American Gas Association v. DOE

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 21, 2024 Decided November 4, 2025

No. 22-1030

AMERICAN GAS ASSOCIATION, ET AL.,

PETITIONERS

v.

UNITED STATES DEPARTMENT OF ENERGY AND CHRIS

WRIGHT, SECRETARY, U.S. DEPARTMENT OF ENERGY,

RESPONDENTS

CITY OF NEW YORK, ET AL.,

INTERVENORS

Consolidated with 23-1285, 23-1337

On Petitions for Review of Final Rules

of the U.S. Department of Energy

Mithun Mansinghani argued the cause for petitioners.

With him on the joint briefs were Michael B. Schon, Renée M.

Lani, Randolph L. Elliott, Samantha L. Fugagli, Drew F.

Waldbeser, Adeline Kenerly Lambert, Michael L. Murray, and

Matthew J. Agen.

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Andrew R. Varcoe, Stephanie A. Maloney, Jeremy C.

Marwell, and Nathan Campbell were on the brief for amicus

curiae the Chamber of Commerce of the United States of

America in support of petitioners.

Jonathan Skrmetti, Attorney General, Office of the

Attorney General for the State of Tennessee, J. Matthew Rice,

Solicitor General, Whitney Hermandorfer, Director of

Strategic Litigation, Matthew D. Cloutier, Assistant Solicitor

General; Steve Marshall, Attorney General, Office of the

Attorney General for the State of Alabama, Ashley Moody,

Attorney General, Office of the Attorney General for the State

of Florida; Theodore E. Rokita, Attorney General, Office of the

Attorney General for the State of Indiana; Kris W. Kobach,

Attorney General, Office of the Attorney General for the State

of Kansas; Liz Murrill, Attorney General, Office of the

Attorney General for the State of Louisiana; Andrew Bailey,

Attorney General, Office of the Attorney General for the State

of Missouri; Gentner Drummond, Attorney General, Office of

the Attorney General for the State of Oklahoma; Tim Griffin,

Attorney General, Office of the Attorney General for the State

of Arkansas; Chris Carr, Attorney General, Office of the

Attorney General for the State of Georgia; Brenna Bird,

Attorney General, Office of the Attorney General for the State

of Iowa; Russell Coleman, Attorney General, Office of the

Attorney General for the Commonwealth of Kentucky; Lynn

Fitch, Attorney General, Office of the Attorney General for the

State of Mississippi; Michael T. Hilgers, Attorney General,

Office of the Attorney General for the State of Nebraska; Alan

Wilson, Attorney General, Office of the Attorney General for

the State of South Carolina; Ken Paxton, Attorney General,

Office of the Attorney General for the State of Texas; Patrick

Morrisey, Attorney General, Office of the Attorney General for

the State of West Virginia; and Jason Miyares, Attorney

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General, Office of the Attorney General for the

Commonwealth of Virginia, were on the brief for amici curiae

States of Tennessee, et al. in support of petitioners.

J. Mark Little and Megan H. Berge were on the brief for

amici curiae National Multifamily Housing Council, et al. in

support of petitioners.

Steven H. Hazel, Attorney, U.S. Department of Justice,

argued the cause for respondents. With him on the brief were

Brian M. Boynton, Principal Deputy Assistant Attorney

General, Michael S. Raab, Attorney, and Samuel Walsh,

General Counsel, U.S. Department of Energy. Sarah Carroll

and John Starcher, Attorneys, U.S. Department of Justice,

entered appearances.

Letitia James, Attorney General, Office of the Attorney

General for the State of New York, Jeffrey W. Lang, Deputy

Solicitor General, Brian Lusignan, Assistant Solicitor General,

Morgan Anna Costello, Laura Mirman-Heslin, Timothy

Hoffman, and Christopher Gore, Assistant Attorneys General,

and; Kevin Breiner and Timothy D. Ballo, Earthjustice; Emily

Davis, Natural Resources Defense Council; Andrea Joy

Campbell, Attorney General, Office of the Attorney General

for the Commonwealth of Massachusetts, Turner Smith,

Assistant Attorney General; Muriel Goode-Trufant, Acting

Corporation Counsel, Christopher Gene King, Senior Counsel,

New York City Law Department; Brian L. Schwab, Attorney

General, Office of the Attorney General for the District of

Columbia, Caroline S. Van Zile, Deputy Solicitor General;

Aaron Frey, Attorney General, Office of the Attorney General

for the State of Maine, Robert L. Martin, Assistant Attorney

General; Kwame Raoul, Attorney General, Office of the

Attorney General for the State of Illinois, Elizabeth Dubats,

Assistant Attorney General; Anthony G. Brown, Attorney

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General, Office of the Attorney General for the State of

Maryland, John B. Howard, Jr., Special Assistant Attorney

General, Steven Jay Goldstein, Assistant Attorney General;

Keith Ellison, Attorney General, Office of the Attorney

General for the State of Minnesota, Peter Surdo, Special

Assistant Attorney General; Matthew J. Platkin, Attorney

General, Office of the Attorney General for the State of New

Jersey, David Apy, Assistant Attorney General; Aaron D. Ford,

Attorney General, Office of the Attorney General for the State

of Nevada, Heidi Parry Stern, Solicitor General; Raúl Torrez,

Attorney General, Office of the Attorney General for the State

of New Mexico, William Granthan, Assistant Attorney

General, Ellen F. Rosenblum, Attorney General, Office of the

Attorney General for the State of Oregon, Paul Garrahan,

Attorney-in-Charge, Steve Novick, Special Assistant Attorney

General; Robert W. Ferguson, Attorney General, Office of the

Attorney General for the State of Washington, Stephen Scheele,

Assistant Attorney General; and Charity Clark, Attorney

General, Office of the Attorney General for the State of

Vermont, and Hannah Yindra, Assistant Attorney General,

were on the brief for respondent-intervenors.

Jason A. Schwartz was on the brief for amicus curiae the

Institute for Policy Integrity at New York University School of

Law in support of respondents.

Before: PILLARD, WILKINS, and RAO, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILKINS.

Dissenting opinion filed by Circuit Judge RAO.

WILKINS, Circuit Judge: After the Department of Energy

(“DOE”) promulgated amended energy efficiency standards

for consumer furnaces (residential non-weatherized gas

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furnaces and mobile home gas furnaces) and certain

commercial water heaters under the Energy Policy and

Conservation Act (“EPCA”), Petitioners—who are a number

of trade associations, manufacturers, and energy providers—

filed petitions for review in this Court challenging DOE’s

actions. Energy Conservation Program: Energy Conservation

Standards for Consumer Furnaces, 88 Fed. Reg. 87502 (Dec.

18, 2023) (“Consumer Furnaces Rule”); Energy Conservation

Program: Energy Conservation Standards for Commercial

Water Heating Equipment, 88 Fed. Reg. 69686 (Oct. 6, 2023)

(“Commercial Water Heaters Rule”); Energy Conservation

Program for Appliance Standards: Energy Conservation

Standards for Residential Furnaces and Commercial Water

Heaters, 86 Fed. Reg. 73947 (Dec. 29, 2021) (“2021

Interpretive Rule”).

In this consolidated case, Petitioners contend that DOE’s

amended energy efficiency standards will expel

non-condensing consumer furnaces and commercial water

heaters—which they allege offer consumers unique

performance characteristics and features—out of the market

because they will be unable to meet the newly amended energy

efficiency standards, unlike their condensing counterparts.

Petitioners also argue that DOE did not provide adequate

economic justification, as is required by EPCA, before

promulgating the amended efficiency standards. Lastly,

Petitioners allege that DOE failed to adhere to procedural

requirements as provided by EPCA when promulgating the

Consumer Furnaces Rule. Because each of Petitioners’

arguments fail, we deny the petitions.

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I. Background

A.

EPCA, amended in 1992, was enacted in order “to provide

for improved energy efficiency1 of . . . major appliances, and

certain other consumer products[,]” among other purposes. 42

U.S.C. § 6201(5). Consumer products such as refrigerators,

freezers, air conditioners, water heaters, furnaces, ovens,

television sets, etc. are “covered products” under EPCA and are

subject to improved energy efficiency standards as authorized

by the Secretary of DOE. Id. §§ 6292(a), 6295(a). As relevant

to this case, DOE was mandated to set energy conservation

standards for consumer furnaces and commercial water heaters

under subsections 6295(f) and 6313(a), respectively.

EPCA also authorizes DOE to make amendments to

energy conservation standards after certain times and

triggering events. Id. §§ 6295(m), 6313(a)(6). For example,

regarding commercial furnaces, subsection 6295(m)(1)

provides that “[n]ot later than 6 years after issuance of any final

rule . . . amending a standard” DOE will either publish a notice

that the standards do not need to be amended, or publish a

notice of proposed rulemaking including the new proposed

standards. A later provision of the statute provides that any

amended energy conservation standard for consumer furnaces

“shall . . . achieve the maximum improvement in energy

efficiency . . . [that] is technologically feasible and

economically justified.” Id. § 6295(o)(2)(A). Likewise, for

commercial water heaters, subsection 6313(a)(6) provides that

1

“The term ‘energy efficiency’ means the ratio of the useful output

of services from a consumer product” or an article of industrial

equipment “to the energy use of such product” or article. 42 U.S.C.

§ 6291(5); 2021 Interpretive Rule, 86 Fed. Reg. at 73955.

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DOE will amend efficiency standards to be at least consistent

with the standards set by the American Society of Heating,

Refrigerating and Air-Conditioning Engineers (“ASHRAE”).

2021 Interpretive Rule, 86 Fed. at 73948. If DOE chooses to

apply a more stringent efficiency standard for commercial

water heaters, the standard needs to result in “significant

additional conservation of energy,” and be “technologically

feasible and economically justified” by clear and convincing

evidence. Id. § 6313(a)(6)(A)(ii)(II).

Congress set out several factors for DOE to consider when

determining whether an amended energy standard is

economically justified. The statutes ask DOE to consider:

(I) the economic impact of the standard

on the manufacturers and on the

consumers of the products subject to

the standard;

(II) the savings in operating costs

throughout the estimated average life

of the product in the type (or class)

compared to any increase in the price

of, or in the initial charges for, or

maintenance expenses of, the

products that are likely to result from

the imposition of the standard;

(III) the total projected quantity of energy

savings likely to result directly from

the imposition of the standard;

(IV) any lessening of the utility or the

performance of the products likely to

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result from the imposition of the

standard;

(V) 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;

(VI) the need for national energy

conservation; and

(VII) other factors the Secretary considers

relevant.

Id. § 6313(a)(6)(B)(ii); see also id. § 6295(o)(2)(B)(i) (same)2

Importantly, and as relevant to this case, DOE may not

prescribe an amended standard if any “interested persons”

establish “by a preponderance of the evidence that [an

efficiency] standard is likely to result in the unavailability in

the United States in any product type (or class) of performance

characteristics (including reliability, features, sizes, capacities,

and volumes) that are substantially the same as those generally

available in the United States.” Id. § 6313(a)(6)(B)(iii)(II)(aa);

see also id. § 6295(o)(4) (“[DOE] may not prescribe an

amended . . . standard . . . if [DOE] finds . . . that interested

persons have established by a preponderance of the evidence

that the standard is likely to result in the unavailability in the

[U.S.] in any covered product type (or class) of performance

characteristics (including reliability), features, sizes,

2

Although the language of these subsections varies slightly, the

parties agree that they are not materially different for the issues

raised in this case. Pet’rs’ Br. 9; Resp’ts’ Br. 4 n.1.

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capacities, and volumes that are substantially the same as those

generally available in the [U.S.] at the time of [DOE’s]

finding.”).3

B.

Before discussing the procedural history of this case, a

brief overview of the mechanics of condensing versus

non-condensing consumer furnaces and commercial water

heaters is necessary. In a non-condensing consumer furnace or

commercial water heater, a heat exchanger burns gas which is

used to heat the air (for furnaces) or water (for water heaters).

The rest of the heated gas, which is not used for the appliance,

is transferred out of a building via an unpowered heat

exchanger, like a vertical chimney. The vents for non-

condensing appliances are “designed to avoid excessive

condensate production in the vent.” Consumer Furnaces Rule,

88 Fed. Reg. at 87563 n.111. In a condensing consumer

furnace or commercial water heater, on the other hand, a

second powered heat exchanger is used to capture the excess

heat not used to heat air or water. This second heat exchanger

turns the excess heat into condensed water vapor, then transfers

the cooler air out through a fanned horizontal vent and the

liquid condensate out through a drain. This added heat

exchanger makes the condensing appliance more efficient

overall as compared to its non-condensing counterpart.

