[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Rules and Regulations]
[Pages 58772-58830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23312]



[[Page 58771]]

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Part III





Department of Energy





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10 CFR Part 431



Energy Conservation Program for Commercial and Industrial Equipment: 
Packaged Terminal Air Conditioner and Packaged Terminal Heat Pump 
Energy Conservation Standards; Final Rule

Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / 
Rules and Regulations

[[Page 58772]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number: EERE-2007-BT-STD-0012]
RIN 1904-AB44


Energy Conservation Program for Commercial and Industrial 
Equipment: Packaged Terminal Air Conditioner and Packaged Terminal Heat 
Pump Energy Conservation Standards

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Final rule.

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SUMMARY: The Department of Energy (DOE) has determined that its 
adoption of amended energy conservation standards for commercial 
standard size packaged terminal air conditioners (PTACs) and packaged 
terminal heat pumps (PTHPs), at efficiency levels more stringent than 
those in American Society of Heating, Refrigerating, and Air-
Conditioning Engineers (ASHRAE)/Illuminating Engineering Society of 
North America (IESNA) Standard 90.1-1999, is supported by clear and 
convincing evidence that such standards would result in significant 
additional conservation of energy and are technologically feasible and 
economically justified. On this basis, DOE is today amending the 
existing energy conservation standards for these types of equipment. In 
addition, DOE has determined that its adoption of amended energy 
conservation standards more stringent than the efficiency levels 
specified by ASHRAE Standard 90.1-1999 for non-standard size PTACs and 
PTHPs is not supported by clear and convincing evidence, thus, DOE is 
adopting the efficiency levels in ASHRAE Standard 90.1-1999 for non-
standard size PTACs and PTHPs in today's final rule.

DATES: The effective date of this rule is November 6, 2008. The 
standards established in today's final rule will be applicable starting 
October 8, 2012 for standard size PTACs and PTHPs. The standards 
established in today's final rule will be applicable starting October 
7, 2010 for non-standard size PTACs and PTHPs.

ADDRESSES: For access to the docket to read background documents, the 
technical support document, transcripts of the public meetings in this 
proceeding, or comments received, visit the U.S. Department of Energy, 
Resource Room of the Building Technologies Program, 950 L'Enfant Plaza, 
SW., 6th Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m. 
and 4 p.m., Monday through Friday, except Federal holidays. For more 
information about visiting the Resource Room, please call Ms. Brenda 
Edwards at (202) 586-2945. (Note: DOE's Freedom of Information Reading 
Room no longer houses rulemaking materials.) You may also obtain copies 
of the final rule notice in this proceeding, related documents (e.g., 
the notice of proposed rulemaking and technical support document DOE 
used to reassess whether to adopt certain efficiency levels in ASHRAE 
Standard 90.1), draft analyses, public meeting materials, and related 
test procedure documents from the Office of Energy Efficiency and 
Renewable Energy's Web site at http://www.eere.energy.gov/buildings/appliance_standards/commercial/packaged_ac_hp.html.

FOR FURTHER INFORMATION CONTACT: Wes Anderson, Project Manager, Energy 
Conservation Standards for Packaged Terminal Air Conditioners and 
Packaged Terminal Heat Pumps, U.S. Department of Energy, Energy 
Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 
1000 Independence Avenue, SW., Washington, DC 20585-0121. Phone: (202) 
586-7335. E-mail: <a href="/cdn-cgi/l/email-protection#ffa89a8cd1be919b9a8d8c9091bf9a9ad19b909ad1989089"><span class="__cf_email__" data-cfemail="401725336e012e242532332f2e0025256e242f256e272f36">[email protected]</span></a>.
    Francine Pinto, Esq., or Michael Kido, Esq., U.S. Department of 
Energy, Office of General Counsel, GC-72, 1000 Independence Avenue, 
SW., Washington, DC 20585. Phone: (202) 586-9507. E-mail: 
<a href="/cdn-cgi/l/email-protection#fdbb8f9c939e949398d3ad94938992bd958cd3999298d39a928b"><span class="__cf_email__" data-cfemail="e4a296858a878d8a81cab48d8a908ba48c95ca808b81ca838b92">[email protected]</span></a> or <a href="/cdn-cgi/l/email-protection#2964404a41484c450762404d46694158074d464c074e465f"><span class="__cf_email__" data-cfemail="95d8fcf6fdf4f0f9bbdefcf1fad5fde4bbf1faf0bbf2fae3">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule and Its Benefits
    A. The Standard Levels
    B. Current Federal Standards for Packaged Terminal Air 
Conditioners and Packaged Terminal Heat Pumps
    C. Benefits to Customers of Packaged Terminal Air Conditioners 
and Packaged Terminal Heat Pumps
    D. Impact on Manufacturers
    E. National Benefits
    F. Other Considerations
    G. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Packaged Terminal 
Equipment
III. General Discussion
    A. Test Procedures
    B. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    C. Energy Savings
    D. Economic Justification
    1. Economic Impact on Commercial Consumers and Manufacturers
    2. Life-Cycle Costs
    3. Energy Savings
    4. Lessening of Utility or Performance of Equipment
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
IV. Analysis Methodology and Discussion of Comments on Analysis 
Methodology
    A. Market and Technology Assessment
    1. Equipment Classes--Generally
    2. Comments
    B. Screening Analysis
    1. Scroll Compressors
    2. ECM Motors
    3. Fan Motors
    4. Micro-Channel Heat Exchangers
    5. Thermal Expansion Valves
    C. Engineering Analysis
    1. Material Prices for the Cost Model
    2. Impacts of the Refrigerant Phaseout on PTAC and PTHP 
Equipment Performance
    3. Manufacturer Production Cost Increases With R-410A
    D. Energy Use Characterization
    E. Life-Cycle Cost Analysis
    1. Equipment Prices
    2. Installation Costs
    3. Annual Energy Use
    4. Electricity Prices
    5. Maintenance Costs
    6. Repair Costs
    7. Equipment Lifetime
    8. Discount Rate
    F. National Impact Analysis--National Energy Savings and Net 
Present Value Analysis
    1. Shipments Analysis
    2. Base Case and Standards Case Forecasted Distribution of 
Efficiencies
    G. Manufacturer Impact Analysis
    1. GRIM Input Updates
    2. Cumulative Regulatory Burden
    3. Employment Impacts
    H. Employment Impact Analysis
    I. Utility Impact Analysis
    J. Environmental Analysis
    K. Other Comments
    1. Burdens on Small, Non-Standard Size PTAC and PTHP 
Manufacturers
    2. PTAC and PTHP Labeling
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Significance of Energy Savings
    C. Economic Justification
    1. Economic Impact on Commercial Consumers
    2. Economic Impact on Manufacturers
    3. National Net Present Value and Net National Employment
    4. Impact on Utility or Performance of Equipment
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    D. Conclusion
    1. Standard Size PTACs and PTHPs
    2. Non-Standard Size PTACs and PTHPs
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    1. Reasons for the Final Rule
    2. Objectives of, and Legal Basis for, the Rule
    3. Description and Estimated Number of Small Entities Regulated

[[Page 58773]]

    4. Description and Estimate of Compliance Requirements
    5. Significant Issues Raised by Public Comments
    6. Steps DOE Has Taken To Minimize the Economic Impact on Small, 
Non-Standard Size PTAC and PTHP Manufacturers
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    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 of 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act of 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Summary of the Final Rule and Its Benefits

A. The Standard Levels

    The Energy Policy and Conservation Act, as amended (EPCA), (42 
U.S.C. 6291, et seq.), establishes mandatory energy conservation 
standards for certain commercial equipment covered by the American 
Society of Heating, Refrigerating, and Air-Conditioning Engineers 
(ASHRAE) and the Illuminating Engineering Society of North America 
(IESNA) Standard 90.1, including packaged terminal air conditioners 
(PTACs) and packaged terminal heat pumps (PTHPs) (collectively referred 
to as ``packaged terminal equipment''). EPCA states that the Department 
of Energy (DOE) may prescribe amended standards for this equipment that 
exceed the stringency of efficiency levels contained in amendments to 
ASHRAE Standard 90.1, only if DOE determines by rule that any such 
standard ``would result in significant additional conservation of 
energy and is technologically feasible and economically justified.'' 
(42 U.S.C. 6313(a)(6)(A)(ii)(II)) This determination must be 
``supported by clear and convincing evidence.'' Id. If DOE is unable to 
find that clear and convincing evidence exists that a more stringent 
efficiency level than the efficiency level contained in ASHRAE Standard 
90.1 would result in a significant additional energy savings and is 
technologically feasible and economically justified, then EPCA states 
DOE must establish an amended uniform national standard for the product 
at the minimum level specified in the amended ASHRAE/IES Standard 90.1. 
(42 U.S.C. 6313(a)(6)(A)(ii)(I)) The standards in today's final rule, 
which apply to all packaged terminal equipment, satisfy these 
requirements and will achieve the maximum improvements in energy 
efficiency that are technologically feasible and economically 
justified. (See 42 U.S.C. 6316(a); 42 U.S.C. 6295(o)(2)(A).)
    Table I.1 shows the amended energy conservation standards that DOE 
is adopting today. These amended energy conservation standards will 
apply to standard size PTACs and PTHPs manufactured for sale in the 
United States, or imported to the United States, on or after October 8, 
2012 and non-standard size PTACs and PTHPs manufactured for sale in the 
United States, or imported to the United States, on or after October 7, 
2010.

  Table I.1--Amended Energy Conservation Standards for PTACs and PTHPs
------------------------------------------------------------------------
                    Equipment class
--------------------------------------------------------
                                            Cooling
                                            capacity          Energy
                                            (British       conservation
      Equipment            Category      thermal units     standards *
                                         per hour [Btu/
                                              h])
------------------------------------------------------------------------
PTAC.................  Standard Size    <7,000.........  EER = 11.7
                        **.
                                        7,000-15,000...  EER = 13.8-
                                                          (0.300 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.3
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 9.4
                        Size [dagger].
                                        7,000-15,000...  EER = 10.9 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 7.7
------------------------------------------------------------------------
PTHP.................  Standard Size    <7,000.........  EER = 11.9
                        **.
                                                         COP = 3.3
                                        7,000-15,000...  EER = 14.0 -
                                                          (0.300 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 3.7 -
                                                          (0.052 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.5
                                                         COP = 2.9
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 9.3
                        Size [dagger].
                                                         COP = 2.7
                                        7,000-15,000...  EER = 10.8 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 2.9 -
                                                          (0.026 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 7.6
                                                         COP = 2.5
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure (Air-
  Conditioning and Refrigeration Institute [ARI] Standard 310/380-2004),
  all energy efficiency ratio (EER) values must be rated at 95 [deg]F
  outdoor dry-bulb temperature for air-cooled equipment and
  evaporatively cooled equipment and at 85 [deg]F entering water
  temperature for water-cooled equipment. All coefficient of performance
  (COP) values must be rated at 47 [deg]F outdoor dry-bulb temperature
  for air-cooled equipment.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions having an external wall opening greater than or equal to 16
  inches high or greater than or equal to 42 inches wide, and a cross-
  sectional area greater than or equal to 670 square inches.
[dagger] Non-standard size refers to PTAC or PTHP equipment with
  existing wall sleeve dimensions having an external wall opening of
  less than 16 inches high or less than 42 inches wide, and a cross-
  sectional area less than 670 square inches.
[dagger][dagger] Cap means cooling capacity in thousand Btu/h (kBtu/h)
  at 95 [deg]F outdoor dry-bulb temperature.

    DOE only presents the benefits and burdens of adopting a standard 
level higher than the efficiency levels specified in ASHRAE Standard 
90.1-1999. The benefits and burdens of adopting the efficiency levels 
in ASHRAE Standard 90.1-1999 for non-standard size PTACs and PTHPs are 
not calculated in this rulemaking because

[[Page 58774]]

DOE considers this the baseline efficiency levels even though they 
represent an increase in energy efficiency when compared to the current 
Federal energy conservation standards.

B. Current Federal Standards for Packaged Terminal Air Conditioners and 
Packaged Terminal Heat Pumps

    Table I.2 presents the minimum efficiency levels in the current 
Federal energy conservation standards for PTACs and PTHPs.

                  Table I.2--Existing Federal Energy Conservation Standards for PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
                      Equipment class
-----------------------------------------------------------
                                     Cooling capacity (Btu/    Existing Federal energy conservation standards*
             Equipment                         h)
----------------------------------------------------------------------------------------------------------------
PTAC...............................  <7,000...............  EER = 8.88
                                     7,000-15,000.........  EER = 10.0 - (0.16 x Cap**)
                                     >15,000..............  EER = 7.6
PTHP...............................  <7,000...............  EER = 8.88
                                                            COP = 2.7
                                     7,000-15,000.........  EER = 10.0 - (0.16 x Cap**)
                                                            COP = 1.3 + (0.16 x EER)
                                     >15,000..............  EER = 7.6
                                                            COP = 2.5
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb
  temperature for air-cooled products and evaporatively cooled products and at 85 [deg]F entering water
  temperature for water-cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
  for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Cap means cooling capacity in kBtu/h at 95 [deg]F outdoor dry-bulb temperature.

C. Benefits to Customers of Packaged Terminal Air Conditioners and 
Packaged Terminal Heat Pumps

    Table I.3 presents the impacts on commercial customers of the 
energy conservation standards adopted in today's final rule.

                   Table I.3--Impacts of New Standards for a Sample of Commercial Customers *
----------------------------------------------------------------------------------------------------------------
                                                                              Total
                                          Amended energy         Total      installed    Life-cycle    Payback
           Equipment class             conservation standard   installed       cost         cost        period
                                                                  cost       increase     savings      (years)
----------------------------------------------------------------------------------------------------------------
Standard Size PTAC, 9,000 Btu/h       11.1 EER..............        1,229          $22         ($3)         13.7
 Cooling Capacity.
Standard Size PTAC, 12,000 Btu/h      10.2 EER..............        1,469           16          (2)         13.1
 Cooling Capacity.
Standard Size PTHP, 9,000 Btu/h       11.3 EER..............        1,362           40           28          4.4
 Cooling Capacity.
                                      3.2 COP
Standard Size PTHP, 12,000 Btu/h      10.4 EER..............        1,603           38           24          4.6
 Cooling Capacity.
                                      3.0 COP
Non-Standard Size PTAC, 11,000 Btu/h  8.6 EER...............        1,570       ** N/A       ** N/A       ** N/A
 Cooling Capacity.
Non-Standard Size PTHP, 11,000 Btu/h  8.5 EER...............        1,692       ** N/A       ** N/A       ** N/A
 Cooling Capacity.
                                      2.6 COP
----------------------------------------------------------------------------------------------------------------
* The values in Table I.3 represent average values and all monetary values are expressed in 2007$.
** DOE did not calculate the implications on commercial customers of non-standard equipment because DOE is
  adopting the efficiency levels in ASHRAE Standard 90.1-1999 (i.e., the baseline efficiency levels).

    The economic impacts on commercial consumers (i.e., the average 
life-cycle cost (LCC) savings) are positive. For example, the typical, 
standard size PTAC with a cooling capacity of 9,000 Btu/h that meets 
the existing Federal energy conservation standards has an installed 
price of $1,207 and an annual energy cost of $109 (cooling only). A 
typical, standard size PTHP of the same cooling capacity that meets the 
existing Federal energy conservation standards has an installed price 
of $1,362 and an annual energy cost of $209. To meet the new standard, 
DOE estimates that the installed price of a typical, standard size PTAC 
with a cooling capacity of 9,000 Btu/h will be $1,229, an increase of 
$22. This price increase will be offset by an annual energy savings of 
about $3. Similarly, for a typical, standard size PTHP of the same 
cooling capacity to meet the new standard, the increase in installed 
price would be $40, offset by an annual energy savings of $11. Whereas 
the typical, non-standard size PTAC that meets the ASHRAE Standard 
90.1-1999 efficiency levels has an installed price of $1,570 and an 
annual energy cost of $180.

D. Impact on Manufacturers

    Using a real corporate discount rate of five-percent, DOE estimates 
the net present value (NPV) of the standard size packaged terminal 
equipment industry to be $427 million in 2007$ and the NPV of the non-
standard size packaged terminal equipment industry to be $30 million in 
2007$. DOE expects the impact of today's standards on the industry net 
present value (INPV) of manufacturers of standard size packaged 
terminal equipment to be between a two-percent loss and a 14 percent 
loss (-$8 million to -$61 million). Based

[[Page 58775]]

on DOE's interviews with the manufacturers of PTACs and PTHPs, DOE 
expects minimal plant closings or loss of employment as a result of the 
standards for both the standard size and non-standard size industries.

E. National Benefits

    DOE estimates the amended energy conservation standards will save 
approximately 0.032 quads (quadrillion (10<SUP>15</SUP>) Btu) of energy 
over 30 years (2012-2042). This is equivalent to all the electricity 
used annually by approximately 500 motels.\1\
---------------------------------------------------------------------------

    \1\ Energy Informaton Agency. 2003 CBECS public use sample, 
where specific building activity = ``motel or inn'' (PBAPLUS8=39). 
Anual electricity use averages about 177,700 kWh per yer.
---------------------------------------------------------------------------

    By 2042, DOE expects the energy savings from the standards to 
eliminate the need for approximately one new 82-megawatt (MW) power 
plant. These energy savings will result in cumulative greenhouse gas 
emission reductions of approximately 1.06 million tons (Mt) of carbon 
dioxide (CO<INF>2</INF>), or an amount equal to that produced by 
approximately 6,700 cars every year. Additionally, the standards will 
help alleviate air pollution by resulting in between approximately 90 
and 2,130 tons (0.09 and 2.13 kilotons (kt)) of nitrogen oxides 
(NO<INF>X</INF>) cumulative emission reductions from 2012 through 2042. 
Finally, the standards will also alleviate air pollution by resulting 
in between approximately 0 and 0.037 tons of mercury (Hg) cumulative 
emission reductions from 2012 through 2042.
    The national NPV of the standard for standard size PTACs and PTHPs 
is $10 million using a seven-percent discount rate and $54 million 
using a three-percent discount rate, cumulative from 2012 to 2062 in 
2007$. This is the estimated total value of future savings minus the 
estimated increased equipment costs, discounted to 2008.
    The benefits and costs of today's final rule can also be expressed 
in terms of annualized 2007$ values over the forecast period 2012 
through 2042. Using a seven-percent discount rate for the annualized 
cost analysis, the cost of the amended energy conservation standards 
established in today's final rule for standard size PTACs and PTHPs is 
$4.7 million per year in increased equipment and installation costs 
while the annualized benefits are $5.7 million per year in reduced 
equipment operating costs. Using a three-percent discount rate, the 
cost of the amended energy conservation standards established in 
today's final rule for standard size PTACs and PTHPs is $4.1 million 
per year, whereas the benefits of today's amended energy conservation 
standards are $6.5 million per year.

 F. Other Considerations

    DOE noted in the April 2008 Notice of Proposed Rulemaking (NOPR) 
that PTAC and PTHP equipment manufacturers also face a mandated 
refrigerant phaseout on January 1, 2010. 73 FR 18858, 18860 (April 7, 
2008). R-22, the only refrigerant currently used by PTACs and PTHPs, is 
a hydrochlorofluorocarbon (HCFC) refrigerant subject to the phaseout 
requirement. Phaseout of this refrigerant could have a significant 
impact on the manufacturing, performance, and cost of PTAC and PTHP 
equipment. DOE discussed and estimated the impacts of the refrigerant 
phaseout on PTAC and PTHP equipment and on the manufacturers of this 
equipment in the NOPR, see generally, 73 FR 18872-74, and today's final 
rule.

G. Conclusion

    DOE concludes that the benefits (energy savings, commercial 
customer LCC savings, positive national NPV, and emissions reductions) 
to the Nation of the amended standards for standard size equipment 
outweigh their costs (loss of manufacturer INPV and commercial customer 
LCC increases for some users of PTACs and PTHPs). DOE believes that 
these amended standards are technologically feasible, economically 
justified, and will save additional significant amounts of energy as 
compared to the savings that would result from adoption of the 
efficiency levels for standard size PTACs and PTHPs in ASHRAE Standard 
90.1-1999. DOE also believes that the standards for non-standard size 
equipment (i.e., the efficiency levels in ASHRAE Standard 90.1-1999) 
are technologically feasible, economically justified, and will save 
significant amounts of energy compared to the current Federal energy 
conservation standards. Finally, DOE concludes that today's standards 
for PTACs and PTHPs are designed to achieve the maximum improvements in 
energy efficiency that are technologically feasible and economically 
justified. Currently, PTACs and PTHPs that meet the new standard levels 
are commercially available utilizing R-22 refrigerant. DOE believes 
that PTACs and PTHPs utilizing R-410A equipment at the new standard 
levels will be commercially available by the effective dates of the new 
standard levels.

II. Introduction

A. Authority

    Title III of EPCA sets forth a variety of provisions designed to 
improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309) 
provides for the Energy Conservation Program for Consumer Products 
Other than Automobiles. Part A-1 of Title III (42 U.S.C. 6311-6317) 
establishes a similar program for ``Certain Industrial Equipment,'' 
including PTACs and PTHPs, the subjects of this rulemaking.\2\ DOE 
publishes today's final rule pursuant to Part A-1 of Title III, which 
provides for test procedures, labeling, and energy conservation 
standards for PTACs and PTHPs and certain other equipment, and 
authorizes DOE to require information and reports from manufacturers. 
The test procedure for PTACs and PTHPs appears in title 10 Code of 
Federal Regulations (CFR) section 431.96.
---------------------------------------------------------------------------

    \2\ This part was originally titled Part C. However, it was 
redesignated Part A-1 after Part B of Title III of EPCA was repealed 
by Public Law 109-58.
---------------------------------------------------------------------------

    EPCA established Federal energy conservation standards that 
generally correspond to the levels in ASHRAE Standard 90.1, effective 
October 24, 1992, for most types of covered equipment listed in section 
342(a) of EPCA, including PTACs and PTHPs. (42 U.S.C. 6313(a)) For each 
type of equipment, EPCA directs that if ASHRAE Standard 90.1 is 
amended, DOE must adopt an amended standard at the new level in ASHRAE 
Standard 90.1, unless clear and convincing evidence supports a 
determination that adoption of a more stringent level as a national 
standard would produce significant additional energy savings and be 
technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)(II))
    EPCA also provides that in deciding whether a more stringent 
standard is economically justified for equipment such as PTACs and 
PTHPs, DOE must, after receiving comments on the proposed standard, 
determine whether the benefits of such a standard exceed its burdens by 
considering the following seven factors to the greatest extent 
practicable:
    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 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

[[Page 58776]]

result from the imposition of the standard;
    3. The total projected amount of energy savings likely to result 
directly from the imposition of the standard;
    4. Any lessening of the utility or the performance of the products 
likely to result from the imposition of the standard;
    5. The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    6. The need for national energy conservation; and
    7. Other factors the Secretary of Energy (Secretary) considers 
relevant. (42 U.S.C. 6316(a); 42 U.S.C. 6295(o)(2)(B)(i)-(ii))
    EPCA also contains an ``anti-backsliding'' provision, which 
prohibits DOE from prescribing any amended energy conservation standard 
that either increases the maximum allowable energy use or decreases the 
minimum required energy efficiency of covered equipment. (42 U.S.C. 
6316(a); 42 U.S.C. 6295(o)(1)) It is a fundamental principle in EPCA's 
statutory scheme that DOE cannot amend standards downward; that is, DOE 
may not weaken standards that have been previously promulgated. Natural 
Resources Defense Council v. Abraham, 355 F.3d 179 (2d Cir. 2004).
    In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii)), 
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 
(and as applicable, water) savings during the first year that the 
consumer will receive as a result of the standard,'' as calculated 
under the test procedure in place for that standard. This approach 
provides an alternative path in establishing economic justification 
under the EPCA factors. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE considered 
this test, but believes that the criterion it applies (i.e., a limited 
payback period) is not sufficient for determining economic 
justification. Instead, DOE has considered a full range of impacts, 
including those to the consumer, manufacturer, Nation, and environment.
    Additionally, the Secretary may not prescribe an amended standard 
if interested persons have established by a preponderance of the 
evidence that the standard is ``likely to result in the unavailability 
in the United States of any product type (or class)'' with performance 
characteristics, features, sizes, capacities, and volumes that are 
substantially the same as those generally available in the United 
States at the time of the Secretary's finding. (42 U.S.C. 6316(a); 42 
U.S.C. 6295(o)(4))
    Section 325(q)(1) of EPCA directs that DOE must specify a different 
standard level than that which applies generally to such type or class 
of equipment for any group of products ``which have the same function 
or intended use, if * * * 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'' than applies or will apply to the other products within that 
type or class. (42 U.S.C. 6295(q)(1)(A) and (B)) In determining whether 
a performance-related feature justifies such 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. (42 U.S.C. 6295(q)(1)) Any rule prescribing such a 
standard must include an explanation of the basis on which DOE 
established such higher or lower level. (42 U.S.C. 6295(q)(2))
    Federal energy efficiency requirements for commercial equipment 
generally supersede State laws or regulations concerning energy 
conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c); 
42 U.S.C. 6316(a) and (b)) However, DOE can grant waivers of preemption 
for particular State laws or regulations, in accordance with the 
procedures and other provisions of section 327(d) of the Act, as 
amended. (42 U.S.C. 6297(d); 42 U.S.C. 6316(b)(2)(D))

B. Background

1. Current Standards
    As described in greater detail in the NOPR, 73 FR 18861-62, the 
current energy conservation standards in EPCA for PTACs and PTHPs apply 
to all equipment manufactured on or after January 1, 1994. (42 U.S.C. 
6313(a)(3); 10 CFR 431.97) Table I.2 details these standards.
2. History of Standards Rulemaking for Packaged Terminal Equipment
    On October 29, 1999, ASHRAE adopted ASHRAE Standard 90.1-1999, 
which revised the efficiency levels for various categories of 
commercial equipment covered by EPCA, including PTACs and PTHPs. In 
amending the ASHRAE Standard 90.1-1989 levels for packaged terminal 
equipment, ASHRAE used the equipment classes contained in EPCA, which 
are distinguished by equipment type (i.e., air conditioner (PTAC) or 
heat pump (PTHP)) and cooling capacity. However, ASHRAE further divided 
these classes by wall sleeve dimensions, because they affect the energy 
efficiency of PTACs and PTHPs. Table II.1 shows the efficiency levels 
in ASHRAE Standard 90.1-1999 for this equipment.

Table II.1--ASHRAE Standard 90.1-1999 Energy Efficiency Levels for PTACs
                                and PTHPs
------------------------------------------------------------------------
                    Equipment class
-------------------------------------------------------- ASHRAE standard
                                            Cooling         90.1-1999
      Equipment            Category     capacity  (Btu/     efficiency
                                               h)            levels *
------------------------------------------------------------------------
PTAC.................  Standard Size    <7,000.........  EER = 11.0
                        **.
                                        7,000-15,000...  EER = 12.5 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.3
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 9.4
                        Size [dagger].
                                        7,000-15,000...  EER = 10.9 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 7.7
------------------------------------------------------------------------
PTHP.................  Standard Size    <7,000.........  EER = 10.8
                        **.                              COP = 3.0
                                         7,000-15,000..  EER = 12.3 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 3.2 -
                                                          (0.026 x Cap
                                                          [dagger][dagge
                                                          r])

[[Page 58777]]

 
                                        >15,000........  EER = 9.1
                                                         COP = 2.8
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 9.3
                        Size [dagger].                   COP = 2.7
                                        7,000-15,000...  EER = 10.8 -
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 2.9 -
                                                          (0.026 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 7.6
                                                         COP = 2.5
------------------------------------------------------------------------
* For equipment rated according to ARI standards, all EER values must be
  rated at 95 [deg]F outdoor dry-bulb temperature for air-cooled
  products and evaporatively cooled products and at 85 [deg]F entering
  water temperature for water-cooled products. All COP values must be
  rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
  products.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions greater than or equal to 16 inches high, or greater than or
  equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall
  sleeve dimensions less than 16 inches high and less than 42 inches
  wide. ASHRAE Standard 90.1-1999 also includes a factory labeling
  requirement for non-standard size PTAC and PTHP equipment as follows:
  ``MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO BE INSTALLED
  IN NEW CONSTRUCTION PROJECTS.''
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F
  outdoor dry-bulb temperature.

    After publication of ASHRAE Standard 90.1-1999, DOE analyzed many 
of its equipment categories to evaluate possible consideration of more 
stringent efficiency levels than those specified in the Standard. DOE 
summarized this analysis in a report, Screening Analysis for EPACT-
Covered Commercial HVAC [Heating, Ventilating and Air-Conditioning] and 
Water-Heating Equipment (commonly referred to as the 2000 Screening 
Analysis).\3\ On January 12, 2001, DOE published a final rule adopting 
the efficiency levels in ASHRAE Standard 90.1-1999 for many types of 
commercial HVAC and water heating equipment, excluding packaged 
terminal equipment and certain other types of equipment. 66 FR 3336. 
Regarding PTACs and PTHPs, the preamble to the final rule stated that 
the 2000 Screening Analysis indicated at least a reasonable possibility 
of finding ``clear and convincing evidence'' that more stringent 
standards ``would be technologically feasible and economically 
justified and would result in significant additional conservation of 
energy.'' 66 FR 3349-50. Under EPCA, these are the criteria for DOE's 
adoption of standards more stringent than the efficiency levels in 
ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(ii)(II)).
---------------------------------------------------------------------------

    \3\ U.S. Department of Energy, Office of Energy Efficiency and 
Renewable Energy. ``Energy Conservation Program for Consumer 
Products: Screening Analysis for EPACT-Covered Commercial HVAC and 
Water-Heating Equipment Screening Analysis.'' April 2000. http://www.eere.energy.gov/buildings/highperformance/pdfs/screening_analysis_main.pdf.
---------------------------------------------------------------------------

    More recently, DOE announced the availability of a technical 
support document (TSD) it developed to reassess whether to adopt as 
national standards certain efficiency levels that were in amendments to 
ASHRAE Standard 90.1, including the levels in the 1999 amendments for 
PTACs and PTHPs. 71 FR 12634 (March 13, 2006) (Notice of Availability). 
According to DOE, although the revised analysis in the TSD reduced the 
potential energy savings that might result from standards more 
stringent than the efficiency levels specified in ASHRAE Standard 90.1-
1999 for PTACs and PTHPs, DOE was inclined to pursue standards that are 
more stringent because there was a possibility that clear and 
convincing evidence exists that such standards are warranted. Id. at 
12638-39. DOE stated that it would explore more stringent efficiency 
levels than those in ASHRAE Standard 90.1-1999 for PTACs and PTHPs 
through a separate rulemaking. Id. at 12639.
    DOE proposed energy conservation standards for PTACs and PTHPs in a 
NOPR published on April 7, 2008. 73 FR 18858. In conjunction with the 
NOPR, DOE also published on its Web site the complete TSD for the 
proposed rule, which incorporated the final analyses that DOE conducted 
and technical support documentation of each analysis. The NOPR TSD 
included the LCC spreadsheets, the national impact analysis 
spreadsheets, and the manufacturer impact analysis (MIA) spreadsheet--
all of which are available on DOE's PTAC and PTHP webpage. The proposed 
standards were as follows:

  Table II.2--NOPR Proposed Energy Conservation Standards for PTACs and
                                  PTHPs
------------------------------------------------------------------------
                    Equipment class
-------------------------------------------------------- Proposed energy
                                            Cooling        conservation
      Equipment            Category     capacity  (Btu/    standards *
                                               h)
------------------------------------------------------------------------
PTAC.................  Standard Size    <7,000.........  EER = 11.4
                        **.
                                        7,000-15,000...  EER = 13.0-
                                                          (0.233 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.5
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 10.2
                        Size.
                                        7,000-15,000...  EER = 11.7-
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 8.5
------------------------------------------------------------------------

[[Page 58778]]

 
PTHP.................  Standard Size    <7,000.........  EER = 11.8
                        **.                              COP = 3.3
                                        7,000-15,000...  EER = 13.4-
                                                          (0.233 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 3.7-
                                                          (0.053 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.9
                                                         COP = 2.9
                      --------------------------------------------------
                       Non-Standard     <7,000.........  EER = 10.8
                        Size.                            COP = 3.0
                                        7,000-15,000...  EER = 12.3-
                                                          (0.213 x Cap
                                                          [dagger][dagge
                                                          r])
                                                         COP = 3.1-
                                                          (0.026 x Cap
                                                          [dagger][dagge
                                                          r])
                                        >15,000........  EER = 9.1
                                                         COP = 2.8
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure (ARI Standard
  310/380-2004), all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled equipment and evaporatively cooled
  equipment and at 85 [deg]F entering water temperature for water-cooled
  equipment. All COP values must be rated at 47 [deg]F outdoor dry-bulb
  temperature for air-cooled equipment, and at 70 [deg]F entering water
  temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions greater than or equal to 16 inches high, or greater than or
  equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall
  sleeve dimensions less than 16 inches high and less than 42 inches
  wide.
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F
  outdoor dry-bulb temperature.

    The NOPR also included additional background information on the 
history of this rulemaking. 73 FR 18862-63. DOE held a public meeting 
in Washington, DC, on May 1, 2008, to accept oral comments on and 
solicit information relevant to the proposed rule.

III. General Discussion

A. Test Procedures

    Section 343(a) of EPCA, as amended, authorizes the Secretary to 
amend the test procedures for PTACs and PTHPs to the latest version 
generally accepted by industry or the rating procedures developed or 
recognized by the ARI, or ASHRAE as referenced in ASHRAE Standard 90.1, 
unless the Secretary determines by clear and convincing evidence that 
the latest version of the industry test procedure does not meet 
specific requirements. (See 42 U.S.C. 6314(a)(4) As the NOPR explains, 
DOE has determined that its existing test procedure for PTACs and PTHPs 
does not need modification. 73 FR 18863. Accordingly, DOE has not 
adopted a revised test procedure for this equipment.

B. Technological Feasibility

1. General
    To adopt standards for PTACs and PTHPs that are more stringent than 
the efficiency levels in ASHRAE Standard 90.1 as amended, DOE must 
determine, supported by clear and convincing evidence, that such 
standards are technologically feasible. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) DOE considers a design option to be 
technologically feasible if it is in use by the respective industry or 
if research has progressed to the development of a working prototype. 
DOE defines technological feasibility as follows: ``Technologies 
incorporated in commercially available products or in working 
prototypes will be considered technologically feasible.'' 10 CFR part 
430, subpart C, appendix A, section 4(a)(4)(i).
    This final rule considers the same design options as those 
evaluated in the NOPR. (See the final rule TSD accompanying this 
notice, Chapter 4.) Based on equipment literature, the teardown 
analysis, manufacturer interviews, and the equipment performance 
degradations provided by AHRI during the NOPR phase of the rulemaking, 
DOE considered the following design options in the final rule analysis: 
(1) Higher efficiency compressors; (2) increasing the heat exchanger 
area; and (3) recircuiting the heat exchanger coils. Since these three 
design options are commercially available, have been used in PTAC and 
PTHP equipment, and are the most common ways by which manufacturers 
improve the energy efficiency of their PTACs and PTHPs, DOE has 
determined that clear and convincing evidence supports the conclusion 
that all of the efficiency levels evaluated in this notice are 
technologically feasible. DOE further discusses the technical 
feasibility of PTAC and PTHP equipment utilizing R-410A in section 
IV.C. of today's notice.
2. Maximum Technologically Feasible Levels
    In order to evaluate whether energy conservation standards for 
PTACs and PTHPs are economically justified, DOE determines the maximum 
improvement in energy efficiency or maximum reduction in energy use 
that is technologically feasible. (42 U.S.C. 6316(a); 42 U.S.C. 
6295(p)(2)) DOE determined the maximum technologically feasible level 
(``max-tech'') efficiency levels in its engineering analysis for the 
NOPR. 73 FR 18863-64. (See NOPR TSD Chapter 5.) In the NOPR, DOE based 
its identification of the max-tech efficiency levels on standard size 
and non-standard size PTAC and PTHP equipment utilizing R-22 that is 
currently available on the market. For the final rule, DOE revised the 
max-tech efficiency levels for standard size and non-standard size 
PTACs and PTHPs based on submitted comments, which are discussed in 
section IV.C of today's notice. The max-tech efficiency levels 
considered for today's final rule are based on the efficiency levels 
identified in the NOPR and factor performance degradations stemming 
from the switch to R-410A refrigerant.\4\ Table III.1 lists the max-
tech efficiency levels that DOE identified for this rulemaking for the

[[Page 58779]]

estimated system performance of equipment utilizing R-410A. DOE 
discusses these levels further in section IV.C.
---------------------------------------------------------------------------

    \4\ DOE expects the overall system efficiency of R-410A PTAC and 
PTHP equipment will be lower than if that equipment used R-22, which 
DOE estimated using an overall system performance degradation. This 
estimate is based on data submitted by manufacturers and AHRI 
pointing to a decline in performance when using R-410A refrigerant 
in place of R-22 refrigerant.

   Table III.1--R-410A Max-Tech Efficiency Levels (7,000-15,000 Btu/h
                          Equipment Classes) *
------------------------------------------------------------------------
                                                          R-410A ``Max-
                                            Cooling           Tech''
    Equipment type     Equipment class   capacity (Btu/     efficiency
                                               h)            level **
------------------------------------------------------------------------
PTAC.................  Standard Size    9,000..........  11.5 EER
                        [dagger].
                                        12,000.........  10.8 EER
                      --------------------------------------------------
                       Non-Standard     11,000.........  10.0 EER
                        Size
                        [dagger][dagge
                        r].
------------------------------------------------------------------------
PTHP.................  Standard Size    9,000..........  11.5 EER
                        [dagger].                        3.3 COP
                                        12,000.........  10.8 EER
                                                         3.1 COP
                      --------------------------------------------------
                       Non-Standard     11,000.........  10.0 EER
                        Size                              2.9 COP
                        [dagger][dagge
                        r].
------------------------------------------------------------------------
* As discussed in the NOPR, DOE is presenting the results for two
  cooling capacities of standard size PTACs and PTHPs, 9,000 and 12,000
  Btu/h, which fall within the equipment classes of PTACs and PTHPs with
  cooling capacities of 7,000-15,000 Btu/h. 73 FR 18870-18871.
** For equipment rated according to the DOE test procedure, all EER
  values would be rated at 95 [deg]F outdoor dry-bulb temperature for
  air-cooled products and evaporatively cooled products and at 85 [deg]F
  entering water temperature for water-cooled products. All COP values
  must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
  products and at 70 [deg]F entering water temperature for water-source
  heat pumps.
[dagger] Standard size refers to PTAC or PTHP equipment with wall sleeve
  dimensions having an external wall opening of greater than or equal to
  16 inches high or greater than or equal to 42 inches wide, and having
  a cross-sectional area greater than or equal to 670 square inches.
[dagger][dagger] Non-standard size refers to PTAC or PTHP equipment with
  existing wall sleeve dimensions having an external wall opening of
  less than 16 inches high or less than 42 inches wide, and having a
  cross-sectional area less than 670 square inches.

C. Energy Savings

    DOE forecasted energy savings in its national energy savings (NES) 
analysis using an NES spreadsheet tool, which the NOPR discussed in 
greater detail. See generally, 73 FR 18864, 18876, 18880-83, 18899.
    Among the criteria that govern DOE's adoption of more stringent 
standards for PTACs and PTHPs than the amended levels in ASHRAE 
Standard 90.1, clear and convincing evidence must support a 
determination that the standards would result in ``significant'' energy 
savings. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) Although EPCA does not 
define ``significant,'' the U.S. Court of Appeals for the District of 
Columbia indicated that Congress intended ``significant'' energy 
savings to mean savings that were not ``genuinely trivial'' in Section 
325 of the Act. Natural Resources Defense Council v. Herrington, 768 
F.2d 1355, 1373 (D.C. Cir. 1985). DOE's estimates of the energy savings 
for each of the TSLs considered for today's rule provide clear and 
convincing evidence that the additional energy savings each would 
achieve by exceeding the corresponding efficiency levels in ASHRAE 
Standard 90.1-1999 are nontrivial. Therefore, DOE considers these 
savings to be ``significant'' as required by 42 U.S.C. 
6313(a)(6)(A)(ii)(II).

