# Energy Conservation Program for Appliance Standards: Proposed Procedures for Use in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-01854

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** February 13, 2019
- **Citation:** 84 FR 3910

## Text

DEPARTMENT OF ENERGY
10 CFR Parts 430 and 431
[EERE-2017-BT-STD-0062]
RIN 1904-AD38
Energy Conservation Program for Appliance Standards: Proposed Procedures for Use in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment

AGENCY:

Office of Energy Efficiency and Renewable Energy (EERE), Department of Energy.

ACTION:

Notice of proposed rulemaking (NOPR) and request for comment.

SUMMARY:

The U.S. Department of Energy (“DOE” or “the Department”) proposes to update and modernize the Department's current rulemaking methodology titled, “Procedures, Interpretations, and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products” (“Process Rule”). In overview, in this document, DOE is proposing to clarify that the Process Rule applies to the establishment of new or revised energy conservation standards and test procedures for both consumer products and commercial/industrial equipment. This proposed rule would make the specified rulemaking procedures binding on DOE, and it would also revise language in certain provisions to make it consistent with the Energy Policy and Conservation Act of 1975 (“EPCA”), as amended, and other applicable law. It also proposes to expand early opportunities for public input on the Appliance Program's priority setting and rulemaking activities, to define a significant energy savings threshold for updating energy conservation standards, to commit to publishing final test procedures at least 180 days in advance of a standards proposal, and to delineate procedures for rulemaking under the separate direct final rule and negotiated rulemaking authorities, among other issues. DOE may consider additional changes to the Process Rule in a future proceeding. In addition to requesting written comments on its proposal, DOE will also hold a public meeting at DOE Headquarters to discuss this proposal and obtain additional input.

DATES:

Comments:
DOE will accept comments, data, and information regarding this notice of proposed rulemaking before and after the public meeting, but no later than April 15, 2019. See section V, “Public Participation,” for details.

Meeting:
DOE will hold a public meeting on Thursday, March 21, 2019, from 9 a.m. to 4:30 p.m. The meeting will also be broadcast as a webinar. See section V, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.

ADDRESSES:

The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW, Washington, DC 20585.

Interested persons are encouraged to submit comments, identified by “Process Rule NOPR” and docket number EERE-2017-BT-STD-0062 and/or the regulatory information number (RIN) 1904-AD38. Comments may be submitted using any of the following methods:

•
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.

•
Email: Process.Rule@ee.doe.gov.
Include “Process Rule NOPR” and docket number EERE-2017-BT-STD-0062 and/or RIN number 1904-AD38 in the subject line of the message. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption.

•
Postal Mail:
Sofie Miller, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, 1000 Independence Avenue SW, Washington, DC 20585, Room 6A-013, Washington, DC, 20585. If possible, please submit all items on a compact disc (CD), in which case it is not necessary to include printed copies.

•
Hand Delivery/Courier:
Sofie Miller, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, 1000 Independence Avenue SW, Washington, DC 20585. Telephone: (202) 586-5000. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

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

Docket:
The docket for this activity, which includes
Federal Register
notices, comments, and other supporting documents/materials, is available for review at
http://www.regulations.gov.
All documents in the docket are listed in the
http://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.

The docket web page can be found at:
https://www.regulations.gov/docket?D=EERE-2017-BT-STD-0062.
The docket web page contains instructions on how to access all documents, including public comments, in the docket. See section V, “Public Participation,” for further information on how to submit comments through
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Sofie Miller, Senior Advisor, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, 1000 Independence Avenue SW, Washington, DC 20585. Telephone: (202) 586-5000. Email:
Process.Rule@ee.doe.gov.

Francine Pinto, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585. Telephone: (202) 586-7432. Email:
Francine.Pinto@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of Proposal

II. Introduction

A. Authority

B. Background on the Process Rule

III. Discussion of Specific Revisions to the Process Rule

A. The Process Rule Will Be Binding on the Department of Energy

B. The Process Rule Will Apply to Both Consumer Products and Commercial Equipment

C. The Application of the Process Rule to ASHRAE Equipment

D. Priority Setting

E. Coverage Determinations

F. Early Stakeholder Input to Determine the Need for Rulemaking

1. Standards

a. Avenues for Early Stakeholder Input: Early Assessment Review

b. Other Avenues for Early Stakeholder Input

c. Elimination of ANOPRs From the Process Rule

d. Decision-Making Process for Issuing a Determination Not To Amend Current Standards

2. Test Procedures

G. Significant Savings of Energy Threshold

H. Finalization of Test Procedures Prior to Issuance of a Standards NOPR

I. Adoption of Industry Standards

J. Direct Final Rules

1. DOE's Authority Under the DFR Provision

2. Interested Persons Fairly Representative of Relevant Points of View

3. Adverse Comments

K. Negotiated Rulemaking

1. Utilizing the Negotiated Rulemaking Process, Including the Establishment of the Appliance Standards and

Rulemaking Federal Advisory Committee (ASRAC)

2. Inclusion of Negotiated Rulemaking in the Process Rule

3. Suggestions Regarding Implementation of Negotiated Rulemakings

L. Other Revisions and Issues

1. DOE's Analytical Methodologies, Generally

2. Cumulative Regulatory Burden

3. Should DOE Conduct Retrospective Reviews of the Energy Savings and Costs of Energy Conservation Standards?

4. Certification, Compliance, and Enforcement (CCE)-Related Issues

IV. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under Executive Order 13771

C. Review Under the Regulatory Flexibility Act

D. Review Under the Paperwork Reduction Act of 1995

E. Review Under the National Environmental Policy Act of 1969

F. Review Under Executive Order 13132

G. Review Under Executive Order 12988

H. Review Under the Unfunded Mandates Reform Act of 1995

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

J. Review Under Executive Order 12630

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

L. Review Under Executive Order 13211

M. Review Under the Information Quality Bulletin for Peer Review

V. Public Participation

A. Attendance at the Public Meeting

B. Procedure for Submitting Prepared General Statements for Distribution

C. Conduct of the Public Meeting

D. Submission of Comments

VI. Approval of the Office of the Secretary

I. Summary of Proposal

DOE generally uses the procedures set forth in its Process Rule (found in 10 CFR part 430, subpart C, appendix A) when prescribing energy conservation standards for both consumer products and commercial equipment pursuant to the Energy Policy and Conservation Act of 1975 (Pub. L. 94-163, codified at 42 U.S.C. 6291,
et seq.
). In this document, DOE is proposing to update and modernize its Process Rule by addressing the following major topics: (1) Emphasizing that the procedures outlined in the Process Rule are binding on the agency; (2) formalizing DOE's past practice of applying the Process Rule to both consumer products and commercial equipment; (3) clarifying the Process Rule's application with regard to equipment covered by ASHRAE Standard 90.1; (4) expanding the Process Rule to test procedure rulemakings, as well as energy conservation standards rulemakings; (5) committing to both an “early look” process and other robust methods for early stakeholder input; (6) defining a significant energy savings threshold that must be met before DOE will update an energy conservation standard; (7) clarifying DOE's commitment to publish a test procedure six months before a related standards NOPR; (8) articulating DOE's authority under the Negotiated Rulemaking Act and EPCA's direct final rule (“DFR”) provision, while clarifying that negotiated rulemakings and DFRs are two separate processes with their own sets of requirements; and (9) addressing other miscellaneous issues. DOE welcomes written comments from the public on any subject within the scope of this proposal (including related topics not specifically raised in this NOPR).

DOE continues to contemplate additional topics regarding its process for undertaking appliance standards rulemakings that may lead to additional rulemaking proceedings to update the Process Rule. In particular, DOE continues to think about potential changes to its analytical methodologies and models for assessing the costs and benefits of appliance standards rulemakings.

II. Introduction

A. Authority

In overview, the Department of Energy's Process Rule was developed to guide implementation of the Appliance Standards Program, which is conducted pursuant to Title III, Parts B
1

of the Energy Policy and Conservation Act of 1975 (“EPCA” or “the Act”), Public Law 94-163 (42 U.S.C. 6291-6309, as codified), for consumer products, and Part C
2

for certain industrial equipment (42 U.S.C. 6311-6317, as codified), added by Public Law 95-619, Title IV, § 441(a).
3

1
For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A.

2
For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.

3
All references to EPCA in this document refer to the statute as amended through the EPS Improvement Act of 2017, Public Law 115-115 (January 12, 2018).

Under EPCA, DOE's energy conservation program for covered products consists essentially of four parts: (1) Testing; (2) labeling; (3) the establishment of Federal energy conservation standards; and (4) certification and enforcement procedures. The Federal Trade Commission (“FTC”) is primarily responsible for labeling, and DOE implements the remainder of the program. Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product and covered equipment. (42 U.S.C. 6293 and 6314) Manufacturers of covered products and covered equipment must use the prescribed DOE test procedure as the basis for certifying to DOE that their products and equipment comply with the applicable energy conservation standards adopted under EPCA and when making any other representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c), 6295(s) 6314(a), and 6316(a)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA.
Id.

In addition, pursuant to EPCA, any new or amended energy conservation standard for covered products (and at least certain types of equipment) 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 6316(a)) Furthermore, the new or amended standard must result in a significant conservation of energy (42 U.S.C. 6295(o)(3)(B), 6313(a)(6), and 6316(a)), and comply with any other applicable statutory provisions.

B. Background on the Process Rule

DOE conducted a formal effort between 1995 and 1996 to improve the process it follows to develop energy conservation standards for covered appliance products. This effort involved many different stakeholders, including manufacturers, energy-efficiency advocates, trade associations, State agencies, utilities, and other interested parties. The result was the publication of a final rule on July 15, 1996, titled, “Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products.” 61 FR 36974. This document was codified at 10 CFR part 430, subpart C, appendix A.
4

4
As explained in the final rule for the Process Rule, this rule came within the scope of the Administrative Procedure Act's exemption from notice-and-comment rulemaking for procedural rules at 5 U.S.C. 553(b)(A). 61 FR 36974, 36980 (July 15, 1996). Although DOE's current rulemaking to consider potential revisions to the Process Rule might similarly warrant exemption from notice-and-comment requirements, DOE nonetheless seeks input from the interested public regarding potential avenues to improve DOE's procedures.

The Process Rule was designed to provide guidance to stakeholders as to how DOE would implement its rulemaking responsibilities under EPCA for the Appliance Program. As part of this enhanced process, supplementing the traditional notice-and-comment rulemaking process under the

Administrative Procedure Act (APA), DOE has invited and promoted extensive stakeholder involvement in its energy conservation standards and test procedure rulemakings. An important legacy of the Process Rule has been both to educate and learn from the many stakeholders who participate in DOE's appliance rulemaking efforts. Some of the successes that have resulted from the Process Rule include: (1) More involvement of a wider variety of stakeholders in DOE's appliance rulemaking process; (2) improved technical analyses in support of the appliance rules due to enhanced input from stakeholders at an early stage of the rulemaking process; (3) improved solutions to issues and problems because of increased stakeholder involvement; and (4) more open dialogue and improved relationships between stakeholders and also between stakeholders and DOE.

While there have been many positive results from the Process Rule, DOE proposes to further improve the Process Rule in this document. These proposals would address: (1) Processes that may no longer track the current legal requirements of EPCA; (2) processes that do not take into account the maturation of DOE's appliance program to the point that modernization is necessary; (3) that DOE has not rigorously followed the Process Rule in many instances; (4) the need for regulatory reform to reduce the costs and burdens of rulemaking; and (5) the need to clarify that the Process Rule applies to commercial/industrial equipment. In evaluating and seeking to expand the positive impacts of the Process Rule, as well as remedying the above-described negative developments, this proposal will address the changed landscape of the rulemaking process under EPCA, and endeavor to modernize the Process Rule.
5

5
In November 2010, DOE also issued a statement intended to expedite its rulemaking process. The statement is currently available at
http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/changes_standards_process.pdf.
In this proposal, DOE is undertaking a thorough review of its Process Rule to determine the procedures it will follow in considering new or amended energy conservation standard and test procedures. As a result, if adopted, this proposed rule would supersede those portions of the November 2010 statement pertaining to the elimination of these early rulemaking steps.