Additionally, the vents that are used in a condensing appliance

are “corrosion-resistant,” like plastic, id. at 87562–63 & n.111,

and therefore non-condensing appliances and condensing

appliances are unable to share the same vents. Id. at 87536; see

3

Again, although the phrasing of the subsections are not identical,

the parties concede that the two sections are materially similar for the

issues raised in this case. Pet’rs’ Br. 9–10, 45; Resp’ts’ Br. 4 n.1.

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also Commercial Water Heaters Rule, 88 Fed. Reg. at 69710

(same).

On March 12, 2015, DOE published a notice of proposed

rulemaking (“NOPR”) to amend energy conservation standards

for consumer furnaces. In this March 2015 NOPR, “DOE

tentatively concluded that the methods by which a furnace is

vented . . . do not provide any separate performance-related

impacts,” and therefore are not a “unique utility to consumers

beyond the basic function of providing heat, which all furnaces

perform.” 2021 Interpretive Rule, 86 Fed. Reg. at 73949. After

publishing a notice of data availability, DOE supplemented its

NOPR on September 23, 2016 (referred to as a “SNOPR”),

proposing to establish capacity-based product classes, and

“reiterated its tentative conclusion that methods of venting do

not provide any performance-related utility separate from the

basic function of a furnace.” Id. Separately, DOE published a

NOPR to amend energy conservation standards for commercial

water heaters on May 31, 2016, in which DOE also tentatively

concluded that condensing and non-condensing commercial

water heaters “provide the same hot water” for commercial

consumers and therefore do not require separate equipment

classes. Id. In each of these notices, DOE “proposed

amend[ing] energy conservation standards that would

effectively require [consumer furnaces and commercial water

heaters] . . . to use condensing technology to meet the proposed

amended standards,” and would “effectively eliminate[] all

non-condensing [consumer furnaces and commercial water

heaters] . . . currently on the market.” Id.

On October 18, 2018, Petitioners submitted a petition for

rulemaking to DOE. In it they asked DOE to: (1) issue an

interpretive rule stating that the agency’s proposed energy

conservation standards would result in the unavailability of

“performance characteristics” in consumer furnaces and

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commercial water heaters, and (2) withdraw the proposed

energy conservation standards because of that finding. DOE

published the petition and requested public comment.

On July 11, 2019, after considering public comments,

DOE published a notice of a proposed interpretive rule

(“NOPIR”) that non-condensing technology “constitute[s] a

performance-related ‘feature’ . . . that cannot be eliminated

through adoption of an energy conservation standard.” Id. at

73949–50. This was eventually followed by a final interpretive

rule on January 15, 2021, “determining that, in the context of

residential furnaces . . . [and] commercial water

heaters . . . use of non-condensing technology (and associated

venting) constitutes a performance-related ‘feature.’” Id. at

73950. DOE found that the reasons non-condensing

technology offers unique “feature[s]” is because it “(1)

[a]void[s] complex installations in certain locations

constrained by space, existing venting, and available drainage;

(2) avoid[s] the encroachment on usable space that would occur

in certain installations; and (3) do[es] not enhance the level of

fuel switching that might accompany standard setting absent a

separate product/equipment class for non-condensing

appliance[s].” Id. Following this final interpretive rule, DOE

withdrew its March 12, 2015, NOPR.

Then, about seven months later, on August 27, 2021, DOE

published another NOPIR where it “re-examined the

conclusions reached in the January 2021” final interpretive

rule. In this August 2021 NOPIR, DOE proposed to “re-instate

its historical interpretation of” “performance characteristics”

and “features” to conclude that “non-condensing technology”

for consumer furnaces and commercial water heaters is “not a

performance-related ‘feature’ for the purpose of the EPCA.”

Id. at 73948, 73950.

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On the same day, August 27, 2021, DOE requested

comment on the NOPIR with the comment period scheduled to

close on September 27, 2021. However, after receiving a

request from Petitioners, DOE extended the comment period to

October 12, 2021.

When the comment period closed DOE issued a Final

Interpretive Rule on December 29, 2021. Consistent with its

March 2015 NOPR, September 2016 SNOPR, and May 2016

NOPR, DOE concluded that non-condensing technology in

consumer furnaces and commercial water heaters does not

offer performance-related “feature[s]” as compared to

condensing consumer furnaces and commercial water heaters.

Id. at 73951. DOE once again found that there was no unique

utility to consumers offered by non-condensing technology as

both non-condensing and condensing appliance’s function is to

provide heated air or water. DOE concluded “[u]pon further

consideration” that “utility is determined through the benefits

and usefulness the feature provides to the consumer while

interacting with the product.” Id. Therefore, differences in

cost or complexity of installation “do not make any method of

venting a performance-related feature.” Id. Instead, DOE

explained that those considerations were more appropriate

under its economic justification analysis under

subsections 6295(o)(2)(B)(i) and 6313(a)(6)(B)(ii).

On October 6, 2023, DOE published a Final Rule updating

the efficiency standards for commercial water heaters after

determining the revised efficiency standards “represent[ed] the

maximum improvement in energy efficiency that [was]

technologically feasible and economically justified.”

Commercial Water Heaters Rule, 88 Fed. Reg. at 69687. The

amended efficiency standards for commercial water heaters

were estimated to save 5.6 percent energy usage relative to the

case without amended standards. Id. at 69688. Likewise, on

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December 18, 2023, DOE amended energy conservation

standards for consumer furnaces that included residential non-

weatherized gas furnaces and mobile home gas furnaces.

Consumer Furnaces Rule, 88 Fed. Reg. at 87503. DOE

estimated that the amended standards for consumer furnaces

would save 4.77 quadrillion British thermal units (“Btu”),

which represented a 3.2 percent savings if compared to a

scenario without amended efficiency standards. Id. at 87504.

Petitioners ask us to vacate DOE’s 2021 Interpretive Rule,

the Commercial Water Heaters Rule, and the Consumer

Furnaces Rule.

II. Analysis

A. Jurisdiction and Standing

We have jurisdiction to review the petitions under 42

U.S.C. sections 6306(b) and 6316. This Court will “hold

unlawful and set aside agency action, findings, and conclusions

found to be . . . arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law” or “without observance

of procedure required by law.” 5 U.S.C. § 706(2)(A), (D). We

will not “substitute [our] judgment for that of the agency,”

Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983), nor will we “supply a

reasoned basis for the agency’s action that the agency itself has

not given.” Id. (citing SEC v. Chenery Corp., 332 U.S. 194,

196 (1947)). If the “agency [has] examine[d] the relevant data

and articulate[d] a satisfactory explanation for its action

including a ‘rational connection between the facts found and

the choice made’” we will uphold the decision. Id. (quoting

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168 (1962)); see also Loper Bright Enters. v. Raimondo, 603

U.S. 369, 395–96 (2024). The agency must “clearly disclose[]”

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“the grounds upon which . . . [it] acted” by substantial evidence.

T-Mobile S., LLC v. City of Roswell, 574 U.S. 293, 301 (2015);

42 U.S.C. § 6306(b)(2) (“No rule under section . . . 6295 of this

title may be affirmed unless supported by substantial

evidence.”).

An association has standing on behalf of its members if at

least one member has standing to sue individually. Sierra Club

v. DOE, 107 F.4th 1012, 1014 (D.C. Cir. 2024) (citing Hunt v.

Wash. State Apple Advert. Comm’n, 432 U.S. 333, 343 (1977)).

An association also must show that “the interests it seeks to

protect are germane to the organization’s purpose” and that

“neither the claim asserted nor the relief requested requires the

participation of individual members in the lawsuit.” Hunt, 432

U.S. at 343.

Petitioners American Gas Association (“AGA”),

American Public Gas Association (“APGA”), and National

Propane Gas Association (“NPGA”) are trade associations.

AGA advocates for natural gas companies and customers;

APGA advocates for publicly owned or operated natural gas

systems; and, NPGA represents various entities in the propane

industry. AGA, APGA, and NPGA have adequately supported

their claim of associational standing in their declarations by

alleging that their members expect to incur economic loss if the

Consumer Furnaces and Commercial Water Heaters Final

Rules are not vacated. They allege that without vacatur their

members will be injured when consumers switch from natural

gas to electric appliances. Pet’rs’ Decl. Addendum at 3–

4 ¶¶ 7–9, 6–7 ¶¶ 6–7, 18–19 ¶¶ 6–8, 31–33 ¶¶ 7–9, 36 ¶¶ 6–8;

see Am. Pub. Gas Ass’n. v. DOE, 72 F.4th 1324, 1336 (D.C.

Cir. 2023) (holding that petitioners “demonstrated standing

through declarations attesting to their expectations of economic

losses caused by the [f]inal [r]ule that may be remedied by

vacatur of the rule”).

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Petitioner Thermo Products, LLC (“Thermo”) is a

manufacturer of gas and oil furnaces and claims its standing to

challenge the 2021 Interpretive Rule and the Consumer

Furnaces Rule is “self-evident.” We agree. A petitioner suffers

an injury in fact by an agency when the agency promulgates a

regulation that prohibits a petitioner from producing or selling

a product that they would have otherwise been able to produce

or sell. See Energy Future Coal. v. EPA, 793 F.3d 141, 144

(D.C. Cir. 2015) (holding that petitioners faced an injury in fact

when they “claim that they face a regulatory

impediment . . . that prevents their product from being used as

a test fuel”). Thermo alleges that DOE’s 2021 Interpretive

Rule and Consumer Furnaces Rule will impose standards that

its noncondensing residential furnaces will not be able to meet

or be redesigned to meet. Pet’rs’ Decl. Addendum at 14–

15 ¶¶ 5–7. Thermo claims that as a result it will not be able to

sell non-condensing furnaces, which will cause it to “face

interrupted and possibly lost revenue streams,” “abandon”

product designs “in which it has invested large amounts of

capital,” and reverse changes in its operations. Id. ¶ 7. We also

find that Thermo has demonstrated causation and redressability

by alleging that the loss of sales it may face will be directly

caused by the efficiency standards imposed in the Consumer

Furnaces Rule, and vacating the rule will redress the alleged

injury. See Energy Future Coal., 793 F.3d at 144.4

4

Because we conclude that AGA, APGA, NPGA, and Thermo have

standing, we need not address Spire Inc., Spire Alabama Inc., and

Spire Missouri Inc.’s standing. See Ams. for Safe Access v. Drug

Enf't Admin., 706 F.3d 438, 443 (D.C. Cir. 2013) (holding that if one

petitioner “has individual standing, we need not address the issue for

the other [p]etitioners”).

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B. Performance Characteristics and Features

Turning to the merits of the petition: We next determine

whether DOE was correct to conclude that non-condensing

appliances offer performance characteristics or features that are

substantially the same as those offered by condensing

appliances. 42 U.S.C. §§ 6295(o)(4),

6313(a)(6)(B)(iii)(II)(aa). We note that DOE’s interpretation

of EPCA does not bind us, but “it may be especially

informative ‘to the extent it rests on factual premises within . . .

[DOE’s] expertise.’” Loper Bright Enters., 603 U.S. at 402

(quoting Bureau of Alcohol, Tobacco and Firearms v. FLRA,

464 U.S. 89, 98, n.8 (1983)). “Such expertise has always been

one of the factors which may give an Executive Branch

interpretation particular ‘power to persuade, if lacking power

to control.’” Id. (quoting Skidmore v. Swift & Co., 323 U.S.

134, 140 (1944)).

Congress gave DOE “a degree of discretion” to decide

what constitutes a performance characteristic or feature under

EPCA. Id. at 2263. “The burden of producing evidence and

proving that a[n efficiency] standard level will result in the

unavailability of certain characteristics, etc., rests on interested

persons asserting the claim of unavailability.” H.R. REP. NO.

100-11, at 23 (1987); 42 U.S.C. §§ 6295(o)(4),

6313(a)(6)(B)(iii)(II)(aa). Petitioners must make this showing

before DOE by a preponderance of the evidence.

We begin with the plain text of the statute. See United

States v. Braxtonbrown-Smith, 278 F.3d 1348, 1352 (D.C. Cir.

2002) (“In construing a statute, the court begins with the plain

language of the statute.”). All parties, including the dissent,

see Dissenting Op. 8–9, agree that the plain meaning of

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“performance characteristics” is broad. The term

“performance” is simply defined as “the execution of an

action,” Performance, MERRIAM-WEBSTER INC. (Ninth New

Collegiate 1985), and “characteristic” is defined as “a

distinguishing trait, quality, or property.” Characteristic,

MERRIAM-WEBSTER INC. (Ninth New Collegiate 1985).

Additionally, “feature” means “the structure, form, or

appearance” and “a prominent part or characteristic.” Feature,

MERRIAM-WEBSTER INC. (Ninth New Collegiate 1985).