D. Economic Justification

    As noted earlier, EPCA provides seven factors to be evaluated in 
determining whether an energy conservation standard for PTACs and PTHPs 
is economically justified. (42 U.S.C. 6316(a); 42 U.S.C. 
6295(o)(2)(B)(i)-(ii)) The following paragraphs discuss how DOE has 
addressed each of those seven factors in this rulemaking.
1. Economic Impact on Commercial Consumers and Manufacturers
    DOE considered the economic impact of the standards on commercial 
consumers and manufacturers. For customers, DOE measures the economic 
impact as the change in installed cost and life-cycle operating costs, 
i.e., the LCC. (See section V.C.1 and Chapter 8 of the TSD.) DOE 
investigates the impacts of amended energy conservation standards of 
PTACs and PTHPs on manufacturers through the manufacturer impact 
analysis (MIA). (See section V.C.2 and Chapter 13 of the TSD.) This 
factor is discussed in detail in the NOPR. See generally 73 FR 18860-
61, 18864-66, 18869, 18883-87, 18893-99, 18906-07, 18910-12.
2. Life-Cycle Costs
    DOE considered life-cycle costs of PTACs and PTHPs. This factor is 
discussed in detail in the NOPR. See generally 73 FR 18860-61, 18865, 
18876-80, 18883, 18888, 18891-93. DOE calculated the sum of the 
purchase price and the operating expense--discounted over the lifetime 
of the equipment--to estimate the range in LCC benefits that commercial 
customers would expect to achieve due to the standards.
3. Energy Savings
    Although significant additional conservation of energy is a 
separate statutory requirement for imposing a more stringent energy 
conservation standard than the level in the most current ASHRAE 
Standard 90.1, EPCA also requires that DOE consider the total projected 
energy savings that will likely result directly from the standard in 
determining whether a standard is economically justified. (42 U.S.C. 
6316(a); 42 U.S.C. 6295(o)(2)(B)(i)(III)) DOE used the NES spreadsheet 
results in its consideration of total projected savings. 73 FR 18860-
61, 18864, 18876, 18880-83, 18899. DOE presents the energy savings at 
each TSL for standard size and non-standard size PTACs and PTHPs in 
section V.B of today's notice.
4. Lessening of Utility or Performance of Equipment
    In selecting today's standard levels, DOE sought to avoid new 
standards for PTACs and PTHPs that would lessen the utility or 
performance of that equipment. (42 U.S.C. 6316(a); 42 U.S.C. 
6295(o)(2)(B)(i)(IV)) 73 FR 18865, 18866-68, 18900. The design options 
considered in the engineering analysis of this rulemaking, which 
include higher efficiency compressors, increasing the heat exchanger 
area, and recircuiting the heat exchanger coils, do not involve changes 
in equipment design or unusual installation requirements that could 
reduce the utility or performance of PTACs and PTHPs. In the NOPR, DOE 
considered

[[Page 58780]]

industry concerns that one-third of the non-standard size market 
subject to the more stringent standards under ASHRAE Standard 90.1-1999 
definition would not be able to meet the efficiency levels specified by 
ASHRAE Standard 90.1-1999 for standard size equipment due to the 
physical size constraints of the wall sleeve if this equipment class 
delineation was adopted. In today's final rule, DOE is adopting the 
equipment class delineations specified in Addendum t to ASHRAE Standard 
90.1-2007. This action should mitigate manufacturers' concerns 
regarding the misclassification of non-standard equipment classes. DOE 
further discusses the equipment classes it is adopting today and the 
comments received from interested parties regarding equipment classes 
in section IV.A of today's rulemaking.
5. Impact of Any Lessening of Competition
    DOE considers any lessening of competition likely to result from 
standards. As discussed in the NOPR (73 FR 18865, 18900), DOE requested 
that the Attorney General transmit to the Secretary a written 
determination of the impact of any lessening of competition likely to 
result from the proposed standards, together with an analysis of the 
nature and extent of such impact. (42 U.S.C. 6316(a); 42 U.S.C. 
6295(o)(2)(B)(i)(V) and (B)(ii))
    To assist the Attorney General in making such a determination, DOE 
provided DOJ with copies of the proposed rule and the TSD for review. 
(DOJ, No. 21 at p. 1-2) \5\ The Attorney General's response is 
discussed in section IV.K.1, and is reprinted at the end of today's 
rulemaking.
---------------------------------------------------------------------------

    \5\ ``DOJ, No. 21 at pp 1-2'' refers to (1) a statement that was 
submitted by the Department of Justice and is recorded in the 
Resource Room of the Building Technologies Program in the docket 
under ``Energy Conservation Program for Commercial and Industrial 
Equipment: Packaged Terminal Air Conditioner and Packaged Terminal 
Heat Pump Energy Conservation Standards,'' Docket Number EERE-2007-
BT-STD-0012, as comment number 21; and (2) a passage that appears on 
pages 1 and 2 of that statement.
---------------------------------------------------------------------------

6. Need of the Nation To Conserve Energy
    In considering standards for PTACs and PTHPs, the Secretary must 
consider the need of the Nation to conserve energy. (42 U.S.C. 6316(a); 
42 U.S.C. 6295(o)(2)(B)(i)(VI)) The Secretary recognizes that energy 
conservation benefits the Nation in several important ways. The non-
monetary benefits of the standards will likely be reflected in 
improvements to the security and reliability of the Nation's energy 
system. Today's standards also will likely result in environmental 
benefits. As discussed in the proposed rule, DOE has considered these 
factors in adopting today's standards. See generally, 73 FR at 18860, 
18865, 18888, 18900-02, 18912.
7. Other Factors
    In determining whether a standard is economically justified, EPCA 
directs the Secretary of Energy to consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6316(a); 42 U.S.C. 
6295(o)(2)(B)(i)(VII)) In adopting today's standard, DOE considered (1) 
the impacts of setting different amended standards for PTACs and PTHPs, 
(2) the potential that amended standards could cause equipment 
switching (i.e., purchase of PTACs instead of PTHPs) and the effects of 
any such switching, (3) the uncertainties associated with the impending 
phaseout in 2010 of R-22 refrigerant, and (4) the impact of amended 
standards on the manufacture of and market for non-standard size 
packaged terminal equipment (e.g., impacts on small businesses). See 
generally, 73 FR at 18860, 18865-66, 18872-74, 18882, 18884-87, 18893-
98, 18902, 18911-12.

IV. Analysis Methodology and Discussion of Comments on Analysis 
Methodology

    DOE used several analytical tools that it developed previously and 
adapted for use in this rulemaking. The first tool is a spreadsheet 
that calculates LCC and payback period (PBP). The second tool 
calculates national energy savings and national NPV. DOE also used the 
Government Regulatory Impact Model (GRIM), among other methods, in its 
MIA. Finally, DOE developed an approach using the National Energy 
Modeling System (NEMS) to estimate impacts of PTAC and PTHP energy 
efficiency standards on electric utilities and the environment. The 
NOPR discusses each analytical tool in detail. 73 FR at 18866-89.
    As a basis for this final rule, DOE has continued to use the 
spreadsheets and approaches described above and in the NOPR. DOE used 
the same general methodology as applied in the NOPR, but revised some 
of the assumptions and inputs for the final rule in response to 
comments from interested parties. The following paragraphs discuss 
these revisions.

A. Market and Technology Assessment

    When beginning an energy conservation standards rulemaking, DOE 
develops information that provides an overall picture of the market for 
the equipment concerned, including the purpose of the equipment, the 
industry structure, and market characteristics. This activity includes 
both quantitative and qualitative assessments based primarily on 
publicly available information. DOE presented various subjects in the 
market and technology assessment for this rulemaking. (See the NOPR and 
Chapter 3 of the NOPR TSD.) These include equipment classes, 
manufacturers, quantities and types of equipment sold and offered for 
sale, retail market trends, and regulatory and nonregulatory programs. 
73 FR 18866-69 and Chapter 3 of the NOPR TSD. In response to 
publication of the NOPR, DOE received comments from interested parties 
about the establishment of equipment classes for the rulemaking.
1. Equipment Classes--Generally
    When evaluating and establishing energy conservation standards, DOE 
generally divides covered equipment into equipment classes by the type 
of energy used, capacity, or other performance-related features that 
affect efficiency. Different energy conservation standards may apply to 
different equipment classes. (42 U.S.C. 6316(a); 42 U.S.C. 6295(q))
    PTACs and PTHPs can be divided into various equipment classes 
categorized by physical characteristics that affect equipment 
efficiency. Key characteristics that affect the energy efficiency of 
the PTAC or PTHP are whether the equipment has reverse cycle heating 
(i.e., air conditioner or heat pump), the cooling capacity, and the 
physical dimensions of the unit.
    In the NOPR, DOE presented two alternative methods for defining 
PTAC and PTHP equipment classes. 73 FR 18866-18868. DOE explained the 
two alternative methods of defining the PTAC and PTHP equipment classes 
consistent with the delineations provided in ASHRAE Standard 90.1-1999 
or Addendum t to ASHRAE Standard 90.1-2007 in the NOPR. Id. at 18867.
    ASHRAE Standard 90.1-1999 refers to wall sleeve dimensions in two 
categories: ``New Construction'' and ``Replacement.'' Although ASHRAE 
Standard 90.1-1999 does not describe ``New Construction,'' Table 6.21D, 
footnote b of ASHRAE Standard 90.1-1999 states that ``replacement'' 
efficiencies apply only to units that are: (1) ``Factory labeled as 
follows: Manufactured for Replacement Applications Only; Not to be 
Installed in New Construction Projects''; and (2) manufactured ``with 
existing wall sleeves less than 16 inches high and less than 42 inches 
wide.'' Based on this

[[Page 58781]]

provision, DOE understands that the ``New Construction'' category under 
ASHRAE Standard 90.1-1999 is residual, and covers all other PTAC and 
PTHPs. Hence, this category consists of equipment with wall sleeve 
dimensions greater than or equal to 16 inches high and greater than or 
equal to 42 inches wide, or lacking the requisite label.
    Addendum t to ASHRAE Standard 90.1-2007 includes a new definition 
for non-standard size PTACs and PTHPs in place of the ``replacement'' 
delineation in ASHRAE Standard 90.1-1999. The new definition reads as 
follows: ``equipment with existing sleeves having an external wall 
opening of less than 16 in. high or less than 42 in. wide, and having a 
cross-sectional area less than 670 in \2\.''
2. Comments
    In the NOPR, DOE stated that ASHRAE must adopt AHRI's \6\ 
continuous maintenance proposal before DOE can officially use this 
definition as the basis for DOE's standard because AHRI's proposed 
definitions would effectively reclassify some equipment under ASHRAE 
90.1-1999's delineations as non-standard size equipment. (42 U.S.C. 
6313(a)(6)(A)(ii)) When the NOPR was published, AHRI's continuous 
maintenance proposal on PTACs and PTHPs had been approved by ASHRAE as 
Addendum t to ASHRAE Standard 90.1-2007. At the time of the NOPR, that 
Addendum was the subject of public review by ASHRAE. DOE stated in the 
NOPR that if ASHRAE were to adopt the Addendum before September 2008, 
which is the deadline by which DOE must issue a final rule for this 
rulemaking, DOE proposed to incorporate the modified definition 
specified by that version of the ASHRAE standard in its final rule. In 
the NOPR, DOE sought comment from interested parties on its proposal to 
adopt Addendum t to ASHRAE Standard 90.1-2007. 73 FR 18867.
---------------------------------------------------------------------------

    \6\ The Air-Conditioning and Refrigeration Institute (ARI) and 
the Gas Appliance Manufacturers Association (GAMA) announced on 
December 17, 2007, that their members voted to approve the merger of 
the two trade associations to represent the interests of cooling, 
heating, and commercial refrigeration equipment manufacturers. The 
merged association became AHRI on Jan. 1, 2008.
---------------------------------------------------------------------------

    AHRI commented that all standard and non-standard manufacturers who 
are AHRI members support adoption of Addendum t. AHRI had not received 
comments challenging the content in Addendum t during ASHRAE's formal 
comment period, and ASHRAE was planning to adopt the Addendum during 
the ASHRAE annual meeting in June 2008. AHRI added that manufacturers 
believe that the definitions in Addendum t are needed to deter against 
the reclassification of large numbers of non-standard size PTACs and 
PTHPs as standard equipment, which will not be able to meet the 
proposed standards. (Public Meeting Transcript, No. 12 at p. 31-32, 
AHRI, No. 23 at pp. 6-7) \7\
---------------------------------------------------------------------------

    \7\ A notation in the form ``ECR, Public Meeting Transcript, No. 
12 at pp. 30, 37, 182'' identifies (1) an oral comment that DOE 
received during the May 30, 2008, NOPR public meeting by ECR, which 
was recorded in the public meeting transcript in the docket for this 
rulemaking as comment number 12; and (2) a passage that appears on 
page 30 of that transcript.
---------------------------------------------------------------------------

    ECR, McQuay, Carrier, and Ice Air also commented that DOE should 
use the delineations within Addendum t to classify non-standard 
equipment. (Public Meeting Transcript (ECR and McQuay), No. 12 at p. 
31; ECR, No. 15 at p. 4; Carrier, No. 16 at p. 1; Ice Air, No. 25 at p. 
5) ECR also noted that if DOE used the delineations in ASHRAE Standard 
90.1-1999 to define the equipment classes for PTACs and PTHPs, 
approximately 50 percent of their equipment would be eliminated from 
the market as a result of being reclassified into the standard size 
category. (ECR, No. 15 at p. 4)
    ECR commented that non-standard equipment is burdened by space 
constraints that are more stringent than the constraints for standard 
size PTACs and PTHPs. ECR added that the delineations within ASHRAE 
Standard 90.1-1999, coupled with the proposed standards (TSL 4), would 
force manufacturers to include more heat exchanger surface area within 
the limited volumes of physical chassis of the equipment, to use 
compressors incorporating inverter technology, and to use variable 
speed motors, which would result in equipment switching. (ECR, No. 15 
at p. 2)
    AHRI, ECR, McQuay, Ice Air, and Cold Point also commented that non-
standard size PTACs and PTHPs meet a specific demand that exists in the 
market, particularly for older buildings. These commenters stated that 
if DOE adopted the delineations in ASHRAE Standard 90.1-1999, which 
could further eliminate non-standard size PTACs and PTHPs from the 
market, this would decrease competition and limit customer choices. 
(Public Meeting Transcript, No. 12 at pp. 20 (ECR), 22 (AHRI), 38 
(McQuay); AHRI, No. 23 at p. 7; ECR, No. 15 at p. 4; Ice Air, No. 25 at 
p. 4; Cold Point, No. 18 at p. 2)
    DOE also received comments about the potential for creating a 
loophole by adopting Addendum t in the final rule. In this regard, 
these commenters supported DOE's adoption of an alternative definition 
for non-standard size PTACs and PTHPs.
    Specifically, General Electric (GE) and the American Council for an 
Energy Efficient Economy (ACEEE) recommended that DOE modify the non-
standard definitions and equipment classes to have the wall sleeve 
dimension requirements set significantly below the proposed dimensions, 
consistent with the non-standard size equipment currently on the 
market. (Public Meeting Transcript, No. 12 at pp. 16 (GE), 33-34 (GE), 
36-37 (ACEEE), 208 (ACEEE); GE, No. 8 at p. 2; GE, No. 20 at pp. 2-3) 
GE asked DOE to make the difference in the wall sleeve dimensions of 
standard size and non-standard size PTACs and PTHPs large enough to 
prevent non-standard PTACs/PTHPs from being installed in standard size 
PTAC and PTHP openings. GE used the example of a PTAC (15.75 x 41.75 
inches) that GE believes could easily fit inside a standard size PTAC 
wall sleeve, yet this unit would be classified as non-standard size 
equipment subject to less stringent energy conservation standards. 
(Public Meeting Transcript, No. 12 at pp. 16, 33-34; GE, No. 8 at p. 2)
    GE stated that the wording in Addendum t might encourage the design 
of new PTAC and PTHP equipment that may circumvent the intent of DOE's 
regulations. (Public Meeting Transcript, No. 12 at pp. 16, 33-34; GE, 
No. 8 at p. 2) As an alternative, GE suggested DOE use the wall sleeve 
dimensions of the largest non-standard size PTAC and PTHP equipment 
currently on the market to define non-standard size PTACs and PTHPs. 
(Public Meeting Transcript, No. 12 at p. 33)
    ECR, McQuay, and AHRI responded to concerns about the potential for 
a loophole for less efficient standard size equipment to enter the 
market if DOE adopts the delineations in Addendum t. (ECR, No. 15 at 
pp. 1, 4; Public Meeting Transcript, No. 12 at pp. 20 (ECR), 22 (AHRI), 
31-32 (AHRI), 38 (McQuay)) AHRI stated that the same potential loophole 
exists in the delineations within ASHRAE Standard 90.1-1999 for 
standard size and non-standard size PTACs and PTHPs. AHRI commented 
that if manufacturers want to introduce less efficient standard size 
equipment with wall sleeve dimensions just shy of the standard size 
limitations, manufacturers would have introduced this type of equipment 
already because this loophole has been in existence since 1999. 
However, AHRI pointed out that none of the manufacturers in the PTAC 
and PTHP industry have taken

[[Page 58782]]

advantage of this potential loophole. AHRI also noted that Addendum t 
requires non-standard size equipment to be labeled to prevent 
misapplications of less efficient non-standard equipment entering into 
newly constructed projects. (AHRI, No. 23 at pp. 6-7)
    ECR also commented that it does not believe that non-standard size 
equipment will be used in newly constructed buildings. ECR stated that 
commercial customers would not purchase non-standard equipment because 
it is rated at lower efficiencies; rather, customers make purchases 
based on the characteristics and needs of the installation (i.e., wall 
sleeve dimensions). Placing non-standard size equipment in newly 
constructed buildings does not make economic sense. (ECR, No. 15 at pp. 
1, 4; Public Meeting Transcript, No. 12 at p. 20) McQuay pointed out 
that non-standard equipment is needed to meet a specific demand that 
exists in the market, particularly for older buildings, and that 
phasing out the market would decrease competition and limit customer 
choices. (Public Meeting Transcript, No. 12 at p. 38) If DOE were to 
adopt the delineations within ASHRAE Standard 90.1-1999, ECR believes 
building owners and commercial customers would keep their older, much 
less efficient units in place longer because replacements could become 
unavailable. (ECR, No. 15 at p. 1)
    On June 22, 2008, ASHRAE Standard 90.1's committee voted to 
officially approve the publication of Addendum t to ASHRAE Standard 
90.1-2007 for PTACs and PTHPs.\8\ This action finalizes Addendum t, 
which means that DOE can officially use this delineation as the basis 
for amended energy conservation standards. (42 U.S.C. 
6313(a)(6)(A)(ii))
---------------------------------------------------------------------------

    \8\ To obtain a copy of Addendum t to ASHRAE Standard 90.1-2007, 
contact the ASHRAE publications department at: <a href="/cdn-cgi/l/email-protection#bfd0cddbdacdccffdeccd7cddeda91d0cdd8"><span class="__cf_email__" data-cfemail="375845535245447756445f45565219584550">[email protected]</span></a> or 
1-(800) 527-4723.
---------------------------------------------------------------------------

    DOE divides equipment classes by the type of energy used or by 
capacity or other performance-related features that affect efficiency. 
Different energy conservation standards may apply to different 
equipment classes. (42 U.S.C. 6295(q)) When installed, PTACs and PTHPs 
are fitted into a wall sleeve. There is a wide variety of wall sleeve 
sizes found in different buildings. Wall sleeve sizes are market driven 
(i.e., the applications or facilities where the PTACs or PTHPs are 
installed is what determines the ``market standard'' wall sleeve 
dimension) and this factor requires manufacturers to offer various 
PTACs and PTHPs that can fit into various wall sleeve dimensions. For 
new units, the industry has standardized the wall sleeve dimension for 
PTACs and PTHPs in buildings over the past 20 years to be 16 inches 
high by 42 inches wide. Therefore, units that have a wall sleeve 
dimension of 16 inches high by 42 inches wide are considered ``standard 
size'' equipment and all other units are considered ``non-standard 
size'' equipment. In contrast, the industry does not have a common wall 
sleeve dimension that is typical for all older existing facilities. 
These facilities, such as high-rise buildings found in large cities, 
typically use non-standard size equipment. In these installations, 
altering the existing wall sleeve opening to accommodate the more 
efficient, standard size equipment could include extensive structural 
changes to the building, which could be very costly, and is, therefore, 
rarely done.
    DOE believes that wall sleeve sizes are performance-related 
features that affect PTAC and PTHP efficiency. Manufacturers typically 
use various heat exchanger sizes in different wall sleeve size 
equipment, and the size of the heat exchanger directly affects the 
energy efficiency of the equipment. By examining the market data, DOE 
found that non-standard size PTACs and PTHPs typically are less 
efficient than standard size PTACs and PTHPs. Consequently, DOE is 
adopting the delineations in Addendum t to ASHRAE Standard 90.1-2007 to 
differentiate between standard size and non-standard size equipment.
    DOE believes the delineations within Addendum t will help to 
mitigate the impacts on manufacturers of non-standard size equipment, 
and will not cause any equipment unavailability issues for commercial 
customers. DOE was concerned that, absent non-standard equipment, 
commercial customers could be forced to invest in costly building 
modifications to convert non-standard sleeve openings to standard size 
dimensions. Alternatively, customers may choose to use less efficient 
through-the-wall air conditioners or maintain their older, less 
efficient equipment longer in the absence of non-standard PTACs and 
PTHPs.
    Although DOE acknowledges GE's and ACEEE's concern about the 
potential loophole in the definition, DOE believes that the effects of 
this loophole will be reduced due to the labeling requirements 
specified in Addendum t. DOE is not adopting the labeling requirement 
set forth in Addendum t, but believes that non-standard manufacturers 
will still be required to use this labeling through some of their State 
building code regulations, which require the use of such labels on PTAC 
and PTHP equipment. DOE believes ASHRAE's labeling requirement will 
deter less efficient equipment from entering into newly constructed 
buildings.
    Additionally, DOE agrees with AHRI's assertion that if 
manufacturers wanted to introduce less standard size equipment with 
wall sleeve dimensions just shy of the standard size limitations they 
could have done this in today's market. DOE believes the market forces 
surrounding the standardized sleeve size have deterred standard size 
manufacturers from producing this type of equipment because of the 
unique non-standard size industry and the cost implications of 
producing customized equipment. Further, DOE believes these market 
forces will continue to deter standard size manufacturers from taking 
advantage of this potential loophole after the adoption of the 
delineations in Addendum t to ASHRAE Standard 90.1-2007.
    In today's final rule, DOE incorporates the following definitions 
of standard size and non-standard size PTACs and PTHPs as presented in 
Addendum t to ASHRAE Standard 90.1-2007:
    <bullet> Standard size refers to a PTAC or a PTHP with wall sleeve 
dimensions having an external wall opening of greater than or equal to 
16 inches high or greater than or equal to 42 inches wide, and having a 
cross-sectional area greater than or equal to 670 square inches.
    <bullet> Non-standard size refers to a PTAC or a PTHP with existing 
wall sleeve dimensions having an external wall opening of less than 16 
inches high or less than 42 inches wide, and having a cross-sectional 
area less than 670 square inches.
    DOE added these two definitions of standard size and non-standard 
size to be codified at 10 CFR 431.2. Consistent with the definitions, 
DOE has defined the equipment classes for today's final rule for PTACs 
and PTHPs (as shown in Table IV.1).

[[Page 58783]]



    Table IV.1--Equipment Classes for PTACs and PTHPs if ASHRAE Adopts Addendum to ASHRAE Standard 90.1-2007
----------------------------------------------------------------------------------------------------------------
                                                 Equipment class
-----------------------------------------------------------------------------------------------------------------
                Equipment                            Category                   Cooling capacity (Btu/h)
----------------------------------------------------------------------------------------------------------------
PTAC.....................................  Standard Size *............  <7,000
                                                                        7,000-15,000
                                                                        >15,000
                                          ----------------------------------------------------------------------
                                           Non-Standard Size **.......  <7,000
                                                                        7,000-15,000
                                                                        >15,000
----------------------------------------------------------------------------------------------------------------
PTHP.....................................  Standard Size *............  <7,000
                                                                        7,000-15,000
                                                                        >15,000
                                          ----------------------------------------------------------------------
                                           Non-Standard Size **.......  <7,000
                                                                        7,000-15,000
                                                                        >15,000
----------------------------------------------------------------------------------------------------------------
* Standard size refers to PTAC or PTHP equipment with wall sleevedimensions having an external wall opening of
  greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and having a cross-
  sectional area greater than or equal to 670 square inches.
** Non-standard size refers to PTAC or PTHP equipment with existing wall sleeve dimensions having an external
  wall opening of less than 16 inches high or less than 42 inches wide, and having a cross-sectional area less
  than 670 square inches.

B. Screening Analysis

    The purpose of the screening analysis is to evaluate the 
technologies that improve equipment efficiency, to determine which 
technologies to consider further, and which to screen out. In 
developing the screening analysis for the NOPR, DOE consulted with a 
range of parties, including industry, technical experts, and others to 
develop a list of technologies for consideration. DOE then applied the 
four screening criteria to determine which technologies are unsuitable 
for further consideration in the rulemaking (10 CFR part 430, subpart 
C, appendix A4.(a)(4) and 5.(b)). DOE presented its results of the 
screening analysis in the NOPR and in Chapter 4 of the NOPR TSD. In 
response to the NOPR, DOE received one comment about the technology 
options that it considered in the screening analysis.
    ACEEE commented that DOE should not have screened out some of the 
technology options. Instead, DOE should have further considered these 
options in the engineering analysis. (Public Meeting Transcript, No. 12 
at pp. 49-52, 64-65) ACEEE stated that DOE neglected to examine other 
types of compressors (such as scroll compressors), electronically 
commutated motor (ECM) fans, clutched fan motors, micro-channel heat 
exchangers, and thermostatic expansion valves (TXVs). According to 
ACEEE, the compressor choices for PTACs should not be different from 
those used for residential refrigerators because the loads are similar. 
ACEEE added that micro-channel heat exchangers allegedly cost less to 
implement, require less refrigerant and space, and have been used in 
air conditioning applications within automobiles. (Public Meeting 
Transcript, No. 12 at pp. 50-51)
1. Scroll Compressors
    As presented in Chapter 4 of the NOPR TSD, scroll compressors are 
an alternative to rotary compressors in air-conditioning applications. 
Scroll compressors are more efficient than rotary compressors at higher 
cooling capacities than are typically found in packaged terminal 
equipment. Whereas rotary compressors use a rotating motion to compress 
refrigerant gases, scroll compressors use two nutating spirals--one 
fixed and the other rotating. Although scroll compressors can be more 
efficient than rotary compressors, they typically are more expensive, 
heavier, and larger than rotary compressors of the same cooling 
capacities.
    After reviewing publicly available equipment literature and 
specifications for scroll compressors currently available on the 
market, DOE determined that manufacturers typically produce scroll 
compressors with cooling capacities of approximately 20,000 Btu/h or 
higher, and that the majority of equipment using scroll compressors is 
typically rated at capacities higher than 40,000 Btu/h. Manufacturers 
also produce scroll compressors with housings larger than those used 
for compressors found in PTACs and PTHPs. DOE found that scroll 
compressors are typically built to be 16 inches or higher in height and 
that capacity ratings do not impact scroll compressor heights 
significantly. For example, DOE found that the height of a scroll 
compressor only decreases by approximately 1.5 inches when capacity 
decreases from 80,000 to 20,000 Btu/h. However, significant 
improvements in efficiency, when compared to rotary compressors, are 
generally achieved with higher capacity models. DOE's market review 
also found that scroll compressors weigh more than PTAC and PTHP 
compressors. Scroll compressors typically weigh 50 pounds or more, 
compared with the 25 to 30 pounds for a PTAC/PTHP rotary compressor 
found in PTACs and PTHPs.
    Ultimately, DOE screened out scroll compressors as a viable design 
option. As stated in the NOPR and subsequently confirmed by DOE using 
updated data, manufacturers do not produce scroll compressors for PTAC 
and PTHP applications, making it unlikely that this technology option 
could be readily applied to these products. DOE also screened out 
scroll compressors because their manufacturers have yet to produce a 
full line of scroll compressors that meet the size limitations, 
capacity requirements, and voltage requirements of packaged terminal 
equipment. The size limitation is particularly problematic when given 
the installation limitations of the sleeve sizes for PTACs and PTHPs.
2. ECM Motors
    As presented in Chapter 4 of the NOPR TSD, there are multiple types 
of electric fan motors that manufacturers

[[Page 58784]]

can choose from to blow air over the condenser and evaporator coils. 
Since the PTAC and PTHP industries have a relatively small number of 
annual shipments, manufacturers typically have to choose their motors 
from existing motor lines, rather than having motors customized for 
their specific needs. The type of motor and its power rating are 
typically indicative of its efficiency. For example, shaded pole motors 
are generally the lowest efficiency motors that are available, 
particularly at very low power levels. By contrast, the electronically 
commutated motors (ECM) or brushless permanent magnet motors (BPMs) are 
typically the most efficient motors for the low power levels.
    DOE determined that the PTAC and PTHP industries have not adopted 
ECMs or similar high efficiency motors due to size and weight 
constraints. The size limitation is particularly problematic when given 
the installation limitations of the sleeve sizes for PTACs and PTHPs, 
particularly for non-standard PTACs. Ultimately, DOE screened out high 
efficiency motors as a viable design option. As stated in the NOPR and 
subsequently confirmed by DOE using updated data and through 
discussions with industry experts, DOE found high efficiency motors are 
not available in the full ranges of sizes needed for the PTAC and PTHP 
industries making it unlikely that this technology option could be 
readily applied to these products. DOE believes that, given these 
circumstances, it would not be practical to manufacture, install, and 
service this technology on the scale necessary to serve the relevant 
market at the time of the effective date of an amended standard.
3. Fan Motors
    ACEEE commented on clutched fan motors, but DOE did not consider 
this technology. Although the automotive industry uses clutched fans to 
engage and disengage a vehicle's cooling fan from the belt driven by 
the engine, using a clutched fan would not provide appreciable benefits 
within the energy efficiency context. In theory, these devices would 
work with PTACs and PTHPs to reduce the load on a single fan motor used 
to drive both the evaporator and the condenser fan blades when the 
refrigerating system is not operating by disengaging the condenser fan. 
In this way, power input could be reduced during times when only the 
indoor blower is running to recirculate air, or when electric 
resistance heating is being provided. However, the measure of energy 
use for PTACs in cooling mode is based on full cooling operation, in 
which both the indoor blower and the condenser fan must operate. Hence, 
including a clutched condenser fan would not provide measurable energy 
efficiency benefits.
4. Micro-Channel Heat Exchangers
    As presented in Chapter 4 of the NOPR TSD, micro-channel heat 
exchangers have a rectangular aluminum cross-section containing several 
small channels through which refrigerant passes. Aluminum fins with a 
corrugated shape are brazed at a 90-degree angle between the 
rectangular tubes. Micro-channel heat exchanger designs provide more 
heat transfer per volume of heat exchanger core and can provide more 
heat transfer per unit of face area. In addition, these designs have 
lower airside pressure drop than similarly performing conventional 
coils, which reduces the fan power requirement. The small size and 
lower airside pressure drop that results from micro-channel heat 
exchangers provide opportunities to reduce the size and weight of the 
heat exchanger. This explains the frequent use of micro-channel heat 
exchangers in automobile air-conditioning systems, where their small 
size and high performance allow car designers to minimize air 
resistance by lowering the leading edge of the car.
    As stated in the NOPR TSD, DOE screened out micro-channel heat 
exchangers from the engineering analysis. 73 FR 18869-70. Through 
review of publicly available literature, product specifications, and 
discussions with manufacturers, DOE determined that micro-channel heat 
exchangers have inherent problems with performance and condensate 
removal when installed in PTAC equipment. In particular, manufacturers 
observed that the smaller airflow passages between plate fins are 
subject to clogging in installations where debris is present, which can 
affect both the heat exchanger and fan motor performance. Additionally, 
for PTACs and PTHPs operating in cooling mode, condensate buildup on 
the evaporator of the installation may result in icing, which is harder 
to remove from small horizontal micro-channel heat exchanger passages 
than from the vertical fins found in the currently used tube and fin 
heat exchangers.
    For the reasons stated above, manufacturers have chosen not to 
install micro-channel heat exchangers in PTAC and PTHP designs. DOE 
determined that this technology has not yet penetrated the PTAC and 
PTHP industry and that design challenges still exist. At this time, DOE 
believes microchannel heat exchangers are technologically infeasible in 
PTAC and PTHP applications. DOE understands that manufacturers are 
conducting research into the use of micro-channel heat exchangers in 
their PTACs and PTHP design at this time. However, DOE does not have 
definite knowledge of whether their research efforts will be 
successful, of when mirco-channel heat exchangers could appear in 
either prototypes or equipment designs, and what the cost implications 
would be and the contribution to system performance would be. Because 
this technology is in the research stage for the PTAC industry, it is 
also not possible to assess whether it will have any adverse impacts on 
equipment utility to customers or equipment availability, or on 
customer health or safety.
5. Thermal Expansion Valves
    Regarding ACEEE's comments about TXVs, DOE did not consider this 
technology for PTACs or PTHPs. TXVs are expansion devices that meter 
the flow of refrigerant from the condenser to the evaporator at a rate 
equivalent to the amount of refrigerant being boiled off in the 
evaporator. For example, when the evaporator is exposed to high 
temperatures, the TXV will open to allow faster flow of refrigerant to 
match the higher boiling rate caused by higher temperatures. 
Alternatively, for lower temperatures, the TXV will reduce the flow 
rate to match the lower boiling rate caused by cooler temperatures. 
Typically, TXVs are installed in central air conditioning applications 
where equipment is rated with the seasonal energy efficiency ratio 
(SEER) metric and testing occurs at various operating conditions and 
temperatures. In contrast, PTACs and PTHPs are measured using the EER 
metric, with testing occurring at a constant temperature of 95 degrees 
F. Therefore, the energy efficiency benefits of a TXV will not affect 
the EER rating of a PTAC because the orifice of the TXV and the flow of 
refrigerant would remain constant during testing. Therefore, DOE does 
not consider TXVs to be a technology for improving the EER of PTACs and 
PTHPs.

C. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the cost and efficiency of PTACs and PTHPs and to 
show the manufacturing costs required to achieve that increased 
efficiency level. As detailed in the NOPR, DOE's engineering analysis 
for PTACs and PTHPs estimated the baseline manufacturer cost, as well 
as the incremental cost for equipment at

[[Page 58785]]

efficiency levels above the baseline. 73 FR 18870-74. DOE presented its 
engineering analysis in the NOPR, which included a discussion on the 
approach, the equipment classes analyzed, the cost model, the baseline 
equipment, the alternative refrigerant analysis, the cost efficiency 
results, and mappings of the EER and COP values. In response to DOE's 
presentation of the engineering analysis in the NOPR, DOE received 
comments on the following topics: Standard size equipment performance 
in systems using R-410A refrigerant, max-tech efficiency levels 
analyzed for standard size equipment, energy-efficiency equations for 
standard size equipment, max-tech efficiency levels analyzed for non-
standard size equipment, energy-efficiency for non-standard size 
equipment, compressor availability, and the manufacturer production 
cost increases with the introduction and use of R-410A. DOE discusses 
each of these topics and the updates to the cost model for the final 
rule in the subsections below.
1. Material Prices for the Cost Model
    In the NOPR analyses, DOE used five-year average material prices 
from years 2002 through 2006. 73 FR 18871. For the final rule, DOE 
updated the five-year averages to include material price data from 2007 
and 2008. DOE uses a five-year span to normalize the fluctuating prices 
experienced in the commodities market to screen out temporary dips or 
spikes. DOE believes a five-year span is the longest span that would 
still provide appropriate weighting to current prices experienced in 
the market.
    DOE basis for its belief relies on updated commodity pricing data, 
which point to continued increases. For example, the 5-year time period 
ending in mid-2008 has higher commodity indices than a 5-year ending in 
mid-2006 by 10 percent, 28 percent, and 45 percent for All Commodities, 
Steel, and Copper, respectively.\9\ Considering the significant amount 
of steel and copper in each PTAC or PTHP, incorporating commodity 
prices that reflect 5-year average prices as close to the current 
conditions best reflect the market conditions. DOE believes it is 
appropriate to use prices from 2007 and 2008 in the data span because 
it more closely represents current PTAC and PTHP material prices and 
manufacturing conditions. DOE calculated a new five-year average 
materials price for cold rolled steel, aluminized steel, galvanized 
steel, painted cold rolled steel, and stainless steel. DOE used the 
U.S. Department of Labor's Bureau of Labor Statistics (BLS) Producer 
Price Indices (PPIs) for various materials from 2004 to 2008 to 
calculate new averages, which incorporate the changes within each 
material industry and inflation. Finally, DOE adjusted all averages to 
2007$ using the gross-domestic-product implicit-price deflator.
---------------------------------------------------------------------------

    \9\ Bureau of Labor Statistics (BLS) for Copper (WPU102502), 
Cold Rolled Steel (WPU101707), and All Commodities (WPU00000000) as 
tracked in the Producer Price Index (PPI) database of the BLS. To 
download the data or to discover how it is gathered, please see 
http://www.bls.gov.
---------------------------------------------------------------------------

    As was the case for the NOPR, DOE developed a material-price-
sensitivity analysis. DOE used the annual average price for each of the 
raw materials from 2008 to calculate the current manufacturing product 
costs (MPCs). DOE expressed the material price sensitivity results in 
2007$. The results for the material-price-sensitivity analysis are 
presented in Chapter 5 of the final rule TSD.
2. Impacts of the Refrigerant Phaseout on PTAC and PTHP Equipment 
Performance
a. Standard Size Equipment Performance in Systems Using R-410A 
Refrigerant
    GE commented that R-410A refrigerant has been in use for years by 
the air conditioning industry. Even though GE believes switching to R-
410A refrigerant in PTAC and PTHP equipment will have a negative impact 
on system efficiency, GE believes the difference can be made up with a 
combination of higher efficiency compressors, motors, as well as 
increases in heat exchanger size. GE stated that manufacturers have 
been aware of the future requirements and should be far along with 
developments and designs to meet both amended energy conservation 
standards and R-410A requirements. GE also pointed out that one 
manufacturer has produced an R-410A PTHP that exceeds the proposed 
energy conservation standard level in the NOPR (i.e., 11.5 EER for 
standard equipment) and is currently available on the market. (GE, No. 
20 at pp. 2-3; Public Meeting Transcript, No. 12 at pp. 17-18, 66) GE 
noted that it is finishing the design and test phase for several models 
and is confident that it can manufacture standard size R-410A PTACs and 
PTHPs at TSL 4 efficiency levels (i.e., the proposed energy 
conservation standards for PTHPs in the NOPR). GE added that achieving 
an efficiency level that is 10 percent higher than the proposed 
standard for a potential ENERGY STAR category is also possible with 
existing technology. (GE, No. 20 at p. 3; Public Meeting Transcript, 
No. 12 at p. 66)
    In addition to comments from manufacturers of standard size PTACs 
and PTHPs, DOE also received confidential performance test data that 
characterizes the equipment performance degradations in standard size 
PTACs and PTHPs using R-410A refrigerant. The confidential data DOE 
received regarding standard size equipment performance suggests the 
performance degradation can vary greatly depending upon the cooling 
capacity of the equipment. DOE further addresses comments from 
interested parties and its analysis of the variation in standard size 
equipment performance with changes in cooling capacity in DOE's 
discussion of the energy-efficiency equations, below.
    DOE reviewed the data submitted by manufacturers and comments from 
interested parties and found, in general, the system performance 
degradations for PTAC and PTHP equipment with R-410A, as described in 
the NOPR, were in the middle of the range of the submitted data. For 
today's final rule, DOE used the same system performance degradations 
for PTAC and PTHP equipment with R-410A refrigerants as described in 
the NOPR. 73 FR 18873. Because standard size PTAC and PTHP equipment 
utilizing R-22 refrigerants exists at efficiency levels well above the 
efficiency levels in ASHRAE Standard 90.1-1999, DOE believes that 
manufacturers will be able to produce equipment utilizing R-410A at 
efficiency levels specified by ASHRAE Standard 90.1-1999 and higher 
efficiency levels in 2012. As GE noted, one standard size manufacturer 
is already producing R-410A equipment at efficiency levels above ASHRAE 
Standard 90.1-1999 efficiency levels. Lastly, the comments submitted by 
GE establishes that PTAC and PTHP prototypes utilizing R-410A 
refrigerant have been developed and will be able to meet the proposed 
efficiency levels, i.e., TSL 4, for standard size PTACs and PTHPs.
    As DOE reviewed the data submitted by interested parties, DOE 
generally found larger performance degradations at higher cooling 
capacities for standard size equipment. As a PTAC or PTHP increases in 
capacity, manufacturers typically increase the surface area or add a 
row to the heat exchanger in order to increase unit capacity. Even at 
larger cooling capacities, manufacturers have to maintain the same 
physical box sleeve, leaving little space for additional efficiency 
modifications (e.g., adding heat exchanger area). DOE considered the 
effects of the R-410A refrigerant

[[Page 58786]]

phaseout on the entire range of cooling capacities as part of the 
generation of the energy-efficiency equations that translates the 
results for the representative cooling capacities to the entire cooling 
capacity range. See section IV.C.2.c for additional details on how DOE 
extended the results for the representative cooling capacities to the 
full range of cooling capacities for standard size PTACs and PTHPs.
b. ``Max-Tech'' Efficiency Levels Analyzed for Standard Size Equipment
    AHRI and the People's Republic of China, through its WTO/TBT 
National Notification and Enquiry Center (PRC), commented that the max-
tech levels are inaccurate because they are based on R-22 refrigerant 
and there is no equipment in the 2008 AHRI Directory of Certified 
Product Performance (AHRI Certified Directory) \10\ operating with R-
410A refrigerant. AHRI and the PRC also commented about the difficulty 
in reaching the max-tech efficiency levels with R-410A refrigerant and 
assert that attaining those efficiency levels is not possible at this 
time. (Public Meeting Transcript, No. 12 at pp. 168-169; PRC, No. 17 at 
p. 3)
---------------------------------------------------------------------------

    \10\ The Air-Conditioning, Heating and Refrigerating Institute, 
Directory of Certified Product Performance for Packaged Terminal Air 
Conditioners and Packaged Terminal Heat Pumps. 2008. <http://www.ahridirectory.org/ahriDirectory/pages/home.aspx<ls-thn-eq>.
---------------------------------------------------------------------------

