Energy Conservation Program: Energy Conservation Standards for Residential Furnaces

Federal RegisterSep 23, 2016

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DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[Docket Number EERE-2014-BT-STD-0031]

RIN 1904-AD20

Energy Conservation Program: Energy Conservation Standards for Residential Furnaces

AGENCY:

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

ACTION:

Supplemental notice of proposed rulemaking (SNOPR) and announcement of public meeting.

SUMMARY:

The Energy Policy and Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including residential furnaces. EPCA also requires the U.S. Department of Energy (DOE) to periodically determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would save a significant amount of energy. On March 12, 2015, DOE published in the

Federal Register

a notice of proposed rulemaking (NOPR), in which DOE proposed amendments to the energy conservation standards for residential non-weatherized gas furnaces and mobile home gas furnaces. In response to the NOPR, DOE received comment expressing concern regarding DOE's proposed approach and encouraging the Department to examine establishing a separate product class for small furnaces. In response, DOE published a notice of data availability (NODA) in the

Federal Register

on September 14, 2015 that contained an analysis of a potential product class for small non-weatherized gas furnaces. In this supplemental notice of rulemaking (SNOPR), DOE responds to comments received on the NOPR and NODA and is making a modified proposal regarding amended energy conservation standards for the subject residential furnaces (including a separate small furnaces product class), which supersedes DOE's earlier proposal, as set forth in the March 12, 2015 NOPR. The notice also requests comment on the SNOPR's proposed standards and associated analyses and results. The SNOPR also proposes clarifications to the certification and reporting requirements of standby mode and off mode values for non-weatherized oil furnaces (including mobile home oil furnaces) and electric furnaces, to provide direction on the rounding of standby mode and off mode values, generally, and to clarify the level of precision for the furnace and boiler standards.

DATES:

Comments:

DOE will accept comments, data, and information regarding this supplemental notice of proposed rulemaking before and after the public meeting, but no later than November 22, 2016. See section VII, “Public Participation,” for details.

Comments regarding the likely competitive impact of the proposed standards should be sent to the Department of Justice contact listed in the

ADDRESSES

section before November 22, 2016.

Meeting:

DOE will hold a public meeting on October 17, 2016, from 9:00 a.m. to 5:00 p.m., in Washington, DC. The meeting will also be broadcast as a webinar. See section VII, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.

ADDRESSES:

The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 6E-069, 1000 Independence Avenue SW, Washington, DC 20585.

Instructions:

Any comments submitted must identify the SNOPR on Energy Conservation Standards for Residential Furnaces, and provide docket number EERE-2014-BT-STD-0031 and/or regulatory information number (RIN) 1904-AD20. Comments may be submitted using any of the following methods:

Federal eRulemaking Portal: www.regulations.gov

. Follow the instructions for submitting comments.

Email:

ResFurnaces2014STD0031@ee.doe.gov

. Include the docket number and/or RIN in the subject line of the message. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption.

Postal Mail:

Mr. John Cymbalsky, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. If possible, please submit all items on a compact disc (CD), in which case it is not necessary to include printed copies.

Hand Delivery/Courier:

Mr. John Cymbalsky, U.S. Department of Energy, Building Technologies Office, 950 L'Enfant Plaza SW., Room 6002, Washington, DC 20024. Telephone: (202) 586-2945. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

No telefacsimilies (faxes) will be accepted. For detailed instructions on submitting comments and additional information on the rulemaking process, see section VII of this document (“Public Participation”).

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule may be submitted to Office of Energy Efficiency and Renewable Energy through the methods listed above and by email to

Chad_S_Whiteman@omb.eop.gov

EPCA requires the Attorney General to provide DOE a written determination of whether the proposed standard is likely to lessen competition. The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the proposed standard. Interested persons may contact the Division at

energy.standards@usdoj.gov

before November 22, 2016. Please indicate in the “Subject” line of your email the title and Docket Number of this rulemaking notice.

Docket:

The docket, which includes

Federal Register

notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at

www.regulations.gov

. All documents in the docket are listed in the

www.regulations.gov

index. However, some documents listed in the index may not be publicly available, such as those containing information that is exempt from public disclosure.

The docket Web page can be found at:

https://www.regulations.gov/docket?D=EERE-2014-BT-STD-0031.

The docket Web page contains simple instructions on how to access all documents, including public comments, in the docket. See section VII, “Public Participation,” for further information on how to submit comments through

www.regulations.gov

For further information on how to submit a comment, review other public comments and the docket, or participate in the public meeting, contact Appliance and Equipment Standards Staff at (202) 586-6636 or by email:

Appliance_Standards_Public_Meetings@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT:

Mr. John Cymbalsky, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 287-1692. Email:

residential_furnaces_and_boilers@ee.doe.gov

Mr. Eric Stas or Ms. Johanna Jochum, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-9507 or (202) 287-6307. Email:

Eric.Stas@hq.doe.gov

Johanna.Jochum@hq.doe.gov

For further information on how to submit or review public comments, contact the Appliance and Equipment Standards Staff at (202) 586-6636 or by email:

Appliance_Standards_Public_Meetings@ee.doe.gov

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Rule

A. Benefits and Costs to Consumers

B. Impact on Manufacturers

C. National Benefits and Costs

1. AFUE Standards

2. Standby Mode and Off Mode Standards

3. Combined Results for AFUE Standards and Standby Mode and Off Mode Standards

D. Conclusion

II. Introduction

A. Authority

B. Background

1. Current Standards

2. History of Standards Rulemaking for Residential Furnaces

III. General Discussion

A. Product Classes and Scope of Coverage

B. Test Procedure

C. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

D. Energy Savings

1. Determination of Savings

2. Significance of Savings

E. Economic Justification

1. Specific Criteria

a. Economic Impact on Manufacturers and Consumers

b. Savings in Operating Costs Compared to Increase in Price (LCC and PBP)

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Any Lessening of Competition

f. Need for National Energy Conservation

g. Other Factors

2. Rebuttable Presumption

F. Other Issues

1. Economic Justification of the March 2015 NOPR Proposed Standards

a. General

b. Consumer Impacts from the Proposed Standards

c. Product Switching Due to the Proposed Standards

d. Summary Response to Comments on the Economic Justification of the March 2015 NOPR Proposed Standards for Non-Weatherized Gas Furnaces

e. Economic Justification of the March 2015 NOPR Proposed Standards for Mobile Home Gas Furnaces

2. Safety Concerns Regarding the Proposed Standards

3. Standby Mode and Off Mode Standards

4. Rulemaking Process

5. Compliance Date

6. Regional Standards

7. Regulatory Issues

8. Certification of Compliance and Level of Precision

IV. Methodology and Discussion of Related Comments

A. Market and Technology Assessment

1. Scope of Coverage and Product Classes

a. General Approach

b. Condensing and Non-Condensing Furnaces

c. Input Capacity

d. Other Comments

2. Technology Options

B. Screening Analysis

1. Screened-Out Technologies

2. Remaining Technologies

C. Engineering Analysis

1. Efficiency Levels

a. Baseline Efficiency Level and Product Characteristics

b. Other Energy Efficiency Levels

2. Cost-Assessment Methodology

a. Teardown Analysis

b. Cost Estimation Method

c. Manufacturing Production Costs

d. Cost-Efficiency Relationship

e. Manufacturer Markup

f. Manufacturer Interviews

3. Electric Furnaces

D. Markups Analysis

E. Energy Use Analysis

1. Active Mode

a. Furnace Capacity

b. Adjustments to Energy Use Estimated for 2009

c. Furnace Electricity Use

d. Rebound Effect

2. Standby Mode and Off Mode

3. Comments on Energy Use Results

F. Life-Cycle Cost and Payback Period Analysis

1. Product Cost

2. Installation Cost

a. Basic Installation Cost

b. Additional Installation Costs for Non-Weatherized Gas Furnaces

c. Comments on Installation Cost Results for Non-Weatherized Gas Furnaces

d. Installation Cost for Mobile Home Gas Furnaces

3. Annual Energy Consumption

4. Energy Prices

5. Maintenance and Repair Costs

6. Product Lifetime

7. Discount Rates

8. Efficiency Distribution in the No-New-Standards Case

9. Accounting for Product Switching Under Potential Standards

a. Consumer Choice Model

b. Product Switching Decision Criteria

c. Summary of Product Switching Model

d. Switching Resulting From Standards for Mobile Home Gas Furnaces

10. Payback Period

G. Shipments Analysis

1. Shipments Model and Inputs

2. Impact of Potential Standards on Shipments

H. National Impact Analysis

1. Product Efficiency Trends

2. National Energy Savings

3. Net Present Value Analysis

I. Consumer Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model Analysis and Key Inputs

a. Capital and Product Conversion Costs

b. Manufacturer Production Costs

c. Shipment Scenarios

d. Manufacturer Markup Scenarios

3. Discussion of Comments

a. Direct Employment Impacts

b. Cumulative Regulatory Burden

c. Impacts of the July 2014 Furnace Fan Final Rule on GRIM

d. Regulatory Flexibility Analysis

K. Emissions Analysis

L. Monetizing Carbon Dioxide and Other Emissions Impacts

1. Social Cost of Carbon

a. Monetizing Carbon Dioxide Emissions

b. Development of Social Cost of Carbon Values

c. Current Approach and Key Assumptions

2. Social Cost of Other Air Pollutants

M. Utility Impact Analysis

N. Employment Impact Analysis

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period

b. Consumer Subgroup Analysis

c. Rebuttable Presumption Payback Period

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results

b. Direct Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Subgroups of Manufacturers

e. Cumulative Regulatory Burden

3. National Impact Analysis

a. Significance of Energy Savings

b. Net Present Value of Consumer Costs and Benefits

c. Indirect Impacts on Employment

4. Impact on Utility or Performance of Products

5. Impact of Any Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors

8. Summary of National Economic Impacts

C. Conclusion

1. Benefits and Burdens of TSLs Considered for Non-Weatherized Gas Furnace and Mobile Home Gas Furnace AFUE Standards

2. Benefits and Burdens of TSLs Considered for Non-Weatherized Gas Furnace and Mobile Home Gas Furnace Standby Mode and Off Mode Standards

3. Summary of Annualized Benefits and Costs of the Proposed Standards

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

1. Description of Reasons Why Action Is Being Considered and Legal Basis

2. Description and Estimated Number of Small Entities Regulated

3. Description and Estimate of Compliance Requirements

a. Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces AFUE Standards

b. Weatherized Gas Furnaces and Mobile Home Gas Furnaces Standby Mode and Off Mode Standards

4. Identification of Duplication, Overlap, and Conflict With Other Rules and Regulations

5. A Description of Significant Alternatives to the Rule

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Information Quality

VII. Public Participation

A. Attendance at the Public Meeting

B. Procedure for Submitting Prepared General Statements for Distribution

C. Conduct of the Public Meeting

D. Submission of Comments

E. Issues on Which DOE Seeks Comment

VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

Title III, Part B

of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified), established the Energy Conservation Program for Consumer Products Other Than Automobiles.

These products include non-weatherized gas furnaces (NWGFs) and mobile home gas furnaces (MHGFs), the subject of this rulemaking. (42 U.S.C. 6292(a)(5))

For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A.

All references to EPCA in this document refer to the statute as amended through the Energy Efficiency Improvement Act of 2015 (EEIA 2015), Public Law 114-11 (April 30, 2015).

Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in a significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) EPCA specifically provides that DOE must conduct a second round of energy conservation standards rulemaking for NWGFs and MHGFs. (42 U.S.C. 6295(f)(4)(C)) The statute also provides that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) Once complete, this rulemaking will satisfy both statutory provisions.

In accordance with these and other statutory provisions discussed in this document, DOE proposes amended energy conservation standards for the subject residential furnaces (

i.e.,

NWGFs and MHGFs). The proposed standards, which are expressed in terms of minimum annual fuel utilization efficiency (AFUE) by certified input capacity and electrical energy consumption, are shown in Table I.1 and Table I.2. These proposed standards, if adopted, would apply to all NWGFs and MHGFs listed in Table I.1 and Table I.2 manufactured in, or imported into, the United States starting on the date 5 years after the publication of the final rule for this rulemaking. For non-weatherized gas furnaces, DOE has also suggested an alternative certified input capcity threshold of 60 kBtu/h for the proposed standard of 80 percent AFUE, and requests public comment on this alternative. Increasing the small furnace threshold reduces the fuel switching impacts relative to the proposed standard (see Table V.3), and has a significantly lower fraction of consumers who would be negatively impacted (see Table V.41). See Section V.C.1 for more discussion on this alternative.

Table I.1—Proposed AFUE Energy Conservation Standards for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

[TSL 6]

Product class

Certified

input

capacity

(kBtu/h)

Proposed

standard:

AFUE

(%)

Non-Weatherized Gas Furnaces

≤55

>55

80.0

92.0

Mobile Home Gas Furnaces

All

92.0

Table I.2—Proposed Standby Mode and Off Mode Energy Conservation Standards for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces Electrical Energy Consumption

[TSL 3]

Product class

Proposed

standby mode

standard: P

W,SB

(watts)

Proposed

off mode

standard: P

W,OFF

(watts)

Non-Weatherized Gas Furnaces

8.5

Mobile Home Gas Furnaces

8.5

A. Benefits and Costs to Consumers

Table I.3 and Table I.4 present DOE's evaluation of the economic impacts of the proposed AFUE standards and standby mode and off mode standards, respectively, on consumers of NWGFs and MHGFs, as measured by the average life-cycle cost (LCC) savings and the

simple payback period (PBP).

In both cases, the average LCC savings are positive for all product classes, and the PBP is less than the average lifetime of NWGFs and MHGFs, which is estimated to be 21.5 years (see section IV.F.6).

The average LCC savings are measured relative to the efficiency distribution in the no-new-standards case, which depicts the market in the compliance year in the absence of amended or new standards (see section IV.F.8). The simple PBP, which is designed to compare specific efficiency levels, is measured relative to the baseline product (see section IV.C.1.a). The AFUE standard results include the projected fuel switching as described in chapter 8 of the SNOPR TSD.