The parties agree that the plain text of “performance

characteristic” means a product attribute that provides utility to

consumers desiring to use the product.5 Pet’rs’ Br. 46; Resp’ts’

Br. 26 (performance characteristics “provide a consumer

unique utility during the operation of the appliance”) (quoting

2021 Interpretive Rule, 86 Fed. Reg. at 73955); Oral Arg. Tr.

at 5:11–20 (When asked for his definition of “performance

characteristic” at oral argument, Petitioners’ counsel stated that

it is “a product attribute that provides utility to consumers

desiring to use the product.”). In other words, a performance

characteristic “has to be . . . about using the product,” and

“doesn’t include things unrelated to the performance of the

product,” Oral Arg. Tr. at 5:23-25. Instead, a performance

characteristic is related to “the product[’s] . . . useful output.”

2021 Interpretive Rule, 86 Fed. Reg. at 73955.

Moreover, because every appliance offers a unique

function to consumers, the concept of a feature or performance

characteristic is “very case-specific.” 2021 Interpretive Rule,

86 Fed. Reg. at 73948. “No single definition could effectively

5

It seems that the dissent would also agree with this definition. See

Dissenting Op. 12 (“Under the best meaning of EPCA, a

‘performance characteristic’ is a distinctive product attribute that

provides utility to the consumer.”).

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capture the potential for features across the broad array of

consumer products and commercial equipment subject to

EPCA’s regulatory scheme.” Id. Therefore, because the plain

text of the statute does not get us home, we will look beyond it

to resolve the specific ambiguity here as it relates to consumer

furnaces and commercial water heaters. See Braxtonbrown-

Smith, 278 F.3d at 1352 (“Where the language is subject to

more than one interpretation and the meaning of Congress is

not apparent from the language itself, the court may be forced

to look to the general purpose of Congress in enacting the

statute and to its legislative history for helpful clues.”)

The parties’ dispute centers around the specific ambiguity

of what product attributes of small furnaces and water heaters

Congress concluded had utility to consumers such that they

warrant protection against energy conservation standards that

could eliminate them from the market. Specifically, the parties

dispute whether venting mechanisms, installation factors, or

space-related attributes encompass features that Congress

meant to treat as providing utility to consumers.

Beginning with venting mechanisms: Petitioners contend

that non-condensing appliances, which use unpowered venting

like vertical chimneys, offer performance characteristics to

consumers that condensing appliances do not. According to

Petitioners, condensing appliances are incompatible with

venting systems like chimneys because condensing appliances

require a fan to generate enough pressure to push or pull gases

outside. Pet’rs’ Br. 12. Petitioners further contend that

condensing appliances require plumbing drains to dispose of

condensate and cannot share vents with non-condensing

appliances. Pet’rs’ Br. 13. Petitioners argue that consumers

derive utility from a product by, for example, not “hav[ing] to

renovate their homes,” “to accommodate the use of

19

[condensing] products for which they were not architecturally

designed.” Oral Arg. Tr. 6:4; J.A. 324.

Congress was well aware of Petitioners’ perspective

regarding venting mechanics for small gas furnaces when it

amended EPCA in 1987. AGA submitted a statement before

the Subcommittee on Energy Conservation and Power in 1986

expressing concern that energy efficiency standards in EPCA

“would ban the conventional, atmospherically vented furnace”

because it would not be able to meet the prescribed efficiency

percentage. A Bill to Amend the Energy Policy and

Conservation Act with Respect to Energy Conservation

Standards for Appliances: Hearing on H.R. 5465 Before the

H. Subcomm. on Energy Conservation & Power, 99th Cong.

149 (1986). After hearing Petitioners’ perspective, the

Committee on Energy and Commerce issued the amended

EPCA bill the following year. In it, the Committee provided

that “[e]xamples of ‘performance characteristics’ of particular

products [were]: safety; cooling; refrigeration and heating;

dehumidification; ability to clean or dry without adverse

effects; serviceability; and incidence and cost o[f] repair.”

H.R. REP. NO. 100-11, at 23 (1987). Additionally, “[e]xamples

of ‘features’ [were]: automatic defrost, through the door ice,

size of room air conditioners, and noise levels.” Id. Therefore,

despite AGA’s comments, the Committee did not state that

venting mechanics were examples of performance

characteristics or features for consumer furnaces. However, it

did specifically provide that heat was a performance

characteristic. The dissent does not discuss this part of the

legislative history.

We think the Committee on Energy and Commerce’s

examples make good sense. At a certain level, it is obvious that

consumers do not buy small furnaces or commercial water

heaters because of how the appliance vents. In fact, venting is

20

a quality that both condensing and non-condensing appliances

share. It “is one of the basic components found in every gas-

fired furnace.” Consumer Furnaces Rule, 88 Fed. Reg. at

87535; see also Commercial Water Heaters Rule, 88 Fed. Reg.

at 69709 (“[V]enting, like a gas burner or heat exchanger, is

one of the basic components found in every gas-fired water

heater (condensing or noncondensing.”). The dissent seems to

overlook this aspect by arguing, without support, that “some

consumers here will be effectively deprived of gas-powered

appliances entirely.” Dissenting Op 12 n.1. This is simply not

true since gas-fired condensing options will still be available to

consumers.

Instead, the unique utility a consumer furnace or

commercial water heater provides to the consumer is that they

either provide hot air or hot water, respectively. If Congress

intended particular methods of venting such as unpowered

venting to be a performance characteristic, it had an

opportunity to clearly state as much—but it did not. See

Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161,

169 (2014) (“Had Congress intended . . . [Petitioners’ view of

the statute], it easily could have drafted language to that

effect.”).

This understanding is also consistent with DOE’s

historical view of whether an appliance provides a unique

utility to consumers. 6 Take vented and ventless residential

6

For example, in the context of dishwashers, “DOE’s longstanding

view [has been] that performance [means] ‘utility accessible to the

layperson and based on user operation.” See Louisiana v. DOE, 90

F.4th 461, 474 (5th Cir. 2024) (discussing DOE’s 2020 Final Rule

establishing a new product class for residential dishwashers, Energy

Conservation Program: Establishment of a New Product Class for

Residential Dishwashers, 85 Fed. Reg. 68723, 68727 (2020))

(internal quotation marks omitted). A practical example is cycle

21

clothes dryers as an example. In 2011, DOE separated ventless

and vented residential clothes dryers into two separate classes

because DOE recognized that having a ventless clothes dryer

was a unique utility for consumers who live in areas where a

vented dryer would not be possible to use (like apartments in

certain high-rise buildings). See Energy Conservation

Program: Energy Conservation Standards for Residential

Clothes Dryers and Room Air Conditioners, 76 Fed. Reg.

22454, 22485 (Apr. 21, 2011). DOE found that “a substantial

subset of consumers . . . would be deprived of the benefits of

. . . having [a] clothes-drying appliance in their residence

entirely unless DOE established a ventless clothes dryers

product class.” 2021 Interpretive Rule, 86 Fed. Reg. at 73957.

Venting was treated as a performance characteristic in the

clothes dryer context because the alternative venting option

(non-vented) impacted whether a consumer could use or install

the particular appliance at all in a large class of applications.7

times in clothes washers and dryers. Cycle times have been

understood as “a valuable consumer utility and performance-related

feature” in the context of clothes washers and clothes dryers because

consumers value the utility of having an option for a shorter cycle

time. Energy Conservation Program: Establishment of New Product

Classes for Residential Clothes Washers and Consumer Clothes

Dryers, 85 Fed. Reg. 81359, 81361 (2020).

7

Instead of acknowledging the reason that ventless and vented

clothes dryers were treated as a separate product class, the dissent

cites the same rule and contends that “the Department has

consistently set distinct efficiency standards for products based on

compatibility with venting systems.” Dissenting Op. 11. However,

this contention overlooks the “case-specific” reason that ventless and

vented clothes dryers were separated into two different product

classes—ventless clothes dryers are the only available option for

those who live in certain high-rise buildings. See 2021 Interpretive

Rule, 86 Fed. Reg. at 73948; see also id. at 73957 (“[I]f a ventless

clothes dryer were not available, no clothes dryer would be available

22

Not so with condensing consumer water heaters or

furnaces. When DOE had to determine whether consumer

water heaters that utilize heat pump technology versus electric

resistance technology should be placed in separate classes,

DOE concluded that they did not. See Energy Conservation

Program: Energy Conservation Standards for Residential

Water Heaters, Direct Heating Equipment, and Pool Heaters,

75 Fed. Reg. 20112, 20135 (April 16, 2010). DOE concluded

that even though an additional water drain had to be installed if

a consumer decides to use a heat pump, that small installation

requirement did not change the utility of providing heated

water to consumers, and moreover that “heat pump water

heaters could replace traditional electric resistance storage

water heaters in most residences, although the installation

requirements may be quite costly.” Id. So is the case here.

DOE found that “[i]n all cases” “consumers facing the prospect

of replacing a non-condensing residential furnace or

commercial water heater with a condensing . . . [appliance] do

have options available to either modify existing venting or

install a new venting system to accommodate a

condensing . . . [appliance], or to install a feasible alternative.”

2021 Interpretive Rule, 86 Fed. Reg. at 73957.

Next, Petitioners contend that “space-related attributes”

are performance characteristics that are “intertwined” with the

function of a consumer furnace and a commercial water heater.

Pet’rs’ Br. 48–50.

Recall that Petitioners’ burden is a heavy one—they must

“establish[] by a preponderance of the evidence that a[n

for certain locations”). That is, however, not the case for condensing

and non-condensing consumer furnaces and commercial water

heaters as we explain.

23

efficiency] standard is likely to result in the unavailability in

the United States in any product type (or class) of performance

characteristics (including . . . sizes, capacities, and volumes)

that are substantially the same as those generally available in

the United States.” 42 U.S.C. § 6313(a)(6)(B)(iii)(II)(aa); see

also id. § 6295(o)(4) (same). Substantial evidence in the record

before us shows that “interested persons” failed to carry that

burden.

In regards to commercial water heaters, DOE explained in

the 2021 Interpretive Rule that condensing technology does not

“require[] an increase in the overall size of a water heater” and

that “a condensing appliance would not result in a loss of useful

space for most consumers.” 2021 Interpretive Rule, 86 Fed.

Reg. at 73955; see also id. at 73957 n.13 (“DOE surveyed the

dimensions of representative commercial water heaters . . . and

found the height and diameter dimensions comparable.”).

Moreover, after conducting a review of both condensing and

non-condensing appliances having similar input ratings and

storage volumes from multiple manufactures, DOE found that

the “overall dimensions for condensing models were not

significantly larger than for non-condensing models.” Id. at

73955. Specifically, DOE found that “non-condensing

residential furnaces and commercial water heaters are not

significantly different in overall footprint, size, or heating

capacity from their condensing counterparts.” Id. at 73957.

Petitioners argue that DOE’s analysis of the space-related

characteristics of consumer furnaces and commercial water

heaters is inconsistent with how it has analyzed other products

like residential condensing and non-condensing furnace fans,

washing machines, and central air conditioners. Petitioners

argue that the reason Congress separated efficiency standards

for residential furnace fans used in mobile homes into its own

product class, for example, was due to the size constraints that

24

manufactured homes face. Pet’rs’ Br. 47–55; see Energy

Conservation Program for Consumer Products: Energy

Conservation Standards for Residential Furnace Fans, 78 Fed.

Reg. 64068, 64077 (Oct. 25, 2013). Although Petitioners may

be correct that size constraints were one of the factors DOE

considered when promulgating efficiency standards for furnace

fans used in mobile homes versus those not used in mobile

homes, they oversimplify DOE’s analysis. DOE separated

furnace fans based on characteristics such as whether the

furnace fan was weatherized (meaning that it could be used

outdoors), the type of energy source the furnace fan used, and

whether the furnace fan was condensing or non-condensing.

See Energy Conservation Program for Consumer Products, 78

Fed. Reg. at 64077. DOE explained that it separated these

categories based on “internal structure and application-specific

design differences that impact furnace fan energy

consumption.” Id. Specifically for condensing furnaces, DOE

explained that the separate fan class structure “allow[ed] for

differentiation of products with designs that achieve higher

thermal efficiency but may have lower fan performance.” Id.

at 64080. Therefore, unlike space-related attributes of

consumer furnaces and commercial water heaters, the design

of mobile home furnace fans is directly related to performance

requirements of the particular product.