    DOE agrees that with the prohibition on R-22 refrigerant, and the 
expected use of R-410A refrigerant as the most likely alternative, 
system performance will decline. The max-tech efficiency level should 
be based on the most likely refrigerant, which is R-410A. Accordingly, 
DOE revised the max-tech efficiency levels for standard size PTACs and 
PTHPs in the final rule analysis. DOE applied the system performance 
degradations described in the NOPR to the AHRI certified market data 
for standard size equipment. (See graphs in Chapter 5 of the final rule 
TSD.) DOE used the modified market data to estimate the max-tech 
efficiency levels corresponding to current models utilizing R-410A and 
has identified these efficiency levels in section III.B for the 
representative cooling capacities. DOE estimates that these performance 
degradations will fall within five to eight percent depending on 
cooling capacity when compared to an R-22 baseline.
c. Energy-Efficiency Equations for Standard Size Equipment
    In response to the NOPR, DOE also received a comment on its 
approach for calculating the energy efficiency equations for standard 
size PTACs and PTHPs. Carrier commented that the engineering 
extrapolations might not provide an accurate view of the max-tech 
efficiency levels for larger size equipment. In particular, Carrier 
commented that the PTAC efficiency levels proposed in the NOPR are 
achievable, but the PTHP proposed efficiency levels in the NOPR may be 
unachievable in equipment with a cooling capacity of 12 kBtu/h and 
above. (Carrier, No. 16 at p. 2)
    DOE further considered the effects of R-410A on system performance 
for larger cooling capacities in the engineering analysis. DOE found 
that as a standard size PTAC or PTHP increases in capacity, 
manufacturers typically increase the coil surface area or add a coil 
row to the heat exchanger in order to increase unit capacity. 
Manufacturers of standard size PTACs and PTHPs maintain the same 
physical box sleeve (i.e., 42 inches by 16 inches) across all models 
regardless of cooling capacity. This sleeve size is an established 
common sleeve size that allows standardization across the industry. 
This common sleeve size allows end-users to simply slide replacement 
units into existing wall sleeve openings. However, the standard size 
wall sleeve imposes a limitation on the total volume available into 
which all components must fit. Manufacturers add heat exchanger coil 
area or coil volume to either increase the cooling capacity or to 
obtain higher efficiencies. This fixed volume limits the size of the 
box into which the unit's components must fit. In turn, this fixed 
volume limits the size of heat exchangers and other components that can 
be used to increase efficiency and there are accompanying decreases in 
thermodynamic returns when making such changes. Thus, higher capacity 
units often have lower energy efficiency potentials due to the size 
constraints of the box sleeve.
    In order to consider the effects of the refrigerant phaseout on 
larger capacity units, DOE reviewed the market data for standard size 
equipment in the AHRI Certified Directory. DOE applied the efficiency 
degradations distinguished by cooling capacity ranges estimated in the 
engineering analysis to each of the models in the AHRI Certified 
Directory. DOE used these data to estimate the overall system 
performance of the models in the AHRI Certified Directory utilizing R-
410A refrigerant. From these data, DOE plotted each TSL it considered 
as part of the final rule to see if there were models in the full range 
of cooling capacity with estimated performance utilizing R-410A 
refrigerant that would meet the TSL being considered.
    For TSL A, which is the amended standard level for standard size 
PTACs and PTHPs, DOE adjusted the slope of the energy-efficiency 
equation from the revised slopes calculated in the NOPR for TSLs 1 
through 7. This adjustment was based on manufacturer comment and DOE 
data pointing to the reduced opportunities for achieving greater 
efficiencies for larger capacity PTAC and PTHP equipment. By revising 
the slope in this manner, DOE could create and ultimately, adopt, a 
standard level that is more stringent for lower cooling capacities, 
where manufacturers have additional physical space to add efficiency 
improvements, but is less stringent for higher cooling capacities, 
where manufacturers are physically constrained by the physical 
dimensions of the box sleeve and less able to introduce efficiency 
improvements. See Chapter 9 of the final rule TSD for additional 
details and graphic demonstrations of the energy-efficiency equations 
for each TSL, including today's amended energy conservation standard 
for standard size PTACs and PTHPs.
d. Efficiency Levels Analyzed for Non-Standard Size Equipment
    In the NOPR, DOE explicitly analyzed one cooling capacity of non-
standard equipment (i.e., 11,000 Btu/h). Based upon this cooling 
capacity, DOE demonstrated a typical design option pathway a 
manufacturer could use to increase the efficiency of its non-standard 
PTAC and PTHP equipment. To account for the potential loss of system 
efficiency as a result of the R-22 refrigerant phaseout, DOE applied an 
overall system degradation of 6.8 percent, which effectively shifted 
the cost-efficiency curve to the left (in the direction of decreasing 
efficiency for the same cost). Thus, for any given efficiency level, 
the MPC increase will be greater when R-410A refrigerants are used. By 
degrading expected system performance, DOE accounts for the shift in 
the baseline performance that a system converted to R-410A use 
typically exhibits. Using the design option pathway described in the 
engineering analysis, the maximum efficiency level analyzed is 10.0 EER 
for non-standard equipment with a cooling capacity of 11,000 Btu/h 
using R-410A.
e. Energy-Efficiency Equations for Non-Standard Size Equipment
    In response to the NOPR, DOE received several comments on its 
approach for calculating the energy-efficiency equations for non-
standard

[[Page 58787]]

size PTACs and PTHPs. Specifically, DOE retained the ASHRAE Standard 
90.1-1999 slope from the energy-efficiency equation, which 
characterizes the relationship between EER and cooling capacity for 
non-standard PTACs and PTHPs in the NOPR. 73 FR 18890-91.
    ECR and AHRI commented that they are particularly concerned about 
reaching the efficiency levels for the larger capacity, non-standard 
size equipment. (AHRI, No. 23 at pp. 4-5; Public Meeting Transcript 
(ECR), No. 12 at p. 170) ECR specifically commented that it is 
concerned about the methodology DOE used to develop the energy-
efficiency equations for non-standard equipment. (ECR, No. 15 at p. 2) 
ECR and Ice Air commented that the proposed energy conservation 
standard for non-standard PTHPs is too high for all capacities 
considering the system performance degradations from switching to R-
410A refrigerant. (Public Meeting Transcript, No. 12 at pp. 56-60; Ice 
Air, No. 25 at p. 2)
    DOE further considered the effects of R-410A on system performance 
in the engineering analysis for larger cooling capacities of non-
standard PTACs and PTHPs. As explained above, DOE found that as a non-
standard size PTAC or PTHP increases in capacity, manufacturers 
typically increase the coil surface area or add a coil row to the heat 
exchanger in order to increase unit capacity. The fixed volume of the 
box sleeve imposes a physical limit on the size of heat exchangers and 
other unit components that can be used to increase efficiency. Thus, 
higher capacity units often have lower energy efficiency potential due 
to the size constraints of the box.
    In order to consider the effects on larger capacity units, DOE 
reviewed the market data for non-standard size equipment in 
manufacturer equipment catalogs. DOE applied the efficiency 
degradations distinguished by cooling capacity ranges estimated in the 
engineering analysis to each of the non-standard models offered for 
sale and described in manufacturer equipment catalogs. DOE used this 
data to estimate the overall system performance of the models on the 
market utilizing R-410A refrigerant. DOE was able to plot each of the 
TSLs it considered as part of the final rule (i.e., TSL 1 through 5) to 
see if there were models in the full range of cooling capacities with 
estimated performance utilizing R-410A refrigerant that would meet the 
TSL being considered. These plots demonstrated the specific cooling 
capacities where the TSL or amended standard would be eliminating all 
of the models from the market using the estimated R-410A performance. 
See Chapter 9 of the final rule TSD for additional details and graphic 
demonstrations of the energy-efficiency equations for each TSL, 
including today's amended energy conservation standard for non-standard 
size PTACs and PTHPs.
    DOE further considered the effects of the refrigerant phaseout on 
larger cooling capacities when weighing the benefits and the burdens 
for non-standard equipment. See section V.D for additional information.
f. Compressor Availability
    AHRI, Carrier, Ice Air, ECR, and Goodman stated that the true 
impact on PTAC and PTHP equipment efficiency levels cannot currently be 
assessed because the lack of available components across the range of 
equipment capacities prevents comprehensive equipment testing. These 
manufacturers also stated that R-410A compressors are not available in 
all required capacities and voltages. Further, compressor manufacturers 
have not committed to improving compressor performance of rotary 
compressors. (Public Meeting Transcript (ECR), No. 12 at p. 68-69; 
Public Meeting Transcript (Goodman), No. 12 at p. 174; AHRI, No. 23 at 
p. 4; Carrier, No. 16 at p. 5; Ice Air, No. 25 at pp. 1-2)
    As DOE presented in the NOPR, DOE found the availability of R-410A 
compressors in a wide range of efficiencies and voltages remains 
uncertain. Several compressor manufacturers make R-22 PTAC and PTHP 
compressors of different capacities, voltages, and efficiencies for 
standard and non-standard equipment. As the market transitions to the 
use of R-410A, manufacturers may only develop and offer one line of 
compressors for PTACs and PTHPs. In engineering interviews conducted 
for the NOPR, compressor manufacturers commented on the uncertainties 
surrounding R-410A compressors and their performance characteristics 
when compared to R-22 compressors. 73 FR 18874. DOE noted in the NOPR 
that compressor manufacturers stated in interviews that they expect to 
offer R-410A compressors at only one efficiency level in the initial 
stages of the R-22 refrigerant phaseout, which could further reduce 
compressor options for PTAC and PTHP manufacturers. Id.
    In response to comments and the uncertainty surrounding compressor 
options for manufacturers, DOE gave particular attention to the PTAC 
and PTHP efficiency levels that cannot be met with current technologies 
and practices with R-410A in weighing the benefits and burdens of the 
various TSLs. However, DOE notes that GE stated its working prototypes 
have experienced significantly less performance degradation due to R-
410A conversion than was modeled in the engineering analysis. (GE, No. 
20 at p. 2) Based on manufacturer feedback during interviews and 
historic precedent in other air-conditioning markets where similar 
refrigerant transitions have taken place, DOE acknowledges that the R-
410A compressors available for use in PTAC and PTHP equipment could be 
less efficient than similar compressors that use R-22 refrigerant at 
the time of the R-22 phaseout. Even though DOE received comments during 
engineering interviews stating compressor manufacturers may only offer 
one rotary compressor line when the refrigerant phaseout occurs, DOE 
believes compressor manufacturers will continue their development 
efforts and eventually offer compressors in the full range of cooling 
capacities, voltages, and efficiencies as they do today. Similar market 
transformations have occurred in other industries and while the initial 
set of compressors were less efficient, the markets eventually matured 
to offer manufacturers a variety of compressors. See Chapter 5 of the 
TSD for additional information. In addition, DOE believes the amended 
energy conservation standards being adopted in today's final rule will 
aid the PTAC and PTHP industry and provide compressor manufacturers 
with target efficiencies for which they can concentrate their research 
and development efforts.
3. Manufacturer Production Cost Increases With R-410A
    Goodman stated that DOE's estimate of a two percent manufacturing 
cost increase for converting standard size PTAC and PTHP equipment to 
utilize R-410A refrigerant is too low. (Public Meeting Transcript, No. 
12 at pp. 46-47, 74)
    Goodman misstates DOE's estimate. DOE did not use a two percent 
cost increase. To derive the baseline MPCs for the R-410A PTACs and 
PTHPs used in the NOPR, DOE estimated the R-410A refrigerant pricing, 
R-410A compressor pricing, as well as other design changes necessary to 
accommodate the alternative refrigerant, and incorporated them into the 
same cost model used for the R-22 engineering analysis. Based on 
technical journals and manufacturer interviews, DOE increased the tube 
wall thicknesses of all heat exchangers by 25 percent to

[[Page 58788]]

account for the higher pressures associated with R-410A refrigerant. 
DOE also used a refrigerant price for R-410A based upon cost estimates 
from refrigerant suppliers and engineering interviews with 
manufacturers. During engineering interviews, PTAC and PTHP equipment 
and component manufacturers stated that compressor prices would 
increase between 10 percent and 20 percent from current R-22 compressor 
prices. To incorporate manufacturers' comments, DOE estimated that 
compressor costs would increase by 15 percent. Using the above 
estimates, DOE calculated the baseline manufacturer selling price 
(MSPs) \11\ of R-410 standard size equipment to be at least 10 percent 
more than its' R-22 counterpart, on average. See Chapter 5 of the final 
rule TSD for additional details of the R-410A analysis and results. See 
TSD, Chapter 5, Section 5.8 (detailing representative capacities of 
standard size equipment using R-410A).
---------------------------------------------------------------------------

    \11\ This is the price at which the manufacturer can recover 
both production and non-production costs and earns a profit.
---------------------------------------------------------------------------

    Accordingly, DOE believes Goodman's statement mischaracterizes the 
estimated manufacturing cost increases in the NOPR. DOE has continued 
to use the same methodology as presented in the NOPR to develop the R-
410A manufacturer production costs for both standard size and non-
standard size equipment. After DOE revised the cost model in response 
to comments from interested parties, DOE calculated the baseline MSPs 
to be at least 15 percent more than its R-22 counterpart, on average, 
for standard size PTAC and PTHP equipment. Additional details and 
results can be found in section 5.8 of Chapter 5 of the final rule TSD.

D. Energy Use Characterization

    The building energy use characterization analysis assessed the 
energy savings potential of PTAC and PTHP equipment at different 
efficiency levels. The analysis estimates the energy use of PTACs and 
PTHPs at specified energy efficiency levels through energy use 
simulations for key commercial building types across a range of climate 
zones. The energy simulations yielded hourly estimates of building 
energy consumption, including lighting, plug loads, and air-
conditioning and heating equipment. The analysis extracted the annual 
energy consumption of the PTACs and PTHPs for use in subsequent 
analyses, including the LCC, PBP, and NES.
    DOE did not consider a rebound effect in the final rule analysis 
when determining the reduction in energy consumption of PTAC and PTHP 
equipment due to increased efficiency. The rebound effect occurs when a 
piece of equipment is made more efficient such that the operating costs 
come down to a point that either the use of the product increases or 
the market increases, resulting in lower than expected energy savings. 
Because the user of the equipment (e.g., the customer in a hotel room) 
does not pay the utility bill, DOE assumed that increasing the 
efficiency of the equipment will not affect the usage or market for the 
equipment and, as a result, no rebound effect would occur. DOE 
requested comment on this assumption in the NOPR. 73 FR 18876. The 
commenters all agreed that there would be no rebound effect for PTACs 
and PTHPs. (Public Meeting Transcript (ECR), No. 12 at p. 138, GE, No. 
8 at p. 2, Carrier, No. 16 at p. 2) Based on the above, DOE did not 
incorporate a rebound effect into the final rule analysis.

E. Life-Cycle Cost Analysis

    For each efficiency level analyzed, the LCC analysis requires input 
data for the total installed cost of the equipment, its operating cost, 
and the discount rate. Table IV.2 summarizes the inputs and key 
assumptions used to calculate the customer economic impacts of all 
energy efficiency levels analyzed in this rulemaking. DOE also 
calculated the PBP of the TSLs relative to a baseline efficiency level. 
The PBP measures the amount of time it takes the commercial customer to 
recover the assumed higher purchase expense of more energy efficient 
equipment through lower operating costs. Similar to the LCC, the PBP is 
based on the total installed cost and operating expenses, and is 
calculated as a range of payback periods depending on the probability 
distributions of the two key inputs (i.e., the supply chain markups and 
where the unit is likely to be shipped). Unlike its calculation of the 
LCC, DOE's calculation of the PBP considered only the first year's 
operating expenses. Because the PBP does not account for changes in 
operating expense over time or the time value of money, it is also 
referred to as a simple payback period. Aside from the installation 
cost, the primary change for the final rule analysis affecting PBP is 
the electricity price forecasted for 2012 based on the 2007 EIA State 
energy price data and the AEO2008 electricity price forecasts. Chapter 
8 of the TSD discusses the PBP calculation in more detail.

  Table IV.2--Final Rule Inputs and Key Assumptions Used in the LCC and
                              PBP Analyses
------------------------------------------------------------------------
                                                      Changes for final
           Inputs               NOPR description            rule
------------------------------------------------------------------------
                                 Overall
------------------------------------------------------------------------
LCC Reporting...............  All cost inputs and   Updated cost inputs
                               LCC analysis and      and LCC reporting
                               reporting done in     to 2007 dollars
                               2006 dollars          (2007$).
                               (2006$).
------------------------------------------------------------------------
                     Affecting Total Installed Cost
------------------------------------------------------------------------
Equipment Price.............  Derived by            All MSPs updated to
                               multiplying MSP       2007. Updated
                               (from the             wholesaler markup
                               engineering           to use 2007
                               analysis) by          industry (Heating,
                               wholesaler markups    Airconditioning and
                               and contractor        Refrigeration
                               markups plus sales    Distributors
                               tax (from markups     International
                               analysis). Used the   (HARDI)) data.
                               probability          Sales tax data
                               distribution for      updated to 2008.
                               the different         Used State
                               markups to describe   population weights
                               their variability.    to determine
                                                     distribution of
                                                     sales updated to
                                                     2007 census data.
Installation Cost...........  Includes              Used RS Means
                               installation labor,   CostWorks 2008 data
                               installer overhead,   to update
                               and any               installation costs.
                               miscellaneous
                               materials and
                               parts, derived from
                               RS Means CostWorks
                               2007.
------------------------------------------------------------------------

[[Page 58789]]

 
                        Affecting Operating Cost
------------------------------------------------------------------------
Annual Energy Use...........  Derived from whole-   No change.
                               building hourly
                               energy use
                               simulation for
                               PTACs or PTHPs in a
                               representative
                               hotel/motel
                               building in various
                               climate locations
                               (from energy use
                               characterization
                               analysis). Used
                               annual electricity
                               use per unit. Used
                               the probability
                               distribution to
                               account for which
                               State a unit will
                               be shipped to,
                               which in turn
                               affects the annual
                               energy use.
Electricity Price...........  Calculated average    Used EIA data for
                               commercial            2007 to update the
                               electricity price     analysis for
                               in each State, as     average electricity
                               determined from DOE   price by state.
                               Energy Information    Used the AEO2008
                               Administration        electricity price
                               (EIA) data for        forecasts to
                               2006. Used the        calculate future
                               AEO2007 forecasts     prices.
                               to estimate the
                               future electricity
                               prices. Used the
                               probability
                               distribution for
                               the electricity
                               price.
Maintenance Cost............  Annual maintenance    Annual maintenance
                               cost did not vary     costs updated to
                               as a function of      use RS Means
                               efficiency.           CostWorks 2008
                                                     data.
Repair Cost.................  Estimated the         No change.
                               annualized repair
                               cost for baseline
                               efficiency PTAC and
                               PTHP equipment as
                               $15, based on costs
                               of extended
                               warranty contracts
                               for PTACs and PTHPs
                               (Chapter 8 of the
                               TSD). Assumed that
                               repair costs would
                               vary in direct
                               proportion with the
                               MSP at higher
                               efficiency levels
                               because it
                               generally costs
                               more to replace
                               components that are
                               more efficient.
------------------------------------------------------------------------
        Affecting Present Value of Annual Operating Cost Savings
------------------------------------------------------------------------
Equipment Lifetime..........  Used the probability  No change.
                               distribution of
                               lifetimes, with
                               mean lifetime for
                               each of four
                               equipment classes
                               assumed to be 10
                               years based on
                               literature reviews
                               and consultation
                               with industry
                               experts.
Discount Rate...............  Mean real discount    Used 2008 financial
                               rates ranging from    data discount rate
                               5.7% for owners of    calculations to
                               health care           update discount
                               facilities to 8.2%    rates.
                               for independent      Mean real discount
                               hotel/motel owners.   rates ranging from
                               Used the              5.53% for owners of
                               probability           large motel/hotel
                               distribution for      chains to 8.14% for
                               the discount rate.    offices.
Date Standards Become         September 30, 2012    No change.
 Effective.                    (4 years after the
                               publication of the
                               final rule).
------------------------------------------------------------------------
                       Analyzed Efficiency Levels
------------------------------------------------------------------------
 Analyzed Efficiency Levels.  Baseline efficiency   No change for
                               levels (ASHRAE        standard size PTAC
                               Standard 90.1-1999)   and PTHP equipment
                               and five higher       classes.
                               efficiency levels    Only three
                               above the baseline    efficiency levels
                               for six equipment     above the baseline
                               classes. (DOE also    analyzed for non-
                               considered levels     standard size
                               that were             equipment classes.
                               combinations of
                               efficiency levels
                               for PTACs and
                               PTHPs.)
------------------------------------------------------------------------

    For this final rule, DOE did not introduce changes to the life-
cycle cost methodology described in the NOPR. However, as the following 
sections discuss in more detail, DOE revised the inputs to the LCC 
analysis.
1. Equipment Prices
    The price of a PTAC or PTHP reflects the application of 
distribution channel markups and the addition of sales tax to the MSP 
as described in the NOPR. Modifications made for the final rule include 
using the latest MSP data in 2007$ and incorporating changes to the 
material prices discussed previously, updating the wholesale markups to 
use 2007 data available from the HARDI 2007 Profit Report, updating 
State sales tax data to 2008 data from the Sales Tax Clearing House Web 
site, and updating State population data (used for allocating national 
shipments to State-level shipments) to use 2007 information from the 
U.S. Census Bureau.
2. Installation Costs
    For the NOPR, DOE derived installation costs for PTACs and PTHPs 
from data provided in RS Means CostWorks 2007 (RS Means).\12\ For the 
final rule, DOE updated the installation costs using the RS Means 
CostWorks 2008 data. Several commenters gave their views on whether 
higher installation costs should be assumed for PTHP equipment compared 
with PTAC equipment. Goodman commented that drain systems for PTHP 
installations as required by several of the building codes might be 
fairly expensive, resulting in higher installation costs for PTHP 
compared to PTAC equipment. Goodman pointed out that the odds of 
replacing a PTAC with a PTHP are low because of the additional cost to 
add drains during equipment replacement. (Goodman, No 8.4 at p. 116) GE 
commented that DOE does not need to include a significant cost in the 
LCC for a drainage system because several manufacturers offer low cost 
kits and special models that remove moisture without the use of a 
drainage system. (GE, No. 20 at p. 3) Since there was differing opinion 
with regard to whether higher installation costs would be required for 
PTHP equipment and since these installation costs were held constant 
for all efficiency levels and would not affect the LCC savings or NPV 
figures calculated for higher

[[Page 58790]]

efficiency PTHP or PTAC standards, DOE did not further modify the 
installation costs beyond what was reflected in the RS Means CostWorks 
data.
---------------------------------------------------------------------------

    \12\ R.S. Means Company, Inc. 2007. RS Means CostWorks 2007. 
Kingston, Massachusetts.
---------------------------------------------------------------------------

 3. Annual Energy Use
    DOE estimated the electricity consumed in kilowatt hours per year 
(kWh/year) by the PTAC and PTHP equipment based on the whole-building 
energy use characterization as described in the NOPR. 73 FR 18876. DOE 
also used the same energy use data and characterization developed for 
the NOPR analysis in the final rule. See Chapter 7 of the NOPR and FR 
TSDs for additional information.
 4. Electricity Prices
    Electricity prices are needed to convert the electric energy 
savings into energy cost savings. DOE updated the State-by-State 
average electricity price information for the commercial sector to 
reflect 2007 data available from EIA. DOE further adjusted these prices 
to reflect average electricity prices for the four types of businesses 
DOE identified that use PTAC and PTHP equipment. DOE identified these 
businesses using Commercial Buildings Energy Consumption Survey (CBECS) 
2003 data,\13\ as described in the NOPR. To develop the LCC 
distributions, DOE continued to use a probability distribution to 
determine not only which State received the shipment of equipment, but 
also which business types would purchase the equipment and what 
electricity price they would pay. State populations formed the basis 
for allocating the equipment shipment distribution to different States. 
DOE updated these State-by-State population data with 2007 data 
published by the U.S. Census. The State-average effective prices 
(2007$) range from approximately 5.1 cents per kWh to approximately 
28.0 cents per kWh. Chapter 8 of the TSD details the development and 
use of State-average electricity prices by business type.
---------------------------------------------------------------------------

    \13\ EIA's CBECS 2003 is the most recent version of this data 
set.
---------------------------------------------------------------------------

    The electricity price trend provides the relative change in 
electricity prices for future years to 2042. DOE applied the AEO2008 
reference case as the default scenario and extrapolated the trend in 
values from 2020 to 2030 of the forecast to establish prices for 2030 
to 2042, as in the NOPR. DOE provided a sensitivity analysis of the LCC 
savings and PBP results to future electricity price scenarios. Because 
EIA did not publish its high- and low-growth forecasts in time for 
incorporation into this final rule, DOE developed high- and low-growth 
electricity forecasts corresponding to the AEO2008 forecasts. DOE 
calculated the ratio of the AEO2007 high- or low-growth forecasted 
electricity price to the AEO2007 reference case forecast for each year. 
DOE then applied those ratios, respectively, to the AEO2008 reference 
case prices.
 5. Maintenance Costs
    Maintenance costs are the customer's costs to keep equipment in top 
operating condition. For the NOPR, DOE estimated annual routine 
maintenance costs for PTAC and PTHP equipment at $50 per year per unit. 
DOE explained that this estimate was based on statements made during 
informational interviews with manufacturers. Because data were not 
available to indicate how maintenance costs vary with equipment 
efficiency, DOE thus determined to use this preventative maintenance 
costs that remain constant as equipment efficiency is increased. 73 FR 
18879. For the final rule, DOE updated the maintenance costs to reflect 
data for packaged terminal equipment available in RS Means Costworks 
2008.
    In the NOPR, DOE specifically requested comments on its estimate 
for maintenance costs and whether the assumptions made would be the 
same under R-410A. GE commented that repair and maintenance costs 
(primarily cleaning) would be fixed costs and handled either in house 
or contracted out. GE's experience working with their customers is that 
maintenance costs are not a function of equipment efficiency, even 
though GE equipment efficiencies have increased nearly 10% in the past 
5 years. (Public Meeting Transcript, No. 12 at p. 99) Goodman commented 
that third-party servicers or hoteliers themselves may be better 
sources of maintenance cost data than manufacturers. (Public Meeting 
Transcript, No. 12 at pp. 111-112) AHRI commented that maintenance 
costs will increase with heat exchanger surface area that is 
commensurate with higher efficiency equipment. (Public Meeting 
Transcript, No. 12 at pp. 97-98) Goodman expressed concerns over 
condenser maintenance if manufacturers use closer fin spacing or three 
or four row coils due to the slinger ring throwing water on the coil 
and dirt buildup. Goodman also pointed out that dirty condensers can 
degrade compressors through overheating. This compressor degradation is 
a long-term impact not improved by coil cleaning. (Public Meeting 
Transcript, No. 12 at pp. 111-112) ACEEE commented that equipment 
redesigns are likely to result in reduced repair costs, which would 
offset any additional maintenance costs. (Public Meeting Transcript, 
No. 12 at p. 98)
    Although opinions were expressed that maintenance costs might 
increase as a function of efficiency level, this appears not to be the 
case in GE's experience. Accordingly, DOE decided to use the Means 
CostWorks 2008 estimate of preventive maintenance costs, which remain 
constant as equipment efficiency increases.
 6. Repair Costs
    The repair cost is the customer's cost of replacing or repairing 
components that have failed in the PTAC and PTHP equipment. DOE 
estimated annual repair costs for the final rule in the same way that 
it estimated annual repair costs for the NOPR. DOE estimated the 
annualized repair cost for baseline efficiency PTAC and PTHP equipment 
at $15, based on costs of extended warranty contracts for PTACs and 
PTHPs. After analyzing these data, DOE determined that repair costs 
would increase in direct proportion with increases in equipment prices. 
See Chapter 8 of the TSD for additional details.
    In the NOPR, DOE specifically requested comment on its estimation 
for repair costs, as well as installation and maintenance costs. The 
comments DOE received addressed several areas. GE commented that it 
does not expect the compressor service call rate to increase for higher 
efficiency equipment because GE already has rotary compressors in 
service. (GE, No. 20 at p. 2) Carrier stated that it would expect to 
see slightly higher repair costs overall for R-410A refrigerant 
equipment because of the more hygroscopic nature of R-410A. (Carrier, 
No. 16 at p. 3) ECR warned that if efficiency standards are set too 
high, existing R-22 refrigerant equipment may be kept in place longer, 
which may result in increased repair costs. Although DOE recognizes 
that overall repair costs may increase under R-410A, commenters 
provided no data to refine DOE's repair cost estimate for equipment 
using R-410A refrigerant. Because no commenter expressed disagreement 
with DOE's methodology of scaling repair costs with efficiency level, 
DOE continued to use the same approach in the final rule. DOE 
recognizes that the extension of life for R-22 equipment is possible 
under any scenario, but has no data with which to refine its shipment 
or repair cost analysis. DOE believes that the impact of life extension 
for R-22 equipment would, if it occurs, primarily affect the energy 
savings estimate. However,

[[Page 58791]]

because extension of life generally increases the period over which a 
purchased product can provide services regardless of efficiency level 
or refrigerant, DOE does not expect a significant impact on the 
economics of higher-efficiency PTAC and PTHP equipment to the Nation.
 7. Equipment Lifetime
    DOE defines equipment lifetime as the age when a PTAC or PTHP unit 
is retired from service. For the NOPR, DOE used a typical lifetime of 
10 years after reviewing available data sources and concluding that a 
10-year life is appropriate for PTAC and PTHP equipment. DOE 
incorporated variability in lifetime in its LCC analysis using a 
Weibull \14\ statistical distribution with an average lifetime of 10 
years and a maximum lifetime of 20 years. In response to the NOPR, DOE 
received no comments on the lifetime assumptions for new equipment 
purchases that would affect the LCC analysis. DOE, therefore, retained 
the same lifetime assumptions and methodologies developed for the NOPR 
in the final rule analysis. See Chapter 8 of the TSD for additional 
information.
---------------------------------------------------------------------------

    \14\ The Weibull distribution is a continuous probability 
distribution used to understand the failure and durability of 
equipment. It is popular because it is extremely flexible and can 
accurately model various types of failure processes. A two-parameter 
version of the Weibull was used and is described in chapter 8 of the 
TSD,
---------------------------------------------------------------------------

 8. Discount Rate
    The discount rate is the rate at which future expenditures are 
discounted to establish their present value. DOE estimated the discount 
rate by estimating the weighted average cost of capital (WACC) for 
purchasers of PTAC and PTHP equipment based on weighting the cost of 
both debt and equity capital used to fund investments. For the NOPR, 
DOE used financial information from a sample of companies, including 
large hotel/motel chains and health-care chains drawn from a database 
of U.S. companies on the Damodaran Online Web site. See http://
pages.stern.nyu.edu/~adamodar. The NOPR used the data available in 
2007. The final rule's analysis relies on the same data source to 
develop discount rates, but was updated to reflect the data available 
in January 2008.
    DOE calculated the weighted average after-tax discount rate for 
PTAC and PTHP purchases, adjusted for inflation, as 5.53 percent for 
large hotel chains and 5.64 percent for health care institutions 
(nursing homes and assisted living facilities). The cost of capital for 
independent hoteliers and small office companies is more difficult to 
determine because these business types are not explicitly identified in 
the Damodaran data. For the final rule, DOE used the same methodology 
that it used to determine the discount rates for these business types 
in the NOPR. Specifically, DOE developed an 8.03 percent after-tax 
discount rate for independent hoteliers and an 8.14 percent after-tax 
rate for small offices. These values vary only slightly from those 
presented in the NOPR. Chapter 8 of the TSD provides more detail on the 
calculation of discount rates.

 F. National Impact Analysis--National Energy Savings and Net Present 
Value Analysis

    The National Impact Analysis (NIA) evaluates the impact of an 
amended energy conservation standard from a national perspective rather 
than from the customer perspective, which is represented by the LCC. 
This analysis assesses the NES and the NPV (future amounts discounted 
to the present) of total commercial customer costs and savings, which 
are expected to result from amended energy conservation standards for 
PTACs and PTHPs at specific efficiency levels. DOE followed the same 
analysis approach for the NIA as it used for the NOPR analysis, using a 
Microsoft Excel spreadsheet model to calculate the energy savings and 
the national economic costs and savings from amended energy 
conservation standards. Unlike the LCC analysis, the NES spreadsheet 
does not use distributions for inputs or outputs. DOE examined 
sensitivities by applying different scenarios. DOE used the NES 
spreadsheet to perform calculations of energy savings and NPV, using 
the annual energy consumption and total installed cost data from the 
LCC analysis. DOE forecasted the energy savings, energy cost savings, 
equipment costs, and NPV of benefits for each TSL from 2012 through 
2042. The forecasts provided annual and cumulative values for all four 
output parameters.
    For each TSL, DOE calculated the NES and NPV as the difference 
between a base case forecast (without amended standards) and the 
standards case (with amended standards). The NES refers to cumulative 
energy savings from 2012 through 2042. The NPV refers to cumulative 
monetary savings. DOE calculated net monetary savings in each year 
relative to the base case as the difference between total operating 
cost savings and increases in total installed equipment cost. 
Cumulative savings are the sum of the annual NPV over the specified 
period. DOE accounted for operating cost savings until 2062 (i.e., 
until all the equipment installed through 2042 is retired).
    DOE built up the NES analysis from a combination of unit energy 
savings for each class of PTAC or PTHP equipment analyzed and estimated 
shipments of units in this class at each efficiency level from 2012 
through 2042. Unit energy savings for each equipment class are the 
weighted-average values calculated in the LCC and PBP spreadsheet. 
These calculations involved multiple steps. First, DOE calculated the 
national site energy consumption (i.e., the energy directly consumed by 
the units of equipment in operation) for PTACs or PTHPs for each year, 
beginning with the expected effective date of the standards (2012) for 
the base-case forecast and the standards case forecast. Second, DOE 
determined the annual site energy savings, consisting of the difference 
in site energy consumption between the base case and the standards 
case. Third, DOE converted the annual site energy savings into the 
annual amount of energy saved at the source of electricity generation 
(the source energy). DOE used a site-to-source conversion factor 
developed from an analysis of the marginal impacts of changes in PTAC 
and PTHP energy use on the energy source energy inputs in DOE's Utility 
Impacts analysis. Finally, DOE summed the annual source energy savings 
from 2012 to 2042 to calculate the total NES for that period. DOE 
performed these calculations for each TSL and equipment class 
considered in this rulemaking.
    Changes in inputs to the analyses and reporting drove the 
modifications to the NIA analyses and results. Changes to the NES 
results between the NOPR and final rule were due to a reduction in the 
TSL levels considered for non-standard PTAC and PTHP equipment classes 
and a change in the mix of equipment efficiencies used in the base case 
and standards case equipment efficiency forecasts. Although DOE used 
the same economic model for predicting the distribution of equipment 
efficiencies in both the final rule and the NOPR, these changes in the 
installed equipment prices and the lower R-410A max tech efficiency 
levels resulted in slight shifts to the overall efficiency 
distributions for each equipment class. In addition, the site-to-source 
energy conversion factor developed for the final rule used EIA's NEMS 
model consistent with AEO2008. The calculated conversion factors in the 
final rule differed from that calculated for the NOPR, which relied on 
EIA's AEO2007.
    To estimate NPV, DOE calculated the net impact as the difference 
between

[[Page 58792]]

total operating cost savings (including electricity, repair, and 
maintenance cost savings) and increases in total installed costs 
(including MSP, sales taxes, distribution chain markups, and 
installation cost). DOE calculated the NPV of each TSL over the life of 
the equipment by determining: (1) The difference between the equipment 
costs under the TSL case and the base case in order to obtain the net 
equipment cost increase resulting from the TSL; (2) the difference 
between the base case operating costs and the TSL operating costs in 
order to obtain the net operating cost savings from the TSL; and (3) 
the difference between the net operating cost savings and the net 
equipment cost increase in order to obtain the net savings (or expense) 
for each year. DOE then discounted the annual net savings (or expenses) 
to 2008 for PTACs and PTHPs bought between 2012 and 2042, and summed 
the discounted values to provide the NPV of a TSL. DOE used discount 
rates of 7 percent and 3 percent in accordance with Office of 
Management and Budget (OMB) guidance to evaluate the impacts of 
regulations. An NPV greater than zero shows net savings (i.e., the TSL 
would reduce customer expenditures relative to the base case in present 
value terms). An NPV less than zero indicates that the TSL would result 
in a net increase in customer expenditures in present value terms.
    Changes in inputs to the analyses and reporting drove modifications 
to the NPV analyses and results. Changes to the NES results were due to 
(1) a reduction in the number of TSL levels considered for non-standard 
PTAC and PTHP equipment classes, (2) a change in the mix of equipment 
efficiencies used in the base case and standards case equipment 
efficiency forecasts, and (3) the use of electricity price forecasts 
from the AEO 2008 reference case. As with the LCC analysis, DOE 
analyzed high- and low-growth energy price forecasts. Because EIA had 
not published actual high- and low-growth forecasts in time for the 
final rule analysis, DOE developed high- and low-growth scenarios based 
on the AEO2008 reference case forecast. DOE applied the ratio of the 
year-by-year energy prices from the AEO2007 high- and low-growth price 
forecasts, respectively, to the AEO2007 reference case forecast. 
Chapter 10 of the TSD provides a full discussion of the NIA. Table IV.3 
summarizes the inputs and key assumptions used to calculate the 
national energy savings and national economic impacts of all energy 
efficiency levels analyzed in this rulemaking.

             Table IV.3--Summary of NES and NPV Model Inputs
------------------------------------------------------------------------
                                                      Changes for final
           Inputs               NOPR description            rule
------------------------------------------------------------------------
Shipments...................  Annual shipments      No change.
                               from shipments
                               model (Chapter 10
                               of the TSD).
Effective Date of Standard..  September 2012......  No change.
Base Case Efficiencies......  Distribution of base  Equipment costs and
                               case shipments by     economic benefits
                               efficiency level.     for each TSL level
                                                     come from final
                                                     rule LCC analysis.
Standard Case Efficiencies..  Distribution of       Equipment costs and
                               shipments by          economic benefits
                               efficiency level      for each TSL level
                               for each standards    come from final
                               case. Standards       rule LCC analysis.
                               case annual          Only three TSL
                               shipment-weighted     levels considered
                               market shares         for non-standard
                               remain the same as    PTAC and PTHP
                               in the base case      equipment.
                               and each standard
                               level for all
                               efficiencies above
                               the TSL. All other
                               shipments are at
                               the TSL efficiency.
Annual Energy Use per Unit..  Annual national       No change.
                               weighted-average
                               values are a
                               function of
                               efficiency level.
Total Installed Cost per      Annual weighted-      Updated with values
 Unit.                         average values are    from final rule LCC
                               a function of         analysis.
                               efficiency level.
Repair Cost per Unit........  Annual weighted-      Updated with values
                               average values        from final rule LCC
                               increase with         analysis.
                               manufacturer's cost
                               level.
Maintenance Cost per Unit...  Annual weighted-      Updated with values
                               average value         from final rule LCC
                               equals $50 (Chapter   analysis.
                               8 of the TSD).
Escalation of Electricity     2007 EIA AEO          2008 EIA AEO
 Prices.                       forecasts (to 2030)   forecasts (to 2030)
                               and extrapolation     and extrapolation
                               beyond 2030.          for beyond 2030.
Electricity Site-to-Source    Conversion factor     Developed conversion
 Conversion Factor.            varies yearly and     factor using EIA's
                               is generated by       NEMS model for AEO
                               EIA's NEMS * model    2008.
                               for AEO2007.
                               Includes the impact
                               of electric
                               generation,
                               transmission, and
                               distribution losses.
Discount Rate...............  3% and 7% real......  No change.
Present Year................  Future costs are      No change.
                               discounted to year
                               2008.
------------------------------------------------------------------------
* Chapter 14 on the utility impact analysis provides more detail on NEMS
  model.

