular, AHRI’s comments 

responding to the September 2015 

NODA expressed concerns regarding the 

number of consumers that would be 

negatively affected or would switch 

heating fuels if an AFUE standard set at 

a condensing level were adopted as the 

minimum efficiency standard for 

MHGFs. Furthermore, AHRI expressed 

its concerns with the tools utilized in 

the (now withdrawn) March 2015 NOPR 

analysis would apply equally to 

MHGFs. (AHRI, No. 195 at p. 1) 

AHRI and Nortek also argued that 

DOE reached a number of incorrect 

conclusions in the September 2016 

SNOPR, including: (1) that condensing 

gas furnaces in new mobile homes will 

cost about the same as non-condensing 

models; (2) that replacing an existing 

non-condensing MHGF with a 

condensing MHGF would not have a 

significant increased installation cost; 

and (3) that very few residents living in 

mobile homes will experience negative 

life cycle costs.40 AHRI and Nortek 

stated that U.S. Department of Housing 

and Urban Development (‘‘HUD’’) 

regulations for the construction of 

mobile (manufactured) homes, require 

that a MHGF be installed such that it is 

isolated from the conditioned space of 

the mobile home, and that all 

combustion and ventilation air must be 

taken from the outdoors, and the vent 

system must vent vertically through a 

roof jack. Additionally, the commenters 

noted that the space in which a MHGF 

is installed is minimized to the smallest 

size that safety and performance 

considerations will allow because space 

is at a premium in mobile homes. 

(AHRI, No. 303 at pp. 18–19; Nortek, 

No. 300 at pp. 3–4) 

After considering these comments 

regarding a ‘‘small’’ MHGF product 

class, DOE has preliminarily determined 

that that some of the potential negative 

outcomes for MHGF consumers could 

be mitigated by consideration of a 

separate standard for ‘‘small’’ MHGF 

similar to the analysis done for NWGF. 

Accordingly, DOE analyzed a separate 

standard for small MHGFs for this 

NOPR. However, as discussed in section 

IV.A.1.a of this document, after 

considering the benefits and burdens of 

potential capacity-based product 

classes, DOE has decided not to propose 

to establish classes based on capacity in 

this document. Section V.C.1 of this 

document contains discussion that 

explains DOE’s weighting of the 

burdens and benefits of the potential 

new and amended energy conservation 

standards analyzed for this NOPR. 

Additionally, DOE does not agree that 

condensing MHGFs are necessarily 

larger than noncondensing MHGFs. 

Based on a review of product literature, 

it appears that noncondensing and 

condensing MHGFs are often designed 

with similar cabinet sizes, and, thus, 

DOE does not expect that replacing a 

noncondensing MHGF with a 

condensing MHGF would necessitate a 

larger footprint. 

d. Standby Mode and Off Mode 

As discussed in section II.A of this 

document, EPCA requires any final rule 

for new or amended energy 

conservation standards promulgated 

after July 1, 2010, to address standby 

mode and off mode energy use. (42 

U.S.C. 6295(gg)(3)) Accordingly, this 

rulemaking considers standby mode and 

off mode energy consumption of 

NWGFs and MHGFs, and this notice 

includes proposed standards for these 

operational modes. 

‘‘Standby mode’’ and ‘‘off mode’’ 

energy use are defined in the DOE test 

procedure for residential furnaces and 

boilers (i.e., ‘‘Uniform Test Method for 

Measuring the Energy Consumption of 

Furnaces and Boilers,’’ 10 CFR part 430, 

subpart B, appendix N). In that test 

procedure, DOE defines ‘‘standby 

mode’’ for consumer furnaces and 

boilers as any mode in which the 

furnace or boiler is connected to a mains 

power source and offers one or more of 

the following space heating functions 

that may persist: (a) To facilitate the 

activation of other modes (including 

activation or deactivation of active 

mode) by remote switch (including 

thermostat or remote control), internal 

or external sensors, or timer; and (b) 

Continuous functions, including 

information or status displays or sensor 

based functions. (10 CFR part 430, 

subpart B, appendix N, section 2.12) 

‘‘Off mode’’ for consumer furnaces and 

boilers is defined as a mode in which 

the furnace or boiler is connected to a 

mains power source and is not 

providing any active mode or standby 

mode function, and where the mode 

may persist for an indefinite time. The 

existence of an off switch in off position 

(a disconnected circuit) is included 

within the classification of off mode. (10 

CFR part 430, subpart B, appendix N, 

section 2.9) An ‘‘off switch’’ is defined 

as the switch on the furnace or boiler 

that, when activated, results in a 

measurable change in energy 

consumption between the standby and 

off modes. (10 CFR part 430, subpart B, 

appendix N, section 2.10.) As discussed 


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41 ‘‘Ultra low NOX’’ furnaces produce no more 

than 14 nanograms of NOX per Joule. 

previously, DOE does not currently 

prescribe standby mode or off mode 

standards for NWGFs and MHGFs. 

DOE’s analysis of standby mode and off 

mode standards is discussed further in 

section IV.C of this document. 

2. Technology Options 

In the market analysis and technology 

assessment, DOE has identified 12 

technology options that would be 

expected to improve the AFUE 

efficiency of NWGFs and MHGFs, as 

measured by the DOE test procedure: (1) 

using a condensing secondary heat 

exchanger; (2) increasing the heat 

exchanger surface area; (3) heat 

exchanger baffles; (4) heat exchanger 

surface feature improvements; (5) twostage combustion; (6) step-modulating 

combustion; (7) pulse combustion; (8) 

premix burners; (9) burner de-rating; 

(10) insulation improvements; (11) offcycle dampers; and (12) direct venting. 

In addition, DOE identified three 

technologies that would reduce the 

standby mode and off mode energy 

consumption of residential furnaces: (1) 

low-loss linear transformer (‘‘LL–LTX’’); 

(2) switching mode power supply 

(‘‘SMPS’’); and (3) control relay for 

models with brushless permanent 

magnet (‘‘BPM’’) motors. A detailed 

discussion of each technology option 

identified is contained in chapter 3 of 

the NOPR TSD. 

DOE considered each technology 

further in the screening analysis (see 

section IV.B of this document or chapter 

4 of the NOPR TSD) to determine which 

could be considered further in the 

analysis and which should be 

eliminated. 

B. Screening Analysis 

DOE uses the following five screening 

criteria to determine which technology 

options are suitable for further 

consideration in an energy conservation 

standards rulemaking: 

(1) Technological feasibility. 

Technologies that are not incorporated 

in commercial products or in working 

prototypes will not be considered 

further. 

(2) Practicability to manufacture, 

install, and service. If it is determined 

that mass production and reliable 

installation and servicing of a 

technology in commercial products 

could not be achieved on the scale 

necessary to serve the relevant market at 

the time of the projected compliance 

date of the standard, then that 

technology will not be considered 

further. 

(3) Impacts on product utility or 

product availability. If it is determined 

that a technology would have significant 

adverse impacts on the utility of the 

product to significant subgroups of 

consumers or would result in the 

unavailability of any covered product 

with performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as products 

generally available in the United States 

at the time, it will not be considered 

further. 

(4) Adverse impacts on health or 

safety. If it is determined that a 

technology would have significant 

adverse impacts on health or safety, it 

will not be considered further. 

(5) Unique-Pathway Proprietary 

Technologies. If a design option utilizes 

proprietary technology that represents a 

unique pathway to achieving a given 

efficiency level, that technology will not 

be considered further due to the 

potential for monopolistic concerns. 

10 CFR part 430, subpart C, appendix A, 

sections 6(b)(3) and 7(b). 

In summary, if DOE determines that a 

technology, or a combination of 

technologies, fails to meet one or more 

of the above five criteria, it will be 

excluded from further consideration in 

the engineering analysis. The reasons 

for eliminating any technology are 

discussed in the following sections. 

The subsequent sections include 

comments from interested parties 

pertinent to the screening criteria, 

DOE’s evaluation of each technology 

option against the screening analysis 

criteria, and whether DOE determined 

that a technology option should be 

excluded (‘‘screened out’’) based on the 

screening criteria. 

1. Screened-Out Technologies 

For this NOPR, DOE has screened out 

the following technologies: pulse 

combustion, burner de-rating, and 

control relay to depower BPM motors. 

Each of these will be discussed in turn. 

As mentioned, DOE screened out the 

use of pulse combustion. Pulse 

combustion furnaces use self-sustaining 

pressure waves to draw a fresh fuel-air 

mixture into the combustion chamber, 

heat it by way of compression, and then 

ignite it using a spark. This technology 

option was screened out due to past 

reliability and safety issues, which has 

resulted in manufacturers generally not 

considering their use a viable option to 

improve efficiency. In addition, furnace 

manufacturers can achieve similar or 

greater efficiencies through the use of 

other technologies that do not operate 

with positive pressure in the heat 

exchanger, such as those relying on 

induced draft. 

DOE also screened out burner derating. Burner de-rating reduces the 

burner firing rate while maintaining the 

same heat exchanger geometry/surface 

area and fuel-air ratio, which increases 

the ratio of heat transfer surface area to 

energy input, which increases 

efficiency. This technology option was 

screened out because it reduces the 

burner firing rate while maintaining the 

same heat exchanger geometry/surface 

area and fuel-air ratio, resulting in less 

heat being provided to the user than is 

provided using conventional burner 

firing rates. 

Lastly, DOE screened out use of a 

control relay to depower BPM motors. 

For this option, a switch is springloaded to a disconnected position and 

can only close to allow a supply of 

electrical power to the BPM motor upon 

an inrush of current. This technology 

option was screened out because 

manufacturer interviews previously 

indicated that using a control relay to 

depower BPM motors could reduce the 

lifetime of the motors. 

It is noted that in earlier rulemaking 

analyses (e.g., for the since withdrawn 

September 2016 SNOPR), DOE had 

screened out premix burners from 

further analysis because premix burners 

had not yet been successfully 

incorporated into a consumer furnace 

design, raising concerns about the 

technological feasibility of premix 

burners in furnaces. Incorporating this 

technology into furnaces on a large scale 

at that time would have required further 

research and development due to the 

technical constraints imposed by 

current furnace burner and heat 

exchanger design. However, in 

conducting the market and technology 

assessment and screening analysis for 

this NOPR, DOE has now identified 

NWGF furnaces with premix burners on 

the market and, therefore, has not 

screened this technology option out of 

its analysis, because the technological 

feasibility and practicability to 

manufacture such designs has been 

demonstrated. However, DOE notes that 

the premix burner designs observed on 

the market were implemented in ultra 

low NOX 41 models, indicating that the 

development of premix burner designs 

has been primarily driven by NOX

requirements. The efficiencies of these 

models are the same as those achieved 

by more conventional non-premix 

burner designs used in furnaces. 

Therefore, while the use of premix 

burners was not screened out, it was not 

considered a primary driver for 

improving efficiency. 

The technology options assumed to be 

implemented to achieve each efficiency 


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42 DOE also notes that a more recent report by the 

National Fire Protection Association (‘‘NFPA’’) does 

not attribute any deaths to fires resulting from 

heating tape between 2014 and 2018. See Richard 

Campbell, National Fire Protection Association Fire 

Analysis and Research Division, Home Heating 

Fires Supporting Tables (January 2021) p. 7 

(Available at: www.nfpa.org/news-and-research/ 

fire-statistics-and-reports/fire-statistics/fire-causes/ 

appliances-and-equipment/heating-equipment) 

(Last accessed February 15, 2022). 

43See section IV.F.9 of this document for further 

discussion of the efficiency distribution for the 

subject furnaces. 

44FEMA, Heating Fires in Residential Buildings 

(2010–2012), Topical Fire Report Series (December 

2014) p. 7 (Available at: www.usfa.fema.gov/ 

downloads/pdf/statistics/v15i7.pdf) (Last accessed 

February 15 2022); See also, Richard Campbell, 

NFPA Fire Analysis and Research Division, Home 

Heating Fires Supporting Tables (January 2021) 

(Available at: www.nfpa.org/news-and-research/ 

fire-statistics-and-reports/fire-statistics/fire-causes/ 

appliances-and-equipment/heating-equipment) 

(Last accessed February 15, 2022). 

level are discussed further in section 

IV.C.1 of this NOPR. Chapter 4 of the 

TSD includes additional information on 

the screening analysis. 

Based on comments received in 

response to the September 2016 SNOPR 

from stakeholders who were concerned 

that raising standards to condensing 

levels would result in adverse impacts 

to safety (see: PHCC, No. 298 at pp. 1, 

2; Lennox, No. 299 at pp. 19–20; 

Southern Company, No. 257 at pp. 10– 

11; Spire, No. 224 at pp. 27, 39; 

Efficiency Advocates, No. 285 at pp. 4– 

5), DOE carefully considered the safety 

of condensing furnaces for this NOPR. 

DOE notes that condensing furnaces 

have been in use for decades and have 

significant market share across the 

entire United States. These products 

have been demonstrated to be safe when 

installed and used in accordance with 

manufacturer instructions. Some 

commenters suggested that an increase 

in the number of condensing furnaces 

installed would lead to an increase in 

safety issues due to a higher likelihood 

of improper venting or use of heat tape. 

However, the reports cited by 

commenters, which suggest an 

increased prevalence of fires and deaths 

attributable to improper furnace 

installation, improper maintenance, and 

improper venting, do not distinguish 

between instances involving condensing 

furnaces and instances involving noncondensing furnaces and may 

encompass both types of units.42 To the 

extent that any theoretical safety issues 

might arise due to inexperience with the 

installation of condensing furnaces, 

DOE once again notes that condensing 

furnaces have achieved substantial 

market penetration in both the northern 

and southern United States,43 and 

installers will become more familiar 

with the proper installation methods for 

these products as their presence 

continues to increase in the market. The 

5-year lead time before compliance is 

required with any standards arising 

from this rulemaking provides 

manufacturers and trade associations 

sufficient time to educate installers, 

particularly those less experienced with 

condensing furnaces, about how to 

safely install, operate, and repair them. 

Commenters also suggested in 

response to the subsequently withdrawn 

2016 SNOPR that the increased cost of 

furnace replacement could lead 

consumers to use alternate heat sources 

that they characterize as less safe, or to 

conduct an unsafe repair of a 

malfunctioning furnace rather than 

replace it. In response, DOE notes that 

furnace repairs are typically performed 

by contractors, so it is unlikely that a 

contractor would opt to repair a furnace 

in a manner that allows for unsafe 

operation. In most cases, to do so would 

be a breach of local codes that have 

negative consequences for the 

contractor. Regarding the possibility of 

a consumer choosing to use an alternate 

heating source such as a space heater, 

the reports cited by commenters state 

that the leading factors contributing to 

fires resulting from space heaters are the 

misuse of the product or improper 

maintenance of the product.44 The 

standards proposed in this document do 

not require consumers to use alternate 

heating products such as space heaters, 

let alone use such products in an unsafe 

manner. Further, there is no indication 

that the proposed standards would 

make it more likely that consumers 

choosing to reply upon such products 

would do so in an unsafe manner. 

2. Remaining Technologies 

Through a review of each technology, 

DOE tentatively concludes that all of the 

other identified technologies listed in 

section IV.A.2 of this document met all 

five screening criteria to be examined 

further as design options in DOE’s 

analysis. In summary, DOE did not 

screen out the following technology 

options to improve AFUE: (1) 

condensing secondary heat exchanger; 

(2) increased heat exchanger face area; 

(3) heat exchanger baffles; (4) heat 

exchanger surface feature 

improvements; (5) two-stage 

combustion; (6) step-modulating 

combustion; (7) insulation 

improvements; (8) off-cycle dampers; (9) 

direct venting; and (10) premix burners. 

DOE also maintained the following 

technology options to improve standby 

mode and off mode energy 

consumption: (1) low-loss transformer; 

and (2) switching mode power supply. 

DOE has determined that these 

technology options are technologically 

feasible because they are being used or 

have previously been used in 

commercially-available products or 

working prototypes. DOE also continues 

to find that all of the remaining 

technology options meet the other 

screening criteria (i.e., practicable to 

manufacture/install/service, do not 

result in adverse impacts on consumer 

utility, product availability, health, or 

safety, and do not involve a proprietary 

technology that is a unique pathway to 

meeting a given efficiency level). For 

additional details, see chapter 4 of the 

TSD. 

C. Engineering Analysis 

The purpose of the engineering 

analysis is to establish the relationship 

between the efficiency and cost of 

NWGFs and MHGFs. There are two 

elements to consider in the engineering 

analysis: (1) the selection of efficiency 

levels to analyze (i.e., the ‘‘efficiency 

analysis’’) and (2) the determination of 

product cost at each efficiency level 

(i.e., the ‘‘cost analysis’’). In determining 

the performance of higher-efficiency 

NWGFs and MHGFs, DOE considers 

technologies and design option 

combinations not eliminated by the 

screening analysis. For each furnace 

class analyzed for this NOPR, DOE 

estimates the baseline cost, as well as 

the incremental cost for the furnace at 

efficiency levels above the baseline. The 

output of the engineering analysis is a 

set of cost-efficiency ‘‘curves’’ that are 

used in downstream analyses (i.e., the 

LCC and PBP analyses and the NIA). 

The methodology for the efficiency 

analysis and the cost analysis is 

described in detail in the following 

sections that immediately follow 

(sections IV.C.1 and IV.C.2, respectively, 

of this document). DOE uses its 

methodology, which consists of the 

engineering analysis and mark-ups 

analysis (see section IV.D of this 

document), to determine the final price 

of the furnace to the consumer for 

several reasons. The sales prices of 

furnaces currently seen in the 

marketplace, which include both a 

manufacturer production cost (‘‘MPC’’) 

and various mark-ups applied through 

the distribution chain, are not 

necessarily indicative of what the sales 

prices of those furnaces would be 

following the implementation of a morestringent energy conservation standard. 

At a given efficiency level, MPC 

depends in part on the production 

volume. In general, for efficiency levels 

above the current baseline, the price to 


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45As one example, consider the 2013 Furnace 

Price Guide, originally published on 

www.furnacecompare.com. See: www.amazon.com/ 

Furnace-Price-Guide-Chris-Brooks-ebook/dp/ 

B00GR784IK. The Gas Technology Institute (GTI) 

used these data for its report ‘‘Technical Analysis 

of DOE Supplemental Notice of Proposed 

Rulemaking on Residential Furnace Minimum 

Efficiencies.’’ (See: EERE–2014–BT–STD–0031– 

0301.) 

the consumer at that level may be high 

relative to what it would be under a 

more-stringent standard, due to the 

increase in production volume (and, 

thus, improved economies of scale and 

purchasing power for furnace 

components) which would occur at that 

level if a Federal standard made it the 

new baseline efficiency. 

DOE notes that the engineering 

analysis incorporated condensing 

furnaces without ‘‘premium’’ features, 

and condensing furnaces are more likely 

to be equipped with ‘‘premium’’ 

features in today’s market. One would 

expect increased designs (and/or sales) 

with minimal ‘‘premium’’ features to 

cater to cost-sensitive consumers, as 

compared to the current market, and 

perhaps redesigns where possible, to 

minimize costs. In its analysis of AFUE 

levels, DOE sought to minimize or 

normalize the presence of additional 

designs or features that do not affect 

AFUE, as they can increase costs while 

not affecting the measured AFUE 

efficiency. In other words, DOE’s 

analysis of the cost-efficiency 

relationship is for a product that 

provides only the basic utility (i.e., heat) 

without other special features that 

consumers may find beneficial (e.g., 

sound reduction or humidity control). 

Although it may be possible to identify 

prices for products without premium 

features, simply aggregating a collection 

of current furnace sales price 

information could lead to a higher 

consumer price than would be expected 

under an amended standards scenario, 

as many condensing products available 

on the market today are bundled with 

‘‘premium’’ features but under an 

amended standards scenario, 

condensing products without as many 

‘‘premium’’ features may become more 

common. 

As described in section IV.D of this 

document, under a more-stringent 

standard, the mark-ups incorporated 

into the sales price may also change 

relative to current mark-ups. Therefore, 

DOE has tentatively concluded that 

basing the engineering analysis on 

prices of furnaces as currently seen in 

the marketplace would be a less 

accurate method of estimating future 

furnace prices following an amended 

standard than DOE’s approach of 

conducting an engineering analysis and 

mark-ups analysis for this NOPR. 

(However, as noted in section IV.C.2 of 

this document, price surveys are 

sometimes required when other 

methods are infeasible.) 

Furthermore, at earlier stages of the 

NWGF and MHGF rulemaking, some 

stakeholders performed cost-benefit 

analyses that relied on online retail 

pricing,45 which raise additional 

concerns beyond the issues previously 

discussed (i.e., the data likely includes 

prices for condensing furnaces with 

‘‘premium’’ features and does not 

account for the likely change in designs, 

market, and pricing that would occur 

under an amended standard). 

Differences between online vendors 

with respect to mark-up and pricing 

practices could lead to online prices 

being unrepresentative for the overall 

market. In addition, manufacturers 

indicated during interviews (see section 

IV.C.2.f of this document) that the 

number of furnaces sold directly to 

consumers over the internet is very 

small, and, therefore, DOE questions 

whether such prices are representative 

of what most consumers actually pay for 

these products. For these reasons, it is 

unlikely that a collection of online price 

data is truly representative of what 

consumers are paying for furnaces 

currently, much less under an amended 

standards scenario. 

Certain stakeholders also urged DOE 

to improve the transparency of the 

engineering analysis by releasing certain 

information currently not available 

within the public domain. (Spire No. 

309–1 at pp. 66–67; APGA, No. 292–1 

at p. 41) However, previously during 

this rulemaking, Rheem objected to DOE 

publishing any information on the 

manufacturing costs of Rheem’s units. 

Further, Rheem commented that 

manufacturers in general will object to 

having a bill of materials (‘‘BOM’’) from 

a complete teardown analysis of their 

product(s) being made available to the 

public. (Rheem, NOPR Public Meeting 

Transcript, No. 0044, at pp. 74–75) 

In response, DOE’s analysis and 

proposal are based, in part, on the 

aggregated data generated during the 

engineering analysis. The process by 

which the aggregated data have been 

generated is discussed in this document 

and is the result of the engineering 

analyses described in chapter 5 of the 

NOPR TSD. The primary inputs to the 

engineering analysis are data from the 

market and technology assessment, 

input from manufacturers, furnace 

specifications, and production cost 

estimates developed based on teardown 

analysis and consultation with 

manufacturers. DOE’s contractor 

conducts interviews with manufacturers 

under non-disclosure agreements 

(‘‘NDAs’’) to determine if the MPCs 

developed by the analysis reflect the 

industry average cost rather than current 

sales prices, and applies mark-ups to 

determine the expected sales price once 

a more-stringent standard is 

implemented. In addition, because the 

cost estimation methodology uses data 

supplied by manufacturers under the 

NDAs (such as raw material and 

purchased part prices), the resulting 

individual model cost estimates 

themselves cannot be published. DOE 

notes that manufacturers that 

participated in manufacturer interviews 

had access to the raw material and 

purchased part price data underlying 

the MPC estimates for those models at 

the time the interviews were conducted. 

The data resulting from the engineering 

analysis and which DOE has used as 

inputs to its modeling are available to 

the public for comment. Including 

manufacturer-specific information in 

the docket would raise serious concerns 

regarding the business confidentiality of 

that information and undermine the 

ability of the Department to gain access 

to key data based on such specific 

information going forward. DOE’s 

treatment of confidential business 

information is governed by the Freedom 

of Information Act (‘‘FOIA’’) and 10 CFR 

1004.11. (5 U.S.C. 552(b)(4)) 

In the present proceeding, as is 

generally the case in appliance 

standards rulemakings, manufacturerspecific and product-specific data are 

presented in aggregate. Given the 

potential for competitive harm, data are 

not released outside the aggregated form 

to DOE or its National Labs. Instead, the 

BOMs used to estimate the industryaggregate MPCs are developed by a DOE 

contractor and are not provided to DOE; 

DOE only receives the industryaggregate MPCs from its contractor for 

use in its analyses, without fear of such 

sensitive data being released to the 

public. This approach allows 

manufacturers to provide candid and 

detailed feedback under NDA, thereby 

improving the quality of the analysis. 

The public is provided the opportunity 

to comment on the aggregated data that 

was provided to DOE (i.e., the same data 

that DOE used in its analyses). Making 

manufacturer-specific data available 

would theoretically provide additional 

background on that data, but it would be 

merely supplemental to the data upon 

which DOE relied, and it would 

certainly have a chilling effect on 

manufacturers’ willingness to share this 

crucial data going forward. 

Consequently, DOE plans to retain its 


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current and long-standing approach to 

the engineering analysis. 

1. Efficiency Analysis 

DOE typically uses one of two 

approaches to develop energy efficiency 

levels for the engineering analysis: (1) 

relying on observed efficiency levels in 

the market (i.e., the efficiency-level 

approach), or (2) determining the 

incremental efficiency improvements 

associated with incorporating specific 

design options to a baseline model (i.e., 

the design-option approach). Using the 

efficiency-level approach, the efficiency 

levels established for the analysis are 

determined based on the market 

distribution of existing products (in 

other words, based on the range of 

efficiencies and efficiency level 

‘‘clusters’’ that already exist on the 

market). Using the design option 

approach, the efficiency levels 

established for the analysis are 

determined through detailed 

engineering calculations and/or 

computer simulations of the efficiency 

improvements from implementing 

specific design options that have been 

identified in the technology assessment. 

DOE may also rely on a combination of 

these two approaches. For example, the 

efficiency-level approach (based on 

actual products on the market) may be 

extended using the design option 

approach to ‘‘gap fill’’ levels (i.e., to 

bridge large gaps between other 

identified efficiency levels) and/or to 

extrapolate to the max-tech level 

(particularly in cases where the maxtech level exceeds the maximum 

efficiency level currently available on 

the market). 

DOE conducted separate engineering 

analyses for analyzing AFUE standards 

and standby mode/off mode standards 

for this rulemaking, because these are 

independent metrics that are improved 

via application of different technologies, 

and DOE had different sources of data 

for the two metrics. For the AFUE 

engineering analysis, DOE generally 

employed an efficiency level approach, 

which identified the intermediate 

efficiency levels (i.e., levels between 

baseline and max-tech) for analysis 

based on the most common efficiency 

levels on the market. One exception is 

that DOE analyzed a 90-percent AFUE 

level for NWGFs and MHGFs despite 

relatively few models at that level, as it 

would serve as a minimum condensing 

level. 

For the standby mode and off mode 

engineering analysis, DOE adopted a 

design option approach to identify the 

efficiency levels that would result from 

implementing certain design options for 

reducing energy use in standby mode 

and off mode. DOE decided on this 

approach because the Department does 

not have sufficient data to execute an 

efficiency-level analysis, as 

manufacturers typically do not rate or 

publish data on the standby mode and/ 

or off mode energy consumption of their 

NWGF and MHGF products. 

a. Baseline Efficiency Level and Product 

Characteristics 

For each product/equipment class, 

DOE generally selects a baseline model 

as a reference point for each class, and 

measures anticipated changes to the 

product resulting from potential energy 

conservation standards against the 

baseline. The baseline model in each 

product/equipment class represents the 

characteristics of a product/equipment 

typical of that class (e.g., capacity, 

physical size). Generally, a baseline 

model is one that just meets current 

energy conservation standards, or, if no 

standards are in place, the baseline is 

typically the most common or least 

efficient unit on the market. 

DOE selected baseline units for the 

NWGF and MHGF product classes that 

include characteristics typical of the 

least-efficient commercially-available 

consumer furnaces. The baseline unit in 

each product class represents the basic 

characteristics of products in that class. 

Baseline units serve as reference points, 

against which DOE measures changes 

resulting from potential amended 

energy conservation standards. 

Additional details on the selection of 

baseline units are in chapter 5 of the 

NOPR TSD. 

AFUE 

Table IV.1 presents the baseline AFUE 

levels identified for each product class 

of furnaces addressed by this 

rulemaking. The baseline AFUE levels 

analyzed are the same as the current 

Federal minimum AFUE standards for 

the subject furnaces, as established by 

the November 2007 final rule. 10 CFR 

430.32(e)(1)(ii); 72 FR 65136, 65169 

(Nov. 19, 2007). 

TABLE IV.1—BASELINE RESIDENTIAL

FURNACE AFUE EFFICIENCY LEVELS

Product class AFUE 

(percent) 

Non-Weatherized Gas Furnaces .. 80 

Mobile Home Gas Furnaces ........ 80 

Standby Mode and Off Mode 

For the standby mode and off mode 

analysis, DOE identified baseline 

components as those that consume the 

most electricity during the operation of 

those modes. Because it would not be 

practical for DOE to test every furnace 

on the market to determine the baseline 

efficiency, and because manufacturers 

do not currently report standby mode 

and off mode energy consumption of 

NWGFs and MHGFs, DOE ‘‘assembled’’ 

the most consumptive baseline 

components from the models selected 

for investigative testing to model the 

electrical system of a furnace with the 

expected maximum system standby 

mode and off mode energy use observed 

during testing of furnaces. Through 

reviewing product literature and 

discussions with manufacturers, DOE 

found that furnaces generally do not 

have a seasonal off switch that would be 

used to turn the product off during the 

off season. Further, if a switch is 

included with a product, it is typically 

left in the on position during the nonheating season because the indoor 

blower motor in the furnace is needed 

to move air for the AC side of the 

home’s HVAC system. DOE found that 

such switch is typically used only as a 

service or repair switch. Therefore, DOE 

concluded that time spent in off mode 

is expected to be minimal, and the 

energy consumption in standby mode 

will always be greater than or equal to 

the energy consumption in off mode. 

Accordingly, in the analysis of potential 

standby mode and off mode energy 

conservation standards, DOE treated 

both the standby mode and the off mode 

energy use for residential furnaces as 

having the same level of energy 

consumption, which is typical of 

standby mode. 

The components of the baseline 

standby mode and off mode energy use 

level used in this analysis are presented 

in Table IV.2 of this document. 

TABLE IV.2—BASELINE STANDBY

MODE AND OFF MODE ENERGY USE

FOR NWGFS AND MHGFS

Component 

Standby 

mode and 

off mode 

energy 

use 

(watts) 

Transformer .................................. 4 

BPM Blower Motor (includes controls) .......................................... 3 

Controls/Other .............................. 4 

Total (Watts) ............................. 11 

b. Higher Energy Efficiency Levels 

AFUE 

Table IV.3 and Table IV.4 show the 

efficiency levels DOE selected for 

analysis of amended AFUE standards 

for NWGFs and MHGFs, respectively, 


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up to the maximum available efficiency 

level, along with a description of the 

typical technological change at each 

level. The maximum available efficiency 

level was the highest-efficiency unit 

available on the market when DOE 

began this analysis. DOE also defines a 

‘‘max-tech’’ efficiency level to represent 

the maximum possible efficiency for a 

given product. 

TABLE IV.3—AFUE EFFICIENCY LEVELS FOR NON-WEATHERIZED GAS FURNACES

Efficiency level 

(EL) 

AFUE 

(%) Technology options 

0—Baseline ............................................... 80 Baseline. 

1 ................................................................ 90 EL0 + Secondary condensing heat exchanger. 

2 ................................................................ 92 EL1 + Increased heat exchanger area. 

3 ................................................................ 95 EL2 + Increased heat exchanger area. 

4—Max-Tech ............................................ 98 EL3 + Increased heat exchanger area + Step-modulating combustion + Constantairflow BPM blower motor. 

TABLE IV.4—AFUE EFFICIENCY LEVELS FOR MOBILE HOME GAS FURNACES

Efficiency level AFUE 

(%) Technology options 

0—Baseline ............................................... 80 Baseline. 

1 ................................................................ 90 EL0 + Secondary condensing heat exchanger. 

2 ................................................................ 92 EL1 + Increased heat exchanger area. 

3 ................................................................ 95 EL2 + Increased heat exchanger area. 

4—Max-Tech ............................................ 96 EL3 + Increased heat exchanger area. 

Standby/Off Mode 

Table IV.5 shows the efficiency levels 

DOE selected for the analysis of standby 

mode and off mode standards in this 

NOPR, along with a description of the 

design options used to achieve each 

efficiency level above baseline. The 

baseline technology options include a 

linear power supply and a 40VA linear 

transformer (‘‘LTX’’). Technology 

options that may be used to achieve 

efficiency levels above baseline include 

a low-loss LTX (‘‘LL–LTX’’) and a 

switching mode power supply 

(‘‘SMPS’’). 

TABLE IV.5—STANDBY MODE AND OFF MODE EFFICIENCY LEVELS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES

Efficiency level 

(EL) 

Standby mode 

and off mode 

energy use 

(watts) 

Technology options 

0—Baseline ............................................... 11 Linear Power Supply with 40VA LTX. 

1 ................................................................ 9.5 Linear Power Supply with 40VA LL–LTX. 

2 ................................................................ 9.2 SMPS with 20VA LTX. 

3—Max-Tech ............................................ 8.5 SMPS with 20VA LL–LTX. 

2. Cost Analysis 

The cost analysis portion of the 

engineering analysis is conducted using 

one or a combination of cost 

approaches. The selection of cost 

approach depends on a suite of factors, 

including the availability and reliability 

of public information, characteristics of 

the regulated product, and the 

availability and timeliness of 

purchasing the product on the market. 

The available cost approaches are 

summarized as follows: 

• Physical teardowns: Under this 

approach, DOE physically dismantles a 

commercially-available product, 

component-by-component, to develop a 

detailed bill of materials for the product. 

• Catalog teardowns: In lieu of 

physically deconstructing a product, 

DOE identifies each component using 

parts diagrams (available from 

manufacturer websites or appliance 

repair websites, for example) to develop 

the bill of materials for the product. 

• Price surveys: If a physical or 

catalog teardown is infeasible (e.g., for 

tightly integrated products such as 

fluorescent lamps, which are infeasible 

to disassemble and for which parts 

diagrams are unavailable), costprohibitive, or otherwise impractical 

(e.g. large commercial boilers), DOE 

conducts price surveys using publiclyavailable pricing data published on 

major online retailer websites and/or by 

soliciting prices from distributors and 

other commercial channels. 

In the present case, DOE conducted 

its cost analysis using a combination of 

physical and catalog teardowns to assess 

how manufacturing costs change with 

increased product efficiency. Products 

were selected for physical teardown 

analysis that have characteristics of 

typical products on the market at a 

representative input capacity of 80,000 

Btu/h (determined based on market data 

and discussions with manufacturers). 

Selections spanned the range of 

efficiency levels analyzed and included 

most manufacturers. The teardown 

analysis allowed the creation of detailed 

BOMs for each product torn down, 

which included all components and 

processes used to manufacture the 

products. DOE used the BOMs from the 

teardowns as inputs to calculate the 

MPC for products at various efficiency 

levels spanning the full range of 

efficiencies from the baseline to the 

maximum technology achievable (‘‘maxtech’’) level. 


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46For more information on MEPS Intl, please 

visit: www.mepsinternational.com/gb/en (Last 

accessed Feb. 16, 2022). 

47For more information on PolymerUpdate, 

please visit: www.polymerupdate.com (Last 

accessed Feb. 16, 2022). 

48For more information on the USGS metal price 

statistics, please visit www.usgs.gov/centers/ 

national-minerals-information-center/commoditystatistics-and-information (Last accessed Feb. 16, 

2022). 

49For more information on the BLS producer 

price indices, please visit: www.bls.gov/ppi/ (Last 

accessed Feb. 16, 2022). 

During the development of the since 

withdrawn March 2015 NOPR, 

interviews were held with NWGF and 

MHGF manufacturers to gain insight 

into the residential furnace industry, 

and to request feedback on the 

engineering analysis. A second round of 

interviews were held in 2021 to review 

updates to the cost analysis since that 

prepared for the withdrawn March 2015 

NOPR. DOE used the information 

gathered from these interviews, along 

with the information obtained through 

the teardown analysis, to develop its 

MPC estimates. For this NOPR, DOE 

used eight physical teardowns 

performed for prior rulemaking stages 

where the model torn down is still 

available on the current market by 

updating the BOM for that model to 

incorporate the most recent input data 

(e.g., for raw materials, purchased 

components, labor). When incorporating 

teardowns from past analyses into the 

analysis for this NOPR, DOE only 

selected the units with designs and 

components that are the same as units 

currently on the market. DOE also 

performed an additional 23 physical 

teardowns in the spring of 2021 to 

update the analysis for this NOPR. DOE 

purposefully selected these particular 

units for use this NOPR, in an effort to 

ensure the analysis’s representativeness 

of current furnace designs. For 

additional detail about the models used, 

see chapter 5 of the NOPR TSD 

a. Teardown Analysis 

To assemble BOMs and to calculate 

the manufacturing costs for the different 

components in residential furnaces, 

multiple units were disassembled into 

their base components, and DOE 

estimated the materials, processes, and 

labor required for the manufacture of 

each individual component, a process 

referred to as a ‘‘physical teardown.’’ 

Using the data gathered from the 

physical teardowns, each component 

was characterized according to its 

weight, dimensions, material, quantity, 

and the manufacturing processes used 

to fabricate and assemble it. 

For supplementary catalog teardowns, 

product data were gathered such as 

dimensions, weight, and design features 

from publicly-available information, 

such as manufacturer catalogs. Such 

‘‘virtual teardowns’’ allowed DOE to 

estimate the major physical differences 

between a product that was physically 

disassembled and a similar product that 

was not. For this NOPR, data from a 

total of 83 physical and virtual 

teardowns of residential furnaces were 

used to calculate industry MPCs in the 

engineering analysis. 

The teardown analysis allowed DOE 

to identify the technologies that 

manufacturers typically incorporate into 

their products, along with the efficiency 

levels associated with each technology 

or combination of technologies. The end 

result of each teardown is a structured 

BOM, which was developed for each of 

the physical and virtual teardowns. The 

BOMs incorporate all materials, 

components, and fasteners (classified as 

either raw materials or purchased parts 

and assemblies), and characterize the 

materials and components by weight, 

manufacturing processes used, 

dimensions, material, and quantity. The 

BOMs from the teardown analysis were 

then used as inputs to calculate the 

MPC for each product that was torn 

down. The MPCs resulting from the 

teardowns were then used to develop an 

industry average MPC for each 

efficiency level of each product class 

analyzed. 

As discussed in section IV.C.2.d of 

this document, DOE also performed 

several physical and catalog teardowns 

of units at input capacities other than 

the representative input capacity (i.e., 

40, 60, 100, and 120 kBtu/h in addition 

to 80 kBtu/h). These teardowns allowed 

DOE to develop cost-efficiency curves 

for NWGFs and MHGFs at different 

input capacities. For more detailed 

information on the teardown analysis, 

see chapter 5 of the NOPR TSD. 

b. Cost Estimation Method 

The costs of individual models are 

estimated using the content of the BOMs 

(i.e., materials, fabrication, labor, and all 

other aspects that make up a production 

facility) to generate MPCs. These MPCs 

hence include overhead and 

depreciation, for example. DOE 

collected information on labor rates, 

tooling costs, raw material prices, and 

other factors as inputs into the cost 

estimates. For purchased parts, DOE 

estimates the purchase price based on 

volume-variable price quotations and 

detailed discussions with manufacturers 

and component suppliers. 

For parts fabricated in-house, the 

prices of the underlying ‘‘raw’’ metals 

(e.g., tube, sheet metal) are estimated on 

the basis of 5-year averages to smooth 

out spikes in demand. Other ‘‘raw’’ 

materials, such as plastic resins, 

insulation materials, etc., are estimated 

on a current-market basis. The costs of 

raw materials are based on manufacturer 

interviews, quotes from suppliers, and 

secondary research. Past results are 

updated periodically and/or inflated to 

present-day prices using indices from 

resources such as MEPS Intl.,46

PolymerUpdate,47 the U.S. geologic 

survey (‘‘USGS’’),48 and the Bureau of 

Labor Statistics (‘‘BLS’’).49 The cost of 

transforming the intermediate materials 

into finished parts is estimated based on 

current industry pricing. 

c. Manufacturing Production Costs 

DOE estimated the MPC at each 

efficiency level considered for each 

product class, from the baseline through 

the max-tech, and then calculated the 

fractions of the MPC (in percentages) 

attributable to each cost component (i.e., 

materials, labor, depreciation, and 

overhead). These percentages were used 

to validate analytical inputs by 

comparing them to manufacturers’ 

actual financial data published in 

annual reports, along with feedback 

obtained from manufacturers during 

interviews. DOE uses these production 

cost percentages in MIA (see section IV.J 

of this document). 

Table IV.6 and Table IV.7 present 

DOE’s estimates of the MPCs by AFUE 

efficiency level at the representative 

input capacity (80 kBtu/h) for both the 

NWGF and MHGF furnaces in this 

rulemaking. The MPCs presented 

incorporate the appropriate design 

characteristics of NWGFs and MHGFs at 

each efficiency level. DOE observed 

both in its market analysis and 

teardown analysis that products are 

available on the market across all 

efficiency levels with a mix of blower 

motor technologies, including 

permanent split capacitor (‘‘PSC’’) 

motors, constant torque brushless 

permanent magnet (‘‘BPM’’) motors, and 

constant airflow BPM motors. To 

account for the variety of blower motors 

available on the market, DOE developed 

cost adjustment factors (‘‘adders’’) for 

each type of blower motor and at each 

input capacity analyzed (i.e., 40, 60, 80, 

100, and 120 kBtu/h) to normalize the 

blower costs and allow for estimation of 

the cost differences between models 

with different blower technologies. DOE 

normalized the costs of the blower 

assemblies present in the teardown 

models when generating the industryaggregate MPCs, with the exception of 


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50The furnace fans final rule set a mandatory fan 

energy rating (FER) of .044 * Qmax + 182 for NWGF 

units, .071 * Qmax + 222 for non-condensing 

MHGF units, and .071 * Qmax + 240 for condensing 

MHGF units, where Qmax equals the airflow 

through the furnace at the maximum airflow-control 

setting operating point. For more information, see 

the furnace fans rulemaking web page at: 

www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx/ruleid/41. 

the max-tech level for NWGFs which 

was always assigned a constant airflow 

BPM motor. These adders are discussed 

in more detail in Chapter 5 of the TSD 

accompanying this notice. As discussed 

in section IV.F of this document, these 

adders were applied in the LCC analysis 

to represent the distribution of blower 

motor technologies expected on the 

market. 

Similarly, in its market analysis and 

teardown analysis, DOE observed 

models across efficiency levels with 

single-stage, two-stage, and modulating 

operation. DOE, therefore, also 

developed a cost adder for two-stage 

and modulating combustion systems (as 

compared to single-stage models). The 

cost to change from a single-stage to a 

two-stage combustion system includes 

the cost of a two-stage gas valve, a twospeed inducer assembly, upgraded 

pressure switch/tubing assembly, and 

additional controls and wiring. 

Similarly, the cost to change from a 

single-stage to a modulating combustion 

system includes the cost of a 

modulating gas valve, an upgraded 

inducer assembly, upgraded pressure 

switch/tubing assembly, and additional 

controls and wiring. These cost adders 

are discussed in more detail in Chapter 

5 of the TSD. DOE normalized the 

burner stages when generating the 

industry-aggregate MPCs, with the 

exception of the max-tech level for 

NWGFs which was assumed to be 

modulating based on current furnace 

designs observed at the max-tech level. 

Table IV.6 and Table IV.7 present 

costs for NWGF with a constant-torque 

BPM and single-stage combustion 

(except for the max-tech level which, as 

previously noted, includes a constant 

airflow BPM and modulating 

combustion), and for MHGF with an 

improved PSC and single-stage 

combustion, respectively. However, as 

discussed, DOE observed that a variety 

of products exist on the market that 

include various blower motor 

technologies and burner system stages, 

so the Department developed adders to 

translate MPCs across various 

technologies. DOE presents MPCs with 

these technologies because they are the 

technologies that DOE has observed are 

necessary to achieve minimum 

compliance with the 2014 furnace fan 

final rule, for which compliance was 

required beginning on July 3, 2019.50 79 

FR 38130, 38151 (July 3, 2014). 

Therefore, DOE believes these designs 

are likely the most representative of 

furnaces on the current market, 

although DOE recognizes there are some 

exceptions. 

TABLE IV.6—MANUFACTURER PRODUCTION COST FOR NON-WEATHERIZED GAS FURNACES AT THE REPRESENTATIVE

INPUT CAPACITY OF 80 kBtu/h 

Efficiency level 

Efficiency level 

(AFUE) 

(%) 

MPC * 

(2020$) 

Incremental 

cost above 

baseline 

(2020$) 

Baseline ....................................................................................................................................... 80 317 ........................

EL1 ............................................................................................................................................... 90 403 86 

EL2 ............................................................................................................................................... 92 411 94 

EL3 ............................................................................................................................................... 95 422 105 

EL4 ............................................................................................................................................... 98 539 222 

* The MPCs for the NWGF efficiency levels from Baseline through EL3 include single-stage combustion and incorporation of a constant-torque 

BPM indoor blower motor. DOE has determined that NWGFs at EL4 incorporate modulating operation and a constant-airflow BPM blower motor. 

TABLE IV.7—MANUFACTURER PRODUCTION COST FOR MOBILE HOME GAS FURNACES AT THE REPRESENTATIVE INPUT

CAPACITY OF 80 kBtu/h 

Efficiency level 

Efficiency level 

(AFUE) 

(%) 

MPC * 

(2020$) 

Incremental 

cost above 

baseline 

(2020$) 

Baseline ....................................................................................................................................... 80 325 ........................

EL1 ............................................................................................................................................... 90 414 89 

EL2 ............................................................................................................................................... 92 421 97 

EL3 ............................................................................................................................................... 95 432 108 

EL4 ............................................................................................................................................... 96 436 112 

* The MPCs for all MHGF efficiency levels include single-stage combustion and incorporation of an improved PSC indoor blower motor. 

Table IV.8 presents DOE’s estimates of 

the incremental MPCs of each standby 

mode/off mode efficiency level for this 

rulemaking, relative to the baseline 

efficiency level. For standby mode and 

off mode, the design options used to 

obtain higher efficiencies were 

composed of purchased parts, so 

obtaining price quotes on these 

electrical components was more 

accurate than attempting to determine 

their manufacturing costs via a reverseengineering analysis. Therefore, the 

incremental MPC shown reflects the 

price to implement the component 

necessary to achieve the given efficiency 

level. DOE also considered whether 

other design changes would be 

necessary to accommodate the 

components at each efficiency level. 

Based on the LL–LTX designs DOE has 

reviewed and the furnace products 

observed during teardowns (which 

included numerous models across 

manufacturers and efficiencies), DOE 

believes that major redesign would not 

be required to accommodate these 

components. While it is possible that 

thicker metal may be required for the 

mounting brackets, DOE maintains that 


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51U.S. Securities and Exchange Commission’s 

Electronic Data Gathering, Analysis, and Retrieval 

system (‘‘EDGAR’’) database. (Available at: 

www.sec.gov/edgar/search/) (Last accessed Feb. 4, 

2022). 

52Modular blower units with electric heat kits are 

also referred to as electric furnaces. 

it is more likely that the current 

mounting brackets are sufficient to 

support the slight increase in weight 

and size of LL–LTX. DOE seeks further 

input on this issue. 

TABLE IV.8—INCREMENTAL MANUFACTURER PRODUCTION COST FOR

NON-WEATHERIZED GAS FURNACES

AND MOBILE HOME GAS FURNACES

STANDBY MODE AND OFF MODE

Efficiency 

level 

Standby mode 

and off mode 

energy use 

(watts) 

Incremental 

MPC 

(2020$) 

Baseline .... 11 0 

EL1 ........... 9.5 0.52 

EL2 ........... 9.2 1.44 

EL3 ........... 8.5 2.65 

Chapter 5 of the NOPR TSD presents 

more information regarding the 

development of DOE’s estimates of the 

MPCs for this proposal. DOE seeks 

further comment on its estimates for the 

MPC of consumer furnaces under each 

standards scenario. 

d. Cost-Efficiency Relationship 

DOE created cost-efficiency curves 

representing the cost-efficiency 

relationships for the product classes that 

it examined (i.e., NWGFs and MHGFs). 

To develop the cost-efficiency 

relationships for NWGFs at the 

representative capacity (80 kBtu/h), 

DOE calculated a market-share weighted 

average MPC for each efficiency level 

analyzed, based on the units torn down 

at that efficiency level. As discussed in 

section IV.C.2.a of this document, DOE 

performed several physical and catalog 

teardowns across a range of input 

capacities in order to develop costefficiency curves for NWGFs and 

MHGFs at different input capacities. 

These cost-efficiency curves were then 

used in the downstream analyses. The 

cost-efficiency curves developed for 

input capacities other than the 

representative input capacity are 

presented in chapter 5 of the NOPR 

TSD. For MHGFs, DOE performed 

physical teardowns of several MHGF 

models and compared them to NWGF 

teardowns from a common 

manufacturer and similar design, in 

order to determine the typical design 

differences between the two product 

classes. (A detailed description of the 

typical differences between MHGF and 

NWGF is provided in chapter 5 of the 

TSD.) Using this information, DOE then 

developed cost adders which it applied 

to the NWGF MPCs, in order to estimate 

the MPCs of MHGFs at each of the 

MHGF efficiency levels. Additional 

details on how DOE developed the costefficiency relationships and related 

results are available in chapter 5 of the 

TSD. 

As displayed in Table IV.6 and Table 

IV.7 of this document, the results 

indicate that cost-efficiency 

relationships are nonlinear. For both 

NWGF and MHGF, the cost increase 

between the non-condensing (80 percent 

AFUE) and condensing (90 percent 

AFUE) efficiency levels is due to the 

addition of a secondary heat exchanger, 

so there is a large step in both AFUE 

and MPC. For NWGFs, a significant cost 

increase also occurs between the 95 

percent and 98 percent AFUE levels due 

to the addition of modulating 

combustion components paired with a 

constant airflow BPM indoor blower 

motor at 98 percent AFUE. 

e. Manufacturer Mark-Up 

DOE calculates the manufacturer 

selling price (‘‘MSP’’) by multiplying 

the MPC and the manufacturer markup. 

The MSP is the price the manufacturer 

charges its direct customer (e.g., a 

wholesaler). The MPC is the cost for the 

manufacturer to produce a single unit of 

product, accounting for direct costs and 

overhead associated with the 

manufacturing facility. The 

manufacturer markup is a multiplier 

that accounts for manufacturers’ 

production costs and revenue 

attributable to the product. 

DOE initially developed an average 

manufacturer mark-up by examining the 

annual Securities and Exchange 

Commission (‘‘SEC’’) 10–K 51 reports 

filed by publicly-traded manufacturers 

primarily engaged in consumer furnace 

manufacturing and whose product range 

includes NWGFs and MHGFs. DOE 

refined its understanding of 

manufacturer mark-ups by using 

information obtained during 

manufacturer interviews. For additional 

detail on DOE’s methodology to 

determine the no-new-standards case 

manufacturer markup, see chapter 5 of 

the NOPR TSD. 

To meet new or amended energy 

conservation standards, manufacturers 

typically redesign their baseline 

products in ways that increase the MPC. 

Depending on the competitive 

environment for these particular 

products, some or all of the increased 

production costs may be passed from 

manufacturers to retailers and 

eventually to consumers in the form of 

higher purchase prices. As production 

costs increase, manufacturers may also 

incur additional overhead (e.g., 

warranty costs). The MSP is typically 

high enough so that the manufacturer 

can recover the full cost of the product 

(i.e., full production and nonproduction costs) and yield a profit. See 

chapter 12 of the NOPR TSD for a 

detailed description of the standardscase manufacturer mark-up calculation. 

f. Manufacturer Interviews 

Throughout the rulemaking process, 

DOE sought feedback and insight from 

interested parties that would improve 

the information used in its analyses. 

DOE interviewed NWGF and MHGF 

manufacturers as a part of the 

manufacturer impact analysis for the 

since withdrawn March 2015 NOPR. 

During these interviews, DOE sought 

feedback on all aspects of its analyses 

for residential furnaces. DOE discussed 

the analytical assumptions and 

estimates, cost estimation method, and 

cost-efficiency curves with consumer 

furnace manufacturers. In 2021, DOE 

conducted a second series of interviews 

to obtain feedback on the updates to the 

cost analysis from the additional 

teardowns performed in spring 2021. 

DOE considered all the information 

manufacturers provided while refining 

its cost estimates (and underlying data) 

and analytical assumptions. In order to 

avoid disclosing sensitive information 

about individual manufacturers’ 

products or manufacturing processes, 

DOE incorporated equipment and 

manufacturing process figures into the 

analysis as averages. Additional 

information on manufacturer interviews 

can be found in chapter 12 of the NOPR 

TSD. 

3. Electric Furnaces 

In addition to NWGFs and MHGFs, 

DOE also estimated the MPCs of electric 

furnaces. This analysis was performed 

to develop accurate electric furnace cost 

data as an input to the product 

switching analysis (see section IV.F.11 

of this document for additional 

information). To estimate the MPCs of 

electric furnaces, DOE used information 

obtained from the teardowns of three 

modular blower units, as well as a 

teardown of an electric heat kit 

assembly, which were all originally 

used as inputs to the engineering 

analysis performed for the 2014 furnace 

fans rulemaking.52

The MPCs of electric furnaces were 

developed by calculating a market 

share-weighted MPC of the three 

modular blower units that were torn 


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53 DOE estimates that three percent of NWGFs are 

installed in commercial buildings. See section IV.G 

of this document for further discussion. 

54New owners are new furnace installations in 

buildings that did not previously have a NWGF or 

MHGF or existing NWGF or MHGF owners that are 

adding an additional consumer furnace. They 

primarily consist of households that add or switch 

to NWGFs or MHGFs during a major remodel. 

55BRG Building Solutions, The North American 

Heating & Cooling Product Markets (2020 Edition) 

(Available at: www.brgbuildingsolutions.com/ 

reports-insights) (Last accessed February 15, 2022). 

56Clear Seas Research, 2019 Unitary Trends 

(Available at: clearseasresearch.com/?attachment_

id=2311) (Last accessed February 15, 2022). 

57 Decision Analyst, 2019 American Home 

Comfort Studies (Available at: 

www.decisionanalyst.com/syndicated/ 

homecomfort/) (Last accessed February 15, 2022). 

58The Do-It-Yourself (‘‘DIY’’) market is very small 

(only represents about 1–2% of the whole gas 

furnace market) and is not analyzed by DOE in this 

analysis. 

59The national accounts channel where the buyer 

is the same as the consumer is mostly applicable 

to NWGFs installed in small to mid-size 

commercial buildings, where on-site contractors 

purchase equipment directly from wholesalers at 

lower prices due to the large volume of equipment 

purchased, and perform the installation themselves. 

Overall, DOE’s analysis assumes that approximately 

15 percent of NWGFs installed in the residential 

and commercial sector use national accounts. 

60Because the projected price of standardscompliant products is typically higher than the 

price of baseline products, using the same mark-up 

for the incremental cost and the baseline cost would 

result in higher per-unit operating profit. While 

such an outcome is possible, DOE maintains that in 

markets that are reasonably competitive, it is 

unlikely that standards would lead to a sustainable 

increase in profitability in the long run. 

61Heating, Air Conditioning & Refrigeration 

Distributors International (‘‘HARDI’’), 2013 HARDI 

Profit Report (Available at: www.hardinet.org/) (Last 

accessed February 15, 2022). 

62U.S. Census Bureau, 2017 Economic Census 

Data (Available at www.census.gov/econ/) (Last 

accessed February 15, 2022). 

63Air Conditioning Contractors of America 

(‘‘ACCA’’), Financial Analysis for the HVACR 

Contracting Industry (2005) (Available at: 

www.acca.org/store) (Last accessed February 15, 

2022). 

down, and then adding the MPC of the 

electric heat kit to the market shareweighted modular blower MPC. The 

MPC of the electric heat kit was scaled 

appropriately in order to approximate 

the MPCs of different input capacity 

electric furnaces. Similar to the 

engineering analysis performed for 

NWGFs, DOE estimated the MPCs of 

electric furnaces at input capacities of 

40, 60, 80, 100, and 120 kBtu/h. These 

MPCs are presented in Table IV.9. 

TABLE IV.9—ELECTRIC FURNACE

MPCS

Input capacity 

(kBtu/h) 

MPC 

(2020$) 

40 .......................................... 261 

60 .......................................... 279 

80 .......................................... 305 

100 ........................................ 316 

120 ........................................ 342 

Further details regarding the 

methodology used to estimate electric 

furnace MPCs are provided in chapter 5 

of the NOPR TSD. 

D. Mark-Ups Analysis 

The mark-ups analysis develops 

appropriate mark-ups (e.g., wholesalers, 

distributors, mechanical contractors, 

remodelers, builder, retailers, mobile 

home manufacturers, and mobile home 

dealers) in the distribution chain and 

sales taxes to convert the MSP estimates 

derived in the engineering analysis to 

consumer prices, which are then used in 

the LCC and PBP analyses. At each step 

in the distribution channel, companies 

mark up the price of the product to 

cover costs. Before developing markups, DOE defines key market 

participants and identifies distribution 

channels. 

DOE characterized two distribution 

channel market segments to describe 

how NWGF and MHGF products pass 

from the manufacturer to residential and 

commercial consumers: 53

(1) replacements and new owners 54 and 

(2) new construction. 

The NWGF and MHGF replacement/ 

new owners market distribution channel 

is primarily characterized as follows: 

Manufacturer → Wholesaler → 

Mechanical contractor → Consumer 

Based on a 2019 BRG report,55 2019 

Clear Seas Research HVAC contractor 

survey,56 and Decision Analyst’s 2019 

American Home Comfort Study,57 DOE 

determined that the retail distribution 

channel (including internet sales) has 

been growing significantly in the last 

five years (previously it was negligible). 

Based on these sources, DOE estimated 

that 15 percent of the replacement 

market distribution channel will be 

going through this market channel as 

follows (including some consumers that 

purchase directly and then have 

contractors install it): 58

Manufacturer → Retailer → Mechanical 

contractor → Consumer 

The NWGF new construction 

distribution channel is characterized as 

follows, where DOE assumes that for 25 

percent of installations, a larger builder 

has an in-house mechanical contractor: 

Manufacturer → Wholesaler → 

Mechanical contractor → Builder → 

Consumer 

Manufacturer → Wholesaler → Builder 

→ Consumer 

The MHGF new construction 

distribution channel is characterized as 

follows: 

Manufacturer → Mobile Home 

Manufacturer → Mobile Home 

Dealer → Consumer 

For replacements, new owners, and 

new construction, DOE also considered 

the national accounts or direct from 

manufacturer distribution channel, 

where the manufacturer sells directly to 

a buyer (builder, mechanical contractor, 

or commercial consumer).59

Manufacturer → Wholesaler → Buyer → 

Consumer (National Account) 

At each step in the distribution 

channel, companies mark up the price 

of the product to cover costs. DOE 

developed baseline and incremental 

mark-ups for each participant in the 

distribution chain to ultimately 

determine the consumer purchase cost. 

Baseline mark-ups are applied to the 

price of products with baseline 

efficiency, while incremental mark-ups 

are applied to the difference in price 

between baseline and higher-efficiency 

models (the incremental cost increase). 

The incremental mark-up is typically 

less than the baseline mark-up and is 

designed to maintain similar per-unit 

operating profit before and after new or 

amended standards.60

To estimate average baseline and 

incremental mark-ups, DOE relied on 

several sources, including: (1) the 

HARDI 2013 Profit Report 61 (for 

wholesalers); and (1) U.S. Census 

Bureau 2017 Economic Census data 62

on the residential and commercial 

building construction industry (for 

general contractors, mechanical 

contractors, and mobile home 

manufacturers). In addition, DOE used 

the 2005 Air Conditioning Contractors 

of America’s (‘‘ACCA’’) Financial 

Analysis on the Heating, Ventilation, 

Air-Conditioning, and Refrigeration 

(‘‘HVACR’’) contracting industry 63 to 

disaggregate the mechanical contractor 

mark-ups into replacement and new 

construction markets. DOE also used 

various sources for the derivation of the 

mobile home dealer mark-ups (see 

chapter 6 of the NOPR TSD). 

Typically, contractors will mark up 

equipment and labor differently, with 

the labor mark-up being greater than the 

equipment mark-up. For the purposes of 

the analysis, DOE is treating the furnace 

installation work, including the 

equipment and labor components, as 

one job, and assumes that the 

mechanical contractors use the same 

mark-up to account for overhead and 

profit of the entire job. However, the 

determination of that overall markup 

accounts for the different components of 


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64U.S. Census Bureau, 2017 Economic Census 

Data (Available at: www.census.gov/econ/) (Last 

accessed February 15, 2022). 

65RS Means Company Inc., 2021 RS Means 

Mechanical Cost Data. Kingston, MA (2021) 

(Available at: www.rsmeans.com/products/books/) 

(Last accessed February 15, 2022). 

66Craftsman Book Company, 2021 National 

Construction Estimator, CA (2021) (Available at: 

craftsman-book.com/books-and-software/shop-bytype/shop-estimating-books) (Last accessed 

February 15, 2022). 

67Sales Tax Clearinghouse Inc., State Sales Tax 

Rates Along with Combined Average City and 

County Rates (February 8, 2021) (Available at: 

www.thestc.com/STrates.stm) (Last accessed 

February 15, 2022). 

68Energy Information Administration (‘‘EIA’’), 

2015 Residential Energy Consumption Survey 

(‘‘RECS’’) (Available at: www.eia.gov/consumption/ 

residential/) (Last accessed Feb. 15, 2022). 69Heating, Air-conditioning and Refrigeration 

Distributors International (‘‘HARDI’’), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International), Gas Furnace Shipments Data from 

2013–2020 (Available at: www.drintldata.com) (Last 

accessed Feb. 15, 2022). 

70U.S. Department of Energy: Energy Information 

Administration, Commercial Buildings Energy 

Consumption Survey (2012) (Available at: 

www.eia.gov/consumption/commercial/data/2012/ 

index.php?view=microdata) (Last accessed Feb. 15, 

2022). EIA has published building characteristics 

data for the 2018 CBECS. However, DOE utilizes the 

energy consumption microdata for the energy use 

analysis. The 2018 CBECS energy consumption 

microdata are expected to be fully released later in 

2022. Until that time, 2012 CBECS remains the most 

recent full data release. For future analyses, DOE 

plans to consider using the complete CBECS 2018 

microdata when available. 

71This is the temperature that is exceeded by the 

30-year minimum average temperature one percent 

of the time. 

the job. After reviewing the available 

2017 economic census data,64 DOE 

adjusted the mechanical contractor 

mark-up to take into account that a 

fraction of the fringe costs related to the 

direct construction labor are part of the 

labor cost. This better matches the 

approach used in RS Means 65 and other 

cost books 66 on how the overall 

contractor mark-up is determined. 

Based on this methodology, the average 

baseline mark-up for mechanical 

contractors is 1.47 for replacements and 

1.38 for new construction, while the 

incremental mark-up for mechanical 

contractors is 1.27 for replacements and 

1.20 for new construction. The overall 

baseline mark-up is 2.68 for NWGFs and 

2.48 for MHGFs, while the incremental 

mark-up is 1.98 for NWGFs and 1.88 for 

MHGFs. See chapter 6 of the NOPR TSD 

for more details. 

In addition to the mark-ups, DOE 

obtained State and local taxes from data 

provided by the Sales Tax 

Clearinghouse.67 These data represent 

weighted average taxes that include 

county and city rates. DOE derived 

shipment-weighted average tax values 

for each region considered in the 

analysis. 

DOE acknowledges that there is 

uncertainty regarding the appropriate 

mark-ups to use, so the Department 

conducted a sensitivity analysis in 

which the same average mark-up is 

applied to baseline and higherefficiency products. Appendix 6B of the 

NOPR TSD describes this analysis and 

how the associated LCC results differ 

from the results using the incremental 

mark-up approach. The relative 

comparison of the different efficiency 

levels remains similar, however, and the 

proposed energy conservation standard 

level remains economically justified 

regardless of which mark-up scenario is 

utilized. 

Chapter 6 of the NOPR TSD provides 

details on DOE’s development of markups for NWGFs and MHGFs. 

E. Energy Use Analysis 

The purpose of the energy use 

analysis is to determine the annual 

energy consumption of NWGFs and 

MHGFs at different efficiencies in 

representative U.S. single-family homes, 

multi-family residences, mobile homes, 

and commercial buildings, and to assess 

the energy savings potential of increased 

furnace efficiency. The energy use 

analysis estimates the range of energy 

use of NWGFs and MHGFs in the field 

(i.e., as they are actually used by 

consumers). The energy use analysis 

provides the basis for other analyses 

DOE performed, particularly 

assessments of the energy savings and 

the savings in consumer operating costs 

that could result from adoption of 

amended or new standards. 

DOE estimated the annual energy 

consumption of NWGFs and MHGFs at 

specific energy efficiency levels across a 

range of climate zones, building 

characteristics, and heating 

applications. The annual energy 

consumption includes the natural gas, 

liquid petroleum gas (‘‘LPG’’), and 

electricity used by the furnace. 

Chapter 7 of the NOPR TSD provides 

details on DOE’s energy use analysis for 

NWGFs and MHGFs. 