Petitioners also point to front-loading and top-loading

washing machines to support their contention that size and

installation limits are “performance characteristics.” Pet’rs’

Br. 48; Energy Conservation Standards for Residential Clothes

Washers, 84 Fed. Reg. 37794 (Aug. 2, 2019). However, unlike

condensing and non-condensing consumer furnaces and

commercial water heaters, washing machine capacity has a

direct impact on efficiency levels and “the location of access”

to a washing machine “provides distinct consumer utility.”

Energy Conservation Standards for Residential Clothes

25

Washers, 84 Fed. Reg. at 37797. For example, front-loading

washers may be preferable to those with disabilities because

the angle may be easier to access, whereas top-loading washers

may be preferred by the elderly “because it is easier to reach

the laundry without excessive bending” or those who

appreciate the ability to add more clothes while the cycle has

already begun. 2021 Interpretive Rule, 86 Fed. Reg. at 73953.

In contrast, “a consumer’s interaction with a furnace or water

heater . . . [is] a simple one.” Id. “After the consumer adjusts

the thermostat or faucet, the user receives the requested heated

air or water.” Id.

Likewise, Petitioners’ argument regarding Congress’s

decision to separate “space-constrained central air

conditioners” from other central air conditioners misses the

point. DOE explained that it separated these two product

classes because “space-constrained central air conditioners

provide centralized air conditioning in locations with space

constraints that would preclude the use of other types of central

air conditioners.” Id. at 73957. “Space-constrained central air

conditioners have an indoor or outdoor unit that is limited in

size due to the location in which the unit operates.” Id. This

explanation does not mean that space-related attributes always

will dictate whether a product should be separated into its own

product class, however.8 As DOE explained, when it came to

8

Take, for example, packaged terminal air conditioners (“PTACs”)

and terminal heat pumps (“PTHPs”). In 2008, DOE separated

standard size, 16 inches high by 42 inches wide, PTACs and PTHPs

in a separate efficiency class from non-standardized PTACs and

PTHPs. Energy Conservation Program for Commercial and

Industrial Equipment: Packaged Terminal Air Conditioner and

Packaged Terminal Heat Pump Energy Conservation Standards, 73

Fed. Reg. 58772 (2008). DOE explained that the industry

standardized the wall sleeve dimensions for PTACs and PTHPs built

after the mid-1980s. Id. at 58782. However, in buildings constructed

26

analyzing non-condensing consumer furnaces and commercial

water heaters, it found that they were “not significantly

different in overall footprint, size, or heating capacity from

their condensing counterparts.” Id.

Lastly, as to installation factors: DOE recognized that

“installation of condensing products/equipment [sometimes]

requires modifications to the installed space . . . and that such

modifications may impact the installation cost and/or

complexity.” Id. at 73962. Because DOE found that

consumers are able to replace non-condensing appliances with

condensing appliances in “all cases,” we agree that installation

factors are more appropriately addressed in the

economic-justification analysis because installation factors

will not prevent the replacement of non-condensing appliances,

but may financially deter consumers from doing so. See id. at

73957. The language of subsections 6295(o)(4) and

6313(a)(6)(B)(iii)(II) bolster this reasoning because neither

includes a reference of “installation factors” or “installation

costs” as a factor that Congress was concerned about as it

relates to the unavailability provisions in EPCA. However,

before the mid-1980s, like “high-rise buildings found in large cities”

non-standard size equipment that varies in size is typically used. Id.

DOE created two different product classes for standard size PTACs

and PTHPs versus their non-standard size counterparts because

“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.” Id.

27

subsections 6295(o)(2)(B)(i)9 and 6313(a)(6)(B)(ii)10 more

appropriately capture a consideration of the installation costs

and factors under the “economic impact” and the “initial

charges for” the products on consumers.

In sum, the record fails to support Petitioners’ claim that

condensing consumer furnaces and commercial water heaters

are not “substantially the same” as their non-condensing

counterparts. We have no reason to second-guess DOE’s view,

“especially since it ‘rests on the agency’s evaluations of

scientific data within its area of expertise.’” Actavis Elizabeth

LLC v. FDA, 625 F.3d 760, 766 (D.C. Cir. 2010) (quoting

9

Subsections 6295(o)(2)(B)(i)(I) and (II) provide that:

[i]n determining whether a standard is economically

justified, the Secretary shall . . . determine whether

the benefits of the standard exceed its burdens by, to

the greatest extent practicable, considering—

(I) the economic impact of the

standard on the manufacturers and

on the consumers of the products

subject to such standard; [and]

(II) the savings in operating costs

throughout the estimated average

life of the covered product in the

type (or class) compared to any

increase in the price of, or in the

initial charges for, or maintenance

expenses of, the covered products

which are likely to result from the

imposition of the standard.

10

Subsections 6313(a)(6)(B)(ii)(I) & (II) are materially the same as

subsections 6295(o)(2)(B)(i)(I) and (II).

28

Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1320 (D.C. Cir.

1998)). We find that, although not identical, condensing

consumer furnaces and commercial water heaters offer

substantially the same performance characteristics and features

as non-condensing options. 42 U.S.C. §§ 6295(o)(4),

6313(a)(6)(B)(iii)(II)(aa); see H.R. REP. NO. 100-11, at 23

(1987) (explaining that “substantially the same” does not mean

“identical”). We are satisfied that DOE has “fulfilled its duty

to ‘examine the relevant data and articulate a satisfactory

explanation for its’” conclusion that Petitioners failed to show,

by a preponderance of the evidence, that non-condensing

consumer furnaces and commercial water heaters offer

performance characteristics that are unlike those offered by

their condensing counterparts. Ark Initiative v. Tidwell, 816

F.3d 119, 127 (D.C. Cir. 2016) (quoting State Farm, 463 U.S.

at 43).

C. Economic Justification

We next determine whether DOE acted arbitrarily in

concluding that the amended standards for consumer furnaces

and commercial water heaters were economically justified.

DOE must show that its amended efficiency standards in the

Consumer Furnaces Rule are supported by substantial

evidence—a burden common to actions we review under the

Administrative Procedure Act. 42 U.S.C. § 6306(b)(2); see

Biestek v. Berryhill, 587 U.S. 97, 102 (2019) (“The phrase

‘substantial evidence’ is a ‘term of art’ used throughout

administrative law to describe how courts are to review agency

factfinding.” (quoting T-Mobile S., LLC, 574 U.S. at 301)).

However, the energy efficiency standards in the Commercial

Water Heaters Rule must be economically justified “by clear

and convincing evidence.” 42 U.S.C. § 6313(a)(6)(A)(ii)(II).

“[C]lear and convincing evidence requires . . . the

Secretary . . . to have an ‘abiding conviction’ that her findings

29

. . . are ‘highly probable’ to be true. APGA v. DOE, 22 F.4th

1018, 1025 (D.C. Cir. 2022) (“APGA I”) (quoting Colorado v.

New Mexico, 467 U.S. 310, 316 (1984)). Our review, even

under the clear and convincing standard, is to determine

whether it was reasonable for the agency to conclude that it met

this standard. Id. at 1025–26 (citing Sea Island Broad. Corp.

of S.C. v. FCC, 627 F.2d 240, 244 (D.C. Cir. 1980)).

1. Random Assignment/Monte Carlo Analysis

Petitioners take issue with the widely used random

assignment test (also known as Monte Carlo analysis) that

DOE utilized as part of the economic analysis for the amended

efficiency standards for both the Consumer Furnace Final Rule

and the Commercial Water Heater Final Rule. Petitioners

argue that DOE relied on an assumption that consumers make

appliance purchases randomly without weighing economic

benefits, and that DOE failed to give a reasoned explanation

for doing so.

The random assignment test or Monte Carlo analysis is

used across industries ranging from physical sciences to high

finance. Lyondell Chem. Co. v. Occidental Chem. Corp., 608

F.3d 284, 293 (5th Cir. 2010). It was first used a little under a

century ago by physicists conducting nuclear weapons

research. Id.; see also AT&T Svs., Inc. v. FCC, 21 F.4th 841,

847 (D.C. Cir. 2021) (noting that Monte Carlo analysis was

“[d]eveloped by scientists working on the Manhattan Project”).

This methodology is “particularly useful when reaching an

exact numerical result is impossible or infeasible and the data

provide[s] a known range—a minimum and a maximum, for

example—but leave[s] the exact answer uncertain.” Lyondell

Chem. Co., 608 F.3d at 293. A random assignment test or

Monte Carlo analysis “runs hundreds of simulations, and

produces a range of possible outcomes.” AT&T Svs., Inc., 21

30

F.4th at 847. This type of analysis “can provide a ‘more

complete view of potential outcomes and their associated

likelihoods.’” Id. (quoting FED. JUDICIAL CTR. & NAT’L RSCH.

COUNCIL, REFERENCE MANUAL ON SCI. EVIDENCE 469 (3d ed.

2011)). The Environmental Protection Agency has explained

that Monte Carlo analysis can be a “viable statistical tool[] for

analyzing variability and uncertainty in risk assessments.”

Lyondell Chem. Co., 608 F.3d at 293 (quotation omitted)

(citing EPA, GUIDING PRINCIPLES FOR MONTE CARLO

ANALYSIS, EPA/630/R-97/001, at 1 (1997)).

The random assignment test is not new to either AGA or

DOE. This Court recently considered the issue of whether

DOE arbitrarily conducted its life-cycle cost (“LCC”) analysis

when it randomly assigned commercial packaged boilers to

buildings without weighing the kind of building the boiler was

being assigned to. APGA I, 22 F.4th at 1027. When DOE

conducted its no-new-standards case analysis, it assumed that

“the distribution of efficiencies among shipped boilers [was]

the same as the distribution of efficiencies across the models

listed in the [Air-Conditioning, Heating, and Refrigeration

Institute (“AHRI”)] data base.” Id. APGA and other

petitioners contended that DOE “failed to recognize that a

purchaser of commercial packaged boilers would rationally

consider the costs and benefits of its investment and is likely to

buy the boiler that produces the best economic performance for

its building.” Id.

Instead of explaining its analysis, DOE “rather

dismissively” explained that it did not have the data that would

be necessary to run an alternative analysis to the one it

conducted. Id. Additionally, DOE listed possible market

failures that its LCC analysis addressed, but did not provide

evidence to show that the market failures it listed affected the

market for commercial packaged boilers. Id. We remanded

31

the case back to DOE, without vacatur, and ordered DOE to

provide a “more complete response” since the “assignment of

efficiencies to the buildings in the sample was a crucial part of

the analysis supporting the DOE’s conclusion that a more

stringent [energy efficiency] standard was warranted.” Id. We

held that DOE’s response that it “essentially . . . did the best it

could with the data it had” was “not enough to justify [an]

assum[ption that] a purchaser’s decisions w[ould] not align

with its economic interests in purchasing a boiler.” Id.

Therefore, we could not conclude that DOE’s amended

efficiency standards were supported by clear and convincing

evidence under subsection 6313(a)(6)(A)(ii)(II). Id. at 1028.

This Court did not discredit, nor decide, that the random

assignment test should not have been used in DOE’s LCC

analysis in APGA I. Instead, we merely ordered DOE to go

back and provide more reasoned explanations for its analysis

and respond to the petitioners’ concerns. The case before us is

unlike what we considered in APGA I. DOE’s LCC here was

“the sum of the purchase price of a piece of equipment

(including its installation and sales tax) and the operating

expense (including energy, maintenance, and repair

expenditures) discounted over the lifetime of the equipment.”

Commercial Water Heaters Rule, 88 Fed. Reg. at 69704;

Consumer Furnaces Rule, 88 Fed Reg. at 87528 (same). To

calculate the LLC, DOE needed a “variety of inputs, such as

product prices, product energy consumption, energy prices,

maintenance and repair costs, product lifetime, and discount

rates appropriate for consumers.” Commercial Water Heaters

Rule, 88 Fed. Reg. at 69704; Consumer Furnaces Rule, 88 Fed

Reg. at 87528 (same).

DOE used real-world historical data for its inputs which

included the highest quality summary statistics submitted by

interested persons as well as data submitted by individual

32

households. Consumer Furnaces Rule, 88 Fed. Reg. at 87555.

The data used correlated inputs to “individual building

characteristics” such as “heating load, building shell indices,

installation costs, and no-new-standards case efficiency

probability.” Id.; see also Commercial Water Heaters Rule, 88

Fed. Reg. at 69731 (explaining that in relation to commercial

water heaters DOE’s analysis captured the average hot water

loads on equipment, but did not necessarily capture extremes).

“DOE develop[ed] probabilities for as many inputs to the LCC

analysis as possible, to reflect the distribution of impacts as

comprehensively as possible.” Consumer Furnaces Rule, 88

Fed. Reg. at 87555; see also Commercial Water Heaters Rule,

88 Fed. Reg. at 69731 (same). It also developed sensitivity

scenarios “to specifically address the potential uncertainty in

some key input parameters.” Consumer Furnaces Rule, 88 Fed.