Table I.3—Impacts of Proposed AFUE Energy Conservation Standards on Consumers of Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

[TSL 6]

Product class

Average

LCC savings

(2015$)

Simple

payback

period

(years)

Non-Weatherized Gas Furnaces

692

6.1

Mobile Home Gas Furnaces

1,049

1.7

Table I.4—Impacts of Proposed Standby Mode and Off Mode Energy Conservation Standards on Consumers of Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

[TSL 3]

Product class

Average

LCC savings

(2015$)

Simple

payback

period

(years)

Non-Weatherized Gas Furnaces

7.0

Mobile Home Gas Furnaces

6.9

Estimates of the combined impact of the proposed AFUE and standby mode and off mode standards on consumers are shown in Table I.5.

Table I.5—Combined Impacts of Proposed AFUE and Standby Mode and Off Mode Energy Conservation Standards on Consumers of Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

Product class

Average

LCC savings

(2015$)

Simple

payback

period

(years)

Non-Weatherized Gas Furnaces

411

7.0

Mobile Home Gas Furnaces

1,050

1.9

DOE's analysis of the impacts of the proposed standards on consumers is described in further detail in section IV.F of this document.

B. Impact on Manufacturers

The industry net present value (INPV) is the sum of industry discounted cash flows from the reference year of the manufacturer impact analysis (MIA) through the end of the analysis period (2016 to 2051). Using a real discount rate of 6.4 percent, DOE estimates that the INPV for manufacturers of NWGFs and MHGFs in the case without amended standards is $1,104.3 million in 2015$. DOE analyzed the impacts of AFUE energy conservation standards and standby mode and off mode energy conservation standards on manufacturers independently. Under the proposed AFUE standards, DOE expects the impacts on INPV to range from −8.0 percent to 3.5 percent, or a change of −$88.0 million to $38.5 million. Under the proposed standby mode and off mode standards, DOE expects impacts on INPV to range from −0.3 percent to 0.5 percent, or a change of −$3.4 million to $5.7 million. Industry conversion costs are expected to total $54.7 million as a result of the proposed standards.

DOE's analysis of the impacts of the proposed standards on manufacturers is described in further detail in section IV.J of this document.

C. National Benefits and Costs

All monetary values in this document are expressed in 2015 dollars and, where appropriate, are discounted to 2016 unless explicitly stated otherwise.

Benefits and costs for the AFUE standards are considered separately from benefits and costs for the standby mode and off mode standards because it was not feasible to develop a single, integrated standard. As discussed in the October 20, 2010 test procedure final rule, DOE concluded that due to the magnitude of the active mode energy consumption as compared to the standby mode and off mode electrical consumption, an integrated metric would not be feasible because the standby and off mode electrical consumption would be a

de minimis

portion of the overall energy consumption. 75 FR 64621, 64627. Thus, an integrated metric could not be used to effectively regulate the standby mode and off mode energy consumption.

1. AFUE Standards

DOE's analyses indicate that the proposed AFUE energy conservation standards for NWGFs and MHGFs would save a significant amount of

energy. Relative to the case without amended standards, the lifetime energy savings for NWGFs and MHGFs purchased in the 30-year period that begins in the anticipated first year of compliance with the amended standards (2022-2051) amount to 2.9 quadrillion British thermal units (Btu), or quads.

This represents a savings of 2.3 percent relative to the energy use of these products in the case without amended standards (referred to as the “no-new-standards case”).

The quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy savings includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy efficiency standards. For more information on the FFC metric, see section IV.H.1. A quad is equal to 10

Btu.

The cumulative net present value (NPV) of total consumer benefits of the proposed AFUE standards for NWGFs and MHGFs ranges from $5.6 billion (at a 7-percent discount rate) to $21.7 billion (at a 3-percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product and installation costs for NWGFs and MHGFs purchased in 2022-2051.

In addition, the proposed AFUE standards for NWGFs and MHGFs are projected to yield significant environmental benefits. DOE estimates that the proposed AFUE standards would result in cumulative emission reductions (over the same period as for energy savings) of 143 million metric tons (Mt)

of carbon dioxide (CO

), 687 thousand tons of nitrogen oxides (NO

), and 2,777 thousand tons of methane (CH

Projected emissions show an increase of 76.8 thousand tons of sulfur dioxide (SO

), 1.07 thousand tons of nitrous oxide (N

O), and 0.3 tons of mercury (Hg). The increase is due to projected switching from NWGFs to electric heat pumps and electric furnaces under the proposed standards. Note that the reduction in carbon emissions would be diminished by 18 percent if DOE were to utilize an alternate threshold for small furnaces of less than or equal to 60 kBTU/hr to set its proposed standard of 80 percent AFUE. See Section V.C.1 for more analysis. The cumulative reduction in CO

emissions through 2030 amounts to 6.44 Mt, which is equivalent to the emissions resulting from the annual electricity use of 0.88 million homes.

A metric ton is equivalent to 1.1 short tons. Results for emissions other than CO

are presented in short tons.

DOE calculated emissions reductions relative to the no-new-standards case, which includes key assumptions in the

Annual Energy Outlook 2015

(

AEO 2015

) Reference case.

AEO 2015

generally represents current legislation and environmental regulations for which implementing regulations were available as of October 31, 2014. At the time when the SNOPR was prepared,

AEO 2015

was the most recent available

AEO.

DOE intends to use

AEO 2016

for the final rule.

The value of the CO

reductions is calculated using a range of values per metric ton (t) of CO

(otherwise known as the “Social Cost of Carbon,” or SCC) developed by a Federal interagency working group.

The derivation of the SCC values is discussed in section IV.L. Using discount rates appropriate for each set of SCC values (see Table I.6), DOE estimates the present monetary value of the CO

emissions reduction (not including CO

equivalent emissions of other gases with global warming potential) is between $0.8 billion and $12.6 billion, with a value of $4.12 billion using the central SCC case represented by $40.6/t in 2015.

Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866,

Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised July 2015) (Available at

https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf

DOE estimates the present monetary value of the NO

emissions reduction to be $0.2 billion at a 7-percent discount rate and $0.5 billion at a 3-percent discount rate.

DOE is still investigating appropriate valuation of changes in methane and other emissions, and therefore did not include any such values in the analysis for this SNOPR. However, the available evidence indicates that the value of the reduction in methane emissions from the proposed standards would far outweigh the cost associated with the relatively small increase in SO

O, and Hg emissions. Consideration of those values would not affect the standards DOE proposes in this SNOPR.

DOE estimated the monetized value of NO

emissions reductions associated with electricity savings using benefit per ton estimates from the

Regulatory Impact Analysis for the Clean Power Plan Final Rule,

published in August 2015 by EPA's Office of Air Quality Planning and Standards. Available at

www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.

See section IV.L.2 for further discussion. The U.S. Supreme Court has stayed the rule implementing the Clean Power Plan until the current litigation against it concludes.

Chamber of Commerce, et al.

EPA, et al.,

Order in Pending Case, 577 U.S. __ (2016). However, the benefit-per-ton estimates established in the Regulatory Impact Analysis for the Clean Power Plan are based on scientific studies that remain valid irrespective of the legal status of the Clean Power Plan. DOE is primarily using a national benefit-per-ton estimate for NO

emitted from the Electricity Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.

2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.

2011), the values would be nearly two-and-a-half times larger.

Table I.6 summarizes the economic benefits and costs expected to result from the proposed AFUE standards for NWGFs and MHGFs.

Table I.6—Summary of Economic Benefits and Costs of Proposed AFUE Energy Conservation Standards for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

[TSL 6] *

Category

Present value

(billion 2015$)

Discount rate

(percent)

Benefits

Consumer Operating Cost Savings

1.7

4.7

Reduction (using mean SCC at 5% discount rate) **

0.1

Reduction (using mean SCC at 3% discount rate) **

0.5

Reduction (using mean SCC at 2.5% discount rate) **

0.8

2.5

Reduction (using 95th percentile SCC at 3% discount rate) **

1.5

Reduction †

0.02

0.05

Total Benefits †

2.2

5.2

Costs

Consumer Incremental Installed Costs

0.4

0.7

Total Net Benefits

Including CO

and NO

Reduction Monetized Value †

1.8

4.5

reduction benefits are global benefits due to actions that occur domestically.

† DOE estimated the monetized value of NO

emissions reductions associated with electricity savings using benefit per ton estimates from the “Regulatory Impact Analysis for the Clean Power Plan Final Rule,” published in August 2015 by EPA's Office of Air Quality Planning and Standards. (Available at

www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis

See section IV.L.2 for further discussion.

DOE is primarily using a national benefit-per-ton estimate for NO

emitted from the Electricity Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.

2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.

2011), the values would be nearly two-and-a-half times larger.

† Total Benefits for both the 3 percent and 7 percent cases are presented using only the average SCC with 3-percent discount rate.

The benefits and costs of the proposed standby mode and off mode standards, for NWGFs and MHGFs sold in 2022-2051, can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are: (1) The national economic value of the benefits in reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the value of the benefits of CO

and NO

emission reductions, all annualized.

e.g.,

2020 or 2030), and then discounted the present value from each year to 2016. The calculation uses discount rates of 3 and 7 percent for all costs and benefits except for the value of CO

reductions, for which DOE used case-specific discount rates, as shown in Table I.8. Using the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in the compliance year, that yields the same present value.

Estimates of annualized benefits and costs of the proposed standby mode and off mode standards are shown in Table I.9. The results under the primary estimate are as follows. Using a 7-percent discount rate for benefits and costs other than CO

reduction (for which DOE used a 3-percent discount rate along with the average SCC series that has a value of $40.6/metric ton in 2015), the estimated cost of the NWGFs and MHGFs standards proposed in this rule is $40.7 million per year in increased equipment costs, while the estimated annual benefits are $188 million in reduced equipment operating costs, $28.2 million in CO

reductions, and $1.79 million in reduced NO

emissions. In this case, the net benefit amounts to $178 million per year. Using a 3-percent discount rate for all benefits and costs and the average SCC series

that has a value of $40.6/metric ton in 2015, the estimated cost of the proposed NWGFs and MHGFs standby mode and off mode standards is $41.4 million per year in increased equipment costs, while the estimated annual benefits are $276 million in reduced operating costs, $28.2 million in CO

reductions, and $2.77 million in reduced NO

emissions. In this case, the net benefit amounts to $265 million per year.

Table I.9—Annualized Benefits and Costs of Proposed Standby Mode and Off Mode Energy Conservation Standards for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

[TSL 3] *

Discount rate

Primary estimate

Low-net-benefits estimate

High-net-benefits estimate

(million 2015$/year)

Benefits

Consumer Operating Cost Savings

188

276

169

246

219

329

Reduction (using mean SCC at 5% discount rate) **

8.2

7.4

9.2

Reduction (using mean SCC at 3% discount rate) **

28.2

25.5

31.8

Reduction (using mean SCC at 2.5% discount rate) **

2.5%

41.6

37.6

46.9

Reduction (using 95th percentile SCC at 3% discount rate ) **

86.0

77.8

96.9

Reduction †

1.8

2.8

1.6

2.5

4.5

7.1

Total Benefits †

7% plus CO

range

198 to 276

178 to 249

233 to 321

218

197

255

3% plus CO

range

287 to 365

256 to 326

345 to 433

307

274

368

Costs

Consumer Incremental Product Costs

40.7

41.4

37.2

37.5

45.4

46.5

Net Benefits

Total †

7% plus CO

range

157 to 235

141 to 212

187 to 275

178

159

210

3% plus CO

range

245 to 323

218 to 288

298 to 386

265

236

321

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2022-2051. These results include benefits to consumers which accrue after 2051 from the products shipped in 2022-2051.The incremental installed costs include incremental equipment cost as well as installation costs. The results account for the incremental variable and fixed costs incurred by manufacturers due to the proposed standards, some of which may be incurred in preparation for the rule. The CO

reduction benefits are global benefits due to actions that occur domestically. The Primary, Low-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from the

AEO 2015

Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect a constant price trend for each of the estimates. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.

** The CO

reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC values are emission year specific. See section IV.L.1 for more details.

† DOE estimated the monetized value of NO

emissions reductions associated with electricity savings using benefit per ton estimates from the

Regulatory Impact Analysis for the Clean Power Plan Final Rule,

published in August 2015 by EPA's Office of Air Quality Planning and Standards. (Available at

www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis

See section IV.L.2 for further discussion. For the Primary Estimate and Low-Net-Benefits Estimate, DOE used national benefit-per-ton estimates for NO

emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.,

2009). For the High-Net-Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.,

2011); these are nearly two-and-a-half times larger than those from the ACS study.

†† Total Benefits for both the 3-percent and 7-percent cases are presented using only the average SCC with 3-percent discount rate. In the rows labeled “7 percent plus CO

range” and “3 percent plus CO

range,” the operating cost and NO

benefits are calculated using the labeled discount rate, and those values are added to the full range of CO

values.

3. Combined Results for AFUE Standards and Standby Mode and Off Mode Standards

DOE also added the annualized benefits and costs from the individual annualized tables to provide a combined benefit and cost estimate of the proposed AFUE and standby mode and off mode standards, as shown in Table I.10.

The results under the primary estimate are as follows. Using a 7-percent discount rate for benefits and costs other than CO

reduction (for which DOE used a 3-percent discount rate along with the average SCC series that has a value of $40.6/metric ton in 2015), the estimated cost of the NWGF and MHGF standards proposed in this rule is $541 million per year in increased equipment costs, while the estimated annual benefits are $1,326 million in reduced equipment operating costs, $272 million in CO

reductions, and $20 million in reduced NO

emissions. In this case, the net benefit amounts to $1,077 million per year. Using a 3-percent discount rate for all

benefits and costs and the average SCC series that has a value of $40.6/metric ton in 2015, the estimated cost of the proposed NWGF and MHGF standards is $546 million per year in increased equipment costs, while the estimated annual benefits are $2,061 million in reduced operating costs, $272 million in CO

reductions, and $32 million in reduced NO

emissions. In this case, the net benefit amounts to $1,819 million per year.

To obtain the combined results, DOE added the results for the AFUE standards in Table I.7 with the results for the standby mode and off mode standards in Table I.9.