1. Building Sample 

To determine the field energy use of 

residential furnaces used in homes, DOE 

established a sample of households 

using NWGFs and MHGFs from EIA’s 

2015 Residential Energy Consumption 

Survey (‘‘RECS 2015’’).68 DOE assumed 

that furnaces in residential buildings 

smaller than 10,000 sq. ft. are consumer 

furnaces subject to this rulemaking. The 

RECS data provide information on the 

vintage of the home, as well as heating 

energy use in each household. DOE 

used the household samples not only to 

determine furnace annual energy 

consumption, but also as the basis for 

conducting the LCC and PBP analyses. 

DOE projected household weights and 

household characteristics in 2029, the 

first year of compliance with any 

amended or new energy conservation 

standards for NWGFs and MHGFs. To 

characterize future new homes, DOE 

used a subset of homes in RECS 2015 

that were built after 2000. 

On November 2016, AHRI provided 

regional shipment data (North vs. Rest 

of Country) up to 2015, and DOE also 

used HARDI shipments data by State 

and region from 2013–2020.69 Based on 

these recent shipments data and the 

updated shipments analysis (as 

explained in section IV.G of this 

document), DOE determined shipment 

weights for the North and Rest of 

Country, projected to 2029. For NWGFs, 

57 percent of shipments are projected to 

be in the North and 43 percent in the 

Rest of Country. For MHGFs, 51 percent 

of shipments are projected to be in the 

North and 49 percent in the Rest of the 

Country. Further details about the 

development of these numbers is 

available in appendix 7A of the NOPR 

TSD. 

Based on DOE’s shipments model, 

DOE estimated that 19 percent of NWGF 

installations in 2029 would be in new 

construction and that 81 percent would 

be for replacement and new owners. 

DOE further estimated that 43 percent of 

MHGF installations in 2029 would be in 

new construction and that 57 percent 

would be for replacement and new 

owners. See section IV.G of this 

document and chapter 9 of the NOPR 

TSD for further details. 

To determine the field energy use of 

NWGFs used in commercial buildings, 

DOE established a sample of buildings 

using NWGFs from EIA’s 2012 

Commercial Building Energy 

Consumption Survey (‘‘CBECS 2012’’), 

which is the most recent such survey 

that is currently available.70 See 

appendix 7A of the NOPR TSD for 

details about the CBECS 2012 sample. 

2. Furnace Sizing 

DOE assigned an input capacity for 

the existing NWGF or MHGF of each 

housing unit based on an algorithm that 

correlates the heating square footage 

provided by RECS 2015 or CBECS 2012 

and the outdoor design temperature for 

heating,71 based on the estimated 

location of the RECS 2015 household or 

CBECS 2012 building, with the 

distribution of input capacities of 

furnaces based on a reduced set of 

models from DOE’s 2021 Compliance 


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72U.S. Department of Energy, Compliance 

Certification Management System (Available at: 

www.regulations.doe.gov/certification-data/) (Last 

accessed Feb. 15, 2022). 

73AHRI, Directory of Certified Product 

Performance: Residential Furnaces (Available at: 

www.ahridirectory.org/Search/QuickSearch?

category=8&searchTypeId=3&producttype=32) (Last 

visited Feb. 15, 2022). 

74AHRI, Attachment A: Percentage of Residential 

Gas Furnace Shipments by Input Ranges, 20 Year 

Average (1995–2014) (October 14, 2015) (Available 

at: www.regulations.gov/comment/EERE-2014-BTSTD-0031-0181) (Last accessed Feb. 15, 2022). 

75Heating, Air-conditioning and Refrigeration 

Distributors International (‘‘HARDI’’), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International), Gas Furnace Shipments Data from 

2013–2020 (Available at: www.drintldata.com) (Last 

accessed Feb. 15, 2022). 

76AHRI, Attachment A: Percentage of Residential 

Gas Furnace Shipments by Input Ranges, 20 Year 

Average (1995–2014) (Oct. 14, 2015) (Available at: 

www.regulations.gov/comment/EERE-2014-BT-STD0031-0181) (Last accessed Feb. 15, 2022). 77Heating, Air-conditioning and Refrigeration 

Distributors International (‘‘HARDI’’), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International), Gas Furnace Shipments Data from 

2013–2020 (Available at: www.drintldata.com) (Last 

accessed Feb. 15, 2022). 

78EIA estimated the equipment’s annual energy 

consumption from the household’s utility bills 

using conditional demand analysis. 

79National Oceanic and Atmospheric 

Administration (NOAA), NNDC Climate Data 

Continued 

Certification Management System 

database for furnaces 72 and from 

AHRI’s 2021 residential furnace 

certification directory.73 DOE assumed 

that for the new furnace installation, the 

output capacity would remain similar to 

the output capacity for the existing 

furnace. DOE distributed the NWGF 

input capacities based on shipments 

data by input capacity bins provided by 

AHRI from 1995–2014,74 HARDI 

shipments data by capacity and region 

from 2013–2020,75 and manufacturer 

input from manufacturer interviews. 

The shipments data by input capacity 

was further disaggregated into 5-kBtu/h 

bins using the reduced set of models. 

DOE further refined the methodology 

to capture the degree of insulation type 

and other household characteristics by 

adding ACCA Manual J calculation 

methods to more accurately determine 

the design heating load requirements of 

each household based on all available 

RECS 2015 household characteristics. 

The households’ calculated design 

heating load values are then rank 

ordered to match actual shipments 

distributions to determine the assigned 

furnace input capacity. This improved 

methodology, applied to both NWGFs 

and MHGFs, allows for older, lessinsulated homes to be assigned larger 

furnaces compared to similar newlybuilt homes. 

The ACCA Manual J process is the 

most widely accepted method to 

calculate heating and cooling 

requirements for the house by using 

well-documented values and building 

codes, based on experimental data and 

extreme conditions (worst-case 

assumptions). For the NOPR analysis, 

the actual sizing in the field is 

accomplished by matching the 

household Manual J heating load 

calculations to actual shipments data by 

capacity. This methodology takes into 

account the actual field conditions 

where some households have a greater 

oversizing factor than recommended by 

ACCA, which could occur due to old 

furnaces being replaced by a much more 

efficient furnace and/or improvements 

to the building shell since the last 

furnace installation. This methodology 

also accounts for regional differences in 

building shells, which show that, on 

average, Southern homes are not as well 

insulated as Northern homes. Regional 

differences in peak heating load are also 

captured in the sizing methodology by 

using the outdoor design temperature 

that best matches the household 

location and climate characteristics. 

Regarding the use of factors for 

adjusting the annual heating load (such 

as heating degree day, or ‘‘HDD,’’ 

adjustment to average climate 

conditions, HDD trends based on 

climate change, and the adjustment 

based on the building shell index), DOE 

notes that these are only used to adjust 

the annual heating load to account for 

changes in the energy use required for 

heating in a given year. In contrast, the 

furnace size is determined by 

calculating the design heating load, 

which is based on outdoor design 

temperature and other household 

characteristics which are not adjusted 

by these annual heating load factors. 

DOE also accounted for the air 

conditioning sizing when determining 

the input capacity size of the furnace. 

DOE acknowledges that currently, there 

are few low-input-capacity furnace 

models with large furnace fans. For 

some installations, particularly in the 

South, a large furnace fan is required to 

meet the cooling requirements. DOE 

accounted for the fact that some furnace 

installations in the South have a larger 

input capacity than determined by the 

peak heating load calculations by 

calculating the size of the furnace fan 

required to meet the cooling 

requirements of the household by using 

the AHRI shipments data 76 and the 

HARDI furnace shipments by input 

capacity and region.77 DOE notes that 

this will primarily affect furnaces 

located in warmer areas of the country 

(with higher cooling loads), which 

potentially lead to a higher amount of 

oversizing than is assumed in the 

analysis for these households. DOE 

performed a sensitivity analysis to 

assess the impact of furnace fan cooling 

requirements and the pending changes 

in furnace fan design as part of its 

furnace sizing methodology by 

primarily using 2013–2020 HARDI 

regional shipments data by capacity. 

DOE notes that the Federal furnace fan 

standards that took effect in July 2019 

require fan motor designs that can more 

efficiently adjust the amount of air 

depending on both heating and cooling 

requirements. Thus, the size of the 

furnace fan (and the furnace capacity) 

will be able to better match both the 

heating and cooling requirements of the 

house. DOE acknowledges that in the 

future, there might be greater 

availability of small furnaces with larger 

furnace fans, but for this NOPR, DOE 

made a conservative assumption that 

larger furnace input capacities will be 

necessary to satisfy these cooling 

requirements. See chapter 7 of the 

NOPR TSD for further detail. 

3. Furnace Active Mode Energy Use 

To estimate the annual energy 

consumption in active mode of furnaces 

meeting the considered efficiency 

levels, DOE first calculated the annual 

household/building heating load using 

the RECS 2015 and CBECS 2012 

estimates of household or building 

furnace annual energy consumption,78

the existing furnace’s estimated capacity 

and efficiency (AFUE), and the heat 

generated from the electrical 

components. The analysis assumes that 

some homes have two or more furnaces, 

with the heating load split evenly 

between them. The estimation of 

furnace capacity is discussed in the 

previous section. The AFUE of the 

existing furnaces was estimated using 

the furnace vintage (the year of 

installation) provided by RECS and 

historical data on the market share of 

furnaces by AFUE by region (see section 

IV.F.10 of this document). DOE then 

used the household/building heating 

load to calculate the burner operating 

hours at each considered efficiency 

level, which were then used to calculate 

the fuel and electricity consumption 

based on the DOE residential furnace 

test procedure. 

a. Adjustments to Energy Use Estimates 

DOE adjusted the energy use 

estimates in RECS 2015 (for the year 

2015) and in CBECS 2012 (for the year 

2012) to ‘‘normal’’ weather using longterm heating degree-day (‘‘HDD’’) data 

for each geographical region.79 For this 


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Online (Available at: www.ncdc.noaa.gov/cdo-web/ 

search) (Last accessed Feb. 15, 2022). 

80U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2021 

(Available at: www.eia.gov/outlooks/aeo/) (Last 

accessed Feb. 15, 2022). 

81 DOE Building Energy Codes Program, Status of 

State Energy Code Adoption (Available at: 

www.energycodes.gov/status) (Last accessed Feb. 

15, 2022). 

82See 10 CFR 430.32(y). 

83Found in 10 CFR part 430, subpart B, appendix 

N, section 10. 

84The furnace fan energy conservation standards 

relevant to condensing and non-condensing MHGFs 

can be met using improved PSC motors and, 

therefore, these considerations do not apply. 

85U.S. Department of Energy—Office of Energy 

Efficiency and Renewable Energy, Energy 

Conservation Program for Consumer Products: 

Technical Support Document: Energy Efficiency 

Standards for Consumer Products: Residential 

Furnace Fans Including: Regulatory Impact 

Analysis (July 2014) (Available at: 

www.regulations.gov/document/EERE-2010-BTSTD-0011-0111) (Last accessed Feb. 15, 2022). 

NOPR, DOE then applied an HDD 

correction factor from AEO2021 80 that 

accounts for projected population 

migrations across the Nation and 

continues any realized historical 

changes in degree days at the State 

level. 

DOE accounted for changes in 

building shell efficiency between 2015 

(for RECS 2015) or 2012 (for CBECS 

2012) and the compliance year by 

applying the shell integrity indexes 

associated with AEO2021. The indexes 

consider projected improvements in 

building shell efficiency due to 

improvements in home insulation and 

other thermal efficiency practices. EIA 

provides separate indexes for new 

buildings and existing buildings for a 

given year, for both residential homes 

and commercial buildings. For the year 

2029, the factor applied for homes is 

0.98 for residential replacements and 

0.97 for residential new construction. 

The factor applied for commercial 

building replacements depend on 

building type and Census Division, 

ranging from 0.81 to 0.97 (on average 

0.91). For new construction commercial 

buildings, the factor used ranged from 

0.31 to 0.86, depending on building type 

and Census Division (on average 0.63). 

See chapter 7 of the NOPR TSD for more 

details. 

Building codes and building practices 

vary widely across the U.S. For 

example, as of November 2021, more 

than half of the States were still under 

the 2009 International Energy 

Conservation Code (‘‘IECC’’) or older 

codes instead of the 2012 IECC, 2015 

IECC, or 2018 IECC.81 EIA’s building 

shell index for new construction takes 

into account regional differences in 

building codes and building practices 

by including both homes that meet IECC 

requirements and homes that are built 

with the most efficient shell 

components, as well as non-compliant 

homes that fail to meet IECC 

requirements. It is uncertain how these 

building codes and building practices 

will change over time, so EIA uses 

technical and economic factors to 

project change in the building shell 

integrity indexes. For new home 

construction, EIA determined the 

building shell efficiency by using the 

relative costs and energy bill savings in 

conjunction with the building shell 

attributes. For commercial buildings, 

the shell efficiency factors vary by 

building type and region, and they take 

into account significant improvements 

to the commercial building shell, 

particularly in new commercial 

buildings. 

4. Furnace Electricity Use 

DOE’s analysis of furnace electricity 

consumption takes into account the 

electricity used by the furnace’s 

electrical components (such as blower, 

the draft inducer, and the ignitor). DOE 

determined furnace fan electricity 

consumption using field data on static 

pressures of duct systems and furnace 

fan performance data from manufacturer 

literature. As noted in section IV.C of 

this document, the furnace designs used 

in DOE’s analysis incorporate furnace 

fans that meet the energy conservation 

standards for those covered products 

that took effect in 2019.82 DOE 

accounted for furnace fan energy use 

during heating mode, as well as for the 

difference in furnace fan electricity use 

between a baseline furnace (80-percent 

AFUE) and a more efficient furnace 

during cooling and continuous fan 

circulation. DOE also accounted for 

increased furnace fan energy use in 

condensing furnaces to produce the 

equivalent airflow output compared to a 

similar non-condensing furnace, since 

condensing furnaces tend to have a 

more restricted airflow path than noncondensing furnaces due to the presence 

of a secondary heat exchanger. To 

calculate electricity consumption for the 

inducer fan, ignition device, gas valve, 

and controls, DOE used the calculation 

described in DOE’s furnaces test 

procedure,83 as well as in DOE’s 2021 

reduced furnace model dataset and 

manufacturer product literature. The 

electricity consumption of condensing 

furnaces also reflects the use of 

condensate pumps and heat tape. 

DOE accounts for the increased 

electricity use of condensing furnaces in 

heating, cooling, and continuous fan 

circulation due to larger internal static 

pressure (a more restricted airflow path 

due to the presence of a secondary heat 

exchanger). DOE notes that the furnace 

fan energy conservation standards that 

took effect in 2019 (for both noncondensing and condensing NWGFs 84) 

can be met using constant-torque 

brushless permanent magnet (‘‘BPM’’) 

motors, which do not require increasing 

the size of an undersized duct since the 

speed of the motor is kept constant with 

increased static pressure. DOE also 

accounts for higher energy use for a 

fraction of installations that include a 

constant airflow BPM (variable speed 

motor) that can increase the speed of the 

motor to compensate for high static 

pressures. See appendix 7C of the NOPR 

TSD for more details. 

As stated previously, a condensing 

furnace uses more electricity than an 

equivalent non-condensing furnace but 

uses significantly less natural gas or 

LPG. DOE accounted for the additional 

heat released by the furnace fan motor, 

which must be compensated by the 

central air conditioner during the 

cooling season, based on the 2014 

furnace fan final rule analysis.85 DOE 

also accounted for additional electricity 

use by the furnace fan during 

continuous fan operation throughout the 

year. 

5. Standby Mode and Off Mode 

DOE calculated annual standby mode 

energy use by multiplying the standby 

power consumption at each efficiency 

level by the number of standby mode 

hours, for each technology option 

identified in the engineering analysis. 

DOE assumed that furnaces are not 

usually equipped with an off mode, so 

only standby mode energy use was 

considered. To calculate the annual 

number of standby mode hours for each 

sampled household, DOE subtracted the 

estimated total furnace fan operating 

hours from the total hours in a year 

(8,760). The total furnace fan operating 

hours are the sum of the furnace fan 

operating hours during heating, cooling, 

and continuous fan modes. It is noted 

that DOE did account for the additional 

electricity use of brushless permanent 

magnet motors in standby mode. 

Chapter 7 of this NOPR TSD describes 

this methodology in more detail. 

F. Life-Cycle Cost and Payback Period 

Analyses 

DOE conducted LCC and PBP 

analyses to evaluate the economic 

impacts on individual consumers of 

potential energy conservation standards 

for NWGFs and MHGFs. The effect of 

new or amended energy conservation 

standards on individual consumers 

usually involves a reduction in 


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86Crystal BallTM is a commercially-available 

software tool to facilitate the creation of these types 

of models by generating probability distributions 

and summarizing results within Excel (Available at: 

www.oracle.com/technetwork/middleware/ 

crystalball/overview/index.html) (Last accessed Feb. 

15, 2022). 

operating cost and an increase in 

purchase cost. DOE used the following 

two metrics to measure consumer 

impacts: 

• Life-cycle cost (LCC) is the total 

consumer expense of an appliance or 

product over the life of that product, 

consisting of total installed cost 

(manufacturer selling price, distribution 

chain mark-ups, sales tax, and 

installation costs) plus operating costs 

(expenses for energy use, maintenance, 

and repair). To compute the operating 

costs, DOE discounts future operating 

costs to the time of purchase and sums 

them over the lifetime of the product. 

• Payback period (PBP) is the 

estimated amount of time (in years) it 

takes consumers to recover the 

increased purchase cost (including 

installation) of a more-efficient product 

through lower operating costs. DOE 

calculates the PBP by dividing the 

change in purchase cost at higher 

efficiency levels by the change in 

annual operating cost for the year that 

amended or new standards are assumed 

to take effect. 

For any given efficiency level, DOE 

measures the change in LCC relative to 

the LCC in the no-new-standards case, 

which reflects the estimated efficiency 

distribution of NWGFs and MHGFs in 

the absence of new or amended energy 

conservation standards. In contrast, the 

PBP for a given efficiency level is 

measured relative to the baseline 

product. 

1. General Method 

For each considered efficiency level 

in each product class, DOE calculated 

the LCC and PBP for a nationally 

representative set of housing units and, 

for NWGFs, commercial buildings. As 

stated previously, DOE developed 

household samples from RECS 2015 and 

CBECS 2012. For each sample 

household, DOE determined the energy 

consumption of the furnace and the 

appropriate natural gas, LPG, and 

electricity price. By developing a 

representative sample of households, 

the analysis captured the variability in 

energy consumption and energy prices 

associated with the use of NWGFs and 

MHGFs. 

Inputs to the LCC calculation include 

the installed cost to the consumer, 

operating expenses, the lifetime of the 

product, and a discount rate. Inputs to 

the calculation of total installed cost 

include the cost of the product—which 

includes MPCs, manufacturer markups, 

product price projections, wholesaler 

and contractor markups, and sales taxes 

(where appropriate)—and installation 

costs. Inputs to the calculation of 

operating expenses include annual 

energy consumption, energy prices and 

price projections, repair and 

maintenance costs, product lifetimes, 

and discount rates. Inputs to the 

payback period calculation include the 

installed cost to the consumer and first 

year operating expenses. DOE created 

distributions of values for installation 

cost, repair and maintenance, product 

lifetime, and discount rates, with 

probabilities attached to each value, to 

account for their uncertainty and 

variability. In addition, DOE established 

the efficiency in the no-new-standards 

case using a distribution of furnace 

efficiency values. 

The computer model DOE uses to 

calculate the LCC and PBP relies on 

Monte Carlo simulations to incorporate 

uncertainty and variability into the 

analysis. The Monte Carlo simulations 

randomly sample input values from the 

probability distributions and NGWF and 

MHGF user samples. For this 

rulemaking, the Monte Carlo approach 

is implemented in MS Excel together 

with the Crystal BallTM add-on.86 The 

model calculated the LCC and PBP for 

products at each efficiency level for 

10,000 furnace installations per 

simulation run. The analytical results 

include a distribution of 10,000 data 

points showing the range of LCC savings 

for a given efficiency level relative to 

the no-new-standards case efficiency 

distribution. In performing an iteration 

of the Monte Carlo simulation for a 

given consumer, product efficiency is 

chosen based on its probability. If the 

chosen product efficiency is greater than 

or equal to the efficiency of the standard 

level under consideration, the LCC and 

PBP calculation reveals that a consumer 

is not impacted by the standard level. 

By accounting for consumers who 

already purchase more-efficient 

products, DOE avoids overstating the 

potential benefits from increasing 

product efficiency. 

DOE calculated the LCC and PBP for 

all consumers of NWGFs and MHGFs as 

if each were to purchase a new product 

in the first year of required compliance 

with new or amended standards. Any 

amended standards would apply to 

NWGFs and MHGFs manufactured 5 

years after the date on which any new 

or amended standard is published. (42 

U.S.C. 6295(f)(4)(C)) For the reasons 

described previously, DOE used 2029 as 

the first year of compliance with 

amended or new standards for NWGFs 

and MHGFs. 

DOE recognizes the uncertainties 

associated with some of the parameters 

used in the analysis. To assess these 

uncertainties, DOE has performed 

sensitivity analyses for key parameters 

such as energy prices, condensing 

furnace market penetration, consumer 

discount rates, lifetime, installation 

costs, downsizing criteria, and product 

switching criteria. DOE notes that the 

analysis is based on a Monte Carlo 

simulation approach, which uses the 

Crystal BallTM add-on as a tool to more 

easily apply probability distributions to 

various parameters in the analysis. See 

appendix 8B of the NOPR TSD and 

relevant analytical sections of this 

document for further details about 

uncertainty, variability, and sensitivity 

analyses in the LCC analysis. 

DOE’s LCC analysis results at a given 

efficiency level account for the 

households that will not install 

condensing NWGFs unless the standard 

is changed, based on the no-newstandards case efficiency distribution 

described in section IV.F.9 of this 

document. This approach reflects the 

fact that some consumers may purchase 

products with efficiencies greater than 

the baseline levels. 

DOE’s analysis models the expected 

product lifetime, not the expected 

period of homeownership. DOE 

recognizes that the lifetime of a gas 

furnace and the residence time of the 

purchaser may not always overlap. 

However, EPCA requires DOE to 

consider the savings in operating costs 

throughout the estimated average life of 

the covered product compared to any 

increase in the price of, or in the initial 

charges for, or maintenance expenses of, 

the covered product that are likely to 

result from a standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) In the context of this 

requirement, the expected product 

lifetime, not the expected period of 

homeownership, is the appropriate 

modeling period for the LCC, as energy 

cost savings will continue to accrue to 

the new owner/occupant of a home after 

its sale. If some of the price premium for 

a more-efficient furnace is passed on in 

the price of the home, there would be 

a reasonable matching of costs and 

benefits between the original purchaser 

and the home buyer. To the extent this 

does not occur, the home buyer would 

gain at the expense of the original 

purchaser. 

As discussed in section IV.F.12 of this 

document, in its LCC analysis, DOE 

considered the possibility that some 

consumers may switch to alternative 

heating systems under a standard that 

requires condensing technology in its 


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87U.S. Department of Labor, Bureau of Labor 

Statistics, Produce Price Indices Series ID 

PCU333415333415C (Available at: www.bls.gov/ 

ppi/) (last accessed Feb. 15, 2022). 

LCC analysis. The LCC analysis showed 

that some consumers who switch end 

up with a reduction in the LCC relative 

to their projected purchase in the nonew-standards case. 

As part of the determination of 

whether a potential standard is 

economically justified, EPCA directs 

DOE to consider, to the greatest extent 

practicable, the savings in operating 

costs throughout the estimated average 

life of the covered product in the type 

(or class) compared to any increase in 

the price of, or in the initial charges for, 

or maintenance expenses of, the covered 

products which are likely to result from 

imposition of the standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) EPCA does not 

expressly limit consideration of the 

covered product or covered products 

likely to result under an amended 

standard to the covered product type (or 

class) of that would be subject to the 

amended standard (i.e., no prohibition 

on consideration of the potential for 

product switching due to new or 

amended standards). EPCA indicates 

that the timeframe of the LCC analysis 

is based on the estimated average life of 

the covered product subject to the 

standard under consideration for 

amendment. (Id.) However, the use of 

‘‘covered products’’ in the plural for 

what is to be considered as resulting 

from an amended standard suggests that 

DOE could consider covered products 

other than that subject to the standard. 

In the present case, were DOE not to 

consider the potential for consumers 

switching products in response to an 

amended standard, the analysis would 

not capture what could be expected to 

occur in actual practice. Given that 

understanding, DOE performed a 

sensitivity analysis without product 

switching for the LCC analysis 

(presented in section V.B.1.a of this 

document and in appendix 8J of the 

NOPR TSD) and for the NIA as well 

(presented in section V.B.3.a of this 

document, section V.B.3.b and in 

appendix 10E of the NOPR TSD). The 

economic justifications for the proposed 

energy conservation standards for 

NWGFs and MHGFs are similar with 

either no product switching or with 

product switching, and the relative 

comparison between the TSLs remains 

similar. 

EPCA also establishes, as noted above 

in section III.E.2 of this document, a 

rebuttable presumption that a standard 

is economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard. (42 U.S.C. 

6295(o)(2)(B)(iii)) As with the LCC 

analysis, accounting for the potential for 

switching in the PBP analysis provides 

a payback that is representative across 

consumers. 

Table IV.10 summarizes the approach 

and data DOE used to derive inputs to 

the LCC and PBP calculations. The 

subsections that follow provide further 

discussion. Details of the spreadsheet 

model, and of all the inputs to the LCC 

and PBP analyses, are contained in 

chapter 8 of the TSD for this NOPR and 

its appendices. 

TABLE IV.10—SUMMARY OF INPUTS AND METHODS FOR THE LCC AND PBP ANALYSES

Inputs Source/method 

Product Cost ................................... Derived by multiplying MPCs by manufacturer, wholesaler, and contractor mark-ups and sales tax, as appropriate. Used historical data to derive a price scaling index to forecast product costs. 

Installation Costs ............................. Baseline installation cost determined with data from 2021 RS Means. Assumed variation in cost with efficiency level. 

Annual Energy Use ......................... Total annual energy use based on the annual heating load, derived from the building samples. Electricity 

consumption based on field energy use data. 

Variability: Based on the RECS 2015 and CBECS 2012. 

Energy Prices .................................. Natural Gas: Based on EIA’s Natural Gas Navigator data for 2020 and RECS 2015 billing data. 

Propane: Based on EIA’s State Energy Data System (‘‘SEDS’’) for 2019. 

Electricity: Based on EIA’s Form 861 data for 2020 and RECS 2015 billing data. 

Variability: Regional energy prices determined for 30 regions for residential applications and 9 regions for 

commercial applications. 

Marginal prices used for natural gas, propane, and electricity prices. 

Energy Price Trends ....................... Based on AEO2021 price projections. 

Repair and Maintenance Costs ...... Based on 2021 RS Means data and other sources. Assumed variation in cost by efficiency. 

Product Lifetime .............................. Based on shipments data, multi-year RECS, American Housing Survey, American Home Comfort Survey 

data. Mean lifetime of 21.4 years. 

Discount Rates ................................ Residential: approach involves identifying all possible debt or asset classes that might be used to purchase 

the considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve 

Board’s Survey of Consumer Finances. 

Commercial: Calculated as the weighted average cost of capital for businesses purchasing NWGFs. Primary data source was Damodaran Online. 

Compliance Date ............................ 2029. 

Note: References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the TSD. 

2. Consumer Product Cost 

To calculate consumer product costs, 

DOE multiplied the MPCs developed in 

the engineering analysis by the markups described in section IV.D of this 

document (along with sales taxes). DOE 

used different mark-ups for baseline 

products and higher-efficiency 

products, because DOE applies an 

incremental mark-up to the increase in 

MSP associated with higher-efficiency 

products. 

For the default price trend for 

residential furnaces, DOE derived an 

experience rate based on an analysis of 

long-term historical data. As a proxy for 

manufacturer price, DOE used Producer 

Price Index (‘‘PPI’’) data for warm-air 

furnace equipment from the Bureau of 

Labor Statistics from 1990 through 

2020.87 An inflation-adjusted PPI was 

calculated using the implicit price 

deflators for GDP for the same years. To 

calculate an experience rate, DOE 

performed a least-squares power-law fit 

on the inflation-adjusted PPI versus 


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88Taylor, M. and K.S. Fujita, Accounting for 

Technological Change in Regulatory Impact 

Analyses: The Learning Curve Technique, Lawrence 

Berkeley National Laboratory, Report No. LBNL– 

6195E (2013) (Available at: eta-publications.lbl.gov/ 

sites/default/files/lbnl-6195e_.pdf) (Last accessed 

Feb. 15, 2022). 

89Taylor, M. and K.S. Fujita, Accounting for 

Technological Change in Regulatory Impact 

Analyses: The Learning Curve Technique, Lawrence 

Berkeley National Laboratory, Report No. LBNL– 

6195E (2013) (Available at: eta-publications.lbl.gov/ 

sites/default/files/lbnl-6195e_.pdf) (Last accessed 

Feb. 15, 2022). 

90RS Means Company Inc., RS Means Mechanical 

Cost Data. Kingston, MA (2021) (Available at: 

www.rsmeans.com/products/books/2021-cost-databooks) (Last accessed Sept. 9, 2021). 

91RS Means Company Inc., RS Means Residential 

Repair & Remodeling Cost Data. Kingston, MA 

(2021) (Available at: www.rsmeans.com/products/ 

books/2021-cost-data-books) (Last accessed Feb. 15, 

2022). 

92RS Means Company Inc., RS Means Plumbing 

Cost Data. Kingston, MA (2021) (Available at: 

www.rsmeans.com/products/books/2021-cost-databooks) (Last accessed Feb. 15, 2022). 

93RS Means Company Inc., RS Means Electrical 

Cost Data. Kingston, MA (2021) (Available at: 

www.rsmeans.com/products/books/2021-cost-databooks) (Last accessed Feb. 15, 2022). 

cumulative shipments of residential 

furnaces, based on a corresponding 

series for total shipments of residential 

furnaces (see section IV.G of this 

document for discussion of shipments 

data). Using the most recent data 

available, DOE fitted a power-law 

function to the deflated warm air 

furnace PPI and cumulative furnace 

shipments time series data between 

1990 and 2020. The resulting power-law 

model has an R-square of 84 percent, 

indicating that the model explains 84 

percent of the variability of the 

observations around the mean. DOE 

then derived a price factor index, with 

the price in 2020 equal to 1, to forecast 

prices in 2029 for the LCC and PBP 

analyses, and, for the NIA, for each 

subsequent year through 2058. The 

index value in each year is a function 

of the experience rate and the 

cumulative production through that 

year. To derive the latter, DOE 

combined the historical shipments data 

with projected shipments in the nonew-standards case determined for the 

NIA (see section IV.H of this document). 

DOE’s learning curve methodology 

was developed by examining the 

literature on accounting for 

technological change and empirical 

studies of energy technology learning 

rates.88 DOE utilized the most extensive 

time series data available specific to 

residential furnaces. 

Furnace prices can be affected by a 

variety of factors, and the cost of 

commodity materials is one of them. 

The nominal commodity PPI data for 

copper wire and cable, iron and steel, 

and aluminum wire and cable indicate 

that the nominal indices rose 

substantially between the early 2000s 

and 2011, which is primarily attributed 

to an increasing demand for such 

commodities from rapid 

industrialization in China, India, and 

other emerging economies. During the 

same period, the nominal warm air 

furnace PPI increased by 16 percent. 

However, these commodity indices have 

trended downward since 2011, and the 

nominal warm air furnace PPI has 

steadily trended upward during this 

period. Based on these observations, 

DOE contends that even though the 

warm air furnace PPI, to a certain 

extent, is influenced by commodity 

indices, other factors impact furnace 

prices. In addition, due to the long-term 

nature of DOE’s analysis, it would be 

inappropriate to make assumptions 

based on recent, short-term trends only. 

The learning curve methodology 

implemented in this proposed rule is 

based on sound economic theory, 

empirical evidence, and historical data. 

Based on the historical PPI data, the cost 

of commodity materials can only 

partially explain the furnace price trend, 

particularly when considering the 

recent trend observed in commodity and 

furnace price indices. The experience 

curve model that DOE developed, using 

the most recent data available, shows 

strong explanatory power and high 

statistical significance. DOE welcomes 

information that could support 

improvement in its methodology. 

DOE acknowledges that the prices of 

non-condensing and condensing 

furnaces may not change at the same 

rate and using a trend for all NWGFs 

and MHGFs to represent the price trend 

of condensing furnaces may 

underestimate the future decline in the 

cost of condensing furnaces. It also 

acknowledges that an increase in 

production and innovation due to a 

condensing standard could result in a 

decline in the cost of condensing 

furnaces. However, DOE could not find 

detailed data that would allow for a 

price trend projection for condensing 

NWGFs and MHGFs that may differ 

from non-condensing NWGFs and 

MHGFs. Thus, for this NOPR, it used 

the same price trend projection for 

condensing and non-condensing 

NWGFs and MHGFs. Although DOE was 

not able to find information or data 

regarding price trends related to 

different furnace technologies, DOE is 

exploring ways to estimate learning 

rates for different technologies.89

A detailed discussion of DOE’s 

derivation of the experience rate is 

provided in appendix 8C of the NOPR 

TSD. 

DOE requests data and information on 

the price trend for condensing NWGFs 

as compared to the trend for noncondensing NWGFs. 

3. Installation Cost 

The installation cost is the cost to the 

consumer of installing the furnace, in 

addition to the cost of the furnace itself. 

The cost of installation covers all labor, 

overhead, and material costs associated 

with the replacement of an existing 

furnace or the installation of a furnace 

in a new home, as well as delivery of 

the new furnace, removal of the existing 

furnace, and any applicable permit fees. 

Higher-efficiency furnaces may require 

one to incur additional installation 

costs. DOE’s analysis of installation 

costs estimated specific installation 

costs for each sample household based 

on building characteristics given in 

RECS 2015. For this NOPR, DOE used 

2021 RS Means data for the installation 

cost estimates, including labor 

costs.90 91 92 93 DOE’s analysis of 

installation costs accounted for regional 

differences in labor costs by aggregating 

city-level labor rates from RS Means 

into 30 distinct State or multi-State 

regions to match RECS 2015 data and 

into the nine Census Divisions to match 

CBECS 2012 data. 

DOE conducted a detailed analysis of 

installation costs for all potential 

installation cases, including when a 

non-condensing gas furnace is replaced 

with a non-condensing gas furnace, and 

when a non-condensing gas furnace is 

replaced with a condensing gas furnace. 

For the latter, particular attention was 

paid to venting issues in replacement 

applications, including adding a new 

flue venting (PVC), combustion air 

venting (PVC), concealing vent pipes, 

addressing an orphaned water heater (by 

updating flue vent connectors, vent 

resizing, or chimney relining), as well as 

condensate removal. DOE also included 

additional installation costs (‘‘adders’’) 

for new construction installations. 

These are described below. 

a. Basic Installation Costs 

DOE’s analysis estimated basic 

installation costs for replacement, new 

owner, and new home applications. 

These costs, which apply to both 

condensing and non-condensing gas 

furnaces, include furnace set-up and 

transportation, gas piping, ductwork, 

electrical hook-up, permit and removal/ 

disposal fees, and where applicable, 

additional labor hours for an attic 

installation. 

DOE’s installation costs account for 

cases where significant ductwork 

redesign is required, including when 


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94Newer variable speed motors are designed with 

lower cut-off static pressures to deal with this issue. 

In addition, the installer can easily decrease the 

airflow to address the issue by changing the airflow 

speed control setting (tap) on the furnace motor. 

95For further details, see the Technical Support 

Document for the July 2014 final rule for furnace 

fans. (Available at: www.regulations.gov/document/ 

EERE-2010-BT-STD-0011-0111) (Last accessed Feb. 

15, 2022). 

96The ANSI Z223.1/NFPA 54 Natural Fuel Gas 

Code (‘‘NFGC’’) venting requirements refer to 

Category I, II, III, and IV gas appliances. Category 

I gas appliances, such as natural draft gas water 

heaters, exhaust high-temperature flue gases and are 

vented using negative static pressure vents designed 

to avoid excessive condensate production in the 

vent. Category IV gas appliances, such as 

condensing furnaces, exhaust low temperature flue 

gases and are vented using positive static pressure 

corrosion-resistant vents. Due to the different 

venting requirements, the NFGC does not allow 

common venting of condensing and noncondensing appliances. The 2021 Edition is 

available at www.nfpa.org/codes-and-standards/allcodes-and-standards/list-of-codes-and-standards/ 

detail?code=54 (Last accessed Feb. 15, 2022). 

furnaces with variable speed motors are 

utilizing undersized ducts. DOE notes 

that this cost is applicable to variable 

speed motors installed in either 

condensing or non-condensing furnaces. 

Variable speed furnace blowers will try 

to maintain the same air flow at high 

static pressure (especially if the variable 

speed blower is designed with a high 

cut-off or no cut-off static pressure),94

which could lead to noise issues in 

smaller ducts due to the increased speed 

of moving the air. However, the Federal 

furnace fan standard that took effect in 

2019 requires constant torque furnace 

fans (with X13 motors), which have 

similar performance curves as PSC 

motors.95

DOE notes that asbestos presents a 

safety hazard that must be properly 

abated for all retrofit installations where 

it is present. As explained above, DOE 

recognizes that potential ductwork 

modifications typically occur due to the 

furnace fan requirements and not 

necessarily due to the installation of a 

condensing furnace. DOE included the 

cost of asbestos abatement for a fraction 

of both non-condensing and condensing 

NWGF installations. See appendix 8D of 

the NOPR TSD for more details. 

b. Additional Installation Costs for NonWeatherized Gas Furnaces 

For replacement applications, DOE 

included a number of adders for a 

fraction of the sample households. For 

non-condensing gas furnaces, these 

additional costs included updating flue 

vent connectors, vent resizing, and 

chimney relining. For condensing gas 

furnaces, DOE included adders for flue 

venting (PVC), combustion air venting 

(PVC), concealing vent pipes, 

addressing an orphaned water heater (by 

updating flue vent connectors, vent 

resizing, or chimney relining), and 

condensate removal. 

Replacement Installations: NonCondensing to Non-Condensing NonWeatherized Gas Furnace 

For non-condensing non-weatherized 

gas furnace replacements, DOE added 

additional costs to a small fraction of 

installations that involve updating flue 

vent connectors, vent resizing, and 

chimney relining. These costs are most 

commonly applied to older furnace 

installations, such as natural draft 

furnace installations, furnaces not 

installed according to the current codes, 

and furnace installations that do not 

meet manufacturers’ installation 

requirements. In total, these costs for 

vent resizing or chimney relining are 

applied to less than 5 percent of noncondensing to non-condensing furnace 

replacement installations in 2029, with 

an average cost of $755. In addition, 

DOE estimated that 24 percent of 

installations of non-condensing to noncondensing furnace replacement 

installations in 2029 would require 

updating flue vent connectors, with an 

average cost of $284. 

Replacement Installations: NonCondensing to Condensing NonWeatherized Gas Furnace 

DOE assumed that condensing 

furnaces that replace non-condensing 

furnaces do not utilize the existing 

venting system, but instead require new, 

dedicated plastic venting that meets all 

applicable building codes and 

manufacturer instructions. In 

determining these installation costs, 

DOE takes into account vent length, 

vent diameter, vent termination, the 

potential need to create openings in 

walls or floors for the vent system, 

additional vent costs for housing units 

with shared walls, vent resizing in the 

case of an orphaned water heater, and 

concealment work cost increases in 

some installations. 

Appendix 8D in the TSD for this 

NOPR describes the methodology used 

to determine the installation costs for all 

of the issues described in the paragraphs 

that follow. 

(a) Flue Venting 

DOE assumed that condensing 

furnaces do not utilize the existing 

venting system but instead require new, 

dedicated plastic venting that meets all 

applicable building codes and 

manufacturer instructions. Accordingly, 

DOE determined whether a condensing 

furnace is horizontally or vertically 

vented based on the shortest vent 

length. DOE’s analysis estimated that 70 

percent of condensing furnaces will be 

installed with a horizontal vent. 

DOE assumed that vent length varies 

depending on where a suitable wall is 

located relative to the furnace. In 

addition, when applicable, DOE 

accounts for use of a snorkel 

termination to meet minimum 

clearances to sidewalks, average snow 

accumulation level, overhangs, and air 

intake sources, including operable doors 

and windows, building corners, and gas 

meter vents. In DOE’s analysis, snorkel 

termination is more frequently needed 

in situations where the furnace is below 

the snow line (such as in basements or 

crawl spaces). DOE assumed that the 

replacement furnace would remain in 

the same location as the existing furnace 

and accounted for the new vent length 

and structural changes, such as wall 

knockouts, to install new venting. In 

some installations, it might be easier 

and cheaper to change the furnace 

location, but this would require both gas 

line extensions and ductwork 

modifications, which were not modeled 

in DOE’s installation cost analysis. DOE 

accounted for additional vent length for 

housing units with shared walls. DOE 

also accounted for the cost of vent 

resizing in the case of an orphaned 

water heater and the cost of 

concealment work in some installations. 

The vent pipe length limitations 

depend on a number of factors 

including number of elbows, vent 

diameter, horizontal vs. vertical length, 

as well as combustion fan size. A review 

of several manufacturer installation 

manuals shows that the maximum vent 

lengths range from 30 to 130 feet, 

depending primarily on the vent 

diameter. For a fraction of installations, 

DOE increased the vent diameter in 

order to be able to extend the vent 

length according to manufacturer 

specifications. 

(b) Common Venting Issues (Including 

Orphaned Water Heaters) 

Common venting provides a single 

exhaust flue for multiple gas appliances. 

In some cases, a non-condensing NWGF 

is commonly vented with a gas-fired 

water heater. When the non-condensing 

NWGF is replaced with a condensing 

NWGF, the new condensing furnace and 

the existing water heater can no longer 

be commonly vented due to different 

venting requirements,96 and the water 

heater becomes ‘‘orphaned.’’ The 

existing vent may need to be modified 

to safely vent the orphaned water 

heater, while a new vent is installed for 

the condensing NWGF. DOE accounted 

for a fraction of installations that would 

require chimney relining or vent 

resizing for the orphaned water heater, 


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97 Data from the residential water heater final rule 

were used in this analysis. 75 FR 20112 (April 16, 

2010). 

98This fraction accounts for buildings without 

common venting; buildings where all/most furnaces 

are replaced at the same time (many rentals/HOA 

situations); smaller multi-family units/smaller 

number of floors; and situations where 

disconnecting one furnace from the common vent 

does not impact the common venting for remaining 

furnaces. This fraction is also based on 2015 RECS 

data regarding the number of apartments/units and 

the number of stories per multi-family building. 99Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 1: The Issue, Prospective 

Solutions, and Facility for Experimental Evaluation 

(October 2014) (Available at: web.ornl.gov/sci/ 

buildings/docs/Condensing-Furnace-Venting-Part1- 

Report.pdf) (Last accessed Feb. 15, 2022). 100Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 2: Evaluation of SameChimney Vent Systems for Condensing Furnaces 

and Natural Draft Water Heaters (February 2015) 

(Available at: web.ornl.gov/sci/buildings/docs/ 

Condensing-Furnace-Venting-Part2-Report.pdf) 

(Last accessed Feb. 15, 2022). 

101M&G DuraVent’s FasNSeal 80/90 Combination 

Cat I and Cat IV gas vent system is UL listed to 

applicable portions of ULC S636/UL1738, UL1777, 

and UL441 (Available at: www.duravent.com/ 

fasnseal-80–90/) (Last accessed Feb. 15, 2022). 

102Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 2: Evaluation of SameChimney Vent Systems for Condensing Furnaces 

and Natural Draft Water Heaters (February 2015) 

(Available at: web.ornl.gov/sci/buildings/docs/ 

Condensing-Furnace-Venting-Part2-Report.pdf) 

(Last accessed Feb. 15, 2022). 

103Oak Ridge National Laboratory, Furnace and 

Water Heater Venting Field Demonstration (May, 

2019) (Available at: www.ornl.gov/publication/ 

furnace-and-water-heater-venting-fielddemonstration) (Last accessed Feb. 15, 2022). 

104A non-direct vent furnace increases the air 

infiltration that the house experiences since for 

every cubic foot of air that leaves the house, another 

cubic foot of air comes in. Thus, a direct vent 

furnace avoids using heated indoor air for 

combustion. 

105By separating the combustion air from indoor 

household air, the furnace is not affected by other 

home appliances in a tight home. A direct vent 

furnace reduces the danger of any potential 

backdrafts (pulling exhaust gases down the 

chimney), as well as reducing the danger of foreign 

gases in the combustion air. For example, a furnace 

could be damaged by vapors from laundry products, 

as these vapors can mix with indoor combustion air 

to corrode furnace components. 

106 DOE, Technology Fact Sheer. Combustion 

Equipment Safety: Provide Safe Installation for 

Combustion Appliances (October 2000) (DOE/GO– 

102000–0784) (Available at: www1.eere.energy.gov/ 

buildings/publications/pdfs/building_america/ 

26464.pdf) (Last accessed Feb. 15, 2022). 

107 DOE, Furnace and Boilers (Available at: 

www.energy.gov/energysaver/home-heatingsystems/furnaces-and-boilers) (Last accessed Feb. 

15, 2022). 

including updating flue vent 

connectors, resizing vents, or relining 

chimneys when applicable based upon 

the age of the furnace and the home. 

DOE accounted for the probability 

that in some cases, replacing a noncondensing furnace with a condensing 

furnace may require significant 

modifications to the existing vent 

system for the commonly-vented gas 

water heater. DOE accounted for costs 

related to updating the vent connector, 

relining the chimney, and resizing the 

vent, which would satisfy the 

installation requirements of the Natural 

Fuel Gas Code. DOE understands that a 

potential option would be to install 

either a storage or tankless powervented water heater to avoid the cost of 

a chimney or metal flue vent 

modification just for the gas water 

heater, or to switch to an electric storage 

water heater. DOE recognizes that the 

frequency of chimney relining and vent 

resizing may decrease slightly due to the 

increase in adoption of high-efficiency 

gas water heaters. However, DOE did 

not find any additional information or 

data 97 to project the market share of 

high-efficiency water heaters in 2029 or 

the decrease in the fraction of 

installations with common vents. 

Therefore, DOE did not consider the 

power-vented gas storage or other 

higher-efficiency water heater options. 

Instead, DOE either added additional 

installation costs associated with 

venting a Category I water heater, such 

that the orphaned water heater could be 

vented through the chimney, or 

accounted for the installation of an 

electric storage water heater as an 

alternative. For new owners and new 

construction installations, DOE applied 

a venting cost differential if the owner/ 

builder was planning to install a 

commonly-vented non-condensing 

furnace and water heater. 

DOE acknowledges that multi-family 

buildings may require additional 

measures to replace non-condensing 

furnaces with condensing furnaces. 

Such measures include the vent length, 

existing common vents, and horizontal 

venting. For this NOPR, DOE assigned 

additional venting installation costs (on 

average $248) for a quarter of 

replacement installations 98 in multifamily buildings to account for 

modifying the existing vent systems to 

accommodate a condensing furnace 

installation. 

(c) New Venting Technologies 

To address certain difficult 

installation situations, new venting 

technologies are being developed to 

vent a condensing residential furnace 

and an atmospheric combustion water 

heater through the same vent by reusing 

the existing metal vent or masonry 

chimney with a new vent cap and 

appropriate liner(s).99 100 In 2015, the 

FasNSeal 80/90 venting system was 

introduced commercially by M&G 

DuraVent, a new venting system that 

uses a unique, pipe-within-a-pipe 

design to vent a condensing furnace and 

a natural draft water heater.101 FasNSeal 

80/90 is UL-approved. An additional 

venting solution known as EntrainVent 

is available as a pre-commercial 

prototype by Oak Ridge National 

Laboratory.102 DOE conducted a 

sensitivity analysis to estimate the 

impact of such technologies on the 

installation cost of a condensing NWGF, 

but did not include the technologies in 

the primary analysis. 

DOE recognizes that there are 

currently limitations to DuraVent’s new 

FasNSeal 80/90 venting technology 

related to venting in masonry chimneys 

and that currently there are limited field 

performance data.103 Because of the 

uncertainty regarding applicability of 

FasNSeal 80/90 and other new venting 

technologies, DOE only considered 

using this option in a sensitivity 

analysis. DOE conducted two additional 

sensitivity analyses: (1) the FasNSeal 

80/90 option is applied to installations 

that can currently meet the FasNSeal 

80/90 installation requirements (metal 

vents only); and (2) all new venting 

technology options are applied to 

installations that could meet the 

respective installation requirements 

(metal vents and masonry chimney 

installations, including installations 

with more horizontal sections). DOE 

notes that while new venting 

technologies could lower installation 

costs, DOE must base its approach on 

currently available data rather than 

make assumptions as to future 

developments in advanced venting 

technologies. DOE welcomes any 

available data on the use of new venting 

technologies. 

(d) Combustion Air Venting 

DOE’s analysis accounts for the 

additional cost associated with direct 

vent installations that use combustion 

air intake. Direct vent or sealed 

combustion is not required for 

condensing installations, but it is 

recommended for any condensing 

furnace to utilize ‘‘sealed combustion.’’ 

All condensing furnaces come with this 

feature (which requires an opening for 

the intake combustion air pipe/vent). 

Condensing furnaces will often be 

installed as direct vent furnaces since it 

offers significant energy savings 104 and 

safety 105 advantages.106 107

DOE’s analysis assumes that twothirds of condensing furnaces will be 

installed with the direct vent feature. 

Typically, the combustion air intake 

pipe will go in the same direction of the 

flue vent or can be in a concentric vent. 

(e) Condensate Withdrawal 

DOE accounted for the cost of 

condensate removal for condensing 


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108Heat tape is also referred to as heating cable 

and provides electric heating. 

109 ICP, Installation Instructions for Condensate 

Freeze Protection Kit (2012) (Available at: 

www.icptempstarparts.com/mdocs-posts/ 

naha00201hh-condensate-freeze-protection-kitinstallation-instructions/) (Last accessed Feb. 15, 

2022). 

110Bryant, Installation Instructions: Condensate 

Drain Protection (2008) (Available at: 

www.questargas.com/ForEmployees/qgcOperations

Training/Furnaces/Bryant_355AAV.pdf) (Last 

accessed Feb. 15, 2022). 

111Brand, L. and W. Rose, Strategy Guideline: 

Accurate Heating and Cooling Load Calculations. 

Partnership for Advanced Residential Retrofits 

(October 2012) (Available at: www.nrel.gov/docs/ 

fy13osti/55493.pdf) (Last accessed Feb. 15, 2022). 

112 DOE considered an installation to be 

‘‘difficult’’ if there is an orphaned water heater, a 

long PVC vent connection though multiple walls, or 

in households with condensate issues (e.g., ones 

requiring heat tape or a condensate pump). 

113 Decision Analyst, Homeowner ‘‘Spotlight’’ 

Report: Equipment Switching, Repair Profile and 

Energy Efficiency (August 2011). 

(www.decisionanalyst.com/) (Last accessed Feb. 15, 

2022). 

114 Decision Analyst, Contractor ‘‘Spotlight’’ 

Report: Energy Efficiency and Installation Profile 

(August 2011). (www.decisionanalyst.com/) (Last 

accessed Feb. 15, 2022). 

115This finding is supported by an expert 

consultant (EER Consulting). 

116 Decision Analysts, 2019 American Home 

Comfort Studies (Available at: 

www.decisionanalyst.com/syndicated/ 

homecomfort/) (Last accessed Feb. 15, 2022). 117 DOE calculated that on average condensing 

NWGF installation costs are lower in the new 

construction market compared to non-condensing 

NWGFs, since high-efficiency NWGF can be vented 

either horizontally or vertically (whichever is most 

cost-effective), and, therefore, a vertical buildout 

with roof penetration is not required. See appendix 

8D of the TSD for this NOPR for more details 

regarding new construction installation costs. 

118Lekov A., V. Franco, G. Wong-Parodi, J. 

McMahon, P. Chan, Economics of residential gas 

furnaces and water heaters in US new construction 

market,. Energy Efficiency (September 2010) 

Volume 3, Issue 3, pp 203–222 (Available at: 

link.springer.com/article/10.1007/s12053-009-9061- 

y) (Last accessed Feb. 15, 2022). 

NWGF installations, including, when 

applicable, a condensate drain, 

condensate pump, freeze protection 

(heat tape),108 drain pan, condensate 

neutralizer, and an additional electric 

outlet for the condensate pump. 

DOE acknowledges that condensate 

management can be costly for some 

installations (e.g., multi-family units) 

and very difficult in rare cases. DOE’s 

current installation cost approach 

accounts for these costs. However, DOE 

added a sensitivity analysis with 

additional condensate costs. 

The use of heat tape to prevent 

condensate pipes from freezing is 

standard installation practice.109 110

DOE’s analysis accounts for the use of 

heat tape typical in unconditioned attic 

installations, which are more likely to 

face freezing conditions. DOE 

acknowledges that other unconditioned 

locations could also face freezing, but it 

is far less common.111 DOE also 

included heat tape to installations in 

additional non-conditioned spaces such 

as crawl spaces, non-conditioned 

basements, and garages that are in 

regions that could be exposed to 

freezing conditions. DOE accounted for 

the additional installation cost and 

energy use of the heat tape. 

Additionally, because it is 

recommended practice that heat tape be 

plugged into a ground fault circuit 

interrupter (‘‘GFCI’’) circuit, DOE 

included the cost of adding a GFCI 

circuit for the fraction of households 

that do not have one available. DOE also 

conducted a sensitivity analysis with an 

additional fraction of installations 

necessitating the use of heat tape. 

To address situations where 

condensate must be treated before 

disposal (e.g., due to a local regulation), 

DOE assumed that a fraction of 

installations require condensate 

neutralizer for condensate withdrawal. 

As discussed in appendix 8D of the TSD 

for this NOPR, the fraction of 

installations that require condensate 

neutralizer used in the analysis is 

representative of the current use. DOE 

includes the cost of using non-corrosive 

drains for an additional fraction of 

installations. Additionally, DOE 

conducted a sensitivity analysis 

assuming a high fraction of installations 

use condensate neutralizer or are 

installed with a non-corrosive drain. 

(f) Difficult Installations 

DOE considered the potential need for 

additional vent length to reach a 

suitable location on an outside wall 

where the vent termination could be 

located, as well as the potential need for 

wall penetrations and/or concealing of 

flue vents in conditioned spaces. 

DOE used the best available 

information and data to characterize the 

likely nature and cost of installations of 

a condensing furnace as a replacement 

for a non-condensing furnace in its 

consumer sample. DOE estimates that 

51 percent of replacements could be 

labeled as ‘‘difficult’’ installations,112

with an average incremental installation 

cost of $1,003 relative to the baseline 80 

percent AFUE NWGF (compared to an 

incremental cost of $262 for all other 

replacement installations). 

DOE is not aware of any physical 

limitations or building code issues that 

would preclude the installation of a 

condensing NWGF in multi-family 

buildings, townhomes, and row houses. 

DOE sought any information or data 

regarding potential physical limitations 

when installing a new condensing 

furnace. In consumer 113 and 

contractor 114 surveys, relocation was 

not mentioned as an issue for furnace 

installation.115 DOE recognizes that in 

some cases, homeowners could elect to 

relocate their furnace when replacing a 

non-condensing NWGF with a 

condensing NWGF, especially if the 

relocation is part of a planned remodel 

of the home. In such cases, the cost of 

relocation is likely to be comparable to 

the costs that DOE estimated for 

difficult installations. 

(g) Emergency Replacements 

DOE acknowledges that installation 

costs could increase for condensing 

furnaces in an unplanned emergency 

situation for the reasons that follow. 

While it is not possible to estimate the 

share of installations that would 

constitute an emergency (unplanned 

during the heating season), Decision 

Analyst’s 2019 American Home Comfort 

Study (‘‘AHCS’’) 116 reported that 

unplanned replacements accounted for 

one third of gas furnace installations. 

For this NOPR, DOE included labor 

costs for unplanned replacements to 

account for additional contractor labor 

needed to finish the installation, 

factoring in the difficulty of accessing 

the roof during periods of snow or ice 

accumulation. In addition, to address 

periods without heat during the 

replacement, DOE considered the costs 

of the temporary use of small electric 

resistance space heaters or secondary/ 

back-up heaters. 

(h) Incremental Installation Cost for 

Condensing Furnaces 

DOE estimated that the incremental 

retrofit installation cost for condensing 

furnaces was $644. For new 

construction and new owners, the 

incremental installation cost was 

estimated to be, on average, ¥$647.117

Since 26 percent of shipments were 

assumed to be in the new construction 

and new owners market, the resulting 

average incremental installation cost 

was $301. The incremental installation 

cost estimates reflect labor cost and 

installation material cost data from 2021 

RS Means. 

(i) New Construction or New Owner 

Installations 

It is common practice in new 

construction, when possible, to avoid 

vertical venting in order to limit roof 

penetrations and reduce potential 

liability issues (e.g., water leakage 

through new roof penetrations).118

Condensing furnaces have the flexibility 

of being vented either horizontally or 

vertically. When presented with this 

option in new construction, it is 

reasonable to conclude that most 


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119Home Advisor, How Much Does a New Gas 

Furnace Cost? (Available at: www.homeadvisor.

com/cost/heating-and-cooling/gas-furnace-prices/) 

(Last accessed February 15, 2022). 

120www.improvenet.com/ (Last accessed Feb. 15, 

2022). 

designers, architects, builders, 

contractors, and/or homeowners would 

opt for the most cost-effective 

installation. Current building practices 

are likely to evolve as the market 

changes in response to any amended 

energy conservation standards for the 

subject furnaces. 

For new owner and new construction 

installations, DOE applied an 

incremental venting cost if the owner/ 

builder had been planning to install a 

commonly-vented non-condensing 

furnace and water heater. 

c. Additional Installation Costs for 

Mobile Home Gas Furnaces 

DOE included the same basic 

installation costs for MHGFs as 

described previously for NWGFs. DOE 

also included costs for venting and 

condensate removal. Protection from 

freezing (heat tape), a condensate pipe, 

condensate neutralizer, and an 

additional electrical connection are 

accounted for in the cost of condensate 

removal, where applicable. 

DOE notes that MHGFs are usually 

installed in tight spaces and often 

require space modifications if the 

replacement furnace dimensions are 

different from those of the existing 

furnace. DOE notes that most of the 

MHGF models at the proposed standard 

level of 95-percent AFUE are similar in 

size to the existing non-condensing 

MHGFs. However, some condensing 

furnaces in the manufacturer literature 

are wider and shorter than existing noncondensing furnaces. Accordingly, DOE 

increased the installation costs for a 

fraction of installations to address the 

impacts related to space constraints or 

condensate withdrawal that may be 

encountered when a condensing MHGF 

replaces an older mobile-home-specific 

furnace. DOE also adjusted the 

installation cost for the dedicated vent 

system for condensing MHGFs by 

including an additional cost to remove 

the old venting system. Mobile homes 

must be approved, as required by the 

U.S. Department of Housing and Urban 

Development, to ensure compliance 

with the HUD Code (24 CFR 3282.203), 

which requires special sealed 

combustion venting for MHGFs that 

cannot be commonly vented with other 

gas-fired equipment (such as a gas-fired 

water heater). DOE also adjusted the 

condensate withdrawal installation 

costs to account for a fraction of 

installations that encounter difficulty 

installing the condensate drain. 

d. Contractor Survey and DOE’s Sources 

AHRI and Carrier commented that 

DOE dismissed industry survey data 

(the ACCA/AHR/PHCC contractor 

survey), and that such dismissal is 

unreasonable, arbitrary and capricious. 

These commenters stated that DOE was 

unreasonable to rely on eight websites 

in lieu of over 700 contractors with 

experience in the field, and that the 

websites relied upon, in fact, indicate 

that the cost of a new furnace 

installation is much higher than DOE 

estimates. These commenters stated that 

a survey seeking average installation 

costs for the purposes of information 

collection, rather than lead-generation, 

is implicitly more reliable that what 

amounts to online advertisements. AHRI 

and Carrier also stated that the 

estimated costs presented by these 

websites suggest that furnace 

installation is far more expensive that 

DOE estimates, with incremental costs 

potentially ranging from $800 to $4,500. 

(AHRI, No. 303 at p. 12; Carrier, No. 302 

at pp. 6–7) Lennox also criticized DOE 

for failing to consider data from the 

contractor survey and commented that 

the sources DOE quotes in its analysis 

actually support much higher 

installation costs and require further 

review and analysis. (Lennox, No. 299 at 

pp. 13–14, 30) 

AHRI continues to object to the 

methodology used by DOE to determine 

installation costs, which it asserts is 

disassociated from actual costs. AHRI 

also stated that the differences between 

the installation costs developed by DOE 

and those from the marketplace as 

measured by the ACCA/AHRI/PHCC 

contractor survey are huge. (AHRI, No. 

303 at p. 41) Spire suggested that DOE 

should rely on actual field installation 

costs rather than estimating the 

installation cost. (Spire, September 2016 

SNOPR Public Meeting Transcript, No. 

243 at p. 88) Spire stated that there is 

nothing in the record to show what 

input DOE’s consultants actually sought 

or obtained on installation costs, and 

that the only manufacturer input that is 

available on the record is comments 

from manufacturers stating that DOE’s 

installed cost estimates are gross 

underestimates of actual installed costs. 

(Spire, No. 309–1 at p. 92) HARDI stated 

that DOE should not rely on installation 

information available on the internet, 

but rather should speak with installing 

contractors across diverse sections of 

the country, in addition to contractor 

organizations, to assess and verify the 

information obtained online. HARDI 

also stated that the online lead 

generation and price quoting 

mechanisms cited by DOE are 

responsible for less than five percent of 

sales amongst HARDI’s customers and 

are not reflective of industry norms, and 

the quality and reliability of participants 

are unknown. Instead, HARDI urged 

DOE to consult the comments by PHCC, 

ACCA, and AHRI to assess true 

installation costs. (HARDI, No. 271 at p. 

3) 

Rheem asserted that the installation 

cost data referenced by DOE in the 

September 2016 SNOPR were 

incomplete and vague, that the data did 

not always differentiate between 

condensing and non-condensing 

NWGFs, and that the cited costs ranged 

wildly. Rheem also stated that 

applications were mixed between 

furnace only and furnace and central air 

conditioners (‘‘CAC’’) combinations. 

(Rheem, No. 307 at pp. 7–8) 

In response, DOE notes that its focus 

for installation costs is to estimate the 

incremental cost between different 

efficiency levels. However, DOE used 

the results of the contractor survey to 

validate its estimates of the average total 

installed cost for condensing furnaces in 

replacement applications, as well as the 

average incremental installation cost. 

DOE examined the ACCA/AHRI/PHCC 

survey of contractors but was unable to 

use the data directly in the LCC analysis 

because only aggregate values were 

reported. The ACCA/AHRI/PHCC 

survey results are binned in wide bins 

of $250, and the sample is heavily 

weighted towards the north (339 

responses in the North and 181 in the 

South). As noted previously, installation 

costs vary widely for different 

contractors and areas of the country. 

The installation costs in the Northern 

region will tend to be much higher than 

those reported in the Rest of the Country 

(as defined in the LCC analysis). For this 

NOPR, DOE revised its installation cost 

methodology to account for various 

factors affecting both non-condensing 

and condensing NWGFs, such as: the 

cost of ductwork upgrades; baseline 

electrical installation costs; additional 

labor required for baseline installations; 

the cost of relining, resizing, and/or 

other adjustments of metal venting for 

baseline installations; premium 

installation costs for emergency 

replacements; and other premium 

installation costs for comfort-related 

features (e.g., advanced thermostats, 

zoning, hypoallergenic filters, humidity 

controls). For this NOPR, DOE also 

compared its average estimates to the 

AHRI/ACCA/PHCC contractor survey 

report and other sources such as Home 

Advisor,119 ImproveNet,120 Angie’s 


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121Angie’s List, How Much Does it Cost to Install 

a New Furnace (Available at: www.angieslist.com/ 

articles/how-much-does-it-cost-install-newfurnace.htm) (Last accessed Feb. 15, 2022). 

122HomeWyse, Cost to Install a Furnace 

(Available at: www.homewyse.com/services/cost_

to_install_furnace.html) (Last accessed Feb. 15, 

2022). 

123Cost Helper, How Much Does a Furnace Cost? 

(Available at: home.costhelper.com/furnace.html) 

(Last accessed Feb. 15, 2022). 124FIXr, Gas Central Heating Installation Cost 

(Available at: www.fixr.com/costs/gas-centralheating-installation) (Last accessed Feb. 15, 2022). 

125CostOwl.com, How much Does a New Furnace 

Cost? (Available at: www.costowl.com/homeimprovement/hvac-furnace-replacement-cost.html) 

(Last accessed Feb. 15, 2022). 

126 Gas Furnace Guide, Gas Furnace Prices and 

Installation Cost Comparison (Available at: 

www.gasfurnaceguide.com/compare/) (Last 

accessed Feb. 15, 2022). 

