Energy Conservation Program: Energy Conservation Standards for Residential Dishwashers

DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[Docket Number EERE-2014-BT-STD-0021]

RIN 1904-AD24

Energy Conservation Program: Energy Conservation Standards for Residential Dishwashers

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

The Energy Policy and Conservation Act of 1975 (EPCA or the Act), as amended, prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including residential dishwashers. 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. In this final rule, DOE has determined that more stringent residential dishwasher standards would not be economically justified, and, thus, does not amend its energy conservation standards for residential dishwashers. DOE also eliminates an obsolete dishwasher test procedure that is no longer used to demonstrate compliance with the existing energy conservation standards.

DATES:

This rule is effective January 12, 2017. The incorporation by reference of the standards listed in this rule was approved by the Director of the Federal Register on December 17, 2012.

ADDRESSES:

This rulemaking can be identified by docket number EERE-2014-BT-STD-0021 and/or regulatory information number (RIN) 1904-AD24.

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, such as those containing information that is exempt from public disclosure, 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-0021

. The docket Web page contains simple instructions on how to access all documents, including public comments, in the docket.

For further information on how to review the docket, contact the Appliance and Equipment Standards Program staff at (202) 586-6636 or by email:

ApplianceStandardsQuestions@ee.doe.gov

.

FOR FURTHER INFORMATION CONTACT:

Mr. Bryan Berringer, 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) 586-0371. Email:

ApplianceStandardsQuestions@ee.doe.gov

.

Ms. Elizabeth Kohl, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-7796. Email:

Elizabeth.Kohl@hq.doe.gov

.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Final Rule

II. Introduction

A. Authority

B. Background

1. Current Standards

2. History of Standards Rulemaking for Residential Dishwashers

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

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

IV. Methodology and Revisions to the Analyses Employed in the 2014 Proposed Rule

A. Market and Technology Assessment

B. Screening Analysis

1. Screened-Out Technologies

2. Remaining Technologies

C. Engineering Analysis

1. Efficiency Levels

a. Data Sources

b. Consumer Utility

c. Final Rule Efficiency Levels

2. Manufacturer Production Cost Estimates

D. Markups Analysis

E. Energy and Water Use Analysis

F. Life-Cycle Cost and Payback Period Analysis

1. Product Cost

2. Installation Cost

3. Annual Energy and Water Consumption

4. Energy Prices

5. Water and Wastewater Prices

6. Maintenance and Repair Costs

7. Product Lifetime

8. Discount Rates

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

10. Payback Period Analysis

G. Shipments Analysis

H. National Impact Analysis

1. Product Efficiency Trends

2. National Energy and Water Savings

3. Net Present Value Analysis

I. Consumer Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model and Key Inputs

a. Manufacturer Production Costs

b. Shipments Projections

c. Product and Capital Conversion Costs

d. Markup Scenarios

3. Discussion of Comments

4. Manufacturer Interviews

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

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results

b. Direct Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Sub-Groups 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

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

M. Congressional Notification

VII. Approval of the Office of the Secretary

I. Synopsis of the Final Rule

Title III, Part B

1

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

2

This program covers most major household appliances, including the residential dishwashers that are the subject of this document. (42 U.S.C. 6292(a)(6)) EPCA, as amended, prescribed energy conservation standards for residential dishwashers and directed DOE to conduct additional rulemakings to determine whether to amend those standards. (42 U.S.C. 6295(g)(1) and (10)(A) and (B)) DOE is issuing this final rule pursuant to 42 U.S.C. 6295(m), which states that DOE must periodically review its already established energy conservation standards for a covered product not later than 6 years after issuance of any final rule establishing or amending such standards. As a result of such review, DOE must either publish a notice of proposed rulemaking to amend the standards or publish a notice of determination indicating that the existing standards do not need to be amended. (42 U.S.C. 6295(m)(1)(A) and (B))

1

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

2

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

Based on the evidence summarized in section V.C of this document, the Secretary has determined that amended standards for residential dishwashers are not economically justified. Specifically, the Secretary has determined that the benefits of energy savings, positive net present value of consumer benefits, and emission reductions of more-stringent standards are outweighed by the economic burden on over half of dishwasher consumers. Furthermore, the impacts on manufacturers, including the conversion costs and profit margin impacts, could result in a large reduction in industry net present value. Therefore, DOE has determined not to amend the energy conservation standards for residential dishwashers.

DOE is eliminating an obsolete dishwasher test procedure in appendix C that is no longer used to demonstrate compliance with existing energy conservation standards. DOE is making corresponding amendments to 10 CFR 429 and 430.23 to remove references to the eliminated appendix C. DOE is also amending the introductory note to the current test procedure at title 10 of the CFR part 430, subpart B, appendix C1 (appendix C1) to clarify that it shall be used to determine compliance with energy conservation standards and to make any representations related to energy and/or water consumption.

II. Introduction

A. Authority

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. 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 dishwashers are included in appendix C1.

DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including residential dishwashers. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that 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)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, 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 codified, 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 codified, 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 a 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)).

EPCA also requires that, in any final rule for new or amended energy conservation standards promulgated after July 1, 2010, DOE 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 in appendix C1 for residential dishwashers address standby mode and off mode energy use.

B. Background

1. Current Standards

In a direct final rule published on May 30, 2012 (2012 Direct Final Rule), DOE prescribed the current energy conservation standards for residential dishwashers manufactured on or after May 30, 2013. 77 FR 31918. These standards are set forth in DOE's regulations at 10 CFR 430.32(f)(3) and are repeated in Table II.1.

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

Product class

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

Standard

307

5.0

Compact

222

3.5

2. History of Standards Rulemaking for Residential Dishwashers

EPCA required that residential dishwashers be equipped with an option to dry without heat. EPCA further required that DOE conduct two cycles of rulemakings to determine if amended standards are justified. (42 U.S.C. 6295(g)(1) and (4))

On May 14, 1991, DOE issued a final rule establishing performance standards for residential dishwashers to complete the first required rulemaking cycle. 56 FR 22250. Compliance with the new standards, codified at 10 CFR 430.32(f), was required on May 14, 1994.

DOE then conducted a second standards rulemaking for residential dishwashers. DOE issued an advance notice of proposed rulemaking (ANOPR) on November 14, 1994, to consider amending the energy conservation standards for residential clothes washers, dishwashers, and clothes dryers. 59 FR 56423. Subsequently, DOE published a Notice of Availability of the “Rulemaking Framework for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and Cooking Products.” 71 FR 15059 (Mar. 27, 2006). On November 15, 2007, DOE published a second ANOPR addressing energy conservation standards for these products. 72 FR 64432.

EPCA was subsequently amended to establish maximum energy and water use levels for residential dishwashers manufactured on or after January 1, 2010. (42 U.S.C. 6295(g)(10)(A)) DOE codified the statutory standards for these products in a final rule published March 23, 2009. 74 FR 12058. EPCA also required DOE to conduct a rulemaking, by no later than January 1, 2015, to determine if the standards for residential dishwashers should be amended, and if so, to publish amended standards. (42 U.S.C. 6295(g)(10)(B))

The current energy conservation standards for residential dishwashers were submitted to DOE by groups representing manufacturers, energy and environmental advocates, and consumer groups on September 25, 2010. This collective set of comments, titled “Agreement on Minimum Federal Efficiency Standards, Smart Appliances, Federal Incentives and Related Matters for Specified Appliances” (the “Joint Petition”

3

), recommended specific energy conservation standards for residential dishwashers that, in the commenters' view, would satisfy the EPCA requirements. (42 U.S.C. 6295(o)) DOE conducted its rulemaking analyses on multiple residential dishwasher efficiency levels, including those suggested in the Joint Petition. In the 2012 Direct Final Rule, DOE established energy conservation standards for residential dishwashers manufactured on or after May 30, 2013, consistent with the levels suggested in the Joint Petition and in satisfaction of the requirement set forth in 42 U.S.C. 6295(g)(10)(B). 77 FR 31918 (May 30, 2012).

3

DOE Docket No. EERE-2011-BT-STD-0060, Comment 1.

DOE is conducting the current energy conservation standards rulemaking pursuant to 42 U.S.C. 6295(m), which requires that within 6 years of issuing any final rule establishing or amending a standard, DOE shall publish either a notice of determination that amended standards are not needed or a notice of proposed rulemaking (NOPR) including new proposed standards. DOE published a NOPR proposing amended standards on December 19, 2014 (2014 NOPR), in which it considered additional information not available at the time of the 2012 Direct Final Rule. 79 FR 76141. In conjunction with the 2014 NOPR, DOE posted on its Web site the associated technical support document (TSD). The TSD included the results of DOE's analyses, including: (1) The market and technology assessment, (2) screening analysis, (3) engineering

analysis, (4) energy and water use determination, (5) markups analysis to determine product price, (6) life-cycle cost (LCC) and payback period (PBP) analyses, (7) shipments analysis, (8) national energy savings (NES) and national impact analysis (NIA), and (9) manufacturer impact analysis (MIA). On February 5, 2015, DOE held a public meeting to receive comments from interested parties on the proposals in the 2014 NOPR.

DOE received a number of comments from interested parties in response to the 2014 NOPR. DOE considered these comments, as well as comments from the public meeting, in preparing this final rule. The commenters are summarized in Table II.2. Relevant comments and DOE's responses are provided in the appropriate sections of this final rule.

Table II.2—Interested Parties Providing Comments on the 2014 NOPR for Residential Dishwashers

Name

Acronym

Commenter

type *

Appliance Standards Awareness Project, Natural Resources Defense Council, Alliance to Save Energy, American Council for an Energy-Efficient Economy, Consumers Union, Northwest Energy Efficiency Alliance, and Northwest Power and Conservation Council

The Joint Commenters

EA

Association of Home Appliance Manufacturers

AHAM

TA

BSH Home Appliances Corporation

BSH

M

Edison Electric Institute

EEI

U

Energy Solutions

Energy Solutions

RO

GE Appliances and Lighting

GE

M

Mercatus Center at George Mason University

Mercatus Center

RO

Natural Resources Defense Council

NRDC

EA

Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas and Electric, and Southern California Edison (the California Investor-Owned Utilities)

CA IOUs

U

People's Republic of China

China

GA

Samsung Electronics America, Inc.

Samsung

M

U.S. Chamber of Commerce, American Chemistry Council, American Forest & Paper Association, American Fuel & Petrochemical Manufacturers, American Petroleum Institute, Brick Industry Association, Council of Industrial Boiler Owners, National Association of Manufacturers, National Mining Association, National Oilseed Processors Association

The Associations

TA

Whirlpool Corporation

Whirlpool

M

* EA: Efficiency Advocate; GA: Government Agency; M: Manufacturer; RO: Research Organization; TA: Trade Association; U: Utility.

III. General Discussion

DOE developed this final rule after considering comments, data, and information from interested parties that represent a variety of interests. The following discussion addresses some of the issues raised by these commenters. Comments on the methodology for DOE's analysis are presented in the relevant sections in section IV of this final rule.

A. Product Classes and Scope of Coverage

Existing energy conservation standards divide residential dishwashers into two product classes based on capacity (

i.e.,

the number of place settings and serving pieces that can be loaded in the product as specified in American National Standards Institute (ANSI)/Association of Home Appliance Manufacturers (AHAM) Standard DW-1-2010,

Household Electric Dishwashers

(ANSI/AHAM Standard DW-1-2010)):

• Standard (capacity equal to or greater than eight place settings plus six serving pieces); and

• Compact (capacity less than eight place settings plus six serving pieces).

In the 2014 NOPR, DOE proposed to maintain the existing standard and compact product classes for residential dishwashers because it determined that compact residential dishwashers provide unique utility by means of their countertop or drawer configurations. 79 FR 76142, 76149 (Dec. 19, 2014).

Mercatus Center disagreed with the separation of residential dishwashers into product classes on the basis of capacity, stating that such classification was overly broad. (Mercatus Center, No. 11 at p. 5)

4

China noted that the standards proposed in the 2014 NOPR are fixed values for the standard product class, and that these values may be too strict for larger residential dishwashers within the standard product class. China suggested a specific standard for these products. (China, No. 25 at p. 3) DOE has not identified any performance-related feature affecting consumer utility that would justify differing residential dishwasher standards within each of the proposed product classes under 42 U.S.C. 6295(q), and maintains that the unique utility of countertop and drawer configurations warrants differentiation of residential dishwashers into standard and compact product classes by capacities. The two product classes each cover a range of capacities. However, although the existing definition of the standard product class specifies a minimum capacity, it does not specify an upper limit on capacity. DOE reviewed the certified energy and water consumption levels for the highest-capacity dishwashers currently available on the market in the United States (

i.e.,

those with capacities of 16 place settings), and observed multiple models from different manufacturers that are ENERGY STAR-qualified. Therefore, DOE concludes that no alternate product class structure is required to adequately consider revised energy conservation standards for higher-capacity products, and DOE is not amending the product classes for residential dishwashers in this final rule.