1. Shipments Analysis
    DOE developed shipments projections under a base case and each of 
the standards cases using the identical shipments model used in the 
NOPR analysis. The NOPR and Chapter 10 of the TSD describe this model 
in more detail.
    The NES spreadsheet model contains a provision for a change in 
projected shipments in response to efficiency level increases, but DOE 
has no information with which to calibrate such a relationship. For the 
NOPR analysis, DOE assumed that the shipments do not change in response 
to the changing TSLs. ECR and Cold Point commented that if DOE sets a 
high or unrealistic efficiency level for non-standard PTAC or PTHP 
equipment, customers might choose to extend the life of existing 
equipment that uses R-22 refrigerant. (Public Meeting Transcript (ECR), 
No. 12 at pp. 100-101, Cold Point, No. 18 at p. 2) However, commenters 
provided no data to suggest specific changes that DOE could make to its 
shipments analysis to account for this possible impact. For the final 
rule analysis, DOE presumed that projected industry shipments by 
product class do not change in response to changing TSLs. See 
discussion of equipment lifetime in section IV.E.7.
    GE, ECR, and Carrier commented that it was possible that customers 
could switch to a less efficient class of HVAC equipment than a 
packaged terminal unit, such as a through-the-wall air

[[Page 58793]]

conditioner or a window air conditioner, which does not have a heat 
pump option for providing space heat. Carrier elaborated that this kind 
of equipment switch would occur mostly in small, independent, motel 
markets. (Public Meeting Transcript (GE), No. 12 at p. 141; Public 
Meeting Transcript (ECR), No. 12 at p. 141-141; Public Meeting 
Transcript (Carrier), No. 12 at p. 143)
    Several interested parties commented that DOE's proposed standard 
level in the NOPR, TSL 4, had higher cooling efficiency requirements 
for PTHP equipment compared with PTAC equipment of the same capacity. 
This difference would mean higher proportional costs for PTHP equipment 
under the new energy conservation standard compared with PTAC 
equipment, and is likely to result in some current or future PTHP 
customers choosing to purchase PTAC equipment. If this occurs, there 
would be a decrease in overall equipment efficiency due to the much 
lower heating efficiency of PTAC compared with PTHP equipment. Several 
manufacturers expressed concern that people would be forced by cost or 
lack of products at the proposed standard levels to shift from PTHP to 
PTAC--forcing people into a less efficient product and negating much of 
the energy savings from the rule. (Public Meeting Transcript (ECR), No. 
12 at pp. 141-142; ECR, No. 15 at p. 3; Ice Air, No. 25 at pp. 3-4; 
Public Meeting Transcript (Goodman), No. 12 at p. 142) AHRI and Carrier 
both agreed that higher efficiency levels for PTHPs will cause a shift 
to less efficient PTACs. (AHRI, No. 23 at p. 8; Carrier, No. 16 at p. 
5)
    In contrast, GE stated that the probability of users shifting to 
other product classes would be remote. GE pointed out that the case for 
a heat pump is compelling when the cost differential is $50. In almost 
all cases, the payback for choosing a heat pump is less than 1 year. In 
most cases, GE said, its customer base is composed of astute business 
people who are concerned about operating costs and efficiencies. 
(Public Meeting Transcript, No. 12 at pp. 145-146) AHRI questioned GE's 
assertion, given that the current market is almost evenly split between 
PTAC and PTHP equipment. (Public Meeting Transcript, No. 12 at p. 144)
    To address concerns about equipment switching, DOE performed a 
sensitivity analysis on the possible impact on energy savings due to 
customers switching from PTACs to PTHPs for a case where a combined TSL 
resulted in a higher cooling efficiency (EER) might be set for PTHPs 
compared to PTACs of the same capacity. This sensitivity analysis 
examined what fraction of the future projected PTHP market would need 
to switch from PTHPs to PTACs with electric resistance heat to offset 
the energy savings from increased efficiency requirements for PTHPs 
relative to PTACs at TSLs 2, 4, and A. It also estimated the change in 
payback period for purchasers of PTHP versus PTAC equipment at the 
TSLs. DOE concluded that based on this analysis the increase in PTHP 
cost and the resulting change in PBP for these TSLs were both small and 
that it was unlikely that the savings from higher PTHP standards under 
these TSLs would be offset by customers switching to PTAC equipment. 
Section V.B. discusses the results of this sensitivity analysis.
2. Base Case and Standards Case Forecasted Distribution of Efficiencies
    The annual energy consumption of a PTAC or PTHP unit relates 
directly to the efficiency of the unit. For the final rule, DOE used 
the same methodology that was used in the NOPR analysis to develop base 
case and standards case efficiency distributions for shipments. DOE 
developed shipment-weighted average equipment efficiency forecasts that 
enabled a determination of the shipment-weighted annual energy 
consumption values for the base case and each TSL analyzed by equipment 
class. DOE developed shipment estimates by converting the 2005 PTAC and 
PTHP equipment shipments by equipment class into market shares by 
equipment class. DOE then adapted a cost-based method used in the NEMS 
to estimate market shares for each equipment class by TSL. DOE used 
those market shares and projections of shipments by equipment class to 
determine future equipment efficiency forecasts both for a base case 
scenario and standards case scenarios. The difference in equipment 
efficiency between the base case and standards cases was the basis for 
determining the reduction in per-unit annual energy consumption that 
could result from amended energy conservation standards. Although the 
methodology DOE used was identical to that in the NOPR, differences in 
equipment price and annual energy consumption established in the LCC 
analysis resulted in slight shifts in the estimated shipments by 
efficiency level.
    For each standards case, DOE assumed that shipments at efficiencies 
below the projected minimum standard levels were most likely to roll up 
to those efficiency levels in response to an increase in energy 
conservation standards. The market shares for equipment at higher 
efficiency levels were assumed not to be affected as the market already 
has a choice of that equipment. DOE, thus, assumed that the new 
standard would not affect the relative attractiveness of equipment with 
efficiencies higher than the standard. For further discussion, see 
Chapter 11 of the TSD.

G. Manufacturer Impact Analysis

    In determining whether a standard for a covered product is 
economically justified, the Secretary of Energy is required to consider 
``the economic impact of the standard on the manufacturers and on the 
consumers of the products subject to such standard.'' (42 U.S.C. 
6295(o)(2)(B)(i)(I)) EPCA also requires for an assessment of the impact 
of any lessening of competition as determined by the Attorney General. 
(42 U.S.C. 6295(o)(2)(B)(i)(V)) DOE performed the MIA to estimate the 
financial impact of energy conservation standards on the standard size 
and non-standard size PTAC and PTHP industries, and to assess the 
impact of such standards on employment and manufacturing capacity. DOE 
published the results in the NOPR. 73 FR 18883-87, 18893-99. For this 
final rule, while DOE did not introduce changes to the methodology 
described in the NOPR, it updated the R-410A-shipment forecast 
distribution of shipments based on the updated NIA results. (See TSD 
Chapter 13.) In response to DOE's NOPR presentation, interested parties 
provided comments on the cumulative regulatory burden, small business 
impacts, and employment.
1. GRIM Input Updates
    The GRIM inputs consists of information regarding the standard size 
and non-standard size PTAC and PTHP industries' cost structure, 
shipments, and revenues. This includes information from many of the 
analyses described above, such as manufacturing costs and prices from 
the engineering analysis and shipments forecasts. In response to the 
presentation of the MIA analysis in the NOPR, DOE revised several key 
inputs to the GRIM based on more recent sources of data for both 
standard and non-standard size PTAC and PTHP industries.
a. Manufacturing Production Costs
    The GRIM uses cost-efficiency curves derived in the engineering 
analysis to calculate the MPCs for each equipment class at each TSL. By 
multiplying different sets of markups with the MPCs, DOE derives the 
manufacturing selling prices (MSP) used to calculate industry revenues. 
For this final rule,

[[Page 58794]]

DOE used the MPCs from the final rule engineering analysis as described 
in Chapter 5 of the TSD.
b. Shipments and Distributions of Efficiencies in the Base Case
    The GRIM estimates manufacturer revenues based on total-unit-
shipment forecasts and the distribution of these values by EER. Changes 
in the efficiency mix at each standard level are a key driver of 
manufacturer finances. For the final rule analysis, DOE used only the 
NES shipments forecasts and the distribution of efficiencies in the 
base case for both standard size and non-standard size PTACs and PTHPs 
from 2007 to 2042. DOE continued to allocate the closest representative 
cooling capacity, within the appropriate equipment class, to any 
shipments forecasted by the NES of equipment that was not within one of 
the representative cooling capacities. For example, the total PTAC or 
PTHP shipments with a cooling capacity less than 10,000 Btu/h for 
standard size equipment are included with the 9,000 Btu/h 
representative cooling capacity. (See Chapter 13 of the final rule 
TSD.)
c. R-410A Base Case and Amended Energy Conservation Standards Markup 
Scenarios
    The PTAC and PTHP manufacturer impact analysis is explicitly 
structured to account for the cumulative burden of sequential 
refrigerant and amended energy conservation standards. In the NOPR, DOE 
described the two markup scenarios used to calculate the base case INPV 
after implementation of the R-22 refrigerant phaseout, and the 
standards case INPV at each TSL. (See Chapter 13 of the NOPR TSD.) For 
the final rule, DOE continued to analyze two distinct R-410A base case 
and amended energy conservation standards markup scenarios: (1) The 
flat markup scenario, and (2) the partial cost recovery markup 
scenario. Under the flat markup scenario, DOE applied a single uniform 
``gross margin percentage'' markup across all TSLs that DOE believes 
represents the current markup for manufacturers in the standard and 
non-standard size PTAC and PTHP industries. The ``partial cost 
recovery'' scenario implicitly assumes that the industries can pass-
through only part of their regulatory-driven increases in production 
costs to consumers in the form of higher prices. As presented in the 
NOPR, these markup scenarios characterize the markup conditions 
described by manufacturers, and reflect the range of market responses 
manufacturers expect as a result of the R-22 phaseout and the amended 
energy conservation standards. See Chapter 13 of the TSD for additional 
details of the markup scenarios.
d. Capital and Equipment Conversion Expenses
    Energy conservation standards typically cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and equipment designs into compliance with the amended standards. For 
the purpose of the MIA, DOE classified these one-time conversion costs 
into two major groups: equipment conversion and capital conversion 
costs. Equipment conversion expenses are one-time investments in 
research, development, testing, and marketing that are focused on 
making equipment designs comply with the new energy conservation 
standard. Capital conversion expenditures are one-time investments in 
property, plant, and equipment to adapt or change existing production 
facilities so that new equipment designs can be fabricated and 
assembled.
    For this final rule, DOE used the same capital expenses as 
presented in the NOPR calculated in 2007$ for both standard and non-
standard size PTAC and PTHP industries. For equipment conversion 
expenses for the standard size PTAC and PTHP industry, DOE also used 
the same product expenses as presented in the NOPR calculated in 2007$. 
For equipment conversion expenses for the non-standard size PTAC and 
PTHP industry, DOE revised figures based on comments from interested 
parties on the NOPR. For more information on DOE's revision to the 
equipment conversion expenses for the non-standard size PTAC and PTHP 
industry, see section V.C. and Chapter 13 of the TSD.
2. Cumulative Regulatory Burden
    As discussed in the NOPR, one aspect of manufacturer burden is the 
cumulative impact of multiple DOE standards and other regulatory 
actions that affect the manufacture of the same covered equipment. All 
PTAC and PTHP manufacturers believe that the EPA-mandated refrigerant 
phaseout will be the largest external burden on PTAC and PTHP 
manufacturers. DOE addressed the cumulative regulatory burden affecting 
manufacturers of PTACs and PTHPs as a result of the refrigerant 
phaseout by first examining impacts on INPV arising from converting R-
22 to R-410A equipment production. DOE then examined the possible 
impacts of amended energy conservation standards on the R-410A base 
case. Thus, DOE examined the cumulative impacts of both R-410A 
conversion and compliance with the proposed energy conservation 
standards. (See Chapter 13 of the TSD.) 73 FR 18897-98.
    In response to DOE's NOPR, ECR stated that manufacturers are forced 
to consider both the refrigerant phaseout and energy conservation 
standard levels due to the timing of the regulations. According to ECR, 
it is difficult to work on designs using R-410A knowing that the 2012 
efficiency levels are not final and the efficiency levels proposed in 
the NOPR may change. (Public Meeting Transcript, No. 12 at pp. 63-64)
    Similarly, Ice Air stated its concern about the cumulative 
regulatory burden placed on manufacturers by the refrigerant phaseout 
and the amended energy conservation standards. Ice Air warned that the 
burdens to comply with both of these regulatory actions could cause 
manufacturers of non-standard size equipment to go out of business and 
could also severely affect the standard size industry. (Ice Air, No. 25 
at p. 2)
    To assess the impacts on INPV due to both refrigerant phaseout and 
energy conservation standards, DOE first examined the changes in 
industry cash flows from 2007 to 2010 using only equipment with R-22 
refrigerant (i.e., before the refrigerant phaseout). DOE then examined 
the changes in industry cash flows from 2010 through 2042 using only 
equipment with R-410A refrigerant (i.e., after the refrigerant 
phaseout). The sum of the cash flows discounted to the current year 
equates to the INPV used to quantify the impacts on the industries. DOE 
included equipment prices using both R-22 and R-410A refrigerant 
estimated in the engineering analysis and equipment conversion and 
capital conversion expenses related to both energy conservation 
standards and refrigerant phaseout in its manufacturer impact analysis. 
Investment estimates used in the analysis can be found in the NOPR, 73 
FR 18893-96, and in Chapter 13 of the TSD. Although investments needed 
to meet the proposed energy conservation standards and refrigerant 
phaseout requirements could vary among manufacturers, the values DOE 
used in its analysis are an aggregate of information manufacturers 
provided. Given these variations in investment within the industry, DOE 
believes that the MIA captures the potential range of costs, 
investments, and impacts on manufacturers due to both energy 
conservation standards and the refrigerant phaseout.
    AHRI commented that DOE did not account for the costs to phase out 
HCFCs from other air-conditioning equipment or to comply with other

[[Page 58795]]

energy conservation standards produced by PTAC and PTHP manufacturers. 
(AHRI, No. 23 at p. 5)
    For the NOPR, DOE examined other Federal regulations that could 
affect manufacturers of standard and non-standard size PTACs and PTHPs. 
Chapter 13 of the TSD presents DOE's findings. 73 FR 18897-98. These 
findings generally indicated that the refrigerant phaseout is the most 
significant other Federal regulation impending in the industry at this 
time. For this final rule, DOE also identified the other DOE 
regulations standard size and non-standard size PTAC and PTHP 
manufacturers are facing for other equipment they manufacture within 
three prior and three years after the effective date of the amended 
energy conservation standards for PTACs and PTHPs. DOE identified the 
costs of additional regulations when these estimates were available 
from other DOE rulemakings. Chapter 13 of the TSD presents additional 
information regarding the cumulative regulatory burden analysis.
3. Employment Impacts
    In response to DOE's presentation of the direct employment impacts 
characterized in the MIA and presented in the NOPR TSD, EarthJustice 
commented that DOE's projection of employment impacts of standards on 
the regulated industry demonstrates an economic benefit in the form of 
increased employment on a global scale. Specifically, EarthJustice 
comments that the benefits from an increase in employment would be 
principally to other countries and that DOE does not take this into 
consideration in its analysis. (EarthJustice, No. 22 at p. 5)
    DOE believes EarthJustice's assertion that DOE only considered the 
direct employment impacts on international manufacturers is incorrect. 
DOE calculated the total labor expenditures for the industry using the 
unit labor costs from the engineering analysis and the total industry 
shipments from the NES. DOE translated the total labor expenditures for 
the industry to the total number of jobs using the average labor rate 
for the industry and the annual worker hours. Finally, DOE multiplied 
the total number of jobs by the domestic market share to derive the 
domestic number of jobs for the base case and each TSL. The direct 
employment results characterized by the MIA represent U.S. production 
workers are impacted by this rulemaking in the standard and non-
standard size PTAC and PTHP manufacturing industries. See section V.C.2 
for the results of the direct employment impact analysis. Accordingly, 
DOE has considered all employment impacts in weighing the benefits and 
the burdens, including direct (as calculated by the MIA) and indirect 
(as calculated by the employment impact analysis).
    In response to the increase in direct employment characterized by 
the MIA, ECR, a domestic manufacturer of non-standard size equipment, 
and McQuay, a domestic manufacturer of both standard and non-standard 
size equipment, commented that the adoption of the proposed amended 
energy conservation standards would have adverse impacts on employment 
and their businesses. Specifically, ECR commented that adopting TSL 4 
from the NOPR might have an adverse impact on employment and customers 
in New York, where a large volume of equipment is produced and shipped. 
(ECR, No. 15 at p. 3; see also Public Meeting Transcript, No. 12 at p. 
184) Similarly, McQuay stated that unlike the standard size equipment 
that is built overseas, the non-standard size equipment is unique 
because it is developed, manufactured, and supported by domestic 
facilities mainly located in the state of New York. Any impacts on its 
non-standard size equipment business would have an economic impact on 
McQuay. (Public Meeting Transcript, No. 12 at p. 184)
    DOE calculated the potential impacts of amended energy conservation 
standards on domestic production employment for the non-standard 
industry by bounding the range of potential impacts. For the upper 
bound, the direct employment impact analysis conducted as part of the 
MIA estimates the number of U.S. production workers who are impacted by 
this rulemaking in the non-standard size PTAC and PTHP manufacturing 
industries, assuming that shipment levels and product availability 
remain at current levels. In this best case scenario, where shipments 
do not decrease and higher efficiency products require more labor, the 
direct employment impact analysis shows a net increase in the number of 
domestic jobs for the non-standard size industries. It is reasonable to 
assume that shipments and product availability will continue because 
consumers will continue to demand non-standard PTACs and PTHPs for 
their replacement needs. For these customers, modifications to their 
buildings to accommodate standard size PTACs and PTHPs is a large cost 
they will try to prevent. However, at higher standard levels, the 
product development costs are prohibitive for the small domestic 
manufacturers that produce PTACs and PTHPs. These domestic 
manufacturers may exit the industry rather than invest in new designs. 
This would result in a loss of domestic employment at these firms. The 
unmet demand could be satisfied by new domestic manufacturers or 
foreign manufacturers.
    To calculate the lower bound of the range of potential impacts, DOE 
developed a scenario where either shipments drop or manufacturers 
respond to higher labor requirements by shifting production to lower-
labor-cost countries. For the non-standard industry, DOE believes this 
scenario is a possibility because DOE noticed that the non-standard 
market currently offers over approximately 40 different equipment 
platforms, many of which are built in very low volumes. As a result, 
the non-standard market will incur a much higher impact due to fixed 
costs on a per unit basis. Since the non-standard PTAC and PTHP 
industry is composed chiefly of small businesses, any energy 
conservation standard for non-standard PTACs and PTHPs will impact 
mostly small businesses, which might choose to exit this industry 
rather than invest the necessary resources to convert existing 
equipment lines. Alternatively, manufacturers could choose to move 
their manufacturing facilities overseas as a method of reducing costs. 
Consequently, DOE assumed that the greater labor requirements displace 
all U.S. production workers in the non-standard industry and used this 
condition as a lower bound to the potential impacts of standards on 
domestic production employment.

H. Employment Impact Analysis

    When developing a standard for adoption, DOE considers its 
employment impact. Direct employment impacts are any changes in the 
number of employees for PTAC and PTHP manufacturers, their suppliers, 
and related service firms. Indirect impacts are changes in employment 
in the larger economy that occur due to the shift in expenditures and 
capital investment caused by the purchase and operation of more 
efficient PTAC and PTHP equipment. The MIA in this rulemaking addresses 
the employment impacts on manufacturers of PTACs and PTHPs (i.e., the 
direct employment impacts) (Chapter 13 of the TSD). This section 
describes other, primarily indirect, employment impacts.
    Indirect employment impacts from PTAC and PTHP standards consist of 
the net jobs created or eliminated in the national economy, other than 
in the manufacturing sector being regulated, as a consequence of (1) 
reduced spending by end users on energy (electricity,

[[Page 58796]]

gas--including liquefied petroleum gas--and oil); (2) reduced spending 
on new energy supply by the utility industry; (3) increased spending on 
the purchase price of new PTACs and PTHPs; and (4) the effects of those 
three factors throughout the economy. DOE expects the net monetary 
savings from standards to be redirected to other forms of economic 
activity. DOE also expects these shifts in spending and economic 
activity to affect the demand for labor.
    DOE estimated indirect national employment impacts using an input/
output model of the U.S. economy called Impact of Sector Energy 
Technologies (ImSET). Developed by DOE's Building Technologies Program, 
the ImSET model estimates changes in employment, industry output, and 
wage income in the overall U.S. economy resulting from changes in 
expenditures in the various sectors of the economy. DOE estimated 
changes in expenditures using the NES spreadsheet. ImSET then estimated 
the net national indirect employment impacts of potential PTAC and PTHP 
equipment efficiency standards on employment by sector. DOE received no 
comments on the employment analysis during the NOPR, so it made no 
changes to the analysis and methodology in the final rule.
    The ImSET input/output model suggests that the amended PTAC and 
PTHP efficiency standards could increase the net demand for labor in 
the economy as the net monetary savings from standards are redirected 
to other forms of economic activity. The gains would most likely be 
small relative to total national employment, primarily due to the small 
net monetary savings from amended PTAC and PTHP energy conservation 
standards available for transfer to other sectors, relative to the 
economy as a whole. Chapter 15 of the TSD provides more details on the 
employment impact analysis.

I. Utility Impact Analysis

    The utility impact analysis estimates the effects of reduced energy 
consumption due to improved equipment efficiency on the utility 
industry. This utility analysis consists of a comparison between 
forecast results for a case comparable to the AEO2008 Reference Case 
and forecasts for policy cases incorporating each of the PTAC and PTHP 
TSLs.
    DOE analyzed the effects of amended standards on electric utility 
industry generation capacity and fuel consumption using a variant of 
the EIA's NEMS. NEMS, which is available in the public domain, is a 
large, multisectoral, partial-equilibrium model of the U.S. energy 
sector. EIA uses NEMS to produce its AEO, a widely recognized baseline 
energy forecast for the United States. DOE used a variant of NEMS, 
referred to as NEMS-BT, to clarify that NEMS has been modified to take 
into account the energy savings from standards for PTAC and PTHP at 
different TSL levels.
    DOE conducted the utility analysis as policy deviations from the 
AEO2008, applying the same basic set of assumptions. The NEMS-BT is run 
similarly to the AEO2008 NEMS, except that PTAC and PTHP energy usage 
is reduced by the amount of energy (by fuel type) saved due to the 
TSLs. DOE obtained the inputs of national energy savings from the NES 
spreadsheet model. Using these inputs, the utility analysis reported 
the changes in installed capacity and generation (by fuel type) that 
result for each TSL, as well as changes in end-use electricity sales. 
Aside from the use of the AEO2008, DOE made no other changes to the 
methodology used for the utility impact analysis from the NOPR. Chapter 
14 of the TSD provides details of the utility analysis methods and 
results.

J. Environmental Analysis

    DOE has prepared a draft environmental assessment (EA) pursuant to 
the National Environmental Policy Act and the requirements under 42 
U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(a), to determine the environmental 
impacts of the amended standards. Specifically, DOE estimated the 
reduction in total emissions of carbon dioxide (CO<INF>2</INF>) using 
the NEMS-BT computer model. DOE calculated a range of estimates for 
reduction in NO<INF>X</INF> emissions and Hg emissions using current 
power sector emission rates. However, the Environmental Assessment (see 
Chapter 16 of the FR TSD accompanying this notice) does not include the 
estimated reduction in power sector impacts of sulfur dioxide 
(SO<INF>2</INF>), because DOE has determined that due to the presence 
of national caps on SO<INF>2</INF> emissions as addressed below, any 
such reduction resulting from an energy conservation standard would not 
affect the overall level of SO<INF>2</INF> emissions in the United 
States.
    The NEMS-BT is run similarly to the AEO2008 NEMS, except the energy 
use is reduced by the amount of energy saved due to the TSLs. DOE 
obtained the inputs of national energy savings from the NIA spreadsheet 
model. For the Environmental Assessment, the output is the forecasted 
physical emissions. The net benefit of the standard is the difference 
between emissions estimated by NEMS-BT and the AEO2008 Reference Case. 
The NEMS-BT tracks CO<INF>2</INF> emissions using a detailed module 
that provides results with a broad coverage of all sectors and 
inclusion of interactive effects.
    The Clean Air Act Amendments of 1990 set an emissions cap on 
SO<INF>2</INF> all power generation. The attainment of this target, 
however, is flexible among generators and is enforced through the use 
of emissions allowances and tradable permits. Because SO<INF>2</INF> 
emissions allowances have value, they will almost certainly be used by 
generators, although not necessarily immediately or in the same year 
with and without a standard in place. In other words, with or without a 
standard, total cumulative SO<INF>2</INF> emissions will always be at 
or near the ceiling, while there may be some timing differences between 
year-by-year forecasts. Thus, it is unlikely that there will be an 
SO<INF>2</INF> environmental benefit from electricity savings as long 
as there is enforcement of the emissions ceilings.
    Although there may not be an actual reduction in SO<INF>2</INF> 
emissions from electricity savings, there still may be an economic 
benefit from reduced demand for SO<INF>2</INF> emission allowances. 
Electricity savings decrease the generation of SO<INF>2</INF> emissions 
from power production, which can decrease the need to purchase or 
generate SO<INF>2</INF> emissions allowance credits, and decrease the 
costs of complying with regulatory caps on emissions.
    Like SO<INF>2</INF>, future emissions of NO<INF>X</INF> and Hg 
would have been subject to emissions caps under the Clean Air 
Interstate Act (CAIR) and Clean Air Mercury Rule (CAMR). As discussed 
later in section V.C.6, these rules have been vacated by a Federal 
court. But the NEMS-BT model used for today's final rule assumed that 
both NO<INF>X</INF> and Hg emissions would be subject to CAIR and CAMR 
emissions caps. In the case of NO<INF>X</INF> emissions, CAIR would 
have permanently capped emissions in 28 eastern States and the District 
of Columbia. Because the NEMS-BT modeling assumed NO<INF>X</INF> 
emissions would be subject to CAIR, DOE established a range of 
NO<INF>X</INF> reductions based on the use of a NO<INF>X</INF> low and 
high emissions rates (in metric kilotons (kt) of NO<INF>X</INF> emitted 
per terawatt-hours (TWh) of electricity generated) derived from the 
AEO2008. To estimate the reduction in NO<INF>X</INF> emissions, DOE 
multiplied these emission rates by the reduction in electricity 
generation due to the standards considered. For mercury, because the 
emissions caps specified by CAMR would have applied to the entire 
country, DOE was unable to use NEMS-BT model to estimate the physical 
quantity changes in mercury emissions due to energy conservation

[[Page 58797]]

standards. To estimate mercury emission reductions due to standards, 
DOE used an Hg emission rate (in metric tons of Hg per energy produced) 
based on AEO2008. Because virtually all mercury emitted from 
electricity generation is from coal-fired power plants, DOE based the 
emission rate on the metric tons of mercury emitted per TWh of coal-
generated electricity. To estimate the reduction in mercury emissions, 
DOE multiplied the emission rate by the reduction in coal-generated 
electricity associated with standards considered.
    In comments on the NOPR, NRDC asked if the monetization of carbon 
should have been included in the LCC and the NPV analyses and 
questioned DOE's selection of the $0 to $14 range for carbon prices in 
the NOPR analysis. The group recommended that DOE use new cost figures 
for monetizing carbon from the new EIA report. (Public Meeting 
Transcript No. 12 at pp. 110-111, 192-194) AHRI by contrast commented 
that DOE is acting appropriately by not speculating on carbon emission 
pricing. (AHRI, No. 23 at p. 9) EarthJustice stated that EPCA mandates 
that DOE consider the need for national energy conservation and 
determine whether a standard is ``economically justified'' require DOE 
to factor economic benefits that are shared by the nation as a whole, 
not just those benefits that accrue to PTAC and PTHP customers. 
EarthJustice commented that in the case of SO<INF>2</INF> emissions and 
NO<INF>X</INF> emissions in states covered by the Clean Air Interstate 
Rule (CAIR)\15\, DOE should monetize the values of total change in the 
value of the allowance credits for these emissions and incorporate this 
amount into the NPV analysis. In the case of CO<INF>2</INF>, 
NO<INF>X</INF> in non-CAIR states, and Hg, EarthJustice stated that DOE 
must consider the value of the environmental benefit resulting from 
reduced emissions of these pollutants in the NPV analysis. Finally, 
EarthJustice questioned the range of valuations for CO<INF>2</INF> 
emissions used in the NOPR, pointing out that the high end valuation 
used by DOE was consistent with the average value from the IPCC source 
cited by DOE. (EarthJustice, No. 22 at pp. 4-5)
---------------------------------------------------------------------------

    \15\ See http://www.epa.gov/cleanairinterstaterule/.
---------------------------------------------------------------------------

    DOE has made several additions to its monetization of environmental 
emissions reductions in today's rule, which are discussed in Section 
V.C.6, but has chosen to continue to report these benefits separately 
from the net benefits of energy savings. Nothing in EPCA, nor in the 
National Environmental Policy Act, requires that the economic value of 
emissions reduction be incorporated in the net present value analysis 
of the value of energy savings. Unlike energy savings, the economic 
value of emissions reduction is not priced in the marketplace.
     SO<INF>2</INF> emissions, which, as discussed previously are not 
impacted by this rulemaking, have markets for emissions allowances. The 
market clearing price of SO<INF>2</INF> emissions is roughly the 
marginal cost of meeting the regulatory cap, not the marginal value of 
the cap itself. Further, because SO<INF>2</INF> (for the nation) is 
regulated by a cap and trade system, the effect of the need to meet 
these caps is already included in the price of energy or energy 
savings. With a cap on SO<INF>2</INF>, the value of energy savings 
already includes the value of SO<INF>2</INF> control for those 
consumers experiencing energy savings. The economic cost savings 
associated with SO<INF>2</INF> emissions caps is approximately equal to 
the change in the price of traded allowances resulting from energy 
savings multiplied by the number of allowances that would be issued 
each year. That calculation is uncertain because the energy savings for 
PTAC and PTHP equipment are so small relative to the entire electricity 
generation market that the resulting emissions savings would have 
almost no impact on price formation in the allowances market and likely 
would be outweighed by uncertainties in the marginal costs of 
compliance with the SO<INF>2</INF> emissions caps.
    For those emissions currently not priced (CO<INF>2</INF>, Hg, and 
NO<INF>X</INF>), only a range of estimated economic values based on 
environmental damage studies of varying quality and applicability is 
available. Consequently, DOE is reporting and weighing these values 
separately and is not including them in the NPV analysis.

K. Other Comments

1. Burdens on Small, Non-Standard Size PTAC and PTHP Manufacturers
    In the MIA conducted for the NOPR, DOE determined the impacts on 
the non-standard size PTAC and PTHP industry separately from the 
standard size PTAC and PTHP industry due to their differences in 
equipment classes, shipment volumes, and equipment prices. DOE took 
into consideration the size, location, and specialization of the non-
standard size PTAC and PTHP industry when calculating production costs 
(see Chapter 5 of the NOPR TSD) and capital and equipment conversion 
expenses (see Chapter 13 of the NOPR TSD) required to meet the proposed 
amended energy conservation standards. Due to the limited number of 
publicly owned manufacturers of non-standard equipment (i.e., the 
majority of non-standard equipment manufacturers are privately held 
companies), DOE relied on information provided by manufacturers during 
interviews for the NOPR MIA. DOE estimated the industry research and 
development (R&D) expenses needed to achieve each trial standard level. 
Details of the R&D expenses by equipment class are presented in Chapter 
13 of the NOPR TSD. The TSD generally indicates that these equipment 
conversion expenses would be over 20 million dollars for the non-
standard size industry to transform their equipment lines at TSL 1 and 
higher TSLs. In addition, the NOPR interviews suggested the kinds of 
impacts imposed by amended energy conservation standards on small 
businesses would not largely differ from impacts on larger companies 
within the non-standard size equipment industry.
    In response to the presentation of the potential impacts on non-
standard size manufacturers that DOE described in the NOPR, AHRI, Ice 
Air, and ECR each provided comments and public statements regarding 
this issue. AHRI commented that the relative impacts on non-standard 
size equipment manufacturers are greater than the impacts on standard 
size equipment manufacturers. (AHRI, No. 23 at p. 5) Ice Air commented 
that the non-standard size PTAC and PTHP industry is comprised of five 
or six smaller businesses (mainly located in New York State) that 
cannot afford to match the R&D spending of large, multi-national 
companies making standard PTACs and PTHPs at much higher volumes. Ice 
Air, being one of the smallest manufacturers, stated that smaller 
companies would be adversely impacted, with some companies forced to go 
out of business. Similarly, Ice Air stated that the proposed standards 
could potentially eliminate the ``non-standard'' segment of the 
industry, including a significant portion of its own product offerings 
of non-standard size PTACs and PTHPs. Ice Air also stated that the 
possible elimination of non-standard size equipment manufacturers may 
lead to a lessening of the competition and limit consumers' choices to 
the offerings of the larger size equipment manufacturers. (Ice Air, No. 
25 at p. 2-4) ECR commented that small manufacturers of non-standard 
size PTAC and PTHP equipment would be negatively impacted at TSL 4 and 
that this proposed standard could impact the availability of products 
for its customers, particularly in concentrated

[[Page 58798]]

areas like New York City that have large shipments of non-standard 
equipment. (ECR, No. 15 at p. 3)
    In response to comments from interested parties, DOE further 
reviewed the non-standard size PTAC and PTHP industry, the data 
gathered during manufacturing interviews, and manufacturer literature 
to determine if the amended energy conservation standards would 
disproportionately harm the small, non-standard manufacturers.
a. Non-Standard PTAC and PTHP Industry Characteristics
    The non-standard PTAC and PTHP equipment industry is characterized 
by a wide scope of products being manufactured at low production rates. 
Most non-standard units are built-to-order and are commonly customized 
by the manufacturer to accommodate specific building requirements. DOE 
review of the non-standard PTAC and PTHP market suggests that the non-
standard PTAC and PTHP industry supports nearly one hundred different 
legacy models that were formerly made under over 30 different brand 
names.
    The six remaining manufacturers of non-standard PTACs and PTHPs 
manufacture approximately 40 different replacement model platforms (as 
determined by sleeve size and other equipment design requirements to 
allow them to be drop-in replacements) and 100 models between them in 
total. Most non-standard units are built-to-order and are commonly 
customized by the manufacturer to accommodate specific building 
requirements. The number of equipment families offered by a particular 
company ranges from seven to 40 units, though customization 
subsequently leads to thousands of stock-keeping-units (SKUs).
    The wide range of non-standard sleeve sizes is the legacy of the 
early PTAC and PTHP industry when over 30 competitors made these units 
to suit the specific needs and different wall sleeve dimensions. 
Industry consolidation has reduced the number of competitors to six, 
though the scope of non-standard equipment for sale has not lessened 
significantly. The number of equipment platforms offered by any 
particular non-standard PTAC and PTHP manufacturer ranges from seven to 
40 units, though multiple capacities per equipment platform and any 
customization options subsequently generates thousands of SKUs.
b. Non-Standard PTAC and PTHP Market Review
    DOE conducted a market review and created a list of every 
manufacturer that produces standard and non-standard size PTACs and 
PTHPs for sale in the United States using manufacturer catalogs. During 
interviews and at the public meeting, DOE asked interested parties and 
industry representatives if they were aware of any other non-standard 
manufacturers. DOE reviewed publicly available data such as Dun and 
Bradstreet reports and contacted manufacturers, where needed, to 
determine whether they meet the SBA's definition of a small business in 
the PTAC and PTHP industry. Table IV.4 lists the number of all 
manufacturers that supply PTACs and PTHPs in standard and/or non-
standard sizes, as well as the number of small businesses in each 
category.

         Table IV.4--PTAC and PTHP Manufacturer Characteristics
------------------------------------------------------------------------
                                     Total number of    Total number of
                                     manufacturers in   small businesses
           Market served               each market       in each market
                                         segment            segment
------------------------------------------------------------------------
Standard..........................                  9                  1
Non-Standard......................                  2                  2
Both Standard and Non-Standard....                  4                  3
------------------------------------------------------------------------

    As Table IV.4 illustrates, there is a greater proportion of small 
businesses serving the non-standard market than the standard market. 
The standard market is characterized by high unit volumes and a 
significant degree of commoditization. The non-standard market offers 
significantly more sleeve sizes and/or equipment platforms to choose 
from, most of which are made to order for specific customers. The 
discrepancy between unit shipments and the number of platforms 
requiring significant product development to meet upcoming efficiency 
standards is the main reason that the non-standard PTAC and PTHP 
industry is expected to experience a greater relative impact for any 
given efficiency level than the standard PTAC and PTHP industry.
    DOE found that most small businesses in the PTAC and PTHP 
industries focus primarily on manufacturing customized and/or non-
standard equipment. For example, standard size units offered by 
manufacturers of both kinds of equipment feature customization features 
such as hydronic coil heating that differentiate them from common 
standard PTAC and PTHPs made by higher-volume competitors. According to 
interviewees, the higher value that customers associate with customized 
and/or non-standard equipment allows them to charge higher prices, 
which in turn makes their (higher cost) low-volume operations viable.
    The much lower volumes and the greater number of equipment 
platforms distinguishes the standard from the non-standard PTAC and 
PTHP market. Whereas standard PTAC and PTHP manufacturers only have to 
modify one equipment platform to meet regulatory standards, non-
standard manufacturers may have to update as many as 40 different 
equipment platforms in their portfolio. Many equipment development 
costs (such as testing, certification, etc.) are somewhat fixed, making 
manufacturing scale an important consideration in determining whether 
the equipment development investments are economically justified. 
Similarly, any capital expenditures, such as upgrading manufacturing 
and fabrication lines can be spread across much higher unit volumes by 
high-volume manufacturers. Due to the concentration of small businesses 
in the non-standard PTAC and PTHP industry, that particular industry 
segment is more vulnerable to impacts from amended energy conservation 
standards. For further illustration of the economic issues, please 
refer to the GRIM analysis in Chapter 13 of the final rule TSD.
c. Impacts on Small Businesses in the Non-Standard Size PTAC and PTHP 
Industry
    The phaseout of R-22 refrigerant use in 2010 adds a two-fold fixed-
cost burden on all manufacturers: (1) Equipment, manufacturing lines, 
and fabrication centers have to be converted to R-410A refrigerant use; 
and (2) all equipment platforms will have to undergo equipment 
development, testing, and certification. Achieving even baseline ASHRAE 
Standard 90.1-

[[Page 58799]]

1999 efficiency levels for all extant products is likely to be beyond 
the reach of some manufacturers since they lack the scale to maintain 
engineering departments with the time, equipment, and budget to address 
multiple equipment platform conversions.
    DOE reviewed published efficiency ratings for non-standard PTACs 
and PTHPs to estimate the percentage of the units on the market that 
would require extensive redesign to achieve the baseline standard level 
once manufacturers switch from R-22 to alternate refrigerants. Table 
IV.5 illustrates the various nominal EERs that non-standard PTACs and 
PTHPs have to achieve and what percentage of the current models are 
projected to achieve that level despite efficiency losses due to a R-
410A conversion. This table also includes the equipment conversion 
costs for standard PTAC and PTHP units made by manufacturers that build 
primarily non-standard equipment because these units share more 
characteristics with non-standard equipment (such as very low 
production volumes, extensive customization, etc.) than with the mass-
market standard PTACs and PTHPs manufactured by high-volume 
manufacturers.

                      Table IV.5--Cumulative Equipment Development Cost Estimates for the Non-Standard Size PTAC and PTHP Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Equipment class                         Baseline          TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minimum EER for Non-Standard PTACs......................            8.6             9.4             9.4             9.7             9.4            10.0
Minimum EER for Non-Standard PTHPs......................            8.5             9.4             9.7             9.7            10.0            10.0
Percentage of Equipment Families to At or Above TSL               73%             25%             23%             23%             13%             13%
 Efficiency Levels......................................
Number of Equipment Families Requiring Significant                 29              82              84              84              95              95
 Equipment Development to Meet Standards................
Aggregated Industry Burden *............................            7.25           20.50           21.00           21.00           23.75           23.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Millions of dollars.

    As noted in Table IV.5, DOE identified six manufacturers of non-
standard PTACs and PTHPs. DOE grouped equipment offered by 
manufacturers into platforms, reflecting how some equipment chassis' 
are sold with minimal modifications under different product names. 
Altogether, these six non-standard manufacturers offer over 100 
different PTAC and PTHP equipment model families for sale, which 
represent approximately 40 different equipment platforms. In 
determining whether equipment platforms would be likely to require 
significant equipment development, DOE's estimates accounted for 
published EERs for equipment platforms, equipment capacity, and 
anticipated degradation factors as a result of adopting R-410A 
refrigerants. DOE took published EER ratings and degraded them 
according to factors from the engineering analysis. If one or more 
capacities within an equipment platform fell below the EER levels 
prescribed by a TSL (either for PTACs or PTHPs), then the equipment 
platform was marked for redesign. Accordingly, non-standard platforms 
that currently claim very high EERs are not expected to require 
extensive redesign except at very high TSLs.
    During interviews with manufacturers, none of the non-standard PTAC 
and PTHP manufacturers were able to give estimates for their total 
equipment conversion costs by efficiency level. As a result, DOE 
estimated the investment requirements to upgrade an existing equipment 
platform for optimal R-410A operation on the basis of its more numerous 
standard size manufacturer responses and its own estimates.
    Even in a best-case scenario ($0.25 million per equipment platform, 
regardless of efficiency level, based on feedback from engineering 
interview), the non-standard PTAC and PTHP industry would have great 
difficulty meeting any standards level above baseline. As Table IV.5 
illustrates, the industry burden to upgrade its equipment families to 
meet TSL 1 would exceed $20 million or approximately 40 percent of its 
total annual revenue. Higher TSL levels would impose even greater 
economic burdens. However unsustainable this impact is in the 
aggregate, the impact on individual businesses could be even greater.
    For example, based on Dun & Bradstreet reports, one small 
manufacturer of non-standard PTACs and PTHPs is estimated to have sales 
of less than $5 million per year and currently ships approximately 12 
different non-standard equipment platforms. DOE estimates that the 
company would have to spend approximately $3 million to meet any 
efficiency level (including baseline) using R-410A refrigerants. A $3 
million equipment development expense translates into more than 60 
percent of annual revenues or about 35 years worth of equipment 
development budget for this manufacturer, assuming it spends the 
industry average of 1.6 percent of revenues on research and 
development.
    DOE estimates that on average, small manufacturers of non-standard 
PTACs and PTHPs require 25 years worth of equipment development budget 
to reach any efficiency level above baseline (which in itself will 
require about 14 years worth of equipment development budget). Because 
small businesses lack the scale to afford the required investments for 
R-410A conversion, certification requirements, and the equipment 
development required for energy conservation standards, adopting an 
efficiency standard above baseline is likely to cause some small 
businesses to exit the market. This situation suggests that the non-
standard industry would reduce the number of equipment families and 
capacities even at baseline efficiency levels to keep equipment 
development expenses within manageable limits.
    Table IV.6 describes DOE estimates regarding the average equipment 
development cost per unit by manufacturing scale and equipment 
lifetime. Manufacturing scale was roughly defined as small vs. large 
businesses whereas equipment lifetime defines the number of years that 
a specific equipment platform will stay in production without major 
changes or

[[Page 58800]]

revisions. In the standard PTAC and PTHP industry, the impact on the 
major manufacturers is relatively minor, regardless of whether they are 
small businesses or not, due to the scale at which they manufacture and 
because they only have one equipment platform to upgrade. However, in 
the non-standard industry the impact of scale and the number of 
equipment platforms is quite evident. The only large business operating 
in the non-standard industry segment offers fewer equipment platforms 
than any of its small business competitors, yet operates at a higher 
overall production volume than most of them. As a result, the per-unit 
conversion costs for the large business are significantly lower than 
those of its smaller competitors.