On December 18, 2017, DOE issued an RFI (December 2017 RFI) to address potential improvements to DOE's Process Rule so that it could to achieve meaningful burden reduction while continuing to achieve the Department's statutory obligations in the development of appliance energy conservation standards and test procedures. 82 FR 59992. Originally, the comment period for this RFI was scheduled to end on February 16, 2018. However, several stakeholders requested a 30-day extension to file comments. (Letter dated January 29, 2018 from Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”), the Association of Home Appliance Manufacturers (“AHAM”), and the National Electrical Manufacturers Association (“NEMA”), to John Cymbalsky, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Buildings Technologies Program). Consequently, DOE extended the comment period until March 2, 2018. 83 FR 5374 (Feb. 7, 2018). Subsequently, DOE posted a notice on its website on March 2, 2018, which stated that the comment period was further extended until March 5, 2018, due to a brief closure of the Federal government in the Washington DC area.

To explore the issues in the December 2017 RFI, DOE convened a public meeting on January 9, 2018, which was attended by a wide range of stakeholders. The Department also simultaneously hosted a webinar, which was attended by approximately 150 additional persons. At this all-day public meeting, a wide variety of topics were addressed, including, but not limited to: (1) Direct final rules; (2) negotiated rulemaking; (3) elimination of the statutory requirement for an advance notice of proposed rulemaking and alternate means to gather additional information early in the process; (4) application of the process rule to commercial equipment; (5) use of industry standards in DOE test procedures; (6) timing of the issuance of DOE test procedures; (7) certification, compliance and enforcement; (8) improvements to DOE's analyses; and (9) any other issues or topics raised by stakeholders.

Overall, DOE experienced a high level of engagement from stakeholders and the interested public regarding potential changes to the Process Rule.
6

Such comments provided important input to DOE's current proposal to modernize the Process Rule, and the issues raised in those public comments are addressed subsequently in this document. Once finalized, DOE envisions promulgation of a Process Rule that increases transparency and public engagement and achieves meaningful burden reduction, while at the same time continuing to meet the Department's statutory obligations under EPCA.

6
The following organizations or individuals provided comments in response to the December 18, 2017 RFI (82 FR 59992): ABB; Acuity Brands, Inc. (“Acuity Brands”); American Boiler Manufacturers Association (“ABMA”); American Public Power Association (“APPA”); American Public Gas Association (“APGA”); Joint Commenters of the Appliance Standards Awareness Project (ASAP), Alliance to Save Energy, American Council for an Energy-Efficient Economy (ACEEE), Consumer Federation of America (CFA), National Consumer Law Center (NCLC), Natural Resources Defense Council (NRDC), Northeast Energy Efficiency Partnerships (NEEP), and the Northwest Energy Efficiency Alliance (NEEA) (filing joint and collectively identified as, “the ASAP Joint Comment”); Atlas Copco North America (“Atlas Copco”); Big Ass Solutions (“BAF”); Bradford White Corporation (“Bradford White”); California Investor Owned Utilities (comprised of Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas and Electric, and Southern California Edison) (collectively referred to as “CA IOUs”); California Energy Commission (“CEC”); CSA America, Inc. (“CSA”); Daikin U.S. Corp. (“Daikin”); Edison Electric Institute (“EEI”); Energy Solutions; George Washington University (“GW”); Mile High Equipment, LLC. (“Ice-O-Matic”); joint comments filed by the Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”), Air Movement and Control Association International Inc. (“AMCA”), American Lighting Association (“ALA”), Association of Home Appliance Manufacturers (“AHAM”), Hearth, Patio & Barbecue Association (“HPBA”), Heating Air-Conditioning & Refrigeration Distributors International (“HARDI”), National Association of Manufacturers (“NAM”), National Electrical Manufacturers Association (“NEMA”), and Plumbing Manufacturers International (“PMI”) (collectively, “the Joint Commenters”); Lennox International Inc. (“Lennox”); Lochinvar; Lutron Electronics Co., Inc. (“Lutron”); Manufactured Housing Institute (“MHI”); Miles & Stockbridge P.C. (“Miles & Stockbridge”); North American Association of Food Equipment Manufacturers (“NAFEM”); National Consumer Law Center (“NCLA”) and the Consumer Federation of America (“CFA”); National Conference of State Legislatures (“NCSL”); Northeast Energy Efficiency Partnerships (“NEEP”); Nor-Lake, Inc. (“Nor-Lake”); Northwest Power and Conservation Council (“NPCC”); National Propane Gas Association (“NPGA”); Office of Information and Regulatory Affairs (“OIRA”); Plumbing Heating Cooling Contractors Association (“PHCC”); Regal Beloit Corporation (“Regal”); Sierra Club and Earth Justice; Rheem; Southern Company Services Inc. (“Southern Company”); Spire Inc. (“Spire”); Sub Zero Group, Inc. (“Sub Zero”); Schneider Electric; ITW-Food Equipment Group (“Traulsen/Kairak”); United Technologies (“UT-Carrier”); Whirlpool Corporation (“Whirlpool”); Daikin; Westinghouse Lighting; and Chris Soares.

III. Discussion of Specific Revisions to the Process Rule

A. The Process Rule Will Be Binding on the Department of Energy

In the December 2017 RFI, DOE asked stakeholders whether DOE should make compliance with the Process Rule mandatory. 82 FR 59992, 59997. At the January 9, 2018, Process Rule public meeting, most stakeholders agreed that the Process Rule should be binding on the Department. (AHRI, January 9, 2018 Public Meeting Transcript at pp. 24, 169, 265; AHAM, January 9, 2018 Public Meeting Transcript at pp. 31, 168; Spire, January 9, 2018 Public Meeting Transcript at pp. 54-55; Southern

Company, January 9, 2018 Public Meeting Transcript at p. 268; NEMA, January 9, 2018 Public Meeting Transcript at p. 265; AGA, January 9, 2018 Public Meeting Transcript, at p. 37)

One commenter at the January 9, 2018, public meeting recommended that any amended Process Rule retain flexibility for DOE. (ASAP, January 9, 2018 Public Meeting Transcript, at pp. 266-268) Two commenters, Spire and Southern Company, suggested a savings or escape clause, respectively, to address this problem. According to Spire, this would mean that DOE must follow the Process Rule unless there is a conflict with EPCA. (Spire, January 9, 2018, Public Meeting Transcript, at p. 266) Southern Company stated that if it is difficult to follow the Process Rule, the matter can be sent to negotiated rulemaking and the group can decide whether to change the procedure. (Southern Company, January 9, 2018 Public Meeting Transcript, at p. 268)

Commenters who took the position that the Process Rule should be binding on the Department generally argued that the Department should be held accountable for complying with its own procedures so that the public will have confidence in the transparency and fairness of DOE's regulatory process, including the certainty that mandatory application would bring. (Joint Commenters, No. 51 at pp. 2, 19, 32; EEI, No. 72 at p. 2; Atlas Copco North America, No. 54 at p. 7; ALA, No. 55 at p. 2; Lennox, No. 62 at p. 1; PHCC, No. 63 at p. 3; Southern Company, No. 70 at p. 2; Public Power Association, No. 36 at p. 4; NPCC, No. 35 at p. 22; Ice-O-Matic, No. 29 at p. 1; Spire, No. 57 at p. 2; Sub-Zero, No. 43 at p. 4)

Conversely, several commenters expressed that it would be potentially harmful to the Department's Appliance Program if DOE were to eliminate all flexibility in the Process Rule. These commenters supported application of the Process Rule, including its goal, among others, of promoting transparency and early stakeholder engagement, as long as DOE also meets its statutory obligations. (Sierra Club and Earth Justice, No. 66 at p. 2) The California Energy Commission (“CEC”) and Natural Resources Defense Council (“NRDC”) stated that DOE should not be subject to prescriptive requirements that limit its flexibility and restrict its ability to respond to the circumstances of each rulemaking. Such an approach, in CEC's view, would increase DOE's litigation risk. (CEC, No. 53, at p. 8) At the same time, NRDC, along with others, expressed openness to revisions to the Process Rule that would make it clearer or provide greater predictability with respect to how DOE will act in the standards-setting process. (NRDC, No. 74 at p. 3) Other commenters also supported maintaining flexibility in the Process Rule and maintaining it as guidance. (CA IOUs, No. 65 at pp. 3, 5; NEEP, No. 77 at pp. 1, 5; ASAP Joint Comment, No. 75 at p. 9)

DOE acknowledges the important points made by commenters on this issue. In the December 2017 RFI, DOE stated that it has declined to follow the procedures in the Process Rule in a number of cases in the recent past. 82 FR 59992, 59993. And, DOE agrees that substantive improvements must be made in the Process Rule to promote greater transparency, consistency, and meaningful participation in DOE rulemakings.

DOE has carefully considered all the comments on this matter and has determined that requiring mandatory compliance on the part of DOE with its own Process Rule would clearly promote a rulemaking environment that is both predictable and consistent (
i.e.,
one where all stakeholders know what to expect during the rulemaking process). Accordingly, DOE is proposing language for the amended Process Rule to make clear that its provisions are binding on the agency. This approach would promote DOE's efforts to achieve meaningful burden reduction in the context of standards setting and compliance, as well as testing requirements, while continuing to achieve the Department's statutory obligations in the development of appliance standards.

DOE hopes that this approach will promote a rulemaking environment that is open, consistent, and predictable for all stakeholders. Furthermore, DOE anticipates that going forward, the rulemaking process with its binding application on the Department, will result in reduced burden to stakeholders through a more consistent set of procedures.

B. The Process Rule Will Apply to Both Consumer Products and Commercial Equipment

By its terms (and specifically by its title), the current Process Rule is applicable only to consumer products. However, in practice, DOE has routinely followed the procedures set forth in the Process Rule when establishing standards for commercial equipment. In its December 2017 RFI, DOE requested comment as to whether the agency should amend the Process Rule to clarify that it is equally applicable to the consideration of standards for commercial equipment. 82 FR 59992, 59996. At the January 9, 2018, Process Rule public meeting, DOE also asked stakeholders how the agency should treat equipment covered by the American National Standards Institute (“ANSI”)/American Society of Heating, Refrigerating, and Air-Conditioning Engineers (“ASHRAE”)/Illuminating Engineering Society of North America (“IESNA”) Standard 90.1 (“ASHRAE Standard 90.1”), if DOE were to amend the Process Rule to include commercial equipment. DOE pointed out that EPCA provides a separate set of procedural requirements and timelines for ASHRAE equipment that are different than those in the Process Rule. (DOE, January 9, 2018 Public Meeting Transcript at pp. 183-184)

Commenters generally supported the principle that the Process Rule procedures should explicitly apply to both new and amended energy conservation standards for both covered consumer products and industrial and commercial covered equipment, but with modified provisions specific to ASHRAE equipment. (AHRI, January 9, 2018 Public Meeting Transcript, at p. 25; Spire, January 9, 2018 Public Meeting Transcript, at p. 184; EEI January 9, 2018 Public Meeting Transcript, at p. 184; AHAM, January 9, 2018 Public Meeting Transcript, at p. 184; AHRI, January 9, 2018 Public Meeting Transcript, at pp. 184-185; Joint Comment, No. 51 at pp. 2, 32-33; NPCC, No. 35 at pp. 7, 16; Spire, No. 57 at p. 15; PHCC, No. 63 at p. 2; Southern Company, No. 70 at p. 2; APPA, No. 36 at p. 3; Ice-O-Matic, No. 29 at p. 1; Nor-Lake, No. 68 at pp. 1-2; Acuity Brands, No. 46 at p. 4; CA IOUs, No. 65 at p. 5; NAFEM, No. 47 at p. 3; CEC, No. 53 at p. 5; NEEP, No. 77 at p. 3; ASAP Joint Comment, No. 75 at p. 7; Lennox, No. 62 at p. 2, 8)