4

A notation in the form “Mercatus Center, No. 11 at p. 5” identifies a written comment: (1) Made by the Mercatus Center at George Mason University; (2) recorded in document number 11 that is filed in the docket of this energy conservation standards rulemaking (Docket No. EERE-2014- BT-STD-0021) and available for review at

www.regulations.gov

; and (3) which appears on page 5 of document number 11.

B. Test Procedure

EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with energy conservation standards and to quantify the efficiency of their product. DOE's current energy conservation standards for residential dishwashers are expressed in terms of estimated annual energy use (EAEU), in kWh/year, and water consumption, in gal/cycle (

see

10 CFR 430.32(f)(3)). The current version of the test procedure at 10 CFR 430.23(c) includes provisions for determining these values as well as estimated annual operating cost (EAOC), based upon testing procedures contained in appendix C1.

In the 2014 NOPR, DOE proposed to delete an obsolete version of the residential dishwasher test procedure codified at 10 CFR part 430, subpart B, appendix C, and re-designate appendix C1 as appendix C. DOE did not receive any objections to the proposed elimination of the obsolete version of the test procedure, and is removing the obsolete test procedure. However, to avoid potential confusion from renaming the current test procedure, DOE is not redesignating appendix C1 as appendix C; DOE is maintaining its designation as appendix C1. Additionally, DOE is revising the text in both 10 CFR 429.19 and 10 CFR 430.23 to account for the removal of the obsolete test procedure, and revising the introductory note in appendix C1 to clarify that it is the applicable test procedure.

DOE received a number of comments which raised concerns about the repeatability and reproducibility of results obtained from appendix C1, and on whether the test procedure is representative of actual consumer use. DOE will address these concerns in a separate test procedure rulemaking and will seek information on these issues in a request for information.

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 final rule discusses the results of the screening analysis for residential dishwashers, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the final rule TSD.

2. Maximum Technologically Feasible Levels

When DOE considers amended standards 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 residential dishwashers, 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 of this final rule and in chapter 5 of the final rule TSD.

D. Energy Savings

1. Determination of Savings

For each trial standard level (TSL), DOE projected energy savings from application of the TSL to residential dishwashers purchased in the 30-year period that begins in the year of compliance with any amended standards (2019-2048).

5

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

5

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

DOE used its NIA spreadsheet model to estimate energy savings from potential amended standards for residential dishwashers. The NIA spreadsheet model (described in section IV.H of this final rule) calculates energy savings in site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. For natural gas, the primary energy savings are considered to be equal to the site energy savings. 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.

6

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 final rule.

6

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

v.

Herrington,

768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated 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 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 potential amended standards on manufacturers, DOE conducts a MIA, as discussed in section IV.J of this final rule. 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 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 (NPV) of the economic impacts applicable to a particular rulemaking. DOE also evaluates the LCC impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a national standard.

b. Savings in Operating Costs Compared to Increase in Price

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 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 amended standards. DOE's LCC and PBP analysis is discussed in further detail in section IV.F of this final rule.

c. Energy Savings

Although significant conservation of energy is a separate statutory requirement for amending 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 of this final rule, 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)) As described in the engineering analysis (see section IV.C of this final rule), DOE considered efficiency levels based on the range of products currently available on the market, and analyzed design options based on those observed in such products. Because DOE is not amending the existing standards for residential dishwashers, this rulemaking will not reduce the utility or performance of the products under consideration.

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 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 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)) Because DOE is not amending energy conservation standards for residential dishwashers, no consulatation with the Department of Justice pursuant to 42 U.S.C. 6295(o)(2)(B)(ii) is necessary.

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 any amended 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 of this final rule.

Amended standards also are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases associated with energy production and

use. DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K of this final rule; the emissions impacts are reported in section IV.K of this final rule. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this final rule.

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 interested parties submit any relevant information regarding economic justification that does not fit into the other categories described above, DOE could consider such information under “other factors.” No other factors were deemed to be relevant for this final rule.

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 year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effect potential amended energy conservation standards would have on the PBP for consumers. These analyses include, but are not limited to, the 3-year PBP contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F of this final rule.

F. Other Issues

DOE received a number of general comments regarding the analysis process and standards in general, and specific comments related to DOE's process guidance at 10 CFR part 430, subpart C, Appendix A. Samsung commented in support of more stringent standards for residential dishwashers, which it stated would encourage innovation and would provide large benefits to U.S. consumers by way of significant energy and water savings. (Samsung, No. 19 at p. 2) The CA IOUs and Joint Commenters also supported the proposed standards. (CA IOUs, No. 23 at p. 1; Joint Commenters No. 22 at p. 1)

EEI stated that in this rulemaking, DOE elected to depart from the Process Improvement Rule by eliminating the Framework stage and the Preliminary Analysis. EEI stated that the effect of this change is to provide interested parties with only one opportunity to impact the outcome of the proposed rule, which conflicts with the Process Improvement Rule provisions. (EEI, No. 20 at p. 3)

More specifically, commenters noted that DOE guidance at 10 CFR part 430, subpart C, appendix A states that DOE will publish an ANOPR prior to issuance of a proposed standards rule. In EISA 2007, Congress eliminated the requirement for DOE to publish an ANOPR for rulemakings to establish or amend an energy conservation standards. In many cases, DOE publishes a framework document and preliminary analysis prior to publishing a proposed standards. For this rulemaking, however, DOE relied primarily on data and analysis from the recent 2012 Direct Final Rule rather than a preliminary analysis in developing the 2014 NOPR. Commenters also expressed concerns regarding three specific objectives outlined in 10 CFR part 430, subpart C, appendix A, section 1: (a), (d), and (f). Objective (a) is to provide for early input from stakeholders in the rulemaking process. In addition to the opportunities for public input on the 2012 rulemaking, DOE engaged stakeholders in a public meeting after publishing the 2014 NOPR, and conducted extensive manufacturer interviews following the 2014 NOPR. Objective (d) is to eliminate problematic design options early in the process. In the 2014 NOPR, DOE evaluated all technology options against the criteria outlined in the screening analysis (

see

section IV.B of this final rule), and then discussed conclusions regarding design options in subsequent manufacturer interviews. Objective (f) is to conduct thorough analysis of impacts. In the 2014 NOPR, DOE conducted all relevant impact analyses and requested any relevant information from stakeholders. DOE received feedback in response to these analyses, and as discussed in section IV of this final rule, has incorporated stakeholder feedback into the analyses for this final rule. In developing the analysis for this final rule, DOE's process, which included extensive stakeholder input, was consistent with the objectives outlined in 10 CFR part 430, subpart C, appendix A, section 1.

Mercatus Center commented in response to the 2014 NOPR that the treatment of market barriers is inconsistent with evidence that consumers are informed about efficiency issues and that this information allows them to make economically efficient choices of residential dishwashers. (Mercatus Center, No. 11 at pp. 3-5)

This comment appears to be referring to section VI.A of the 2014 NOPR, in which DOE, responding to requirements of Executive Order 12866, “Regulatory Planning and Review,” briefly describes the problems that the proposed standards address. One of the problems mentioned is a lack of consumer information and/or information processing capability about energy efficiency opportunities in the residential dishwasher market. However, it is difficult to determine the significance of this problem. The commenter presents data showing the popularity of ENERGY STAR-certified residential dishwashers as evidence that consumers are informed about efficiency issues. DOE is aware that there is a segment of the consumer market that responds to the information implicit in the ENERGY STAR certification. This was confirmed in a recent paper from the National Bureau of Economic Research that examined how consumers respond to ENERGY STAR certification in the U.S. refrigerator market,

7

but the study also found that “a non-negligible fraction of consumers also appears to neither value the certification nor consider electricity costs in their purchase decisions.” While the reasons for this are not entirely clear, difficulties in processing information in purchase decision-making may be a factor.

7

Houde, Sebastien. 2014. How Consumers Respond to Environmental Certification and the Value of Energy Information. National Bureau of Economic Research Working Paper No. 20019.

http://www.nber.org/papers/w20019

.

Mercatus Center stated that the proposed rule may yield economic inefficiencies as it treats dissimilar consumers as similar. It stated that manufacturers respond to the heterogeneity of consumers by offering a wide variety of products, and forcing all residential dishwashers to include energy-saving technology can generate an excess of costs over benefits (

e.g.,

for buyers who only use their dishwashers

a few times a month). (Mercatus Center, No. 11 at p. 9)

DOE acknowledges that for some consumers the cost of purchasing a residential dishwasher that meets the proposed standards exceeds the operating cost savings from a more efficient dishwasher. In issuing this final rule, DOE considered this burden in the context of the full range of benefits and burdens associated with different standard levels and determined not to issue amended standards for residential dishwashers.

IV. Methodology and Revisions to the Analyses Employed in the 2014 Proposed Rule

This section addresses the analyses DOE has performed for this rulemaking with regard to residential dishwashers. Separate subsections address each component of DOE's analyses.

DOE used several analytical tools to estimate the impact of the potential standards levels considered in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended or new energy conservation standards. The NIA uses a second spreadsheet set that provides shipments projections and calculates NES and NPV of total consumer costs and savings expected to result from potential energy conservation standards. DOE uses the third spreadsheet tool, the Government Regulatory Impact Model (GRIM), to assess manufacturer impacts of potential standards. These three spreadsheet tools are available on the DOE Web site for this rulemaking:

http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=106

. Additionally, DOE used output from the latest version of the Energy Information Administration's (EIA's)

Annual Energy Outlook

(

AEO

) for the emissions and utility impact analyses.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this rulemaking include: (1) A determination of the scope of the rulemaking and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of residential dishwashers. See chapter 3 of the final rule TSD for further discussion of the market and technology assessment.

In the 2014 NOPR market analysis and technology assessment, DOE identified 16 technology options that would be expected to improve the efficiency of residential dishwashers, as measured by the DOE test procedure, shown in Table IV.1. 79 FR 76142, 76151 (Dec. 19, 2014).

Table IV.1—2014 NOPR Technology Options

1. Condensation drying.

2. Control strategies.

3. Fan/jet drying.

4. Flow-through heating.

5. Improved fill control.

6. Improved food filter.

7. Improved motor efficiency.

8. Improved spray-arm geometry.

9. Increased insulation.

10. Low-standby-loss electronic controls.

11. Microprocessor controls and fuzzy logic, including adaptive or soil-sensing controls.

12. Modified sump geometry, with and without dual pumps.

13. Reduced inlet-water temperature.

14. Supercritical carbon dioxide washing.

15. Ultrasonic washing.

16. Variable washing pressures and flow rates.

In the 2014 NOPR, DOE requested feedback from manufacturers on its NOPR analyses. After publishing the 2014 NOPR, DOE also conducted manufacturer interviews to discuss the possible design pathways to improve dishwasher efficiencies. From these conversations and additional research, DOE identified desiccant drying as an additional technology option for improving dishwasher efficiency. Along with desiccant drying, all of the technology options identified in the 2014 NOPR were considered in this final rule analysis.

B. Screening Analysis

DOE uses the following four screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking:

(1)

Technological feasibility.

Technologies that are not incorporated in commercial products or in working prototypes will not be considered further.

(2)

Practicability to manufacture, install, and service.

If it is determined that mass production and reliable installation and servicing of a technology in commercial products could not be achieved on the scale necessary to serve the relevant market at the time of the projected compliance date of the standard, then that technology will not be considered further.

(3)

Impacts on product utility or product availability.

If it is determined that a technology would have significant adverse impact on the utility of the product to significant subgroups of consumers or would result in the unavailability of any covered product type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not be considered further.

(4)

Adverse impacts on health or safety.

If it is determined that a technology would have significant adverse impacts on health or safety, it will not be considered further. 10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b).

In sum, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the above four criteria, it will be excluded from further consideration in the engineering analysis. The reasons for eliminating any technology are discussed below.

The subsequent sections include comments from interested parties pertinent to the screening criteria, DOE's evaluation of each technology option against the screening analysis criteria, and whether DOE determined that a technology option should be excluded (“screened out”) based on the screening criteria.

1. Screened-Out Technologies

In the 2014 NOPR screening analysis, DOE removed three technology options from further consideration: Reduced inlet-water temperature, supercritical carbon dioxide washing, and ultrasonic washing. 79 FR 76142, 76152 (Dec. 19, 2014).

In response to the 2014 NOPR, AHAM commented that DOE did not seek updated information from manufacturers on technology options, resulting in analyzing technology options that should have been removed in the screening analysis. (AHAM, No. 21 at p. 6)

DOE received no additional comments, either in response to the 2014 NOPR or in additional manufacturer interviews, regarding technology options identified in the 2014 NOPR that would not meet the screening criteria. However, DOE is screening out an additional design

option for the final rule analysis, described below.