Table I.10—Annualized Benefits and Costs of Proposed AFUE (TSL 6) and Standby Mode and Off Mode (TSL 3) Energy Conservation Standards for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces *

Discount rate

Primary estimate

Low-net-benefits estimate

High-net-benefits estimate

(million 2015$/year)

Benefits

Consumer Operating Cost Savings

1326

2061

1176

1794

1572

2486

Reduction (using mean SCC at 5% discount rate) **

Reduction (using mean SCC at 3% discount rate) **

272

242

315

Reduction (using mean SCC at 2.5% discount rate) **

2.5%

401

358

465

Reduction (using 95th percentile SCC at 3% discount rate ) **

828

739

959

Reduction †

Total Benefits †

7% plus CO

range

1424 to 2175

1264 to 1933

1715 to 2584

1618

1437

1939

3% plus CO

range

2171 to 2921

1892 to 2561

2660 to 3529

2364

2065

2884

Costs

Consumer Incremental Product Costs

541

546

592

597

497

506

Net Benefits

Total †

7% plus CO

range

884 to 1634

673 to 1342

1217 to 2086

1077

845

1442

3% plus CO

range

1625 to 2375

1295 to 1964

2154 to 3023

1819

1468

2378

* This table presents the annualized costs and benefits associated with NWGFs and MHGFs shipped in 2022−2051. These results include benefits to consumers which accrue after 2051 from the products shipped in 2022−2051. The results account for the incremental variable and fixed costs incurred by manufacturers due to the proposed standards, some of which may be incurred in preparation for the rule. The CO

reduction benefits are global benefits due to actions that occur domestically. The Primary, Low-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from the

AEO 2015

Reference case, Low-Economic-Growth case, and High-Economic-Growth case, respectively. In addition, incremental product costs for AFUE standards reflect a medium decline rate in the Primary Estimate, a constant price trend in the Low-Net-Benefits Estimate, and a high decline rate in the High-Net-Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.1. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.

** The CO

reduction benefits are calculated using four different sets of SCC values. The first three use the average SCC calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC values are emission year specific. See section IV.L.1 for more details.

† DOE estimated the monetized value of NO

emissions reductions associated with electricity savings using benefit per ton estimates from the

Regulatory Impact Analysis for the Clean Power Plan Final Rule,

published in August 2015 by EPA's Office of Air Quality Planning and Standards. (Available at

www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis

See section IV.L.2 for further discussion. For the Primary Estimate and Low-Net-Benefits Estimate, DOE used national benefit-per-ton estimates for NO

emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.

2009). For the High-Net-Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.

2011); these are nearly two-and-a-half times larger than those from the ACS study.

† Total Benefits for both the 3-percent and 7-percent cases are presented using only the average SCC with 3-percent discount rate. In the rows labeled “7% plus CO

range” and “3% plus CO

range,” the operating cost and NO

benefits are calculated using the labeled discount rate, and those values are added to the full range of CO

values.

DOE's analysis of the national impacts of the proposed standards is described in further detail in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE has tentatively concluded that the proposed AFUE standards and standby mode and off mode standards represent the maximum improvement in energy efficiency that DOE has determined is technologically feasible and economically justified, and would result in the significant conservation of energy. DOE further notes that products achieving these standard levels are already commercially available for all product classes covered by this proposal. Based on the analyses described above, DOE has tentatively concluded that the benefits of the proposed standards to the Nation (energy savings, positive NPV of consumer benefits, consumer LCC savings, and emission reductions) would outweigh the burdens (loss of INPV for manufacturers and LCC increases for some consumers).

DOE also considered more-stringent energy efficiency levels as potential standards, and is still considering them in this rulemaking. However, DOE has tentatively concluded that the potential burdens of the more-stringent energy

efficiency levels would outweigh the projected benefits. DOE is also seeking comment on an option that considers an alternate capacity size for the small furnace threshold for the 80 percent AFUE standard (See section V.C.1), which reduces the fuel switching impacts relative to the proposed option (see Table V.3), and has a significantly lower fraction of consumers who would be negatively impacted (see Table V.41). Based on consideration of the public comments DOE receives in response to this SNOPR and related information collected and analyzed during the course of this rulemaking effort, DOE may adopt energy efficiency levels presented in this notice that are either higher or lower than the proposed standards, or some combination of level(s) that incorporate the proposed standards in part.

II. Introduction

The following section briefly discusses the statutory authority underlying this supplemental proposal, as well as some of the relevant historical background related to the establishment of amended and new standards for residential NWGFs and MHGFs.

A. Authority

Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified) established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program covering most major household appliances (collectively referred to as “covered products”). These products includes the residential furnaces that are the subject of this rulemaking. (42 U.S.C. 6292(a)(5)) EPCA, as amended, prescribed energy conservation standards for these products (42 U.S.C. 6295(f)(1) and (2)), and directed DOE to conduct future rulemakings to determine whether to amend these standards. (42 U.S.C. 6295(f)(4)) Under 42 U.S.C. 6295(m), the agency must periodically review its already established energy conservation standards for a covered product no later than six years from the issuance of any final rule establishing or amending a standard for a covered product.

Pursuant to EPCA, DOE's energy conservation program for covered products consists essentially of four parts: (1) Testing; (2) labeling; (3) the establishment of Federal energy conservation standards; and (4) certification and enforcement procedures. The Federal Trade Commission (FTC) is primarily responsible for labeling, and DOE implements the remainder of the program. Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product prior to the adoption of a new or amended energy conservation standard. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for residential furnaces appear at title 10 of the Code of Federal Regulations (CFR) part 430, subpart B, appendix N.

DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including residential furnaces. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and (3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard: (1) For certain products, including residential furnaces, if no test procedure has been established for the product, or (2) if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified after receiving comments on the proposed standard, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination by, to the greatest extent practicable, considering the following seven statutory factors:

(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;

(2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard;

(3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard;

(4) Any lessening of the utility or the performance of the covered products likely to result from the standard;

(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard;

(6) The need for national energy and water conservation; and

(7) Other factors the Secretary of Energy (Secretary) considers relevant.

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

Further, EPCA, as amended, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))

EPCA, as amended, also contains what is known as an “anti-backsliding” provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4))

Additionally, EPCA specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. DOE must specify a different standard level for a type or class of product that has the same function or intended use, if DOE determines that products within such group: (A) Consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether capacity or another performance-related feature justifies a different standard for a group of products, DOE must consider

such factors as the utility to the consumer of the feature and other factors DOE deems appropriate.

Id.

Any rule prescribing such a standard must include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q)(2))

Federal energy conservation requirements generally supersede State laws or regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions set forth under 42 U.S.C. 6297(d)).

Pursuant to amendments contained in the Energy Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, DOE may consider the establishment of regional energy conservation standards for furnaces (except boilers). (42 U.S.C. 6295(o)(6)(B)) Specifically, in addition to a base national standard for a product, DOE may establish for furnaces a single more-restrictive regional standard. (42 U.S.C. 6295(o)(6)(B)) The regions must include only contiguous States (with the exception of Alaska and Hawaii, which may be included in regions with which they are not contiguous), and each State may be placed in only one region (

i.e.,

an entire State cannot simultaneously be placed in two regions, nor can it be divided between two regions). (42 U.S.C. 6295(o)(6)(C)) Further, DOE can establish the additional regional standards only: (1) Where doing so would produce significant energy savings in comparison to a single national standard; (2) if the regional standards are economically justified; and (3) after considering the impact of these standards on consumers, manufacturers, and other market participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 6295(o)(6)(D))

Finally, pursuant to the amendments contained in EISA 2007, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) DOE's current test procedures for residential furnaces address standby mode and off mode energy use. In this rulemaking, DOE intends to adopt separate energy conservation standards to address standby mode and off mode energy use.

B. Background

1. Current Standards

EPCA established the energy conservation standards that apply to most residential furnaces currently being manufactured. The original standards established a minimum AFUE of 75-percent for mobile home furnaces. For all other furnaces, the original standards generally established a minimum AFUE of 78-percent. However, Congress recognized the potential need for a separate standard based on the capacity of a furnace and directed DOE to undertake a rulemaking to establish a standard for “small” gas furnaces (those having an input of less than 45,000 Btu per hour). (42 U.S.C. 6295(f)(1)-(2)) DOE initially established a standard for small furnaces at the same level as furnaces generally (

i.e.,

a minimum AFUE of 78-percent). (10 CFR 430.32(e)(1)(i); 54 FR 47916 (Nov. 17, 1989))

EPCA also required DOE to conduct two rounds of rulemaking to consider amended standards for residential furnaces (42 U.S.C. 6295(f)(4)(B)-(C)), a requirement subsequently expanded to encompass a six-year look back review of all covered products (42 U.S.C. 6295(m)(1)). In a final rule published on November 19, 2007 (November 2007 final rule), DOE prescribed amended energy conservation standards for residential furnaces manufactured on or after November 19, 2015. 72 FR 65136. The November 2007 final rule revised the energy conservation standards to 80-percent AFUE for non-weatherized gas furnaces (NWGF), to 81-percent AFUE for weatherized gas furnaces, to 80-percent AFUE for mobile home gas furnaces (MHGF), and to 82-percent AFUE for non-weatherized oil-fired furnaces.

Id.

at 65169. Based on market assessment and the standard levels at issue, the October 2006 NOPR proposed and the November 2007 final rule established standards without regard to the certified input capacity of a furnace. 71 FR 59204, 59214 (Oct. 6, 2006); 72 FR 65136, 65169 (Nov. 19, 2007). Subsequently, on October 31, 2011, DOE published a notice of effective date and compliance dates (76 FR 67037) to confirm amended energy conservation standards and compliance dates contained in a June 27, 2011 direct final rule (June 2011 DFR; 76 FR 37408) for residential central air conditioners and residential furnaces. These two rulemakings represented the first and the second, respectively, of the two rulemakings required under 42 U.S.C. 6295(f)(4)(B)-(C) to consider amending the standards for residential furnaces.

The June 2011 DFR and October 2011 notice of effective date and compliance dates amended, in relevant part, the energy conservation standards and compliance dates for three product classes of residential furnaces (

i.e.,

NWGFs, MHGFs, and non-weatherized oil furnaces). The existing standards were left in place for three classes of residential furnaces (

i.e.,

weatherized oil-fired furnaces, mobile home oil-fired furnaces, and electric furnaces). For one class of residential furnaces (weatherized gas furnaces), the existing standard was left in place, but the compliance date was amended. Electrical standby mode and off mode energy consumption standards were established for non-weatherized gas and oil-fired furnaces (including mobile home furnaces) and electric furnaces. Compliance with the energy conservation standards promulgated in the June 2011 DFR was to be required on May 1, 2013 for non-weatherized furnaces and on January 1, 2015 for weatherized furnaces. 76 FR 37408, 37547-48 (June 27, 2011); 76 FR 67037, 67051 (Oct. 31, 2011). The amended energy conservation standards and compliance dates in the June 2011 DFR would have superseded those standards and compliance dates promulgated by the November 2007 final rule for NWGFs, MHGFs, and non-weatherized oil furnaces. Similarly, the amended compliance date for weatherized gas furnaces in the June 2011 DFR superseded the compliance date in the November 2007 final rule.

After publication of the October 2011 notice, the American Public Gas Association (APGA) sued DOE

in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) to invalidate the rule as it pertained to NWGFs (as discussed further in section II.B.2). Petition for Review,

American Public Gas Association, et al.

Department of Energy, et al.,

No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). The parties to the litigation engaged in settlement negotiations which ultimately led to filing of an unopposed motion on March 11, 2014, seeking to vacate DOE's rule in part and to remand to the agency for further rulemaking. On April 24, 2014, the Court granted the motion and ordered that the standards established

for NWGFs and MHGFs be vacated and remanded to DOE for further rulemaking. As a result, only the standards for non-weatherized oil-fired furnaces and weatherized gas furnaces established in the June 2011 DFR went into effect as stated in that final rule. The standards established by the June 2011 DFR for the NWGFs and MHGFs did not go into effect, and thus, compliance with the standards established in the November 2007 final rule for these products was required beginning on November 19, 2015. As stated previously, the standards for weatherized oil-fired furnaces, mobile home oil-fired furnaces, and electric furnaces were unchanged, and as such, the original standards for those product classes remain in effect. The standards for all residential furnaces, including the two product classes being analyzed in this SNOPR, are set forth in DOE's regulations at 10 CFR 430.32(e)(1)(ii). Table II.1 below shows the current standards for product classes that have been previously amended (either by the November 2007 final rule or June 2011 DFR) and the existing standards for the product classes where the AFUE standard has not been amended.

After APGA filed its petition for review on December 23, 2011, various entities subsequently intervened.

Table II.1—Federal Energy Conservation Standards for Residential Furnaces

Product class

Minimum

annual fuel

utilization

efficiency

(%)

Compliance date

Non-weatherized Gas *

11/19/2015

Mobile Home Gas *

11/19/2015

Weatherized Gas

1/1/2015

Non-weatherized Oil-Fired

5/1/2013

Mobile Home Oil-Fired

9/1/1990

Weatherized Oil-Fired

1/1/1992

Electric

1/1/1992

* Only non-weatherized gas and mobile home gas furnaces are being analyzed for this current rulemaking.

2. History of Standards Rulemaking for Residential Furnaces

Given the somewhat complicated interplay of recent DOE rulemakings and statutory provisions related to residential furnaces, DOE provides the following regulatory history as background leading to the present rulemaking. Amendments to EPCA in the National Appliance Energy Conservation Act of 1987 (NAECA; Pub. L. 100-12) established EPCA's original energy conservation standards for furnaces, consisting of the minimum AFUE levels described above for mobile home furnaces and for all other furnaces except “small” gas furnaces. (42 U.S.C. 6295(f)(1)-(2)) Pursuant to 42 U.S.C. 6295(f)(1)(B), in November 1989, DOE adopted a mandatory minimum AFUE level for “small” furnaces. 54 FR 47916 (Nov. 17, 1989). The standards established by NAECA and the November 1989 final rule for “small” gas furnaces are still in effect for mobile home oil-fired furnaces, weatherized oil-fired furnaces, and electric furnaces.