                Table IV.6--Impact of Manufacturing Scale on per Unit Equipment Development Cost
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
 Per unit equipment development cost by industry         5               7              10              20
    segment versus equipment lifetime (years)
----------------------------------------------------------------------------------------------------------------
Standard PTAC and PTHP........  Small Business..              $6              $4              $3              $1
                                Large Business                 7               5               3               2
                                 Average.
Non-Standard PTAC and PTHP....  Small Business               136              97              68              34
                                 Average.
                                Large Business..              45              32              22              11
----------------------------------------------------------------------------------------------------------------

    The current wide scope of equipment families offered by the non-
standard industry (over 100 equipment families from six manufacturers 
with thousands of SKUs) is thus likely to shrink dramatically in 
response to amended energy conservation standards by DOE. In 
particular, higher capacity units will be vulnerable for elimination 
since cabinet constraints may make required improvements to units 
infeasible to implement. Equipment manufacturers would be expected to 
cut their least popular equipment classes first, potentially 
eliminating multiple extant equipment platforms from the market 
altogether. However, cutting equipment classes by itself is difficult, 
since every equipment class (and its resultant enhancement and 
diversification of the revenue stream) adds some necessary 
manufacturing scale to the manufacturer. Once enough equipment classes 
are removed from its equipment offering, the manufacturer may lack the 
scale to operate.
    A likely result of these market dynamics is that some manufacturers 
of non-standard PTACs and PTHPs will exit the market or consolidate 
with other small business manufacturers to meet even baseline 
efficiency requirements. At least in the initial years after the 
implementation date of the energy conservation standard, DOE estimates 
that most non-standard PTAC and PTHP equipment manufacturers will 
reduce their scope of equipment platforms by 50 percent or more in 
order to bring the required equipment development expenses down to more 
sustainable levels, which will be likely to affect consumer choices in 
the near term.
    Whereas current equipment buyers benefit from being able to source 
non-standard equipment families from multiple manufacturers, the number 
of manufacturers for a specific type of non-standard PTAC or PTHP is 
likely to shrink as manufacturers cut back the equipment families they 
offer as a result of the R-410A conversion, certification requirements, 
and efficiency standards. Limited monopolistic or oligopolistic market 
conditions may result--limited only because consumers always have the 
option of modifying their building to allow the use of alternative 
cooling and heating equipment. Manufacturers also expect consumers to 
prolong the life of existing units via repairs and remanufacturing--and 
reduce demand for replacement units--if compliance with energy 
conservation standards results in higher replacement costs or the 
complete unavailability of replacement units.
2. PTAC and PTHP Labeling
    In the NOPR, DOE stated that it believes that a label on PTAC and 
PTHP equipment that identifies the equipment class would be useful in 
enforcing both the energy conservation standards as well as the 
building codes and would assist States and other interested parties in 
determining which application correlates to a given PTAC or PTHP (based 
upon size). DOE invited public comment on the type of information and 
other requirements or factors, including format, it should consider in 
developing a proposed labeling rule for PTACs and PTHPs.
    AHRI commented that it continues to support the ASHRAE Standard 
90.1-1999 labeling requirements and believes that a label on the 
equipment identifying the equipment class would be useful. AHRI stated 
that it does not support a label similar to the EnergyGuide label used 
on consumer products and that such a label will do nothing to help 
commercial customers in making purchasing decisions. It asserted that 
product literature such as fact sheets and the AHRI Certified Directory 
are more effective in providing customers with energy efficiency 
information they need before purchasing PTACs and PTHPs. (AHRI, No. 23 
at p. 7)
    Carrier stated that the inclusion of an energy use information 
label for customers of PTAC and PTHP equipment would have little or no 
value since the purchasing entity will rely on the advice of the 
contractor or literature, not on ``labels''. The nameplates also 
provide an avenue for the performance information as necessary to 
confirm that they received what was requested. (Carrier, No. 16 at p. 
6)
    ACEEE and NRDC also commented that with regard to non-standard 
equipment, the path to a loophole-free standard requires adoption of 
labeling, code, and/or equivalent measures to prevent installation of 
non-standard PTAC and PTHP equipment in new construction. (ACEEE and 
NRDC, No. 26 at p. 3)
    In developing the final rule, DOE considered the information 
identified by interested parties on the types of energy use or 
efficiency information commercial customers and owners of PTACs and 
PTHPs would find useful in making purchasing decisions. Before DOE can 
establish labeling rules, it must first ascertain whether the criteria 
outlined in the NOPR are met. 73 FR 18888-89. DOE will work with the 
Federal Trade Commission and other interested parties to determine the 
types of information and the forms (e.g., labels, fact sheets, or 
directories) that would be most useful for commercial customers and 
owners of PTACs and PTHPs. DOE continues to believe that a label on 
PTAC and PTHP equipment identifying the equipment class and efficiency 
level would be useful for enforcement of both the energy conservation 
standards as well as the building codes and would assist States and 
other interested parties in determining which application correlates to 
a given PTAC or PTHP

[[Page 58801]]

(based upon size) because it would help commercial customers identify 
the efficiency associated with the PTAC and PTHP equipment being placed 
into commercial buildings. As DOE stated in the NOPR, DOE anticipates 
proposing labeling requirements for PTAC and PTHP equipment in a 
separate rulemaking and is not incorporating a labeling requirement as 
part of today's final rule. 73 FR 18889.

V. Analytical Results and Conclusions

A. Trial Standard Levels

    In the NOPR, DOE examined seven TSLs for standard size and non-
standard size PTACs and PTHPs at the representative cooling capacities. 
73 FR 18889. Each TSL represented a set of efficiency levels that 
describe a possible amended energy conservation standard for each 
equipment class. For the final rule, DOE did not consider TSL 7 for 
standard size equipment (see section IV.C) because DOE determined that 
TSL 7 represented an efficiency level that potentially could not be 
attained in the full range of cooling capacities for standard size 
equipment utilizing R-410A. In addition, DOE analyzed a new TSL for 
standard size PTACs and PTHPs--TSL A--which is adopted in today's final 
rule. TSL A combines the efficiency levels in TSL 3 and TSL 1 for 
standard size PTACs at the representative cooling capacities and the 
efficiency levels in TSL 5 and TSL 3 for standard size PTHPs at the 
representative cooling capacities. DOE's inclusion of TSL A recognizes 
the challenge manufacturers encounter when increasing the efficiency of 
larger cooling capacity equipment. Table V.1 presents the TSLs analyzed 
for standard size PTACs and PTHPs in today's final rule and the 
efficiency levels within each TSL for each class and size of equipment 
analyzed.

                                      Table V.1--Standard Size PTACs and PTHPs Baseline Efficiency Levels and TSLs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Baseline
                                                                            (ASHRAE                                                          TSL 6  (Max-
    Equipment class (cooling capacity)            Efficiency metric         standard    TSL 1    TSL 2    TSL 3    TSL A    TSL 4    TSL 5      Tech)
                                                                           90.1-1999)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size PTAC, 9,000 Btu/h...........  EER.........................         10.6     10.9     10.9     11.1     11.1     10.9     11.3         11.5
Standard Size PTAC, 12,000 Btu/h..........  EER.........................          9.9     10.2     10.2     10.4     10.2     10.2     10.6         10.8
Standard Size PTHP, 9,000 Btu/h...........  EER.........................         10.4     10.9     11.1     11.1     11.3     11.3     11.3         11.5
                                            COP.........................          3.0      3.1      3.2      3.2      3.3      3.3      3.3          3.3
Standard Size PTHP, 12,000 Btu/h..........  EER.........................          9.7     10.2     10.4     10.4     10.4     10.6     10.6         10.8
                                            COP.........................          2.9      3.0      3.1      3.1      3.1      3.1      3.1          3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table V.2 presents the TSLs analyzed for non-standard size PTACs 
and PTHPs in today's final rule and the efficiency levels within each 
TSL for each class and size of equipment analyzed.

                Table V.2--Non-Standard Size PTACs and PTHPs Baseline Efficiency Levels and TSLs
----------------------------------------------------------------------------------------------------------------
                                                  Baseline
   Equipment class (cooling       Efficiency      (ASHRAE                                            TSL 5  (Max-
          capacity)                 metric        standard     TSL 1     TSL 2     TSL 3     TSL 4      Tech)
                                                 90.1-1999)
----------------------------------------------------------------------------------------------------------------
Non-Standard Size PTAC,        EER............          8.6       9.4       9.4       9.7       9.4         10.0
 11,000 Btu/h.
Non-Standard Size PTHP,        EER............          8.5       9.4       9.7       9.7      10.0         10.0
 11,000 Btu/h.                                          2.6       2.8       2.8       2.8       2.9          2.9
----------------------------------------------------------------------------------------------------------------

    As stated in the engineering analysis (Chapter 5 of the final rule 
TSD), current Federal energy conservation standards and the efficiency 
levels specified by ASHRAE Standard 90.1-1999 for PTACs and PTHPs are a 
function of the equipment's cooling capacity. Both the Federal energy 
conservation standards and the efficiency standards in ASHRAE Standard 
90.1-1999 are based on equations that calculate the efficiency levels 
for PTACs and PTHPs with a cooling capacity greater than or equal to 
7,000 Btu/h and less than or equal to 15,000 Btu/h for each equipment 
class (see Table II.1). For the NOPR, DOE derived the proposed 
standards (i.e., efficiency level as a function of cooling capacity) by 
plotting the representative cooling capacities and the corresponding 
efficiency levels for each TSL. DOE then calculated the equation of the 
line passing through the EER values for 9,000 Btu/h and 12,000 Btu/h 
for standard size PTACs and PTHPs. Chapter 9 of the NOPR TSD describes 
in detail how DOE determined the energy-efficiency equations for each 
TSL.
    For the final rule, DOE used the energy-efficiency equations 
derived from the NOPR for TSLs 1, 2, 3, 4, 5, and 6 to extend the 
results from the representative cooling capacities to the entire range 
of cooling capacities of standard size PTACs and PTHPs. For TSL A, DOE 
calculated a new slope of the energy-efficiency equations using the 
methodology from the NOPR. Specifically, DOE calculated the equation of 
the line passing through the EER values for 9,000 Btu/h and 12,000 Btu/
h for standard size PTACs and PTHPs. Table V.3 and Table V.4 identify 
the energy-efficiency equations for each TSL for standard size PTACs 
and PTHPs.

  Table V.3--Energy-Efficiency Equations (EER as a Function of Cooling Capacity) by TSL for Standard Size PTACs
----------------------------------------------------------------------------------------------------------------
            Standard size ** PTACs                                Energy-efficiency equation *
----------------------------------------------------------------------------------------------------------------
Baseline ASHRAE Standard 90.1-1999...........  EER = 12.5 - (0.213 x Cap[dagger]/1000)

[[Page 58802]]

 
TSL 1........................................  EER = 13.0 - (0.233 x Cap [dagger]/1000)
TSL 2........................................  EER = 13.0 - (0.233 x Cap [dagger]/1000)
TSL 3........................................  EER = 13.2 - (0.233 x Cap [dagger]/1000)
TSL A........................................  EER = 13.8 - (0.300 x Cap [dagger]/1000)
TSL 4........................................  EER = 13.0 - (0.233 x Cap [dagger]/1000)
TSL 5........................................  EER = 13.4 - (0.233 x Cap [dagger]/1000)
TSL 6........................................  EER = 13.6 - (0.233 x Cap [dagger]/1000)
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled products and evaporatively cooled products, and at 85 [deg]F entering water
  temperature for water-cooled products.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions having an external wall opening
  greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and a cross-sectional area
  greater than or equal to 670 square inches.
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.


  Table V.4--Energy-Efficiency Equations (EER as a Function of Cooling Capacity) by TSL for Standard Size PTHPs
----------------------------------------------------------------------------------------------------------------
            Standard size ** PTHPs                                Energy-efficiency equation *
----------------------------------------------------------------------------------------------------------------
Baseline ASHRAE Standard 90.1-1999...........  EER = 12.3 - (0.213 x Cap[dagger]/1000)
                                               COP = 3.2 - (0.026 x Cap [dagger]/1000)
TSL 1........................................  EER = 13.0 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.6 - (0.046 x Cap [dagger]/1000)
TSL 2........................................  EER = 13.2 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.6 - (0.044 x Cap [dagger]/1000)
TSL 3........................................  EER = 13.2 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.6 - (0.044 x Cap [dagger]/1000)
TSL A........................................  EER = 14.0 - (0.300 x Cap [dagger]/1000)
                                               COP = 3.7 - (0.052 x Cap [dagger]/1000)
TSL 4........................................  EER = 13.4 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.7 - (0.053 x Cap [dagger]/1000)
TSL 5........................................  EER = 13.4 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.7 - (0.053 x Cap [dagger]/1000)
TSL 6........................................  EER = 13.6 - (0.233 x Cap [dagger]/1000)
                                               COP = 3.8 - (0.053 x Cap [dagger]/1000)
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled and evaporatively cooled products, and at 85 [deg]F entering water temperature
  for water-cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-
  cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions having an external wall opening
  greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and a cross-sectional area
  greater than or equal to 670 square inches.
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.

    For non-standard size PTACs and PTHPs, DOE used the ASHRAE Standard 
90.1-1999 equation slope and the representative cooling capacity (i.e., 
11,000 Btu/h cooling capacity) to determine the energy-efficiency 
equations corresponding to each TSL in the NOPR. Chapter 9 of the NOPR 
TSD details how DOE determined the energy-efficiency equations for each 
TSL. For the final rule, DOE used the energy-efficiency equations 
presented in the NOPR for TSLs 1 through 5 to extend the results from 
the representative cooling capacities to the entire range of cooling 
capacities of non-standard size PTACs and PTHPs. Table V.5 and Table 
V.6 identify the energy-efficiency equations for each TSL for non-
standard size PTAC and PTHP.

   Table V.5--Energy-Efficiency Equations (EER as a Function of Cooling Capacity) by TSL for Non-Standard Size
                                                      PTACs
----------------------------------------------------------------------------------------------------------------
          Non-standard size ** PTACs                              Energy-efficiency equation *
----------------------------------------------------------------------------------------------------------------
Baseline ASHRAE Standard 90.1-1999...........  EER = 10.9 - (0.213 x Cap[dagger]/1000)
TSL 1........................................  EER = 11.7 - (0.213 x Cap [dagger]/1000)
TSL 2........................................  EER = 11.7 - (0.213 x Cap [dagger]/1000)
TSL 3........................................  EER = 12.0 - (0.213 x Cap [dagger]/1000)
TSL 4........................................  EER = 11.7 - (0.213 x Cap [dagger]/1000)
TSL 5........................................  EER = 12.3 - (0.213 x Cap [dagger]/1000)
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled and evaporatively cooled products, and at 85 [deg]F entering water temperature
  for water-cooled products.
** Non-standard size refers to PTAC or PTHP equipment with existing wall sleeve dimensions having an external
  wall opening of less than 16 inches high or less than 42 inches wide, and a cross-sectional area less than 670
  square inches.
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.


[[Page 58803]]


   Table V.6--Energy-Efficiency Equations (EER as a Function of Cooling Capacity) by TSL for Non-Standard Size
                                                      PTHPs
----------------------------------------------------------------------------------------------------------------
          Non-standard size ** PTHPs                              Energy-efficiency equation *
----------------------------------------------------------------------------------------------------------------
Baseline ASHRAE Standard 90.1-1999...........  EER = 10.8-(0.213 x Cap [dagger]/1000)
                                               COP = 2.9-(0.026 x Cap [dagger]/1000)
 
TSL 1........................................  EER = 11.7-(0.213 x Cap [dagger]/1000)
                                               COP = 3.1-(0.026 x Cap [dagger]/1000)
TSL 2........................................  EER = 12.0-(0.213 x Cap [dagger]/1000)
                                               COP = 3.1-(0.026 x Cap [dagger]/1000)
TSL 3........................................  EER = 12.0-(0.213 x Cap [dagger]/1000)
                                               COP = 3.1-(0.026 x Cap [dagger]/1000)
TSL 4........................................  EER = 12.3-(0.213 x Cap [dagger]/1000)
                                               COP = 3.1-(0.026 x Cap [dagger]/1000)
TSL 5........................................  EER = 12.3-(0.213 x Cap [dagger]/1000)
                                               COP = 3.1-(0.026 x Cap [dagger]/1000)
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled and evaporatively cooled products, and at 85 [deg]F entering water temperature
  for water-cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-
  cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Non-standard size refers to PTAC or PTHP equipment with existing wall sleeve dimensions having an eternal
  wall opening of less than 16 inches high or less than 42 inches wide, and a cross-sectional area less than 670
  square inches.
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.

    For PTACs and PTHPs with a cooling capacity of less than 7,000 Btu/
h, DOE determined the EERs using a cooling capacity of 7,000 Btu/h in 
the energy-efficiency equations. For PTACs and PTHPs with a cooling 
capacity greater than 15,000 Btu/h cooling capacity, DOE determined the 
EERs using a cooling capacity of 15,000 Btu/h in the energy-efficiency 
equations. This is the same method established in the Energy Policy Act 
of 1992 and provided in ASHRAE Standard 90.1-1999 for calculating the 
EER and COP of equipment with cooling capacities less than 7,000 Btu/h 
and greater than 15,000 Btu/h.

 B. Significance of Energy Savings

    To estimate the energy savings through 2042 due to amended 
standards, DOE compared the energy consumption of packaged terminal 
equipment under the base case (standards at the levels in ASHRAE 
Standard 90.1-1999) to energy consumption of this equipment under each 
standards case (i.e., each TSL, or set of amended standards, that DOE 
has considered). Table V.7 and Table V.8 summarize DOE's NES estimates, 
which are based on the AEO2008 energy price forecast, for each TSL. 
Chapter 11 of the TSD describes these estimates in more detail. The 
tables provide both undiscounted and discounted values of energy 
savings from 2012 through 2042. Discounted energy savings at rates of 7 
percent and 3 percent represent a policy perspective where energy 
savings farther in the future are less significant than energy savings 
closer to the present. Each TSL that is more stringent than the 
corresponding level in ASHRAE Standard 90.1-1999 results in additional 
energy savings, ranging from 0.015 quads to 0.068 quads for TSLs 1 
through 6 for standard size PTAC and PTHP equipment classes, and from 
0.004 to 0.009 quads for TSLs 1 through 5 for non-standard size PTAC 
and PTHP equipment classes.

           Table V.7--Summary of Cumulative National Energy Savings for Standard Size PTACs and PTHPs
                                [Energy savings for units sold from 2012 to 2042]
----------------------------------------------------------------------------------------------------------------
                                                                               Trial standard level
  Primary national energy savings (quads) (sum of all equipment  -----------------------------------------------
                            classes)                               Undiscounted   3%  Discounted  7%  Discounted
----------------------------------------------------------------------------------------------------------------
1...............................................................           0.015           0.007           0.003
2...............................................................           0.024           0.012           0.006
3...............................................................           0.031           0.016           0.007
A...............................................................           0.032           0.016           0.007
4...............................................................           0.033           0.017           0.008
5...............................................................           0.049           0.025           0.011
6...............................................................           0.068           0.035           0.015
----------------------------------------------------------------------------------------------------------------


         Table V.8--Summary of Cumulative National Energy Savings for Non-Standard Size PTACs and PTHPs
                                [Energy savings for units sold from 2012 to 2042]
----------------------------------------------------------------------------------------------------------------
                                                                               Trial standard level
  Primary national energy savings (quads) (sum of all equipment  -----------------------------------------------
                            classes)                               Undiscounted   3%  Discounted  7%  Discounted
----------------------------------------------------------------------------------------------------------------
1...............................................................           0.004           0.002           0.001
2...............................................................           0.004           0.002           0.001
3...............................................................           0.005           0.003           0.001
4...............................................................           0.006           0.003           0.001

[[Page 58804]]

 
5...............................................................           0.009           0.004           0.002
----------------------------------------------------------------------------------------------------------------

    Several commenters noted the potential for equipment switching 
where TSLs resulted in higher cooling efficiency requirements for PTHP 
and PTAC of the same cooling capacity. Higher cooling efficiency 
requirements would result in an increase in the price differential of 
minimum efficiency PTHP and PTAC equipment, causing some PTHP customers 
to shift to a PTAC with electric resistance heat.
    From the perspective of assessing the energy savings achieved by a 
standard at a defined TSL, the primary concern from this anticipated 
equipment switching is the loss in energy savings that could result if 
some fraction of the PTHP market switches to the use of PTAC with 
electric resistance heat. While DOE recognizes that some PTHP customers 
might also switch to the use of fossil fuel (e.g. hydronic) heating, 
the relatively small fraction of the existing PTAC customers who 
currently use hydronic heat for the spaces served by PTAC (estimated at 
less than 1%), and the difficulty of retrofitting hydronic heating into 
buildings that do not use it suggests that the total fraction of the 
market that would opt for PTAC with hydronic heating is small. The 
majority of the total packaged terminal equipment market (PTAC and 
PTHP) currently uses PTAC with electric resistance heat, which supports 
the possibility that some purchasers would choose to switch from PTHPs 
to PTACs.
    DOE did not have the information with which to assess the 
elasticity of the PTHP market with regards to this switching between 
PTHP and PTAC. To assess the significance of a shift from PTHP to PTAC 
purchases, DOE calculated the total fraction of the heat pump market 
that would need to shift to the purchase of PTAC equipment to negate 
the energy savings from increasing the PTHP cooling efficiency above 
that of the PTAC equipment. Two TSLs were first examined, TSL 2, and 
TSL 4. For standard size PTAC and PTHP equipment, TSL 2 has the same 
EER requirements for PTAC as TSL 1 but has a 0.2 EER increase for PTHP 
equipment as compared with TSL 1. For TSL 2, DOE calculated that a 
shift of 2.0 percent of the heat pump market to the use of PTAC with 
electric resistance would be sufficient to offset the energy savings 
difference between TSL 1 and TSL 2. If PTAC and PTHP standards were set 
at TSL 2, the purchase price differential between the two would 
increase on the order of $11, which would represent an increase of 
approximately 9.4 percent increase in the purchase price differential 
between PTAC and PTHP over TSL 1. This increase in the purchase price 
differential results from the increased PTHP efficiency at TSL 2. At 
TSL 1, the average annual payback in 2012 for a PTHP over a PTAC was 
calculated at approximately 2.10 years. At TSL 2, the average annual 
payback for a PTHP over a PTAC was 2.18 years. The average PBP for 
purchase of a PTHP over a PTAC increased 3.7 percent between TSL 1 and 
TSL 2.
    Similarly, for TSL 4, DOE calculated that a shift of 3.8 percent of 
the heat pump market to the use of PTAC with electric resistance would 
offset the energy savings difference between TSL 1 and TSL 4. If PTAC 
and PTHP standards were set at TSL 4, the purchase price differential 
between the two would increase on the order of $22, or an 18.8 percent 
increase in the purchase price differential compared to that at TSL 1. 
This increase in price reflects the higher efficiency of the PTHP 
equipment at TSL 2 and TSL 4. At TSL 4, the average annual payback for 
purchase of a PTHP over a PTAC was 2.29 years. The average PBP for 
purchase of a PTHP over a PTAC increased approximately 9.2 percent 
between TSL 1 and TSL 4.
    DOE also examined TSL A in light of potential equipment switching. 
In the case of TSL A, there is no comparable TSL considered by DOE that 
had a PTAC cooling efficiency level identical to TSL A but with PTHP 
cooling efficiencies at the same efficiency level. However, the nominal 
difference between PTHP and PTAC EER levels at TSL A, 0.2 EER, is 
identical to the nominal difference in EER levels at TSL 2 for all 
capacities. The difference in equipment price between a PTHP and PTAC 
at TSL A is $127 for a 9,000 Btu/h unit and $129 for a 12,000 Btu/h 
unit, which is virtually identical to the price differential at TSL 2, 
and represents a 9.2 percent increase in differential purchase price 
compared with TSL 1. DOE examined the energy savings at TSL A and TSL 1 
for standard size PTAC and PTHP equipment only, and determined that 
under TSL A, it would take approximately 4.0 percent of standard size 
PTHP users to switch to a PTAC to negate the energy savings for TSL A 
over TSL 1. At TSL A, the estimated PBP for purchase of a PTHP over a 
PTAC under average use conditions was estimated at 2.15 years. Given 
the very small increase in differential purchase price between PTAC and 
PTHP at TSL A compared with standards set at identical efficiency 
levels (TSL 1) and the minimal difference in payback period at TSL A 
compared to TSL 1, DOE concludes that it is unlikely that an efficiency 
Standard set at TSL A would result in a significant number of standard 
size PTHP customers opting to instead purchase PTAC equipment with 
electric resistance heat.

C. Economic Justification

1. Economic Impact on Commercial Consumers
a. Life-Cycle Costs and Payback Period
    Commercial consumers will be affected by the standards because they 
will experience higher purchase prices and lower operating costs. 
Generally, these impacts are best captured by changes in life-cycle 
costs and payback period. To determine these impacts, DOE calculated 
the LCC and PBP for the standard levels considered in this proceeding. 
DOE's LCC and PBP analyses provided five key outputs for each TSL, 
which are reported in Table V.9 through Table V.14. The first three 
outputs in each table are the proportion of PTAC or PTHP purchases in 
which the purchase of a design that complies with the TSL would create 
a net life-cycle cost, no impact, or a net life-cycle cost savings for 
the consumer. The fourth output is the average net life-cycle savings 
from purchasing a complying design compared with purchasing baseline 
equipment.

[[Page 58805]]

    The fifth output is the average PBP for the consumer purchasing a 
design that complies with the TSL compared with purchasing baseline 
equipment. The PBP is the number of years it would take for the 
customer to recover, as a result of energy savings, the increased costs 
of higher-efficiency equipment based on the operating cost savings from 
the first year of ownership. The PBP is an economic benefit-cost 
measure that uses benefits and costs without discounting. TSD Chapter 8 
details the LCC and PBP analyses.

            Table V.9--Summary LCC and PBP Results for Standard Size PTAC With a Cooling Capacity of
                                                   9,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                Trial standard level *
                                    ----------------------------------------------------------------------------
                                         1          2          3          A          4          5          6
----------------------------------------------------------------------------------------------------------------
EER................................      10.9       10.9       11.1       11.1       10.9       11.3       11.5
PTAC with Net LCC Increase (%).....        15         15         30         30         15         46         62
PTAC with No Change in LCC (%).....        77         77         56         56         77         37         18
PTAC with Net LCC Savings (%)......         7          7         14         14          7         17         21
Mean LCC Savings (2007$)...........        (1)        (1)        (3)        (3)        (1)        (6)       (10)
Mean Payback Period (years)........      13.0       13.0       13.7       13.7       13.0       14.5      15.2
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative LCC savings, i.e., an increase in LCC. Detailed percentage changes
  may not sum to 100% due to rounding.


            Table V.10--Summary LCC and PBP Results for Standard Size PTHP With a Cooling Capacity of
                                                   9,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                Trial standard level *
                                    ----------------------------------------------------------------------------
                                         1          2          3          A          4          5          6
----------------------------------------------------------------------------------------------------------------
EER................................       10.9       11.1       11.1       11.3       11.3       11.3       11.5
PTHP with Net LCC Increase (%).....        7         10         10         13         13         13         24
PTHP with No Change in LCC (%).....       78         57         57         37         37         37         18
PTHP with Net LCC Savings (%)......       16         33         33         50         50         50         58
Mean LCC Savings (2007$)...........       11         20         20         28         28         28         24
Mean Payback Period (years)........        5.1        4.5        4.5        4.4        4.4        4.4        5.1 
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative LCC savings, i.e., an increase in LCC. Detailed percentage changes
  may not sum to 100% due to rounding.


            Table V.11--Summary LCC and PBP Results for Standard Size PTAC With a Cooling Capacity of
                                                  12,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                Trial standard level *
                                    ----------------------------------------------------------------------------
                                         1          2          3          A          4          5          6
----------------------------------------------------------------------------------------------------------------
EER................................      10.2       10.2       10.4       10.2       10.2       10.6       10.8
PTAC with Net LCC Increase (%).....        16         16         31         16         16         48         65
PTAC with No Change in LCC (%).....        77         77         56         77         77         36         18
PTAC with Net LCC Savings (%)......         7          7         13          7          7         16         17
Mean LCC Savings * (2007$).........        (2)        (2)        (5)        (2)        (2)       (10)       (15)
Mean PBP (years)...................      13.1       13.1       14.0       13.1       13.1       14.9      15.9
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings, i.e., an increase in LCC. Detailed percentage changes may
  not sum to 100% due to rounding.


            Table V.12--Summary LCC and PBP Results for Standard Size PTHP With a Cooling Capacity of
                                                  12,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                Trial standard level *
                                    ----------------------------------------------------------------------------
                                         1          2          3          A          4          5          6
----------------------------------------------------------------------------------------------------------------
EER................................       10.2       10.4       10.4       10.4       10.6       10.6       10.8
PTHP with Net LCC Increase (%).....        7         10         10         10         21         21         35
PTHP with No Change in LCC (%).....       77         57         57         57         37         37         18
PTHP with Net LCC Savings (%)......       16         33         33         33         42         42         47
Mean LCC Savings (2007$)...........       13         24         24         24         20         20         14
Mean PBP (years)...................        5.1        4.6        4.6        4.6        5.5        5.5        6.4 
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings, i.e., an increase in LCC. Detailed percentage changes may
  not sum to 100% due to rounding.


[[Page 58806]]


         Table V.13--Summary LCC and PBP Results for Non-Standard Size PTACs With a Cooling Capacity of
                                                  11,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Trial standard level *
                                                          ------------------------------------------------------
                                                               1          2          3          4          5
----------------------------------------------------------------------------------------------------------------
EER......................................................        9.4        9.4        9.7        9.4       10.0
PTAC with Net LCC Increase (%)...........................        6          6         14          6         25
PTAC with No Change in LCC (%)...........................       73         73         47         73         23
PTAC with Net LCC Savings (%)............................       22         22         39         22         52
Mean LCC Savings (2007$).................................       26         26         30         26         31
Mean PBP (years).........................................        4.4        4.4        5.1        4.4        5.9 
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings, i.e., an increase in LCC. Detailed percentage changes may
  not sum to 100% due to rounding.


         Table V.14--Summary LCC and PBP Results for Non-Standard Size PTHPs With a Cooling Capacity of
                                                  11,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Trial standard level *
                                                          ------------------------------------------------------
                                                               1          2          3          4          5
----------------------------------------------------------------------------------------------------------------
EER......................................................        9.4        9.7        9.7       10.0       10.0
PTHP with Net LCC Increase (%)...........................        1          3          3          5          5
PTHP with No Change in LCC (%)...........................       73         47         47         23         23
PTAC with Net LCC Savings (%)............................       27         50         50         72         72
Mean LCC Savings (2007$).................................       62         66         66         80         80
Mean PBP (years).........................................        2.2        2.8        2.8        3.0        3.0 
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings, i.e., an increase in LCC. Detailed percentage changes may
  not sum to 100% due to rounding.

    For PTACs and PTHPs with a cooling capacity of less than 7,000 Btu/
h, DOE established the energy conservation standards using a cooling 
capacity of 7,000 Btu/h in the efficiency-capacity equation (see 
section VI.A). The LCC and PBP impacts for equipment in this category 
will be similar to the impacts for the 9,000 Btu/h units because the 
MSP and usage characteristics are in a similar range. Similarly, for 
PTACs and PTHPs with a cooling capacity greater than 15,000 Btu/h, DOE 
established the energy conservation standards using a cooling capacity 
of 15,000 Btu/h in the efficiency-capacity equation. Further, for PTACs 
and PTHPs with a cooling capacity greater than 15,000 Btu/h, DOE 
established that the impacts will be similar for units with a cooling 
capacity of 12,000 Btu/h. Section V.A of today's final rule provides 
more details on how DOE developed the energy-efficiency equations based 
on the analysis results for the representative cooling capacities.
b. Commercial Consumer Subgroup Analysis
    DOE estimated commercial consumer subgroup impacts by determining 
the LCC impacts at each TSL on small businesses, such as small 
independent hotels and motels. Table V.15 shows the mean LCC savings 
from the final energy conservation standards; Table V.16 shows the mean 
payback period (in years) for this subgroup of commercial consumers. 
DOE's analysis using the LCC spreadsheet model indicated that the LCC 
and PBP impacts on the small independent hotels and motels were similar 
to the corresponding impacts on the larger population of the commercial 
consumers. Chapter 12 of the TSD explains DOE's method for conducting 
the consumer subgroup analysis and presents the detailed results of 
that analysis.

     Table V.15--Mean Life-Cycle Cost Savings for PTAC or PTHP Equipment Purchased by LCC Subgroups (2007$)
----------------------------------------------------------------------------------------------------------------
        Equipment class (cooling capacity)                              Trial standard level
----------------------------------------------------------------------------------------------------------------
                  Standard Size                     TSL 1    TSL 2    TSL 3    TSL A    TSL 4    TSL 5    TSL 6
----------------------------------------------------------------------------------------------------------------
Standard Size PTAC (9,000 Btu/h).................      (2)      (2)      (5)      (5)      (2)      (9)     (13)
Standard Size PTHP (9,000 Btu/h).................       8       16       16       22       22       22       17
Standard Size PTAC (12,000 Btu/h)................      (4)      (4)      (7)      (4)      (4)     (13)     (19)
Standard Size PTHP (12,000 Btu/h)................      10       18       18       18       13       13        7
----------------------------------------------------------------------------------------------------------------


 
 
----------------------------------------------------------------------------------------------------------------
                      Non-Standard Size                         TSL 1    TSL 2    TSL 3    TSL 4    TSL 5
-----------------------------------------------------------------------------------------------------------
Non-Standard Size PTAC.......................................      22       22       24       22       23
Non-Standard Size PTHP.......................................      54       56       56       68       68
-----------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings.


[[Page 58807]]


          Table V.16--Mean Payback Period for PTAC or PTHP Equipment Purchased by LCC Subgroups (Years)
----------------------------------------------------------------------------------------------------------------
           Equipment class (cooling capacity)                              Trial standard level
----------------------------------------------------------------------------------------------------------------
                      Standard Size                        TSL 1   TSL 2   TSL 3   TSL A   TSL 4   TSL 5   TSL 6
----------------------------------------------------------------------------------------------------------------
Standard Size PTAC (9,000 Btu/h)........................    13.0    13.0    13.6    13.6    13.0    14.4    15.1
Standard Size PTHP (9,000 Btu/h)........................     5.0     4.5     4.5     4.4     4.4     4.4     5.1
Standard Size PTAC (12,000 Btu/h).......................    13.1    13.1    13.9    13.1    13.1    14.8    15.8
Standard Size PTHP (12,000 Btu/h).......................     5.1     4.6     4.6     4.6     5.5     5.5     6.3
----------------------------------------------------------------------------------------------------------------


 
 
--------------------------------------------------------------------------------------------------------
                   Non-Standard Size                     TSL 1   TSL 2   TSL 3   TSL 4   TSL 5
-----------------------------------------------------------------------------------------------
Non-Standard Size PTAC................................     4.4     4.4     5.1     4.4     5.9
Non-Standard Size PTHP................................     2.2     2.8     2.8     2.9     2.9
-----------------------------------------------------------------------------------------------

2. Economic Impact on Manufacturers
    DOE described the qualitative economic impacts of today's standard 
on manufacturers in the NOPR. 73 FR 18893-99. This analysis is 
described in greater detail in Chapter 13 of the TSD.
    As part of its NOPR analysis, DOE analyzed two distinct markup 
scenarios: (1) The flat markup scenario, and (2) the partial cost 
recovery markup scenario. 73 FR 18886. The flat markup scenario can 
also be characterized as the ``preservation of gross margin 
percentage'' scenario. Under this scenario, DOE applied, across all 
TSLs, a single uniform ``gross margin percentage'' markup that DOE 
believes represents the current markup for manufacturers in the PTAC 
and PTHP industry. This flat markup scenario implies that, as 
production costs increase with efficiency, the absolute dollar markup 
will also increase. DOE calculated that the non-production cost markup, 
which consists of SG&A expenses, R&D expenses, interest, and profit, is 
1.29. This markup is consistent with the one DOE used in its 
engineering and GRIM analyses for the base case.
    The implicit assumption behind the ``partial cost recovery'' 
scenario is that the industry can pass-through only part of its 
regulatory-driven increases in production costs to consumers in the 
form of higher prices. DOE implemented this markup scenario in the GRIM 
by setting the non-production cost markups at each TSL to yield an 
increase in MSP equal to half the increase in production cost.
    Together, these two markup scenarios characterize the markup 
conditions described by manufacturers, and reflect the range of market 
responses manufacturers expect as a result of the R-22 phaseout and the 
amended energy conservation standards (See Chapter 13 of the TSD for 
additional details of the markup scenarios.). For this final rule, DOE 
also examined both of these scenarios.
a. Industry Cash-Flow Analysis Results
    Using the two different markup scenarios described above, DOE 
estimated the impact of amended standards for PTACs and PTHPs on the 
INPV of the package terminal equipment industry. See 73 FR 18886-87 and 
18893-94. The impact of new standards on INPV consists of the 
difference between the INPV in the base case and the INPV in the 
standards case. INPV is the primary metric used in the MIA, and 
represents one measure of the fair value of the industry in today's 
dollars. DOE calculated the INPV by summing all of the net cash flows, 
discounted at the industry's cost of capital or discount rate.
    Table V.17 through Table V.20 show the estimated changes in INPV 
for manufacturers of standard size packaged terminal equipment and non-
standard size packaged terminal equipment, respectively, that would 
result from the TSLs DOE considered for this final rule. The tables 
also present the equipment conversion expenses and capital investments 
that the industry would incur at each TSL. Equipment conversion 
expenses include engineering, prototyping, testing, and marketing 
expenses incurred by a manufacturer as it prepares to comply with a 
standard. Capital investments are the one-time outlays for equipment 
and buildings required for the industry to comply (i.e., conversion 
capital expenditures).

      Table V.17--Manufacturer Impact Analysis Results, Including INPV Estimates, for Standard Size PTACs and PTHPs Under the Flat Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 R-410A full cost recovery with amended energy standards full recovery of increased cost
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Trial standard level
                                                  Units           Base case ----------------------------------------------------------------------------
                                                                                 1          2          3          A          4          5          6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................  (2007$ millions)........      427        424        421        424        419        419        426        423
Change in INPV........................  (2007$ millions)........  .........       -3         -6         -3         -8         -8         -1         -4
                                        (%).....................  .........       -0.8       -1.4       -0.8       -1.9       -1.9       -0.2       -0.9
Amended Energy Conservation Standards   (2007$ millions)........  .........        4.5        7.4        6.3        9.1       10.6        7.2       13.5
 Equipment Conversion Expenses.
Amended Energy Conservation Standards   (2007$ millions)........  .........        3.5        5.7        4.9        8.2        8.2        5.6       10.4
 Capital Conversion Expenses.