Desiccant Drying

Desiccant drying relies on a material, such as zeolite, to adsorb moisture to aid in the drying process and reduce drying energy consumption. Certain European dishwashers currently incorporate this technology option; however, DOE is unaware of any dishwashers available in the United States that use desiccant drying. DOE has screened out desiccant drying from further consideration because it would not be practicable to manufacture on the scale necessary for the residential dishwasher market.

2. Remaining Technologies

Through a review of each technology, DOE concludes that all of the other identified technologies listed in section IV.A of this final rule met all four screening criteria to be examined further as design options in DOE's final rule analysis. In summary, DOE retained the following technology options as shown in Table IV.2:

Table IV.2—Remaining Final Rule Technology Options

1. Condensation drying.

2. Control strategies.

3. Fan/jet drying.

4. Flow-through heating.

5. Improved fill control.

6. Improved food filter.

7. Improved motor efficiency.

8. Improved spray-arm geometry.

9. Increased insulation.

10. Low-standby-loss electronic controls.

11. Microprocessor controls and fuzzy logic, including adaptive or soil-sensing controls.

12. Modified sump geometry, with and without dual pumps

13. Variable washing pressures and flow rates.

DOE determined that these technology options are technologically feasible because they are being used or have previously been used in commercially-available products or working prototypes. DOE also finds that all of the remaining technology options meet the other screening criteria (

i.e.,

practicable to manufacture, install, and service and do not result in adverse impacts on consumer utility, product availability, health, or safety). For additional details, see chapter 4 of the final rule TSD.

C. Engineering Analysis

In the engineering analysis, DOE establishes the relationship between the manufacturer production cost (MPC) and improved residential dishwasher efficiency. This relationship serves as the basis for cost-benefit calculations for individual consumers, manufacturers, and the Nation. DOE typically structures the engineering analysis using one of three approaches: (1) Design option, (2) efficiency level, or (3) reverse engineering (or cost assessment). The design-option approach involves adding the estimated cost and associated efficiency of various efficiency-improving design changes to the baseline product to model different levels of efficiency. The efficiency-level approach uses estimates of costs and efficiencies of products available on the market at distinct efficiency levels to develop the cost-efficiency relationship. The reverse-engineering approach involves testing products for efficiency and determining cost from a detailed bill of materials (BOM) derived from reverse engineering representative products. The efficiency ranges from that of the least-efficient residential dishwasher sold today (

i.e.

the baseline) to the maximum technologically feasible efficiency level. At each efficiency level examined, DOE determines the MPC; this relationship is referred to as a cost-efficiency curve. In the 2014 NOPR, DOE used a hybrid approach of the three methods to develop the relationship between MPC and residential dishwasher efficiency because it is difficult to assign a specific energy or water savings to a particular design option. 79 FR 76142, 76152 (Dec. 19, 2014).

1. Efficiency Levels

In the 2014 NOPR, DOE analyzed the efficiency levels shown in Table IV.3 and Table IV.4. 79 FR 76142, 76153-76154 (Dec. 19, 2014).

Table IV.3—2014 NOPR Efficiency Levels—Standard Product Class

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

0—Baseline

307

5.00

1

295

4.25

2

280

3.50

3

234

3.10

4—Max-Tech

180

2.22

Table IV.4—2014 NOPR Efficiency Levels—Compact Product Class

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

0—Baseline

222

3.50

1

203

3.10

2—Max-Tech

141

2.00

China suggested that DOE use international units of measure, rather than gallons, for the convenience of World Trade Organization (WTO) member states. (China, No. 25 at p. 3) DOE proposes to maintain water consumption specifications for each efficiency level in gallons per cycle to maintain consistency with current product ratings and consumer familiarity. The conversion from gallons to an international unit, such as liters, is a simple calculation and would not represent a significant burden to WTO member states.

a. Data Sources

DOE used information in its Compliance Certification Database

8

as one data source for developing the efficiency levels in the 2014 NOPR. 79 FR 76142, 76153-76154 (Dec. 19, 2014). As described in chapter 5 of the NOPR TSD, DOE also relied on test data gathered using the ENERGY STAR

Test Method for Determining Residential Dishwasher Cleaning Performance

(ENERGY STAR Cleaning Performance Test Method) to determine Efficiency Level 3 for standard residential dishwashers.

8

DOE's Compliance Certification Database is accessible at

http://www.regulations.doe.gov/certification-data/

.

AHAM observed that the NOPR analysis incorporated data accessed from DOE's Compliance Certification Database as of May 22, 2014, which included some outdated models that had since been removed from the market. (AHAM, No. 21 at p. 6) Energy Solutions asked DOE to review data more recent than May 2014 to see where newer models are rated. (Energy Solutions, Public Meeting Transcript, No. 10 at p. 39)

9

9

A notation in the form “Energy Solutions, Public Meeting Transcript, No. 10 at p. 39” identifies an oral comment that DOE received during the February 5, 2015, residential dishwasher energy conservation standards NOPR public meeting. Oral comments were recorded in the public meeting transcript and are available in the residential dishwasher energy conservation standards rulemaking docket (Docket No. EERE-2014-BT-STD-0021). This particular notation refers to a comment: (1) Made by Energy Solutions during the public meeting; (2) recorded in document number 10, which is the public meeting transcript that is filed in the docket of this energy conservation standards rulemaking; and (3) which appears on page 39 of document number 10.

In developing its rulemaking proposals, DOE strives to use the most recent data available at the time it conducts its analyses. DOE therefore has updated the efficiency levels analyzed in this final rule to reflect current product availability, specifically for the max-tech efficiency level for both product classes. DOE notes that the certification for the model at the max-tech level for the standard product class in the 2014 NOPR analysis has since been withdrawn. At the time of the final rule analysis, DOE found that the maximum available efficiency of products listed in the Compliance Certification Database and available on the market with a typical dishwasher configuration (

i.e.,

built-in and typical product width) for the standard product class was a product with rated annual energy use of 225 kWh/year and water consumption of 2.4 gal/cycle. In addition, the maximum available efficiency of residential dishwashers listed in the compact product class was 130 kWh/year and 1.7 gal/cycle. For residential dishwashers, DOE considers the maximum available efficiency as the max-tech efficiency because DOE has observed all design options that it has identified for improving dishwasher efficiency in units currently on the market. DOE also observed that fewer residential dishwashers in the standard product class are available on the market at the energy and water consumption values for Efficiency Level 3 as defined in the 2014 NOPR than existed at the time the 2014 NOPR was issued. Accordingly, DOE has revised the energy and water consumption values that define Efficiency Level 3 for the standard product class, as described in greater detail in section IV.C.1 of this final rule.

The CA IOUs were concerned that in the 2014 NOPR, DOE presented data from testing conducted in support of the 2012 Direct Final Rule. They commented that tested models should be ones that are representative of models meeting the current standard and reasonably representative of the market. (CA IOUs, No. 23 at p. 2) AHAM noted that DOE conducted testing and teardowns on a limited sample of models, some of which were outdated or had been removed from the market. (AHAM, No. 21 at p. 6)

All test data presented in the 2014 NOPR TSD were from testing conducted either in support of developing the ENERGY STAR Cleaning Performance Test Method or specifically for the 2014 NOPR analysis, and were included in the analyses for the 2014 NOPR and this final rule analysis only if the unit under test met the current dishwasher energy conservation standards. DOE did not conduct additional testing for the final rule analysis, but, as described earlier in this section, it has revised the efficiency levels used in the analysis to better reflect the current residential dishwasher market. Additionally, in manufacturer interviews conducted after publishing the 2014 NOPR, DOE confirmed that the design options incorporated in its test units are representative of the design options included in products currently on the market and of the design options manufacturers would likely use to achieve higher efficiencies. Accordingly, DOE determined that its test data are representative of the current dishwasher market.

b. Consumer Utility

As described in chapter 5 of the NOPR TSD, DOE identified Efficiency Level 3 for the standard product class in the 2014 NOPR as the most efficient level that would maintain product cleaning performance. DOE based this determination on cleaning performance data from the ENERGY STAR Cleaning Performance Test Method, which showed that cleaning performance begins to drop off at energy consumptions and water consumptions below Efficiency Level 3. DOE received multiple comments from interested parties on this issue.

The Joint Commenters emphasized that dishwasher performance should be maintained with new standard levels for consumers to achieve actual energy and water savings, because otherwise consumers may select cycles other than the normal cycle. The Joint Commenters urged DOE to evaluate any additional information beyond cleaning performance, including drying performance and cycle time, provided by manufacturers to ensure that performance can be maintained. (Joint Commenters, No. 22 at p. 2)

AHAM objected to the use of the ENERGY STAR Cleaning Performance Test Method to evaluate performance at the proposed efficiency levels due to AHAM's evaluation of the repeatability and reproducibility of that test procedure. (AHAM, Public Meeting Transcript, No. 10 at p. 20; AHAM, No. 21 at p. 13) According to AHAM, its round robin testing conducted during the development of the ENERGY STAR Cleaning Performance Test Method demonstrated that the test procedure has a maximum standard deviation of 6.76 when using AHAM scoring, albeit on models that did not meet the efficiency levels proposed in the 2014 NOPR. AHAM also stated that it believes that the standard deviation will likely increase as the stringency of the standard levels increases. Furthermore, AHAM and GE commented that DOE's proposed standard level could just as likely negatively impact performance as be neutral, specifically noting that Efficiency Level 3 performance may overlap with Efficiency Level 4 performance. (AHAM, No. 21 at pp. 9-10; GE, No. 26 at pp. 3-4) BSH noted its internal testing found that the ENERGY STAR Cleaning Performance Test Method is repeatable within a single laboratory, but that variability is introduced with tests at different test facilities. (BSH, Public Meeting Transcript, No. 10 at pp. 47-48)

AHAM and GE also commented that DOE did not address dishwasher attributes other than cleaning (

e.g.,

cycle time, drying performance, and noise levels) which potentially impact dishwasher performance and utility. (AHAM, No. 21 at pp. 6-7; GE, No. 26 at pp. 2-3) AHAM expressed concern

that DOE had made incorrect assumptions about the mass consumer appeal of the few products on the market (or once on the market) that meet Efficiency Level 3, and commented that energy and water savings for products currently available are more likely to come at the expense of performance and features than in the past. AHAM noted the small number of models available that meet the proposed levels as compared to its estimates of approximately 667 standard models and 54 compact models on the market at the time of its comment. (AHAM, No. 21 at pp. 6-7, 10)

AHAM stated that water heating is the biggest contributor to dishwasher energy use regardless of the manufacturer, and that manufacturers may be forced to reduce water heating in an effort to comply with the proposed standards, putting performance at risk. (AHAM, No. 21 at p. 8) GE commented that DOE's data from the 2014 NOPR show that performance may begin to degrade at the ENERGY STAR levels in effect at the time of the 2014 NOPR analysis (295 kWh/year and 4.25 gal/cycle). (GE, No. 26 at p. 10)

AHAM and BSH commented that if a portion of a dishwasher cycle changes to save energy, some other aspect must also change to compensate, for example, increasing cycle times. (AHAM, No. 21 at pp. 7-8; BSH, Public Meeting Transcript, No. 10 at pp. 53-55) AHAM stated that data it collected from manufacturers comprising over 90 percent of the market show that as energy use decreases, cycle time (including drying time) increases. According to AHAM, these data indicate that the shipment-weighted average cycle time increases by 12 percent for products meeting Efficiency Level 2 compared to products at the baseline. AHAM further stated that the shipment-weighted average cycle time increases by 37 percent for products meeting Efficiency Level 3 compared to products at the baseline (based on the few models meeting Efficiency Level 3 in the AHAM data set). AHAM commented that this increase in cycle time is likely to be unacceptable to consumers. Finally, AHAM noted that DOE had not shown why it determined that cycle times would be acceptable at Efficiency Level 3 but not at Efficiency Level 4. (AHAM, No. 21 at pp. 7-8) GE stated that standards at Efficiency Level 3 would drive cycle time to greater than 3 hours. According to GE, a survey of 11,000 dishwasher owners showed that cycle time is one of the four major sources of dissatisfaction with these products, the others being odor, rinsing performance, and drying performance. (GE, No. 26 at pp. 3-4)

AHAM stated that in addition to using all or most of the technology options identified in the 2014 NOPR, manufacturers will be required to apply significant innovation at increased cost to meet the proposed standards. AHAM commented that to offset that cost, manufacturers will be forced to make trade-offs, potentially causing loss of product utility. (AHAM, No. 21 at pp. 10-11)

GE believes there would be a compression of the market if standards were adopted at Efficiency Level 3, forcing manufacturers to add cost to increase efficiency rather than increase consumer utility. GE stated as an example that a manufacturer may not be able to invest in sound performance or enhanced rack designs in value-priced models, resulting in reduced consumer utility at lower price points. (GE, No. 26 at p. 4)

Because of the extensive response from interested parties on potential utility concerns at the standard levels proposed in the 2014 NOPR for the standard product class, and at the request of multiple interested parties, DOE conducted additional manufacturer interviews after the 2014 NOPR to further assess the potential utility impacts at varying dishwasher efficiencies.