Pursuant to EPCA, DOE was required to conduct two rounds of rulemaking to consider amended energy conservation standards for furnaces. (42 U.S.C. 6295(f)(4)(B) and (C)) In satisfaction of this first round of amended standards rulemaking under 42 U.S.C. 6295(f)(4)(B), as noted above, DOE published a final rule in the

Federal Register

on November 19, 2007 (the November 2007 Rule) that revised these standards for most furnaces, but left them in place for two product classes (

i.e.,

mobile home oil-fired furnaces and weatherized oil-fired furnaces). The standards amended in the November 2007 Rule were to apply to furnaces manufactured or imported on and after November 19, 2015. 72 FR 65136. The energy conservation standards in the November 2007 final rule consist of a minimum AFUE level for each of the six classes of furnaces.

Id.

at 65169. As previously noted, based on the market analysis for the November 2007 final rule and the standards established under that rule, the November 2007 final rule eliminated the distinction between furnaces based on their certified input capacity, (

i.e.,

the standards applicable to “small” furnaces were established at the same level and as part of their appropriate class of furnace generally).

Following DOE's adoption of the November 2007 final rule, several parties jointly sued DOE in the United States Court of Appeals for the Second Circuit (Second Circuit) to invalidate the rule. Petition for Review,

State of New York, et al.

Department of Energy, et al.,

Nos. 08- 0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The petitioners asserted that the standards for residential furnaces promulgated in the November 2007 final rule did not reflect the “maximum improvement in energy efficiency” that “is technologically feasible and economically justified” under 42 U.S.C. 6295(o)(2)(A). On April 16, 2009, DOE filed with the Court a motion for voluntary remand that the petitioners did not oppose. The motion did not state that the November 2007 final rule would be vacated, but indicated that DOE would revisit its initial conclusions outlined in the November 2007 Rule in a subsequent rulemaking action. DOE also agreed that the final rule in that subsequent rulemaking action would address both regional standards for furnaces, as well as the effects of alternate standards on natural gas prices. The Second Circuit granted DOE's motion on April 21, 2009. DOE notes that the Second Circuit's order did not vacate the energy conservation standards set forth in the November 2007 final rule, and during the remand, they went into effect as originally scheduled.

As described previously in section II.B, on June 27, 2011, DOE published a direct final rule (June 2011 DFR) revising the energy conservation standards for residential furnaces pursuant to the voluntary remand in

State of New York, et al.

Department of Energy, et al.

76 FR 37408. In the June 2011 DFR, DOE considered the amendment of the same six product classes considered in the November 2007 final rule analysis plus electric furnaces. As discussed in section II.B.1, the June 2011 DFR amended the existing energy conservation standards for NWGFs, MHGFs, and non-weatherized oil furnaces, and amended the compliance date (but left the existing standards in place) for weatherized gas furnaces. The June 2011 DFR also established electrical standby mode and

off mode standards for NWGFs, non-weatherized oil furnaces, and electric furnaces. DOE confirmed the standards and compliance dates promulgated in the June 2011 DFR in a notice of effective date and compliance dates published on October 31, 2011. 76 FR 67037.

As noted earlier, following DOE's adoption of the June 2011 DFR, APGA filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit to invalidate the DOE rule as it pertained to NWGFs. Petition for Review,

American Public Gas Association, et al.

Department of Energy, et al.,

No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). On April 24, 2014, the Court granted a motion that approved a settlement agreement that was reached between DOE, APGA, and the various intervenors in the case, in which DOE agreed to a partial vacatur and remand of the NWGFs and MHGFs portions of the June 2011 DFR in order to conduct further notice-and-comment rulemaking. Accordingly, the Court's order vacated the June 2011 DFR in part (

i.e.,

those portions relating to NWGFs and MHGFs) and remanded to the agency for further rulemaking.

As part of the settlement, DOE agreed to use best efforts to issue a notice of proposed rulemaking within one year of the remand, and to issue a final rule within the later of two years of the issuance of remand, or one year of the issuance of the proposed rule, including at least a ninety-day public comment period. Due to the extensive and recent rulemaking history for residential furnaces, as well as the associated opportunities for notice and comment described above, DOE forwent the typical earlier rulemaking stages (

e.g.,

Framework Document, preliminary analysis) and instead published a NOPR on March 12, 2015 (March 2015 NOPR). 80 FR 13120. DOE concluded that there was a sufficient recent exchange of information between interested parties and DOE regarding the energy conservation standards for residential furnaces such as to allow for this proceeding to move directly to the NOPR stage. Moreover, DOE notes that under 42 U.S.C. 6295(p) and 5 U.S.C. 553(b) and (c), DOE is only required to publish a notice of proposed rulemaking and accept public comments before amending energy conservation standards in a final rule (

i.e.,

DOE is not required to conduct any earlier rulemaking stages).

In the March 2015 NOPR, DOE proposed adopting a national standard of 92-percent AFUE for all NWGFs and MHGFs. 80 FR 13120, 13198 (March 12, 2015). In response, while some stakeholders supported the national 92-percent AFUE standard, others opposed the proposed standards and encouraged DOE to withdraw the March 2015 NOPR. (See section III.F.1 for comments providing specific reasons for opposing or supporting the proposed standards are summarized in that section.)

Multiple parties suggested that DOE should create a separate product class for furnaces based on input capacity and set lower standards for the “small furnaces” product class in order to mitigate some of the negative impacts of the proposed standards. Among other reasons, commenters suggested that such an approach would reduce the number of low-income consumers switching to electric heat due to higher installation costs, because those consumers typically have smaller homes in which a furnace with a lower input capacity would be installed and, therefore, would not be impacted if a condensing standard were adopted only for higher-input-capacity furnaces. (These comments are discussed further in section IV.I.A.) To explore the potential impacts of such an approach, DOE published a notice of data availability (NODA) in the

Federal Register

on September 14, 2015 (September 2015 NODA). 80 FR 55038. The September 2015 NODA contained analysis that considered thresholds for defining the small furnace product class from 45 kBtu/h to 65 kBtu/h certified input capacity and maintaining a non-condensing 80-percent AFUE standard for that product class, while increasing the standard to a condensing level (

i.e.,

either 90-percent, 92-percent, 95-percent, or 98-percent AFUE) for large furnaces.

Id.

at 55042. The results indicated that life-cycle cost savings increased and the share of consumers with net costs decreased as a result of an 80-percent AFUE standard for the small furnace product class.

Id.

at 55042-44. It also showed that national energy savings increased because fewer consumers switched to more energy-intensive electric heat.

Id.

at 55044.

DOE has initiated this rulemaking in partial fulfillment of the remand in

American Public Gas Association, et al.

Department of Energy, et al.

and pursuant to its authority under 42 U.S.C. 42 U.S.C. 6295(f)(4)(C), which requires DOE to conduct a second round of amended standards rulemaking for residential non-weatherized gas furnaces and mobile home gas furnaces. EPCA, as amended by EISA 2007, also requires that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of the determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including proposed energy conservation standards. (42 U.S.C. 6295(m)(1)) To this end, DOE published a NOPR for the subject furnaces on March 12, 2015, and this SNOPR is a continuation of that rulemaking in light of comments and other information received at earlier stages of the process. Once completed, this rulemaking will satisfy both statutory provisions.

Furthermore, EISA 2007 amended EPCA to require that any new or amended energy conservation standard adopted after July 1, 2010, shall address standby mode and off mode energy consumption pursuant to 42 U.S.C. 6295(o). (42 U.S.C. 6295(gg)(3)) If feasible, the statute directs DOE to incorporate standby mode and off mode energy consumption into a single standard with the product's active mode energy use. If a single standard is not feasible, DOE may consider establishing a separate standard to regulate standby mode and off mode energy consumption. Consequently, DOE is considering standby mode and off mode energy use as part of this rulemaking for residential furnaces. In the March 2015 NOPR, DOE proposed a maximum energy use of 8.5 watts in both standby and off mode for NWGF and MHGF. 80 FR 13120, 13198 (March 12, 2015). The changes in this SNOPR apply only to the active mode AFUE standards, and therefore, the proposed standby mode and off mode standards set forth in the March 2015 NOPR remain part of this SNOPR.

DOE received a number of written comments from interested parties in response to the March 2015 NOPR and September 2015 NODA. DOE considered these comments, as well as comments from the March 2015 NOPR public meeting, in preparing this SNOPR. The commenters are summarized in Table II.2. Relevant comments, and DOE's responses, are provided in the appropriate sections of this notice.

To the extent interested parties filed requests under the Freedom of Information Act (FOIA) that related to this rulemaking, such requests were addressed through DOE's FOIA process under 10 CFR part 1004.

Table II.2—Interested Parties Providing Written Comment on the NOPR and NODA for Non-Weatherized Gas Furnaces and Mobile Home Gas Furnaces

Name

Acronyms

Type

A Ware Productions

A Ware

African American Environmentalist Association

AAEA

American Gas Association and American Public Gas Association

AGA and APGA

American Gas Association, American Public Gas Association, and Gas Technology Institute

AGA, APGA, and GTI

AGL Resources

Air Conditioning Contractors of America

ACCA

Air-Conditioning, Heating, and Refrigeration Institute

AHRI

Alliance to Save Energy

ASE

Allied Air

American Association of Blacks in Energy

AABE

American Council for an Energy-Efficient Economy

ACEEE

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

Joint Advocates

American Energy Alliance

AEA

American Gas Association

AGA

American Public Gas Association

APGA

American Public Power Association

APPA

Anonymous

Appliance Standards Awareness Project

ASAP

Austell Natural Gas System

Austell

Borough of Chambersburg, PA

Chambersburg

California Energy Commission

CEC

Cato Institute

CenterPoint Energy

City of Adairsville, Georgia

Adairsville

City of Cairo, Georgia

Cairo

City of Camilla, Georgia

Camilla

City of Cartersville, Georgia

Cartersville

City of Commerce, Georgia

Commerce

City of Covington, Georgia

Covington

City of Dublin, Georgia

Dublin

City of Lawrenceville, Georgia

Lawrenceville

City of Louisville, Georgia

Louisville

City of Monroe, Georgia

Monroe

City of Moultrie

Moultrie

City of Sugar Hill, Georgia

Sugar Hill

City of Sylvania, Georgia

Sylvania

City of Thomasville, Georgia

Thomasville

City of Tifton, Georgia

Tifton

City of Toccoa/Toccoa Natural Gas

Toccoa

G/U

Clearwater Gas System

CGS

Members of the U.S. Congress *

Joint Congress Members

Gregory W. Meeks (Member of Congress)

Meeks

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

Bishop

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

Payne

Consumer Federation of America, National Consumer Law Center, Massachusetts Union of Public Housing Tenants, and Texas Ratepayers' Organization to Save Energy

Joint Consumer Commenters

Contractor Advisors

Arthur Corbin

Corbin

Jim Darling

Darling

DC Jobs or Else

Earthjustice

Edison Electric Institute

EEI

Energy Association of Pennsylvania

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

Joint Advocates

Fitzgerald Utilities

Fitzgerald

Catherine Fletcher

Fletcher

Florida Natural Gas Association

FNGA

Gas Technology Institute

GTI

Goodman Global, Inc.

Goodman

Heating, Air-Conditioning & Refrigeration Distributors International

HARDI

Jennifer Hombach

Hombach

Ingersoll Rand

David Johnson

Johnson

Johnson Controls, Inc.

JCI

Jointly Owned Natural Gas

Aaron Kelly

Kelly

The Laclede Group, Inc

Laclede

Lennox International Inc.

Lennox

Liberty Utilities

Manufactured Housing Institute

MHI

Mark Nayes

Nayes

Mercatus Center at George Mason University

Abdukadirov

et al.

Metal-Fab

Metropolitan Utilities District, Omaha, NE

Metropolitan Utilities District

Don Meyers

Meyers

Cameron Moore

Moore

Mortex Products, Inc.

Mortex

Municipal Gas Authority of Georgia

Gas Authority

National Association of Home Builders

NAHB

National Energy & Utility Affordability Coalition

NEUAC

National Multifamily Housing Council, National Apartment Association, National Leased Housing Association

NMHC, NAA, NLHA

National Propane Gas Association

NPGA

Natural Gas Association of Georgia

NGA

Natural Resources Defense Council

NRDC

New Jersey Natural Gas

NJNG

NiSource Inc.

NiSource

Nortek Global HVAC

Nortek

Northeast Energy Efficiency Partnerships

NEEP

ONE Gas, Inc.

ONE Gas

Pacific Gas and Electric Company

PG&E

Pennsylvania Chamber of Business and Industry

Pennsylvania Department of Environmental Protection

Philadelphia Gas Works

PGW

Plumbing-Heating-Cooling Contractors

PHCC

Prime Energy Partners, LLC

Prime Energy Partners

Questar Gas Company

Questar Gas

Rheem Manufacturing Company

Rheem

David Schroeder

Schroeder

Terry Small

Small

Southern California Gas Company

SoCalGas

Southern Company

Southern Gas Association

SGA

Southside Heating and Air Conditioning

State of Indiana

Indiana

Kimberly Swanson

Swanson

Town of Rockford Alabama

Rockford

Ubuntu Center of Chicago

Ubuntu

United Technologies Building and Industrial Systems—Carrier Corporation

Carrier

United States Joint Representatives **

Joint Representatives

University of Pennsylvania, Kleinman Center for Energy Policy

Kleinman Center

U.S. Chamber of Commerce, the American Chemistry Council, the American Coke and Coal Chemicals Institute, the American Forest & Paper Association, the American Fuel & Petrochemical Manufacturers, the American Petroleum Institute, the Brick Industry Association, the Council of Industrial Boiler Owners, the National Association of Home Builders, the National Association of Manufacturers, the National Mining Association, the National Oilseed Processors Association, and the Portland Cement Association

Associations

Vectren Corporation

Vectren

John von Harz

von Harz

Washington Gas Light Company

Washington Gas

Walter Wood

Wood

C: Mechanical Contractor; CS: Component Supplier; CR: Consumer Representative; EA: Efficiency/Environmental Advocate; EI: Educational Institution; G: Government; I: Individual; M: Manufacturer; PP: Public Policy Research Organization; TA: Trade Association; U: Utility or Utility Trade Association.