Some of the commenters expressed the reasons for their support of this principle. For instance, Acuity Brands stated that a consistent approach would ease compliance burdens by applying the same set of rules across the board. (Acuity Brands, No. 46 at p. 4) The North American Association of Food Equipment Manufacturers (“NAFEM”) agreed that a consistent approach reduces administrative burdens and costs. NAFEM also stated that the Process Rule need not be identical as it relates to consumer products and commercial equipment given that there could be differences in the two markets that necessitate differences in the standard-setting process. (NAFEM, No. 47 at p. 3) The Joint Commenters stated that since the procedures for developing energy efficiency standards for both consumer products and commercial

equipment are largely the same, with the exception of ASHRAE equipment, it makes sense to have one set of expectations regardless of whether the regulated product/equipment has residential or commercial applications. (Joint Commenters, No. 51 at p. 33) Spire stated that it sees no legal impediment to extending the requirements of the Process Rule to commercial equipment. (Spire, No. 57 at p. 15)

One commenter, the American Boiler Manufacturers Association (“ABMA”), did not agree that a Process Rule developed for consumer products can be equally applied to commercial equipment. It states that in many sectors, including the boiler industry that it represents, consumer products do not resemble their commercial counterparts in terms of size, complexity, and application, to name just a few distinctions. ABMA stated that this is particularly true for the largest commercial equipment engineered for a specific application that have sales in the single digits annually in some instances. ABMA advocated that there needs to be a way to differentiate between the equipment with a similar name but possessing significant differences in terms of processes and features, including capacity. (ABMA, No. 71 at pp. 2-3)

Overall, DOE agrees with commenters that a modernized and amended Process Rule should apply to both consumer products and industrial and commercial equipment, and that the Process Rule must contain language that clarifies this coverage. Historically, DOE has applied the Process Rule to both consumer and industrial and commercial rules. This proposal would make clear that such practice will continue. To promote a consistent process that reduces the regulatory burden of the rulemaking, DOE proposes to apply the same procedures in the Process Rule to both consumer products and industrial and commercial equipment rulemakings, except as discussed in section III.C for ASHRAE equipment. In response to ABMA, DOE does not see the procedural safeguards of the Process Rule in any way negatively impacting the detailed consideration to be accorded a given type of product or equipment in the context of an individual standards or test procedure rulemaking. On the contrary, DOE has tentatively concluded that formally applying the Process Rule to commercial and industrial equipment will enhance the consideration of such equipment by ensuring that there is proper time and information before the agency prior to promulgation of new or amended regulations.

C. The Application of the Process Rule to ASHRAE Equipment

As noted previously, at the January 9, 2018, Process Rule public meeting, DOE requested comment as to how the agency should treat ASHRAE equipment subject to ASHRAE Standard 90.1, in the event DOE were to amend the Process Rule to formally apply to commercial equipment. In relevant part, EPCA provides that ASHRAE equipment is subject to unique statutory requirements and its own set of timelines. More specifically, pursuant to EPCA's statutory scheme for covered ASHRAE equipment, DOE is required to consider amending the existing Federal energy conservation standards for certain enumerated types of commercial and industrial equipment (generally, commercial water heaters, commercial packaged boilers, commercial air-conditioning and heating equipment, and packaged terminal air conditioners and heat pumps) when ASHRAE Standard 90.1 is amended with respect to such equipment. (42 U.S.C. 6313(a)(6)(A)) For each type of equipment, EPCA directs that if ASHRAE Standard 90.1 is amended, DOE must adopt amended energy conservation standards at the new efficiency level in ASHRAE Standard 90.1 as the uniform national standard for such equipment, unless DOE determines by rule, and supported by clear and convincing evidence, that a more-stringent standard would result in significant additional conservation of energy and is technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(I)-(II))

Several stakeholders expressed their views as to how DOE should handle ASHRAE equipment. The Joint Commenters stated that ASHRAE equipment occupies a unique place under EPCA. They asserted that the language and intent of EPCA reflects the underlying policy that the stakeholder-driven process of ASHRAE Standard 90.1 is working and that DOE should defer to that process. The Joint Commenters argued that amendments to the Process Rule should set apart ASHRAE equipment and acknowledge the expectation that DOE will normally codify the industry consensus standards adopted in Standard 90.1 as the uniform national standard. Furthermore, they stated that DOE should undertake some form of early stakeholder engagement for ASHRAE equipment. They stated that if ASHRAE Standard 90.1 is amended to increase minimum efficiency requirements for covered equipment, DOE should act promptly to publish a NOPR with the expectation that the applicable ASHRAE Standard 90.1 levels will be adopted as a final rule within 18 months. (Joint Commenters, No. 51 at p. 33)

Lennox stated that the Process Rule should be applied to commercial equipment except when it would conflict with special statutory provisions specific to commercial equipment rulemakings, such as provisions for adopting ASHRAE 90.1 industry standards. For commercial equipment covered by ASHRAE Standard 90.1, Lennox pointed out that DOE must adopt the industry standard unless “clear and convincing evidence” dictates otherwise. (42 U.S.C. 6313(a)(6)(A)(ii)) It stated that if DOE simply adopts ASHRAE Standard 90.1 standards, the additional provisions in the Process Rule are not necessary. However, if DOE considers promulgating regulations more stringent than ASHRAE 90.1 standards, Lennox argued that DOE should follow the Process Rule. Moreover, according to Lennox, the Process Rule should clarify the high bar for what constitutes “clear and convincing evidence” for promulgating a standard more stringent than ASHRAE Standard 90.1. (Lennox, No. 62 at p. 8) The Joint Commenters agreed with Lennox that an amended Process Rule should develop an interpretation of what the higher bar of “clear and convincing” evidence means for the establishment of energy conservation standards. The Joint Commenters stated that in recent years, DOE has published rules that adopt more stringent standards than the national uniform consensus ASHRAE 90.1 energy efficiency standards and has not taken steps to demonstrate that their findings meet a higher threshold of evidentiary proof. They stated that EPCA provides a statutory presumption that standards more stringent than those required by ASHRAE Standard 90.1 are not necessary, and that presumption can be rebutted only on the basis of “clear and convincing evidence.” (Joint Commenters, No. 51 at p. 34) (Also see, AHRI, January 9, 2018 Public Meeting Transcript at p. 188, for the proposition that DOE should codify the clear and convincing burden of proof standard for when DOE seeks to go beyond the ASHRAE levels.)

The Joint Commenters also stated that DOE needs evidence to support its assumptions in every case, and it needs even more evidence when the “clear and convincing” standard applies. The commenter argued that the “clear and convincing” standard is more demanding than the “reasonable”

standard required for non-ASHRAE rulemakings. The Joint Commenters added that an assumption is not even “reasonable” in the absence of any evidence of its validity (
i.e.,
unless it is supported by “substantial evidence,” which EPCA requires in the case of standards for consumer products under 42 U.S.C. 6306(b)(2)). The Joint Commenters gave as an example the single package, vertical unit rulemaking in which DOE raised the standard level over the ASHRAE minimums, arguing that if DOE had developed the required evidence, the agency would have reached a different and better result. (Joint Commenters, No. 51 at pp. 34-35)

One commenter (AHRI) stated that to the extent DOE plans on conducting an ASHRAE rulemaking that goes above the ASHRAE Standard 90.1 standards level, the full Process Rule should apply. Also, if DOE is doing a six-year review of ASHRAE standards and DOE is initiating that review, AHRI argued that the full Process Rule should apply. However, if a rule is being conducted based upon and consistent with an ASHRAE change, AHRI suggested that the process should be the same as it is now. (AHRI, January 9, 2018 Public Meeting Transcript at pp. 185-186)

In this proposal, DOE has tentatively determined that the amended Process Rule will contain a new section that clearly delineates the procedure DOE will follow for evaluating amendments to ASHRAE Standard 90.1 and conducting related rulemakings. First, DOE's statutory obligations for ASHRAE equipment will be reiterated in this new section. Through its amended Process Rule, DOE is also announcing its tentative decision that, going forward, DOE anticipates adopting the revised ASHRAE levels as contemplated by EPCA, except in very limited circumstances as discussed below. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) DOE's commitment to adopting the amended ASHRAE Standard 90.1 level(s) as its regular practice will result in reducing the regulatory burden on stakeholders and will promote consistency and simplicity when DOE is addressing ASHRAE equipment.

With respect to DOE's consideration of more-stringent standards than the ASHRAE levels, DOE tentatively takes the position that for DOE to utilize its statutory authority to establish more-stringent standards than the amendments to ASHRAE Standard 90.1 pursuant to 42 U.S.C. 6313(a)(6)(A)(ii)(II), DOE will be required to meet a very high bar to demonstrate the “clear and convincing evidence” threshold that is articulated in this latter subsection. When evaluating whether it can proceed with a rulemaking to potentially establish more-stringent standards than those adopted by ASHRAE, DOE will seek, from interested stakeholders and the public, data and information to assist in making this determination, prior to publishing a proposed rule to adopt more stringent standards. Moreover, DOE proposes that clear and convincing evidence would exist only if:

Given the circumstances, facts, and data that exists for a particular ASHRAE amendment, DOE determines there is no substantial doubt that the more stringent standard would result in a significant additional conservation of energy, is technologically feasible and economically justified.

This high bar would mean that only in extraordinary circumstances would DOE conduct a rulemaking to establish more-stringent standards for covered ASHRAE equipment. In the event that DOE determines that such a rule is possible, all of the Process Rule requirements would apply. However, for the typical situation wherein DOE is adopting the ASHRAE Standard 90.1 level(s), DOE would follow the EPCA statutory requirements and not be required to follow additional Process Rule requirements.

Making clear that DOE will adopt the action taken by ASHRAE except in rare circumstances raises the question as to how broadly DOE is triggered by ASHRAE action in amending Standard 90.1. For example, if ASHRAE acts to amend its standard at the equipment class level for air-cooled variable refrigerant flow (VRF) multi-split air conditioners greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, is DOE triggered to consider amended standards: (1) Only for that specific equipment class that was actually amended in ASHRAE 90.1; (2) for the entire equipment category of VRF equipment, or (3) for the entire covered equipment type of small commercial package air conditioning and heating equipment? EPCA does not specifically define the term “amended” in the context of ASHRAE Standard 90.1. Although the statute is not entirely clear on this matter, DOE has maintained a consistent position for over a decade, at least since it interpreted what would constitute an “amended standard” in a final rule published in the
Federal Register
on March 7, 2007. 72 FR 10038. In that rule, DOE stated that the statutory triggering event requiring DOE to adopt uniform national standards based on ASHRAE action is for ASHRAE to change a standard for any of the equipment listed in EPCA section 342(a)(6)(A)(i) (42 U.S.C. 6313(a)(6)(A)(i)) by increasing the energy efficiency level for that equipment.
Id.
at 10042. In other words, if the revised ASHRAE Standard 90.1 leaves the standard level unchanged or lowers the standard, as compared to the level specified by the national standard adopted pursuant to EPCA, DOE does not have the authority to conduct a rulemaking to consider a higher standard for that equipment pursuant to 42 U.S.C. 6313(a)(6)(A). DOE subsequently reiterated this position in final rules published in the
Federal Register
on July 22, 2009 (74 FR 36312, 36313), May 16, 2012 (77 FR 28928, 28937), and July 17, 2015 (80 FR 42614, 42617).