Information gathered during the manufacturer interviews suggests that some aspect of dishwasher performance would be compromised in order to maintain cleaning performance at the Efficiency Level 3 considered in the 2014 NOPR. As mentioned in the comments from interested parties, manufacturers generally identified drying performance and cycle times as the parameters most likely to be affected at that efficiency level.

During manufacturer interviews, DOE also requested information on how much the energy or water consumption would need to increase from the previous Efficiency Level 3 to maintain acceptable performance. Manufacturers generally indicated that by using all available design options to improve efficiency, they would likely be able to maintain performance with a maximum energy consumption between 250 and 260 kWh/year. With the additional energy consumption, manufacturers suggested that dishwasher cycles would be able to maintain sufficiently high wash and rinse temperatures to result in good cleaning and drying performance. Based on this feedback, DOE adjusted the energy consumption for Efficiency Level 3 in this final rule analysis to 255 kWh/year.

10

10

As discussed later in this section, manufacturers provided different views on consumer utility impacts at this efficiency level. AHAM and a group of its members provided public feedback indicating performance concerns at this level, which differed from the information provided to DOE in confidential manufacturer interviews.

Manufacturers also indicated during interviews that the maximum energy consumption limit proposed in the 2014 NOPR was the primary concern at Efficiency Level 3 rather than the water consumption. They stated that they would likely be able to maintain performance with the same water consumption proposed in the 2014 NOPR if it is combined with a higher energy use value. From this feedback, DOE maintained water consumption at 3.1 gal/cycle for Efficiency Level 3.

One major concern noted in the comments from interested parties was the lack of products available at the proposed standards at Efficiency Level 3. In addition to the manufacturer feedback during interviews, DOE notes that its Compliance Certification Database includes 97 models that would meet the revised Efficiency Level 3 out of a total of 789 standard dishwashers.

11

Additionally, 137 certified models meet the energy consumption at revised Efficiency Level 3 and 305 models meet the water consumption at revised Efficiency Level 3. For products that would currently meet only one of the two metrics for Efficiency Level 3, the rated value for the other metric is, on average, 261 kWh/year for models not meeting the energy consumption and 3.3 gal/cycle for products not meeting the water consumption. This suggests that these products would likely be able to meet Efficiency Level 3 with only minor changes.

11

Based on products listed as of August 10, 2016.

Following the manufacturer interviews, AHAM and a group of its members gathered additional data regarding cleaning performance and presented the information to DOE in a meeting on July 8, 2015.

12

The AHAM materials focused on two sets of manufacturer testing: One set consisting of a modified DOE sensor heavy soil load tested in dishwashers reprogrammed to match three energy and water use levels (307 kWh/year and 4.1 gal/cycle, 255 kWh/year and 3.1 gal/cycle, and 234 kWh/year and 3.1 gal/cycle); and one set consisting of two

dishwashers that were each loaded with ten place settings soiled with a modified ANSI/AHAM Standard DW-1-2010 soil load, with each dishwasher programmed to match two energy and water use levels (307 kWh/year and 5.0 gal/cycle and 234 kWh/year and 3.1 gal/cycle). AHAM presented results from these tests by exhibiting certain load items as they came out of a test unit at the end of the cycle. AHAM also presented compiled consumer feedback on the test load results in which the consumers generally indicated that the test load items from the units set to 307 kWh/year were adequately cleaned (although some had concerns with performance), while the items coming from the units set to 255 kWh/year or 234 kWh/year would be unacceptable for use. Based on these data, AHAM commented that any standards at these lower energy consumption and water consumption levels would result in worse performance than products currently on the market achieve. Accordingly, AHAM stated that amended dishwasher standards should not be more stringent than the upcoming ENERGY STAR level (270 kWh/year and 3.5 gal/cycle). (AHAM, No. 27 at pp. 1-13)

12

A summary of the meeting and the materials presented at this meeting are available at

http://www.energy.gov/sites/prod/files/2015/08/f25/AHAM%20Comments_Ex%20Parte%20Memo_July%208%2C%202015_Dishwasher%20Standards_FINAL%20%2800039961%29.pdf

.

DOE appreciates the additional information on cleaning performance gathered by AHAM and its members. DOE acknowledges that the data may demonstrate utility impacts at Efficiency Level 3 under the test methods utilized by AHAM. In the paragraphs that follow, however, DOE discusses its concerns with AHAM's test methods:

First, DOE notes that the soil loads used for both sets of testing, and in particular the tests conducted with ten soiled place settings, were heavier than the soils typical of 95 percent of consumer loads. The heaviest soil load in appendix C1 requires only 4 soiled place settings, and represents the 5 percent of consumer cycles run with the heaviest soil loads. The majority of consumer use corresponds to the light soil load in appendix C1 (62 percent of cycles), which requires only one soiled place setting with half the soil amount specified in ANSI/AHAM Standard DW-1-2010.

Second, both sets of AHAM tests included additional soils that are more difficult to remove than those specified in appendix C1. For the first set of tests, animal and vegetable fats were applied, and these were the soils that appeared upon visual inspection to remain after the test cycles. For the second set of tests, a significant amount of adhered soil was added to a serving bowl, and cooked-on milk was added to one glass. The soil loads used in appendix C1 and ANSI/AHAM Standard DW-1-2010 were developed to be representative of typical consumer use, so these substitutions resulted in a soiled load that was more difficult to clean than the typical load.

Third, the controls on the four test units were adjusted to obtain certain energy and water responses for each test cycle rather than allowing a soil sensor to determine the appropriate energy and water consumption for the encountered soil load. As described in chapter 5 of the final rule TSD, DOE expects that manufacturers would incorporate soil sensors, among other design options, to achieve Efficiency Level 3. In appendix C1, the light and medium soil loads represent 95 percent of overall dishwasher use. Accordingly, the cycle responses to these soil loads effectively determine the overall energy and water use for a unit, allowing a dishwasher to meet Efficiency Level 3 even if it were to use a relatively high level of energy and water under heavy soil conditions. DOE expects that a load with ten soiled place settings would always trigger a heavier cycle response in a soil-sensing dishwasher that is designed specifically to meet Efficiency Level 3. As a result, DOE concludes that forcing dishwashers to consume less energy and water under the heaviest soil loading conditions than they would likely be designed for would not reflect how actual units in the field would operate for consumers.

In summary, DOE concludes that the results of AHAM's testing do not demonstrate conclusively that residential dishwashers would have unacceptable cleaning performance at the proposed Efficiency Level 3. DOE expects that typical consumer use conditions would be less severe than those used in AHAM's testing, and that actual units in the field would adjust their cycle responses to heavier-than-typical soil loads to obtain better cleaning performance. Further, the information gathered during confidential manufacturer interviews and the 97 certified models that would meet Efficiency Level 3 indicate that performance could be maintained at that efficiency level.

c. Final Rule Efficiency Levels

Based on the information gathered in manufacturer interviews and the Certification Compliance Database, DOE revised the energy consumption associated with Efficiency Level 3 for standard residential dishwashers to 255 kWh/year in this final rule analysis. As described in section IV.C.1.a. of this final rule, DOE also revised the max-tech Efficiency Level 4 for both standard and compact residential dishwashers.

DOE did not receive any comments in response to the Efficiency Level 2 analyzed for standard residential dishwashers in the 2014 NOPR; however, DOE revised the energy consumption at Efficiency Level 2 to 270 kWh/year for this final rule. The energy use and water consumption corresponding to Efficiency Level 2 in the 2014 NOPR were originally selected for analysis in the 2012 Direct Final Rule based on the ENERGY STAR Draft 2 Version 5.0 Dishwashers Specification, released on February 3, 2011.

13

Although these values represent a technologically feasible efficiency level, DOE updated Efficiency Level 2 for this final rule analysis based on the ENERGY STAR Version 6.0 Dishwashers Specification, which became effective on January 29, 2016. This updated specification establishes maximum values of annual energy consumption and per-cycle water consumption of 270 kWh/year and 3.5 gal/cycle, respectively. For consistency with the current ENERGY STAR specification, DOE analyzed Efficiency Level 2 at 270 kWh/year and 3.5 gal/cycle for this final rule.

13

The draft specification document is available at

https://www.energystar.gov/products/specs/sites/products/files/ES_Draft_2_V5.0_Dishwashers_Specification.pdf

. DOE notes that this level was removed from the Final V5.0 Dishwashers Specification, and subsequent specification versions 5.1 and 5.2.

In summary, Table IV.5 and Table IV.6 present the efficiency levels DOE considered in this final rule analysis.

Table IV.5—Final Rule Efficiency Levels—Standard Product Class

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

0—Baseline

307

5.00

1

295

4.25

2

270

3.50

3

255

3.10

4—Max-Tech

225

2.4

Table IV.6—Final Rule Efficiency Levels—Compact Product Class

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

0—Baseline

222

3.50

1

203

3.10

2—Max-Tech

130

1.70

2. Manufacturer Production Cost Estimates

In the 2014 NOPR, DOE developed MPC estimates for products at each efficiency level. To do this, DOE conducted product teardowns and referred to the 2012 Direct Final Rule to determine which design options manufacturers would likely incorporate at each efficiency level. DOE entered information from the teardowns and expected design options into its cost model to determine associated MPC estimates for products incorporating the expected design options at each efficiency level, as described in chapter 5 of the NOPR TSD. Table IV.7 and Table IV.8 present the cost-efficiency relationships developed for the 2014 NOPR. 79 FR 76142, 76155-76156 (Dec. 19, 2014).

Table IV.7—2014 NOPR Cost-Efficiency Relationship for Standard Residential Dishwashers

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

Incremental manufacturer

production cost

(2013$)

0—Baseline

307

5.00

1

295

4.25

9.52

2

280

3.50

36.53

3

234

3.10

74.72

4—Max-Tech

180

2.22

74.72

Table IV.8—2014 NOPR Cost-Efficiency Relationship for Compact Residential Dishwashers

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

Incremental manufacturer

production cost

(2013$)

0—Baseline

222

3.50

1

203

3.10

8.01

2—Max-Tech

141

2.00

21.50

AHAM commented that it is not clear how DOE chose the representative products for the baseline and higher efficiency levels, and that DOE did not use current information obtained directly from the manufacturers in its analysis, leading to an overstated baseline cost (by $45 to $60) and understated costs for the higher efficiency levels. Specifically, AHAM commented that the overall MPC estimate for Efficiency Level 1 was reasonable, but the incremental cost to reach that efficiency level was too low due to the overestimated baseline cost. According to AHAM, the incremental cost between Efficiency Level 1 and Efficiency Level 2 is relatively small, but the change to Efficiency Level 3 would require significant redesign and cost ($55 to $70 beyond Efficiency Level 2). AHAM stated that it was not able to comment on costs required to reach Efficiency Level 4 due to lack of data for that efficiency level. (AHAM, No. 21 at pp. 3, 6, A-4-A-5) GE supported AHAM's claims that DOE overstated the cost of the baseline unit and understated the costs of reaching the higher efficiency levels (including understating the cost of moving from baseline to Efficiency Level 1). GE also stated that Efficiency Level 3 would require

innovative technology and new platform designs, but the NOPR analysis did not account for this invention risk, investment cost, nor the potential loss of product utility. (GE, No. 26 at p. 2)

AHAM stated that it collected data from manufacturers representing over 90 percent of shipments in 2014 in order to evaluate the design options associated with each efficiency level in the 2014 NOPR. According to AHAM, its data show that 92 percent of models that do not reach Efficiency Level 3 already use hydraulic system optimization and temperature sensors, so manufacturers would not be able to use those options to meet more stringent levels. In addition, AHAM stated that its data show that 70 percent of models in its data set already employ the control strategies DOE described for meeting Efficiency Level 4. AHAM commented that all of the incremental changes DOE concluded manufacturers could use to improve dishwasher designs from Efficiency Level 2 to Efficiency Level 3 are already in use in products that do not meet Efficiency Level 3. AHAM suggested that DOE review design options with manufacturers to understand how they would reach each efficiency level and to update the standards analysis. (AHAM, No. 21 at p. 11) GE commented that many of the technology options identified in the 2014 NOPR are not included in products to improve energy efficiency, which has the effect of overstating the cost of the baseline unit. In addition, GE stated that DOE's analysis did not adequately capture either the technology path or the costs to move from Efficiency Level 2 to Efficiency Level 3 because the design options identified for Efficiency Level 3 are either already utilized in products at lower efficiency levels, or would not be considered as an approach to meet Efficiency Level 3. (GE, No. 26 at p. 2)

After publishing the 2014 NOPR, DOE reviewed its MPC estimates for standard residential dishwashers in its interviews with manufacturers. Topics of discussion included the design options that would be used to reach each efficiency level for standard products as well as the costs associated with those design options. DOE also reviewed its cost estimates for other components not directly related to energy and water performance to improve its estimates of the total MPCs for products at each efficiency level.