[[Page 58808]]

 
Total Energy Conservation Standards     (2007$ millions)........  .........        8.0       13.2       11.2       17.3       18.7       12.8       23.9
 Investment Required.
--------------------------------------------------------------------------------------------------------------------------------------------------------


  Table V.18--Manufacturer Impact Analysis Results, Including INPV Estimates, for Standard Size PTACs and PTHPs Under the Partial Cost Recovery Markup
                                                                        Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 R-410A base case full cost recovery with amended energy standards partial cost recovery
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Trial standard level
                                                  Units              Base   ----------------------------------------------------------------------------
                                                                     case        1          2          3          A          4          5          6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................  (2007$ millions).........       427      399        382        367        366        359        325        263
Change in INPV........................  (2007$ millions).........  ........      -28        -45        -60        -61        -68       -103       -164
                                        (%)......................  ........       -6.6      -10.7      -14.0      -14.3      -16.0      -24.0      -38.3
Amended Energy Conservation Standards   (2007$ millions).........  ........        4.5        7.4        6.3        9.1       10.6        7.2       13.5
 Equipment Conversion Expenses.
Amended Energy Conservation Standards   (2007$ millions).........  ........        3.5        5.7        4.9        8.2        8.2        5.6       10.4
 Capital Conversion Expenses.
Total Energy Conservation Standards     (2007$ millions).........  ........        8.0       13.2       11.2       17.3       18.7       12.8       23.9
 Investment Required.
--------------------------------------------------------------------------------------------------------------------------------------------------------


   Table V.19--Manufacturer Impact Analysis Results, Including INPV Estimates, for Non-Standard Size PTACs and
                                      PTHPs Under the Flat Markup Scenario
----------------------------------------------------------------------------------------------------------------
             R-410A full cost recovery with amended energy standards full recovery of increased cost
-----------------------------------------------------------------------------------------------------------------
                                                                            Trial standard level
                                     Units         Base   ------------------------------------------------------
                                                   case        1          2          3          4          5
----------------------------------------------------------------------------------------------------------------
INPV.........................  (2007$ millions)        30       14         13         13          9         11
Change in INPV...............  (2007$ millions)  ........      -16        -17        -17        -21        -20
                               (%).............  ........      -53.6      -57.6      -56.3      -68.5      -64.8
Amended Energy Conservation    (2007$ millions)  ........       20.5       21.0       21.0       23.8       23.8
 Standards Equipment
 Conversion Expenses.
Amended Energy Conservation    (2007$ millions)  ........        1.3        2.3        2.0        3.6        2.6
 Standards Capital Conversion
 Expenses.
Total Energy Conservation      (2007$ millions)  ........       21.8       23.3       23.0       27.3       26.4
 Standards Investment
 Required.
----------------------------------------------------------------------------------------------------------------


   Table V.20--Manufacturer Impact Analysis Results, Including INPV Estimates, for Non-Standard Size PTACs and
                              PTHPs Under the Partial Cost Recovery Markup Scenario
----------------------------------------------------------------------------------------------------------------
             R-410A base case full cost recovery with amended energy standards partial cost recovery
-----------------------------------------------------------------------------------------------------------------
                                                                            Trial standard level
                                     Units         Base   ------------------------------------------------------
                                                   case        1          2          3          4          5
----------------------------------------------------------------------------------------------------------------
INPV.........................  (2007$ millions)        30       13         11         10          7          6
Change in INPV...............  (2007$ millions)  ........      -17        -19        -20        -23        -24
                               (%).............  ........      -57.8      -63.8      -65.4      -78.0      -81.2
Amended Energy Conservation    (2007$ millions)  ........       20.5       21.0       21.0       23.8       23.8
 Standards Equipment
 Conversion Expenses.

[[Page 58809]]

 
Amended Energy Conservation    (2007$ millions)  ........        1.3        2.3        2.0        3.6        2.6
 Standards Capital Conversion
 Expenses.
Total Energy Conservation      (2007$ millions)  ........       21.8       23.3       23.0       27.3       26.4
 Standards Investment
 Required.
----------------------------------------------------------------------------------------------------------------

    The NOPR provides a discussion of the estimated impact of amended 
PTAC and PTHP standards on INPV for each equipment class. 73 FR 18893-
97. This qualitative discussion on the estimated impacts of amended 
PTAC and PTHP standards in INPV for each equipment class for the final 
rule can be found in Chapter 13 of the TSD.
b. Impacts on Employment
    As discussed in the NOPR, DOE expects no significant, discernable 
direct employment impacts on both standard size and non-standard size 
PTAC and PTHP manufacturers under today's standards compared to the 
base case, or under any of the TSLs considered for today's rule. 73 FR 
18898. Today's notice estimates the impacts on U.S. production workers 
in the standard size and non-standard size PTAC and PTHP industry 
impacted by the final rule. The estimated impacts are shown in Table 
V.21. For the standard size PTAC and PTHP industry, DOE does not expect 
negative direct employment impacts because the labor content of each 
unit produced is expected to be slightly higher and the total number of 
units produced is expected to be the same. Furthermore, based on 
interviews with domestic manufacturers, DOE expects the proportion of 
units produced domestically to remain unchanged. Therefore, DOE 
presents a scenario where employment increases as a function of 
increasing production costs.
    For the non-standard size PTAC and PTHP industry, DOE reports a 
range of possible domestic employment impacts. Assuming shipment levels 
and product availability remain at the levels experienced in the 
current market, DOE expects a slight increase in domestic employment as 
characterized by the high-bound scenario. However, if either shipments 
drop or if manufacturers respond to higher labor requirements by 
shifting production to lower-labor-cost countries, DOE expects that 
there could be reductions in total domestic employment as characterized 
by the low-bound scenario. Further support for these conclusions is set 
forth in Chapter 13 of the final rule TSD.

   Table V.21--Change in Total Number of Domestic Production Employees in 2012 in the Standard Size and Non-Standard Size PTAC and PTHP Manufacturing
                                                                       Industry *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Standard size PTAC and PTHP manufacturing industry
                                                              ------------------------------------------------------------------------------------------
                                                                  TSL 1        TSL 2        TSL 3        TSL A        TSL 4        TSL 5        TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change in Total Number of Domestic Production Employees in               1            2            3            3            3            6            9
 2012........................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------


 
                                                      Non-standard size PTAC and PTHP manufacturing industry
                                                ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Change in Total Number of Domestic Production       (106)--1     (106)--1     (107)--1     (107)--1     (108)--2
 Employees in 2012.............................
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate a loss in domestic employment.

3. National Net Present Value and Net National Employment
    The NPV analysis estimates the cumulative benefits or costs to the 
Nation that would result from particular standard levels. While the NES 
analysis estimates the energy savings from each standard level DOE 
considers, relative to the base case, the NPV analysis estimates the 
national economic impacts of each such level relative to the base case. 
Table V.22 and Table V.23 provide an overview of the NPV results for 
PTACs and PTHPs, respectively, using both a 7-percent and a 3-percent 
real discount rate. See TSD Chapter 11 for more detailed NPV results.

                                  Table V.22--Summary of Cumulative Net Present Value for Standard Size PTACs and PTHPs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       PTAC NPV *  (million 2007$)       PTHP NPV *  (million 2007$)      PTAC and PTHP  NPV * (million
                                                   --------------------------------------------------------------------              2007$)
               Trial standard level                                                                                    ---------------------------------
                                                      7% Discount      3% Discount      7% Discount      3% Discount      7% Discount      3% Discount
                                                          rate             rate             rate             rate             rate             rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................................................             ($3)             ($1)               $4              $18               $1              $17
2.................................................              (3)              (1)               12               44                8               43

[[Page 58810]]

 
3.................................................              (9)              (6)               12               44                2               38
A.................................................              (5)              (3)               15               57               10               54
4.................................................              (3)              (1)               10               50                6               49
5.................................................             (20)             (20)               10               50             (11)               31
6.................................................             (38)             (43)              (3)               34             (41)            (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV, i.e., a net cost. Detail may not appear to sum to total due to rounding.


                                Table V.23--Summary of Cumulative Net Present Value for Non-Standard Size PTACs and PTHPs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       PTAC NPV *  (million 2007$)       PTHP NPV *  (million 2007$)      PTAC and PTHP  NPV* (million
                                                   --------------------------------------------------------------------              2007$)
               Trial standard level                                                                                    ---------------------------------
                                                      7% Discount      3% Discount      7% Discount      3% Discount      7% Discount      3% Discount
                                                          rate             rate             rate             rate             rate             rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................................................               $2               $6               $3               $8               $5              $14
2.................................................                2                6                4               10                6               16
3.................................................                3                8                4               10                7               19
4.................................................                2                6                6               17                8               23
5.................................................                4               11                6               17               10              29
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV, i.e., a net cost. Detail may not appear to sum to total due to rounding.

    Using a 3-percent discount rate increases the present value of 
future equipment purchase costs and operating cost savings. Because 
annual operating cost savings in later years grow at a faster rate than 
annual equipment purchase costs, using a 3-percent discount rate 
increases the NPV at most TSLs. (See TSD Chapter 11.)
    DOE also estimated the national employment impacts that would 
result from each TSL. As discussed in the NOPR, 73 FR 18887, 18899-900, 
DOE expects the net monetary savings from standards to be redirected to 
other forms of economic activity. DOE also expects these shifts in 
spending and economic activity to affect the demand for labor. As Table 
V.24 and Table V.25 illustrate, DOE estimates net indirect employment 
impacts--those changes of employment in the larger economy (other than 
in the manufacturing sector being regulated)--from PTAC and PTHP energy 
conservation standards to be positive but very small relative to total 
national employment, primarily due to the small net monetary savings 
from PTAC and PTHP standards available for transfer to other sectors, 
relative to the economy as a whole. This increase would likely be 
sufficient to fully offset any adverse impacts on employment that might 
occur in the packaged terminal equipment industry. For details on the 
employment impact analysis methods and results, see TSD Chapter 15.

  Table V.24--Net National Change in Indirect Employment, Jobs in 2042,
                      Standard Size PTACs and PTHPs
------------------------------------------------------------------------
                                                          Net national
                                                         change in jobs
                 Trial standard level                   (number of jobs)
                                                       -----------------
                                                         PTACs    PTHPs
------------------------------------------------------------------------
1.....................................................       14       27
2.....................................................       14       56
3.....................................................       31       56
A.....................................................       20       71
4.....................................................       14       82
5.....................................................       56       82
6.....................................................       86      104
------------------------------------------------------------------------


  Table V.25--Net National Change in Indirect Employment, Jobs in 2042,
                    Non-Standard Size PTACs and PTHPs
------------------------------------------------------------------------
                                                          Net national
                                                         change in jobs
                 Trial standard level                   (number of jobs)
                                                       -----------------
                                                         PTACs    PTHPs
------------------------------------------------------------------------
1.....................................................        3        5
2.....................................................        3        6
3.....................................................        6        6
4.....................................................        3       11
5.....................................................        9       11
------------------------------------------------------------------------

4. Impact on Utility or Performance of Equipment
    DOE believes that the standards it is adopting today will not 
lessen the utility or performance of any PTAC or PTHP because of the 
steps DOE has taken to establish product classes and evaluate design 
options and the impact of potential standard levels, as indicated in 
section V.B.4 of the NOPR. 73 FR 18900. DOE stated in the NOPR, it was 
concerned about the potential misclassification of a portion of the 
non-standard size market if the delineations within ASHRAE Standard 
90.1-1999 were adopted by DOE. 73 FR 18865. DOE has mitigated non-
standard manufacturers' concerns by adopting the delineations within 
Addendum t to ASHRAE Standard 90.1-2007 for distinguishing various 
sleeve size equipment.
5. Impact of Any Lessening of Competition
    As discussed in the NOPR, 73 FR 18865, 18900, and in section 
III.D.5 of this notice, DOE considered any lessening of competition 
likely to result from standards. The Attorney General determines the 
impact of any such lessening of competition.
    In its comment on the NOPR, DOJ expressed concerns about whether 
the proposed standards would adversely affect competition. In 
particular, DOJ stated its belief that the efficiency levels for non-
standard size PTACs and PTHPs in the NOPR may create a risk that is too

[[Page 58811]]

strict for the manufacturers to satisfy given the state of the 
technology. DOJ further commented that non-standard customers could 
face the choice of incurring capital expenditures to alter the size of 
the wall opening to accommodate standard size PTACs and PTHPs if non-
standard size units become unavailable. DOJ also stated its concerns 
regarding the efficiency levels for standard size PTHPs proposed in the 
NOPR, arguing the proposed levels would be too stringent for the 
manufacturers to achieve. (DOJ, No. 21 at p. 1-2) The Attorney 
General's response is reprinted at the end of today's rulemaking.
6. Need of the Nation To Conserve Energy
    An improvement in the energy efficiency of PTACs and PTHPs, where 
economically justified, is likely to improve the security of the 
Nation's energy system by reducing overall demand for energy, and thus, 
reducing the Nation's reliance on foreign sources of energy. Reduced 
demand is also likely to improve the reliability of the electricity 
system, particularly during peak-load periods. As a measure of this 
reduced demand, DOE expects the amended standards covered under this 
rulemaking to eliminate the need for construction of between 
approximately 40 megawatts and 196 megawatts of new power by 2042.
    Enhanced energy efficiency also produces environmental benefits. 
The expected energy savings from higher standards for the products 
covered by this rulemaking will reduce the emissions of air pollutants 
and greenhouse gases associated with energy production and building use 
of fossil fuels. Table V.26 and Table V.27 show cumulative 
CO<INF>2</INF>, NO<INF>X</INF>, and Hg emissions reductions for 
standard size and non-standard size PTACs and PTHPs by TSL over the 
rulemaking period. The expected energy savings from amended standards 
will reduce the emissions of greenhouse gases associated with energy 
production, and may reduce the cost of maintaining nationwide emissions 
standards and constraints.

       Table V.26--Summary of Emissions Reductions for Standard Size PTACs and PTHPs (Cumulative Reductions for Equipment Sold From 2012 to 2042)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Trial standard levels
                              --------------------------------------------------------------------------------------------------------------------------
                                     TSL 1             TSL 2             TSL 3             TSL A            TSL 4            TSL 5            TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Emissions Reductions for PTACs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt).....................  0.20............  0.20............  0.45............  0.29............  0.20...........  0.79...........  1.22.
NOX (kt).....................  0.01 to 0.31....  0.01 to 0.31....  0.03 to 0.69....  0.02 to 0.45....  0.01 to 0.31...  0.05 to 1.23...  0.08 to 1.88.
Hg (t).......................  0 to 0.007......  0 to 0.007......  0 to 0.016......  0 to 0.010......  0 to 0.007.....  0 to 0.028.....  0 to 0.043.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Emissions Reductions for PTHPs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt).....................  0.29............  0.61............  0.61............  0.77............  0.88...........  0.88...........  1.12.
NOX (kt).....................  0.03 to 0.63....  0.05 to 1.33....  0.05 to 1.33....  0.07 to 1.68....  0.08 to 1.94...  0.08 to 1.94...  0.10 to 2.46.
Hg (t).......................  0 to 0.010......  0 to 0.021......  0 to 0.021......  0 to 0.027......  0 to 0.031.....  0 to 0.031.....  0 to 0.039.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Emissions Reductions for PTACs and PTHPs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt).....................  0.49............  0.81............  1.05............  1.06............  1.09...........  1.68...........  2.34.
NOX (kt).....................  0.04 to 0.94....  0.07 to 1.64....  0.08 to 2.02....  0.09 to 2.13....  0.09 to 2.25...  0.13 to 3.17...  0.18 to 4.34.
Hg (t).......................  0 to 0.017......  0 to 0.028......  0 to 0.037......  0 to 0.037......  0 to 0.038.....  0 to 0.059.....  0 to 0.082.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Negative values indicate emission increases. Detail may not appear to sum to total due to rounding.


     Table V.27--Summary of Emissions Reductions for Non-Standard Size PTACs and PTHPs (Cumulative Reductions for Equipment Sold From 2012 to 2042)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Trial standard levels
                                    --------------------------------------------------------------------------------------------------------------------
                                              TSL 1                   TSL 2                  TSL 3                  TSL 4                  TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Emissions Reductions for PTACs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt)...........................  0.06..................  0.06..................  0.10.................  0.06.................  0.16.
NOX (kt)...........................  0.004 to 0.10.........  0.004 to 0.10.........  0.006 to 0.16........  0.004 to 0.10........  0.010 to 0.24.
Hg (t).............................  0 to 0.002............  0 to 0.002............  0 to 0.004...........  0 to 0.002...........  0 to 0.005.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Emissions Reductions for PTHPs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt)...........................  0.06..................  0.08..................  0.08.................  0.14.................  0.14.
NOX (kt)...........................  0.005 to 0.13.........  0.007 to 0.18.........  0.007 to 0.18........  0.012 to 0.30........  0.012 to 0.30.
Hg (t).............................  0 to 0.002............  0 to 0.003............  0 to 0.003...........  0 to 0.005...........  0 to 0.005.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Emissions Reductions for PTACs and PTHPs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (Mt)...........................  0.12..................  0.14..................  0.18.................  0.20.................  0.29.
NOX (kt)...........................  0.009 to 0.23.........  0.011 to 0.28.........  0.014 to 0.34........  0.016 to 0.40........  0.022 to 0.55.
Hg (t).............................  0 to 0.004............  0 to 0.005............  0 to 0.006...........  0 to 0.007...........  0 to 0.010.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Negative values indicate emission increases. Detail may not appear to sum to total due to rounding.


[[Page 58812]]

    The estimated cumulative CO<INF>2</INF>, NO<INF>X</INF>, and Hg 
emissions reductions for the amended energy conservation standards 
range up to a maximum of 2.34 Mt for CO<INF>2</INF>, 0.04 to 4.34 kt 
for NO<INF>X</INF>, and 0 to 0.08 t for Hg for standard size PTACs and 
PTHPs over the period from 2012 to 2042. In the Environmental 
Assessment (Chapter 16 of the FR TSD), DOE reports estimated annual 
changes in CO<INF>2</INF>, NO<INF>X</INF>, and Hg emissions 
attributable to each TSL. As discussion in section IV.J of this final 
rule, DOE does not report SO<INF>2</INF> emissions reduction from power 
plants because reductions from an energy conservation standard would 
not affect the overall level of SO<INF>2</INF> emissions in the United 
States due to the emissions caps for SO<INF>2</INF>.
    The NEMS-BT modeling assumed that NOX would be subject to the Clean 
Air Interstate Rule (CAIR) issued by the U.S. Environmental Protection 
Agency on March 10, 2005.\16\ 70 FR 25162 (May 12, 2005). On July 11, 
2008, the U.S. Court of Appeals for the District of Columbia Circuit 
(D.C. Circuit) issued its decision in North Carolina v. Environmental 
Protection Agency,\17\ in which the court vacated the CAIR. 531 F.3d 
896 (D.C. Cir. 2008). If left in place, the CAIR would have permanently 
capped emissions of NO<INF>X</INF> in 28 eastern States and the 
District of Columbia. As with the SO<INF>2</INF> emissions cap, a cap 
on NO<INF>X</INF> emissions would have meant that energy conservation 
standards are not likely to have a physical effect on NO<INF>X</INF> 
emissions in States covered by the CAIR caps. While the caps would have 
meant that physical emissions reductions in those States would not have 
resulted from the energy conservation standards that DOE is amending 
today, the standards might have produced an environmental-related 
economic impact in the form of lower prices for emissions allowance 
credits, if large enough. DOE notes that the estimated total reduction 
in NO<INF>X</INF> emissions, including projected emissions or 
corresponding allowance credits in States covered by the CAIR cap was 
insignificant and too small to affect allowance prices for 
NO<INF>X</INF> under the CAIR.
---------------------------------------------------------------------------

    \16\ See http://www.epa.gov/cleanairinterstaterule/.
    \17\ Case No. 05-1244, 2008 WL 2698180 at *1 (DC Cir. July 11, 
2008).
---------------------------------------------------------------------------

    Even though the D.C. Circuit vacated the CAIR, DOE notes that the 
D.C. Circuit left intact EPA's 1998 NO<INF>X</INF> SIP Call rule, which 
capped seasonal (summer) NO<INF>X</INF> emissions from electric 
generating units and other sources in 23 jurisdictions and gave those 
jurisdictions the option to participate in a cap and trade program for 
those emissions. 63 FR 57356, 57359 (Oct. 27, 1998).\18\ DOE notes that 
the SIP Call rule may provide a similar, although smaller in extent, 
regional cap and may limit actual reduction in NO<INF>X</INF> emissions 
from revised standards occurring in States participating in the SIP 
Call rule. However, the possibility that the SIP Call rule may have the 
same effect as CAIR is highly uncertain. Therefore, DOE established a 
range of NO<INF>X</INF> reductions due to the standards being amended 
in today's final rule. DOE's low estimate was based on the emission 
rate of the cleanest new natural gas combined-cycle power plant 
available for electricity generated based on the assumption that energy 
conservation standards would result in only the cleanest available 
fossil-fueled generation being displaced. DOE used the emission rate, 
specified in 0.0341t of NO<INF>X</INF> emitted per TWh of electricity 
generated, associated with an advanced natural gas combined-cycle power 
plant, as specified by NEMS-BT. To estimate the reduction in 
NO<INF>X</INF> emissions, DOE multiplied this emission rate by the 
reduction in electricity generation due to the amended energy 
conservation standards considered. DOE's high estimate of 0.843 t of 
NO<INF>X</INF> per TWh was based on the use of a nationwide 
NO<INF>X</INF> emission rate for all electrical generation. Use of such 
an emission rate assumes that future energy conservation standards 
would result in displaced electrical generation mix that is equivalent 
to today's mix of power plants (i.e., future power plants displaced are 
no cleaner than what are being used currently to generate electricity). 
In addition, under the high estimate assumption, energy conservation 
standards would have little to no effect on the generation mix. Based 
on AEO2008 for a recent year (2006) in which no regulatory or non-
regulatory measures were in effect to limit NO<INF>X</INF> emissions, 
DOE multiplied this emission rate by the reduction in electricity 
generation due to the standards considered. The range in NO<INF>X</INF> 
emission changes calculated under using the low and high estimate 
scenarios are shown in Table V.26 and Table V.27 by TSL. The range of 
total NO<INF>X</INF> emission reductions is from 0.04 to 4.34 tons for 
the range of TSLs considered. These changes in NO<INF>X</INF> emissions 
are extremely small, with a range between 0.0001 and 0.009 percent of 
the national base case emissions forecast by NEMS-BT, depending on the 
TSL.
---------------------------------------------------------------------------

    \18\ In the NO<INF>X</INF> SIP Call rule, EPA found that sources 
in the District of Columbia and 22 ``upwind'' states (States) were 
emitting NO<INF>X</INF> (an ozone precursor) at levels that 
significantly contributed to ``downwind'' states not attaining the 
ozone NAAQS or at levels that interfered with states in attainment 
maintaining the ozone NAAQS. In an effort to ensure that 
``downwind'' states attain or continue to attain the ozone NAAQS, 
EPA established a region-wide cap for NO<INF>X</INF> emissions from 
certain large combustion sources and set a NO<INF>X</INF> emissions 
budget for each State. Unlike the cap that CAIR would have 
established, the NO<INF>X</INF> SIP Call Rule's cap only constrains 
seasonal (summer time) emissions. In order to comply with the 
NO<INF>X</INF> SIP Call Rule, States could elect to participate in 
the NO<INF>X</INF> Budget Trading Program. Under the NO<INF>X</INF> 
Budget Trading Program, each emission source is required to have one 
allowance for each ton of NO<INF>X</INF> emitted during the ozone 
season. States have flexibility in how they allocate allowances 
through their State Implementation Plans but States must remain 
within the EPA-established budget. Emission sources are allowed to 
buy, sell and bank NO<INF>X</INF> allowances as appropriate. It 
should be noted that, on April 16, 2008, EPA determined that Georgia 
is no longer subject to the NO<INF>X</INF> SIP Call rule. 73 FR 
21528 (April 22, 2008).
---------------------------------------------------------------------------

    As noted above in section IV.J, with regard to Hg emissions, DOE is 
able to report an estimate of the physical quantity changes in these 
emissions associated with an energy conservation standard. As opposed 
to using the NEMS-BT model, DOE established a range of Hg rates to 
estimate the Hg emissions that could be reduced from standards. DOE's 
low estimate was based on the assumption that future standards would 
displace electrical generation from natural gas-fired power plants 
resulting in an effective emission rate of zero. The low-end emission 
rate is zero because virtually all Hg emitted from electricity 
generation is from coal-fired power plants. Based on an emission rate 
of zero, no emissions would be reduced from energy conservation 
standards. DOE's high estimate was based on the use of a nationwide 
mercury emission rate from AEO2008. Because power plant emission rates 
are a function of local regulation, scrubbers, and the mercury content 
of coal, it is extremely difficult to come up with a precise high-end 
emission rate. Therefore, DOE believes the most reasonable estimate is 
based on the assumption that all displaced coal generation would have 
been emitting at the average emission rate for coal generation as 
specified by AEO2008. As noted previously, because virtually all 
mercury emitted from electricity generation is from coal-fired power 
plants, DOE based the emission rate on the tons of mercury emitted per 
TWh of coal-generated electricity. Based on the emission rate for a 
recent year (2006), DOE derived a high-end emission rate of 0.0255 tons 
per TWh. To estimate the reduction in mercury emissions, DOE multiplied 
the emission rate by the reduction in coal-generated electricity due to 
the standards considered as determined in the utility impact analysis. 
The estimated changes in Hg

[[Page 58813]]

emissions are shown in Table V.26 and Table V.27 for both the standard 
and non-standard size PTAC and PTHP equipment for the period from 2012 
to 2042. The range of total Hg emission reductions is from 0 to 0.082 
tons for the range of TSLs considered. These changes in Hg emissions 
are extremely small, with a range between 0 and 0.016 percent of the 
national base case emissions forecast by NEMS-BT, depending on the TSL.
    The NEMS-BT model used for today's rulemaking could not be used to 
estimate Hg emission reductions due to standards as it assumed that Hg 
emissions would be subject to EPA's Clean Air Mercury Rule \19\ (CAMR), 
which would have permanently capped emissions of mercury for new and 
existing coal-fired plants in all States by 2010. Similar to 
SO<INF>2</INF> and NO<INF>X</INF>, DOE assumed that under such a 
system, energy conservation standards would have resulted in no 
physical effect on these emissions, but might have resulted in an 
environmental-related economic benefit in the form of a lower price for 
emissions allowance credits, if large enough. DOE estimated that the 
change in the Hg emissions from energy conservation standards would not 
be large enough to influence allowance prices under CAMR.
---------------------------------------------------------------------------

    \19\ 70 FR 28606 (May 18, 2005).
---------------------------------------------------------------------------

    On February 8, 2008, the D.C. Circuit issued its decision in New 
Jersey v. Environmental Protection Agency, \20\ in which the D.C. 
Circuit, among other actions, vacated the CAMR referenced above. In 
light of this development and because the NEMS-BT model could not be 
used to directly calculate the Hg emission reductions, DOE used the 
current Hg emission rates as discussed above to calculate the 
reductions in Hg emissions in Table V.26 and Table V.27.
---------------------------------------------------------------------------

    \20\ No. 05-1097, 2008 WL 341338, at * (DC Cir. Feb. 9, 2008),
---------------------------------------------------------------------------

    In the NOPR, DOE stated that it was considering taking into account 
a monetary benefit of CO<INF>2</INF> emission reductions associated 
with this rulemaking. To put the potential monetary benefits from 
reduced CO<INF>2</INF> emissions into a form that is likely to be most 
useful to decisionmakers and stakeholders, DOE used the same methods 
used to calculate the net present value of consumer cost savings: The 
estimated year-by-year reductions in CO<INF>2</INF> emissions were 
converted into monetary values and these resulting annual values were 
then discounted over the life of the affected appliances to the present 
using both 3 percent and 7 percent discount rates.
    In the NOPR, DOE proposed to use the range $0 to $14 per ton. These 
estimates were based on an assumption of no benefit to an average 
benefit value reported by the IPCC.\21\ It is important to note that 
the IPCC estimate used as the upper bound value was derived from an 
estimate of the mean value of worldwide impacts from potential climate 
impacts caused by CO<INF>2</INF> emissions, and not just the effects 
likely to occur within the United States. As DOE considers a monetary 
value for CO<INF>2</INF> emission reductions, the value should be 
restricted to a representation of those costs/benefits likely to be 
experienced in the United States. As DOE also explained in the NOPR, it 
expects that such values would be lower than comparable global values, 
however, there currently are no consensus estimates for the U.S. 
benefits likely to result from CO<INF>2</INF> emission reductions. 
However, DOE believes it is appropriate to use U.S. benefit values, 
where available, and not world benefit values, in its analysis.\22\ 
Because U.S. specific estimates are not available, and DOE did not 
receive any additional information that would help serve to narrow the 
proposed range as a representative range for domestic U.S. benefits, 
DOE believes it is appropriate to use the global mean value as an 
appropriate upper bound U.S. value for purposes of sensitivity 
analysis.
---------------------------------------------------------------------------

    \21\ During the preparation of its most recent review of the 
state of climate science, the Intergovernmental Panel on Climate 
Change (IPCC) identified various estimates of the present value of 
reducing carbon-dioxide emissions by one ton over the life that 
these emissions would remain in the atmosphere. The estimates 
reviewed by the IPCC spanned a range of values. In the absence of a 
consensus on any single estimate of the monetary value of 
CO<INF>2</INF> emissions, DOE used the estimates identified by the 
study cited in Summary for Policymakers prepared by Working Group II 
of the IPCC's Fourth Assessment Report to estimate the potential 
monetary value of CO<INF>2</INF> reductions likely to result from 
standards finalized in this rulemaking. According to IPCC, the mean 
social cost of carbon (SCC) reported in studies published in peer-
reviewed journals was $43 per ton of carbon. This translates into 
about $12 per ton of carbon dioxide. The literature review (Tol 
2005) from which this mean was derived did not report the year in 
which these dollars were denominated. However, we understand this 
estimate was denominated in 1995 dollars. Updating that estimate to 
2007 dollars yields a SCC of $15 per ton of carbon dioxide.
    \22\ In contrast, most of the estimates of costs and benefits of 
increasing the efficiency of PTACs and PTHPs include only economic 
values of impacts that would be experienced in the U.S. For example, 
in determining impacts on manufacturers, DOE generally does not 
consider impacts that occur solely outside of the United States.
---------------------------------------------------------------------------

    DOE received several comments in response to the proposed estimated 
value of CO<INF>2</INF> emissions reductions. EarthJustice questioned 
both the upper and lower bounds of DOE's range of estimated 
CO<INF>2</INF> values, both of which EarthJustice argued were too low. 
EarthJustice also stated that it would be inappropriate to limit the 
consideration to the value of CO<INF>2</INF> to a domestic value. 
EarthJustice and the joint comment from ACEE and the Natural Resource 
Defense Council recommended that DOE consider relying on the estimate 
used in DOE's analysis of the America's Climate Security Bill of 2007 
(S. 2191).\23\ AHRI commented that DOE should not rely on the IPCC 
study or values under the European Union ``cap and trade'' program, but 
instead should consider a monetary value for CO<INF>2</INF> only once a 
U.S. ``cap and trade'' program has been established, stressing that DOE 
should consider only the domestic value of CO<INF>2</INF> emissions.
---------------------------------------------------------------------------

    \23\ EarthJustice, ACEEE, and the Natural Resource Defense 
Council noted that the analysis of the America's Climate Security 
Bill of 2007, used a value of $17 per ton of CO<INF>2</INF> with a 
7.4 percent annual growth rate. EarthJustice also cited a study by 
the United Kingdom's Department for Environment, Food, and Rural 
Affairs, which recommended valuing carbon emissions at just over $25 
per ton of CO<INF>2</INF>.
---------------------------------------------------------------------------

    Given the uncertainty surrounding estimates of the SCC, relying on 
any single study may be inadvisable since its estimate of the SCC will 
depend on many assumptions made by its authors. The Working Group II's 
contribution to the Fourth Assessment Report of the IPCC notes that:

    The large ranges of SCC are due in the large part to differences 
in assumptions regarding climate sensitivity, response lags, the 
treatment of risk and equity, economic and non-economic impacts, the 
inclusion of potentially catastrophic losses, and discount 
rates.\24\
---------------------------------------------------------------------------

    \24\ Climate Change 2007--Impacts, Adaption and Vulnerability 
Contribution of Working Group II to the Fourth Assessment Report of 
the IPCC, 17. Available at http://www.ipcc-wg2.org (last accessed 
Aug. 7, 2008).

Because of this uncertainty, DOE relied on Tol (2005), which was 
presented in the IPCC's Fourth Assessment Report, and was a 
comprehensive meta-analysis of estimates for the value of SCC. 
Commenters did not provide a rationale for why it would be more 
accurate or reliable for DOE to use values based on the limited number 
of studies they cited. As a result, DOE continues to rely on the Tol 
study reported by the IPCC as the basis for its analysis.
    DOE continues to believe that the most appropriate monetary values 
for consideration in the development of efficiency standards are those 
drawn from studies that attempt to estimate the present value of the 
marginal economic benefits likely to result from reducing greenhouse 
gas emissions, rather than estimates that are based on the market

[[Page 58814]]

value of emission allowances under existing cap and trade programs or 
estimates that are based on the cost of reducing emissions--both of 
which are largely determined by policy decisions that set the timing 
and extent of emission reductions and do not necessarily reflect the 
benefit of reductions. DOE also believes that the studies it relies 
upon generally should be studies that were the subject of a peer review 
process and were published in reputable journals.
    In today's final rule, DOE is essentially relying on the range of 
values proposed in the NOPR, which was based on the values presented in 
Tol (2005), as proposed. However, DOE notes that in the proposed rule, 
DOE mistakenly assumed that the values presented in Tol (2005) were in 
2000 dollars. In actuality, the values in Tol (2005) were indicated to 
be approximately 1995 values in 1995 dollars. Had DOE, at the NOPR 
stage, applied the correct dollar year of the values presented in Tol 
(2005), DOE would have proposed the range of $0 to $15 in the NOPR. 
Additionally, DOE has applied an annual growth rate of 2.4% to the 
value of SCC, as suggested by the IPCC Working Group II (2007, p. 822), 
based on estimated increases in damages from future emissions reported 
in published studies. As a result, for today's final rule, DOE is 
assigning a range for the SCC of $0 to $20 ($2007) per ton of 
CO<INF>2</INF> emissions.
    EarthJustice questioned the use of the median estimated social cost 
of CO<INF>2</INF> as an upper bound of the range. However, the upper 
bound of the range used by DOE is based on Tol (2005), which reviewed 
103 estimates of the SCC from 28 published studies, and concluded that 
when only peer-reviewed studies published in recognized journals are 
considered, ``that climate change impacts may be very uncertain but 
[it] is unlikely that the marginal damage costs of carbon dioxide 
emissions exceed $50 per ton carbon [comparable to a 2007 value of $20 
per ton carbon dioxide when expressed in 2007 U.S. dollars with a 2.4% 
growth rate.]''
    EarthJustice also questioned the use of $0 as the lower bound of 
DOE's estimated range. In setting a lower bound, DOE agrees with the 
IPCC Working Group II (2007) report that ``significant warming across 
the globe and the locations of significant observed changes in many 
systems consistent with warming is very unlikely to be due solely to 
natural variability of temperatures or natural variability of the 
systems'' (pp. 9), and thus tentatively concludes that a global value 
of zero for reducing emissions cannot be justified. However, DOE also 
believes that it is reasonable to allow for the possibility that the 
U.S. portion of the global cost of carbon dioxide emissions may be 
quite low. In fact, some of the studies looked at in Tol (2005) 
reported negative values for the SCC. As stated in the NOPR, DOE is 
using U.S. benefit values, and not world benefit values, in its 
analysis and, further, DOE believes that U.S. domestic values will be 
lower than the global values. Additionally, the statutory criteria in 
EPCA do not require consideration of global effects. Therefore, DOE is 
using a lower bound of $0 per ton of CO<INF>2</INF> emissions in 
estimating the potential benefits of today's final rule.
    The resulting estimates of the potential range of net present value 
benefits associated with the reduction of CO<INF>2</INF> emissions are 
reflected in Table V.28.

    Table V.28--Estimates of Savings From CO2 Emissions Reductions Under PTAC and PTHP Trial Standard Levels at 7% Discount Rate and 3% Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Estimated
                                            cumulative CO2     Value of estimated CO2 emission reductions    Value of estimated CO2 emission reductions
                                            (Mt) emission         (million 2007$) at 7% discount rate            (million 2007$) at 3% discount rate
                                              reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size TSL:
    1...................................               0.49  $0 to $4.8...................................  $0 to $9.0.
    2...................................               0.81  $0 to $8.0...................................  $0 to $14.9.
    3...................................               1.05  $0 to $10.4..................................  $0 to $19.4.
    A...................................               1.06  $0 to $10.5..................................  $0 to $19.5.
    4...................................               1.09  $0 to $10.8..................................  $0 to $20.0.
    5...................................               1.68  $0 to $16.5..................................  $0 to $30.9.
    6...................................               2.34  $0 to $22.9..................................  $0 to $43.0.
Non-Standard Size TSL:
    1...................................               0.12  $0 to $1.2...................................  $0 to $2.2.
    2...................................               0.14  $0 to $1.4...................................  $0 to $2.7.
    3...................................               0.18  $0 to $1.8...................................  $0 to $3.4.
    4...................................               0.20  $0 to $2.0...................................  $0 to $3.7.
    5...................................               0.29  $0 to $2.9...................................  $0 to $5.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    DOE also investigated the potential monetary impact resulting from 
the impact of today's energy conservation standards on SO<INF>2</INF>, 
NO<INF>X</INF>, and Hg emissions. As previously stated, DOE's initial 
analysis assumed the presence of nationwide emission caps on 
SO<INF>2</INF> and Hg, and caps on NO<INF>X</INF> emissions in the 28 
States covered by the CAIR caps. In the presence of these caps, DOE 
concluded that no physical reductions in power sector emissions would 
occur, but that the lower generation requirements associated with 
energy conservation standards could potentially put downward pressure 
on the prices of emissions allowances in cap-and-trade markets. 
Estimating this effect is very difficult because of the factors such as 
credit banking, which can change the trajectory of prices. DOE has 
further concluded that the effect from energy conservation standards on 
SO<INF>2</INF> allowance prices is likely to be negligible, based upon 
runs of the NEMS-BT model. See Chapter 16 (Environmental Assessment) of 
the FR TSD for further details.
    As discussed earlier, with respect to NO<INF>X</INF> the CAIR rule 
has been vacated by the courts, so projected annual NO<INF>X</INF> 
allowances from NEMS-BT are no longer relevant. In DOE's subsequent 
analysis, NO<INF>X</INF> emissions are not controlled by a nationwide 
regulatory system. For the range of NO<INF>X</INF> reduction estimates 
(and Hg reduction estimates), DOE estimated the national monetized 
benefits of emissions reductions from today's rule based on 
environmental damage estimates from the literature. Available estimates 
suggest a very wide

[[Page 58815]]

range of monetary values for NO<INF>X</INF> emissions, ranging from 
$370 per ton to $3,800 per ton of NO<INF>X</INF> from stationary 
sources, measured in 2001 dollars \25\ or a range of $432 per ton to 
$4,441 per ton in 2007 dollars.
---------------------------------------------------------------------------

    \25\ 2006 Report to Congress on the Costs and Benefits of 
Federal Regulations and Unfunded Mandates on State, Local, and 
Tribal Entities. Office of Management and Budget Office of 
Information and Regulatory Affairs, Washington, DC.
---------------------------------------------------------------------------

    DOE has already conducted research for today's final rule and 
determined that the basic science linking mercury emissions from power 
plants to impacts on humans is considered highly uncertain. However, 
DOE identified two estimates of the environmental damages of mercury 
based on two estimates of the adverse impact of childhood exposure to 
methyl mercury on IQ for American children, and subsequent loss of 
lifetime economic productivity resulting from these IQ losses. The high 
end estimate is based on an estimate of the current aggregate cost of 
the loss of IQ in American children that results from exposure to 
mercury of U.S. power plant origin ($1.3 billion per year in year 
2000$), which works out to $32.6 million per ton emitted per year 
(2007$).\26\ The low-end estimate was $664,000 per ton emitted in 2004$ 
or $729,000 per ton in 2007$), which DOE derived from a published 
evaluation of mercury control using different methods and assumptions 
from the first study, but also based on the present value of the 
lifetime earnings of children exposed.\27\ The resulting estimates of 
the potential range of the present value benefits associated with the 
national reduction of NO<INF>X</INF> and national reductions in Hg 
emissions are reflected in Table V.29 and Table V.30.
---------------------------------------------------------------------------

    \26\ Trasande, L., et al., ``Applying Cost Analyses to Drive 
Policy that Protects Children'' 1076 ANN. N.Y. ACAD. SCI. 911 
(2006).
    \27\ Ted Gayer and Robert Hahn, Designing Environmental Policy: 
Lessons from the Regulation of Mercury Emissions, Regulatory 
Analysis 05-01. AEI-Brookings Joint Center For Regulatory Studies, 
Washington, DC, 31 pp., 2004. A version of this paper was published 
in the Journal of Regulatory Economics in 2006. The estimate was 
derived by back-calculating the annual benefits per ton from the net 
present value of benefits reported in the study.

Table V.29--Estimates of Savings From Reductions of NOX and Hg Under PTAC and PTHP Trial Standard Levels at a 7%
                                                  Discount Rate
----------------------------------------------------------------------------------------------------------------
                                       Estimated      Value of estimated       Estimated      Value of estimated
                                    cumulative NOX       NOX emission        cumulative Hg        Hg emission
                                     (kt) emission        reductions        (tons) emission       reductions
                                     reductions *      (thousand 2007$)       reductions*      (thousand 2007$)
----------------------------------------------------------------------------------------------------------------
Standard Size TSL:
    1...........................  0.04 to 0.94......  $4 to $1,091......  0 to 0.017........  $0 to $182.
    2...........................  0.07 to 1.64......  $7 to $1,892......  0 to 0.028........  $0 to $299.
    3...........................  0.08 to 2.02......  $9 to $2,335......  0 to 0.037........  $0 to $392.
    A...........................  0.09 to 2.13......  $10 to $2,462.....  0 to 0.037........  $0 to $393.
    4...........................  0.09 to 2.25......  $10 to $2,599.....  0 to 0.038........  $0 to $403.
    5...........................  0.13 to 3.17......  $14 to $3,658.....  0 to 0.059........  $0 to $624.
    6...........................  0.18 to 4.34......  $20 to $5,014.....  0 to 0.082........  $0 to $871.
Non-Standard Size TSL:
    1...........................  0.01 to 0.23......  $1 to $263........  0 to 0.004........  $0 to $45.
    2...........................  0.01 to 0.28......  $1 to $319........  0 to 0.005........  $0 to $54.
    3...........................  0.01 to 0.34......  $2 to $390........  0 to 0.006........  $0 to $69.
    4...........................  0.02 to 0.40......  $2 to $463........  0 to 0.007........  $0 to $75.
    5...........................  0.02 to 0.55......  $2 to $631........  0 to 0.010........  $0 to $110.
----------------------------------------------------------------------------------------------------------------
* Values in Table V.32 may not appear to sum to the cumulative values in Table V.26 due to rounding.