In the American Energy Manufacturing Technical Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012), Congress modified several provisions related to ASHRAE Standard 90.1 equipment. In relevant part, DOE must act whenever ASHRAE Standard 90.1's “standard level or design requirements under that standard” are amended. (42 U.S.C. 6313(a)(6)(A)(i)) Furthermore, that statutory amendment required that DOE must conduct an evaluation of each class of covered equipment in ASHRAE Standard 90.1 “every 6 years.” (42 U.S.C. 6313(a)(6)(C)(i))

In practice, DOE's review in making this assessment has been strictly limited to the specific standards for the specific equipment for which ASHRAE has made a change (
i.e.,
determined down to the equipment class level). DOE believes that this is the best reading of the statutory provisions discussed previously, because if ASHRAE were to change the standard for a single equipment class, but DOE then considered itself triggered at the equipment category level or equipment type level, the process would arguably no longer comport with the statutory scheme. More specifically, in such cases, DOE would be addressing certain classes of ASHRAE equipment for which standards had not changed, so it would be impossible for DOE to adopt the ASHRAE level as the statute envisions (as it would already be the same as the existing Federal standard). Instead, DOE could only consider adoption of more-stringent standard levels. Such interpretation would arguably run counter to the “follow ASHRAE” statutory structure set in place by Congress. Furthermore, Congress specifically and recently added a 6-year-lookback provision for covered ASHRAE equipment at 42 U.S.C. 6313(a)(6)(C)(i), a provision which arguably instructs DOE in terms of how and when to address covered

equipment upon which ASHRAE has not acted in a timely manner. However, DOE believes that ASHRAE not acting to amend Standard 90.1 is tantamount to a decision that the existing standard remain in place. Thus, as required by 42 U.S.C. 6313(a)(6)(C), DOE would need to find clear and convincing evidence, as defined above, to issue a standard more stringent than the existing standard for the product. DOE welcomes comments, data, and information on this topic.

D. Priority Setting

The current Process Rule at 10 CFR part 430, subpart C, Appendix A, section 3(d) outlines DOE's priority-setting analysis, which considers ten factors: (1) Potential energy savings; (2) potential economic benefits; (3) potential environmental or energy security benefits; (4) applicable deadlines for rulemakings; (5) incremental DOE resources required to complete the rulemaking process; (6) other relevant regulatory actions affecting products; (7) stakeholder recommendations; (8) evidence of energy efficiency gains in the market absent new or revised standards; (9) status of required changes to test procedures; and (10) other relevant factors. The current Process Rule requires that the results of this analysis will be used to develop rulemaking priorities and proposed schedules for the development and issuance of all rulemakings which will then be documented and distributed for review and comment. 10 CFR part 430, subpart C, Appendix A, section 3(a). The Process Rule also states that each fall, DOE will issue, simultaneously with the Administration's Regulatory Agenda, a final set of rulemaking priorities, the accompanying analysis, and the schedules for all priority rulemakings that it anticipates within the next two years.
Id.
at section 3(c).

In this document, while DOE intends to continue considering the 10 factors in its priority-setting, DOE proposes to revise the process discussed above. In the past, DOE has not successfully fulfilled its prioritization objectives as outlined in the Process Rule, perhaps in part because DOE determined that the analysis described in the current Process Rule is reflected in the Regulatory Agenda, which is available to the public. In any event, DOE sees value in streamlining and clarifying the reporting of its priority-setting activities in the revised Process Rule. Going forward, DOE is proposing that stakeholders would have the opportunity to provide input on prioritization of rulemakings through a request for comment as DOE begins preparation of its Regulatory Agenda each spring. In particular, DOE would point interested parties to the Regulatory Agenda posted to
www.reginfo.gov
the previous fall and would request input concerning which rulemaking proceedings should be in particular action categories in the spring Regulatory Agenda and the timing of such rulemakings. If stakeholders believe that the Department is pursuing a rule that should not be prioritized, they would have the opportunity to use this mechanism to so inform DOE. If stakeholders believe DOE should act more quickly on another rulemaking they could make that point as well. Through this revised process, DOE has tentatively concluded that increased stakeholder input early in the rulemaking process, combined with the public availability of the Regulatory Agenda, would meet the same objectives as DOE's previous priority-setting analysis.

E. Coverage Determinations

In addition to specifying a list of covered residential and commercial products, EPCA contains provisions that enable the Secretary of Energy to classify additional types of consumer products and industrial/commercial equipment as “covered” within the meaning of EPCA. (42 U.S.C. 6292(b);
see also
42 U.S.C. 6295(l) for consumer products; 42 U.S.C. 6312 for commercial and industrial equipment) This authority allows DOE to consider regulating additional products/equipment that further the goals of EPCA; that is, to conserve energy for the Nation as long as the statutory threshold requirements are met.

If DOE determines to initiate the coverage determination process, it will first publish a notice of proposed determination, limited to the issue of coverage, in which DOE will explain how such products/equipment that it seeks to designate as “covered” meet the statutory criteria for coverage and why such coverage is “necessary or appropriate” to carry out the purposes of EPCA. (42 U.S.C. 6292(b)(1)) In the case of commercial/industrial equipment, DOE follows the same process, except that the Department need only show the coverage determination is “necessary” to carry out the purposes of EPCA. (42 U.S.C. 6312) DOE's authority to add commercial equipment is more limited than its authority to add consumer products because Congress specified the particular types of equipment that could be added. (42 U.S.C. 6311(2)(B)) Stakeholders would then be given 60 days to submit written comments to DOE on the proposed determination notice. Subsequently (and in a change from DOE's past practice), DOE would assess the written comments and then publish its final decision on coverage as a separate notice, an action which would be completed prior to the initiation of any rulemaking for related test procedures or energy conservation standards. If the final decision determines that coverage is warranted, DOE will proceed with its typical rulemaking process for both test procedures and standards, applying the requirements of the Process Rule, as amended. Specifically, DOE would not issue any RFIs, notices of data availability (“NODAs”), or any other mechanism to gather information for the purpose of initiating a rulemaking to establish a test procedure or energy conservation standard for the proposed covered product prior to finalization of the coverage determination. DOE will also finalize coverage for a product at least six months prior to publication of a proposed rule to establish a test procedure. And, DOE will complete the test procedure rulemaking at least six months prior to publication of a proposed energy conservation standard. This timing does not present any legal issue because adding coverage for a product and establishing test procedures and standards is a purely discretionary act without legal deadline.

The Joint Commenters, citing to 42 U.S.C. 6292(b)(1)(A), argued that DOE should exercise its authority to identify new “covered products” in a limited fashion, extending only to those products for which EPCA regulation is “necessary or appropriate” to the achievement of EPCA's purposes. They further argued that DOE's authority to identify new “covered products” is limited to products that consume at least enough energy to satisfy a stated minimum energy consumption criterion. The Joint Commenters urged that coverage determinations be made on a product-specific basis with each new covered product being defined separately with sufficient clarity to ensure that products serving different purposes are not treated as a single covered product. They added that each product should individually satisfy the minimum energy consumption requirement and qualify as a “necessary or appropriate” target for regulation. The Joint Commenters advocated that the Process Rule should be amended to require that proposed and final coverage determinations under 42 U.S.C. 6292(b) specifically identify each of the products at issue and provide a separate justification for the coverage of each.

They further added that DOE has failed to satisfy these requirements in the past. Moreover, the Joint Commenters recommended that a final coverage determination be in place before substantive rulemaking on test procedures or energy conservation standards commences so that the public clearly understands which products are covered, thus avoiding unnecessary confusion, wasted resources, and the failure to address critical issues. Lastly, the Joint Commenters suggested that the current Process Rule requires a reopening of comment on the justification for a coverage determination during the first rulemaking in which substantive regulation is imposed and if broader coverage is required, a new coverage determination must be proposed and finalized before initiating a rulemaking to regulate the broader range of products. (Joint Comment, No. 51 at pp. 9-10) Whirlpool and Lutron expressed support for these views. (
See
Whirlpool, No. 76 at p. 1; Lutron, No. 50 at p. 2)

DOE agrees with the points raised by the Joint Commenters, discussed above, that DOE should exercise its authority to identify new “covered products” in a limited fashion. To this end, DOE proposes to extend coverage only to: (1) Those consumer products for which EPCA regulation is “necessary or appropriate” to the achievement of EPCA's purposes and which meet statutory consumption criterion, and (2) to that commercial/industrial equipment for which EPCA regulation is “necessary” to the achievement of EPCA's purposes. DOE agrees that any proposed new covered products/equipment should be narrowly defined with sufficient clarity so that the proposed coverage corresponds to that which is intended.

DOE does not agree with the Joint Commenter's suggestion that all coverage determinations must be reopened as a matter of course in the first substantive rulemaking on the newly covered product/equipment. After completing notice and comment on a proposed coverage determination and issuing a final determination, DOE believes it is appropriate to accord such process finality. However, if during the substantive rulemaking proceeding DOE finds it necessary and appropriate to expand or reduce the scope of coverage, the Department agrees with the Joint Commenter's that a new coverage determination process at that point should be initiated and finalized prior to moving forward with the test procedure or standards rulemaking.

F. Early Stakeholder Input To Determine the Need for Rulemaking

1. Standards

In the December 2017 RFI, DOE sought comment on whether the Process Rule should be revised to eliminate its current provisions related to the publication of an advanced notice of proposed rulemaking (“ANOPR”) because of statutory amendments that eliminated the ANOPR requirement and/or to include additional preliminary rulemaking steps. 82 FR 59992, 59995. DOE received a number of comments regarding both the elimination of the ANOPR and the inclusion of other avenues for early stakeholder input, which are discussed in further detail, along with DOE's response, in the subsections immediately following.

a. Avenues for Early Stakeholder Input: Early Assessment Review

In response to comments discussed below, DOE proposes adding a process for an early assessment review of a potential rule. For example, the Joint Commenters recommended that DOE should adopt “a quick hard look process” for use at an early juncture in the rulemaking to determine whether a standard needs to be amended. The Joint Commenters stated that this type of preliminary evaluation procedure would allow DOE to focus its resources on rulemakings offering the potential for significant energy savings. In those instances where opportunities for energy savings are not significant or an amended standard is not technologically feasible or economically justified, DOE could make a determination to not amend standards. The Joint Commenters argued that such an approach would continue to allow DOE to meet its statutory obligations, while focusing the regulatory process on those areas where the most benefit can be obtained and at the same time reducing the burden on stakeholders. As part of this “quick hard look,” the Joint Commenters recommended that DOE should publish an RFI seeking information that would assist the Department in determining whether anything has changed (technologically, economically, or otherwise) since the last final rule as would necessitate amended standards. Under this preliminary assessment procedure, the Joint Commenters presume that standards would not need amendment unless DOE or stakeholders identify significant changes since the last rulemaking. (Joint Commenters, No. 51 at pp. 4-6)

In contrast to the Joint Commenters, the Appliance Standards Awareness Project (“ASAP”) Joint Commenters did not support a separate “quick look” process to determine whether a full rulemaking is necessary. The ASAP Joint Commenters argued that existing law already provides the necessary framework for DOE to quickly determine, after notice and comment, that no change is warranted for a particular standard. (ASAP Joint Comment, No. 75 at p. 6)

In response to the Joint Comment, DOE agrees generally with the need for an early assessment review at the beginning of the rulemaking process to allow DOE to focus its resources appropriately, and an understanding of any changed circumstances since the last final rule would certainly be relevant to that inquiry. DOE notes that it discusses significant energy savings in detail later in this proposal (see section III.G). An assessment of the potential energy savings at issue would also be an important consideration when evaluating the need for further rulemaking. Thus, DOE is proposing to adopt provisions in the revised Process Rule that would provide for an early assessment review of the suitability of further rulemaking, thereby allowing both the agency and interested stakeholders to conserve and target limited resources so as to achieve the greatest benefit. Therefore, as the first step in any proceeding to consider establishing or amending any energy conservation standard, DOE proposes to publish a notice in the
Federal Register
announcing that DOE is considering initiation of a proceeding, and as part of that notice, DOE would request submission of related comments, including data and information showing whether any new or amended standard is economically justified, technologically feasible or would result in a significant savings of energy. If DOE receives sufficient information suggesting that it could justify a determination that no new or amended standard would meet the applicable statutory criteria, DOE would engage in notice and comment rulemaking to make that determination. If DOE does not receive sufficient information or the information received is inconclusive with regard to the statutory criteria, DOE would undertake the preliminary stages of a rulemaking to issue or amend an energy conservation standard. Beginning such a rulemaking, however, would not preclude DOE from later making a determination that a new or amended energy conservation standard is not economically justified, technologically feasible or would not result in a significant savings of energy.