* Paul D. Tonka, Raúl M. Grijalva, Michael M. Honda, Scott H. Peters, Alan S. Lowenthal, Jerrold Nadler, Sander M. Levin, Chris Van Hollen, Alan S. Lowenthal, Rep. Ted Lieu, Donald S. Beyer, Jr., Louise M. Slaughter, Rep. Lois Capps, and Donna F. Edwards.

** Mo Brooks, Tom Price, Lou Barletta, Bradley Byrne, Glenn `GT' Thompson, Steve Russell, Joe Heck, Gary Palmer, Kevin Yoder, Jim Bridenstine, Scott Tipton, Robert Pittenger, Chuck Fleischmann, Robert Aderholt, Mimi Walters, Barry Loudermilk, Gregg Harper, Mark Walker, Brian Babin, Candice S. Miller, Chris Stewart, Mike D. Rogers, Jim Renacci, Bob Gibbs, Dave Brat, Jeff Miller, Phil Roe, David Schweikert, Tom Marino, David B. McKinley, Scott DesJarlais, Marc Veasey, Ralph Abraham, Matt Salmon, David Rouzer, Richard Hudson, Cresent Hardy, Buddy Carter, Mike Pompeo, Martha Roby, Glenn Grothman, Tom Emmer, Paul Gosar, Ted S. Yoho, Rick Allen, Dan Benishek, David Young, Randy Weber, Mark Meadows, Kay Granger, Blake Farenthold, Bill Flores, Kevin Cramer, Daniel Webster, Tim Huelskamp, Markwayne Mullin, Chris Collins, Jason Smith, Steve Womack, Diane Black, Keith Rothfus, Sean P. Duffy, Renee Ellmers, Alex X. Mooney, Jim Costa, Brad Wenstrup, Sam Graves, Charles W. Boustany, Jr., Andy Barr, Mike Bost, Doug Collins, Jody Hice, Mike Kelly, Jim Jordan, Lynn Jenkins, Andy Harris, Billy Long, Bill Johnson, Rob Woodall, David W. Jolly, Rodney Davis, Joe Barton, Gus M. Bilirakis, Pete Olson, Randy Forbes, Ed Whitfield, Ken Calvert, John Duncan, Henry Cuellar, Steve King, John Shimkus, Jeb Hensarling, Pete Sessions, Vicky Hartzler, Adrian Smith, Louie Gohmert, Marsha Blackburn, Sam Johnson, Tom McClintock, Walter Jones, Patrick T. McHenry, Steve Chabot, Doug Lamborn, Frank D. Lucas, Sanford D. Bishop, Jr., Lamar Smith, Austin Scott, Mick Mulvaney, Steve Pearce, Brett Guthrie, Trent Franks, Blaine Luetkemeyer, Tom Graves, Mike Coffman, Robert E. Latta, F. James Sensenbrenner, Jr., Stephen Fincher, Tom Cole, Lynn Westmoreland, John Ratcliffe, and John Moolenaar.

III. General Discussion

DOE issued this supplemental proposal after considering oral and written comments, data, and information from interested parties that represent a variety of interests. DOE considered all comments received in response to both the March 2015 NOPR and the September 2015 NODA when developing this SNOPR, but acknowledges that in light of this modified proposal some comments received to date may no longer apply. The following discussion addresses issues raised by commenters in response to both notices on the listed topics.

A. Product Classes and Scope of Coverage

When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used or by capacity or by other performance-related feature that justify a different standard. In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors such as the utility of the feature to the consumer and other factors DOE deems appropriate. (42 U.S.C. 6295(q))

DOE agreed to the partial vacatur and remand of the June 2011 DFR, specifically as it related to energy conservation standards for NWGFs and MHGFs in the settlement agreement to resolve the litigation in

American Public Gas Ass'n

U.S. Dept. of Energy

(No. 11-1485, D.C. Cir. Filed Dec 23, 2011). 80 FR 13120, 13130-32 (March 12, 2015). These two product classes were evaluated in the March 2015 NOPR. In today's SNOPR, DOE is proposing to further divide NWGFs into two product classes based on capacity. For a detailed discussion of this proposal and the comments on product classes received in response to the March 2015 NOPR and September 2015 NODA, please see Section IV.A.1.

B. Test Procedure

DOE's current energy conservation standards for residential furnaces are expressed in terms of AFUE for fossil fuel consumption (

see

10 CFR 430.32(e)(1)). AFUE is an annualized fuel efficiency metric that fully accounts for fuel consumption in active, standby, and off modes. The existing DOE test procedure for determining the AFUE of residential furnaces is located at 10 CFR part 430, subpart B, appendix N. The current DOE test procedure for residential furnaces was originally established by a May 12, 1997 final rule, which incorporates by reference the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE)/American National Standards Institute (ANSI) Standard 103-1993,

Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boilers

(1993). 62 FR 26140, 26157.

On October 20, 2010, DOE updated its test procedures for residential furnaces in a final rule published in the

Federal Register

(October 2010 test procedure rule). 75 FR 64621. This rule amended DOE's test procedure for residential furnaces and boilers to establish a method for measuring the electrical energy use in standby mode and off mode for gas-fired, oil-fired, and electric furnaces pursuant to requirements established by EISA 2007. These test procedure amendments were primarily based on and incorporate by reference provisions of the International Electrotechnical Commission (IEC) Standard 62301 (First Edition), “Household electrical appliances—Measurement of standby power.” On December 31, 2012, DOE published a final rule in the

Federal Register

which updated the incorporation by reference of the standby mode and off mode test procedure provisions to refer to the latest edition of IEC Standard 62301 (Second Edition). 77 FR 76831.

On July 10, 2013, DOE published a final rule in the

Federal Register

(July 2013 final rule) that modified the existing testing procedures for residential furnaces and boilers. 78 FR 41265. The modification addressed the omission of equations needed to calculate AFUE for two-stage and modulating condensing furnaces and boilers that are tested using an optional procedure provided by section 9.10 of ASHRAE 103-1993 (incorporated by reference into DOE's test procedure), which allows the test engineer to omit the heat-up and cool-down tests if certain conditions are met. Specifically, the DOE test procedure allows condensing boilers and furnaces to omit the heat-up and cool-down tests provided that the units have no measurable airflow through the combustion chamber and heat exchanger during the burner off period and have post-purge period(s) of less than 5 seconds. For two-stage and modulating condensing furnaces and boilers, ASHRAE 103-1993 (and by extension the DOE test procedure) does not contain the necessary equations to calculate the heating seasonal efficiency (which contributes to the ultimate calculation of AFUE) when the option in section 9.10 is selected. The July 2013 final rule adopted two new equations needed to account for the use of section 9.10 for two-stage and modulating condensing furnaces and boilers.

Id.

On March 11, 2015, DOE published a notice of proposed rulemaking for its test procedure for residential furnaces and boilers in the

Federal Register

(March 2015 Test Procedure NOPR). 80 FR 12876. In the March 2015 Test Procedure NOPR, DOE proposed a range of changes to the test procedure including incorporating by reference ANSI/ASHRAE 103-2007 in place of ANSI/ASHRAE 103-1993. After publication of the March 2015 Test Procedure NOPR, DOE granted a request from AHRI to reopen the comment period for an additional 45 days, so as to allow further time to conduct product testing and to review supporting information. 80 FR 31324 (June 2, 2015). In response to the March 2015 Test Procedure NOPR, several commenters raised concerns that some proposed test provisions would affect efficiency ratings. DOE published a final rule for the residential furnaces and boilers test procedure in the

Federal Register

on January 15, 2016 (January 2016 test procedure final rule). 81 FR 2628. In that final rule, DOE did not adopt those provisions for which commenters expressed concern regarding impacts on efficiency ratings, including a decision to withdraw its proposal to incorporate by reference ANSI/ASHRAE 103-2007.

Id.

at 2628-30. The final revisions included:

• Clarification of the electrical power term “PE”;

• Adoption of a smoke stick test for determining use of minimum default draft factors;

• Allowance for the measurement of condensate under steady-state conditions;

• Reference to manufacturer's installation and operation manual and clarifications for when that manual does not specify test set-up;

• Specification of ductwork requirements for units that are installed without a return duct; and

• Revision of the requirements regarding AFUE reporting precision.

Id.

at 2628.

DOE determined that none of the adopted test procedure amendments would alter the projected measured energy efficiency or energy use of residential furnaces. 81 FR 2628-2641 (Jan. 15, 2016). Commenters also raised issues regarding the timing of the test procedure rulemaking vis-à-vis the standards rulemaking. In response to the March 2015 NOPR, AHRI asserted that the timing of the test procedure rulemaking and proposed standards rulemaking was contrary to both EPCA and DOE's own regulation on process.

AHRI added that it is unfair to propose a standard that will be enforced by DOE and FTC in terms of labeling requirements, but that will be measured by some undetermined test procedure. AHRI further stated that it is only after DOE has considered and resolved all comments on the test procedure that the required analysis of the impact on the related standard can be actually determined. (AHRI, No. 0159 at pp. 9-10) Several stakeholders stated that the test procedure must be finalized before issuing a NOPR for efficiency standards, which DOE did not do for residential furnaces. (AGA, No. 0118 at p. 6; Vectren, No. 0111 at p. 7; Goodman, No. 0135 at p. 10; Laclede, No. 0141 at p. 35, JCI, No. 0148 at pp. 3-4; ACCA, No. 0158-1 at pp. 4-5; APGA, No. 0106 at pp. 8-9) AGA and HARDI stated that stakeholders cannot properly assess the proposed standards without knowing the impact of the final test procedure on AFUE. (AGA, No. 0118 at pp. 43-44; HARDI, No. 0131 at p. 2)

In response to the March 2015 NOPR and the September 2015 NODA, several stakeholders expressed concern about the potential change in furnace efficiency due to the provisions of the proposed furnace and boiler test procedure and the resulting impact on the standards rulemaking analyses. (Laclede, No. 0141 at p. 35; JCI, No. 0148 at pp. 3-4; Ingersoll Rand, No. 0156 at p. 7; Ingersoll Rand, No. 0182 at p. 2) Ingersoll Rand also suggested that the amended test procedure proposed in the March 2015 Test Procedure NOPR would have an impact on the measured efficiency of furnaces. Ingersoll Rand suggested that on average, two-stage/modulating condensing furnaces would see a drop of 0.7-percent AFUE, and two-stage/modulating non-condensing furnaces would see an increase of 0.4-percent AFUE under the proposed test procedure, and that the efficiency levels analyzed in the engineering analysis should be adjusted based on these changes in ratings. (Ingersoll Rand, No. 0182 at p. 2) AGA urged DOE to issue an SNOPR and re-open the comment period after the test procedure is finalized to implement appropriate adjustments regarding the test procedure. (AGA, No. 0118 at pp. 43-44)

In response, DOE finalized its amendments to the residential furnace and boiler test procedure on January 15, 2016, which means that the test procedure amendments have been completed as of the issuance of the modified proposal contained in this SNOPR. Furthermore, in the January 2016 test procedure final rule, DOE addressed the comments regarding the timing of that test procedure final rule and the standards rulemaking process, stating that appendix A to 10 CFR part 430, subpart C, establishes procedures, interpretations, and policies to guide DOE in the consideration and promulgation of new or revised appliance efficiency standards under EPCA. (See section 1 of 10 CFR part 430, subpart C, appendix A) Those procedures are a general guide to the steps DOE typically follows in promulgating energy conservation standards, but the guidance recognizes that DOE can and will, on occasion, deviate from the typical process. (See 10 CFR part 430, subpart C, appendix A, section 14(a)) Accordingly, DOE concluded that there was no basis to either: (1) Delay the final rules adopting standards for residential furnaces and boilers; or (2) suspend the test procedure rulemaking until the standards rulemaking has been completed. 81 FR 2628, 2631 (Jan. 15, 2016). With regards to the effect of test procedure changes on measured efficiency and accounting for such changes in the standards rulemaking analyses, DOE again notes that its final rule did not adopt those specific provisions about which commenters on the test procedure rulemaking expressed concern for these impacts. As DOE concluded in the January 2016 test procedure final rule, the amendments to the test procedure adopted in that final rule will not alter the measured energy efficiency or energy use of the covered products that are subject to the test procedures.

Id.

at 2642. Therefore, no further action is necessary in this standards rulemaking in order to accommodate the test procedure amendments. This SNOPR is consistent with the guidance provided in the Process Rule, section 7(c) of 10 CFR part 430, subpart C, appendix A, because it was issued subsequent to the finalization of the relevant test procedure.

C. Technological Feasibility

1. General

In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially-available products or in working prototypes to be technologically feasible. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(i).

After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) Practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; and (3) adverse impacts on health or safety. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its analysis any proprietary technology that is a unique pathway to achieving a certain efficiency level. Section IV.B of this notice discusses the results of the screening analysis for NWGFs and MHGFs, particularly the designs DOE considered, those it screened out, and those that are the basis for the potential standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the SNOPR technical support document (TSD).

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for NWGFs and MHGFs, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C.1.b of this SNOPR and in chapter 5 of the SNOPR TSD.

D. Energy Savings

1. Determination of Savings

For each trial standard level (TSL), DOE projected energy savings from application of the TSL to NWGFs and MHGFs purchased in the 30-year period that begins in the expected first year of compliance with the proposed

standards (2022-2051).

The savings are measured over the entire lifetime of NWGFs and MHGFs purchased in the above 30-year period. DOE quantified the energy savings attributable to each TSL as the difference in energy consumption between each standards case and the no-new-standards case. The no-new-standards case represents a projection of energy consumption that reflects how the market for a product would likely evolve in the absence of amended energy conservation standards.

Each TSL is composed of specific efficiency levels for each product class. The TSLs considered for this SNOPR are described in section V.A. DOE conducted a sensitivity analysis that considers impacts for products shipped in a 9-year period.

DOE used its national impact analysis (NIA) spreadsheet model to estimate national energy savings (NES) from potential amended standards for NWGFs and MHGFs. The NIA spreadsheet model (described in section IV.H of this SNOPR) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy impacts on an annual basis in terms of primary (source) energy, which is the energy that is used to generate and transmit the site electricity. To calculate the primary energy impacts, DOE derives annual conversion factors from the model used to prepare the Energy Information Administration's (EIA) most recent

Annual Energy Outlook

(

AEO

DOE also calculates NES in terms of full-fuel-cycle (FFC) energy savings. The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy conservation standards.

DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.H.2 of this notice. For natural gas, the primary energy savings are considered to be equal to the site energy savings.

At the time when the SNOPR was prepared,

AEO 2015

was the most recent available

AEO.

DOE intends to use

AEO 2016

for the final rule.

The FFC metric is discussed in DOE's statement of policy and notice of policy amendment. 76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 (August 17, 2012).

2. Significance of Savings

To adopt any new or amended standards for a covered product, DOE must determine that such action would result in significant energy savings. (42 U.S.C. 6295(o)(3)(B)) Although the term “significant” is not defined in the Act, the U.S. Court of Appeals for the District of Columbia Circuit, in

Natural Resources Defense Council

Herrington,

768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended “significant” energy savings in the context of EPCA to be savings that are not “genuinely trivial.” The energy savings for all of the TSLs considered in this rulemaking, including the proposed standards (presented in section V.B.3.a), are nontrivial, and, therefore, DOE considers them “significant” within the meaning of section 325 of EPCA.

E. Economic Justification

1. Specific Criteria

As noted above, EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.

a. Economic Impact on Manufacturers and Consumers

In determining the impacts of a potential amended standard on manufacturers, DOE conducts a manufacturer impact analysis (MIA), as discussed in section IV.J. DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include: (1) Industry net present value (INPV), which values the industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.

For individual consumers, measures of economic impact include the changes in LCC and payback period (PBP) associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national net present value of the consumer costs and benefits expected to result from particular standards. DOE also evaluates the impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a standard.

b. Savings in Operating Costs Compared to Increase in Price (LCC and PBP)

EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analysis.

The LCC is the sum of the purchase price of a product (including its installation) and the operating expense (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC analysis requires a variety of inputs, such as product prices, product energy consumption, energy prices, maintenance and repair costs, product lifetime, and discount rates appropriate for consumers. To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribution of values, with probabilities attached to each value.

The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost due to a more-stringent standard by the change in annual operating cost for the year that standards are assumed to take effect.

For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with new or amended standards. The LCC savings for the considered efficiency levels are calculated relative to the case that reflects projected market trends in the absence of new or amended standards. DOE's LCC and PBP analysis is discussed in further detail in section IV.F.

c. Energy Savings

Although significant conservation of energy is a separate statutory requirement for adopting an energy

conservation standard, EPCA requires DOE, in determining the economic justification of a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section III.D, DOE uses the NIA spreadsheet models to project national energy savings.

d. Lessening of Utility or Performance of Products

In establishing product classes and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards proposed in this document would not reduce the utility or performance of the products under consideration in this rulemaking.

e. Impact of Any Lessening of Competition

EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this supplemental proposed rule to the Attorney General with a request that the Department of Justice (DOJ) provide its determination on this issue. DOE will publish and respond to the Attorney General's determination in the final rule. DOE invites comment from the public regarding the competitive impacts that are likely to result from this proposed rule. In addition, stakeholders may also provide comments separately to DOJ regarding these potential impacts. See

ADDRESSES

section for information to send comments to DOJ.

f. Need for National Energy Conservation

DOE also considers the need for national energy conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the proposed standards are likely to provide improvements to the security and reliability of the nation's energy system. Reductions in the demand for electricity also may result in reduced costs for maintaining the reliability of the Nation's electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the Nation's needed power generation capacity, as discussed in section IV.M.

DOE maintains that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The proposed standards are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases (GHGs) associated with energy production and use. DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K; the emissions impacts are reported in section V.B.6 of this notice. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L.

g. Other Factors

In determining whether an energy conservation standard is economically justified, DOE may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To the extent DOE identifies any relevant information regarding economic justification that does not fit into the other categories described above, DOE could potentially consider such information under “other factors.”

2. Rebuttable Presumption

As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first full year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effects that proposed energy conservation standards would have on the payback period for consumers. These analyses include, but are not limited to, the 3-year payback period contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F.9.d of this document.

F. Other Issues

1. Economic Justification of the March 2015 NOPR Proposed Standards

a. General

The March 2015 NOPR elicited a large number of public comments which represented a range of views regarding DOE's proposed standards for NWGFs and MHGFs and the economic justification and other impacts thereof. Comments on the general reasons for opposing or supporting the proposed standards are summarized and summarily addressed here. Comments related to DOE's NOPR analysis, and how DOE addressed them in its subsequent analyses, are presented in section IV.

Several stakeholders stated that there was no economic justification for a national condensing standard for NWGFs. (AGA, No. 0036 at p. 3; AGL Resources, No. 0039 at p. 1; APGA, No. 0106 at p. 12; AGL Resources, No. 0112 at pp. 1-, 2; Carrier, No. 0116 at pp. 3-4; AGA, No. 0118 at pp. 3-5; Lennox, No. 0125 at p. 15; NPGA, No. 0130 at p. 8; SoCalGas, No. 0132 at p. 5; Goodman, No. 0135 at p. 2; Nortek, No. 0137 at p. 2; Laclede, No. 0141 at p. 58; Rheem, No. 0142 at p. 2; JCI, No. 0148 at p. 9; AHRI, No. 0181 at p. 1; Metal-Fab, No. 0192 at p. 2; Municipal Gas Authority of Georgia, No. 0086 at p. 3; Natural Gas Association of Georgia, No. 0110 at p. 1) Stakeholders also expressed concern that the proposed standard would harm rather than benefit consumers. (AGA, No. 0040 at pp. 2-3; AGA, No. 0118 at pp. 2-3; Joint Representatives, No. 0067 at p. 1; NAHB, No. 0124 at p. 5; Southern Gas Association, No. 0145 at p. 1; Energy Association of Pennsylvania, No. 0146 at p. 1; NiSource, No. 0127 at pp. 8-9) Many stakeholders stated that the proposed standard would result in a net cost for many consumers, particularly those living in the south and low-income consumers (see section III.F.1.b), and would cause an unacceptable amount of switching from NWGFs to electric heating products (see section III.F.1.c).

Many other stakeholders opposed the proposed 92-percent AFUE national standards for NWGFs and encouraged DOE to withdraw the NOPR. (Moore, No. 0033 at p. 1; Wood, No. 0068 at p.

1; Dublin, No. 0071 at p. 1; CenterPoint Energy, No. 0083 at p. 5; NGA, No. 0110 at p. 1; PGW, No. 0122 at p. 1; NiSource, No. 0127 at p. 10; Nortek, No. 0137 at p. 2; Meeks, No. 0140 at p. 2; Laclede, No. 0141 at p. 7; Rockford, No. 0070 at p. 1; Chambersburg, No. 0084 at p. 1; Dublin, No. 0071 at p. 1; Sylvania, No. 0085 at p. 1; Louisville, No. 0087 at p. 1; Monroe, No. 0088 at p. 1; Cairo, No. 0089 at p. 1; Jointly Owned Natural Gas, No. 0090 at p. 1; Adairsville, No. 0091 at p. 1; Camilla, No. 0092 at p. 1; Sugar Hill, No. 0093 at p. 1; Covington, No. 0096 at p. 1; Austell, No. 0097 at p. 1; Fitzgerald, No. 0100 at p. 1; Cartersville, No. 0101 at p. 1; Commerce, No. 0103 at p. 1; Thomasville, No. 0104 at p. 1; Toccoa, No. 0105 at p. 1; Tifton, No. 0114 at p. 1; Moultrie; No. 0121 at p. 1; SGA, No. 0145 at p. 2; Gas Authority, No. 0086 at pp. 7-8; Laclede, No. 0178 at pp. 3-4; Rheem, No. 0184 at p. 2; Johnson, No. 0190 at p. 1; AABE, No. 0197 at p. 1; Rheem, No. 0199 at p. 2; APGA, No. 0106 at pp. 1, 50; AGA, No. 0118 at p. 45; SoCalGas, No. 0132-1 at p. 2)

On the other hand, the Joint Congress Members, PG&E, CEC, the Joint Consumer Commenters, ACEEE, ASE, NRDC, NEEP, and Fletcher supported the standards proposed in the NOPR. (Joint Consumer Commenters, No. 0123 at p. 1; PG&E, No. 0153 at pp. 1-2; CEC, No. 0120 at p. 4; Joint Congress Members, No. 0161 at pp. 1-3; ACEEE, No. 0113 at p. 1; ASE, No. 0115 at p. 1; NRDC, No. 0134 at p. 2; NEEP, No. 0150 at p. 2; Fletcher, No. 0064 at p. 1) The Joint Consumer Commenters stated that the performance standards in the proposed rule is are well designed in that it addresses clear market imperfections which lead to market failure; is technology neutral, product neutral, and pro-competitive; is technologically feasible; and offers adequate lead time. (Joint Consumer Commenters, No. 0123 at pp. 27-28) The Joint Congress Members stated that because furnaces are one of the longest-lived products in a home, it is important to set an aggressive standard to ensure that consumers will benefit from maximum energy savings over the lifetime of this investment. NEEP and the Joint Congress Members stated that many States have been actively pursuing and advocating for condensing furnace standards but are preempted by Federal standards. (Joint Congress Members, No. 0161 at pp. 1-3; NEEP, No. 0150 at pp. 1-2) The CEC stated that DOE's current standards for furnaces have formed a significant barrier to California being able to achieve its climate goals for new and existing buildings. The CEC stated that any further delay in adopting more stringent Federal furnace standards threatens to set California back in its efforts to double energy efficiency in existing buildings by 2030 and to achieve zero net energy in newly constructed residential buildings by 2020. (CEC, No. 0120 at p. 3)

ACEEE, ASE, NRDC, PG&E, and Kelly suggested that DOE should establish a 95-percent AFUE national standard for NWGFs. (ACEEE, No. 0113 at p. 4; ASE, No. 0115 at p. 1; NRDC, No. 0134 at p. 3; PG&E, No. 0153 at pp. 2-3; Kelly, No. 0038 at p. 1) Prime Energy Partners and CGS stated that DOE's analysis presents a clear case for a standard for NWGFs at 98-percent AFUE as the maximum improvement in energy efficiency that is technologically feasible and economically justified. (Prime Energy Partners, No. 0143 at p. 2; CGS, No. 0098 at p. 5)

b. Consumer Impacts From the Proposed Standards

AGA stated that DOE should not find that a standard is economically justified when such a significant share of consumers would be worse off under the proposed rule. (AGA, No. 0036 at p. 3; AGA, No. 0118 at p. 5) AGA, Ingersoll Rand, and Laclede stated that the majority of consumers impacted by the rule would see a net cost under a condensing standard. (AGA, No. 0118 at pp. 16, 26; Ingersoll Rand, No. 0156 at p. 2;) JCI and Laclede expressed concern about the number of consumers that would be negatively impacted by a condensing furnace standard. (JCI, No. 0202 at p. 2; Laclede, No. 0141 at p. 6) AGA, CGS, PCCBI, NGA, and SoCalGas stated that the proposed rule would unnecessarily burden millions of residents. (AGA, No. 0036 at pp. 2-3; CGS, No. 0098 at p. 1; PCCBI, No. 0082 at p. 1; NGA, No. 0110 at p. 1; SoCalGas, No. 0132-2 at p. 1) AHRI stated that if the proposed standards are finalized, virtually all affected consumers would experience a net cost. (AHRI, No. 0159 at pp. 57-58) AHRI added that purchasers who do not currently buy condensing furnaces predominantly have poor economic returns or face difficult installations. (AHRI, No. 0159 at pp. 69-70) Metal-Fab stated that due to the higher initial cost of condensing gas furnaces and low natural gas prices, installing a condensing gas furnace does not make economic sense for the majority of U.S. consumers. (Metal-Fab, No. 0192 at p. 1)

A number of stakeholders stated that according to DOE's own analysis for the NOPR, 20 percent of households nationwide would see a net life-cycle cost increase. (AGA, No. 0036 at p. 3; Corbin, No. 0066 at p. 1; Lawrenceville, No. 0074 at p. 1; Mercatus Center, No. 0079 at p. 4; Pennsylvania Chamber of Business and Industry, No. 0082 at p. 1; CenterPoint Energy, No. 0083 at p. 32; Indiana, No. 0094 at p. 1; Vectren, No. 0111 at pp. 2, 5; Goodman, No. 0135 at p. 2; Metropolitan Utilities District, No. 0144 at pp. 1-2; Energy Association of Pennsylvania, No. 0146 at p. 1; ONE Gas, No. 0102 at p. 2) NAHB argued that 20 percent of consumers with net cost is unacceptable, but that such figure would be much higher after incorporating the changes in product cost, energy use, and discount rates that NAHB believes to be more appropriate. NAHB stated that regulations that negatively impact a large portion of the population would result in consumers being priced out of the market for a new home and living in older, less-efficient homes with less-efficient equipment, which is contrary to the purpose of the rule. (NAHB, No. 0124 at p. 5) AGA, ONE Gas, and Vectren also stated that according to DOE's analysis, in the replacement market, fully one-quarter of all households would see a net cost increase. (AGA, No. 0118 at p. 5; ONE Gas, No. 0102 at p. 2; Vectren, No. 0111 at pp. 2, 5) The report by GTI submitted by SoCalGas stated that DOE's analysis shows that more Southern California consumers would suffer a net cost than would experience a net benefit under the proposed standard. (SoCalGas, No. 0132-7 at p. v)

On the other hand, the Joint Consumer Commenters stated that in the case of a NWGF standard at 92-percent AFUE or higher, the winners exceed the losers by a wide margin. (The Joint Consumer Commenters considered those who break even financially and enjoy other indirect benefits of the standard as winners.) The Joint Consumer Commenters stated that the economic analysis also shows that the winners gain more per household, on average, than the losers lose. (Joint Consumer Commenters, No. 0123 at pp. 9-11)