Reg. at 87555. Contrary to Petitioners’ argument, DOE

included “an increasing penetration of condensing furnaces”

into its analysis based on the trend that consumers are

progressively purchasing condensing furnaces and water

heaters even without new standards. Consumer Furnaces Rule,

88 Fed. Reg. at 87556; Pet’rs’ Br. 75–77. DOE then responded

to comments from interested persons and provided “additional

sensitivity scenarios to demonstrate that its conclusions of

economic justification [were] robust.” Consumer Furnaces

Rule, 88 Fed. Reg. at 87555.11

Petitioners’ argument—that DOE did not provide a

reasoned explanation for assuming that consumers sometimes

11

Despite the inputs DOE used and the analysis it performed, the

dissent believes that we somehow found solace in DOE’s analysis

because it was “longer,” see Dissenting Op. 20, but no where do we

conclude that DOE’s reasoning was sound based on the length—

instead we base our holding on the reasoned explanation DOE

provided and its calculus based on the entirety of the data in the

record before it.

33

do not act in their best economic interest—is not supported by

the record before us. The dissent seems to take this even farther

by contending that DOE “assumed consumers never consider

costs when choosing between gas-fired appliances.”

Dissenting Op. 15 (emphasis in original). But this is once again

simply not true. See e.g., Consumer Furnaces Rule, 88 Fed. at

87584 (“DOE [did] not mak[e] an assumption that consumers

never consider the economics of their purchasing decision.”).

Although DOE’s burden for the Commercial Water

Heaters Final Rule was a high one—clear and convincing

evidence—there is substantial evidence in the record to show

that they met the mark. In order “[t]o accurately estimate the

share of consumers that would be affected by a potential energy

conservation standard,” DOE analyzed the LCC of commercial

water heaters “under the no-new standards case (i.e., the case

without amended or new energy conservation standards).”

Commercial Water Heaters Rule, 88 Fed. Reg. at 69757.

“DOE developed the no-new-standards distribution of

equipment using data from DOE’s Compliance Certification

database and data submitted by AHRI regarding condensing

versus non-condensing equipment.” Id. DOE then assigned a

commercial water heater to each building it had in its sample

based “on the forecasted efficiency distribution (which is

constrained by the shipment and model data collected by DOE

and submitted by AHRI) and accounts for consumers that

[we]re already purchasing efficient” commercial water heaters.

Id.

Specifically, regarding Petitioners’ concern that DOE used

data which suggests that consumers do not act in their best

economic interest—DOE explained that disregarding that data

“would not be representative of the [commercial water heater]

market. Commercial Water Heaters Rule, 88 Fed. Reg. at

69760. DOE “took into account all of the available data

34

concerning the market implementation of condensing natural

gas-fired [commercial water heater] equipment.” Id. at 69757.

From this data, DOE projected commercial water heater

shipments by efficiency level over the analysis period. Id.

“[B]ased on the presence of well-understood market failures

and a corresponding lack of data showing a correlation between

[commercial water heater] efficiency and building hot water

load,” DOE concluded that “a random assignment of

efficiencies best accounts for consumer behavior in the”

commercial water heater market. Id. at 69758. DOE explained

that it “is aware of multiple market failures that prevent []

purely economic decision making[,]” and random assignment

“reflect[s] the full range of consumer behaviors, including

those consumers who make purely economic decisions.” Id.

Therefore, the dissent’s argument that the random assignment

test never accounts for costs is simply not supported by the

record and misunderstands the inputs to the analysis.

Even for large economic purchases, like the purchase of a

commercial water heater, DOE “acknowledge[d] that

economic factors play a role” but that an analysis “based solely

on economic measures . . . most likely would not fully and

accurately reflect actual real-world installations.” Id. DOE

reasoned that consumers make decisions based on factors like

the timing of the purchase, competing demands for the funds,

loss aversion, sensitivity to information salience, and other

forms of bounded rationality. Id. (citing Richard H. Thaler &

Shlomo Bernartzi, Save More Tomorrow: Using Behavioral

Economics to Increase Employee Saving, 112 J. OF POL. ECON.

S164, S164–S187 (2004) (Nobel laureate Richard H. Thaler’s

work on behavioral economics)). These factors are amplified

when the decisions involved are complex and infrequent—like

35

purchasing water heaters for commercial buildings. Id. at

69758–60.12

We also find that DOE’s explanation regarding why

consumers may not always act in their best economic interest

when purchasing consumer furnaces was also reasonably

explained and supported by substantial evidence in the record.

First, DOE explained that Petitioners’ contention is a

“significant[] mischaracteriz[ation]” of DOE’s analysis.

Consumer Furnaces Rule, 88 Fed. Reg. at 87580. DOE

similarly analyzed the LCC of consumer furnaces under the

“no-new-standards case.” Id.. at 87574–80. DOE “estimate[d]

not only the expected market share of products at varying

efficiencies, but also estimate[d] how such products will be

used.” Id. at 87574. DOE used a base case that “reflect[ed]

three analytical steps: (1) an estimate of the buildings likely to

use furnaces, (2) an estimate of the efficiency of the furnaces

that would be sold absent the rule; and (3) the matching of

particular furnace efficiencies with particular building types.”

Id. Each building in the sample was then assigned a furnace at

a state level and a building specific level. Id. at 87576. DOE

once again concluded that “[r]andom assignment of

efficiencies reflects the full range of consumer behaviors in

th[e] market, including consumers who make economically

beneficial decisions and consumers that, due to market failures,

do not.” Id. at 87574. The random assignment method

“simulate[d] behavior in the furnace market, where market

failures result in purchasing decisions not being perfectly

aligned with economic interests, and it d[id] so more

realistically than relying only on apparent cost-

12

Despite these explanations, the dissent somehow contends that

DOE did not provide evidence that market failures affect the market,

see Dissenting Op. 20, while at the same time providing no evidence

that consumers make economically sound decisions 100% of the

time.

36

effectiveness[.]” Id. at 87576. In other words, the random

assignment method accounts for the fact that consumers do

sometimes base decisions on cost-effectiveness. DOE

considered available data to determine whether any

modifications needed to be made. Id. at 87574–75. This data

included historical information about shipments of condensing

and non-condensing furnaces in various regions around the

country, and accounted for the fact that consumers are already

purchasing furnaces at higher efficiency levels. Id. at 87575.

Petitioners contend that DOE “assum[ed] rationality is not

the typical behavior” for consumers, Pet’rs’ Br. 74 (emphasis

omitted), but the record shows that DOE once again

acknowledged that economic factors “play a role” when

consumers purchase furnaces, but that an economic analysis

“based solely” on life-cycle costs or payback periods “would

not fully and accurately reflect actual real-world installations.”

Consumer Furnaces Rule, 88 Fed. Reg. at 87576. Instead,

DOE took market failures into account because it could not

“assume that all purchasers of furnaces make economically

rational or irrational decisions one-hundred percent of the

time.” Id. For example, DOE responded that Petitioners’

approach “depends on the assumption . . . that homeowners

[always] know . . . the efficiency of their homes’ insulation and

windows, such that they always make heating investments

accordingly.” Id. at 87580. DOE explained that that

assumption would not be realistic and is “unsupported by the

available evidence.” Id. at 87576. Therefore, the random

assignment “methodology is not an assertion of economic

irrationality, but instead, it is a methodological approximation

of complex consumer behavior.” Id. at 87580.

Petitioners also contend that DOE assumed that “new

homebuilders routinely act against their own economic

interest” and that consumers do not purchase furnaces

37

depending on the type of climate they are in. Pet’rs’ Br. 78,

82–83. Both contentions are contradicted by the record before

us. DOE’s analysis did “incorporate and reflect regional

market share data.” Consumer Furnaces Rule, 88 Fed. Reg. at

87581. DOE explained that “[f]or States with a large majority

of consumers already purchasing more-efficient

furnaces[,] . . . the analysis assign[ed] a correspondingly large

majority of households with an efficient furnace at or above the

adopted efficiency level in the no-new-standards case.” Id. For

example, states with colder weather have a higher market share

of condensing furnaces because they are more efficient, and

therefore less costly to run. Further, DOE’s analysis also

included “a greater probability that new construction is

assigned higher-efficiency furnaces in the no-new-standards

case, given the typically lower installation costs in new

construction.” Id.

The dissent responds with two contentions: (1) DOE

provided no explanation on why its model reflected that, in

some cases, consumers would choose to install a condensing

furnace in a building where it would have been cheaper to

install a non-condensing furnace; and (2) DOE “provide[d] no

rebuttal to petitioners’ expert” who argued that the random

assignment model “assigned a more expensive option to new

buildings . . . and to existing homeowners” most of the time.

Dissenting Op. 18–19. But, DOE did address the dissent’s

concerns and adjusted its model based on new construction vs.

replacement installations. Consumer Furnaces Rule, 88 Fed.

Reg. at 87582. As noted supra, DOE explained its model

reflected real-world data which included “the State-level

shipments market share data.” Id. at 87584. “For example, in

States with a low current market share of condensing furnaces,

the [model was] constrained to assign mostly non-condensing

furnaces in the no-new-standards case, reflecting the current

market[.]” Id. Therefore, instead of making assumptions

38

devoid of data, DOE used the entirety of the data at its disposal

to conduct its analysis. Further, to respond to commenters who

argued that DOE’s analysis produced an illogical outcome,

DOE reiterated that the analysis “simply reflect[ed] the reality

of the current market.” Id. And even so, DOE explained that

this outcome was “limited to only a few percent [of cases

predominately] in new construction.” Id. Further, “[e]ven if

DOE were to exclude these . . . outcomes as extreme outlier

results, the LCC analysis would [still] demonstrate economic

justification[.]” Id.

Another reason the present case is unlike the random

assignment analysis conducted by DOE in APGA I is that DOE

considered all the scientific literature relevant to its LCC

analysis, and all data submitted in the course of the rulemaking

for both the Consumer Furnaces Final Rule and the

Commercial Water Heaters Final Rule. Id. at 87580;

Commercial Water Heaters Rule, 88 Fed. Reg at 69758–59.

DOE cited the available literature it was aware of, and

repeatedly requested more data from interested persons.

Consumer Furnaces Rule, 88 Fed. Reg. at 87580–81. Despite

Petitioners’ disagreement, they provided DOE with no

alternative “specific external data, information, or studies that

could be incorporated into [DOE’s] analysis.” Id. at 87581; see

also Consumer Water Heaters Rule, 88 Fed. Reg. at 69699.

Further, regarding installation costs, DOE responded to

comments by interested persons by “enhanc[ing]” its estimates

“a number of times” to address the comments. Consumer

Furnaces Rule, 88 Fed. Reg. at 87555.

Overall, we find that DOE’s economic justification

analysis and conclusions were robust. The economic

justification analysis independently and sufficiently supported

DOE’s conclusion that the amended efficiency standards were

economically justified, and we need not address the impacts of

39

fuel switching in DOE’s analysis. This is so for two main

reasons: (1) “[t]he amended standards plainly do not compel

fuel switching” since the Final Rules do “not ban gas”

appliances; and (2) DOE concluded that even if the impacts of

fuel switching were not included in its economic justification

analysis, the amended standards would still be economically

justified. Id. at 87590, 87595; Commercial Water Heaters

Rule, 88 Fed. Reg. at 69771–72.

D. Consumer Furnaces Rule Comment Period

Lastly, Petitioners contend that DOE did not provide a

meaningful opportunity for stakeholders to comment on the

Consumer Furnaces Rule, and therefore the Rule is

procedurally flawed.

On July 7, 2022, DOE published a NOPR and request for

comment on the proposed energy conservation standards for

consumer furnaces. Energy Conservation Program: Energy

Conservation Standards for Consumer Furnaces, 87 Fed. Reg.

40590 (July 7, 2022). DOE asked that any “comments, data,

and information regarding th[e] NOPR” be submitted “no later

than September 6, 2022.” Id. at 40590. In its analysis of the

impact that the amended or new efficiency standards would

have, DOE used “Monte Carlo simulations to incorporate

uncertainty and variability into the analysis” by “randomly

sampl[ing] input values from probability distributions” and gas

furnace “user samples.” Id. at 40627. To implement this, DOE

used an add-on tool in Microsoft Excel called Crystal Ball™,

which is a “commercially-available software tool” that can

“facilitate the creation of” randomized models “by generating

probability distributions and summarizing results within

Excel.” Id. n.86. Each time that Excel is opened with the

Crystal Ball™ add-on, it produces a slight variation in the data

generated. So, when DOE published its LCC spreadsheet

40

accompanying the NOPR, it “inadvertently” used a version of

the LCC spreadsheet that showed a slight variation of what was

included in the published NOPR and an accompanying

Technical Support Document (“TSD”), although the results

shown in the spreadsheet were similar to those included in the

NOPR and TSD. Energy Conservation Standards for

Consumer Furnaces, 87 Fed. Reg. 52861, 52862 (Aug. 30,

2022).