b. Other Avenues for Early Stakeholder Input

In response to comments discussed below, DOE will continue to seek early stakeholder input after the early assessment review. A number of commenters stressed the importance of early stakeholder input during the rulemaking process. (UT-Carrier, No. 41 at p. 4; Sub Zero, No. 43 at p. 4; Ice-O-Matic, No. 29 at p. 1; NAFEM, No. 47 at p. 2) The California Investor-Owned Utilities (“CA IOUs”) urged that as part of such engagement, DOE should perform testing and research so as to generate publicly-available information to inform the process. (CA IOUs, No. 65 at p. 5) Other commenters touted early stakeholder input as a means of understanding the industry's own efforts to advance energy efficiency. (
See e.g.,
Schneider Electric, No. 69 at p. 2) CEC stated that for newly covered products, a Framework Document is likely appropriate, whereas for previously covered products, a Request for Information would probably be adequate. CEC added that depending on the product, a Preliminary Technical Support Document or Notice of Data Availability should typically precede a NOPR. (CEC, No. 53 at p. 4)

In response to these comments, DOE agrees that early stakeholder input is an important part of the rulemaking process, particularly when it comes to information exchange. In the November 6, 2010, policy statement (
https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/changes_standards_process.pdf
), DOE stated that “the energy conservation standards rulemaking process typically began with a framework document, followed by a preliminary analysis. Only after these two steps were completed did the Department issue a proposed rule for public comment. While the framework document and preliminary analysis provide useful information, there are more efficient ways of gathering data. Accordingly, in appropriate cases, the Department will gather the needed preliminary data informally and begin the public rulemaking process with the issuance of a proposed rule for public comment.” DOE now proposes, however, that after conducting the early assessment review process described above, if the Department does not receive sufficient information suggesting that it could justify a determination that no new or amended standard would meet the applicable statutory criteria, or the information received is inconclusive with regard to the statutory criteria, the preliminary stages of a rulemaking to issue or amend an energy conservation standard that DOE would undertake would be the framework document and preliminary analysis or an ANOPR. These documents, as opposed to “informal” data gathering, would provide the necessary robust analysis to determine whether to move forward with a proposed standard. RFIs and NODAs could be issued, as appropriate, in addition to these analytical documents, and the Department will continue to rely on a variety of notices (including those mentioned by the commenters) to ensure opportunities for public input in the rulemaking process.

c. Elimination of ANOPRs From the Process Rule

A number of commenters spoke specifically about the use of ANOPRs during the rulemaking process, including whether DOE should follow through on removal of that step in the rulemaking process, given the statute's rescission of such requirements. Several commenters did not support the elimination of the ANOPR from the Process Rule, stating that it helps to ensure early stakeholder input in the process. (Bradford White, No. 42 at pp. 1-2; Atlas Copco, No. 54 pp. 7-8; Ice-O-Matic, No. 29 at p. 2; Spire, No. 57 at p. 14; ABMA, No. 71 at p. 2; Lennox, No. 62 at p. 7) Acuity Brands added that ANOPRs can improve the quality of proposed rules/standards, in part by obtaining prompt input on topics such as defining terms and scope and setting criteria for data modeling. Without stakeholder involvement at the front end of the process, the commenter argued that there is a higher risk of proceeding with erroneous assumptions, which could negatively impact the NOPR. As part of the ANOPR (or at a similar preliminary stage), Acuity Brands recommended that DOE should undertake consideration of the effect of any current standards, in order to assess the usefulness, scope, and parameters of a new rulemaking. (Acuity Brands, No. 46 at pp. 3-4) The National Propane Gas Association (“NPGA”) did not favor the elimination of ANOPRs because early stakeholder engagement encourages the exchange of valuable information and transparency. (NPGA, No. 59 at p. 2) In contrast, two commenters supported the elimination of the ANOPR in order to reflect the Congress's change to the statute, reminding that DOE has alternative ways to achieve the same objectives. (Sierra Club and Earth Justice, No. 66 at p. 5; NPCC, No. 35 at p. 7, 15; CEC, No. 53 at p. 4)

Others expressed support for either an ANOPR or a similar method for early stakeholder involvement. (Southern Company, No. 70 at p. 4; APPA, No. 36 at p. 3; EEI, No. 72 at p. 3; ASAP Joint Comment, No. 75 at p. 7; PHCC, No. 63 at p. 2) The Northeast Energy Efficiency Partnerships (“NEEP”) commented that data collection early in the rulemaking process helps to ensure a successful rule in the end. It further stated that DOE has several available options for obtaining advanced information: ANOPRs, Framework Documents, Preliminary Analyses, NODAs, and/or RFIs. Because of the wide breadth of consumer appliances and commercial equipment that DOE regulates, NEEP commented that DOE should select the tool that is most appropriate for a given products/equipment rulemaking. (NEEP, No. 77 at p. 3)

In response to these comments, DOE has tentatively concluded that there are multiple procedures the agency could adopt as part of the revised Process Rule that achieve the aims of early information gathering in the rulemaking process. The ANOPR might be preferable in a given proceeding. Alternatively, an RFI or Notice of Data Availability would allow for early stakeholder input through a request for comments in circumstances where DOE may not have sufficient information to develop an ANOPR. DOE might issue a Framework Document and Preliminary Analysis where DOE received information in response to the early look that might have been inconclusive with regard to the need for a new or amended standard, and DOE seeks additional input to help make that determination. These alternate tools should equally promote transparency in DOE's process and allow for early information exchange. In all cases, however, contrary to DOE's November 2010 policy statement, DOE will provide for some form of preliminary data gathering and public comment process, including either an ANOPR or Framework Document and Preliminary Analysis, prior to issuing a proposed rule.

d. Decision-making Process for Issuing a Determination Not To Amend Current Standards

DOE received a number of comments regarding the potential for DOE's issuance of a determination not to amend a current energy conservation standard. These comments fell within two groups—those that supported the potential for such a determination and those that did not.

Commenters at the January 9, 2018, public meeting supported DOE's review of the suitability of pursuing amended standards for a given type of product or equipment at the start of a rulemaking. In cases where covered products have

undergone multiple amended standards rulemakings to date, these commenters asserted that DOE's analyses have demonstrated diminishing returns that either left little room for technical improvement to move energy efficiency beyond the current minimum efficiency standard or indicated that the highest efficiency models have already achieved a significant share of the market. These commenters added that, in their view, DOE and stakeholders understand that amending the standards for certain products/equipment would be unlikely to result in significant energy savings and present either serious economic or technological obstacles to further improve efficiency. For such products/equipment, these commenters suggested that DOE should exercise the opportunity to issue a determination pursuant to EPCA that the applicable standards will remain unchanged ithout going through the usual costly suite of analyses (
i.e.,
market, manufacturer impact teardown, and LCC analyses) and multiple rounds of amendment proposals and comment periods. In their collective view, the continued application of this approach, is neither required by statute, nor a good use of DOE's resources. AHRI in particular recommended that the Process Rule should specify that the opportunity to issue a notice determining that no new standard is needed will occur early in the rulemaking process so that DOE, industry, and other stakeholders can allocate time and resources to focus on those products/equipment that are the best candidates for improvement based on technological feasibility and economic opportunity. It added that such an approach would need to be designed to meet all statutory timelines and requirements. (AHRI, January 9, 2018, Public Meeting Transcript at pp. 25-27, 182-183, 250; AHAM, January 9, 2018, Public Meeting Transcript at pp. 30-32, 177-179)

Other industry commenters held similar views. The American Public Power Association (“APPA”) supported the inclusion of guidelines regarding the issuance of determinations that no amended standards are warranted, particularly in cases where it would apply to products for which little energy savings would result due to declining shipments. (APPA, No. 36 at p. 4) Ice-O-Matic supported the inclusion of such guidelines and argued in favor of formalizing a process for the immediate assessment of whether an amended standard is required. It argued that many covered products and equipment have undergone multiple rulemakings, and the pace of normal technological development shows a diminishing rate of return with each rulemaking. The company stressed that DOE has the ability under EPCA to allow a standard to remain static after first determining from available data that there will be little return from a future rulemaking. In its view, the current approach of fully reviewing a given standard creates high levels of “non-valued added work” for the Department of Energy and stakeholders. (Ice-O-Matic, No. 29 at p. 1)

NEMA commented that the Process Rule must fit within the statutory parameters and take into account DOE's experience with EPCA over the past several decades. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 45-48) In NEMA's view, DOE's Energy Conservation Program has reached in some cases, or is reaching in other cases, a point of maturity for many covered products. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 48-49) The energy savings to date stemming from these standards are very large, and the program, by that metric, has achieved a measure of success. NEMA argued that for a number of regulated products, DOE's rulemaking experience indicates that the limit of efficiency improvements through further rulemaking has occurred or is fast approaching. In NEMA's view, DOE should re-examine its approach used to-date for undertaking rulemakings to amend a given standard for a covered product. (NEMA, January 9, 2018, Public Meeting Transcript at p. 46) According to NEMA, this approach of continuing the pursuit of a full-blown multi-year regulatory process under the Administrative Procedure Act in the face of likely diminishing returns on energy savings is costly for both the government and the stakeholders who participate in DOE's rulemakings. In NEMA's view, if the public is going to continue to invest in this regulatory process, where products have been subject to multiple rulemakings over time, it should be on the basis that there are very significant economic benefits to be realized at a reasonable cost. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 46-47) Accordingly, NEMA suggested that when reviewing whether a covered product is a suitable candidate for amended standards, DOE should inquire whether further efforts at amending the standards are really needed. (
Id.
)

NEMA also commented that when the current Process Rule was first adopted in 1996, DOE had little experience with rulemakings, and part of the intent behind the Process Rule was to find an efficient means forward for gaining that experience. It stated that the Process Rule was aimed at prioritizing regulatory activity in a manner consistent with the statute as written at that point in time, and it relied on scarce appropriated funds that Congress had provided for the program. A modern Process Rule, NEMA argued, needs to fit with both DOE's experience and the statute as it is now written. (NEMA, January 9, 2018, Public Meeting Transcript at p. 48) With a modernized version of the Process Rule, NEMA asserted that DOE should be able to determine very quickly in the next rulemaking cycle for any given covered product or equipment, whether the current situation has changed so significantly as to warrant a different conclusion. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 48-49)

AHRI added that it did not believe that a determination not to amend the current standards for a given product or equipment would require the development of additional criteria beyond those already used by DOE in its analyses. It argued that this assessment should be made pursuant to EPCA and suggested developing a process for doing so. (AHRI, January 9, 2018 Public Meeting Transcript, at p. 250)

Lennox argued that DOE should more actively consider “no amended standard” scenarios, and to this end, DOE should apply presumptions against over-regulation as part of this consideration. By having robust presumptions against new or more stringent regulations—for instance, by applying an approach that avoids new efficiency standards where 20 percent or more of consumers would be “economically harmed”—these presumptions would, in Lennox's view, protect manufacturers from over-regulation. Lennox argued that applying this type of approach would be better than trying to develop a one-size-fits-all approach definition of significant energy savings. (
See
Lennox, No. 17 at pp. 14-15)

Spire argued that the Process Rule should specify appropriate decision criteria to preclude the adoption of standards that impose net costs on too many purchasers or that are overly regressive for which average payback periods are unreasonably long and that would have excessive adverse impacts on manufacturers. (Spire, No. 57 at p. 22) Spire added that DOE should be required to provide more than “'substantial evidence” in support of a proposed standard, particularly in those instances where a “clear and convincing” standard “is required by anyone attempting to refute EERE's findings.”
Id.
In its opinion, DOE and

interested parties with a dissenting view of a proposed standard should share the same evidentiary burden. (
Id.
)