At the baseline efficiency level, DOE revised its MPC estimate downwards, as recommended in comments from interested parties and supported by the information gained through manufacturer discussions. In the 2014 NOPR, DOE had incorporated representative cost estimates for non-efficiency components such as racks and detergent dispensers. For this final rule analysis, DOE estimated that manufacturers would use the lowest cost option available. DOE also revised its cost estimates for certain components at the baseline efficiency level based on manufacturer feedback. With these revisions, the updated final rule baseline MPC is approximately $55 lower than the 2014 NOPR estimate. DOE notes that the non-efficiency related component costs that decreased from the 2014 NOPR to this final rule at the baseline level would also decrease at the higher efficiency levels for this final rule because the engineering analysis only considers improvements related to efficiency. As a result, the overall MPCs at each analyzed efficiency level decreased compared to the 2014 NOPR.

For the higher efficiency levels, DOE received manufacturer feedback that it had identified all of the design options manufacturers would use to improve efficiencies. Manufacturers also generally agreed with the design options DOE assumed for Efficiency Level 1 and Efficiency Level 2. However, with the change to the energy consumption at Efficiency Level 2 as described in section IV.C.1.c of this final rule, DOE determined that manufacturers would incorporate a water diverter assembly at Efficiency Level 2. For this final rule analysis, DOE also revised the design options associated with Efficiency Level 3 and Efficiency Level 4. The key changes were shifting condensation drying and an in-sump heater from Efficiency Level 3 to Efficiency Level 4. DOE also determined that incorporating condensation drying at Efficiency Level 4 would require the use of a stainless steel tub. Furthermore, in addition to revising the Efficiency Level 3 and Efficiency Level 4 design options, DOE updated its cost estimates for specific design options at each efficiency level based on manufacturer feedback. This included updating costs for components such as pumps, controls, sensors, and portions of the water system. DOE then adjusted the MPC estimates to reflect 2015 dollars.

There were no substantive changes for the compact dishwasher cost-efficiency relationship other than updating the costs to 2015 dollars. Although the max-tech efficiency level for the compact product class changed compared to the 2014 NOPR analysis, DOE observed that the product offered at the updated max-tech efficiency level appears to have the same design as the previous model, and therefore, DOE expects the MPC to remain unchanged.

Table IV.9 and Table IV.10 provide the updated MPC estimates used for this final rule analysis. Further details of the engineering analysis are provided in chapter 5 of the final rule TSD.

Table IV.9—Final Rule Cost-Efficiency Relationship for Standard Residential Dishwashers

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

Incremental

manufacturer

production

cost

(2015$)

0—Baseline

307

5.00

1

295

4.25

14.76

2

270

3.50

42.20

3

255

3.10

57.61

4—Max-Tech

225

2.40

92.20

Table IV.10—Final Rule Cost-Efficiency Relationship for Compact Residential Dishwashers

Efficiency level

Annual

energy use

(kWh/year)

Per-cycle

water

consumption

(gal/cycle)

Incremental

manufacturer

production

cost

(2015$)

0—Baseline

222

3.50

1

203

3.10

8.50

2—Max-Tech

130

1.70

28.11

D. Markups Analysis

The markups analysis develops appropriate markups (

e.g.,

manufacturer markups, retailer markups, distributor markups, contractor markups) in the distribution chain and sales taxes to convert the manufacturer selling price (MSP) estimates derived based on the MPCs determined in the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis and in the MIA. At each step in the distribution channel, companies mark up the price of the product to cover business costs and profit margin. For residential dishwashers, the main parties in the distribution chain are manufacturers, retailers, and consumers. The manufacturer markup converts MPC to MSP. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission (SEC) 10-K reports filed by publicly-traded manufacturers primarily engaged in appliance manufacturing and whose combined product range includes residential dishwashers.

For retailers, DOE developed separate markups for baseline products (baseline markups) and for the incremental cost of more-efficient products (incremental markups). Incremental markups are coefficients that account for the change in the MSP of higher-efficiency models and the change in the retailer sales price. DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups.

AHAM criticized DOE's reliance on the concept of incremental markups, stating that its theory has been disproved and it is in contradiction to empirical evidence. (AHAM, No. 21 at p. 15) In an attachment to AHAM's comment, Shorey Consulting, Inc. (Shorey Consulting) stated that (1) DOE requires a strong form of economic theory, since it is saying that something will happen solely because theory says it should; and (2) an

a priori

resort to economic theory without clear empirical support is highly problematic. Shorey Consulting interviewed a sample of local/regional and national appliance retailers and reported that, with very few exceptions, they were skeptical that percentage margins will be lower in a post-standards situation. Shorey Consulting concluded that DOE needs to abandon the incremental margin approach and revert to the average margin approach that corresponds to actual industry practice. (AHAM, No. 21 at pp. A-10-A-11)

DOE disagrees that the theory behind the concept of incremental markups has been disproved. The concept is based on the theory that an increase in profitability, which is implied by keeping a fixed markup percentage when the product price goes up, is not likely to be viable over time in a business that is reasonably competitive. DOE agrees that empirical data on markup practices would be desirable, but such information is closely held and difficult to obtain.

Regarding the Shorey Consulting interviews with appliance retailers, although the retailers said that they maintain the same percentage margin after amended standards for refrigerators took effect, it is not clear to what extent the wholesale prices of refrigerators actually increased. There is some empirical evidence indicating that prices may not always increase following a new standard

14 15 16

. If this happened to be the case following the new refrigerator standard, then there is no reason to suppose that percentage margins changed either.

14

Spurlock, C. A. 2013. “Appliance Efficiency Standards and Price Discrimination.” Lawrence Berkeley National Laboratory Report LBNL-6283E.

15

Houde, S. and C. A. Spurlock. 2015. “Do Energy Efficiency Standards Improve Quality? Evidence from a Revealed Preference Approach.” Lawrence Berkeley National Laboratory Report LBNL-182701.

16

Taylor, M., C. A. Spurlock, and H.-C. Yang. 2015. “Confronting Regulatory Cost and Quality Expectations: An Exploration of Technical Change in Minimum Efficiency Performance Standards.”

Resources for the Future (RFF)

15-50.

DOE's analysis necessarily considers a simplified version of the world of appliance retailing; namely, a situation in which other than appliance product offerings, nothing changes in response to amended standards. DOE's analysis assumes that product cost will increase while the other costs remain constant (

i.e.,

no change in labor, material, or operating costs), and asks whether retailers will be able to keep the same markup percentage over time. DOE recognizes that retailers are likely to seek to maintain the same markup percentage on appliances if the price they pay goes up as a result of appliance standards, but DOE contends that over time downward adjustments are likely to occur due to competitive pressures. Some retailers may find that they can gain sales by reducing the markup and maintaining the same per-unit gross profit as they had before the new standard took effect. Additionally, DOE contends that retail pricing is more complicated than a simple percentage margin or markup. Retailers undertake periodic sales and they reduce the prices of older models as new models come out to replace them.

17 18 19

Even if retailers maintain the same percent markup when appliance wholesale prices increase as the result of a standard, retailers may respond to competitive pressures and revert to pre-standard average per-unit profits by holding more frequent sales, discounting products under promotion to a greater extent, or discounting older products more quickly. These factors would counteract the higher percentage markup on average, resulting in much the same effect as a lower percentage markup in terms of the prices consumers actually face on average.

17

Bagwell, K. and Riordan, M.H., 1991. “High and declining prices signal product quality.”

The American Economic Review,

pp. 224-239.

18

Betts, E. and Peter, J.M., 1995. “The strategy of the retail `sale': Typology, review and synthesis.”

International Review of Retail, Distribution and Consumer Research,

5(3), pp. 303-331

19

Elmaghraby, W. and Keskinocak, P., 2003. “Dynamic pricing in the presence of inventory considerations: Research overview, current practices, and future directions.”

Management Science,

49(10), pp. 1287-1309.

DOE acknowledges that its approach to estimating retailer markup practices after amended standards take effect is an approximation of real-world practices that are both complex and varying with business conditions. However, DOE continues to maintain that its assumption that standards do not

facilitate a sustainable increase in profitability is reasonable.

Chapter 6 of the final rule TSD provides details on DOE's development of markups for residential dishwashers.

E. Energy and Water Use Analysis

The purpose of the energy and water use analysis is to determine the annual energy and water consumption of residential dishwashers at different efficiencies in representative U.S. single-family homes, multi-family, and manufactured housing residences, and to assess the energy and water savings potential of increased residential dishwasher efficiency. The analysis estimates the range of energy and water use of residential dishwashers in the field (

i.e.,

as they are actually used by consumers). The energy and water use analysis provides the basis for other analyses DOE performed, particularly assessments of the energy and water savings and the savings in consumer operating costs that could result from adoption of amended or new standards.

DOE determined a range of annual energy use and per-cycle water consumption of residential dishwashers by multiplying the per-cycle energy use and per-cycle water use of each considered design by the number of cycles per year in a representative sample of U.S. households.

DOE analyzed per-cycle energy consumption based on two components: (1) Water-heating energy, and (2) machine electrical energy use which consists of primarily of energy for motor operation and for drying. The largest component of residential dishwasher energy consumption is water-heating energy use, which is the energy required to heat the inlet water to the temperature for dishwashing. The machine energy consists of the motor energy (for water pumping and food disposal), and drying energy consists of heat to dry cleaned dishes.

DOE estimated the per-cycle water-heating energy consumption based on DOE's residential dishwasher test procedure (which refers to this quantity as “water energy consumption”). DOE estimated this energy consumption for residential dishwashers that operate with a nominal inlet hot water temperature of 120 °F, the most common situation in U.S. homes. For a residential dishwasher using electrically heated water, the water-heating energy consumption, expressed in kWh per cycle, is equal to the water consumption per cycle times a nominal water heater temperature rise of 70 °F times the specific heat of water (0.0024 kWh per gallon per °F).

20

For a residential dishwasher using gas-heated or oil-heated water, the calculation is the same, but also incorporates a nominal water heater recovery efficiency of 0.80 for gas-fired water heating and 0.78 for oil-fired water heating.

21

20

The water heater temperature rise of 70 °F assumes an average water heater inlet temperature of 50 °, as specified as the national average in the dishwasher test procedure.

21

The recovery efficiency indicates how efficient a water heater is at heating water. The DOE test procedure for dishwashers specifies a recovery efficiency of 0.80 for gas-fired water heating and 0.78 for oil-fired water heating, which is representative of gas and oil water heaters currently in the housing stock.

DOE estimated the per-cycle energy use by subtracting the annual energy use associated with standby power from the total annual energy use and dividing the result by the national average number of residential dishwasher cycles per year. DOE used the following data from the engineering analysis for each considered efficiency level: The total annual residential dishwasher energy use and the standby power use.

DOE determined the standby annual energy consumption by multiplying the energy use in standby mode per hour by the hours the residential dishwasher is in standby mode. Standby mode hours are the difference between the number of hours in a year and the active hours. Active hours are equal to the number of residential dishwasher cycles per year multiplied by cycle time, estimated to be 1 hour.

22

22

The 1-hour cycle time is an estimate of the typical cycle time for a dishwasher. Actual cycle times vary based on wash selection, load, and model of dishwasher.

GE noted that DOE indicated that the average dishwasher cycle time is one hour, but AHAM data collected from companies representing over 90 percent of the market indicates that shipment-weighted average cycle time is 1.76 hours. (GE, No. 26 at pp. 2-3) DOE notes that the 1-hour estimate is used in calculating the number of standby and off mode hours to determine the overall energy consumption in those modes. Using 1.76 hours has less than a 2-percent change on the number of hours associated with standby mode or off mode, which already represents a small portion of overall energy consumption. So, DOE expects any change to the energy use associated with the assumed cycle time to be negligible. DOE will consider whether revisions to the cycle time are appropriate when it next revises its test procedure for dishwashers.

DOE estimated the per-cycle water use for each efficiency level in its engineering analysis, as described in chapter 5 of the final rule TSD.

For the NOPR, to estimate the average number of dishwasher cycles per year in a representative sample of U.S. households, DOE relied on a review of survey data it used to develop the 2003 residential dishwasher test procedure amendments. Survey data on consumers' dishwasher usage habits were collected from a number of sources including the EIA's 1997

Residential Energy Consumption Survey

(

RECS

),

23

several residential dishwasher manufacturers, detergent manufacturers, energy and consumer interest groups, independent researchers, and government agencies. These data yielded an average usage of 215 cycles per year.

23

RECS is a national sample survey of housing units that collects statistical information on the consumption of and expenditures for energy in housing units along with data on energy-related characteristics of the housing units and occupants. For information on RECS, see

www.eia.doe.gov/emeu/recs/

.