Table V.30--Estimates of Savings From Reductions of NOX and Hg Under PTAC and PTHP Trial Standard Levels at a 3%
                                                  Discount Rate
----------------------------------------------------------------------------------------------------------------
                                       Estimated      Value of estimated       Estimated      Value of estimated
                                    cumulative NOX       NOX emission        cumulative Hg        Hg emission
                                     (kt) emission        reductions        (tons) emission       reductions
                                     reductions *      (thousand 2007$)      reductions *      (thousand 2007$)
----------------------------------------------------------------------------------------------------------------
Standard Size TSL:
    1...........................  0.04 to 0.94......  $9 to $2,250......  0 to 0.017........  $0 to $331.
    2...........................  0.07 to 1.64......  $15 to $3,903.....  0 to 0.028........  $0 to $544.
    3...........................  0.08 to 2.02......  $19 to $4,815.....  0 to 0.037........  $0 to $712
    A...........................  0.09 to 2.13......  $20 to $5,079.....  0 to 0.037........  $0 to $714.
    4...........................  0.09 to 2.25......  $21 to $5,362.....  0 to 0.038........  $0 to $732.
    5...........................  0.13 to 3.17......  $30 to $7,545.....  0 to 0.059........  $0 to $1,135.
    6...........................  0.18 to 4.34......  $41 to $10,341....  0 to 0.082........  $0 to $1,582.
Non-Standard Size TSL:
    1...........................  0.01 to 0.23......  $2 to $542........  0 to 0.004........  $0 to $83.
    2...........................  0.01 to 0.28......  $3 to $659........  0 to 0.005........  $0 to $98.
    3...........................  0.01 to 0.34......  $3 to $805........  0 to 0.006........  $0 to $125.
    4...........................  0.02 to 0.40......  $4 to $954........  0 to 0.007........  $0 to $136.
    5...........................  0.02 to 0.55......  $5 to $1,301......  0 to 0.010........  $0 to $200.
----------------------------------------------------------------------------------------------------------------
* Values in Table V.33 may not appear to sum to the cumulative values in Table V.26 due to rounding.


[[Page 58816]]

7. Other Factors
    In developing today's standards, the Secretary took into 
consideration: (1) The impacts of setting different amended standards 
for PTACs and PTHPs; (2) the potential that amended standards could 
cause equipment switching (i.e., purchase of PTACs instead of PTHPs) 
and the effects of any such switching; (3) the uncertainties associated 
with the impending phaseout in 2010 of R-22 refrigerant; and (4) the 
impact of amended standards on the manufacturers of and market for non-
standard size packaged terminal equipment (e.g., impacts on small 
businesses). To address the impact of setting different amended energy 
conservation standards for PTACs and PTHPs and the potential that 
amended energy conservation standards could cause equipment switching, 
DOE conducted a sensitivity analysis. The results of the sensitivity 
analysis are shown in section V.B. DOE discusses the uncertainties 
associated with the impending refrigerant phaseout in 2010 of R-22 
refrigerant and the impact of amended energy conservation standards on 
the non-standard size industry in the conclusion section below.

D. Conclusion

    EPCA contains criteria for prescribing new or amended energy 
conservation standards. For commercial HVAC and water heating equipment 
such as PTACs and PTHPs, DOE must adopt as national standards the 
levels in amendments to ASHRAE Standard 90.1 unless DOE determines, 
``supported by clear and convincing evidence,'' that standards more 
stringent than those levels ``would result in significant additional 
conservation of energy and [be] technologically feasible and 
economically justified.'' (42 U.S.C. 6313(a)(6)(A)(ii)(II)) Any more 
stringent standard must be designed to achieve the maximum improvement 
in energy efficiency and be technologically feasible and economically 
justified. (42 U.S.C. 6316(a); 42 U.S.C. 6295(o)(2)(A)) Moreover, in 
determining whether an energy conservation standard is economically 
justified, DOE must weigh all seven factors specified in EPCA, and set 
forth above, to determine whether the benefits of the standard exceed 
its costs. (42 U.S.C. 6316(a); 42 U.S.C. 6295(o)(2)(B)(i))
    In this rulemaking, DOE has evaluated whether standards more 
stringent than the efficiency levels in ASHRAE Standard 90.1-1999 for 
PTACs and PTHPs are justified under the above criteria. As stated in 
sections III.B.1 and C, DOE determined, based on clear and convincing 
evidence, that all of the more stringent standard levels considered in 
this rulemaking are technologically feasible and would save significant 
additional amounts of energy. To determine if these more stringent TSLs 
are economically justified, DOE compared the maximum technologically 
feasible levels with the base case, and determined whether those levels 
are economically justified. Upon finding the maximum technologically 
feasible levels not to be justified, DOE analyzed the next lower TSL to 
determine whether that level was economically justified. DOE repeated 
this procedure until it identified a TSL that was economically 
justified.
    In the NOPR, DOE weighed the benefits and burdens for standard size 
and non-standard size PTACs and PTHPs through TSL 1 through 7. In 
response to both the uniqueness of the two separate industries and 
comments from interested parties on the potential impacts of standards 
on the standard size and non-standard size equipment, DOE weighed the 
benefits and burdens separately in today's final rule.
    In addition to the quantitative results, DOE also considered other 
factors that might affect economic justification. DOE took into 
consideration the EPA-mandated refrigerant phaseout and its effect on 
PTAC and PTHP equipment efficiency, which concern both standard size 
and non-standard size PTACs and PTHPs. In addition, DOE considered the 
uniqueness of the PTAC and PTHP industry with its substantial number of 
manufacturers of non-standard size equipment. In particular, DOE 
considered the declining shipments of non-standard size equipment, the 
small size segment of the industry (both relative to the rest of the 
PTAC and PTHP industry and in absolute terms), and the small businesses 
that could be affected by amended energy conservation standards.
1. Standard Size PTACs and PTHPs
    Table V.31 summarizes DOE's quantitative analysis results for each 
TSL it considered for standard size PTACs and PTHPs in this final rule. 
This table presents the results or, in some cases a range of results, 
for each TSL, and will aid the reader in the discussion of costs and 
benefits of each TSL. The range of values for industry impacts 
represents the results for the different markup scenarios that DOE used 
to estimate manufacturer impacts.

                     Table V.31--Summary of Results for Standard Size PTACs and PTHPs Based Upon the AEO2008 Energy Price Forecast *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               TSL 1           TSL 2           TSL 3           TSL A           TSL 4           TSL 5           TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary energy saved (quads)............           0.015           0.024           0.031           0.032           0.033           0.049           0.068
    7% Discount rate (Standard Size)....           0.003           0.006           0.007           0.007           0.008           0.011           0.015
    3% Discount rate (Standard Size)....           0.007           0.012           0.016           0.016           0.017           0.025           0.035
Generation capacity reduction (GW)               (0.040)         (0.062)         (0.086)         (0.082)         (0.082)         (0.139)         (0.196)
 (Standard Size) **.....................
NPV (2007$ million) (Standard Size):
    7% Discount rate....................               1               8               2              10               6            (11)            (41)
    3% Discount rate....................              17              43              38              54              49              31            (10)
Industry impacts (Standard Size):
    Industry NPV (2007$ million)........        (3)-(28)        (6)-(45)        (3)-(60)        (8)-(61)        (8)-(68)       (1)-(103)       (4)-(164)
    Industry NPV (% Change).............       (0.8)-(7)        (1)-(11)      (0.8)-(14)        (2)-(14)        (2)-(16)      (0.2)-(24)      (0.9)-(38)

[[Page 58817]]

 
Cumulative emissions impacts (Standard
 Size) [dagger]:
    CO2 (Mt)............................          (0.49)          (0.81)          (1.05)          (1.06)          (1.09)          (1.68)          (2.34)
    NOX (kt)............................   (0.04)-(0.94)   (0.07)-(1.64)   (0.08)-(2.02)   (0.09)-(2.13)   (0.09)-(2.25)   (0.13)-(3.17)   (0.18)-(4.34)
    Hg (t)..............................       0-(0.017)       0-(0.028)       0-(0.037)       0-(0.037)       0-(0.038)       0-(0.059)       0-(0.082)
Employment Impacts (Standard Size):
    Indirect Employment Impacts.........              41              70              87              91              96             138             190
    Direct, Domestic Employment Impacts.               1               2               3               3               3               6               9
Mean LCC savings (2007$) (Standard Size)
 *:
    Standard Size PTAC, 9,000 Btu/h.....             (1)             (1)             (3)             (3)             (1)             (6)            (10)
    Standard Size PTHP, 9,000 Btu/h.....              11              20              20              28              28              28              24
    Standard Size PTAC, 12,000 Btu/h....             (2)             (2)             (5)             (2)             (2)            (10)            (15)
    Standard Size PTHP, 12,000 Btu/h....              13              24              24              24              20              20              14
Mean PBP (years) (Standard Size):
    Standard Size PTAC, 9,000 Btu/h.....            13.0            13.0            13.7            13.7            13.0            14.5            15.2
    Standard Size PTHP, 9,000 Btu/h.....             5.1             4.5             4.5             4.4             4.4             4.4             5.1
    Standard Size PTAC, 12,000 Btu/h....            13.1            13.1            14.0            13.1            13.1            14.9            15.9
    Standard Size PTHP, 12,000 Btu/h....             5.1             4.6             4.6             4.6             5.5             5.5             6.4
LCC Results (Standard Size):
    Standard Size PTAC, 9,000 Btu/h.....
        Net Cost (%)....................             15%             15%             30%             30%             15%             46%             62%
        No Impact (%)...................             77%             77%             56%             56%             77%             37%             18%
        Net Benefit (%).................              7%              7%             14%             14%              7%             17%             21%
    Standard Size PTHP, 9,000 Btu/h.....
        Net Cost (%)....................              7%             10%             10%             13%             13%             13%             24%
        No Impact (%)...................             78%             57%             57%             37%             37%             37%             18%
        Net Benefit (%).................             16%             33%             33%             50%             50%             50%             58%
    Standard Size PTAC, 12,000 Btu/h....
        Net Cost (%)....................             16%             16%             31%             16%             16%             48%             65%
        No Impact (%)...................             77%             77%             56%             77%             77%             36%             18%
        Net Benefit (%).................              7%              7%             13%              7%              7%             16%             17%
    Standard Size PTHP, 12,000 Btu/h....
        Net Cost (%)....................              7%             10%             10%             10%             21%             21%             35%
        No Impact (%)...................             77%             57%             57%             57%             37%             37%             18%

[[Page 58818]]

 
        Net Benefit (%).................             16%             33%             33%             33%             42%             42%             47%
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. For LCCs, a negative value means an increase in LCC by the amount indicated.
** Change in installed generation capacity by the year 2042 based on AEO 2008 Reference Case.
[dagger] CO2 emissions impacts are physical reductions from all sources. NOX and Hg emissions impacts are physical reductions at power plants.

    First, DOE considered TSL 6, the max-tech efficiency level for 
standard size PTACs and PTHPs. TSL 6 would likely save 0.068 quads of 
energy through 2042 for standard size PTACs and PTHPs, an amount DOE 
considers significant. Discounted at seven percent, the projected 
energy savings through 2042 would be 0.015 quads. For the Nation as a 
whole, DOE projects that TSL 6 would result in a net decrease of $41 
million in NPV for standard size PTACs and PTHPs, using a discount rate 
of seven percent and a net decrease of $10 million for standard size 
PTACs and PTHPs, using a discount rate of three percent. The emissions 
reductions at TSL 6 for standard size PTACs and PTHPs are 2.34 Mt of 
CO<INF>2</INF>, between 0.18 kt and 4.34 kt of NO<INF>X</INF>, and 
between zero and 0.082 t of Hg. Total generating capacity needed in 
2042 is estimated to decrease compared to the reference case by 0.196 
gigawatts (GW) under TSL 6.
    At TSL 6, DOE projects that the average PTAC customer will 
experience an increase in LCC for all standard size equipment classes. 
Purchasers of standard size PTACs are projected to lose on average -$12 
(2007$) over the life of the product, and purchasers of standard size 
PTHPs would save on average $20 (2007$). DOE estimates LCC increases 
for 63 percent of customers in the Nation who purchase a standard size 
PTAC, and for 29 percent of customers in the Nation who purchase a 
standard size PTHP. The mean payback period of each standard size PTAC 
equipment class at TSL 6 is projected to be substantially longer than 
the mean lifetime of the equipment.
    The projected change in the standard size industry value (INPV) 
ranges from a decrease of $4 million to a decrease of $164 million, in 
2007$. For standard size PTACs and PTHPs, the impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. Currently, there are equipment lines 
being manufactured with efficiency levels above TSL 6 utilizing R-22 
refrigerant. Using the degradations estimated in the engineering 
analysis, DOE believes standard size equipment could be produced at TSL 
6 in the lower range of cooling capacities. DOE believes manufacturers 
would not be able to manufacture standard size PTACs and PTHPs at TSL 6 
at the high range of the cooling capacities (e.g., 15,000 Btu/h) within 
a given equipment class (i.e., standard size PTACs with a cooling 
capacity greater than or equal to 7,000 Btu/h and less than or equal to 
15,000 Btu/h). DOE has not initially been able to identify technologies 
and design approaches for R-410A units to meet these higher levels in 
the absence of the availability of high efficiency compressors spanning 
the full range of cooling capacities. At TSL 6, DOE recognizes the risk 
of very large negative impacts if manufacturers' expectations about 
reduced profit margins are realized. In particular, if the high end of 
the range of impacts is reached as DOE expects, TSL 6 could result in a 
net loss of 38.3 percent in INPV to the standard size PTAC and PTHP 
industry.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 6, the Secretary has concluded that at TSL 6, even 
if manufacturers could overcome the barriers to produce R-410 equipment 
in the full range of cooling capacities by the effective date of an 
amended energy conservation standard, the benefits of energy savings 
and emissions reductions would be outweighed by the potential multi-
million dollar negative net economic cost to the Nation, the economic 
burden on consumers, and the large capital conversion costs that could 
result in a reduction in INPV for manufacturers.
    Next, DOE considered TSL 5. Primary energy savings is estimated at 
0.049 quads of energy through 2042 for standard size PTACs and PTHPs, 
which DOE considers significant. Discounted at seven percent, the 
energy savings through 2042 would be 0.011 quads. For the Nation as a 
whole, DOE projects that TSL 5 would result in a net decrease of $11 
million in NPV for standard size PTACs and PTHPs, using a discount rate 
of seven percent and an increase of $31 million for standard size PTACs 
and PTHPs, using a discount rate of three percent. The emissions 
reductions are projected to be 1.68 Mt of CO<INF>2</INF>, between 0.013 
kt and 3.17 kt of NO<INF>X</INF> and between 0 and 0.082 t of Hg. Total 
generating capacity needed in 2042 under TSL 5 is estimated to decrease 
by 0.139 GW for standard size PTACs and PTHPs.
    At TSL 5, DOE found the impacts of amended energy conservation 
standards on customers of PTACs would likely differ significantly from 
their impacts on PTHP customers. While only 16 percent of customers of 
standard size PTHPs would likely have an LCC increase at TSL 5, 47 
percent of customers of standard size PTACs would experience an LCC 
increase at this TSL. A customer for a standard size PTAC, on average, 
would experience an increase in LCC of $8, while the customer for a 
standard size PTHP, on average, would experience a decrease in LCC of 
$25. At TSL 5, DOE projects that the average PTAC customer for a 
standard size PTAC will experience an increase in LCC in each equipment 
class. In addition, the mean payback period of each standard size PTAC 
equipment class at TSL 5 is projected to be substantially longer than 
the mean lifetime.
    At TSL 5, the projected change in INPV ranges between losses of $1 
million and $103 million. For manufacturers of standard size equipment 
alone, DOE estimated a decrease in the INPV to range from 0.2 percent 
to 24.0 percent. The magnitude of projected impacts is still largely 
determined, however, by the manufacturers' ability to pass on larger 
increases in MPC to the customer. Thus, the potential INPV decrease of 
$103 million assumes that DOE's projections of partial cost recovery as 
described in Chapter 13 of the TSD remain valid. In addition, at TSL 5 
the impending refrigerant phaseout could also have a significant impact 
on manufacturers. Currently, both standard size PTACs and PTHPs using 
R-22 refrigerant are available on the market at and above TSL 5 
efficiency levels. However, at the performance degradations that DOE 
estimated in the engineering analysis for R-410A equipment, 
manufacturers would be unable to produce R-410A equipment at these 
levels unless high

[[Page 58819]]

efficiency R-410A compressors become available. The absence of such 
compressors would likely mean that the negative financial impacts of 
TSL 5 would be greater than characterized by DOE's MIA analysis. Even 
though the ability of manufacturers to produce equipment utilizing R-
410A is greater at TSL 5 than at TSL 6, DOE anticipates that 
manufacturers would not be able to produce standard size PTACs and 
PTHPs at TSL 5 in the full range of capacities available today due to 
the physical size constraints imposed by the wall sleeve dimensions.
    While DOE recognizes the increased economic benefits to the nation 
that could result from TSL 5 for standard size PTACs and PTHPs, DOE 
concludes that the benefits of a Federal standard at TSL 5 would still 
be outweighed by the economic burden that would be placed upon PTAC 
customers. In addition, DOE believes at TSL 5, the benefits of energy 
savings and emissions impacts would be outweighed by the large impacts 
on standard size manufacturers' INPV. Finally, DOE is concerned that 
standard size manufacturers may be unable to offer the full capacity 
range of equipment utilizing R-410A by the effective date of the 
amended energy conservation standards.
    Next, DOE considered TSL 4. For TSL 4, DOE combined the efficiency 
levels in TSL 1 for PTACs and the efficiency levels in TSL 5 for PTHPs. 
This combination of efficiency levels serves to maximize LCC savings, 
while recognizing the differences in LCC results for standard size 
PTACs and PTHPs. DOE projects that TSL 4 for standard size PTACs and 
PTHPs would save 0.033 quads of energy through 2042, an amount DOE 
considers significant. Discounted at seven percent, the projected 
energy savings through 2042 would be 0.008 quads. For the Nation as a 
whole, DOE projects that TSL 4 would result in net savings in NPV of $6 
million for standard size PTACs and PTHPs, using a discount rate of 
seven percent, and $49 million for standard size PTACs and PTHPs, using 
a discount rate of three percent. The estimated emissions reductions 
are 1.09 Mt of CO<INF>2</INF>, between 0.09 kt and 2.25 kt of 
NO<INF>X</INF>, and between 0 and 0.038 t of Hg. Total generating 
capacity needed in 2042 under TSL 4 would likely decrease by 0.082 GW.
    At TSL 4, DOE projects that the average PTAC or PTHP customer would 
experience LCC savings. Purchasers of standard size PTACs, on average, 
have LCC increase of $2 (2007$) over the life of the product and 
purchasers of PTHPs would save on average $25 (2007$). DOE estimates an 
LCC increase for 15 percent of customers in the Nation who purchase a 
standard size PTAC, and for 16 percent of customers in the Nation who 
purchase a standard size PTHP. For standard size PTACs and PTHPs, the 
remainder of customers would experience either a decrease or no change 
in LCC. DOE also projects that the mean payback period of each standard 
size PTAC equipment class at TSL 4 would be substantially longer than 
the mean lifetime of the equipment.
    The projected change in INPV ranges between a loss of $8 million 
and a loss of $68 million for the standard size PTAC and PTHP industry. 
Just as with TSLs 5 and 6, the projected impacts continue to be driven 
primarily by the manufacturers' ability to pass on increases in MPCs to 
the customer. The loss of $68 million assumes DOE's projections of 
partial cost recovery as described in Chapter 13 of the TSD. TSL 4 
requires the production of standard size PTACs at the efficiency levels 
in TSL 1 and standard size PTHPs at efficiency levels at TSL 5. For the 
larger cooling capacity range (e.g., 15,000 Btu/h) of standard size 
PTACs with cooling capacities greater than or equal to 7,000 Btu/h and 
less than or equal to 15,000 Btu/h, DOE believes manufacturers would 
not be able to produce equipment in a given equipment class at the EER 
required by the TSL 4 energy-efficiency equation. Specifically, DOE is 
concerned that standard size manufacturers would be forced to eliminate 
larger cooling capacity equipment due to the stringency of the standard 
in the higher cooling capacity regions.
    While DOE recognizes the increased economic benefits to the nation 
that could result from TSL 4 for standard size PTACs and PTHPs, DOE 
concludes that the benefits of a Federal standard at TSL 4 would still 
be outweighed by the economic burden that would be placed upon PTAC 
customers. In addition, DOE believes at TSL 4, the benefits of energy 
savings and emissions impacts would be outweighed by the large impacts 
on standard size manufacturers' INPV. Finally, DOE is concerned that 
standard size manufacturers may be unable to offer the full capacity 
range of equipment utilizing R-410A by the effective date of the 
amended energy conservation standards.
    Next, DOE considered TSL A. TSL A is a modified version of TSL 3 
and TSL 4 DOE used for the final rule. To generate the efficiency 
analyzed in TSL A for standard size equipment, DOE further investigated 
the slope of the energy-efficiency equation as discussed in section 
IV.C. DOE adjusted the slope of the energy-efficiency equation to make 
the curve steeper. In other words, DOE adjusted the energy-efficiency 
to require more stringent efficiency levels for lower cooling 
capacities, where manufacturers have more physical space inside the box 
sleeve to make efficiency improvements, while lessening the stringency 
for higher cooling capacities, where manufacturers are already using 
most of the physical space inside the box sleeve for capacity 
increases, leaving little room for efficiency improvements. For TSL A, 
DOE combined the efficiency levels in TSL 3 and TSL 1 for standard size 
PTACs depending on cooling capacity. For TSL A, DOE combined the 
efficiency levels in TSL 5 and TSL 3 for standard size PTHPs depending 
on cooling capacity. This combination of efficiency levels serves to 
maximize LCC savings, while recognizing the differences in LCC results 
for standard size PTACs and PTHPs and the differences in the energy 
efficiency potentials between the various cooling capacities of 
standard size equipment. (See Chapter 9 of the TSD for further 
explanation and a graphical representation of the energy-efficiency 
equations.)
    DOE projects that TSL A for standard size PTACs and PTHPs would 
save 0.032 quads of energy through 2042, an amount DOE considers 
significant. Discounted at seven percent, the projected energy savings 
through 2042 would be 0.007 quads. For the Nation as a whole, DOE 
projects that TSL A would result in net savings in NPV of $10 million 
for standard size PTACs and PTHPs, using a discount rate of seven 
percent, and $54 million for standard size PTACs and PTHPs, using a 
discount rate of three percent. The estimated emissions reductions are 
1.06 Mt of CO<INF>2</INF>, between 0.09 kt and 2.13 kt of 
NO<INF>X</INF>, and between 0 and 0.037 t of Hg. Total generating 
capacity needed in 2042 under TSL A would likely decrease by 0.082 GW.
    At TSL A, DOE projects that the average PTAC or PTHP customer would 
experience LCC savings. Purchasers of standard size PTACs, on average, 
would experience an LCC increase of $3 (2007$) over the life of the 
product while purchasers of PTHPs would save on average $26 (2007$). 
DOE estimates LCC savings for 24 percent of customers in the Nation who 
purchase a standard size PTAC, and for 12 percent of customers in the 
Nation who purchase a standard size PTHP. For standard size PTACs and 
PTHPs, the remainder of customers would experience either a decrease or 
no change in LCC. DOE also projects that the mean payback period of 
each standard size PTAC equipment

[[Page 58820]]

class at TSL A would be substantially longer than the mean lifetime of 
the equipment.
    The projected change in INPV ranges between losses of $8 million 
and $61 million for the standard size PTAC and PTHP industry at TSL A. 
Just as with TSL 4, the projected impacts continue to be driven 
primarily by the manufacturers' ability to pass on increases in MPCs to 
the customer. However, TSL A requires efficiency levels for standard 
size PTHPs to be 0.2 EER higher than the efficiency levels for PTACs. 
DOE believes bringing these efficiency levels closer together will 
ultimately aid manufacturers in using one equipment platform to design 
their standard size PTAC and PTHP equipment offerings. The loss of $61 
million assumes the continued validity of DOE's projections of partial 
cost recovery as described in Chapter 13 of the TSD. For the larger 
cooling capacity range (e.g., 15,000 Btu/h), DOE believes manufacturers 
could produce equipment at the EER required by the TSL A energy-
efficiency equation utilizing R-410A. Specifically, DOE believes 
manufacturers would not be forced to eliminate larger cooling capacity 
equipment since DOE modified the slope of the energy-efficiency 
equation at TSL A to accommodate the additional concerns regarding the 
physical constraints at larger cooling capacities.
    After considering the analysis and weighing the benefits and the 
burdens, DOE concludes that the benefits of a TSL A standard outweigh 
the burdens. In particular, the Secretary concludes that TSL A saves a 
significant amount of energy and is technologically feasible and 
economically justified in the full range of cooling capacities for R-
410A standard size PTACs and PTHPs. Therefore, DOE adopts the energy 
conservation standards for standard size PTACs and PTHPs at TSL A, as 
described by the energy-efficiency equations. Table V.32 sets out the 
energy conservation standards for standard size PTACs and PTHPs in the 
full range of cooling capacities that DOE is adopting.

                Table V.32--Final Energy Conservation Standards for Standard Size PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
                         Equipment class
-----------------------------------------------------------------
                                                     Cooling           Final energy conservation standards *
          Equipment                Category          capacity
----------------------------------------------------------------------------------------------------------------
PTAC.........................  Standard Size **  <7,000.........  EER = 11.7
                                                 7,000-15,000...  EER = 13.8 - (0.300 x Cap [dagger])
                                                 >15,000........  EER = 9.3
PTHP.........................  Standard Size **  <7,000.........  EER = 11.9
                                                                  COP = 3.3
                                                 7,000-15,000...  EER = 14.0 - (0.300 x Cap [dagger])
                                                                  COP = 3.7 - (0.052 x Cap [dagger])
                                                 >15,000........  EER = 9.5
                                                                  COP = 2.9
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure (ARI Standard 310/380-2004), all energy efficiency
  ratio (EER) values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-cooled equipment and
  evaporatively-cooled equipment and at 85 [deg]F entering water temperature for water cooled equipment. All
  coefficient of performance (COP) values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
  equipment.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions having an external wall opening
  greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and a cross-sectional area
  greater than or equal to 670 square inches.
[dagger] Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F outdoor dry-
  bulb temperature.

2. Non-Standard Size PTACs and PTHPs
    Table V.33 summarizes DOE's quantitative analysis results for each 
TSL it considered for non-standard size PTACs and PTHPs in this final 
rule. This table presents the results or, in some cases a range of 
results, for each TSL, and will aid the reader in the discussion of 
costs and benefits of each TSL. The range of values for industry 
impacts represents the results for the different markup scenarios that 
DOE used to estimate manufacturer impacts.

    Table V.33--Summary of Results for Non-Standard Size PTACs and PTHPs Based Upon the AEO2008 Energy Price
                                                   Forecast *
----------------------------------------------------------------------------------------------------------------
                                       TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
Primary energy saved (quads)....           0.004           0.004           0.005           0.006           0.009
    7% Discount rate (Non-                 0.001           0.001           0.001           0.001           0.002
     Standard Size).............
    3% Discount rate (Non-                 0.002           0.002           0.003           0.003           0.004
     Standard Size).............
Generation capacity reduction            (0.009)         (0.010)         (0.013)         (0.014)         (0.021)
 (GW) (Standard Size) **........
NPV (2007$million) (Non-Standard
 Size):
    7% Discount rate............               5               6               7               8              10
    3% Discount rate............              14              16              19              23              29
Industry Impacts (Non-Standard
 Size):
    Industry NPV (2007$ million)       (16)-(17)       (17)-(19)       (17)-(20)       (21)-(23)       (20)-(24)
    Industry NPV (% Change).....       (54)-(58)       (58)-(64)       (56)-(65)       (69)-(78)       (65)-(81)
Cumulative Emissions Impacts
 (Non-Standard Size): [dagger]
    CO2 (Mt)....................          (0.12)          (0.14)          (0.18)          (0.20)          (0.29)
    NOX (kt)....................   (0.01)-(0.23)   (0.01)-(0.28)   (0.01)-(0.34)   (0.02)-(0.40)   (0.02)-(0.55)
    Hg (t)......................       0-(0.004)       0-(0.005)       0-(0.006)       0-(0.007)       0-(0.010)
Employment Impacts (Non-Standard
 Size):
    Indirect Employment Impacts.               8               9              12              14              20
    Direct, Domestic Employment          (106)-1         (106)-1         (107)-1         (107)-1         (108)-2
     Impacts....................
Mean LCC Savings (2007$) (Non-
 Standard Size): \*\

[[Page 58821]]

 
    Non-Standard Size PTAC,                   26              26              30              26              31
     11,000 Btu/h...............
    Non-Standard Size PTHP,                   62              66              66              80              80
     11,000 Btu/h...............
Mean PBP (years) (Standard
 Size):
    Non-Standard Size PTAC,                  4.4             4.4             5.1             4.4             5.9
     11,000 Btu/h...............
    Non-Standard Size PTHP,                  2.2             2.8             2.8             3.0             3.0
     11,000 Btu/h...............
----------------------------------------------------------------------------------------------------------------
                                         LCC Results (Non-Standard Size)
----------------------------------------------------------------------------------------------------------------
Non-Standard Size PTAC, 11,000
 Btu/h:
    Net Cost (%)................               6               6              14               6              25
    No Impact (%)...............              73              73              47              73              23
    Net Benefit (%).............              22              22              39              22              52
Non-Standard Size PTHP, 11,000
 Btu/h:
    Net Cost (%)................               1               3               3               5               5
    No Impact (%)...............              73              47              47              23              23
    Net Benefit (%).............              27              50              50              72             72
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. For LCCs, a negative value means an increase in LCC by the amount
  indicated.
** Change in installed generation capacity by the year 2042 based on AEO2008 Reference Case.
[dagger] CO2 emissions impacts are physical reductions from all sources. NOX and Hg emissions impacts are
  physical reductions at power plants.

    First, DOE considered TSL 5, the max-tech efficiency level for non-
standard size PTACs and PTHPs. TSL 5 would likely save 0.009 quads of 
energy through 2042 for non-standard size PTACs and PTHPs, an amount 
DOE considers significant. Discounted at seven percent, the projected 
energy savings through 2042 would be 0.002 quads. For the Nation as a 
whole, DOE projects that TSL 5 would result in a net increase of $10 
million in NPV for non-standard size PTACs and PTHPs, using a discount 
rate of seven percent, and $29 million for non-standard size PTACs and 
PTHPs, using a discount rate of three percent. The emissions reductions 
at TSL 5 for non-standard size PTACs and PTHPs are 0.29 Mt of 
CO<INF>2</INF>, between 0.02 and 0.55 kt of NO<INF>X</INF>, and between 
0.0 and 0.01 t of Hg. Total generating capacity needed in 2042 is 
estimated to decrease compared to the reference case by 0.021 GW under 
TSL 5 for non-standard size equipment.
    At TSL 5, DOE projects that the average PTAC customer will 
experience a decrease in LCC for all non-standard size equipment 
classes. Purchasers of non-standard size PTACs are projected to save on 
average $31 (2007$) over the life of the product and purchasers of non-
standard size PTHPs would save on average $80 (2007$). DOE estimates 
LCC increases for 25 percent of customers in the Nation that purchase a 
non-standard size PTAC, and for 5 percent of customers in the Nation 
that purchase a non-standard size PTHP.
    The projected change in the non-standard size industry value (INPV) 
ranges from a decrease of $20 million to a decrease of $24 million, in 
2007$. For non-standard size PTACs and PTHPs, the impacts are driven 
primarily by the assumptions regarding the ability to pass on larger 
increases in MPCs to the customer. Currently, there are very few 
equipment lines being manufactured that have efficiency levels at or 
above TSL 5 utilizing R-22 refrigerant. Using the degradations 
estimated in the engineering analysis, DOE believes non-standard size 
equipment could be produced at TSL 5 in the lower range of cooling 
capacities. DOE believes manufacturers would not be able to manufacture 
non-standard size PTACs and PTHPs at TSL 5 at the high range of cooling 
capacities (e.g., 15,000 Btu/h) within a given equipment class for non-
standard size PTACs and PTHPs with cooling capacities greater than or 
equal to 7,000 Btu/h and less than or equal to 15,000 Btu/h. In 
addition, DOE believes many small manufacturers of non-standard size 
equipment would be unable to recover the large investments needed to 
change over all of their existing equipment lines to the efficiency 
levels required by TSL 5. If some small non-standard manufacturers 
cannot invest the product and capital conversion costs necessary to 
comply with TSL 5, they would be forced to abandon their equipment 
lines and exit the business. Others could be forced to reduce their 
equipment offerings in order to reduce the magnitude of the investments 
required to meet TSL 5 efficiency levels for non-standard equipment.
    After carefully considering the analysis and weighing the benefits 
and burdens of TSL 5, the Secretary has reached the following 
conclusion: At TSL 5, even if manufacturers overcome the barriers to 
produce R-410 equipment in the full range of cooling capacities by the 
effective date of an amended energy conservation standard, the benefits 
of energy savings and emissions reductions would be outweighed by the 
potential multi-million dollar negative economic burden on 
manufacturers, the risks of small, non-standard manufacturers exiting 
from the market, and the reduction of equipment lines resulting from 
decreased equipment offerings.
    Next, DOE considered TSL 4. For TSL 4, DOE combined the efficiency 
levels in TSL 1 for non-standard size PTACs and the efficiency levels 
in TSL 5 for non-standard size PTHPs. This combination of efficiency 
levels serves to maximize LCC savings, while recognizing the 
differences in LCC results for non-standard size PTACs and PTHPs. DOE 
projects that TSL 4 for non-standard size PTACs and PTHPs would save 
0.006 quads of energy through 2042, an amount DOE considers 
significant. Discounted at seven percent, the projected energy savings 
through 2042 would be 0.001 quads. For the Nation as a whole, DOE 
projects that TSL 4 would result in net savings in NPV of $8 million 
for non-standard size PTACs and PTHPs, using a discount rate of seven 
percent, and $23 million for non-standard size PTACs and PTHPs, using a 
discount rate of three percent. The estimated emissions reductions are 
0.20 Mt of CO<INF>2</INF>, between 0.02 kt and 0.40 kt of 
NO<INF>X</INF>, and between 0 and 0.007 t of Hg. Total generating 
capacity needed in 2042 under TSL 4 would likely decrease by 0.014 GW.
    At TSL 4, DOE projects that the average PTAC or PTHP customer would 
experience LCC savings. Purchasers of

[[Page 58822]]

non-standard size PTACs, on average, would experience an LCC decrease 
of $26 (2007$) over the life of the product and purchasers of non-
standard size PTHPs would save on average $80 (2007$). DOE estimates an 
LCC increase for 6 percent of customers in the Nation who purchase a 
non-standard size PTAC, and for 5 percent of customers in the Nation 
who purchase a non-standard size PTHP. The remaining customers of non-
standard size PTACs and PTHPs would experience either a decrease or no 
change in LCC.
    The projected change in INPV ranges between losses of $21 million 
and $23 million for the non-standard size PTAC and PTHP industry. Just 
as with TSL 5, the projected impacts continue to be driven primarily by 
the manufacturers' ability to pass on increases in MPCs to the 
customer. The loss of $23 million assumes that DOE's projections of 
partial cost recovery as described in Chapter 13 of the TSD remain 
valid. TSL 4 requires the production of non-standard size PTACs at the 
efficiency levels in TSL 1 and non-standard size PTHPs at efficiency 
levels at TSL 5. Thus, TSL 4 requires the production of non-standard 
size PTHPs using R-410A that would have efficiencies equivalent to the 
``max tech'' efficiency levels with R-410A applying the degradations 
estimated in the engineering analysis in the absence of a high 
efficiency compressor. For the larger cooling capacity range (i.e., 
15,000 Btu/h) within a given equipment class of non-standard size PTACs 
and PTHPs with a cooling capacity greater than or equal to 7,000 Btu/h 
and less than or equal to 15,000 Btu/h, DOE believes manufacturers 
would not be able to produce equipment at the efficiency levels 
provided by the TSL 4 energy-efficiency equations. At larger cooling 
capacities for non-standard equipment, manufacturers do not have the 
additional space within the box sleeve to add heat exchanger area to 
increase the efficiency of the equipment. Specifically, DOE believes 
non-standard manufacturers would eliminate equipment due to the 
stringency of the standard--and the costs associated with attaining 
them--at higher cooling capacity regions. In addition, DOE believes 
many small manufacturers of non-standard size equipment would be unable 
to recover the large investments needed to change over all of their 
existing equipment lines to the efficiency levels required by TSL 4. If 
some of these manufacturers cannot invest the product and capital 
conversion costs necessary to comply with TSL 4, they would be forced 
to abandon their equipment lines and exit the business. Others could be 
forced to reduce their equipment offerings in order to reduce the 
magnitude of the investments required to meet the TSL 4 efficiency 
levels, which will affect their ability to offer R-410A-compatible 
equipment in the full range of capacities currently being offered by 
the time the new standard would become effective.
    Based on the reasons stated earlier, while DOE recognizes the 
increased economic benefits to the nation that could result from TSL 4 
for non-standard size PTACs and PTHPs, DOE concludes that the benefits 
of a Federal standard at TSL 4 would still be outweighed by the 
economic burden that would be placed upon non-standard size PTAC and 
PTHP manufacturers.
    Next, DOE considered TSL 3. TSL 3 includes the same efficiency 
levels for non-standard PTACs as non-standard PTHPs. DOE projects that 
TSL 3 for non-standard size PTACs and PTHPs would save 0.005 quads of 
energy through 2042, an amount DOE considers significant. Discounted at 
seven percent, the projected energy savings through 2042 would be 0.001 
quads. For the Nation as a whole, DOE projects that TSL 3 would result 
in net savings in NPV of $7 million for non-standard size PTACs and 
PTHPs, using a discount rate of seven percent, and $19 million for non-
standard size PTACs and PTHPs, using a discount rate of three percent. 
The estimated emissions reductions are 0.18 Mt of CO<INF>2</INF>, 
between 0.01 and 0.34 kt of NO<INF>X</INF>, and between 0 and 0.006 t 
of Hg. Total generating capacity needed in 2042 under TSL 3 for non-
standard size PTACs and PTHPs would likely decrease by 0.013 GW.
    At TSL 3, DOE projects that the average PTAC or PTHP customer would 
experience LCC savings. Purchasers of non-standard size PTACs, on 
average, would experience a decrease in LCC of $30 (2007$) over the 
life of the product and purchasers of non-standard size PTHPs would 
save on average $66 (2007$). DOE estimates an LCC increase for 14 
percent of customers in the Nation that purchase a non-standard size 
PTAC, and for 3 percent of customers in the Nation that purchase a non-
standard size PTHP. The remaining customers would experience either a 
decrease or no change in LCC.
    The projected change in INPV ranges between a loss of $17 million 
and a loss of $20 million for the non-standard size PTAC and PTHP 
industry. Just as with TSL 5, the projected impacts continue to be 
driven primarily by the manufacturers' ability to pass on increases in 
MPCs to the customer. The loss of $20 million assumes the continued 
validity of DOE's projections of partial cost recovery as described in 
Chapter 13 of the TSD. Even at TSL 3, DOE is concerned about the 
manufacturers' ability to produce and offer equipment in the full range 
of cooling capacities that would fit the wide variety of wall sleeves 
that currently exist. For the larger cooling capacity range (i.e., 
15,000 Btu/h) within a given equipment class of non-standard size PTACs 
and PTHPs with a cooling capacity greater than or equal to 7,000 Btu/h 
and less than or equal to 15,000 Btu/h, DOE believes manufacturers 
would not be able to produce equipment at the efficiency levels 
provided by the TSL 3 energy-efficiency equations. Specifically, DOE 
believes non-standard manufacturers would eliminate equipment due to 
the stringency of the standard at higher cooling capacity regions. In 
addition, TSL 3 requires a $23 million investment by the industry in 
order to transform all of the existing equipment lines available in the 
current non-standard market to TSL 3 efficiency levels. DOE believes 
many small non-standard manufacturers would not be able to recover 
these investments needed to change over all of their existing equipment 
lines to the efficiency levels required by TSL 3. If some small non-
standard manufacturers cannot invest the product and capital conversion 
costs necessary to comply with TSL 3, they would be forced to abandon 
their equipment lines and exit the business. Others could be forced to 
reduce their equipment offerings in order to reduce the magnitude of 
the investments required to meet TSL 3 efficiency levels for non-
standard equipment.
    While DOE recognizes the increased economic benefits to the nation 
and the energy savings that could result from TSL 3 for non-standard 
size PTACs and PTHPs, DOE concludes that, based on the above, the 
benefits of an amended energy conservation standard at TSL 3 would be 
outweighed by the economic burden that would be placed upon non-
standard size PTAC and PTHP manufacturers.
    Next, DOE considered TSL 2. TSL 2 requires different efficiency 
levels for non-standard size PTACs and non-standard PTHPs at the same 
cooling capacity. DOE projects that TSL 2 for non-standard size PTACs 
and PTHPs would save 0.004 quads of energy through 2042, an amount DOE 
considers significant. Discounted at seven percent, the projected 
energy savings through 2042 would be 0.001 quads. For the Nation as a 
whole, DOE projects that TSL 2 would result in net savings in