After interested parties, including Petitioners, alerted DOE

that the spreadsheet varied from the table results included in

the NOPR and TSD, DOE issued a Notification of Data

Availability (“NODA”) in which DOE published a revised

version of the LCC spreadsheet that was static and supported

the NOPR. DOE also extended the NOPR comment period an

extra thirty-days to October 6, 2022, and announced that it

would hold—at Petitioners’ request—a public meeting

webinar workshop where it would “provide instruction on the

operation of the LCC spreadsheet.” Id. In total, DOE provided

interested parties ninety-days to comment on the Consumer

Furnaces Rule.

Nonetheless, Petitioners contend that the ninety-days was

a “break-neck” comment period. Pet’rs’ Br. 104. We cannot

agree. 42 U.S.C. subsection 6295(p)(2) provides that DOE

shall “afford interested persons an opportunity, during a period

of not less than 60 days, to present oral and written

comments . . . on matters relating to” proposed new or

amended energy conservation standards. Petitioners

acknowledge this sixty-day statutory requirement, but contend

that DOE “promise[d] that stakeholders w[ould] have at least

75 days to comment on proposed rulemaking” as was provided

41

in DOE regulations at the time.13 Pet’rs’ Br. 102; see 10 C.F.R.

pt. 430, subpt. C, app. A(6)(b)(2) (2022). But as Petitioners

acknowledge in their briefing, the seventy-five-day allotment

provided in the appendix to the regulation did “not intend[] to,

and [did] not, create any right or benefit, substantive or

procedural” that DOE was required to adhere to. 10 C.F.R. pt.

430, subpt. C, app. A(3)(c) (2022). It was only required to

provide at least sixty days for interested parties to comment—

which it did. Moreover, the regulation expressly authorized

DOE to “deviate” from the 75-day period for comments if DOE

found it “necessary or appropriate” and provided “notice of the

deviation and an explanation.” Id. pt. 430, subpt. C, app.

A(3)(a) (2022). DOE explained in the NOPR that it was

“necessary and appropriate” to only provide the statutory

minimum for comments in this NOPR because DOE was

facing “an overdue statutory deadline” and the “analytical

methods used . . . [in the] NOPR [were] similar to those used

in previous rulemaking notices.” Energy Conservation

Standards for Consumer Furnaces, 87 Fed. Reg. at 40607.

Moreover, because the static spreadsheet DOE provided

the public on August 30, 2022, did not amount to “critical

factual material,” it was not necessary to extend the comment

period past the thirty-days it already provided. See Chamber

of Com. v. SEC, 443 F.3d 890, 900 (D.C. Cir. 2006) (“[F]urther

notice and comment are not required when additional fact

gathering merely supplements information in the rulemaking

record by checking or confirming prior assessments without

changing methodology, [or] by confirming or corroborating

data in the rulemaking record.” (citations omitted)). This is

because, as DOE explained, its Monte Carlo analysis utilized

13

10 C.F.R. pt. 430, subpt. C, app. A(6)(b)(2) (2024) was amended,

effective June 24, 2024, and presently provides that “[t]here will be

not less than 60 days for public comment on the NOPR.”

42

random number generation, where the sequence of random

numbers was expected to change, but “[t]he relative

comparison of the various proposed energy conservation

standard levels in the published LCC spreadsheet remain[ed]

similar to the comparison presented in the NOPR.” Energy

Conservation Standards for Consumer Furnaces, 87 Fed. Reg.

at 52862. Therefore, DOE’s “conclusions of the analysis, the

policy decision, and associated rationale [we]re not impacted

by [the] sampling variability” in the two different LCC

spreadsheets. Id.

III.

Because each of Petitioners’ arguments fail for the reasons

explained, the petitions are denied.

So ordered.

RAO, Circuit Judge, dissenting: This case concerns

Department of Energy regulations that effectively ban a class

of common and affordable gas-powered appliances. Millions

of homes and commercial buildings are equipped with

traditional, “non-condensing” gas furnaces and water heaters.

These reliable appliances vent their exhaust up a standard

chimney. A more efficient “condensing” technology exists, but

it is incompatible with traditional chimneys. Instead, it requires

a different venting mechanism. In its quest for greater

efficiency, the Department has issued new efficiency standards

that effectively ban the sale of non-condensing appliances. As

a result, any consumer seeking to replace a traditional gas

furnace or commercial water heater will be forced to install a

condensing model, a switch that often requires disruptive and

expensive renovations to a building’s venting and plumbing

systems.

These standards run afoul of the careful balance Congress

struck in the Energy Policy and Conservation Act (“EPCA”)

between improving energy efficiency and preserving consumer

choice. While EPCA empowers the Department to set

efficiency standards, the statute also imposes a critical limit on

that authority. The agency is prohibited from imposing an

efficiency standard that will result in the “unavailability” of a

product with a “performance characteristic” that consumers

value.

No one doubts that the challenged regulations make non-

condensing appliances unavailable. The central question in this

case is whether a non-condensing appliance’s venting

mechanism is a protected “performance characteristic.”

Because these appliances utilize a chimney common to many

older homes and buildings, installing a condensing appliance

will often require complex and costly renovations that may

reduce a building’s useable space. The ability to vent through

2

a traditional chimney is exactly the kind of real-world feature

Congress protected from elimination in the marketplace. The

Department’s efficiency standards, which make non-

condensing appliances unavailable, are therefore contrary to

law.

Independent of this legal error, the Department failed to

demonstrate that the regulations are “economically justified,”

as mandated by EPCA, by showing their “benefits … exceed

[their] burdens.” 42 U.S.C. § 6295(o)(2)(B)(i); see also id.

§ 6313(a)(6)(B)(ii). The Department utilized an economic

model that we have previously held to be irrational and

inconsistent with EPCA’s requirements. The flawed model

fares no better here. Because the regulations are contrary to law

and predicated on an arbitrary economic analysis, I respectfully

dissent.

I.

A.

Congress enacted EPCA in 1975 to increase energy

production and supply while reducing energy demand. Pub. L.

94-163, 89 Stat. 871, 874 (1975). EPCA authorizes the

Department to promulgate energy efficiency standards for

consumer appliances such as refrigerators, dishwashers, air

conditioners, water heaters, and furnaces, as well as

commercial industrial equipment, like walk-in freezers and

commercial water heaters. 42 U.S.C. §§ 6292(a), 6311(1).

Congress did not, however, write the Department a blank

check to pursue efficiency at all costs. Instead, the statute

repeatedly tempers the agency’s authority by requiring it to

balance efficiency gains with the preservation of consumer

choice and product utility. While EPCA instructs the

Department to set standards that “achieve the maximum

3

improvement in energy efficiency,” those standards must be

both “technologically feasible and economically justified.” Id.

§ 6295(o)(2)(A) (consumer appliances); see also id.

§ 6313(a)(6)(A)(ii)(II) (commercial equipment). As part of this

analysis, the agency “shall” consider whether an efficiency

standard would “lessen[] … the utility or the performance of

the” covered products. Id. §§ 6295(o)(2)(B)(i)(IV),

6313(a)(6)(B)(ii)(IV).

At issue here, EPCA also contains an “unavailability”

provision that prohibits the Department from prescribing a

standard that “is likely to result in the unavailability in the

United States in any covered product type (or class) of

performance characteristics (including reliability), features,

sizes, capacities, and volumes.” Id. § 6295(o)(4); see also id.

§ 6313(a)(6)(B)(iii)(II)(aa). This limitation balances the

regulatory promotion of greater energy efficiency with the

preservation of products that have features that provide utility

to consumers. See H.R. Rep. No. 100-11, at 22–23 (1987)

(explaining the unavailability provision “ensures that energy

savings are not achieved through the loss of significant

consumer features” and prevents a standard from making a

product with a particular feature “prohibitively expensive”).

For consumer products, the unavailability provision is

paired with the requirement that the Secretary “shall specify”

separate efficiency standards if a type of the covered product

either “consume[s] a different kind of energy” or possesses a

“performance-related feature” that other products in the group

lack. 42 U.S.C. § 6295(q)(1). In determining whether a feature

justifies a separate standard, the Secretary must consider

“utility to the consumer” and any other factors he “deems

appropriate.” Id.

4

B.

The challenged efficiency standards apply to two classes

of products: gas-fired consumer furnaces and gas-fired

commercial water heaters. These appliances can be further

divided into two classes: non-condensing and condensing.

Both types of appliances produce hot exhaust gases that require

exterior venting; however, they employ different venting

methods.

Non-condensing appliances are the traditional design and

are currently used in millions of homes and commercial

buildings. These units use unpowered venting systems that

keep exhaust gases hot enough to rise naturally through a

vertical chimney. Because some usable heat is lost in the

exhaust, non-condensing appliances typically achieve an

efficiency of around 80 percent. Furthermore, if a building

lacks a suitable vertical chimney, installing a non-condensing

appliance requires constructing one, which adds to initial costs.

Condensing appliances use a different ventilation method

that captures some of the lost heat and can achieve efficiency

levels of over 90 percent. The exhaust from condensing

appliances cannot be vented through a traditional chimney

without significant modification. Instead, condensing

appliances use a powered ventilation method and exhaust

through vents that are generally installed horizontally. While a

new horizontal vent is typically cheaper to install than a new

vertical chimney, it can be difficult to retrofit into some

existing homes and buildings.

The Department’s approach to these appliances has flip-

flopped across administrations. In 2016, the agency proposed

rules that would set minimum efficiency standards for certain

consumer furnaces and commercial water heaters to levels

above 90 percent. See Energy Conservation Program: Energy

5

Conservation Standards for Residential Furnaces, 81 Fed. Reg.

65720, 65722 (Sept. 23, 2016); Energy Conservation Program:

Energy Conservation Standards for Commercial Water

Heating Equipment, 81 Fed. Reg. 34440, 34443 (May 31,

2016). Because only condensing appliances can meet these

efficiency levels, the proposed rules would have effectively

banned the sale of new non-condensing models.

In January 2021, the Department switched course in an

interpretive rule, which determined that, for consumer furnaces

and commercial water heaters, non-condensing technology

provides a unique “performance characteristic” and

eliminating it from the market would violate EPCA’s

“unavailability” provision. See Energy Conservation Program

for Appliance Standards: Energy Conservation Standards for

Residential Furnaces and Commercial Water Heaters, 86 Fed.

Reg. 4776, 4816 (Jan. 15, 2021). The agency explained that

non-condensing technology allows consumers to: (1) avoid

complex or costly installations where space, venting, or

drainage is constrained; (2) prevent the loss of usable space that

installing a condensing unit might require; and (3) maintain a

meaningful choice of fuel type by preserving an affordable gas-

powered option, as the alternative would cause significant “fuel

switching” from gas to electric appliances. See id. Following

this interpretation, the agency withdrew the 2016 proposed

standards.

Later that year, the Department again reversed course. In

a new interpretive rule, the agency concluded that non-

condensing technology is not a “performance characteristic”

because it “does not provide unique utility to consumers

separate from an appliance’s function of providing heated air

or water.” See Energy Conservation Program for Appliance

Standards: Energy Conservation Standards for Residential

Furnaces and Commercial Water Heaters, 86 Fed. Reg. 73947,

6

73951 (Dec. 29, 2021) (“December 2021 Interpretive Rule”).

The Department explained that consumer utility arises from

interacting with a product’s primary function, “not through

design parameters impacting installation complexity[] or

costs.” Id. Because consumers do not directly interact with

vents, the agency reasoned that differences in venting methods

or installation costs are not a unique performance characteristic

of non-condensing appliances. Id. at 73953.

Relying on this interpretation, the Department set

minimum efficiency standards for gas-fired consumer furnaces

and commercial water heaters at 95 percent, a level that non-

condensing appliances cannot achieve. See Energy

Conservation Program: Energy Conservation Standards for

Consumer Furnaces, 88 Fed. Reg. 87502, 87503 (Dec. 18,

2023) (“Consumer Furnace Rule”); Energy Conservation

Program: Energy Conservation Standards for Commercial

Water Heating Equipment, 88 Fed. Reg. 69686, 69687 (Oct. 6,

2023) (“Commercial Water Heater Rule”).

A coalition of gas industry associations, manufacturers,

and utilities petitions for review of these regulations. We have

jurisdiction under 42 U.S.C. §§ 6306(b) and 6316, which

provide for judicial review under the Administrative Procedure

Act.