NAFEM also argued in favor of applying a “no amended standards” determination. It asserted that because certain products have gone through multiple rounds of standards rulemaking, improvements in energy savings are becoming harder to obtain at costs the market is able to bear. In its view, regulations are outpacing product and equipment design and life-cycles, and the data about the real world outcomes of the last round of rulemaking are not available by the time the next rulemaking starts. NAFEM stated that EPCA allows for a determination that no new standards are needed and that DOE needs to consider taking this route in appropriate cases. (NAFEM, No. 47 at pp. 4-5)

EEI and Southern Company indicated that with some products there is little margin for improvement, so for these products, it makes no sense to invest resources for only limited further gain in energy savings. (EEI, January 9, 2018, Public Meeting Transcript at pp. 251-252; Southern Company, January 9, 2018 Public Meeting Transcript at p. 253)

With respect to the contours of a possible approach that DOE could follow, NEMA referred to the Direct Heating Equipment final rule as an instance providing lessons for other future rulemaking proceedings. In that case, DOE determined early on not to amend the energy conservation standard by comparing the current market for the covered product against the market that it evaluated six years earlier. NEMA argued that section 325(m) (42 U.S.C. 6295(m)) provides the opportunity to quickly look and determine early on whether standards need further amending. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 49-50) In NEMA's view, a modernized version of the Process Rule should invite public comment at the outset of every rulemaking proceeding examining a given energy conservation standard as to whether DOE should: (1) Amend that standard after accounting for what has been accomplished with that particular product/equipment since the previous rulemaking and (2) discuss any changes (technological or otherwise) that have occurred since that time. It further asserted that DOE's modernized Process Rule could also inquire as to whether the prior rulemaking contained any erroneous conclusions or assumptions. Additionally, NEMA stated that DOE should focus on asking whether there are opportunities for increasing deployment by customers and users of energy-consuming products of the most efficient set of already efficient products that remain in the marketplace (instead of establishing new minimum energy conservation standards for a given covered product where the regulatory limit has effectively been reached). NEMA mentioned that both the current Process Rule and Executive Orders encourage consideration of non-regulatory approaches to achieving statutory goals—and where the EPCA program has reached maturity, other approaches may offer better ways of achieving incremental, permanent energy savings over time. (NEMA, January 9, 2018, Public Meeting Transcript at pp. 50-52)

Acuity Brands also suggested that DOE should develop a “quick look” process before engaging in “serial” rulemakings for covered products in order to assess early on whether new, higher energy conservation standards are warranted. In its view, such early determinations will save time and resources by avoiding standards updates that would not produce significant energy savings. It added that adopting such an approach would focus DOE's process on ensuring that proposed standards offer actual utility and value to consumers and towards DOE's energy efficiency goals, in part by accounting for technological advancements, changes in marketplace demand, and other real-world dynamics. (Acuity Brands, No. 46 at p. 8)

In contrast, the Northwest Power and Conservation Council (“NPCC”) expressed the view that EPCA already provides DOE with more than sufficient guidance and flexibility to make a “no new standards” determinations without needing to add criteria to the Process Rule. (NPCC, No. 35 at p. 21) NEEP articulated a similar view, asserting that there would be no benefit to adding criteria to the Process Rule for reaching no amended standards determinations. (NEEP, No. 77 at p. 5) The CEC also stated that the statutory criteria in EPCA are already adequate and allow for a determination of “no amended standards.” It did not, however, object to DOE revising the Process Rule to conform to EPCA. (CEC, No. 53 at p. 7) The CA IOUs acknowledged that EPCA allows for a “no new standards” determination, but they asserted that DOE would need to go through the complete rulemaking process to determine the impact of updated standards. Consequently, they opposed the suggestion that a no new standards determination could be made through a truncated (
i.e.,
abbreviated or quick) process. (CA IOUs, No. 65 at p. 9)

While DOE considers four factors in screening energy conservation standard design options, Nor-Lake pointed out that DOE does not consider the economic impact to manufacturers from revising a standard until after a proposed standard has been selected. In its view, the Process Rule should also gauge the economic impact to manufacturers during the “screening” phase; otherwise, DOE may only be left with options that all have economically detrimental impacts on manufacturers, often with only minimal energy conservation results. Accordingly, Nor-Lake argued that the inclusion of this evaluation at the earliest stage of the rulemaking process (
i.e.,
screening analysis) may save many unnecessary steps in the protracted regulatory process. (Nor-Lake, No. 68 at pp. 2-3)

After careful consideration, DOE responds to these comments as follows. In those instances where the early hard look either suggested that a new or amended energy conservation standard might be justified or in which the information was inconclusive on this point, DOE has tentatively decided to develop a process by which it will examine the potential costs and benefits of a new standard that will enable it to more expeditiously review and determine whether to amend a given energy conservation standard. The process would apply both to instances where DOE is establishing a new standard and in cases where DOE is weighing whether to amend an already-existing standard. Performing this task in an expeditious manner—
i.e.,
something short of initiating the usual three-year process involved in proposing and finalizing a new standard—is consistent with the statute (
see
42 U.S.C. 6295(m) (providing that the Secretary shall publish either a notice of determination that standards for a product do not need to be amended or a proposal with new standards). In determining whether to move forward with a given standards rulemaking, DOE intends to address a series of issues that, while more expeditious than a complete rulemaking analysis, will nonetheless be supported by a thorough analysis to ensure that DOE proceeds with only those rulemakings that are likely to yield a significant conservation of energy and be technologically feasible and economically justified. That process would consider a variety of factors, such as whether there are sufficiently developed, cost-effective technological improvements that would allow a given product to achieve an enhanced level of efficiency. The level of improvement under consideration would need to be

consistent with the threshold for significant energy conservation, as discussed elsewhere in this document. In evaluating the prospects of proposing a new standard—or in determining that no new standard is needed—DOE would first look to the projected energy savings that are likely to result using available information solicited from the public through an ANOPR, preliminary analysis, RFI or NODA, as appropriate. DOE would then compare these projected savings against the technological feasibility of, and likely costs necessary to meet, the amended standards needed to achieve these energy savings. DOE disagrees with commenters who insist DOE must always go through the full analysis, because if potential amended standards can be shown to be lacking in terms of significant energy savings, technological feasibility, or economic justification, DOE cannot adopt them regardless of whether DOE makes such determination at an early stage or upon completion of its full suite of analyses.

In the Department's view, applying this new approach would enable DOE to more readily ascertain whether the expenditure on a rulemaking of its limited resources and those of interested parties is merited for a given regulated product or equipment. DOE believes that this proposed approach, if adopted, would enable it to focus its efforts in the most efficient manner possible, while satisfying its legal obligations.

DOE seeks comment on its initial decision-making process for determining whether to proceed with a standard rulemaking, including what specific criteria, factors, or circumstances it should apply when conducting this proposed approach.

2. Test Procedures

As with the early stakeholder input process for energy conservation standards, DOE believes that early stakeholder input is also very important during test procedure rulemakings. Consequently, DOE proposes to publish a notice in the
Federal Register
announcing whenever DOE is considering initiation of a rulemaking for new or revised test procedures. Particularly when considering amended test procedures, DOE would follow an early assessment process similar to that described in the preceding sections discussing DOE's consideration of new or amended energy conservation standards. As part of such notice, DOE would request submission of related comments, including data and information substantively showing that an amended test procedure rule is not necessary at that time and that DOE should not proceed with the rulemaking. DOE would review these comments and, subject to its statutory obligations, determine whether it agrees with the submitted information. If DOE agrees that the test procedure is not justified at that time, it would not pursue the rulemaking and would publish a notice to that effect.

However, these documents would offer stakeholders the chance to provide DOE with feedback on such test procedures, including information about industry-based test procedures that may meet the same need as those proposed by DOE.

G. Significant Savings of Energy Threshold

DOE received numerous comments regarding whether it should determine or otherwise apply a threshold with respect to whether the projected energy savings for a given standard would be significant for purposes of satisfying the statutory requirements under EPCA. (
See
42 U.S.C. 6295(o)(3)(B) (providing, among other things, that the Secretary may not prescribe an amended or new standard that “will not result in significant conservation of energy”)) Applying such a threshold would determine whether DOE proceeds forward with a rulemaking to amend or establish energy conservation standards for a given covered product or covered equipment. Comments are discussed immediately below, followed by DOE's response.

A number of industry commenters suggested during the January 9, 2018, public meeting that DOE should determine an appropriate threshold of what constitutes significant energy savings. AHRI, for example, indicated that using a reasonable threshold for energy savings would permit DOE and industry to allocate resources to improve technologies that will have the greatest impact. (AHRI, January 9, 2018 Public Meeting Transcript at pp. 28-29, 264; AHAM, January 9, 2018 Public Meeting Transcript at p. 32; Spire, January 9, 2018 Public Meeting Transcript at 261)

Interested parties who submitted written comments also indicated that DOE should focus on standards rulemakings that produce significant energy savings. In that vein, they suggested that DOE should take steps to define a threshold level for significant energy savings, which some argued would help avoid producing regulations yielding a small reduction in energy usage but requiring a significant expenditure of resources to meet and resulting in higher product and equipment prices for consumers. (
See
Ice-O-Matic, No. 29 at p. 2; Nor-Lake, No. 68 at p. 2; Lutron, No. 50 at p. 2; ABMA, No. 71 at p. 4; and Whirlpool, No. 76 at p. 1) Ice-O-Matic argued that DOE has conducted rulemakings in the past producing “a very small total energy reduction” while requiring manufacturers and stakeholders to expend many months and years of work for a very small total payback, thereby “resulting in negative impacts on consumers due to higher product and equipment prices.” (Ice-O-Matic, No. 29 at p. 2) ABMA, which focused its attention on issues related to boilers, supported the use of a baseline for significant energy savings, particularly since, in its view, current boiler designs may be close to the point of diminishing returns with respect to improved efficiency for this product. (ABMA, No. 71 at p. 4)

In ascertaining what constitutes “significant” energy savings, Nor-Lake urged DOE to solicit comments from stakeholders and suggested that DOE should follow a number of steps. (Nor-Lake, No. 68 at p. 2) First, it suggested that DOE should only promulgate an amended energy conservation standard if it will result in “significant” energy savings. Nor-Lake criticized DOE's approach to date, arguing that the agency has rarely determined that incremental energy savings were not significant—including cases where the projected incremental savings amounted to less than a 1 percent gain in efficiency. It also stated that there is currently no definition for the term “significant” as it relates to energy savings. Second, it suggested that DOE should more rigorously examine whether an existing (or proposed) standard imposes “significant” costs on manufacturers and solicit comments on how to define “significant” manufacturer costs and other impacts. The company pointed to DOE rulemakings and Office of Hearings and Appeals orders that appear to endorse, or at least accept, that a 10-percent to 20-percent impact on earnings is not significant to a manufacturer, a stance with which the commenter appeared to disagree. Third, it suggested that DOE should evaluate the economic impact of proposed energy conservation standards on manufacturers earlier in the process than it currently does under the Process Rule. Nor-Lake also suggested that DOE should articulate criteria, whether by rule or through guidance, for issuing a “no amended standard determination,” which would be justified when the energy savings from an incremental increase in the energy conservation standard for a given product would not

result in significant energy savings and/or when the economic impact on manufacturers from a revised standard would be significant, in isolation or relative to the energy savings to be gained. (Nor-Lake, No. 68 at pp. 2-3)

Lutron asserted that setting a threshold for “significant conservation of energy” in the Process Rule is needed to plan for future rulemakings and to add clarity to those rulemakings. By establishing a threshold for this term, it argued that DOE can limit the variability in how this term has been applied, which would reduce the overall burden on regulated industries. The company, citing to a recommendation from the Joint Commenters, suggested a threshold of “one quad (or equivalent amount of energy savings in kWh) saved over 30 years” be used. (Lutron, No. 50 at p. 2)
7

(
See also
APPA, No. 36 at p. 4 (suggesting that DOE should apply criteria for energy savings such as a threshold difference of under 2-4 percent between the standard under consideration and max-tech or savings over a 30-year period of less than 0.2 quads)
and
Sullivan-Palatek, No. 64 at p. 1 (criticizing DOE's recent rulemaking efforts on compressors, commercial packaged boilers, and pumps, which it asserted provided energy savings of 0.6 percent, 0.6 percent, and 1.0 percent, respectively))

7
Although Lutron referenced the submission from the Joint Commenters with respect to the one quad threshold, that comment contained no reference to, or discussion on, that particular issue.

