Opinion ID: 6104167
Heading Depth: 3
Heading Rank: 2

Heading: Fuel prices

Text: The petitioners also challenge the DOE’s LCC analysis insofar as it involves predicting energy prices. Accurate energy prices are indispensable to the LCC analysis because fuel costs are a large part of the life-cycle cost of a boiler. In order to estimate future energy prices, the DOE began with historical price data from the Energy Information Administration for various geographic areas, which it then multiplied by forecasted fuel price indices derived from the Energy Information Administration’s Annual Energy Outlook 2016. For electricity and natural gas prices, the DOE then applied “seasonal marginal price factors” to obtain marginal fuel prices, which it said better represent the cost to the consumer of changes in energy consumption. For oil, however, the DOE used the average prices, because it did not have sufficient data to convert average prices into marginal prices. According to the petitioners, the average prices the DOE used do not reflect the marginal prices paid by purchasers of commercial packaged boilers. Because operators of commercial packaged boilers are among the largest purchasers of fuel from energy utilities, they receive volume discounts and enter into hedging contracts, and therefore pay significantly less. Consequently, by using predicted average energy prices to compare the LCC of boilers with and without a heightened efficiency standard, the DOE significantly overstated the savings associated with promulgation of a stricter standard. The DOE responded that the data sets it used “are the best aggregate sources for energy prices currently available” and it “incorporate[d] many adjustment factors to the average price data and the price trend data to account for the price differences 17 due to variations in locations, seasons, and market sectors and to ensure that the energy prices are properly accounted for in the economic analysis.” 85 Fed. Reg. at 1632. This response is conclusory, not explanatory. The DOE never explained how its “adjustment factors” address the specific concerns raised by the petitioners, which are not about “locations, seasons, [or] market sectors.” The DOE points us to the Technical Support Document, which lays out the DOE’s methodology for calculating energy prices. That document correctly states: “Because marginal prices reflect a change in a consumer’s bill associated with a change in energy consumed, such prices are appropriate for determining energy cost savings associated with possible changes to efficiency standards.” In keeping with that insight, we are told “[m]onthly electricity and natural gas prices were adjusted using seasonal marginal price factors to determine monthly marginal electricity and natural gas prices.” None of this addresses the lower prices for fuel allegedly paid by those who operate commercial packaged boilers. Perhaps the DOE could provide a cogent response to the concerns raised by the petitioners, but we cannot discern it in the administrative record. Therefore, we cannot say the Secretary reasonably concluded she had clear and convincing evidence a more stringent efficiency standard is economically justified.