AHAM commented that DOE used outdated assumptions on the number of annual dishwasher cycles, including disregard for recent

RECS

data used extensively by DOE in its analyses in favor of the 1997

RECS

data. (AHAM, No. 21 at p. 15) In an attachment to AHAM's comment, Shorey Consulting stated that DOE should either use the average number of cycles per year from the 2009

RECS,

or substitute the 2009

RECS

data for the 1997 data in the Arthur D. Little (ADL) study. (AHAM, No. 21 at p. A-6)

For the final rule, DOE used an average value based on the 2009

RECS

data rather than the 1997

RECS

average originally used in the review of survey data in the ADL study.

24

These survey data from the ADL study provided a comprehensive data set of point estimates which the

RECS

data alone do not provide, and are therefore more reflective of dishwasher use nation-wide.

24

Arthur D. Little Inc.

Review of Survey Data to Support Revisions to DOE's Dishwasher Test Procedure

https://www.regulations.gov/document?D=EERE-2014-BT-STD-0021-0001.

Of the more than 12,000 households in the 2009

RECS,

almost 7,400 have residential dishwashers. For each household using a residential dishwasher,

RECS

provides data on the number of residential dishwasher cycles in the following bins: (1) Less than once per week, (2) once per week, (3) 2-3 times per week, (4) 4-6 times per week, and (5) at least once per day. DOE converted the above information to annual values. DOE amended its characterization of the

RECS

usage bins to eliminate the gaps in the number of annual cycles that had existed in the

NOPR analysis.

25

The variability of each bin was accounted for by using triangular distributions for the least and most usage bins and uniform distributions for the three middle bins. This revision changed the weighted average annual cycles from the 171 value used for the NOPR to 204 cycles per year. DOE used the 204 cycles derived from the 2009

RECS

(rather than the 245 cycles, the value derived from the 1997

RECS

), and followed the method used to derive the average usage of 215 cycles per year for the DOE test procedure. The substitution of the 2009

RECS

average changed the average cyles per year from 215 to 207, which DOE used for the final rule. The revisions made for the final rule are described in chapter 7 of the final rule TSD.

25

For the lowest bin, usage ranges from 1 to 51 cycles per year; for the bin “once per week,” usage ranges from 51 to 103 cycles per year; for the bin “2-3 times per week,” usage ranges from 104 to 207 cycles per year; for the bin “4-6 times per week,” usage ranges from 208 to 364 cycles per year; and for the highest bin, usage ranges from 365 to 730 cycles per year.

To develop the variability of dishwasher use, DOE used the revised bin ranges from the 2009

RECS.

DOE randomly assigned a specific numerical value from within the appropriate bin to each household in the residential dishwasher sample. Following the method used for the NOPR, DOE then scaled the assigned usage to the revised average from the survey data (207 cycles/year).

Table IV.11 and Table IV.12 show the estimated average annual energy and water use for each efficiency level analyzed for standard and compact residential dishwashers.

Table IV.11—Standard Residential Dishwashers: Average Annual Energy and Water Use by Efficiency Level

Efficiency level

Annual energy use

Water

heating *

(kWh/year)

Machine +

drying

(kWh/year)

Standby †

(kWh/year)

Total

(kWh/year)

Annual

water use

(gal/year)

Baseline

177.0

130.0

0.0

307

1,075.0

1

150.4

140.3

4.3

295

913.8

2

123.9

141.8

4.3

270

752.5

3

109.7

141.0

4.3

255

666.5

4

85.0

135.8

4.3

225

516.0

* Shown for the case of electrically heated water.

† Standby annual energy use based on a dishwasher cycle length of one hour. Standby hours = 8,760 hours −(215 cycles × 1 hour) = 8,545 hours. The 215 cycles is used in the test procedure.

Table IV.12—Compact Residential Dishwashers: Average Annual Energy and Water Use by Efficiency Level

Efficiency level

Annual energy use

Water

heating *

(kWh/year)

Machine +

drying

(kWh/year)

Standby †

(kWh/year)

Total

(kWh/year)

Annual

water use

(gal/year)

Baseline

123.9

78.4

19.7

222

752.5

1

109.7

78.7

14.5

203

666.5

2

60.2

65.5

4.3

130

365.5

* Shown for the case of electrically heated water.

† Standby annual energy use based on a dishwasher cycle length of 1 hour. Standby hours = 8,760 hours −(215 cycles × 1 hour) = 8,545 hours.

Chapter 7 of the final rule TSD provides details on DOE's energy and water use analysis for residential dishwashers.

F. Life-Cycle Cost and Payback Period Analysis

DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for residential dishwashers. The effect of new or amended energy conservation standards on individual consumers usually involves a reduction in operating cost and an increase in purchase price. DOE used the following two metrics to measure consumer impacts:

• The LCC is the total consumer expense of an appliance or product over the life of that product, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy and water use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product.

• The simple 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 simple PBP by dividing the change in purchase cost at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect.

For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-new-standards case, which reflects the estimated efficiency distribution of dishwashers in the absence of new or amended energy conservation standards. In contrast, the simple PBP for a given efficiency level is measured relative to the baseline product.

For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of housing units. As stated previously, DOE developed household samples from the 2009

RECS.

For each sample household, DOE determined the energy and water consumption for residential dishwashers and the appropriate energy price. By developing a representative

sample of households, the analysis captured the variability in energy and water consumption and energy and water prices associated with the use of residential dishwashers.

Inputs to the calculation of total installed cost include the cost of the product—which includes MPCs, manufacturer markups, retailer markups, and sales taxes—and installation costs. Inputs to the calculation of operating expenses include annual energy and water consumption, energy and water prices and price projections, repair and maintenance costs, product lifetimes, and discount rates. DOE created distributions of values for product lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability.

The computer model DOE uses to calculate the LCC and PBP, which incorporates Crystal Ball

TM

(a commercially-available software program), relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and residential dishwasher user samples. The model calculated the LCC and PBP for products at each efficiency level for 10,000 housing units per simulation run.

DOE calculated the LCC and PBP for all consumers as if each were to purchase a new product in the expected year of compliance with amended standards. For purposes of its analysis, DOE estimated that any amended standards would apply to residential dishwashers manufactured 3 years after the date on which the amended standard is published. (42 U.S.C. 6295(g)(10)(B)) DOE estimated publication of a final rule in 2016. Therefore, for purposes of its analysis, DOE used 2019 as the first year of compliance.

Table IV.13 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the final rule TSD and its appendices.

Table IV.13—Summary of Inputs and Methods for the LCC and PBP Analysis *

Inputs

Source/method

Product Cost

Derived by multiplying MPCs by manufacturer and retailer markups and sales tax, as appropriate. Used historical data to derive a price scaling index to project product costs.

Installation Costs

Baseline installation cost determined with data from RS Means. Assumed no change with efficiency level.

Annual Energy Use

Per cycle energy use multiplied by the total cycles per year.

Average number of cycles based on ADL field data and substituting the 2009

RECS

average cycles for the 1997

RECS

average cycles in the final rule analysis.

Variability: Based on the 2009

RECS

normalized to the average number of cycles.

Energy Prices

Electricity: Average and marginal prices based on Edison Electric Institute (EEI) 2014.

Gas: Based on EIA's Natural Gas Navigator for 2014.

Liquified petroleum gas (LPG): Based on EIA's State Energy Consumption, Price and Expenditures Estimates for 2014.

Variability: Regional energy prices determined for 27 regions.

Energy Price Trends

Based on

AEO 2016

price projections.

Water Prices

Based on Raftelis Financial Consultants and the American Water Works Association's 2014 Water and Wastewater Rate Survey

Variability: By census region.

Water Price Trends

Based on Bureau of Labor Statistics (BLS) 2016 water price index.

Repair and Maintenance Costs

Assumed no change with efficiency level.

Product Lifetime

Estimated using survey results from

RECS

(1990, 1993, 1997, 2001, 2005, 2009) and the U.S. Census American Housing Survey (2005, 2007, 2009, 2011, 2013), along with historic data on appliance shipments.

Variability: Characterized using Weibull probability distributions.

Discount Rates

Approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve Board's Survey of Consumer Finances.

Compliance Date

2019.

* References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the final rule TSD.

1. Product Cost

To calculate consumer product costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described above (along with sales taxes). DOE used different markups for baseline products and higher-efficiency products, because DOE applies an incremental markup to the increase in MSP associated with higher-efficiency products.

Economic literature and historical data suggest that the real costs of many products may trend downward over time according to “learning” or “experience” curves. An experience curve analysis focuses on entire industries (often operating globally) and aggregates over many causal factors that may not be well characterized. Experience curve analysis implicitly includes factors such as efficiencies in labor, capital investment, automation, materials prices, distribution, and economies of scale at an industry-wide level.

26

26

Taylor, M. and Fujita, K.S.

Accounting for Technological Change in Regulatory Impact Analyses: The Learning Curve Technique.

LBNL-6195E. Lawrence Berkeley National Laboratory, Berkeley, CA. April 2013.

http://escholarship.org/uc/item/3c8709p4#page-1.

For the default price trend, DOE estimated an experience rate for residential dishwashers based on an analysis of long-term historical data. Producer Price Index (PPI) data specific to residential dishwashers were not available. Instead, DOE used PPI data for miscellaneous household appliances (1988 to 2014) from the Bureau of Labor Statistics (BLS). An inflation-adjusted price index was calculated using the implicit price deflators for gross domestic product (GDP) for the same years. This series was then regressed on the cumulative quantity of residential dishwashers produced, based on a

corresponding series for total shipments of residential dishwashers.

To calculate an experience rate, a least-squares power-law fit was performed on the residential dishwasher price index versus cumulative shipments (including imports). DOE then derived a price factor index, with the price in 2014 equal to 1, to project prices in the year of compliance for amended energy conservation standards in the LCC and PBP analysis, and for the NIA, for each subsequent year through 2048. The index value in each year is a function of the experience rate and the cumulative production through that year. To derive the latter, DOE used projected shipments from the base-case projections made for the NIA (see section IV.G of this final rule). The average annual rate of price decline in the default case is 1.25 percent.

2. Installation Cost

Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. DOE used data from RS Means to estimate the baseline installation cost for residential dishwashers. DOE found no evidence that installation costs would be impacted with increased efficiency levels.

3. Annual Energy and Water Consumption

For each sampled household, DOE determined the energy consumption for residential dishwashers at different efficiency levels using the approach described above in section IV.E of this final rule.

4. Energy Prices

For electricity, DOE used marginal and average prices which vary by season, region, and baseline electricity consumption level. DOE estimated these prices using data published with the Edison Electric Institute (EEI), Typical Bill and Average Rates reports for summer and winter 2014. For the residential sector each report provides, for most of the major investor-owned utilities (IOUs) in the country, the total bill assuming household consumption levels of 500, 750, and 1,000 kWh for the billing period. See Chapter 8 of the final rule TSD for more information on the methodology.

To value energy savings from reduced hot water use by the dishwasher, DOE calculated average residential natural gas prices for each of the 27 geographic regions using data from EIA's “Natural Gas Navigator.”

27

DOE calculated average residential liquified petroleum gas (LPG) prices for each of the 27 geographic regions using data from EIA's “State Energy Consumption, Price, and Expenditures Estimates (SEDS).”

28

DOE calculated average annual regional residential prices by: (1) Estimating an average residential price for each State; and (2) weighting each State by the number of residential consumers. The final rule analysis used the data for 2014.

27

Available at:

http://www.eia.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.html

.

28

Available at:

http://www.eia.gov/state/seds/seds-data-fuel.cfm?sid=US.

To estimate energy prices in future years, DOE multiplied the average regional energy prices by a projection of annual change in national-average residential energy price consistent with the projections found on page E-8 in the

AEO 2016,

which has an end year of 2040.

29

To estimate price trends after 2040, DOE used the average annual rate of change in prices from 2030 to 2040.

29

EIA.

Annual Energy Outlook 2016 with Projections to 2040.

Washington, DC. Available at

www.eia.gov/forecasts/aeo/

. The standards finalized in this rulemaking will take effect before the requirements of the Clean Power Plan (CPP) as modeled in the

AEO 2016

reference case, putting downward pressure on electricity prices relative to the projections in this

AEO 2016

CPP case. Consequently, DOE used the more conservative price projections found in the

AEO 2016

No-CPP case.

5. Water and Wastewater Prices

DOE obtained data on water and wastewater prices for 2014 from the Water and Wastewater Rate Survey conducted by Raftelis Financial Consultants

30

and the water utility association, American Water Works Association (AWWA). The survey, which analyzes each industry separately, covers approximately 318 water utilities and 231 wastewater utilities. The survey includes, for each utility, the cost to consumers of purchasing a given volume of water or treating a given volume of wastewater. The data provide a division of the total consumer cost into fixed and volumetric charges. DOE's calculations use only the volumetric charge to calculate water and wastewater prices, because only this charge is affected by a change in water use. Average water and wastewater prices were estimated for each of four census regions. Each

RECS

household was assigned a water and wastewater price depending on its census region location.