Many stakeholders expressed concern that consumers in the South may be disproportionately impacted by the proposed NWGF standard. (Contractor Advisors, No. 0061 at p. 1; Corbin, No. 0066 at p. 1; U.S. Joint Representatives, No. 0067 at p. 1; Lawrenceville, No. 0074 at p. 1; PGW, No. 0122 at p. 3; Liberty Utilities, No. 0109 at p. 1; NPGA, No. 0130 at p. 5; Anonymous, No. 0060 at p. 1; AEA, No. 0069 at p. 1; Meyers, No. 0072 at p. 1; JCI, No. 0202 at p. 2; Vectren, No. 0111 at pp. 2, 5; CenterPoint Energy, No. 0083 at p. 3; Rheem, No. 0142 at pp. 1-2; MUD,

No. 0144 at p. 1) APGA, AGA, and NAHB stated that the proposed NWGF standard is too burdensome on consumers in the South to be economically justified. (APGA, No. 0034 at p. 6; AGA, No. 0036 at p. 3; AGA, No. 0118 at pp. 27-28; NAHB, No. 0124 at p. 5) Several stakeholders stated that according to DOE's analysis, 31 percent of overall consumers in the South and 39% of low-income consumers in the South would experience a net life-cycle cost increase. (AGA, No. 0036 at p. 3; Corbin, No. 0066 at p. 1; Lawrenceville, No. 0074 at p. 1; Mercatus Center, No. 0079 at p. 4; PCCBI, No. 0082 at p. 1; CenterPoint Energy, No. 0083 at p. 3; Indiana, No. 0094 at p. 1; Vectren, No. 0111 at pp. 2, 5; MHI, No. 0129 at p. 2; Goodman, No. 0135 at p. 2; Nortek, No. 0137 at p. 4; SGA, No. 0145 at p. 1) Many contractors who responded to PHCC and ACCA's survey commented that in some Southern areas, the payback from a condensing furnace is unacceptable to the customer. (PHCC, No. 0136 at p. 12; ACCA, No. 0158-2 at p. 12) Metal-Fab stated that based on current natural gas prices, for consumers in the South, the LCC is higher for a condensing furnace than a non-condensing furnace. (Metal-Fab, No. 0192 at p. 1)

Many stakeholders expressed concern that low-income consumers may be disproportionately impacted by the proposed standards. (Contractor Advisors, No. 0061 at p. 1; Corbin, No. 0066 at p. 1; U.S. Joint Representatives, No. 0067 at p. 1; Lawrenceville, No. 0074 at p. 1; PGW, No. 0122 at p. 3; Liberty Utilities, No. 0109 at p. 1; NPGA, No. 0130 at pp. 3-4; Anonymous, No. 0060 at p. 1; AEA, No. 0069 at p. 1; Meyers, No. 0072 at p. 1; JCI, No. 0202 at p. 24; Vectren, No. 0111 at pp. 2, 5; CenterPoint Energy, No. 0083 at p. 3; Rheem, No. 0142 at pp. 1-2; AGA, No. 0036 at p. 3; Lawrenceville, No. 0074 at p. 1; Mercatus Center, No. 0079 at p. 4; PCCBI, No. 0082 at p. 1; CenterPoint Energy, No. 0083 at p. 3; Indiana, No. 0094 at p. 1; Vectren, No. 0111 at pp. 2, 5; AGL Resources, No. 0112 at p. 8; Goodman, No. 0135 at p. 2; MUD, No. 0144 at p. 2; Nortek, No. 0137 at p. 4; SGA, No. 0145 at p. 1; Energy Association of Pennsylvania, No. 0146 at p. 12; ONE Gas, No. 0102 at p. 2; MUD, No. 0144 at p. 41) Many stakeholders stated that the proposed rule would hurt the very people who can least afford additional costs. (Corbin, No. 0066 at p. 1; Rockford, No. 0070 at p. 1; Chambersburg, No. 0084 at p. 1; Sylvania, No. 0085 at p. 1; Louisville, No. 0087 at p. 1; Monroe, No. 0088 at p. 1; Cairo, No. 0089 at p. 1; Jointly Owned Natural Gas, No. 0090 at p. 1; Adairsville, No. 0091 at p. 1; Camilla, No. 0092 at p. 1; Sugar Hill, No. 0093 at p. 1; Covington, No. 0096 at p. 1; Austell, No. 0097 at p. 1; Fitzgerald, No. 0100 at p. 1; Cartersville, No. 0101 at p. 1; Commerce, No. 0103 at p. 1; Thomasville, No. 0104 at p. 1; Toccoa, No. 0105 at p. 1; Tifton, No. 0114 at p. 1; Moultrie; No. 0121 at p. 1; Carrier, No. 0116 at p. 37) APGA and, AGA, and NAHB stated that the proposed NWGF standard is too burdensome on low-income consumers to be economically justified. (APGA, No. 0034 at p. 6; AGA, No. 0036 at p. 3; AGA, No. 0118 at pp. 27-28; NAHB, No. 0124 at p. 5)

AGA, the U.S. Joint Representatives, CenterPoint Energy, Energy Association of Pennsylvania, SoCalGas, NiSource, CA, Indiana, and A Ware stated that a condensing standard would place an undue burden on low-income consumers, especially in the South, who will be faced with the difficult choice of having to replace their non-condensing furnace with either a condensing furnace with higher installation costs or an electric space heating appliance with higher monthly energy bills. (AGA, No. 0036 at p. 3; U.S. Joint Representatives, No. 0067 at p. 1; CenterPoint Energy, No. 0083 at p. 3; Energy Association of Pennsylvania, No. 0146 at pp. 1-2; SoCalGas, No. 0132-2 at p. 4; SoCalGas, No. 0132-6 at p. 8; NiSource, No. 0127 at pp. 8-9; Contractor Advisors, No. 0061 at p. 1; Indiana, No. 0094 at p. 1; A Ware, No. 0204 at p. 1) Vectren stated that a large percentage of its customers, who fall within Federal poverty guidelines, would be negatively impacted by the proposed furnace rule. (Vectren, No. 0111 at p. 5)

AGL Resources, SoCalGas, and Nortek stated that the rule would disproportionally affect low- and fixed-income consumers. AGL Resources and SoCalGas stated that because low- and fixed-income homeowners typically live in smaller spaces that require less energy to heat, the reduced fuel costs from a 92-percent AFUE furnace would never be enough to offset the total installed cost of a condensing furnace. AGL Resources stated that the overwhelming majority of low- and fixed-income homeowners would receive neutral or negative paybacks when they install a new condensing furnace. (AGL Resources, No. 0039 at p. 4; AGL Resources, No. 0112 at p. 8; SoCalGas, No. 0132-2 at p. 3; SoCalGas, No. 0132-6 at p. 8; Nortek, No. 0137 at pp. 3-4)

AABE, Payne, Bishop, Meeks, and Nortek stated that many low-income homeowners have less access to capital, and consequently, they do not have the equity or cash savings to afford the significant upfront costs of a condensing NWGF. Payne and Bishop stated that while it is true that low-income consumers would save money in the long run by switching to a condensing furnace, many low-income families do not have the financial flexibility to make decisions based on life-cycle-costs. (AABE, No. 0155 at p. 1; AABE, No. 0197 at p. 1; Payne, No. 0075 at p. 1; Bishop, No. 0076 at p. 12; Meeks, No. 0140 at p. 1; Nortek, No. 0137 at pp. 3-4) MHI stated that low-income homeowners have limited access to credit to finance a new furnace, creating additional hardships. (MHI, No. 0129 at p. 2) AABE stated that because over 50 percent of low-income gas households are owner-occupied, it is important that the rulemaking process acknowledge the social, financial, and economic implications on low-income communities of retrofitting gas furnaces. (AABE, No. 0155 at p. 1; AABE, No. 0197 at p. 1)

On the other hand, the Joint Congress Members, CEC, the Joint Consumer Commenters, PG&E, NEEP, and ASAP stated that furnace efficiency standards are beneficial for low-income consumers because heating bills represent such a large portion of their monthly bills and income. (Joint Congress Members, No. 0161 at p. 23; Joint Consumer Commenters, No. 0123 at p. 13; PG&E, No. 0153 at pp. 11-12; NEEP, No. 0150 at p. CEC, No. 120 at p. 5; ASAP, No. 0154 at p. 6) NEEP stated that roughly 75 percent of low-income consumers would receive net benefits from the proposed standards. (NEEP, No. 0150 at p. 3)

Many stakeholders are concerned that landlords would avoid the high costs of installing a condensing natural gas furnace by installing a system less expensive to install but more expensive to operate, with the operating costs being left in the hands of the tenant. (A Ware, No. 0045 at p. 1; PGW, No. 0003-1 at p. 3; PWG, No. 0003-2 at pp. 4-6; AAEA, No. 0056 at p. 2; Ubuntu, No. 0057 at p. 1; DC Jobs or Else, No. 0059 at p. 1; Corbin, No. 0066 at p. 1; Lawrenceville, No. 0074 at p. 1; Payne, No. 0075 at p. 1; Bishop, No. 0076 at p. 1; Gas Authority, No. 0086 at p. 6; Vectren, No. 0111 at p. 6; NiSource, No. 0127 at p. 5; AGL Resources, No. 0112 at p. 8; AGL Resources, No. 0039 at p. 5; SoCalGas, No. 0132-2 at pp. 3-4; SoCalGas, No. 0132-6 at p. 8; Ubuntu, No. 0191 at p. 1; A Ware, No. 0204 at p. 1) NMHC, NAA, and NLHA stated that for properties that replace gas furnaces with electric furnaces, there would likely be an increase in operating

cost for consumers. (NMHC, NAA, and NLHA, No. 0117 at p. 4)

NMHC, NAA, and NLHA stated that unplanned retrofits would likely require property owners to raise their rents. (NMHC, NAA, and NLHA, No. 0117 at p. 1) NEUAC, AGL Resources, SoCalGas, and MUD stated that landlords often pass along infrastructure costs to their tenants in higher rents. (NEUAC, No. 0095 at pp. 1-2; AGL Resources, No. 0039 at pp. 5, 8; SoCalGas, No. 0132-2 at pp. 3-4; SoCalGas, No. 0132-6 at p. 8; MUD, No. 0144 at p. 2) NAHB stated that increases in energy efficiency will not be free to renters, because if landlords cannot get an adequate return on their investment, they will leave the market, thereby decreasing supply and increasing rents. (NAHB, No. 0050 at pp. 24-25) However, PG&E stated that replacement of equipment is part of normal repair and maintenance of a property and is built into the landlord's cost structure, so rents do not necessarily increase because a furnace is replaced. (PG&E, No. 0153 at pp. 11-12)

Several stakeholders pointed to positive impacts of the proposed standards on low-income renters. The Joint Congress Members, Joint Consumer Commenters, PG&E, NEEP, and CEC, and ASAP stated that many low-income consumers are renters who are responsible for monthly energy bills, but do not choose their heating equipment. They stated that a strong national energy efficiency standard would address the split incentive situation, protecting these consumers from having to pay higher bills to heat their homes. (Joint Congress Members, No. 0161 at p. 23; Joint Consumer Commenters, No. 0123 at pp. 26-27; PG&E, No. 0153 at pp. 11-12; NEEP, No. 0150 at p. 3; CEC, No. 0120 at pp. 5-6; ASAP, No. 0154-1 at p. 6) ACEEE stated that the majority of low-income households are renters, so in many cases, the capital costs will be borne by the owners. ACEEE stated that because DOE's analysis implicitly assumes that the full cost of furnace efficiency improvements are passed on in rent increases, the LCC analysis underestimates the LCC savings for such low-income consumers. (ACEEE, No. 0113 at p. 8) PG&E stated that utility subsidies are given to low-income customers, who are predominantly renters, to cover gas and electricity consumption. PG&E stated that a condensing furnace would reduce the gas consumption of low-income consumers, thereby allowing the subsidy to cover a large portion of the heating season gas costs. (PG&E, No. 0153 at p. 12)

c. Product Switching Due to the Proposed Standards

Many stakeholders expressed concern that the proposed standards would cause product switching from gas furnaces to less-efficient heating alternatives, which are less expensive to install but more costly to operate, because consumers would not be able to afford the initial purchase and installation cost of a condensing furnace, the installation of a condensing furnace may be impossible, or consumers would not realize sufficient savings. (Contractor Advisors, No. 0061 at p. 1; Corbin, No. 0066 at p. 1; U.S. Joint Representatives, No. 0067 at p. 1; Lawrenceville, No. 0074 at p. 1; PGW, No. 0122 at p. 3; Liberty Utilities, No. 0109 at p. 1; Goodman, No. 0135 at p. 1; Laclede, No. 0141 at pp. 3, 6; Anonymous, No. 0060 at p. 1; AEA, No. 0069 at p. 1; Meyers, No. 0072 at p. 1; Chambersburg, No. 0084 at p. 1; Gas Authority, No. 0086 at pp. 4-5; NPGA, No. 0130 at pp. 4-5; PCCBI, No. 0082 at p. 1; Carrier, No. 0116 at p. 10; Nortek, No. 0137 at pp. 2-3; NGA, No. 0110 at p. 1; SoCalGas, No. 0132-2 at pp. 2-3; SoCalGas, No. 0132-6 at p. 9; SoCalGas, No. 0132-7 at p. 2; NMHC, NAA, and NLHA, No. 0117 at p. 4; Washington Gas, No. 0133 at p. 2; NiSource, No. 0127 at pp. 4-5; Ingersoll Rand, No. 0203 at p. 2) Specifically, many stakeholders expressed concern that due to physical limitations, building code issues, or prohibitively high costs, the venting and condensate withdrawal requirements of condensing furnaces would be impossible or impractical to accommodate in some buildings, such as rowhouses, older buildings, and multi-family housing, and could force consumers to switch to alternative space heating systems. (PGW, No. 0003-2 at p. 3; Kleinman Center, No. 0053 at p. 1; AAEA, No. 0056 at pp. 1-2; Corbin, No. 0066 at p. 1; Lawrenceville, No. 0074 at p. 1; Pennsylvania Department of Environmental Protection, No. 0099 at p. 1; AGL Resources, No. 0112 at pp. 11-12; NMHC, NAA, and NLHA, No. 0117 at pp. 2, 3; NiSource, No. 0127 at p. 5; Washington Gas, No. 0133 at p. 2; Rheem, No. 0142 at p. 8; MHI, No. 0129 at p. 1)