List,121 HomeWyse,122 Cost Helper,123

Fixr,124 CostOwl,125 and Gas Furnace 

Guide,126 and also consulted with RS 

Means staff. In addition, DOE was able 

to obtain installation costs disaggregated 

for households installing only a furnace 

versus installing both a furnace and air 

conditioner from the 2016 AHCS. For 

this NOPR, the average incremental 

installation cost for a condensing NWGF 

in a retrofit installation was $644 (in 

2020$), which is consistent with the 

AHRI/ACCA/PHCC contractor survey 

and data provided by SoCalGas, as well 

as the other sources listed above. 

Therefore, DOE concludes that the 

industry-supplied data support its 

installation cost methodology. 

e. Summary of Installation Costs 

Table IV.12 shows the fraction of 

installations impacted and the average 

cost for each of the installation cost 

adders in replacement applications (not 

including new owners). The estimates of 

the fraction of installations impacted 

were based on the furnace location 

(primarily derived from information in 

RECS 2015) and a number of other 

sources that are described in chapter 8 

of this NOPR TSD. 

TABLE IV.12—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES IN REPLACEMENT APPLICATIONS

Installation cost adder 

NWGFs MHGFs 

Replacement 

installations 

impacted 

(percent) 

Average cost 

(2020$) 

Replacement 

installations 

impacted 

(percent) 

Average cost 

(2020$) 

Non-Condensing Furnaces 

Updating Vent Connector ................................................................................ 24 284 ........................ ........................

Updating Flue Vent * ........................................................................................ 5 751 100 195 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................. 100 301 100 47 

Combustion Air Venting (PVC) ........................................................................ 57 298 100 47 

Concealing Vent Pipes .................................................................................... 7 551 ........................ ........................

Orphaned Water Heater .................................................................................. 18 747 ........................ ........................

Condensate Removal ...................................................................................... 100 95 100 201 

Multi-Family Adder ........................................................................................... 4 248 ........................ ........................

Mobile Home Adder ......................................................................................... ........................ ........................ 25 236 

* For a fraction of installations, this cost includes the commonly-vented water heater vent connector, chimney relining, and vent resizing. For 

mobile home gas furnaces, DOE assumed that flue venting has to be upgraded for all replacement installations. 

Table IV.13 shows the estimated 

fraction of new home installations 

impacted and the average cost for each 

of the adders. 

TABLE IV.13—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES IN NEW CONSTRUCTION AND NEW OWNER APPLICATIONS

Installation cost adder 

NWGFs MHGFs 

New 

installations 

impacted 

(percent) 

Average cost 

(2020$) 

New 

installations 

impacted 

(percent) 

Average cost 

(2020$) 

Non-Condensing Furnaces 

New Flue Vent (Metal) * ................................................................................... 100 $1,520 100 $259 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................. 100 167 100 23 

Combustion Air Venting (PVC) ........................................................................ 57 162 100 23 

Concealing Vent Pipes * .................................................................................. 2 209 ........................ ........................

Orphaned Water Heater .................................................................................. 47 1,150 ........................ ........................

Condensate Removal ...................................................................................... 100 66 100 111 

* Applied to new owner installations only. 


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127Steven Sorrell, et al., Empirical Estimates of 

the Direct Rebound Effect: A Review, 37 Energy 

Policy 1356–71 (2009) (Available at 

www.sciencedirect.com/science/article/pii/ 

S0301421508007131) (Last accessed Feb. 15, 2022). 

128Steven Nadel, ‘‘The Rebound Effect: Large or 

Small?’’ ACEEE White Paper (August 2012) 

(Available at www.aceee.org/files/pdf/white-paper/ 

rebound-large-and-small.pdf) (Last accessed Feb. 

15, 2022). 

129Brinda Thomas and Ines Azevedo, Estimating 

Direct and Indirect Rebound Effects for U.S. 

Households with Input–Output Analysis, Part 1: 

Theoretical Framework, 86 Ecological Econ. 199– 

201 (2013) (Available at www.sciencedirect.com/ 

science/article/pii/S0921800912004764) (Last 

accessed Feb. 15, 2022). 

130Lorna A. Greening, et al., Energy Efficiency 

and Consumption—The Rebound Effect—A Survey, 

28 Energy Policy 389–401 (2002) (Available at 

www.sciencedirect.com/science/article/pii/ 

S0301421500000215) (Last accessed Feb. 15, 2022). 

131See: www.eia.gov/outlooks/aeo/nems/ 

documentation/residential/pdf/m067(2020).pdf 

(Last accessed May 19, 2022). 

132 DOE. Energy Conservation Program for Certain 

Industrial Equipment: Energy Conservation 

Standards for Small, Large, and Very Large AirCooled Commercial Package Air Conditioning and 

Heating Equipment and Commercial Warm Air 

Furnaces; Direct final rule. 81 FR 2419 (Jan. 15, 

2016) (Available at www.regulations.gov/document/ 

EERE-2013-BT-STD-0021-0055) (Last accessed Feb. 

15, 2022). 

133 DOE. Energy Conservation Program: Energy 

Conservation Standards for Residential Boilers; 

Final rule. 81 FR 2319 (Jan. 15, 2016) (Available at 

www.regulations.gov/document/EERE-2012-BTSTD-0047-0078) (Last accessed Feb. 15, 2022). 

134 DOE. Energy Conservation Program: Energy 

Conservation Standards for Commercial Packaged 

Boilers; Final Rule. 85 FR 1592 (Jan. 10, 2020) 

(Available at www.regulations.gov/document/EERE2013-BT-STD-0030-0099) (Last accessed Feb. 15, 

2022). 

4. Annual Energy Consumption 

For each sampled residential furnace 

installation, DOE determined the energy 

consumption for a NWGF or MHGF at 

different efficiency levels using the 

approach described above in section 

IV.E of this document. 

Higher-efficiency furnaces reduce the 

operating costs for a consumer, which 

can lead to greater use of the furnace. A 

direct rebound effect occurs when a 

product that is made more efficient is 

used more intensively, such that the 

expected energy savings from the 

efficiency improvement may not fully 

materialize. At the same time, 

consumers benefit from increased 

utilization of products due to rebound. 

Overall consumer surplus (taking into 

account additional costs and benefits) is 

generally understood to increase from 

rebound. DOE examined a 2009 review 

of empirical estimates of the rebound 

effect for various energy-using 

products.127 This review concluded that 

the econometric and quasi-experimental 

studies suggest a mean value for the 

direct rebound effect for household 

heating of around 20 percent. DOE also 

examined a 2012 ACEEE paper 128 and 

a 2013 paper by Thomas and 

Azevedo.129 Both of these publications 

examined the same studies that were 

reviewed by Sorrell, as well as Greening 

et al.,130 and identified methodological 

problems with some of the studies. The 

studies believed to be most reliable by 

Thomas and Azevedo show a direct 

rebound effect for heating products in 

the 1-percent to 15-percent range, while 

Nadel concludes that a more likely 

range is 1 to 12 percent, with rebound 

effects sometimes higher for low-income 

households who could not afford to 

adequately heat their homes prior to 

weatherization. Based on DOE’s review 

of these recent assessments, DOE used 

a 15-percent rebound effect for NWGFs 

and MHGFs. This rebound is the same 

as assumed in EIA’s National Energy 

Modeling System (‘‘NEMS’’) for 

residential space heating.131 However, 

for commercial applications DOE 

applied no rebound effect, consistent 

with other recent energy conservation 

standards rulemakings.132 133 134

The LCC analysis is an analysis that 

does not account for consumer behavior; 

as a result, DOE does not include the 

rebound effect in the LCC. Some 

households may increase their furnace 

use in response to increased efficiency, 

and as a result, not all households will 

realize the LCC savings represented in 

section V.B of this document. DOE does 

include rebound in the NIA for a 

conservative estimate of national energy 

savings and the corresponding impact to 

consumer NPV. See section IV.H of this 

document. 

EPCA requires that in its evaluation of 

proposed energy conservation 

standards, DOE must consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product in the type (or class) compared 

to any increase in the price of, or in the 

initial charges for, or maintenance 

expenses of, the covered products 

which are likely to result from the 

imposition of the standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) That is, DOE must 

consider the savings resulting from 

operating a covered product that the 

consumer would purchase under the 

proposed standard and the costs that the 

consumer would realize from operating 

such a product, as compared to the costs 

that the consumer would realize from 

operating a product under the current 

standard. This consideration is to 

inform the determination of whether an 

amended standard would be 

economically justified. EPCA does not 

prohibit this consideration from 

monetizing additional benefits that the 

consumer may receive from a covered 

product that complies with a proposed 

improvement in efficiency. 

EPCA directs DOE to consider 

‘‘savings in operating costs’’ with no 

reference as to how DOE is to consider 

any potential increase in value provided 

to the consumer under a proposed 

standard. (See, 42 U.S.C. 

6295(o)(2)(B)(i)(II)) In evaluating 

potential changes in the operating costs, 

DOE has considered the useful output of 

a furnace provided to the consumer. The 

rebound effect does not capture an 

external benefit, but reflects a benefit 

directly realized by the consumer in the 

form of increased comfort. Were DOE to 

adopt an approach that did not include 

a value for the additional comfort 

provided by a more-efficient furnace, 

the economic benefits from the 

proposed standard would have been 

underestimated. DOE’s evaluation of the 

economic impact of a proposed standard 

would include the cost of additional 

fuel consumption resulting from the 

rebound effect, but would fail to 

recognize the additional welfare 

provided directly to the consumer from 

a NWGF or MHGF that complies at the 

proposed efficiency level. 

In addition to the consideration 

required by 42 U.S.C. 

6295(o)(2)(B)(i)(II), EPCA directs DOE to 

consider the economic impact of the 

standard on manufacturers and on the 

consumers of the products subject such 

standard. (42 U.S.C. 6295(o)(2)(B)(i)(I)) 

The economic impact is not narrowly 

defined to include only costs related to 

energy consumption. The occurrence of 

a rebound effect demonstrates that 

consumers value the additional output 

(i.e., heat) as they are paying for the 

additional heat, and resulting increase 

in comfort, reflected in their energy 

bills. To quantify the effects of rebound, 

DOE estimates the economic and energy 

savings impact in the NIA. See chapter 

10 of the NOPR TSD for more details. 

5. Energy Prices 

A marginal energy price reflects the 

cost or benefit of adding or subtracting 

one additional unit of energy 

consumption. Marginal electricity prices 

more accurately capture the incremental 

savings associated with a change in 

energy use by higher-efficiency products 

and provide a better representation of 

incremental change in consumer costs 

than average electricity prices. 

Therefore, DOE applied average 

electricity prices for the energy use of 

the product purchased in the no-newstandards case and marginal electricity 

prices for the incremental change in 

energy use associated with the other 

efficiency levels considered. 


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135U.S. Department of Energy-Energy Information 

Administration, Form EIA–861M (formerly EIA– 

826) detailed data (2020) (Available at: 

www.eia.gov/electricity/data/eia861m/) (Last 

accessed Feb. 15, 2022). 

136U.S. Department of Energy-Energy Information 

Administration, Natural Gas Navigator (2020) 

(Available at: www.eia.gov/naturalgas/data.php) 

(Last accessed Feb. 15, 2022). 

137U.S. Department of Energy-Energy Information 

Administration, 2019 State Energy Data System 

(‘‘SEDS’’) (2019) (Available at: www.eia.gov/state/ 

seds/) (Last accessed Feb. 15, 2022). 

138 GTI provided a reference located in the docket 

of DOE’s 2016 rulemaking to develop energy 

conservation standards for residential boilers. 

(Docket No. EERE–2012–BT–STD–0047–0068) 

(Available at: www.regulations.gov/document/ 

EERE-2012-BT-STD-0047-0068) (Last accessed Feb. 

15, 2022). 

139U.S. Department of Energy–Energy 

Information Administration, Annual Energy 

Outlook 2021 (Available at: www.eia.gov/outlooks/ 

aeo/) (Last accessed Feb. 15, 2022). 

140RS Means Company Inc., RS Means Facilities 

Maintenance & Repair Cost Data (2021) (Available 

at: www.rsmeans.com/) (Last accessed Feb. 15, 

2022). 

141 Decision Analysts, 2019 American Home 

Comfort Study: Online Database Tool (Available at: 

www.decisionanalyst.com/Syndicated/ 

HomeComfort/) (Last accessed Feb. 15, 2022). 

142 Jakob, F.E., J.J. Crisafulli, J.R. Menkedick, R.D. 

Fischer, D.B. Philips, R.L. Osbone, J.C. Cross, G.R. 

Whitacre, J.G. Murray, W.J. Sheppard, D.W. 

DeWirth, and W.H. Thrasher, Assessment of 

Technology for Improving the Efficiency of 

Residential Gas Furnaces and Boilers, Volume I and 

II—Appendices (September 1994) Gas Research 

Institute, Report No. GRI–94/0175 (Available at: 

www.gti.energy/software-and-reports/) (Last 

accessed Feb. 15, 2022). 

143Lutz, J., A. Hopkins, V. Letschert, V. Franco, 

and A. Sturges, Using national survey data to 

estimate lifetimes of residential appliances, 

HVAC&R Research (2011) 17(5): pp. 28 (Available 

at: www.tandfonline.com/doi/abs/10.1080/ 

10789669.2011.558166) (Last accessed Feb. 15, 

2022). 

144U.S. Department of Energy: Energy 

Information Administration, Residential Energy 

Consumption Survey (‘‘RECS’’), Multiple Years 

(1990, 1993, 1997, 2001, 2005, 2009, and 2015) 

(Available at: www.eia.gov/consumption/ 

residential/) (Last accessed Feb. 15, 2022). 

145U.S. Census Bureau: Housing and Household 

Economic Statistics Division, American Housing 

Survey, Multiple Years (1974, 1975, 1976, 1977, 

1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989, 

1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 

2007, 2009, 2011, 2013, 2015, 2017, and 2019) 

DOE derived average monthly 

marginal residential and commercial 

electricity, natural gas, and LPG prices 

for each state using data from 

EIA.135 136 137 DOE calculated marginal 

monthly regional energy prices by: (1) 

first estimating an average annual price 

for each region; (2) multiplying by 

monthly energy price factors, and (3) 

multiplying by seasonal marginal price 

factors for electricity, natural gas, and 

LPG. The analysis used historical data 

up to 2020 for residential and 

commercial natural gas and electricity 

prices and historical data up to 2019 for 

LPG prices. Further details may be 

found in chapter 8 of the NOPR TSD. 

DOE compared marginal price factors 

developed by DOE from the EIA data to 

develop seasonal marginal price factors 

for 23 gas tariffs provided by the Gas 

Technology Institute for the 2016 

residential boilers energy conservation 

standards rulemaking.138 DOE found 

that the winter price factors used by 

DOE are generally comparable to those 

computed from the tariff data, 

indicating that DOE’s marginal price 

estimates are reasonable at average 

usage levels. The summer price factors 

are also generally comparable. Of the 23 

tariffs analyzed, eight have multiple 

tiers, and of these eight, six have 

ascending rates and two have 

descending rates. The tariff-based 

marginal factors use an average of the 

two tiers as the commodity price. A full 

tariff-based analysis would require 

information about the household’s total 

baseline gas usage (to establish which 

tier the consumer is in), and a weight 

factor for each tariff that determines 

how many customers are served by that 

utility on that tariff. These data are 

generally not available in the public 

domain. DOE’s use of EIA State-level 

data effectively averages overall 

consumer sales in each State, and so 

incorporates information from all 

utilities. DOE’s approach is, therefore, 

more representative of a large group of 

consumers with diverse baseline gas 

usage levels than an approach that uses 

only tariffs. 

DOE notes that within a State, there 

could be significant variation in the 

marginal price factors, including 

differences between rural and urban 

rates. In order to take this to account, 

DOE developed marginal price factors 

for each individual household using 

RECS 2015 billing data. These data are 

then normalized to match the average 

State marginal price factors, which are 

equivalent to a consumption-weighted 

average marginal price across all 

households in the State. For more 

details on the comparative analysis and 

updated marginal price analysis, see 

appendix 8D of this NOPR TSD. 

To estimate energy prices in future 

years, DOE multiplied the 2020 energy 

prices by the projection of annual 

average price changes for each of the 

nine Census Divisions from the 

Reference case in AEO2021, which has 

an end year of 2050.139 To estimate 

price trends after 2050, DOE used the 

average annual rate of change in prices 

from 2045 through 2050. DOE also 

conducted sensitivity analyses using 

lower and higher energy price 

projections. The impact of these 

alternative scenarios is shown in 

appendix 8K of the NOPR TSD. 

6. Maintenance and Repair Costs 

Maintenance costs are associated with 

maintaining the operation of the 

product, while repair costs are 

associated with repairing or replacing 

product components that have failed in 

an appliance. 

DOE estimated maintenance costs for 

residential furnaces at each considered 

efficiency level using a variety of 

sources, including 2021 RS Means,140

manufacturer literature, and information 

from expert consultants. DOE estimated 

the frequency of annual maintenance 

using data from RECS 2015 and the 

2019 American Home Comfort Study.141

DOE accounted for the likelihood that 

condensing furnaces require more 

maintenance and repair than noncondensing furnaces by adding costs to 

check the secondary heat exchanger and 

condensate system (including regular 

replacement of the condensate 

neutralizer). For repair costs, DOE 

included repair of the ignition, gas 

valve, controls, and inducer fan, as well 

as the furnace fan blower. For 

condensing repair costs, DOE assumed 

higher material repair costs for the 

ignition, gas valve, controls, and 

inducer fan, as well as a higher fraction 

of BPM furnace fans compared to noncondensing furnaces. To determine the 

service lifetime of various components, 

DOE used a Gas Research Institute 

(‘‘GRI’’) study.142 For the considered 

standby mode and off mode standards, 

DOE assumed that no additional 

maintenance or repair is required. 

In order to validate DOE’s approach, 

DOE did a review of maintenance and 

repair costs available from a variety of 

sources, including online resources. 

Overall, DOE found that the 

maintenance and repair cost estimates 

applied in its analysis fall within the 

typical range of published maintenance 

and repair charges. 

For more details on DOE’s 

methodology for calculating repair 

costs, including all online resources 

reviewed, see appendix 8F of the TSD 

for this NOPR. 

7. Product Lifetime 

Product lifetime is the age at which an 

appliance is retired from service. DOE 

conducted an analysis of furnace 

lifetimes based on the methodology 

described in a recent journal paper.143

For this analysis, DOE relied on RECS 

1990, 1993, 2001, 2005, 2009, and 

2015.144 DOE also used the U.S. 

Census’s biennial American Housing 

Survey (‘‘AHS’’), from 1974–2019, 

which surveys all housing, noting the 

presence of a range of appliances.145


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(Available at: www.census.gov/programs-surveys/ 

ahs/) (Last accessed Feb. 15, 2022). 146Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2010–2015, 

Confidential Data Provided to Navigant Consulting 

(Nov. 26, 2016). 147U.S. Department of Energy: Energy 

Information Administration, Residential Energy 

Consumption Survey (‘‘RECS’’) (2015) (Available at: 

www.eia.gov/consumption/residential/) (Last 

accessed Feb. 15, 2022). 148U.S. Census Bureau: Housing and Household 

Economic Statistics Division, American Housing 

Survey, Multiple Years (2015–2019) (Available at: 

www.census.gov/programs-surveys/ahs/) (Last 

accessed Feb. 15, 2022). 149 Decision Analysts, 2006, 2008, 2010, 2013, 

2016, and 2019 American Home Comfort Studies 

(Available at: www.decisionanalyst.com/ 

Syndicated/HomeComfort/) (Last accessed Feb. 15, 

2022). 

150The implicit discount rate is inferred from a 

consumer purchase decision between two otherwise 

identical goods with different first cost and 

operating cost. It is the interest rate that equates the 

increment of first cost to the difference in net 

present value of lifetime operating cost, 

incorporating the influence of several factors: 

transaction costs; risk premiums and response to 

uncertainty; time preferences; and interest rates at 

which a consumer is able to borrow or lend. 

151The Federal Reserve Board, Survey of 

Consumer Finances (1995, 1998, 2001, 2004, 2007, 

2010, 2013, 2016, and 2019) (Available at: 

www.federalreserve.gov/econres/scfindex.htm) (last 

accessed Feb. 15, 2022). 

152 Decision Analyst’s 2019 American Home 

Comfort Study (Available at: 

www.decisionanalyst.com/syndicated/ 

homecomfort/) (Last accessed Feb. 15, 2022) shows 

that for HVAC purchases, consumers used cash or 

debit cards 58 percent of the time, a credit card 23 

Continued 

DOE used the appliance age data from 

these surveys, as well as the historical 

furnace shipments, to generate an 

estimate of the survival function. The 

survival function provides a lifetime 

range from minimum to maximum, as 

well as an average lifetime. DOE 

estimates the average product lifetime to 

be 21.4 years for NWGFs and MHGFs. 

This estimate is consistent with the 

range of values identified in a literature 

review, which included values from 16 

years to 23.6 years. 

To better account for differences in 

lifetime due to furnace utilization, DOE 

determined separate lifetimes for the 

North and Rest of Country (as identified 

in the shipments analysis) but only 

based on the difference in operating 

hours in the two regions. DOE assumed 

that equipment operated for fewer hours 

will have a longer service lifetime. DOE 

developed regional lifetime estimates by 

using regional shipments, RECS survey 

data, and AHS survey data and applying 

the methodology described above. More 

specifically, these data include AHRI 

shipments in the North and Rest of 

Country regions from 2010–2015,146

2015 RECS data,147 and 2015–2019 AHS 

data survey data.148 DOE also 

incorporated lifetime data from Decision 

Analyst’s AHCS from 2006, 2008, 2010, 

2013, 2016, and 2019.149 The average 

lifetime used in this NOPR is 22.5 years 

in the North and 20.2 years in the Rest 

of Country for both NWGFs and MHGFs 

(national average is 21.4 years). 

Consumer furnaces located in the North 

are generally higher capacity to meet the 

higher heating load, and thus can have 

lower operating hours. Additionally, 

furnace replacements in the Rest of 

Country are more likely to be linked to 

a paired central air conditioner. For 

these reasons, the consumer furnace 

lifetimes in the two regions differ 

slightly. DOE also conducted sensitivity 

analyses using a median lifetime of 16 

years (low lifetime scenario) and 27 

years (high lifetime scenario) for 

NWGFs and MHGFs (see appendix 8G 

in the TSD for this NOPR). 

There is significant variation in the 

distribution of furnace lifetime and DOE 

uses a Weibull distribution to account 

for this distribution of product failure. 

DOE accounts for this variation by 

projecting energy cost savings and 

health benefits through the final year of 

furnace lifetime for all products shipped 

in 2058 (i.e., through 2113). Given the 

length of time horizon needed to 

account for the furnaces shipped in the 

30-year analysis, DOE seeks comment 

on its analysis of benefits that accrue 

beyond the year 2070. 

Chapter 8 of the TSD for this NOPR 

provides further details on the 

methodology and sources DOE used to 

develop furnace lifetimes. 

8. Discount Rates 

In the calculation of LCC, DOE 

applies discount rates appropriate to 

households to estimate the present 

value of future operating costs. The 

discount rate used in the LCC analysis 

represents the rate from an individual 

consumer’s perspective. DOE estimated 

a distribution of residential discount 

rates for NWGFs and MHGFs based on 

consumer financing costs and the 

opportunity cost of consumer funds. 

DOE applies weighted average 

discount rates calculated from consumer 

debt and asset data, rather than marginal 

or implicit discount rates.150 DOE notes 

that the LCC does not analyze the 

appliance purchase decision, so the 

implicit discount rate is not relevant in 

this model. The LCC estimates net 

present value over the lifetime of the 

product, and, therefore, the appropriate 

discount rate will reflect the general 

opportunity cost of household funds, 

taking into account the time scale of the 

product lifetime. Given the long time 

horizon modeled in the LCC, the 

application of a marginal interest rate 

associated with an initial source of 

funds is inaccurate. Regardless of the 

method of purchase, consumers are 

expected to continue to rebalance their 

debt and asset holdings over the LCC 

analysis period, based on the 

restrictions consumers face in their debt 

payment requirements and the relative 

magnitude of the interest rates available 

for debts and assets. DOE estimates the 

aggregate impact of this rebalancing 

using the historical distribution of debts 

and assets. 

To establish residential discount rates 

for the LCC analysis, DOE identified all 

relevant household debt or asset classes 

in order to approximate a consumer’s 

opportunity cost of funds related to 

appliance energy cost savings. DOE 

estimated the average percentage shares 

of the various types of debt and equity 

by household income group using data 

from the Federal Reserve Board’s Survey 

of Consumer Finances (‘‘SCF’’) for 1995, 

1998, 2001, 2004, 2007, 2010, 2013, 

2016, and 2019.151 Using the SCF and 

other sources, DOE developed a 

distribution of rates for each type of 

debt and asset by income group to 

represent the rates that may apply in the 

year in which amended or new 

standards would take effect. DOE 

assigned each sample household a 

specific discount rate drawn from one of 

the distributions. 

DOE notes that the interest rate 

associated with the specific source of 

funds used to purchase a furnace (i.e., 

the marginal rate) is not the appropriate 

metric to measure the discount rate as 

defined for the LCC analysis. The 

marginal interest rate alone would only 

be the relevant discount rate if the 

consumer were restricted from rebalancing their debt and asset holdings 

(by redistributing debts and assets based 

on the relative interest rates available) 

over the entire time period modeled in 

the LCC analysis. The LCC is not 

analyzing a marginal decision; rather, it 

estimates net present value over the 

lifetime of the product, so, therefore, the 

discount rate needs to reflect the 

opportunity cost of both the money 

flowing in (through operating cost 

savings) and out (through upfront cost 

expenditures) of the net present value 

calculation. In the context of the LCC 

analysis, the consumer is not only 

discounting based on their opportunity 

cost of money spent today, but instead, 

they are additionally discounting the 

stream of future benefits. A consumer 

might pay for an appliance with cash, 

thereby forgoing investment of those 

funds into one of the interest earning 

assets to which they might have 

access.152 Alternatively, a consumer 


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percent of the time, and other financing options the 

remaining 18 percent of the time. 153 Damodaran Online, Data Page: Costs of Capital 

by Industry Sector (2021) (Available at: 

pages.stern.nyu.edu/∼adamodar/) (Last accessed 

Feb. 15, 2022). 

154Fujita, S., Commercial, Industrial, and 

Institutional Discount Rate Estimation for Efficiency 

Standards Analysis: Sector-Level Data 1998–2018 

(Available at: ees.lbl.gov/publications/commercialindustrial-and) (Last accessed Feb. 15, 2022). 

155The market share of furnaces with AFUE 

between 80 and 90 percent is well below 1 percent 

due to the very high installed cost of 81-percent 

AFUE furnaces, compared with condensing designs, 

and concerns about safety of operation. AHRI also 

provided national shipments data (not 

disaggregated by region) by efficiency for 1975, 

1978, 1980, 1983–1991, and 1993. 

156Air-Conditioning, Heating, and Refrigeration 

Institute (formerly Gas Appliance Manufacturers 

Association), Updated Shipments Data for 

Residential Furnaces and Boilers (April 25, 2005) 

(Available at: www.regulations.gov/document/ 

EERE-2006-STD-0102-0138) (Last accessed Feb. 15, 

2022). 

157Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2004–2009 

Data Provided to DOE (July 20, 2010). 

158Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing Gas 

Furnace Shipments for 2010–2014 (Available at: 

www.regulations.gov/document/EERE-2014-BTSTD-0031-0052) (Last accessed Feb. 15, 2022). 

159Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2010–2015, 

Confidential Data Provided to Navigant Consulting 

(Nov. 26, 2016). 

160Heating, Air-conditioning and Refrigeration 

Distributors International (HARDI), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International), Gas Furnace Shipments Data from 

2013–2020 (Available at: www.drintldata.com) (Last 

accessed Feb. 15, 2022). 

161 DOE did not use the data for 2008–2011 

because these data appear to be influenced by 

incentives. AHRI also stated the period from 2008 

through 2011 was an outlier. (AHRI, No. 303 at pp. 

23–25) 

162The Energy Policy Act of 2005 established the 

tax credit for energy improvements to existing 

homes. The credit was originally limited to 

purchases made in 2006 and 2007, with an 

aggregate cap of $500 for all qualifying purchases 

made in these two years combined. For 

improvements made in 2009 and 2010, the cap was 

increased to $1,500. This coincides with a sharp 

increase in condensing furnace shipments. This 

credit has since been renewed several times, but the 

credit was reduced to its original form and original 

cap of $500 starting in 2011. More information is 

available at www.energy.gov/savings/dsire-page 

(Last accessed Feb. 15, 2022). 

might pay for the initial purchase by 

going into debt, subject to the cost of 

capital at the interest rate relevant for 

that purchase. However, a consumer 

will also receive a stream of future 

benefits in terms of annual operating 

cost savings that they could either put 

towards paying off that or other debts, 

or towards assets, depending on the 

restrictions they face in their debt 

payment requirements and the relative 

size of the interest rates on their debts 

and assets. All of these interest rates are 

relevant in the context of the LCC 

analysis, as they all reflect direct costs 

of borrowing, or opportunity costs of 

money either now or in the future. 

Additionally, while a furnace itself is 

not a readily tradable commodity, the 

money used to purchase it and the 

annual operating cost savings accruing 

to it over time flow from and to a 

household’s pool of debt and assets, 

including mortgages, mutual funds, 

money market accounts, etc. Therefore, 

the weighted-average interest rate on 

debts and assets provides a reasonable 

estimate for a household’s opportunity 

cost (and discount rate) relevant to 

future costs and savings. The best proxy 

for this re-optimization of debt and asset 

holdings over the lifetime of the LCC 

analysis is to assume that the 

distribution of debts and assets in the 

future will be proportional to the 

distribution of debts and assets 

historically. Given the long time horizon 

modeled in the LCC, the application of 

a marginal rate alone would be 

inaccurate. DOE’s methodology for 

deriving residential discount rates is in 

line with the weighted-average cost of 

capital used to estimate commercial 

discount rates. The average rate in this 

NOPR analysis across all types of 

household debt and equity and across 

all income groups, weighted by the 

shares of each type, is 4.2 percent for 

NWGFs and 4.7 percent for MHGFs. 

To establish commercial discount 

rates for the small fraction of NWGFs 

installed in commercial buildings, DOE 

estimated the weighted-average cost of 

capital using data from Damodaran 

Online.153 The weighted-average cost of 

capital is commonly used to estimate 

the present value of cash flows to be 

derived from a typical company project 

or investment. Most companies use both 

debt and equity capital to fund 

investments, so their cost of capital is 

the weighted average of the cost to the 

firm of equity and debt financing. DOE 

estimated the cost of equity using the 

capital asset pricing model, which 

assumes that the cost of equity for a 

particular company is proportional to 

the systematic risk faced by that 

company. DOE’s commercial discount 

rate approach is based on the 

methodology described in a LBNL 

report, and the distribution varies by 

business activity.154 The average rate for 

NWGFs used in commercial 

applications in this NOPR analysis, 

across all business activity, is 6.7 

percent. 

See chapter 8 of this NOPR TSD for 

further details on the development of 

consumer and commercial discount 

rates. 

9. Energy Efficiency Distribution in the 

No-New-Standards Case 

To accurately estimate the share of 

consumers that would be affected by a 

potential energy conservation standard 

at a particular efficiency level, DOE’s 

LCC analysis considered the projected 

distribution (i.e., market shares) of 

product efficiencies under the no-newstandards case (i.e., the case without 

amended or new energy conservation 

standards). This approach reflects the 

fact that some consumers may purchase 

products with efficiencies greater than 

the baseline levels. 

a. Condensing Furnace Market Share in 

Compliance Year 

To estimate the efficiency distribution 

of NWGFs and MHGFs in 2029, DOE 

considered the market trends regarding 

increased sales of high-efficiency 

furnaces (including any available 

incentives). DOE relied on data 

provided by AHRI on historical 

shipments for each product class. DOE 

reviewed AHRI data from 1992 and 

1994–2003 (which includes both NWGF 

and MHGF shipments data), detailing 

the market shares of non-condensing 155

and condensing (90-percent AFUE and 

greater) furnaces by State.156 AHRI also 

provided data for non-condensing and 

condensing furnace shipments by region 

for 2004–2009 157 and nationally for 

2010–2014.158 AHRI additionally 

submitted proprietary data including 

shipments of condensing and noncondensing furnaces in the North and 

Rest of Country regions from 2010 to 

2015.159 DOE also obtained 2013–2020 

HARDI shipments data by efficiency for 

most States.160 AHRI and HARDI data 

capture different fractions of the market. 

Using the shipments data from AHRI 

and HARDI, DOE derived historical 

trends for each State. DOE used the 

HARDI State-level data (2013–2020) to 

project the trends and estimate the 

condensing furnace market share in 

2029. This excludes years with a 

Federal tax incentive 161 162 in order to 

better reflect the trends of the current 

market. The maximum share of 

condensing furnace shipments for each 

region was assumed to be 95 percent, in 

order to reflect a small fraction of the 

market that would continue to install 

non-condensing furnaces. The national 

average condensing NWGFs market 

share in 2029 was estimated to be 58.0 

percent, with an anticipated market 

share of 75.6 percent in the North and 

34.3 percent in the Rest of Country. The 

national average condensing market 

share for MHGFs in 2029 was estimated 

to be 31.4 percent, with an anticipated 

market share of 37.8 percent in the 

North and 21.1 percent in the Rest of 


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Country, overall about half the fraction 

of NWGFs. 

Additionally, DOE developed a 

sensitivity analysis incorporating a 

higher and lower market share for 

condensing NWGFs and MHGFs. See 

appendix 8I of the TSD for this NOPR 

for further information on the derivation 

of the efficiency distribution projections 

and sensitivity analysis results. 

b. Market Shares of Different 

Condensing Furnace Efficiency Levels 

DOE used data on the shipments by 

efficiency from the 2013–2020 HARDI 

shipments to disaggregate the 

condensing furnace shipments among 

the different condensing efficiency 

levels. Based on stakeholder input, DOE 

assumed that the fraction of furnace 

shipments of 95-percent or higher AFUE 

in the replacement market would be 

double the fraction in the new 

construction market. DOE also assumed 

that the fraction of furnace shipments of 

95-percent or higher AFUE would be 

higher in the North compared to the 

South, because the threshold for 

ENERGY STAR designation in the North 

is 95-percent AFUE compared to 90- 

percent AFUE in the South. The 

resulting distributions were then used to 

assign the new furnace AFUE for each 

sampled household or building in the 

no-new-standards case, both in the 

replacement and new construction 

markets, and in each of the 30 RECS 

regions and 9 CBECS Census Divisions. 

The resulting national distribution for 

condensing NWGFs in 2029 is expected 

to be 0.3 percent for 90-percent AFUE, 

16.5 percent for 92-percent AFUE, 40.3 

percent for 95-percent AFUE, and 0.9 

percent for 98-percent AFUE. For 

condensing MHGFs in 2029, the 

national distribution is expected to be 

8.9 percent for 92-percent AFUE, 21.3 

percent for 95-percent AFUE, and 1.3 

percent for 96-percent AFUE. See 

appendix 8I of the TSD for this NOPR 

for further details. 

c. Assignment of Furnace Efficiency to 

Sampled Households 

For the September 2016 SNOPR (since 

withdrawn), the assignment of furnace 

efficiency to each household or building 

was random within each of the 

disaggregated distributions (i.e., in each 

of the 30 RECS regions and 9 CBECS 

Census Division regions, and in the new 

construction and replacement markets). 

A number of stakeholders objected to 

DOE’s approach to assigning furnace 

efficiency in the no-new-standards case. 

AHRI stated that DOE’s decision model 

assumes that consumers ignore 

economic factors such as climate when 

choosing a non-condensing or 

condensing NWGF. (AHRI, No. 303 at 

pp. 9–10) AHRI stated that DOE is 

assuming that consumers behave 

randomly in their consideration of 

energy efficiency absent new standards, 

a position that AHRI believes is 

arbitrary and capricious. AHRI 

commented that none of the studies 

cited by DOE support the proposition 

that consumer behavior is completely 

irrational. AHRI stated that most of the 

academic studies cited by DOE are 

based on home appliances (e.g., 

refrigerators), or they focus on 

information gaps in consumer 

knowledge. AHRI stated that none of 

these have any relevance to furnaces 

because furnace selection is heavily 

influenced by installing contractors, 

who have the knowledge and 

experience to present consumers with 

accurate economic analyses of their 

potential choices. (AHRI, No. 303 at pp. 

31–34) 

APGA contended that DOE offers the 

unsupported proposition that random 

assignment, while admittedly not based 

on economics, ‘‘may simulate actual 

behavior as well as assigning furnace 

efficiency based solely on imputed costeffectiveness.’’ APGA contended that 

DOE relies on working papers for the 

proposition that consumers do not 

always act in a perfectly economically 

rational fashion, but the fact that there 

are market failures does not undermine 

reliance on economic decision-making 

as the best representation of consumer 

behavior. APGA stated that rejecting 

economic decision-making 

demonstrates agency bias to reach a 

preordained outcome. (APGA, No. 292– 

1 at pp. 23–25) AGA stated that DOE’s 

methodology lacks any regard to 

consumer costs and benefits—even to 

consumers for whom the first cost of the 

more-efficient condensing furnace is 

lower than the first cost of the noncondensing furnace. (AGA, No. 306–1 at 

p. 11) Lennox, Carrier, and Spire 

commented that DOE’s analysis ignores 

the logical behavior of consumers when 

purchasing residential furnace products. 

(Lennox, No. 299 at p. 5; Carrier, No. 

302 at p. 4; Spire, No. 309–1 at pp. 5– 

6) Additionally, Lennox commented 

that based on U.S. contractor survey 

data, factors such as installation 

difficulty, high first cost, or the 

diminishment of air conditioning 

performance in regions with milder 

climates drive consumers to the most 

economical decision, which in many 

cases is an 80-percent AFUE NWGF. 

(Lennox, No. 299 at p. 6) SoCalGas 

expressed concern that DOE did not 

revise its model for assigning furnace 

efficiency in the no-new-standards case 

in accordance with stakeholder 

comments on the NOPR and NODA. 

(SoCalGas, No. 304–3 at p. 5) The City 

of Rocky Mount, Austin Utilities, Gas 

Authority, Dickson Gas, and the 

Jefferson Cocke Utility District stated 

that the random assignment of furnace 

efficiency in the no-new-standards case, 

rather than relying on economic 

decision making, produces irrational 

outcomes. (City of Rocky Mount, No. 

254 at p. 2; Austin Utilities, No. 255 at 

p. 1; Gas Authority, No. 256 at pp. 1– 

2; Dickson Gas, No. 276 at p. 2; Jefferson 

Cocke Utility District, No. 289 at p. 2) 

The GTI report on the (since 

withdrawn) September 2016 SNOPR 

submitted by APGA stated that the 

random assignment of furnace efficiency 

in the no-new-standards case does not 

consider any individual building’s 

characteristics in a given region. (APGA, 

No. 292–2 at pp. 60–61) APGA argued 

that despite a disaggregation by region, 

there is still a misallocation of furnaces 

within a region on a building-specific 

basis as a result of DOE’s failure to use 

economic decision-making to assign 

furnaces. (APGA, No. 292–1 at p. 21) 

Spire stated that despite randomly 

assigning the right percentage of 

condensing and non-condensing 

furnaces to each region, there remains a 

break in the link between consumer 

decision-making and individual 

economics. Spire stated that consumer 

behavior can be modeled in a way that 

reflects a degree of economic decisionmaking that would be reasonably 

consistent with observed consumer 

behavior, which GTI did in its analysis 

of the September 2016 SNOPR. (Spire, 

No. 309–1 at pp. 60–61) The GTI report 

on the September 2016 SNOPR 

submitted by APGA stated that the 

shipment projections only affect the 

number of impacted buildings on a per 

region and per building type basis, not 

the LCC savings per impacted building 

within a certain region and building 

type. For a given region and building 

type, the LCC savings per impacted 

building will be the same regardless of 

the condensing NWGF shipment 

projections. The report stated that the 

inherent result of the random 

assignment methodology is a finding of 

LCC savings in any region where LCC 

savings are present on average, whether 

or not the shipment projections include 

a very high or very low condensing 

NWGF market share in the no-newstandards case. (APGA, No. 292–2 at p. 

61) APGA and AGA noted that the GTI 

report on the September 2016 SNOPR 

shows that it is possible to monetize 

non-economic factors to consumer 

decision making, including product 


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40640 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

163 Gas Technology Institute (‘‘GTI’’), Empirical 

Analysis of Natural Gas Furnace Sizing and 

Operation, GTI–16/0003 (Nov. 2016) (Available at: 

www.regulations.gov/document/EERE-2014-BTSTD-0031-0309) (Last accessed Feb. 15, 2022). 

164 Decision Analysts, 2019 American Home 

Comfort Studies (Available at: 

www.decisionanalyst.com/Syndicated/ 

HomeComfort/) (Last accessed Feb. 15, 2022). 

performance or reliability, manufacturer 

reputation, intangible societal benefits, 

and perceived risks and rewards 

associated with the decision. (APGA, 

No. 292–1 at pp. 25–26; AGA, No. 306– 

1 at pp. 23–24) SoCalGas recommended 

that the DOE use building-specific data 

(e.g., heating load) when assigning 

furnace efficiency to improve accuracy. 

(SoCalGas, No. 304–3 at p. 4) AHRI 

stated that survey data are widely 

recognized in consumer research as 

significantly overstating actual 

consumer behavior, in this case their 

willingness to pay a premium for more 

energy-efficient products. (AHRI, No. 

303 at pp. 31–34) 

In contrast to the preceding 

comments, the Efficiency Advocates 

stated that, given the lack of data to 

incorporate economic and noneconomic factors, DOE’s current 

approach for assigning efficiency in the 

no-new-standards case is reasonable 

because DOE’s approach is more likely 

to capture actual consumer behavior 

than a model that assumes all 

consumers are strictly rational economic 

actors. (Efficiency Advocates, No. 285 at 

p. 5) 

Several stakeholders contended that 

DOE’s decision to not use economic 

criteria in assigning furnace efficiency is 

at odds with its use of economic criteria 

in other parts of the analysis. AGA 

stated that DOE’s assumption that, in 

the absence of a new standard, 

consumers will make random rather 

than at least somewhat rational 

economic decisions is in conflict with 

DOE’s assumptions used for other LCC 

analysis and decision making 

algorithms. (AGA, No. 306–1 at p. 27) 

Spire stated that despite DOE’s 

assumption that consumers never 

consider economics when purchasing 

NWGFs, DOE assumes for the purposes 

of its product switching analysis that 

consumers always consider both initial 

cost and payback economics in deciding 

whether to switch from a NWGF to an 

electric alternative. (Spire, No. 309–1 at 

p. 31) AHRI noted that DOE relies on a 

pure theory of competition, which is 

related to economically rational choice 

theory, to justify its use of incremental 

mark-ups; according to the commenter, 

DOE does not explain why it is 

appropriate to consider rational choice 

in this context but not when considering 

consumer behavior. (AHRI, No. 303 at p. 

31) APGA stated that unavailability of 

perfect information on consumer 

behavior is not a valid reason for not 

using the available data to assign 

furnace efficiency, noting by contrast 

that DOE used available data in the 

consumer choice model underlying the 

product switching analysis. (APGA, No. 

292–1 at p. 27) Lennox questioned what 

it understood as DOE’s contradictory 

characterization of consumers— 

assuming when determining the 

appropriate discount rate that 

consumers have sufficient 

understanding to rebalance debt, yet 

when projecting consumer purchases of 

furnaces, assuming consumers do not 

include economic considerations. 

Lennox commented that DOE must 

articulate the basis for its seemingly 

contradictory assumptions regarding 

consumer behavior. (Lennox, No. 299 at 

p. 11) The GTI report on the September 

2016 SNOPR submitted by APGA 

argued that DOE’s assertion that a 

random approach to furnace efficiency 

assignment is as accurate as a 

methodology based solely on estimated 

cost-effectiveness is inconsistent with 

other parts of the LCC model that 

incorporate rational economic decisions 

by various stakeholders. (APGA, No. 

292–2 at p. 67) APGA and AGA 

commented that even though DOE does 

not have site-specific information 

regarding product switching and 

downsizing, it still relied on ‘‘consumer 

choice’’ models that do not account for 

the potential illogical consumer 

behavior. (APGA, No. 292–1 at p. 26; 

AGA, No. 306–1 at pp. 23–24) 

In response, for this NOPR, DOE 

continued to assign furnace efficiency to 

households in the no-new-standards 

case in two steps, first at the state level, 

then at the building-specific level. 

However, DOE’s approach was modified 

to include other household 

characteristics. The market share of each 

efficiency level at the State level is 

based on historical shipments data 

(from the 2013–2020 HARDI data) and 

an estimated projection of trends 

between 2020 and the compliance year. 

The furnace efficiency distribution is 

then allocated to specific RECS 

households or CBECS, according to the 

market shares generated for each State. 

If a household is assigned a condensing 

furnace in the no-new-standards case, 

the replacement furnace is assumed to 

be condensing as well. 

To assign the efficiency at the 

building-specific level, DOE carefully 

considered any available data that might 

improve assignment of furnace 

efficiency in the LCC analysis. First, 

DOE examined the 2013–2020 HARDI 

data of gas furnace input capacity by 

efficiency level and region. DOE did not 

find a significant correlation between 

input capacity and condensing furnace 

market share in a given region, a 

correlation which might be expected a 

priori since buildings with larger 

furnace input capacity are more likely to 

be larger and have greater energy 

consumption. DOE next considered the 

GTI data for 21 Illinois households, 

which included the efficiency of the 

furnace (AFUE), size of the furnace 

(input capacity), square footage of the 

house, and annual energy use.163

Recognizing the relatively small sample 

size, DOE notes that these data exhibit 

no significant correlations between 

furnace efficiency and other household 

characteristics (with most furnace 

installations in this sample being noncondensing furnaces with high energy 

use). DOE also considered other data of 

furnace efficiency compared to 

household characteristics for other parts 

of the country, including the NEEA 

Database and permit data (see appendix 

8I of the TSD for this NOPR for more 

details). These data also suggest fairly 

weak correlation between furnace 

efficiency and household characteristics 

or economic factors. Finally, DOE 

considered the 2019 AHCS survey 

data.164 This survey includes questions 

to recent purchasers of HVAC 

equipment regarding the perceived 

efficiency of their equipment (Standard, 

High, and Super High Efficiency), as 

well as questions related to various 

household and demographic 

characteristics. From these data, DOE 

did find a statistically significant 

correlation: Households with larger 

square footage exhibited a higher 

fraction of High- or Super-High 

efficiency equipment installed. DOE 

used the AHCS data to adjust its furnace 

efficiency distributions as follows: (1) 

the market share of condensing 

equipment for households under 1,500 

sq. ft. was decreased by 5 percentage 

points; and (2) the market share of 

condensing equipment for households 

above 2,500 sq. ft. was increased by 5 

percentage points. 

While DOE acknowledges that 

economic factors may play a role when 

consumers, commercial building 

owners, or builders decide on what type 

of furnace to install, assignment of 

furnace efficiency for a given 

installation, based solely on economic 

measures such as life-cycle cost or 

simple payback period most likely 

would not fully and accurately reflect 

actual real-world installations. There are 

a number of market failures discussed in 

the economics literature that illustrate 

how purchasing decisions with respect 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40641 

165Ward, D.O., Clark, C.D., Jensen, K.L., Yen, 

S.T., & Russell, C.S. (2011): ‘‘Factors influencing 

willingness-to pay for the ENERGY STAR® label,’’ 

Energy Policy, 39(3), 1450–1458. (Available at: 

www.sciencedirect.com/science/article/abs/pii/ 

S0301421510009171) (Last accessed Feb. 15, 2022). 

166Thaler, R.H., Sunstein, C.R., and Balz, J.P. 

(2014). ‘‘Choice Architecture’’ in The Behavioral 

Foundations of Public Policy, Eldar Shafir (ed). 

167Thaler, R.H., and Bernartzi, S. (2004). ‘‘Save 

More Tomorrow: Using Behavioral Economics in 

Increase Employee Savings,’’ Journal of Political 

Economy 112(1), S164–S187. See also Klemick, H., 

et al. (2015) ‘‘Heavy-Duty Trucking and the Energy 

Efficiency Paradox: Evidence from Focus Groups 

and Interviews,’’ Transportation Research Part A: 

Policy & Practice, 77, 154–166. (providing evidence 

that loss aversion and other market failures can 

affect otherwise profit-maximizing firms). 

168Thaler, R.H., and Sunstein, C.R. (2008). 

Nudge: Improving Decisions on Health, Wealth, and 

Happiness. New Haven, CT: Yale University Press. 

169 Davis, L.W., and G.E. Metcalf (2016): ‘‘Does 

better information lead to better choices? Evidence 

from energy-efficiency labels,’’ Journal of the 

Association of Environmental and Resource 

Economists, 3(3), 589–625. (Available at: 

www.journals.uchicago.edu/doi/full/10.1086/ 

686252) (Last accessed Feb. 15, 2022). 

170Attari, S.Z., M.L. DeKay, C.I. Davidson, and W. 

Bruine de Bruin (2010): ‘‘Public perceptions of 

energy consumption and savings.’’ Proceedings of 

the National Academy of Sciences 107(37), 16054– 

16059 (Available at: www.pnas.org/content/107/37/ 

16054) (Last accessed Feb. 15, 2022). 

171Houde, S. (2018): ‘‘How Consumers Respond 

to Environmental Certification and the Value of 

Energy Information,’’ The RAND Journal of 

Economics, 49 (2), 453–477 (Available at: 

onlinelibrary.wiley.com/doi/full/10.1111/1756- 

2171.12231) (Last accessed Feb. 15, 2022). 

to energy efficiency are unlikely to be 

perfectly correlated with energy use, as 

described further down. DOE maintains 

that the method of assignment, which is 

in part random, is a reasonable 

approach, one that simulates behavior 

in the furnace market, where market 

failures result in purchasing decisions 

not being perfectly aligned with 

economic interests, more realistically 

than relying only on apparent costeffectiveness criteria derived from the 

limited information in CBECS or RECS. 

DOE further emphasizes that its 

approach does not assume that all 

purchasers of furnaces make 

economically irrational decisions (i.e., 

the lack of a correlation is not the same 

as a negative correlation). As part of the 

random assignment, some homes or 

buildings with large heating loads will 

be assigned higher efficiency furnaces, 

and some homes or buildings with 

particularly low heating loads will be 

assigned baseline furnaces, which aligns 

with the available data. By using this 

approach, DOE acknowledges the 

uncertainty inherent in the data and 

minimizes any bias in the analysis by 

using random assignment, as opposed to 

assuming certain market conditions that 

are unsupported given the available 

evidence. 

First, consumers are motivated by 

more than simple financial trade-offs. 

There are consumers who are willing to 

pay a premium for more energy-efficient 

products because they are 

environmentally conscious.165 There are 

also several behavioral factors that can 

influence the purchasing decisions of 

complicated multi-attribute products, 

such as furnaces. For example, 

consumers (or decision makers in an 

organization) are highly influenced by 

choice architecture, defined as the 

framing of the decision, the surrounding 

circumstances of the purchase, the 

alternatives available, and how they’re 

presented for any given choice 

scenario.166 The same consumer or 

decision maker may make different 

choices depending on the characteristics 

of the decision context (e.g., the timing 

of the purchase, competing demands for 

funds), which have nothing to do with 

the characteristics of the alternatives 

themselves or their prices. Consumers 

or decision makers also face a variety of 

other behavioral phenomena including 

loss aversion, sensitivity to information 

salience, and other forms of bounded 

rationality.167 Thaler, who won the 

Nobel Prize in Economics in 2017 for 

his contributions to behavioral 

economics, and Sunstein point out that 

these behavioral factors are strongest 

when the decisions are complex and 

infrequent, when feedback on the 

decision is muted and slow, and when 

there is a high degree of information 

asymmetry.168 These characteristics 

describe almost all purchasing 

situations of appliances and equipment, 

including furnaces. The installation of a 

new or replacement furnace is done 

very infrequently, as evidenced by the 

mean lifetime of 21.4 years for NWGFs 

and MHGFs. Additionally, it would take 

at least one full heating season for any 

impacts on operating costs to be fully 

apparent. Further, if the purchaser of 

the furnace is not the entity paying the 

energy costs (e.g., a building owner and 

tenant), there may be little to no 

feedback on the purchase. Additionally, 

there are systematic market failures that 

are likely to contribute further 

complexity to how products are chosen 

by consumers, as explained in the 

following paragraphs. 

The first of these market failures—the 

split-incentive or principal-agent 

problem—is likely to affect furnaces 

more than many other types of 

appliances. The principal-agent problem 

is a market failure that results when the 

consumer that purchases the equipment 

does not internalize all of the costs 

associated with operating the 

equipment. Instead, the user of the 

product, who has no control over the 

purchase decision, pays the operating 

costs. There is a high likelihood of split 

incentive problems in the case of rental 

properties where the landlord makes the 

choice of what furnace to install, 

whereas the renter is responsible for 

paying energy bills. In the LCC sample, 

25.7 percent of households with a 

NWGF and 26.5 percent of households 

with a MHGF are renters. These 

fractions are significantly higher for 

low-income households (see section 

IV.I.1 of this document). In new 

construction, builders influence the 

type of furnace used in many homes but 

do not pay operating costs. Finally, 

contractors install a large share of 

furnaces in replacement situations, and 

they can exert a high degree of influence 

over the type of furnace purchased. 

In addition to the split-incentive 

problem, there are other market failures 

that are likely to affect the choice of 

furnace efficiency made by consumers. 

Davis and Metcalf 169 conducted an 

experiment demonstrating that the 

nature of the information available to 

consumers from EnergyGuide labels 

posted on air conditioning equipment 

results in an inefficient allocation of 

energy efficiency across households 

with different usage levels. Their 

findings indicate that households are 

likely to make decisions regarding the 

efficiency of the climate control 

equipment of their homes that do not 

result in the highest net present value 

for their specific usage pattern (i.e., their 

decision is based on imperfect 

information and, therefore, is not 

necessarily optimal). 

In part because of the way 

information is presented, and in part 

because of the way consumers process 

information, there is also a market 

failure consisting of a systematic bias in 

the perception of equipment energy 

usage, which can affect consumer 

choices. Attari, Krantz, and Weber 170

show that consumers tend to 

underestimate the energy use of large 

energy-intensive appliances, but 

overestimate the energy use of small 

appliances. Therefore, it is likely that 

consumers systematically underestimate 

the energy use associated with furnaces, 

resulting in less cost-effective furnace 

purchases. 

These market failures affect a sizeable 

share of the consumer population. A 

study by Houde 171 indicates that there 

is a significant subset of consumers that 

appear to purchase appliances without 

taking into account their energy 

efficiency and operating costs at all. 

There are market failures relevant to 

furnaces installed in commercial 


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applications as well. It is often assumed 

that because commercial and industrial 

customers are businesses that have 

trained or experienced individuals 

making decisions regarding investments 

in cost-saving measures, some of the 

commonly observed market failures 

present in the general population of 

residential customers should not be as 

prevalent in a commercial setting. 

However, there are many characteristics 

of organizational structure and historic 

circumstance in commercial settings 

that can lead to underinvestment in 

energy efficiency. 

First, a recognized problem in 

commercial settings is the principalagent problem, where the building 

owner (or building developer) selects 

the equipment and the tenant (or 

subsequent building owner) pays for 

energy costs.172 173 Indeed, more than a 

quarter of commercial buildings in the 

CBECS 2012 sample are occupied at 

least in part by a tenant, not the 

building owner (indicating that, in 

DOE’s experience, the building owner 

likely is not responsible for paying 

energy costs). Additionally, some 

commercial buildings have multiple 

tenants. There are other similar 

misaligned incentives embedded in the 

organizational structure within a given 

firm or business that can impact the 

choice of a furnace. For example, if one 

department or individual within an 

organization is responsible for capital 

expenditures (and therefore equipment 

selection) while a separate department 

or individual is responsible for paying 

the energy bills, a market failure similar 

to the principal-agent problem can 

result.174 Additionally, managers may 

have other responsibilities and often 

have other incentives besides operating 

cost minimization, such as satisfying 

shareholder expectations, which can 

sometimes be focused on short-term 

returns.175 Decision-making related to 

commercial buildings is highly complex 

and involves gathering information from 

and for a variety of different market 

actors. It is common to see conflicting 

goals across various actors within the 

same organization as well as 

information asymmetries between 

market actors in the energy efficiency 

context in commercial building 

construction.176

Second, the nature of the 

organizational structure and design can 

influence priorities for capital 

budgeting, resulting in choices that do 

not necessarily maximize 

profitability.177 Even factors as simple 

as unmotivated staff or lack of prioritysetting and/or a lack of a long-term 

energy strategy can have a sizable effect 

on the likelihood that an energy 

efficient investment will be 

undertaken.178 U.S. tax rules for 

commercial buildings may incentivize 

lower capital expenditures, since capital 

costs must be depreciated over many 

years, whereas operating costs can be 

fully deducted from taxable income or 

passed through directly to building 

tenants.179

Third, there are asymmetric 

information and other potential market 

failures in financial markets in general, 

which can affect decisions by firms with 

regard to their choice among alternative 

investment options, with energy 

efficiency being one such option.180

Asymmetric information in financial 

markets is particularly pronounced with 

regard to energy efficiency 

investments.181 There is a dearth of 

information about risk and volatility 

related to energy efficiency investments, 

and energy efficiency investment 

metrics may not be as visible to 

investment managers,182 which can bias 

firms towards more certain or familiar 

options. This market failure results not 

because the returns from energy 

efficiency as an investment are 

inherently riskier, but because 

information about the risk itself tends 

not to be available in the same way it 

is for other types of investment, like 

stocks or bonds. In some cases energy 

efficiency is not a formal investment 

category used by financial managers, 

and if there is a formal category for 

energy efficiency within the investment 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40643 

183Cooremans, C. (2012). ‘‘Investment in energy 

efficiency: do the characteristics of investments 

matter?’’ Energy Efficiency, 5(4), 497–518. 

184Lovins 1992, op. cit. The Atmospheric Fund. 

(2017). Money on the table: Why investors miss out 

on the energy efficiency market. (Available at: 

taf.ca/publications/money-table-investors-energyefficiency-market/) (Last accessed January 20, 

2022). 

185Blumstein, C. and Taylor, M. (2013). 

Rethinking the Energy-Efficiency Gap: Producers, 

Intermediaries, and Innovation. Energy Institute at 

Haas Working Paper 243. (Available at: 

haas.berkeley.edu/wp-content/uploads/WP243.pdf) 

(Last accessed April 6, 2022). 

186A hurdle rate is the minimum rate of return 

on a project or investment required by an 

organization or investor. It is determined by 

assessing capital costs, operating costs, and an 

estimate of risks and opportunities. 

187 DeCanio 1994, op. cit. 

188 DeCanio, S.J. (1998). ‘‘The Efficiency Paradox: 

Bureaucratic and Organizational Barriers to 

Profitable Energy-Saving Investments,’’ Energy 

Policy, 26(5), 441–454. 

189Andersen, S.T., and Newell, R.G. (2004). 

‘‘Information programs for technology adoption: the 

case of energy-efficiency audits,’’ Resource and 

Energy Economics, 26, 27–50. 

190Prindle 2007, op. cit. Howarth, R.B., Haddad, 

B.M., and Paton, B. (2000). ‘‘The economics of 

energy efficiency: insights from voluntary 

participation programs,’’ Energy Policy, 28, 477– 

486. 

191 Klemick, H., Kopits, E., Wolverton, A. (2017). 

‘‘Potential Barriers to Improving Energy Efficiency 

in Commercial Buildings: The Case of Supermarket 

Refrigeration,’’ Journal of Benefit-Cost Analysis, 

8(1), 115–145. 

192de Almeida, E.L.F. (1998). ‘‘Energy efficiency 

and the limits of market forces: The example of the 

electric motor market in France’’, Energy Policy, 

26(8), 643–653. Xenergy, Inc. (1998). United States 

Industrial Electric Motor Systems Market 

Opportunity Assessment. (Available at: 

www.energy.gov/sites/default/files/2014/04/f15/ 

mtrmkt.pdf) (Last accessed January 20, 2022). 

portfolio options assessed by financial 

managers, they are seen as weakly 

strategic and not seen as likely to 

increase competitive advantage.183 This 

information asymmetry extends to 

commercial investors, lenders, and realestate financing, which is biased against 

new and perhaps unfamiliar technology 

(even though it may be economically 

beneficial).184 Another market failure 

known as the first-mover disadvantage 

can exacerbate this bias against adopting 

new technologies, as the successful 

integration of new technology in a 

particular context by one actor generates 

information about cost-savings, and 

other actors in the market can then 

benefit from that information by 

following suit; yet because the first to 

adopt a new technology bears the risk 

but cannot keep to themselves all the 

informational benefits, firms may 

inefficiently underinvest in new 

technologies.185

In sum, the commercial and industrial 

sectors face many market failures that 

can result in an under-investment in 

energy efficiency. This means that 

discount rates implied by hurdle 

rates 186 and required payback periods 

of many firms are higher than the 

appropriate cost of capital for the 

investment.187 The preceding arguments 

for the existence of market failures in 

the commercial and industrial sectors 

are corroborated by empirical evidence. 

One study in particular showed 

evidence of substantial gains in energy 

efficiency that could have been 

achieved without negative 

repercussions on profitability, but the 

investments had not been undertaken by 

firms.188 The study found that multiple 

organizational and institutional factors 

caused firms to require shorter payback 

periods and higher returns than the cost 

of capital for alternative investments of 

similar risk. Another study 

demonstrated similar results with firms 

requiring very short payback periods of 

1–2 years in order to adopt energysaving projects, implying hurdle rates of 

50 to 100 percent, despite the potential 

economic benefits.189 A number of other 

case studies similarly demonstrate the 

existence of market failures preventing 

the adoption of energy-efficient 

technologies in a variety of commercial 

sectors around the world, including 

office buildings,190 supermarkets,191

and the electric motor market.192

The existence of market failures in the 

residential and commercial sectors is 

well supported by the economics 

literature and by a number of case 

studies. If DOE developed an efficiency 

distribution that assigned furnace 

efficiency in the no-new-standards case 

solely according to energy use or 

economic considerations such as lifecycle cost or payback period, the 

resulting distribution of efficiencies 

within the building sample would not 

reflect any of the market failures or 

behavioral factors above. DOE thus 

concludes such a distribution would not 

be representative of the furnace market. 

Further, even if a specific household/ 

building/organization is not subject to 

the market failures above, the 

purchasing decision of furnace 

efficiency can be highly complex and 

influenced by a number of factors not 

captured by the building characteristics 

available in the RECS or CBECS 

samples. These factors can lead to 

households or building owners choosing 

a furnace efficiency that deviates from 

the efficiency predicted using only 

energy use or economic considerations 

such as life-cycle cost or payback period 

(as calculated using the information 

from RECS 2015 or CBECS 2012). 

However, DOE intends to investigate 

this issue further, and it welcomes 

suggestions as to how it might improve 

its assignment of furnace efficiency in 

its analyses. 

The estimated market shares for the 

no-new-standards case for NWGFs and 

MHGFs in 2029 are shown in Table 

IV.14 and Table IV.15 of this document, 

respectively. See chapter 8 and 

appendix 8I of the NOPR TSD for 

further information on the derivation of 

the efficiency distributions. 

TABLE IV.14—AFUE EFFICIENCY DISTRIBUTION IN THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACES

Efficiency, AFUE 

(percent) 

2029 Market share in percent 

National North, repl North, new South, repl South, new 

Residential Market 

80 ......................................................................................... 40.0 23.7 13.1 73.0 33.5 

90 ......................................................................................... 0.3 0.4 0.6 0.1 0.4 

92 ......................................................................................... 16.5 18.5 20.8 9.5 27.2 

95 ......................................................................................... 41.1 55.5 63.1 15.9 35.0 

98 ......................................................................................... 2.0 1.9 2.5 1.6 3.9 

Commercial Market 

80 ......................................................................................... 35.1 17.3 15.0 64.5 30.8 

90 ......................................................................................... 0.0 0.0 0.0 0.0 0.0 


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193Scott Pigg, Electricity Use by New Furnaces: 

A Wisconsin Field Study, Seventh Wave (formerly 

Energy Center of Wisconsin) (2003) (Available at: 

www.proctoreng.com/dnld/WIDOE2013.pdf) (Last 

accessed Feb. 15, 2022). 

194By typical oversizing, DOE refers to a value of 

1.7, as specified in ASHRAE 103, ‘‘Method of 

Testing for Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and Boilers’’, which is 

incorporated by reference in the DOE residential 

furnace and boiler test procedure at 10 CFR part 

430, subpart B, appendix N. 