Other commenters, however, asserted that such an approach was unnecessary or flat-out opposed it. (NPCC, No. 22, at p. 9; CEC, No. 53 at p. 8; NRDC, No. 74 at p. 3; NEEP, No. 77 at p. 5) In Joint Comments filed by ASAP, those groups stated that DOE must comply with the meaning provided by the U.S. Court of Appeals for the District of Columbia in
NRDC
v.
Herrington
for “significant” energy savings. (ASAP Joint Comment, No. 75 at pp. 6, 8) This position was also supported by NRDC. (
See
NRDC, No. 74, at p. 1) The CEC added that if DOE were to decide that a baseline for significant energy savings was necessary, the determination of that baseline would need to be done on a case-by-case basis and require updating to reflect market changes for the product at issue, as well as studies of the existing product stock and specific sales data. (CEC, No. 53 at p. 8) NEEP asserted that there is no benefit in adding criteria for considering the establishment of a baseline for energy savings with respect to qualifying for a “not significant” determination. It emphasized that DOE should adhere to the definition of “significant” laid out in
NRDC
v.
Herrington.
(NEEP, No. 77 at p. 5)

Separately, the CA IOUs suggested that DOE should continue reviewing standards, even in cases where several rounds of rulemaking have already been conducted, because the potential savings from an updated standard which were determined not to be significant in one round of rulemaking may become significant in a later round of rulemaking due to technological innovation. (CA IOUs, No. 65 at p. 8) They also urged DOE not to adopt a no-standard standard since such an approach would prevent individual States from adopting their own levels. In their view, such an approach can prevent significant, cost-effective energy savings from being realized. (
Id.
at p. 9)

In response to these comments, DOE has undertaken a review of how it applies the concept of “significant conservation of energy” in its rulemaking process, including how it has interpreted the court's mandate in
Natural Resources Defense Council
v.
Herrington,
768 F.2d 1355 (DC Cir. 1985) (hereinafter, “
NRDC
v.
Herrington”,
the “
Herrington
case” or “
Herrington”
). The following discussion reflects DOE's understanding of that term in light of the court case, a response to comments on this issue, and DOE's proposed approach moving forward.

EPCA provides that the Secretary of Energy may not prescribe an amended or new energy conservation standard if the Secretary determines that such standard will not result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B); 42 U.S.C. 6313(a)(6)(A)(ii)(II); 42 U.S.C. 6316(a)) A determination of significant energy savings is made for each type of covered product or covered equipment when conducting an energy conservation standards rulemaking. Congress did not define the statutory term “significant conservation of energy” (nor has DOE done so in regulation), but the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) added a judicial gloss to the understanding of that term in
NRDC
v.
Herrington.
In
Herrington,
the court held that it was unlikely that Congress intended for DOE to pass up a “cost-free chance to save energy unless the amount of energy saved was genuinely trivial,” but stressed that it was not dictating any specific definition of significance to DOE with respect to the application of this term.
Id.
at 1373. With this decision in mind, DOE conducted numerous rulemakings for a variety of covered products and equipment that yielded a range of energy savings (typically quantified in terms of the number of quadrillion British thermal units or “quads” of energy saved) projected over a 30-year period.

In further examining the
Herrington
decision, however, DOE has tentatively concluded that the court's opinion affords DOE a degree of latitude with respect to determining whether a given level of energy savings constitutes “significant” energy savings for purposes of satisfying the requirements under EPCA. Specifically, in DOE's view, the agency may, consistent with the
Herrington
decision, apply a specific numeric and/or percentage threshold rather than the more general conceptual approach it has applied in years past when considering potential new or amended energy conservation standards authorized under EPCA. Such threshold may be determined in absolute terms (
i.e.,
setting a uniform level of significance for each product or equipment type—a total quads saved threshold), in relative terms (
i.e.,
setting a level of significance based on a percentage of energy use), or a combination of both. DOE is considering applying such a threshold to ensure that limited agency resources are devoted to the analysis of those standards rulemakings that are most likely to yield substantial benefits to consumers and the Nation. DOE is concerned with the direct economic impacts that are likely to flow from imposing standards that are projected to yield relatively lower energy savings—standards that may produce little in overall benefits in energy and cost savings for consumers when compared to the costs related to the manufacture and purchase of products and equipment meeting these kinds of standards. This approach gives effect to the
Herrington
court's reference to not forego energy savings that are “cost-free.” However, this approach would also limit the first-cost impacts to consumers to those instances where a given rulemaking is expected to generate significant energy savings and other substantial benefits.

In the aftermath of
Herrington,
DOE largely focused on the court's “genuinely trivial” language, without accounting for the fact that this language was in reference to “cost-free” standards when determining the significance of potential energy savings. This approach resulted in a low bar for setting standards.
8

However, in examining

DOE's regulatory history post-
Herrington
through July 10, 2017 (
i.e.,
publication of the final rule for walk-in coolers and freezers—see 82 FR 31808), DOE set standards for covered products and equipment a total of 57 times (excluding instances where DOE set no-standard standards or adopted the standard levels from ASHRAE Standard 90.1). This figure also reflects, in certain cases, the same products or equipment being regulated more than once. Of that total, 23 of those rulemakings adopted standards that DOE projected would achieve less than 0.50 quad of energy savings over the standard 30-year period that DOE uses when analyzing the impacts of its standards (which yielded a total of 4.24 quads in energy savings); in contrast, the remaining 34 rulemakings each resulted in over 0.50 quad of energy savings over the same period (for a total of 109 quads in energy savings).
9

These figures suggest that instituting an appropriate threshold for energy savings may significantly reduce the burdens of regulation without significantly reducing energy savings.

8
The language contained in DOE's 1989 final rule establishing energy conservation standards for refrigerators and small gas furnaces is illustrative of the agency's understanding of how it was to determine “significant energy savings” in the post-

Herrington
environment. Specifically, that rule's preamble stated:

Under section 325(l)(3)(B) of the Act, the Department is prohibited from adopting a standard for a product if that standard would not result in “significant” energy savings. While the term `significant' has never been defined in the Act, the Department believes that a standard level option need not meet a threshold level of energy savings to be considered a “significant” saver of energy. The U.S. Court of Appeals,
NRDC
v.
Herrington,
768 F.2d 1355 (DC Cir. 1985), concluded that Congressional intent in using the word “significant” was to mean “non-trivial.”
Id.
at 1373. Thus, for this rulemaking, DOE believes that each candidate standard considered results in significant energy savings.

54 FR 47916, 47920 (Nov. 17, 1989).

9
These totals were drawn from DOE's analysis of rulemakings done since the inception of the Appliance Standards Program. It is noted that these values reflect: (1) The lower end of any range of energy savings reported in a final rule, and (2) the reported values for analytical periods less than 30 years (
i.e.,
without extrapolation of those values to 30 years). Nonetheless, in DOE's view, these totals should be sufficient to represent the trends under discussion vis-à-vis DOE's energy conservation standards rulemakings.

In this proceeding, DOE is seeking a middle ground with regard to what constitutes a significant savings of energy to help improve both the predictability and transparency of its rulemaking process when setting standards for the various products and equipment it regulates. Looking to the statute, the
Herrington
court discussed DOE's authority to prescribe a discretionary standard for an appliance if, among other criteria, the national energy consumption of the appliance exceeds 0.014335 quads per year, which corresponds to 1.449 quads of source energy over 30 years.
Herrington
at 1374. The court suggested that a threshold that exceeded this value “is inconsistent with the congressional decision to authorize discretionary standards for [these] appliances.”
Id.
at 1375-76. However, the court acknowledged that DOE may set energy savings thresholds so long as the levels “show some awareness of the range of energy savings congress thought worth pursuing.”
Id.
at 1372. Thus, DOE has some latitude when determining significant energy savings. In this regard, one factor of particular relevance is the fact that DOE has completed multiple cycles of standards rulemakings for those products and equipment for which Congress has mandated standards since the
Herrington
decision. With now decades of completed rulemakings that have steadily increased the stringency of the energy conservation standards for a wide variety of products and equipment, evaluating the significance of the energy savings produced by a given standard—along with the likelihood of additional energy efficiency improvements (
i.e.,
the prospect for diminishing returns) and the likely increasing cost of additional efficiency gains—must be viewed against that backdrop.

After careful consideration, DOE has tentatively decided to apply a threshold-based analysis that, in DOE's view, is both comprehensive and workable while remaining cognizant of the goals and requirements of EPCA. This “hybrid” approach would examine energy savings through the twin lenses of the total amount of projected energy savings and the relative percentage increase in efficiency/decrease in energy usage that could be obtained from setting or amending standards for a given product/equipment.

Under the first step of this approach, the projected energy savings from a potential maximum technologically feasible (“max-tech”) standard would be evaluated against a given numerical threshold. This initial step would be performed to ascertain whether a potential standard satisfies 42 U.S.C. 6295(o)(3)(B) to ensure that DOE avoids setting a standard that “will not result in significant conservation of energy.” If the projected max-tech energy savings does not meet or exceed this numerical threshold (with any lower level expected to achieve even less energy savings), those max-tech savings would then be compared to the total energy usage of the product/equipment to calculate a potential percentage improvement in energy efficiency/reduction in energy usage. If this comparison does not yield an energy savings improvement of a given percentage, the analysis would end, and DOE would determine that no significant energy savings would likely result from setting new or amended standards. This step would ensure promulgation of those standards most likely to confer substantial benefits to consumers and the Nation by eliminating from further consideration those potential standards that are projected to result in low energy savings.

If either one of these thresholds is reached, DOE would then conduct analyses to ascertain whether a standard can be prescribed that produces the maximum improvement in energy efficiency that is both technologically feasible and economically justified (and still constitutes significant energy savings at the level determined to be economically justified).
See
42 U.S.C. 6295(o)(2)(A). Because technological feasibility is already determined through the max-tech analysis, DOE would then focus on performing an economic justification analysis under 42 U.S.C. 6295(o)(2)(B)(i).

In performing this analysis, DOE would consider the total amount of energy savings at issue at each trial standard level (“TSL”). Assuming that DOE uses a minimum numerical threshold and a separate percentage threshold, the projected savings for any given TSL would be measured against these two thresholds. DOE would perform its economic analysis to determine whether an economically justified level (producing the maximum amount of energy savings possible) can be reached that meets or exceeds either of these thresholds. The analysis would proceed to compare that projected savings against the amount that the examined product/equipment consumes at each TSL.

In DOE's view, this approach would enable the agency to more readily ascertain whether pursuing a standards rulemaking for a given product/equipment would yield energy savings that the Secretary would consider significant under EPCA. It would also provide the public with greater transparency and predictability regarding how DOE's analytical process would work with respect to the setting of standards through the use of these minimum energy savings thresholds and potentially allow industry to improve its product planning. Further, DOE believes that following this approach would encourage the development of gradual efficiency improvements independent of mandatory regulatory requirements and help focus utility and energy efficiency advocacy efforts on development of

standards that generate greater energy savings and that yield more meaningful impacts through fewer regulatory actions.
10

10
While this discussion does not delve into the details of how the max-tech and economic justification analyses are performed, there are a number of variables that may come into play depending on the product/equipment at issue that may not be readily apparent during the max-tech analysis but appear in the more comprehensive economic justification analysis. For example, fuel-switching (
e.g.,
in the context of furnaces) may affect the projected energy savings from a standard and result in lower than expected savings when performing the relevant economic analysis. Similarly, there may be cases where technology-switching may occur that could impact the analysis. Also, depending on the pricing impacts of adopting more stringent efficiency standards, the projected savings may be less if potential purchasers of the more efficient product opt to repair their current product, rather than replace it.