II.

Petitioners first argue the efficiency standards are contrary

to law because they violate EPCA’s unavailability provision.

EPCA prohibits the Department from setting standards that

make unavailable products with distinct “performance

characteristics”—that is, with attributes that provide utility to

the consumer. Non-condensing appliances plainly provide such

utility: a venting method that is compatible with the

conventional chimneys found in millions of older homes and

7

buildings. For these consumers, replacing a non-condensing

appliance with a condensing one may require cumbersome and

costly retrofits. These modifications often include punching

new holes through exterior walls for plastic vents, sacrificing

closets or other living space to run new piping, giving up

windows or balconies that are too close to a new vent’s exhaust,

and re-lining or abandoning a perfectly functional chimney.

Because non-condensing appliances can integrate directly

into an existing exhaust system, they have a protected

“performance characteristic” under the plain meaning of

EPCA. And because it is undisputed that the efficiency

standards make these appliances unavailable, the standards are

contrary to law.

A.

Under EPCA, the Department of Energy

may not prescribe an amended or new

standard under this section 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 in any covered product type (or class)

of performance characteristics (including

reliability), features, sizes, capacities, and

volumes that are substantially the same as

those generally available in the United States

at the time of the Secretary’s finding.

42 U.S.C. § 6295(o)(4); see also id.

§ 6313(a)(6)(B)(iii)(II)(aa).

No one questions that the challenged efficiency standards

will make non-condensing appliances unavailable. The

8

question in this case is therefore a legal one: Is a non-

condensing appliance’s compatibility with existing, standard

chimney vents a protected “performance characteristic” under

EPCA?

The parties agree that a “performance characteristic” is

one that provides utility to the consumer, but they disagree

about what type of utility counts. The Department claims a

“performance characteristic” only includes features a

consumer interacts with during the product’s operation and

excludes “design parameters impacting installation

complexity[] or costs.” December 2021 Interpretive Rule, 86

Fed. Reg. at 73951. Petitioners counter that the term

encompasses other utility conferring features, and that

“noncondensing technology provides obvious utility—

functioning in the purchaser’s existing building and vents.”

To determine whether non-condensing appliances have a

“performance characteristic,” this court must identify the “best

meaning” of the statute and “exercise [its] independent

judgment in deciding whether [the Department] has acted

within its statutory authority.” Loper Bright Enters. v.

Raimondo, 144 S. Ct. 2244, 2266, 2273 (2024). The term

“performance characteristic” is not defined in EPCA, so we

must give it its “ordinary, contemporary, common meaning.”

Sandifer v. U.S. Steel Corp., 571 U.S. 220, 227 (2014) (cleaned

up). The ordinary meaning of a term is informed by the context

of the “overall statutory scheme.” Sturgeon v. Frost, 577 U.S.

424, 438 (2016) (cleaned up).

The text and structure of EPCA demonstrate that

petitioners’ broader understanding of “performance

characteristic”—any product attribute that provides “utility” to

the consumer—is correct. EPCA is a highly detailed statute in

which Congress created a framework for balancing energy

9

efficiency with consumer utility. The statute repeatedly uses

“utility” and “performance” in tandem, treating them as related

concepts that capture a product’s overall value and usefulness

to the consumer. For example, when determining if a new

efficiency standard is “economically justified,” the agency

must consider the “lessening of the utility or the performance

of the covered products likely to result from the imposition of

the standard.” 42 U.S.C. §§ 6295(o)(2)(B)(i)(IV),

6313(a)(6)(B)(ii)(IV). Likewise, the unavailability provision,

which ensures products with valued characteristics remain on

the market, is paired for consumer appliances with a

requirement that the Secretary “shall specify” a separate

efficiency standard for any product with a “performance-

related feature” that provides “utility to the consumer.” Id.

§ 6295(q)(1).

The plain meaning of these terms is exceptionally broad.

“Utility” simply means “usefulness” or “fitness for some

desirable purpose.” See Utility, Oxford English Dictionary

(2nd ed. 1989). A “performance characteristic,” in turn, is a

“distinctive” or “essential quality,” see Characteristic, Oxford

English Dictionary (2nd ed. 1989), that relates to the

“execution … of any action or work,” see Performance,

Oxford English Dictionary (2nd ed. 1989). By repeating these

terms in several provisions preserving consumer choice,

Congress enacted comprehensive protections for consumer

utility.

EPCA protects the availability of products that provide

utility broadly understood, an interpretation that is confirmed

by the list of terms Congress included with “performance

characteristics”: “reliability, features, sizes, capacities, and

volumes.” 42 U.S.C. § 6313(a)(6)(B)(iii)(II)(aa); see also id.

§ 6295(o)(4). “Under the … interpretive canon noscitur a

sociis, a word is known by the company it keeps.” McDonnell

10

v. United States, 579 U.S. 550, 569 (2016) (cleaned up). The

fact that “several items in a list share an attribute counsels in

favor of interpreting the other items as possessing that attribute

as well.” Beecham v. United States, 511 U.S. 368, 371 (1994).

Here, the list is expansive and practical. It includes intangible

qualities like “reliability” and “features,” as well as concrete

attributes like “sizes, capacities, and volumes.” These terms

reflect multiple ways in which a product may provide real

world utility and reinforce that the term “performance

characteristic” has an expansive meaning that protects

consumer choice.

The Department’s cramped interpretation of “performance

characteristic” cannot be reconciled with the text and structure

of EPCA. The agency asserts that a “performance

characteristic” is limited to features that provide utility during

operation, “not through design parameters impacting

installation complexity[] or costs.” See December 2021

Interpretive Rule, 86 Fed. Reg. at 73951. Nothing in EPCA

suggests such a limitation. To the contrary, Congress explicitly

protected the availability of “sizes, capacities, and volumes,”

terms that plainly encompass an appliance’s physical

dimensions and compatibility with a building’s existing

infrastructure. And “reliability” similarly refers to a

performance characteristic that goes beyond operation to

consider a product’s long-term effectiveness. There is no

reason to think that consumers derive utility only from

operational features like “through the door ice” and not from

the ability to install a product in their home without

cumbersome (and costly) renovations that change the use of

their interior space. Cf. Majority Op. 19.

EPCA’s broad protection for the availability of consumer

products demonstrates that a “performance characteristic” may

11

include a product’s physical dimensions, its functional output,

and how it integrates into a home or building.

The Department’s regulations also cannot be squared with

its long-standing practice. The agency has frequently invoked

its authority to create separate efficiency standards to preserve

a “performance-related feature” based on installation-related

features. For example, the Department established a separate

standard for air conditioners that fit into smaller wall openings

to ensure consumers would not “be forced to invest in costly

building modifications.” See Energy Conservation Program for

Commercial and Industrial Equipment: Packaged Terminal Air

Conditioner and Packaged Terminal Heat Pump Energy

Conservation Standards, 73 Fed. Reg. 58772, 58782 (Oct. 7,

2008).

In addition, the Department has consistently set distinct

efficiency standards for products based on compatibility with

venting systems, installation location, and availability of power

sources. See, e.g., Energy Conservation Program: Energy

Conservation Standards for Residential Clothes Dryers and

Room Air Conditioners, 76 Fed. Reg. 22454, 22485 n.28 (Apr.

21, 2011) (specifying separate standards for ventless clothes

dryers because they offer utility to consumers in homes that

cannot accommodate an external vent); 10 C.F.R.

§ 430.32(c), (e) (specifying separate standards for air

conditioners, heat pumps, and furnaces based on installation

constraints). In these prior rules, the agency correctly

recognized that features related to installation provide

significant utility and set separate standards to preserve them.

The Department’s refusal to do so here for non-condensing

furnaces—which likewise provide utility related to

12

installation—is an unexplained and arbitrary departure from

the agency’s long-standing practice.1

Under the best meaning of EPCA, a “performance

characteristic” is a distinctive product attribute that provides

utility to the consumer. Non-condensing appliances plainly

provide such utility through their unique venting method,

which allows for direct integration into many existing exhaust

systems without cumbersome and costly retrofits. This

integration capability is a “performance characteristic” of non-

condensing appliances that EPCA protects from regulatory

elimination.

B.

Relying on the Department’s “scientific data,” the

majority concludes that petitioners have failed to meet their

burden of proving that non-condensing appliances have a

protected “performance characteristic.” Majority Op. 27–28.

But this is not the burden EPCA imposes. The evidentiary

burden applies only to the factual question of whether a

standard will cause a protected product to become unavailable,

not to the legal question of what qualifies as a protected

“performance characteristic.” See 42 U.S.C. §§ 6295(o)(4),

6313(a)(6)(B)(iii)(II)(aa). The facts of unavailability are not in

1

The majority’s attempt to distinguish these previous regulations is

unpersuasive. It claims ventless dryers are different because some

consumers would be deprived of a dryer entirely, yet it ignores that

the Department projects some consumers here will be effectively

deprived of gas-powered appliances entirely. See Majority Op. 19–

22. It claims size-based distinctions are permitted, yet it ignores that

“sizes” naturally includes the dimensional constraints associated

with venting, which make non-condensing appliances the only viable

option for many consumers who prefer to have a gas-powered

appliance. See Majority Op. 22–27.

13

dispute here. The Department’s new standards demand

efficiency levels of 95 percent, which will eliminate non-

condensing appliances from the market.2

The central disagreement turns on the legal question of

what counts as a “performance characteristic” under EPCA.

The majority largely ducks this question by declaring that

EPCA is ambiguous as to the meaning of “performance

characteristic” and “utility.” Majority Op. 16–18. The majority

takes this ambiguity as a license to defer to the Department.

But this Loper Bright avoidance is inconsistent with the

Supreme Court’s directive that a court must “use every tool at

[its] disposal to determine the best reading of the statute and

resolve the ambiguity.” 144 S. Ct. at 2266.

The majority also relies on the Department’s conclusion

that non-condensing appliances lack a distinct “performance

characteristic” because “venting is a quality that both

condensing and non-condensing appliances share.” Majority

Op. 19–20; see also Consumer Furnaces Rule, 88 Fed. Reg. at

87535; Commercial Water Heaters Rule, 88 Fed. Reg. at

69709–10. This framing misses the point. The issue is not the

generic existence of venting, but whether the specific type of

venting provides utility to consumers. And on this question, the

Department does not contest that non-condensing and

condensing appliances use different types of venting, such that

2

See Technical Support Document, Consumer Furnace Rule 8D-3–

4 (“Almost all of the non-condensing [gas furnaces] have an annual

fuel utilization efficiency (AFUE) of 80 percent. … Condensing [gas

furnaces] have an AFUE of 90 percent or greater.”); id. 8I-1 n.b

(“The market share of furnaces with AFUE between 80 and 90

percent is well below 1 percent due to the very high installed cost of

81-percent AFUE furnaces, compared with condensing designs.”).

14

replacements may require awkward retrofits and costly

renovations.

The Department attempts to minimize the loss of

consumer utility, claiming only “5 percent or fewer of

condensing gas appliance installations were challenging.”

December 2021 Interpretive Rule, 86 Fed. Reg. at 73960. But

this only supports the conclusion that non-condensing

appliances in fact have a performance characteristic that

provides utility to consumers. For such ubiquitous appliances,

5 percent of installations may easily impact millions of

consumers. In any event, nothing in EPCA suggests that the

unavailability provision applies only when a large percentage

of consumers are harmed.

The majority also relies on the Department’s reassurance

that consumers have other options available. Majority Op. 22.

But the Department’s elaboration of these so-called options

reveals the true nature of the rules: consumers can either

undertake undesirable and costly building modifications or

they can switch to an electric appliance. See December 2021

Interpretive Rule, 86 Fed. Reg. at 73957. EPCA’s

unavailability provision protects consumer choice for products

with performance characteristics—it would be rendered a dead

letter if the mere existence of other options (no matter how

different) allowed the Department to set standards that made

products unavailable.

The distinctive venting mechanism of non-condensing

appliances is precisely the kind of “performance characteristic”

that condensing appliances lack and that EPCA protects from

regulatory elimination.

15

***

In sum, the Department’s interpretation of EPCA

contradicts the statute’s text, context, and the agency’s

regulatory practice. The ability of non-condensing appliances

to integrate into a building’s existing ventilation without

disruptive renovations is a protected “performance

characteristic.” Because the Consumer Furnace Rule and

Commercial Water Heater Rule make appliances with this

characteristic unavailable, the Department’s standards are

contrary to law.

III.