TABLE IV.14—AFUE EFFICIENCY DISTRIBUTION IN THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACES—Continued 

Efficiency, AFUE 

(percent) 

2029 Market share in percent 

National North, repl North, new South, repl South, new 

92 ......................................................................................... 16.6 14.4 21.7 10.9 30.8 

95 ......................................................................................... 45.7 64.4 61.7 22.7 35.9 

98 ......................................................................................... 2.6 3.8 1.7 1.8 2.6 

All 

80 ......................................................................................... 39.9 23.6 13.2 72.7 33.4 

90 ......................................................................................... 0.3 0.4 0.5 0.1 0.4 

92 ......................................................................................... 16.5 18.4 20.9 9.5 27.3 

95 ......................................................................................... 41.2 55.7 63.0 16.1 35.0 

98 ......................................................................................... 2.1 1.9 2.4 1.6 3.9 

‘‘Repl’’ means ‘‘replacement.’’ 

TABLE IV.15—AFUE EFFICIENCY DISTRIBUTION IN THE NO-NEW-STANDARDS CASE FOR MOBILE HOME GAS FURNACES

Efficiency, AFUE 

(percent) 

2029 Market share in percent 

National North, repl North, new South, repl South, new 

80 ......................................................................................... 70.4 61.7 62.9 79.0 78.9 

90 ......................................................................................... 0.0 0.0 0.0 0.0 0.0 

92 ......................................................................................... 8.4 10.5 11.3 6.0 5.7 

95 ......................................................................................... 19.7 27.4 25.3 12.5 12.6 

96 ......................................................................................... 1.5 0.4 0.4 2.6 2.7 

‘‘Repl’’ means ‘‘replacement.’’ 

DOE also estimated no-new-standards 

case efficiency distributions for furnace 

standby mode and off mode power. As 

shown in Table IV.16 of this document, 

DOE estimated that 66 percent of the 

affected market for NWGFs and 32 

percent of the affected market for 

MHGFs would be at the baseline level 

in 2029, according to data from 18 

furnace models from a field study 

conducted in Wisconsin 193 and data 

from DOE laboratory tests (see appendix 

8I of the NOPR TSD). 

TABLE IV.16—STANDBY MODE AND OFF MODE NO-NEW-STANDARDS CASE EFFICIENCY DISTRIBUTION IN 2029 FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Efficiency level 

Standby 

mode/ 

off mode 

in watts 

NWGF 

market share 

in percent 

MHGF 

market share 

in percent 

Baseline ....................................................................................................................................... 11.0 61.6 31.5 

1 ................................................................................................................................................... 9.5 0.0 0.0 

2 ................................................................................................................................................... 9.2 16.6 8.9 

3 ................................................................................................................................................... 8.5 21.8 59.6 

10. Alternative Size Thresholds for 

Small Consumer Gas Furnaces 

DOE analyzed potential separate 

energy conservation standards for small 

and large NWGFs and MHGFs, with 

varying capacity thresholds for a small 

NWGF or MHGF. The examined 

thresholds had a maximum input rate 

that ranged from less than or equal to 40 

kBtu/h to 100 kBtu/h, which were 

assessed in 5 kBtu/h increments. 

DOE assigned an input capacity to 

existing furnaces based on data from 

RECS 2015 and CBECS 2012. It is 

common industry practice to oversize 

furnaces to ensure that they can meet 

the house heating load in extreme 

temperature conditions. Under a 

scenario which envisions a separate 

energy conservation standard for small 

NWGFs and MHGFs set at a level which 

does not require condensing technology, 

DOE expects that some consumers who 

would otherwise install a typicallyoversized furnace 194 may choose to 

downsize in order to be able to purchase 

a less-expensive non-condensing 

furnace. 

DOE identified households from the 

NWGF and MHGF sample that might 

downsize at each of the considered 

standard levels. In identifying these 

households, DOE first determined 

whether a household would install a 

non-condensing furnace with an input 


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195 10 CFR part 430, subpart B, appendix N. 196ACCA recommends oversizing by a maximum 

of 40 percent. ACCA. See Manual S—Residential 

Equipment Selection (2nd Edition) (Available at: 

www.acca.org/) (Last accessed Feb. 15, 2022). 197City of Fort Collins, Evaluation of New Home 

Energy Efficiency: Summary Report (June 2002) 

(Available at: www.fcgov.com/utilities/img/site_

specific/uploads/newhome-eval.pdf) (Last accessed 

Feb. 15, 2022). 198Pigg, Scott, What you need to know about 

residential furnaces, air conditioners and heat 

pumps if you’re NOT an HVAC professional (Feb. 

2017) (Available at: www.duluthenergydesign.com/ 

Content/Documents/GeneralInfo/Presentation

Materials/2017/Day2/What-You-Need-Pigg.pdf) 

(Last accessed Feb. 15, 2022). 

199Energy Center of Wisconsin, Electricity Use by 

New Furnaces: A Wisconsin Field Study (2003) 

(Available at: www.proctoreng.com/dnld/ 

WIDOE2013.pdf) (Last accessed Feb. 15, 2022). 

200Burdick, Arlan, Strategy Guideline: Accurate 

Heating and Cooling Load Calculations. Ibacos, Inc. 

(June 2011) (Available at: www.nrel.gov/docs/ 

fy11osti/51603.pdf) (Last accessed Feb. 15, 2022). 

201Ecovent, When Bigger is not Better (August 

2014) (Available at: docplayer.net/13225631-Whenbigger-isn-t-better.html) (Last accessed Feb. 15, 

2022). 

202Energy Center of Wisconsin, Central Air 

Conditioning in Wisconsin (May 2008) (Available 

at: www.focusonenergy.com/sites/default/files/ 

centralairconditioning_report.pdf) (Last accessed 

Feb. 15, 2022). 

203Washington State University, Efficient Home 

Cooling (2003) (Available at: www.energy.wsu.edu/ 

documents/AHT_Energy%20Efficient%20

Home%20Cooling.pdf) (Last accessed Feb. 15, 

2022). 

capacity greater than the small furnace 

size limit in the no-new-standards case, 

based on the assigned input capacity 

(which reflects historical oversizing) 

and efficiency. DOE relied on the 

ASHRAE 103–1993 test procedure, 

‘‘Method of Testing for Annual Fuel 

Utilization Efficiency of Residential 

Central Furnaces and Boilers,’’ 

(incorporated by referenced in the DOE 

residential furnace and boiler test 

procedure) 195 to estimate that the 

typical oversize factor used to size 

furnaces was 70 percent (i.e., the 

furnace capacity is 70 percent greater 

than required to heat the home under 

heating outdoor design temperature 

(‘‘ODT’’) conditions). DOE assumed that 

if the input capacity of the furnace using 

a reduced oversize factor of 35 percent 

(half of the 70-percent oversize factor) is 

less than or equal to the input capacity 

limit for small furnaces, the consumer 

would downsize the furnace 

accordingly. DOE has tentatively 

concluded that an oversize factor of 35 

percent is realistic, given that ACCA 

recommends a maximum oversize factor 

of 40 percent.196

DOE has found that the available data 

regarding oversizing of furnaces in the 

existing stock indicate that an average 

oversizing in past installations of 70 

percent is likewise 

reasonable.197 198 199 200 201 202 203 DOE 

acknowledges that the oversizing varies 

among furnace installations. For this 

NOPR, DOE assigned an oversizing 

factor for each household, which varied 

from 0 percent to 180 percent (76 

percent on average). 

AHRI stated that DOE severely 

overestimated the number of consumers 

who would downsize their NWGF to 

avoid the higher cost of a condensing 

NWGF. AHRI argued that DOE’s 

downsizing estimate is speculation, 

unsupported by historical shipment 

data or any documented field study. 

(AHRI, No. 303 at p. 16) Consequently, 

AHRI urged DOE to be much more 

conservative in its downsizing analysis 

because if the downsizing estimates are 

incorrect, the proposed rule will harm 

many more consumers and negatively 

affect the industry. (AHRI, September 

2016 SNOPR Public Meeting Transcript, 

No. 243 at pp. 145–146) Ingersoll Rand 

likewise argued that the oversizing 

factor is limited in practice to 40 

percent and, therefore, that DOE’s 

downsizing approach substantially 

overestimates the number of consumers 

that would be able to install a lower 

capacity furnace, resulting in an 

underestimation of the percentage of 

consumers who would experience an 

increased cost due to the new standard. 

(Ingersoll Rand, No. 297 at p. 10) Rheem 

similarly stated that it is not reasonable 

to assume that the primary heating 

source will be downsized. In Rheem’s 

experience, consumers and installers are 

reluctant to risk an investment in a 

replacement NWGF that may not 

provide adequate heat in extreme 

weather conditions or allow for quick 

recovery from their thermostat setback 

(i.e., raising the thermostat from a 

lowered temperature to the desired 

temperature). (Rheem, No. 307 at pp. 9– 

10) 

Lennox strongly disagreed with DOE’s 

assumption that a significant shift in 

furnace sizing would occur with an 80- 

percent AFUE standard for small 

NWGFs. Lennox stated that NWGFs are 

sized to meet the heat load of the home 

according to local climate conditions; 

therefore, consumers and contractors are 

not expected to shift their sizing 

practices, as downsizing equipment 

creates the risk of not providing 

adequate heat to the dwelling. (Lennox, 

No. 299 at p. 30) Lennox stated that 

DOE used a flawed downsizing 

methodology without any market data to 

support the agency’s assumption. 

Lennox stated that DOE failed to 

mention the negative impacts of 

downsizing, such as a loss of utility, 

consumer comfort, and a shortened life 

of the furnace due to an increase in 

operating time, as well as the need for 

consumers to supplement their heating 

needs in extreme conditions with lessefficient options than the use of a 

properly-sized NWGF. (Lennox, No. 299 

at p. 18) Along these same lines, 

Goodman stated that downsizing would 

occur for only a small percentage of 

applications. (Goodman, No. 308 at p. 

10) The GTI report on the September 

2016 SNOPR submitted by APGA stated 

that DOE’s downsizing decision 

approach ignores other utility functions 

of a furnace and the range of consumer 

risk tolerances regarding known 

variability in design calculations and 

accommodation of their own behavior. 

(APGA, No. 292–2 at p. 68) Spire stated 

that NWGFs must be oversized to be 

able to satisfy peak heating demands; 

encouraging downsizing would leave 

many low-income consumers desperate 

to minimize initial costs with NWGFs 

that are inadequate to meet their peak 

heating needs. Spire commented that 

DOE has not analyzed the loss of utility 

downsizing would impose on 

consumers. (Spire, No. 309–1 at pp. 46– 

47) 

In contrast, the Efficiency Advocates 

stated that data from RECS 2009 imply 

that a 55,000 Btu/h or even a 50,000 

Btu/h NWGF would be sufficient for 

many households. Based on this 

analysis, the Efficiency Advocates stated 

that DOE’s assumption of downsizing to 

an oversize factor of 35 percent is 

reasonable and might even be too 

conservative, as they would expect 

some furnaces to be downsized even 

more to take advantage of the 80-percent 

AFUE standard for small NGWFs. 

(Efficiency Advocates, No. 285 at p. 3) 

NEAA stated that downsizing as a result 

of a separate standard for small NWGFs 

is logical. (NEEA, September 2016 

SNOPR Public Meeting Transcript, No. 

243 at p. 158) 

In response to these comments, DOE 

continues to expect that in the case of 

an energy conservation standard that 

allows small furnaces to use noncondensing technology, some 

consumers would have a financial 

incentive to downsize their furnace. 

Even without oversizing, a furnace 

installation should be designed to 

handle dry-bulb temperatures that will 

occur 99 percent of the time. Therefore, 

handling nearly all extreme conditions 

is already accounted for when selecting 

the unit, so a 35-percent oversizing 

should provide ample allowance for the 

most extreme conditions that might 

occur. Thus, DOE reasons that there 

would be no loss of utility or comfort 

under DOE’s proposed approach. DOE 

acknowledges that there could be cases 

where downsizing might not be 

advantageous. Therefore, for this NOPR, 

DOE assumed that not all consumers 


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40646 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

204Electric furnaces are estimated to have the 

same lifetime as NWGFs (21.4 years); however, heat 

pumps have an estimated average lifetime of 19 

years. To ensure comparable accounting, DOE 

annualized the installed cost of a second heat pump 

and multiplied the annualized cost by the 

difference in lifetime between the heat pump and 

a NWGF. 

205U.S. Department of Energy–Office of Energy 

Efficiency and Renewable Energy, Residential 

would downsize when the oversize 

factor of 35 percent is less than or equal 

to the assumed input capacity limit for 

small furnaces. In addition, DOE 

conducted several sensitivity analyses 

of its downsizing methodology, 

assuming no downsizing as well as 

higher and lower levels of downsizing. 

See appendix 8M of this NOPR TSD for 

further details. 

AHRI requested that DOE analyze the 

alternative concept of separate standard 

levels for small and large mobile home 

gas furnaces for the same purpose of 

minimizing these potential negative 

outcomes, as was done for NWGFs. 

(AHRI, No. 202, p. 18) For this NOPR, 

DOE analyzed the potential for similar 

separate energy conservation standards 

for small and large MHGFs, as it did for 

NWGFs. 

Goodman stated that the rational 

downsizing methodology is inconsistent 

with the random furnace sizing 

methodology and furnace efficiency 

assignment in the no-new-standards 

case. (Goodman, No. 308 at p. 10) In 

response, DOE notes that the furnace 

efficiency assignment in the no-newstandards case methodology has been 

revised for this NOPR to include some 

economic criteria (see section IV.F.9.c of 

this document). 

a. Accounting for Impacts of Downsized 

Equipment 

The estimated degree of downsizing 

anticipated in the case of a noncondensing standard for small NWGFs 

and MHGFs is presented in Table IV.17 

under the criteria of various ‘‘small 

furnace’’ definitions. For further details 

regarding this downsizing methodology, 

see appendix 8M of the TSD for this 

NOPR. This appendix also presents 

sensitivity analysis results. 

TABLE IV.17—SHARE OF LCC SAMPLE HOUSEHOLDS MEETING SMALL FURNACE DEFINITION IN 2029 

Small furnace definition 

NWGFs MHGFs 

Without 

amended 

standards 

(percent) 

With separate 

small furnace 

standard 

and with 

downsizing 

(percent) 

Without 

amended 

standards 

(percent) 

With separate 

small furnace 

standard 

and with 

downsizing 

(percent) 

≤40 kBtu/h ........................................................................................................ 4.3 11.3 8.3 23.9 

≤45 kBtu/h ........................................................................................................ 6.6 15.9 16.8 32.6 

≤50 kBtu/h ........................................................................................................ 9.3 19.3 21.7 36.5 

≤55 kBtu/h ........................................................................................................ 11.3 21.6 21.7 38.8 

≤60 kBtu/h ........................................................................................................ 23.6 31.4 46.7 57.1 

≤65 kBtu/h ........................................................................................................ 25.4 34.3 46.7 57.7 

≤70 kBtu/h ........................................................................................................ 35.3 42.7 60.3 67.5 

≤75 kBtu/h ........................................................................................................ 44.9 50.9 72.1 76.3 

≤80 kBtu/h ........................................................................................................ 59.2 62.9 89.3 91.0 

≤85 kBtu/h ........................................................................................................ 60.6 64.4 90.1 91.8 

≤90 kBtu/h ........................................................................................................ 67.2 70.4 91.8 94.7 

≤95 kBtu/h ........................................................................................................ 67.2 70.7 91.8 94.8 

≤100 kBtu/h ...................................................................................................... 83.0 84.3 99.3 99.4 

11. Accounting for Product Switching 

Under Potential Standards 

DOE considered the potential for a 

standard level to impact the choice 

between various types of heating 

products, for residential new 

construction, new owners, and the 

replacement of existing products. 

Because home builders are sensitive to 

the initial cost of heating equipment, a 

standard level that significantly 

increases purchase price may induce 

some builders to switch to a different 

heating product than they would have 

otherwise installed in the no-newstandards case. Such an amended 

standard level may also induce some 

homeowners to replace their existing 

furnace at the end of its useful life with 

a different type of heating product. 

a. Product Switching Resulting From 

Standards for Non-Weatherized Gas 

Furnaces 

DOE developed a consumer choice 

model to estimate the switching 

response of builders and homeowners in 

residential installations to potential 

amended AFUE standards for NWGFs. 

DOE analyzed product switching 

scenarios that represent the most 

common combinations of space 

conditioning and water heating 

products. The model considers three 

options available for each sample home 

when installing a heating product: (1) a 

NWGF that meets a particular standard 

level, (2) a heat pump, or (3) an electric 

furnace. In addition, for situations in 

which installation of a condensing 

furnace would leave an ‘‘orphaned’’ gas 

water heater requiring costly re-venting, 

the model allows for the option to 

purchase an electric water heater as an 

alternative. For option 2, DOE took into 

consideration the age of the existing 

central air conditioner, if one exists. If 

the existing air conditioner is not very 

old, it is unlikely that the consumer 

would opt to install a heat pump, which 

can also provide cooling. 

The consumer choice model 

calculates the PBP between the higherefficiency NWGF in each standards case 

compared to the electric heating options 

using the total installed cost and firstyear operating cost for each sample 

household or building. The operating 

costs take into account the space heating 

load and the water heating load for each 

household, as well as the energy prices 

over the lifetime of the available 

product options.204 DOE accounted for 

any additional installation costs to 

accommodate a new product. DOE also 

accounted for the cooling load of each 

relevant household that might switch 

from a NWGF and CAC to a heat pump. 

For switching to occur, the total 

installed cost of the electric option must 

be less than the NWGF standards case 

option. 

DOE used updated CAC and heat 

pump prices from the 2016 CAC and 

heat pump final rule,205 assuming 


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Central Air Conditioners and Heat Pumps Technical 

Support Document (Available at: 

www.regulations.gov/document/EERE-2014-BTSTD-0048-0098) (Last accessed Feb. 15, 2022). 

206U.S. Department of Energy–Office of Energy 

Efficiency and Renewable Energy, Heating Products 

Final Rule (Available at: www.regulations.gov/ 

document?D=EERE-2006-STD-0129-0005) (Last 

accessed Feb. 15, 2022). 

207 Decision Analysts, 2006, 2008, 2010, 2013, 

2016, and 2019 American Home Comfort Studies 

(Available at: www.decisionanalyst.com/ 

Syndicated/HomeComfort/) (Last accessed Feb. 15, 

2022). Non-proprietary data of a similar nature were 

not available. 

208The PBP is negative when the electric heating 

option has lower operating cost compared to the 

condensing NWGF option. 

209 Gas Technology Institute (‘‘GTI’’), Fuel 

Switching Study (Available at: www.aga.org/ 

research/reports/gas-technology-institute--fuelswitching-study/) (Last accessed Feb. 15, 2022). 

implementation of the CAC/HP 

minimum standards scheduled to take 

effect in 2023. 82 FR 1786 (Jan. 6, 2017). 

These heat pump prices include the 

manufacturer production costs, 

shipping costs, markups, and 

installation costs determined in the 

2016 final rule. These costs were 

updated to 2020$ and the installation 

costs were updated using the same labor 

costs as discussed in section IV.F.3 of 

this document. DOE additionally 

updated the decreasing price trend for 

heat pumps derived in the 2016 final 

rule with the latest price data available. 

This trend suppresses the cost of heat 

pumps over time for the analysis period 

in this rulemaking. The consumer 

choice model assumes that if a 

consumer switches to a heat pump, it is 

to a minimally compliant heat pump 

(SEER 14). DOE requests comment on 

DOE’s heat pump cost estimates, 

including any decreases in price likely 

to be experienced during the analysis 

period as a result of increased heat 

pump shipments and scale in the 

market due to decarbonization policies 

and increased domestic supply of heat 

pumps. DOE estimated the price of 

electric furnaces in the engineering 

analysis (see section IV.C.3 of this 

document). For water heaters, DOE used 

efficiency and consumer prices for 

models that meet the amended energy 

conservation standards that took effect 

on April 16, 2015. (10 CFR 430.32(d); 75 

FR 20112 (April 16, 2010).) DOE 

estimated the price of gas and electric 

storage water heaters based on the 2010 

heating products final rule. 75 FR 20112 

(April 16, 2010).206 For situations where 

a household with a NWGF might switch 

to an electric space heating appliance, 

DOE determined the total installed cost 

of the electric heating options, including 

a separate circuit up to 100 amps that 

would need to be installed to power the 

electric resistance heater within an 

electric furnace or heat pump, as well as 

the cost of upgrading the electrical 

service panel for a fraction of 

households. 

The decision criterion in DOE’s model 

was based on proprietary survey data 

from Decision Analyst, collected from 

four separate surveys conducted 

between 2006 and 2019.207 Each survey 

involved approximately 30,000 

homeowners. For a representative 

sample of consumers, the surveys 

identified consumers’ willingness to 

purchase more-efficient spaceconditioning systems. The surveys 

asked respondents the maximum price 

they would be willing to pay for a 

product that was 25 percent more 

efficient than their existing product, 

which DOE assumed is equivalent to a 

25-percent decrease in annual energy 

costs. From these data, as well as RECS 

billing data to determine average annual 

space heating energy costs, DOE 

determined that consumers considering 

replacing their gas furnace would 

require, on average, a payback period of 

3.5 years or less in order to purchase a 

condensing furnace rather than switch 

to an electric space heating option. 

The consumer choice model 

calculates the PBP between the 

condensing NWGF in each standards 

case compared to the electric heating 

options using the total installed cost and 

first-year operating cost as estimated for 

each sample household or building. For 

switching to occur, the total installed 

cost of the electric option must be less 

than the NWGF standards case option. 

The model assumes that a consumer 

will switch to an electric heating option 

if the PBP of the condensing NWGF 

relative to the electric heating option is 

greater than 3.5 years or the PBP relative 

to the electric heating option is 

negative.208 In the case of switching to 

an electric heating option, the model 

selects the most economically beneficial 

product. DOE requests comment on the 

consumer’s willingness to switch 

heating options, especially for heat 

pumps. 

DOE acknowledges that the consumer 

survey data it used to determine the 

switching criterion do not directly 

address the consumer choice to switch 

heating fuels, but because the data 

reflect a trade-off between first cost and 

ongoing savings, it is reasonable to 

expect that the payback criterion is 

broadly reflective of the potential 

consumer behavior regarding switching. 

Furthermore, the fuel switching results 

from DOE’s analysis match the overall 

findings from the GTI Fuel Switching 

Study 209 (see appendix 8J of this NOPR 

TSD), which surveyed both contractors 

and home builders. In addition to the 

primary estimate, DOE conducted 

sensitivity analyses using higher and 

lower levels of switching, as well as a 

scenario with no switching. The 

sensitivity analyses use payback periods 

that are one year higher or lower than 

3.5 years (i.e., 2.5 years and 4.5 years). 

DOE’s analysis also takes into account 

propane NWGFs when considering 

product switching. For the proposed 

standard, the switching fraction of 

propane NWGF consumers is 15.1 

percent, and the switching fraction of 

propane MHGF consumers is 17.6 

percent. 

The GTI report on the 2016 SNOPR 

submitted by APGA stated that the DOE 

product switching model should 

exclude product switching in cases 

where there is a first-cost advantage for 

the electric technology when comparing 

to an 80-percent AFUE NWGF, as well 

as when there is an operating cost 

advantage for the electric technology 

compared to the proposed TSL for 

NWGFs. According to the comment, 

these cases would likely cause product 

switching without an amended rule and 

would be considered as ‘‘No Impact’’ 

cases when using Consumer Economic 

Decision criteria proposed by GTI. GTI 

contends that DOE’s approach results in 

overstated LCC savings compared to 

rational product switching under a 

Consumer Economic Decision 

framework methodology. (APGA, No. 

292–2 at p. 25) In response, for the 2016 

September SNOPR, DOE’s product 

switching methodology was primarily 

dependent on a first-cost comparison 

between an alternative electric option 

and the standards-compliant NWGF 

option. As a result, DOE estimated that 

switching could occur when the first 

cost of an alternative electric option is 

lower than the baseline NWGF (80 

percent AFUE) and the operating cost of 

the alternative electric option is less 

than the standards-compliant NWGF 

option. For this NOPR, DOE adopted a 

more conservative approach and 

excluded these households from the 

product switching methodology. 

b. Switching Resulting From Standards 

for Mobile Home Gas Furnaces 

For the September 2016 SNOPR (since 

withdrawn), DOE concluded that fuel 

switching would be unlikely for 

MHGFs. 81 FR 65720, 65793 (Sept. 23, 

2016). 

Nortek and MHI stated that DOE must 

consider product switching in the 

MHGF market. (Nortek, No. 300 at p. 3; 

MHI, No. 282 at p. 1) Nortek and MHI 

stated that the proposed rule will lead 

to increased switching from MHGFs to 

less-efficient electric heating options 


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210Fujita, S., Estimating Price Elasticity using 

Market-Level Appliance Data. LBNL–188289 

(August 2015) (Available at: etapublications.lbl.gov/sites/default/files/lbnl188289.pdf) (Last accessed Feb. 15, 2022). 

because in many instances, it is 

impractical, if not impossible, to install 

a condensing furnace due to a 

manufactured home’s structural 

framework. MHI cited a survey from 

AGA showing that 20 percent of mobile 

homes utilizing non-condensing MHGFs 

would not be able to install a 

condensing furnace because of the 

home’s framework or other issues. MHI 

argued that these consumers would 

switch to less-efficient electric heating 

equipment. (MHI, No. 282 at p. 5) 

Nortek and MHI stated that 68 percent 

of the 8.5 million existing manufactured 

homes are located in the South, where 

condensing MHGFs are not costeffective for the consumer, adding that 

these homeowners would likely switch 

to alternative forms of energy for 

heating. (Nortek, No. 300 at pp. 7–8; 

MHI, No. 282 at p. 5) The GTI report on 

the September 2016 SNOPR submitted 

by APGA stated that MHGF consumers 

tend to have lower incomes and are 

even more sensitive to first cost than 

NWGF consumers. The GTI report noted 

that it would be simple to switch to 

electric resistance heaters, including 

low-cost space heaters. The GTI report 

stated that the installed cost difference 

is high enough for MHGFs that in only 

20 percent of the cases is the simple 

payback period for a 92-percent AFUE 

MHGF less than 3.5 years, which 

indicates a high probability of product 

switching in the MHGF market. (APGA, 

No. 292–2 at pp. A–31—A–33) 

For this NOPR, DOE added product 

switching in its analysis for MHGFs. 

The MHGF product switching 

methodology is similar to the product 

switching methodology for NWGFs, 

except that there is no switching from 

gas storage water heaters to electric 

storage water heaters, since MHGFs and 

gas storage water heaters do not share 

common vents. See appendix 8J of the 

TSD for this NOPR for more details 

regarding the product switching model 

for MHGFs. 

12. Accounting for Furnace Repair as an 

Alternative to Replacement Under 

Potential Standards 

Several stakeholders commented that 

when facing the costly installation of a 

condensing furnace, consumers will 

likely delay the replacement of their 

existing furnace by repairing it to extend 

the lifetime. (ACCA, No. 265 at p. 2; 

HARDI, No. 271 at p. 3; Carrier, No. 302 

at pp. 4–6; PGW, No. 273 at p. 4; 

SoCalGas, No. 304–3 at p. 5; Rheem, No. 

307 at pp. 14, 15; Goodman, No. 308 at 

pp. 11–12; AHRI, No. 303 at pp. 7–9; 

Lennox, No. 299 at pp. 16–17, 

Multifamily Associations, No. 260 at p. 

2) AHRI stated that DOE has not 

provided a reasoned basis for excluding 

the repair option, other than the 

difficulty of including the potential for 

repair in the consumer choice model 

DOE is currently using. AHRI 

characterized this as an arbitrary and 

unsupported decision, particularly since 

in other rulemakings, DOE has taken a 

very different approach. (AHRI, No. 303 

at pp. 7–9) Lennox offered a similar 

comment. (Lennox, No. 299 at pp. 16– 

17) Carrier stated that DOE did not 

analyze the repair vs. replace option, 

disregarding stakeholders’ comments 

that increased product and installation 

costs will drive up the frequency of both 

product switching and repair. (Carrier, 

No. 302 at pp. 4–6) SoCalGas 

recommended that DOE should account 

for extended repairs, as this may be the 

most economical option for some 

retrofit consumers who need a NWGF 

with a capacity above the small NWGF 

threshold but for whom switching to 

electric products would be expensive. 

(SoCalGas, No. 304–3 at p. 5) Goodman 

stated that the majority of respondents 

to an HVAC survey conducted by Parks 

Associates would replace a system if the 

repair cost is half the total cost of new 

equipment. (Goodman, No. 308 at pp. 

11–12) Rheem commented that 

homeowners will most likely repair an 

old furnace and replace components for 

as long as possible before switching 

products. (Rheem, No. 307 at p. 15) 

Spire stated that according to informal 

interviews it conducted with Canadian 

gas utilities, many homeowners have 

continued repairing their older, lowerefficiency NWGFs to avoid having to 

replace them with condensing NWGFs. 

(Spire, No. 309–1 at p. 17) The 

Multifamily Associations stated that 

rather than replace an aging, inefficient 

NWGF with a new, efficient model, 

multifamily property owners will 

typically repair the existing NWGF. 

(Multifamily Associations, No. 260 at p. 

2) 

In contrast, the Efficiency Advocates 

stated that few contractors will repair 

major malfunctions, such as a failed 

heat exchanger or failed air handler, 

because the repair costs are a large 

percentage of the purchase price of a 

new unit. They also commented that 

very few consumers will make a major 

investment in a repair when such repair 

cost is a large percentage of a new unit’s 

cost. The Efficiency Advocates noted 

that Canada has had a condensing 

furnace standard for several years 

without reporting a substantial increase 

in repairs. (Efficiency Advocates, No. 

285 at p. 4) 

For this NOPR, DOE added a repair 

option into its consumer choice model. 

Because repair is likely to be considered 

first by consumers facing furnace 

replacement, DOE evaluated this option 

before the product switching options. 

To estimate the fraction of consumers 

in a standards case that would choose 

to repair their existing furnace rather 

than replace it or switch to an 

alternative product, DOE used a price 

elasticity parameter, which relates the 

incremental total installed cost to total 

gas furnace shipments, and an efficiency 

elasticity parameter, which relates the 

change in the operating cost to gas 

furnace shipments. Both types of 

elasticity relate changes in demand to 

changes in the corresponding 

characteristic (price or efficiency). A 

regression analysis estimated these 

terms separately from each other and 

found that the price elasticity of 

demand for several appliances is on 

average –0.45.210 Thus, for example, a 

price increase of 10 percent would 

result in a shipments decrease of 4.5 

percent, all other factors held constant. 

The same regression analysis found that 

the efficiency elasticity is estimated to 

be on average 0.2 (i.e., a 10-percent 

efficiency improvement, equivalent to a 

10-percent decrease in operating costs, 

would result in a shipments increase of 

2 percent, all else being equal). From 

these two parameters, DOE derived a 

probability that a given household will 

not purchase a furnace, which is 

interpreted as the household repairing 

rather than replacing the furnace. The 

regression analysis included a range for 

the elasticity parameters. The price 

elasticity parameter was adjusted by 

income such that the higher elasticity 

was assigned to lower-income 

households and the lower elasticity 

assigned to higher-income households, 

resulting in a greater probability of 

repairing existing equipment for lowerincome households. Households that are 

designated as doing a repair rather than 

replacement are not considered in the 

subsequent switching analysis. DOE 

also conducted sensitivity analyses 

using higher and lower rates of repair. 

See appendix 8J of the TSD for this 

NOPR for more details on the repair vs. 

replace consumer choice model for 

NWGFs and MHGFs. 

13. Payback Period Analysis 

The payback period is the amount of 

time it takes the consumer to recover the 

additional installed cost of moreefficient products, compared to baseline 

products, through energy cost savings. 

Payback periods are expressed in years. 


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211 DOE uses data on manufacturer shipments as 

a proxy for national sales, as aggregate data on sales 

are lacking. In general one would expect a close 

correspondence between shipments and sales. 

212The new owners primarily consist of 

households that add or switch to NWGFs or MHGFs 

during a major remodel. Because DOE calculates 

new owners as the residual between its shipments 

model compared to historical shipments, new 

owners also include shipments that switch away 

from NWGFs or MHGFs. 

213Appliance Magazine. Appliance Historical 

Statistical Review: 1954–2012 (2014). 

214Air-Conditioning, Heating, & Refrigeration 

Institute, Furnace Historical Shipments Data. 

(1996–2020) (Available at: www.ahrinet.org/ 

resources/statistics/historical-data/furnaceshistorical-data) (Last accessed Feb. 15, 2022). 

215Heating, Air-conditioning and Refrigeration 

Distributors International (‘‘HARDI’’). DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International), Gas Furnace Shipments Data from 

2013–2020 (Available at: www.drintldata.com) (Last 

accessed Feb. 15, 2022). 

216BRG Building Solutions. The North American 

Heating & Cooling Product Markets (2020 Edition) 

(Available at: www.brgbuildingsolutions.com/ 

reports-insights) (last accessed Feb. 15, 2022). 

217Air-Conditioning, Heating, and Refrigeration 

Institute (formerly Gas Appliance Manufacturers 

Association). Updated Shipments Data for 

Residential Furnaces and Boilers, April 25, 2005 

(Available at: www.regulations.gov/document/ 

EERE-2006-STD-0102-0138) (Last accessed Feb. 15, 

2022). 

218Air-Conditioning, Heating, and Refrigeration 

Institute. Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2004–2009 and 

2010–2015 Data Provided to DOE contractors, July 

20, 2010 and November 26, 2016. 

219The results derived from RECS 2015 and 

CBECS 2012 in this NOPR show there are 45.0 and 

1.5 million NWGFs in residential and commercial 

buildings (excluding weatherized gas furnaces and 

MHGFs), respectively. DOE assumed that the share 

of shipments is similar to the share in the stock. 

BRG shipments data shows a similar fraction. See 

chapter 9 for further details. 

220U.S. Census Bureau, Manufactured Homes 

Survey: Annual Shipments to States from 1994– 

2020 (Available at: www.census.gov/data/tables/ 

time-series/econ/mhs/shipments.html) (Last 

accessed Feb. 15, 2022). 

221U.S. Census Bureau, Manufactured Homes 

Survey: Historical Annual Placements by State from 

1980–2013 (Available at: www.census.gov/data/ 

tables/time-series/econ/mhs/historical-annualplacements.html) (Last accessed Feb. 15, 2022). 

222U.S. Census Bureau—Housing and Household 

Economic Statistics Division, American Housing 

Survey, multiple years from 1973–2019 (Available 

at: www.census.gov/programs-surveys/ahs/ 

data.html) (Last accessed Feb. 15, 2022). 

223Energy Information Administration (‘‘EIA’’). 

Residential Energy Consumption Survey (RECS), 

multiple years from 1979–2015 (Available at: 

www.eia.gov/consumption/residential/) (last 

accessed Feb. 15, 2022). 

224Mortex estimated that the total number of 

MHGFs manufactured in 2014 was about 54,000, 

and about two-thirds were sold to the replacement 

market. Mortex also stated that MHGF sales have 

not been growing. (Mortex, No. 0157 at p. 3) 

(Available at: www.regulations.gov/document/ 

EERE-2014-BT-STD-0031-0157) (Last accessed Feb. 

15, 2022). 

Payback periods that exceed the life of 

the product mean that the increase in 

total installed cost is not recovered in 

reduced operating expenses. 

The inputs to the PBP calculation for 

each efficiency level are the change in 

total installed cost of the product and 

the change in the first-year annual 

operating expenditures relative to the 

baseline. The PBP calculation uses the 

same inputs as the LCC analysis, except 

that discount rates are not needed. 

As noted previously in section III.E.2 

of this document, EPCA establishes a 

rebuttable presumption that a standard 

is economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the first year’s energy 

savings resulting from the standard, as 

calculated under the applicable test 

procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) 

For each considered efficiency level, 

DOE determined the value of the first 

year’s energy savings by calculating the 

energy savings in accordance with the 

applicable DOE test procedure, and 

multiplying those savings by the average 

energy price projection for the year in 

which compliance with the amended or 

new standards would be required. 

G. Shipments Analysis 

1. Shipments Model and Inputs 

DOE uses projections of annual 

product shipments to calculate the 

national impacts of potential amended 

or new energy conservation standards 

on energy use, net present value 

(‘‘NPV’’), and future manufacturer cash 

flows.211 The shipments model takes an 

accounting approach, tracking market 

shares of each product class and the 

vintage of units in the stock. Stock 

accounting uses product shipments as 

inputs to estimate the age distribution of 

in-service product stocks for all years. 

The age distribution of in-service 

product stocks is a key input to 

calculations of both the NES and NPV, 

because operating costs for any year 

depend on the age distribution of the 

stock. 

DOE developed shipment projections 

based on historical data and an analysis 

of key market drivers for each product. 

DOE estimated NWGF and MHGF 

shipments by projecting shipments in 

three market segments: (1) replacement 

of existing consumer furnaces; (2) new 

housing; and (3) new owners in 

buildings that did not previously have 

a NWGF or MHGF or existing NWGF or 

MHGF owners that are adding an 

additional consumer furnace.212 DOE 

also considered whether standards that 

require more-efficient consumer 

furnaces would have an impact on 

consumer furnace shipments, as 

discussed in section IV.G.2 of this 

NOPR. 

a. Historical Shipments Data 

DOE assembled historical shipments 

data for NWGFs and MHGFs from 

Appliance Magazine for 1954–2012,213

AHRI from 1996–2020,214 HARDI from 

2013–2020,215 and BRG from 2007– 

2019.216 DOE also used the 1992 and 

1994–2003 shipments data by state 

provided by AHRI 217 and 2004–2009 

and 2010–2015 shipments data by North 

and Rest of Country regions provided by 

AHRI 218 as well as HARDI shipments 

data that is disaggregated by region and 

most states to disaggregate shipments by 

region. DOE also used CBECS 2012 data 

and BRG shipments data to estimate the 

commercial fraction of shipments.219

Disaggregated shipments for MHGFs are 

not available, so DOE disaggregated 

MHGF shipments from the total by 

using a combination of data from the 

U.S. Census,220 221 American Housing 

Survey (AHS),222 RECS,223 and a 2014 

MHGF shipments estimate by 

Mortex.224

b. Shipment Projections in No-New 

Standards Case 

As stated previously, DOE estimated 

NWGF and MHGF shipments by 

projecting shipments in three market 

segments: (1) replacement of existing 

furnaces; (2) new housing; and (3) new 

owners in buildings that did not 

previously have a NWGF or MHGF or 

existing NWGF or MHGF owners that 

are adding an additional consumer 

furnace. These projections reflect 

equipment switching that is occurring 

without standards and additions to 

homes without central heating. 

To project furnace replacement 

shipments, DOE developed retirement 

functions from furnace lifetime 

estimates and applied them to the 

existing products in the housing stock, 

which are tracked by vintage. DOE 

calculated replacement shipments using 

historical shipments and the lifetime 

estimates (average 21.4 years). In 

addition, DOE adjusted replacement 

shipments by taking into account 

demolitions, using the estimated 

changes to the housing stock from 

AEO2021. 

To project shipments to the new 

housing market, DOE utilized a forecast 

of new housing construction and 

historic saturation rates of furnaces in 

new housing. DOE used the AEO2021 

housing starts and commercial building 

floor space projections and data from 

U.S. Census Characteristics of New 


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225U.S. Census. Characteristics of New Housing 

from 1999–2020 (Available at: www.census.gov/ 

construction/chars/) (Last accessed Feb. 15, 2022). 

226U.S. Census. Characteristics of New Housing 

(Multi-Family Units) from 1973–2020 (Available at: 

www.census.gov/construction/chars/mfu.html) 

(Last accessed Feb. 15, 2022). 

227Home Innovation Research Labs (independent 

subsidiary of the National Association of Home 

Builders (‘‘NAHB’’). Annual Builder Practices 

Survey (2015–2019) (Available at: 

www.homeinnovation.com/trends_and_reports/ 

data/new_construction) (Last accessed Feb. 15, 

2022). 228U.S. Census Bureau, Characteristics of New 

Housing (Available at: www.census.gov/ 

construction/chars/) (Last accessed Feb. 15, 2022). 229 Decision Analysts, 2002, 2004, 2006, 2008, 

2010, 2013, 2016, and 2019 American Home 

Comfort Study (Available at: 

www.decisionanalyst.com/Syndicated/ 

HomeComfort/) (Last accessed Feb. 15, 2022). 

230AHRI (formerly GAMA), Furnace and Boiler 

Shipments data provided to DOE for Furnace and 

Boiler ANOPR (Jan. 23, 2002). 

231South Coast Air Quality Management District. 

2016 Air Quality Management Plan (‘‘AQMP’’) 

(Available at: www.aqmd.gov/home/air-quality/ 

clean-air-plans/air-quality-mgt-plan/final-2016- 

aqmp) (Last accessed Feb. 15, 2022). 

232 DOE also accounted for situations when 

installing a condensing furnace could leave an 

‘‘orphaned’’ gas water heater that would require 

expensive re-sizing of the vent system. Rather than 

incurring this cost, the consumer could choose to 

purchase an electric water heater along with a new 

furnace. 

Housing,225 226 Home Innovation 

Research Labs Annual Builder Practices 

Survey,227 RECS 2015, AHS 2019, and 

CBECS 2012 to estimate new 

construction saturations. DOE also 

estimated future furnace saturation rates 

in new single-family housing based on 

a weighted-average of values from the 

U.S. Census Bureau’s Characteristics of 

New Housing from 1990 through 

2020.228

To project shipments to the new 

owners market, DOE estimated the new 

owners based on the residual shipments 

from the calculated replacement and 

new construction shipments compared 

to historical shipments in the last 5 

years (2016–2020 for this NOPR). DOE 

compared this with data from Decision 

Analysts’ 2002 to 2019 American Home 

Comfort Study,229 2019 BRG data, and 

AHRI’s estimated shipments in 2000,230

which showed similar historical 

fractions of new owners. DOE assumed 

that the new owner fraction would be 

the 10-year average in 2029 and then 

decrease to zero by the end of the 

analysis period (2058). If the resulting 

fraction of new owners is negative, DOE 

assumed that it was primarily due to 

equipment switching or nonreplacement and added this number to 

replacements (thus reducing the 

replacements value). 

Table IV.18 shows the fraction of 

shipments for the replacement, new 

construction, and new owner markets. 

See chapter 9 for more details on the 

shipments analysis. 

TABLE IV.18—TOTAL AND FRACTION OF NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

SHIPMENTS BY MARKET SEGMENT (REPLACEMENTS, NEW CONSTRUCTION, AND NEW OWNERS) IN 2029 

Product class Market segment 

North Rest of country Total 

Million Percentage Million Percentage Million Percentage 

NWGF (Residential) .............. Replacements * ..................... 1.565 84 1.059 77 2.624 81 

New Construction .................. 0.293 16 0.319 23 0.611 19 

Total ............................... 1.857 100 1.378 100 3.235 100 

NWGF (Commercial) ............. Replacements * ..................... 0.043 68 0.031 68 0.074 68 

New Construction .................. 0.020 32 0.014 32 0.035 32 

Total ............................... 0.064 100 0.045 100 0.109 100 

MHGF .................................... Replacements * ..................... 0.026 62 0.012 48 0.038 57 

New Construction .................. 0.015 38 0.013 52 0.029 43 

Total ............................... 0.041 100 0.025 100 0.066 100 

* Includes new owners. 

Notice: percentages may not add up to 100% due to rounding. 

Assumptions regarding future policies 

encouraging electrification of 

households (such as in the states of 

California, Maryland, Washington, New 

York) or electric heating that decrease 

furnace shipments are speculative at 

this time, so such policies were not 

incorporated into the shipments 

projection. In regards to the proposed 

California 2016 AQMP,231 which targets 

the ozone depleting NOX emissions, 

DOE notes that the proposed control 

measure has two components: (1) 

implementing the existing Rule 1111 

emission limit of NOX for residential 

space heaters; and (2) incentivizing the 

replacement of older space heaters with 

more efficient low NOX products, and/ 

or ‘‘green technologies’’ such as solar 

heating or heat pumps. Incentivizing 

heat pumps is only one of the proposed 

approaches to reduce NOX emissions 

that were offered in the plan, but it is 

unclear how this would trigger actual 

market and/or policy changes in the 

future. Current requirements in many 

parts of California for low NOX and ultra 

low NOX furnaces could also increase 

the cost of these furnaces, but it is 

currently unclear if it will be enough to 

drive shipments towards other heating 

options (including heat pumps). Thus, it 

is very uncertain to what extent 

installations of heat pumps would 

increase. 

2. Impact of Potential Standards on 

Shipments 

a. Impact of Equipment Switching 

DOE applied the consumer choice 

model described in section IV.F.12 of 

this document to estimate the impact on 

NWGF shipments of product switching 

that may be incentivized by potential 

standards. The options available to each 

sample household or building are to 

purchase and install: (1) the NWGF that 

meets a particular standard level, (2) a 

heat pump, or (3) an electric furnace.232

As applied in the LCC and PBP 

analyses, the consumer choice model 

considers product prices in the 

compliance year and energy prices over 

the lifetime of products installed in that 

year. The shipments model considers 

the switching that might occur in each 

year of the analysis period (2029–2058). 

To do so, DOE estimated the switching 

in the first year of the analysis period 

(2029) and derived trends from 2029 to 

2058. First, DOE applied the NWGF 

product price trend described in section 

IV.F.2 of this document to project prices 

in 2058. DOE used the appropriate 

energy prices over the lifetime of 

products installed in each year. 


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233The NIA accounts for impacts in the 50 States 

and U.S. territories. 

234For the NIA, DOE adjusts the installed cost 

data from the LCC analysis to exclude sales tax, 

which is a transfer. 

Although the inputs vary, the decision 

criteria were the same in each year. For 

each considered standard level, the 

number of NWGFs shipped in each year 

is equal to the base shipments in the nonew-standards case minus the number 

of NWGF buyers who switch to either a 

heat pump or an electric furnace. The 

shipments model also tracks the number 

of additional heat pumps and electric 

furnaces shipped in each year. 

b. Impact of Repair vs. Replace 

In the September 2016 SNOPR, DOE 

did not include the option of repairing 

rather than replacing the furnace or 

switching to a heat pump or electric 

furnace in the consumer choice model 

described in section IV.F.12 of this 

document. 

Ingersoll Rand stated that not 

considering the option of consumers 

repairing rather than replacing a failed 

NWGF leads to overestimating the NES 

and NPV impacts of the proposed 

standards. (Ingersoll Rand, No. 297 at 

pp. 6, 12) 

As discussed in IV.F.12, for this 

NOPR, DOE estimated a fraction of both 

NWGF and MHGF replacement 

installations that choose to repair their 

equipment, rather than replace their 

equipment or switch to a heat pump or 

electric furnace, in the new standards 

case. The approach captures not only a 

decrease in NWGF and MHGF 

replacement shipments, but also the 

energy use from continuing to use the 

existing furnace and the cost of the 

repair. DOE assumes that the demand 

for space heating is inelastic and, 

therefore, that no household or 

commercial building will forgo either 

repairing or replacing their equipment 

(either with a new NWGF of MHGF or 

a suitable space-heating alternative). 

Because measures to limit standby 

mode and off mode energy use have a 

very small impact on the total installed 

cost and do not impact consumer utility, 

and thus have a minimal effect on 

consumer purchase decisions, DOE 

assumed that NWGF and MHGF 

shipments in the no-new-standards case 

would be unaffected by new standby 

mode and off mode standards. 

For details on DOE’s shipments 

analysis, product and fuel switching, 

and the repair option, see chapter 9 of 

the NOPR TSD. 

H. National Impact Analysis 

The NIA assesses NES and the 

national NPV from a national 

perspective of total consumer costs and 

savings that would be expected to result 

from new or amended standards at 

specific efficiency levels.233

(‘‘Consumer’’ in this context refers to 

consumers of the product being 

regulated.) DOE calculates the NES and 

NPV for the potential standard levels 

considered based on projections of 

annual product shipments, along with 

the annual energy consumption and 

total installed cost data from the energy 

use and LCC analyses.234 For the 

present analysis, DOE projected the 

energy savings, operating cost savings, 

product costs, and NPV of consumer 

benefits over the lifetime of NWGFs and 

MHGFs sold from 2029 through 2058. 

DOE evaluates the impacts of new or 

amended standards by comparing a case 

without such standards with standardscase projections. The no-new-standards 

case characterizes energy use and 

consumer costs for each product class in 

the absence of new or amended energy 

conservation standards. For this 

projection, DOE considers historical 

trends in efficiency and various forces 

that are likely to affect the mix of 

efficiencies over time. DOE compares 

the no-new-standards case with 

projections characterizing the market for 

each product class if DOE adopted new 

or amended standards at specific energy 

efficiency levels (i.e., the TSLs or 

standards cases) for that class. For the 

standards cases, DOE considers how a 

given standard would likely affect the 

market shares of products with 

efficiencies greater than the standard. In 

the standards cases, a small fraction of 

households will replace the furnace a 

second time within the 30-year 

analytical period of the NIA. For these 

households, the additional installation 

cost adders for going from a noncondensing furnace to a condensing 

furnace are not applied in the standards 

cases for the second replacement, as the 

household already has a condensing 

furnace. 

DOE uses a spreadsheet model to 

calculate the energy savings and the 

national consumer costs and savings 

from each TSL. AEO2021 is the source 

of the energy price trends as well as 

other inputs to the NIA such as 

projected housing starts and new 

commercial building floor space, 

heating and cooling degree day 

projections, and building shell 

efficiency projections. Interested parties 

can review DOE’s analyses by changing 

various input quantities within the 

spreadsheet. The NIA spreadsheet 

model uses typical values (as opposed 

to probability distributions) as inputs. 

Table IV.19 summarizes the inputs 

and methods DOE used for the NIA 

analysis for this NOPR. Discussion of 

these inputs and methods follows the 

table. See chapter 10 of the TSD for this 

NOPR for further details. 

TABLE IV.19—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS

Inputs Method 

Shipments ....................................... Annual shipments from shipments model. 

Compliance Date of Standard ........ 2029. 

Efficiency Trends ............................ No-New-Standards case: Based on historical data. Standard cases: Roll-up in the compliance year (except 

for EL 1, 90 percent AFUE for NWGFs as described below) and then DOE estimated growth in shipment-weighted efficiency in all the standards cases, except max-tech. 

Annual Energy Consumption per 

Unit.

Annual weighted-average values are a function of energy use at each TSL. Incorporates projection of future energy use based on AEO2021 projections for HDD/CDD and building shell efficiency index. 


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TABLE IV.19—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS—Continued 

Inputs Method 

Total Installed Cost per Unit ........... Annual weighted-average values are a function of cost at each TSL. Incorporates projection of future product prices based on historical data. 

Repair and Maintenance Cost per 

Unit.

Annual weighted-average values vary by efficiency level. 

Energy Prices .................................. AEO2021 projections (to 2050) and extrapolation thereafter. Natural gas and electricity marginal prices 

based on EIA and RECS 2015 billing data. 

Energy Site-to-Primary and FFC 

Conversion.

A time-series conversion factor based on AEO2021. 

Discount Rate ................................. Three and seven percent. 

Present Year ................................... 2021. 

1. Product Efficiency Trends 

A key component of the NIA is the 

trend in energy efficiency projected for 

the no-new-standards case and each of 

the standards cases. Section IV.F.10 of 

this document describes how DOE 

developed an energy efficiency 

distribution for the no-new-standards 

case for each of the considered product 

classes for the year of anticipated 

compliance with an amended or new 

standard (2029). To project the trend in 

efficiency absent amended standards for 

NWGFs and MHGFs over the entire 

shipments projection period, DOE 

extrapolated the historical trends in 

efficiency that were described in section 

IV.F.10 of this document. These trends 

are based on industry shipment data 

from AHRI and HARDI and include a 

near 100 percent saturation of 

condensing furnaces in the North 

region. For this NOPR, DOE estimated 

that the national market share of 

condensing products would grow from 

58 percent in 2029 to 62 percent by 

2058 for NWGFs, and from 31 percent 

to 43 percent for MHGFs. The market 

shares of the different condensing 

efficiency levels (i.e., 90-, 92-, 95-, and 

98-percent AFUE for NWGFs and 92-, 

95-, and 97-percent AFUE for MHGFs) 

are maintained in the same proportional 

relationship as in 2029. For standby 

mode and off mode energy use, DOE 

estimated that the efficiency 

distribution would remain the same 

throughout the forecast period. The 

approach is further described in 

appendix 8I and chapter 10 of the TSD 

for this NOPR. 

Lennox stated that DOE 

underestimated the market share of 

condensing NWGFs in the absence of 

standards, which results in the energy 

savings of the proposed rule being 

overstated by taking credit for energy 

savings from condensing NWGFs that 

would already be purchased without 

amended standards. (Lennox, No. 299 at 

p. 7) 

DOE agrees that there is some 

uncertainty associated with estimating 

of condensing furnace shipments in the 

future. As stated in section IV.F.10 of 

this document, DOE’s methodology is 

based on the latest available data. DOE 

developed for this NOPR a sensitivity 

analysis that captures some of this 

uncertainty. The scenario resulting in 

significant lower condensing shipment 

projections does not change the 

conclusion that the proposed standards 

are economically justified (see appendix 

10E of the TSD for this NOPR for the 

condensing shipments projection 

comparison, NES, and NPV results). 

To reduce the uncertainty associated 

with shipment projections for this 

product class, DOE requests data for 

shipments of condensing furnaces. 

For the standards cases, DOE used a 

‘‘roll-up’’ scenario to establish the 

shipment-weighted efficiency for the 

year that standards are assumed to 

become effective (2029). In this 

scenario, the market shares of products 

in the no-new-standards case that do not 

meet the standard under consideration 

would ‘‘roll up’’ to meet the new 

standard level, and the market share of 

products above the standard would 

remain unchanged. In the standards 

case with a 90-percent AFUE national 

standard, DOE estimated that many 

consumers will purchase a 92-percent 

AFUE NWGF rather than a 90-percent 

AFUE furnace because the extra 

installed cost is minimal, and the 

market has already moved significantly 

toward the 92-percent level. To develop 

standards case efficiency trends after 

2029, DOE estimated growth in 

shipment-weighted efficiency in the 

standards cases, except in the max-tech 

standards case. 

DOE did not have a basis on which to 

predict a change in efficiency trend for 

standby mode and off mode energy use, 

so DOE assumed that the efficiency 

distribution would not change after the 

first year of compliance. 

2. National Energy Savings 

The national energy savings analysis 

involves a comparison of national 

energy consumption of the considered 

products between each potential trial 

standards case (‘‘TSL’’) and the case 

with no new or amended energy 

conservation standards. DOE calculated 

the national energy consumption by 

multiplying the number of units (stock) 

of each product (by vintage or age) by 

the unit energy consumption (also by 

vintage). DOE calculated annual NES 

based on the difference in national 

energy consumption for the no-newstandards case and for each higher 

efficiency standard case. DOE estimated 

energy consumption and savings based 

on site energy and converted the 

electricity consumption and savings to 

primary energy (i.e., the energy 

consumed by power plants to generate 

site electricity) using annual conversion 

factors derived from AEO2021. For 

natural gas and LPG, DOE assumed that 

site energy consumption is the same as 

primary energy consumption. 

The per-unit annual energy use is 

adjusted with the building shell 

improvement index, which results in a 

decline of 3 percent in the heating load 

from 2029 to 2058, and the climate 

index, which results in a decline of 9 

percent in the heating load. Cumulative 

energy savings are the sum of the NES 

for each year over the timeframe of the 

analysis. 

DOE incorporated a rebound effect for 

NWGFs and MHGFs by reducing the site 

energy savings (and the associated FFC 

energy savings) in each year by 15 

percent. However, for commercial 

applications DOE applied no rebound 

effect in order to be consistent with 

other recent standards rulemakings (see 

section IV.F.4 of this document). 

In the standards cases, there are fewer 

shipments of NWGFs or MHGFs 

compared to the no-new-standards case 

because of product switching and repair 

vs. replaced, but there are additional 

shipments of heat pumps, electric 

furnaces, and electric water heaters. 

DOE incorporated the per-unit annual 

energy use of the heat pumps and 

electric furnaces that was calculated in 


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235For more information on NEMS, refer to The 

National Energy Modeling System: An Overview 

2009, DOE/EIA–0581(2009). (Available at: 

www.eia.gov/outlooks/aeo/nems/overview/pdf/ 

0581(2018).pdf) (Last accessed Feb. 15, 2022). 

236United States Office of Management and 

Budget, Circular A–4: Regulatory Analysis (Sept. 17, 

2003) Section E (Available at: www.whitehouse.gov/ 

wp-content/uploads/legacy_drupal_files/omb/ 

circulars/A4/a-4.pdf) (Last accessed Feb. 15, 2022). 

237RECS 2015 includes a category for households 

that pay only some of the gas bill. For the lowincome consumer subgroup analysis, DOE assumes 

that these households pay 50 percent of the gas bill, 

and, therefore, would receive 50 percent of 

Continued 

the LCC and PBP analyses (based on the 

specific sample households that switch 

to these products) into the NIA model. 

In 2011, in response to the 

recommendations of a committee on 

‘‘Point-of-Use and Full-Fuel-Cycle 

Measurement Approaches to Energy 

Efficiency Standards’’ appointed by the 

National Academy of Sciences, DOE 

announced its intention to use FFC 

measures of energy use and greenhouse 

gas and other emissions in the national 

impact analyses and emissions analyses 

included in future energy conservation 

standards rulemakings. 76 FR 51281 

(Aug. 18, 2011). After evaluating the 

approaches discussed in the August 18, 

2011 notice, DOE published a statement 

of amended policy in which DOE 

explained its determination that EIA’s 

NEMS is the most appropriate tool for 

its FFC analysis and its intention to use 

NEMS for that purpose. 77 FR 49701 

(Aug. 17, 2012). NEMS is a public 

domain, multi-sector, partial 

equilibrium model of the U.S. energy 

sector 235 that EIA uses to prepare its 

Annual Energy Outlook. The FFC factors 

incorporate losses in production and 

delivery in the case of natural gas 

(including fugitive emissions) and 

additional energy used to produce and 

deliver the various fuels used by power 

plants. The approach used for deriving 

FFC measures of energy use and 

emissions is described in appendix 10A 

of TSD for this NOPR. 

3. Net Present Value Analysis 

The inputs for determining the NPV 

of the total costs and benefits 

experienced by consumers are: (1) total 

annual installed cost, (2) total annual 

operating costs (energy costs and repair 

and maintenance costs), and (3) a 

discount factor to calculate the present 

value of costs and savings. DOE 

calculates net savings each year as the 

difference between the no-newstandards case and each standards case 

in terms of total savings in operating 

costs versus total increases in installed 

costs. DOE calculates operating cost 

savings over the lifetime of each product 

shipped during the projection period. 

As discussed in section IV.F.2 of this 

document, DOE developed NWGF and 

MHGF price trends based on historical 

PPI data. DOE applied the same trends 

to project prices for each product class 

at each considered efficiency level. 

DOE’s projection of product prices is 

described in appendix 10C of the NOPR 

TSD. 

To evaluate the effect of uncertainty 

regarding the price trend estimates, DOE 

investigated the impact of different 

product price projections on the 

consumer NPV for the considered TSLs 

for NWGFs and MHGFs. In addition to 

the default price trend, DOE considered 

two product price sensitivity cases: (1) 

a high price decline case based on PPI 

data from 2015–2020 and (2) a constant 

price trend case. The derivation of these 

price trends and the results of these 

sensitivity cases are described in 

appendix 10C of the NOPR TSD. 

As described in section IV.H.2 of this 

document, DOE assumed a 15-percent 

rebound from an increase in utilization 

of the product arising from the increase 

in efficiency (i.e., the direct rebound 

effect). In considering the economic 

impact on consumers due to the direct 

rebound effect, DOE accounted for 

change in consumer surplus attributed 

to additional heating/comfort from the 

purchase of a more-efficient unit. 

Overall consumer surplus is generally 

understood to be enhanced from 

rebound. The net consumer impact of 

the rebound effect is included in the 

calculation of operating cost savings in 

the consumer NPV results. See 

appendix 10G of the NOPR TSD for 

details on DOE’s treatment of the 

monetary valuation of the rebound 

effect. DOE requests comments on its 

approach to monetizing the impact of 

the rebound effect in both the NIA and 

the LCC analysis. 

The operating cost savings are energy 

cost savings, which are calculated using 

the estimated energy savings in each 

year and the projected price of the 

appropriate form of energy. To estimate 

energy prices in future years, DOE 

multiplied the average regional energy 

prices by the projection of annual 

national-average residential energy price 

changes in the Reference case from 

AEO2021, which has an end year of 

2050. To estimate price trends after 

2050, DOE used the average annual rate 

of change in prices from 2045 through 

2050. As part of the NIA, DOE also 

analyzed scenarios that used inputs 

from variants of the AEO2021 Reference 

case that have lower and higher 

economic growth. Those cases have 

lower and higher energy price trends 

compared to the Reference case. NIA 

results based on these cases are 

presented in appendix 10D of the NOPR 

TSD. 

In calculating the NPV, DOE 

multiplies the net savings in future 

years by a discount factor to determine 

their present value. For this NOPR, DOE 

estimated the NPV of consumer benefits 

using both a 3-percent and a 7-percent 

real discount rate. DOE uses these 

discount rates in accordance with 

guidance provided by the Office of 

Management and Budget (‘‘OMB’’) to 

Federal agencies on the development of 

regulatory analysis.236 The discount 

rates for the determination of NPV are 

in contrast to the discount rates used in 

the LCC analysis, which are designed to 

reflect a consumer’s perspective. The 7- 

percent real value is an estimate of the 

average before-tax rate of return to 

private capital in the U.S. economy. The 

3-percent real value represents the 

‘‘social rate of time preference,’’ which 

is the rate at which society discounts 

future consumption flows to their 

present value. 

I. Consumer Subgroup Analysis 

In analyzing the potential impact of 

new or amended energy conservation 

standards on consumers, DOE evaluates 

the impact on identifiable subgroups of 

consumers that may be 

disproportionately affected by a new or 

amended national standard. The 

purpose of a subgroup analysis is to 

determine the extent of any such 

disproportional impacts. DOE evaluates 

impacts on particular subgroups of 

consumers by analyzing the LCC 

impacts and PBP for those particular 

consumers from alternative standard 

levels. For this NOPR, DOE analyzed the 

impacts of the considered standard 

levels on two subgroups: (1) low-income 

households and (2) senior-only 

households. The analysis used subsets 

of the RECS 2015 sample composed of 

households that meet the criteria for the 

considered subgroups. DOE used the 

LCC and PBP spreadsheet model to 

estimate the impacts of the considered 

efficiency levels on these subgroups. 

Chapter 11 in the NOPR TSD describes 

the consumer subgroup analysis. 

1. Low-Income Households 

Low-income households are 

significantly more likely to be renters or 

live in subsidized housing units, 

compared to home owners. DOE notes 

that in these cases the landlord 

purchases the equipment and may pay 

the gas bill as well. RECS 2015 includes 

data on whether a household pays for 

the gas bill, allowing DOE to categorize 

households appropriately in the 

analysis.237 For this consumer subgroup 


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operating cost benefits of an amended energy 

conservation standard. 

analysis, DOE considers the impact on 

the low-income household narrowly, 

excluding any costs or benefits that are 

accrued by either a landlord or 

subsidized housing agency. This allows 

DOE to determine whether low-income 

households are disproportionately 

affected by an amended energy 

conservation standard in a more 

representative manner. DOE takes into 

account a fraction of renters that face 

product switching (when landlords 

switch to products that have lower 

upfront costs but higher operating costs, 

which will be incurred by tenants). 

Table IV.1920 summarizes the lowincome statistics and potential impacts 

compared to DOE’s LCC analysis results. 

TABLE IV.19—SUMMARIZED LOW-INCOME STATISTICS AND POTENTIAL NET BENEFITS COMPARED TO DOE’S LCC 

ANALYSIS RESULTS

Type of household * (pay for gas?) ** 

Percentage of low-income 

sample * Impact on energy bill Impact of first cost 

NWGF MHGF 

Renters (Pay for Gas Bill) .......................... 52.2 46.9 Full/Partial savings .................................... None. *** 

Renters (Do Not Pay for Gas Bill) ............. 9.9 0.0 None .......................................................... None. *** 

Owners (Pay for Gas Bill) .......................... 37.4 49.6 Full/Partial savings .................................... Full. 

Owners (Do Not Pay for Gas Bill) ............. 0.5 3.5 None .......................................................... Full. 

* RECS 2015 lists three categories: (1) Owned or being bought by someone in your household (here classified as ‘‘Owners’’ in this table); (2) 

Rented (here classified as ‘‘Renters’’ in this table); (3) Occupied without payment of rent (also classified as ‘‘Renters’’ in this table). Therefore, 

renters include occupants in subsidized housing including public housing, subsidized housing in private properties, and other households that do 

not pay rent RECS 2015 does not distinguish homes in subsidized or public housing. 

** RECS 2015 lists four categories: (1) Household is responsible for paying for all used in this home; (2) All used in this home is included in the 

rent or condo fee; (3) Some is paid by the household, some is included in the rent or condo fee; and (4) Paid for some other way. ‘‘Pay for Gas 

Bill’’ includes only category (1), all other categories are included in ‘‘Don’t Pay for Gas Bill’’. 