APGA stated that the high levels of fuel switching reported in the NOPR render the proposed standard unacceptable. (APGA, No. 0034 at p. 5) The U.S. Joint Representatives, Lawrenceville, Nortek, and AAEA are concerned that product switching caused by the proposed rule would financially burden consumers and ultimately undermine the efficiency goals that underlie the Energy Policy and Conservation Act. (U.S. Joint Representatives, No. 0067 at p. 1; Lawrenceville, No. 0074 at p. 1; Nortek, No. 0137 at pp. 2-3-4; AAEA, No. 0056 at pp. 1-2) ONE Gas, NiSource, Vectren, Dublin, Gas Authority, and Lawrenceville stated that an efficiency standard that encourages consumers to switch from natural gas to electricity would not improve overall efficiency and would be bad economic and environmental policy. (ONE Gas, No. 0102 at p. 2; NiSource, No. 0127 at p. 6; Vectren, No. 0111 at p. 2; Dublin, No. 0071 at p. 1; Gas Authority, No. 0086 at pp. 6-7; Lawrenceville, No. 0074 at p. 1) JCI stated that given the life of furnaces, the lost energy savings, increased emissions, and costs for consumers become a significant number over a 20-year lifetime for each household that switches fuel. (JCI, No. 0148 at p. 7)

Many stakeholders expressed concern that low-income and/or senior-only households would be unable to afford the higher up-front costs for a condensing furnace and would switch to alternative space heating products that are cheaper to install but have higher operating costs. (AGA, No. 0036 at p. 3; U.S. Joint Representatives, No. 0067 at p. 1; CenterPoint Energy, No. 0083 at p. 3; Energy Association of Pennsylvania, No. 0146 at pp. 1-2; SoCalGas, No. 0132-2 at p. 4; SoCalGas, No. 0132-6 at p. 8; A Ware, No. 0045 at p. 1; AAEA, No. 0056 at p. 1; Ubuntu, No. 0057 at p. 1; DC Jobs or Else, No. 0059 at p. 1; Contractor Advisors, No. 0061 at p. 1; Rockford, No. 0070 at p. 1; Dublin, No. 0071 at p. 1; Chambersburg, No. 0084 at p. 1; Sylvania, No. 0085 at p. 1; Louisville, No. 0087 at p. 1; Monroe, No. 0088 at p. 1; Cairo, No. 0089 at p. 1; Jointly Owned Natural Gas, No. 0090 at p. 1; Adairsville, No. 0091 at p. 1; Sugar Hill, No. 0093 at p. 1; Camilla, No. 0092 at p. 1; Covington, No. 0096 at p. 1; Austell, No. 0097 at p. 1; Fitzgerald, No. 0100 at p. 1; Cartersville, No. 0101 at p. 1; Commerce, No. 0103 at p. 1; Thomasville, No. 0104 at p. 1; Toccoa, No. 0105 at p. 1; NGA, No. 0110 at p. 1; Tifton, No. 0114 at p. 1; Moultrie,; No. 0121 at p. 1; A Ware, No. 02054 at p. 1; Payne, No. 0075 at p. 1; Bishop, No. 0076 at p. 1; Meeks, No. 0140 at p. 1; NJNG, No. 0119 AT P. 2; Pennsylvania Department of Environmental Protection, No. 0099 at p. 1; PGW, No. 0003-1 at p. 3; PGW, No. 0003-2 at pp. 2-6; PGW, No. 0122 at p. 2; Gas Authority, No. 0086 at pp. 5-6; NGA, No. 0110 at p. 1; DC Jobs or Else, No. 0059 at p. 1; Pennsylvania Department of Environmental

Protection, No. 0099 at p. 1) NPGA stated that consumers in the South and low-income consumers would be more likely to switch fuels based on the high total installed cost of a condensing furnace combined with their less frequent reliance on heating appliances. (NPGA, No. 0171 at pp. 1-2) NPGA also stated that consumers who switch from a propane furnace to another product would have less incentive to maintain a propane storage tank to supply appliances that utilize a smaller amount of fuel, thus encouraging switching to all electric appliances (

e.g.,

water heater or stove). (NPGA, No. 0130 at p. 5; NPGA, No. 0171 at pp. 1-2; NPGA, No. 0200 at pp. 2-3) Gas Authority stated that consumers would likely fuel switch to avoid the high cost of a condensing furnace, especially given the generous incentives for installing heat pumps offered by electric utilities. (Gas Authority, No. 0086 at pp. 6-7)

CenterPoint Energy stated that fuel switching from natural gas to electric space heating would create a net cost for consumers and increase energy use. (CenterPoint Energy, No. 0083 at pp. 2-3) Questar Gas stated that because condensing furnaces are not economically justified in the new single-family home market, especially in areas with limited need for heating, home builders may choose electric space heating options that significantly lower FFC energy efficiency and increase operating costs. (Questar Gas, No. 0151 at p. 1)

Many stakeholders stated that the proposed standards would cause switching to electric or oil-fired space heating equipment that would increase harmful emissions. (AGL Resources, No. 0039 at p. 3; DC Jobs or Else, No. 0059 at p. 1; Dublin, No. 0071 at p. 1; AGA, No. 0036 at p. 3; AGA, No. 0118 at pp. 3, 5-6, 29; Rockford, No. 0070 at p. 1; Chambersburg, No. 0084 at p. 1; Sylvania, No. 0085 at p. 1; Louisville, No. 0087 at p. 1; Monroe, No. 0088 at p. 1; Cairo, No. 0089 at p. 1; Jointly Owned Natural Gas, No. 0090 at p. 1; Adairsville, No. 0091 at p. 1; Sugarhill, No. 0093 at p. 1; Camilla, No. 0092 at p. 1; Covington, No. 0096 at p. 1; Austell, No. 0097 at p. 1; Fitzgerald, No. 0100 at p. 1; Cartersville, No. 0101 at p. 1; Commerce, No. 0103 at p. 1; Thomasville, No. 0104 at p. 1; Toccoa, No. 0105 at p. 1; NGA, No. 0110 at p. 1; Tifton, No. 0114 at p. 1; Moultrie; No. 0121 at p. 1; Vectren, No. 0111 at p. 2; PGW, No. 0003-2 at p. 5; CenterPoint Energy, No. 0083 at pp. 2-3; Lawrenceville, No. 0074 at p. 1; NPGA, No. 0130 at p. 6; AGL Resources, No. 0112 at pp. 5-6; Carrier, No. 0116 at p. 10; NMHC, NAA, and NLHA, No. 0117 at p. 4; Laclede, No. 0141 at p. 6; Questar Gas, No. 0151 at p. 1; AAEA, No. 0056 at pp. 1-2; Questar Gas, No. 0151 at p. 1; Corbin, No. 0066 at p. 1; A Ware, No. 0204 at p. 1; Liberty Utilities, No. 0109 at p. 1) Laclede stated that emissions benefits are likely not to materialize due to fuel switching to electric space heaters and water heaters. (Laclede, No. 0141 at p. 23) In contrast, EEI stated that due to flaws in the product switching analysis, the emissions impacts of increased use of electricity for home heating are overestimated. (EEI, No. 0179 at p. 4)

The Joint Congress Members stated that while product switching may occur in a small number of situations, such as new construction in the South where air conditioning is a higher priority than heating, it is unrealistic for other parts of the country or for existing residences because the cost of fuel switching would likely be much greater for installation and operation than the incremental costs of installing a condensing furnace. The Joint Congress Members stated that the most likely alternative choice, a heat pump, is not as cost-competitive or as effective as a gas furnace for most housing in regions with sustained cold weather. (Joint Congress Members, No. 0161 at p. 3)

d. Summary Response to Comments on the Economic Justification of the March 2015 NOPR Proposed Standards for Non-Weatherized Gas Furnaces

The Department appreciates the stakeholder comments with regard to the proposed standards for NWGFs. As discussed in section II.B.2, a number of parties suggested that DOE should create a separate product class for NWGFs based on certified input capacity and set lower standards for that product class in order to mitigate some of the negative impacts of the proposed standards, and in particular, the impact of fuel switching. The September 2015 NODA evaluated the impacts of adopting separate standards for product classes based on certified input capacity. Subsequent refinement of that analysis, along with comments on the September 2015 NODA, formed the basis for selecting the standards proposed in this document. The results of the SNOPR analysis, and the reasons why DOE has tentatively determined that the currently-proposed standards are economically justified, are presented in section V of this document.

DOE believes that the standards for NWGFs proposed in this SNOPR address many of the concerns raised in the March 2015 NOPR comments described in sections III.F.1.a through III.F.1.c. Because replacement of a non-condensing NWGF with a condensing NWGF would not be necessary in many of the buildings where their installation poses challenges or would entail considerable cost, the currently-proposed standards significantly reduce the number of consumers expected to experience negative impacts or to switch to electric heating, compared with a standard at 92-percent AFUE for all NWGFs.

e. Economic Justification of the March 2015 NOPR Proposed Standards for Mobile Home Gas Furnaces

AHRI and JCI expressed concern that MHGF consumers would be negatively affected or would switch fuels for heating if an amended minimum efficiency standard of 92-percent were adopted. (AHRI, No. 0195 at p. 1; JCI, No. 0202 at pp. 2-4) MHI and Mortex commented that the proposed rule would be particularly burdensome to many of the 22 million Americans residing in mobile homes, which primarily house low- and moderate-income families. (MHI, No. 0129 at p. 2; Mortex, No. 0157 at pp. 2-3) MHI and Nortek commented that mobile home buyers are particularly sensitive to price increases because of their limited incomes and limited access to credit. (MHI, No. 0129 at p. 2; Nortek, No. 0137 at pp. 4-5)

The results presented in section V.B.1 indicate that under the proposed standard of 92-percent AFUE for MHGFs, 63 percent of MHGF consumers would see a net benefit, and only 8 percent would see a net cost. DOE believes that there would be minimal switching away from MHGFs for several reasons. First, for new mobile homes, the type of heating equipment is determined more by the intended location of the home, the expected heating load, and availability of a gas supply. For replacement applications, switching away from gas is not likely because the cost increase for installing a condensing furnace relative to a non-condensing furnace is not a significant factor due to the much simpler venting system compared to installation of a NWGF.

MHI and Nortek stated that the proposed energy conservation standards for manufactured housing developed by DOE's Appliance Standards Rulemaking Advisory Committee (ASRAC) Working Group on Manufactured Housing will likely increase the cost a new single-section mobile home by an average of $1,734. MHI and Nortek stated that adding an additional cost for a condensing furnace and an upgraded furnace fan could mean that more than one million households would be

unable to afford an average-priced single-section mobile home. (MHI, No. 0129 at p. 2; Nortek, No. 0137 at pp. 4-5)

In response, DOE notes that the expected average cost of a condensing furnace in a new mobile home is comparable to a non-condensing furnace because the increase in the price of the product is offset by a lower installation cost for a condensing furnace for most installations.

New furnaces installed in mobile homes must be approved by the U.S. Department of Housing and Urban Development, which requires special sealed combustion (direct vent) for all non-condensing and condensing installations of manufactured home furnaces. (24 CFR 3280.709(d)(1)) For condensing installations, the PVC piping is usually less expensive than the metal vent system used for non-condensing furnaces. Thus, there is not likely to be any effect on the affordability of single-section mobile homes due to the proposed MHGF standard.

The standard for MHGF furnace fans requires technology (improved PSC motor) that entails a slight price increase ($11) in 2013$ compared to the baseline PSC motor (see furnace fan energy conservation standards final rule; available at:

https://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0117

). This cost is applicable to less than 50 percent of installations because the rest of the market is already comprised of MHGFs with improved PSC motors or motors with higher efficiencies.

2. Safety Concerns Regarding the Proposed Standards

Several stakeholders raised potential safety concerns related to condensing furnace installations. CenterPoint Energy and NMHC, NAA, and NLHA stated that in the case of replacement with a condensing furnace, changes in the volume of gas being vented due to orphaning the water heater would affect the draw of the venting system, and could result in toxic combustion gases being drawn back into the building.

NMHC, NAA, and NLHA stated that it is foreseeable that local building inspectors would have concerns about the adequacies of the draw of a vent when it is carrying a reduced volume of gases. (CenterPoint Energy, No. 0083 at p. 23; NMHC, NAA, and NLHA, No. 0117 at pp. 3-4) MUD stated that many contractors fail to inform consumers that an orphaned water heater may require resizing existing vent stacks or installing chimney liners, resulting in the vent stacks of consumers who elect not to make those changes eventually being degraded. (MUD, No. 0144 at p. 2)

The venting systems for commonly vented non-condensing NWGFs and gas water heaters that are atmospherically vented rely on a certain volume of air to operate properly. When a water heater is orphaned, the volume of air being vented is reduced.

As discussed in section IV.F.2, DOE's analysis accounts for resizing existing vent stacks or installing chimney liners in the case of an orphaned water heater. DOE has concluded that the National Fuel Gas Code (NFGC) provides adequate guidance for installers regarding vent sizing to ensure that the venting system is safe when a condensing furnace is installed.

DOE notes that AHRI has previously stated that from 2000 to 2010, there were about 7.5 million replacement installations of condensing NWGFs, some of which must have resulted in orphaned gas water heaters. (Docket No. EERE-2011-BT-STD-0011, AHRI, No. 0046 at p. 4) However, there is no evidence from the field over that time that consumers incurred a higher safety risk because they chose to not address the water heater's venting system when the new condensing furnace was installed.

National Fire Protection Association and American Gas Association.

National Fuel Gas Code.

2015. (Last accessed April 20, 2016.) available at:

www.nfpa.org/codes-and-standards/document-information-pages?mode=code&code=54

The Pennsylvania Department of Environmental Protection, Carrier, PGW, Gas Authority, Nayes, and AGL Resources stated that due to the difficulty and expense of installing a condensing furnace, many homeowners will probably choose to repair rather than replace their failing furnace, or they might turn to an unlicensed contractor, thereby jeopardizing safety by not following the minimum fuel gas code requirements. (Pennsylvania Department of Environmental Protection, No. 0099 at p. 2; Carrier, No. 0116 at pp. 8, 20;

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