[[Page 58823]]

NPV of $6 million for non-standard size PTACs and PTHPs, using a 
discount rate of seven percent, and $16 million for non-standard size 
PTACs and PTHPs, using a discount rate of three percent. The estimated 
emissions reductions are 0.14 Mt of CO<INF>2</INF>, between 0.01 kt and 
0.28 kt of NO<INF>X</INF>, and between 0 and 0.005 t of Hg. Total 
generating capacity needed in 2042 under TSL 2 for non-standard size 
PTACs and PTHPs would likely decrease by 0.010 GW.
    At TSL 2, DOE projects that the average PTAC or PTHP customer would 
experience LCC savings. Purchasers of non-standard size PTACs, on 
average, would have an LCC decrease of $26 (2007$) over the life of the 
product and purchasers of non-standard size PTHPs would save on average 
$66 (2007$). DOE estimates an LCC increase for 6 percent of customers 
in the Nation that purchase a non-standard size PTAC and for 3 percent 
of customers in the Nation that purchase a non-standard size PTHP. The 
remaining customers of non-standard size PTACs and PTHPs would 
experience either a decrease or no change in LCC.
    The projected change in INPV ranges between a loss of $17 million 
and a loss of $19 million for the non-standard size PTAC and PTHP 
industry. Just as with other TSLs, the projected impacts continue to be 
driven primarily by the manufacturers' ability to pass on increases in 
MPCs to the customer. The loss of $19 million assumes DOE's projections 
of partial cost recovery as described in Chapter 13 of the TSD remain 
valid. Since TSL 2 requires non-standard size manufacturers to be 
produced at the efficiency levels in TSL 3, DOE is concerned about the 
manufacturer's ability to produce and offer equipment in the full range 
of cooling capacities to fit the wide variety of wall sleeves that 
currently exist for non-standard size PTHPs.
    For the larger cooling capacity range (i.e., 15,000 Btu/h) within a 
given equipment class of non-standard size PTACs and PTHPs with a 
cooling capacity greater than or equal to 7,000 Btu/h and less than or 
equal to 15,000 Btu/h, DOE believes manufacturers would be unable to 
produce equipment at the efficiency levels provided by the TSL 2 
energy-efficiency equations. Specifically, DOE believes non-standard 
manufacturers would eliminate equipment due to the costs required to 
satisfy this level at higher cooling capacity regions. In addition, TSL 
2 requires a 23.3 million dollar investment in order to transform all 
of the existing equipment lines available in the current non-standard 
market to TSL 2 efficiency levels. The investment required at TSL 2 is 
larger than at TSL 3 because manufacturers could be forced to design 
separate equipment platforms for non-standard size PTACs and non-
standard size PTHPs because of the differences in efficiency level 
requirements. DOE believes many small manufacturers of non-standard 
size equipment would be unable to recover these investments needed to 
change over all of their existing equipment lines to the efficiency 
levels required by TSL 2. If some small, non-standard manufacturers 
cannot invest the product and capital conversion costs necessary to 
comply with TSL 2, they would be forced to abandon their equipment 
lines and exit the business. Others could be forced to reduce their 
equipment offerings in order to reduce the magnitude of the investments 
required to meet TSL 2 efficiency levels for non-standard equipment.
    While DOE recognizes the increased economic benefits to the nation 
and the energy savings that could result from TSL 2 for non-standard 
size PTACs and PTHPs, DOE concludes, based on the reasons stated above, 
that the benefits of an amended energy conservation standard at TSL 2 
would be outweighed by the economic burden that would be placed upon 
non-standard size PTAC and PTHP manufacturers.
    Last, DOE considered TSL 1. TSL 1 requires the same efficiency 
levels for non-standard size PTACs and non-standard PTHPs at the same 
cooling capacity. DOE projects that TSL 1 for non-standard size PTACs 
and PTHPs would save 0.004 quads of energy through 2042, an amount DOE 
considers significant. Discounted at seven percent, the projected 
energy savings through 2042 would be 0.001 quads. For the Nation as a 
whole, DOE projects that TSL 1 would result in net savings in NPV of $5 
million for non-standard size PTACs and PTHPs, using a discount rate of 
seven percent, and $14 million for non-standard size PTACs and PTHPs, 
using a discount rate of three percent. The estimated emissions 
reductions are 0.12 Mt of CO<INF>2</INF>, between 0.01 kt and 0.23 kt 
of NO<INF>X</INF>, and between 0 and 0.004 t of Hg. Total generating 
capacity needed in 2042 under TSL 1 for non-standard size PTACs and 
PTHPs would likely decrease by 0.009 GW.
    At TSL 1, DOE projects that the average PTAC or PTHP customer would 
experience an LCC savings. Purchasers of non-standard size PTACs, on 
average would experience an LCC decrease of $26 (2007$) over the life 
of the product and purchasers of non-standard size PTHPs would save on 
average $62 (2007$). DOE estimates LCC increase for 6 percent of 
customers in the Nation that purchase a non-standard size PTAC, and for 
1 percent of customers in the Nation that purchase a non-standard size 
PTHP. The remaining customers of non-standard size equipment would 
experience either a decrease or no change in LCC.
    The projected change in INPV ranges between losses of $16 million 
and $17 million for the non-standard size PTAC and PTHP industry. Just 
as with other TSLs, the projected impacts continue to be driven 
primarily by the manufacturers' ability to pass on increases in MPCs to 
the customer. The loss of $17 million assumes DOE's projections of 
partial cost recovery as described in Chapter 13 of the TSD remain 
valid. Even at TSL 1, DOE estimates manufacturers of non-standard PTACs 
and PTHPs would experience over a 50 percent reduction in INPV as a 
result of amended energy conservation standards. TSL 1 requires a 22 
million dollar investment by the industry in order to transform all of 
the existing equipment lines available in the current non-standard 
market to TSL 1 efficiency levels. DOE believes many small 
manufacturers of non-standard equipment would be unable to recover 
these investments needed to change over all of their existing equipment 
lines to the efficiency levels required by TSL 1. If some small non-
standard manufacturers cannot invest the product and capital conversion 
costs necessary to comply with TSL 1, they would be forced to abandon 
their equipment lines and exit the business. Others could be forced to 
reduce their equipment offerings in order to reduce the magnitude of 
the investments required to meet TSL 1 efficiency levels for non-
standard equipment.
    While DOE recognizes the increased economic benefits to the nation 
and the energy savings that could result from TSL 1 for non-standard 
size PTACs and PTHPs, DOE concludes that the benefits of an amended 
energy conservation standard at TSL 1 would still be outweighed by the 
economic burden that would be placed upon non-standard size PTAC and 
PTHP manufacturers. DOE is especially concerned about the large 
investments required for non-standard size manufacturers to transform 
their entire equipment offerings to TSL 1 efficiency levels and with 
the likelihood that small non-standard size manufacturers would exit 
the market, causing some existing non-standard size PTACs and PTHPs to 
become unavailable to consumers.
    After considering the analysis and weighing the benefits and the 
burdens, DOE concludes that the benefits of a standard at the 
efficiency levels

[[Page 58824]]

specified by ASHRAE Standard 90.1-1999 outweigh the burdens.
    Therefore based on the discussion above, DOE concludes that the 
efficiency levels beyond those in ASHRAE Standard 90.1-1999 are not 
economically justified and is adopting the efficiency level in ASHRAE 
Standard 90.1-1999. Table V.34 demonstrates the amended energy 
conservation standards for standard size PTACs and PTHPs in the full 
range of cooling capacities.

              Table V.34--Final Energy Conservation Standards for Non-Standard Size PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
                         Equipment class
-----------------------------------------------------------------
                                                     Cooling           Final energy conservation standards *
          Equipment                Category          capacity
----------------------------------------------------------------------------------------------------------------
PTAC.........................  Non-Standard      <7,000.........  EER = 9.4
                                Size **.
                                                 7,000-15,000...  EER = 10.9 - (0.213 x Cap [dagger])
                                                 >15,000........  EER = 7.7
                                                 <7,000.........  EER = 9.3
                                                                  COP = 2.7
PTHP.........................  Non-Standard      7,000-15,000...  EER = 10.8 - (0.213 x Cap [dagger])
                                Size **.                          COP = 2.9 - (0.026 x Cap [dagger])
                                                 >15,000........  EER = 7.6
                                                                  COP = 2.5
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure (ARI Standard 310/380-2004), all energy efficiency
  ratio (EER) values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-cooled equipment and
  evaporatively cooled equipment and at 85 [deg]F entering water temperature for water cooled equipment. All
  coefficient of performance (COP) values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
  equipment.
** Non-standard size refers to PTAC or PTHP equipment with existing wall sleeve dimensions having an external
  wall opening of less than 16 inches high or less than 42 inches wide, and a cross-sectional area less than 670
  square inches.
[dagger] Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F outdoor dry-
  bulb temperature.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (October 4, 1993), requires each agency to 
identify in writing the market failure or other problem that it intends 
to address that warrants agency action such as today's final rule, and 
to assess the significance of that problem in evaluating whether any 
new regulation is warranted.
    DOE's analysis suggests that much of the hospitality industry 
segment using PTAC and PTHP equipment tends to be small hotels or 
motels. DOE believes that these small hotels and motels tend to be 
individually owned and operated and lack corporate direction in terms 
of energy policy. The transaction costs for these smaller owners or 
operators to research, purchase, and install optimum efficiency 
equipment are too high to make such action commonplace. DOE believes 
that there is a lack of information and/or information processing 
capability about energy efficiency opportunities in the PTAC and PTHP 
market available to hotel or motel owners. Unlike residential heating 
and air conditioning products, PTACs and PTHPs are not included in 
energy labeling programs such as the Federal Trade Commission's energy 
labeling program. Furthermore, the energy use of PTACs and PTHPs 
depends on the climate and equipment usage and, as such, is not readily 
available for the owners or operators to decide whether improving the 
energy efficiency of PTAC and PTHP equipment is cost effective.
    PTACs and PTHPs are not purchased in the same manner as other 
regulated appliances that are sold in retail stores (e.g., room air 
conditioners). When purchased by the end user, PTACs and PTHPs are more 
likely to be purchased through contractors and builders that perform 
the installation. (See Chapter 8 of the final rule TSD) The AHRI 
Certified Directory includes PTACs and PTHPs, and provides the energy 
efficiency and capacity information on PTACs and PTHPs produced by 
participating manufacturers.
    To the extent that a lack of information may exist, DOE could 
expect the energy efficiency for PTACs and PTHPs to be more or less 
randomly distributed across key variables such as energy prices and 
usage levels. DOE found that energy efficiency and energy cost savings 
are not the primary drivers of the hotel and motel business. Instead, 
hotel and motel operators work on a fixed budget and are concerned 
primarily with providing clean and comfortable rooms to the customers 
to ensure customer satisfaction. If consumer satisfaction decreases, 
hotel or motel owners may incur increased transaction costs, thus 
preventing access to capital to finance energy efficiency investment.
    A related issue is the problem of asymmetric information (one party 
to a transaction has more and better information than the other) and/or 
high transactions costs (costs of gathering information and effecting 
exchanges of goods and services) among PTAC and PTHP equipment 
customers. In the case of PTACs and PTHPs, in many cases, the party 
responsible for the equipment purchase may not be the one who pays the 
operating cost. For example, PTAC and PTHP equipment are also used in 
nursing homes (i.e., assisted living) and medical office buildings. In 
these settings, the builder or complex owner often makes decisions 
about PTACs and PTHPs without input from tenants and typically does not 
offer tenants the option to upgrade that equipment. Furthermore, DOE 
believes that the tenant typically pays the utility bills. If there 
were no transactions costs, it would be in the builder or complex 
owners' interest to install equipment that the tenants would choose on 
their own. For example, a tenant who knowingly faces higher utility 
bills from low-efficiency equipment would expect to pay less in rent, 
thereby shifting the higher utility cost back to the complex owner. 
However, this information is not without a cost. It may not be in the 
tenant's interest to take the time to develop it or, in the case of the 
complex owner who installs less efficient equipment, to convey that 
information to the tenant.
    To the extent that asymmetric information and/or high transaction 
costs are problems, one would expect to find certain outcomes regarding 
PTAC and PTHP efficiency. For example, all things being equal, one 
would not expect to see higher rents for office complexes with high-
efficiency

[[Page 58825]]

equipment. Alternatively, one would expect higher energy efficiency in 
rental units where the rent includes utilities, compared with those 
where the tenant pays the utility bills separately. DOE did not receive 
any data that would enable it to conduct tests of market failure in 
response to the NOPR.
    In addition, this rulemaking is likely to yield certain 
``external'' benefits resulting from improved energy efficiency of 
PTACs and PTHPs that are not captured by the users of such equipment. 
These benefits include externalities related to environmental and 
energy security that are not reflected in energy prices, such as 
reduced emissions of greenhouse gases. Regarding environmental 
externalities, the emissions reductions in today's final rule are 
projected to be 1.06 million metric tons (Mt) of CO<INF>2</INF>, 
between 0.09 kilotons and 2.13 kilotons (kt) of NO<INF>X</INF>, and 
between 0 and 0.037 tons of Hg.
    Because today's regulatory action is a significant regulatory 
action under section 3(f)(1) of Executive Order 12866, section 6(a)(3) 
of the Executive Order requires DOE to prepare and submit for review to 
OMB's Office of Information and Regulatory Affairs (OIRA) an assessment 
of the costs and benefits of today's rule. Accordingly, DOE presented 
to OIRA for review the draft final rule and other documents prepared 
for this rulemaking, including a regulatory impact analysis (RIA). 
These documents are included in the rulemaking record and are available 
for public review in the Resource Room of DOE's Building Technologies 
Program, 950 L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024, 
(202) 586-9127, between 9 a.m. and 4 p.m., Monday through Friday, 
except Federal holidays.
    The NOPR contained a summary of the RIA, which evaluated the extent 
to which major alternatives to standards for PTACs and PTHPs could 
achieve significant energy savings at reasonable cost, compared with 
the effectiveness of the proposed rule. 73 FR 18907-10. The complete 
RIA (Regulatory Impact Analysis for Proposed Energy Conservation 
Standards for Packaged Terminal Air Conditioners and Heat Pumps), is 
contained in the TSD prepared for today's rule. The RIA consists of (1) 
a statement of the problem addressed by this regulation and the mandate 
for government action, (2) a description and analysis of the feasible 
policy alternatives to this regulation, (3) a quantitative comparison 
of the impacts of the alternatives, and (4) the national economic 
impacts of the amended standards.
    As explained in the NOPR, DOE determined that none of the 
alternatives that it examined would save as much energy or have an NPV 
as high as the proposed standards. That same conclusion applies to the 
amended standards in today's rule. In addition, several of the 
alternatives would require new enabling legislation, because authority 
to conduct those alternatives currently does not exist. The RIA report 
in the TSD provides additional detail on the regulatory alternatives.

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, and a final 
regulatory flexibility analysis (FRFA) for any such rule that an agency 
adopts as a final rule, unless the agency certifies that the rule, if 
promulgated, will not have a significant economic impact on a 
substantial number of small entities. A regulatory flexibility analysis 
examines the impact of the rule on small entities and considers 
alternative ways of reducing negative impacts. Also, as required by 
Executive Order 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 rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site: http://www.gc.doe.gov.
    Small businesses, as defined by the Small Business Administration 
(SBA) for the packaged terminal equipment manufacturing industry, are 
manufacturing enterprises with 750 employees or fewer. DOE used the 
small business size standards published on March 11, 2008, as amended, 
by the SBA to determine whether any small entities would be required to 
comply with the rule. 61 FR 3286 and codified at 13 CFR part 121. The 
size standards are listed by North American Industry Classification 
System (NAICS) code and industry description. PTAC and PTHP 
manufacturing is classified under NAICS 333415, which sets a threshold 
of 750 employees or less for an entity to be considered as a small 
business under the ``Air-Conditioning and Warm Air Heating Equipment 
and Commercial and Industrial Refrigeration Equipment Manufacturer'' 
category.
    For the NOPR, DOE identified and interviewed two manufacturers of 
PTACs and PTHPs that are small businesses affected by this rulemaking. 
73 FR 18910. DOE reviewed the proposed rule under the provisions of the 
Regulatory Flexibility Act and the procedures and policies published on 
February 19, 2003. Id. On the basis of this review, DOE determined that 
it could not certify that the proposed standards (TSL4), if 
promulgated, would have no significant economic impact on a substantial 
number of small entities. Id. DOE made this determination because of 
the potential impacts of the proposed standard levels on PTAC and PTHP 
manufacturers generally, including small businesses. Id.
    Because of these potential impacts on small manufacturers, DOE 
prepared an IRFA during the NOPR stage of this rulemaking. DOE provided 
the IRFA in its entirety in the NOPR, 73 FR 18910-12, and also 
transmitted a copy to the Chief Counsel for Advocacy of the SBA for 
review. Chapter 13 of the TSD contains more information about the 
impact of this rulemaking on manufacturers.
    The IRFA divided potential impacts on small businesses into two 
broad categories: (1) Impacts associated with standard size PTAC and 
PTHP manufacturers; and (2) impacts associated with non-standard size 
PTAC and PTHP manufacturers. The PTAC and PTHP industry is 
characterized by both domestic and international manufacturers. 
Standard size PTACs and PTHPs are primarily manufactured outside of the 
U.S. with the exception of one domestic PTAC and PTHP manufacturer. 
Non-standard size PTACs and PTHPs are primarily manufactured 
domestically by a handful of manufacturers. Consolidation within the 
PTAC and PTHP industry has reduced the number of parent companies that 
manufacture similar equipment under different affiliates and labels.
    DOE has prepared a FRFA for this rulemaking, which is presented in 
the following discussion. Comments received in response to the IRFA 
regarding the impacts on small businesses in the non-standard industry 
are summarized in section IV.K.2. In addition, DOE further reviewed the 
non-standard size industry, in particular, the market for small 
businesses, and presented its finding in section IV.K.2. The FRFA below 
is written in accordance with the requirements of the Regulatory 
Flexibility Act, and addresses the comments received from interested 
parties in response to the IRFA.
1. Reasons for the Final Rule
    Part A-1 of Title III of EPCA addresses the energy efficiency of 
certain types of commercial and

[[Page 58826]]

industrial equipment. (42 U.S.C. 6311-6317) It contains specific 
mandatory energy conservation standards for commercial PTACs and PTHPs. 
(42 U.S.C. 6313(a)(3)) EPACT 1992, Public Law 102-486, also amended 
EPCA with respect to PTACs and PTHPs, providing definitions in section 
122(a), test procedures in section 122(b), labeling provisions in 
section 122(c), and the authority to require information and reports 
from manufacturers in section 122(e). DOE publishes today's final rule 
pursuant to Part A-1. The PTAC and PTHP test procedures appear at 10 
CFR 431.96.
    EPCA established Federal energy conservation standards that 
generally correspond to the levels in ASHRAE Standard 90.1, as in 
effect on October 24, 1992 (ASHRAE Standard 90.1-1989), for each type 
of covered equipment listed in section 342(a) of EPCA, including PTACs 
and PTHPs. (42 U.S.C. 6313(a)) For each type of equipment, EPCA 
directed that if ASHRAE Standard 90.1 is amended, DOE must adopt an 
amended standard at the new level in ASHRAE Standard 90.1, unless clear 
and convincing evidence supports a determination that adoption of a 
more stringent level as a national standard would produce significant 
additional energy savings and be technologically feasible and 
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) In accordance 
with these statutory criteria, DOE is amending the energy conservation 
standards for PTACs and PTHPs by raising the efficiency levels for this 
equipment above the efficiency levels specified by ASHRAE Standard 
90.1-1999 for standard size PTACs and PTHPs and adopting the efficiency 
levels in ASHRAE Standard 90.1-1999 for non-standard size PTACs and 
PTHPs.
2. Objectives of, and Legal Basis for, the Rule
    To determine whether economic justification exists, DOE reviews 
comments received and conducts analysis to determine whether the 
economic benefits of the amended standard exceed the burdens to the 
greatest extent practicable, taking into consideration seven factors 
set forth in 42 U.S.C. 6295(o)(2)(B) (see section II.B of this 
preamble). (42 U.S.C. 6316(a)) Further information concerning the 
background of this rulemaking is provided in Chapter 1 of the TSD.
3. Description and Estimated Number of Small Entities Regulated
    Through market research, interviews with manufacturers of all 
sizes, discussions with industry trade groups, and comments from 
interested parties on the IRFA, DOE identified six small manufacturers 
in the PTAC and PTHP industry. These six manufacturers can be further 
sub-categorized by their manufacturing scale: (1) One small business 
competes successfully making standard-size PTACs and PTHPs in high 
volumes; (2) the remaining five small businesses make PTACs and PTHPs 
at much lower volumes. While three of these five low-volume small 
businesses make PTACs and PTHPs that fit into standard-size sleeves, 
the customization options offered by these manufacturers suggests that 
these units have more in common with the non-standard size equipment 
that these manufacturers also offer than with the high-volume standard 
size PTAC and PTHP equipment on the market. DOE found one small 
manufacturer of standard size PTACs and PTHPs manufactures equipment 
outside the U.S. DOE found the five small manufacturers produce 
equipment domestically. None of the six firms are divisions of larger 
owned companies.
4. Description and Estimate of Compliance Requirements
    Potential impacts on all manufacturers of PTACs and PTHPs vary by 
TSL. Margins for all businesses could be impacted negatively by the 
adoption of any TSL, since all manufacturers have expressed an 
inability to pass on cost increases to retailers and consumers. The six 
small domestic businesses under discussion differ from their 
competitors in that they are much smaller entities than their 
competitors in the standard PTAC and PTHP industry. Any rule affecting 
products manufactured by these small businesses will affect them 
disproportionately because of their size and their focus on non-
standard PTAC and PTHP equipment. However, due to the low number of 
competitors that agreed to be interviewed, DOE was not able to 
characterize the small business industry segment with a separate cash-
flow analysis due to concerns about maintaining confidentiality.
    For all other TSLs concerning PTAC and PTHP equipment (which are 
not being considered in today's rule), the impact on small, focused 
business entities will be proportionately greater than for their 
competitors since these businesses lack the scale to afford significant 
R&D expenses and capital expansion budgets. The exact extent is hard to 
gauge since manufacturers did not respond to all proposed investment 
requirements by TSL during interviews. However, research associated 
with other small entities in prior rulemakings suggests that many costs 
associated with complying with rulemakings are typically fixed, 
regardless of production volume. Thus, given their focus and scale, any 
appliance rulemaking could affect these six small businesses 
disproportionately compared to their larger and more diversified 
competitors.
5. Significant Issues Raised by Public Comments
    DOE summarized comments from interested parties in section IV.K.1.
6. Steps DOE Has Taken To Minimize the Economic Impact on Small, Non-
Standard Size PTAC and PTHP Manufacturers
    In consideration of the benefits and burdens of standards, 
including the burdens posed to small manufacturers, DOE concluded that 
the efficiency levels in ASHRAE Standard 90.1-1999 are the highest 
levels that can be justified for non-standard size PTAC and PTHP 
equipment. DOE discusses the potential impacts on small, non-standard 
manufacturers from higher TSLs in section IV.K.1. Since DOE has adopted 
the efficiency levels in ASHRAE Standard 90.1-1999, DOE believes it has 
taken the necessary steps to minimize the economic impact on small, 
non-standard size PTAC and PTHP manufacturers.

C. Review Under the Paperwork Reduction Act

    DOE stated in the NOPR that this rulemaking would impose no new 
information and recordkeeping requirements, and that OMB clearance is 
not required under the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.). 73 FR 18912. DOE received no comments on this in response to the 
NOPR and, as with the proposed rule, today's rule imposes no 
information and recordkeeping requirements. DOE takes no further action 
in this rulemaking with respect to the Paperwork Reduction Act.

D. Review Under the National Environmental Policy Act

    DOE prepared an environmental assessment of the impacts of today's 
standards, which it published as a chapter within the TSD for the final 
rule. DOE found the environmental effects associated with today's 
various standards levels for PTACs and PTHPs to be not significant, and 
therefore it is issuing a Finding of No Significant Impact (FONSI) 
pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.), the regulations of the Council on

[[Page 58827]]

Environmental Quality (40 CFR parts 1500-1508), and DOE's regulations 
for compliance with the National Environmental Policy Act (10 CFR part 
1021). The FONSI is available in the docket for this rulemaking.

E. Review Under Executive Order 13132

    DOE reviewed this rule pursuant to Executive Order 13132, 
Federalism, 64 FR 43255 (August 4, 1999), which imposes certain 
requirements on agencies formulating and implementing policies or 
regulations that preempt State law or that have federalism 
implications. In accordance with DOE's statement of policy describing 
the intergovernmental consultation process that it will follow in the 
development of regulations that have federalism implications, 65 FR 
13735 (March 14, 2000), DOE examined the proposed rule and determined 
that the rule 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. 73 FR 18912. DOE received no comments on this 
issue in response to the NOPR, and its conclusions on this issue are 
the same for the final rule as they were for the proposed rule. DOE 
takes no further action in today's final rule with respect to Executive 
Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
Civil Justice Reform 61 FR 4729 (February 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, and (3) provide a clear legal standard for 
affected conduct rather than a general standard and promote 
simplification and burden reduction. 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 section 3(a) and section 3(b) to determine whether they 
are met or whether 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, the final regulations meet the relevant standards of 
Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    As described in the NOPR, title II of the Unfunded Mandates Reform 
Act of 1995 (Pub. L. 104-4) (UMRA) imposes requirements on Federal 
agencies when their regulatory actions will have certain types of 
impacts on State, local, and Tribal governments and the private sector. 
73 FR 18912-13. DOE concluded that, because this rule would contain 
neither an intergovernmental mandate nor a mandate that may result in 
expenditure of $100 million or more in any year, the requirements of 
UMRA do not apply to the rule. Id. DOE received no comments concerning 
the UMRA in response to the NOPR, and its conclusions on this issue are 
the same for the final rule as for the proposed rule. DOE takes no 
further action in today's final rule with respect to the UMRA.

H. Review Under the Treasury and General Government Appropriations Act 
of 1999

    DOE determined that, for this rulemaking, it need not prepare a 
Family Policymaking Assessment under Section 654 of the Treasury and 
General Government Appropriations Act, 1999 (Pub. L. 105-277). 73 FR 
18913. DOE received no comments concerning Section 654 in response to 
the NOPR, and thus takes no further action in today's final rule with 
respect to this provision.

I. Review Under Executive Order 12630

    DOE determined, under Executive Order 12630, Governmental Actions 
and Interference with Constitutionally Protected Property Rights, 53 FR 
8859 (March 18, 1988), that today's rule would not result in any 
takings which might require compensation under the Fifth Amendment to 
the U.S. Constitution. 73 FR 18913. DOE received no comments concerning 
Executive Order 12630 in response to the NOPR, and thus takes no 
further action in today's final rule with respect to this Executive 
Order.

J. Review Under the Treasury and General Government Appropriations Act 
of 2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most 
disseminations of information to the public under guidelines 
established by each agency pursuant to general guidelines issued by 
OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), 
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). 
DOE has reviewed today's final rule under the OMB and DOE guidelines 
and 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 at 
28355 (May 22, 2001), requires Federal agencies to prepare and submit 
to the OIRA a Statement of Energy Effects for any significant energy 
action. DOE determined that the proposed rule was not a significant 
energy action within the meaning of Executive Order 13211. 73 FR 18913. 
Accordingly, it did not prepare a Statement of Energy Effects on the 
proposed rule. DOE received no comments on this issue in response to 
the NOPR. As with the proposed rule, DOE has concluded that today's 
final rule is not a significant energy action within the meaning of 
Executive Order 13211, and has not prepared a Statement of Energy 
Effects on the rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, the OMB, in consultation with the Office of 
Science and Technology, issued its Final Information Quality Bulletin 
for Peer Review (the Bulletin). 70 FR 2664 (January 14, 2005). The 
purpose of the Bulletin is to enhance the quality and credibility of 
the Government's scientific information. The Bulletin establishes that 
certain scientific information shall be peer reviewed by qualified 
specialists before it is disseminated by the federal government, and, 
as indicated in the NOPR, this includes influential scientific 
information related to agency regulatory actions, such as the analyses 
in this rulemaking. 73 FR 18913.
    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer

[[Page 58828]]

Review Report pertaining to the energy conservation standards 
rulemaking analyses. The ``Energy Conservation Standards Rulemaking 
Peer Review Report'' dated February 2007 has been disseminated and is 
available at the following web site: http://www.eere.energy.gov/buildings/appliance_standards/peer_review.html. DOE on June 28-29, 
2005.

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will submit to Congress a report 
regarding the issuance of today's final rule prior to the effective 
date set forth at the outset of this notice. The report will state that 
it has been determined that the rule is a ``major rule'' as defined by 
5 U.S.C. 804(2). DOE also will submit the supporting analyses to the 
Comptroller General in the U.S. Government Accountability Office (GAO) 
and make them available to Congress.

VII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of today's final 
rule.

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation.

    Issued in Washington, DC, on September 29, 2008.
John F. Mizroch,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.

0
For the reasons set forth in the preamble, chapter II of title 10, Code 
of Federal Regulations, part 431 is amended to read as set forth below.

PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND 
INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 431 continues to read as follows:

    Authority: 42 U.S.C. 6291-6317.


0
2. Section 431.92 is amended by adding in alphabetical order new 
definitions for ``Non-standard size,'' and ``Standard size'' to read as 
follows:


Sec.  431.92  Definitions concerned commercial air conditioners and 
heat pumps.

* * * * *
    Non-standard size means a packaged terminal air conditioner or 
packaged terminal heat pump with existing wall sleeve dimensions having 
an external wall opening of less than 16 inches high or less than 42 
inches wide, and a cross-sectional area less than 670 square inches.
* * * * *
    Standard size means a packaged terminal air conditioner or packaged 
terminal heat pump with wall sleeve dimensions having an external wall 
opening of greater than or equal to 16 inches high or greater than or 
equal to 42 inches wide, and a cross-sectional area greater than or 
equal to 670 square inches.
* * * * *

0
3. Section 431.97 is amended by revising paragraph (a), including 
Tables 1 and 2, and by adding a new paragraph (c) to read as follows:


Sec.  431.97  Energy efficiency standards and their effective dates.

    (a) All small or large commercial package air conditioning and 
heating equipment manufactured on or after January 1, 1994 (except for 
large commercial package air-conditioning and heating equipment, for 
which the effective date is January 1, 1995), and before January 1, 
2010, in the case of the air-cooled equipment covered by the standards 
in paragraph (b), must meet the applicable minimum energy efficiency 
standard level(s) set forth in Tables 1 and 2 of this section. Each 
standard size packaged terminal air conditioner or packaged terminal 
heat pump manufactured on or after January 1, 1994, and before 
September 30, 2012, must meet the applicable minimum energy efficiency 
standard level(s) set forth in Tables 1 and 2 of this section. Each 
non-standard size packaged terminal air conditioner or packaged 
terminal heat pump manufactured on or after January 1, 1994, and before 
September 30, 2010, must meet the applicable minimum energy efficiency 
standard level(s) set forth in Tables 1 and 2 of this section.

                                               Table 1 to Sec.   431.97--Minimum Cooling Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Efficiency level \1\
                                                                                                           ---------------------------------------------
              Product                       Category            Cooling capacity          Sub-category             Products        Products manufactured
                                                                                                              manufactured until   on and after  October
                                                                                                               October 29, 2003           29, 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air        Air Cooled, 3 Phase...  <65,000 Btu/h.........  Split System.........  SEER = 10.0..........  SEER = 10.0.
 Conditioning and Heating Equipment.                                                 Single Package.......  SEER = 9.7...........  SEER = 9.7.
                                     Air Cooled............  >=65,000 Btu/h and      All..................  EER = 8.9............  EER = 8.9.
                                                              <135,000 Btu/h.
                                     Water Cooled,           <17,000 Btu/h.........  AC...................  EER = 9.3............  EER = 12.1.
                                      Evaporatively Cooled,                          HP...................  EER = 9.3............  EER = 11.2.
                                      and Water-Source.
                                                             >=17,000 Btu/h and      AC...................  EER = 9.3............  EER = 12.1.
                                                              <65,000 Btu/h.         HP...................  EER = 9.3............  EER = 12.0.
                                                             >=65,000 Btu/h and      AC...................  EER = 10.5...........  EER = 11.5.\2\
                                                              <135,000 Btu/h.        HP...................  EER = 10.5...........  EER = 12.0.
Large Commercial Packaged Air        Air Cooled............  >=135,000 Btu/h and     All..................  EER = 8.5............  EER = 8.5.
 Conditioning and Heating Equipment.                          <240,000 Btu/h.
                                     Water-Cooled and        >=135,000 Btu/h and     All..................  EER = 9.6............  EER = 9.6.\3\
                                      Evaporatively Cooled.   <240,000 Btu/h.

[[Page 58829]]

 
Packaged Terminal Air Conditioners   All...................  <7,000 Btu/h..........  All..................  EER = 8.88...........  EER = 8.88.
 and Heat Pumps.
                                                             >=7,000 Btu/h and       .....................  EER = 10.0-(0.16 x     EER = 10.0-(0.16 x
                                                              <=15,000 Btu/h.                                capacity [in kBtu/h    capacity [in kBtu/h
                                                                                                             at 95 [deg]F outdoor   at 95 [deg]F outdoor
                                                                                                             dry-bulb               dry-bulb
                                                                                                             temperature]).         temperature]).
                                                             >15,000 Btu/h.........  .....................  EER = 7.6............  EER = 7.6.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For equipment rated according to the ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-cooled products
  and evaporatively cooled products and at 85 [deg]F entering water temperature for water-cooled products. For water-source heat pumps rated according
  to the ISO standard, EER must be rated at 30 [deg]C (86 [deg]F) entering water temperature.
\2\ Deduct 0.2 from the required EER for units with heating sections other than electric resistance heat.
\3\ Effective 10/29/2004, the minimum value became EER = 11.0.


                                               Table 2 to Sec.   431.97--Minimum Heating Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Efficiency level \1\
                                                                                                           ---------------------------------------------
              Product                       Category            Cooling capacity          Sub-category             Products        Products manufactured
                                                                                                              manufactured until    on and after October
                                                                                                               October 29, 2003           29, 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Commercial Packaged Air        Air Cooled, 3 Phase...  <65,000 Btu/h.........  Split System.........  HSPF = 6.8...........  HSPF = 6.8.
 Conditioning and Heating Equipment.                                                 Single Package.......  HSPF = 6.6...........  HSPF = 6.6.
                                     Water-Source..........  <135,000 Btu/h........  Split System and       COP = 3.8............  COP = 4.2.
                                                                                      Single Package.
                                     Air Cooled............  >=65,000 Btu/h and      All..................  COP = 3.0............  COP = 3.0.
                                                              <135,000 Btu/h.
Large Commercial Packaged Air        Air Cooled............  >=135,000 Btu/h and     Split System and       COP = 2.9............  COP = 2.9.
 Conditioning and Heating Equipment.                          <240,000 Btu/h.         Single Package.
Packaged Terminal Heat Pumps.......  All...................  All...................  All..................  COP = 1.3 + (0.16 x    COP = 1.3 + (0.16 x
                                                                                                             the applicable         the applicable
                                                                                                             minimum cooling EER    minimum cooling EER
                                                                                                             prescribed in Table    prescribed in Table
                                                                                                             1--Minimum Cooling     1--Minimum Cooling
                                                                                                             Efficiency Levels).    Efficiency Levels).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For units tested by ARI standards, all COP values must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled products, and at 70 [deg]F
  entering water temperature for water-source heat pumps. For heat pumps tested by the ISO Standard 13256-1, the COP values must be obtained at the
  rating point with 20 [deg]C (68 [deg]F) entering water temperature.

* * * * *
    (c) Each standard size packaged terminal air conditioner or 
packaged terminal heat pump manufactured on or after September 30, 2012 
and each non-standard size packaged terminal air conditioner or 
packaged terminal heat pump manufactured on or after September 30, 
2010, shall have an Energy Efficiency Ratio and Coefficient of 
Performance no less than:

----------------------------------------------------------------------------------------------------------------
                           Equipment class
---------------------------------------------------------------------
                                                    Cooling capacity
                                                    (British thermal        Energy conservation standards *
           Equipment                 Category        units per hour
                                                        [Btu/h])
----------------------------------------------------------------------------------------------------------------
PTAC..........................  Standard Size....  <7,000...........  EER = 11.7
                                                   7,000-15,000.....  EER = 13.8-(0.300 x Cap**)
                                                   >15,000..........  EER = 9.3
                                Non-Standard Size  <7,000...........  EER = 9.4
                                                   7,000-15,000.....  EER = 10.9-(0.213 x Cap**)
                                                   >15,000..........  EER = 7.7

[[Page 58830]]

 
PTHP..........................  Standard Size....  <7,000...........  EER = 11.9
                                                   7,000-15,000.....  COP = 3.3
                                                   >15,000..........  EER = 14.0-(0.300 x Cap**)
                                                                      COP = 3.7-(0.052 x Cap**)
                                                                      EER = 9.5
                                                                      COP = 2.9
                                Non-Standard Size  <7,000...........  EER = 9.3
                                                   7,000-15,000.....  COP = 2.7
                                                   >15,000..........  EER = 10.8-(0.213 x Cap**)
                                                                      COP = 2.9-(0.026 x Cap**)
                                                                      EER = 7.6
                                                                      COP = 2.5
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 [deg]F outdoor dry-
  bulb temperature for air-cooled products and evaporatively-cooled products and at 85 [deg]F entering water
  temperature for water cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
  for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F outdoor dry-bulb
  temperature.

* * * * *

APPENDIX

    [The following letter from the Department of Justice will not 
appear in the Code of Federal Regulations.]
DEPARTMENT OF JUSTICE,
Antitrust Division,
Main Justice Building,
950 Pennsylvania Avenue, NW.,
Washington, DC 20530-0001, (202) 514-2401/(202) 616-2645(f), 
<a href="/cdn-cgi/l/email-protection#debfb0aab7aaacabadaa9eb4abadaab7bdbbf0abadbab1b4f0b9b1a8"><span class="__cf_email__" data-cfemail="7918170d100d0b0c0a0d39130c0a0d101a1c570c0a1d1613571e160f">[email protected]</span></a>, http://www.usdoj.gov.

June 6, 2008
Warren Belmar, Deputy General Counsel for Energy Policy, Department 
of Energy, Washington, DC 20585.

Dear Deputy General Counsel Belmar:
    I am responding to your April 3, 2008 letter seeking the views 
of the Attorney General about the potential impact on competition of 
two proposed energy conservation standards for packaged terminal air 
conditioners (``PTACs'') and packaged terminal heat pumps 
(``PTHPs''). Your request was submitted pursuant to Section 
325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as 
amended, (``EPCA''), 42 U.S.C. 6295(o)(B)(i)(V), which requires the 
Attorney General to make a determination of the impact of any 
lessening of competition that is likely to result from the 
imposition of proposed energy conservation standards. The Attorney 
General's responsibility for responding to requests from other 
departments about the effect of a program on competition has been 
delegated to the Assistant Attorney General for the Antitrust 
Division in 28 CFR 0.40(g).
    In conducting its analysis the Antitrust Division examines 
whether a proposed standard may lessen competition, for example, by 
placing certain manufacturers of a product at an unjustified 
competitive disadvantage compared to other manufacturers, or by 
inducing avoidable inefficiencies in production or distribution of 
particular products. In addition to harming consumers directly 
through higher prices, these effects could undercut the ultimate 
goals of the legislation.
    We have reviewed the proposed standards and the supplementary 
information submitted to the Attorney General, including the 
transcript of the May 1 public meeting on the proposed standards. We 
have additionally conducted interviews with members of the industry.
    What we have heard raises legitimate issues about whether the 
proposed standards may adversely affect competition. The proposed 
standard for non-standard PTACs and PTHPs may create a risk that is 
too strict for the manufacturers to satisfy, given the state of 
technology.
    Customers that own older buildings with non-standard wall 
openings for air conditioning and heating units could face the 
choice of incurring capital expenditures to alter the size of the 
wall openings so that they could use standard sized units, or of not 
being able to replace their nonstandard sized units with units that 
are appropriately sized and meet the proposed energy conservation 
standards. Similarly, we have heard that the proposed standards for 
standard sized PTHPs may be too strict for manufacturers to satisfy. 
Since there are few manufacturers of standard PTHPs and of 
nonstandard PTACs and PTHPs, if some manufacturers cannot meet the 
proposed standards, consumers will have fewer competitive 
alternatives and may pay higher prices.
    The Department of Justice is not in a position to judge whether 
manufacturers will be able to meet the proposed standards--we urge, 
however, the Department of Energy to take into account these 
possible impacts on competition in determining its final energy 
efficiency standard for PTACs and PTHPs.


 Sincerely,
Deborah A. Garza,
Acting Assistant Attorney General.

[FR Doc. E8-23312 Filed 10-6-08; 8:45 am]
BILLING CODE 6450-01-P


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