*** For occupants in public housing and other households that do not pay rent the impact of first cost would be none. 

The majority of low-income 

households that experience a net cost at 

TSL 8 are homeowner households, as 

opposed to renters. These households 

either have a smaller capacity NWGF or 

MHGF, or a lower building heating load 

due to the local climate, such that the 

reduction in operating costs does not 

offset the higher total installed cost of a 

higher-efficiency furnace. Unlike 

renters, homeowners would bear the full 

cost of installing a new furnace. For 

these households, a potential rebate 

program to reduce the total installed 

costs would be effective in lowering the 

percentage of low-income consumers 

with a net cost. DOE understands that 

the landscape of low-income consumers 

with a furnace may change before the 

compliance date of amended energy 

conservation standards, if finalized. For 

example, point-of-sale rebate programs 

are being considered that may moderate 

the impact on low-income consumers to 

help offset the total installed cost of a 

condensing furnace, particularly given 

the lower total installed cost of smaller 

capacity NWGFs and MHGFs, or offset 

the costs of switching to an electric 

heating systems. Currently, DOE is 

noticing State or utility program rebates 

in the Northeast, for example, that 

support additional heat pump 

deployment as a result of 

decarbonization policy goals. Point-ofsale rebates or weatherization programs 

could also reduce the total number of 

low-income consumers that would be 

impacted because the household no 

longer has a furnace to upgrade. DOE is 

particularly interested in seeking 

comment around the landscape of 

heating replacements leading up to 

2029, which may impact the lowincome consumer economics being 

presented and considered in this 

proposed rulemaking. 

Measures of energy insecurity provide 

another accounting of the number of 

households that are affected by cost 

changes due to rules for heating 

equipment energy efficiency in addition 

to the senior-only and low-income 

categories used by DOE in this analysis. 

Energy insecurity in the 2020 RECS 

quantifies the households reporting one 

or more of the metrics for energy 

insecurity, including that they that are 

foregoing basic necessities to pay for 

energy, and that they leave their home 

at an unhealthy temperature due to 

energy cost. The energy insecurity data 

are disaggregated by heating equipment 

type, income category, race, ethnicity, 

presence of children, presence of 

seniors, regional distribution, and 

ownership/rental status. DOE has 

determined that the energy insecure 

designation captures more households 

than the low-income and seniors-only 

categories used for distributional 

analysis. Similar PBP and net savings/ 

net cost analysis applied to energy 

insecure households could result in 

larger impacts than for the categories 

DOE chose to analyze and may be more 

directly interpreted in terms of welfare 

changes that can be disaggregated by the 

factors already listed. DOE seeks 

comment on conducting distributional 

analysis for energy insecure households 

in addition to, or instead of, the lowincome and seniors-only categories 

currently analyzed and described in the 

NOPR. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed an MIA to determine 

the financial impact of proposed new 

and amended energy conservation 

standards on manufacturers of NWGFs 

and MHGFs and to estimate the 

potential impacts of such standards on 

domestic direct employment, 

manufacturing capacity, and cumulative 

regulatory burden for those 

manufacturers. The MIA has both 

quantitative and qualitative aspects. The 

quantitative part of the MIA includes 

analyses of forecasted industry cash 

flows to calculate the INPV, additional 

investments in research and 

development (‘‘R&D’’) and 

manufacturing capital necessary to 

comply with amended standards, and 

the potential impact on domestic 

manufacturing employment. 

Additionally, the MIA seeks to 

qualitatively determine how amended 

energy conservation standards might 

affect manufacturers’ capacity and 

competition, as well as how standards 

contribute to manufacturers’ overall 

regulatory burden. Finally, the MIA 

serves to identify any disproportionate 


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238A copy of the GRIM spreadsheet tool is 

available on the DOE website for this rulemaking: 

www1.eere.energy.gov/buildings/appliance_

standards/standards.aspx?productid=59&action

=viewlive. 239U.S. Securities and Exchange Commission’s 

Electronic Data Gathering, Analysis, and Retrieval 

system (‘‘EDGAR’’) database (Available at: 

www.sec.gov/edgar/search/) (Last accessed Feb. 4, 

2022). 

240U.S. Census Bureau’s Annual Survey of 

Manufactures: 2018–2019 (Available at 

www.census.gov/programs-surveys/asm/data/ 

tables.html) (Last accessed Oct. 19, 2021). 

impacts on manufacturer subgroups, 

including small business manufacturers. 

The quantitative part of the MIA 

primarily relies on the GRIM,238 an 

industry cash flow model with inputs 

specific to this rulemaking. The key 

GRIM inputs include data on the 

industry cost structure, unit production 

costs, product shipments, manufacturer 

markups, and investments in R&D and 

manufacturing capital required to 

produce compliant products. The key 

GRIM outputs are INPV, which is the 

sum of industry annual cash flows 

throughout the analysis period 

discounted using the industry-weighted 

average cost of capital, and the impact 

on domestic manufacturing 

employment. The model uses standard 

accounting principles to estimate the 

impacts of amended energy 

conservation standards on the NWGF 

and MHGF manufacturing industry by 

comparing changes in INPV and 

domestic production employment 

between the no-new-standards case and 

each of the standard levels (i.e., TSLs). 

To capture the uncertainty relating to 

manufacturer pricing strategy following 

amended standards, the GRIM estimates 

a range of possible impacts under 

different manufacturer markup 

scenarios. 

The qualitative part of the MIA 

addresses manufacturer characteristics 

and market trends. Specifically, the MIA 

considers such factors as manufacturing 

capacity, competition within the 

industry, the cumulative regulatory 

burden of other Federal product-specific 

regulations, and impacts on 

manufacturer subgroups. The complete 

MIA is outlined in chapter 12 of the 

NOPR TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In the first 

phase of the MIA, DOE prepared a 

profile of the NWGF and MHGF 

manufacturing industry based on the 

market and technology assessment and 

publicly available information. This 

included a top-down cost analysis of 

NWGF and MHGF manufacturers in 

order to derive preliminary financial 

inputs for the GRIM (e.g., selling, 

general, and administration (‘‘SG&A’’) 

expenses; R&D expenses; and tax rates). 

DOE used public sources of information, 

including company SEC 10–K filings,239

corporate annual reports, the U.S. 

Census Bureau’s Annual Survey of 

Manufactures (‘‘ASM’’),240 and prior 

NWGF and MHGF rulemakings, as well 

as subscription-based market research 

tools, to conduct this analysis. 

In the second phase of the MIA, DOE 

prepared a framework industry cashflow analysis to quantify the potential 

impacts of new energy conservation 

standards. The GRIM uses several 

factors to determine a series of annual 

cash flows starting with the 

announcement of the standards and 

extending over a 30-year period 

following the compliance date of the 

standards. These factors include annual 

expected revenues, costs of sales, SG&A 

and R&D expenses, taxes, and capital 

expenditures. In general, energy 

conservation standards can affect 

manufacturer cash flow in three distinct 

ways: (1) create a need for increased 

investment; (2) raise production costs 

per unit; and (3) alter revenue due to 

higher per-unit prices and changes in 

sales volumes. 

In addition, during the second phase, 

DOE developed interview guides to 

distribute to NWGF and MHGF 

manufacturers in order to develop other 

key GRIM inputs, including product and 

capital conversion costs, and to gather 

additional information on the potential 

impacts of amended energy 

conservation standards on revenue, 

direct employment, capital assets, 

industry competitiveness, and 

manufacturer subgroup impacts. 

In the third phase of the MIA, DOE’s 

contractor conducted structured, 

detailed interviews with NWGF and 

MHGF manufacturers. These interviews 

covered engineering, manufacturing, 

procurement, and financial topics to 

validate assumptions used in the GRIM. 

The interviews also solicited 

information about manufacturers’ views 

of the industry as a whole and their key 

concerns regarding this rulemaking. 

DOE’s contractor conducted 

manufacturer interviews for the 

withdrawn March 2015 NOPR. DOE’s 

contractor conducted additional 

abridged interviews in October 2021 for 

the purposes of updating analyses. 

Additionally, in the third phase, DOE 

evaluated subgroups of manufacturers 

that may be disproportionately 

impacted by amended standards or that 

may not be accurately represented by 

the average cost assumptions used to 

develop the industry cash-flow analysis. 

For example, small manufacturers, 

niche players, or manufacturers 

exhibiting a cost structure that largely 

differs from the industry average could 

be more negatively affected by amended 

energy conservation standards. The 

small business subgroup is discussed in 

section VI.B of this document, ‘‘Review 

under the Regulatory Flexibility Act’’ 

and in chapter 12 of the NOPR TSD. 

2. Government Regulatory Impact Model 

and Key Inputs 

DOE uses the GRIM to quantify the 

changes in cash flows over time due to 

amended energy conservation 

standards. These changes in cash flows 

result in either a higher or lower INPV 

for the standards cases compared to the 

no-new-standards case. The GRIM 

analysis uses a standard annual cash 

flow analysis that incorporates 

manufacturer costs, manufacturer 

markups, shipments, and industry 

financial information as inputs. It then 

models changes in costs, investments, 

and manufacturer margins that result 

from new energy conservation 

standards. The GRIM calculates a series 

of annual cash flows beginning with the 

reference year of the analysis, 2022, and 

continuing to the terminal year of the 

analysis, 2058. DOE calculates INPV by 

summing the stream of annual 

discounted cash flows throughout the 

analysis period. 

DOE used a real discount rate of 6.4 

percent for NWGF and MHGF 

manufacturers. The discount rate 

estimate was derived from industry 

corporate annual reports to the 

Securities and Exchange Commission 

(‘‘SEC 10-Ks’’) and then modified 

according to feedback received during 

manufacturer interviews. More 

information on the derivation of the 

manufacturers’ discount rate can be 

found in chapter 12 of the NOPR TSD. 

Many GRIM inputs came from the 

engineering analysis, the NIA, 

manufacturer interviews, and other 

research conducted during the MIA. The 

major GRIM inputs are described in 

detail in the following sections. 

For consideration of standby mode 

and off mode regulations, DOE modeled 

the impacts of the technology options 

for reducing electricity usage discussed 

in the engineering analysis (chapter 5 of 

the NOPR TSD). The GRIM analysis 

incorporates the increases in MPCs and 

changes in manufacturer markups into 

the results from the standby mode and 

off mode requirements. Due to the small 

cost of standby mode and off mode 

components relative to the overall cost 

of a NWGF or MHGF, DOE assumed that 

standby mode and off mode standards 

alone would not significantly impact 

product shipment numbers. DOE 

determined that the impacts of the 


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standby mode and off mode standard 

are substantially smaller than the 

impacts of the AFUE standard. 

The GRIM results for both the AFUE 

standards and the standby mode and off 

mode standards are discussed in section 

V.B.2 of this document. Additional 

details about the GRIM, discount rate, 

and other financial parameters can be 

found in chapter 12 of the NOPR TSD. 

a. Manufacturer Production Costs 

Manufacturing a higher-efficiency 

product is typically more expensive 

than manufacturing a baseline product 

due to the use of more complex 

components, which are typically more 

expensive than baseline components. 

The higher MPCs of more efficient 

products can affect revenue and gross 

margin, which will then affect the total 

volume of future shipments, and cash 

flows of NWGF and MHGF 

manufacturers. To calculate the MPCs 

for NWGFs and MHGFs at and above the 

baseline, DOE performed teardowns for 

representative units. The data generated 

from these analyses were then used to 

estimate the incremental materials, 

labor, depreciation, and overhead costs 

for products at each efficiency level. For 

a complete description of the MPCs, see 

chapter 5 of the NOPR TSD. 

b. Shipments Projections 

DOE used the GRIM to estimate 

industry revenues based on total unit 

shipment forecasts and the distribution 

of these values by efficiency level and 

product class. Changes in sales volumes 

and efficiency distribution can 

significantly affect manufacturer 

finances over the course of the analysis 

period. For this analysis, DOE used the 

NIA’s annual shipment forecasts from 

2022 (the reference year) to 2058 (the 

terminal year of the analysis period). In 

the shipments analysis, DOE estimates 

the distribution of efficiencies in the nonew-standards case and standards cases 

for all product classes. To account for a 

regional standard at TSL 4, shipment 

values in the GRIM are broken down by 

region, North and Rest of Country, for 

the NWGF and MHGF product classes. 

The NIA assumes that product 

efficiencies in the no-new-standards 

case that do not meet the energy 

conservation standard in the standards 

case either ‘‘roll up’’ to meet the 

amended standard or switch to another 

product, such as a heat pump or electric 

furnace. In other words, the market 

share of products that are below the 

energy conservation standard is added 

to the market share of products at the 

minimum energy efficiency level 

allowed under each standard case. The 

market share of products above the 

energy conservation standard is 

assumed to be unaffected by the 

standard in the compliance year. For a 

complete description of the shipments 

analysis see section IV.G of this 

document and chapter 9 of the NOPR 

TSD. 

c. Capital and Product Conversion Costs 

Amended energy conservation 

standards could cause manufacturers to 

incur one-time conversion costs to bring 

their production facilities and product 

designs into compliance. DOE evaluated 

the level of conversion-related 

expenditures that would be required to 

comply with each analyzed efficiency 

level in each product class. For the MIA, 

DOE classified these conversion costs 

into two major groups: (1) capital 

conversion costs; and (2) product 

conversion costs. Capital conversion 

costs are one-time investments in 

property, plant, and equipment 

necessary to adapt or change existing 

production facilities such that new 

compliant product designs can be 

fabricated and assembled. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with amended 

energy conservation standards. 

To evaluate the level of capital 

conversion expenditures manufacturers 

could incur to comply with amended 

AFUE energy conservation standards, 

DOE used manufacturer interviews to 

gather data on the anticipated level of 

capital investment that would be 

required at each efficiency level. 

Manufacturer data was aggregated to 

better reflect the industry as a whole 

and to protect confidential information. 

DOE then scaled up the capital 

conversion cost feedback from 

interviews to estimate total industry 

capital conversion costs. 

DOE assessed the product conversion 

costs at each considered AFUE 

efficiency level by integrating data from 

quantitative and qualitative sources. 

DOE considered market-share weighted 

feedback regarding the potential costs at 

each efficiency level from multiple 

manufacturers to estimate product 

conversion costs. Manufacturer data was 

aggregated to better reflect the industry 

as a whole and to protect confidential 

information. 

Industry conversion costs for the 

proposed AFUE standard total $149.0 

million. It consists of $107.8 million in 

capital conversion costs and $41.2 in 

product conversion costs. 

DOE calculated the conversion costs 

for the standby mode and off mode 

standards separately from the AFUE 

conversion costs. DOE anticipated that 

manufacturers would incur minimal 

capital conversion costs to comply with 

standby and off mode standards, as the 

engineering analysis indicates that all 

the design options that improve standby 

and off mode performance are 

component swaps which would not 

require new investments in production 

lines. However, the standby and off 

mode standards may require product 

conversion costs related to testing new 

components and component 

configurations as well as one-time 

updates to marketing materials. DOE 

estimated these product conversion 

costs based on the engineering analysis 

and feedback collected during 

manufacturer interviews. In general, 

DOE assumed that all conversionrelated investments occur between the 

year of publication of a final rule and 

the compliance year. The conversion 

cost figures used in the GRIM for the 

proposed standby and off mode 

standard total $1.6 million. For 

additional information on the estimated 

capital and product conversion costs, 

see chapter 12 of the NOPR TSD. 

d. Manufacturer Mark-Up Scenarios 

As discussed in section IV.C.2.e of 

this document, MSPs include 

manufacturer production costs and all 

non-production costs (i.e., SG&A, R&D, 

and interest), along with profit. To 

calculate the MSPs in the GRIM, DOE 

applied manufacturer markups to the 

MPCs estimated in the engineering 

analysis for each product class and 

efficiency level. For the MIA, DOE 

modeled three standards-case scenarios 

to represent the uncertainty regarding 

the potential impacts on prices and 

profitability for manufacturers following 

the implementation of amended energy 

conservation standards: (1) a 

preservation of gross margin percentage 

scenario; (2) a preservation of per-unit 

operating profit scenario; and (3) a 

tiered scenario. These scenarios lead to 

different markup values that, when 

applied to the MPCs, result in varying 

revenue and cash-flow impacts. The 

industry cash flow analysis results in 

section V.B.2 of this document present 

the impacts of the upper and lower 

bound markup scenarios on INPV. For 

the proposed AFUE standards, the 

preservation of gross margin percentage 

scenario represents the upper bound 

scenario, and the tiered scenario 

represents the lower bound scenario for 

INPV impacts. For the proposed standby 

and off mode standards, preservation of 

gross margin percentage scenario 

represents the upper bound scenario, 

and the per-unit preservation of 


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241The gross margin percentages correspond to 

manufacturer markups of 1.34 for NWGFs and 1.27 

for MHGFs. 

operating profit scenario represents the 

lower bound scenario for INPV impacts. 

Under the preservation of gross 

margin percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ across all efficiency levels, 

which assumes that following amended 

standards, manufacturers would be able 

to maintain the same amount of profit 

as a percentage of revenue at all 

efficiency levels within a product class. 

As production costs increase with 

efficiency, this scenario implies that the 

per-unit dollar profit will increase. 

Based on publicly-available financial 

information for NWGF and MHGF 

manufacturers, as well as comments 

from manufacturer interviews, DOE 

assumed average gross margin 

percentages of 25.3% for NWGFs and 

21.3% for MHGF.241 Manufacturers 

noted that this scenario represents the 

upper bound of the NWGF and MHGF 

industry’s profitability in the standards 

case because manufacturers can fully 

pass on additional costs due to 

standards to consumers. 

In the preservation of operating profit 

scenario, as the cost of production 

increases in the standards case, 

manufacturers reduce their 

manufacturer markups to a level that 

maintains per-unit operating profit in 

the year after the standard goes into 

effect. In this scenario, the industry 

maintains its operating profit in 

absolute dollars but not on a percentage 

basis. Manufacturer markups are set so 

that operating profit in the standards 

case is the same as in the no-newstandards case one year after the 

compliance date of the amended energy 

conservation standards. As a result, 

manufacturers are not able to earn 

additional operating profit from the 

increased production costs and the 

investments that are required to comply 

with amended standards. In percentage 

terms, the operating margin is reduced 

between the no-new-standards case and 

the standards cases. This scenario is the 

lower bound of the proposed standby 

mode and off mode standards. 

DOE also modeled a tiered scenario, 

which reflects the industry’s ‘‘good, 

better, best’’ pricing structure. DOE 

implemented the tiered markup 

scenario because several manufacturers 

stated in interviews that they offer 

multiple tiers of product lines that are 

differentiated, in part, by efficiency 

level. Manufacturers further noted that 

tiered pricing encompasses additional 

differentiators such as comfort features, 

brand, and warranty. To account for this 

nuance in the GRIM, DOE’s tiered markup structure incorporates both AFUE 

and combustion systems (e.g., singlestage, two-stage, and modulating 

combustion systems) into its ‘‘good, 

better, best’’ markup analysis. 

Multiple manufacturers suggested that 

amended standards could lead to a 

compression of overall mark-ups and 

reduce the profitability of higherefficiency products. During interviews, 

manufacturers provided information on 

the range of typical manufacturer markups in the ‘‘good, better, best’’ tiers. 

DOE used this information to estimate 

manufacturer mark-ups for NWGFs and 

MHGFs under a tiered pricing strategy 

in the no-new-standards case. In the 

standards cases, DOE modeled the 

situation in which amended standards 

result in a reduction of product 

differentiation, compression of the 

mark-up tiers, and an overall reduction 

in profitability. 

3. Manufacturer Interviews 

DOE contractors interviewed 

manufacturers representing 

approximately 65 percent of industry 

shipments. The information gathered 

during interviews enabled DOE to tailor 

the GRIM to reflect the unique 

characteristics of the gas-fired consumer 

furnace industry. 

In interviews, DOE asked 

manufacturers to describe their major 

concerns regarding this rulemaking. The 

following section highlights 

manufacturer concerns that helped 

inform the projected potential impacts 

of an amended standard on the industry. 

Manufacturer interviews are conducted 

under non-disclosure agreements 

(‘‘NDAs’’), so DOE does not document 

these discussions in the same way that 

it does public comments. 

a. Product Switching 

Several manufacturers stated that, 

depending on the level of the amended 

energy conservation standard, gas-fired 

consumer furnaces may not be 

economically justified for certain 

consumers. These consumers may be 

forced to seek alternatives with lower 

up-front costs. Manufacturers expressed 

concern that consumers may opt to buy 

alternative products, such as heat 

pumps, water heater systems, or electric 

space heaters. Such substitutions could 

decrease shipments of gas-fired 

furnaces, which in turn would reduce 

industry revenue. 

b. High Installation Costs for Some 

Consumers 

Multiple manufacturers noted that an 

energy conservation standard set above 

80-percent AFUE would make it 

difficult for substantial portions of the 

install base to replace their existing 

consumer furnaces. They noted the 

potential for significant installation and 

home renovation costs when replacing 

non-condensing furnaces with 

condensing furnaces due to the 

challenges of managing condensate from 

furnaces with efficiencies above 80 

percent AFUE. 

c. Negative Impacts on Industry 

Profitability 

During interviews, manufacturers 

agreed that if DOE set amended energy 

conservation standards too high, 

increased standards could limit their 

ability to differentiate consumer furnace 

products based on efficiency. As the 

standard approaches max-tech, 

manufacturers stated that there would 

be fewer performance differences and 

operating cost savings between baseline 

and premium products. They were 

concerned the drop in differentiation 

would lead to an erosion of 

manufacturer mark-ups (and 

profitability). 

K. Emissions Analysis 

The emissions analysis consists of 

two components. The first component 

estimates the effect of potential energy 

conservation standards on power sector 

and site (where applicable) combustion 

emissions of CO2, NOX, SO2, and Hg. 

The second component estimates the 

impacts of potential standards on 

emissions of two additional greenhouse 

gases, CH4 and N2O, as well as the 

reductions to emissions of other gases 

due to ‘‘upstream’’ activities in the fuel 

production chain. These upstream 

activities comprise extraction, 

processing, and transporting fuels to the 

site of combustion. 

The analysis of electric power sector 

emissions of CO2, NOX, SO2, and Hg 

uses emissions factors intended to 

represent the marginal impacts of the 

change in electricity consumption 

associated with amended or new 

standards. The methodology is based on 

results published for the AEO, including 

a set of side cases that implement a 

variety of efficiency-related policies. 

The methodology is described in 

appendix 13A in the NOPR TSD. The 

analysis presented in this notice uses 

projections from AEO2021. 

Power sector emissions of CH4 and 

N2O from fuel combustion are estimated 

using Emission Factors for Greenhouse 

Gas Inventories published by the 


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242Available at: www.epa.gov/sites/production/ 

files/2021-04/documents/emission-factors_

apr2021.pdf (Last accessed Feb. 15, 2022). 

243U.S. Environmental Protection Agency, 

External Combustion Sources, In Compilation of Air 

Pollutant Emission Factors. AP–42. Fifth Edition. 

Volume I: Stationary Point and Area Sources. 

Chapter 1 (Available at www.epa.gov/air-emissionsfactors-and-quantification/ap-42-compilation-airemissions-factors) (Last accessed Feb. 15, 2022). 

244For further information, see the Assumptions 

to AEO2021 report that sets forth the major 

assumptions used to generate the projections in the 

Annual Energy Outlook. (Available at: www.eia.gov/ 

outlooks/aeo/assumptions/) (Last accessed Feb. 15, 

2022). 

245CSAPR requires states to address annual 

emissions of SO2 and NOX, precursors to the 

formation of fine particulate matter (‘‘PM2.5’’) 

pollution, in order to address the interstate 

transport of pollution with respect to the 1997 and 

2006 PM2.5 National Ambient Air Quality Standards 

(‘‘NAAQS’’). CSAPR also requires certain states to 

address the ozone season (May-September) 

emissions of NOX, a precursor to the formation of 

ozone pollution, in order to address the interstate 

transport of ozone pollution with respect to the 

1997 ozone NAAQS. 76 FR 48208 (August 8, 2011). 

EPA subsequently issued a supplemental rule that 

included an additional five states in the CSAPR 

ozone season program; 76 FR 80760 (Dec. 27, 2011) 

(Supplemental Rule), and EPA issued the CSAPR 

Update for the 2008 ozone NAAQS. 81 FR 74504 

(Oct. 26, 2016). 

246 In Sept. 2019, the DC Court of Appeals 

remanded the 2016 CSAPR Update to EPA. In April 

2021, EPA finalized the 2021 CSAPR Update which 

resolved the interstate transport obligations of 21 

states for the 2008 ozone NAAQS. 86 FR 23054 

(April 30, 2021); see also, 86 FR 29948 (June 4, 

2021) (correction to preamble). The 2021 CSAPR 

Update became effective on June 29, 2021. The 

release of AEO 2021 in February 2021 predated the 

2021 CSAPR Update. On April 6, 2022, EPA issued 

a Proposed Rule that seeks to resolve the interstate 

transport obligations of 26 states under the Clean 

Air Act’s ‘‘good neighbor provision’’ for the 2015 

ozone NAAQS, by issuing federal implementation 

plan (‘‘FIP’’) requirements for these states. 87 FR 

20036, 20038. EPA proposes to establish NOx 

emission budgets that will require fossil fuel-fired 

power plants in 25 states to participate in an 

‘‘allowance-based ozone season trading program 

beginning in 2023’’ and NOX emissions limits ‘‘for 

certain other industrial stationary sources in 23 

states with an earliest possible compliance date of 

2026.’’ Id. at 87 FR 20036. 247See footnote 245. 

Environmental Protection Agency 

(‘‘EPA’’).242

The on-site operation of certain 

consumer furnaces requires combustion 

of fossil fuels and results in emissions 

of CO2, NOX, SO2, CH4, and N2O where 

these products are used. Site emissions 

of these gases were estimated using 

Emission Factors for Greenhouse Gas 

Inventories and, for NOX and SO2, 

emissions intensity factors from an EPA 

publication.243

FFC upstream emissions, which 

include emissions from fuel combustion 

during extraction, processing, and 

transportation of fuels, and ‘‘fugitive’’ 

emissions (direct leakage to the 

atmosphere) of CH4 and CO2, are 

estimated based on the methodology 

described in chapter 15 of the NOPR 

TSD. 

The emissions intensity factors are 

expressed in terms of physical units per 

megawatt-hour (‘‘MWh’’) or million 

British thermal units (‘‘MMBtu’’) of site 

energy savings. For power sector 

emissions, specific emissions intensity 

factors are calculated by sector and end 

use. Total emissions reductions are 

estimated using the energy savings 

calculated in the national impact 

analysis. 

1. Air Quality Regulations Incorporated 

in DOE’s Analysis 

DOE’s no-new-standards case for the 

electric power sector reflects the 

AEO2021, which incorporates the 

projected impacts of existing air quality 

regulations on emissions. AEO2021 

generally represents current legislation 

and environmental regulations, 

including recent government actions, 

that were in place at the time of 

preparation of AEO2021, including the 

emissions control programs discussed in 

the following paragraphs.244

SO2 emissions from affected electric 

generating units (‘‘EGUs’’) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (‘‘DC’’). (42 U.S.C. 7651 et 

seq.) SO2 emissions from numerous 

States in the eastern half of the United 

States are also limited under the CrossState Air Pollution Rule (‘‘CSAPR’’). 76 

FR 48208 (Aug. 8, 2011). CSAPR 

requires these States to reduce certain 

emissions, including annual SO2

emissions, and went into effect as of 

January 1, 2015.245 AEO2021 

incorporates implementation of CSAPR, 

including the update to the CSAPR 

ozone season program emission budgets 

and target dates issued in 2016, 81 FR 

74504 (Oct. 26, 2016).246 Compliance 

with CSAPR is flexible among EGUs and 

is enforced through the use of tradable 

emissions allowances. Under existing 

EPA regulations, for States subject to 

SO2 emissions limits under CSAPR, 

excess SO2 emissions allowances 

resulting from the lower electricity 

demand caused by the adoption of an 

efficiency standard could be used to 

permit offsetting increases in SO2

emissions by another regulated EGU. 

However, beginning in 2016, SO2

emissions began to fall as a result of the 

Mercury and Air Toxics Standards 

(‘‘MATS’’) for power plants. 77 FR 9304 

(Feb. 16, 2012). In the MATS final rule, 

EPA established a standard for hydrogen 

chloride as a surrogate for acid gas 

hazardous air pollutants (‘‘HAP’’), and 

also established a standard for SO2 (a 

non-HAP acid gas) as an alternative 

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions are being reduced 

as a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. To continue operating, coal 

power plants must have either flue gas 

desulfurization or dry sorbent injection 

systems installed. Both technologies, 

which are used to reduce acid gas 

emissions, also reduce SO2 emissions. 

Because of the emissions reductions 

under the MATS, it is unlikely that 

excess SO2 emissions allowances 

resulting from the lower electricity 

demand would be needed or used to 

permit offsetting increases in SO2

emissions by another regulated EGU. 

Therefore, energy conservation 

standards that decrease electricity 

generation would generally reduce SO2

emissions. DOE estimated SO2

emissions reduction using emissions 

factors based on AEO2021. 

CSAPR also established limits on NOX

emissions for numerous States in the 

eastern half of the United States. Energy 

conservation standards would have 

little effect on NOX emissions in those 

States covered by CSAPR emissions 

limits if excess NOX emissions 

allowances resulting from the lower 

electricity demand could be used to 

permit offsetting increases in NOX

emissions from other EGUs. In such 

case, NOx emissions would remain near 

the limit even if electricity generation 

goes down. A different case could 

possibly result, depending on the 

configuration of the power sector in the 

different regions and the need for 

allowances, such that NOX emissions 

might not remain at the limit in the case 

of lower electricity demand. In this case, 

energy conservation standards might 

reduce NOx emissions in covered 

States. Despite this possibility, DOE has 

chosen to be conservative in its analysis 

and has maintained the assumption that 

standards will not reduce NOX

emissions in States covered by CSAPR. 

Energy conservation standards would be 

expected to reduce NOX emissions in 

the States not covered by CSAPR.247

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps and, as such, 

DOE’s energy conservation standards 

would be expected to slightly reduce Hg 

emissions. DOE estimated mercury 

emissions reduction using emissions 

factors based on AEO2021, which 

incorporates the MATS. 

DOE welcomes any additional 

comments on the approach for 


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248See Interagency Working Group on Social Cost 

of Greenhouse Gases, Technical Support Document: 

Social Cost of Carbon, Methane, and Nitrous Oxide. 

Interim Estimates Under Executive Order 13990, 

Washington, DC, February 2021 (Available at: 

www.whitehouse.gov/wp-content/uploads/2021/02/ 

TechnicalSupportDocument_SocialCostofCarbon

MethaneNitrousOxide.pdf) (Last accessed Jan. 18, 

2022). 

249Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. 

Newbold, and A. Wolverton. Incremental CH4 and 

N2O mitigation benefits consistent with the US 

Government’s SC–CO2 estimates. Climate Policy. 

2015. 15(2): pp. 272–298. 

250National Academies of Sciences, Engineering, 

and Medicine. Valuing Climate Damages: Updating 

Estimation of the Social Cost of Carbon Dioxide. 

Continued 

conducting the emissions analysis for 

furnaces. 

L. Monetizing Emissions Impacts 

As part of the development of this 

proposed rule, for the purpose of 

complying with the requirements of 

Executive Order 12866, DOE considered 

the estimated monetary benefits from 

the reduced emissions of CO2, CH4, N2O, 

NOX, and SO2 that are expected to result 

from each of the TSLs considered. In 

order to make this calculation analogous 

to the calculation of the NPV of 

consumer benefit, DOE considered the 

reduced emissions expected to result 

over the lifetime of products shipped in 

the projection period for each TSL. This 

section summarizes the basis for the 

values used for monetizing the 

emissions benefits and presents the 

values considered in this NOPR. 

On March 16, 2022, the Fifth Circuit 

Court of Appeals (No. 22–30087) 

granted the Federal government’s 

emergency motion for stay pending 

appeal of the February 11, 2022, 

preliminary injunction issued in 

Louisiana v. Biden, No. 21–cv–1074– 

JDC–KK (W.D. La.). As a result of the 

Fifth Circuit’s order, the preliminary 

injunction is no longer in effect, 

pending resolution of the Federal 

government’s appeal of that injunction 

or a further court order. Among other 

things, the preliminary injunction 

enjoined the defendants in that case 

from ‘‘adopting, employing, treating as 

binding, or relying upon’’ the interim 

estimates of the social cost of 

greenhouse gases—which were issued 

by the Interagency Working Group on 

the Social Cost of Greenhouse Gases on 

February 26, 2021—to monetize the 

benefits of reducing greenhouse gas 

emissions. In the absence of further 

intervening court orders, DOE will 

revert to its approach prior to the 

injunction and present monetized 

benefits where appropriate and 

permissible under law. DOE requests 

comment on how to address the climate 

benefits of the proposal. 

1. Monetization of Greenhouse Gas 

Emissions 

DOE estimates the monetized benefits 

of the reductions in emissions of CO2, 

CH4, and N2O by using a measure of the 

SC of each pollutant (e.g., SC–CO2). 

These estimates represent the monetary 

value of the net harm to society 

associated with a marginal increase in 

emissions of these pollutants in a given 

year, or the benefit of avoiding that 

increase. These estimates are intended 

to include (but are not limited to) 

climate-change-related changes in net 

agricultural productivity, human health, 

property damages from increased flood 

risk, disruption of energy systems, risk 

of conflict, environmental migration, 

and the value of ecosystem services. 

DOE exercises its own judgment in 

presenting monetized climate benefits 

as recommended by applicable 

Executive Orders, and DOE would reach 

the same conclusion presented in this 

notice in the absence of the social cost 

of greenhouse gases, including the 

February 2021 Interim Estimates 

presented by the Interagency Working 

Group on the Social Cost of Greenhouse 

Gases. 

DOE estimated the global social 

benefits of CO2, CH4, and N2O 

reductions (i.e., SC–GHGs) using the 

estimates presented in the Technical 

Support Document: Social Cost of 

Carbon, Methane, and Nitrous Oxide 

Interim Estimates under Executive 

Order 13990 published in February 

2021 by the IWG.248 The SC–GHGs is 

the monetary value of the net harm to 

society associated with a marginal 

increase in emissions in a given year, or 

the benefit of avoiding that increase. In 

principle, SC–GHGs includes the value 

of all climate change impacts, including 

(but not limited to) changes in net 

agricultural productivity, human health 

effects, property damage from increased 

flood risk and natural disasters, 

disruption of energy systems, risk of 

conflict, environmental migration, and 

the value of ecosystem services. The 

SC–GHGs therefore, reflects the societal 

value of reducing emissions of the gas 

in question by one metric ton. The SC– 

GHGs is the theoretically appropriate 

value to use in conducting benefit-cost 

analyses of policies that affect CO2, N2O 

and CH4 emissions. As a member of the 

IWG involved in the development of the 

February 2021 SC–GHG TSD), the DOE 

agrees that the interim SC–GHG 

estimates represent the most appropriate 

estimate of the SC–GHG until revised 

estimates have been developed 

reflecting the latest, peer-reviewed 

science. 

The SC–GHGs estimates presented 

here were developed over many years, 

using transparent process, peerreviewed methodologies, the best 

science available at the time of that 

process, and with input from the public. 

Specifically, in 2009, the IWG, that 

included the DOE and other executive 

branch agencies and offices was 

established to ensure that agencies were 

using the best available science and to 

promote consistency in the social cost of 

carbon (SC–CO2) values used across 

agencies. The IWG published SC–CO2

estimates in 2010 that were developed 

from an ensemble of three widely cited 

integrated assessment models (IAMs) 

that estimate global climate damages 

using highly aggregated representations 

of climate processes and the global 

economy combined into a single 

modeling framework. The three IAMs 

were run using a common set of input 

assumptions in each model for future 

population, economic, and CO2

emissions growth, as well as 

equilibrium climate sensitivity—a 

measure of the globally averaged 

temperature response to increased 

atmospheric CO2 concentrations. These 

estimates were updated in 2013 based 

on new versions of each IAM. In August 

2016 the IWG published estimates of the 

social cost of methane (SC–CH4) and 

nitrous oxide (SC–N2O) using 

methodologies that are consistent with 

the methodology underlying the SC– 

CO2 estimates. The modeling approach 

that extends the IWG SC–CO2

methodology to non-CO2 GHGs has 

undergone multiple stages of peer 

review. The SC–CH4 and SC–N2O 

estimates were developed by Marten et 

al.249 and underwent a standard doubleblind peer review process prior to 

journal publication. In 2015, as part of 

the response to public comments 

received to a 2013 solicitation for 

comments on the SC–CO2 estimates, the 

IWG announced a National Academies 

of Sciences, Engineering, and Medicine 

review of the SC–CO2 estimates to offer 

advice on how to approach future 

updates to ensure that the estimates 

continue to reflect the best available 

science and methodologies. In January 

2017, the National Academies released 

their final report, Valuing Climate 

Damages: Updating Estimation of the 

Social Cost of Carbon Dioxide, and 

recommended specific criteria for future 

updates to the SC–CO2 estimates, a 

modeling framework to satisfy the 

specified criteria, and both near-term 

updates and longer-term research needs 

pertaining to various components of the 

estimation process (National 

Academies, 2017).250 Shortly thereafter, 


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2017. The National Academies Press: Washington, 

DC. 

251 Interagency Working Group on Social Cost of 

Carbon. Social Cost of Carbon for Regulatory Impact 

Analysis under Executive Order 12866. 2010. 

United States Government. (Available at: 

www.epa.gov/sites/default/files/2016-12/ 

documents/scc_tsd_2010.pdf) (Last accessed April 

15, 2022.); Interagency Working Group on Social 

Cost of Carbon. Technical Update of the Social Cost 

of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866. 2013. (Available at: 

www.federalregister.gov/documents/2013/11/26/ 

2013-28242/technical-support-document-technicalupdate-of-the-social-cost-of-carbon-for-regulatoryimpact) (Last accessed April 15, 2022.); Interagency 

Working Group on Social Cost of Greenhouse Gases, 

United States Government. Technical Support 

Document: Technical Update on the Social Cost of 

Carbon for Regulatory Impact Analysis-Under 

Executive Order 12866. August 2016. (Available at: 

www.epa.gov/sites/default/files/2016-12/ 

documents/sc_co2_tsd_august_2016.pdf) (Last 

accessed January 18, 2022.); Interagency Working 

Group on Social Cost of Greenhouse Gases, United 

States Government. Addendum to Technical 

Support Document on Social Cost of Carbon for 

Regulatory Impact Analysis under Executive Order 

12866: Application of the Methodology to Estimate 

the Social Cost of Methane and the Social Cost of 

Nitrous Oxide. August 2016. (Available at: 

www.epa.gov/sites/default/files/2016-12/ 

documents/addendum_to_sc-ghg_tsd_august_

2016.pdf) (Last accessed January 18, 2022). 

in March 2017, President Trump issued 

Executive Order 13783, which 

disbanded the IWG, withdrew the 

previous TSDs, and directed agencies to 

ensure SC–CO2 estimates used in 

regulatory analyses are consistent with 

the guidance contained in OMB’s 

Circular A–4, ‘‘including with respect to 

the consideration of domestic versus 

international impacts and the 

consideration of appropriate discount 

rates’’ (E.O. 13783, Section 5(c)). 

Benefit-cost analyses following E.O. 

13783 used SC–GHG estimates that 

attempted to focus on the U.S.-specific 

share of climate change damages as 

estimated by the models and were 

calculated using two discount rates 

recommended by Circular A–4, 3 

percent and 7 percent. All other 

methodological decisions and model 

versions used in SC–GHG calculations 

remained the same as those used by the 

IWG in 2010 and 2013, respectively. 

On January 20, 2021, President Biden 

issued Executive Order 13990, which reestablished the IWG and directed it to 

ensure that the U.S. Government’s 

estimates of the social cost of carbon 

and other greenhouse gases reflect the 

best available science and the 

recommendations of the National 

Academies (2017). The IWG was tasked 

with first reviewing the SC–GHG 

estimates currently used in Federal 

analyses and publishing interim 

estimates within 30 days of the E.O. that 

reflect the full impact of GHG 

emissions, including by taking global 

damages into account. The interim SC– 

GHG estimates published in February 

2021 are used here to estimate the 

climate benefits for this proposed 

rulemaking. The E.O. instructs the IWG 

to undertake a fuller update of the SC– 

GHG estimates by January 2022 that 

takes into consideration the advice of 

the National Academies (2017) and 

other recent scientific literature. 

The February 2021 SC–GHG TSD 

provides a complete discussion of the 

IWG’s initial review conducted under 

E.O. 13990. In particular, the IWG found 

that the SC–GHG estimates used under 

E.O. 13783 fail to reflect the full impact 

of GHG emissions in multiple ways. 

First, the IWG found that the SC–GHG 

estimates used under E.O. 13783 fail to 

fully capture many climate impacts that 

affect the welfare of U.S. citizens and 

residents, and those impacts are better 

reflected by global measures of the SC– 

GHG. Examples of effects omitted from 

the E.O. 13783 estimates include direct 

effects on U.S. citizens, assets, and 

investments located abroad, supply 

chains, U.S. military assets and interests 

abroad, and tourism, and spillover 

pathways such as economic and 

political destabilization and global 

migration that can lead to adverse 

impacts on U.S. national security, 

public health, and humanitarian 

concerns. In addition, assessing the 

benefits of U.S. GHG mitigation 

activities requires consideration of how 

those actions may affect mitigation 

activities by other countries, as those 

international mitigation actions will 

provide a benefit to U.S. citizens and 

residents by mitigating climate impacts 

that affect U.S. citizens and residents. A 

wide range of scientific and economic 

experts have emphasized the issue of 

reciprocity as support for considering 

global damages of GHG emissions. If the 

United States does not consider impacts 

on other countries, it is difficult to 

convince other countries to consider the 

impacts of their emissions on the United 

States. The only way to achieve an 

efficient allocation of resources for 

emissions reduction on a global basis— 

and so benefit the U.S. and its citizens— 

is for all countries to base their policies 

on global estimates of damages. As a 

member of the IWG involved in the 

development of the February 2021 SC– 

GHG TSD, DOE agrees with this 

assessment and, therefore, in this 

proposed rule DOE centers attention on 

a global measure of SC–GHG. This 

approach is the same as that taken in 

DOE regulatory analyses from 2012 

through 2016. A robust estimate of 

climate damages that accrue only to U.S. 

citizens and residents does not currently 

exist in the literature. As explained in 

the February 2021 TSD, existing 

estimates are both incomplete and an 

underestimate of total damages that 

accrue to the citizens and residents of 

the U.S. because they do not fully 

capture the regional interactions and 

spillovers discussed above, nor do they 

include all of the important physical, 

ecological, and economic impacts of 

climate change recognized in the 

climate change literature. As noted in 

the February 2021 SC–GHG TSD, the 

IWG will continue to review 

developments in the literature, 

including more robust methodologies 

for estimating a U.S.-specific SC–GHG 

value, and explore ways to better inform 

the public of the full range of carbon 

impacts. As a member of the IWG, DOE 

will continue to follow developments in 

the literature pertaining to this issue. 

Second, the IWG found that the use of 

the social rate of return on capital (7 

percent under current OMB Circular A– 

4 guidance) to discount the future 

benefits of reducing GHG emissions 

inappropriately underestimates the 

impacts of climate change for the 

purposes of estimating the SC–GHG. 

Consistent with the findings of the 

National Academies (2017) and the 

economic literature, the IWG continued 

to conclude that the consumption rate of 

interest is the theoretically appropriate 

discount rate in an intergenerational 

context (IWG 2010, 2013, 2016a, 

2016b),251 and recommended that 

discount rate uncertainty and relevant 

aspects of intergenerational ethical 

considerations be accounted for in 

selecting future discount rates. 

Furthermore, the damage estimates 

developed for use in the SC–GHG are 

estimated in consumption-equivalent 

terms, and so an application of OMB 

Circular A–4’s guidance for regulatory 

analysis would then use the 

consumption discount rate to calculate 

the SC–GHG. DOE agrees with this 

assessment and will continue to follow 

developments in the literature 

pertaining to this issue. DOE also notes 

that while OMB Circular A–4, as 

published in 2003, recommends using 3 

percent and 7 percent discount rates as 

‘‘default’’ values, Circular A–4 also 

reminds agencies that ‘‘different 

regulations may call for different 

emphases in the analysis, depending on 

the nature and complexity of the 

regulatory issues and the sensitivity of 

the benefit and cost estimates to the key 

assumptions.’’ On discounting, Circular 

A–4 recognizes that ‘‘special ethical 

considerations arise when comparing 

benefits and costs across generations,’’ 

and Circular A–4 acknowledges that 

analyses may appropriately ‘‘discount 


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252 Interagency Working Group on Social Cost of 

Greenhouse Gases (IWG). 2021. Technical Support 

Document: Social Cost of Carbon, Methane, and 

Nitrous Oxide Interim Estimates under Executive 

Order 13990. February. United States Government. 

(Available at: www.whitehouse.gov/briefing-room/ 

blog/2021/02/26/a-return-to-science-evidencebased-estimates-of-the-benefits-of-reducing-climatepollution/) (Last accessed Jan. 18, 2022). 

253For example, the February 2021 TSD discusses 

how the understanding of discounting approaches 

suggests that discount rates appropriate for 

intergenerational analysis in the context of climate 

change may be lower than 3 percent. 

future costs and consumption benefits 

. . . at a lower rate than for 

intragenerational analysis.’’ In the 2015 

Response to Comments on the Social 

Cost of Carbon for Regulatory Impact 

Analysis, OMB, DOE, and the other IWG 

members recognized that ‘‘Circular A–4 

is a living document’’ and ‘‘the use of 

7 percent is not considered appropriate 

for intergenerational discounting. There 

is wide support for this view in the 

academic literature, and it is recognized 

in Circular A–4 itself.’’ Thus, DOE 

concludes that a 7 percent discount rate 

is not appropriate to apply to value the 

social cost of greenhouse gases in the 

analysis presented in this analysis. In 

this analysis, to calculate the present 

and annualized values of climate 

benefits, DOE uses the same discount 

rate as the rate used to discount the 

value of damages from future GHG 

emissions, for internal consistency. That 

approach to discounting follows the 

same approach that the February 2021 

TSD recommends ‘‘to ensure internal 

consistency—i.e., future damages from 

climate change using the SC–GHG at 2.5 

percent should be discounted to the 

base year of the analysis using the same 

2.5 percent rate.’’ DOE has also 

consulted the National Academies’ 2017 

recommendations on how SC–GHG 

estimates can ‘‘be combined in RIAs 

with other cost and benefits estimates 

that may use different discount rates.’’ 

The National Academies reviewed 

‘‘several options,’’ including 

‘‘presenting all discount rate 

combinations of other costs and benefits 

with [SC–GHG] estimates.’’ 

As a member of the IWG involved in 

the development of the February 2021 

SC–GHG TSD, DOE agrees with this 

assessment and will continue to follow 

developments in the literature 

pertaining to this issue. 

While the IWG works to assess how 

best to incorporate the latest, peer 

reviewed science to develop an updated 

set of SC–GHG estimates, it set the 

interim estimates to be the most recent 

estimates developed by the IWG prior to 

the group being disbanded in 2017. The 

estimates rely on the same models and 

harmonized inputs and are calculated 

using a range of discount rates. As 

explained in the February 2021 SC– 

GHG TSD, the IWG has recommended 

that agencies revert to the same set of 

four values drawn from the SC–GHG 

distributions based on three discount 

rates as were used in regulatory analyses 

between 2010 and 2016 and subject to 

public comment. For each discount rate, 

the IWG combined the distributions 

across models and socioeconomic 

emissions scenarios (applying equal 

weight to each) and then selected a set 

of four values recommended for use in 

benefit-cost analyses: an average value 

resulting from the model runs for each 

of three discount rates (2.5 percent, 3 

percent, and 5 percent), plus a fourth 

value, selected as the 95th percentile of 

estimates based on a 3 percent discount 

rate. The fourth value was included to 

provide information on potentially 

higher-than-expected economic impacts 

from climate change. As explained in 

the February 2021 SC–GHG TSD, and 

DOE agrees, this update reflects the 

immediate need to have an operational 

SC–GHG for use in regulatory benefitcost analyses and other applications that 

was developed using a transparent 

process, peer-reviewed methodologies, 

and the science available at the time of 

that process. Those estimates were 

subject to public comment in the 

context of dozens of proposed 

rulemakings as well as in a dedicated 

public comment period in 2013. 

There are a number of limitations and 

uncertainties associated with the SC– 

GHG estimates. First, the current 

scientific and economic understanding 

of discounting approaches suggests 

discount rates appropriate for 

intergenerational analysis in the context 

of climate change are likely to be less 

than 3 percent, near 2 percent or 

lower.252 Second, the IAMs used to 

produce these interim estimates do not 

include all of the important physical, 

ecological, and economic impacts of 

climate change recognized in the 

climate change literature and the 

science underlying their ‘‘damage 

functions’’—i.e., the core parts of the 

IAMs that map global mean temperature 

changes and other physical impacts of 

climate change into economic (both 

market and nonmarket) damages—lags 

behind the most recent research. For 

example, limitations include the 

incomplete treatment of catastrophic 

and non-catastrophic impacts in the 

integrated assessment models, their 

incomplete treatment of adaptation and 

technological change, the incomplete 

way in which inter-regional and 

intersectoral linkages are modeled, 

uncertainty in the extrapolation of 

damages to high temperatures, and 

inadequate representation of the 

relationship between the discount rate 

and uncertainty in economic growth 

over long time horizons. Likewise, the 

socioeconomic and emissions scenarios 

used as inputs to the models do not 

reflect new information from the last 

decade of scenario generation or the full 

range of projections. The modeling 

limitations do not all work in the same 

direction in terms of their influence on 

the SC–CO2 estimates. However, as 

discussed in the February 2021 TSD, the 

IWG has recommended that, taken 

together, the limitations suggest that the 

interim SC–GHG estimates used in this 

final rule likely underestimate the 

damages from GHG emissions. DOE 

concurs with this assessment. 

DOE’s derivations of the SC–GHG 

(i.e., SC–CO2, SC–N2O, and SC–CH4) 

values used for this NOPR are discussed 

in the following sections, and the results 

of DOE’s analyses estimating the 

benefits of the reductions in emissions 

of these pollutants are presented in 

section V.B.6. 

a. Social Cost of Carbon 

The SC–CO2 values used for this 

NOPR were generated using the values 

presented in the 2021 update from the 

IWG’s February 2021 TSD. Table IV.20 

shows the updated sets of SC–CO2

estimates from the latest interagency 

update in 5-year increments from 2020 

to 2050. The full set of annual values 

used is presented in appendix 14A of 

the NOPR TSD. For purposes of 

capturing the uncertainties involved in 

regulatory impact analysis, DOE has 

determined it is appropriate to include 

all four sets of SC–CO2 values, as 

recommended by the IWG.253


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254See EPA, Revised 2023 and Later Model Year 

Light-Duty Vehicle GHG Emissions Standards: 

Regulatory Impact Analysis, Washington, DC, 

December 2021 (Available at: www.epa.gov/system/ 

files/documents/2021-12/420r21028.pdf) (Last 

accessed Jan. 13, 2022). 

255See Interagency Working Group on Social Cost 

of Greenhouse Gases, Technical Support Document: 

Social Cost of Carbon, Methane, and Nitrous Oxide. 

Interim Estimates Under Executive Order 13990, 

Washington, DC (February 2021) (Available at: 

www.whitehouse.gov/wp-content/uploads/2021/02/ 

TechnicalSupportDocument_SocialCostofCarbon

MethaneNitrousOxide.pdf) (Last accessed Jan. 18, 

2022). 

TABLE IV.20—ANNUAL SC–CO2 VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 

[2020$ per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th percentile 

2020 ................................................................................................................. 14 51 76 152 

2025 ................................................................................................................. 17 56 83 169 

2030 ................................................................................................................. 19 62 89 187 

2035 ................................................................................................................. 22 67 96 206 

2040 ................................................................................................................. 25 73 103 225 

2045 ................................................................................................................. 28 79 110 242 

2050 ................................................................................................................. 32 85 116 260 

In calculating the potential global 

benefits resulting from reduced CO2

emissions, DOE used the values from 

the 2021 interagency report, adjusted to 

2020$ using the implicit price deflator 

for gross domestic product (GDP) from 

the Bureau of Economic Analysis. For 

each of the four sets of SC–CO2 cases 

specified, the values for emissions in 

2020 were $14, $51, $76, and $152 per 

metric ton avoided (values expressed in 

2020$). DOE derived values from 2051 

to 2070 based on estimates published by 

EPA.254 These estimates are based on 

methods, assumptions, and parameters 

identical to the 2020–2050 estimates 

published by the IWG. DOE expects 

additional climate benefits to accrue for 

any longer-life furnaces post 2070, but 

a lack of available SC–CO2 estimates for 

emissions years beyond 2070 prevents 

DOE from monetizing these potential 

benefits in this analysis. If further 

analysis of monetized climate benefits 

beyond 2070 becomes available prior to 

the publication of the final rule, DOE 

will include that analysis in the final 

rule. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SC–CO2 value for that year in each of 

the four cases. To calculate a present 

value of the stream of monetary values, 

DOE discounted the values in each of 

the four cases using the specific 

discount rate that had been used to 

obtain the SC–CO2 values in each case. 

See chapter 13 for the annual emissions 

reduction. See appendix 14A for the 

annual SC–CO2 values. 

b. Social Cost of Methane and Nitrous 

Oxide 

The SC–CH4 and SC–N2O values used 

for this NOPR were generated using the 

values presented in the 2021 update 

from the IWG.255 Table IV.21 shows the 

updated sets of SC–CH4 and SC–N2O 

estimates from the latest interagency 

update in 5-year increments from 2020 

to 2050. The full set of annual values 

used is presented in appendix 14A of 

the NOPR TSD. To capture the 

uncertainties involved in regulatory 

impact analysis, DOE has determined it 

is appropriate to include all four sets of 

SC–CH4 and SC–N2O values, as 

recommended by the IWG. DOE derived 

values after 2050 using the approach 

described above for the SC–CO2. 

TABLE IV.21—ANNUAL SC–CH4 AND SC–N2O VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 

[2020$ per metric ton] 

Year 

SC–CH4 SC–N2O 

Discount rate and statistic Discount Rate and Statistic 

5% 3% 2.5% 3% 5% 3% 2.5% 3% 

Average Average Average 

95th 

percentile Average Average Average 

95th 

percentile 

2020 .......................................................................................................... 670 1500 2000 3900 5800 18000 27000 48000 

2025 .......................................................................................................... 800 1700 2200 4500 6800 21000 30000 54000 

2030 .......................................................................................................... 940 2000 2500 5200 7800 23000 33000 60000 

2035 .......................................................................................................... 1100 2200 2800 6000 9000 25000 36000 67000 

2040 .......................................................................................................... 1300 2500 3100 6700 10000 28000 39000 74000 

2045 .......................................................................................................... 1500 2800 3500 7500 12000 30000 42000 81000 

2050 .......................................................................................................... 1700 3100 3800 8200 13000 33000 45000 88000 

DOE multiplied the CH4 and N2O 

emissions reduction estimated for each 

year by the SC–CH4 and SC–N2O 

estimates for that year in each of the 

cases. To calculate a present value of the 

stream of monetary values, DOE 

discounted the values in each of the 

cases using the specific discount rate 

that had been used to obtain the SC–CH4

and SC–N2O estimates in each case. See 

chapter 13 for the annual emissions 

reduction. See appendix 14A for the 

annual SC–CH4 and SC–N2O values. 


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256Estimating the Benefit per Ton of Reducing 

PM2.5 Precursors from 21 Sectors. (Available at: 

www.epa.gov/benmap/estimating-benefit-tonreducing-pm25-precursors-21-sectors) (Last 

accessed March 25, 2022). 

257 ‘‘Area sources’’ represents all emission sources 

for which states do not have exact (point) locations 

in their emissions inventories. Because exact 

locations would tend to be associated with larger 

sources, ‘‘area sources’’ would be fairly 

representative of small dispersed sources like 

homes and businesses. 

258 ‘‘Area sources’’ are a category in the 2018 

document from EPA, but are not used in the 2021 

document cited previously. See: www.epa.gov/sites/ 

default/files/2018-02/documents/source

apportionmentbpttsd_2018.pdf. (Last accessed 

March 25, 2022). 

259Revenue decoupling is a regulatory approach 

ensuring natural gas utilities recover a defined 

amount of revenue sufficient to cover the utility’s 

fixed and variable costs (including the authorized 

rate of return). Revenue decoupling mechanisms 

typically include a symmetrical ‘‘true-up’’ 

mechanism either charging customers additional 

revenues if actual utility collected revenues are 

below the fixed level due to a smaller volume of 

sales than expected. Conversely, if a utility’s actual 

collected revenues are above the fixed level due to 

a larger volume of sales than expected, customers 

receive a credit from the utility for the difference. 

To this end, a utility’s revenues are decoupled from 

its volume of sales because its revenues are fixed 

as sales fluctuate and utilities, therefore, are made 

indifferent to the level of energy efficiency (or other 

factors that may adversely affect their volumetric 

sales). 

2. Monetization of Other Air Pollutants 

DOE estimated the monetized value of 

NOX and SO2 emissions reductions from 

electricity generation using the latest 

benefit-per-ton estimates for that sector 

from the EPA’s Benefits Mapping and 

Analysis Program.256 DOE used EPA’s 

values for PM2.5-related benefits 

associated with NOX and SO2 and for 

ozone-related benefits associated with 

NOX for 2025, 2030, 2035 and 2040, 

calculated with discount rates of 3 

percent and 7 percent. DOE used linear 

interpolation to define values for the 

years not given in the 2025 to 2040 

period; for years beyond 2040 the values 

are held constant. DOE derived values 

specific to the sector for consumer 

furnaces using a method described in 

appendix 14B of the NOPR TSD. 

DOE also estimated the monetized 

value of NOX and SO2 emissions 

reductions from site use of natural gas 

in NWGFs and MHGFs using benefitper-ton estimates from the EPA’s 

Benefits Mapping and Analysis 

Program. Although none of the sectors 

covered by EPA refers specifically to 

residential and commercial buildings, 

the sector called ‘‘area sources’’ would 

be a reasonable proxy for residential and 

commercial buildings.257 The EPA 

document provides high and low 

estimates for 2025 and 2030 at 3- and 7- 

percent discount rates.258 DOE used the 

same linear interpolation and 

extrapolation as it did with the values 

for electricity generation. 

DOE multiplied the site emissions 

reduction (in tons) in each year by the 

associated $/ton values, and then 

discounted each series using discount 

rates of 3 percent and 7 percent as 

appropriate. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

several effects on the electric power 

generation industry that would result 

from the adoption of new or amended 

energy conservation standards. The 

utility impact analysis estimates the 

changes in installed electrical capacity 

and generation that would result for 

each TSL. The analysis is based on 

published output from the NEMS 

associated with AEO2021. NEMS 

produces the AEO Reference case, as 

well as a number of side cases that 

estimate the economy-wide impacts of 

changes to energy supply and demand. 

For the current analysis, impacts are 

quantified by comparing the levels of 

electricity sector generation, installed 

capacity, fuel consumption and 

emissions in the AEO2021 Reference 

case and various side cases. Details of 

the methodology are provided in the 

appendices to chapters 13 and 15 of the 

NOPR TSD. 

The output of this analysis is a set of 

time-dependent coefficients that capture 

the change in electricity generation, 

primary fuel consumption, installed 

capacity and power sector emissions 

due to a unit reduction in demand for 

a given end use. These coefficients are 

multiplied by the stream of electricity 

savings calculated in the NIA to provide 

estimates of selected utility impacts of 

potential new or amended energy 

conservation standards. 

Energy efficiency can reduce utility 

fixed and variable costs (e.g., growthrelated gas distribution infrastructure 

costs, fuel costs), the degree to which is 

highly variable and based on the 

particular utility’s cost, operating, and 

regulatory characteristics. Energy 

efficiency can also reduce utility 

collected revenues through lower 

volumetric sales, the degree to which is 

dependent on rate design and 

proportion of customer bill that is 

volumetric. Utility financial impacts of 

energy efficiency, therefore, depend 

critically on the under-recovery of fixed 

costs when the decline in utility 

revenues is greater than the reduction in 

utility costs. To remedy the potential 

financial impacts of energy efficiency, 

regulators have approved regulatory and 

ratemaking mechanisms intended to 

make the utility financially harmless to 

the level of achieved energy savings. 

These mechanisms include revenue 

decoupling,259 lost revenue adjustment 

mechanisms, and straight-fixed variable 

rate design. 

As of February 2020, 26 states have 

approved revenue decoupling for one or 

more gas utilities. Several other states 

without revenue decoupling have 

approved lost revenue adjustment 

mechanisms (e.g., Montana) or straightfixed variable rate design (e.g., Missouri) 

for at least one gas utility that function 

similar to revenue decoupling by 

addressing lost fixed cost recovery. 

Revenue decoupling mechanisms, in 

particular, are designed symmetrically 

with a ‘‘true-up’’ mechanism that either 

charge customers additional revenues in 

instances where collected revenues are 

less than authorized levels or refund 

customers when collected revenues are 

in excess of authorized levels. As a 

result, revenue decoupling does not 

result in higher costs to customers all 

the time. 

The specific design of revenue 

decoupling mechanism varies across 

states and utilities, but the mechanisms 

share many common design elements, 

including adjustments to authorized 

revenue to account for growth in 

customers and ‘‘attrition.’’ These design 

elements ensure the utility fully 

recovers its fixed costs in years between 

rate cases and does not suffer loss of 

revenue. It is true that revenue 

decoupling does not insulate utilities 

from loss of customers. However, 

revenue decoupling does not alter 

underlying retail rate design that can be 

adjusted to limit fuel switching. 

Furthermore, loss of customers due to 

fuel switching is also dependent on the 

price of electricity as a substitute 

product and electric service rate design, 

factors that cannot be directly 

influenced by gas utilities. 

The precise magnitude of impacts on 

utility revenues and customer retail 

rates, with or without revenue 

decoupling, lost revenue adjustment 

mechanisms, or straight-fixed variable 

rate design, depends on many factors. 

One of the most important drivers of 

financial impacts to utilities and 

ratepayers is the magnitude of energy 

savings, as the decline in retail sales 

drives both utility cost and revenue 

reductions. Similarly, the proportion of 

total utility costs that are fixed versus 

variable and the proportion of revenues 

that are based on volumetric sales also 

determine a significant portion of the 

magnitude of financial impacts. Given 

that many of these factors are utilityspecific, it is difficult to ascertain the 

precise financial impacts on specific gas 

utilities, with or without revenue 


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40664 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

260Other States without revenue decoupling for 

which estimated switching is 5 percent or greater 

are Alabama, Kentucky, Mississippi, Louisiana, 

Oklahoma, California, and New Mexico. 

261Natural gas consumption is from EIA data 

(Available at: www.eia.gov/dnav/ng/ng_cons_sum_

dcu_STX_a.htm) (Last accessed Feb. 15, 2022). 

262See U.S. Department of Commerce—Bureau of 

Economic Analysis. Regional Multipliers: A User 

Handbook for the Regional Input-Output Modeling 

System (RIMS II) (1997) U.S. Government Printing 

Office: Washington, DC (Available at: apps.bea.gov/ 

scb/pdf/regional/perinc/meth/rims2.pdf) (Last 

accessed Feb. 15, 2022). 

263Livingston, O.V., S.R. Bender, M.J. Scott, and 

R.W. Schultz. ImSET 4.0: Impact of Sector Energy 

Technologies Model Description and User’s Guide. 

2015. Pacific Northwest National Laboratory: 

Richland, WA. PNNL–24563 (Available at: 

www.pnnl.gov/main/publications/external/ 

technical_reports/PNNL-24563.pdf) (Last accessed 

Feb. 15, 2022). 

decoupling, lost revenue adjustment 

mechanisms, or straight-fixed variable 

rate design. 

DOE identified the States (or groups 

of States) where it estimated that more 

than 5 percent of customers installing a 

non-weatherized gas furnace in the 

compliance year would switch to 

electric heating as a result of the 

potential amended standard. Of these 14 

States, five have approved revenue 

decoupling or a similar mechanism for 

one or more gas utilities as of February 

2020 (see chapter 13 of the NOPR TSD 

for details). Based on its current 

understanding of revenue decoupling 

arrangements, DOE tentatively 

concludes that negative impacts on gas 

utilities in these States would be 

minimal. The States without revenue 

decoupling include Florida and Texas, 

States for which DOE estimates 

switching would affect approximately 

15 percent of customers installing a gas 

furnace in the compliance year. For 

these and several other States,260 there 

would be a potential for negative 

financial impacts on gas utilities. The 

extent of impacts in a given State would 

depend on how much gas consumption 

would decline under the potential 

amended standards, relative to total 

utility gas sales. DOE evaluated the 

potential impacts for Texas, which has 

the largest estimated reduction in 

natural gas consumption due to both 

switching and installation of standardcompliant gas furnaces in the 

compliance year. For the proposed 

standards, the estimated reduction of 

1.7 trillion Btu in 2029 is approximately 

0.7 percent of residential natural gas 

consumption in Texas in 2019, and 

approximately 0.4 percent of residential 

and commercial natural gas 

consumption.261 Although DOE has not 

been able to perform a financial analysis 

of potential impacts on specific gas 

utilities, based on the evaluation of 

Texas, it would appear that the impact 

of the standard would be minimal even 

where revenue decoupling is not in 

place. 