30

AWWA and Raftelis. 2014 Water and Wastewater Rate Survey. (Available at: <

http://www.awwa.org/store/productdetail.aspx?productid=47549801

.)

DOE included well water prices for well water users using information from the National Groundwater Association. Given the similarity in operating costs between septice systems and public sewer systems and the lack of national data on septic system costs, DOE used the wastewater price calculated for consumers on public sewer systems for users of septic systems. Chapter 8 of the final rule TSD provides details on DOE's energy and water price development.

To estimate the future trend for water and wastewater prices, DOE used data on the historic trend in the national water price index (U.S. city average) from 1986 through 2014. DOE used the historic inflation-adjusted water price trend to project water and wastewater prices for residential dishwashers.

AHAM commented that DOE should use water and wastewater prices specific to well water and septic users. (AHAM, No. 21 at p. 16) As mentioned above, DOE included well water prices for well water users. DOE uses the wastewater price calculated for consumers on public sewer systems for users of septic systems. DOE notes that well water and septic users account for a very small fraction of dishwasher consumers.

6. Maintenance and Repair Costs

Repair costs are associated with repairing or replacing dishwasher components that have failed in an appliance; maintenance costs are associated with maintaining the operation of the product. Typically, small incremental increases in product efficiency produce no, or only minor, changes in repair and maintenance costs compared to baseline efficiency products.

For the 2014 NOPR, DOE requested information as to whether maintenance and repair costs are a function of efficiency level and product class. DOE did not assume that more efficient residential dishwashers would have greater repair or maintenance costs.

7. Product Lifetime

Because the lifetime of appliances varies depending on utilization and other factors, DOE develops a distribution of lifetimes from which specific values are assigned to the appliances in the household sample. DOE conducted an analysis of residential dishwasher lifetimes in the field based on a combination of shipments data,

RECS

data on the reported age of the residential dishwashers, and dishwasher stock data reported in the U.S. Census Bureau's American Housing Survey.

31

As described in chapter 8 of the NOPR TSD, the analysis yielded an estimate of

mean age for residential dishwashers of approximately 15 years. It also yielded a survival function that DOE incorporated as a probability distribution in its LCC analysis.

31

http://www.census.gov/programs-surveys/ahs.html.

AHAM stated that the lifetime of dishwashers should be shorter. It cited two references, an AHAM study conducted in 2011 and a report from 2010.

32

(AHAM, No. 21 at p. 16)

32

Welch, Cory and Brad Rogers, 2010.

Estimating the Remaining Useful Lifetime of Residential Appliances.

American Council on Energy Efficient Economy Summer Study on Energy Efficiency in Buildings.

http://aceee.org/files/proceedings/2010/data/papers/1977.pdf.

DOE did not receive data from the AHAM study nor is the AHAM 2011 study publically available. DOE reviewed the 2010 report, which analyzed data from a Natural Resources Canada survey,

33

and fit these data to a Weibull function. The authors of the 2010 report found a shape factor similar to DOE's, but their calculation produced a shorter average lifetime (12.6 years vs. 15.4 years estimated by DOE for the 2014 NOPR). The Canadian survey, which took place in 2003, asked the age of the previous dishwasher when replaced. Such replacements presumably would have taken place during the previous 10-15 years, meaning that the dishwashers were produced even before that. The lifetime of products of that vintage is not relevant to the lifetime of dishwashers produced in the near future. Both the technology and consumer utilization patterns have changed. The evidence suggests that the number of cycles per year was higher in the past, which would lead to a shorter lifetime. Moreover, the accuracy of Natural Resources Canada's survey of dishwasher age is highly uncertain because it was performed only once and did not show the variability of dishwasher vintage over time. In contrast, DOE's method of estimating lifetime uses both historical and more recent data that show how the age of the dishwasher stock has changed over time rather than taking a snap shot of a single year.

33

Natural Resources Canada, Office of Energy Efficiency. 2003. “Survey of Household Energy Use (SHEU), Detailed Statistical Report.”

http://oee.nrcan.gc.ca/publications/statistics/sheu03/pdf/sheu03.pdf.

8. Discount Rates

In the calculation of LCC, DOE applies discount rates appropriate to households to estimate the present value of future operating costs. DOE estimated a distribution of residential discount rates for residential dishwashers based on consumer financing costs and opportunity cost of funds related to appliance energy cost savings and maintenance costs.

To establish residential discount rates for the LCC analysis, DOE identified all relevant household debt or asset classes to approximate a consumer's opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board's Survey of Consumer Finances

34

(SCF) for 1995, 1998, 2001, 2004, 2007, 2010, and 2013. Using the SCF and other sources, DOE developed a distribution of rates for each type of debt and asset by income group to represent the rates that may apply in the year in which amended standards would take effect. DOE assigned each sample household a specific discount rate drawn from one of the distributions. The average rate across all types of household debt and equity and income groups, weighted by the shares of each type, is 4.34 percent. See chapter 8 in the final rule TSD for further details on the development of consumer discount rates.

34

The Federal Reserve Board, Survey of Consumer Finances 1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010, 2013.

http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.

AHAM suggested that DOE should use marginal rather than average consumer cost of capital for its discount rate. It pointed to DOE's assumption that, in the long term, consumers are likely to draw from or add to their collection of debt and asset holdings approximately in proportion to their current holdings when future expenditures are required or future savings accumulate, and stated that DOE does not analyze whether consumers' actual long-term marginal cost of funds approximates their current mix of funds. It stated that in looking at the percentage share of consumer balance sheets made up of different types of assets and debts, DOE does not consider whether consumers could add to any of these asset or liability classes and/or what it would mean in the savings/consumption trade-off to do so. It stated that the percentages obscure the absolute magnitude of the amounts available to consumers and the relative ability to generate additional funds from the various sources. It stated that forms of consumer debt such as credit card, other installment loan, or other residential loan should be considered as the only marginal source of funds. It stated that the weighted average real cost of credit card, other installment loan, other residential loan, and other line of credit, which would be 10-12 percent depending on income group, would provide a more accurate estimate of the marginal cost of capital to consumers. (AHAM, No. 21 at pp. A-11-12)

DOE notes that several stakeholders have suggested the use of a marginal discount rate in the LCC analysis, defined as the interest rate applicable to the specific method of financing an appliance purchase. Generally, this is assumed to be the interest rate on credit card purchases. For the reasons explained in the following paragraph, DOE does not use a marginal discount rate in the LCC analysis.

The LCC analysis estimates the net present value of the financial impacts of a given standard level over the lifetime of the product (

i.e.,

30 years) assuming the standard-compliant product has already been installed. The appropriate discount rate in this context is the consumer's opportunity cost of increased spending today on a more efficient product with a return in the form of reduced operating costs in the future. The opportunity cost of an investment is the return a consumer could make on that upfront incremental cost by applying it to another investment option. For example, a consumer could pay for an appliance with cash, thereby forgoing potential earnings arising from interest or forgoing the opportunity to pay off existing debt. Alternatively, a consumer could take on debt by using credit to either pay for the purchase of the more efficient appliance, or could put that credit towards an alternative investment option. If a consumer pays for the incremental up-front cost of a more efficient appliance using such debt, they will face the interest rate relevant for that purchase for however long the principal remains in that line of credit. However, the consumer will receive a stream of future benefits in the form of energy expenditure savings that they could either put towards paying off that or other debts, or towards assets, depending on the restrictions they face in their debt payment requirements and the relative size of the interest rates on their debts and assets.

Consumers, however, do not tend to shift all of their funds to assets with the highest interest rate, nor away from debt types with the highest interest rate. Examination of many years of data from the SCF

35

suggests that, at the time of each survey, the vast majority of households held multiple types of debt

and/or assets. This tendency is observed across numerous cross-sections of the population, such as income groups, geographic locations, and age of household head. This is because consumers hold a portfolio of debts and assets for a reason. Different credit and asset options reflect differing levels of risk, availability, or other factors.

35

Board of Governors of the Federal Reserve System (1995, 1998, 2001, 2004, 2007, 2010, 2013). “Survey of Consumer Finances.” Retrieved August, 2015, from

http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html

.

When assessing the net present value of an investment in energy efficiency, the marginal interest rate alone (assuming it were the interest rate on the credit card used to make the purchase, for example) would only be the relevant discount rate if either: (1) The consumer were restricted from rebalancing debt and asset holdings (by redistributing debt and assets based on the relative interest rates available) over the entire time period modeled in the LCC analysis; or (2) the risk associated with an investment in energy efficiency was at a level commensurate with that reflected by credit card interest rates (

i.e.,

that the risk premium required for an investment in energy efficiency was very high). Below each of these points is addressed in turn:

(1) In reference to (1), above, the following provides quantitative justification for the assertion that even if an appliance is purchased with a credit card, few people are likely to keep that purchase on their credit card, thereby paying 20 percent interest on the purchase throughout the product lifetime, while only paying off that purchase with the operating cost savings realized from the more efficient product. The U.S. Bureau of Economic Analysis (BEA) tracks “non-mortgage interest paid by households.”

36

Non-mortgage interest paid by households peaked in the recession, reflecting the fact that it was harder for people to pay down credit cards during that time, then returned to more or less flat pre-recession levels thereafter. The fact that interest payments have this flat trend over a long-term time horizon, even while people are using credit cards to make purchases more and more frequently,

37

implies that credit card debt itself is not increasing on average, and therefore people must be paying off those credit card purchases and rebalancing their portfolio of debt and assets over time.

36

U.S. Bureau of Economic Analysis. (2015). “Table 7.11. Interest Paid and Received by Sector and Legal Form of Organization.” Retrieved June, 2016, from

http://www.bea.gov/iTable/iTable.cfm?ReqID=9#reqid=9&step=3&isuri=1&903=288

.

37

New, C. (2012). “Cash Dying As Credit Card Payments Predicted To Grow In Volume.” Retrieved June, 2016, from

http://www.huffingtonpost.com/2012/06/07/credit-card-payments-growth_n_1575417.html

.

In addition, a Federal Reserve report addressing consumer credit card use and payment behavior summarizes a 1999-2000 survey, revealing, that among bank-type credit card users,

38

a substantial share of consumers (about two-thirds) regularly pay any and all outstanding credit card balance in full, and a vast majority of the remaining one-third pay more than the minimum payment due.

39

Of those that only pay the minimum payment due, most do not continue incurring additional debt on that credit card.

38

Bank-type credit cards (

i.e.,

cards issued by a bank rather than a retail store, gas company, and other such issuers) represent the majority of credit cards in use. Data from the 1990s, presented earlier in this Federal Reserve report, suggest that consumers are approximately twice as likely to carry a balance on a bank-type credit card as compared to on credit cards from other issuers.

39

Durkin, T. A. (2000). “Credit Cards: Use and Consumer Attitudes, 1970-2000.” Federal Reserve Bulletin September 2000: 623-634.

(2) With respect to a reasonable risk premium applicable to an investment in energy efficiency, DOE notes that there is some uncertainty surrounding returns to an energy efficiency investment (

e.g.,

fluctuations in energy prices). While there is limited data available on the risk associated with specific types of energy efficiency investments, Mills

et al.

(2006)

40

present results from an analysis demonstrating that the risk associated with the returns from investing in an ENERGY STAR Building are in line with that of long-term government bonds (

i.e.,

quite low). There is no reason to assume that the risk premium required for an investment in energy efficiency should be particularly high, and certainly not high enough to justify a required rate of return at a level commensurate with a credit card interest rate.

40

Mills, E., Kromer, S., Weiss, G. and Mathew, P.A., 2006. “From volatility to value: analysing and managing financial and performance risk in energy savings projects.” Energy Policy, 34(2), pp. 188-199.

DOE concludes that the best proxy for the appropriate discount rate to assess the value of an investment in a higher efficiency product in the context of the LCC analysis is the weighted average interest rate from the portfolio of debts and assets held by that household. This value best reflects the opportunity cost of the upfront investment in efficiency to that individual household, and assumes that the household will be able to rebalance their portfolio of debt and asset holdings over the long-term timeframe of the LCC analysis.

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

To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution (market shares) of product efficiencies in the no-new-standards case (

i.e.,

the case without amended or new energy conservation standards).

DOE first considered the historical shipments-weighted base-case efficiency trend that was developed for the previous rulemaking for residential dishwashers based on data submitted by AHAM. Based on these historical data, DOE projected a future decline in annual energy use of new dishwashers using an exponential function. This projection was not performed for compact dishwashers, because too few data were available. DOE then conducted an efficiency distribution anslysis for dishwashers based on DOE's Compliance Certification Database for residential dishwashers. The estimated market shares for the no-new-standards case for residential dishwashers are shown in Table IV.14. See chapter 8 of the final rule TSD for further information on the derivation of the efficiency distributions.