Based on an examination of all past DOE standards rulemakings, DOE is considering using a quad threshold value (over a 30-year period) of 0.5 quad and a percentage threshold value of 10 percent. DOE requests comments, information, and data regarding whether these values represent an appropriate threshold for determining significant energy savings.

To aid in understanding the energy conservation standards rulemaking process envisioned by DOE, the below chart is included to visualize DOE's decision-making approach.

BILLING CODE 6450-01-P

EP13FE19.000

BILLING CODE 6450-01-C
H. Finalization of Test Procedures Prior to Issuance of a Standards NOPR

Currently, the Process Rule states that DOE will propose any modifications to a test procedure prior to issuing an ANOPR for energy conservation standards and finalize those modifications prior to issuing a NOPR for energy conservation standards. However, DOE has deviated from this schedule in the past and conducted test procedure and standards rulemakings concurrently. DOE recognizes that a finalized test procedure allows interested parties to provide more effective comments on proposed standards. Further, if the test procedure is finalized sufficiently in advance of the issuance of proposed standards, manufacturers will have experience using the new test procedure, which may provide additional insights into the proposed standards. As a result, DOE proposes to require that test procedures used to evaluate new or amended standards will be finalized at least 180 days before publication of a NOPR proposing new or amended standards.

Commenters were in general agreement that test procedures should be finalized before DOE proposes new or amended standards. For example, Acuity Brands stated that manufacturers need time to develop baseline data using the finalized test procedure before evaluating the proposed efficiency levels. (Acuity Brands, No. 46 at pp. 4-5) Similarly, the ASAP Joint Commenters expressed support for finalizing test procedures prior to DOE proposing new or amended standards “because it allows manufacturers and other stakeholders to better assess the effects of proposed standard levels.” (ASAP Joint Commenters, No. 75 at p. 5)

Commenters also provided more specific suggestions regarding the timing of test procedure and standards rulemakings. For instance, UT-Carrier stated that an “[e]nergy conservation standard rulemaking should only be initiated 3-6 months after the related test procedure is finalized and is published in the
Federal Register
.” (UT-Carrier, No. 41 at p. 2) Big Ass Fans (“BAF”) recommended that new test procedures be finalized 6 to 18 months before DOE proposes a new energy conservation standard. (BAF, No. 73 at p. 2) The Joint Commenters recommended that test procedure amendments be finalized 6 months before initiating a standards rulemaking and that test procedures for newly covered products be finalized 1 year before initiating a standards rulemaking. (Joint Commenters, No. 51 at p. 19) Several other commenters simply stated that test procedures should be finalized prior to DOE initiating a rulemaking to propose new or amended standards. (
See, e.g.,
Bradford White, No.42 at p. 2; ABMA, No. 71 at p. 3)

As stated previously, DOE is proposing that test procedures used to evaluate proposed standards be finalized at least 180 days prior to publication of a NOPR proposing new or amended standards. DOE believes that 180 days provides interested parties with sufficient time to evaluate the new or amended test procedure. DOE seeks comment on the appropriateness of this 180-day period.

Currently, the Process Rule states that DOE will propose any modifications to a test procedure prior to issuing an ANOPR for energy conservation standards and finalize those modifications prior to issuing a NOPR for energy conservation standards. However, DOE has deviated from this schedule in the past and conducted test procedure and standards rulemakings concurrently. DOE recognizes that a finalized test procedure allows interested parties to provide more effective comments on proposed standards. Further, if the test procedure is finalized sufficiently in advance of the issuance of proposed standards, manufacturers will have experience using the new test procedure, which may provide additional insights into the proposed standards. As a result, DOE proposes to require that test procedures used to evaluate new or amended standards will be finalized at least 180 days before publication of a NOPR proposing new or amended standards.

Commenters were in general agreement that test procedures should be finalized before DOE proposes new or amended standards. For example, Acuity Brands stated that manufacturers need time to develop baseline data using the finalized test procedure before evaluating the proposed efficiency levels. (Acuity Brands, No. 46 at pp. 4-5) Similarly, the ASAP Joint Commenters expressed support for finalizing test procedures prior to DOE proposing new or amended standards “because it allows manufacturers and other stakeholders to better assess the effects of proposed standard levels.” (ASAP Joint Commenters, No. 75 at p. 5)

Commenters also provided more specific suggestions regarding the timing of test procedure and standards rulemakings. For instance, UT-Carrier stated that an “[e]nergy conservation standard rulemaking should only be initiated 3-6 months after the related test procedure is finalized and is published in the
Federal Register
.” (UT-Carrier, No. 41 at p. 2) Big Ass Fans (“BAF”) recommended that new test procedures be finalized 6 to 18 months before DOE proposes a new energy conservation standard. (BAF, No. 73 at p. 2) The Joint Commenters recommended that test procedure amendments be finalized 6 months before initiating a standards rulemaking and that test procedures for newly covered products be finalized 1 year before initiating a standards rulemaking. (Joint Commenters, No. 51 at p. 19) Several other commenters simply stated that test procedures should be finalized prior to DOE initiating a rulemaking to propose new or amended standards. (
See, e.g.,
Bradford White, No.42 at p. 2; ABMA, No. 71 at p. 3)

As stated previously, DOE is proposing that test procedures used to evaluate proposed standards be finalized at least 180 days prior to publication of a NOPR proposing new or amended standards. DOE believes that 180 days provides interested parties with sufficient time to evaluate the new or amended test procedure. DOE seeks comment on the appropriateness of this 180-day period.

I. Adoption of Industry Standards

The current Process Rule does not discuss the verbatim adoption of industry standards as DOE test procedures. That being said, DOE is obligated to adopt industry standards in certain cases. For example, under EPCA, DOE is required to use industry standards developed or recognized by ASHRAE for several categories of covered equipment. (42 U.S.C. 6314(a)(4)(A)) Additionally, if these industry standards are amended, EPCA requires that DOE amend its test procedures as necessary to be consistent with the amended industry standard unless it determines, by rule published in the
Federal Register
and supported by clear and convincing evidence, that the amended test procedure would be unduly burdensome to conduct or would not produce test results that reflect the energy efficiency, energy use, and estimated operating costs of that equipment during a representative average use cycle. (42 U.S.C. 6314(a)(2), (3) and (4)(B)) As for covered products and equipment where use of an industry standard is not mandated by EPCA, DOE still routinely adopts industry standards as DOE test procedures. In many cases, aspects of these industry standards are modified by DOE upon incorporation into the DOE test procedure. DOE recognizes that modifications to these standards impose a burden on industry.

For instance, manufacturers will face increased costs if the DOE modifications require different testing equipment or facilities.

Some commenters urged DOE to adopt industry standards without modification. For example, Sub Zero stated that industry is best positioned to develop tests that accurately, fairly, and consistently measure energy, and modifications to industry test procedures are costly, unnecessary, and duplicative. (Sub Zero, No. 43 at p. 3) Similarly, the Joint Commenters stated that DOE modifications to industry standards frequently have little impact on test results, but significantly increase the testing burden on manufacturers. (Joint Commenters, No. 51 at p. 21) The Joint Commenters also stated that DOE should only modify industry standards in narrow circumstances, supported by clear and convincing evidence. (
Id.
)

Other commenters supported the adoption of industry standards under certain conditions. For instance, Nor-Lake stated that industry standards should only be adopted without modification if there is unanimous agreement among DOE, manufacturers, and other stakeholders. (Nor-Lake, No. 68 at p. 3)

Finally, some commenters opposed adding language to the Process Rule that would require DOE to adopt industry standards without modification. For example, the CA IOUs stated that industry standards may serve as a useful starting point for a DOE test procedure, but they are not typically developed with DOE's energy efficiency metrics and CCE requirements in mind. And, as such, DOE should not amend the Process rule to specify the use of industry standards without modification. (CA IOUs, No. 65 at p. 5) Similarly, NPCC stated that adopting industry standards without modifications would rarely satisfy EPCA requirements. Correspondingly, NPCC stated that DOE should not amend the Process Rule to specify the use of industry standards without modification. (NPCC, No. 35 at pp. 8, 16)

In recognition of the costs discussed by commenters that are imposed by DOE's adoption of changes to industry test methods, DOE proposes to amend the Process Rule to require adoption, without modification, of industry standards as test procedures for covered products and equipment unless such standards would be unduly burdensome to conduct or would not produce test results that reflect the energy efficiency, energy use, and estimated operating costs of that equipment during a representative average use cycle. DOE seeks comment on this proposal. Further, given DOE's past adoption of test procedures that did vary from the industry test, DOE seeks comment on whether, if DOE were to adopt this proposal, there are existing test procedures that should be modified to conform to the existing industry test method.

J. Direct Final Rules

The Energy Independence Security Act of 2007 (“EISA 2007”) (Pub. L. 110-140) amended EPCA, in relevant part, to grant DOE authority to issue a “direct final rule” (
i.e.
DFR) to establish energy conservation standards. As amended, EPCA establishes requirements for when DOE uses this type of rulemaking proceeding for the issuance of certain actions. Specifically, DOE may issue a DFR adopting energy conservation standards for a covered product or equipment upon receipt of a joint proposal from a group of “interested persons that are fairly representative of relevant points of view,” provided DOE determines the energy conservation standards recommended in the joint proposal conform with the requirements of 42 U.S.C. 6295(o) or section 342(a)(6)(B) as applicable. (42 U.S.C. 6295(p)(4)(A))

In the December 2017 RFI, DOE requested feedback as to whether it should amend the Process Rule to include provisions related to the use of DFRs. 82 FR 59992, 59993 (Dec. 18, 2017). Most responders supported both the use of the DFR process in developing rules and addressing the DFR provision in the Process Rule. A more detailed discussion of these DFR-related comments follows, along with DOE's response.

Some commenters supported DFRs as an alternative to negotiated rulemaking, while others stated conversely that DFRs should only be issued in the context of negotiated rulemaking, led by an Appliance Standards and Rulemaking Federal Advisory Committee (“ASRAC”) subcommittee. The CEC stated that DFRs should remain available as an option for finalizing standards developed in either ASRAC negotiations or in non-ASRAC negotiations. (CEC, No. 53 at p. 2) Lennox supported the use of DFRs and suggested that identifying DFRs as an alternative to consensus rulemaking outlined in the current Process Rule would be helpful. (Lennox, No. 62 at p. 3) EEI stated that DFRs that have not been the result of negotiated rulemakings should be part of the final Process Rule. However, EEI stressed that DOE should have a preference for conducting notice and comment rulemaking, and the use of DFR's should be limited in practice. (EEI, No. 72 at p. 2). The National Consumer Law Center (“NCLC”) supported the DFR process when it can be used to speed up the rulemaking process, reduce unnecessary time and expense for all parties, reduce the likelihood of contentious hearings and litigation, and lead to results that maximize the satisfaction of all parties. (National Consumer Law Center, January 9, 2018 Public Meeting Transcript at pp. 22)

The APPA expressed its opinion that DOE should not issue DFRs outside of negotiated rulemakings. (APPA, No. 36 at p. 2) The NPCC supports the continued use of DFRs coupled with the ASRAC negotiated rulemaking process. (NPCC, No. 35 at pp. 7, 10) Southern Company stated that it is unrealistic to expect that an energy or water standard which is not part of a negotiated rulemaking would be adopted using this process. (Southern Company, No. 70 at p. 3). NEMA suggested that the DFR and the negotiated rulemaking process should be treated as two separate processes. (NEMA, January 9, 2018 Public Meeting Transcript at pp. 78-79)

In response to these comments, DOE notes that DFRs are intended to be a process that is distinct from that outlined under the Negotiated Rulemaking Act, although in the recent past, the Department has sometimes conflated the two. The Negotiated Rulemaking Act clearly contemplates that the outcome of the negotiation process will be a proposed rule.
See
5 U.S.C. 563.

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-01854. Public record. Not legal advice.