N. Employment Impact Analysis 

DOE considers employment impacts 

in the domestic economy as one factor 

in selecting a standard. Employment 

impacts from new or amended energy 

conservation standards include both 

direct and indirect impacts. Direct 

employment impacts are any changes in 

the number of employees of 

manufacturers of the products subject to 

standards. The MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient appliances. Indirect 

employment impacts from standards 

consist of the net jobs created or 

eliminated in the national economy, 

other than in the manufacturing sector 

being regulated, caused by: (1) reduced 

spending by consumers on energy, (2) 

reduced spending on new energy supply 

by the utility industry, (3) increased 

consumer spending on the products to 

which the new standards apply and 

other goods and services, and (4) the 

effects of those three factors throughout 

the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (‘‘BLS’’). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.262 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

sector (i.e., the utility sector) to more 

labor-intensive sectors (e.g., the retail 

and service sectors). Thus, the BLS data 

suggest that net national employment 

may increase due to shifts in economic 

activity resulting from energy 

conservation standards. 

DOE estimated indirect national 

employment impacts for the standard 

levels considered in this NOPR using an 

input/output model of the U.S. economy 

called Impact of Sector Energy 

Technologies version 4 (‘‘ImSET’’).263

ImSET is a special-purpose version of 

the ‘‘U.S. Benchmark National InputOutput’’ (‘‘I–O’’) model, which was 

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer-based I–O 

model having structural coefficients that 

characterize economic flows among 187 

sectors most relevant to industrial, 

commercial, and residential building 

energy use. 

DOE notes that ImSET is not a general 

equilibrium forecasting model, and 

understands the uncertainties involved 

in projecting employment impacts, 

especially changes in the later years of 

the analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run for this proposed rule. 

Therefore, DOE used ImSET only to 

generate results for near-term 

timeframes (2029–2034), where these 

uncertainties are reduced. For more 

details on the employment impact 

analysis, see chapter 16 of the NOPR 

TSD. 

V. Analytical Results and Conclusions 

The following section addresses the 

results from DOE’s analyses with 

respect to the considered energy 

conservation standards for NWGFs and 

MHGFs. It addresses the TSLs examined 

by DOE, the projected impacts of each 

of these levels if adopted as energy 

conservation standards for NWGFs and 

MHGFs, and the standards levels that 

DOE is proposing in this NOPR. 

Additional details regarding DOE’s 

analyses are contained in the TSD 

supporting this notice. 

A. Trial Standard Levels 

In general, DOE typically evaluates 

potential amended standards for 

products and equipment at the product 

class level and by grouping select 

individual efficiency levels for each 

class into TSLs. Use of TSLs allows DOE 

to identify and consider industry-level 

manufacturer cost interactions between 

the product classes, to the extent that 

there are such interactions, and 

national-level market cross-elasticity 

from consumer purchasing decisions 

that may change when different 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40665 

standard levels are set. For consumer 

furnaces, it is particularly important to 

look at the aggregated impacts as 

characterized by TSLs due to the 

changes in consumer purchasing 

decisions as a result of the increased 

product and installation costs that 

impact the shipments model. The 

changes to the shipments model will 

drive differential national impacts both 

on the consumer and manufacturer side 

that are more realistic of how the market 

may change in response to amended 

DOE standards. 

For this NOPR, DOE analyzed the 

consumer impacts of four efficiency 

levels for NWGFs, four efficiency levels 

for MHGFs, and the national impacts of 

nine TSLs for NWGFs and MHGFs. 

Table V.1 presents the TSLs and the 

corresponding efficiency levels that 

DOE has identified for potential 

amended energy conservation standards 

for NWGFs and MHGFs. It is noted that 

because the impact of a potential 

standard on different consumers can 

depend on the input capacity of the 

NWGF or MHGF, DOE considered 

certain TSLs (six cases) with an input 

capacity threshold, below which the 

proposed standard would remain at the 

current efficiency level of 80-percent 

AFUE. For other TSLs (three cases), 

DOE examined a national standard level 

for NWGFs and MHGFs not 

differentiated by input capacity. Also, 

because the impact of a potential 

standard on different consumers can 

depend on the region of the country, 

DOE considered a regional TSL such 

that the proposed standard would 

remain at an efficiency level of 80- 

percent AFUE outside the Northern 

region. Next, DOE presents the results 

for the TSLs and corresponding ELs in 

Table V.47 and Table V.48 of this 

document. Results for all efficiency 

levels that DOE analyzed are in the 

NOPR TSD. 

The following provides a brief 

overview of the TSLs considered. Each 

TSL consists of similar efficiency levels 

for both NWGFs and MHGFs. TSL 9 

represents the maximum 

technologically feasible (‘‘max-tech’’) 

energy efficiency for both NWGFs and 

MHGFs and represents the maximum 

energy savings possible among the 

specific efficiency levels analyzed by 

DOE (see section III.C.2 of this NOPR). 

TSL 8 consists of a national standard at 

an efficiency level of 95-percent AFUE 

for both NWGFs and MHGFs, which 

reflects a high degree of energy savings 

second only to the max-tech efficiency 

levels. TSL 7 consists of an efficiency 

level at 80-percent AFUE for small 

NWGFs and MHGFs at or below an 

input capacity of 55 kBtu/h and an 

efficiency level at 95-percent AFUE for 

large NWGFs and MHGFs. The 

threshold of 55 kBtu/h generally 

separates the market into larger capacity 

furnaces typically installed in larger 

single-family detached homes versus 

smaller capacity furnaces more likely to 

be installed in multi-family buildings 

and other households with higher 

potential installation costs. TSL 6 

consists of the next highest efficiency 

levels, which would set a national 

standard at 92-percent AFUE for both 

NWGFs and MHGFs, regardless of input 

capacity. Similarly to TSL 7, TSL 5 is 

constructed with an input capacity 

threshold. TSL 5 consists of an 

efficiency level at 80-percent AFUE for 

small NWGFs and MHGFs at or below 

an input capacity of 55 kBtu/h and an 

efficiency level at 92-percent AFUE for 

large NWGFs and MHGFs. TSL 4 

consists of the efficiency levels that 

represent 95-percent AFUE for the 

Northern region for both NWGFs and 

MHGFs, but retains the baseline 

efficiency level (80-percent AFUE) for 

the Rest of Country. TSLs 3, 2, and 1 are 

similar to TSL 5, except with an 

increasingly higher input capacity 

threshold (and a correspondingly 

smaller fraction of the market subject to 

more-stringent standards). TSL 3 

consists of the efficiency level that 

represents 80-percent AFUE for small 

NWGFs and MHGFs at or below an 

input capacity of 60 kBtu/h and the 

efficiency level that represents 92- 

percent AFUE for large NWGFs and 

MHGFs. TSL 2 consists of the efficiency 

level that represents 80-percent AFUE 

for small NWGFs and MHGFs at or 

below an input capacity of 70 kBtu/h 

and the efficiency level that represents 

92-percent AFUE for large NWGFs and 

MHGFs. TSL 1 consists of the efficiency 

level that represents 80-percent AFUE 

for small NWGFs and MHGFs at or 

below an input capacity of 80 kBtu/h 

and the efficiency level that represents 

92-percent AFUE for large NWGFs and 

MHGFs. 

TABLE V.1—TRIAL STANDARD LEVELS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

TSL 

AFUE (percent) 

Non-weatherized gas furnace Mobile home gas furnace 

1 ....................... 92% (>80 kBtu/h) ......................................................................

80% (≤80 kBtu/h) ......................................................................

92% (>80 kBtu/h). 

80% (≤80 kBtu/h). 

2 ....................... 92% (>70 kBtu/h) ......................................................................

80% (≤70 kBtu/h) ......................................................................

92% (>70 kBtu/h). 

80% (≤70 kBtu/h). 

3 ....................... 92% (>60 kBtu/h) ......................................................................

80% (≤60 kBtu/h) ......................................................................

92% (>60 kBtu/h). 

80% (≤60 kBtu/h). 

4 ....................... 95% (North) ...............................................................................

80% (Rest of Country) ..............................................................

95% (North). 

80% (Rest of Country). 

5 ....................... 92% (>55 kBtu/h) ......................................................................

80% (≤55 kBtu/h) ......................................................................

92% (>55 kBtu/h). 

80% (≤55 kBtu/h). 

6 ....................... 92% ........................................................................................... 92%. 

7 ....................... 95% (>55 kBtu/h) ......................................................................

80% (≤55 kBtu/h) ......................................................................

95% (>55 kBtu/h). 

80% (≤55 kBtu/h). 

8 ....................... 95% ........................................................................................... 95%. 

9 ....................... 98% ........................................................................................... 96%. 

Table V.2 presents the standby mode 

and off mode TSLs and the 

corresponding efficiency levels (values 

expressed in watts) that DOE considered 

for NWGFs and MHGFs. DOE 

considered three efficiency levels. TSL 

3 represents the maximum 

technologically feasible (‘‘max-tech’’) 

energy efficiency for both NWGFs and 

MHGFs and represents the maximum 

energy savings possible among the 

specific efficiency levels analyzed by 

DOE (see section III.C.2 of this NOPR). 

TSL 2 represents efficiency levels below 

max-tech and represents the maximum 


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energy savings excluding max-tech 

efficiency levels. TSL 1 represents 

efficiency level 1 for both NWGFs and 

MHGFs. 

TABLE V.2—TRIAL STANDARD LEVELS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS FURNACE

STANDBY MODE AND OFF MODE STANDARDS

TSL 

Standby and off mode energy use 

(watts) 

Non-weatherized 

gas furnace 

Mobile home 

gas furnace 

1 ................................................................................................................................................................... 9.5 9.5 

2 ................................................................................................................................................................... 9.2 9.2 

3 ................................................................................................................................................................... 8.5 8.5 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

DOE analyzed the economic impacts 

on NWGF and MHGF consumers by 

looking at the effects that potential new 

and amended standards at each TSL 

would have on the LCC and PBP. DOE 

also examined the impacts of potential 

standards on selected consumer 

subgroups. These analyses are discussed 

in the following sections. 

a. Life-Cycle Cost and Payback Period 

In general, higher-efficiency products 

affect consumers in two ways: (1) 

purchase price increases and (2) annual 

operating costs decrease. In addition, for 

NWGFs, some consumers may choose to 

switch to an alternative heating system 

rather than purchase and install a 

NWGF if they judge the economics to be 

favorable. DOE estimated the extent of 

switching at each TSL using the 

consumer choice model discussed in 

section IV.F.11. 

Inputs used for calculating the LCC 

and PBP include total installed costs 

(i.e., product price plus installation 

costs), and operating costs (i.e., annual 

energy use, energy prices, energy price 

trends, repair costs, and maintenance 

costs). The LCC calculation also uses 

product lifetime and a discount rate. In 

cases where consumers are predicted to 

switch, the inputs include the total 

installed costs, operating costs, and 

product lifetime for the chosen heating 

system. Chapter 8 of the NOPR TSD 

provides detailed information on the 

LCC and PBP analyses. 

For NWGFs, the LCC and PBP results 

at each efficiency level include 

consumers that would purchase and 

install a NWGF at that level, and also 

consumers that would choose to switch 

to an alternative heating product rather 

than purchase and install a NWGF at 

that level. The impacts for consumers 

that switch depend on the product that 

they choose (heat pump or electric 

furnace) and the NWGF that they would 

purchase in the no-new-standards case. 

The extent of projected product/fuel 

switching (in 2029) is shown in Table 

V.3 and Table V.4 for each TSL for 

NWGFs and MHGFs, respectively. The 

degree of switching increases at higherefficiency TSLs where the installed cost 

of a NWGF is very high for some 

consumers, making the alternative 

option competitive. As discussed in 

section IV.F.12, DOE also conducted 

sensitivity analysis using no-switching, 

high, and low switching estimates. See 

appendix 8J of the NOPR TSD for more 

details. . For the proposed standards 

(TSL 8), the total switching and repair 

vs. replace is 11.1 percent for NWGFs 

and 10.3 percent for MHGFs. 

TABLE V.3—RESULTS OF FUEL SWITCHING ANALYSIS FOR NON-WEATHERIZED GAS FURNACES IN 2029 

Consumer option 

Trial standard level 

1 2 3 4 5 6 7 8 9 

% of consumers 

Purchase NWGF at Standard 

Level ......................................... 98.4 97.7 96.3 98.5 95.4 88.8 95.5 88.9 86.4 

Switch to Heat Pump * ................. 0.8 1.1 2.2 0.6 2.9 7.3 2.8 7.3 8.9 

Switch to Electric Furnace * ......... 0.2 0.3 0.5 0.2 0.6 1.6 0.5 1.6 2.0 

Repair vs. Replacing .................... 0.6 0.9 1.0 0.8 1.2 2.4 1.2 2.3 2.8 

Total ...................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

* Includes switching from a gas water heater to an electric water heater. 

Note: Components may not sum due to rounding. 

TABLE V.4—RESULTS OF FUEL SWITCHING ANALYSIS FOR MOBILE HOME GAS FURNACES IN 2029 

Consumer option 

Trial standard level 

1 2 3 4 5 6 7 8 9 

% of consumers 

Purchase MHGF at Standard 

Level ......................................... 99.9 99.8 99.2 96.9 97.8 89.9 97.8 89.7 85.0 

Switch to Heat Pump ................... 0.0 0.0 0.58 1.5 0.6 4.8 0.6 4.9 4.7 

Switch to Electric Furnace ........... 0.0 0.0 0.0 0.6 1.0 3.0 1.1 3.1 3.2 


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TABLE V.4—RESULTS OF FUEL SWITCHING ANALYSIS FOR MOBILE HOME GAS FURNACES IN 2029—Continued 

Consumer option 

Trial standard level 

1 2 3 4 5 6 7 8 9 

% of consumers 

Repair vs. Replacing .................... 0.1 0.2 0.3 1.1 0.6 2.3 0.5 2.3 7.2 

Total ...................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Note: Components may not sum due to rounding. 

Table V.5 through Table V.8 show the 

LCC and PBP results for the TSLs 

considered for each product class. Table 

V.9 through Table V.12 show the LCC 

and PBP results for the TSLs considered 

for each product class for standby mode 

and off mode standards. In the first of 

each pair of tables, the simple payback 

is measured relative to the baseline 

product. In the second table, the 

impacts are measured relative to the 

efficiency distribution in the in the nonew-standards case in the compliance 

year (see section IV.F.10 of this 

document). The LCC and PBP results for 

NWGFs include both residential and 

commercial users. The LCC and PBP 

results are shipment-weighted and 

averaged over all capacities and regions. 

Results for all efficiency levels are 

reported in chapter 8 of the NOPR TSD. 

LCC Results for the alternative product 

switching scenarios are reported in 

appendix 8J of the NOPR TSD. 

Because some consumers purchase 

products with higher efficiency in the 

no-new-standards case, the average 

savings are less than the difference 

between the average LCC of the baseline 

product and the average LCC at each 

TSL. The savings refer only to 

consumers who are affected by a 

standard at a given TSL. Those who 

already purchase a product with 

efficiency at or above a given TSL are 

not affected. Consumers for whom the 

LCC increases at a given TSL experience 

a net cost. 

TABLE V.5—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACE AFUE STANDARDS

TSL AFUE 

% 

Average costs 

2020$ Simple 

payback 

years 

Average lifetime years Installed 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ............................ 92/80 * ................... 3,475 640 10,141 13,616 6.8 21.4 

2 ............................ 92/80 * ................... 3,547 628 9,942 13,490 6.6 21.4 

3 ............................ 92/80 * ................... 3,585 623 9,860 13,445 6.7 21.4 

4 ............................ 95/80 ** .................. 3,620 625 9,870 13,490 8.0 21.4 

5 ............................ 92/80 * ................... 3,624 620 9,788 13,412 7.1 21.4 

6 ............................ 92 † ....................... 3,720 618 9,671 13,391 8.9 21.4 

7 ............................ 95/80 * ................... 3,629 609 9,619 13,249 5.8 21.4 

8 ............................ 95 † ....................... 3,727 606 9,490 13,217 7.2 21.4 

9 ............................ 98 (Max-Tech) † .... 3,879 602 9,352 13,231 9.1 21.4 

* The first number refers to the standard for large NWGFs; the second refers to the standard for small NWGFs. The input capacity threshold 

definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h. 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the Rest of Country. 

† Refers to national standards. 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative 

to the baseline product. 

TABLE V.6—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACE AFUE STANDARDS

TSL AFUE 

% 

Life-cycle cost savings 

Average LCC 

savings 

2020$ 

Percentage of 

consumers 

that 

experience net 

cost, % 

1 .................................................................................... 92/80 * ........................................................................... 663 3.7 

2 .................................................................................... 92/80 * ........................................................................... 603 6.0 

3 .................................................................................... 92/80 * ........................................................................... 575 7.9 

4 .................................................................................... 95/80 ** ......................................................................... 350 5.2 

5 .................................................................................... 92/80* ........................................................................... 625 9.1 

6 .................................................................................... 92 † ............................................................................... 470 17.7 


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40668 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

TABLE V.6—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACE AFUE STANDARDS—Continued 

TSL AFUE 

% 

Life-cycle cost savings 

Average LCC 

savings 

2020$ 

Percentage of 

consumers 

that 

experience net 

cost, % 

7 .................................................................................... 95/80 * ........................................................................... 563 8.3 

8 .................................................................................... 95 † ............................................................................... 464 16.6 

9 .................................................................................... 98 (Max-Tech) † ............................................................ 254 52.4 

* The first number refers to the standard for large NWGFs; the second refers to the standard for small NWGFs. The input capacity threshold 

definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the Rest of Country. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. 

TABLE V.7—AVERAGE LCC AND PBP RESULTS FOR MOBILE HOME GAS FURNACE AFUE STANDARDS

TSL AFUE 

% 

Average costs 

2020$ Simple 

payback 

years 

Average 

lifetime years Installed 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ............................................. 92/80 * ................................... 2,114 517 8,372 10,486 6.5 21.4 

2 ............................................. 92/80 * ................................... 2,183 504 8,181 10,364 5.6 21.4 

3 ............................................. 92/80 * ................................... 2,208 500 8,123 10,331 5.7 21.4 

4 ............................................. 95/80 ** .................................. 2,264 498 8,011 10,275 7.7 21.4 

5 ............................................. 92/80 * ................................... 2,256 491 7,967 10,223 5.7 21.4 

6 ............................................. 92 † ........................................ 2,389 485 7,702 10,091 8.5 21.4 

7 ............................................. 95/80 * ................................... 2,262 486 7,888 10,150 5.1 21.4 

8 ............................................. 95 † ........................................ 2,399 479 7,601 10,000 7.5 21.4 

9 ............................................. 96 (Max-Tech) † .................... 2,406 496 7,601 10,007 12.6 21.4 

* The first number refers to the standard for large MHGFs; the second refers to the standard for small MHGFs. The input capacity threshold definitions for small 

MHGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h. 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the Rest of Country. 

† Refers to national standards. 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline 

product. 

TABLE V.8—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR MOBILE HOME GAS FURNACE

AFUE STANDARDS

TSL AFUE 

% 

Life-cycle cost savings 

Average LCC 

savings 

2020$ 

Percentage of 

consumers 

that 

experience 

net cost, % 

1 .................................................................................... 92/80 * ........................................................................... 406 1.9 

2 .................................................................................... 92/80 * ........................................................................... 516 3.2 

3 .................................................................................... 92/80 * ........................................................................... 501 3.9 

4 .................................................................................... 95/80 ** ......................................................................... 446 10.4 

5 .................................................................................... 92/80* ........................................................................... 569 4.8 

6 .................................................................................... 92 † ............................................................................... 493 21.8 

7 .................................................................................... 95/80 * ........................................................................... 603 4.6 

8 .................................................................................... 95 † ............................................................................... 526 21.5 

9 .................................................................................... 96 (Max-Tech) † ............................................................ 414 38.0 

* The first number refers to the standard for large NWGFs; the second refers to the standard for small NWGFs. The input capacity threshold 

definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 


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264 DOE did not perform a subgroup analysis for 

the residential furnace standby mode and off mode 

efficiency levels. The standby mode and off mode 

analysis relied on the test procedure to assess 

energy savings for the considered standby mode 

and off mode efficiency levels. Because the analysis 

used the same test procedure parameters for all 

sample households, there is no difference in energy 

savings between the consumer subgroups and the 

full sample. 

TSL 7: 55 kBtu/h 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the Rest of Country. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. 

TABLE V.9—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACE STANDBY MODE AND OFF MODE

STANDARDS

TSL Watts 

Average costs 

2020$ Simple 

payback 

years 

Average 

lifetime years Installed 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ............................................. 9.5 ......................................... 1 20 293 294 0.7 21.4 

2 ............................................. 9.2 ......................................... 3 20 289 292 1.5 21.4 

3 ............................................. 8.5 (Max-Tech) ...................... 5 19 279 284 2.0 21.4 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline 

product. 

TABLE V.10—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACE STANDBY MODE AND OFF MODE STANDARDS

TSL Watts 

Life-cycle cost savings 

Average LCC 

savings 

2020$ 

Percentage of 

consumers 

that 

experience 

net cost 

1 .................................................................................... 9.5 ................................................................................. 21 2.5 

2 .................................................................................... 9.2 ................................................................................. 23 2.5 

3 .................................................................................... 8.5 (Max-Tech) ............................................................. 26 3.5 

* The savings represent the average LCC for affected consumers. 

TABLE V.11—AVERAGE LCC AND PBP RESULTS FOR MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE

STANDARDS

TSL Watts 

Average costs 

2020$ Simple 

payback 

years 

Average 

lifetime years Installed 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 ............................................. 9.5 ......................................... 1 22 317 318 0.6 21.4 

2 ............................................. 9.2 ......................................... 3 22 312 315 1.3 21.4 

3 ............................................. 8.5 (Max-Tech) ...................... 5 21 301 306 1.7 21.4 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline 

product. 

TABLE V.12—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR MOBILE HOME GAS FURNACE

STANDBY MODE AND OFF MODE STANDARDS

TSL Watts 

Life-cycle cost savings 

Average LCC 

savings * 

2020$ 

Percentage of 

consumers 

that 

experience 

net cost 

1 .................................................................................... 9.5 ................................................................................. 22 1.2 

2 .................................................................................... 9.2 ................................................................................. 24 1.2 

3 .................................................................................... 8.5 (Max-Tech) ............................................................. 27 1.6 

* The savings represent the average LCC for affected consumers. 

b. Consumer Subgroup Analysis 

In the consumer subgroup analysis, 

DOE estimated the impact of the 

considered AFUE TSLs on low-income 

households and senior-only 

households.264 Table V.13 and Table V.14 compare the average LCC savings 


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40670 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

and PBP at each efficiency level for the 

consumer subgroups, along with the 

average LCC savings for the entire 

consumer sample. Because the small 

NWGF and MHGF efficiency levels at 

TSLs 1, 2, 3, 5, and 7 and the Rest of 

Country efficiency level at TSL 4 are at 

the baseline (i.e., the current standard), 

these tables only include results for 

large NWGFs and MHGFs or the 

Northern region for these TSLs. The 

percent of low-income NWGF and 

MHGF consumers experiencing a net 

cost is smaller than the full LCC sample 

in all cases, largely due to the high 

proportion of renter households. The 

percentage of senior-only NWGF and 

MHGF households experiencing a net 

cost is either very similar to or smaller 

than the full LCC sample. Chapter 11 of 

the NOPR TSD presents the complete 

LCC and PBP results for the subgroups. 


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TABLE V.13—COMPARISON OF LCC SAVINGS AND PBP FOR

CONSUMER

SUBGROUPS AND

ALL

HOUSEHOLDS FOR

NON-WEATHERIZED

GAS

FURNACE AFUE 

STANDARDS

TSL 

Average LCC savings Simple payback period % of Consumers experiencing net cost % of Consumers experiencing net benefit 

2020$ Years % % 

Lowincome Senior- only All Low- income Senior- only All Low- income Senior- only All Low- income Senior- only All 

1 * ........ 384 190 663 3.1 6.6 6.8 2.0 3.9 3.7 4.3 6.4 6.8 2 * ........ 427 257 603 2.8 7.1 6.6 2.8 6.0 6.0 6.2 10.4 11.0 3 * ........ 307 293 575 2.4 6.9 6.7 4.2 7.5 7.9 11.0 13.2 13.8 4 ** ....... 314 173 350 1.2 5.7 8.0 3.6 3.9 5.2 19.8 20.7 18.1 5 * ........ 359 430 625 2.5 7.2 7.1 5.0 9.1 9.1 14.2 16.0 15.9 6 † ....... 266 402 470 2.6 7.8 8.9 14.0 17.4 17.7 31.7 23.2 22.5 7 * ........ 376 328 563 2.0 5.8 5.8 5.0 7.4 8.3 24.7 31.7 31.1 8 † ....... 292 327 464 2.1 6.3 7.2 13.7 15.1 16.6 46.1 41.2 40.1 9 † ....... 160 329 254 2.8 8.2 9.1 34.8 43.4 52.4 58.2 52.0 45.6 

* Refers to TSLs with separate standards for small and large NWGFs. The input capacity threshold definitions for small NWGFs are as follows: TSL 1: 80 kBtu/h TSL 2: 70 kBtu/h TSL 3: 60 kBtu/h TSL 5: 55 kBtu/h TSL 7: 55 kBtu/h ** Regional standards. † Refers to national standards. Note: The savings represent the average LCC for affected consumers. The PBP is measured relative to the baseline product. 

TABLE V.14—COMPARISON OF LCC SAVINGS AND PBP FOR

CONSUMER

SUBGROUPS AND

ALL

HOUSEHOLDS FOR

MOBILE

HOME

GAS

FURNACE AFUE 

STANDARDS

TSL 

Average LCC savings 

(2020$) 

Simple payback period 

(Years) 

% of Consumers experiencing net cost % of Consumers experiencing net benefit 

Low-income Senior-only All Low-income Senior-only All Low-income Senior-only All Low-income Senior-only All 

1 * ........ 1,118 632 406 3.6 4.4 6.5 0.1 0.3 1.9 1.6 8.4 3.0 2 * ........ 965 480 516 3.1 5.0 5.6 0.5 3.5 3.2 16.0 24.0 16.2 3 * ........ 876 488 501 3.2 5.3 5.7 0.9 4.1 3.9 19.1 29.9 21.6 4 ** ....... 779 401 298 2.3 3.6 12.1 5.3 7.2 22.6 31.7 17.8 28.0 5 * ........ 992 463 569 3.2 5.4 5.7 1.4 4.3 4.8 41.6 31.1 32.6 6 † ....... 745 796 493 4.7 4.5 8.5 11.8 17.0 21.8 61.5 49.5 48.7 7 * ........ 1024 411 603 2.8 4.6 5.1 1.5 3.7 4.6 47.4 40.6 39.0 8 † ....... 782 701 526 4.2 4.0 7.5 12.6 14.8 21.5 69.6 61.1 57.3 9 † ....... 663 1,648 414 7.0 5.3 12.6 23.3 32.0 38.0 75.4 65.4 60.5 

* Refers to TSLs with separate standards for small and large MHGFs. The input capacity threshold definitions for small MHGFs are as follows: * TSL 1: 80 kBtu/h * TSL 2: 70 kBtu/h * TSL 3: 60 kBtu/h * TSL 5: 55 kBtu/h * TSL 7: 55 kBtu/h ** Regional standards. † Refers to national standards. Note: The savings represent the average LCC for affected consumers. The PBP is measured relative to the baseline product. 


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40672 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

c. Rebuttable Presumption Payback 

As discussed in section III.E.2, EPCA 

establishes a rebuttable presumption 

that an energy conservation standard is 

economically justified if the increased 

purchase cost for a product that meets 

the standard is less than three times the 

value of the first-year energy savings 

resulting from the standard. In 

calculating a rebuttable presumption 

payback period for each of the 

considered TSLs, DOE used discrete 

values, and, as required by EPCA, based 

the energy use calculation on the DOE 

test procedures for residential furnaces 

and boilers. In contrast, the PBPs 

presented in section V.B.1.a were 

calculated using distributions that 

reflect the range of energy use in the 

field. 

Table V.15 and Table V.16 present the 

rebuttable-presumption payback periods 

for the considered AFUE and standby 

mode/off mode TSLs, respectively, for 

NWGFs and MHGFs. The payback 

periods for most NWGF and MHGF 

AFUE TSLs do not meet the rebuttablepresumption criterion. The payback 

periods for all NWGF and MHGF 

standby mode and off mode TSLs meet 

the rebuttable-presumption criterion. 

While DOE examined the rebuttablepresumption criterion, it considered 

whether the standard levels considered 

for this rule are economically justified 

through a more detailed analysis of the 

economic impacts of those levels, 

pursuant to 42 U.S.C. 6295(o)(2)(B)(i), 

that considers the full range of impacts 

to the consumer, manufacturer, Nation, 

and environment. The results of that 

analysis serve as the basis for DOE to 

definitively evaluate the economic 

justification for a potential standard 

level, thereby supporting or rebutting 

the results of any preliminary 

determination of economic justification. 

TABLE V.15—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE AFUE STANDARDS

TSL 

Non-weatherized gas 

furnaces 

Mobile home 

gas furnaces 

1 * ............................................................................................................................................................................. 3.24 3.17 

2 * ............................................................................................................................................................................. 3.52 3.44 

3 * ............................................................................................................................................................................. 3.64 3.64 

4 ** ............................................................................................................................................................................ 2.70 2.45 

5 * ............................................................................................................................................................................. 3.79 3.66 

6 † ............................................................................................................................................................................ 3.96 3.92 

7 * ............................................................................................................................................................................. 3.47 3.11 

8 † ............................................................................................................................................................................ 3.63 3.29 

9 † ............................................................................................................................................................................ 3.98 3.26 

* Refers to TSLs with separate standards for small and large MHGFs. The input capacity threshold definitions for small MHGFs are as follows: 

* TSL 1: 80 kBtu/h 

* TSL 2: 70 kBtu/h 

* TSL 3: 60 kBtu/h 

* TSL 5: 55 kBtu/h 

* TSL 7: 55 kBtu/h 

** Regional standards. 

† Refers to national standards. 

TABLE V.16—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE STANDARDS

TSL 

Standby and 

off mMode 

energy use 

(watts) 

Nonweatherized 

gas furnaces 

Mobile home 

gas furnaces 

1 ................................................................................................................................................... 9.5 0.62 0.64 

2 ................................................................................................................................................... 9.2 1.43 1.48 

3 ................................................................................................................................................... 8.5 1.89 1.96 

2. Economic Impacts on Manufacturers 

DOE performed an MIA to estimate 

the impact of amended energy 

conservation standards on 

manufacturers of NWGFs and MHGFs. 

The next section describes the expected 

impacts on manufacturers at each 

considered TSL. Chapter 12 of the 

NOPR TSD explains the analysis in 

further detail. 

a. Industry Cash Flow Analysis Results 

In this section, DOE provides GRIM 

results from the analysis, which 

examines changes in the industry that 

could result from a standard. Table V.17 

presents the financial impacts of 

analyzed standards on NWGF and 

MHGF manufacturers represented by 

changes in INPV and free cash flow in 

the year before the standard would take 

effect as well by the conversion costs 

that DOE estimates NWGF and MHGF 

manufacturers would incur at each TSL. 

To evaluate the range of cash-flow 

impacts on the NWGF and MHGF 

industry, DOE modeled three markup 

scenarios that correspond to the range of 

anticipated market responses to 

amended standards. For AFUE 

standards, DOE modeled a preservation 

of gross margin percentage markup 

scenario and a tiered markup scenario. 

For standby mode and off mode 

standards, DOE modeled a preservation 

of gross margin percentage markup 

scenario and a per-unit preservation of 

operating profit markup scenario. Each 

scenario results in a unique set of cash 

flows and corresponding industry 

values at each TSL. 

In the following discussion, the INPV 

results refer to the difference in INPV 

between the no-new-standards case and 

the standards cases, calculated by 

summing discounted cash flows from 

the reference year (2022) through the 

end of the analysis period (2058). 


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265The gross margin percentage values 

correspond to manufacturer markups of 1.34 for 

NWGFs and 1.27 for MHGFs. 

Changes in INPV reflect the potential 

impacts on the value of the industry 

over the course of the analysis period as 

a result of implementing a particular 

TSL. The results also discuss the 

difference in cash flows between the nonew-standards case and the standards 

cases in the year before the compliance 

date for analyzed standards (2028). This 

difference in cash flow represents the 

size of the required conversion costs 

relative to the cash flow generated by 

the NWGF and MHGF industry in the 

absence of amended energy 

conservation standards. 

To assess the upper (less severe) 

bound of the range of potential impacts 

on NWGF and MHGF manufacturers, 

DOE modeled a preservation of gross 

margin percentage scenario. This 

scenario assumes industry would be 

able to maintain its average no-newstandards case gross margin percentage 

in the standard case, even as MPCs 

increase and companies make upfront 

investments to bring products into 

compliance with amended standards. 

DOE assumed gross margin percentages 

of 25.3% for NWGFs and 21.3% for 

MHGF.265 Manufacturers noted in 

interviews that it is optimistic to assume 

that as their production costs increase in 

response to an amended energy 

conservation standard, they would be 

able to maintain the same gross margin 

percentage markup. DOE understands 

this scenario to be an upper bound to 

industry profitability under an energy 

conservation standard. 

To assess the lower (more severe) 

bound of the range of potential impacts 

of AFUE standards on NWGF and 

MHGF manufacturers, DOE modeled a 

tiered scenario. DOE implemented the 

tiered scenario because multiple 

manufacturers stated in interviews that 

they offer multiple tiers of product lines 

that are differentiated, in part, by 

efficiency level. Manufacturers further 

noted that pricing tiers encompass 

additional differentiators, such as the 

combustion system (e.g., single-stage, 

two-stage, and modulating combustion 

systems). To account for this nuance, 

the tiered markup in the GRIM 

incorporates both efficiency and 

combustion system technology into the 

‘‘good, better, best’’ manufacturer 

markup scenario. 

Several manufacturers suggested that 

amended standards would lead to a 

reduction in premium markups and 

would reduce the profitability of higher 

efficiency products. During the MIA 

interviews, manufacturers provided 

information on the range of typical 

efficiency levels in those tiers and the 

change in profitability at each level. 

DOE used this information to estimate 

manufacturer markups for NWGFs and 

MHGFs under a tiered pricing strategy 

in the no-new-standards case. In the 

standards cases, DOE modeled the 

situation in which standards result in 

less product differentiation, 

compression of the markup tiers, and an 

overall reduction in profitability. 

To assess the lower (more severe) 

bound of the range of potential impacts 

of standby mode and off mode standards 

on NWGF and MHGF manufacturers, 

DOE modeled a per-unit preservation of 

operating profit scenario. In this 

scenario, manufacturer markups are set 

so that operating profit one year after 

the compliance date of amended energy 

conservation standards (2030) is the 

same as in the no-new-standards case on 

a per-unit basis. Under this scenario, 

manufactures do not earn additional 

operating profit from increased 

manufacturer production costs and 

conversion costs incurred as a result of 

standards. 

Cash-Flow Analysis Results for NonWeatherized Gas Furnaces and Mobile 

Home Gas Furnaces AFUE Standards 

Table V.17 presents the financial 

impacts of the analyzed AFUE standards 

on NWGF and MHGF manufacturers. 

These impacts are represented by 

changes in INPV summed over the 

analysis period and free cash flow in the 

year before the standard (2028), as well 

as by the conversion costs that DOE 

estimates NWGF and MHGF 

manufacturers would incur at each TSL. 

The range of results reflect the two 

manufacturer markup scenarios that 

were modeled. 

TABLE V.17—MANUFACTURER IMPACT ANALYSIS: AFUE STANDARDS RESULTS FOR NON-WEATHERIZED GAS FURNACES

AND MOBILE HOME GAS FURNACES

Units 

No-new 

standards case 

Trial standard level 

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

INPV ........................... 2020$ millions .. 1,411.8 1,316.7 to 

1,394.6 

1,280.4 to 

1,395.0 

1,260.0 to 

1,387.8 

1,126.6 to 

1,395.7 

1,250.7 to 

1,394.2 

1,237.4 to 

1,377.4 

1,067.5 to 

1,396.8 

1,031.5 to 

1,381.4 

728.0 to 

1,420.8 

Change in INPV ......... 2020$ millions .. ................ (95.2) to 

(17.3) 

(131.5) to 

(16.8) 

(151.9) to 

(24.1) 

(285.2) to 

(16.2) 

(161.2) to 

(17.6) 

(174.4) to 

(34.5) 

(344.4) to 

(15.0) 

(380.3) to 

(30.5) 

(683.8) to 

9.0 

% ...................... ................ (6.7) to 

(1.2) 

(9.3) to 

(1.2) 

(10.8) to 

(1.7) 

(20.2) to 

(1.1) 

(11.4) to 

(1.2) 

(12.4) to 

(2.4) 

(24.4) to 

(1.1) 

(26.9) to 

(2.2) 

(48.4) to 

0.6 

Free Cash Flow (2028) 2020$ millions .. 85.8 65.0 58.6 55.3 45.1 52.2 44.9 34.0 22.8 (42.1) 

Change in Free Cash 

Flow (2028).

% ...................... ................ (24.2) (31.7) (35.6) (47.5) (39.2) (47.7) (60.4) (73.4) (149.0) 

Product Conversion 

Costs.

2020$ millions .. ................ 26.6 26.6 26.6 41.2 26.6 26.6 41.2 41.2 79.9 

Capital Conversion 

Costs.

2020$ millions .. ................ 25.4 39.6 47.1 58.3 53.9 70.2 82.9 107.8 221.6 

Total Investment 

Required.

2020$ millions .. ................ 51.9 66.1 73.6 99.6 80.5 96.8 124.1 149.0 301.6 

Note: Parentheses indicate negative values. 

The following cash flow results 

discussion refers to the AFUE efficiency 

levels and capacity threshold cutoffs 

detailed in section V.A of this 

document. Table V.18 and Table V.19 

present the percentage of NWGF and 

MHGF shipments in 2028 that are 

considered to be large or small, based on 

the input capacity threshold for each 

TSL. See section IV.G of this document 

for additional details on the shipments 

analysis. 


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TABLE V.18—SHIPMENTS BREAKDOWNS (2028) REPRESENTING LARGE AND SMALL NON-WEATHERIZED GAS FURNACES

AT EACH TRIAL STANDARD LEVEL

Size 

Trial standard level and capacity threshold 

TSL 1 

80 kBtu/h 

(%) 

TSL 2 

70 kBtu/h 

(%) 

TSL 3 

60 kBtu/h 

(%) 

TSL 4 

no cutoff 

(%) 

TSL 5 

55 kBtu/h 

(%) 

TSL 6 

no cutoff 

(%) 

TSL 7 

55 kBtu/h 

(%) 

TSL 8 

no cutoff 

(%) 

TSL 9 

no cutoff 

(%) 

Large .......................... 41.2 65.0 76.7 100.0 88.8 100.0 88.8 100.0 100.0 

Small .......................... 58.8 35.0 23.3 0.0 11.2 0.0 11.2 0.0 0.0 

TABLE V.19—SHIPMENTS BREAKDOWNS (2028) REPRESENTING LARGE AND SMALL MOBILE HOME GAS FURNACES AT

EACH TRIAL STANDARD LEVEL

Size 

Trial standard level and capacity threshold 

TSL 1 

80 kBtu/h 

(%) 

TSL 2 

70 kBtu/h 

(%) 

TSL 3 

60 kBtu/h 

(%) 

TSL 4 

no cutoff 

(%) 

TSL 5 

55 kBtu/h 

(%) 

TSL 6 

no cutoff 

(%) 

TSL 7 

55 kBtu/h 

(%) 

TSL 8 

no cutoff 

(%) 

TSL 9 

no cutoff 

(%) 

Large .......................... 11.6 40.2 53.3 100.0 78.2 100.0 78.2 100.0 100.0 

Small .......................... 88.4 59.8 46.7 0.0 21.8 0.0 21.8 0.0 0.0 

TSLs 1, 2, 3, and 5 all represent 

national standards set at 92-percent 

AFUE for large furnaces, while small 

furnaces remain at the current Federal 

minimum of 80-percent AFUE. 

However, the capacity threshold used to 

classify small furnaces is different at 

each TSL. Small NWGFs and MHGFs 

are defined as units having an input 

capacity of 80 kBtu/h or less at TSL 1, 

70 kBtu/h or less at TSL 2, 60 kBtu/h 

or less at TSL 3, and 55 kBtu/h or less 

at TSL 5. As the capacity threshold 

decreases from 80 kBtu/h at TSL 1 down 

to 55 kBtu/h at TSL 5, the number of 

furnace shipments classified as large 

gas-fired consumer furnaces, and 

subsequently the portion of shipments 

that must be condensing after the 

standard year, increases. Capital 

conversion costs increase as 

manufacturers add additional capacity 

to their secondary heat exchanger 

production lines. Manufacturers would 

also incur product conversion costs as 

they invest resources to develop costoptimized 92-percent AFUE models that 

are competitive at lower price points. 

Manufacturers are expected to incur 

$26.6 million in product conversion 

costs to develop such models at each of 

TSLs 1, 2, 3, and 5. 

In addition to conversion costs, a 

national standard of 92-percent AFUE 

for large NWGFs and MHGFs could lead 

to a slight compression of manufacturer 

markups. In its manufacturer markup 

scenarios, DOE includes a scenario 

which models the industry maintaining 

three tiers of markups, with efficiency 

as one differentiating attribute. In a 

market where the national standard is 

92-percent AFUE, DOE characterizes 

these markups as ‘‘good,’’ ‘‘better,’’ and 

‘‘best,’’ and they correspond to 92- 

percent AFUE, 95-percent AFUE, and 

max-tech levels (98-percent for NWGFs 

and 96-percent for MHGFs), 

respectively. 

TSL 1 represents a national standard 

set at 92-percent AFUE for large NWGFs 

and MHGFs, while small NWGFs and 

MHGFs remain at the current Federal 

minimum of 80-percent AFUE. At TSL 

1, small furnaces are defined as NWGFs 

and MHGFs with input capacities of 80 

kBtu/h or less. DOE estimates the 

change in INPV to range from ¥$95.2 

million to ¥$17.3 million, or a change 

of ¥6.7 percent to ¥1.2 percent. At this 

level, industry free cash flow in 2028 

(the year before the compliance date) is 

estimated to decrease to $65.0 million, 

or a decrease of 24.2 percent compared 

to the no-new-standards case value of 

$85.8 million. 

Small furnaces with input capacities 

of 80 kBtu/h or less account for 

approximately 58.8 percent of NWGF 

shipments and 88.4 percent of MHGF 

shipments in 2028, a year before the 

standard goes into effect. In the no-newstandards case, approximately 59.1 

percent of NWGF shipments and 30.4 

percent of MHGF shipments are 

expected to be sold at condensing levels 

in the year before the standard goes into 

effect. At TSL 1, once the standard goes 

into effect, DOE expects 70.5 percent of 

NWGF shipments and 36.5 percent of 

MHGF shipments to be sold at 

condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. 

Manufacturers will incur an estimated 

$25.4 million in capital conversion costs 

as manufacturers increase secondary 

heat exchanger production line 

capacity. Manufacturers would also 

incur product conversion costs driven 

by the development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs are 

expected to reach $51.9 million at TSL 

1. 

TSL 2 represents a national standard 

at 92-percent AFUE for large furnaces, 

while small furnaces remain at the 

current Federal minimum of 80-percent 

AFUE. Small furnaces are defined as 

NWGFs and MHGFS with input 

capacities of 70 kBtu/h or less. At TSL 

2, DOE estimates the change in INPV to 

range from ¥$131.5 million to ¥$16.8 

million, or a change in INPV of ¥9.3 

percent to ¥1.2 percent. At this level, 

free cash flow in 2028 is estimated to 

decrease to $58.6 million, or a decrease 

of 31.7 percent compared to the no-newstandards-case value of $85.8 million in 

the year 2028. 

Small furnaces with input capacities 

of 70 kBtu/h or less account for 

approximately 35.0 percent of NWGF 

shipments and 59.8 percent of MHGF 

shipments in the year before standards 

go into effect. At TSL 2, once the 

standard goes into effect, DOE expects 

77.2 percent of NWGF shipments and 

50.6 percent of MHGF shipments to be 

sold at condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. Capital 

conversion costs increase from $25.4 

million at TSL 1 to $39.6 million at TSL 

2. Manufacturers would also incur 

product conversion costs driven by the 

development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs are 

expected to reach $66.1 million at TSL 

2. 

TSL 3 represents a national standard 

at 92-percent AFUE for large furnaces, 

while small furnaces remain at the 


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current Federal minimum of 80-percent 

AFUE. Small furnaces are defined as 

NWGFs and MHGFs with input 

capacities of 60 kBtu/h or less. At TSL 

3, DOE estimates the change in INPV to 

range from ¥$151.9 million to ¥$24.1 

million, or a change in INPV of ¥10.8 

percent to ¥1.7 percent. At this level, 

free cash flow is estimated to decrease 

to $55.3 million, or a decrease of 35.6 

percent compared to the no-newstandards case value of $85.8 million in 

the year 2028. 

Small furnaces with input capacities 

of 60 kBtu/h or less account for 

approximately 23.3 percent of NWGF 

shipments and 46.7 percent of MHGF 

shipments in the year before standards 

take effect. At TSL 3, once standards go 

into effect, DOE expects 81.4 percent of 

NWGF shipments and 57.5 percent of 

MHGF shipments to be sold at 

condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. Capital 

conversion costs would increase from 

$39.6 million at TSL 2 to $47.1 million 

at TSL 3 as manufacturers increase 

secondary heat exchanger production 

line capacity. Manufacturers would also 

incur product conversion costs driven 

by the development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs could 

reach $73.6 million at TSL 3. 

TSL 4 represents a regional standard 

set at 95-percent AFUE for products 

sold in the North and 80-percent AFUE 

for products sold in the Rest of Country. 

TSL 4 does not have a small furnace 

capacity threshold. At TSL 4, DOE 

estimates the change in INPV to range 

from ¥$285.2 million to ¥$16.2 

million, or a change in INPV of ¥20.2 

percent to –1.1 percent. At this level, 

free cash flow is estimated to decrease 

to $45.1 million, or a decrease of 47.5 

percent compared to the no-newstandards case value of $85.8 million in 

the year 2028. 

In the year before the standard goes 

into effect, DOE expects that the North 

region will account for approximately 

57.3 percent of consumer furnace 

shipments, with the remaining 

shipments attributable to the Rest of 

Country region. Once the standard goes 

into effect, consumer furnaces sold in 

the North must achieve 95-percent 

AFUE. At TSL 4, DOE expects 72.7 

percent of NWGFs and 69.0 percent of 

MHGFs would be sold at condensing 

levels in 2029. Capital conversion costs 

are expected to reach $58.3 million as 

manufacturers increase secondary heat 

exchanger production line capacity. 

Product conversion costs reach $41.2 

million, as manufacturers develop costoptimized 95-percent AFUE furnaces 

that are competitive at reduced 

markups. Total industry conversion 

costs would be expected to reach $99.6 

million at TSL 4. 

For products sold in the North that 

must achieve 95-percent AFUE, the 

industry faces a noticeable compression 

of markups. In the no-new-standards 

case, 95-percent AFUE products garner 

a higher markup than baseline products. 

At TSL 4, 95-percent AFUE products 

become the minimum AFUE efficiency 

offering and would no longer command 

the same premium manufacturer 

markup in the North. However, at this 

level, manufacturers can still 

differentiate products and offer multiple 

markup tiers based on ‘‘comfort’’ 

features, such as two-stage or 

modulating combustion technology. 

DOE models the industry maintaining 

three manufacturer markup tiers (‘‘good, 

better, best’’) but at a compressed range 

of manufacturer markup values. This 

approach accounts for manufacturers’ 

continued ability to differentiate 

products based on combustion system 

technology while recognizing that 

manufacturer markups (and 

profitability) for high-efficiency 

products in the North may be reduced 

due to the higher AFUE standard. 

TSL 5 represents a standard set at 92- 

percent AFUE for large furnaces, while 

small furnaces remain at the current 

Federal minimum of 80-percent AFUE. 

Small furnaces are defined as NWGFs 

and MHGFs with input capacities of 55 

kBtu/h or less. At TSL 5, DOE estimates 

the change in INPV to range from 

¥$161.2 million to ¥$17.6 million, or 

a change in INPV of ¥11.4 percent to 

¥1.2 percent. At this level, free cash 

flow is estimated to decrease to $52.2 

million, or a decrease of 39.2 percent 

compared to the no-new-standards case 

value of $85.8 million in the year 2028. 

Small furnaces with input capacities 

of 55 kBtu/h or less account for 

approximately 11.2 percent of NWGFs 

and 21.8 percent of MHGFs in the year 

before the standard goes into effect. At 

TSL 5, 84.6 percent of NWGF shipments 

and 70.0 percent of MHGF shipments 

would be sold at condensing levels 

when the standard goes into effect, 

requiring the industry to expand its 

production of secondary heat 

exchangers. Capital conversion costs 

would increase from $47.1 million at 

TSL 3, the previous TSL with a separate 

standard level for small furnaces, to 

$53.9 million at TSL 5. Manufacturers 

will also incur product conversion costs 

driven by the development necessary to 

create compliant, cost-competitive 

products. DOE estimates total industry 

conversion costs could reach $80.5 

million at TSL 5. 

TSLs 6, 8, and 9 represent national 

standards for all covered NWGFs and 

MHGFs. At these TSLs, there is no 

separate standard level based on furnace 

input capacity. As the TSL increases 

from 6 to 8 to 9, the national standard 

increases and DOE models a 

compression of markups in the tiered 

markup scenario. Compressed markups 

are a significant driver of negative 

impacts to INPV in the tiered markup 

scenario, particularly at TSL 9 for 

NWGFs, when neither efficiency nor 

combustion system technology (e.g., 

single-stage, two-stage, or modulating 

combustion) is a means for product 

differentiation. 

TSL 6 represents a national 92- 

percent AFUE standard for all covered 

NWGFs and MHGFs. TSL 6 does not 

have a small furnace capacity threshold. 

At this level, DOE estimates the change 

in INPV to range from ¥$174.4 million 

to ¥$34.5 million, or a change in INPV 

of ¥12.4 percent to ¥2.4 percent. At 

this level, free cash flow is estimated to 

decrease to $44.9 million, or a decrease 

of 47.7 percent compared to the no-newstandards case value of $85.8 million in 

the year 2028. 

At TSL 6, all shipments of the covered 

product would be at a condensing level 

once the standard goes into effect. 

Manufacturer markups at TSL 6 are 

slightly reduced, but the industry is still 

able to maintain three tiers of markups. 

Manufacturers would incur product 

conversion costs of $26.6 million at TSL 

6, as manufacturers develop 92-percent 

AFUE furnaces that are competitive at 

reduced markups. Capital conversion 

costs would total $70.2 million, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

all NWGF and MHGF shipments sold 

into the domestic market. Total 

conversion costs could reach $96.8 

million for the industry. 

TSL 7 represents a 95-percent AFUE 

standard for large furnaces, while small 

furnaces remain at the current Federal 

minimum of 80-percent AFUE. At TSL 

7, small furnaces are defined as NWGFs 

and MHGFs with input capacities of 55 

kBtu/h or less. DOE estimates the 

change in INPV to range from ¥$344.4 

million to ¥$15.0 million, or a change 

in INPV of ¥24.4 percent to ¥1.1 

percent. At this level, free cash flow is 

estimated to decrease to $34.0 million, 

or a decrease of 60.4 percent compared 

to the no-new-standards case value of 

$85.8 million in the year 2028. 

Small furnaces with input capacities 

of 55 kBtu/h or less account for 

approximately 11.2 percent of NWGF 

shipments and 21.8 percent of MHGF 

shipments before the standard goes into 

effect. At this level, 84.6 percent of 


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NWGF shipments and 70.0 percent of 

MHGF shipments would be sold at 

condensing levels when the standard 

goes into effect, requiring the industry 

to expand its production of secondary 

heat exchangers. Capital conversion 

costs would total $82.9 million, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

the majority of NWGF and MHGF 

shipments sold into the domestic 

market. Manufacturers would also incur 

product conversion costs of an 

estimated $41.2 million, driven by the 

development necessary to create 

compliant, cost-competitive products. 

Total conversion costs could reach 

$124.1 million. 

For large NWGFs and MHGFs, 

industry faces a noticeable compression 

of markups due to their limited ability 

to differentiate products purely based 

on AFUE. However, as with TSL 4, 

manufacturers can still differentiate 

products subject to the 95-percent 

standard based on ‘‘comfort’’ features, 

such as two-stage or modulating 

combustion technology. DOE models 

the industry as maintaining three 

markup tiers (‘‘good, better, best’’) but at 

a compressed range of tiers where maxtech products do not command the same 

premium as they did in the no-newstandards case. This approach accounts 

for manufacturers’ continued ability to 

differentiate large NWGFs and MHGFs 

based on combustion systems while 

recognizing that markups (and 

profitability) for high-efficiency 

products may be reduced for large 

furnaces due to the 95-percent AFUE 

standard. While manufacturers would 

not experience a compression of 

markups for small capacity products, 

most shipments qualify as large furnaces 

at this capacity cutoff. The reduction in 

premium product offerings and 

deterioration of markups for the 

majority of furnace shipments coupled 

with increased conversion costs are 

expected to result in a negative change 

in INPV at TSL 7. 

TSL 8 represents a national 95- 

percent AFUE standard for all covered 

NWGFs and MHGFs. TSL 8 does not 

have a small capacity threshold. At TSL 

8, DOE estimates the change in INPV to 

range from ¥$380.3 million to ¥$30.5 

million, or a change in INPV of ¥26.9 

percent to ¥2.2 percent. At this level, 

free cash flow is estimated to decrease 

to $22.8 million, or a decrease of 73.4 

percent compared to the no-newstandards case value of $85.8 million in 

the year 2028. 

DOE estimates that approximately 

39.3 percent of the annual NWGF 

shipments and approximately 14.9 

percent of the annual MHGF shipments 

currently meet or exceed the efficiencies 

required at TSL 8. At TSL 8, all covered 

furnaces would be condensing after the 

standard goes into effect. DOE estimates 

capital conversion costs would increase 

to $107.8 million at TSL 8, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

all NWGF and MHGF shipments sold 

into the domestic market. Product 

conversion costs would total $41.2 

million, as manufacturers develop costoptimized 95-percent AFUE NWGF and 

MHGF models that are competitive at 

reduced markups. Total industry 

conversion costs could reach $149.0 

million. 

With a national standard of 95- 

percent AFUE, industry faces a 

noticeable compression of markups due 

to their limited ability to differentiate 

products purely based on AFUE. As 

with TSL 4 and TSL 7, manufacturers 

can still differentiate products based on 

‘‘comfort’’ features such as the 

combustion systems. At TSL 8, DOE 

models the industry as maintaining 

three markup tiers (‘‘good, better, best’’) 

but at a compressed range of 

manufacturer markup values where 

max-tech products do not command the 

same premium as they did in the nonew-standards case. This approach 

accounts for manufacturers’ continued 

ability to differentiate NWGFs and 

MHGFs based on combustion systems 

while recognizing that markups (and 

profitability) for high-efficiency 

products may be reduced due to the 95- 

percent AFUE standard. The 

compression of markups and a 

reduction in product offerings, coupled 

with increased conversion costs are 

expected to result in INPV losses at TSL 

8. 

TSL 9 represents a national max-tech 

standard, where NWGF products must 

achieve 98-percent AFUE and MHGF 

products must achieve 96-percent 

AFUE. At TSL 9, DOE estimates the 

change in INPV to range from ¥$683.8 

million to $9.0 million, or a change in 

INPV of ¥48.4 percent to 0.6 percent. 

At this level, the large conversion costs 

result in a free cash flow dropping 

below zero in the years before the 

standard year. The negative free cash 

flow calculation indicates 

manufacturers may need to access cash 

reserves or outside capital to finance 

conversion efforts. 

At TSL 9, approximately 1.8 percent 

of NWGFs and 0.8 percent of MHGFs 

are sold at this level today. 

Manufacturers would incur $79.9 

million in product conversion costs as 

they develop cost-optimized, highefficiency NWGF models that can 

compete in a market where efficiency 

and combustion systems are no longer 

viable options for product 

differentiation and MHGF models that 

can compete in a market where 

efficiency is no longer a means for 

product differentiation. More than half 

of all NWGF and MHGF OEMs do not 

currently offer any models that meet the 

efficiency levels required by TSL 9. 

Manufacturers would also incur capital 

conversion costs of $221.6 million as 

manufacturers add the production 

capacity necessary to produce all 

NWGFs and MHGFs sold into the 

domestic market at 98-percent and 96- 

percent AFUE, respectively. Total 

conversion costs would be expected to 

reach $301.6 million for the industry. 

Some manufacturers expressed great 

concern about the state of technology at 

max-tech. Specifically, those 

manufacturers’ noted uncertainty about 

the ability to deliver cost-effective 

products for their customers. They also 

cited high conversion costs and large 

investments in R&D to produce all 

products at this level. Many OEMs do 

not currently manufacture any models 

that meet these efficiency levels. These 

OEMs would likely have more technical 

challenges in designing new models that 

meet max-tech levels. Furthermore, 

NWGF manufacturers would lose 

efficiency and combustion systems as 

differentiators between baseline and 

premium product offerings. The extent 

of conversion costs, the compression of 

markups, and the reduced ability to 

differentiate products would likely alter 

the consumer furnace competitive 

landscape. 

DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each AFUE standard TSL. 

Cash-Flow Analysis Results for NonWeatherized Gas Furnaces and Mobile 

Home Gas Furnaces Standby Mode and 

Off Mode Standards 

Table V.20 presents the financial 

impacts of standby mode and off mode 

standards on NWGF and MHGF 

manufacturers. These impacts are 

represented by changes in INPV and free 

cash flow in the year before the standard 

(2028) as well as by the conversion costs 

that DOE estimates NWGF and MHGF 

manufacturers would incur at each TSL. 

The impacts of standby mode and off 

mode features were analyzed for the 

same product classes as the amended 

AFUE standards, but at different 

efficiency levels, which correspond to a 

different set of technology options for 

reducing standby mode and off mode 

energy consumption. Therefore, the 

TSLs in the standby mode and off mode 


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266U.S. Census Bureau’s Annual Survey of 

Manufactures: 2018–2019 (Available at 

www.census.gov/programs-surveys/asm/data/ 

tables.html) (Last accessed Oct. 19, 2021). 

267U.S. Bureau of Labor Statistics, Employer 

Costs for Employee Compensation (June 17, 2021) 

(Available at: www.bls.gov/news.release/pdf/ 

ecec.pdf) (Last accessed May 20, 2022). 

268The comprehensive description of production 

and non-production workers is available online at: 

www.census.gov/programs-surveys/asm/ 

information.html, ‘‘Definitions and Instructions for 

the Annual Survey of Manufacturers, MA–10000.’’ 

(pp. 13–14). 

analysis do not correspond to the TSLs 

in the AFUE analysis. 

DOE considered the impacts of 

standby mode and off mode features 

under two markup scenarios to 

represent the upper and lower bounds 

of industry impacts: (1) a preservation of 

gross margin percentage scenario, and 

(2) a preservation of operating profit 

scenario. The preservation of gross 

margin percentage scenario represents 

the upper bound of impacts (less 

severe), while the preservation of 

operating profit scenario represents the 

lower bound of impacts (more severe). 

TABLE V.20—MANUFACTURER IMPACT ANALYSIS: STANDBY MODE AND OFF MODE STANDARDS RESULTS FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Units 

No-newstandards 

case 

Trial standard level 

TSL 1 TSL 2 TSL 3 

INPV ............................................................................... 2020$ millions ..... 1,411.8 1,410.8 to 

1,412.7 

1,410.8 to 

1,412.8 

1,409.7 to 

1,416.8 

Change in INPV ............................................................. 2020$ millions ..... ........................ (1.0) to 0.9 (1.1) to 1.0 (2.1) to 5.0 

% ......................... ........................ (0.1) to 0.1 (0.1) to 0.1 (0.1) to 0.4 

Free Cash Flow (2028) .................................................. 2020$ millions ..... 85.8 85.4 85.4 85.3 

Change in Free Cash Flow (2028) ................................ % ......................... ........................ (0.5) (0.5) (0.6) 

Product Conversion Costs ............................................. 2020$ millions ..... ........................ 1.2 1.2 1.6 

Capital Conversion Costs ............................................... 2020$ millions ..... ........................ ........................ ........................ ........................

Total Investment Required ...................................... 2020$ millions ..... ........................ 1.2 1.2 1.6 

Note: Parentheses indicate negative values. 

At TSL 1, DOE estimates the impacts 

on INPV for NWGF and MHGF 

manufacturers to change by less than 0.1 

percent in both markup scenarios 

(preservation of gross margin percentage 

and preservation of operating profit). At 

this potential standard level, industry 

free cash flow is estimated to decrease 

by 0.5 percent compared to the no-newstandards case value of $85.8 million in 

2028. DOE expects industry conversion 

costs for standby mode and off mode to 

be $1.2 million. 

At TSL 2, DOE estimates the impacts 

on INPV for NWGF and MHGF 

manufacturers to change by less than 0.1 

percent in both markup scenarios 

(preservation of gross margin percentage 

and preservation of operating profit). At 

this potential standard level, industry 

free cash flow is estimated to decrease 

by 0.5 percent compared to the no-newstandards case value of $85.8 million in 

2028. DOE expects industry conversion 

costs for standby mode and off mode to 

be $1.2 million. 

At TSL 3, DOE estimates the impacts 

on INPV for NWGF and MHGF 

manufacturers to range from a decrease 

of 0.1 percent to an increase of 0.4 

percent. At this potential standard level, 

industry free cash flow is estimated to 

decrease by 0.6 percent compared to the 

no-new-standards case value of $85.8 

million in 2028. DOE expects industry 

conversion costs for standby mode and 

off mode to be $1.6 million. 

DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each standby mode and off mode 

TSL. 

b. Direct Impacts on Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment in the NWGF and MHGF 

industry, DOE used the GRIM to 

estimate the domestic labor 

expenditures and number of direct 

employees in the no-new-standards case 

and in each of the AFUE standards cases 

during the analysis period. DOE 

calculated these values using statistical 

data from the U.S. Census Bureau’s 2019 

ASM,266 the U.S. Bureau of Labor 

Statistics’ (‘‘BLS’’) employee 

compensation data,267 results of the 

engineering analysis, and manufacturer 

interviews. 

Labor expenditures related to product 

manufacturing depend on the labor 

intensity of the product, the sales 

volume, and an assumption that wages 

remain fixed in real terms over time. 

The total labor expenditures in each 

year are calculated by multiplying the 

total MPCs by the labor percentage of 

MPCs. The total labor expenditures in 

the GRIM were then converted to 

domestic production employment levels 

by dividing production labor 

expenditures by the average fully 

burdened wage multiplied by the 

average number of hours worked per 

year per production worker. To do this, 

DOE relied on the ASM inputs 

Production Workers Annual Wages, 

Production Workers Annual Hours, 

Production Workers Average for Year, 

and Number of Employees. DOE also 

relied on the BLS employee 

compensation data to determine the 

fully burdened wage ratio. The fully 

burdened wage ratio factors in paid 

leave, supplemental pay, insurance, 

retirement and savings, and legally 

required benefits. 

Total production employees is then 

multiplied by the U.S. labor percentage 

to convert total production employment 

to total domestic production 

employment. The U.S. labor percentage 

represents the industry fraction of 

domestic manufacturing production 

capacity for the covered product. This 

value is derived from manufacturer 

interviews, product database analysis, 

and publicly available information. DOE 

estimates that 45 percent of gas-fired 

consumer furnaces are produced 

domestically. 

The domestic production employees 

estimate covers production line 

workers, including line supervisors, 

who are directly involved in fabricating, 

processing, or assembling products 

within the OEM facility. Workers 

performing services that are closely 

associated with production operations, 

such as handling materials using 

forklifts, are also included as production 

labor.268 DOE’s estimates only account 

for production workers who 


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manufacture the specific equipment 

covered by this rulemaking. 

Non-production workers account for 

the remainder of the direct employment 

figure. The non-production employees 

covers domestic workers who are not 

directly involved in the production 

process, such as sales, engineering, 

human resources, management, etc. 

Using the amount of domestic 

production workers calculated above, 

non-production domestic employees are 

extrapolated by multiplying the ratio of 

non-production workers in the industry 

compared to production employees. 

DOE assumes that this employee 

distribution ratio remains constant 

between the no-standards case and 

standards cases. 