Table IV.14—Residential Dishwasher Base-Case Efficiency Distribution by Product Class in 2019

Efficiency level

Standard

Annual

energy use

(kWh/year)

% of

shipments

Compact

Annual

energy use

(kWh/year)

% of

shipments

Baseline

307

6.5

222

37.0

1

295

31.2

203

51.9

2

270

51.6

130

11.1

3

255

10.2

4

225

0.4

10. Payback Period Analysis

The PBP is the amount of time it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. PBPs are expressed in years. PBPs that exceed the life of the product mean that the increased total installed cost is not recovered in reduced operating expenses.

The inputs to the simple PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. The simple PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed.

As noted above, 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 first year's energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of the first year's energy savings by calculating the energy savings in accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price projection for the year in which compliance with the amended standards would be required.

G. Shipments Analysis

DOE uses projections of annual product shipments to calculate the national impacts of potential amended energy conservation standards on energy use, NPV, and future manufacturer cash flows.

41

The shipments model takes an accounting approach, tracking market shares of each product class and the vintage of units in the stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of in-service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock.

41

DOE uses data on manufacturer shipments as a proxy for national sales, since aggregate data on sales are lacking. In general one would expect a close correspondence between shipments and sales.

New housing projections and residential dishwasher saturation data comprised the two primary inputs for DOE's estimates of new construction shipments. “New housing” includes newly-constructed single-family and multi-family units (referred to as “new housing completions”) and mobile home placements. For new housing completions and mobile home placements, DOE used

AEO 2016

for 2012-2040, and froze new housing starts at the level in 2040.

DOE calibrated the shipments model against historical residential dishwasher shipments. In general, DOE estimated replacements using a product retirement function developed from product lifetime. DOE based the retirement function on a probability distribution for the product lifetime that was developed in the LCC analysis. The shipments model assumes that no units are retired below a minimum product lifetime and that all units are retired before exceeding a maximum product lifetime.

For the final rule, DOE applied price and efficiency elasticity parameters to estimate the effect of new standards on residential dishwasher shipments. DOE estimated the price and efficiency elasticity parameters from a regression analysis that incorporated shipments, purchase price, and efficiency data specific to several residential appliances, including clothes washers, dishwashers, freezers, refrigerators, and room air conditioners, during 1989-2009. Based on evidence that the price elasticity of demand is significantly different over the short run and long run for other consumer goods (

i.e.,

automobiles), A review of the literature shows evidence from numerous markets for durable goods including automobiles, electronics, and refrigerators, suggests long run price elasticity of demand is smaller in magnitude than short run price elasticity of deman; thus a declining trend over time is applied to the estimate of price elasticity for appliances following a price increase subsequent to a standard, therefore, DOE assumed that these elasticities decline over time.

42 43 44

DOE estimated shipments in each standards case using the price and efficiency elasticity along with the change in the product price and operating costs between a standards case and the no-new-standards case. See chapter 9 of the final rule TSD for further information.

42

Gowrisankaran, Gautam and Marc Rysman. Dynamics of consumer demand for new durable goods. NBER Working Paper 14737, National Bureau of Economic Research, February 2009.

http://www.nber.org/papers/w14737

.

43

Hymans, Saul H., Gardner Ackley, and F. Thomas Juster. Consumer durable spending: Explanation and prediction. Brookings Papers on Economic Activity, 1970(2):173-206, 1970.

http://www.jstor.org/stable/2534239

.

44

Parker, Philip and Ramya Neelamegham. Price elasticity dynamics over the product life cycle: A study of consumer durables. Marketing Letters, 8(2):205-216, April 1997.

http://link.springer.com/article/10.1023%2FA%3A1007962520455

.

H. National Impact Analysis

The NIA assesses the NES and the national NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels.

45

DOE calculates the NES and NPV based on projections of annual product shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses.

46

For the present analysis, DOE projected the energy savings, operating cost savings, product costs, and NPV of consumer benefits over the lifetime of residential dishwashers sold from 2019 through 2048.

45

The NIA accounts for impacts in the 50 States and the U.S. territories.

46

For the NIA, DOE adjusts the installed cost data from the LCC analysis to exclude sales tax, which is a transfer.

DOE evaluates the impacts of new and amended standards by comparing a case without such standards with standards-case projections. The no-new-standards

case characterizes energy use and consumer costs for each product class in the absence of new or amended energy conservation standards. For this projection, DOE considers historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. DOE compares the no-new-standards case with projections characterizing the market for each product class if DOE adopted new or amended standards at specific energy efficiency levels (

i.e.,

the TSLs or standards cases) for that class. For the standards cases, DOE considers how a given standard would likely affect the market shares of products with efficiencies greater than the standard.

DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs.

Table IV.15 summarizes the inputs and methods DOE used for the NIA analysis for the final rule. Discussion of these inputs and methods follows the table. See chapter 10 of the final rule TSD for further details.

Table IV.15—Summary of Inputs and Methods for the National Impact Analysis

Inputs

Method

Shipments

Annual shipments from shipments model.

Compliance Date of Standard

2019.

Efficiency Trends

No-new-standards case: Efficiency distributions are projected based on historical efficiency data.

Standards cases: Use a “roll-up” and shift scenario.

Annual Energy/Water Consumption per Unit

Annual weighted-average values are a function of energy/water use at each TSL.

Total Installed Cost per Unit

Annual weighted-average values are a function of cost at each TSL.

Incorporates projection of future product prices based on historical data.

Annual Energy/Water Cost per Unit

Annual weighted-average values as a function of the annual energy/water consumption per unit and energy/water prices.

Repair and Maintenance Cost per Unit

Annual values do not change with efficiency level.

Energy Prices Trend

AEO 2016

projections (to 2040) and extrapolation through 2048.

Water Prices Trend

Linear extrapolation of inflation-adjusted historical national water price index.

Energy Site-to-Primary Conversion

A time-series conversion factor based on

AEO 2016.

Discount Rate

Three and seven percent.

Present Year

2016.

1. Product Efficiency Trends

A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.9 of this final rule describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the first year of the projection period. To project the trend in efficiency for residential dishwashers in the no-new-standards case, DOE assumed that in the base case, shipment-weighted annual energy use will decrease from 278 kWh/year in 2019 to 275 kWh/year in 2048 for standard dishwashers. The approach is further described in chapter 10 of the final rule TSD.

For the standards cases, DOE used a “roll-up” scenario to establish the shipment-weighted efficiency for the year that standards are assumed to become effective (2019). In this scenario, the market shares of products in the no-new-standards case that do not meet the standard under consideration would “roll up” to meet the new standard level, and the market share of products above the standard would remain unchanged.

For standard dishwasher efficiency after 2019, DOE assumed an efficiency shift scenario in which efficiency increases until reaching a value of 275 kWh/year and then remaining at that level for the remainder of the analysis period. DOE assumed that projected efficiencies for the compact dishwasher product class would remain frozen at the 2019 efficiency level until the end of the analysis period.

2. National Energy and Water Savings

The national energy and water savings analysis involves a comparison of national energy and water consumption of the considered products in each potential standards case (TSL) with consumption in the case with no new or amended energy conservation standards. DOE calculated the national energy and water consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy and water consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new-standards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy (

i.e.,

the energy consumed by power plants to generate site electricity) using annual conversion factors derived from

AEO 2016.

Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis.

In 2011, in response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the NIA and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in which DOE explained its determination that EIA's National Energy Modeling System (NEMS) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector

47

that EIA uses to prepare its

AEO.

The approach used for deriving FFC measures of energy use and emissions is described in appendix 10B of the final rule TSD.

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For more information on NEMS, refer to

The National Energy Modeling System: An Overview,

DOE/EIA-0581 (2009) (Oct. 2009) (Available at:

http://www.eia.gov/forecasts/aeo/nems/overview/appendix.html

).

3. Net Present Value Analysis

The inputs for determining the NPV of the total costs and benefits experienced by consumers are: (1) Total annual installed cost; (2) total annual savings in operating costs; and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period.

As discussed in section IV.F.1 of this final rule, DOE developed residential dishwasher price trends based on historical PPI data. DOE applied the same trends to project prices for each product class at each considered efficiency level. By 2048, which is the end date of the projection period, the average residential dishwasher price is projected to drop 45 percent relative to 2015. DOE's projection of product prices is described in appendix 10C of the final rule TSD.

To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of different product price projections on the consumer NPV for the considered TSLs for residential dishwashers. In addition to the default price trend, DOE considered two product price sensitivity cases: (1) A high price decline case based on an exponential fit approach using PPI data for 1991 to 2014; (2) a low price decline case based on an experience rate derived using PPI and shipments data for 2001 to 2014. The derivation of these price trends and the results of these sensitivity cases are described in appendix 10C of the final rule TSD.

The operating cost savings are equal to the energy and water cost savings, which are calculated using the estimated energy and water savings in each year and the projected price of the appropriate form of energy and the projected price of water. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average residential energy price changes consistent with the projections found on page E-8 in

AEO 2016,

48

which has an end year of 2040. To estimate price trends after 2040, DOE used the average annual rate of change in prices from 2020 to 2040. Water prices and price trends were estimated based on the sources discussed in section IV.F.5. As part of the NIA, DOE also analyzed scenarios that used inputs from the

AEO 2016

cases that have higher and lower energy price trends and the NIA results based on these cases are presented in appendix 10D of the final rule TSD.

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The standards finalized in this rulemaking will take effect before the requirements of the Clean Power Plan (CPP) as modeled in the

AEO 2016

reference case, putting downward pressure on electricity prices relative to the projections in this AEO 2016 CPP case. Consequently, DOE used the more conservative price projections found in the

AEO 2016

No-CPP case.

In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this final rule, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis.

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The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a consumer's perspective. The 7-percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the “social rate of time preference,” which is the rate at which society discounts future consumption flows to their present value.

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OMB. Circular A-4: Regulatory Analysis,” (Sept. 17, 2003), section E (Available at:

www.whitehouse.gov/omb/memoranda/m03-21.html

).

The Associations commented that the Department's own calculations in the “adverse” case scenario showed that there is a potential for a net loss under the Proposed Rule and would not satisfy the economic feasibility test required by governing law. (The Associations, No. 17 at p. 4) DOE assumes that the term “economic feasibility” used by the Associations refers to the two measures by which a potential standard level is evaluated: Economic justification and technological feasibility. DOE further assumes that with the term “adverse case scenario,” the Associations are referring to the LCC results that show the impacts of the LCC analysis: The amount of LCC savings and the percentage of the population that experiences a net cost. DOE evaluates the economic justification of each TSL using efficiency levels with positive LCC savings as the basis for the evaluation. Efficiency levels with negative LCC savings are not analyzed in the NIA and are not considered in the development of potential standards.

I. Consumer Subgroup Analysis

In analyzing the potential impact of new or amended standards on consumers, DOE evaluates the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this final rule, DOE analyzed the impacts of the considered standard levels on low-income households. Chapter 11 in the final rule TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview

DOE performed an MIA to estimate the financial impacts of amended energy conservation standards on manufacturers of residential dishwashers and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of projected industry cash flows, the INPV, investments in research and development (R&D) and manufacturing capital, and domestic manufacturing employment. Additionally, the MIA seeks to determine how amended energy conservation standards might affect manufacturing employment, capacity, and competition, as well as how standards contribute to the overall regulatory burden on manufacturers. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers.

The quantitative part of the MIA primarily relies on the GRIM, an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, unit production costs, product shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant products. The key GRIM outputs are the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital, and the impact to domestic manufacturing employment. The model uses standard accounting principles to estimate the impacts of more-stringent energy conservation standards on a given industry by comparing changes in INPV and domestic manufacturing employment between a no-new-standards case and

the various standards cases (TSLs). To capture the uncertainty relating to manufacturer pricing strategies following amended standards, the GRIM estimates a range of possible impacts under different markup scenarios.

The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard's impact on manufacturing capacity, competition within the industry, the cumulative impact of other DOE and non-DOE regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the final rule TSD.

DOE conducted the MIA for this rulemaking in three phases. In Phase 1 of the MIA, DOE prepared a profile of the residential dishwasher manufacturing industry based on the market and technology assessment, interviews conducted in support of the 2012 Direct Final Rule, and publicly-available information. This included an analysis of residential dishwasher manufacturers that DOE used to derive preliminary financial inputs for the GRIM (

e.g.,

revenues; materials, labor, overhead, and depreciation expenses; selling, general, and administrative expenses (SG&A); and R&D expenses). DOE also used public sources of information to further calibrate its initial characterization of the residential dishwasher manufacturing industry, including company filings of form 10-K from the SEC

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, corporate annual reports, the U.S. Census Bureau's

Economic Census,

and reports from Hoovers.

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Based on its analysis, DOE used the same industry average financial parameters developed in support of the 2012 D

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