Petitioners separately maintain that the Department has

failed to demonstrate these efficiency standards are

“economically justified.” I agree. The agency relied on an

irrational economic model that assumed consumers never

consider costs when choosing between gas-fired appliances,

but always consider costs when deciding whether to switch

from a gas-fired appliance to an electric one. With no support

for these contradictory assumptions, the Department’s Monte

Carlo model is arbitrary and capricious and cannot justify

imposing these efficiency standards on consumers.

A.

EPCA requires the Department to demonstrate that a new

efficiency standard is “economically justified,” by “substantial

evidence” for consumer appliances and “clear and convincing

evidence” for commercial equipment. 42 U.S.C.

§§ 6306(b)(2), 6313(a)(6)(A)(ii)(II). A standard is

economically justified only if its “benefits ... exceed its

burdens.” Id. § 6295(o)(2)(B)(i); see also id.

§ 6313(a)(6)(B)(ii). As we have previously held on very similar

facts, when the Department’s economic model rests on a false

16

or unexplained premise about consumer behavior, the

justification falls short of EPCA’s evidentiary requirements.

Am. Pub. Gas Ass’n v. Dep’t of Energy (“APGA I”), 22 F.4th

1018, 1022, 1027–28 (D.C. Cir. 2022).

To determine whether an efficiency standard results in net

benefits, the Department must consider, among other things,

“the savings in operating costs throughout the estimated

average life of the covered product … compared to any

increase in the price of, or in the initial charges for, or

maintenance expenses of,” the covered product. 42 U.S.C.

§ 6295(o)(2)(B)(i); see also id. § 6313(a)(6)(B)(ii)(II). To

satisfy this statutory mandate, the agency generally conducts a

life-cycle cost analysis that compares two hypothetical

scenarios: one without the new standards and one with the new

standards in effect. APGA I, 22 F.4th at 1023. These

calculations are complicated because consumer costs vary

tremendously across the country depending on local labor

rates, energy prices, and building characteristics. Costs will

also differ based on a consumer’s individual building and

construction type and on a consumer’s priorities and projected

use of the new appliance. As a result, there is not one life-cycle

cost, but many.

To account for this variability, the Department employed

a Monte Carlo model. The model’s name refers to how casinos

predict earnings—while the outcome of a single roll of the dice

is random, the average outcome over thousands of repeated

plays is predictable. In its analysis, the agency simulated ten

thousand buildings with randomly assigned appliances and

then calculated the life-cycle costs in two scenarios. First, in

the scenario without the new standards, the life-cycle costs

were based on the randomly assigned appliance. Second, in the

scenario with the new standards, every consumer assigned a

non-condensing appliance would be required to purchase a

17

condensing appliance. To estimate the rules’ net economic

impact, the Department averaged the cost difference between

the two scenarios for each building.

I agree with the majority that a Monte Carlo analysis could

be used to model the economic impacts of an efficiency

standard. The reliability and validity of the resulting

predictions, however, depend on the inputs. Like all models,

the Monte Carlo method “adhere[s] to the inviolable law of

data analysis, ‘garbage in; garbage out.’” Mississippi v. EPA,

744 F.3d 1334, 1352 (D.C. Cir. 2013).

The inputs here were fundamentally flawed. The

Department properly used real-world data for energy prices and

building types, but it excluded the most salient factor

influencing appliance selection: cost. On the grounds that

consumers are sometimes irrational or myopic in choosing

appliances, the model assumed that consumers choose among

available appliances completely at random, with no regard for

costs.3

This assumption defies both reality and basic economics.

As the Department has documented, installation costs for

condensing and non-condensing appliances differ substantially

and predictably depending on construction scenario. For

example, in new construction, a condensing furnace is

3

The Department concedes that “[t]he efficiency assignment is a

methodological simplification that takes into account existing market

trends … and acknowledges a range of consumer behaviors and

market failures.” Consumer Furnaces Rule, 88 Fed. Reg. at 87534.

That is to say, the Department’s model did not consider costs. The

majority glosses over the actual inputs used by the Department and

simply relies on the Department’s self-serving assertion that “DOE

[did] not mak[e] an assumption that consumers never consider the

economics of their purchasing decision.” Majority Op. 33.

18

significantly cheaper to install ($1,796 on average) than a non-

condensing one ($2,467). Technical Support Document,

Consumer Furnace Rule 8D-32. But when replacing a non-

condensing furnace, it costs significantly more to install a

condensing furnace ($1,345 versus $801). Id. 8D-31. Given

these stark cost differences, the Department must provide a

“cogent and reasoned” explanation for its assumption that “a

purchaser’s decisions will not align with its economic interests

in purchasing” an appliance. APGA I, 22 F.4th at 1027–28. But

the Department provided no such explanation here, and instead

merely assumed consumers ignored these costs and selected

appliances at random.4

This unsound assumption of a total market failure stacked

the deck in favor of the rules by manufacturing artificial

savings. Because the model ignored consumer costs and

assigned appliances at random, it frequently assigned

consumers an economically irrational appliance. For example,

it sometimes assigned a non-condensing appliance in new

construction even though that would require constructing an

expensive vertical chimney. The model then credited the new

standards with the “savings” realized when it banned non-

condensing appliances and prevented a consumer from

incurring those construction costs—a choice no rational

consumer would have made in the first place.

This economic sleight of hand undermines the

Department’s justification for its rules. The Department

4

Perhaps recognizing that the market failure is not complete, the

Department defends its model on the grounds that it predicted

approximately 45 percent of consumers will choose the most cost-

effective furnace. But this is merely a byproduct of chance and not a

“prediction” in any meaningful sense. A coin flip will be correct half

the time, but it is hardly a predictive model for economic behavior.

19

provides no rebuttal to petitioners’ expert, who explains that

the model randomly assigned a more expensive option to new

buildings 80 percent of the time and to existing homeowners

60 percent of the time.5 Meyer Declaration 3–5. If the

Department had assumed that consumers rationally choose the

lowest cost appliance, the Consumer Furnace Rule would

impose a $2.5 million net cost on the public, rather than the

projected net savings of $1.4 million. Id. at 6. That is, the

benefits of the standards would not exceed the costs, and under

EPCA the standards could not be promulgated. See 42 U.S.C.

§§ 6295(o)(2)(B)(i), 6313(a)(6)(B)(ii).

In APGA I, we rejected a similar economic analysis in

which the Department used a Monte Carlo model to project the

costs of an efficiency standard for boilers but “failed to

recognize that a purchaser … would rationally consider the

costs and benefits of its investment and is likely to buy the

[appliance] that produces the best economic performance for

its building.” 22 F.4th at 1027. The assumption of consumer

irrationality “inflated the economic value of a more stringent

standard by attributing to a new regulation economic benefits

that would be realized even without a new regulation.” Id.

Relying on a model that presumes widespread consumer

irrationality without supporting evidence “bespeaks a failure to

consider an important aspect of the problem.” Id. at 1027–28

(cleaned up); see also Chem. Mfrs. Ass’n v. EPA, 28 F.3d 1259,

1265 (D.C. Cir. 1994) (explaining “we must reverse” agency

action “as arbitrary and capricious if there is simply no rational

5

The analysis by petitioners’ expert, Richard Meyer, focuses on the

Consumer Furnace Rule because the Department did not make the

raw data for the Commercial Water Heater Rule available.

Petitioners assert, and the Department does not contest, that the same

flawed modeling assumptions were made in both rules.

20

relationship between the model and the known behavior … to

which it is applied”).

The majority suggests APGA I is distinguishable because

here the Department provided a more detailed explanation for

its model and included additional inputs. Majority Op. 30–33.

But a longer explanation of an erroneous premise does not cure

the defect. Nor does adding additional inputs that fail to address

the core shortcoming. The central error in APGA I was not a

lack of explanation, but a failure of proof. 22 F.4th at 1027–28

(explaining the Department bears the burden of “provid[ing]

actual evidence that … market failures affect the market” and

“justify[ing] the assumptions that underly its analysis”).

While consumers may not be perfect estimators of life-

cycle costs, that fact cannot explain a wholesale disregard for

stark differences in initial costs.6 For these regulations, the

Department lacked evidence to justify its assumption of

widespread market failure, and therefore its economic model

does not substantially or clearly support the new efficiency

standards.

B.

The Consumer Furnace Rule’s economic analysis is also

flawed because of its reliance on rational fuel switching—the

prediction that higher costs under the new standard would

cause consumers to shift from gas-fired to electric furnaces.7

6

Contrary to the majority, consumers do not need to “make

economically sound decisions 100% of the time” for cost to be a

relevant consideration. Majority Op. 35 n.12.

7

The Department did not include benefits from forced fuel switching

as part of its analysis in the Commercial Water Heater Rule. 88 Fed.

Reg. at 69771.

21

The Department modeled two scenarios: one with no fuel

switching and one in which consumers always switched to

electric when it was economically advantageous. Consumer

Furnace Rule, 88 Fed. Reg. at 87587. While the agency

predicted cost savings in both scenarios, the savings in the

scenario with fuel switching were more than double the

scenario without.

The majority does not address the Department’s fuel

switching analysis because it upholds the agency’s Monte

Carlo analysis. Majority Op. 38–39. But because I reject that

analysis, I explain why the Department’s fuel switching

analysis also fails to justify the rule.

There are two fundamental problems with the

Department’s analysis. First, it is in tension with EPCA, which

requires the agency to weigh the “savings in operating costs”

against any “increase in the price of … the covered products.”

42 U.S.C. § 6295(o)(2)(B)(i). The most natural reading of this

provision is that it requires a comparison of costs and benefits

related to the covered product, not savings generated because

the rule forces consumers to switch to an entirely different type

of appliance. Moreover, EPCA explicitly preserves products

that “consume a different kind of energy” and requires different

standards for them. See id. § 6295(q)(1)(A); cf. id.

§ 6295(f)(1)(B)(iii) (prohibiting standards likely to cause “a

significant shift from gas heating to electric resistance heating

with respect to either residential construction or furnace

replacement”). These provisions strongly suggest that the

Department cannot count as an economic “benefit” the fact that

an efficiency standard makes a regulated product so costly that

consumers are forced to abandon it.

The Department’s justification for this approach does not

withstand scrutiny. The agency argues that the statute’s broad

22

instruction to consider “the total projected amount of

energy[] … savings” allows it to count savings from fuel

switching. See Respondents’ Br. 70 (citing 42 U.S.C.

§ 6295(o)(2)(B)(i)(III)). But this general provision must be

read in harmony with the specific instruction to analyze the

costs and savings of the “covered product.” When a standard

for gas furnaces causes a consumer to buy an electric heat

pump, the resulting savings are not savings from efficiency

improvements to the gas furnace (the covered product); they

are savings from a different product in a different product class.

Justifying a standard for one product class based on its

projected demise in the marketplace creates a perverse

incentive that runs contrary to EPCA’s protection of distinct

product classes and consumer choice. See 42 U.S.C.

§ 6295(q)(1).

Second, the Department’s fuel-switching analysis is

starkly inconsistent with its primary economic model. When

analyzing the choice between gas furnaces, the model assumed

consumers are wholly indifferent to cost. Yet when analyzing

the choice between a gas and an electric furnace, the model

suddenly presumed a perfectly rational consumer who

carefully weighs all costs to make an economically optimal

decision. The efficiency standards depend on a schizophrenic

view of the consumer.

A rule built on two diametrically opposed assumptions

about consumer behavior is the antithesis of reasoned

decisionmaking. The Department provides no explanation, let

alone evidence, to support its approach. Because the Consumer

Furnace Rule fails to explain this internal inconsistency, it is

arbitrary and capricious. ANR Storage Co. v. FERC, 904 F.3d

1020, 1028 (D.C. Cir. 2018); see also Engine Mfrs. Ass’n v.

EPA, 20 F.3d 1177, 1182 (D.C. Cir. 1994) (concluding that

23

“unexplained inconsistency” in final rule was “not

reasonable”).

In sum, the Department’s economic justification for the

challenged standards is fundamentally flawed. The agency

propped up its cost-benefit analysis by relying on a model that

first assumed consumer irrationality to manufacture benefits

from the new standards and then assumed perfect consumer

rationality to claim additional savings from fuel switching.

This analysis is the epitome of arbitrary and capricious

decisionmaking. The Department’s economic justifications are

not supported by substantial evidence, much less by the clear

and convincing evidence required for commercial products.

***

Congress prohibited the Department of Energy from

setting efficiency standards in a way that would eliminate

product features and characteristics that provide substantial

utility to consumers. But the challenged rules do just that by

banning a class of useful gas-fired appliances. Moreover, the

agency’s economic analysis defies reality and runs headlong

into this circuit’s precedents. Because these standards are

contrary to law and predicated on an arbitrary and capricious

economic justification, I would grant the petitions and vacate

the rules.