TABLE V.21—POTENTIAL CHANGES IN THE TOTAL NUMBER OF NON-WEATHERIZED GAS FURNACE AND MOBILE HOME

GAS FURNACE PRODUCTION AND NON-PRODUCTION WORKERS IN 2029 

Trial standard level 

No-newstandards 

case 

TSL 1 TSL 2 TSL 3 TSL 4 

Direct Employment in 2029 (Production workers + NonProduction Workers) ......................................................... 1,718 1,761 1,789 1,778 1,829 

Potential Changes in Direct Employment Workers in 

2029 * ................................................................................ ........................ (1,274) to 43 (1,274) to 71 (1,274) to 60 (1,274) to 111 

Trial standard level 

TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Direct employment estimate in 2029 (Production Workers 

+ Non-Production Workers) ............................................. 1,803 1,755 1,898 1,875 1,812 

Potential Changes in Direct Employment Workers in 

2029 * ................................................................................ (1,274) to 85 (1,274) to 37 (1,274) to 180 (1,274) to 157 (1,274) to 94 

* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative values. 

The direct employment impacts 

shown in Table V.23 represent the 

potential domestic employment changes 

that could result following the 

compliance date for the NWGF and 

MHGF product classes in this proposal. 

The upper end of the range estimates an 

increase in the number of domestic 

workers producing NWGFs and MHGFs 

after implementation of an amended 

energy conservation standard at each 

TSL. This upper bound assumes 

manufacturers would continue to 

produce the same scope of covered 

products within the United States and 

would require additional labor to 

produce more-efficient products. The 

lower bound of the range represents the 

estimated maximum decrease in the 

total number of U.S. domestic workers 

if production moved to lower labor-cost 

countries or manufacturers left the 

market. Some large manufacturers are 

currently producing covered products in 

countries with lower labor costs, and an 

amended standard that necessitates 

large increases in labor content or large 

expenditures to re-tool facilities could 

cause manufacturers to re-evaluate 

domestic production siting options. 

The impacts in the direct employment 

analysis are based on the analysis of 

amended AFUE energy conservation 

standards only. Standby mode and off 

mode technology options considered in 

the engineering analysis would result in 

component swaps, which would not 

make the product significantly more 

complex. While some product 

development effort would be required, 

the standby mode and off mode 

standard would not significantly affect 

the amount of labor required in 

production. Therefore, DOE did not 

conduct a quantitative domestic 

manufacturing employment impact 

analysis for the proposed standby mode 

and off mode standards. 

Additional detail on the analysis of 

direct employment can be found in 

chapter 12 of the NOPR TSD. 

Additionally, the employment impacts 

discussed in this section are 

independent of the employment impacts 

from the broader U.S. economy, which 

are documented in chapter 15 of the 

NOPR TSD. 

c. Impacts on Manufacturing Capacity 

According to manufacturer feedback, 

production facilities are not currently 

equipped to supply the entire NWGF 

and MHGF market with condensing 

products. However, most manufacturers 

would be able to add capacity and 

adjust product designs in the 5-year 

period between the announcement year 

of the standard and the compliance year 

of the standard. DOE interviewed 

manufacturers representing over 65 

percent of industry shipments. None of 

the interviewed manufacturers 

expressed concern over the industry’s 

ability increase the capacity of 

production lines that meet required 

efficiency levels at TSLs 1 through 8 to 

meet consumer demand. At TSL 9, 

technical uncertainty was expressed by 

manufacturers that do not offer maxtech efficiency products today, as they 

were unsure of what production lines 

changes would be needed to meet an 

amended standard set at max-tech. 

d. Impacts on Subgroups of 

Manufacturers 

Using average cost assumptions to 

develop an industry cash-flow estimate 

is not adequate for assessing differential 

impacts among subgroups of 

manufacturers. Small manufacturers, 

niche players, or manufacturers 

exhibiting a cost structure that differs 

substantially from the industry average 

could be affected disproportionately. 

DOE used the results of the industry 

characterization to group manufacturers 

exhibiting similar characteristics. 

Specifically, DOE identified small 

businesses as a manufacturer subgroup 

that it believes could be 

disproportionally impacted by energy 

conservation standards and would 

require a separate analysis in the MIA. 

DOE did not identify any other 

adversely impacted manufacturer 

subgroups for this rulemaking based on 

the results of the industry 

characterization. 

DOE analyzes the impacts on small 

businesses in a separate analysis in 


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269U.S. Department of Energy Compliance 

Certification Management System (‘‘CCMS’’). 

(Available at: www.regulations.doe.gov/ 

certification-data/) (Last accessed July 7, 2021). 

section VI.B of this NOPR as part of the 

Regulatory Flexibility Analysis. In 

summary, the SBA defines a ‘‘small 

business’’ as having 1,250 employees or 

less for NAICS 333415, ‘‘AirConditioning and Warm Air Heating 

Equipment and Commercial and 

Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

classification, DOE identified four 

domestic OEMs that certify NWGFs 

and/or MHGFs in DOE’s Compliance 

Certification Management System 

database (‘‘CCMS’’) 269 that qualify as a 

small business. For a discussion of the 

impacts on the small business 

manufacturer subgroup, see the 

Regulatory Flexibility Analysis in 

section VI.B of this NOPR and chapter 

12 of the NOPR TSD. 

e. Cumulative Regulatory Burden 

One aspect of assessing manufacturer 

burden involves examining the 

cumulative impact of multiple DOE 

standards and the product-specific 

regulatory actions of other Federal 

agencies that affect the manufacturers of 

a covered product or equipment. While 

any one regulation may not impose a 

significant burden on manufacturers, 

the combined effects of several recent or 

impending regulations may have serious 

consequences for some manufacturers, 

groups of manufacturers, or an entire 

industry. Assessing the impact of a 

single regulation may overlook this 

cumulative regulatory burden. In 

addition to energy conservation 

standards, other regulations can 

significantly affect manufacturers’ 

financial operations. For these reasons, 

DOE conducts an analysis of cumulative 

regulatory burden as part of its 

rulemakings pertaining to appliance 

efficiency. 

For the cumulative regulatory burden 

analysis, DOE examines Federal, 

product-specific regulations that could 

affect NWGF and MHGF manufacturers 

that take effect approximately three 

years before or after the 2029 

compliance date. Table V.22 presents 

the DOE energy conservation standards 

that would impact manufacturers of 

NWGF and MHGF products in the 2026 

to 2032 timeframe. 

TABLE V.22—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING GAS-FIRED CONSUMER FURNACE ORIGINAL EQUIPMENT MANUFACTURERS

Federal energy conservation standard Number of 

OEMs * 

Number of 

OEMs affected 

from today’s 

rule ** 

Approx. 

standards year 

Industry 

conversion 

costs 

(millions $) 

Industry 

conversion 

costs/product 

revenue *** 

(%) 

Room Air Conditioners † 87 FR 20608 (April 7, 2022) ....... 8 2 2026 $22.8 0. 5 

Consumer Pool Heaters † 87 FR 22640 (April 15, 2022) ... 21 1 2028 38.8 1.9 

Commercial Water Heating Equipment † 87 FR 30610 

(May 19, 2022) ................................................................. 15 3 2026 34.6 4.7 

* This column presents the total number of OEMs identified in the energy conservation standard rule contributing to cumulative regulatory burden. 

** This column presents the number of OEMs producing consumer furnaces that are also listed as OEMs in the identified energy conservation 

standard contributing to cumulative regulatory burden. 

*** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs 

are the upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue 

from just the covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are 

made and lasts from the publication year of the final rule to the compliance year of the final rule. The conversion period typically ranges from 3 

to 5 years, depending on the energy conservation standard. 

† The Room Air Conditioners, Consumer Pool Heaters, and Commercial Water Heating Equipment rulemakings are in the NOPR stage and all 

values are subject to change until finalized. 

3. National Impact Analysis 

This section presents DOE’s estimates 

of the national energy savings and the 

NPV of consumer benefits that would 

result from each of the TSLs considered 

as potential amended AFUE standards 

and new standby mode and off mode 

standards. 

a. Significance of Energy Savings 

To estimate the energy savings 

attributable to potential amended and 

new standards for NWGFs and MHGFs, 

DOE compared their energy 

consumption under the no-newstandards case to their anticipated 

energy consumption under each TSL. 

The savings are measured over the 

entire lifetime of products purchased in 

the 30-year period that begins in the 

year of anticipated compliance with 

amended standards (2029–2058). Table 

V.23 presents DOE’s projections of the 

national energy savings for each AFUE 

TSL considered for NWGFs and MHGFs. 

The savings were calculated using the 

approach described in section IV.H.2 of 

this document. 

TABLE V.23—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE AFUE STANDARDS; 30 YEARS OF SHIPMENTS (2029–2058) 

Energy savings Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

quads 

Primary energy .................................................................. NWGF ............... 1.60 2.45 2.82 2.92 3.01 3.49 4.15 4.70 6.45 

MHGF ................ 0.01 0.03 0.05 0.08 0.06 0.09 0.07 0.10 0.09 

Total .................. 1.61 2.49 2.86 3.00 3.07 3.58 4.22 4.81 6.54 

FFC energy ....................................................................... NWGF ............... 1.77 2.72 3.14 3.26 3.37 4.03 4.63 5.37 7.38 

MHGF ................ 0.01 0.04 0.05 0.09 0.06 0.10 0.08 0.12 0.11 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
40680 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

270U.S. Office of Management and Budget, 

Circular A–4: Regulatory Analysis (September 17, 

2003) (Available at: www.whitehouse.gov/sites/

whitehouse.gov/files/omb/circulars/A4/a-4.pdf) 

(Last accessed Sept. 9, 2021). 

271Section 325(m) of EPCA requires DOE to 

review its standards at least once every 6 years, and 

requires, for certain products, a 3-year period after 

any new standard is promulgated before 

compliance is required, except that in no case may 

any new standards be required within 6 years of the 

compliance date of the previous standards. While 

adding a 6-year review to the 3-year compliance 

period adds up to 9 years, DOE notes that it may 

undertake reviews at any time within the 6 year 

period and that the 3-year compliance date may 

yield to the 6-year backstop. A 9-year analysis 

period may not be appropriate given the variability 

that occurs in the timing of standards reviews and 

the fact that for some products, the compliance 

period is 5 years rather than 3 years. 

272 DOE presents results based on a 9-year 

analytical period only for the AFUE TSLs; the 

percentage difference between nine-year and 30- 

year results for the standby mode and off mode 

TSLs is the same as for the AFUE TSLs. 

TABLE V.23—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE AFUE STANDARDS; 30 YEARS OF SHIPMENTS (2029–2058)—Continued 

Energy savings Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

quads 

Total .................. 1.78 2.76 3.19 3.35 3.44 4.12 4.70 5.48 7.48 

For the proposed standards (TSL 8), 

the FFC energy savings of 5.48 quads are 

the FFC natural gas savings minus the 

increase in FFC energy use associated 

with higher electricity use due primarily 

to switching to electric heating. 

The previously results reflect the use 

of the reference product switching 

scenario and repair vs. replace trend for 

NWGFs and MHGFs (as described in 

section IV.F.12 of this document). DOE 

also conducted a sensitivity analysis 

that considered scenarios with lower 

and higher rates of product switching, 

as compared to the default case. The 

results of these alternative cases are 

presented in appendix 10E of the NOPR 

TSD. 

Table V.24 presents DOE’s projections 

of the primary and FFC national energy 

savings for each standby mode and off 

mode TSL considered for NWGFs and 

MHGFs. National energy savings were 

calculated using the approach described 

in section IV.H.2 of this NOPR. 

TABLE V.24—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE STANDARDS; 30 YEARS OF SHIPMENTS (2029–2058) 

Energy savings Product class 

Trial standard level 

1 2 3 

quads 

Primary energy ................................................................................................ NWGF ............ 0.15 0.18 0.26 

MHGF ............ 0.002 0.002 0.003 

Total .............. 0.15 0.18 0.27 

FFC energy ...................................................................................................... NWGF ............ 0.15 0.18 0.27 

MHGF ............ 0.002 0.002 0.003 

Total .............. 0.16 0.19 0.28 

OMB Circular A–4 270 requires 

agencies to present analytical results, 

including separate schedules of the 

monetized benefits and costs that show 

the type and timing of benefits and 

costs. Circular A–4 also directs agencies 

to consider the variability of key 

elements underlying the estimates of 

benefits and costs. For this rulemaking, 

DOE undertook a sensitivity analysis 

using 9 years, rather than 30 years, of 

product shipments. The choice of a 9- 

year period is a proxy for the timeline 

in EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

revised standards.271 The review 

timeframe established in EPCA is 

generally not synchronized with the 

product lifetime, product manufacturing 

cycles, or other factors specific to 

NWGFs and MHGFs. Thus, such results 

are presented for informational 

purposes only and are not indicative of 

any change in DOE’s analytical 

methodology. The NES sensitivity 

analysis results based on a 9-year 

analytical period are presented in Table 

V.25 for AFUE standards and Table V.26 

for standby and off mode standards.272

The impacts are counted over the 

lifetime of NWGFs and MHGFs 

purchased in 2029–2037. 

TABLE V.25—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES AFUE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037) 

Energy savings Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

quads 

Primary energy .................................................................. NWGF ............... 0.45 0.69 0.79 0.78 0.85 0.98 1.17 1.33 1.94 

MHGF ................ 0.00 0.01 0.01 0.02 0.02 0.02 0.02 0.03 0.03 

Total .................. 0.45 0.70 0.80 0.81 0.86 1.01 1.19 1.36 1.96 

FFC energy ....................................................................... NWGF ............... 0.50 0.76 0.88 0.88 0.95 1.15 1.30 1.53 2.23 

MHGF ................ 0.00 0.01 0.02 0.03 0.02 0.03 0.02 0.03 0.03 


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I I I I I I I I 

I I I I I I I I 
Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40681 

273U.S. Office of Management and Budget, 

Circular A–4: Regulatory Analysis (September 17, 

2003) (Available at: www.whitehouse.gov/sites/ whitehouse.gov/files/omb/circulars/A4/a-4.pdf) 

(Last accessed September 9, 2021). 

TABLE V.25—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES AFUE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037)—Continued 

Energy savings Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

quads 

Total .................. 0.50 0.77 0.90 0.90 0.97 1.17 1.33 1.56 2.26 

TABLE V.26—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037) 

Energy savings Product class 

Trial standard level 

1 2 3 

quads 

Primary energy ................................................................................................ NWGF ............ 0.04 0.05 0.07 

MHGF ............ 0.000 0.001 0.001 

Total .............. 0.04 0.05 0.07 

FFC energy ...................................................................................................... NWGF ............ 0.04 0.05 0.08 

MHGF ............ 0.000 0.001 0.001 

Total .............. 0.04 0.05 0.08 

b. Net Present Value of Consumer Costs 

and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for 

consumers that would result from the 

TSLs considered for NWGFs and 

MHGFs. In accordance with OMB’s 

guidelines on regulatory analysis,273

DOE calculated NPV using both a 7- 

percent and a 3-percent real discount 

rate. Table V.27 E;shows the consumer 

NPV results for AFUE standards with 

impacts counted over the lifetime of 

products purchased in 2029–2058. 

TABLE V.27—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE AFUE STANDARDS; 30 YEARS OF SHIPMENTS (2029–2058) 

Discount rate Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

billion 2017$ 

7 percent ........................................................................... NWGF ............... 1.44 2.35 2.87 2.60 3.10 4.11 4.79 5.92 6.48 

MHGF ................ 0.02 0.06 0.10 0.19 0.12 0.18 0.16 0.23 0.23 

Total .................. 1.45 2.41 2.97 2.79 3.22 4.28 4.95 6.15 6.71 

3 percent ........................................................................... NWGF ............... 5.42 8.68 10.52 9.79 11.41 15.35 16.51 20.79 24.82 

MHGF ................ 0.06 0.20 0.31 0.61 0.39 0.60 0.50 0.77 0.77 

Total .................. 5.48 8.88 10.83 10.40 11.79 15.94 17.01 21.56 25.59 

The above results reflect the use of the 

default product switching trend for 

NWGFs (as described in section IV.F.12 

of this document). As previously 

discussed, DOE conducted a sensitivity 

analysis assuming higher and lower 

levels of product switching for NWGFs. 

The results of these alternative cases are 

presented in appendix 10 E of the NOPR 

TSD. 

Table V.28 shows the consumer NPV 

results for standby mode and off mode 

standards with impacts counted over 

the lifetime of products purchased in 

2029–2058. 

TABLE V.28—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE STANDARDS; 30 YEARS OF SHIPMENTS (2029–2058) 

Discount rate Product class 

Trial standard level 

1 2 3 

billion 2020$ 

7 percent ......................................................... NWGF ............................................................. 0.67 0.77 1.13 

MHGF ............................................................. 0.01 0.01 0.01 

Total ............................................................... 0.67 0.78 1.14 

3 percent ......................................................... NWGF ............................................................. 1.94 2.27 3.34 

MHGF ............................................................. 0.02 0.03 0.04 


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I I I I I I I I 

I I I I I I I I 
40682 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

274 DOE presents results based on a 9-year 

analytical period only for the AFUE TSLs; the 

percentage difference between nine-year and 30- year results for the standby mode and off mode 

TSLs is the same as for the AFUE TSLs. 

TABLE V.28—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE STANDARDS; 30 YEARS OF SHIPMENTS (2029– 

2058)—Continued 

Discount rate Product class 

Trial standard level 

1 2 3 

billion 2020$ 

Total ............................................................... 1.96 2.30 3.38 

The NPV results for AFUE standards 

based on the aforementioned 9-year 

analytical period are presented in Table 

V.29 for AFUE standards and Table V.30 

for standby and off mode standards.274

The impacts are counted over the 

lifetime of products purchased in 2029– 

2037. As mentioned previously, such 

results are presented for informational 

purposes only and are not indicative of 

any change in DOE’s analytical 

methodology or decision criteria. 

TABLE V.29—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE AFUE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037) 

Discount rate Product class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

billion 2020$ 

7 percent ........................................... NWGF ............................................... 0.7 1.1 1.4 1.3 1.5 2.1 2.5 3.2 3.6 

MHGF ................................................ 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 

Total .................................................. 0.7 1.1 1.4 1.4 1.6 2.2 2.6 3.3 3.7 

3 percent ........................................... NWGF ............................................... 1.8 3.0 3.7 3.6 4.1 5.5 6.3 8.0 9.9 

MHGF ................................................ 0.0 0.1 0.1 0.2 0.2 0.2 0.2 0.3 0.3 

Total .................................................. 1.9 3.1 3.8 3.8 4.2 5.8 6.4 8.2 10.2 

TABLE V.30—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE STANDBY MODE AND OFF MODE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037) 

Discount rate Product class 

Trial standard level 

1 2 3 

billion 2020$ 

7 percent ......................................................... NWGF ............................................................. 0.3 0.4 0.6 

MHGF ............................................................. 0.00 0.00 0.01 

Total ............................................................... 0.3 0.4 0.6 

3 percent ......................................................... NWGF ............................................................. 0.7 0.9 1.3 

MHGF ............................................................. 0.01 0.01 0.01 

Total ............................................................... 0.8 0.9 1.3 

The previous results reflect the use of 

a default trend to estimate the change in 

price for NWGFs and MHGFs over the 

analysis period (see section IV.F.2 of 

this document). DOE also conducted a 

sensitivity analysis that considered one 

scenario with a lower rate of price 

decline than the reference case and one 

scenario with a higher rate of price 

decline than the reference case. The 

results of these alternative cases are 

presented in appendix 10C of the NOPR 

TSD. In the high-price-decline case, the 

NPV of consumer benefits is higher than 

in the default case. In the low-pricedecline case, the NPV of consumer 

benefits is lower than in the default 

case. 

c. Indirect Impacts on Employment 

It is estimated that amended energy 

conservation standards for NWGFs and 

MHGFs will reduce energy expenditures 

for consumers of those products, with 

the resulting net savings being 

redirected to other forms of economic 

activity. These expected shifts in 

spending and economic activity could 

affect the demand for labor. As 

described in section IV.N of this 

document, DOE used an input/output 

model of the U.S. economy to estimate 

indirect employment impacts of the 

TSLs that DOE considered. There are 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Therefore, DOE generated 

results for near-term timeframes (2029– 

2034), where these uncertainties are 

reduced. 

The results suggest that the proposed 

standards are likely to have a negligible 

impact on the net demand for labor in 

the economy. The net change in jobs is 

so small that it would be imperceptible 

in national labor statistics and might be 

offset by other, unanticipated effects on 

employment. Chapter 16 of the NOPR 

TSD presents detailed results regarding 

anticipated indirect employment 

impacts. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2

I I 

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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40683 

4. Impact on Utility or Performance of 

Products 

As discussed in section III.E.1.d of 

this document, DOE has initially 

concluded that the standards proposed 

in this NOPR would not lessen the 

utility or performance of the NWGFs 

and MHGFs under consideration in this 

rulemaking. Manufacturers of these 

products currently offer units that meet 

or exceed the proposed standards. 

5. Impact of Any Lessening of 

Competition 

DOE considered any lessening of 

competition that would be likely to 

result from new or amended standards. 

As discussed in section III.E.1.e of this 

document, EPCA directs the Attorney 

General of the United States (‘‘Attorney 

General’’) to determine the impact, if 

any, of any lessening of competition 

likely to result from a proposed 

standard and to transmit such 

determination in writing to the 

Secretary within 60 days of the 

publication of a proposed rule, together 

with an analysis of the nature and 

extent of the impact. DOE has also 

provided DOJ with copies of this NOPR 

and the accompanying TSD for review. 

DOE will consider DOJ’s comments on 

the proposed rule in determining 

whether to proceed to a final rule. DOE 

will publish and respond to DOJ’s 

comments in that document. DOE 

invites comment from the public 

regarding the competitive impacts that 

are likely to result from this proposed 

rule. In addition, stakeholders may also 

provide comments separately to DOJ 

regarding these potential impacts. See 

the ADDRESSES section for information 

to send comments to DOJ. 

6. Need of the Nation to Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

Nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts (costs) of energy 

production. Chapter 15 in the NOPR 

TSD presents the estimated impacts on 

electricity generating capacity, relative 

to the no-new-standards case, for the 

TSLs that DOE considered in this 

rulemaking. 

Energy conservation resulting from 

potential energy conservation standards 

for NWGFs and MHGFs is expected to 

yield environmental benefits in the form 

of reduced emissions of certain air 

pollutants and greenhouse gases. Table 

V.31 provides DOE’s estimate of 

cumulative emissions reductions 

expected to result from the AFUE TSLs 

considered in this rulemaking. The 

increase in emissions of SO2, Hg, and 

N2O is due to a fraction of NWGF 

consumers that are projected to switch 

from gas furnaces to electric heat pumps 

and electric furnaces in response to the 

potential standards. Table V.32 provides 

DOE’s estimate of cumulative emissions 

reductions expected to result from the 

standby mode and off mode TSLs 

considered in this rulemaking. The 

emissions were calculated using the 

multipliers discussed in section IV.K of 

this document. DOE reports annual 

emissions reductions for each TSL in 

chapter 13 of the NOPR TSD. 

TABLE V.31—AFUE STANDARDS: CUMULATIVE EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

Trial standard level 

1 2 3 4 5 6 7 8 9 

Power Sector Emissions 

CO2 (million metric tons) ........... 89 140 166 176 182 251 245 318 440 

SO2 (thousand tons) ................. (3) (6) (11) (13) (15) (50) (16) (52) (77) 

NOX (thousand tons) ................. 37 58 69 74 75 104 102 133 182 

Hg (tons) ................................... (0.02) (0.04) (0.07) (0.09) (0.10) (0.31) (0.11) (0.33) (0.48) 

CH4 (thousand tons) ................. 1.5 2.0 1.9 1.9 1.8 (1.3) 2.9 (0.1) (0.8) 

N2O (thousand tons) ................. 0.12 0.16 0.11 0.09 0.07 (0.48) 0.17 (0.38) (0.62) 

Upstream Emissions 

CO2 (million metric tons) ........... 11 18 22 23 24 36 32 44 62 

SO2 (thousand tons) ................. 0.02 0.01 (0.02) (0.03) (0.05) (0.34) (0.03) (0.32) (0.49) 

NOX (thousand tons) ................. 172 275 332 353 367 555 489 686 957 

Hg (tons) ................................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) 

CH4 (thousand tons) ................. 1,258 2,009 2,435 2,588 2,694 4,113 3,583 5,068 7,071 

N2O (thousand tons) ................. 0.02 0.03 0.03 0.03 0.03 0.03 0.04 0.05 0.06 

Total FFC Emissions 

CO2 (million metric tons) ........... 100 158 188 199 205 286 277 363 502 

SO2 (thousand tons) ................. (3) (6) (11) (13) (15) (51) (16) (52) (77) 

NOX (thousand tons) ................. 209 333 401 427 443 660 591 819 1,139 

Hg (tons) ................................... (0.02) (0.04) (0.07) (0.09) (0.10) (0.32) (0.11) (0.33) (0.48) 

CH4 (thousand tons) ................. 1,259 2,011 2,437 2,590 2,696 4,112 3,586 5,068 7,070 

N2O (thousand tons) ................. 0.14 0.18 0.14 0.13 0.10 (0.45) 0.21 (0.33) (0.56) 

Negative values (shown in parentheses) refer to an increase in emissions. 

TABLE V.32—STANDBY MODE AND OFF MODE STANDARDS: CUMULATIVE EMISSIONS REDUCTION FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

Trial standard level 

1 2 3 

Power Sector Emissions 

CO2 (million metric tons) ............................................................................................................. 5.0 6.0 9.0 

SO2 (thousand tons) .................................................................................................................... 2.5 3.0 4.4 

NOX (thousand tons) ................................................................................................................... 2.1 2.5 3.7


khammond on DSKJM1Z7X2PROD with PROPOSALS2

I I I I I I I I 

I I I I I I 

I I I I I I I I 
40684 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

TABLE V.32—STANDBY MODE AND OFF MODE STANDARDS: CUMULATIVE EMISSIONS REDUCTION FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058—Continued 

Trial standard level 

1 2 3 

Hg (tons) ...................................................................................................................................... 0.01 0.02 0.03 

CH4 (thousand tons) .................................................................................................................... 0.4 0.5 0.7 

N2O (thousand tons) .................................................................................................................... 0.1 0.1 0.1 

Upstream Emissions 

CO2 (million metric tons) ............................................................................................................. 0.4 0.4 0.7 

SO2 (thousand tons) .................................................................................................................... 0.0 0.0 0.0 

NOX (thousand tons) ................................................................................................................... 5.4 6.5 9.8

Hg (tons) ...................................................................................................................................... 0.0 0.0 0.0 

CH4 (thousand tons) .................................................................................................................... 36.3 43.6 65.1 

N2O (thousand tons) .................................................................................................................... 0.0 0.0 0.0 

Total FFC Emissions 

CO2 (million metric tons) ............................................................................................................. 5.4 6.4 9.6 

SO2 (thousand tons) .................................................................................................................... 2.5 3.0 4.5 

NOX (thousand tons) ................................................................................................................... 7.5 9.0 13.5 

Hg (tons) ...................................................................................................................................... 0.01 0.02 0.03 

CH4 (thousand tons) .................................................................................................................... 36.7 44.1 65.9 

N2O (thousand tons) .................................................................................................................... 0.1 0.1 0.1 

As part of the analysis for this 

rulemaking, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of CO2 that DOE 

estimated for each of the considered 

TSLs for NWGFs and MHGFs. Section 

IV.L.1.a of this document discusses the 

SC–CO2 values used. 

Table V.33 presents the present value 

of the CO2 emissions reduction at each 

AFUE TSL. Table V.34 presents the 

present value of CO2 emissions 

reductions at each standby mode and off 

mode TSL. 

TABLE V.33—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CO2 case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 648 3,038 4,868 9,191 

2 ....................................................................................................................... 1,021 4,788 7,673 14,486 

3 ....................................................................................................................... 1,217 5,701 9,134 17,249 

4 ....................................................................................................................... 1,250 5,886 9,445 17,800 

5 ....................................................................................................................... 1,332 6,240 9,998 18,882 

6 ....................................................................................................................... 1,867 8,733 13,984 26,427 

7 ....................................................................................................................... 1,789 8,389 13,442 25,380 

8 ....................................................................................................................... 2,360 11,047 17,695 33,429 

9 ....................................................................................................................... 3,307 15,441 24,714 46,740 

TABLE V.34—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: PRESENT VALUE OF CO2 EMISSIONS REDUCTION

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CO2 case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 35 165 264 499 

2 ....................................................................................................................... 42 198 317 599 

3 ....................................................................................................................... 63 296 473 895 

As discussed in section IV.L.1.b of 

this document, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of methane and N2O 

that DOE estimated for each of the 

considered TSLs for furnaces. Table 


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V.35 and Table V.36 presents the value 

of the CH4 emissions reduction at each 

TSL, and Table V.37 and Table V.38 

presents the value of the N2O emissions 

reduction at each TSL. 

TABLE V.35—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF METHANE EMISSIONS REDUCTION FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CH4 case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 386 1,270 1,814 3,360 

2 ....................................................................................................................... 616 2,027 2,894 5,361 

3 ....................................................................................................................... 749 2,460 3,512 6,507 

4 ....................................................................................................................... 773 2,557 3,656 6,763 

5 ....................................................................................................................... 829 2,724 3,887 7,204 

6 ....................................................................................................................... 1,276 4,173 5,950 11,040 

7 ....................................................................................................................... 1,099 3,615 5,161 9,561 

8 ....................................................................................................................... 1,566 5,133 7,322 13,578 

9 ....................................................................................................................... 2,210 7,218 10,289 19,096 

TABLE V.36—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: PRESENT VALUE OF METHANE EMISSIONS

REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CH4 case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 11 37 53 98 

2 ....................................................................................................................... 14 45 64 118 

3 ....................................................................................................................... 20 67 95 176 

TABLE V.37—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF NITROUS OXIDE EMISSIONS REDUCTION FOR NONWEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–N2O case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 0.3 1.5 2.4 4.1 

2 ....................................................................................................................... 0.4 2.0 3.1 5.2 

3 ....................................................................................................................... 0.3 1.5 2.4 3.9 

4 ....................................................................................................................... 0.3 1.4 2.2 3.7 

5 ....................................................................................................................... 0.2 1.1 1.7 2.8 

6 ....................................................................................................................... (1.2) (5.2) (8.1) (13.8) 

7 ....................................................................................................................... 0.5 2.3 3.6 6.1 

8 ....................................................................................................................... (0.9) (3.9) (6.0) (10.3) 

9 ....................................................................................................................... (1.5) (6.4) (10.0) (17.0) 

TABLE V.38—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: PRESENT VALUE OF NITROUS OXIDE EMISSIONS

REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–N2O case discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th 

percentile 

million 2020$ 

1 ....................................................................................................................... 0.2 0.7 1.0 1.8 

2 ....................................................................................................................... 0.2 0.8 1.3 2.1 

3 ....................................................................................................................... 0.3 1.2 1.9 3.2 


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40686 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other GHG 

emissions to changes in the future 

global climate and the potential 

resulting damages to the world economy 

continues to evolve rapidly. Thus, any 

value placed on reduced GHG emissions 

in this rulemaking is subject to change. 

That said, because of omitted damages, 

DOE agrees with the IWG that these 

estimates most likely underestimate the 

climate benefits of greenhouse gas 

reductions. DOE, together with other 

Federal agencies, will continue to 

review various methodologies for 

estimating the monetary value of 

reductions in CO2 and other GHG 

emissions. This ongoing review will 

consider the comments on this subject 

that are part of the public record for this 

and other rulemakings, as well as other 

methodological assumptions and issues. 

DOE notes that the proposed standards 

would be economically justified even 

without inclusion of monetized benefits 

of reduced GHG emissions. 

DOE also estimated the monetary 

value of the economic impacts 

associated with changes in SO2

emissions anticipated to result from the 

considered TSLs for NWGFs and 

MHGFs. The dollar-per-ton values that 

DOE used are discussed in section 

IV.L.2 of this document. Table V.39 

presents the present value SO2 emission 

changes for each AFUE TSL calculated 

using 7-percent and 3-percent discount 

rates. Table V.40 presents the 

cumulative present values for SO2

emissions for each standby mode and 

off mode TSL calculated using 7-percent 

and 3-percent discount rates. These 

tables present results that use the low 

benefit-per-ton values, which reflect 

DOE’s primary estimate. 

TABLE V.39—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF SO2 EMISSION CHANGES FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% discount 

rate 

3% discount 

rate 

million 2020$ 

1 ............................................................................................................................................................................... (39) (125) 

2 ............................................................................................................................................................................... (91) (288) 

3 ............................................................................................................................................................................... (165) (517) 

4 ............................................................................................................................................................................... (173) (570) 

5 ............................................................................................................................................................................... (218) (680) 

6 ............................................................................................................................................................................... (745) (2,296) 

7 ............................................................................................................................................................................... (229) (737) 

8 ............................................................................................................................................................................... (756) (2,357) 

9 ............................................................................................................................................................................... (1,122) (3,490) 

Parentheses indicate negative (¥) values. 

TABLE V.40—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: PRESENT VALUE OF SO2 EMISSIONS REDUCTION

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% discount 

rate 

3% discount 

rate 

million 2020$ 

1 ............................................................................................................................................................................... 33.3 108.3 

2 ............................................................................................................................................................................... 40.0 129.9 

3 ............................................................................................................................................................................... 59.7 194.1 

DOE also estimated the monetary 

value of the economic benefits 

associated with NOX emissions 

reductions anticipated to result from the 

considered TSLs for NWGFs and 

MHGFs. The dollar-per-ton values that 

DOE used are discussed in section IV.L 

of this document. Table V.41 presents 

the present value for NOX emissions 

reduction for each AFUE TSL calculated 

using 7-percent and 3-percent discount 

rates. Table V.42 presents the 

cumulative present values for NOX

emissions for each standby mode and 

off mode TSL calculated using 7-percent 

and 3-percent discount rates. These 

tables present results that use the low 

benefit-per-ton values, which reflect 

DOE’s primary estimate. 

TABLE V.41—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% discount 

rate 

3% discount 

rate 

million 2020$ 

1 ............................................................................................................................................................................... 1,720 5,682 

2 ............................................................................................................................................................................... 2,726 9,008 

3 ............................................................................................................................................................................... 3,284 10,820 

4 ............................................................................................................................................................................... 3,327 11,233 

5 ............................................................................................................................................................................... 3,620 11,907 

6 ............................................................................................................................................................................... 5,344 17,393 

7 ............................................................................................................................................................................... 4,815 15,903 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
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TABLE V.41—POTENTIAL AFUE STANDARDS: PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058—Continued 

TSL 7% discount 

rate 

3% discount 

rate 

million 2020$ 

8 ............................................................................................................................................................................... 6,631 21,695 

9 ............................................................................................................................................................................... 9,390 30,407 

Note: Results are based on the low benefit-per-ton values. 

TABLE V.42—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: PRESENT VALUE OF NOX EMISSIONS REDUCTION

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% discount 

rate 

3% discount 

rate 

million 2020$ 

1 ............................................................................................................................................................................... 75.7 247.8 

2 ............................................................................................................................................................................... 90.8 297.4 

3 ............................................................................................................................................................................... 135.7 444.3 

Note: Results are based on the low benefit-per-ton values. 

The benefits of reduced CO2, CH4, and 

N2O emissions are collectively referred 

to as climate benefits. The net benefits 

of SO2 and NOX emission changes are 

collectively referred to as health 

benefits. For the time series of estimated 

monetary values of reduced emissions, 

see chapter 14 of the NOPR TSD. 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6295(o)(2)(B)(i)(VII)) No other factors 

were considered in this analysis. 

8. Summary of National Economic 

Impacts 

Table V.43 and Table V.44 present the 

NPV values that result from adding the 

monetized estimates of the potential 

economic, climate, and health net 

benefits resulting from GHG, SO2, and 

NOX emission changes to the NPV of 

consumer savings calculated for each 

TSL considered in this rulemaking. The 

consumer benefits are domestic U.S. 

monetary savings that occur as a result 

of purchasing the covered NWGFs and 

MHGFs, and are measured for the 

lifetime of products shipped in 2029– 

2058. The climate benefits associated 

with reduced GHG emissions resulting 

from the adopted standards are global 

benefits and are also calculated based 

on the lifetime of consumer furnaces 

shipped in 2029–2058. The climate 

benefits associated with four SC–GHG 

estimates are shown. DOE does not have 

a single central SC–GHG point estimate 

and it emphasizes the importance and 

value of considering the benefits 

calculated using all four SC–GHG 

estimates. 

TABLE V.43—POTENTIAL AFUE STANDARDS: NPV OF CONSUMER BENEFITS COMBINED WITH MONETIZED CLIMATE AND

HEALTH BENEFITS FROM EMISSIONS REDUCTIONS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

3% discount rate for NPV of Consumer and Health Benefits (billion 2020$) 

5% d.r., Average SC–GHG 

case ....................................... 12.1 19.2 23.1 23.1 25.2 34.2 35.1 44.8 58.0 

3% d.r., Average SC–GHG 

case ....................................... 15.3 24.4 29.3 29.5 32.0 43.9 44.2 57.1 75.2 

2.5% d.r., Average SC–GHG 

case ....................................... 17.7 28.2 33.8 34.2 36.9 51.0 50.8 65.9 87.5 

3% d.r., 95th percentile SC– 

GHG case .............................. 23.6 37.4 44.9 45.6 49.1 68.5 67.1 87.9 118.3 

7% discount rate for NPV of Consumer and Health Benefits (billion 2020$) 

5% d.r., Average SC–GHG 

case ....................................... 4.2 6.7 8.1 8.0 8.8 12.0 12.4 16.0 20.5 

3% d.r., Average SC–GHG 

case ....................................... 7.4 11.9 14.2 14.4 15.6 21.8 21.5 28.2 37.6 

2.5% d.r., Average SC–GHG 

case ....................................... 9.8 15.6 18.7 19.0 20.5 28.8 28.1 37.0 50.0 

3% d.r., 95th percentile SC– 

GHG case .............................. 15.7 24.9 29.8 30.5 32.7 46.3 44.5 59.0 80.8 


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I 

I 
40688 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

275P.C. Reiss and M.W. White (2005), Household 

Electricity Demand, Revisited. The Review of 

Economic Studies, 72 (3), 853–883 (Available at: 

academic.oup.com/restud/article/72/3/853/ 

1557538) (Last accessed Feb. 15, 2022). 

TABLE V.44—POTENTIAL STANDBY MODE AND OFF MODE STANDARDS: NPV OF CONSUMER BENEFITS COMBINED WITH

MONETIZED CLIMATE AND HEALTH BENEFITS FROM EMISSIONS REDUCTIONS

Category TSL 1 TSL 2 TSL 3 

3% discount rate for NPV of Consumer and Health Benefits (billion 2020$) 

5% d.r., Average SC–GHG case ................................................................................................. 2.4 2.8 4.1 

3% d.r., Average SC–GHG case ................................................................................................. 2.5 3.0 4.4 

2.5% d.r., Average SC–GHG case .............................................................................................. 2.6 3.1 4.6 

3% d.r., 95th percentile SC–GHG case ...................................................................................... 2.9 3.4 5.1 

7% discount rate for NPV of Consumer and Health Benefits (billion 2020$) 

5% d.r., Average SC–GHG case ................................................................................................. 0.8 1.0 1.4 

3% d.r., Average SC–GHG case ................................................................................................. 1.0 1.2 1.7 

2.5% d.r., Average SC–GHG case .............................................................................................. 1.1 1.3 1.9 

3% d.r., 95th percentile SC–GHG case ...................................................................................... 1.4 1.6 2.4 

C. Conclusion 

When considering new or amended 

energy conservation standards, the 

standards that DOE adopts for any type 

(or class) of covered product must be 

designed to achieve the maximum 

improvement in energy efficiency that 

the Secretary determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) In determining whether a 

standard is economically justified, the 

Secretary must determine whether the 

benefits of the standard exceed its 

burdens by, to the greatest extent 

practicable, considering the seven 

statutory factors discussed previously. 

(42 U.S.C. 6295(o)(2)(B)(i)) The new or 

amended standard must also result in 

significant conservation of energy. (42 

U.S.C. 6295(o)(3)(B)) 

In this NOPR, DOE considered the 

impacts of amended and new standards 

for NWGFs and MHGFs at each TSL, 

beginning with the maximum 

technologically feasible level, to 

determine whether that level was 

economically justified. Where the maxtech level was not justified, DOE then 

considered the next most efficient level 

and undertook the same evaluation until 

it reached the highest efficiency level 

that is both technologically feasible and 

economically justified and saves a 

significant amount of energy. 

To aid the reader as DOE discusses 

the benefits and/or burdens of each TSL, 

tables in this section present a summary 

of the results of DOE’s quantitative 

analysis for each TSL. In addition to the 

quantitative results presented in the 

tables, DOE also considers other 

burdens and benefits that affect 

economic justification. These include 

the impacts on identifiable subgroups of 

consumers who may be 

disproportionately affected by a national 

standard and impacts on employment. 

DOE also notes that the economics 

literature provides a wide-ranging 

discussion of how consumers trade off 

upfront costs and energy savings in the 

absence of government intervention. 

Much of this literature attempts to 

explain why consumers appear to 

undervalue energy efficiency 

improvements. There is evidence that 

consumers undervalue future energy 

savings as a result of (1) a lack of 

information; (2) a lack of sufficient 

salience of the long-term or aggregate 

benefits; (3) a lack of sufficient savings 

to warrant delaying or altering 

purchases; (4) excessive focus on the 

short term, in the form of inconsistent 

weighting of future energy cost savings 

relative to available returns on other 

investments; (5) computational or other 

difficulties associated with the 

evaluation of relevant tradeoffs; and (6) 

a divergence in incentives (for example, 

between renters and owners, or builders 

and purchasers). Having less than 

perfect foresight and a high degree of 

uncertainty about the future, consumers 

may trade off these types of investments 

at a higher than expected rate between 

current consumption and uncertain 

future energy cost savings. 

In DOE’s current regulatory analysis, 

potential changes in the benefits and 

costs of a regulation due to changes in 

consumer purchase decisions are 

included in two ways. First, if 

consumers forego the purchase of a 

product in the standards case, this 

decreases sales for product 

manufacturers, and the impact on 

manufacturers attributed to lost revenue 

is included in the MIA. Second, DOE 

accounts for energy savings attributable 

only to products actually used by 

consumers in the standards case; if a 

standard decreases the number of 

products purchased by consumers, this 

decreases the potential energy savings 

from an energy conservation standard. 

DOE provides estimates of shipments 

and changes in the volume of product 

purchases in chapter 9 of the SNOPR 

TSD. However, DOE’s current analysis 

does not explicitly control for 

heterogeneity in consumer preferences, 

preferences across subcategories of 

products or specific features, or 

consumer price sensitivity variation 

according to household income.275

1. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnace and Mobile Home Gas Furnace 

AFUE Standards 

Table V.45 and Table V.46 summarize 

the quantitative impacts estimated for 

each AFUE TSL for NWGFs and 

MHGFs. The national impacts are 

measured over the lifetime of NWGFs 

and MHGFs purchased in the 30-year 

period that begins in the anticipated 

year of compliance with amended 

standards (2029–2058). The energy 

savings and emissions reductions refer 

to full-fuel-cycle results. The efficiency 

levels contained in each TSL are 

described further in section V.A of this 

document. 


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TABLE V.45—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE AFUE TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Cumulative FFC National Energy Savings (quads) 

Quads ........................................ 1.78 2.76 3.19 3.35 3.44 4.12 4.70 5.48 7.48 

Cumulative FFC Emissions Reduction (total FFC emission) 

CO2 (million metric tons) ........... 100 158 188 199 205 286 277 363 502 

SO2 (thousand tons) ................. (2.6) (6.2) (11.3) (13.1) (14.9) (50.6) (16.4) (52.3) (77.1) 

NOX (thousand tons) ................. 209 333 401 427 443 660 591 819 1,139 

Hg (tons) ................................... (0.02) (0.04) (0.07) (0.09) (0.10) (0.32) (0.11) (0.33) (0.48) 

CH4 (thousand tons) ................. 1,259 2,011 2,437 2,590 2,696 4,112 3,586 5,068 7,070 

N2O (thousand tons) ................. 0.14 0.18 0.14 0.13 0.10 (0.45) 0.21 (0.33) (0.56) 

Present Value of Benefits and Costs (3% discount rate, billion 2020$) 

Consumer Operating Cost Savings ........................................ 7.8 12.4 15.1 15.0 16.6 22.8 22.8 29.7 40.0 

Climate Benefits * ...................... 4.3 6.8 8.2 8.4 9.0 12.9 12.0 16.2 22.7 

Net Health Benefits ** ................ 5.6 8.7 10.3 10.7 11.2 15.1 15.2 19.3 26.9 

Total Benefits † .................. 17.6 27.9 33.6 34.1 36.8 50.8 50.0 65.2 89.6 

Consumer Incremental Product 

Costs ‡ ................................... 2.3 3.6 4.3 4.6 4.9 6.9 5.9 8.2 14.4 

Consumer Net Benefits ............. 5.5 8.9 10.8 10.4 11.8 15.9 17.0 21.6 25.6 

Total Net Benefits .............. 15.3 24.4 29.3 29.5 32.0 43.9 44.2 57.1 75.2 

Present Value of Benefits and Costs (7% discount rate, billions 2020$) 

Consumer Operating Cost Savings ........................................ 2.6 4.2 5.2 5.0 5.7 7.8 7.8 10.2 13.9 

Climate Benefits * ...................... 4.3 6.8 8.2 8.4 9.0 12.9 12.0 16.2 22.7 

Health Benefits ** ...................... 1.7 2.6 3.1 3.2 3.4 4.6 4.6 5.9 8.3 

Total Benefits † .................. 8.6 13.7 16.4 16.6 18.1 25.3 24.4 32.2 44.8 

Consumer Incremental Product 

Costs ‡ ................................... 1.2 1.8 2.2 2.2 2.5 3.5 2.9 4.0 7.2 

Consumer Net Benefits ............. 1.5 2.4 3.0 2.8 3.2 4.3 4.9 6.2 6.7 

Total Net Benefits ....... 7.4 11.9 14.2 14.4 15.6 21.8 21.5 28.2 37.6 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to consumers which accrue after 2058 from the products shipped in 2029–2058. Parentheses indicate negative (¥) values. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide (SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these represent the global social cost of greenhouse 

gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but 

the Department does not have a single central SC–GHG point estimate. See section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit 

Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction 

issued in Louisiana v. Biden, No. 21-cv-1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present monetized benefits where appropriate and permissible 

under law. 

** Net health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health 

benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can be monetized. For presentation purposes, total and net benefits for both the 

3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department does not have a single central SC–GHG 

point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates.

‡ Costs include incremental equipment costs as well as installation costs. 

TABLE V.46—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE AFUE TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Manufacturer Impacts 

Industry NPV (million 2020$) 

(No-new-standards case 

INPV = 1,411.8) ..................... 1,316.7 to 

1,394.6 

1,280.4 to 

1,395.0 

1,260.0 to 

1,387.8 

1,126.6 to 

1,395.7 

1,250.7 to 

1,394.2 

1,237.4 to 

1,377.4 

1,067.5 to 

1,396.8 

1,031.5 to 

1,381.4 

728.0 

to 1,420.8 

Industry NPV (% change) ......... (6.7) to (1.2) (9.3) to (1.2) (10.8) to 

(1.7) 

(20.2) to 

(1.1) 

(11.4) to 

(1.2) 

(12.4) to 

(2.4) 

(24.4) to 

(1.1) 

(26.9) to 

(2.2) 

(48.4) to 0.6 

Consumer Average LCC Savings (2020$) 

NWGF ....................................... 663 603 575 350 625 470 563 464 254 

MHGF ........................................ 406 516 501 298 569 493 603 526 414 

Shipment-Weighted Average * .. 661 601 573 348 624 471 564 466 258 


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40690 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

TABLE V.46—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE AFUE TSLS: MANUFACTURER AND CONSUMER IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Consumer Simple PBP (years) 

NWGF ....................................... 6.8 6.6 6.7 8.0 7.1 8.9 5.8 7.2 9.1 

MHGF ........................................ 6.5 5.6 5.7 12.1 5.7 8.5 5.1 7.5 12.6 

Shipment-Weighted Average * .. 6.8 6.6 6.7 8.0 7.1 8.8 5.8 7.2 9.2 

Percentage of Consumers That Experience a Net Cost 

NWGF ....................................... 3.7 6.0 7.9 5.2 9.1 17.7 8.3 16.6 52.4 

MHGF ........................................ 1.9 3.2 3.9 10.4 4.8 21.8 4.6 21.5 38.0 

Shipment-Weighted Average * .. 3.7 6.0 7.8 5.3 9.0 17.8 8.3 16.7 52.1 

Parentheses indicate negative (¥) values. 

* Weighted by shares of each product class in total projected shipments in 2029. 

DOE first considered the AFUE 

standards at TSL 9, which represents 

the max-tech efficiency levels and 

which includes the highest efficiency 

commercially available for both nonweatherized gas furnaces and mobile 

furnaces (i.e., 98-percent AFUE for 

NWGFs and 96-percent AFUE for 

MHGFs). TSL 9 would save 7.48 quads 

of energy, an amount DOE considers 

significant. Under TSL 9, the NPV of 

consumer benefit would be $6.7 billion 

using a discount rate of 7 percent, and 

$25.6 billion using a discount rate of 3 

percent. 

The cumulative emissions reductions 

at TSL 9 are 502 Mt of CO2, 1.1 million 

tons of NOX, and 7.1 million tons of 

CH4. Projected emissions show an 

increase of 77 thousand tons of SO2, 0.6 

thousand tons of N2O, and 0.5 tons of 

Hg. The increase is due to projected 

switching from gas furnaces to electric 

heat pumps and electric furnaces under 

standards at TSL 9. The estimated 

monetary value of the climate benefits 

from reduced GHG emissions 

(associated with the average SC–GHG at 

a 3-percent discount rate) at TSL 9 is 

$22.7 billion. The estimated monetary 

value of the health benefits from 

changes to SO2 and NOX emissions at 

TSL 9 is $8.3 billion using a 7-percent 

discount rate and $26.9 billion using a 

3-percent discount rate. 

Using a 7-percent discount rate for 

consumer benefits and costs, health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated total NPV 

at TSL 9 is $37.6 billion. Using a 3- 

percent discount rate for all benefits and 

costs, the estimated total NPV at TSL 9 

is $75.2 billion. 

At TSL 9, the average LCC impact on 

affected consumers is a savings of $254 

for NWGFs and $414 for MHGFs. The 

simple payback period is 9.1 years for 

NWGFs and 12.6 years for MHGFs. The 

fraction of consumers experiencing a net 

LCC cost is 52.4 percent for NWGFs and 

38.0 percent for MHGFs. The fraction of 

low-income consumers experiencing a 

net LCC cost is 34.8 percent for NWGFs 

and 23.3 percent for MHGFs. 

At TSL 9, the projected changes in 

INPV range from a decrease of $683.8 

million to an increase of 9.0 million. If 

the more severe end of this range is 

realized, TSL 9 could result in a net loss 

of 48.4 percent in INPV. Industry 

conversion costs could reach $301.6 

million at this TSL. 

At TSL 9, manufacturers would need 

to significantly restructure their product 

offerings. Currently, less than half of 

consumer furnace manufacturers offer a 

product that meets the max-tech 

efficiencies. The models available at 

these efficiencies are not produced in 

high volumes. DOE estimates that 

approximately 1.8 percent of NWGF 

shipments and 0.8 percent of MHGF 

shipments are currently sold at the maxtech levels, 98-percent AFUE and 96- 

percent AFUE, respectively. The NWGF 

industry would incur significant 

product conversion costs to develop 

cost-optimized NWGF models for a 

marketplace where efficiency and 

combustion system technology are no 

longer viable options for product 

differentiation. Similarly, the MHGF 

industry would incur significant 

product conversion costs to develop 

cost-optimized models for a marketplace 

where efficiency is no longer a means 

for product differentiation. As noted in 

section IV.J.2.d of this document, 

manufacturers currently maintain 

multiple tiers of product lines, which 

have varying levels of profitability. DOE 

models the industry operating with 

three manufacturer markup tiers (‘‘good, 

better, best’’) that are primarily 

differentiated on AFUE and combustion 

system technology (e.g., single-stage, 

two-stage, and modulating combustion 

systems). Generally, higher efficiency 

models and those with more advanced 

combustion system technology 

command a higher manufacturer 

markup than lower efficiency models. 

At max-tech, NWGF and MHGF 

manufacturers would lose the ability to 

charge a premium markup based on 

AFUE, which would lead to an overall 

reduction in profitability. At the NWGF 

max-tech level, manufacturers would 

also lose the ability to differentiate 

products based on combustion system 

technology as all models would need to 

integrate modulating combustion. 

Without these differentiators, 

manufacturers would have a more 

difficult time maintaining premium 

product lines that command higher 

manufacturer markups. The reduction 

in product differentiation leads to a 

reduction in profitability, which is a key 

driver of loss in INPV. Even as 

profitability of products are expected to 

decline, NWGF and MHGF 

manufacturers would need to invest in 

significant capital conversion costs to 

update manufacturing lines to produce 

max-tech designs at high volume. The 

reduced profitability due to limited 

product differentiation, large upfront 

investments to remain in the market, 

and negative impacts on INPV could 

alter the consumer furnaces competitive 

landscape. Manufacturers that have 

lower cash reserves, more difficulty 

raising capital, a greater portion of 

products that require redesign, or fewer 

technical resources would experience 

more business risk than their 

competitors in the industry. 

Based upon the above considerations, 

the Secretary tentatively concludes that 

at TSL 9 for NWGFs and MHGFs AFUE 

standards, the benefits of energy 

savings, positive NPV of consumer 

benefits, emission reductions, and the 

estimated monetary value of the health 

benefits of emissions reductions would 

be outweighed by the economic burden 

on many consumers, especially lowincome consumers, as well as the 

impacts on manufacturers, including the 

large potential reduction in INPV. In 


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reaching this initial decision, DOE notes 

that a large fraction of both NWGF and 

MHGF consumers (52.4 percent and 

38.0 percent, respectively), including 

low-income consumers, experience a 

net cost at TSL 9. This is due to the high 

incremental cost of NWGFs and MHGFs 

at the max-tech efficiency levels. This is 

particularly pronounced for NWGFs, 

where the incremental production cost 

above baseline is more than twice as 

large as the next highest efficiency level 

(see section IV.C.2 of this document). 

Consumers with existing furnaces above 

90-percent AFUE but below 98-percent 

AFUE are more likely to experience a 

net cost at TSL 9, given the relatively 

modest decrease in operating costs 

compared to the high incremental 

installed costs. At max-tech, most 

manufacturers would need to make 

significant upfront investments to 

update product lines and manufacturing 

facilities. Additionally, the companies 

must make those investments to remain 

in a less-profitable market where there 

is less product differentiation to 

maintain premium pricing tiers and 

where consumers are more likely to 

repair their existing furnaces or switch 

to alternative heating technologies. As 

result, there is risk that some 

manufacturers would choose to leave 

the market and risk that the standard 

would drive industry consolidation that 

would not otherwise have occurred. 

Consequently, the Secretary has 

tentatively concluded that TSL 9 is not 

economically justified. 

DOE then considered the AFUE 

standards at TSL 8, which consists of 

intermediate condensing efficiency 

levels at 95-percent AFUE for both 

NWGFs and MHGFs across the Nation. 

TSL 8 would save 5.48 quads of energy, 

an amount DOE considers significant. 

Under TSL 8, the NPV of consumer 

benefit would be $6.2 billion using a 

discount rate of 7 percent, and $21.6 

billion using a discount rate of 3 

percent. 

The cumulative emissions reductions 

at TSL 8 would be expected to be 363 

Mt of CO2, 0.8 million tons of NOX, and 

5.1 million tons of CH4. Projected 

emissions show an increase of 52 

thousand tons of SO2, 0.3 thousand tons 

of N2O, and 0.3 tons of Hg. The increase 

is due to projected switching from gas 

furnaces to electric heat pumps and 

electric furnaces under standards at TSL 

8. The estimated monetary value of the 

climate benefits from reduced GHG 

emissions (associated with the average 

SC–GHG at a 3-percent discount rate) at 

TSL 8 is $16.2 billion. The estimated 

monetary value of the health benefits 

from changes to SO2 and NOX emissions 

at TSL 8 is $5.9 billion using a 7-percent 

discount rate and $19.3 billion using a 

3-percent discount rate. 

Using a 7-percent discount rate for 

consumer benefits and costs, health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated total NPV 

at TSL 8 is $28.2 billion. Using a 3- 

percent discount rate for all benefits and 

costs, the estimated total NPV at TSL 8 

is $57.1 billion. 

At TSL 8, the average LCC impact on 

affected consumers is a savings of $464 

for NWGFs and $526 for MHGFs. The 

simple payback period is 7.2 years for 

NWGFs and 7.5 years for MHGFs. The 

fraction of consumers experiencing a net 

LCC cost is 16.6 percent for NWGFs and 

21.5 percent for MHGFs. The fraction of 

low-income consumers experiencing a 

net LCC cost is 13.7 percent for NWGFs 

and 12.6 percent for MHGFs. 

At TSL 8, the projected changes in 

INPV range from a decrease of $380.3 

million to a decrease of $30.5 million. 

If the more severe end of this range is 

realized, TSL 8 could result in a net loss 

of 26.9 percent in INPV. Industry 

conversion costs would reach $149.0 

million as manufacturers expand 

secondary heat exchanger capacity and 

redesign products to meet the standard. 

At TSL 8, manufacturers would incur 

conversion costs to develop costoptimized model offerings at the new 

minimum 95-percent AFUE and to 

expand secondary heat exchanger 

production capacity. However, the 

conversion costs at TSL 8 are 

substantially lower than those at TSL 9. 

Ninety percent of manufacturers 

currently have a range of compliant 

offerings at TSL 8. DOE estimates that 

approximately 39.3 percent of the 

annual NWGF shipments and 

approximately 14.9 percent of the 

annual MHGF shipments are already at 

this level. Furthermore, manufacturers 

would not be making the upfront 

investments with same level of 

profitability risk noted at TSL 9. With a 

national standard of 95-percent AFUE, 

both NWGF and MHGF manufacturers 

would maintain the ability to 

differentiate products based on 

efficiency and combustion system 

technology. With these options 

available, industry can continue to 

operate with three markup tiers (‘‘good, 

better, best’’) that enable greater 

industry profitability. However, the 

range of manufacturer markups are 

compressed, as max-tech products 

would not be expected to command the 

same premium as they did in the nonew-standards case. 

After considering the analysis and 

weighing the benefits and burdens, the 

Secretary has tentatively concluded that 

an AFUE standard set at TSL 8 for 

NWGFs and MHGFs would be 

economically justified. At this TSL, the 

average LCC savings for both NWGF and 

MHGF consumers are positive. An 

estimated 16.6 percent of NWGF 

consumers and 21.5 percent of MHGF 

consumers experience a net cost. The 

reduction in the percentage of 

consumers experiencing a net cost at 

TSL 8 compared to TSL 9 is largely due 

to the market share of consumers 

already with a furnace at 95-percent 

AFUE (see section IV.F.9 of this 

document). These consumers are not 

impacted by a standard set at TSL 8. For 

the remaining consumers that are 

impacted, the lower incremental cost 

above baseline for a 95-percent AFUE 

furnace compared to a max-tech furnace 

(see section IV.C.2 of this document), 

particularly for NWGFs, results in fewer 

consumers experiencing a net cost as 

compared to TSL 9. The FFC national 

energy savings at TSL 8 are significant 

and the NPV of consumer benefits is 

positive using both a 3-percent and 7- 

percent discount rate. Notably, the 

benefits to consumers vastly outweigh 

the cost to manufacturers. At TSL 8, the 

NPV of consumer benefits, even 

measured at the more conservative 

discount rate of 7 percent is over 15 

times higher than the maximum 

estimated manufacturers’ loss in INPV. 

The shipment-weighted average LCC 

savings are more than 80 percent larger 

than at TSL 9. The standard levels at 

TSL 8 are economically justified even 

without weighing the estimated 

monetary value of the health benefits of 

emissions reductions. When those 

emissions reductions are included— 

representing $16.2 billion in climate 

benefits (associated with the average 

SC–GHG at a 3-percent discount rate), 

and $19.3 billion (using a 3-percent 

discount rate) or $5.9 billion (using a 7- 

percent discount rate) in health 

benefits—the rationale becomes stronger 

still. 

DOE further notes that there have 

been regulations in Canada requiring 

condensing furnaces with at least 90- 

percent AFUE for over ten years and 

requiring at least 95-precent AFUE since 

July 2019 (see section II.B.3 of this 

NOPR). The proposed standard levels 

for NWGFs at TSL 8 align with the 

Canadian regulations. As discussed in 

the 2016 SNOPR (since withdrawn), 

some stakeholders noted that Canada 

has required condensing furnaces for 

years and stated that neither Natural 

Resources Canada nor its mortgage 

agency found any significant 

implementation issues. 81 FR 65720, 


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65779 (Sept. 23, 2016). While DOE 

realizes that climate and fuel prices 

differ between the U.S. and Canada and 

will yield different results on costs and 

benefits of the standard, there are 

similarities in the equipment and 

venting materials used in both the U.S. 

and Canada with respect to NWGFs. 

Because the stock of buildings using 

NWGFs in Canada has many similarities 

to the stock using NWGFs in northern 

parts of the U.S., the Canadian 

experience in terms of installation of 

condensing furnaces may have 

relevance to the U.S. 

DOE acknowledges that an estimated 

13.7 percent of low-income NWGF and 

12.6 percent of low-income MHGF 

consumers experience a net cost at TSL 

8, whereas an estimated 5.0 percent of 

low-income NWGF and 1.5 percent of 

low-income MHGF consumers 

experience a net cost at TSL 7. (TSL 7 

is an AFUE standard at the same level 

as TSL 8 but for NWGFs and MHGFs 

greater than 55 kBtu/h only.) The 

majority of negatively impacted lowincome consumers at TSL 8 have 

smaller capacity NWGFs or MHGFs 

below 55 kBtu/h and, therefore, would 

not be impacted by a standard set at TSL 

7, since the standards for NWGFs and 

MHGFs below 55 kBtu/h would remain 

at 80-percent AFUE. However, 

compared to TSL 7, it is estimated that 

TSL 8 would result in additional FFC 

national energy savings of 0.78 quads 

and additional health benefits of $4.1 

billion (using a 3-percent discount rate) 

or $1.3 billion (using a 7-percent 

discount rate). The national consumer 

NPV similarly increases at TSL 8, 

compared to TSL 7, by $1.3 billion 

using a 7-percent discount rate and $4.6 

billion using a 3-percent discount rate. 

These additional savings and benefits at 

TSL 8 are significant. DOE considers 

these impacts to be, as a whole, 

economically justified at TSL 8, but will 

continue to evaluate the impacts on 

low-income consumers relative to all 

consumers. If DOE were to conclude 

that the costs of TSL 8 outweighed the 

benefits of TSL 8, then DOE could 

consider factors in TSL 7 such as the 

national energy savings of 4.70 quads, 

the NPV of consumer benefit of $4.9 

billion using a discount rate of 7 percent 

and $17.0 billion using a discount rate 

of 3 percent, and CO2 emission 

reductions of 277 million metric tons 

over the analysis period. Accordingly, 

DOE seeks comment on the merits of 

adopting TSL 7 as an alternative 

consideration to mitigating the impacts 

on low-income consumers. DOE could 

consider TSL 7, among others, in the 

final rule based on comments received. 

Accordingly, the Secretary has 

tentatively concluded that TSL 8 would 

offer the maximum improvement in 

efficiency that is technologically 

feasible and economically justified and 

would result in the significant 

conservation of energy. Although results 

are presented here in terms of TSLs, 

DOE analyzes and evaluates all possible 

ELs for each product class in its 

analysis. For both NWGFs and MHGFs, 

TSL 8 is comprised of the highest 

efficiency level below max-tech. For 

NWGFs and MHGFs, the max-tech 

efficiency level results in a large 

percentage of consumers that experience 

a net LCC cost, in addition to significant 

manufacturer impacts. The ELs one 

level below max-tech, representing the 

proposed standard levels, result in 

positive LCC savings for both classes, 

significantly reduce the number of 

consumers experiencing a net cost, and 

reduce the decrease in INPV and 

conversion costs to the point where 

DOE has tentatively concluded they are 

economically justified, as discussed for 

TSL 8 in the preceding paragraphs. 

However, DOE acknowledges the 

potential impacts to low-income 

consumers and seeks additional 

information for further consideration. 

Therefore, based on the above 

considerations, DOE proposes the AFUE 

energy conservation standards for 

NWGFs and MHGFs at TSL 8. The 

proposed energy conservation standards 

for NWGFs and MHGFs, which are 

expressed as AFUE, are shown in Table 

V.47. 

TABLE V.47—PROPOSED AFUE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES

[Compliance starting 2029] 

Product class AFUE 

(percent) 

Non-Weatherized Gas Furnaces ......................................................................................................................................................... 95 

Mobile Home Gas Furnaces ................................................................................................................................................................ 95 

2. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnace and Mobile Home Gas Furnace 

Standby Mode and Off Mode Standards 

Table V.48 and Table V.49 summarize 

the quantitative impacts estimated for 

each standby mode and off mode TSL 

for NWGFs and MHGFs. The national 

impacts are measured over the lifetime 

of NWGFs and MHGFs purchased in the 

30-year period that begins in the 

anticipated year of compliance with 

amended standards (2029–2058). The 

energy savings and emissions 

reductions refer to full-fuel-cycle 

results. The efficiency levels contained 

in each TSL are described in section 

V.A of this document. 

TABLE V.48—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 

Cumulative FFC National Energy Savings (quads) 

Quads .......................................................................................................................................... 0.16 0.19 0.28 

Cumulative FFC Emissions Reduction (Total FFC Emission) 

CO2 (million metric tons) ............................................................................................................. 5.4 6.4 9.6 

SO2 (thousand tons) .................................................................................................................... 2.5 3.0 4.5 

NOX (thousand tons) ................................................................................................................... 7.5 9.0 13.5 


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TABLE V.48—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE TSLS: NATIONAL IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 

Hg (tons) ...................................................................................................................................... 0.015 0.018 0.027 

CH4 (thousand tons) .................................................................................................................... 36.7 44.1 65.9 

N2O (thousand tons) .................................................................................................................... 0.06 0.07 0.11 

Present Value of Benefits and Costs (3% discount rate, billion 2020$) 

Consumer Operating Cost Savings ............................................................................................. 2.0 2.4 3.6 

Climate Benefits * ......................................................................................................................... 0.2 0.2 0.4 

Health Benefits ** ......................................................................................................................... 0.4 0.4 0.6 

Total Benefits † ............................................................................................................................ 2.6 3.1 4.6 

Consumer Incremental Product Costs‡ ....................................................................................... 0.0 0.1 0.2 

Consumer Net Benefits ............................................................................................................... 2.0 2.3 3.4 

Total Net Benefits ........................................................................................................................ 2.5 3.0 4.4 

Present Value of Benefits and Costs (7% discount rate, billions 2020$) 

Consumer Operating Cost Savings ............................................................................................. 0.7 0.8 1.2 

Climate Benefits * ......................................................................................................................... 0.2 0.2 0.4 

Health Benefits ** ......................................................................................................................... 0.1 0.1 0.2 

Total Benefits † ............................................................................................................................ 1.0 1.2 1.8 

Consumer Incremental Product Costs ‡ ...................................................................................... 0.0 0.0 0.1 

Consumer Net Benefits ............................................................................................................... 0.7 0.8 1.1 

Total Net Benefits ........................................................................................................................ 1.0 1.2 1.7 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. Parentheses indicate negative (¥) values. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these 

represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with 

the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. See 

section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing 

greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present 

monetized benefits where appropriate and permissible under law. 

* Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can be monetized. For presentation purposes, total and net 

benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department 

does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using 

all four SC–GHG estimates. 

‡ Costs include incremental equipment costs as well as installation costs. 

TABLE V.49—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 TSL 2 TSL 3 

Manufacturer Impacts 

Industry NPV (million 2020$) (No-new-standards case INPV = 1,411.8) ................. 1,410.8 to 1,412.7 1,410.8 to 1,412.8 1,409.7 to 1,416.8 

Industry NPV (% change) .......................................................................................... (0.1) to 0.1 (0.1) to 0.1 (0.1) to 0.4 

Consumer Average LCC Savings (2020$) 

NWGF ........................................................................................................................ 21 23 26 

MHGF ........................................................................................................................ 22 24 27 

Shipment-Weighted Average * ................................................................................... 21 23 26 

Consumer Simple PBP (years) 

NWGF ........................................................................................................................ 0.7 1.5 2.0 

MHGF ........................................................................................................................ 0.6 1.3 1.7 

Shipment-Weighted Average * ................................................................................... 0.7 1.5 2.0 

Percent of Consumers that Experience a Net Cost 

NWGF ........................................................................................................................ 2.5 2.5 3.5 

MHGF ........................................................................................................................ 1.2 1.2 1.6 


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TABLE V.49—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE STANDBY MODE AND OFF MODE TSLS: MANUFACTURER AND CONSUMER IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 

Shipment-Weighted Average * ................................................................................... 2.5 2.5 3.4 

Parentheses indicate negative (¥) values. 

* Weighted by shares of each product class in total projected shipments in 2029. 

DOE first considered TSL 3, which 

represents the max-tech efficiency 

levels. TSL 3 would save 0.28 quads of 

energy, an amount DOE considers 

significant. Under TSL 3, the NPV of 

consumer benefit would be $1.1 billion 

using a discount rate of 7 percent, and 

$3.4 billion using a discount rate of 3 

percent. 

The cumulative emissions reductions 

at TSL 3 are 9.6 Mt of CO2, 4.5 thousand 

tons of SO2, 13.5 thousand tons of NOX, 

0.03 tons of Hg, 65.9 thousand tons of 

CH4, and 0.1 thousand tons of N2O. The 

estimated monetary value of the climate 

benefits from reduced GHG emissions 

(associated with the average SC–GHG at 

a 3-percent discount rate) at TSL 3 is 

$0.4 billion. The estimated monetary 

value of the health benefits from 

reduced SO2 and NOX emissions at TSL 

3 is $0.2 million using a 7-percent 

discount rate and $0.6 million using a 

3-percent discount rate. 

Using a 7-percent discount rate for 

consumer benefits and costs, health 

benefits from reduced SO2 and NOX

emissions, and the 3-percent discount 

rate case for climate benefits from 

reduced GHG emissions, the estimated 

total NPV at TSL 3 is $1.7 billion. Using 

a 3-percent discount rate for all benefits 

and costs, the at TSL 3 is $4.4 billion. 

At TSL 3, the average LCC impact is 

a savings of $26 for NWGFs and $27 for 

MHGFs. The simple payback period is 

2.0 years for NWGFs and 1.7 years for 

MHGFs. The fraction of consumers 

experiencing a net LCC cost is 3.5 

percent for NWGFs and 1.6 percent for 

MHGFs. 

At TSL 3, the change in INPV is 

projected to range from a decrease of 

$2.1 million to an increase of $5.0 

million, which corresponds to a 0.1 

percent decrease and 0.4 percent 

increase, respectively. The more 

negative INPV results are driven by the 

conversion costs, which could reach 

$1.6 million, and the model’s lower 

bound assumption that manufacturers 

would not be able to pass these costs 

onto consumers. These changes have 

less than a one percent impact on free 

cash flow in 2028. 

After considering the analysis and 

weighing the benefits and burdens, the 

Secretary has tentatively concluded that 

standby and off mode standards set at 

TSL 3 for NWGFs and MHGFs would be 

economically justified. At this TSL, the 

average LCC savings for both NWGF and 

MHGF consumers are expected to be 

positive. Only an estimated 3.5 percent 

of NWGF consumers and 1.6 percent of 

MHGF consumers are expected to 

experience a net cost. The FFC national 

energy savings are significant and the 

NPV of consumer benefits is positive 

using both a 3-percent and 7-percent 

discount rate. Notably, the national 

benefits vastly outweigh the costs. The 

positive LCC savings—a different way of 

quantifying consumer benefits— 

reinforces this conclusion. The 

shipment-weighted average LCC savings 

are largest at TSL 3. The standard levels 

at TSL 3 are economically justified even 

without weighing the estimated 

monetary value of emissions reductions. 

When those emissions reductions are 

included—representing $0.4 billion in 

climate benefits (associated with the 

average SC–GHG at a 3-percent discount 

rate), and $0.6 billion (using a 3-percent 

discount rate) or $0.2 billion (using a 7- 

percent discount rate) in health 

benefits—the rationale becomes stronger 

still. 

Accordingly, the Secretary has 

tentatively concluded that TSL 3 would 

offer the maximum improvement in 

efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy. Although results 

are presented here in terms of TSLs, 

DOE analyzes and evaluates all possible 

ELs for each product class in its 

analysis. For both NWGFs and MHGFs, 

TSL 3 is comprised of the max-tech 

efficiency level. The ELs representing 

the proposed standard levels result in 

positive LCC savings for both classes, a 

small percentage of consumers 

experiencing a net cost, and a small 

decrease in INPV to the point where 

DOE has tentatively concluded they are 

economically justified, as discussed for 

TSL 3 in the preceding paragraphs. 

Therefore, based on the above 

considerations, DOE proposes the 

standby mode and off mode energy 

conservation standards for NWGFs and 

MHGFs at TSL 3. The proposed energy 

conservation standards for NWGFs and 

MHGFs, which are expressed as watts, 

are shown in Table V.50. 

TABLE V.50—PROPOSED STANDBY MODE AND OFF MODE ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES (COMPLIANCE STARTING 2029) 

Product class 

Standby mode 

standard: 

PW,SB

(watts) 

Off mode 

standard: 

PW,OFF

(watts) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 8.5 8.5 

Mobile Home Gas Furnaces .................................................................................................................................... 8.5 8.5 

3. Benefits and Costs of the Proposed 

Standards 

The benefits and costs of the proposed 

standards can also be expressed in terms 

of annualized values. The annualized 

net benefit is (1) the annualized national 

economic value (expressed in 2020$) of 

the benefits from operating products 

that meet the proposed standards 

(consisting primarily of operating cost 

savings from using less energy, minus 

increases in product purchase costs), 

and (2) the annualized monetary value 

of the climate and health benefits from 

emission reductions. 

Table V.51 shows the annualized 

values for NWGFs and MHGFs AFUE 

standards under TSL 8, expressed in 


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2020$. The results under the primary 

estimate are as follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated cost of 

the proposed AFUE standards for 

NWGFs and MHGFs is $524 million per 

year in increased equipment costs, 

while the estimated annual benefits 

would be $1,320 million in reduced 

equipment operating costs, $1,015 

million in climate benefits, and $760 

million in health benefits (accounting 

for reduced NOX emissions and 

increased SO2 emissions). In this case, 

the net benefit amounts to $2,571 

million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed AFUE standards for 

NWGFs and MHGFs is $511 million per 

year in increased equipment costs, 

while the estimated annual benefits 

would be $1,865 million in reduced 

operating costs, $1,015 million in 

climate benefits, and $1,213 million in 

health benefits (accounting for reduced 

NOX emissions and increased SO2

emissions). In this case, the net benefit 

amounts to $3,581 million per year. 

TABLE V.51—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED AFUE STANDARDS FOR NON-WEATHERIZED

GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 8) 

Million 2020$/year 

Primary estimate Low-net-benefits 

estimate 

High-net-benefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ................................................................................. 1,865 1,891 1,937 

Climate Benefits * ............................................................................................................. 1,015 1,000 1,042 

Net Health Benefits ** ...................................................................................................... 1,213 1,197 1,251 

Total Benefits † ......................................................................................................... 4,093 4,088 4,230 

Consumer Incremental Product Costs ‡ .......................................................................... 511 508 461 

Net Benefits .............................................................................................................. 3,581 3,580 3,769 

7% discount rate 

Consumer Operating Cost Savings ................................................................................. 1,320 1,338 1,352 

Climate Benefits * ............................................................................................................. 1,015 1,000 1,042 

Health Benefits ** ............................................................................................................. 760 751 780 

Total Benefits † ......................................................................................................... 3,095 3,089 3,173 

Consumer Incremental Product Costs ‡ .......................................................................... 524 516 471 

Net Benefits .............................................................................................................. 2,571 2,573 2,702 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these 

represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with 

the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. See 

section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing 

greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present 

monetized benefits where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs as well as installation costs. 

Table V.52 shows the annualized 

values for NWGFs and MHGFs standby 

mode and off mode standards under 

TSL 3, expressed in 2020$. The results 

under the primary estimate are as 

follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from reduced SO2 and NOX

emissions, and the 3-percent discount 

rate case for climate benefits from 

reduced GHG emissions, the estimated 

cost of the proposed standby mode and 

off mode standards for NWGFs and 

MHGFs is $12.2 million per year in 

increased equipment costs, while the 

estimated annual benefits would be 

$160 million in reduced equipment 

operating costs, $23 million in climate 

benefits, and $25 million in health 

benefits. In this case, the net benefit 

would amount to $196 million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed standby mode and off 

mode standards for NWGFs and MHGFs 

is $12.4 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $224 million 

in reduced operating costs, $23 million 

in climate benefits, and $40 million in 

health benefits. In this case, the net 


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benefit would amount to $275 million 

per year. 

TABLE V.52—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED STANDBY MODE AND OFF MODE STANDARDS

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES (TSL 3) 

Million 2020$/year 

Primary estimate Low-net-benefits 

estimate 

High-net-benefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ................................................................................. 224 214 251 

Climate Benefits * ............................................................................................................. 23 23 24 

Health Benefits ** ............................................................................................................. 40 40 43 

Total Benefits † ......................................................................................................... 287 276 318 

Consumer Incremental Product Costs ‡ .......................................................................... 12 12 13 

Net Benefits .............................................................................................................. 275 264 305 

7% discount rate 

Consumer Operating Cost Savings ................................................................................. 160 155 176 

Climate Benefits * ............................................................................................................. 23 23 24 

Health Benefits ** ............................................................................................................. 25 25 27 

Total Benefits † ......................................................................................................... 208 203 227 

Consumer Incremental Product Costs ‡ .......................................................................... 12 12 13 

Net Benefits .............................................................................................................. 196 190 214 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these 

represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with 

the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. See 

section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing 

greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present 

monetized benefits where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs as well as installation costs. 

DOE considers and evaluates these 

standards independently under EPCA 

and the analytical process outlined in 

DOE’s Process Rule (as amended). 

However, DOE is also presenting the 

combined effects of these standards for 

the benefit of the public and in 

compliance with E.O. 12866. To provide 

a complete picture of the overall 

impacts of this NOPR, the following 

combines and summarizes the benefits 

and costs for both the amended AFUE 

standards and the proposed standby 

mode and off mode standards for 

NWGFs and MHGFs. Table V.53 shows 

the combined annualized benefit and 

cost values for the proposed AFUE 

standards and the standby mode and off 

mode standards for NWGFs and 

MHGFs. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated cost of 

the proposed standards in this rule is 

$536 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $1,480 million 

in reduced equipment operating costs, 

$1,038 million in climate benefits, and 

$785 million in health benefits 

(accounting for reduced NOX emissions 

and increased SO2 emissions). In this 

case, the net benefit amounts to $2,767 

million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the proposed standards in this rule is 

$524 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $2,089 million 

in reduced operating costs, $1,038 

million in climate benefits, and $1,253 

million in health benefits (accounting 

for reduced NOX emissions and 

increased SO2 emissions). In this case, 

the net benefit would amount to $3,856 

million per year. 


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TABLE V.53—MONETIZED BENEFITS AND COSTS OF PROPOSED AFUE (TSL 8) AND STANDBY MODE AND OFF MODE

(TSL 3) STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

Annualized 

(million 2020$/yr) 

Total present 

value 

(billion 2020$) 

3% 

Consumer Operating Cost Savings ................................................................................................................. 2,089 33.3 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 1,253 20.0 

Total Benefits † ......................................................................................................................................... 4,380 69.8 

Consumer Incremental Product Costs ‡ .......................................................................................................... 524 8.3 

Net Benefits .............................................................................................................................................. 3,856 61.5 

7% 

Consumer Operating Cost Savings ................................................................................................................. 1,480 11.4 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 785 6.1 

Total Benefits † ......................................................................................................................................... 3,303 34.0 

Consumer Incremental Product Costs ‡ .......................................................................................................... 536 4.1 

Net Benefits .............................................................................................................................................. 2,767 29.9 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these 

represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with 

the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. See 

section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv– 

1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing 

greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present 

monetized benefits where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs as well as installation costs. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866 and 13563 

Executive Order (‘‘E.O.’’) 12866, 

‘‘Regulatory Planning and Review,’’ as 

supplemented and reaffirmed by E.O. 

13563, ‘‘Improving Regulation and 

Regulatory Review, 76 FR 3821 (Jan. 21, 

2011), requires agencies, to the extent 

permitted by law, to (1) propose or 

adopt a regulation only upon a reasoned 

determination that its benefits justify its 

costs (recognizing that some benefits 

and costs are difficult to quantify); (2) 

tailor regulations to impose the least 

burden on society, consistent with 

obtaining regulatory objectives, taking 

into account, among other things, and to 

the extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. DOE emphasizes as 

well that E.O. 13563 requires agencies to 

use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs 

(‘‘OIRA’’) in the Office of Management 

and Budget (‘‘OMB’’) has emphasized 

that such techniques may include 

identifying changing future compliance 

costs that might result from 

technological innovation or anticipated 

behavioral changes. For the reasons 

stated in the preamble, this proposed 

regulatory action is consistent with 

these principles. 

Section 6(a) of E.O. 12866 also 

requires agencies to submit ‘‘significant 

regulatory actions’’ to OIRA for review. 

OIRA has determined that this proposed 

regulatory action constitutes an 

economically significant regulatory 

action under section 3(f) of E.O. 12866. 

Accordingly, pursuant to section 

6(a)(3)(C) of E.O. 12866, DOE has 

provided to OIRA an assessment, 

including the underlying analysis, of 

benefits and costs anticipated from the 

proposed regulatory action, together 

with, to the extent feasible, a 

quantification of those costs; and an 

assessment, including the underlying 


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analysis, of costs and benefits of 

potentially effective and reasonably 

feasible alternatives to the planned 

regulation, and an explanation why the 

planned regulatory action is preferable 

to the identified potential alternatives. 

A summary of the potential costs and 

benefits of the combined regulatory 

actions are presented in Table VI.1. 

TABLE VI.1—MONETIZED BENEFITS, COSTS, AND NET BENEFITS OF PROPOSED AFUE AND STANDBY AND MODE AND OFF

MODE STANDARDS

Annualized 

(million 2020$/yr) 

Total present 

value 

(billion 2020$) 

3% 

Consumer Operating Cost Savings ................................................................................................................. 2,089 33.3 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 1,253 20.0 

Total Benefits † ......................................................................................................................................... 4,380 69.8 

Consumer Incremental Product Costs‡ ........................................................................................................... 524 8.3 

Net Benefits .............................................................................................................................................. 3,856 61.5 

7% 

Consumer Operating Cost Savings ................................................................................................................. 1,480 11.4 

Climate Benefits * ............................................................................................................................................. 1,038 16.5 

Health Benefits ** ............................................................................................................................................. 785 6.1 

Total Benefits † ......................................................................................................................................... 3,303 34.0 

Consumer Incremental Product Costs ‡ .......................................................................................................... 536 4.1 

Net Benefits .............................................................................................................................................. 2,767 29.9 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). Together these 

represent the global social cost of greenhouse gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with 

the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. See 

section. IV.L of this document for more details. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21-cv1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that 

case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were 

issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing 

greenhouse gas emissions. In the absence of further intervening court orders, DOE will revert to its approach prior to the injunction and present 

monetized benefits where appropriate and permissible under law. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the 

Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four SC–GHG estimates. 

‡ Costs include incremental equipment costs as well as installation costs. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis (‘‘IRFA’’) for any rule that by 

law must be proposed for public 

comment, unless the agency certifies 

that the rule, if promulgated, will not 

have a significant economic impact on 

a substantial number of small entities. 

As required by E.O. 13272, ‘‘Proper 

Consideration of Small Entities in 

Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the DOE 

rulemaking process. 68 FR 7990. DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s website (www.energy.gov/gc/ 

office-general-counsel). DOE has 

prepared the following IRFA for the 

products that are the subject of this 

rulemaking. 

For manufacturers of NWGFs and 

MHGFs, the SBA has set a size 

threshold, which defines those entities 

classified as ‘‘small businesses’’ for the 

purposes of the statute. DOE used the 

SBA’s small business size standards to 

determine whether any small entities 

would be subject to the requirements of 

the rule. (See 13 CFR part 121.) The size 

standards are listed by North American 

Industry Classification System 

(‘‘NAICS’’) code and industry 

description and are available at 

www.sba.gov/document/support--tablesize-standards. Manufacturing of 

NWGFs and MHGFs is classified under 

NAICS 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing.’’ The SBA 

sets a threshold of 1,250 employees or 

fewer for an entity to be considered as 

a small business for this category. 

1. Description of Reasons Why Action Is 

Being Considered 

DOE is proposing amended energy 

conservation standards and new 

standby mode and off mode energy 

standards for NWGFs and MHGFs. 

EPCA specifically provides that DOE 

must conduct two rounds of energy 

conservation standard rulemakings for 


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276 DOE’s CCMS (Available at: 

www.regulations.doe.gov/certification-data/) (Last 

accessed July 7, 2021). 

277California Energy Commission’s MAEDbS 

(Available at: cacertappliances.energy.ca.gov/ 

Pages/Search/AdvancedSearch.aspx) (Last accessed 

July 15, 2021). 

278AHRI’s Directory of Certified Product 

Performance (Available at: www.ahridirectory.org/ 

Search/SearchHome) (last accessed July 15, 2021). 

NWGFs and MHGFs. (42 U.S.C. 

6295(f)(4)(B) and (C)) The statute also 

requires that not later than 6 years after 

issuance of any final rule establishing or 

amending a standard, DOE must publish 

either a notice of determination that 

standards for the product do not need to 

be amended, or a NOPR including new 

proposed energy conservation 

standards. (42 U.S.C. 6295(m)(1)) This 

rulemaking is pursuant to the statutorily 

required second round of rulemaking for 

NWGFs and MHGFs, and the statutorily 

required 6-year review. 

2. Objectives of, and Legal Basis for, 

Rule 

Amendments to EPCA in the National 

Appliance Energy Conservation Act of 

1987 (NAECA; Pub. L. 100–12) 

established EPCA’s original energy 

conservation standards for furnaces, 

consisting of the minimum AFUE levels 

described above for mobile home 

furnaces and for all other furnaces 

except ‘‘small’’ gas furnaces. (42 U.S.C. 

6295(f)(1)-(2)) Pursuant to 42 U.S.C. 

6295(f)(1)(B), in November 1989, DOE 

adopted a mandatory minimum AFUE 

level for ‘‘small’’ furnaces. 54 FR 47916 

(Nov. 17, 1989). The standards 

established by NAECA and the 

November 1989 final rule for ‘‘small’’ 

gas furnaces are still in effect for mobile 

home oil-fired furnaces, weatherized 

oil-fired furnaces. 

Under EPCA, DOE was required to 

conduct two rounds of rulemaking to 

consider amended energy conservation 

standards for furnaces. (42 U.S.C. 

6295(f)(4)(B) and (C)) In satisfaction of 

this first round of amended standards 

rulemaking under 42 U.S.C. 

6295(f)(4)(B), as noted previously, DOE 

published a final rule in the Federal 

Register on November 19, 2007, that 

revised these standards for most 

furnaces, but left them in place for two 

product classes (i.e., mobile home oilfired furnaces and weatherized oil-fired 

furnaces). The standards amended in 

the November 2007 Rule were to apply 

to furnaces manufactured or imported 

on and after November 19, 2015. 72 FR 

65136 (Nov. 19, 2007). The energy 

conservation standards in the November 

2007 final rule consist of a minimum 

AFUE level for each of the six classes of 

furnaces. Id. at 72 FR 65169. As 

previously noted, based on the market 

analysis for the November 2007 final 

rule and the standards established 

under that rule, the November 2007 

final rule eliminated the distinction 

between furnaces based on their 

certified input capacity, i.e., the 

standards applicable to ‘‘small’’ 

furnaces were established at the same 

level as the corresponding class of 

furnace generally. 

Following DOE’s adoption of the 

November 2007 final rule, several 

parties jointly sued DOE in the United 

States Court of Appeals for the Second 

Circuit (Second Circuit), seeking to 

invalidate the rule. Petition for Review, 

State of New York, et al. v. Department 

of Energy, et al., Nos. 08–0311–ag(L); 

08–0312–ag(con) (2d Cir. filed Jan. 17, 

2008). The petitioners asserted that the 

standards for residential furnaces 

promulgated in the November 2007 Rule 

did not reflect the ‘‘maximum 

improvement in energy efficiency’’ that 

‘‘is technologically feasible and 

economically justified’’ under 42 U.S.C. 

6295(o)(2)(A). On April 16, 2009, DOE 

filed with the Court a motion for 

voluntary remand that the petitioners 

did not oppose. The motion did not 

state that the November 2007 rule 

would be vacated, but indicated that 

DOE would revisit its initial 

conclusions outlined in the November 

2007 Rule in a subsequent rulemaking 

action. DOE also agreed that the final 

rule would address both regional 

standards for furnaces, as well as the 

effects of alternate standards on natural 

gas prices. The Second Circuit granted 

DOE’s motion on April 21, 2009. 

On June 27, 2011, DOE published in 

the Federal Register a direct final rule 

(‘‘June 2011 DFR’’) revising the energy 

conservation standards for residential 

furnaces pursuant to the voluntary 

remand in State of New York, et al. v. 

Department of Energy, et al. 76 FR 

37408. In the June 2011 DFR, DOE 

considered the amendment of the same 

six product classes considered in the 

November 2007 final rule analysis plus 

electric furnaces. The June 2011 DFR 

amended the existing energy 

conservation standards for NWGFs, 

MHGFs, and non-weatherized oil 

furnaces, and amended the compliance 

date (but left the existing standards in 

place) for weatherized gas furnaces. The 

June 2011 DFR also established 

electrical standby mode and off mode 

energy conservation standards for 

NWGFs, non-weatherized oil furnaces, 

and electric furnaces. DOE confirmed 

the standards and compliance dates 

promulgated in the June 2011 final rule 

in a notice of effective date and 

compliance dates published in the 

Federal Register on October 31, 2011. 

76 FR 67037. 

As noted earlier, following DOE’s 

adoption of the June 2011 DFR, APGA 

filed a petition for review with the 

United States Court of Appeals for the 

District of Columbia Circuit, seeking to 

invalidate the DOE rule as it pertained 

to NWGFs. Petition for Review, 

American Public Gas Association, et al. 

v. Department of Energy, et al., No. 11– 

1485 (D.C. Cir. filed Dec. 23, 2011). On 

April 24, 2014, the Court granted a 

motion that allowed for the settlement 

agreement reached between DOE and 

APGA, in which DOE agreed to a 

remand of the NWGFs and MHGFs 

portions of the June 2011 DFR in order 

to conduct further notice-and-comment 

rulemaking. Accordingly, the Court’s 

order vacated the June 2011 DFR in part 

(i.e., those portions relating to NWGFs 

and MHGFs) and remanded to the 

agency for further rulemaking. As part 

of the settlement, DOE agreed to use 

best efforts to issue a notice of proposed 

rulemaking within one year of the 

remand, and to issue a final rule within 

the later of two years of the issuance of 

remand, or one year of the issuance of 

the proposed rule, including at least a 

ninety-day public comment period. As 

noted earlier in section II.B.2 of this 

document, in accordance with the 

settlement agreement, DOE issued a 

NOPR in March of 2015 and an SNOPR 

in September of 2016 to address NWGFs 

and MHGFs; however, in January of 

2021, DOE published notification of 

withdrawal of the March 2015 NOPR 

and September 2016 SNOPR. 86 FR 

3873 (Jan. 15, 2021). 

3. Description of Estimated Number of 

Small Entities Regulated 

DOE reviewed this proposed rule 

under the provisions of the Regulatory 

Flexibility Act and the procedures and 

policies published on February 19, 

2003. 68 FR 7990. DOE conducted a 

market survey to identify potential 

small manufacturers of the covered 

products. DOE began its assessment by 

reviewing DOE’s CCMS database,276

California Energy Commission’s 

Modernized Appliance Efficiency 

Database System (‘‘MAEDbS’’),277 Air 

Conditioning, Heating, and Refrigeration 

Institute’s (‘‘AHRI’’) Directory of 

Certified Product Performance 

database,278 individual retailer websites, 

and the withdrawn September 2016 

SNOPR to identify manufacturers of the 

covered products. 81 FR 65720. DOE 

then consulted publicly available data, 

such as manufacturer websites, 

manufacturer specifications and product 

literature, import/export logs, and basic 


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279 D&B Hoovers | Company Information | 

Industry Information | Lists, app.dnbhoovers.com/) 

(Last accessed Sept. 22, 2021). 

model numbers, to identify original 

equipment manufacturers (‘‘OEMs’’) of 

the products covered by this 

rulemaking. DOE further relied on 

public data and subscription-based 

market research tools (e.g., Dun & 

Bradstreet reports 279) to determine 

company location, headcount, and 

annual revenue. DOE also asked 

industry representatives if they were 

aware of any other small manufacturers 

during manufacturer interviews. DOE 

screened out companies that do not 

offer products covered by this 

rulemaking, do not meet the SBA’s 

definition of a ‘‘small business,’’ or are 

foreign-owned and operated. 

DOE initially identified 15 OEMs that 

sell NWGFs and/or MHGFs in the 

United States. Of the 15 OEMs 

identified, DOE tentatively determined 

that four companies qualify as small 

businesses and are not foreign-owned or 

operated. 

4. Description and Estimate of 

Compliance Requirements Including 

Differences in Cost, if Any, for Different 

Groups of Small Entities 

In response to the withdrawn 

September 2016 SNOPR IRFA, AHRI 

and Mortex Products, Inc. (‘‘Mortex’’) 

raised concerns that DOE’s methodology 

of using model counts to scale industrylevel conversion costs down to a 

company level do not fully characterize 

the impacts on small manufacturers. 

(AHRI, No. 303 at p. 12; Mortex, No. 305 

at p. 4) They were concerned that this 

methodology understates the cost 

impact to small manufacturers, with 

particular concern about ‘‘the small 

manufacturer whose primary product is 

marketed for manufactured homes does 

not make a single product that meets the 

lofty 92% AFUE.’’ (AHRI, No. 303 at p. 

12) As noted by Mortex, ‘‘we do not 

manufacture condensing mobile home 

gas furnaces.’’ (Mortex, No. 305 at p. 1) 

In response to these stakeholder 

comments, DOE updated its conversion 

cost methodology. Specifically, DOE 

updated its analysis to give special 

consideration to Mortex. In the 

withdrawn September 2016 SNOPR 

IRFA, DOE’s small business compliance 

costs were based on data collected 

during the 2014 manufacturer 

interviews. However, unlike the MHGF 

manufacturers that DOE interviewed, 

Mortex does not currently offer 

condensing products. As a result, 

Mortex’s conversion cost were not well 

reflected in the withdrawn September 

2016 SNOPR IRFA since Mortex would 

need to make a different set of 

investments than the rest of the MHGF 

industry. In this Notice’s IRFA, DOE 

estimates the cost for Mortex to set up 

a production line capable of 

manufacturing condensing furnaces. 

Mortex’s conversion costs are analyzed 

separately from the rest of the MHGF 

industry. 

a. AFUE Standards 

Of the four small domestic OEMs 

identified, two manufacture NWGFs, 

one manufactures MHGFs, and one 

manufactures both NWGFs and MHGFs. 

DOE considered the impact of today’s 

rule on the four manufacturers. 

One of the small NWGF 

manufacturers sells a niche product in 

the NWGF market. The company offers 

three basic models of a through-the-wall 

furnace marketed for multi-family 

construction. The three models have 

identical dimensions and share many 

components. One model is rated at 80- 

percent AFUE, one model is rated at 93- 

percent AFUE, and the other model is 

rated at 95-percent AFUE. Given the 

product similarities and low volume of 

sales, DOE expects the manufacturer 

would likely discontinue the noncompliant models. DOE does not expect 

the small manufacturer would incur 

conversion costs due to the proposed 

standard, as the company currently 

offers their niche product at 95-percent 

AFUE. 

The other small NWGF manufacturer 

does not currently certify any models of 

the covered product in DOE’s CCMS. 

DOE identified this small business 

through its review of the California 

Energy Commission’s MAEDbS and the 

withdrawn September 2016 SNOPR. 

DOE reviewed the company’s website 

and available product literature to 

determine the range of products offered 

by this small manufacturer. According 

to the company’s website, they offer 

condensing and non-condensing 

NWGFs, including models that meet the 

95-percent AFUE required by the 

proposed standard. However, detailed 

product information is scarce, and the 

company’s 2021 Product Catalog does 

not include gas-fired consumer 

furnaces. The limited product 

information and lack of legally 

compliant products indicate that the 

company may no longer produce 

covered NWGFs. If the company still 

manufactures NWGFs, DOE expects the 

manufacturer would likely discontinue 

the non-compliant models given the low 

volume of sales. As with the other small 

NWGF manufacturer, DOE does not 

expect this company would incur 

conversion costs as they currently offer 

a product at 95-percent AFUE. 

The small MHGF manufacturer, 

Mortex, sells non-condensing furnaces 

into the manufactured housing 

replacement market. DOE identified this 

small business through its review of the 

withdrawn September 2016 SNOPR. Of 

the seven MHGF OEMs identified, 

Mortex is the only company that does 

not offer a condensing product. DOE 

analyzed the conversion costs for 

Mortex separately from other MHGF 

manufacturers since Mortex would need 

to make a different set of investments 

than the rest of the MHGF industry. 

To offer condensing MHGFs, Mortex 

would need to either source secondary 

heat exchangers from a vendor or setup 

its own manufacturing line to produce 

secondary heat exchangers. Setting up 

in-house production is the significantly 

more capital-intensive option. For this 

IRFA, DOE estimated the investments 

required for the company to setup inhouse production. Based on DOE’s 

engineering analysis, the main driver of 

additional capital conversion costs 

would be the production of secondary 

heat exchangers. Including equipment, 

tooling, and conveyer, DOE estimates 

upfront capital investments of $4.1 

million to setup manufacturing of 

condensing MHGFs. Additionally, the 

design and product development of 

condensing products could run as high 

as $1.4 million. If the company has less 

than 15 percent market share in the 

MHGF market, as suggested by the 

percentage of industry model offerings, 

the cost recovery period for this 

investment would be in excess of 10 

years. Unlike other MHGF 

manufacturers, which can leverage their 

investments in secondary heat 

exchanger production across other 

heating products, DOE is not aware of 

any other heating product from Mortex 

that could make use of the secondary 

heat exchanger production capacity. 

The total conversion costs of $5.5 

million are approximately 2 percent of 

company revenues over the 5-year 

conversion period and are considered 

significant. 

Given the high upfront investment 

and long cost recovery period, the small 

manufacturer would likely seek options 

other than investing in secondary heat 

exchanger production capabilities. The 

company could source the secondary 

heat exchanger, which would reduce the 

need for capital conversion costs but 

would also increase the per-unit cost of 

the final product. DOE estimates that 

the secondary heat exchanger accounts 

for approximately 14 percent of the total 

manufacturer production cost. Sourcing 

the heat exchanger could put the 

company at a pricing disadvantage 

relative to manufacturers that produce 


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their heat exchangers in-house. 

Depending on the business’ ability to 

compete on factors other than price, its 

willingness to invest technical resources 

toward designing a condensing product, 

and the role of MHGFs in the company’s 

business strategy, the small 

manufacturer could also choose to leave 

the MHGF business. 

The small domestic manufacturer of 

NWGFs and MHGFs is one of the six 

MHGF companies that offer condensing 

products. Of these six companies with 

condensing MHGFs, one manufacturer 

only offers products at or above the 

proposed AFUE standard and would, 

therefore, likely incur no conversion 

costs. The remaining five 

manufacturers, which includes the 

small manufacturer of NWGFs and 

MHGFs, have some products that do not 

meet the standard. All MHGF 

conversion costs that are not directly 

attributed to Mortex would be borne by 

these five manufacturers. The small 

domestic business has two MHGF 

models that would require redesign or 

retirement, which is an estimated 2.6 

percent of the 76 MHGF models in 

CCMS with an AFUE below 95-percent. 

DOE estimated industry conversion 

costs of $2.8 million for the MHGF 

AFUE standard when excluding the 

conversion costs attributable to Mortex. 

For the purposes of this IRFA analysis, 

DOE assumes the $2.8 million in 

conversion costs are evenly allocated 

across the five companies that may 

incur MHGF conversion costs. The 

MHGF-related conversion costs are 

approximately $0.6 million per 

company. DOE believes this even 

allocation of capital and product 

conversion costs avoids underestimating the investment requirements 

on the small, domestic manufacturer, 

given that this manufacturer has a small 

market share. For the small 

manufacturer, total conversion costs are 

approximately 0.1 percent of company 

revenue over the 5-year conversion 

period. 

As noted earlier, this small domestic 

manufacturer also produces NWGFs. 

The company offers four NWGF models, 

out of over 2,200 NWGFs in CCMS. All 

four of their NWGF offerings are at or 

above the proposed AFUE standard and 

would not likely incur conversion costs 

due to the AFUE standard. Therefore, 

the small manufacturer that produces 

both MHGFs and NWGFs is expected to 

only incur conversion costs relating to 

their MHGF products at TSL 8, the 

proposed standard level. 

b. Standby Mode and Off Mode 

Standards 

The engineering analysis suggests that 

the design paths required to meet the 

standby mode and off mode 

requirements consist of relatively 

straight-forward component swaps. 

Additionally, the INPV and short-term 

cash flow impacts of the standby mode 

and off mode requirements are dwarfed 

by the impacts of the AFUE standard. In 

general, the impacts of the standby and 

off mode standard are significantly 

smaller than the impacts of the AFUE 

standard. For this reason, the IRFA 

focuses on the impacts of the AFUE 

standard. 

DOE seeks comments, information, 

and data on the number of small 

businesses in the industry, the names of 

those small businesses, and their market 

shares by product class. DOE also 

requests comment on the potential 

impacts of the proposed AFUE 

standards and standby mode and off 

mode standards on small manufacturers. 

5. Duplication, Overlap, and Conflict 

With Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with the proposed rule. 

6. Significant Alternatives to the Rule 

The discussion in the previous 

section analyzes impacts on small 

businesses that would result from DOE’s 

proposed rule, represented by TSL 8. In 

reviewing alternatives to the proposed 

rule, DOE examined a range of different 

efficiency levels and their respective 

impacts to both manufacturers and 

consumers. Representative of lower 

efficiency levels, TSL 1, 2, 3, 4, 5, 6, and 

7 would reduce the impact on small 

business manufacturers but at the 

expense of a reduction in energy 

savings. TSL 9 was also analyzed, but it 

was determined those levels would lead 

to greater costs to manufacturers. 

Based on the presented discussion, 

DOE believes that TSL 8 would deliver 

the highest energy savings while 

mitigating the potential burdens placed 

on NWGF and MHGF manufacturers, 

including small business manufacturers. 

Accordingly, DOE does not propose one 

of the other TSLs considered in the 

analysis, or the other policy alternatives 

as part of the regulatory impact analysis 

and included in chapter 17 of the NOPR 

TSD. 

In reviewing alternatives to the 

proposed standards, DOE examined 

energy conservation standards set at 

both lower and higher efficiency levels 

than the proposed levels. At TSL 9, the 

conversion costs were higher for small 

businesses and for industry overall. At 

TSLs 1, 2, 3, 4, 5, 6, and 7, the impacts 

on small manufacturers would have 

been potentially lower. Those changes 

would have would come at the expense 

of reduced consumer benefits and a 

reduction in energy savings. In general, 

the consumer benefits were an order of 

magnitude greater than the cost to 

industry, and multiple orders of 

magnitude greater than the conversion 

costs to small manufacturers. DOE 

believes that establishing standards at 

the proposed level, TSL 8, balances the 

benefits of energy savings with the 

potential burdens placed on 

manufacturers of covered products, 

including small business manufacturers. 

Additional compliance flexibilities 

may be available through other means. 

EPCA provides that a manufacturer 

whose annual gross revenue from all of 

its operations does not exceed $8 

million may apply for an exemption 

from all or part of an energy 

conservation standard for a period not 

longer than 24 months after the effective 

date of a final rule establishing the 

standard. (42 U.S.C. 6295(t)) 

Additionally, manufacturers subject to 

DOE’s energy efficiency standards may 

apply to DOE’s Office of Hearings and 

Appeals for exception relief under 

certain circumstances. Manufacturers 

should refer to 10 CFR part 430, subpart 

E, and 10 CFR part 1003 for additional 

details. 

C. Review Under the Paperwork 

Reduction Act of 1995 

Manufacturers of NWGFs and MHGFs 

must certify to DOE that their products 

comply with any applicable energy 

conservation standards in terms of 

AFUE. 

In certifying compliance, 

manufacturers must test their products 

according to the DOE test procedures for 

NWGFs and MHGFs, including any 

amendments adopted for those test 

procedures. DOE has established 

regulations for the certification and 

recordkeeping requirements for all 

covered consumer products and 

commercial equipment, including 

NWGFs and MHGFs. See generally 10 

CFR part 429. The collection-ofinformation requirement for the 

certification and recordkeeping is 

subject to review and approval by OMB 

under the Paperwork Reduction Act 

(‘‘PRA’’), and has been approved by 

OMB under OMB control number 1910– 

1400. Public reporting burden for the 

certification is estimated to average 35 

hours per response, including the time 

for reviewing instructions, searching 

existing data sources, gathering and 

maintaining the data needed, and 


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completing and reviewing the collection 

of information. 

Under EPCA, DOE’s energy 

conservation program consists 

essentially of four parts: (1) testing, (2) 

labeling, (3) Federal energy conservation 

standards, and (4) certification and 

enforcement procedures. For covered 

equipment, relevant provisions of the 

Act include definitions (42 U.S.C. 6291), 

test procedures (42 U.S.C. 6293), 

labeling provisions (42 U.S.C. 6294), 

energy conservation standards (42 

U.S.C. 6295), and the authority to 

require information and reports from 

manufacturers (42 U.S.C. 6296). 

DOE’s certification and compliance 

activities ensure accurate and 

comprehensive information about the 

energy and water use characteristics of 

covered products and covered 

equipment sold in the United States. 

Manufacturers of all covered products 

and covered equipment must submit a 

certification report before a basic model 

is distributed in commerce, annually 

thereafter, and if the basic model is 

redesigned in such a manner to increase 

the consumption or decrease the 

efficiency of the basic model such that 

the certified rating is no longer 

supported by the test data. Additionally, 

manufacturers must report when 

production of a basic model has ceased 

and is no longer offered for sale as part 

of the next annual certification report 

following such cessation. DOE requires 

the manufacturer of any covered 

product or covered equipment to 

establish, maintain, and retain the 

records of certification reports, of the 

underlying test data for all certification 

testing, and of any other testing 

conducted to satisfy the requirements of 

part 429, part and part 431. Certification 

reports provide DOE and consumers 

with comprehensive, up-to date 

efficiency information and support 

effective enforcement. 

DOE requires manufacturers or their 

party representatives to prepare and 

submit certification reports and 

compliance statements using DOE’s 

electronic Web-based tool, the CCMS, 

which is the primary mechanism for 

submitting certification reports to DOE. 

CCMS currently has product and 

equipment specific templates which 

manufacturers are required to use when 

submitting certification data to DOE. 

DOE believes the availability of 

electronic filing through the CCMS 

system reduces reporting burdens, 

streamlines the process, and provides 

DOE with needed information in a 

standardized, more accessible form. 

This electronic filing system also 

ensures that records are recorded in a 

permanent, systematic way. 

DOE is not proposing to amend the 

existing reporting requirements or 

establish new DOE reporting 

requirements. Were DOE to establish 

amended and new energy conservation 

standards as proposed in this NOPR, 

DOE would consider associated 

reporting and certification requirements 

in a future rulemaking. Therefore, DOE 

has tentatively concluded that amended 

energy conservation standards for 

NWGFs and MHGFs would not impose 

additional costs for manufacturers 

related to reporting and certification. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

DOE is analyzing this proposed 

regulation in accordance with the 

National Environmental Policy Act of 

1969 (‘‘NEPA’’) and DOE’s NEPA 

implementing regulations (10 CFR part 

1021). DOE’s regulations include a 

categorical exclusion for rulemakings 

that establish energy conservation 

standards for consumer products or 

industrial equipment. 10 CFR part 1021, 

subpart D, appendix B5.1. DOE 

anticipates that this rulemaking 

qualifies for categorical exclusion B5.1 

because it is a rulemaking that 

establishes amended energy 

conservation standards for consumer 

products or industrial equipment, none 

of the exceptions identified in 

categorical exclusion B5.1(b) apply, no 

extraordinary circumstances exist that 

require further environmental analysis, 

and it otherwise meets the requirements 

for application of a categorical 

exclusion. See 10 CFR 1021.410. DOE 

will complete its NEPA review before 

issuing the final rule. 

E. Review Under Executive Order 13132 

E.O. 13132, ‘‘Federalism,’’ 64 FR 

43255 (August 10, 1999), imposes 

certain requirements on Federal 

agencies formulating and implementing 

policies or regulations that preempt 

State law or that have federalism 

implications. The Executive Order 

requires agencies to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and to carefully assess the 

necessity for such actions. The 

Executive order also requires agencies to 

have an accountable process to ensure 

meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have Federalism 

implications. On March 14, 2000, DOE 

published a statement of policy 

describing the intergovernmental 

consultation process it will follow in the 

development of such regulations. 65 FR 

13735. DOE has examined this proposed 

rule and has determined that it would 

not have a substantial direct effect on 

the States, on the relationship between 

the national government and the States, 

or on the distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the products that are the subject of this 

proposed rule. States can petition DOE 

for exemption from such preemption to 

the extent, and based on criteria, set 

forth in EPCA. (42 U.S.C. 6297(d)) 

Therefore, no further action is required 

by Executive Order 13132. 

F. Review Under Executive Order 12988 

Regarding the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 61 FR 4729 (Feb. 7, 1996), 

imposes on Federal agencies the general 

duty to adhere to the following 

requirements: (1) eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; (3) 

provide a clear legal standard for 

affected conduct rather than a general 

standard, and (4) promote simplification 

and burden reduction. Regarding the 

review required by section 3(a), section 

3(b) of Executive Order 12988 

specifically requires that Executive 

agencies make every reasonable effort to 

ensure that the regulation (1) clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on 

existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms, and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of Executive Order 12988 requires 

Executive agencies to review regulations 

in light of applicable standards in 

sections 3(a) and 3(b) to determine 

whether they are met or it is 

unreasonable to meet one or more of 

them. DOE has completed the required 

review and determined that, to the 

extent permitted by law, this proposed 

rule meets the relevant standards of E.O. 

12988. 


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280The 2007 ‘‘Energy Conservation Standards 

Rulemaking Peer Review Report’’ is available at the 

following website: www.energy.gov/eere/buildings/

downloads/energy-conservation-standardsrulemaking-peer-review-report-0. 

281The report is available at 

www.nationalacademies.org/our-work/review-ofmethods-for-setting-building-and-equipmentContinued 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (‘‘UMRA’’) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Public Law 104–4, 

section 201 (codified at 2 U.S.C. 1531). 

For a proposed regulatory action likely 

to result in a rule that may cause the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector of $100 million or more 

in any one year (adjusted annually for 

inflation), section 202 of UMRA requires 

a Federal agency to publish a written 

statement that estimates the resulting 

costs, benefits, and other effects on the 

national economy. (2 U.S.C. 1532(a), (b)) 

The UMRA also requires a Federal 

agency to develop an effective process 

to permit timely input by elected 

officers of State, local, and Tribal 

governments on a ‘‘significant 

intergovernmental mandate,’’ and 

requires an agency plan for giving notice 

and opportunity for timely input to 

potentially affected small governments 

before establishing any requirements 

that might significantly or uniquely 

affect them. On March 18, 1997, DOE 

published a statement of policy on its 

process for intergovernmental 

consultation under UMRA. 62 FR 

12820. DOE’s policy statement is also 

available at https://energy.gov/sites/ 

prod/files/gcprod/documents/umra_

97.pdf. 

This proposed rule does not contain 

a Federal intergovernmental mandate, 

nor is it expected to require 

expenditures of $100 million or more in 

any one year by the private sector. As 

a result, the analytical requirements of 

UMRA do not apply. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

proposed rule would not have any 

impact on the autonomy or integrity of 

the family as an institution. 

Accordingly, DOE has concluded that it 

is not necessary to prepare a Family 

Policymaking Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights,’’ 53 FR 8859 (March 18, 1988), 

DOE has determined that this proposed 

rule would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

Act, 2001 (44 U.S.C. 3516, note) 

provides for Federal agencies to review 

most disseminations of information to 

the public under information quality 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (Feb. 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (Oct. 7, 2002). Pursuant to 

OMB Memorandum M–19–15, 

‘‘Improving Implementation of the 

Information Quality Act’’ (April 24, 

2019), DOE published updated 

guidelines which are available at: 

www.energy.gov/sites/prod/files/2019/

12/f70/DOE%20Final%20Updated

%20IQA%20Guidelines%20Dec

%202019.pdf. DOE has reviewed this 

NOPR under the OMB and DOE 

guidelines and has concluded that it is 

consistent with applicable policies in 

those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to OIRA at OMB, a 

Statement of Energy Effects for any 

proposed significant energy action. A 

‘‘significant energy action’’ is defined as 

any action by an agency that 

promulgates or is expected to lead to 

promulgation of a final rule, and that: 

(1) is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has tentatively concluded that 

this regulatory action, which proposes 

new and amended energy conservation 

standards for NWGFs and MHGFs, is 

not a significant energy action because 

the proposed standards are not likely to 

have a significant adverse effect on the 

supply, distribution, or use of energy, 

nor has it been designated as such by 

the Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on this proposed rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (‘‘OSTP’’), 

issued its Final Information Quality 

Bulletin for Peer Review (‘‘the 

Bulletin’’). 70 FR 2664 (Jan. 14, 2005). 

The Bulletin establishes that certain 

scientific information shall be peer 

reviewed by qualified specialists before 

it is disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

Bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as ‘‘scientific 

information the agency reasonably can 

determine will have, or does have, a 

clear and substantial impact on 

important public policies or private 

sector decisions.’’ 70 FR 2664, 2667 

(Jan. 14, 2005). 

In response to OMB’s Bulletin, DOE 

conducted formal peer reviews of the 

energy conservation standards 

development process and the analyses 

that are typically used and prepared a 

report describing that peer review.280

Generation of this report involved a 

rigorous, formal, and documented 

evaluation using objective criteria and 

qualified and independent reviewers to 

make a judgment as to the technical/ 

scientific/business merit, the actual or 

anticipated results, and the productivity 

and management effectiveness of 

programs and/or projects. Because 

available data, models, and 

technological understanding have 

changed since 2007, DOE has engaged 

with the National Academy of Sciences 

to review DOE’s analytical 

methodologies to ascertain whether 

modifications are needed to improve the 

Department’s analyses. DOE is in the 

process of evaluating the resulting 

report.281


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performance-standards (Last accessed Feb. 16, 

2022). 

VII. Public Participation 

A. Participation in the Public Meeting 

Webinar 

The time and date of the webinar 

meeting are listed in the DATES section 

at the beginning of this document. 

Webinar registration information, 

participant instructions, and 

information about the capabilities 

available to webinar participants will be 

published on DOE’s website: 

www1.eere.energy.gov/buildings/

appliance_standards/standards.aspx?

productid=59&action=viewlive. 

Participants are responsible for ensuring 

their systems are compatible with the 

webinar software. 

B. Procedure for Submitting Prepared 

General Statements for Distribution 

Any person who has an interest in the 

topics addressed in this proposed rule, 

or who is representative of a group or 

class of persons that has an interest in 

these issues, may request an 

opportunity to make an oral 

presentation at the public meeting 

webinar. Such persons may submit 

requests to speak via email to the 

Appliance and Equipment Standards 

Program at: ApplianceStandards

Questions@ee.doe.gov. Persons who 

wish to speak should include with their 

request a computer file in WordPerfect, 

Microsoft Word, PDF, or text (ASCII) file 

format that briefly describes the nature 

of their interest in this rulemaking and 

the topics they wish to discuss. Such 

persons should also provide a daytime 

telephone number where they can be 

reached. 

Persons requesting to speak should 

briefly describe the nature of their 

interest in this rulemaking and provide 

a telephone number for contact. DOE 

requests persons selected to make an 

oral presentation to submit an advance 

copy of their statements at least two 

weeks before the public meeting 

webinar. At its discretion, DOE may 

permit persons who cannot supply an 

advance copy of their statement to 

participate, if those persons have made 

advance alternative arrangements with 

the Building Technologies Office. As 

necessary, requests to give an oral 

presentation should ask for such 

alternative arrangements. 

C. Conduct of the Public Meeting 

Webinar 

DOE will designate a DOE official to 

preside at the webinar/public meeting 

and may also use a professional 

facilitator to aid discussion. The 

meeting will not be a judicial or 

evidentiary-type public hearing, but 

DOE will conduct it in accordance with 

section 336 of EPCA (42 U.S.C. 6306). A 

court reporter will be present to record 

the proceedings and prepare a 

transcript. DOE reserves the right to 

schedule the order of presentations and 

to establish the procedures governing 

the conduct of the webinar/public 

meeting. There shall not be discussion 

of proprietary information, costs or 

prices, market share, or other 

commercial matters regulated by U.S. 

anti-trust laws. After the webinar/public 

meeting and until the end of the 

comment period, interested parties may 

submit further comments on the 

proceedings and any aspect of the 

rulemaking. 

The public meeting webinar will be 

conducted in an informal, conference 

style. DOE will present summaries of 

comments received before the webinar, 

allow time for prepared general 

statements by participants, and 

encourage all interested parties to share 

their views on issues affecting this 

rulemaking. Each participant will be 

allowed to make a general statement 

(within time limits determined by DOE), 

before the discussion of specific topics. 

DOE will allow, as time permits, other 

participants to comment briefly on any 

general statements. 

At the end of all prepared statements 

on a topic, DOE will permit participants 

to clarify their statements briefly and 

comment on statements made by others. 

Participants should be prepared to 

answer questions by DOE and by other 

participants concerning these issues. 

DOE representatives may also ask 

questions of participants concerning 

other matters relevant to this 

rulemaking. The official conducting the 

public meeting webinar will accept 

additional comments or questions from 

those attending, as time permits. The 

presiding official will announce any 

further procedural rules or modification 

of the above procedures that may be 

needed for the proper conduct of the 

public meeting webinar. 

A transcript of the public meeting 

webinar will be included in the docket, 

which can be viewed as described in the 

Docket section at the beginning of this 

NOPR. In addition, any person may buy 

a copy of the transcript from the 

transcribing reporter. 

D. Submission of Comments 

DOE will accept comments, data, and 

information regarding this proposed 

rule before or after the public meeting 

webinar, but no later than the date 

provided in the DATES section at the 

beginning of this proposed rule. 

Interested parties may submit 

comments, data, and other information 

using any of the methods described in 

the ADDRESSES section at the beginning 

of this document. 

Submitting comments via 

www.regulations.gov. The 

www.regulations.gov web page will 

require you to provide your name and 

contact information. Your contact 

information will be viewable to DOE 

Building Technologies staff only. Your 

contact information will not be publicly 

viewable except for your first and last 

names, organization name (if any), and 

submitter representative name (if any). 

If your comment is not processed 

properly because of technical 

difficulties, DOE will use this 

information to contact you. If DOE 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, DOE may not be 

able to consider your comment. 

However, your contact information 

will be publicly viewable if you include 

it in the comment itself or in any 

documents attached to your comment. 

Any information that you do not want 

to be publicly viewable should not be 

included in your comment, nor in any 

document attached to your comment. If 

this instruction is followed, persons 

viewing comments will see only first 

and last names, organization names, 

correspondence containing comments, 

and any documents submitted with the 

comments. 

Do not submit to www.regulations.gov 

information for which disclosure is 

restricted by statute, such as trade 

secrets and commercial or financial 

information (hereinafter referred to as 

Confidential Business Information 

(‘‘CBI’’)). Comments submitted through 

www.regulations.gov cannot be claimed 

as CBI. Comments received through the 

website will waive any CBI claims for 

the information submitted. For 

information on submitting CBI, see the 

Confidential Business Information 

section. 

DOE processes submissions made 

through www.regulations.gov before 

posting. Normally, comments will be 

posted within a few days of being 

submitted. However, if large volumes of 

comments are being processed 

simultaneously, your comment may not 

be viewable for up to several weeks. 

Please keep the comment tracking 

number that www.regulations.gov 

provides after you have successfully 

uploaded your comment. 

Submitting comments via email. 

Comments and documents submitted 

via email also will be posted to 

www.regulations.gov. If you do not want 

your personal contact information to be 


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Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 40705 

publicly viewable, do not include it in 

your comment or any accompanying 

documents. Instead, provide your 

contact information in a cover letter. 

Include your first and last names, email 

address, telephone number, and 

optional mailing address. The cover 

letter will not be publicly viewable as 

long as it does not include any 

comments. 

Include contact information each time 

you submit comments, data, documents, 

and other information to DOE. No 

telefacsimiles (‘‘faxes’’) will be 

accepted. 

Comments, data, and other 

information submitted to DOE 

electronically should be provided in 

PDF (preferred), Microsoft Word or 

Excel, WordPerfect, or text (ASCII) file 

format. Provide documents that are not 

secured, that are written in English, and 

that are free of any defects or viruses. 

Documents should not contain special 

characters or any form of encryption 

and, if possible, they should carry the 

electronic signature of the author. 

Campaign form letters. Please submit 

campaign form letters by the originating 

organization in batches of between 50 to 

500 form letters per PDF or as one form 

letter with a list of supporters’ names 

compiled into one or more PDFs. This 

reduces comment processing and 

posting time. 

Confidential Business Information. 

Pursuant to 10 CFR 1004.11, any person 

submitting information that he or she 

believes to be confidential and exempt 

by law from public disclosure should 

submit via email two well-marked 

copies: one copy of the document 

marked ‘‘confidential’’ including all the 

information believed to be confidential, 

and one copy of the document marked 

‘‘non-confidential’’ with the information 

believed to be confidential deleted. DOE 

will make its own determination about 

the confidential status of the 

information and treat it according to its 

determination. 

It is DOE’s policy that all comments 

may be included in the public docket, 

without change and as received, 

including any personal information 

provided in the comments (except 

information deemed to be exempt from 

public disclosure). 

E. Issues on Which DOE Seeks Comment 

Although DOE welcomes comments 

on any aspect of this proposal, DOE is 

particularly interested in receiving 

comments and views of interested 

parties concerning the following issues: 

(1) DOE requests data and information 

on the price trend for condensing 

NWGFs as compared to the trend for 

non-condensing NWGFs. 

(2) DOE seeks comments, information, 

and data on the number of small 

businesses in the industry, the names of 

those small businesses, and their market 

shares by product class. DOE also 

requests comment on the potential 

impacts of the proposed AFUE 

standards and standby mode and off 

mode standards on small manufacturers. 

(3) DOE seeks comment on the 

feasibility of integrating LL–LTX 

designs and whether significant changes 

would need to be made to integrate 

them. 

(4) DOE seeks further comment on its 

estimates for the MPC of consumer 

furnaces under each standards scenario. 

(5) DOE seeks further comment on the 

designs of the secondary heat 

exchanger, including on any recent 

design changes. DOE also seeks 

additional feedback on the cost of 

AL29–4C stainless steel. 

(6) DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each AFUE standard TSL. 

(7) DOE seeks comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each standby mode and off mode 

TSL. 

(8) DOE seeks comments, information, 

and data on the number of small 

businesses in the industry, the names of 

those small businesses, and their market 

shares by product class. DOE also 

requests comment on the potential 

impacts of the proposed AFUE 

standards and standby mode and off 

mode standards on small manufacturers. 

(9) DOE welcomes comments on how 

to more fully assess the potential impact 

of energy conservation standards on 

consumer choice and affordability and 

how to quantify this impact in its 

regulatory analysis in this and future 

rulemakings. 

(10) DOE requests data and 

information on the price trend for 

condensing NWGFs as compared to the 

trend for non-condensing NWGFs. 

(11) DOE requests comment on its 

approach to monetizing the impact of 

the rebound effect in standards cases. 

(12) DOE welcomes any additional 

comments on the approach for 

conducting the emissions analysis for 

furnaces. 

Additionally, DOE welcomes 

comments on other issues relevant to 

the conduct of this rulemaking that may 

not specifically be identified in this 

document. 

VIII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this notice of proposed 

rulemaking and request for comment. 

List of Subjects 

10 CFR Part 430 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Intergovernmental relations, Small 

businesses. 

Signing Authority 

This document of the Department of 

Energy was signed on June 10, 2022, by 

Kelly J. Speakes-Backman, Principal 

Deputy Assistant Secretary for Energy 

Efficiency and Renewable Energy, 

pursuant to delegated authority from the 

Secretary of Energy. That document 

with the original signature and date is 

maintained by DOE. For administrative 

purposes only, and in compliance with 

requirements of the Office of the Federal 

Register, the undersigned DOE Federal 

Register Liaison Officer has been 

authorized to sign and submit the 

document in electronic format for 

publication, as an official document of 

the Department of Energy. This 

administrative process in no way alters 

the legal effect of this document upon 

publication in the Federal Register. 

Signed in Washington, DC, on June 14, 

2022. 

Treena V. Garrett, 

Federal Register Liaison Officer, U.S. 

Department of Energy. 

For the reasons set forth in the 

preamble, DOE proposes to amend part 

430 of chapter II, subchapter D, of title 

10 of the Code of Federal Regulations, 

as set forth below: 

PART 430—ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

■ 1. The authority citation for part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 

2461 note. 

■ 2. Section 430.32 is amended by: 

■ a. Revising paragraph (e)(1)(ii); 

■ b. Redesignating paragraph (e)(1)(iii) 

as (e)(1)(iv); 

■ c. Adding a new paragraph (e)(1)(iii); 

and 

■ d. Revising newly redesignated 

paragraph (e)(1)(iv). 

The additions and revisions read as 

follows: 


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40706 Federal Register / Vol. 87, No. 129 / Thursday, July 7, 2022 / Proposed Rules 

§ 430.32 Energy and water conservation 

standards and their compliance dates. 

* * * * * 

(e) * * * 

(1) * * * 

(ii) The AFUE for non-weatherized 

gas furnaces (not including mobile 

home gas furnaces) manufactured on or 

after November 19, 2015, but before 

[date 5 years after publication of the 

final rule]; mobile home gas furnaces 

manufactured on or after November 19, 

2015, but before [date 5 years after 

publication of the final rule]; nonweatherized oil-fired furnaces (not 

including mobile home furnaces) 

manufactured on or after May 1, 2013, 

mobile home oil-fired furnaces 

manufactured on or after September 1, 

1990; weatherized gas-fired furnaces 

manufactured on or after January 1, 

2015; weatherized oil-fired furnaces 

manufactured on or after January 1, 

1992; and electric furnaces 

manufactured on or after January 1, 

1992; shall not be less than indicated in 

the table below: 

Product class AFUE 

(percent) 1

(A) Non-weatherized gas furnaces (not including mobile home furnaces) ......................................................................................... 80.0 

(B) Mobile home gas furnaces ............................................................................................................................................................ 80.0 

(C) Non-weatherized oil-fired furnaces (not including mobile home furnaces) ................................................................................... 83.0 

(D) Mobile home oil-fired furnaces ...................................................................................................................................................... 75.0 

(E) Weatherized gas furnaces ............................................................................................................................................................. 81.0 

(F) Weatherized oil-fired furnaces ....................................................................................................................................................... 78.0 

(G) Electric furnaces ............................................................................................................................................................................ 78.0 

1Annual Fuel Utilization Efficiency, as determined in § 430.23(n)(2) of this part. 

(iii) The AFUE for non-weatherized 

gas (not including mobile home gas 

furnaces) manufactured on and after 

[date 5 years after publication of the 

final rule]; and mobile home gas 

furnaces manufactured on and after 

[date 5 years after publication of the 

final rule], shall not be less than 

indicated in the table below: 

Product class AFUE 

(percent) 1

(A) Non-weatherized gas furnaces (not including mobile home gas furnaces) .................................................................................. 95.0 

(B) Mobile home gas furnaces ............................................................................................................................................................ 95.0 

1Annual Fuel Utilization Efficiency, as determined in § 430.23(n)(2) of this part. 

(iv) Furnaces manufactured on and 

after the compliance date listed in the 

table below shall have an electrical 

standby mode power consumption 

(‘‘PW,SB’’) and electrical off mode power 

consumption (PW,OFF’’) not more than 

the following: 

Product class 

Maximum 

standby mode 

electrical 

power 

consumption, 

(PW,SB) 

(watts) 

Maximum 

off mode 

electrical 

power 

consumption, 

(PW,OFF) 

(watts) 

Compliance date 

(A) Non-weatherized oil-fired furnaces (including mobile home oil-fired furnaces).11.0 11.0 May 1, 2013. 

(B) Electric furnaces ................................................... 10.0 10.0 May 1, 2013. 

(C) Non-weatherized gas furnaces (including mobile 

home gas furnaces).

8.5 8.5 [date 5 years after the publication of final rule] 

* * * * * 

[FR Doc. 2022–13108 Filed 7–6–22; 8:45 am] 

BILLING CODE 6450–01–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS2